Execution Version STOCK PURCHASE AGREEMENT AMONG HORACE MANN EDUCATORS CORPORATION, AND ROBERT PAGLIONE, PAGLIONE FAMILY IRREVOCABLE TRUST F/B/O ADAM PAGLIONE, PAGLIONE FAMILY IRREVOCABLE TRUST F/B/O LISA AND JORGE ARROYO, BEAU ADAMS AND BENEFIT...
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Execution Version STOCK PURCHASE AGREEMENT AMONG XXXXXX XXXX EDUCATORS CORPORATION, AND XXXXXX XXXXXXXX, XXXXXXXX FAMILY IRREVOCABLE TRUST F/B/O XXXX XXXXXXXX, XXXXXXXX FAMILY IRREVOCABLE TRUST F/B/O XXXX AND XXXXX XXXXXX, XXXX XXXXX AND BENEFIT CONSULTANTS GROUP, INC. DATED AS OF OCTOBER 30, 2018 40733748.21
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STOCK PURCHASE AGREEMENT This STOCK PURCHASE AGREEMENT, dated as of October 30, 2018 (this “Agreement”), is made by and among XXXXXX XXXX EDUCATORS CORPORATION, a Delaware corporation (“Buyer”), XXXXXX XXXXXXXX, an individual resident of the State of New Jersey (the “Class A Shareholder”), THE XXXXXXXX FAMILY IRREVOCABLE TRUST F/B/O XXXX XXXXXXXX, an irrevocable trust established under the laws of the State of New Jersey (the “Xxxx Xxxxxxxx Trust”), THE XXXXXXXX FAMILY IRREVOCABLE TRUST F/B/O XXXX AND XXXXX XXXXXX, an irrevocable trust established under the laws of the State of New Jersey (the “Xxxx Xxxxxx Trust” and together with the Xxxx Xxxxxxxx Trust, the “Trusts”), BEAU XXXXXXXXX XXXXX, an individual resident of the State of New Jersey (“Xxxxx” and together with the Class A Shareholder and the Trusts, the “Sellers” and each individually, a “Seller”), and BENEFIT CONSULTANTS GROUP, INC., a Pennsylvania corporation (the “Company”). Buyer, the Company (prior to the Effective Time) and the Sellers shall be referred to herein from time to time collectively as the “parties” and individually as a “party.” RECITALS WHEREAS, the Sellers collectively own all of the issued and outstanding shares of the Company; WHEREAS, the Company owns all of the issued and outstanding capital stock of BCG Securities, Inc., a Pennsylvania corporation (“BCGS”); WHEREAS, the Company and BCGS engage in the business of providing retirement planning, consulting, actuarial designing and recordkeeping services with respect to non-qualified and qualified plans, investment advisory and brokerage services, and other related services; and WHEREAS, the Sellers desire to sell to Buyer, and Buyer desires to acquire from Sellers, all of the outstanding capital stock of the Company upon the terms and subject to the conditions set forth herein; NOW THEREFORE, in consideration of the mutual covenants, conditions and agreements set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE I DEFINITIONS Section 1.1 Definitions. For purposes of this Agreement, the following terms shall have the respective meanings set forth below: “Acceptable PLR” means a private letter ruling from the IRS reasonably satisfactory to Buyer that the Company will be treated as continuing to be an S corporation within the meaning of Sections 1361 and 1362 of the Code on and after December 31, 2017. 00000000.21
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“Accounts Receivable” means all notes and accounts receivable of the Company Business, determined in accordance with Applicable Accounting Principles. “Action” means any claim, action, suit, litigation, arbitration, investigation, subpoena, examination or other proceeding by or before any Governmental Authority or arbitral body. “Acquisition Proposal” has the meaning set forth in Section 5.9. “Xxxx Xxxxxxxx Trust” has the meaning set forth in the introductory paragraph hereof. “Xxxxx” has the meaning set forth in the introductory paragraph hereof. “Additional Holdback” has the meaning set forth in Section 5.14. “Affiliate” means, with respect to any specified Person, any other Person that, at the time of determination, directly or indirectly through one or more intermediaries, Controls, is Controlled by, or is under common Control with, such first person. “Agreement” has the meaning set forth in the introductory paragraph hereof. “Allocation Schedule” has the meaning set forth in Section 8.2(c). “Applicable Accounting Principles” means GAAP applied on a consistent basis. “Assets” means the Leased Real Property, machines, furniture, computer hardware, Intellectual Property, Computer Software, Technology, Contracts, office furnishings and other tangible personal property which are owned or used in the Company Business. Assets shall not include the art work at the Leased Real Property set forth in Section 1.1 of the Seller Disclosure Schedule, which art work shall be retained and owned by Seller, Xxxxxx Xxxxxxxx. “Base Consideration” means an amount equal to $25 million. “BCGS” has the meaning set forth in the Recitals hereof. “BCGS Financial Statements” has the meaning set forth in Section 3.5(a). “BCGS Shares” has the meaning set forth in Section 3.2(b). “Benefit Plans” means each “employee pension benefit plan” (as defined in Section 3(2) of ERISA), “employee welfare benefit plan” (as defined in Section 3(1) of ERISA), “employee plan” (as defined in Section 3(3) of ERISA, and each stock option or other equity based, employment or other contract for personal services, bonus, incentive or deferred compensation, welfare, life, medical, or dental benefits, retention, change-in-control, restrictive covenant, Tax gross-up, severance, paid leave, vacation, fringe, or other benefit, compensation plan, program, policy, arrangement or agreement, whether or not subject to ERISA and whether or not written, (a) that is sponsored, maintained, or contributed to by the Company or any of its Affiliates, (b) with respect to which the Company or any of its Affiliates otherwise has any obligation or liability -2- 40733748.21
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(whether direct or contingent), or (c) that otherwise provides benefits to any current or former employee, officer, director or independent contractor of the Company or any of its Affiliates. “Books and Records” means the originals or copies of all books and records, data and information, customer lists, disclosure and other documents and filings required under all applicable Laws, administrative records, marketing information, customer information, personnel records, sales records, financial records, Tax records, compliance records and email data of the Company, BCGS and Company Business, including, without limitation, any database, magnetic or optical media or any other form of recorded, computer generated or stored information or process (including emails) and the Company’s and BCGS’s organizational, ownership and corporate records. “Business Day” means any day other than a Saturday, Sunday, a U.S. federal holiday or a day on which the New York Stock Exchange is closed. “Buyer” has the meaning set forth in the introductory paragraph hereof. “Buyer 401(k) Plan” has the meaning set forth in Section 6.1(c). “Buyer Disclosure Schedule” means the Buyer Disclosure Schedule delivered by Buyer to the Sellers concurrently with the execution of this Agreement. “Buyer Fundamental Representations” has the meaning set forth in Section 9.1. “Buyer Indemnitees” has the meaning set forth in Section 10.1(a). “Buyer Material Adverse Effect” means a material impairment of the ability of Buyer to perform its obligations under the Agreement or to consummate the transactions contemplated thereby. “Buyer’s Allocation” has the meaning set forth in Section 8.2(c). “Cause” means, with respect to any Person, the occurrence of any of the following: (i) such Person’s indictment of, commission of or plea of guilty or nolo contendere to any felony or any crime involving fraud, dishonesty or moral turpitude under the laws of the United States or any state thereof or under the laws of any other jurisdiction; (ii) such Person’s commission of, or participation in, a fraud or act of dishonesty against Buyer or any Affiliate of Buyer or any client of Buyer or any of its Affiliates or such Person’s commission of an act or omission that could bring the business of the Buyer and its Affiliates into material disrepute or cause such entities significant embarrassment; (iii) such Person’s material violation of any material policy, contract or agreement between the Person and Buyer or any of its Affiliates (other than this Agreement); (iv) any act or omission by such Person involving malfeasance or gross negligence in the performance of the Person’s duties and responsibilities to the detriment of Buyer or any of its Affiliates; (v) such Person’s habitual use of illegal drugs or alcohol during the performance of his duties for the Buyer or its Affiliates; (vi) such Person’s violation of the applicable rules or regulations of any governmental or self-regulatory authority that causes material harm to Buyer or any of its Affiliates; or (vii) such Person’s disqualification or bar by any governmental or self-regulatory authority from serving in the capacity required by his or her job description or such Person’s loss -3- 40733748.21
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of any governmental or self-regulatory license that is reasonably necessary for such Person to perform his or her duties or responsibilities, in each case as an employee of Buyer or any of its Affiliates. The determination as to whether Cause has occurred shall be made by Buyer, in its sole discretion. “Certificates of Trust” means, collectively, the Certificate of Trust relating to the Xxxx Xxxxxxxx Trust and the Certificate of Trust relating to the Xxxx Xxxxxx Trust, in each case attached hereto as Exhibit A. “Change of Control” means, with respect to any Person, (i) any event or series of events by which any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, as amended), directly or indirectly, of shares of the capital stock of such Person representing more than 50% of the aggregate ordinary voting power represented by the issued and outstanding capital stock of such Person, or (ii) any transaction involving a sale of all or substantially all of the assets of such Person to an independent third party. “Class A Common Stock” has the meaning set forth in Section 3.2(a). “Class A Shareholder” has the meaning set forth in the introductory paragraph hereof. “Class B Common Stock” has the meaning set forth in Section 3.2(a). “Closing” has the meaning set forth in Section 2.2. “Closing Consideration” means the Base Consideration plus the Working Capital Adjustment less the Indebtedness Payoff Amount less the Company Transaction Expenses. “Closing Date” has the meaning set forth in Section 2.2. “Closing Payment” has the meaning set forth in Section 2.4(b). “COBRA” has the meaning set forth in Section 6.1(f). “Code” means the Internal Revenue Code of 1986, as amended, as well as any guidance issued thereunder. “Company” has the meaning set forth in the recitals. “Company 401(k) Plan” has the meaning set forth in Section 6.1(c). “Company Business” means the business of the Company and BCGS, including but not limited to providing retirement planning, consulting, actuarial designing and recordkeeping services with respect to non-qualified and qualified plans, investment advisory and brokerage services, and any ancillary services. -4- 40733748.21
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“Company Material Adverse Effect” means any fact, circumstance, condition, event, development, occurrence, change or effect that (a) has, or could reasonably be expected to have, individually or in the aggregate, a material adverse effect on the business, sales, prospects assets, liabilities, operations, or financial condition or results of operations of the Company, BCGS or the Company Business, (b) has caused, or could reasonably be expected to cause, individually or in the aggregate, material damage or harm to the commercial reputation of the Company, BCGS or the Company Business, including association with any misleading sales practices, or (c) causes, or reasonably could be expected to cause, individually or in the aggregate, a material impairment of the ability of the Seller Parties to perform their obligations hereunder or to consummate the transactions contemplated hereby; provided, however, that no effect, change, event, occurrence or development (an “Event”) (by itself or when aggregated with any other Event) resulting from, arising out or relating to, any of the following shall be deemed to give rise to a Company Material Adverse Effect with respect to clause (a) hereof, or be taken into account when determining whether a “Company Material Adverse Effect” under clause (a) or (b) hereof, has occurred or may, would or could occur: (i) any Event (including any loss of employees, any disruption in supplier, distributor, partner or similar relationships) to the extent resulting from or arising out of the public announcement of this Agreement, (ii) any action taken by Seller Parties that is consented to by Buyer in writing and (iii) to the extent that such Event does not disproportionately affect Sellers, the Company, BCGS or the Company Business relative to other participants in the industries or geographic locations in which Sellers, the Company, or BCGS participate: (A) any Event resulting from or arising out of general economic or political conditions or changes in such conditions (including acts of terrorism or war), (B) changes in GAAP or applicable Law after the date of this Agreement and (C) changes resulting from natural or man-made disaster, a declaration of a national emergency, war, or the occurrence of any military attack. “Company Real Property Leases” has the meaning set forth in Section 3.6(b). “Company Shares” means, collectively, the shares of Class A Common Stock and Class B Common Stock of the Company. “Computer Software” means currently used versions, releases, modifications, updates, upgrades, enhancements thereto of computer software applications, programs, middleware, firmware, materials and tapes used in the administration of the Company Business, as well as any legacy versions thereof necessary to meet customer needs, including documentation, object code, executables and available source code, in each case owned or used by the Company or any of its Affiliates. “Company Transaction Expenses” means, in each case solely to the extent not paid immediately prior to the Closing Date, and whether or not invoiced, (i) the fees and expenses payable by the Company to XxxXxxxx Xxxxxx, Ltd. and any other attorneys engaged by the Company in connection with this Agreement and the transactions and other agreements contemplated by this Agreement, and (ii) the fees and expenses payable by the Company to outside accountants or other advisors, in each case incurred on or before the Closing Date in connection with this Agreement and the transactions and other agreements contemplated by this Agreement. “Confidentiality Agreement” means that certain Non-Disclosure Agreement dated February 28, 2018 by and between the Company and Xxxxxx Xxxx Services Corporation. -5- 40733748.21
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“Continued Employee” has the meaning set forth in Section 6.1(a). “Continuing Membership Application” has the meaning set forth in Section 5.3(b). “Contract” means any contract, agreement, Permit, note, lease, license, instrument or other legally binding obligation. “Control,” “Controlled” or “Controlling” means, as to any Person, the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise. The terms “Controlled by” and “under common Control with” shall have correlative meanings. “Customer” means any Plan Sponsor or individual recipient of individual wealth advisory or other services by the Company or BCGS in connection with the Company Business. “D&O Indemnified Person” has the meaning set forth in Section 5.6. “Disputed Item” has the meaning set forth in Section 2.5(c). “Earn-Out Payment” has the meaning set forth in Section 2.6(b). “Earn-Out End Date” has the meaning set forth in Section 2.6(a). “Earn-Out Start Date” has the meaning set forth in Section 2.6(a). “Effective Time” has the meaning set forth in Section 2.2. “Eligibility Date” has the meaning set forth in Section 6.1(d). “Employee” means each natural person who is a common law employee of the Company or BCGS, each of which (including any Employee on leave and any employee on long-term disability) is listed on Section 3.9(g) of the Seller Disclosure Schedule. “Environmental Laws” means all applicable Law governing Environmental Matters. “Environmental Matters” means any matters arising out of or relating to health and safety, or pollution or protection of the environment or workplace, including, without limitation, any of the foregoing relating to the use, generation, transport, treatment, storage, or disposal of any material defined as a “hazardous substance” or “hazardous waste” under any Environmental Law. “ERISA” means the Employee Retirement Income Security Act of 1974, as amended, as well as any guidance issued thereunder. “ERISA Affiliate” means any Person (whether incorporated or unincorporated) that together with the Company would be deemed a “single employer” within the meaning of Section 414 of the Code. “Estimated Closing Consideration” has the meaning set forth in Section 2.4(a). -6- 40733748.21
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“Estimated Working Capital Adjustment” has the meaning set forth in Section 2.4(a). “Example Calculation” has the meaning set forth in Section 3.5(a). “Existing Employment Agreement” means each employment agreement or other agreement for personal services between the Company or BCGS, on one hand, and an Employee, on the other hand. For the avoidance of doubt, each such agreement (including any terminated agreement for which the Company or BCGS has any liability) is listed on Section 3.9(h) of the Seller Disclosure Schedule. “Final Adjustment Amount” has the meaning set forth in Section 2.5(f)(ii). “Final Working Capital Adjustment” has the meaning set forth in Section 2.5(b). “Financial Statements” has the meaning set forth in Section 3.5(a). “FINRA” means the Financial Industry Regulatory Authority, Inc. “First Holdback Release Amount” means $2.5 million. “First Holdback Release Date” has the meaning set forth in Section 10.2(i). “Fund” means any registered investment company, bank commingled fund or other unregistered pooled investment entity or separate account in which any Participant or Plan Sponsor invests as part of any investment menu or other program offered by the Company or BCGS with respect to the Company Business. “Fund Agreement” means any Contract to which Company or BCGS is a party with any Fund, an Affiliate of a Fund, or an agent of a Fund (including any Fund Manager) that is related to the Company Business and calls for the payment to or on behalf of the Company or BCGS in excess of $5,000 per annum, including, but not limited to, all agreements that are styled as “participation agreements” and any corresponding ancillary documents, and all Contracts providing for the use of Funds as investment options and payment of distribution service fees, administrative service fees, shareholder service fees or other payments relating to the offering of such Funds as investment options. “Fund Managers” means the advisors to the Funds. “GAAP” means generally accepted accounting principles in the United States. “Governmental Approval” has the meaning set forth in Section 3.4. “Governmental Authority” means any domestic or foreign governmental, legislative, judicial, administrative or regulatory authority, agency, self-regulatory organization (including FINRA), commission, body, court or entity. “Governmental Order” means any order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental Authority. -7- 40733748.21
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“Holdback Amount” means $5,000,000. “Holdback Release Date” means the First Holdback Release Date or Second Holdback Release Date, as applicable. “Indebtedness” means, with respect to any Person, any obligations of such Person or its Subsidiaries whether evidenced by notes, bonds, debentures or similar instruments or otherwise that relate to (a) borrowed money or any obligation to repay amounts, (b) any deferred purchase price of goods or services, (c) any letter of credit, (d) any capital lease, lease-purchase arrangement or similar agreement, (e) any undertaking by such Person or its Subsidiaries on which others rely in extending credit or conditional sales agreements, or (f) any undertaking in the nature of guarantees of the obligations described in clauses (a) through (e) above of any other Person, in each case including any accrued and unpaid interest or penalty thereon. “Indebtedness Payoff Amount” means the aggregate amounts required to extinguish the Indebtedness set forth on Exhibit B hereto. “Indemnification Cap” has the meaning set forth in Section 10.1(a). “Indemnification Deductible” has the meaning set forth in Section 10.1(a). “Indemnification Retention Amount” means the aggregate amount of all claims for indemnification set forth in any demand for indemnification made by a Buyer Indemnitee pursuant to and in compliance with Article VII or Article X as applicable (whether disputed or undisputed) on or prior to the applicable Holdback Release Date that are outstanding and unpaid as of such Holdback Release Date. “Indemnified Party” has the meaning set forth in Section 10.2(a). “Indemnifying Party” has the meaning set forth in Section 10.2(a). “Indemnity Claim” has the meaning set forth in Section 10.2(a). “Independent Accountant” has the meaning set forth in Section 2.5(d). “Individual Registered Representative Agreement” means each agreement among the Company, BCGS and a Registered Person pursuant to which such Registered Person is appointed as a “registered representative” of BCGS and/or serves as an investment adviser representative of BCGS. “Intellectual Property” means any and all of the following: (a) Trademarks; (b) copyrightable works and works of authorship, including moral rights, copyright, registrations and applications for registration thereof, and all rights therein provided by applicable Law; (c) Trade Secrets and confidential know-how; (d) patents, patent applications and statutory invention registrations, including reissues, divisions, continuations, continuations-in-part, renewals, extensions and reexaminations thereof, all patents that may issue on such applications, and all rights therein provided by applicable Law; and (e) other intellectual property and related proprietary rights, interests and protections. -8- 40733748.21
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“Interest Rate” means the greater of (a) a rate of interest per annum equal to the rate of interest quoted in The Wall Street Journal, Money Rates Section as the “Prime Rate” as in effect from time to time, or (b) the applicable federal short-term rate as defined in section 1274(d) of the Code. “Investment Advisers Act” means the Investment Advisers Act of 1940, as amended, and the rules and regulations of the SEC thereunder. “IRS” means the Internal Revenue Service. “Knowledge” means, with respect to Seller Parties, the actual knowledge after due inquiry of the individuals listed in Section 1.1(a) of the Seller Disclosure Schedule. “Law” means any federal, state, local or foreign law, statute or ordinance, common law or any rule, regulation, standard, judgment, order, writ, injunction, ruling, decree, arbitration award, agency requirement, license or permit of any Governmental Authority. “Leased Real Property” has the meaning set forth in Section 3.6(b). “Licensed Intellectual Property and Technology” has the meaning set forth in Section 3.13(c). “Lien” means any mortgage, deed of trust, pledge, hypothecation, security interest, encumbrance, claim, lien or charge of any kind. “Xxxx Xxxxxx Trust” has the meaning set forth in the introductory paragraph hereof. “Losses” means any and all liabilities, claims, expenses (including reasonable attorneys’ fees and expenses) and damages, reasonably foreseeable lost profits and any claim properly paid to a third party in connection with a Third Party Claim, provided, that Losses shall exclude punitive, consequential, special, and indirect damages (including any damages based on any type of multiple). “Material Contract” means any (i) Services Agreement, (ii) Plan Sponsor Recordkeeping Agreement, (iii) Fund Agreement, (iv) Revenue Agreement, (v) Significant Producer Agreement, (vi) any Contract evidencing Indebtedness of the Company or BCGS, (vii) any other Contract with any Customer, and (viii) any other Contract to which the Company or BCGS is a party or by which its assets are bound that (a) calls for the payment by or on behalf of the Company or BCGS in excess of $10,000 per annum, or the delivery of goods or services with a fair market value in excess of $10,000 per annum, during the remaining term thereof, (b) establishes a joint venture or similar arrangement, (c) involves an acquisition or disposition of any material portion of the Company Business or pursuant to which there is continuing indemnification obligations of the Company or BCGS, (d) contains covenants restricting the ability of the Company or BCGS to compete in any line of business or geographical area or to do business with any Person or solicit the employment of any Person or (e) constitutes any real property interest. “MSRB” means the Municipal Securities Rulemaking Board. -9- 40733748.21
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“Non-Compete and Nondisclosure Agreements” means the Non-Compete and Nondisclosure Agreements between Buyer, on one hand, and each of the Principals, on the other hand, in substantially the form attached hereto as Exhibit C. “OFAC” has the meaning set forth in Section 3.11(e). “One-Day Notes” means the One-Day Notes to be delivered by Buyer to the Sellers at Closing in a form mutually acceptable to Buyer and Sellers. “Ordinary Course of Business” means, with respect to any Person, the ordinary course of business of such Person consistent with past practice. “Organizational Documents” means (a) the articles or certificate of incorporation and bylaws of a corporation; and (b) any charter, trust documents, or similar document adopted or filed in connection with the creation, formation, or organization of a Person, and (c) any amendment to any of the foregoing. “Outside Date” has the meaning set forth in Section 11.1(b). “Owned Intellectual Property” means the Intellectual Property relating to the Company Business owned by the Company or any of its Affiliates. “Participant” means an employee who meets the eligibility requirements to participate in a plan that is included in the Company Business with the applicable Plan Sponsor. “Permits” has the meaning set forth in Section 3.11(b). “Permitted Liens” means all imperfections of title or Liens (a) that arise out of Taxes imposed that are not due and payable as of the Closing Date or are being contested in appropriate proceedings, (b) of carriers, warehousemen, mechanics, materialmen and other similar Persons or other similar Liens imposed by Law incurred in the Ordinary Course of Business for sums not yet delinquent or being contested in good faith, or (c) that relate to deposits made in the Ordinary Course of Business in connection with workers’ compensation, unemployment insurance and other types of social security, other than, in each case, such imperfections or Liens that would individually or in the aggregate with other Permitted Liens, interfere with the use of the asset or assets to which such Liens relates in the Ordinary Course of Business or materially detract from the value of such asset or assets. “Person” means any natural person, corporation, partnership, joint venture, limited liability company, association, trust, unincorporated organization or other entity. “Personal Information” means (i) any “nonpublic personal information” as such term is defined under Title V of the U.S. Xxxxx-Xxxxx-Xxxxxx Act, 15 U.S.C. § 6801 et seq., and the rules and regulations issued thereunder, (ii) any “individually identifiable health information” or “protected health information” as such terms are used under Health Insurance Portability and Accessibility Act of 1996 and the rules and regulations issued thereunder, (iii) any information that can specifically identify an individual, such as name, signature, address, social security number, telephone number or other unique identifier, together with any other information that -10- 40733748.21
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relates to an individual who has been so identified in any format whether written, electronic or otherwise, or (iv) information that can be used to authenticate an individual (including, without limitation, passwords or PINs, biometric data, unique identification numbers, answer to security questions, or other personal identifiers) in each case in any format whether written, electronic or otherwise. “Phantom Stock Plan” means the Phantom Stock and Stock Appreciations Rights Plan, by and between the Company and Xxxxxxx X. Xxxxxxx, dated April 12, 2004 and terminated as to future benefits as of December 28, 2006, as amended from time to time. “Plan” means any non-qualified deferred compensation plans, qualified defined contribution or defined benefit plans or other arrangements or programs sponsored or maintained by a Plan Sponsor with respect to which the Company or any of its Affiliates provides any retirement plan program services as part of the Company Business. “Plan Sponsor” means an employer or other entity that sponsors or maintains non-qualified deferred compensation plans, qualified defined contribution or defined benefit plans or other arrangements or programs with respect to which the Company or any of its Affiliates provides services as part of the Company Business. “Plan Sponsor Recordkeeping Agreements” means any Contract pursuant to which the Company or any of its Affiliates provides Recordkeeping Services to a Plan Sponsor and which has resulted in the annual payments to the Company or any of its Affiliates in excess of $5,000 per annum. “Post-Closing Statement” has the meaning set forth in Section 2.5(b). “Post-Closing Tax Period” means any Tax period that begins after the Closing Date and the portion of any Straddle Period that begins after the Closing Date. “Pre-Closing Statement” has the meaning set forth in Section 2.4(a). “Pre-Closing Tax Period” means any Tax period that ends on or before the Closing Date and the portion of any Straddle Period ending at the end of the Closing Date. “Principals” means Xxxxxx Xxxxxxxx, Xxxx Xxxxxxxx, Xxxxx Xxxxxx and Xxxx Xxxxx. “Pro Rata Share” means for each Seller, the number of Company Shares owned by such Seller over the total number of Company Shares. “Producer” has the meaning set forth in Section 3.14(a). “Purchase Price” has the meaning set forth in Section 2.1(b). “Quarterly Financial Statements” has the meaning set forth in Section 3.5(a). “Recordkeeping Services” means, administrative maintenance of plans and plan- participant accounts, processing of plan transactions, transfer and clearing services related to plan- -11- 40733748.21
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level trades, check preparation, provision of Tax reporting information, plan consulting, participant distribution education services and related services. “Recovery Amounts” has the meaning set forth in Section 10.2(d). “Registered Intellectual Property” means all Owned Intellectual Property that is registered, filed or issued under the authority of any Governmental Authority (or, in the case of an internet domain name, with an internet domain name registrar), or for which an application to register has been filed with any Governmental Authority. “Registered Person” means each Employee and independent contractor of the Company or any of its Affiliates who is (a) required to be licensed as a registered representative with certain states and FINRA, and/or (b) required to be licensed or registered as an investment adviser representative where such licensing or registration is required by a state, in order to perform his or her responsibilities for or on behalf of the Company or any of its Affiliates in connection with the Company Business. “Related Person” means (a) with respect to a particular individual: (i) each other member of such individual’s Family; and (ii) any Person that is directly or indirectly Controlled by such individual or one or more members of such individual’s Family, and (b) with respect to a specified Person other than an individual, any other Person that directly or indirectly Controls, is directly or indirectly Controlled by, or is directly or indirectly under common Control with such specified Person. For purposes of this definition, the “Family” of an individual includes (A) the individual, (B) the individual’s spouse, (C) the individual’s children (including adoptive relationships); and (D) all familial relations living in the individual’s household. In the case of a trust, any trustee or co-trustee shall be deemed to control the relevant trust. “Representatives” as to any Person, means such Person’s directors, officers, partners (other than limited partners), managers, employees, Affiliates, representatives (including financial advisors, attorneys and accountants) or agents. “Resolution Period” has the meaning set forth in Section 2.5(d). “Restricted Period” has the meaning set forth in Section 5.8(a). “Revenue Agreement” means any Contract to which the Company or BCGS or one of their agents is a party, which calls for the payment in excess of $5,000 per annum, directly or indirectly, to the Company or BCGS. “Salary Continuation Agreement” means that certain Salary Continuation Agreement between the Company and Xxxxxx Xxxxxxxx, dated January 1, 2008, as amended from time to time. “SEC” means the U.S. Securities and Exchange Commission. “Second Holdback Release Date” has the meaning set forth in Section 10.2(i). “Section 338(h)(10) Election” has the meaning set forth in Section 8.2(a). -12- 40733748.21
![slide17](https://www.sec.gov/Archives/edgar/data/850141/000162828019002351/exhibit1012bcgpurchaseag017.jpg)
“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations of the SEC thereunder. “Selected Court” has the meaning set forth in Section 12.7(b). “Seller Delivered Documents” has the meaning set forth in Section 3.4. “Seller Disclosure Schedule” means the Seller Disclosure Schedule delivered by the Company to Buyer concurrently with the execution of this Agreement. “Seller Fundamental Representations” has the meaning set forth in Section 9.1. “Seller Indemnitees” has the meaning set forth in Section 10.1(b). “Seller Parties” means Sellers and, prior to the Effective Time, the Company. “Sellers” has the meaning set forth in the introductory paragraph hereof. “Services Agreement” means any Contract to which the Company or BCGS is a party pursuant to which services are provided by any Person in connection with the Company Business such as the provision of system, infrastructure, application, custodial, trust or brokerage, clearing or settlement services (other than Plan Sponsor Recordkeeping Agreements, other Contracts with Customers, or Fund Agreements) and which calls for the payments by or on behalf of the Company or BCGS to such Person in excess of $5,000 per annum. “Significant Producer” has the meaning set forth in Section 3.14(c). “Significant Producer Agreement” has the meaning set forth in Section 3.14(c). “Spousal Consents” means the consent of the spouse of each of the Class A Shareholder and Xxxxx, in substantially the form set forth as Exhibit D. “Straddle Period” means any Tax year or period beginning on or before the Closing Date and ending after the Closing Date. “Subsidiary” of any Person means another Person of which more than 50% of the total combined voting power of all classes of stock or other voting interests or Controlling equity interest in the case of a Person that is not a corporation is owned at the time of determination directly or indirectly by such first Person. “Substantially Converted” means conversion of 90% or more of the Buyer’s “retirement advantage” plans (which does not include remitter services or data sharing) from the Buyer’s platform to the Company’s platform such that Buyer clients are able to access their client account information from the website maintained by the Company; provided that a plan shall be deemed converted to the Company’s platform if (i) the plan has not been converted due to delay by the custodian (Matrix/MG Trust) or the recordkeeping platform (FIS Relius), provided that Sellers shall have used best efforts to cause such conversion, or (ii) the plan has been converted and is subsequently “de-converted” by the Buyer. -13- 40733748.21
![slide18](https://www.sec.gov/Archives/edgar/data/850141/000162828019002351/exhibit1012bcgpurchaseag018.jpg)
“Survival Period” has the meaning set forth in Section 9.3. “Target Net Working Capital” means $800,000. “Tax Closing Agreement” has the meaning set forth in Section 3.10(g). “Tax Ruling” has the meaning set forth in Section 3.10(g). “Tax” means any federal, state, county, local, or foreign tax (including income taxes and Transfer Taxes), charge, fee, levy, impost, duty, or other assessment, including income, gross receipts, excise, employment, sales, use, transfer, recording, license, payroll, franchise, severance, documentary, stamp, occupation, windfall profits, environmental, highway use, commercial rent, customs duty, capital stock, paid-up capital, profits, withholding, social security, single business, unemployment, disability, real property, personal property, registration, ad valorem, value added, alternative or add-on minimum, estimated, or other tax or taxing fee of any kind whatsoever, imposed or required to be withheld by any Taxing Authority, including any estimated payments relating thereto, any interest, penalties, and additions imposed thereon or with respect thereto, whether disputed or not, and including liability for taxes of another Person under Treasury Regulations Section 1.1502-6 or similar provision of state, local or foreign law, or as a transferee or successor, by contract or otherwise. “Tax Adjustment” has the meaning set forth in Section 8.2(b). “Tax Return” means any return, declaration or report relating to Taxes due, any information return with respect to Taxes, or other similar report, statement, declaration or document required to be filed under applicable Law in respect of Taxes, any amendment to any of the foregoing, any claim for refund of Taxes paid, and any attachments, amendments or supplements to any of the foregoing. “Taxing Authority” means the IRS and any other domestic or foreign Governmental Authority responsible for the administration and/or collection of any Tax. “Technology” means hardware, information technology equipment and systems, third- party software, data and databases, and associated documentation, in each case relating to the Company Business as currently conducted and owned by or licensed by the Company. “Texas Application” has the meaning set forth in Section 5.3(b). “Third Party Claim” has the meaning set forth in Section 10.2(b). “Trademarks” mean trademarks, trade names, service marks, trade dress, logos, internet domain names, any and all common law rights thereto, and registrations and applications for registration thereof (including intent-to-use applications), all rights therein provided by applicable Law, and all reissues, extensions and renewals of any of the foregoing. “Trade Secrets” means information that derives economic value, actual or potential, from not being generally known and not being readily ascertainable to other persons who can obtain economic value from its disclosure or use and that is the subject of reasonable efforts by the -14- 40733748.21
![slide21](https://www.sec.gov/Archives/edgar/data/850141/000162828019002351/exhibit1012bcgpurchaseag021.jpg)
(viii) a certificate dated the Closing Date and executed by the trustee of each Trust stating that the condition set forth in Section 7.2(c) has been satisfied; (ix) evidence of the termination of each Existing Employment Agreement reasonably satisfactory to Buyer; (x) evidence of the termination of (A) all Contracts set forth in Section 3.17(b)(ii) of the Seller Disclosure Schedule and the settlement of all amounts due thereunder, (B) if the Closing Date occurs in 2019, all Benefit Plans and other Contracts set forth in Section 3.9(b) of the Seller Disclosure Schedule, and (C) the Company 401(k) Plan in accordance with Section 6.1(c), in each case reasonably satisfactory to Buyer; (xi) Certificate of the Secretary of the Company and BCGS dated as of the Closing Date (A) certifying, as complete and accurate as of the Closing Date, attached copies of the Company’s and BCGS’s Organizational Documents, each amended as of such date, and (B) certifying and attaching all resolutions adopted by the Company’s and BCGS’s board of directors authorizing the execution, delivery and performance by the Company of this Agreement and by the Company and BCGS (if applicable) of the other Seller Delivered Documents and the consummation of all transactions contemplated hereby and thereby, and certifying that such resolutions are in full force and effect and are all of the resolutions adopted in connection with such transactions; (xii) Good Standing Certificate for the Company and BCGS from the Pennsylvania Secretary of State; (xiii) an IRS Form 8023, with attached schedules as required, containing all information required by the IRS with respect to each S Corporation Shareholder (as defined in the Treasury Regulations) of the Company, and signed by each Seller in accordance with the IRS instructions to such Form; and (xiv) evidence of termination of the Salary Continuation Agreement and Phantom Stock Plan, in each case reasonably satisfactory to Buyer. (b) Deliveries at Closing by Buyer. At the Closing, Buyer will pay or deliver to the Sellers the following: (i) each Seller’s Pro Rata Share of the Closing Payment in accordance with Section 2.4(b) hereof; (ii) a certificate dated the Closing Date and executed by an officer of Buyer stating that the conditions set forth in Section 7.3(a) and 7.3(b) have been satisfied; (iii) Certificate of the Secretary of the Buyer dated as of the Closing Date certifying and attaching all resolutions adopted by the Buyer’s board of directors authorizing the execution, delivery and performance by the Buyer of this -17- 40733748.21
![slide23](https://www.sec.gov/Archives/edgar/data/850141/000162828019002351/exhibit1012bcgpurchaseag023.jpg)
existing as of the Closing Date and not reflected in the calculation of Working Capital Adjustment shall be identified as such in Section 3.5(d) of the Seller Disclosure Schedule as updated by Seller as of the fifth (5th) Business Day prior to the Closing Date. From and after the Closing Date, Company shall use commercially reasonable efforts to collect the Accounts Receivable balances aged two hundred forty (240) days or less and will remit such funds, net of the Company’s collection expense, to Seller. (b) As promptly as practicable, but no later than one hundred twenty (120) days after the Closing Date, Buyer shall prepare and deliver to Sellers a statement (the “Post-Closing Statement”) consisting of (i) a pro forma consolidated balance sheet of the Company and BCGS as of the Effective Time, (ii) a calculation of the Working Capital Adjustment as of the Effective Time derived from such pro forma consolidated balance sheet, including the Indebtedness Payoff Amount and Company Transaction Expenses as of the Effective Time (the “Final Working Capital Adjustment”), and (iii) a calculation of the Closing Consideration. The Post-Closing Statement shall be (A) based upon the Books and Records and prepared in good faith, (B) based on the same format as the consolidated balance sheets contained in the Financial Statements as of year-end 2017 with respect to the consolidated balance sheet and the Example Calculation with respect to the Working Capital Adjustment, (C) prepared consistent with the Applicable Accounting Principles and with respect to the Working Capital Adjustment also consistent with the Example Calculation and the notes therein, and (D) accompanied with work papers and supporting documentation and a written certification from a responsible financial officer of Buyer certifying that the Post-Closing Statement complies with the requirements of this Section 2.5(b). (c) If Sellers disagree with the Post-Closing Statement on the basis that it contains manifest mathematical errors or was not prepared in accordance with Section 2.5(b), Sellers may, within thirty (30) days after its receipt of the Post-Closing Statement, deliver a notice to Buyer disagreeing with the Post-Closing Statement and specifying in reasonable detail each item that the Sellers dispute on such basis (a “Disputed Item”), the amount in dispute for each such Disputed Item and the reasons supporting Sellers’ positions. If the Sellers do not deliver a notice of any Disputed Items within such thirty (30) day period, the Post-Closing Statement as delivered by Buyer shall be final, conclusive and binding on the Buyer and Sellers. (d) If a notice of disagreement shall be delivered in accordance with Section 2.5(c), Buyer and Sellers shall, during the fifteen (15) days following such delivery (the “Resolution Period”), negotiate in good faith to reach agreement on the Disputed Items. If, during such period, Buyer and Sellers are unable to reach such agreement, they shall promptly thereafter engage, and submit the unresolved Disputed Items (the “Unresolved Items”) to any of the independent registered public accounting firms listed on Exhibit H, or, if none of such firms is engaged, the parties will engage an independent registered public accounting firm that is selected by Sellers (and not engaged or used by Seller or Buyer within the past five years) and reasonably acceptable to Buyer (the “Independent Accountant”), which shall promptly review this Agreement and the Unresolved Items; provided, that if Buyer and Sellers are not able to agree on the accounting firm to serve as the Independent Accountant within ten (10) days after the end of the Resolution Period, Buyer and Sellers shall request the American Arbitration Association to appoint as the Independent Accountant an independent registered public accounting firm that has not had a material relationship with Buyer, Sellers or any of their respective Affiliates (including the Company) within the preceding two years, and such appointment shall be final, binding and -19- 40733748.21
![slide26](https://www.sec.gov/Archives/edgar/data/850141/000162828019002351/exhibit1012bcgpurchaseag026.jpg)
(ii) if the Total Net Revenue exceeds the Benchmark Revenue by nineteen percent (19%) or more but less than twenty-four percent (24%), the respective Seller’s Pro Rata Share of $2,500,000.00; (iii) if the Total Net Revenue exceeds the Benchmark Revenue by twenty-four percent (24%) or more, the respective Seller’s Pro Rata Share of $5,000,000.00; and (iv) if the Total Net Revenue does not exceed the Benchmark Revenue or exceeds the Benchmark Revenue by less than fifteen (15%), zero. The Earn-Out Payment, if any, will be payable to each Seller in accordance with the respective Seller’s Pro Rata Share and will be paid by Buyer to each Seller by certified bank checks or Wire Transfer no later than the third (3rd) Business Day following the notice delivered by Buyer pursuant to this Section 2.6(b). For the avoidance of doubt, (i) the parties hereto acknowledge that the Earn- Out Payment, if any, is based on service fees the Company and its Subsidiaries generate and is not in any way commission payments, (ii) each Seller’s right to receive their Pro Rata Share of the Earn-Out Payment, if any, shall not be conditioned on (or measured with respect to), if applicable, their continued employment with or services to the Company or its Affiliates and shall be treated as additional Purchase Price for federal and state income tax purposes, and (iii) no Earn-Out Payment shall be payable by Buyer if the Buyer’s “Retirement Advantage” platform has not been Substantially Converted to the platform of the Company on or prior to the first anniversary date of the Closing. (c) Notwithstanding anything herein to the contrary, if any indemnification obligation is owing from Sellers to Buyer under Article VIII or Section 10.1 as of the date of any Earn-Out Payment and the Holdback Amount has been exhausted such amount shall be deducted from the Earn-Out Payment payable by Buyer to the Sellers ratably in accordance with the Sellers’ Pro Rata Share up to the Earn-Out Payment allocable to each such Seller. (d) Buyer shall provide its documentation in support of its calculation of the Earn-Out Payment to the Sellers at the time of its notice to the Sellers of its calculation delivered under Section 2.6(b), and the Sellers shall have thirty (30) days from the date of receipt of such Earn-Out Payment or such notice, as the case may be, to deliver written notice of its objections to the calculation of the Earn-Out Payment, specifying in reasonable detail the basis for the objections. If Sellers do not timely object, Buyer’s calculation of the Earn-Out Payment shall be binding and conclusive. If the Sellers object on a timely basis, the calculation of the Earn-Out Payment shall not be binding and conclusive, and Buyer and the Sellers shall negotiate in good faith to resolve the Sellers’ objections. If Buyer and Sellers resolve such objections, the amount they agree upon shall be final and binding, but if the objections cannot be resolved by such negotiation within thirty (30) days after Buyer’s receipt of the Sellers’ objections, Buyer and Sellers shall cause the calculation of the Earn-Out Payment, and all documents related thereto, to be submitted to the Independent Accountant and the procedures, timelines and expense allocations set forth in Section 2.5 with respect to the resolution of the Purchase Price as of the Closing Date shall be followed to obtain final resolution of such Earn-Out Payment. -22- 40733748.21
![slide35](https://www.sec.gov/Archives/edgar/data/850141/000162828019002351/exhibit1012bcgpurchaseag035.jpg)
Law and the terms of such Benefit Plan. The Company and each ERISA Affiliate have timely made all contributions, premiums and other payments required to be made with respect to such Benefit Plan on or before their due dates and, if not yet due, such items have been properly reflected or accrued on the Company’s financial statements to the extent required. No circumstances exist that would result in a liability to the Company (whether direct or indirect) under Title IV of ERISA with respect to any defined benefit pension plan that is or has been sponsored, maintained, or contributed to by the Company or any of its ERISA Affiliates. None of the Company or any of its ERISA Affiliates has (or has ever had) any liability with respect to any (i) “multiemployer plan,” as defined in Section 3(37) of ERISA, (ii) “multiple employer plan,” as described in Section 413(c) of the Code, (iii) “multiple employer welfare arrangement,” as defined in Section 3(40) of ERISA, (iv) “voluntary employees’ beneficiary association,” as defined in Section 501(c)(9) of the Code, or (v) a Benefit Plan covered by Title IV of ERISA. Each Benefit Plan that is a “nonqualified deferred compensation plan” within the meaning of Section 409A(d)(1) of the Code and that is subject to Section 409A of the Code is set forth in Section 3.9(b) of the Seller Disclosure Schedule and, except as set forth in Section 3.9(b) of the Seller Disclosure Schedule, has been operated in compliance in all respects with Section 409A of the Code and the final regulations and other applicable guidance issued thereunder. The Company has not paid and will not pay in connection with the consummation of the transactions contemplated by this Agreement compensation to any current or former employee or independent contractor of the Company pursuant to a Benefit Plan in a manner that would reasonably be expected to cause compensation paid under such plan to become subject to the Tax imposed by Section 409A(a)(1)(B) or 409A(b)(5) of the Code. (c) Each Benefit Plan that is intended to qualify under Section 401(a) of the Code, and each amendment thereto, is the subject of a favorable determination letter (or opinion letter, if applicable) from the IRS as to its qualification under the Code, and, to the Knowledge of Seller Parties, no circumstances exist that would reasonably be expected to adversely affect the validity of an Benefit Plan’s tax-qualification. All amendments and actions required to bring each Benefit Plan into material conformity with the applicable provisions of ERISA, the Code and other Law have been made or taken, except to the extent such amendments or actions are not required by Law to be made or taken until after the Closing Date. (d) Neither the execution of this Agreement nor the consummation of the transactions contemplated hereby will (either alone or together with any other event) entitle any Employee and/or Seller to severance, retention, change of control or other similar pay or benefits under, or accelerate the time of payment or trigger any payment or funding (through a grantor trust or otherwise) of compensation or benefits under, or increase the amount payable or trigger any other material obligation pursuant to, any Benefit Plan. Neither the Company nor BCGS has made any payment which constitutes an “excess parachute payment” within the meaning of Code §280(G), and no payment by the Company or BCGS required to be made under any written or oral agreement will, if made, constitute an “excess parachute payment” within the meaning of Code §280(G). Neither the execution of this Agreement nor the consummation of the transactions contemplated hereby will (either alone or together with any other event) result in any payment that could constitute an “excess parachute payment” within the meaning of Section 280G of the Code. (e) Except as set forth in Section 3.9(e) of the Seller Disclosure Schedule, neither the Company nor BCGS has any obligations for post-termination welfare or retirement benefits other than coverage mandated by applicable Law. Neither the Company nor BCGS -31- 40733748.21
![slide36](https://www.sec.gov/Archives/edgar/data/850141/000162828019002351/exhibit1012bcgpurchaseag036.jpg)
thereof has any obligation or commitment to adopt or approve any plan, arrangement or other scheme that will become a Benefit Plan, or, except where required by Law, any amendment to any Benefit Plan. No proposal or commitment has been communicated to any Continuing Employee regarding the introduction, increase or improvement of any Benefit Plan. Neither the Company nor BCGS has made any loan or advance, or provided any other form of financial assistance to any Employee or Seller that is still outstanding as of the Closing. Neither the Company nor BCGS has any defined benefit plan. (f) Except for accruals disclosed on the latest balance sheet, the Company and BCGS do not have any liabilities (i) for any bonus payments to any employee, manager, director, officer or independent contractor (or any former employee, manager, director, officer or independent contractor), (ii) for any workers’ compensation benefits which have or, to the Knowledge of Seller Parties, may become payable as a result of events prior to Closing, (iii) for any matching or other employer contributions to any 401(k) plan, (iv) to any employee, director or independent contractor (or any former employee, director or independent contractor) related to compensation or for benefits accrued prior to Closing under any Benefit Plan (including with respect to any accrued but unused or unpaid vacation, sick time or other paid time off), or (v) to any employee, manager, director, officer or independent contractor arising out of any acts or omissions by the Sellers or the Company or BCGS prior to the Closing. (g) Section 3.9(g) of the Seller Disclosure Schedule lists each Employee as of the date of this Agreement and as updated no later than five (5) days before the Closing Date, and for each such Employee, (i) the individual’s title or position (including whether full or part time and whether hourly, salaried, or commissioned), (ii) the individual’s job location, (iii) the individual’s date of hire, (iv) the individual’s current base salary or hourly wages and base salary or hourly wages for the last three (3) completed fiscal years, and (v) for the last three (3) completed fiscal years, the individual’s annual incentive and bonus compensation paid and the target incentive compensation for the current year (with each form of incentive compensation separately listed and including any commissions). Section 3.9(g) of the Seller Disclosure Schedule also lists all individuals providing services to the Company or otherwise with respect to the Company Business of more than five (5) hours per month as consultants or other independent contractors. (h) Section 3.9(h) of the Seller Disclosure Schedule lists each written (i) employment agreement and offer letter with any Employee; (ii) personal service contracts for individuals who perform services for the Company or BCGS in the capacity of an independent contractor; and (iii) non-compete, non-solicit, confidentiality or proprietary rights agreements with current or former Employees or independent contractors of the Company or BCGS, which with respect to clauses (i), (ii) and (iii) are currently in effect, and true and complete copies of all such agreements referred to in clauses (i), (ii) and (iii) above (and any amendments thereto) have been furnished or made available to Buyer, and, with respect to the type of agreements set forth in clauses (i) and (ii) above, neither the Company nor BCGS is a party to any such oral agreements which cannot be terminated at will by the Company or BCGS without penalty or any continuing obligations thereunder. Except as set forth on Section 3.9(h) of the Seller Disclosure Schedule, to the Knowledge of Seller Parties, no Employee or independent contractor of the Company or BCGS is a party to, or is otherwise bound by, any agreement or arrangement, including any confidentiality, noncompetition, or proprietary rights agreement, between such Employee or independent contractor, as the case may be, and any other Person, in each case, that (x) limits the -32- 40733748.21
![slide38](https://www.sec.gov/Archives/edgar/data/850141/000162828019002351/exhibit1012bcgpurchaseag038.jpg)
unclaimed property (if required for any Tax Return), and material local business Tax Returns filed with respect to the Company and BCGS (together with all examination reports and statements of deficiencies assessed against or agreed to by the Company or BCGS) with respect to any taxable period ending on or after December 31, 2013. All such Tax Returns since December 31, 2015, have been delivered to Buyer. (b) (i) Each of the Company and BCGS has properly and timely filed all Tax Returns required to be filed by it, all of which are correct and complete in all material respects and were prepared in compliance with all applicable Laws; (ii) each of the Company and BCGS has paid all Taxes required to be paid by it (whether or not shown on a Tax Return); (iii) no audit of the Company or BCGS by any Governmental Authority has been conducted, is currently pending or, to the Knowledge of the Seller Parties, is threatened, and no notice of any proposed audit, or of any Tax deficiency or adjustment, has been received by the Company or BCGS; (iv) there are no agreements or waivers currently in effect that provide for an extension of time for the assessment of any Tax against the Company or BCGS; (v) the Financial Statements fully accrue all actual and contingent liabilities for Taxes with respect to all periods through the dates thereof in accordance with Applicable Accounting Principles; (vi) since the date of the Quarterly Financial Statements, neither the Company nor BCGS has incurred any liabilities for Taxes except in the Ordinary Course of Business; (vii) no Action is pending or has been threatened, and no claim has been asserted against or with respect to the Company or BCGS in respect of any Tax; and (viii) no claim has been made by a Governmental Authority in a jurisdiction where a Tax Return is not filed by or on behalf of the Company or BCGS that the Company or BCGS is subject to Tax in that jurisdiction. (c) Neither the Company nor BCGS has participated in any transaction that could give rise to a disclosure obligation as a “reportable transaction” under Section 6111 of the Code and the Treasury Regulations thereunder or any similar provision under other similar applicable Laws. (d) Neither the Company nor BCGS is, nor has it ever been, a United States real property holding corporation within the meaning of Section 897(c)(2) of the Code during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code. No Seller Party is a “foreign person” as such term is defined in Section 1445 of the Code. (e) Neither the Company nor BCGS has ever been either the “distributing corporation” (within the meaning of Section 355(a)(1) of the Code) or the “controlled corporation” (within the meaning of Section 355(a)(1) of the Code) in a distribution that is described, or purported to be described, in Section 355 of the Code. Within the last five years, neither the Company nor BCGS has been a party to a “reorganization” as that term is defined in Section 368 of the Code. (f) Each of the Company and BCGS has materially complied with the provisions of the Code relating to the withholding and payment of Taxes, including, without limitation, the withholding and reporting requirements under Code sections 1441 through 1464, 3401 through 3406, and 6041 through 6049, as well as similar provisions under any other applicable Laws, and has, within the time and in the manner prescribed by Law, withheld from employee wages and paid over to the proper Governmental Authority all amounts required. Each -34- 40733748.21
![slide40](https://www.sec.gov/Archives/edgar/data/850141/000162828019002351/exhibit1012bcgpurchaseag040.jpg)
BCGS has at any time since December 31, 2015 (i) received any written notice from any Governmental Authority regarding any actual or alleged material violation of, or failure to comply with any applicable Law or (ii) to the Knowledge of Seller Parties, been placed under investigation with respect to any material violation of applicable Law. The Company and BCGS has made available to the Buyer true and correct copies of all reports or other written correspondence between the Company or BCGS and any Governmental Authority or any Person acting on behalf of a Governmental Authority since December 31, 2015 relating to any unclaimed property or escheat matters and the Company and BCGS has complied with all unclaimed property or escheat obligations. Neither the Company nor BCGS underwrites insurance policies, collects premiums or settles any insurance claims. (b) The Company and BCGS hold all material governmental qualifications, registrations, filings, licenses, permits, approvals or authorizations necessary to conduct the Company Business and to own or use its assets and properties associated with the Company Business, as the Company Business, assets and properties are conducted, owned and used by the Company and BCGS (collectively, the “Permits”). All material Permits are valid and in full force and effect. Neither the Company nor BCGS is the subject of any pending or, to the Knowledge of Seller Parties, threatened Action seeking the revocation, suspension, termination, modification or impairment of any material Permit. There is no Governmental Order that would be binding on the Company or BCGS following the Closing that prohibits or restricts the payment of shareholder dividends or other shareholder distributions by the Company or BCGS. The Company and BCGS hold all applicable insurance licenses they are required to hold to conduct the Company Business, including third party administrator, insurance agency or producer licenses, under any applicable state Law. (c) Except as qualified herein, to the Knowledge of Seller Parties, each of the Company and BCGS and their Affiliates, and to the Knowledge of Seller Parties, the Producers, are and have been in connection with the Company Business, in material compliance in with applicable Laws regulating the marketing and sale of securities, life insurance policies and annuity contracts, regulating advertisements, requiring mandatory disclosure of information relating to the securities, policy information, requiring employment of standards to determine if the purchase of a policy or contract is suitable for an applicant, prohibiting the use of unfair methods of competition and deceptive acts or practices and regulating replacement transactions. For purposes of this Section 3.11(c), (i) “advertisement” means any material designed to create public interest in life insurance policies and annuity contracts or in an insurer, or in an insurance producer, or to induce the public to purchase, increase, modify, reinstate, borrow on, surrender, replace or retain such a policy or contract, and (ii) “replacement transaction” means a transaction in which a new life insurance policy or annuity contract is to be purchased by a prospective insured and the proposing producer knows or should know that one or more existing life insurance policies or annuity contracts will lapse, or will be forfeited, surrendered, reduced in value or pledged as collateral. (d) The Company and BCGS are in material compliance with applicable anti- money laundering Laws. The Company and BCGS have established and maintain an anti-money laundering program, which includes written internal policies, procedures and controls, including a means for monitoring and identifying suspicious activity, the designation of an anti-money laundering compliance officer, an ongoing employee training program, an independent audit -36- 40733748.21
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Company or BCGS as a direct result of the transactions contemplated by this Agreement except where such abandonment, termination, or revocation would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect. Except as set forth in Section 3.13(c) of the Seller Disclosure Schedules, the Company and BCGS are in compliance in all material respects with the terms of the license or purchase agreements governing any Computer Software owned by a third party and licensed to the Company or BCGS. Section 3.13(c) of the Seller Disclosure Schedule sets forth a complete and correct list of all Owned Intellectual Property, Computer Software or Technology used in the conduct of the Company Business that is owned by Company or BCGS that has been licensed to a third party, and correct and complete copies of all licenses or other agreements relating to such Owned Intellectual Property, Computer Software or Technology have heretofore been delivered by Sellers to Buyer. (d) Except as set forth in Section 3.13(d) of the Seller Disclosure Schedule, neither the Company nor BCGS has received any written notice of any infringement or misappropriation of the rights of any third party that has not been resolved with respect to any Intellectual Property, Computer Software or Technology. No use by the Company or BCGS of any Intellectual Property, Computer Software or Technology infringes or misappropriates any Intellectual Property or technology right of any third party in any material respect related to the conduct of the Company Business. To the Knowledge of Seller Parties, no Person is infringing or misappropriating any material Owned Intellectual Property or Computer Software. (e) All Persons who have materially contributed to the creation, invention or development of the Owned Intellectual Property and Computer Software (other than “off-the- shelf” or software that is available generally through retail distribution networks or is subject to “shrink-wrap” or “click wrap” license agreements or retail software) have assigned to Company or BCGS all of their rights therein to the extent such rights have not been vested in Company or BCGS by operation of applicable Law. (f) The Company and BCGS have used commercially reasonable efforts to maintain the confidentiality and secrecy of the Trade Secrets and material proprietary information relating to the Company Business. Except as set forth in Section 3.13(f) of the Seller Disclosure Schedule, all employees, consultants and contractors who have been given access to such Trade Secrets or material proprietary information for the performance of their duties for the Company or BCGS have signed agreements (or are subject to an enforceable duty of confidentiality) that adequately protect the interests of the Company and BCGS in such Trade Secrets or other material proprietary information used in the Company Business. (g) The Technology owned by the Company or BCGS (i) has been reasonably maintained, (ii) has been operated in material compliance with all applicable manufacturer specifications, and (iii) is in good working condition to perform all material information technology operations necessary for the conduct of the Company Business. The Company has taken or has caused to be taken commercially reasonable steps to provide for the backup and recovery of the data critical to the conduct of the Company Business as currently conducted. Since December 31, 2015, neither the Company nor BCGS has experienced an unplanned interruption of operation of the Technology or Computer Software that had a material impact on the Company Business or any Plan. Except as set forth in Section 3.13(g) of the Seller Disclosure Schedule, the Computer Software (other than “off-the-shelf” or software that is available generally through retail -38- 40733748.21
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the Company Business requires such registration, licensing or qualification. BCGS is in compliance in all material respects with the state securities laws governing the operations of broker-dealers in each state in which it operates and applicable FINRA and MSRB requirements. BCGS is duly registered as an investment adviser under the Investment Advisers Act. BCGS is duly registered, licensed or qualified as an investment adviser in each state or any other jurisdiction where the conduct of the Company Business requires such registration, licensing or qualification, and BCGS is in good standing under the rules and regulations thereof. BCGS is in compliance in all material respects with federal and state securities Laws. (b) Section 3.15(b) of the Seller Disclosure Schedules contains a true, complete and correct list of all Registered Persons, along with the following information with respect to each Registered Person: (i) the Registered Person’s employment status with the Company or BCGS, (ii) the date of the Registered Person’s Individual Registered Representative Agreement, (iii) the jurisdiction(s) in which the Registered Person is registered as a “registered representative;” and (iv) the jurisdiction(s) in which the Registered Person is registered as an investment adviser representative. Each of the Registered Persons is, and has been since such Registered Person became associated with BCGS, duly registered as a “registered representative” with FINRA and in all applicable states, duly licensed or registered as an investment adviser representative in all applicable states, and is in material compliance with the applicable Laws having jurisdiction over each such Registered Person, and such registrations are and have been in full force and effect. The Company has delivered or made available to Buyer true, correct and complete copies of each Individual Registered Representative Agreement, and each Individual Registered Representative Agreement is in full force and effect and is valid, binding and enforceable upon the Company, BCGS and the Registered Person that is a party thereto and will continue to be following Closing, and none of the Company, BCGS nor the Registered Person that is a party thereto is in material default under, and no event has occurred which, with the passage of time or giving of notice or both, would result in the Company, BCGS or the Registered Person that is a party thereto being in material default under, any of the terms of each Individual Registered Representative Agreement. (c) Except as set forth in Section 3.15(c) of the Seller Disclosure Schedule, none of the Company, BCGS, or any of their respective officers, managers, directors, Employees, or, solely with respect to services relating to the Company Business, independent contractors are or have been (i) the subject of any investigations or disciplinary proceedings or orders of the SEC, FINRA or any other Governmental Authority arising under applicable Law and no such disciplinary proceeding or order is pending or, to the Knowledge of Seller Parties, threatened, nor is any basis known to the Sellers for any such action by any Governmental Authority; (ii) permanently enjoined by the order, judgment or decree of any court or other Governmental Authority from engaging in or continuing any conduct or practice in connection with any activity; (iii) convicted of any crime or subject to any disqualification which would be the basis for any denial, suspension, revocation or limitation of any necessary registration (including, with respect to the Registered Person’s status as a “registered representative” or investment adviser representative), or for any limitation on its activities, in connection with the Company Business; and (iv) subject to or involved in any orders, disqualifications, penalties or special restrictions relating to or affecting its services related to the Company Business. (d) Neither BCGS nor any of the Persons associated with BCGS, as enumerated under Section 506 of Regulation D under the Securities Act, are subject to any of the disqualifying -40- 40733748.21
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and BCGS to, (x) conduct the Company Business only in the Ordinary Course of Business, (y) use commercially reasonable efforts to preserve intact the business organizations and goodwill of the Company Business and maintain material relationships with Customers, Funds, Employees, suppliers, service providers and other third parties having business dealings with the Company Business and (z) not do any of the following: (a) declare, set aside or pay any non-cash dividends, or make any other non- cash distributions, in respect of the Company Shares or BCGS Shares; (b) repurchase, redeem, repay or otherwise acquire any outstanding Company Shares or BCGS Shares; (c) transfer, issue, sell or dispose of any Company Shares or BCGS Shares, or grant options, warrants, calls or other rights to purchase or otherwise encumber or acquire any capital stock or other interest in the Company or BCGS; (d) effect any recapitalization, reclassification, stock split or similar change in the capitalization of the Company or BCGS; (e) amend the Organizational Documents of the Company, BCGS or either Trust, adopt or enter into any plan of liquidation, dissolution, merger, reorganization or similar transaction of the Company or BCGS, or allow the Company or BCGS to acquire any other Person or substantially all of the assets of any other Person or enter into a new line of business; (f) make any change in the accounting, sales, marketing or administration policies, practices or principles of the Company or BCGS in effect on the date hereof (other than any change required by applicable Law or GAAP); (g) (x) purchase, sell, lease, exchange, transfer, encumber or otherwise dispose of or allow to lapse or acquire any property or assets of the Company, BCGS or the Company Business (including Permits and Intellectual Property rights) or (y) make any capital expenditure with respect to the Company or BCGS; (h) incur any Indebtedness, or allow the Company or BCGS to (x) assume, grant, guarantee or endorse, or otherwise as an accommodation become responsible for, the obligations or Indebtedness of any Person, or (y) make any loans or advances or investments in capital; (i) except in the Ordinary Course of Business, enter into, amend, terminate, renew or extend any Material Contract; (j) (x) promise or grant any increase in the compensation or benefits of any Employee, except as required by Law or by any Benefit Plan or contract in existence on the date hereof, or (y) enter into, or amend in any respect, any employment contract (except in the Ordinary Course of Business), agreement for personal services or Benefit Plan; (k) hire, terminate or accept the resignation of any key officer or Employee, other than for cause; -45- 40733748.21
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(b) Employees on Leave. Notwithstanding anything in this Agreement to the contrary, any Employee who is on long-term, short-term or other authorized leave as of the close of business on the Closing Date will continue to be covered by the leave plan in which he is then participating and will not be a Continued Employee unless and until he advises Company that he wants to return to full-time employment with Company within the six months immediately following the Closing. In making that decision, Buyer will, and will cause Company to, comply with applicable Law as to those employees of Company on leave or on layoff on the Closing Date, including re-employment. (c) Company 401(k) Plan. Effective no later than immediately before the Closing Date and contingent upon the Closing, the Company shall take all actions necessary and appropriate to terminate the Benefit Consultants Group 401(k) Plan (the “Company 401(k) Plan”) in accordance with applicable Law and to amend the Company 401(k) Plan to remove pre- requisites for eligible participants to receive and fully vest in all matching and non-elective employer contributions on the Closing Date, which contributions shall be in an amount consistent with past practice and as set forth on Section 6.3(c) of the Seller Disclosure Schedule. No later than the Closing Date, the Company will contribute to the Company 401(k) Plan all employer and employee contributions with respect to the period before the Closing as set forth on Section 6.1(c) of the Seller Disclosure Schedule. The Company will be responsible for all liabilities with respect to the Company 401(k) Plan whether arising before or after the Closing. Buyer will cause the Continued Employees who were participants in Company’s 401(k) plan in which the Continued Employees participate on the Closing Date to be automatically enrolled in a 401(k) plan sponsored by the Buyer or one of its Affiliates (the “Buyer 401(k) Plan”), which will occur as soon as administratively practical. Following the Closing, Buyer also agrees to provide each Continued Employee an opportunity to make a direct rollover to the Buyer 401(k) Plan of an eligible distribution from the Company 401(k) Plan that includes promissory notes reflecting such Continued Employee’s then outstanding participant loans under the Company 401(k) Plan. (d) Company Benefit Plans. (i) Except as otherwise provided herein or set forth in Section 6.1(c) and (e), if the Closing Date occurs in calendar year 2018, from and after the Closing Date through December 31, 2018, Buyer shall cause the Company to continue to cover the Continuing Employees under the Benefit Plans on substantially the same terms and conditions as in effect immediately prior to Closing. Notwithstanding the foregoing, except as otherwise provided in Section 6.1(c) and (e), Buyer shall cause the Company to terminate the Benefit Plans as of December 31, 2018, and the Continued Employees shall, effective as of January 1, 2019 (the “Eligibility Date”), to the extent otherwise permitted by the terms of the applicable plans, be immediately eligible to participate in the employee benefit plans, arrangements and programs maintained by Buyer and its Affiliates in which similarly situated employees of Buyer and its Affiliates are generally eligible to participate. (ii) If the Closing Date occurs in calendar year 2019, except as otherwise provided herein or set forth in Section 6.1(c) and (e), Seller shall cause the Company to continue to cover the Continuing Employees under the Benefit Plans through the Closing Date. Notwithstanding the foregoing, except as -53- 40733748.21
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otherwise provided in Section 6.1(c) and (e), upon written request of the Buyer, Seller shall cause the Company to terminate the Benefit Plans as of the Closing Date and the Continued Employees shall, effective as of the Closing Date (the “Eligibility Date”), to the extent otherwise permitted by the terms of the applicable plans, be immediately eligible to participate in the employee benefit plans, arrangements and programs maintained by Buyer and its Affiliates in which similarly situated employees of Buyer and its Affiliates are generally eligible to participate. (iii) With respect to severance and vacation benefits and any employee benefit plan maintained by Buyer or an Affiliate of Buyer for the benefit of any Continued Employee, effective as of the Eligibility Date, Buyer shall, or shall cause its Affiliate to, recognize all service with the Company of the Continued Employee, as if such service were with Buyer, for vesting, eligibility and severance and vacation accrual rate purposes (but not for any purposes under any defined benefit plan or eligibility under any retiree life or medical plan), provided, however, such service shall not be recognized to the extent that such recognition would result in a duplication of benefits. (iv) The Company shall cause the Phantom Stock Plan and Salary Continuation Agreement to be terminated effective as of no later than immediately prior to Closing. (e) Accrued Compensation. Prior to, or as soon as reasonably practicable following Closing, the Company will pay its employees or accrue on its financial statements all accrued compensation through the Closing Date, including wages, business expense, and other reimbursements and all severance payments for all of Company’s employees who are not Continued Employees, and, to the extent required by Law, obligations for accrued but unpaid vacation and other paid time off. (f) COBRA Coverage. Sellers will reimburse the Company or Buyer for all costs of any required continuation coverage pursuant to Code §4980B (“COBRA”) for the Company employees who are not Continued Employees and their “qualified beneficiaries” (as defined in Code §4980B(g)(1)) with respect to any “qualifying event” (as defined in Code §4980B(f)(3)) that occurred before the Closing Date. Buyers will provide, or cause the Company to provide, COBRA coverage for the Continued Employees and their qualified beneficiaries with respect to “qualifying events” occurring on or after the Closing Date. (g) Workers Compensation. The Sellers will reimburse Company or Buyer for all the cost of workers’ compensation claims, both medical and disability, for Company employees that relate to loss events occurring before the Closing Date. Buyer will be, or will cause Company to be, responsible for all workers’ compensation claims for Continued Employees that relate to loss events occurring on or after the Closing Date. (h) WARN Act. Neither the Sellers, on the one hand, nor Buyer, on the other, shall cause the Company or its Affiliates to take any actions that will cause liability for the other or require Buyer or Sellers to give notice or otherwise comply with the Workers Adjustment and -54- 40733748.21
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Retraining Notification Act or any similar state or local law (the “WARN Act”). The parties hereto shall cooperate to effectuate this Section 6.1(h). (i) Confidentiality. From and after the date hereof, except as otherwise provided herein, the parties hereto will use commercially reasonable efforts to cause all Employees and Continuing Employees to execute and deliver an agreement pursuant to which such Employee (a) acknowledges that the Confidential Information of the Company and its Affiliates is owned by the Company or Buyer (as applicable), is secret, is the subject of reasonable efforts by the Company and Buyer (as applicable) to keep it secret, and has value because of its secrecy, (b) agrees to hold in trust and strictest confidence all such Confidential Information and to use all reasonable measures to protect such Confidential Information from disclosure, and to make no use of such Confidential Information, except in connection with his or her employment with the Company or its Affiliates, and (c) agrees not to compete with the business of the Buyer or its Affiliates (including the Company and BCGS) or solicit customers of the Buyer or its Affiliates (including the Company and BCGS). (j) No Third Party Beneficiaries. Each provision of this Section 6.1 is included for the sole benefit of Buyer and the Company. Without limiting the foregoing, this Section 6.1: (i) does not create or confer any express or implied third party beneficiary or other rights on any individual or any legal representative of any individual (including any current or former employee, any participant in any employee benefit plan, or any dependent or beneficiary of any of the foregoing, any alternative payee or dependent or beneficiary of any of the foregoing and further including collective bargaining agents or representatives); (ii) without limiting or being limited by the foregoing clause (i), does not create or confer any rights to any of the foregoing individuals or other persons described in clause (i) to either (A) continued employment with the Company or employment with Buyer or any Affiliate of either of them (and thus does not constitute or create an employment agreement) or (B) participation in any employee benefit plan, program, agreement or arrangement of the Company or Buyer or any Affiliate of either of them; and (iii) will not be construed either (A) to establish, amend, or modify any employee benefit plan or any other plan, program, agreement or arrangement of Company or Buyer or any Affiliate of either of them or (B) to alter or limit the ability of Buyer or the Company or any Affiliate of either of them to amend, modify or terminate any employee benefit plan or any other plan, program, agreement or arrangement of Buyer or the Company or any Affiliate of either of them. ARTICLE VII CONDITIONS PRECEDENT Section 7.1 Conditions to Each Party’s Obligations. The respective obligations of the parties hereto to consummate the Closing shall be subject to the satisfaction or waiver at or prior to the Closing Date of the following conditions: (a) No Injunctions or Restraints; Illegality. (i) There shall not be in effect any Governmental Order, injunction (whether temporary, preliminary or permanent) or other legal restraint or prohibition issued by any Governmental Authority of competent jurisdiction that has the effect of making the transactions contemplated by this Agreement illegal or otherwise prohibiting consummation thereof, and (ii) there shall not be any Law or Governmental Order -55- 40733748.21
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(ii) any breach of the representations and warranties of the Seller Parties constituting Seller Fundamental Representations or contained in Section 3.10 (Taxes), (iii) any breach of the covenants or agreements of the Seller Parties contained in this Agreement or any certificates or documents delivered in connection with this Agreement, (iv) any Action set forth or required to be set forth on Section 3.12 of the Seller Disclosure Schedule and any additional Action resulting from or relating to the issues or matters giving rise to such Actions set forth or required to be set forth on Section 3.12 of the Seller Disclosure Schedule, (v) any Final Adjustment Amount owed to Buyer in excess of the Holdback Amount, (vi) Sellers’ share of any Transfer Tax under Section 8.1(g), (vii) any transfer of Company Shares prior to the date hereof, including the failure to notify or obtain approval of any Governmental Authority (including without limitation the filing of a Continuing Membership Application) in connection with such transfer, or (viii) without duplication, any indemnity obligation of the Sellers under Section 8.1(a). provided, however, that, except in the case of fraud, the Sellers shall not have any liability under Section 10.1(a)(i) unless the aggregate of all Losses for which the Sellers would, but for this proviso, be liable, exceeds on a cumulative basis an amount equal to $100,000 (the “Indemnification Deductible”), and then only to the extent of any such excess. In any event, except in the case of fraud by the Sellers, the maximum amount for which the Sellers shall be liable under Section 10.1(a)(i) shall not exceed $2,000,000 in the aggregate (the “Indemnification Cap”). (b) Subject to the Survival Period and the limitations set forth in this Article X, Buyer agrees to indemnify and hold harmless the Sellers, and their Affiliates and respective Representatives and each of their respective successors and assigns (collectively, the “Seller Indemnitees”) from and against all Losses (without duplication of recovery for the same Loss) to the extent arising from or related to: (i) any breach of the representations and warranties of Buyer contained in this Agreement or any documents or certifications delivered in connection with this Agreement (other than any representations and warranties constituting Buyer Fundamental Representations), (ii) any breach of the representations and warranties of Buyer constituting Buyer Fundamental Representations, -63- 40733748.21
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agreed in writing to the retention of the same counsel, (ii) the named parties to any such Third Party Claim (including any impleaded parties) include the Indemnifying Party and Indemnified Party and representation of both parties by the same counsel would, in the opinion of counsel to such Indemnified Party, be impermissible under the applicable code of professional responsibility due to actual or potential differing interests between the Indemnifying Party and Indemnified Party, including situations in which there are one or more legal defenses available to the Indemnified Party that are different from, or additional to, those available to the Indemnifying Party, or (iii) the Indemnifying Party fails to diligently pursue the Third Party Claim it has assumed, in which case the Indemnifying Party will bear such expense of the Indemnified Party. Any election by an Indemnifying Party to assume the defense of a Third Party Claim must be delivered by the Indemnifying Party to the Indemnified Party within thirty (30) Business Days after receipt of the Indemnified Party’s notice under Section 10.2(a), and failure on the part of the Indemnifying Party to send such notice within such thirty (30) Business Day period shall be deemed an election not to assume the defense of such Third Party Claim. If the Indemnifying Party elects to assume the defense of a Third Party Claim, then the Indemnified Party shall, and shall cause each of its Representatives and permitted assigns to, cooperate fully with the Indemnifying Party in the defense of any such Third Party Claim, which cooperation shall include designating a liaison counsel to whom the Indemnifying Party may direct notices and other communications, using commercially reasonable efforts to make witnesses available, and providing records and documents to the extent such witnesses, records and documents are relevant to the Third Party Claim. In the event that the Indemnifying Party does not assume the defense of a Third Party Claim within the thirty (30) Business Day period specified in this Section 10.2(b), the Indemnified Party may assume the defense and control of a Third Party Claim at the Indemnifying Party’s expense and may consent to a settlement of, or the entry of any judgment arising from, any Third Party Claim without the consent of the Indemnifying Party. The Indemnifying Party shall be authorized to consent to a settlement of, or the entry of any judgment arising from, any Third Party Claim as to which the Indemnifying Party has assumed the defense in accordance with the terms of this Section 10.2(b), without the consent of any Indemnified Party, but only to the extent that such settlement or entry of judgment: (i) provides solely for the payment of money that will be paid in full by the Indemnifying Party, and (ii) provides a complete release of, or dismissal with prejudice of claims against, any Indemnified Party potentially affected by such Third Party Claim from all matters that were asserted in connection with such claims. (c) The obligations to indemnify and hold harmless a party hereto in respect of a breach of representation, warranty or covenant will terminate on the applicable Survival Period termination date (as set forth in Section 9.1 or 9.2), unless, prior to such applicable termination date, an Indemnified Party has brought a claim for indemnification pursuant to Article VIII or Section 10.1 subject to the terms and conditions of this Article X by delivering a written notice (stating in reasonable detail the amount and nature of, and factual and legal basis for, any such claim for indemnification, and the provisions of this Agreement upon which such claim for indemnification is made) to the Indemnifying Party. If an Indemnified Party has made a proper claim for indemnification pursuant to Section 10.2 prior to such termination date, then such claim, if then unresolved, will not be extinguished by the passage of the deadlines set forth in Section 9.1 or Section 9.2. (d) Notwithstanding anything contained in this Agreement to the contrary, Losses of an Indemnified Party shall be determined without duplication of recovery for the same -65- 40733748.21
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Loss and shall be net of any insurance or amounts from other applicable sources of recovery actually recovered by the Indemnified Party with respect to such Loss, net of any actual costs, expenses or premiums incurred in connection with securing or obtaining such proceeds (such net amount, “Recovery Amounts”). Each applicable Indemnified Party shall use commercially reasonable efforts to recover from insurance policies or other applicable sources of recovery the maximum portion of any Losses of such Indemnified Party. If the applicable Indemnified Party shall have used commercially reasonable efforts to recover any amounts recoverable under insurance policies or other applicable sources of recovery and shall not have recovered the applicable Losses, the applicable Indemnifying Party shall be liable for the amount by which such Losses exceeds the Recovery Amounts (subject to the limitations contained in this Article X). If the applicable Indemnified Party fails to use commercially reasonable efforts to recover any amounts recoverable under insurance policies or other applicable sources of recovery, the applicable Indemnifying Party shall not be required to indemnify the applicable Indemnified Party for that portion of any Losses that could reasonably be expected to have been included in a Recovery Amount had the applicable Indemnified Party used such commercially reasonable efforts. Any related unreimbursed cost of recovery shall be included in Losses. In addition, any indemnification obligation of an Indemnifying Party shall be subject to and calculated in accordance with the provisions of Section 8.4. (e) The Indemnified Party shall use, and shall cause each of its Affiliates to use, commercially reasonable efforts to mitigate any Losses upon and after becoming aware of any facts, matters, failures or circumstances that would reasonably be expected to result in any Losses that are indemnifiable hereunder. (f) In the event of indemnification payment pursuant to this Article X by or on behalf of any Indemnifying Party to any Indemnified Party, such Indemnifying Party shall be subrogated to the rights of the Indemnified Party as against any third party in respect of the Loss to which the payment relates, provided, that until the Indemnified Party recovers full payment of its Loss, any and all claims of the Indemnifying Party against any such third party on account of said payment are hereby made expressly subordinated and subjected in right of payment to the Indemnified Party’s rights against such third party. Such Indemnified Party shall cooperate with such Indemnifying Party in a reasonable manner, and at the cost of such Indemnifying Party, in presenting any subrogated right, defense or claim. (g) In the event a claim or any action for indemnification under this Article X has been finally determined, the amount of such final determination shall be paid (i) if the Indemnified Party is a Buyer Indemnitee prior to the Closing Date, by the Seller Parties to the Indemnified Party on demand by Wire Transfer, (ii) if the Indemnified Party is a Buyer Indemnitee on or after the Closing Date, subject to Section 2.6(c), first by payment of such amounts from the Holdback Amount to the Indemnified Party, and if the Holdback Amount is insufficient to compensate Buyer Indemnitee for such amount, then by payment by Seller(s) to the Indemnified Party on demand by Wire Transfer, and (iii) if the Indemnified Party is a Seller Indemnitee, by Buyer to the Indemnified Party on demand by Wire Transfer. A claim or an action, and the liability for and amount of damages therefor, shall be deemed to be “finally determined” for purposes of this Article X when the parties to this Agreement have so determined by mutual agreement or, if disputed, when a final non-appealable Governmental Order has been entered into with respect to such claim or action. -66- 40733748.21
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Whenever used in this Agreement, reference to a particular gender shall include the masculine, feminine and neutral genders. Where this Agreement states that a party “shall,” “will” or “must” perform in some manner or otherwise act or omit to act, it means that the party is legally obligated to do so in accordance with this Agreement. All Exhibits and the Seller Disclosure Schedule and the Buyer Disclosure Schedule annexed hereto or referred to herein are hereby incorporated in and made a part of this Agreement as if set forth in full herein. Any capitalized term used in any Exhibit, Schedule, Annex or section or subsection of the Seller Disclosure Schedule or the Buyer Disclosure Schedule but not otherwise defined therein will have the meaning given to such term in this Agreement. Any reference to “days” means calendar days unless Business Days are expressly specified. If any action under this Agreement is required to be done or taken on a day that is not a Business Day, then such action shall be required to be done or taken not on such day but on the first succeeding Business Day thereafter. “Writing,” “written” and comparable terms refer to printing, typing and other means of reproducing words (including electronic media) in a visible form. References from or through any date mean, unless otherwise specified, from and including or through and including, respectively. This Agreement is to be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting or causing any instrument to be drafted. Any reference herein to any applicable Law, Contract (including this Agreement) or document, or any section thereof, shall, unless otherwise expressly provided, be a reference to such applicable Law, Contract, document or section as amended, modified or supplemented (including any successor section) and in effect from time to time. References to “$” or “dollars” are references to United States dollars. Section 12.4 Entire Agreement; Third-Party Beneficiaries. This Agreement and the documents and certificates delivered in connection with this Agreement constitute the entire agreement of the parties hereto with respect to the subject matter of this Agreement and supersede all prior agreements and undertakings, both written and oral, other than the Confidentiality Agreement to the extent not in conflict with this Agreement, between or on behalf of the Sellers and Buyer with respect to the subject matter of this Agreement. Except as provided in Section 5.6 with respect to D&O Indemnified Persons, and Article X with respect to Buyer Indemnitees and Seller Indemnitees, this Agreement is for the sole benefit of the parties to this Agreement and their permitted successors and assigns, and nothing in this Agreement, express or implied, is intended to or shall confer upon any other Person any legal or equitable right, benefit or remedy of any nature whatsoever under or by reason of this Agreement. Section 12.5 Governing Law. This Agreement shall be governed by, and construed in accordance with, the Laws of the State of Illinois, regardless of the Laws that might otherwise govern under applicable principles of conflicts of laws thereof. Section 12.6 Assignment. Neither this Agreement nor any of the rights, interests or obligations under this Agreement shall be assigned, in whole or in part, by operation of law or otherwise by any of the parties without the prior written consent of the other parties, and any such assignment that is not consented to shall be null and void. Subject to the preceding sentence, this Agreement shall be binding upon, inure to the benefit of, and be enforceable by, the parties and their respective successors and assigns. Section 12.7 Dispute Resolution; Enforcement. -70- 40733748.21
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(a) In the event of any dispute arising under this Agreement, prior to the commencement of litigation, a senior officer of Buyer and the Seller Parties shall attempt in good faith to resolve the dispute consistent with the terms of this Agreement. If they are unable to resolve the dispute in this manner within a reasonable period of time, the parties may pursue judicial remedies with respect to such dispute. (b) The parties agree that any action arising directly or indirectly out of this Agreement shall be litigated (1) if such action is brought by any Seller against Buyer or its Affiliates, only in the United States District Court for the Central District of Illinois and (2) if such action is brought by Buyer, its successors or assigns or its Affiliates against any Seller, only in the United States District Court for the District of New Jersey. Each party hereby irrevocably and unconditionally submits to the jurisdiction of the District Court specified above (the “Selected Court”) for purposes of enforcing this Agreement or determining any claim arising from or related to the transactions contemplated by this Agreement. In any such action, suit or other proceeding, each party hereto irrevocably and unconditionally waives and agrees not to assert by way of motion, as a defense or otherwise any claim that it is not subject to the jurisdiction of the Selected Court, that such action, suit or other proceeding is not subject to the jurisdiction of the Selected Court, that such action, suit or other proceeding is brought in an inconvenient forum or that the venue of such action, suit or other proceeding is improper. The parties hereto agree that any process or other paper to be served in connection with any action or proceeding under this Agreement shall, if delivered, sent or mailed in accordance with Section 12.2, constitute good, proper and sufficient service thereof. Each party hereto also agrees that any final and unappealable judgment against a party hereto in connection with any action, suit or other proceeding shall be conclusive and binding on such party and that such award or judgment may be enforced in any court of competent jurisdiction, either within or outside of the United States. A certified or exemplified copy of such award or judgment shall be conclusive evidence of the fact and amount of such award or judgment. Notwithstanding anything contained herein to the contrary or any waivable provision of Law, in the event of litigation among the parties, any prejudgment interest applied shall be at the Interest Rate. Section 12.8 Severability; Amendment and Waiver. (a) Whenever possible, each provision or portion of any provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable Law, but if any provision or portion of any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable Law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or portion of any provision in such jurisdiction so long as the economic or legal substance of the transactions contemplated by this Agreement is not affected in any manner adverse to any party. Upon such determination that any provision is invalid, illegal or unenforceable, the parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated by this Agreement be consummated as originally contemplated to the greatest extent possible. (b) This Agreement may be amended, and the terms hereof may be waived, only by a written instrument signed by each of the parties or, in the case of a waiver, by the party waiving compliance. -71- 40733748.21
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IN WITNESS WHEREOF, the parties have caused this Agreement to be signed by their respective officers thereunto duly authorized, all as of the date first written above. XXXXXX MA ATORS CORPORAT By , Na e: M, ck 2tArati- XX X. e: c est +- i G g: 0 Signature Page to Stock Purchase Agreement
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IN WITNESS WHEREOF, the parties have caused this Agreement to be signed by their respective officers thereunto duly authorized, all as of the date first written above. XXXXXX XXXXXXXX XXXXXXXX FAMILY TRUST F/B/O XXXX XXXXXXXX By Name: Xxxx Xxxxxx Title: Trustee for Xxxxxxxx Family Trust F/B/O Xxxx Xxxxxxxx XXXXXXXX FAMILY TRUST F/B/O XXXX AND XXXXX XXXXXX By Name: Xxxx Xxxxxxxx Title: Trustee for Xxxxxxxx Family Trust F/B/O Xxxx and Xxxxx Xxxxxx XXXX XXXXX BENEFITS CONSULTAN S GROUP, INC. By Nam‘: Jorg' Arr yo Title: President Signature Page to Stock Purchase Agreement
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IN WITNESS WHEREOF, the parties have caused this Agreement to be signed by their respective officers thereunto duly authorized, all as of the date first written above. XXXXXX XXXXXXXX XXXXXXXX FAMILY TRUST F/B/0 XXXX XXXXXXXX By / ame: ✓ Title: XXXXXXXX FAMILY TRUST F/B/0 XXXX AND XXXXX XXXXXX By Name: Title: XXXX XXXXX BENEFITS CONSULTANTS GROUP, INC. By Name: Title: Signature Page to Stock Purchase Agreement
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Exhibit A Certificates of Trust [Executed at signing] A-1 40733748.21
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Exhibit B Indebtedness Payoff Amount As of September 30, 2018 FirsTrust Line of Credit Account #10172-504870 $ 497,678.25 FirsTrust Term Loan Acct 8026 279,268.56 FirsTrust Term Loan Acct 8027 242,288.80 FirsTrust Letter of credit Acct 0832 (Landlord holds letter -0- drawdowns) - Salary Continuation Agreement (Xxxxxx Xxxxxxxx) 5,000,000.00 Phantom Stock Plan (Xxxxxxx Xxxxxxx)1 629,816.50 Sokolic Release Consideration 40,000.00 Note Payable - Xxxx Xxxxx 44,000.00 Note Payable - Xxxxx Xxxxxx 44,000.00 Note Payable - Xxxx Xxxxxxxx 44,000.00 $ 6,821,052.61 1 As of October 30, 2018 B-1 40733748.21
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Exhibit C Non-Compete and Non-Disclosure Agreement [See attached.] C-1 40733748.21
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NON-COMPETITION, NON-SOLICITATION AND NON-DISCLOSURE AGREEMENT This Non-Competition, Non-Solicitation and Non-Disclosure Agreement (this “Agreement”) is entered into as of the ____ day of ____________, 2018, by and between Xxxxxx Xxxx Educators Corporation, a Delaware corporation (“Buyer”), and [Name of Principal]1 (the “Principal”). WHEREAS, in connection with that certain Stock Purchase Agreement, dated as of____________ , 2018, by and among Buyer, Xxxxxx Xxxxxxxx, the Xxxxxxxx Family Irrevocable Trust f/b/o Xxxx Xxxxxxxx, the Xxxxxxxx Family Irrevocable Trust f/b/o Xxxx and Xxxxx Xxxxxx, Xxxx Xxxxxxxxx Xxxxx, and Benefit Consultants Group, Inc. (the “Company”) (the “Stock Purchase Agreement”), Buyer is acquiring all of the equity of the Company; WHEREAS, the Principal is currently an employee of the Company; WHEREAS, Buyer or one of its Affiliates wishes to employ the Principal with respect to the continued business and operations of the Company and its Subsidiaries following the Closing and the Principal agrees to continue in the employ of Buyer or its Affiliate following the Closing; and WHEREAS, the Principal acknowledges that the execution and delivery of this Agreement is a condition to Buyer’s obligation to consummate the transactions pursuant to the Stock Purchase Agreement and that Buyer is relying on the Principal’s entering into this Agreement in consummating such transactions. NOW, THEREFORE, in consideration of the premises and the mutual agreements contained in this Agreement and the Stock Purchase Agreement, the parties agree as follows: 1. Defined Terms. All capitalized terms not expressly defined in this Agreement shall have the respective meanings ascribed to them in the Stock Purchase Agreement. 2. Acknowledgment. The Principal acknowledges that (i) the execution and delivery of this Agreement is a condition to Buyer’s obligation to purchase the Company Shares pursuant to the Stock Purchase Agreement and that Buyer is relying on this Agreement in consummating such purchase, (ii) Buyer intends to carry on the business of the Company and its Subsidiaries, and (iii) the Principal will receive significant remuneration in connection with the transactions consummated under the Stock Purchase Agreement. The Principal further acknowledges that (i) he has become familiar with confidential information and trade secrets of the Company and its Subsidiaries and Affiliates, and, during the course of his employment with Buyer or its Affiliate, will become familiar with the confidential information and trade secrets of the Buyer Entities; and (ii) his services are of special, unique and extraordinary value to the 1 Note to Draft: Principals who are continuing employment post-Closing to sign this Agreement (i.e., Xxxx Xxxxxxxx, Xxxxx Xxxxxx and Xxxx Xxxxx). 1 40947999.4 2983433v2 020818.64824
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(a) This Agreement shall be governed by, and construed in accordance with, the Laws of the State of New Jersey, regardless of the Laws that might otherwise govern under applicable principles of conflicts of laws thereof. (b) Each party hereby irrevocably and unconditionally submits to the exclusive jurisdiction of any court of the United States or any state court, which in either case is located in the State of New Jersey (each, a “New Jersey Court”) for purposes of enforcing this Agreement or determining any claim arising from or related to the transactions contemplated by this Agreement. In any such action, suit or other proceeding, each party hereto irrevocably and unconditionally waives and agrees not to assert by way of motion, as a defense or otherwise any claim that it is not subject to the jurisdiction of any such New Jersey Court, that such action, suit or other proceeding is not subject to the jurisdiction of any such New Jersey Court, that such action, suit or other proceeding is brought in an inconvenient forum or that the venue of such action, suit or other proceeding is improper; provided, however, that nothing set forth in this sentence shall prohibit any party hereto from removing any matter from one New Jersey Court to another New Jersey Court. The parties hereto agree that any process or other paper to be served in connection with any action or proceeding under this Agreement shall, if delivered, sent or mailed in accordance with Section 10 constitute good, proper and sufficient service thereof. Each party hereto also agrees that any final and unappealable judgment against a party hereto in connection with any action, suit or other proceeding shall be conclusive and binding on such party and that such award or judgment may be enforced in any court of competent jurisdiction, either within or outside of the United States. A certified or exemplified copy of such award or judgment shall be conclusive evidence of the fact and amount of such award or judgment. Notwithstanding anything contained herein to the contrary or any waivable provision of Law, in the event of litigation among the parties, any prejudgment interest applied shall be at the Interest Rate. (c) EACH PARTY TO THIS AGREEMENT ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY THAT MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES AND, THEREFORE, EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY HERETO CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OR ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (B) EACH PARTY HERETO UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (C) EACH PARTY HERETO MAKES THIS WAIVER VOLUNTARILY AND (D) EACH PARTY HERETO HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS OF THIS SECTION 14. ANY PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY. 6 40947999.4 2983433v2 020818.64824
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Exhibit D Spousal Consent [Executed at signing] D-1 40733748.21
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Exhibit E Form of Release [See attached.] E-1 40733748.21
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[_________], 2018 [Benefit Consultants Group, Inc.] [BCG Securities, Inc.] [Xxxxxx Xxxx Educators Corp.] Re: Release of Claims1 Ladies and Gentlemen: Reference is made to that certain Stock Purchase Agreement, dated as of the date hereof, by and among Xxxxxx Xxxx Educators Corporation (“Buyer”), Xxxxxx Xxxxxxxx, The Xxxxxxxx Family Irrevocable Trust f/b/o Xxxx Xxxxxxxx, The Xxxxxxxx Family Irrevocable Trust f/b/o Xxxx and Xxxxx Xxxxxx, Xxxx Xxxxxxxxx Xxxxx, and Benefit Consultants Group, Inc. (the “Company”) (the “Stock Purchase Agreement”). Any undefined terms used herein and not defined have the meanings set forth in the Stock Purchase Agreement. I acknowledge and agree that execution and delivery of this Release of Claims (this “Release”) is a condition to Buyer’s obligation to purchase the Company Shares pursuant to the Stock Purchase Agreement, and that Buyer is relying on this Release in consummating such purchase. For good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and intending to be legally bound, in order to induce Buyer to purchase the Company Shares pursuant to the Stock Purchase Agreement, I agree as follows: I, [___________], on behalf of myself and my heirs, executors, administrators and assigns (collectively, “Related Persons”), hereby forever, absolutely, unconditionally and irrevocably release, acquit and forever discharge, to the fullest extent permitted by Law, the Company, BCG Securities, Inc. (“BCGS”), Buyer, Buyer’s Affiliates, each of their Benefit Plans, and each of their respective past, present and future officers, managers, directors, equityholders, partners, members, Affiliates, employees, counsel and agents (individually, a “Releasee” and collectively, “Releasees”) from all obligations and liabilities of either the Company or BCGS to me, all agreements and understandings of either the Company or BCGS involving me, and all of my rights, claims and causes of action (whether at law or in equity and whether or not currently known to exist) against either the Company or BCGS that are a result of, involve or otherwise exist by reason of any act, omission, fact, circumstance or other matter, cause or thing whatsoever that arose, occurred or existed before the Closing, including without limitation any indemnification obligations to me, and the right to advancement and reimbursement of expenses, pursuant to the organizational documents of the Company or BCGS (collectively, the “Released Claims”). For clarity, notwithstanding anything herein to the contrary, this Release does not in any way release any loss, liability, claim, damage or expense (including indemnity, costs of investigation and defense and reasonable attorneys’ and accountants’ fees), whether or not involving third-party claims, arising directly or indirectly from or in connection with the Stock Purchase Agreement or any documents ancillary thereto or executed in connection therewith. 1 Note to Draft: This form to be used for the beneficiaries of the Trusts (X. Xxxxxx, Xxxxx Xxxxxx, and X. Xxxxxxxx). 41006896.2 2983440v2 020818.64824
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I represent and warrant to each Releasee that I have not transferred, assigned, or otherwise disposed of any part of or interest in any Released Claim. I hereby irrevocably covenant not to, directly or indirectly, assert any claim or demand, or commence, institute, or voluntarily aid in any way, or cause to be commenced or instituted, any proceeding of any kind against any Releasee based upon any Released Claim. Without in any way limiting any rights and remedies otherwise available to any Releasee, I agree to indemnify and hold harmless each Releasee from and against and shall pay to each Releasee the amount of, or reimburse each Releasee for, all loss, liability, claim, damage (including incidental and consequential damages), or expense (including costs of investigation and defense and reasonable attorneys’ and accountants’ fees), whether or not involving third- party claims, arising directly or indirectly from or in connection with (a) the assertion by or on behalf of me or any of my Related Persons of any Released Claim, and (b) the assertion by any third party of any claim or demand against any Releasee which claim or demand arises directly or indirectly from, or in connection with, any assertion by or on behalf of me or any of my Related Persons against such third party of any Released Claim. I acknowledge and agree that the execution of this Release does not constitute in any manner whatsoever an admission of liability on the part of any Releasee for any Released Claim, and that such liability is specifically denied. I agree to (a) execute and deliver such other documents and (b) do such other acts and things, as Buyer may reasonably request for the purpose of carrying out the intent of this Release. This Release may not be amended, supplemented, or otherwise modified except in a writing signed by the Person against whose interest such change will operate. All matters relating to or arising out of this Release will be governed by and construed in accordance with the Laws of the State of New Jersey, regardless of the Laws that might otherwise govern under applicable principles of conflicts of laws thereof. Very truly yours, [____________] 41006896.2 2983440v2 020818.64824
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[_________], 2018 [Benefit Consultants Group, Inc.] [BCG Securities, Inc.] [Xxxxxx Xxxx Educators Corp.] Re: Letter of Resignation and Release1 Ladies and Gentlemen: Reference is made to that certain Stock Purchase Agreement, dated as of the date hereof, by and among Xxxxxx Xxxx Educators Corporation (“Buyer”), Xxxxxx Xxxxxxxx, The Xxxxxxxx Family Irrevocable Trust f/b/o Xxxx Xxxxxxxx, The Xxxxxxxx Family Irrevocable Trust f/b/o Xxxx and Xxxxx Xxxxxx, Xxxx Xxxxxxxxx Xxxxx, and Benefit Consultants Group, Inc. (the “Company”) (the “Stock Purchase Agreement”). Any undefined terms used herein and not defined have the meanings set forth in the Stock Purchase Agreement. I acknowledge and agree that execution and delivery of this Letter of Resignation and Release (this “Letter Agreement”) is a condition to Buyer’s obligation to purchase the Company Shares pursuant to the Stock Purchase Agreement, and that Buyer is relying on this Letter Agreement in consummating such purchase. For good and valuable consideration, in the amount of forty-thousand dollars ($40,000), the receipt and sufficiency of which is hereby acknowledged, and intending to be legally bound, in order to induce Buyer to purchase the Company Shares pursuant to the Stock Purchase Agreement, I agree as follows: I, [Xxxxxx Xxxxxxx], do hereby resign from my position as [General Counsel of the Company and BCG Securities, Inc., a Pennsylvania Corporation (“BCGS”)]2, effective as of the Closing of (and conditioned upon the Closing under) the Stock Purchase Agreement. In addition, on behalf of myself and my heirs, executors, administrators and assigns (collectively, “Related Persons”), I hereby forever, absolutely, unconditionally and irrevocably release, acquit and forever discharge, to the fullest extent permitted by Law, the Company, BCGS, Buyer, Buyer’s Affiliates, each of their Benefit Plans, and each of their respective past, present and future officers, managers, directors, equityholders, partners, members, Affiliates, employees, counsel and agents (individually, a “Releasee” and collectively, “Releasees”) from all obligations and liabilities of either the Company or BCGS to me, all agreements and understandings of either the Company or BCGS involving me, and all of my rights, claims and causes of action (whether at law or in equity and whether or not currently known to exist) against either the Company or BCGS that are a result of, involve or otherwise exist by reason of any act, omission, fact, circumstance or other matter, cause or thing whatsoever that arose, occurred or existed before the Closing, including without limitation any indemnification obligations to me, and the right to advancement and reimbursement of expenses, pursuant to the organizational documents of the Company or BCGS (collectively, the “Released Claims”). 1 Note to Draft: This form to be used for X. Xxxxxxx 2 Note to Draft: To confirm 41006865.2
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I represent and warrant to each Releasee that I have not transferred, assigned, or otherwise disposed of any part of or interest in any Released Claim. I hereby irrevocably covenant not to, directly or indirectly, assert any claim or demand, or commence, institute, or voluntarily aid in any way, or cause to be commenced or instituted, any proceeding of any kind against any Releasee based upon any Released Claim. Without in any way limiting any rights and remedies otherwise available to any Releasee, I agree to indemnify and hold harmless each Releasee from and against and shall pay to each Releasee the amount of, or reimburse each Releasee for, all loss, liability, claim, damage (including incidental and consequential damages), or expense (including costs of investigation and defense and reasonable attorneys’ and accountants’ fees), whether or not involving third-party claims, arising directly or indirectly from or in connection with (a) the assertion by or on behalf of me or any of my Related Persons of any Released Claim, and (b) the assertion by any third party of any claim or demand against any Releasee which claim or demand arises directly or indirectly from, or in connection with, any assertion by or on behalf of me or any of my Related Persons against such third party of any Released Claim. I acknowledge and agree that the execution of this Letter Agreement does not constitute in any manner whatsoever an admission of liability on the part of any Releasee for any Released Claim, and that such liability is specifically denied. I agree to (a) execute and deliver such other documents and (b) do such other acts and things, as Buyer may reasonably request for the purpose of carrying out the intent of this Letter Agreement. This Letter Agreement may not be amended, supplemented, or otherwise modified except in a writing signed by the Person against whose interest such change will operate. All matters relating to or arising out of this Letter Agreement will be governed by and construed in accordance with the Laws of the State of New Jersey, regardless of the Laws that might otherwise govern under applicable principles of conflicts of laws thereof. Very truly yours, [Xxxxxx Xxxxxxx] 41006865.2
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[_________], 2018 [Benefit Consultants Group, Inc.] [BCG Securities, Inc.] [Xxxxxx Xxxx Educators Corp.] Re: Letter of Resignation, Release, Non-Competition, Non-Solicitation and Non- Disclosure1 Ladies and Gentlemen: Reference is made to that certain Stock Purchase Agreement, dated as of the date hereof, by and among Xxxxxx Xxxx Educators Corporation (“Buyer”), myself, The Xxxxxxxx Family Irrevocable Trust f/b/o Xxxx Xxxxxxxx, The Xxxxxxxx Family Irrevocable Trust f/b/o Xxxx and Xxxxx Xxxxxx, Xxxx Xxxxxxxxx Xxxxx, and Benefit Consultants Group, Inc. (the “Company”) (the “Stock Purchase Agreement”). Any undefined terms used herein and not defined have the meanings set forth in the Stock Purchase Agreement. I acknowledge that I own the Class A Voting Stock of the Company (my “Equity Interest”) and, in connection with such ownership, have significantly contributed to the development and goodwill of the Company. I acknowledge that in connection with the consummation of the transactions contemplated by the Stock Purchase Agreement (the “Transaction”), I will receive significant proceeds from the sale of my Equity Interest and that a significant asset the Buyer is purchasing pursuant to the Transaction (and for which I am receiving proceeds) is such development and goodwill of the Company. I acknowledge and agree that execution and delivery of this Letter of Resignation, Release, Non-Competition, Non-Solicitation and Non-Disclosure (this “Letter Agreement”) is a condition to Buyer’s obligation to purchase the Company Shares pursuant to the Stock Purchase Agreement, that Buyer is relying on this Letter Agreement in consummating the Transaction and that without my agreement to such Letter Agreement, the Buyer would not consummate the Transaction. For good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and intending to be legally bound, in order to induce Buyer to purchase the Company Shares pursuant to the Stock Purchase Agreement, I agree as follows: I, Xxxxxx Xxxxxxxx, do hereby resign from my position as [Chief Executive Officer and member of the board of directors of the Company and BCG Securities, Inc., a Pennsylvania Corporation (“BCGS”)]2, effective as of the Closing of (and conditioned upon the Closing under) the Stock Purchase Agreement. In addition, on behalf of myself and my heirs, executors, administrators and assigns (collectively, “Related Persons”), I hereby forever, absolutely, unconditionally and irrevocably release, acquit and forever discharge, to the fullest extent permitted by Law, the Company, BCGS, Buyer, Buyer’s Affiliates, each of their Benefit Plans, and each of their respective past, present 1 Note to Draft: This form to be used for X. Xxxxxxxx 2 Note to Draft: To confirm 40875129.6
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and future officers, managers, directors, equityholders, partners, members, Affiliates, employees, counsel and agents (individually, a “Releasee” and collectively, “Releasees”) from all obligations and liabilities of either the Company or BCGS to me, all agreements and understandings of either the Company or BCGS involving me, and all of my rights, claims and causes of action (whether at law or in equity and whether or not currently known to exist) against either the Company or BCGS that are a result of, involve or otherwise exist by reason of any act, omission, fact, circumstance or other matter, cause or thing whatsoever that arose, occurred or existed before the Closing, including without limitation any indemnification obligations to me, and the right to advancement and reimbursement of expenses, pursuant to the organizational documents of the Company or BCGS (collectively, the “Released Claims”). For clarity, notwithstanding anything herein to the contrary, this Letter Agreement does not in any way release any loss, liability, claim, damage or expense (including indemnity, costs of investigation and defense and reasonable attorneys’ and accountants’ fees), whether or not involving third-party claims, arising directly or indirectly from or in connection with the Stock Purchase Agreement or any documents ancillary thereto or executed in connection therewith. I represent and warrant to each Releasee that I have not transferred, assigned, or otherwise disposed of any part of or interest in any Released Claim. I hereby irrevocably covenant not to, directly or indirectly, assert any claim or demand, or commence, institute, or voluntarily aid in any way, or cause to be commenced or instituted, any proceeding of any kind against any Releasee based upon any Released Claim. Without in any way limiting any rights and remedies otherwise available to any Releasee, I agree to indemnify and hold harmless each Releasee from and against and shall pay to each Releasee the amount of, or reimburse each Releasee for, all loss, liability, claim, damage (including incidental and consequential damages), or expense (including costs of investigation and defense and reasonable attorneys’ and accountants’ fees), whether or not involving third-party claims, arising directly or indirectly from or in connection with (a) the assertion by or on behalf of me or any of my Related Persons of any Released Claim, and (b) the assertion by any third party of any claim or demand against any Releasee which claim or demand arises directly or indirectly from, or in connection with, any assertion by or on behalf of me or any of my Related Persons against such third party of any Released Claim. I acknowledge and agree that the execution of this Letter Agreement does not constitute in any manner whatsoever an admission of liability on the part of any Releasee for any Released Claim, and that such liability is specifically denied. I acknowledge and agree that for a period of sixty (60) months from the date hereof (the “Restricted Period”), I (i) shall refrain from, directly or indirectly, engaging in, soliciting for engagement in, performing services (whether as employee, officer, director, shareholder, member, manager, consultant, investor, partner, sole proprietor or otherwise) for, or be concerned with or interested in, financially or otherwise, or offering or providing anywhere in the United States any business of the types (x) conducted by a Buyer Entity as of the date hereof, or (y) actively developed, marketed or solicited by a Buyer Entity during the twelve (12) month period prior to the date hereof; and (ii) shall not sell or propose to sell to, or otherwise solicit, whether through another employee, a producer or otherwise, any other services, including but not limited to 40875129.6
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Recordkeeping Services, provided by a Buyer Entity to any Plan Sponsor (clauses (i) and (ii) collectively, a “Competing Business”); provided, however, that nothing in this paragraph shall preclude, prohibit or restrict me from engaging, or require me not to engage, in making investments in Persons engaging in a Competing Business not in excess of two percent (2%) of the outstanding securities of such entity. For purposes of this Letter Agreement, (i) “Buyer Entities” means Buyer and its Subsidiaries and Affiliates (including the Company and its Affiliates and Subsidiaries), and (ii) “Plan Sponsor” means an employer or other entity that sponsors or maintains non-qualified deferred compensation plans, qualified defined contribution or defined benefit plans or other arrangements or programs with respect to which a Buyer Entity provides services as of the date hereof or has actively solicited during the twelve (12) month period prior to the date hereof. I acknowledge and agree that during the Restricted Period I shall not directly or indirectly, (a) solicit for employment or hire any employee who is then a current employee of any Buyer Entity, or within the six (6)-month period prior to the date hereof, has been an employee, of any Buyer Entity; (b) (i) hire or solicit for hire any Producer who is then a Producer, or within the twelve (12) month period prior to the date hereof has been a Producer, or (ii) solicit, encourage, initiate or participate in discussions or negotiations with, or provide any information to, any present or future Producer for the purpose of causing the termination or other alteration of his, her or its relationship with a Buyer Entity; (c) (i) solicit insurance business from any Person who is then a policyholder or customer of a Buyer Entity, or within the twelve (12) month period prior to the date hereof has been a policyholder or customer of a Buyer Entity (or any successor in interest to any such Person) for the purpose of securing Record Keeping Services or insurance business or contracts related to the Record Keeping Services or insurance businesses of the Buyer Entities, or (ii) solicit, encourage, initiate or participate in discussions or negotiations with, or provide any information to, any present or future policyholder or customer of a Buyer Entity for the purpose of causing the termination or other alteration of his, her or its relationship with a Buyer Entity; (d) solicit or attempt to solicit any Competing Business from any Person with whom I and/or employees managed by me had material contact, and that is, or in the twelve (12) month period prior to the date hereof was, a customer of a Buyer Entity or with respect to which any Buyer Entity actively solicits, or has solicited, the sale of products and services offered by the Buyer Entities; or (e) disparage a Buyer Entity or any of their products, services, or activities or any of their partners, officers, or employees. For the purposes of this Letter Agreement, “Producer” means brokers, broker-dealers, producers, third party administrators or intermediaries or other Persons who market or sell the services offered by a Buyer Entity, other than employees of the Buyer Entities. I acknowledge and agree that, except as otherwise expressly required by Law, I shall not disclose any Confidential Information (as defined below) to any Person whatsoever. For purposes of this Letter Agreement “Confidential Information” means the confidential or proprietary business information of the Buyer Entities, whether or not marked as such, whether acquired by the Buyer Entities prior to or after Closing, including any business plans, technology, plans, blueprints, drawings, models, designs, templates, processes, formulae, computer programs, customer lists, supplier lists, pricing data, financial data, Trade Secrets or other information identified or otherwise treated as confidential or proprietary business information; provided, however, that Confidential Information shall not include any information: (x) that is in the public domain through no fault of disclosure by me, or (y) that is lawfully acquired by me from source(s) 40875129.6
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which are not prohibited from disclosing such information by a legal, contractual or fiduciary obligation. I acknowledge and agree that the Confidential Information is owned by the Buyer Entities, is secret, is the subject of reasonable efforts by the Buyer Entities to keep it secret, and has value because of its secrecy. If I am compelled to disclose any information by judicial or administrative process or by other requirements of applicable Law, I shall promptly notify Buyer in writing, shall disclose only that portion of such information which I am advised by counsel in writing is legally required to be disclosed, and shall, if requested, use reasonable best efforts to obtain an appropriate protective order or other reasonable assurance that confidential treatment will be accorded such information. Notwithstanding the foregoing, nothing in this Agreement prohibits me from reporting to any governmental authority information concerning possible violations of law or regulation. I further acknowledge that, at all times, Trade Secrets shall be subject to the maximum protections available under applicable Law and no less protection than that provided by this Letter Agreement applicable to “Confidential Information,” as described in this paragraph. For the purposes of this Letter Agreement, “Trade Secrets” means information that (i) derives economic value, actual or potential, from not being generally known and not being readily ascertainable to other persons who can obtain economic value from its disclosure or use and that is the subject of reasonable efforts by the Buyer Entities to maintain its secrecy or confidentiality and has value as a result of such secrecy or confidentiality, or (ii) is defined as such by the New Jersey statutory and common law and by federal law. Trade Secrets may include either technical or non-technical data, including, without limitation, information concerning customers of the Buyer Entities (including customer information, identities, profiles, preferences and contacts), vendors, suppliers, products, pricing or pricing strategies, personnel assignments and policies, the legal or financial affairs, or the management of, in each case, the Buyer Entities. I acknowledge and agree that in the event I violate any of my obligations under this Letter Agreement, the Buyer Entities may proceed against me in law or in equity for such damages or other relief as a court may deem appropriate. I acknowledge that a violation of any of the provisions of this Letter Agreement may cause the Buyer Entities irreparable harm which may not be adequately compensated for by money damages. I therefore agree that in the event of any actual or threatened violation of this Letter Agreement, the Buyer Entities shall be entitled, in addition to other remedies that they may have, to a temporary restraining order and to preliminary and final injunctive relief against me to prevent any such violations, without the necessity of posting a bond. If, in any action before any court or other Governmental Authority legally empowered to enforce this Letter Agreement, any term, restriction, covenant or promise herein is found to be unreasonable and for that reason unenforceable, then such term, restriction, covenant or promise shall be deemed modified to the extent necessary to make it enforceable by such court or other Governmental Authority and any such court or other Governmental Authority shall have authority, as permitted by applicable Law, to apply reformation or “blue pencil” principles to provide for the greatest possible duration, geographical territory and business scope to the covenants contained herein. I acknowledge and agree that the covenants set forth in this Letter Agreement are (i) reasonable in all respects, including duration, territory and scope of activity restricted, in light of the transactions contemplated by this Letter Agreement and the Stock Purchase Agreement; (ii) an essential element of this Letter Agreement and that, but for these covenants, the parties would not have entered into the Stock Purchase Agreement; and (iii) necessary to protect the 40875129.6
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goodwill of the Buyer Entities and to protect other legitimate business interests of the Buyer Entities. I agree to (a) execute and deliver such other documents and (b) do such other acts and things, as Buyer may reasonably request for the purpose of carrying out the intent of this Letter Agreement. This Letter Agreement may not be amended, supplemented, or otherwise modified except in a writing signed by the Person against whose interest such change will operate. All matters relating to or arising out of this Letter Agreement will be governed by and construed in accordance with the Laws of the State of New Jersey, regardless of the Laws that might otherwise govern under applicable principles of conflicts of laws thereof. Very truly yours, [Xxxxxx Xxxxxxxx] 40875129.6
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Exhibit F Estimated and Final Working Capital Adjustment Examples Estimated Working Capital Adjustment Cash 789 Less: Restricted cash (63) Net Cash $ 726 Accounts receivable 1,160 Less: Accounts receivable > 90 days (213) (1) Net Accounts receivable 947 (2) Prepaids 103 (3)(4) Accounts payable (2,263) (5) Deferred rent (current portion only) (34) Deferred income (157) $ Estimated Working Capital (678) Less: Target Working Capital 800 $ Estimated Working Capital Adjustment (1,478) 1) Accounts receivable has been reduced by the balances over 90 days; will be increased by $20,000 for Buyer’s portion of a release payment amount. 2) Prepaids reflect the write off of the custodian fee 3) Accounts payable excludes the following which will be paid off at closing: Line of Credit, long-term and short-term debt, payable to owners, Phantom Stock Plan, and Salary Continuation Agreement. 4) Accounts payable includes the PTO liability and is subject to adjustment to include any litigation reserve if needed. 5) Deferred rent only reflects the current portion of deferred rent. F-1 40733748.21
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Final Working Capital Adjustment Calculated within 120 days after Closing Date (Example Calculation) Cash 500 Less: restricted cash (25) Net cash $ 475 (1) Accounts receivable 1,225 Less: Subsequent write-offs (50) Less: Uncollected receivable > 90 days (250) Net Accounts receivable 975 (2) Prepaids 90 (3) Accounts payable (1,600) (4) Deferred income (393) (5) Deferred rent (300) Final Net Working Capital $ 753) Less: Target Working Capital $ 800 Final Working Capital Adjustment $ (1,603) Estimated Working Capital Adjustment (1,635) Final Adjustment Amount to Buyer / (Seller) $ 32 1) Accounts receivable to be reduced by the balances over 90 days; will be increased by $20,000 for Buyer’s portion of a release payment amount. 2) Prepaids to reflect the write off of the custodian fee 3) Accounts payable to exclude the following which will be paid off at closing: Line of Credit, long-term and short-term debt, payable to owners, Phantom Stock Plan, and Salary Continuation Agreement. 4) Accounts payable to include the PTO liability and is subject to adjustment to include any litigation reserve if needed. 5) Deferred rent only reflects the current portion of deferred rent. F-2 40733748.21
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Exhibit G Earn-Out Calculation To be based on Benchmark Date For the twelve-months ended September 30, 0000 XXX 2 Fee Income - Accounts 4010-4217 $ 5,715,190 Less: Commissions – Accounts 5920 0 Net 5,715,190 BCS Commission Income - Accounts 4000-4316 13,599,266 Less: Commissions - Accounts 5090 1,227,310 Less: Commissions - Accounts 5920 9,431,484 Net 2,940,472 Total Net Revenue $ 8,655,662 2 Note: Accounts information to be included separately and shall not include any accounts converted from Buyer’s accounts. G-1 00000000.21
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EXHIBIT H Independent Accountants Xxxxx Xxxxxxx LLP BDO USA LLP RSM US LLP 40733748.21