AMENDMENT NO. 1 TO ASSET PURCHASE AGREEMENT
Exhibit 10.65
Execution Version
This Amendment No. 1 (this “Amendment”), dated as of November 22, 2010, is made to
that certain Asset Purchase Agreement, dated as of October 5, 2010, by and among GAIN Capital
Group, LLC, a Delaware limited liability company (“GAIN Capital”), GAIN Xxxxxxx-Xxxxx.xxx
U.K., Limited, an English private limited company (company number: 03770004) (“GAIN UK”),
and GAIN Capital Xxxxx.xxx Japan, Co. Ltd., a Japanese limited liability company (“GAIN
Japan”, collectively with GAIN Capital and GAIN UK, the “Purchaser”), and Capital
Market Services, LLC, a New York limited liability company(“CMS”), Capital Market Services
UK Ltd., an English private limited company (company number: 06592025) (“CMS UK”), Capital
Market Services International — BM, Ltd., an exempted company incorporated in Bermuda (“CMS
Bermuda”) and CMS Japan K.K., a limited company (Kabushiki Kaisha) registered under the laws of
Japan (“CMS Japan”) (CMS, collectively with CMS UK, CMS Bermuda and CMS Japan, the
“Seller”) (as the same may be amended, supplemented or otherwise modified, the
“Agreement”).
INTRODUCTORY STATEMENTS:
On October 5, 2010, the parties entered into the Agreement. The parties have since agreed
that certain changes are required under the Agreement, including with respect to the calculation
and timing of consideration payable and the closing process relating to the transaction.
On October 15, 2010, Seller wired to Purchaser $14,059,333.52, representing eighty-one percent
(81%) of the aggregate Transferring Customers’ Account Balances from Sellers’ U.S. and Bermuda
business only, and Purchaser wired to Seller $1,800,000 of Purchase Price.
On October 20, 2010, Seller wired to Purchaser an additional $3,233,230.54, representing the
remaining nineteen percent (19%) of the aggregate Transferring Customers’ Account Balances from
Seller’s U.S. and Bermuda business only, and Purchaser wired to Seller an additional $793,884.61 of
Purchase Price.
On October 22, 2010, Purchaser wired Seller an additional $1,729,256.40 in order to reconcile
Purchaser’s payments to Seller to equal to an aggregate of twenty-five percent (25%) of the
Transferring Customers’ Account Balances previously received from Seller through such date.
On October 22, 2010, October 26, 2010 and October 27, 2010, Seller wired to Purchaser an
additional $3,234,678.66, $169,326.62 and $1,509,486.75, respectively, for an aggregate of
$4,913,492.03, representing one hundred percent (100%) of the aggregate Transferring
Customers’ Account Balances from Seller’s U.K. business.
On October 26, 2010 and October 27, 2010, Purchaser wired Seller an additional
$851,001.32 and $377,371.69 respectively, for an aggregate of $1,228,373.01, representing a
payment of twenty-five percent (25%) of the aggregate Transferring Customers’ Account Balances from
Seller’s U.K. business.
Through October 27, 2010, Seller has wired an aggregate of $22,206,056.08 in Transferring
Customers’ Account Balances to Purchaser and Purchaser has wired an aggregate of $5,551,514.02 in
Purchase Price to Seller.
On October 12, 2010 Purchaser wired back to Seller EUR 3,740.11 and $10,909.46. On October
12, 2010 Seller wired to Purchaser EUR 935.03 and $2,727.37 representing 25% of overstated equity.
The parties further acknowledge and agree that a closing with respect to Purchased Assets from
CMS Japan is targeted for November 24, 2010, as more fully described in this Amendment.
In order to facilitate Purchaser and Seller’s performance of their respective obligations
under the Agreement with respect to Purchased Assets from CMS UK and CMS Japan and to reflect the
delay in delivering such Purchased Assets, Purchaser and Seller have agreed to amend the Agreement
on the terms and subject to the conditions hereinafter set forth.
Therefore, the parties agree as follows:
Section 1. Defined Terms. Capitalized terms used herein and not otherwise defined
herein shall have the meaning given them in the Agreement.
Section 2. Amendment to the Agreement. The Agreement is amended as of the date hereof
as follows:
(a) Section 3.1 of the Agreement is hereby amended and restated in its entirety to read as
follows:
Section 3.1 Consideration for Purchased Assets/Earn-Out.
(a) Upon the terms and subject to the conditions of this Agreement, in consideration of
the aforesaid sale, conveyance, assignment, transfer and delivery of the Purchased Assets,
Purchaser shall deliver or cause to be delivered to Seller, in full payment for the
aforesaid sale, conveyance, assignment, transfer and delivery of the Purchased Assets, an
amount equal to twenty-five percent (25%) of the aggregate Transferring Customers’ Account
Balances, based on the U.S. Dollar equivalent of such Account Balances, as determined by the
end-of-day exchange rates agreed upon by the parties, as of 4:00 p.m. (eastern time) on the
date of transfer (the “Purchase Price”). The Purchase Price shall be paid by wire
transfer of immediately available funds, free of any
costs and charges, to the account or accounts designated by Seller in writing prior to the
payment.
(b) In addition to the amounts payable by Purchaser to Seller under Section 3.1(a),
Seller shall also be entitled, during the eighteen (18) month period following the
respective date of transfer (the “Earn-Out Period”) to receive fifteen percent (15%)
of
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Purchaser’s Net Revenue recognized by Purchaser which is directly attributable to the
Transferring Customers during such period (the “Earn-Out Payments”). Earn-Out
Payments shall be made on a monthly basis during the Earn-Out Period within thirty (30) days
of the end of each calendar month during the Earn-Out Period. For the avoidance of doubt,
payments due to Seller which are attributable to any new customers of Purchaser introduced
to Purchaser by an Introducing Broker shall be calculated in accordance with, and subject
to, the terms and conditions of those certain Introducing Broker Agreements entered into by
and among certain Purchaser Parties, on the one hand, and certain Seller Parties, on the
other hand, as such agreements may be modified, amended or restated from time to time in
accordance with their respective terms. Such customers shall be deemed to be “Originated
Customers” as defined in such Introducing Broker Agreements.
(c) During the Earn-Out Period, Seller shall have the right to audit Purchasers’
records regarding Purchaser’s Net Revenue directly attributable to the Transferring
Customers upon thirty (30) day written notice. Auditors chosen by Seller shall be
pre-approved by Purchaser (such approval not to be unreasonably withheld) and shall agree to
a confidentiality agreement with customary terms and conditions reasonably acceptable to
Purchaser. The approval of such auditors shall not be unreasonably withheld. If any audit
is undertaken by Seller discloses a shortfall or overpayment between the amounts due Seller
and the amounts actually received by Seller, then Purchaser shall promptly remit to Seller
the amount of the shortfall or receive a credit for such overpayment to any future amounts
payable to Seller. In the event there remains a credit due to Purchaser at the end of the
Earn-Out Period, Seller shall remit payment in such amount within thirty (30) days following
the end of the Earn-Out Period. All fees and expenses related to any audit shall be the
sole responsibility of Seller. Seller shall be entitled to no more than two (2) audits
hereunder.
(d) Notwithstanding the foregoing, the parties agree that in the event a Transferring
Customer terminates its customer arrangement with Purchaser as a result of a breach of
Section 7.6, Section 7.7 or Section 7.8 below (the “Terminating Customer”), then
Purchaser’s Earn-Out Payment obligations shall be reduced by an amount equal to the Purchase
Price paid by Purchaser for such Terminating Customer.
(e) In the event that any Retail Customers residing in Japan do not become Transferring
Customers as of the Closing but subsequently become customers of the Purchaser or its
Affiliates on or prior to November 22, 2010 (the “Added Japan Retail Customers”),
(1) such Added Japan Retail Customers shall count for purposes of determining the
Transferring Customers’ Account Balances and the calculations in Sections 3.1(a) and 3.1(b)
shall be recalculated in a manner assuming that the Account Balances as calculated as of the
actual date of assignment for the Added Japan Retail
Customers were treated as Transferring Customers’ Account Balances, and (2) Purchaser shall
pay to Seller pursuant to Section 4.4(e) below an amount equal to the difference, if any,
between the amount paid by Purchaser to Seller at Closing and the amount that would have
been due to Seller at Closing had such Transferring Customers’ Account Balances been
included as of the Closing. For the avoidance of doubt, the Added Japan Retail Customers
shall be treated as having been Transferring Customers as of the
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Closing for all purposes
hereunder, including, for calculating the Earn-Out Payments attributable to such Added Japan
Retail Customers.
(b) Section 4.4(e) of the Agreement is hereby amended and restated in its entirety to read as
follows:
(e) In the event Added Japan Retail Customers are to be assigned to Purchaser on or
prior to November 22, 2010, then, (i) on or prior to November 24, 2010 (local time),
Purchaser shall deliver or cause to be delivered to Seller (A) the additional amounts, if
any, payable to Seller pursuant to the application of Section 3.1(e) and (B) the
deliverables contained in Section 4.3(b) and (c), and (ii) on or prior to November 26, 2010,
Seller shall deliver or cause to be delivered to Purchaser (A) the aggregate Account
Balances of the Added Japan Retail Customers, and (B) the deliverables contained in Section
4.2 (b), (c), (d), (e), (f), (g), (h), (i) and (j), in each case with respect to the Added
Japan Retail Customers.
(c) Section 7.8 of the Agreement is hereby amended by deleting the last sentence thereof and
replacing it with the following:
“Notwithstanding the foregoing, Seller shall not be restricted from providing
retail foreign exchange trading services solely to Retail Customers through CMS Japan for
the period beginning on the date hereof and ending on November 22, 2010 (local time).”
Section 3. Outstanding Deliverables:
(a) On or prior to November 24, 2010, Seller shall deliver or cause to be delivered to
Purchaser (i) the deliverables required under Section 4.2(h) with respect to the U.S., Bermuda and
the U.K., and Section 4.2(b), (c), (d), (e), (f), (g), (h) and (i) with respect to Japan.
(b) On or prior to November 24, 2010, Purchaser shall deliver or cause to be delivered to
Seller the deliverables required under Section 4.3(b) with respect to the U.S. and the U.K.
Section 4. Purchase Price. The parties acknowledge and agree that, as of the date
hereof, Seller has transferred and assigned to Purchaser Transferring Customers’ Accounts Balances
from Sellers’ U.S., Bermuda and the U.K. businesses equal to an aggregate of $22,206,056.08, and
Purchaser has paid to Seller an aggregate of $5,551,514.02 with respect to such Transferring
Customers’ Account Balances. After giving effect to the amendments to Section 3.1 of the
Agreement, as described in Section 2(a) of this Amendment, the parties acknowledge and agree that
Purchaser has paid Seller in full for all Transferring Customers’ Account Balances received to
date.
Section 5. Rejected Accounts. The parties acknowledge and agree that, on or prior to
November 24, 2010, Purchaser shall have the right to reject any Retail Customers from CMS Japan;
provided, however, (a) such rejected Retail Customers’ Account Balances shall not exceed $150,000
in the aggregate, and (b) notwithstanding anything else herein or in the
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Agreement to the contrary,
Seller shall not be subject to the restrictions contained in Section 7.8 of the Agreement solely
with respect to rejected Retail Customers from CMS Japan.
Section 6. Transferring Customers’ Account Balances from CMS Japan. The parties
acknowledge and agree that on November 22, 2010 Seller shall close all of its Transferring Customer
positions at the original open rate for such positions and transfer and assign all of the
Transferring Customer Account Balances and open positions to Purchaser. Purchaser will then reopen
the Transferring Customers’ positions at rate(s) equal to the rate(s) used by Seller on November
22, 2010. As a result, no Transferring Customer’s net realized and unrealized profit and loss
combined will be affected by the transaction.
Section 7. Representations and Warranties.
(a) Each Seller Party represents and warrants that after giving effect to this Amendment, the
representations and warranties contained in the Agreement are true and correct in all material
respects on and as of the date hereof as if such representations and warranties had been made on
and as of the date hereof (except to the extent that any such representations and warranties
specifically relate to an earlier date), except where the failure of such representations and
warranties to be true and correct as so made (without giving effect to any materiality
qualification therein) does not, individually or in the aggregate, result in a Seller Material
Adverse Effect.
(b) Each Purchaser Party represents and warrants that after giving effect to this Amendment,
the representations and warranties contained in the Agreement are true and correct in all material
respects on and as of the date hereof as if such representations and warranties had been made on
and as of the date hereof (except to the extent that any such representations and warranties
specifically relate to an earlier date), except where the failure of such representations and
warranties to be true and correct as so made (without giving effect to any materiality
qualification therein) does not, individually or in the aggregate, result in a Purchaser Material
Adverse Effect.
Section 8. Full Force and Effect. Except as expressly amended hereby, the Agreement
shall continue in full force and effect in accordance with the provisions thereof on the date
hereof. The terms “Agreement”, “this Agreement”, “herein”, “hereafter”, “hereto”, “hereof”, and
words of similar import, shall, unless the context requires otherwise, mean the Agreement as
amended by this Amendment.
Section 8. Applicable Law. This Amendment shall be governed by and construed in
accordance with the laws of the state of New York, without regard to the conflict of law principles
thereof or of any other jurisdiction.
Section 10. Counterparts. This Amendment may be executed in two or more counterparts,
each of which shall constitute an original, but all of which when taken together shall constitute
but one instrument.
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IN WITNESS WHEREOF, this Amendment has been duly executed and delivered by the duly authorized
officers of each of the Seller Parties and the Purchaser Parties as of the date first above
written.
| PURCHASER PARTIES: GAIN CAPITAL GROUP, LLC |
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| By: | /s/ Xxxxx Xxxxxxx | |||
| Name: | Xxxxx Xxxxxxx | |||
| Title: | Chief Executive Officer | |||
| GAIN XXXXXXX-XXXXX.XXX U.K., LIMITED |
||||
| By: | /s/ Xxxxxxx Xxxxxx | |||
| Name: | Xxxxxxx Xxxxxx | |||
| Title: | ||||
| GAIN CAPITAL XXXXX.XXX JAPAN, CO. LTD. |
||||
| By: | /s/ Xxxxx Xxxxxxxxxx | |||
| Name: | Xxxxx Xxxxxxxxxx | |||
| Title: | Representative Director | |||
| SELLER PARTIES: CAPITAL MARKET SERVICES, LLC |
||||
| By: | /s/ Xxxx Xxxxxx | |||
| Name: | Xxxx Xxxxxx | |||
| Title: | ||||
| CAPITAL MARKET SERVICES UK, LTD |
||||
| By: | /s/ Xxxx Xxxxxx | |||
| Name: | Xxxx Xxxxxx | |||
| Title: | ||||
| CAPITAL MARKET SERVICES INTERNATIONAL — BM, LTD. |
||||
| By: | /s/ Xxxx Xxxxxx | |||
| Name: | Xxxx Xxxxxx | |||
| Title: | ||||
| CMS JAPAN, K.K. |
||||
| By: | /s/ Xxxx Xxxxxx | |||
| Name: | Xxxx Xxxxxx | |||
| Title: | ||||
