CERTAIN INFORMATION IN THIS EXHIBIT HAS
BEEN OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT FILED WITH THE SEC AND IS
MARKED BY AN ASTERISK [*]
LIMITED LIABILITY COMPANY INTEREST PURCHASE AGREEMENT AMONG XXXXX,
XXXX, XXXXXX & XXXXXX, INC., XXXXXX XXXXX, XXXX XXXX, XXXXX XXXXXX,
XXXXXX XXXXXX AND GTBA HOLDINGS, INC.
EXHIBIT 10.59
CERTAIN INFORMATION IN THIS EXHIBIT HAS
BEEN OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT FILED WITH THE SEC AND IS
MARKED BY AN ASTERISK [*]
LIMITED LIABILITY COMPANY INTEREST PURCHASE AGREEMENT
AMONG
XXXXX, XXXX, XXXXXX & XXXXXX, INC.,
XXXXXX XXXXX,
XXXX XXXX,
XXXXX XXXXXX,
XXXXXX XXXXXX and
GTBA HOLDINGS, INC.
Made as of April 2, 2004
TABLE OF CONTENTS
PAGE
----
ARTICLE 1 DEFINITIONS.......................................................................................... 2
ARTICLE 2 SALE AND PURCHASE OF LLC INTEREST.................................................................... 9
Section 2.1 Sale and Purchase.......................................................... 9
Section 2.2 Closing.................................................................... 9
Section 2.3 Execution of LLC Agreement................................................. 9
Section 2.4 Final Closing Balance Sheet................................................ 9
ARTICLE 3 PAYMENT.............................................................................................. 10
Section 3.1 Payment.................................................................... 10
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF XXXXX XXXX AND THE PRINCIPALS TO HOLDINGS.......................... 11
Section 4.1 Organization............................................................... 11
Section 4.2 Authority.................................................................. 12
Section 4.3 Governmental Filings; Non-Contravention.................................... 12
Section 4.4 Capitalization............................................................. 12
Section 4.5 Subsidiaries and Other Relationships....................................... 13
Section 4.6 Business................................................................... 13
Section 4.7 Assets..................................................................... 13
Section 4.8 Clients and Services....................................................... 14
Section 4.9 Receivables................................................................ 14
Section 4.10 Contracts.................................................................. 14
Section 4.11 Employment Arrangements.................................................... 14
Section 4.12 Financial Statements....................................................... 15
Section 4.13 Material Adverse Change.................................................... 15
Section 4.14 Ordinary Course of Business................................................ 15
Section 4.15 Litigation and Compliance with Laws........................................ 15
Section 4.16 Environmental Matters...................................................... 16
Section 4.17 Broker Dealer.............................................................. 17
Section 4.18 Insurance Policies......................................................... 17
Section 4.19 Tax Matters................................................................ 17
Section 4.20 Certain Transactions....................................................... 18
Section 4.21 Employee Benefit Plans..................................................... 18
Section 4.22 Brokerage.................................................................. 20
i
Section 4.23 Access to Information...................................................... 20
Section 4.24 Privacy.................................................................... 20
Section 4.25 No Known Regulatory Delays................................................. 20
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF HOLDINGS TO XXXXX XXXX AND THE PRINCIPALS.......................... 21
Section 5.1 Organization............................................................... 21
Section 5.2 Authority.................................................................. 21
Section 5.3 Governmental Filings; Non-Contravention.................................... 21
Section 5.4 Litigation and Compliance with Laws........................................ 22
Section 5.5 Investment Representations................................................. 22
Section 5.6 No Known Regulatory Delays................................................. 23
Section 5.7 Brokerage.................................................................. 23
ARTICLE 6 COVENANTS OF XXXXX XXXX AND THE PRINCIPALS........................................................... 23
Section 6.1 Notice to Clients.......................................................... 23
Section 6.2 Conduct of Business........................................................ 23
Section 6.3 Preservation of Business and Assets........................................ 24
Section 6.4 Standstill................................................................. 24
Section 6.5 Non-Competition............................................................ 24
Section 6.6 Specific Performance....................................................... 25
Section 6.7 Licensing; Client Agreements............................................... 25
Section 6.8 Assignment and Assumption Agreement and Original LLC Agreement............. 26
ARTICLE 7 COVENANTS OF HOLDINGS................................................................................ 26
Section 7.1 Business Benefits.......................................................... 26
Section 7.2 Retirement Plan Rollovers.................................................. 27
ARTICLE 8 COVENANTS OF THE PARTIES............................................................................. 27
Section 8.1 Regulatory Authorizations.................................................. 27
Section 8.2 Confidentiality............................................................ 27
Section 8.3 Expenses Incident to this Agreement........................................ 28
Section 8.4 Access; Information........................................................ 28
Section 8.5 Press Releases............................................................. 28
ARTICLE 9 CONDITIONS PRECEDENT TO HOLDINGS' OBLIGATIONS........................................................ 28
Section 9.1 No Litigation; No Opposition............................................... 28
Section 9.2 Representations, Warranties and Covenants of Xxxxx Xxxx and the
Principals................................................................. 29
Section 9.3 Client Objection.......................................................... 29
Section 9.4 Licensing; Client Agreements............................................... 29
Section 9.5 Shareholder Approval....................................................... 30
ii
Section 9.6 Engagement Letter and Marketing Materials.................................. 30
Section 9.7 Other Approvals............................................................ 30
Section 9.8 Capitalization............................................................. 30
Section 9.9 Deliveries................................................................. 30
Section 9.10 No Material Adverse Change................................................. 32
Section 9.12 Buy-Sell Agreement......................................................... 32
Section 9.13 Satisfaction of Employee Loans............................................. 32
Section 9.14 Accrual Basis Financial Statements......................................... 32
ARTICLE 10 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF XXXXX XXXX AND THE PRINCIPALS............................ 32
Section 10.1 No Litigation; No Opposition............................................... 32
Section 10.2 Representations, Warranties and Covenants.................................. 33
Section 10.3 Deliveries................................................................. 33
Section 10.4 No Material Adverse Change................................................. 33
ARTICLE 11 INDEMNIFICATION..................................................................................... 33
Section 11.1 Indemnification by the Principals.......................................... 33
Section 11.2 Indemnification by Holdings................................................ 34
Section 11.3 Limitation................................................................. 34
Section 11.4 Defense of Claims.......................................................... 34
Section 11.5 Prompt Payment............................................................. 35
Section 11.6 Certain Reductions; Subrogation............................................ 35
ARTICLE 12 TERMINATION......................................................................................... 36
Section 12.1 Termination................................................................ 36
Section 12.2 Effect of Termination...................................................... 36
ARTICLE 13 MISCELLANEOUS....................................................................................... 36
Section 13.1 Survival of Representations, Warranties and Covenants...................... 36
Section 13.2 Waivers.................................................................... 36
Section 13.3 Modifications.............................................................. 37
Section 13.4 Further Assurances......................................................... 37
Section 13.5 Governing Law; Consent to Jurisdiction..................................... 37
Section 13.6 Notices.................................................................... 37
Section 13.7 Assignability.............................................................. 39
Section 13.8 Captions................................................................... 39
Section 13.9 Number and Gender.......................................................... 39
Section 13.10 Severability............................................................... 39
Section 13.11 Counterparts............................................................... 39
Section 13.12 No Third-Party Beneficiaries............................................... 39
Section 13.13 Remedies for Section 8.2................................................... 39
Section 13.14 Integration................................................................ 39
iii
LIST OF EXHIBITS
A Assignment and Assumption Agreement
B Original LLC Agreement
C Form of Client Agreements
D Form of Employment Agreements
E Form of Amended and Restated Limited Liability Company Agreement
F Form of Management Operating Agreement
G Form of Offer Letter
H Form of Notice to Clients
I Form of Legal Opinion of Xxxxxxxx, Xxxxxxxx & Xxxxxxxx, Inc.
J Form of Legal Opinion of Xxxx Xxxx Xxxxx, Esquire
LIST OF SCHEDULES
Schedule 1(uu) Certain Clients of Xxxxx Xxxx
Schedule 1(sss) Pro Forma Financial Statements and Valuation Examples
Schedule 4.3 Governmental Filings of Xxxxx Xxxx and the Principals
Schedule 4.4(a) Stockholders and Shares
Schedule 4.4(b) Members, Capital Account Balances and Membership Points
Schedule 4.5 Subsidiaries and Other Relationships
Schedule 4.7 Real and Personal Property
Schedule 4.7(d) Art Owned by Xxxxxx Xxxxx
Schedule 4.8(a) Client Agreements of Xxxxx Xxxx
Schedule 4.8(b) Referral Arrangements
Schedule 4.10 Material Contracts
Schedule 4.11 Employment Arrangements
Schedule 4.12(a) Financial Statements of Xxxxx Xxxx
Schedule 4.12(c) Other Liabilities
Schedule 4.15 Regulatory Compliance
Schedule 4.18 Insurance Policies
Schedule 4.21(a) Amendments to Seller Qualified Plans
Schedule 4.21(b) Title IV Plans and Qualified Beneficiaries
Schedule 4.21(d) Seller Employee Plans
Schedule 4.21(f) Seller Employee Plan Assets
Schedule 5.3 Governmental Filings of Holdings
Schedule 5.4 Regulatory Compliance of Holdings and WTC
iv
THIS LIMITED LIABILITY COMPANY INTEREST PURCHASE AGREEMENT (the
"Agreement") is made as of April 2, 2004, among XXXXX, XXXX, XXXXXX & XXXXXX,
INC., a California corporation ("Xxxxx Xxxx"), XXXXXX XXXXX, XXXX XXXX, XXXXX
XXXXXX and XXXXXX XXXXXX (such individuals sometimes individually referred to
herein as a "Principal" and collectively referred to herein as the
"Principals"), and GTBA HOLDINGS, INC., a Delaware corporation ("Holdings").
BACKGROUND
A. Xxxxx Xxxx provides business management services to its
clients that include bookkeeping, cash flow management, budgeting, tax planning,
insurance consultation and other services.
B. The Principals own all of the outstanding shares of stock of
Xxxxx Xxxx.
X. Xxxxx Tani and Xxxxxx Xxxxx (the "Second Member") have
heretofore formed Grant Xxxx Xxxxxx & Xxxxxx, LLC, a Delaware limited liability
company (the "LLC"), which will succeed to Xxxxx Xxxx'x business, have
contributed certain assets to the LLC and have executed an operating agreement
of the LLC in the form of Exhibit B hereto ("Original LLC Agreement").
D. The LLC has been formed as a limited liability company under
the Delaware Limited Liability Company Act, 6 Del. C. Sections 18-101 et seq.,
as amended from time to time, by filing a Certificate of Formation of the LLC
with the Office of the Secretary of State of Delaware on February 24, 2004 (the
"LLC Certificate").
E. Pursuant to an Assignment and Assumption Agreement in the form
of Exhibit A hereto, prior to the transactions contemplated hereby, Xxxxx Xxxx
will contribute all of its assets, including the goodwill of its business
(excluding any right of Xxxxx Xxxx to receive a reversion of surplus assets from
the Xxxxx, Xxxx, Xxxxxx & Xxxxxx, Inc. Defined Benefit Plan) to the LLC (which
will assume all of Xxxxx Xxxx'x liabilities, except those liabilities relating
to the Xxxxx Xxxx Qualified Plans (as hereinafter defined) in exchange for which
the LLC will issue Xxxxx Xxxx an LLC Interest consisting of 99.99 Membership
Points. At that time, Grant will own an LLC Interest consisting of .01
Membership Points.
F. Holdings desires to purchase, and Xxxxx Xxxx desires to sell,
an LLC Interest consisting of 90 Membership Points, on the terms and conditions
set forth herein.
G. Holdings is a Delaware corporation and not a natural person.
Under California law, for Holdings to own an interest in the LLC, certain
activities Xxxxx Xxxx conducts will need to be performed outside the LLC by a
public accounting firm licensed with the California State Board of Accountancy.
Accordingly, prior to Holdings' purchase of 90.00 Membership Points, Xxxxx Xxxx
will become licensed as such a public accounting firm and will conduct those
activities. In addition, prior to that purchase, Xxxxx Xxxx will cause
individuals who will prepare and sign client tax returns on behalf of the LLC to
become licensed as tax preparers under California law.
X. Xxxxx Tani, the Principals and Holdings intend that this
Agreement memorialize their respective representations, warranties, covenants
and other agreements to induce each of them to execute and deliver this
Agreement and the other Transaction Documents, as defined herein.
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which hereby are acknowledged, the parties hereto, intending to
be legally bound hereby, agree as follows:
ARTICLE 1
DEFINITIONS
Capitalized terms used in this Agreement and not otherwise defined
herein shall have the meanings set forth below:
a. "Advisers Act" means the Investment Advisers Act of 1940, as
amended from time to time.
b. "Affiliate" of a Person means a Person that directly or
indirectly, through one or more intermediaries, controls, is controlled by or is
under common control with the first Person. As used in this definition, the term
"control" (including the terms "controlled by" and "under common control with")
means the possession, directly or indirectly, of the power to (i) vote 25% or
more of the outstanding voting securities of a Person or (ii) otherwise direct
the management policies of a Person by contract or otherwise.
c. "Assignment and Assumption Agreement" means the instrument in
the form of Exhibit A hereto by which Xxxxx Xxxx assigns its business to the LLC
(which will assume all of Xxxxx Xxxx'x liabilities, except those liabilities
relating to the Xxxxx Xxxx Qualified Plans). Nothing in the Assignment and
Assumption Agreement shall be interpreted or construed to obligate Xxxxx Xxxx to
contribute, assign, transfer or convey to the LLC Xxxxx Xxxx'x right to receive
a reversion of surplus assets from the Xxxxx, Xxxx, Xxxxxx & Xxxxxx, Inc.
Defined Benefit Plan.
d. "Bankruptcy Code" means the U.S. Bankruptcy Code, as amended
from time to time, and any successor to that code.
e. "Berkshire" has the meaning assigned to that term in Section
5.7.
f. "Business Day" means a day Wilmington Trust Company is open
for business.
g. "Cause," with respect to a Person, means any of the events set
forth below, determined in accordance with the terms of the LLC Agreement,
provided that a Person shall have 20 days after written notice of any such event
to cure such an event that is curable:
(1) A breach of any material provision of Article 11 of
the LLC Agreement;
(2) The failure of a Person to perform substantially that
Person's duties with the LLC or the Management Company (other than any such
failure resulting from incapacity due to physical or mental illness);
2
(3) The engaging by a Person in illegal conduct,
dishonest conduct, conduct that is a breach of that Person's fiduciary duty or
gross misconduct; or
(4) Any disqualification, suspension or revocation of any
applicable registration or license of a Person as a result of a final,
non-appealable proceeding by the California State Board of Accountancy, any
other state accounting board, the U.S. Securities and Exchange Commission, any
state securities commission or any self-regulatory authority or court with
jurisdiction over the LLC or the Management Company.
h. "Change of Control" means (1) the acquisition by any Person or
group of Persons of beneficial ownership (as that term is defined in Rule 13d-3
promulgated under the Exchange Act), directly or indirectly, of 25% or more of
the outstanding capital stock of Holdings or Wilmington Trust Corporation, a
Delaware corporation that owns all of Holdings' outstanding shares of capital
stock ("WTC"), entitled to vote for the election of directors ("Voting Shares");
(2) the acquisition by any person or any group of Persons (other than Holdings,
WTC or any of their respective Affiliates) of 50% or more of the Membership
Points in the LLC owned by Holdings or any of its Affiliates immediately prior
to that acquisition; (3) the merger or consolidation of WTC with one or more
other Persons as a result of which the holders of the outstanding Voting Shares
of WTC immediately before the merger or consolidation hold less than 50% of the
Voting Shares of the surviving or resulting Person; (4) the merger or
consolidation of the LLC with one or more other Persons (other than Holdings or
WTC or one or more of their respective Affiliates) as a result of which the
holders of the outstanding Membership Points immediately before the merger or
consolidation hold less than 50% of the total outstanding Membership Points (or
equivalent) of the surviving or resulting Person; (5) the transfer of all or
substantially all of Holdings', WTC's or the LLC's assets, other than to an
Affiliate of Holdings or WTC; or (6) a proxy contest for the election of
directors of WTC that results in Persons constituting the Board of Directors of
WTC immediately before the initiation of that proxy contest ceasing to be a
majority of the Board of Directors of WTC upon the conclusion of that proxy
contest; provided that neither (x) any transfer of the capital stock or assets
of Holdings or WTC to, or the merger or consolidation of Holdings or WTC with or
into, (A) an entity that both prior to and also after that transfer, merger or
consolidation had been and will be consolidated with Holdings or WTC for federal
income tax purposes or (B) any newly-formed, wholly owned subsidiary of Holdings
or WTC that will be consolidated with Holdings or WTC for federal income tax
purposes, nor (y) a transfer of LLC Interests by one or more Principals to one
or more Permitted Transferees (as that term is defined in the LLC Agreement)
shall be deemed to be a Change of Control for purposes hereof.
i. "Client Agreement" has the meaning assigned to that term in
Section 6.7 and is in the form of Exhibit C attached hereto, except as that form
may be revised to incorporate revisions requested by the California Department
of Corporations.
j. "Client Fees" has the meaning assigned to that term in Section
9.3(b).
k. "Closing" and "Closing Date" have the meanings assigned to
those terms in Section 2.2.
l. "COBRA" has the meaning assigned to that term in Section
4.21(b).
m. "Code" means the Internal Revenue Code of 1986, as amended
from time to time, or any corresponding federal tax statute enacted hereafter. A
reference to a specific section of the Code
3
refers to that section as well as any corresponding provision of any federal tax
statute enacted hereafter, as that section is in effect on the date of
application of the provisions hereof containing that reference.
n. "Disclosing Party" has the meaning assigned to that term in
Section 8.2.
o. "Earnout Payment" shall mean a payment Holdings makes to Xxxxx
Xxxx under Section 3.1(a).
p. "Effective Time" has the meaning assigned to that term in
Section 2.2.
q. "Employee Plan" or "Plan" has the meaning assigned to that
term in Section 4.21(d).
r. "Employment Agreements" means the employment agreements
between the Management Company and each Principal substantially in the form of
Exhibit D attached hereto.
s. "Employment Arrangement" has the meaning assigned to that term
in Section 4.11.
t. "ERISA" has the meaning assigned to that term in Section
4.21(b).
u. "Environmental Laws" has the meaning assigned to that term in
Section 4.16(a).
v. "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time.
w. "Final Closing Balance Sheet" has the meaning assigned to that
term in Section 2.4.
x. "Financial Statements" has the meaning assigned to that term
in Section 4.12(a).
y. "401(k) Plan" has the meaning assigned to that term in Section
4.21(a).
z. "GAAP" means United States generally accepted accounting
principles applied consistently with prior periods.
aa. "Good Reason" means, with respect to any Principal employed by
the LLC or the Management Company:
(1) a reduction by the LLC or the Management Company in
that Principal's title or salary as the foregoing is in effect at Closing;
(2) the LLC's or the Management Company's requiring that
Principal, without his or her consent, to be based at any office or location
more than 25 miles outside the Los Angeles, California Metropolitan Statistical
Area;
(3) without the written consent of a Principal, the
assignment to that Principal of duties inconsistent in any material respect with
the Principal's position, authority, duties or responsibilities as in effect on
the effective date of that Principal's employment by the LLC or the Management
Company, or any other action by the LLC or the Management Company, which
4
assignment, in each instance, results in a material diminution in that position,
authority, duties or responsibilities;
(4) the material breach by the Management Company of that
Principal's Employment Agreement.
"Good Reason" shall not include a Principal's death or
Disability. The LLC or the Management Company shall have an opportunity to cure
any claimed event of Good Reason within 30 days of notice from the Principal.
bb. "Governmental Authority" means any United States or foreign
government, any state or other political subdivision thereof, any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government, including, without limitation, the SEC
or any other government authority, agency, department, board, commission or
instrumentality of the United States or any foreign government or any state or
other political subdivision thereof or any state insurance, accounting,
securities or banking authority (including the California State Board of
Accountancy and the Securities Regulation Division of the California Department
of Corporations), the Board of Governors of the Federal Reserve System, a
Federal Reserve Bank, the Federal Deposit Insurance Corporation, the NASD, the
NYSE, any other similar self-regulatory organization and any court or tribunal
of competent jurisdiction.
cc. "Xxxxx Xxxx Entities" means the LLC, Xxxxx Xxxx, the
Management Company and any Subsidiary (present or future), and the term "Xxxxx
Xxxx Entity" means any one of the foregoing Xxxxx Xxxx Entities.
dd. "Xxxxx Xxxx Qualified Plans" has the meaning assigned to that
term in Section 7.2.
ee. "Immediate Family" means, with respect to any natural person,
that person's spouse, parents, grandparents, children, grandchildren, siblings,
mother-in-law, father-in-law, brothers-in-law and sisters-in-law.
ff. "Initial Payment" shall mean the payment Holdings is to make
to Xxxxx Xxxx under Section 3.1(a)(1).
gg. "HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976, as amended, and the rules and regulations thereunder.
hh. "Indemnified Party" means a Person entitled to be indemnified
under Article 11 hereof.
ii. "Indemnifying Party" means a Person obligated to indemnify
another Person under Article 11 hereof.
jj. "Knowledge" means that which a Person actually knows or should
know. "Knowledge of Xxxxx Xxxx" shall mean the Knowledge of the individual
Principals.
kk. "Leased Real Property" has the meaning assigned to that term
in Section 4.16.
ll. "Licenses" means licenses, franchises, permits and regulatory
approvals.
5
mm. "Lien" means a charge, mortgage, pledge, security interest,
restriction (other than a restriction on transfer arising under federal or state
securities laws (or rules and regulations thereunder) or laws relating to the
regulation of brokers, dealers, investment advisers, investment companies,
banks, insurance companies and other regulated businesses), lien or encumbrance
of any nature whatsoever.
nn. "LLC" has the meaning assigned to that term in Recital C
hereof.
oo. "LLC Agreement" means the Amended and Restated Limited
Liability Company Agreement of the LLC in the form of Exhibit E attached hereto.
pp. "LLC Certificate" has the meaning assigned to that term in
Recital D hereof.
qq. "LLC Interest" has the meaning assigned to that term in the
LLC Agreement.
rr. "Losses" has the meaning assigned to that term in Section
11.1.
ss. "Management Company" means Xxxxx, Xxxx, Xxxxxx & Xxxxxx
Management, Inc., a Delaware corporation owned by Holdings.
tt. "Management Operating Agreement" means the Management
Operating Agreement between the LLC and the Management Company in the form of
Exhibit F attached hereto.
uu. "Material Adverse Effect" with respect to a Person or Persons
means a material adverse effect on the business, assets or condition (financial
or otherwise) of that Person or Persons determined on a consolidated basis with
respect to all Subsidiaries of that Person, as the case may be. A Material
Adverse Effect with respect to a Person shall include, without limitation, any
of the following: (1) in the case of Holdings, a decrease of 10% or more of
WTC's annual net revenues or potential net revenues as a result of the
occurrence of the Material Adverse Effect; (2) in the case of Xxxxx Xxxx, a
decrease of 20% or more of the number of its clients other than those clients
set forth on Schedule 1(uu); or (3) a prolonged impairment of the Person's
ability to conduct business in any material respect as it was conducted before
the occurrence of the Material Adverse Effect. Notwithstanding the foregoing
provisions, a Material Adverse Effect shall not include the effect of any event,
change or occurrence arising out of or attributable to changes in accounting
principles applicable to the Person to the extent required by law or GAAP.
vv. "Member" has the meaning assigned to that term in the LLC
Agreement.
ww. "Membership Points" has the meaning assigned to that term in
the LLC Agreement.
xx. "Metropolitan Statistical Area" of a city means that city's
metropolitan statistical area as defined by the United States Office of
Management and Budget.
yy. "NASD" means the NASD, Inc. and any successor thereto.
zz. "NYSE" means the New York Stock Exchange, Inc. and any
successor thereto.
6
aaa. "Offer Letter" means the letter agreement between the
Management Company and each employee of the Management Company (other than a
Principal) that performs business management services in the form of Exhibit G
attached hereto.
bbb. "Original LLC Agreement" has the meaning assigned to that term
in Recital C hereof.
ccc. "Party" means Xxxxx Xxxx, any Principal or Holdings, and
"parties" means all Persons that qualify as a Party.
ddd. "PBGC" has the meaning assigned to that term in Section
4.21(e).
eee. "Person" means any individual, partnership, corporation,
limited liability company, limited liability partnership, association, trust,
joint venture, unincorporated organization and any government, governmental
department or agency or political subdivision thereof.
fff. "Purchase Price" shall have the meaning assigned to that term
in Section 3.1.
ggg. "Receiving Party" has the meaning assigned to that term in
Section 8.2.
hhh. "Restricted Area" has the meaning assigned to that term in
Section 6.5.
iii. "Restricted Period" has the meaning assigned to that term in
Section 6.5.
jjj. "SEC" means the U.S. Securities and Exchange Commission.
kkk. "Second Member" has the meaning assigned to that term in
Recital C hereof.
lll. "Securities Act" means the Securities Act of 1933, as amended
from time to time.
mmm. "Seller Employee Plan" has the meaning assigned to that term
in Section 4.21(d).
nnn. "Seller Qualified Plan" has the meaning assigned to that term
in Section 4.21(a).
ooo. "Shares" has the meaning assigned to that term in Section
4.4(a).
ppp. "Subsidiary" or "Subsidiaries" means any corporation,
partnership or other organization, whether incorporated or unincorporated, of
which more than twenty-five percent (25%) of either the equity interests in, or
the voting control of, that corporation, partnership or other organization is
beneficially owned by a Person, directly or indirectly, through Subsidiaries or
otherwise, or of which a Person serves as the general partner or managing
member.
qqq. "Taxes" has the meaning assigned to that term in Section 4.19.
rrr. "Transaction Documents" means this Agreement, the LLC
Agreement, the Employment Agreements, the Assignment and Assumption Agreement,
the Management Operating Agreement, the Offer Letters, the Client Agreements and
all other agreements, documents, instruments and certificates executed in
connection herewith or therewith and any and all exhibits and schedules
appertaining thereto.
7
sss. "Valuation" shall be based on a formula that weights the LLC's
gross revenue and pre-tax net income at [*]% each, and applies a multiple based
on the annual compound growth rate of each from the amounts reflected on Xxxxx
Xxxx'x pro forma financial statements for the year ended December 31, 2003,
which are attached hereto as part of Schedule 1(sss). For all purposes in
calculating the Valuation, Xxxxx Xxxx'x gross revenues for the year ended
December 31, 2003 shall be deemed to be [*] and its pre-tax net income for the
year ended December 31, 2003 shall be deemed to be [*]. The gross revenue
multiple shall be between [*]x and [*]x, based on a range of annual compound
growth rates of gross revenues. The pre-tax net income multiple shall be between
[*]x and [*]x, based on a range of annual compound growth rates of pre-tax net
income. The multiples will be determined by calculating the annual compound
growth rate of the LLC's gross revenues and pre-tax net income according to the
following formula:
Pre-Tax Net
Annual Compound Growth Gross Revenue Multiple Income Multiple
---------------------- ---------------------- ---------------
[*]% or less [*]x [*]x
[*]% [*]x [*]x
[*]% [*]x [*]x
[*]% [*]x [*]x
[*]% or greater [*]x [*]x
Annual compound growth in gross revenue or pre-tax net income between
[*]% and [*]% shall be interpolated proportionately.
The Valuation will be determined for each calendar year in accordance
with GAAP, provided that the following items will be excluded: (1)
extraordinary, non-recurring items of revenue (including any fees received for
services previously provided to Burger Business, LLC) and expense; and (2)
$[*] of recurring expense. For purposes of determining the Valuation,
expenses of the LLC do not include the cost of support services generally
available from WTC but do include the cost of the benefits described in Section
7.1 and the costs and fees paid to the Management Company under the Management
Operating Agreement. For the calendar years following 2003, the Valuation will
be calculated by reference to the LLC's financial statements prepared on an
accrual basis in accordance with GAAP and separately audited by an independent
accounting firm selected by the Principals and acceptable to Holdings, which
acceptance will not be unreasonably withheld, and such other books and records
as are sufficient to identify the items in the proviso in the first sentence of
this paragraph.
The following is a sample calculation of the Valuation at the end of
the second calendar year after Closing assuming annual compound growth of gross
revenue of [*]% and annual compound growth of pre-tax net income of [*]%:
Gross Revenue = $[*]
Interpolated gross revenue multiple = [*]x
Valuation based on gross revenue = $[*]
Pre-tax net income = $[*]
Interpolated pre-tax net income multiple = [*]x
Valuation based on pre-tax net income = $[*]
8
Earnout Valuation = ([*]% * $[*]) +
([*]% * $[*])
= $[*]
Earnout Payment = [*]% * $[*]
= $[*]
Included in Schedule 1(sss) are additional examples of computations related to
the Valuation.
Notwithstanding the foregoing or anything to the contrary herein, for
purposes of determining the Valuation, for any period beginning after January 1,
2004 until Closing, Xxxxx Xxxx'x financial statements, prepared on an accrual
basis in accordance with GAAP (including, without limitation, an appropriate
accrual for the Bonus Plan that is Schedule 5.1 to the LLC Agreement) and
separately audited by an independent accounting firm selected by the Principals
and acceptable to Holdings (which acceptance shall not be unreasonably
withheld), and such other books and records as sufficient to identify the items
in the proviso in the first sentence of the third paragraph of this Section
1(sss) for Xxxxx Xxxx, shall be used in place of the LLC's financial statements.
ARTICLE 2
SALE AND PURCHASE OF LLC INTEREST
AND LLC AGREEMENT
Section 2.1 Sale and Purchase. Subject to the terms, provisions and
conditions and on the basis of the representations, warranties and covenants
herein, Xxxxx Xxxx shall issue, sell and deliver to Holdings, and Holdings shall
purchase from Xxxxx Xxxx, an LLC Interest free and clear of any Lien except
restrictions that are set forth herein, consisting of 90 Membership Points, at
the Purchase Price as set forth in Section 3.1.
Section 2.2 Closing. The closing of the transactions contemplated
hereby (the Closing") shall take place at the offices of Xxxxxxxxxxx & Xxxxxxxx
LLP, 00000 Xxxxx Xxxxxx Xxxxxxxxx, Xxxxxxx Xxxxx, Xxx Xxxxxxx, Xxxxxxxxxx 00000
at 10:30 a.m., local time, and be effective at the close of business on the
closing date (the "Effective Time"), which shall be five Business Days after the
fulfillment or waiver of each condition set forth in Articles 9 and 10 hereof
(other than the conditions that are fulfilled or waived as a part of the
Closing), or such other date as the Parties mutually agree, that date being
referred to herein as the "Closing Date." The parties shall use their reasonable
best efforts to cause the conditions to Closing set forth in Articles 9 and 10
hereof to be satisfied as soon as practicable, and shall cause to be executed at
Closing the Transaction Documents (except for the Assignment and Assumption
Agreement, which shall be executed prior to Closing) by the respective parties
to each of documents.
Section 2.3 Execution of LLC Agreement. On the Closing Date, the LLC
Agreement shall be executed and a copy of the LLC Agreement shall be delivered
to Holdings, Xxxxx Xxxx and the Principals.
Section 2.4 Final Closing Balance Sheet. Promptly after Closing, Xxxxx
Xxxx and the Principals shall prepare a consolidated balance sheet and related
notes of Xxxxx Xxxx as of the close of business on the Closing Date (the "Final
Closing Balance Sheet"), audited by an independent
9
accounting firm selected by the Principals and acceptable to Holdings (which
acceptance shall not be unreasonably withheld) and prepared in accordance with
GAAP, except that (a) no item shall fail to be included therein or excluded
therefrom on the basis of materiality, individually or collectively, and (b) at
Holding's option, the effect of any breaches of the representations and
warranties of Xxxxx Xxxx or the Principals made herein and discovered by
Holdings on or before the date of the Final Closing Balance Sheet shall be fully
reserved therein. As soon as practicable following the Closing, the Final
Closing Balance Sheet shall be delivered to Holdings by Xxxxx Xxxx and the
Principals, accompanied by the report of the auditors thereon.
ARTICLE 3
PAYMENT
Section 3.1 Payment.
a. Subject to the terms and conditions hereof and as a
part of this transaction, Holdings shall pay or cause to be paid to Xxxxx Xxxx
cash, by wire transfer of immediately available funds to a bank account
designated in writing by Xxxxx Xxxx, the following amounts (the "Purchase
Price"):
1. At Closing, $[*];
2. By March 31, 2006, [*]% times the Valuation
for 2005;
3. By March 31, 2007, [*]% times the Valuation
for 2006;
4. By March 31, 2008, [*]% times the Valuation
for 2007; and
5. By March 31, 2009, [*]% times the Valuation
for 2008.
b. In the event of a Change of Control, and provided
that some or all of the Principals so elect (which election may be made prior to
the effective date of the Change of Control), any amounts due to Xxxxx Xxxx with
respect to the Principals making that election and unpaid under Sections
3.1(a)(2), 3.1(a)(3), 3.1(a)(4) and 3.1(a)(5) shall be calculated on the basis
of the Valuation for the full calendar year preceding that Change of Control
(the "Accelerated Valuation") and their respective ownership percentages of
Xxxxx Xxxx immediately prior to Closing as set forth in Schedule 4.4(a) hereto,
and that amount shall be paid in cash to Xxxxx Xxxx within a period of the later
of (A) 30 days following the receipt of the respective Principals' election or
(B) the closing of the transactions giving rise to the Change of Control in the
proportions set forth in Schedule 4.4(a) hereto. For example, if a Change of
Control occurs prior to the payment due under Section 3.1(a)(2), some Principals
shall, if they so elect, receive in the aggregate [*]% of the Accelerated
Valuation multiplied by the sum of their respective ownership percentages of
Xxxxx Xxxx immediately prior to Closing as set forth in Schedule 4.4(a) hereto.
If some, but not all, of the Principals make the election contemplated
by this Section 3.1(b) and Section 3.1(c) does not apply, then (1) the amounts
payable to Xxxxx Xxxx with respect to the Principals who have made that election
shall be determined by multiplying (A) the sum of the amount determined in
accordance with the preceding paragraph by (B) a percentage equal to the sum of
their respective ownership percentages of Xxxxx Xxxx immediately prior to
Closing as set forth in
10
Schedule 4.4(a) hereto, and shall be distributed among them in accordance with
those respective ownership percentages, and (2) the amounts payable to Xxxxx
Xxxx with respect to the Principals who have not made that election shall remain
payable at the times they would otherwise be payable and shall be determined by
multiplying the amount they would otherwise have received under Section 3.1 by a
percentage equal to the sum of their respective ownership percentages of Xxxxx
Xxxx immediately prior to Closing as set forth on Schedule 4.4(a) hereto, and
shall be allocated among them in accordance with those respective ownership
percentages.
c. To the extent that any Principals and/or their Permitted
Transferees have exercised their right to purchase LLC Interests pursuant to
Section 7.5(b) of the LLC Agreement, (1) neither Xxxxx Xxxx nor those Principals
shall be entitled to receive any future payments with respect to those
Principals under this Section 3.1, and (2) the amounts otherwise payable to the
Principals under this Section 3.1 shall be determined as though they had elected
to receive the accelerated payments pursuant to Section 3.1(b), multiplied by a
percentage equal to the sum of their respective ownership percentages of Xxxxx
Xxxx immediately prior to Closing as set forth in Schedule 4.4(a) hereto, and
allocated among them in accordance with those relative ownership percentages. If
this Section 3.1(c) applies, then none of the Principals shall have any rights
to receive payments under Section 3.1, if any, other than through this Section
3.1(c).
d. Notwithstanding anything to the contrary in Section 3.1, to
the extent that some or all of the Principals and/or their Permitted Transferees
have exercised their right to put some or all their LLC Interests to Holdings
under Section 7.5(a) of the LLC Agreement, (1) the amounts otherwise payable to
those Principals under this Section 3.1 shall be determined as though they had
elected to receive the accelerated payments pursuant to Section 3.1(b) and shall
be multiplied by a percentage equal to the sum of their respective ownership
percentages of Xxxxx Xxxx immediately prior to Closing as set forth in Schedule
4.4(a) hereto, and shall be distributed among them in accordance with those
relative ownership percentages, and (2) unless Section 3.1(c) applies, the
amounts otherwise payable under this Section 3.1 to those Principals who have
not exercised their right to put their LLC Interests to Holdings under Section
7.5(a) of the LLC Agreement shall remain payable at the times they would
otherwise be payable and shall be equal to the amount they would have otherwise
received under this Section 3.1 multiplied by the sum of their respective
ownership percentages of Xxxxx Xxxx immediately prior to Closing as set forth in
Schedule 4.4(a) hereto, and shall be allocated among them in accordance with
those relative ownership percentages.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF XXXXX XXXX AND THE
PRINCIPALS TO HOLDINGS
Xxxxx Xxxx and each Principal, jointly and severally, make each of the
following representations, warranties and agreements to Holdings:
Section 4.1 Organization. Each of Xxxxx Xxxx and the LLC is duly
organized, validly existing and in good standing under California law in the
case of Xxxxx Xxxx and Delaware law in the case of the LLC; and each is duly
qualified to do business in each jurisdiction in which the nature of its
business or the ownership or leasing of its properties requires that
qualification. Xxxxx Xxxx has had in effect a valid and effective election under
Section 1362(a)(2) of the Code to be an S corporation for each taxable year
since its incorporation. Neither Xxxxx Xxxx nor the Principals have
11
taken or will take any action prior to the Effective Time to terminate Xxxxx
Xxxx'x S corporation election.
Section 4.2 Authority. Xxxxx Xxxx and the LLC have all requisite power
and authority to (a) own assets and conduct business as presently carried on and
as contemplated to be carried on after Closing and (b) execute, deliver and
perform this Agreement and each other Transaction Document to which each is a
party. This Agreement and each other Transaction Document to be executed,
delivered and performed by any of Xxxxx Xxxx, the LLC and the Principals in
connection with the transactions contemplated hereby or thereby with respect to
that Person has been duly and validly approved by all necessary action of that
Person. This Agreement and each other Transaction Document to which any of Xxxxx
Xxxx, the LLC or any Principal is a party represents or, when executed, will
represent, the valid and legally binding obligation of that Person, enforceable
against it, him or her in accordance with its terms, except as may be limited by
(i) bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance,
fraudulent transfer or similar laws now or hereafter relating to creditors'
rights generally or (ii) general principles of equity, whether asserted in a
proceeding in equity or at law.
Section 4.3 Governmental Filings; Non-Contravention. Except as set
forth on Schedule 4.3, no notices, reports, applications or other filings are
required to be made by any of Xxxxx Xxxx, the LLC or the Principals with, nor
are any consents, registrations, approvals, permits, Licenses or authorizations
required to be obtained by any of them from, any Governmental Authority in
connection with the execution and delivery of this Agreement and the other
Transaction Documents and the consummation by each such Person of the
transactions contemplated hereby and thereby. Except as set forth on Schedule
4.3, the execution, delivery and performance of this Agreement and each other
Transaction Document to be executed, delivered and performed by any of Xxxxx
Xxxx, the LLC or any Principal in connection with the transactions contemplated
hereby and thereby do not and will not: (a) violate any provision of the
articles of incorporation or bylaws of Xxxxx Xxxx, the LLC Certificate or the
LLC Agreement; (b) violate, conflict with or result in a default under any
material contract or material obligation to which any of Xxxxx Xxxx, the LLC or
any Principal is a party or by which any of that Person's assets are bound; (c)
violate or result in a violation of, or constitute a default, in any material
respect, under any law, regulation or rule, or any order of or restriction
imposed by any court or other Governmental Authority on, any of Xxxxx Xxxx, the
LLC and/or any Principal or any of that Person's properties; (d) require any of
Xxxxx Xxxx, the LLC and/or any Principal to obtain any approval, consent or
waiver of, or make any filing with, any person or entity that has not been
obtained or made, except as contemplated by Section 8.1(b), which approvals,
consents, waivers or filings, as applicable, will have been received prior to
Closing or at any earlier time required hereunder or under applicable laws,
rules and regulations; or (e) result in the creation or imposition of any Lien
on any of the assets of any of Xxxxx Xxxx, the LLC or any Principal.
Section 4.4 Capitalization.
a. The authorized capital stock of Xxxxx Xxxx consists
of 10,000 shares of common stock, no par value per share (the "Shares"). As at
the date hereof, 1,070 shares are outstanding and are validly issued, fully paid
and non-assessable. Schedule 4.4(a) lists by name, address and number of shares
each holder of Shares. Except as set forth in Schedule 4.4(a), there are no (i)
outstanding shares of capital stock or other securities of Xxxxx Xxxx, (ii)
outstanding options, warrants, puts, calls, commitments, agreements, contracts
or preemptive or other rights to purchase, issue or otherwise acquire any
capital stock or other securities of Xxxxx Xxxx or (iii) obligations or
securities convertible
12
into or exchangeable for capital stock or other securities of Xxxxx Xxxx. None
of the Shares is subject to any Lien.
b. After giving effect to the transactions contemplated
hereby, the LLC Agreement, and the Assignment and Assumption Agreement, the
Members and their respective capital account balances and Membership Points in
the LLC shall be as set forth in Schedule 4.4(b) hereto. Except as set forth in
the Transaction Documents, there are no existing rights, agreements or
commitments obligating or that might obligate the LLC or any of its Members to
issue, transfer, sell or redeem any securities.
Section 4.5 Subsidiaries and Other Relationships. Except as set forth
in Schedule 4.5, neither Xxxxx Xxxx nor the LLC: (a) owns, directly or
indirectly, any capital stock of or other equity or proprietary interest in any
Subsidiary or any other corporation, any such interest in any association,
trust, partnership, limited liability company, joint venture or similar entity
or in any other entity or enterprise; (b) is an Affiliate of any other entity
that is not a Principal; or (c) is a party to any joint venture, profit-sharing
or similar agreement regarding the profitability or financial results of any of
Xxxxx Xxxx, the LLC or any Principal or the division of revenues or profits of
any Xxxxx Xxxx, the LLC or any Principal. Neither Xxxxx Xxxx nor the LLC has any
off-balance sheet financial obligation, guaranty or promissory note to any
Person.
Section 4.6 Business. Since their inception, each of Xxxxx Xxxx and the
LLC has been engaged solely in the business of providing bookkeeping, cash flow
management, budgeting, tax preparation, tax planning, insurance consultation and
other services to its clients. Each of Xxxxx Xxxx, the LLC and each Principal is
in material compliance with all federal and state laws. Each of Xxxxx Xxxx and
the LLC has delivered to Holdings true and complete copies of its organizational
documents, as amended to date. Each of Xxxxx Xxxx, the LLC, and each Principal
has all Licenses necessary to own its properties and conduct its business as it
is presently conducted. Neither Xxxxx Xxxx nor the LLC serves as trustee for any
Person.
Section 4.7 Assets. Xxxxx Xxxx and the LLC have good and marketable
title to all of their assets. None of the assets contributed by Xxxxx Xxxx to
the LLC is subject to any Lien in favor of any Person. Neither Xxxxx Xxxx nor
the LLC owns any real property. No personal property owned by any of Xxxxx Xxxx
or the LLC is or, to the Knowledge of Xxxxx Xxxx will be, subject to any Lien
except for minor imperfections of title or insignificant Liens that do not, in
the aggregate, materially detract from the value of Xxxxx Xxxx. Schedule 4.7
hereto lists:
a. All leases for real property by Xxxxx Xxxx or the
LLC, together with the location of that property, monthly lease payments and
lease termination dates, true and complete copies of which have been provided to
Holdings;
b. All personal property leases in which either Xxxxx
Xxxx or the LLC is obligated to make annual lease payments to any Person in
excess of $10,000, true and complete copies of which have been provided to
Holdings; and
c. All personal property owned by either Xxxxx Xxxx or
the LLC, together with the book value thereof that is reflected on the books
either of Xxxxx Xxxx or the LLC (with any personal property owned by a Principal
indicated on Schedule 4.7).
13
d. Certain art owned by Xxxxxx Xxxxx set forth on
Schedule 4.7(d) is not being conveyed to the LLC.
All leases for real or personal property are valid and
effective in accordance with their terms, and there is no existing breach or
event under any lease that, which with the giving of notice, the lapse of time
or both would become a breach, on the part of Xxxxx Xxxx or the LLC or, to the
Knowledge of Xxxxx Xxxx, on the part of any other party thereto.
Section 4.8 Clients and Services.
a. Schedule 4.8(a) lists, as of December 31, 2003, the
names of all of Xxxxx Xxxx'x clients, indicating the date when each first became
a client and which have executed agreements with Xxxxx Xxxx and the fee schedule
with respect to that client. True and complete copies of each agreement listed
in Schedule 4.8(a) have been delivered to Holdings.
b. Except as set forth in Schedule 4.8(b), neither Xxxxx
Xxxx nor any employee of Xxxxx Xxxx has paid, nor will the LLC or any employee
of the LLC pay, any Person, directly or indirectly, for soliciting business of
any kind for Xxxxx Xxxx or the LLC.
Section 4.9 Receivables. All accounts receivable set forth on the books
and records of Xxxxx Xxxx are (a) accurately reflected in Xxxxx Xxxx'x books and
records, (b) valid receivables owned by Xxxxx Xxxx, free and clear of any Lien
and (c) to the Knowledge of Xxxxx Xxxx, not subject to setoffs or counterclaims.
Section 4.10 Contracts. All contracts to which either Xxxxx Xxxx or the
LLC is a party or by which either of them is bound are enforceable against that
Person and, to the Knowledge of Xxxxx Xxxx, the other parties thereto in
accordance with their respective terms. There is not under any such contract an
existing material breach or event that, with the giving of notice or the lapse
of time or both, would become a material breach or event, on the part of Xxxxx
Xxxx or the LLC, or, to the Knowledge of Xxxxx Xxxx, on the part of any other
party thereto. Schedule 4.10 lists all material contracts to which either Xxxxx
Xxxx or the LLC is a party or by which either of them is bound together with a
list of any material contract to which either Xxxxx Xxxx or the LLC is a party
or by which any of them is bound where the consent or approval of the other
party(ies) to that contract is required for the consummation of the transactions
contemplated hereby. True and complete copies of all contracts listed in
Schedule 4.10 have been provided to Holdings.
Section 4.11 Employment Arrangements. Except as set forth in Schedule
4.11 hereto, neither Xxxxx Xxxx nor the LLC has any obligation, contingent or
otherwise, under (a) any written or oral employment, collective bargaining or
other labor agreement, (b) any written or oral agreement containing severance or
termination pay arrangements, (c) any written or oral deferred compensation
agreement, retainer or consulting arrangement, (d) any pension or retirement
plan, bonus or profit-sharing plan or stock option or stock purchase plan
(except any Seller Employee Plan listed on Schedule 4.21(d) hereto) or (e) any
other written or oral employee contract or non-terminable employment arrangement
(each, an "Employment Arrangement"). Neither Xxxxx Xxxx nor the LLC is in
default with respect to any term or condition of any Employment Arrangement.
14
Section 4.12 Financial Statements.
a. Xxxxx Xxxx has delivered to Holdings unaudited
balance sheets, income statements and statements of cash flows of Xxxxx Xxxx as
of December 31, 2003 (collectively, the "Financial Statements"), as set forth in
Schedule 4.12(a) hereto.
b. The Financial Statements, subject to the
qualifications and exceptions noted thereon or in the notes thereto: (i) are
accurate and complete in accordance with the books of account and records of
Xxxxx Xxxx; (ii) have been prepared on a cash basis; and (iii) fairly present in
all material respects the financial condition, assets and liabilities and
results of operations of Xxxxx Xxxx, as of the dates thereof or for the periods
then ended.
c. Except as set forth in Schedule 4.12(c), neither
Xxxxx Xxxx nor the LLC has any debt, obligation or liability, absolute, fixed,
contingent or otherwise, of any nature whatsoever, whether due or to become due,
including any unasserted claim, whether incurred directly or by any predecessor
thereto, and whether arising out of any act, omission, transaction,
circumstance, sale of goods or services, state of facts or other condition,
except: (i) those reflected or reserved against on the Financial Statements in
the amounts shown therein; and (ii) those incurred in the ordinary course of
business since the date of the Financial Statements.
Section 4.13 Material Adverse Change. Since December 31, 2003, no event
or condition, individually or in the aggregate, has had a Material Adverse
Effect on Xxxxx Xxxx or the LLC, taken as a whole, and, to the Knowledge of
Xxxxx Xxxx, there is no impending event or condition that would have a Material
Adverse Effect on Xxxxx Xxxx and the LLC, taken as a whole.
Section 4.14 Ordinary Course of Business. Since the date of the
Financial Statements, Xxxxx Xxxx has operated its business in the normal, usual
and customary manner in the ordinary and regular course of business, consistent
in all material respects with prior practice.
Section 4.15 Litigation and Compliance with Laws.
a. There are no orders, writs, injunctions, decrees or
unsatisfied judgments, and no actions, suits, claims or proceedings or
investigations pending or, to the Knowledge of Xxxxx Xxxx, threatened against
any of Xxxxx Xxxx, the LLC or any Principal for any of their past or current
business activities.
b. (1) Except as set forth in Schedule 4.15, each
of Xxxxx Xxxx, the LLC and the Principals are currently and, during the past
five years (or, with respect to the LLC, such shorter time that it has been in
existence), have been, operating in compliance in all material respects with all
laws, rules, regulations and orders applicable to that Person's business, and:
(A) None of Xxxxx Xxxx, the LLC or any
Principal nor, to the Knowledge of Xxxxx Xxxx, any Person "associated" (as that
term is defined under the Advisers Act) with any of Xxxxx Xxxx, the LLC or any
Principal has, within five years prior to the date hereof (or, with respect to
the LLC, such shorter time that it has been in existence), been convicted of any
crime or is or has been subject to any disqualification in each case that would
be the basis for denial, suspension or revocation of registration of an
investment adviser under Section 203(e) or 206(4) of the Advisers Act or Rule
206(4)-4(b) thereunder or for disqualification as an investment adviser for
15
any investment company pursuant to Section 9 of the Investment Company Act of
1940, as amended; and
(B) None of any of Xxxxx Xxxx, the LLC
or any Principal, nor to the Knowledge of Xxxxx Xxxx, any Affiliate of Xxxxx
Xxxx, the LLC or any Principal, (i) is subject to a "statutory disqualification"
as defined in Section 3(a)(39) of the Exchange Act or is subject to a
disqualification that would be a basis for censure, limitations on the
activities, functions or operations of, or suspension or revocation of
registration as a broker-dealer, municipal securities dealer, government
securities broker or government securities dealer under Section 15, Section 15B
or Section 15C of the Exchange Act, or (ii) is subject to a disqualification
that would be the basis for censure, denial, suspension or revocation of a
certificate as an investment adviser under Sections 25232 or 25232.1 of the
California Corporate Securities Law of 1968, and, to the Knowledge of Xxxxx
Xxxx, there is no reasonable basis for, or proceeding or investigation, whether
formal or informal or whether preliminary or otherwise, that is reasonably
likely to result in, any such censure, denial, limitations, suspension or
revocation.
(2) Without limiting the generality of the
foregoing, (a) the information to be filed with the Securities Regulation
Division of the California Department of Corporations with respect to the
licensing of the LLC, the Management Company, their associated persons and the
Principals as investment advisers or investment adviser representatives, as the
case may be, (b) the information to be filed with respect to the licensing of at
least two individuals as tax preparers under the provisions of California
Business and Professions Code Sections 22250-22258 and (c) the information to be
filed to cause Xxxxx Xxxx, or a new entity to be formed by the Principals, to be
licensed as a public accounting firm by the California State Board of
Accountancy, when filed shall comply in all material respects with applicable
rules and regulations and shall not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances in which
they were made, not misleading.
c. None of Xxxxx Xxxx, the LLC nor any Principal is in
default with respect to any judgment, order, writ, injunction, decree, demand or
assessment issued by any court or any federal, state, municipal or other
governmental agency, board, commission, bureau, instrumentality or department,
domestic or foreign, relating to any aspect of the business, affairs, properties
or assets of that Person, provided that the foregoing representation and
warranty does not apply to minor traffic violations.
d. None of any of Xxxxx Xxxx, the LLC nor any Principal
is charged or, to the Knowledge of Xxxxx Xxxx, threatened with or under
investigation with respect to any violation of any federal, state, municipal or
other law or any administrative rule or regulation, domestic or foreign,
applicable to the business, affairs, properties or assets of that Person;
provided, however, that the foregoing representation and warranty does not apply
to minor traffic violations.
Section 4.16 Environmental Matters.
a. Each of Xxxxx Xxxx and the LLC is currently and
during the preceding five years (or, with respect to the LLC, such shorter time
that it has been in existence) has operated its business at the properties
identified in Schedule 4.7 ("Leased Real Property") in material compliance with
all applicable federal, state and local statutes, ordinances, regulations and
rules enacted or promulgated to protect air, water, land and human health and
welfare (including, without limitation,
16
amendments thereto (collectively, "Environmental Laws"), and in accordance with
the terms of all leases addressing Environmental Laws.
b. Neither Xxxxx Xxxx nor the LLC is subject to any
liability, penalty or expense (including legal fees) by virtue of:
(1) Any violation of any Environmental Law;
(2) Any activity conducted on or with respect to
any property owned or leased by that Person;
(3) Any environmental condition existing on or
with respect to any property owned or leased by that Person,
in each case whether or not that Person permitted or
participated in that act or omission;
(4) Any off-site transportation, storage,
treatment or disposal of any hazardous substance or waste; and
(5) The presence of polychlorinated biphenyls,
asbestos-containing material, urea formaldehyde insulation or
storage tanks at any Leased Real Property.
c. To the Knowledge of Xxxxx Xxxx, none of the Leased
Real Property is listed or proposed for listing on the National Priorities List
Pursuant to the Comprehensive Environmental Response Compensation and Liability
Act of 1980, as amended, or any state or local list of sites requiring
investigation or cleanup.
d. Each of Xxxxx Xxxx and the LLC has furnished Holdings
copies of all environmental reports, studies or audits in its possession
conducted on its behalf relating to the Leased Real Property.
e. Neither Xxxxx Xxxx nor the LLC has received any
communication from a Governmental Authority requesting information relating to
any environmental condition on the Leased Real Property.
Section 4.17 Broker Dealer. None of Xxxxx Xxxx, the LLC or any
Principal is a "broker" or "dealer" that is registered or required to be
registered with the SEC pursuant to the Exchange Act, with any self-regulatory
organization (including, without limitation, the NASD) pursuant to its
membership and registration rules or with any state pursuant to any applicable
state securities law.
Section 4.18 Insurance Policies. Each of Xxxxx Xxxx and the LLC has in
full force and effect insurance that management has reasonably determined is
prudent with respect to its business, properties and assets (including, without
limitation, errors and omissions liability insurance) as listed in Schedule 4.18
attached hereto. Neither Xxxxx Xxxx nor the LLC is in material default under any
such policy, and each will use commercially reasonable efforts to continue those
policies in full force and effect.
Section 4.19 Tax Matters. Each of Xxxxx Xxxx, each Principal and the
LLC has (a) paid or caused to be paid all federal, state, county, local, foreign
and other taxes (including, without limitation, income, excise, property,
withholding, sales, use and franchise taxes, unemployment
17
insurance, social security, gross receipt taxes, occupation taxes and other
similar obligations) and all deficiencies or additions to tax, interest, fines
and penalties (collectively, "Taxes") required to be paid by him, her or it
(other than, with respect to Xxxxx Xxxx, current taxes the liability for which
is adequately provided for in the Financial Statements) and (b) in accordance
with applicable law, filed all federal, state, county, local and foreign tax
returns required to be filed by him, her or it. All such returns correctly and
accurately set forth the amount of any Taxes relating to the applicable period.
No taxing authority is now asserting or, to the Knowledge of Xxxxx Xxxx,
threatening to assert against any of them any deficiency or claim for additional
taxes.
Section 4.20 Certain Transactions. Other than as contemplated by this
Agreement, the Transaction Documents or any schedule or exhibit hereto or
thereto, no officer, director, stockholder, partner or member of any of Xxxxx
Xxxx, the LLC and/or any Principal is presently a party to any material
transaction with any of Xxxxx Xxxx, the LLC and/or any Principal (including,
without limitation, any material contract, agreement or other material
arrangement providing for the furnishing of services to or by or otherwise
requiring payments to or from any such Person, any member of the Immediate
Family of any such Person or any corporation, partnership, trust, limited
liability company or other entity in which any such Person or any member of the
Immediate Family of any such Person has an interest or is an officer, director,
stockholder, trustee, member or partner). Without limiting the foregoing,
neither Xxxxx Xxxx, the LLC nor any Principal receives or is entitled to any
referral or other fee for recommending an investment adviser, insurer,
accountant, broker-dealer, trustee or other service provider to any of its
clients.
Section 4.21 Employee Benefit Plans.
a. Each Seller Employee Plan (as that term is defined in
Section 4.21(d) below) has at all times complied with all applicable laws,
including the Code and ERISA. Except as set forth below, each Seller Employee
Plan that is maintained as of the Closing Date and that is intended to be
qualified under Section 401(a) of the Code (each, a "Seller Qualified Plan") is,
in its current form, subject to a determination letter issued by the Internal
Revenue Service with respect to its tax-qualified status, and those
qualification requirements of Section 401(a) of the Code that are, under
Internal Revenue Service rules, covered by a basic determination letter. The
Grant Xxxx Xxxxxx & Xxxxxx, Inc. 401(k) Plan (the "401(k) Plan") is not the
subject of a determination letter. The 401(k) Plan utilizes City National Bank's
"GUST" prototype plan, and that plan's sponsor is relying upon the opinion
letter received by City National Bank expressing the Internal Revenue Service's
favorable opinion as to the form of the prototype plan. Schedule 4.21(a) sets
forth a list of each amendment to each Seller Qualified Plan adopted on or after
the date on which an application for a favorable determination letter was made,
or in the case of the 401(k) Plan, the date of adoption of the GUST prototype
plan. To the Knowledge of Xxxxx Xxxx, no event or omission has occurred which
could cause any such Seller Qualified Plan not to be so qualified or for any
trust thereunder not to be tax-exempt under Section 501(a) of the Code.
b. Neither Xxxxx Xxxx nor the LLC now has, or within the
past ten years had, an obligation to contribute to a Multiemployer Plan (as
defined in Section 4001(a)(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")), or, except as disclosed on Schedule 4.21(b), any
other Plan subject to Title IV of ERISA. Neither Xxxxx Xxxx nor the LLC has,
within the past ten years, ever promised or provided health care or other
non-pension benefits to its former employees (other than "Continuation Coverage"
under the Consolidated Omnibus Reconciliation Act of 1985 required to be
provided by Part 6 of Subtitle B of Title I of ERISA ("COBRA")), nor are any
such benefits provided for in any Seller Employee Plan. Schedule 4.21(b)
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lists each qualified beneficiary (as defined for purposes of COBRA) receiving
benefits under COBRA as of the Closing Date and the aggregate amount of claims
made by such beneficiary under COBRA.
c. With respect to each Seller Employee Plan, there has
been no transaction prohibited by Section 406 of ERISA or Section 4975 of the
Code that could result in any tax, penalty or liability of Xxxxx Xxxx or the
LLC. There are no material actions, suits or claims pending or threatened with
respect to any Seller Employee Plan.
d. The term "Employee Plan" or "Plan" includes (i) any
"employee benefit plan" as defined in Section 3(3) of ERISA, (ii) any
profit-sharing, deferred compensation, bonus, stock option, stock purchase,
pension, retainer, consulting, retirement severance, welfare or incentive plan,
agreement or arrangement, and (iii) any plan, agreement or arrangement providing
for fringe benefits or perquisites to employees, officers, directors or agents,
including but not limited to benefits relating to automobiles, clubs, vacation,
child care, parenting, sabbatical, sick leave, medical, dental, hospitalization,
life insurance and other types of insurance. Schedule 4.21(d) hereto is a list
of each Employee Plan that either Xxxxx Xxxx or the LLC now maintains,
contributes to or provides benefits under or has, within the past ten years,
established, maintained, contributed to or provided benefits under (each a
"Seller Employee Plan"). Xxxxx Xxxx has delivered to Holdings, to the extent
applicable, true and complete copies of all documents and summary plan
descriptions of the Seller Employee Plans, including amendments thereto, and
complete copies of the most recent Form 5500 filed with respect to that Seller
Employee Plan.
e. There is no matter pending with respect to any Plan
before the Internal Revenue Service, the Pension Benefit Guaranty Corporation
(the "PBGC"), the U.S. Department of Labor or any other Governmental Authority.
f. Each of Xxxxx Xxxx and the LLC has made full and
timely payment of all amounts that are required under the terms of each Seller
Employee Plan and any related trust or collective bargaining agreement or that
are otherwise required by law to be paid as a contribution to each such Seller
Employee Plan with respect to all periods through the Closing. No accumulated
funding deficiency (as defined in Section 302 of ERISA and Section 412 of the
Code) exists nor has any funding waiver from the IRS been received or requested
with respect to any Seller Employee Plan. No excise tax or other taxes are due
or owing because of any failure to comply with the minimum funding standards of
the Code and ERISA with respect to any Seller Employee Plan. With respect to
each Seller Employee Plan that is subject to Title IV of ERISA, (i) neither
Xxxxx Xxxx nor the LLC has filed a notice of intent to terminate any such Seller
Employer Plan or adopted any amendment to treat any such Seller Employee Plan as
terminated, (ii) the PBGC has not instituted proceedings to terminate any such
Seller Employee Benefit Plan, (iii) no other event or condition has occurred
that might constitute grounds under Section 4042 of ERISA for the termination
of, or the appointment of a trustee to administer, any such Seller Employee
Plan, (iv) all required premium payments to the PBGC have been paid when due,
(v) no reportable event (as described in Section 4043 of ERISA) has occurred
with respect to any such Seller Employee Plan, (vi) no excise taxes are payable
under the Code, and (vii) no amendment with respect to which security is
required under Section 307 of ERISA has been made or is reasonably expected to
be made. All costs of any Seller Employee Plans subject to Title IV of ERISA
have been provided for on the basis of consistent methods in accordance with
sound actuarial assumptions and practices. Schedule 4.21(f) includes for each
Seller Employee Plan, as of its last valuation date, the amount by which its
assets exceeded (or were less than) its "benefit liabilities" (within the
meaning of Section 4001(a)(16) of ERISA). Since
19
the last valuation date for each such Seller Employer Plan, there has been no
amendment or change to such Seller Employer Plan that would increase the amount
of benefits thereunder and, to the Knowledge of Xxxxx Xxxx, there has been no
event or occurrence that would cause the excess of assets over benefit
liabilities as listed in Schedule 4.21(f) to be reduced or the amount by which
benefit liabilities exceed assets as listed in Schedule 4.21(f) to be increased.
g. There has been no act or omission by Xxxxx Xxxx or
the LLC that has given rise to or may give rise to fines, penalties, taxes, or
related charges under Section 402(c), (i) or (l) or Section 4071 of ERISA or
Chapter 43 of the Code of the imposition of a lien pursuant to Sections
401(a)(29) or 412(n) of the Code or pursuant to ERISA.
h. Neither Xxxxx Xxxx nor the LLC is required to be
aggregated with any other entity under Sections 414(b), (c), (m) or (o) of the
Code.
i. To the Knowledge of Xxxxx Xxxx, there are no claims
(other than routine claims for benefits) pending or threatened with respect to
any Seller Employee Plan and no facts exist which could give rise to any such
claim.
Section 4.22 Brokerage. None of any of Xxxxx Xxxx, the LLC or any
Principal has incurred any obligation for a brokerage commission or finders' fee
in connection with the transactions contemplated hereby. Xxxxx Xxxx and the
Principals shall, jointly and separately, indemnify Holdings for any liability
to any broker other than Berkshire.
Section 4.23 Access to Information.
a. Each Principal acknowledges that Holdings has not
provided that Principal with information regarding Xxxxx Xxxx because that
Principal, as a result his or her position with Xxxxx Xxxx, has access to all
information, financial or otherwise, regarding Xxxxx Xxxx necessary for that
Principal to determine whether to execute this Agreement and otherwise
participate in the transactions contemplated hereby.
b. Each Principal acknowledges that his or her residence
is set forth under his or her name on the signature pages to this Agreement.
Section 4.24 Privacy. Each of Xxxxx Xxxx and the LLC complies in all
material respects with all applicable U.S. federal and state privacy laws in
effect prior to the date of this Agreement, including, without limitation, Title
V of the Xxxxx-Xxxxx-Xxxxxx Act, the Fair Credit Reporting Act and any and all
applicable regulations implementing either act.
Section 4.25 No Known Regulatory Delays. To the Knowledge of Xxxxx
Xxxx, there is no reason to believe that Xxxxx Xxxx, the Management Company, the
LLC and the Principals will be unable to obtain all Licenses, consents and
permits from all Governmental Authorities and other Persons necessary to
complete the transactions contemplated by this Agreement promptly and without
undue delay, expense or restriction.
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ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF HOLDINGS TO XXXXX XXXX AND THE PRINCIPALS
Holdings represents and warrants to Xxxxx Xxxx and each Principal that:
Section 5.1 Organization. Each of Holdings and WTC is a corporation
duly organized, validly existing and in good standing under Delaware law.
Section 5.2 Authority. Each of Holdings and WTC has all requisite power
and authority to (a) own its assets and conduct its business and (b) execute,
deliver and perform this Agreement and the other Transaction Documents to be
executed, delivered and performed by it in connection with this Agreement and
the transactions contemplated hereby and thereby. This Agreement and each other
Transaction Document to be executed, delivered and performed by Holdings in
connection with the transactions contemplated hereby have been duly and validly
approved by all necessary corporate action. This Agreement and each other
Transaction Document to which Holdings is a party represents, or when executed
will represent, its valid and legally binding obligation, enforceable against it
in accordance with its terms, except as may be limited by (i) bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance, fraudulent
transfer or similar laws now or hereafter in effect affecting creditors; rights
generally or (ii) general principles of equity, whether asserted in a proceeding
in equity or at law.
Section 5.3 Governmental Filings; Non-Contravention. Other than the
filings and/or notices set forth in Schedule 5.3 (including those (a) under the
HSR Act (if Holdings determines that a filing under that act is required), the
Exchange Act and the Securities Act, and with the NYSE and (b) required to be
made with the Federal Reserve Bank of Philadelphia), no notices, reports,
applications or other filings are required to be made by Holdings with, nor are
any Licenses, consents, registrations, approvals, permits or authorizations
required to be obtained by it from, any Governmental Authority in connection
with the execution and delivery of this Agreement and the other Transaction
Documents, and the consummation by Holdings of the transactions contemplated
hereby and thereby. Subject to the making or obtaining of all filings, notices,
applications, Licenses, consents, registrations, approvals, permits or
authorizations with or of any relevant Government Authority with respect to the
transactions contemplated by this Agreement and the other Transaction Documents
as set forth in Schedule 5.3, the execution, delivery and performance of this
Agreement and each other Transaction Document to be executed, delivered and
performed by Holdings or WTC in connection with the transactions contemplated
hereby and thereby does not and will not: (a) violate any provision of its
charter or bylaws; (b) violate, conflict with or result in a default under any
contract or obligation to which Holdings or WTC is a party or by which it or its
assets are bound; (c) violate or result in a violation of, or constitute a
default under, any law, regulation or rule, or any order of or restriction
imposed by any court or other Governmental Agency on Holdings or WTC or any of
their respective properties; and (d) except with respect to a post-Effective
Time notice to be filed or cause to be filed by WTC with the Federal Reserve
Bank of Philadelphia and as contemplated by Section 8.1(b) hereof, require
Holdings or WTC to obtain any approval, consent or waiver of, or make any filing
with, any Governmental Authority that has not been obtained or made, except for
approvals, consents, waivers or filings, as applicable, that are set forth in
Schedule 5.3 and that will have been received prior to Closing or at any earlier
time required hereunder or under applicable laws, rules and regulations.
21
Section 5.4 Litigation and Compliance with Laws.
a. Except as set forth on Schedule 5.4, there are no
orders, writs, injunctions, decrees or unsatisfied judgments, and no actions,
claims, suits, proceedings or investigations pending or, to Holdings' or WTC's
Knowledge, threatened against Holdings or WTC that, if adversely determined,
might call into question the validity or hinder or delay the enforceability or
performance of this Agreement or any other Transaction Document or have a
Material Adverse Effect on Holdings and WTC or their respective assets or
properties, taken as a whole. Except as set forth on Schedule 5.4, each of
Holdings and WTC is and, during the past five years (or, with respect to
Holdings, such shorter time that it has been in existence) has been, operating
in material compliance with all laws and governmental rules and regulations,
domestic or foreign (including, without limitation, all federal and state
securities laws), applicable to the business, affairs, properties and assets of
Holdings or WTC, as the case maybe. Except as set forth in Schedule 5.4, neither
Holdings nor WTC is in default with respect to any judgment, order, writ,
injunction, decree, demand or assessment issued by any court or any federal,
state, municipal or other governmental agency, board, commission, bureau,
instrumentality or department, domestic or foreign, relating to any aspect of
its business, affairs, properties or assets. Except as set forth in Schedule
5.4, neither Holdings nor WTC has been charged or, to Holdings' Knowledge,
threatened with or is under investigation with respect to any violation of any
federal, state, municipal or other law or any administrative rule or regulation,
domestic or foreign, affecting Holdings or WTC or the transactions contemplated
hereby.
b. To Holdings' Knowledge, neither Holdings, WTC nor any
Person "associated" (as that term is defined under the Advisers Act) with
Holdings or WTC has, within five years prior to the date hereof, been convicted
of any crime or is or has been subject to any disqualification in each case that
would be the basis for denial, suspension or revocation of registration of an
investment adviser under Section 203(e) or 206(4) of the Advisers Act or Rule
206(4)-4(b) thereunder or for disqualification as an investment adviser for any
investment company pursuant to Section 9 of the Investment Company Act of 1940,
as amended.
c. To Holdings' Knowledge, none of Holdings, WTC nor any
Affiliate of Holdings or WTC is subject to a "statutory disqualification" as
defined in Section 3(a)(39) of the Exchange Act or is subject to a
disqualification that would be a basis for censure, limitation on the
activities, functions or operations of, or suspension or revocation of the
registration of any Affiliate of Holdings or WTC as a broker-dealer, municipal
securities dealer, government securities broker or government securities dealer
under Section 15, Section 15B or Section 15C of the Exchange Act, and, to
Holdings' Knowledge, there is no reasonable basis for, or proceeding or
investigation, whether formal or informal or whether preliminary or otherwise,
that is reasonably likely to result in, any such censure, limitation, suspension
or revocation.
Section 5.5 Investment Representations.
a. Holdings will acquire its LLC Interest under the
terms of this Agreement for its own account for investment and not with a view
to or for sale in connection with any distribution thereof or with any present
intention of selling or distributing all or any part thereof. Holdings
acknowledges that the LLC Interests have not been registered under the
Securities Act or the securities laws of any state or other jurisdiction, and
cannot be disposed of unless registered under the Securities Act and any
applicable state laws or an exemption from that registration is available.
22
b. Holdings is sufficiently knowledgeable and
experienced in making investments of this type as to be able to evaluate the
risks and merits of its investment in LLC Interests and is able to bear the
economic risk of its investment in the LLC. Holdings acknowledges that the LLC
Interests are illiquid, that no market for the LLC Interests exists and that
none is contemplated to be created.
c. Holdings is an "accredited investor" within the
meaning of Rule 501(a) under the Securities Act.
Section 5.6 No Known Regulatory Delays. Holdings has no Knowledge or
reason to believe that it will be unable to obtain all Licenses, consents and
permits from all Governmental Authorities and other Persons necessary to
complete the transactions contemplated by this Agreement promptly and without
undue delay, expense or restriction.
Section 5.7 Brokerage. Holdings has not incurred any obligation for a
brokerage commission or finders' fee in connection with the transactions
contemplated hereby other than to Berkshire Capital Corporation ("Berkshire").
Holdings shall indemnify Xxxxx Xxxx and the Principals for any liability to
Berkshire for a brokerage fee in connection with the transactions contemplated
hereby.
ARTICLE 6
COVENANTS OF XXXXX XXXX AND THE PRINCIPALS
Xxxxx Xxxx and each Principal covenants as follows:
Section 6.1 Notice to Clients. As soon as practicable after the date
hereof, Xxxxx Xxxx shall notify each of its clients of the transactions
contemplated hereby and by the other Transaction Documents. That notice shall be
in the form of Exhibit H and shall indicate that Xxxxx Xxxx will assume that
each client consents to those transactions unless the client notifies Xxxxx Xxxx
otherwise. Xxxxx Xxxx shall keep a record indicating when and by what means each
client was contacted, and shall provide Holdings with an opportunity to review
that record prior to Closing.
Section 6.2 Conduct of Business. Until Closing, except as specifically
contemplated by this Agreement, without Holdings' prior written consent:
a. The business of Xxxxx Xxxx shall be conducted only in
the ordinary course, in a manner consistent in all material respects with past
practices and in compliance in all material respects with all applicable laws,
rules and regulations;
b. Neither Xxxxx Xxxx nor any Principal shall in any
capacity make or assist in making any change in the charter documents or bylaws
of Xxxxx Xxxx;
c. Neither Xxxxx Xxxx nor any Principal shall acquire
any asset or make any capital expenditure, or sell, lease or dispose of any
asset other than (i) in the ordinary course of business and (ii) in an amount
not to exceed $100,000;
23
d. Neither Xxxxx Xxxx nor any Principal shall permit any
Person to mortgage, pledge, subject to or permit to exist any Lien on any
property or asset of Xxxxx Xxxx except for minor imperfections of title or
insignificant Liens that do not, in the aggregate, materially detract from the
value of Xxxxx Xxxx (and Xxxxx Xxxx shall not, nor shall any Principal permit
Xxxxx Xxxx to, mortgage, pledge, subject to or permit to exist any Lien on, any
properties, assets or contracts that are to be acquired by the LLC pursuant to
the Transaction Documents);
x. Xxxxx Tani shall not issue any (i) shares of its
capital stock or other securities, (ii) options, warrants, puts, calls,
commitments, agreements, contracts or preemptive or other rights to purchase,
issue or otherwise acquire any capital stock or other securities of Xxxxx Xxxx
or (iii) obligations or securities convertible into or exchangeable for capital
stock or other securities of Xxxxx Xxxx;
x. Xxxxx Tani shall not declare or pay any dividend or
distribution on its capital stock or other securities, whether in the form of
cash, capital stock or other securities, except that, prior to Closing, Xxxxx
Xxxx will distribute to (1) employees who are not Principals $[*],
representing half of the retention bonuses payable to those employees, and (2)
the Principals amounts consistent with past practices, including distributing
all excess cash held on or before Closing except for $[*], representing one
month's expenses for Xxxxx Xxxx, which shall be contributed to the LLC; and
x. Xxxxx Tani shall cause the LLC not to conduct any
business or take any actions, other than as specifically contemplated in Recital
E to this Agreement.
Section 6.3 Preservation of Business and Assets.
a. Until Closing, except as contemplated hereby, each of
Xxxxx Xxxx and the Principals shall use his, her or its reasonable best efforts
to: (1) preserve the current business of Xxxxx Xxxx; (2) except for those
clients set forth in Schedule 1(uu), maintain the present clients of Xxxxx Xxxx,
in each case on terms substantially equivalent to the terms of the existing
agreements between those clients and Xxxxx Xxxx in effect on the date hereof;
and (3) preserve the goodwill of Xxxxx Xxxx.
b. Except for the transactions contemplated by the
Transaction Documents prior to Closing, Xxxxx Xxxx shall not materially change
the fundamental nature or characteristics of its business from the business
conducted as of the date hereof without Holdings' prior written consent.
Section 6.4 Standstill. The relative interests of the Principals in
Xxxxx Xxxx as of the date hereof may not be altered without Holdings' prior
written consent.
Section 6.5 Non-Competition. With respect to each Principal, for a
period commencing on the Closing Date and terminating on the later of (a) the
fifth anniversary of the Closing Date or (b) the first anniversary of the
termination of each Principal's employment with the Management Company (the
"Restricted Period"), that Principal shall not, for whatever reason, whether for
his or her account or for the account of any other Person, without the prior
written consent of the LLC and the Management Company, as a shareholder,
employee, partner, member, board member, consultant, independent contractor,
representative or otherwise, engage in any business competitive with any
business conducted by any of the Xxxxx Xxxx Entities at any time during the
Restricted Period, in the Xxxxxxxxxxxx Xxxxxxxxxxx Xxxx xx Xxx Xxxxxxx,
Xxxxxxxxxx (the "Restricted Area"). Notwithstanding the foregoing, nothing
herein shall prohibit that Principal from being a shareholder or equity holder
24
in any publicly-traded entity whose business is competitive with, the business
heretofore conducted, or conducted at any time during the Restricted Period and
in the Restricted Area, by any of the Xxxxx Xxxx Entities, as long as that
Principal does not hold more than a three percent equity interest in that
publicly-traded entity. Each Principal acknowledges that the restrictions set
forth in this Section 6.5, including the Restricted Period and the Restricted
Area, are made in connection with the sale of substantially all of the assets of
Xxxxx Xxxx, including the goodwill of that business, and are intended to comply
with the California Business and Professions Code Section 16601.
The restrictions set forth in this Section 6.5 shall not apply (1) to a
Principal whose employment with the LLC and each of its Subsidiaries or by the
Management Company is terminated by the LLC and those Subsidiaries or by the
Management Company without Cause or by that Principal for Good Reason, (2) to a
Principal if a Change of Control occurs and Holdings and its Permitted
Transferees or WTC's successor, as the case may be, purchase all of the
Principal's LLC Interests (including his or her Derivative Share (as that term
is defined in the LLC Agreement) and the LLC Interests held by his or her
Permitted Transferees (as that term is defined in the LLC Agreement)) pursuant
to Section 7.5(a) of the LLC Agreement or (3) if the LLC is liquidated and its
business is not continued by a successor entity.
Section 6.6 Specific Performance. The Principals acknowledge that it is
fair and reasonable that they make the covenants set forth in Section 6.5, and
have done so with the benefit of the advice of counsel. In addition, the
Principals acknowledge that any breach or attempted breach by any of them of the
provisions of Section 6.5 will cause irreparable harm to Holdings, WTC, their
respective Affiliates and each Xxxxx Xxxx Entity, for which monetary damages
will not be an adequate remedy. Accordingly, Holdings, WTC, their respective
Affiliates and each Xxxxx Xxxx Entity shall be entitled to apply for and obtain
injunctive relief (temporary, preliminary and permanent) to restrain the breach
or threatened breach of, or otherwise to specifically enforce, any provision of
Section 6.5, without the requirement to post a bond or provide other security.
Nothing herein shall be construed as a limitation or waiver of any other right
or remedy that may be available to Holdings, WTC, their respective Affiliates or
a Xxxxx Xxxx Entity for that breach or threatened breach. For emergency relief
(including temporary and preliminary injunctive relief), an application may be
made in any court of competent jurisdiction. The Principals further agree that
the subject matter and duration of the restrictions covered herein are
reasonable in light of the facts as they exist today. If any restriction
contained in Section 6.5 is deemed unreasonable by a court, it shall, to the
extent permitted by applicable law, be reduced to the maximum restriction that
is enforceable under such law.
Section 6.7 Licensing; Client Agreements.
a. (1) As soon as practicable after the date
hereof, Xxxxx Xxxx and the Principals shall cause the LLC and the Management
Company and/or any Principal to be licensed as investment advisers and the
Principals and associated persons of the LLC and of the Management Company to be
licensed as investment adviser representatives with the Securities Regulation
Division of the California Department of Corporations. Xxxxx Xxxx shall provide
Holdings with evidence that the LLC, the Principals and the Management Company
have obtained any such licenses promptly after they are obtained.
(2) As soon as practicable after such licenses
have been obtained, Xxxxx Xxxx shall cause the LLC to enter into a written
agreement, in a form substantially similar to Exhibit C hereto except as that
form may be revised to incorporate revisions requested by the California
25
Department of Corporations (a "Client Agreement"), with each client to or for
whom the LLC or any Principal proposes to provide investment advice (including,
without limitation, suggesting investment advisers or investment managers or
monitoring or recommending investments) whether by itself, as a general partner
or managing member of any entity or otherwise. Xxxxx Xxxx shall provide Holdings
with copies of all such agreements promptly after they are fully executed.
b. As soon as practicable after the date
hereof, Xxxxx Xxxx shall cause at least two individuals who will primarily be
responsible for preparing and signing client tax returns on behalf of the LLC to
be licensed as tax preparers under the provisions of California Business and
Professions Code Sections 22250-22258. Xxxxx Xxxx shall provide Holdings with
evidence that those licenses have been obtained promptly after they are
obtained.
c. As soon as practicable after the date
hereof, Xxxxx Xxxx and the Principals shall cause Xxxxx Xxxx to be licensed as a
public accounting firm by the California State Board of Accountancy. Xxxxx Xxxx
shall provide Holdings with evidence that license has been obtained promptly
after it is obtained. After that license has been obtained, the Principals shall
cause Xxxxx Xxxx to enter into an agreement with the LLC under which Xxxxx Xxxx
would issue financial reports with a cover letter in compliance with
professional standards under California law on behalf of the LLC at a fee not to
exceed $[*] per report.
Section 6.8 Assignment and Assumption Agreement and Original LLC
Agreement. Prior to Closing, Xxxxx Xxxx and the Second Member shall consummate
the transactions contemplated by the Assignment and Assumption Agreement and
execute the Original LLC Agreement.
ARTICLE 7
COVENANTS OF HOLDINGS
Section 7.1 Business Benefits. The LLC shall have the right to elect,
on or prior to six months after the Closing Date, to have the officers and
employees of the LLC (or the Management Company, if such Persons are employed by
the Management Company) participate in some or all of the then-existing employee
benefit plans of WTC (other than WTC bonus or incentive plans or defined benefit
plans) at the cost of the LLC (or the Management Company, if those Persons are
employed by the Management Company); provided, however, that (a) once the
election to participate or not participate in a particular plan is made it
cannot be changed without Holdings' written consent, which shall not be
unreasonably withheld, (b) those officers and employees are otherwise eligible
to participate in those plans in accordance with their terms and (c) nothing
herein shall entitle such an officer or employee to participate in a plan where
participation is not based solely on eligibility criteria set forth in the plan.
With respect to the WTC employee benefit plans, Holdings agrees that years of
service with Xxxxx Xxxx shall be deemed to be years of service with WTC.
Holdings shall pay the cost of (x) quarterly reviews of the LLC's
financial statements by WTC's independent auditor and (y) computers and related
infrastructure (such as computer firewalls) necessary for the LLC's computer
systems to be compatible with Holdings' and WTC's.
26
Section 7.2 Retirement Plan Rollovers. Upon Xxxxx Xxxx'x request,
Holdings shall cause a retirement plan qualified under Section 401(a) of the
Code sponsored by WTC or an Affiliate of WTC to accept rollovers of
distributions from the Xxxxx, Xxxx, Xxxxxx & Xxxxxx, Inc. Defined Benefit Plan
and/or the Xxxxx, Xxxx, Xxxxxx & Xxxxxx, Inc. 401(k) Plan (the "Xxxxx Xxxx
Qualified Plans") to participants therein who, at the time of such distribution,
are employed by WTC or an Affiliate of WTC, only if: (a) such distributions are
"eligible rollover distributions" within the meaning of Section 401(a)(31) of
the Code and (b) prior to any such rollover, Xxxxx Xxxx has provided to Holdings
a copy of a favorable determination letter issued by the Internal Revenue
Service with respect to the termination of the applicable Xxxxx Xxxx Qualified
Plan.
ARTICLE 8
COVENANTS OF THE PARTIES
Section 8.1 Regulatory Authorizations.
a. Holdings shall at its sole expense timely and
promptly make all filings required to be made by it with any Governmental
Authority with respect to the consummation of the transactions contemplated
hereby (including, without limitation, filings with the Federal Reserve Bank of
Philadelphia). Holdings shall furnish to Xxxxx Xxxx such information and
assistance it may reasonably request in connection with the preparation by it of
necessary filings or submissions to any Governmental Authority. Holdings shall
promptly supply Xxxxx Xxxx with copies of all non-confidential correspondence,
filings or communications (or memoranda summarizing the substance thereof)
between Holdings or its counsel and any Governmental Authority with respect to
this Agreement and the transactions contemplated hereby.
x. Xxxxx Tani and the Principals shall cause each of
Xxxxx Xxxx, the Principals and the Management Company, prior to the transactions
contemplated hereby and at Xxxxx Xxxx'x or his or her sole expense, timely and
promptly make all filings required to be made by him, her, Xxxxx Xxxx, the
Management Company, the LLC or its associated persons with any Governmental
Authority with respect to the consummation of the transactions contemplated
hereby (including, without limitation, (1) the filing with the Securities
Regulation Division of the California Department of Corporations of an
application necessary to license the LLC and the Management Company as
investment advisers and the Principals and the Management Company's and the
LLC's associated persons as investment adviser representatives in California,
(2) the filing of applications for at least two individuals to be licensed as
tax preparers under the provisions of California Business and Professionals Code
Sections 22250-22258 and (3) an application for Xxxxx Xxxx to be licensed as a
public accounting firm by the California State Board of Accountancy). Each of
Xxxxx Xxxx and the Principals shall furnish to Holdings such information and
assistance as Holdings may reasonably request in connection with its preparation
of necessary filings or submissions to any Governmental Authority. Xxxxx Xxxx
shall promptly supply Holdings with copies of all non-confidential
correspondence, filings or communications (or memoranda summarizing the
substance thereof) between any of the Principals, Xxxxx Xxxx, the Management
Company, the LLC or his, her or its counsel and any Governmental Authority with
respect to this Agreement and the transactions contemplated hereby.
Section 8.2 Confidentiality. Each Party (each, a "Receiving Party")
shall, on behalf of himself, herself or itself and his, her or its
representatives and agents, keep confidential any and all
27
information and data of a proprietary or confidential nature with respect to any
other party (a "Disclosing Party") in the Receiving Party's possession or that
he, she or it receives as a result of any investigation made in connection with
this Agreement, other than information that is or becomes generally available to
the public other than as a result of disclosure by the Receiving Party in
violation of this Agreement. Notwithstanding the preceding sentence, each party
shall be free to disclose any such information or data (a) to the extent
required by applicable law, order, rule or regulation and (b) during the course
of or in connection with any litigation, arbitration or other proceeding based
upon or in connection with the subject matter of this Agreement; provided that,
prior to disclosing any such information in connection with any such litigation,
arbitration or proceeding, the Receiving Party shall, to the extent permitted by
law, give prior notice to the Disclosing Party and use reasonable efforts to
obtain confidential treatment therefor.
Section 8.3 Expenses Incident to this Agreement. Except as otherwise
expressly provided herein, each party shall pay his, her or its own expenses
incident to the negotiation and consummation of the transactions contemplated by
this Agreement and the other Transaction Documents and the preparation and
carrying out of this Agreement and the transactions contemplated hereby or
thereby.
Section 8.4 Access; Information. Xxxxx Xxxx and the Principals hereby
agree that, upon reasonable notice and subject to all applicable U.S. federal
and state privacy laws in effect prior to the date of this Agreement, including,
without limitation, Title V of the Xxxxx-Xxxxx-Xxxxxx Act, the Fair Credit
Reporting Act and any and all applicable regulations implementing either act,
Xxxxx Xxxx and the Principals shall afford Holdings and its officers, employees
and representatives access during normal business hours throughout the period
prior to Closing to the books, records, properties, personnel and to such other
information of Xxxxx Xxxx as Holdings may reasonably request.
Section 8.5 Press Releases. The Parties shall coordinate and approve,
to the extent permitted by law, any public announcement, press release or
response to media inquiries regarding this Agreement and the transactions
contemplated hereby.
ARTICLE 9
CONDITIONS PRECEDENT TO HOLDINGS' OBLIGATIONS
The obligations of Holdings to consummate the transactions contemplated
hereby are subject to the satisfaction at Closing or, where appropriate, before
the Closing Date, of the following conditions, except to the extent Holdings
waives any such condition in writing on or before the Closing Date:
Section 9.1 No Litigation; No Opposition. No judgment, injunction,
order or decree enjoining or prohibiting any of Holdings, the LLC, Xxxxx Xxxx or
any Principal or other party to any Transaction Document from consummating the
transactions contemplated by this Agreement or by any other Transaction Document
or from engaging in any advisory or broker-dealer activity shall have been
entered. No suit, action, claim, proceeding or investigation shall be pending or
threatened at any time prior to or on the Closing Date before or by any court or
Governmental Authority seeking to materially restrain or prohibit, or seeking
material damages or other significant relief in connection with, the execution
and delivery of this Agreement or any other Transaction Document or the
consummation of the transactions contemplated hereby or thereby.
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Section 9.2 Representations, Warranties and Covenants of Xxxxx Xxxx and
the Principals. The representations and warranties of each of Xxxxx Xxxx and the
Principals contained in this Agreement, any schedule or exhibit hereto and in
each other Transaction Document shall be true and correct in all material
respects at and as of Closing as though newly made at that time. Each and all of
the agreements and conditions to be performed or satisfied by each of Xxxxx
Xxxx, the LLC and/or the Principals hereunder and under the other Transaction
Documents at or prior to Closing shall have been duly performed or satisfied in
all material respects. Each of Xxxxx Xxxx and the Principals shall have
furnished Holdings with a certificate or certificates dated as of the Closing
Date with respect to each of the foregoing.
Section 9.3 Client Objection.
a. Not more than ten percent (10%) (based on the total
Client Fees for all of Xxxxx Xxxx'x clients other than those set forth in
Schedule 1(uu)) of Xxxxx Xxxx'x clients shall have indicated in any manner that
they will not continue as clients of the LLC following Closing. Compliance with
this condition shall be measured five Business Days prior to the Closing Date.
b. "Client Fees" shall mean, with respect to a client,
the fees payable to Xxxxx Xxxx for its fiscal year ending December 31, 2003,
computed on an annualized basis for a client that was not a client of Xxxxx Xxxx
for the entire year, measured on an accrual basis (adjusted for any new clients
since December 31, 2003 in the manner provided below).
c. Client Fees for a new client added after December 31,
2003 shall be added by computing the reasonably expected Client Fees for the
fiscal year ending December 31, 2004, computed on both an accrual and annualized
basis, with respect to the value of the Client Fees on the date that Person
became a new client (using the fee rate for that client when it first becomes a
client) for the entire year.
d. Fees associated with new clients shall be included in
the numerator but not the denominator for purposes of computing such 10%.
At Closing, Xxxxx Xxxx shall deliver to Holdings a certificate
certifying compliance with this Section 9.3.
Section 9.4 Licensing; Client Agreements.
a. (1) Xxxxx Xxxx and the Principals shall have
caused the LLC, the Management Company and/or any Principal to be licensed as
investment advisers and the Principals and associated persons of the LLC and of
the Management Company to be licensed as investment adviser representatives with
the Securities Regulation Division of the California Department of Corporations.
(2) Xxxxx Xxxx and the Principals shall have
provided Holdings a list identifying each client to or for whom the LLC proposes
to provide investment advice after Closing (including, without limitation,
suggesting investment advisers or investment managers or monitoring or
recommending investments), whether by itself, as a general partner or managing
member of any entity or otherwise, and shall have caused the LLC to enter into a
Client Agreement with each such client.
29
x. Xxxxx Tani shall have caused at least two individuals
who will primarily be responsible for preparing and signing tax returns on
behalf of the LLC to be licensed as tax preparers under the provisions of
California Business and Professions Code Sections 22250-22258.
x. Xxxxx Tani shall have caused itself to be licensed as
a public accounting firm by the California State Board of Accountancy, and the
Principals shall have caused Xxxxx Xxxx to enter into an agreement with the LLC
under which Xxxxx Xxxx would issue financial reports with a cover letter in
compliance with professional standards under California law on behalf of the LLC
for a fee not to exceed $[*] per report.
At Closing, Xxxxx Xxxx shall deliver to Holdings a certificate
certifying compliance with this Section 9.4.
Section 9.5 Shareholder Approval. Xxxxx Xxxx'x Board of Directors shall
have approved the transactions contemplated by the Transaction Documents, Xxxxx
Xxxx'x shareholders shall have approved the transactions contemplated by the
Transaction Documents and, at Closing, Xxxxx Xxxx shall deliver to Holdings a
certificate certifying that such Board and shareholder approval have been
obtained.
Section 9.6 Engagement Letter and Marketing Materials. Xxxxx Xxxx shall
have revised its engagement letter and marketing materials in a manner
acceptable to Holdings and shall have provided true and complete copies of those
revised documents to Holdings.
Section 9.7 Other Approvals. All actions and approvals by or in respect
of, or filings with, any Governmental Authority required to permit the
consummation of the transactions contemplated hereby so that the LLC, Xxxxx Xxxx
and the Management Company shall be able to continue to carry on after the
Closing Date the business conducted by Xxxxx Xxxx immediately prior to Closing
shall have been taken, made or obtained. All other material permits, approvals,
Licenses, consents or other actions commercially necessary to consummate the
transactions hereunder shall have been received or taken, except where the
failure to obtain that permit, approval, consent or other action would not have
a Material Adverse Effect on Xxxxx Xxxx and the LLC, taken as a whole.
Without limiting the generality of the foregoing, the parties
acknowledge that Xxxxx Xxxx and WTC have received a letter from the Chief of
Enforcement of the California State Board of Accountancy in form and substance
satisfactory to Holdings indicating that, based on the proposed services to be
provided by the LLC, the LLC will not be required to be registered as a public
accounting firm with, or be required to obtain a permit to engage in the
practice of public accountancy issued by, the California State Board of
Accountancy.
Section 9.8 Capitalization. The Members of the LLC, and the capital
account balances and Membership Points of each Member in the LLC, shall be as
set forth on Schedule 4.4(b) hereto.
Section 9.9 Deliveries. Each of Xxxxx Xxxx, the LLC and the Principals
shall have executed, where applicable, and delivered to Holdings (or shall have
caused to be executed and delivered to Holdings by the appropriate person) the
following:
a. A certificate of the Secretary of Xxxxx Xxxx and a
manager of the LLC that each entity has completed all required actions
contemplated by the Transaction Documents;
30
b. The certificate or certificates contemplated by
Section 9.2;
c. The certificates contemplated by Section 9.3 and 9.4;
d. The certificates contemplated by Sections 9.10, 9.11,
9.12 and 9.13;
e. The LLC Agreement;
f. Certified copies of resolutions of the board of
directors (and, if necessary, the shareholders) authorizing the execution of
each Transaction Document to which Xxxxx Xxxx is a party;
g. The articles of incorporation (certified as of a
recent date by the Secretary of State of California) and bylaws of Xxxxx Xxxx;
h. A certificate of the Secretary of Xxxxx Xxxx
certifying that the resolutions, articles of incorporation and bylaws in
paragraphs (f) and (g) above are in full force and effect and have not been
amended or modified, and that the officers of Xxxxx Xxxx are those persons named
in the certificate;
i. Certified copies of the resolutions of the board of
managers (and, if necessary, the Members) authorizing the execution of each
Transaction Document to which the LLC is a party;
j. The LLC Certificate, certified as of a recent date by
the Secretary of State of Delaware;
k. A certificate of a manager of the LLC certifying that
the resolutions and LLC Certificate in paragraphs (i) and (j) above are in full
force and effect and have not been amended or modified;
l. A certificate issued by the appropriate state
authority certifying that each of Xxxxx Xxxx and the LLC are validly existing in
that state as of the most recent practicable date;
m. The Employment Agreements;
n. The Management Operating Agreement;
o. The Offer Letters;
p. True and correct copies of each of the other
Transaction Documents (including, without limitation, the Assignment and
Assumption Agreement);
q. An opinion from Xxxxxxxx, Xxxxxxxx & Xxxxxxxx, Inc.,
counsel to each of Xxxxx Xxxx and the LLC, in the form of Exhibit I;
r. An opinion from Xxxx Xxxx Xxxxx, Esquire, special
counsel to each of Xxxxx Xxxx and the LLC, in the form of Exhibit J; and
31
s. A copy of the Form D to be filed with the SEC with
respect to the issuance of the LLC Interests and of any similar filing or
notification of filing that will be filed with any applicable state securities
commission.
Section 9.10 No Material Adverse Change. No event or condition,
individually or in the aggregate, shall have had a Material Adverse Effect on
Xxxxx Xxxx and the LLC, taken as a whole. Xxxxx Xxxx and the LLC shall have
furnished Holdings with a certificate dated as of the Closing Date with respect
to the foregoing. Without limiting the foregoing, the LLC shall have at least
$[*] of cash on hand at Closing.
Section 9.11 Liens. Any and all Liens on the Shares shall be released
in full, and any and all Liens on the assets of Xxxxx Xxxx shall be released in
full and to Holdings' satisfaction, and Xxxxx Xxxx'x Secretary shall have
furnished Holdings a certificate to this effect.
Section 9.12 Buy-Sell Agreement. The Buy-Sell Agreement dated as of
January 2, 1997 among Xxxxx Xxxx, the Principals and Xxxxx X. Xxxxxxxx, Trustee
of the Xxxxx-Xxxx Trust-1994 shall have been terminated to Holdings'
satisfaction, and Xxxxx Xxxx'x Secretary shall have furnished Holdings a
certificate to that effect.
Section 9.13 Satisfaction of Employee Loans. All loans to any employee
of Xxxxx Xxxx (other than the loan to Xxx X. Xxxxxxx in the principal amount of
$[*]) shall have been satisfied to Holdings' satisfaction, and Xxxxx Xxxx'x
Secretary shall have furnished Holdings a certificate to that effect.
Section 9.14 Accrual Basis Financial Statements. Xxxxx Xxxx shall have
provided Holdings balance sheets, income statements and statements of cash
flows, prepared on an accrual basis, for the fiscal year ending December 31,
2003.
ARTICLE 10
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF
XXXXX XXXX AND THE PRINCIPALS
The obligations of Xxxxx Xxxx and the Principals to consummate the
transactions contemplated hereby and by the other Transaction Documents are
subject to the satisfaction at Closing or prior to the Closing Date of the
following conditions, except to the extent that any of Xxxxx Xxxx or the
Principals, as the case may be, has waived any such condition in writing on or
prior to the Closing Date:
Section 10.1 No Litigation; No Opposition. No judgment, injunction,
order or decree enjoining or prohibiting any of Holdings, the LLC, Xxxxx Xxxx or
any Principal from consummating the transactions contemplated hereby or thereby
shall have been entered. No suit, action, claim, proceeding or investigation
shall be pending or threatened on the Closing Date before or by any court or
Governmental Authority seeking to restrain or prohibit the execution and
delivery of this Agreement or any other Transaction Document or the consummation
of the transactions contemplated hereby or thereby.
32
Section 10.2 Representations, Warranties and Covenants. Each
representation and warranty of Holdings contained in this Agreement and in any
schedule or exhibit hereto and in each other Transaction Document shall be true
and correct in all material respects at and as of Closing as though newly made
at that time. Each and all of the agreements and conditions to be performed or
satisfied by Holdings hereunder and under the other Transaction Documents at or
prior to Closing shall have been duly performed or satisfied in all material
respects. Holdings shall have furnished each Principal with a certificate dated
as of the Closing Date to that effect.
Section 10.3 Deliveries. Holdings shall have executed and delivered to
Xxxxx Xxxx or the Principals:
a. Certified copies of resolutions of Holdings' board of
directors authorizing the execution of this Agreement and each other Transaction
Document to which Holdings is a party;
b. A copy of the charter and current bylaws of Holdings
which, in the case of the charter, is certified as of a recent date by the
Secretary of State of Delaware;
c. A certificate of the Secretary of Holdings certifying
that the resolutions, charters and bylaws in paragraphs (a) and (b) above are in
full force and effect and have not been amended or modified, and that the
officers of Holdings are those persons named in the certificate;
d. The certificate contemplated by Section 10.2;
e. The certificate contemplated by Section 10.4;
f. A certificate issued by the Secretary of State of
Delaware certifying that Holdings is validly existing in Delaware as of the most
recent practicable date; and
g. True and correct copies of each other Transaction
Document to which Holdings is a party.
In addition, at Closing, Holdings shall have delivered or caused to be
delivered to Xxxxx Xxxx the Initial Payment.
Section 10.4 No Material Adverse Change. No event or condition,
individually or in the aggregate, shall have had a Material Adverse Effect on
Holdings. Holdings shall have furnished Xxxxx Xxxx and the Principals with a
certificate dated as of the Closing Date with respect to the foregoing.
ARTICLE 11
INDEMNIFICATION
Section 11.1 Indemnification by the Principals. Subject to the
provisions of this Article 11, Xxxxx Xxxx and each Principal shall jointly and
severally defend, indemnify, save and hold harmless Holdings, its Affiliates and
the shareholders, directors, officers, employees and agents of each of the
foregoing, from and against any and all actions, suits, claims, proceedings,
demands, assessments, judgments, costs, losses, liabilities, damages,
deficiencies and expenses (including, without limitation, interest, penalties,
reasonable attorneys' and accountants' fees and all reasonable
33
amounts paid in the investigation, defense or settlement of any of the
foregoing) (collectively, "Losses") incurred in connection with, arising out of,
or resulting from (a) any misrepresentation or breach of any representation or
warranty by any of Xxxxx Xxxx, the LLC or the Principals herein or in any other
Transaction Document, without regard to the information set forth in the
Schedules to this Agreement, (b) any breach of any covenant or agreement to be
performed pursuant to this Agreement or any other Transaction Document by any of
Xxxxx Xxxx, the LLC or the Principals or (c) the conduct of Xxxxx Xxxx'x
business prior to Closing.
Section 11.2 Indemnification by Holdings. Subject to the provisions of
this Article 11, Holdings shall defend, indemnify, save and hold harmless Xxxxx
Xxxx, the LLC and the Principals from and against any and all Losses incurred in
connection with, arising out of, or resulting from (a) any misrepresentation or
breach of any representation or warranty by Holdings herein or in any other
Transaction Document, and (b) any breach of any covenant or agreement to be
performed pursuant to this Agreement or any other Transaction Document by
Holdings.
Section 11.3 Limitation. No amount shall be recoverable under this
Article 11 by Holdings, on the one hand, or Xxxxx Xxxx and the Principals, on
the other hand, until the total amount of Losses suffered exceeds $[*].
Section 11.4 Defense of Claims. If any action, suit, claim, tax audit,
proceeding, demand, assessment or enforcement action is filed or initiated
against an Indemnified Party with respect to a matter subject to an
indemnification claim by that Indemnified Party, the Indemnified Party shall
give written notice thereof to the Indemnifying Party or Parties as promptly as
practicable, and in any event within 20 days after service of the citation or
summons, but the failure of an Indemnified Party to give timely notice shall not
affect the rights of that party to indemnification hereunder to the extent that
failure does not prejudice the Indemnifying Party. After that notice and a
reasonable period of time to allow for analysis of the claim, if the
Indemnifying Party acknowledges in writing to the Indemnified Party that the
Indemnifying Party is obligated under the terms of its indemnity hereunder for
all Losses of the Indemnified Party in connection with that action, suit, claim,
tax audit, proceeding, demand, assessment or enforcement action, the
Indemnifying Party shall be entitled, if it so elects and with counsel
reasonably satisfactory to the Indemnified Party, to take control of the defense
and investigation of that action, suit, claim, tax audit, proceeding, demand,
assessment or enforcement action and to employ and engage attorneys to handle
and defend the same, at the Indemnifying Party's cost, risk and expense, except
that, if the Indemnifying Party elects not to assume that defense or counsel for
the Indemnified Party determines in good faith and advises the Indemnifying
Party in writing that there are issues that raise conflicts of interest between
the Indemnifying Party and the Indemnified Party, the Indemnified Party may
retain counsel satisfactory to him, her or it, and the Indemnifying Party shall
pay all reasonable fees and expenses of such counsel for the Indemnified Party
promptly as statements therefor are received; provided, however, that (a) the
Indemnifying Party shall be obligated pursuant to this Section 11.4 to pay for
only one firm of counsel (unless the use of one counsel for that Indemnified
Party would present that counsel with a conflict of interest) for all
Indemnified Parties in any jurisdiction, and (b) the Indemnified Party shall
cooperate in the defense of any such matter. If the Indemnifying Party assumes
the control of that defense, the Indemnified Party shall cooperate in all
reasonable respects, at the Indemnifying Party's request and cost, risk and
expense, with the Indemnifying Party and its attorneys in the investigation,
trial and defense of the action, suit, claim, tax audit, proceeding, demand,
assessment or enforcement action and any appeal arising therefrom; provided that
the Indemnified Party may, at its own cost, participate in the investigation,
trial and defense of that action, suit, claim, tax audit, proceeding, demand,
assessment or enforcement action and any appeal
34
arising therefrom. The Indemnifying Party shall keep the Indemnified Party
apprised of the status of the action, suit, claim, tax audit, proceeding,
demand, assessment or enforcement action, furnish the Indemnified Party with all
documents and information the Indemnified Party reasonably requests in
connection therewith, and consult with the Indemnified Party before acting on
major matters involved in that action, suit, claim, tax audit, proceeding,
demand, assessment or enforcement action, including settlement discussions.
Unless the Indemnified Party receives a complete release from all matters
involved in the dispute, no settlement of any action for which indemnification
may be payable hereunder shall be made without the prior written consent of the
Indemnified Party. The Indemnified Party shall be entitled to defend, settle or
proceed in such other manner as it deems fit, in its sole discretion, in
connection with any action, suit, claim, proceeding, demand, assessment or
enforcement action with respect to which the Indemnifying Party has not
acknowledged its obligations in writing in accordance with the foregoing; and no
reasonable action taken by the Indemnified Party in connection therewith shall
affect or limit the obligations of the Indemnifying Party pursuant to this
Section 11.4.
If the Indemnifying Party assumes the control of the defense as
provided above but subsequently, in the course of defending the matter, comes to
believe that the matter is not properly an obligation of that Indemnifying
Party, the Indemnifying Party may with reasonable promptness advise the
Indemnified Party of that new information. In that case, (a) if the Indemnified
Party then agrees with the Indemnifying Party, the Indemnifying Party and the
Indemnified Party shall make mutually satisfactory arrangements for the
Indemnified Party to assume the defense of that matter and to repay the
Indemnifying Party for any amounts reasonably expended by it pursuant to this
Article 11 with respect to that matter, and (b) if the Indemnified Party does
not then agree with the Indemnifying Party, the Indemnifying Party shall have
the right to commence legal proceedings to determine whether the matter is
subject to indemnification by the Indemnifying Party; provided that, in the case
of the foregoing clause (b), the Indemnifying Party shall continue to be
obligated to defend the Indemnified Party with respect to that matter and to
otherwise make the payments required by this Article 11 until that dispute is
finally adjudicated by a court of competent jurisdiction and all rights to
appeal with respect thereto have expired.
Section 11.5 Prompt Payment. Any indemnity payable pursuant to this
Article 11 shall be paid within the later of ten days of the Indemnified Party's
request therefor or five days before the date on which the liability upon which
the indemnity is based is required to be paid by the Indemnified Party.
Section 11.6 Certain Reductions; Subrogation. All indemnification
payments payable hereunder shall be reduced by the amount of insurance proceeds
received by the Indemnified Party as a result of the Losses for which the
Indemnified Party is seeking indemnification. If the Indemnifying Party is
obligated to indemnify the Indemnified Party pursuant to this Article 11, the
Indemnifying Party shall, upon payment of that indemnity in full, be subrogated
to all rights of the Indemnified Party with respect to the Losses to which that
indemnification relates; provided, however, that the Indemnifying Party shall
only be subrogated to the extent of any amount paid by it pursuant to this
Article 11 in connection with such Loss.
35
ARTICLE 12
TERMINATION
Section 12.1 Termination. This Agreement may be terminated (a) by the
mutual consent of Holdings and Xxxxx Xxxx; (b) by Holdings or Xxxxx Xxxx at any
time after October 1, 2004 if for any reason the transactions contemplated by
this Agreement have not been consummated by that date and the failure to
consummate those transactions is not caused by a material breach of this
Agreement by Holdings, if Holdings seeks to terminate this Agreement pursuant to
this Section 12.1(b), or Xxxxx Xxxx and the Principals, if Xxxxx Xxxx seeks to
terminate this Agreement pursuant to this Section 12.1(b); (c) by Holdings if
there has been a material misrepresentation or breach on the part of Xxxxx Xxxx
or the Principals in the representations, warranties or covenants of Xxxxx Xxxx
or the Principals set forth herein that, if curable, has not been cured within
20 days after notice thereof by Holdings and which breach, if not cured, would
cause a failure of the conditions set forth in Article 9; (d) by Xxxxx Xxxx if
there has been a material misrepresentation or breach on the part of Holdings in
the representations, warranties or covenants of Holdings set forth herein that,
if curable, has not been cured within 20 days after notice thereof by Xxxxx Xxxx
and which breach, if not cured, would cause a failure of the conditions set
forth in Article 10; (e) by Holdings or Xxxxx Xxxx if any court of competent
jurisdiction or other competent governmental or regulatory authority (i) has
issued an order making illegal or otherwise materially restricting, preventing
or prohibiting any of the transactions contemplated hereby and that order has
become final and non-appealable or (ii) whose approval is necessary to the
consummation of the transactions contemplated hereby and whose approval has not
been obtained after all appeals have been taken; (f) by Holdings if an event or
condition or events or conditions occur that, either individually or the
aggregate, have a Material Adverse Effect on the LLC and Xxxxx Xxxx, taken as a
whole; and (g) by Xxxxx Xxxx if an event or condition or events or conditions
occur, that, either individually or in the aggregate, have a Material Adverse
Effect on Holdings.
Section 12.2 Effect of Termination. If this Agreement is validly
terminated pursuant to Section 12.1, it will become null and void immediately
and there will be no liability or obligation on the part of any party hereto (or
any of their respective representatives or Affiliates), except that (a) the
provisions of Sections 8.2 and 8.3 and Article 11 shall continue to apply
following that termination and (b) nothing contained herein shall relieve any
Party hereto from liability for breach of its representations, warranties,
covenants or agreements contained in this Agreement.
ARTICLE 13
MISCELLANEOUS
Section 13.1 Survival of Representations, Warranties and Covenants. The
representations and warranties contained herein and in any certificate or other
writing delivered pursuant hereto shall survive the Closing Date and the
consummation of the transactions contemplated hereby. All covenants herein not
fully performed shall survive the Closing Date and continue thereafter until
fully performed.
Section 13.2 Waivers. Any waiver of any term or condition or of the
breach of any covenant, representation or warranty in this Agreement in any one
instance shall not operate as or be deemed to be a further or continuing waiver
of any other breach of that term, condition, covenant, representation or
warranty or any other term, condition, covenant, representation or warranty. No
36
failure or delay at any time to enforce or require performance of any provision
hereof shall operate as a waiver of or affect in any manner that party's right
at a later time to enforce or require performance of that provision or any other
provision hereof. No such waiver, unless by its own terms it explicitly provides
to the contrary, shall be construed to effect a continuing waiver of the
provision being waived, and no such waiver in any instance shall constitute a
waiver in any other instance or for any other purpose or impair the right of the
party against whom that waiver is claimed in all other instances or for all
other purposes to require full compliance.
Section 13.3 Modifications. Except as otherwise expressly provided in
this Agreement, neither this Agreement (including the exhibits and schedules
hereto) nor any term hereof or thereof may be changed, amended, modified,
waived, discharged or terminated except to the extent the same is evidenced by
the written consent of the party against whom enforcement of that change or
modification is sought.
Section 13.4 Further Assurances. Each Party agrees to execute all
further instruments and documents and to take all additional actions as any
other Party may reasonably require in order to effectuate the terms and purposes
of this Agreement and the transactions contemplated hereby.
Section 13.5 Governing Law; Consent to Jurisdiction. This Agreement
shall be construed under and governed by California law, without giving effect
to the choice or conflicts of law provisions thereof. Holdings hereby agrees to
submit to the jurisdiction of the courts of the State of California and the
courts of the United States of America located in the Central District in the
State of California in any action or proceeding arising out of or relating to
this Agreement. The Principals and Xxxxx Xxxx hereby agree to submit to the
jurisdiction of the courts of the State of Delaware and to the courts of the
United States of America located in Delaware in any action or proceeding arising
out of or relating to this Agreement.
Section 13.6 Notices.
a. All notices, requests, demands and other
communications required or permitted under this Agreement shall be in writing
and sent as provided in Section 13.6(b) hereof:
(1) If to Holdings, to:
GTBA Holdings, Inc.
Xxxxxx Square North
0000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxx,
Executive Vice President
37
with a copy to:
GTBA Holdings, Inc.
Xxxxxx Square North
0000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxxxxxx, Esquire
Vice President
(2) If to Xxxxx Xxxx or the LLC, to:
Xxxxx, Xxxx, Xxxxxx & Xxxxxx, Inc.
0000 Xxxxxxxx Xxxxxxxxx
Xxxxx 0000 Xxxx
Xxxxxxx Xxxxx, XX 00000
Attention: Xxxxxx Xxxxx
with a copy to:
Xxxxxxxx, Xxxxxxxx & Xxxxxxxx, Inc.
000 Xxxxx Xxxxxxx Xxxxx
Xxxxx 000
Xxxxxxx Xxxxx, XX 00000
Attention: Xxxxx Xxxxxxxx, Esquire
(3) If to the Principals, to:
x/x Xxxxx, Xxxx, Xxxxxx & Xxxxxx, Inc.
0000 Xxxxxxxx Xxxxxxxxx
Xxxxx 0000 Xxxx
Xxxxxxx Xxxxx, XX 00000
with a copy to:
Xxxxxxxx, Xxxxxxxx & Xxxxxxxx, Inc.
000 Xxxxx Xxxxxxx Xxxxx
Xxxxx 000
Xxxxxxx Xxxxx, XX 00000
Attention: Xxxxx Xxxxxxxx, Esquire
b. All notices and other communications required or
permitted hereunder that are addressed as provided in this Section 13.6, (i) if
delivered personally against proper receipt shall be effective upon delivery and
(ii) if sent (A) by certified or registered mail with postage prepaid or (B) by
Federal Express or similar courier service with courier fees paid by the sender,
shall be effective upon receipt. A party may change its address for the purpose
of notices to that party from time to time by a similar notice specifying a new
address, but no such change shall be deemed to have been given unless it is sent
and received in accordance with this Section 13.6.
38
Section 13.7 Assignability. Neither this Agreement nor any rights or
obligations hereunder shall be assignable by any party to any other Person
without the prior written consent of the other Parties, except that WTC may,
with notice to the other Parties, assign any or all of its interests in this
Agreement and its rights and obligations hereunder to any Person directly or
indirectly wholly owned by WTC or one of its Affiliates. This Agreement shall be
binding upon, enforceable by and inure to the benefit of the parties hereto and
their respective successors and permitted assigns.
Section 13.8 Captions. The captions in this Agreement are for
convenience only and shall not affect the construction or interpretation of any
term or provision hereof.
Section 13.9 Number and Gender. Whenever used herein, the singular
number shall include the plural, the plural shall include the singular unless
the context otherwise requires and the use of any gender shall include all
genders.
Section 13.10 Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the other provisions hereof, and
this Agreement shall be construed in all respects by interpreting that invalid
or unenforceable provision as nearly to the original meaning as possible so as
to make it valid and enforceable or, if that is not possible or permitted by
applicable law, by omitting that invalid or unenforceable provision.
Section 13.11 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
Section 13.12 No Third-Party Beneficiaries. Except as otherwise
provided in Article 11, no Person who is not a party to this Agreement shall be
entitled to any rights or benefits hereunder; provided further that Holdings,
WTC, their respective Affiliates, each Xxxxx Xxxx Entity and each Subsidiary of
a Xxxxx Xxxx Entity is a third-party beneficiary of Sections 6.5 and 6.6.
Section 13.13 Remedies for Section 8.2. Each Receiving Party
acknowledges that any breach or attempted breach by that party of the provisions
of Section 8.2 will cause irreparable harm to the Disclosing Party, for which
monetary damages will not be an adequate remedy. Accordingly, each Disclosing
Party shall be entitled to apply for and obtain injunctive relief (temporary,
preliminary and permanent) to restrain the breach or threatened breach by a
Receiving Party of, or otherwise to specifically enforce, any provision of
Section 8.2, without the requirement to post a bond or provide other security.
Nothing herein shall be construed as a limitation or waiver of any other right
or remedy that may be available to the Disclosing Party for that breach or
threatened breach. For emergency relief (including temporary and preliminary
injunctive relief), an application may be made in any court of competent
jurisdiction. Each Receiving Party further agrees that the subject matter and
duration of the restrictions covered in Section 8.2 are reasonable in light of
the facts as they exist today.
Section 13.14 Integration. This Agreement (as it may be amended from
time to time) and the exhibits and schedules hereto constitute the entire
agreement among the parties hereto (including WTC) with respect to the subject
matter hereof, and supersede all prior agreements and understandings, oral or
written, express or implied, with respect thereto.
39
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
XXXXX, XXXX, XXXXXX & XXXXXX, INC.
By: /s/ Xxxxxx Xxxxx
-----------------------------------
Name: Xxxxxx Xxxxx
Title: President
Address: 0000 Xxxxxxxx Xxxx. Xxxxx 0000
Xxxxxxx Xxxxx, XX 00000-0000
/s/ Xxxxxx Xxxxx (SEAL)
---------------------------------------
XXXXXX XXXXX
Address: 0000 Xxxxxxxx Xxxx. Xxxxx 0000
Xxxxxxx Xxxxx, XX 00000-0000
/s/ Xxxx Xxxx (SEAL)
---------------------------------------
XXXX XXXX
Address: 0000 Xxxxxxxx Xxxx. Xxxxx 0000
Xxxxxxx Xxxxx, XX 00000-0000
/s/ Xxxxx Xxxxxx (SEAL)
---------------------------------------
XXXXX XXXXXX
Address: 0000 Xxxxxxxx Xxxx. Xxxxx 0000
Xxxxxxx Xxxxx, XX 00000-0000
/s/ Xxxxxx Xxxxxx (SEAL)
---------------------------------------
XXXXXX XXXXXX
Address: 0000 Xxxxxxxx Xxxx. Xxxxx 0000
Xxxxxxx Xxxxx, XX 00000-0000
40
GTBA HOLDINGS, INC.
By: /s/ Xxxxxx X. Xxxx
-----------------------------------
Name: Xxxxxx X. Xxxx,
Title: President
By its execution below, Wilmington Trust Corporation guarantees the
obligations of GTBA Holdings, Inc. under this Limited Liability Company Interest
Purchase Agreement.
WILMINGTON TRUST CORPORATION
By: /s/ Xxxxxx X. Xxxx
-----------------------------------
Name: Xxxxxx X. Xxxx
Title: Executive Vice President
41
