Penson Worldwide Inc. Contracts
Sample Business Contracts
Asset Purchase Agreement - SAI Holdings Inc. and Computer Clearing Services Inc.
Asset Purchase Forms
Execution Draft
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ASSET PURCHASE AGREEMENT
BY AND AMONG
SAI HOLDINGS, INC.,
COMPUTER CLEARING SERVICES, INC.
AND
THE COMPANY STOCKHOLDERS DEFINED HEREIN
DATED AS OF JANUARY 31, 2006
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TABLE OF CONTENTS
PAGE
ARTICLE I DEFINITIONS............................................................................ 1
Section 1.01. Certain Defined Terms............................................... 1
Section 1.02. Other Defined Terms................................................. 7
Section 1.03. Construction........................................................ 8
ARTICLE II PURCHASE OF SHARES.................................................................... 9
Section 2.01. Purchase and Sale of the Assets..................................... 9
Section 2.02. Retained Assets..................................................... 10
Section 2.03. Assumed Liabilities................................................. 10
Section 2.04. Retained Liabilities................................................ 10
ARTICLE III CONSIDERATION ....................................................................... 12
Section 3.01. Purchase Price ..................................................... 12
Section 3.02. Allocation of Purchase Price ....................................... 12
Section 3.03. Closing ............................................................ 12
Section 3.04. Closing Deliveries by the Company................................... 13
Section 3.05. Closing Deliveries by Buyer......................................... 13
Section 3.06. Purchase Price Adjustment........................................... 13
Section 3.07. Right of Offset..................................................... 15
Section 3.08. Accounts Receivable................................................. 15
ARTICLE IV REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY STOCKHOLDERS AND THE COMPANY.... 15
Section 4.01. Company Organization................................................ 16
Section 4.02. Company Stockholder Organization.................................... 16
Section 4.03. Authority........................................................... 16
Section 4.04. No Conflicts........................................................ 16
Section 4.05. No Subsidiaries..................................................... 17
Section 4.06. Capitalization; Title to the Shares................................. 17
Section 4.07. Financial Statements................................................ 17
Section 4.08. No Undisclosed Liabilities.......................................... 18
Section 4.09. Receivables......................................................... 18
Section 4.10. Absence of Material Adverse Change; Conduct of
Business............................................................ 18
Section 4.11. Permits; Compliance ................................................ 19
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TABLE OF CONTENTS
(continued)
PAGE
Section 4.12. Taxes .................................................... 19
Section 4.13. Absence of Litigation..................................... 21
Section 4.14. Investment Securities ............ ....................... 21
Section 4.15. Derivative Instruments .......... ........................ 21
Section 4.16. Customer Agreements and Related Documentation ............ 22
Section 4.17. Disclosure of All Matters Relating To Regulatory
Approval of the Change-of-Control and Licensing........... 22
Section 4.18. Tangible Property................... ..................... 22
Section 4.19. Material Contracts........................................ 22
Section 4.20. Employee Benefit Plans.................................... 22
Section 4.21. Intellectual Property .................................... 24
Section 4.22. Environmental Matters..................................... 25
Section 4.23. Broker-Dealer............................................. 25
Section 4.24. Insurance................................................. 29
Section 4.25. Bank Accounts............................................. 29
Section 4.26. No Improper Payments ..................................... 30
Section 4.27. Brokers ....................................... .......... 30
Section 4.28. Customers ............................................... 30
Section 4.29. Computer Systems ........................... ............. 30
Section 4.30. Affiliate Transactions ......... ......................... 30
Section 4.31. No Guaranties ............................................ 31
Section 4.32. Real Property ........................ .................. 31
Section 4.33. Sufficiency of Assets .......... ......................... 31
Section 4.34. Disclosure ............................................... 31
ARTICLE V REPRESENTATIONS AND WARRANTIES REGARDING BUYER ........................... 32
Section 5.01. Organization of Buyer..................................... 32
Section 5.02. Authority................................................. 32
Section 5.03. No Conflicts.............................................. 32
Section 5.04. Brokers................................................... 33
Section 5.05. Absence of Litigation..................................... 33
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TABLE OF CONTENTS
(continued)
PAGE
Section 5.06. Financial Statements....................................... 33
ARTICLE VI COVENANTS AND OTHER AGREEMENTS OF THE PARTIES............................ 33
Section 6.01. Conduct of Business........................................ 33
Section 6.02. Access to Information...................................... 35
Section 6.03. Confidentiality............................................ 35
Section 6.04. Maintenance of Records..................................... 35
Section 6.05. No Negotiation............................................. 36
Section 6.06. Commercially Reasonable Efforts; Obtaining Consents;
Further Action............................................. 36
Section 6.07. Notifications......................................... .... 37
Section 6.08. Public Announcements; Customer Communications.............. 37
Section 6.09. Conduct of Company Stockholders............................ 38
Section 6.10. Certain Employee Matters................................... 38
Section 6.11. Non-Competition....................................... .... 39
Section 6.12. Non-Solicitation; Non-Disparagement........................ 40
Section 6.13. Reimbursement of NSCC Deposit............................... 41
Section 6.14. Reimbursement of DTC Deposit............................... 41
Section 6.15. Further Assurances......................................... 41
ARTICLE VII CONDITIONS.............................................................. 41
Section 7.01. Conditions Precedent to Closing Obligation of Buyer ....... 41
Section 7.02. Conditions Precedent to Closing Obligation of the
Company ................................................... 43
ARTICLE VIII TERMINATION; EFFECT OF TERMINATION...................................... 44
Section 8.01. Termination................................................ 44
Section 8.02. Effect of Termination...................................... 44
ARTICLE IX TAX MATTERS.............................................................. 44
Section 9.01. Tax Indemnification........................................ 44
Section 9.02. Allocation of Certain Taxes................................ 45
Section 9.03. Transfer Tax and Other Closing Expenses.................... 46
Section 9.04. Contests................................................... 46
Section 9.05. Tax Returns................................................ 46
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TABLE OF CONTENTS
(continued)
PAGE
Section 9.06. Cooperation................................................ 47
Section 9.07. Survival................................................... 48
Section 9.08. Characterization as Purchase Price Adjustment.............. 48
Section 9.09. Absence of Withholding Tax Liability....................... 48
Section 9.10. Conflict................................................... 48
ARTICLE X INDEMNIFICATION............................................................ 48
Section 10.01. Survival of Representations and Warranties................. 48
Section 10.02. Indemnification by the Company and the Company
Stockholders............................................... 49
Section 10.03. Indemnification by Buyer................................... 50
Section 10.04. Limitations on Indemnification............................. 50
Section 10.05. Claims..................................................... 51
Section 10.06. Notice of Third Party Claims; Assumption of Defense........ 51
Section 10.07. Settlement................................................. 52
Section 10.08. Failure of Indemnifying Person to Act...................... 53
Section 10.09. Exclusive Remedy........................................... 53
ARTICLE XI CONTINGENT PAYMENT........................................................ 53
Section 11.01. Contingent Payment......................................... 53
Section 11.02. Disputes................................................... 57
Section 11.03. Buyer Discretion........................................... 58
ARTICLE XII MISCELLANEOUS............................................................ 58
Section 12.01. Headings................................................... 58
Section 12.02. Notices.................................................... 58
Section 12.03. Assignment................................................. 59
Section 12.04. Governing Law; Jurisdiction; Waiver of Jury Trial.......... 59
Section 12.05. Severability............................................... 60
Section 12.06. Entire Agreement; Amendment; No Waiver..................... 60
Section 12.07. Expenses................................................... 60
Section 12.08. Obligations Joint and Several.............................. 60
Section 12.09. Schedules and Exhibits..................................... 60
Section 12.10. No Third Party Beneficiaries............................... 61
Section 12.11. Counterparts .............................................. 61
Section 12.12. Stockholders' Representative............................... 61
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Annex A Shares and Percentage Ownership
Annex B Key Employees
Exhibit A Form of Key Employment Agreement
Exhibit B Form of Bill of Sale, Assignment and Assumption Agreement
Exhibit C Form of Legal Opinion
Schedule 1.01-1 Book Value Calculation Methodology
Schedule 1.01-2 Excluded Receivables
Schedule 1.01-3 Initial Balance Sheet
Schedule 2.01(a) Tangible Personal Property
Schedule 2.01(d) Records
Schedule 2.01(g) Claims against Assets
Schedule 2.02(f) Retained Prepaid Expenses and Claims
Schedule 2.02(h) Retained Contracts
Schedule 2.02(m) Other Retained Assets
Schedule 2.03 Additional Assumed Liabilities
Schedule 3.02 Allocation of Purchase Price
Schedule 4.02 Jurisdictions of Company Stockholders
Schedule 4.04 Conflicts
Schedule 4.05 Subsidiaries
Schedule 4.08 Undisclosed Liabilities
Schedule 4.10 Material Adverse Change
Schedule 4.11 Permits; Compliance
Schedule 4.12 Taxes
Schedule 4.12(d) Tax Jurisdictions
Schedule 4.12(e) Tax Returns
Schedule 4.12(i) Tax Sharing Agreement
Schedule 4.12(j) NOLs
Schedule 4.13 Litigation
Schedule 4.15 Derivative Instruments
Schedule 4.17 Regulatory Matters
Schedule 4.19 Material Contracts; Defaults
Schedule 4.20(a) Benefit Plans
Schedule 4.20(f) Acceleration of Benefit Plans
Schedule 4.20(g) ERISA
Schedule 4.21(a) Intellectual Property
Schedule 4.21(b) Domain Names
Schedule 4.23(a) Broker-Dealer
Schedule 4.23(b) Registrations
Schedule 4.23(d) Regulatory Agreements
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Schedule 4.24 Insurance
Schedule 4.25 Bank Accounts
Schedule 4.29 Computer Systems
Schedule 4.30(a) Affiliate Transactions
Schedule 4.30(b) Arm's-Length Transactions
Schedule 4.30(c) Settlements
Schedule 4.31 Guaranties
Schedule 4.32 Real Property
Schedule 5.03 Conflicts
Schedule 6.01 Conduct of Business
Schedule 6.10(a) Business Employees
Schedule 11.01(e)-1 Qualifying Customers
Schedule 6.11 Permitted Activities
Schedule 11.01(e)-2 Prospective Qualifying Customers
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT is entered into as of January 31, 2006 by
and among SAI HOLDINGS, INC., a Texas corporation ("Buyer"), COMPUTER CLEARING
SERVICES, INC., a Delaware corporation (the "Company"), and the Company
Stockholders. The parties hereto agree and acknowledge that this Agreement shall
amend and restate that certain Stock Purchase Agreement by and among Buyer, the
Company and the Company Stockholders, dated as of May 12, 2005.
RECITALS
WHEREAS, each Company Stockholder and Epoch is the record and beneficial
owner of that number of shares of common stock, no par value per share, of the
Company ("Company Common Stock") as is set forth opposite the name of such
Company Stockholder or Epoch, as the case may be, on Annex A, which such shares,
taken together with the shares of Company Common Stock held by the other Company
Stockholders and Epoch, represent one hundred percent (100%) of the issued and
outstanding shares of Company Common Stock (collectively, the "Shares").
WHEREAS, the Company desires to sell and the Buyer desires to purchase the
Assets (but not the Retained Assets) and assume the Assumed Liabilities (but not
the Retained Liabilities) of the Company on the terms and conditions set forth
in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and obligations
contained herein, the parties hereto, intending to be legally bound, hereby
agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Certain Defined Terms. As used in this Agreement, except as
expressly provided herein or as the context otherwise requires:
"Accounts Receivable" means (a) all trade accounts receivable and other
rights to payment from customers of the Company and the full benefit of all
security for such accounts or rights to payment, including all trade accounts
receivable representing amounts receivable in respect of services rendered to
customers of the Company, (b) all other accounts or notes receivable of the
Company and the full benefit of all security for such accounts or notes and (c)
any claim, remedy or other right related to any of the foregoing.
"Acument" means Acument Holding, Inc., a California corporation.
"Affiliate" means, with respect to any Person, (i) a Person that controls,
is controlled by, or is under common control with such Person (it being
understood that a Person shall be deemed to "control" another Person, for
purposes of this definition, if such Person directly or indirectly has the power
to direct or cause the direction of the management and policies of such other
Person, whether through holding beneficial ownership interests in such other
Person, by Contract
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or otherwise) and (ii) in addition, if such Person is a natural person, any
spouse or lineal descendant of such Person.
"Agreement" means this Asset Purchase Agreement, including all recitals,
Annexes, Exhibits and Schedules relating hereto.
"Ancillary Agreements" means the Key Employment Agreements and the Bill of
Sale, Assignment and Assumption Agreement.
"Book Value" means the book value of the Company calculated based on the
Initial Balance Sheet and in accordance with the methodology for such
calculation set forth on Schedule 1.01-1.
"Books and Records" means all books of account and other financial
records, files, documents, instruments, books and records relating principally
to the Company, including the books and records required under Rules 17a-3 and
17a-4 of the Exchange Act and other applicable Law.
"Boston Lease" means that certain Boston Community Property Lease, dated
as of September 2004 between Marilyn Ray, Trustee and the Company.
"Business Day" means any day which is not a Saturday, a Sunday or any
other day on which banks in the State of New York are authorized or required by
law to close.
"Buyer Indemnified Parties" means Buyer and each of its Affiliates, and
their respective officers, directors, employees, agents and representatives.
"Buyer Material Adverse Effect" means an effect that is materially adverse
on the ability of Buyer to perform its obligations under or consummate the
transactions contemplated by this Agreement.
"Closing Date Payment" means the Book Value of the Company plus Five
Hundred Thousand Dollars ($500,000) and the assumption by Buyer of the Assumed
Liabilities.
"Code" means the U.S. Internal Revenue Code of 1986, as amended.
"COI Amendment" means the amendment to the Certificate of Incorporation of
the Company establishing the authorized capital stock of the Company at Six
Million (6,000,000) shares of Common Stock.
"Company Intellectual Property Rights" shall mean all Intellectual
Property Rights owned or held by the Company.
"Company Stockholders" means each of Acument, Robert T. Angle, Richard W.
Barber, Financial Technology Partners L.L.C., Michael Bolgatz, Stephen S.
Worcester, Albert Laubenstein, Charles A. Smith, Tanveer Anas, and Brian P.
Forberg.
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"Competitive Business" means the business of being a clearing or executing
broker in the United States of America.
"Confidentiality Agreement" means that certain Non-Disclosure Agreement
between Penson and the Company.
"Contract" means any agreement, lease, sublease, occupancy agreement,
license, evidence of indebtedness, mortgage, indenture, instrument, security
agreement, security interest, guaranty, deed of trust or other contract
obligation or commitment (whether written or oral).
"Debt" means obligations in respect of (i) borrowed money, (ii)
capitalized lease obligations, (iii) obligations under interest rate agreements
and currency agreements, (iv) guaranties of any obligation of any third Person,
(v) letters of credit and (vi) indemnities or performance bonds.
"Effective Time" means 11:59 p.m. (eastern standard time) on the Closing
Date, or such other time as the parties hereto may agree to in writing.
"Epoch" means Epoch Investments, L.P., a Colorado limited partnership
(f/k/a Empyrean Investments, L.P.), which prior to the Closing of this Agreement
held Nine Hundred Twenty Eight Thousand Eight Hundred Eighty (928,880) shares of
Company Common Stock.
"Epoch Agreement" means the Stock Purchase Agreement by and between Buyer
and Epoch, dated as of December 20, 2005.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Excluded Litigation" means the litigation designated as "Excluded
Litigation" on Schedule 4.13.
"Excluded Receivables" means those receivables of the Company set forth on
Schedule 1.01-2.
"Final Closing Date Payment" means the calculation of the Closing Date
Payment based on the Revised Balance Sheet as such calculation is reflected on
the Revised Balance Sheet and, pursuant to Section 3.06(c), the Final Balance
Sheet.
"GAAP" shall mean United States generally accepted accounting principles,
as in effect from time to time and applied consistently throughout the
applicable periods.
"Glendale Securities" means Glendale Securities, Inc., a California
corporation.
"Indemnified Person" means the Person or Persons entitled to
indemnification under Article X.
"Indemnifying Person" means the Person or Persons obligated to provide
indemnification under Article X.
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"Initial Balance Sheet" means the balance sheet of the Company, as of
either the date thirty (30) calendar days prior to the Closing Date or the last
day of the most recent calendar month ending prior to the Closing Date,
whichever is earlier, attached hereto as Schedule 1.01-3.
"IRS" means the United States Internal Revenue Service.
"Intellectual Property Rights" means all proprietary and other rights,
including rights granted under license, in and to the following: (i) trademarks,
service marks, trademark registrations, service mark registrations, trade names,
trade dress, corporate names, logos and other designations of origin,
applications to register any of the foregoing and the goodwill associated
therewith; (ii) copyrights, copyrightable works, copyright registrations and
applications for registration of copyrights; (iii) Domain Names; (iv) patents,
design patents and utility patents, all applications for grant of any such
patents pending as of the date hereof or as of the Closing Date, all
improvements to the inventions disclosed in each patent, registration or
application and all reissues, divisions, continuations, continuations-in-part,
reexaminations and extensions thereof; (v) Software; (vi) technical
documentation, confidential information, trade secrets, designs, inventions,
technology, processes, formulae, know-how, operating manuals and guides,
financial, marketing and business data, plans, new product development,
technical and marketing surveys, material specifications, product
specifications, invention records, research records, labor routings, inspection
processes, equipment lists, engineering reports and drawings, architectural or
engineering plans, marketing and licensing records, sales literature, customer
and supplier lists, trade lists, sales forces and distributor networks lists,
advertising and promotional materials, service and parts records, warranty
records, maintenance records and similar records; (vii) all rights and incidents
of interest in and to all non-competition or confidentiality agreements; (viii)
copies and tangible embodiments of all of the foregoing, as well as related
documentation in whatever form or medium; and (ix) all rights to sue or recover
and retain damages and costs and attorney's fees for present and past
infringement of any of the foregoing.
"Key Employees" means the individuals listed on Annex B, as such list may
be amended in Buyer's sole discretion from time to time up until the date which
is five (5) Business Days prior to the Closing Date.
"Key Employment Agreements" means those certain employment agreements
between the Company and each of the Key Employees entered into on or prior to
the Closing Date, substantially in the form attached hereto as Exhibit A.
"Knowledge" means (i) with regard to a natural person, the actual
knowledge of such individual as to a particular fact or matter and such
knowledge of such fact or matter as a prudent individual could be expected to
discover or otherwise become aware of in the course of conducting a reasonably
comprehensive investigation concerning the existence of such fact or matter and
(ii) with regard to any other Person, the knowledge of each individual who is
serving as a director, officer, employee, partner, executor or trustee of such
Person (or in any similar capacity) as determined in accordance with the
preceding clause (i). Notwithstanding anything to the contrary in the foregoing
definition, it is agreed that the term Knowledge when applied to Financial
Technology Partners L.L.C. and Michael Bolgatz shall mean the actual knowledge
of such Person without implying any duty of investigation.
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"Law" means any statute, law, constitutional provision, code, regulation,
ordinance, rule, ruling, judgment, decision, order, writ, injunction, decree,
permit, concession, grant, franchise, license, agreement, directive, binding
guideline or policy or rule of common law, requirement of, or other governmental
restriction of or determination by any Governmental Entity or any interpretation
of any of the foregoing by any Governmental Entity.
"Liabilities" means all Debt, and other liabilities of a Person of any
kind, character or description, whether absolute or contingent, known or
unknown, accrued or unaccrued, disputed or undisputed, liquidated or
unliquidated, secured or unsecured, joint or several, vested or unvested,
executory, determined, determinable or otherwise, and whether or not the same is
required to be accrued on the financial statements of such Person.
"Lien" means any encumbrance, mortgage, lien, claim, pledge, right of
first refusal, charge or other security interest or similar limitation.
"Litigation" means any actions, suits, arbitrations, proceedings,
hearings, investigations or complaints of any kind of, in, or before any court
or quasi-judicial or administrative agency of any federal, state, local, or
foreign jurisdiction or before any arbitrator.
"Loss" or "Losses" means any and all losses, Liabilities, costs, claims,
damages, penalties, interest and expenses (including reasonable attorneys' fees
and expenses and reasonable costs of investigation and litigation but excluding
lost profits and consequential damages).
"Material Adverse Effect" means a material adverse effect on the financial
condition, business, prospects, assets, liabilities, or results of operations of
the Company or Buyer, as the case may be, individually or in the aggregate, but
shall not include any effect arising out of or resulting from (a) a change in
general economic or financial conditions and (b) a change affecting the
securities markets or the brokerage industries in the United States generally;
provided that such change does not have a disproportional effect on the Company.
"NASD" shall mean the NASD (f/k/a the National Association of Securities
Dealers, Inc.).
"Permitted Liens" means (a) Liens for Taxes not yet due and payable, (b)
mechanics', materialman's, carriers', workers', repairers', landlords' and
similar Liens arising or incurred in the ordinary course of business, (c)
zoning, entitlement, building and other land use regulations that are not
violated by current occupancy or use and (d) customary covenants, conditions,
restrictions, easements and similar restrictions of record affecting title that
do not impair current occupancy or use.
"Penson" means Penson Worldwide, Inc., a Delaware corporation.
"Person" means an individual, corporation, partnership, trust, limited
liability company, a branch of any legal entity, unincorporated organization,
joint stock company, joint venture, association, other entity or Governmental
Entity.
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"Post-Closing Period" means any taxable period or portion thereof
beginning after the Closing Date. If a taxable period begins on or before the
Closing Date and ends after the Closing Date, then the portion of the taxable
period that begins on the day following the Closing Date shall constitute a
Post-Closing Period.
"Pre-Closing Period" means any taxable period or portion thereof that is
not a Post-Closing Period.
"Proportionate Percentage" means, at any given time and with regard to
each Company Stockholder, the result, expressed as a percentage, obtained by
dividing (x) the total number of shares of Company Common Stock sold (or, prior
to the Closing, to be sold) to Buyer by such Company Stockholder pursuant to
this Agreement by (y) the total number of shares of Company Common Stock, in the
aggregate, sold (or, prior to the Closing, to be sold) to Buyer by all Company
Stockholders pursuant to this Agreement.
"Records" means information that is inscribed on a tangible medium or that
is stored in an electronic or other medium and is retrievable in perceivable
form.
"SEC" means the United States Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Software" means all computer software, including source code, object
code, operating systems and specifications, algorithms, data, databases and all
related documentation.
"SRO" means any domestic or foreign securities broker-dealer
self-regulatory organization.
"Stockholder Indemnified Parties" means the Company Stockholders and each
of their Affiliates, and their respective officers, directors, employees, agents
and representatives; provided that in no event shall the Company be deemed to be
a Stockholder Indemnified Party.
"Subsidiary" means, with respect to any Person, any other Person (i) of
which such Person (either alone or through or together with one or more of such
first Person's other Subsidiaries) owns or has rights to acquire, directly or
indirectly, more than fifty percent (50%) of the stock or other equity interests
the holders of which are generally entitled to vote for the election of the
board of directors or other governing body of such other Person or (ii) any
other Person over which such Person directly or indirectly has the power to
direct or cause the direction of the management and policies of such other
Person, whether through holding beneficial ownership interests in such other
Person, by Contract or otherwise.
"Tangible Personal Property" means all machinery, equipment, tools,
furniture, office equipment, computer hardware, supplies, materials, vehicles
and other items of tangible personal property of every kind owned or leased by
the Company (wherever located and whether or not carried on the Company's
books), together with any express or implied warranty by the manufacturers or
sellers or lessors of any item or component part thereof and all maintenance
records and other documents relating thereto.
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"Tax" or "Taxes" means all federal, state, local, or foreign net or gross
income, gross receipts, net proceeds, sales, use, ad valorem, value added,
franchise, bank shares, withholding, payroll, employment, excise, property,
deed, stamp, alternative or add-on minimum, environmental, profits, windfall
profits, transaction, license, lease, service, service use, occupation,
severance, energy, unemployment, social security, worker's compensation,
capital, premium, or other taxes, assessments, customs, duties, fees, levies, or
other governmental charges of any nature whatever, whether disputed or not,
together with any interest, penalties, additions to tax, or additional amounts
with respect thereto.
"Tax Return" means a report, return or other information (including any
amendments) required to be supplied to a Taxing Authority with respect to Taxes,
including, where permitted or required, combined, consolidated, unitary or
similar returns for any group of entities that includes the Company.
"Taxing Authority" means any governmental agency, board, bureau, body,
department, or authority of any United States federal, state, or local
jurisdiction or any foreign jurisdiction, having jurisdiction with respect to
any Tax.
Section 1.02. Other Defined Terms. The following terms have the meanings
given thereto in the Sections set forth below:
Term Section
--------------------------------------- --------
1940 Act 4.23(d)
Accounting Firm 3.06(c)
Additional Contingent Payment 11.01(f)
Assets 2.01
Assumed Liabilities 2.03
Audited Financial Statements 4.07(a)
Benefit Plans 4.20(a)
Bill of Sale, Assignment and Assumption
Agreement 3.04
Bonus Account 11.01(e)
Bonus Committee 11.01(e)
Business Employees 4.20(d)
Buyer Preamble
Closing 3.03
Closing Date 3.03
Company Preamble
Company Common Stock Recitals
Company Permits 4.11
Company Plans 4.20(a)
Company Policies and Procedures 4.23(e)
Competitive Activities 6.11(a)
Contest 9.04
Contingent Payment 11.01(e)
Designated Purpose 12.12
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Dispute Notice 11.02(a)
Domain Names 4.21(b)
Earnout Year 11.01(e)
ERISA 4.20(a)
Final Balance Sheet 3.06(c)
Final Statement 11.02(a)
Financial Statements 4.07(a)
Governmental Entity 4.04
Investment Advisers Act 4.23(f)
IPO 11.01(e)
Leased Real Property 4.32
Management Group 11.01(e)
Material Contract 4.19
Notice of Disagreement 3.06(b)
Penson Stock 11.01(e)
Penson Stock Cap 11.01(b)
Penson Valuation 11.01(e)
Plans 4.23(i)
Preliminary Statement 11.02(a)
Purchase Price 3.01
Qualifying Customers 11.01(e)
Qualifying Revenue 11.01(e)
Real Property Lease 4.32
Receivables Settlement Date 3.08
Receivables Reserve 3.08
Regulatory Agreement 4.23(d)
Relevant Group 4.12(a)
Retained Assets 2.02
Revised Balance Sheet 3.06(a)
Seller Plan 4.20(a)
Shares Recitals
Stockholders' Representative 12.12(a)
Tax Indemnitee 9.01(a)
Unaudited Financial Statements 4.07(a)
Uncollected Receivables 3.08
Section 1.03. Construction. Unless otherwise expressly provided herein or
unless the context of this Agreement clearly requires otherwise, (a) words using
the singular or plural number also include the plural or singular number,
respectively, (b) the use of any gender herein shall be deemed to include the
other genders, (c) references herein to "Preamble," "Recitals," "Schedules,"
"Articles," "Sections," "subsections" and other subdivisions without reference
to a document are to the Preamble or specified Recitals, Schedules, Articles,
Sections, subsections and other subdivisions of this Agreement, (d) a reference
to a subsection without further reference to a Section is a reference to such
subsection as contained in the same Section in which the reference appears, and
this rule shall also apply to other subdivisions within a Section or subsection,
(d) the words "herein," "hereof," "hereunder," "hereby" and other words of
similar
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import refer to this Agreement as a whole and not to any particular provision,
and (e) the words "include," "includes" and "including" are deemed to be
followed by the phrase "without limitation". All accounting terms used and not
expressly defined herein shall have the meanings given to them under GAAP.
ARTICLE II
PURCHASE OF ASSETS
Section 2.01. Purchase and Sale of the Assets. Subject to the terms and
conditions set forth herein, at the Closing, the Company shall sell, convey,
assign, transfer and deliver to Buyer, and Buyer shall accept and purchase all
of the Company's right, title and interest in and to all of the Company's
properties, assets, powers and rights of any type, kind or nature, whether
tangible or intangible, and wherever located, used in connection with the
Company's business (other than the Retained Assets)(collectively, the "Assets"),
including, without limitation, the following:
(a) all Tangible Personal Property, including those items described
in Schedule 2.01(a);
(b) all Accounts Receivable as more fully described in Section 3.08;
(c) all Material Contracts;
(d) all data and Records related to any accounts transferred,
including client and customer lists and Records, referral sources,
research and development reports and Records, financial and accounting
Records, creative materials, advertising materials, promotional materials,
studies, reports, correspondence, other similar documents and all
documents and Records listed on Schedule 2.01(d);
(e) all of the intangible rights and property of the Company,
including Intellectual Property Rights, telephone, telecopy and e-mail
addresses and listings, except as specifically provided in Section
2.02(e);
(f) all insurance benefits, including rights and proceeds, arising
from or relating to the Assets or the Assumed Liabilities prior to the
Effective Time, unless expended in accordance with this Agreement;
(g) all claims of the Company against third parties relating to the
Assets, whether choate or inchoate, known or unknown, contingent or
noncontingent, and all such claims listed in Schedule 2.01(g), but
excluding the Excluded Litigation; and
(h) all other Assets of the Company not otherwise identified as
Retained Assets.
Notwithstanding the above, the transfer of the Assets pursuant to this
Agreement shall not include the assumption of any Liability related to the
Assets unless Buyer expressly assumes that Liability hereunder.
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Section 2.02. Retained Assets.
Notwithstanding anything to the contrary contained in Section 2.01 or
elsewhere in this Agreement, the following assets of the Company (collectively,
the "Retained Assets") are not part of the sale and purchase contemplated
hereunder, are excluded from the Assets and shall remain the property of the
Company after the Closing:
(a) all cash, deposits and/or cash equivalents and short-term
investments;
(b) all minute books, stock Records and corporate seals;
(c) the shares of capital stock of the Company held in treasury;
(d) all Company data and Records not included under Section 2.01(d);
(e) the Company's going concern value and goodwill;
(f) those rights relating to deposits and prepaid expenses and
claims for refunds and rights to offset in respect thereof listed in
Schedule 2.02(f);
(g) all insurance policies and rights thereunder (except to the
extent specified in Sections 2.01 (f) and (g));
(h) all of the Material Contracts listed in Schedule 2.02(h),
including, without limitation, the Boston Lease;
(i) all personnel Records and other Records that the Company is
required by law to retain in its possession;
(j) all claims for refund of Taxes and other governmental charges of
whatever nature;
(k) all rights in connection with and assets of the Company Plans;
(l) all rights of the Company under this Agreement and the Bill of
Sale, Assignment and Assumption Agreement; and
(m) the property and assets expressly designated in Schedule
2.02(m).
Section 2.03. Assumed Liabilities. On the Closing Date, but effective as
of the Effective Time, Buyer shall assume and agree to discharge only the
Liabilities of the Company described in Schedule 2.03, be they current
Liabilities or those incurred by the Company prior to the Closing Date
(collectively, the "Assumed Liabilities").
Section 2.04. Retained Liabilities. The Retained Liabilities shall remain
the sole responsibility of and shall be retained, paid, performed and discharged
solely by the Company. "Retained Liabilities" shall mean every Liability of the
Company other than the Assumed Liabilities, including:
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(a) any Liability arising out of or relating to products or services
of the Company to the extent manufactured or sold prior to the Effective
Time other than to the extent assumed under Schedule 2.03;
(b) any Liability under any Contract assumed by Buyer pursuant to
Section 2.03 that arises after the Effective Time but that arises out of
or relates to any breach that occurred prior to the Effective Time;
(c) any Liability for Taxes, including (A) any Taxes arising as a
result of the Company's operation of its business or ownership of the
Assets prior to the Effective Time, (B) any Taxes that will arise as a
result of the sale of the Assets pursuant to this Agreement and (C) any
deferred Taxes of any nature;
(d) any Liability under any Contract not assumed by Buyer under
Section 2.02, including any Liability arising out of or relating to the
Company's credit facilities or any security interest related thereto;
(e) any Environmental, Health and Safety Liabilities arising out of
or relating to the operation of the Company's business or the Company's
leasing, ownership or operation of real property;
(f) except for reimbursable payroll expenses and other Assumed
Liabilities set forth on Schedule 2.03, any Liability under the Company
Plans or relating to payroll, vacation, sick leave, workers' compensation,
unemployment benefits, pension benefits, employee stock option or
profit-sharing plans, health care plans or benefits or any other employee
plans or benefits of any kind for the Company's employees or former
employees or both;
(g) any Liability under any employment, severance, retention or
termination agreement with any employee of the Company or any of its
Affiliates;
(h) any Liability arising out of or relating to any employee
grievance whether or not the affected employees are hired by Buyer;
(i) any Liability of the Company to any Company Stockholder or
Affiliate of the Company or any Company Stockholder;
(j) any Liability to indemnify, reimburse or advance amounts to any
officer, director, employee or agent of the Company;
(k) any Liability to distribute to any of the Company's Stockholders
or otherwise apply all or any part of the consideration received
hereunder;
(l) any Liability arising out of any proceeding pending as of the
Effective Time;
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(m) any Liability arising out of any proceeding commenced after the
Effective Time and arising out of or relating to any occurrence or event
happening prior to the Effective Time;
(n) any Liability arising out of or resulting from the Company's
compliance or noncompliance with any Law or order of any Governmental
Entity;
(o) any Liability of the Company under this Agreement or any other
document executed in connection with the transactions contemplated
hereunder; and
(p) any Liability of the Company based upon the Company's acts or
omissions occurring after the Effective Time.
ARTICLE III
CONSIDERATION
Section 3.01. Purchase Price. As consideration for the Assets, Buyer shall
(i) assume the Assumed Liabilities on the Closing Date, (ii) deliver the Closing
Date Payment to the Company on the Closing Date and (iii) to the extent payable
after the Closing Date, the contingent consideration to be paid pursuant to
Article XI at such times as are set forth thereunder for any such payments
(collectively, the "Purchase Price"). All payments to be made by Buyer to the
Company hereunder are assigned directly to the Company Stockholders according to
their respective percentage ownership interests as set forth on Annex A;
provided, however, that should Mr. Richard W. Barber, or any person later
designated by the Company's Board of Directors, determine that any portion of
such payments should be retained by the Company to satisfy any then existing or
future Company obligations, such funds shall be retained by the Company and not
be assigned directly to the Company Stockholders. Notwithstanding anything in
the preceding sentence to the contrary, the Buyer may, at its sole discretion,
require any payments to be made hereunder be assigned directly to the Company
Stockholders to protect any interests Buyer may have.
Section 3.02. Allocation of Purchase Price. The Purchase Price shall be
allocated in as the parties shall agree. After the Closing, the parties shall
make consistent use of the allocation, fair market value and useful lives
specified in the manner agreed by the parties, for all Tax purposes and in all
filings, declarations and reports with the IRS in respect thereof, including the
reports required to be filed under Section 1060 of the Code. Buyer shall prepare
and deliver IRS Form 8594 to the Company within forty-five (45) days after the
Closing Date to be filed with the IRS. In any proceeding related to the
determination of any Tax, neither Buyer nor the Company or Company Stockholders
shall contend or represent that such allocation is not a correct allocation.
Section 3.03. Closing. The closing of the purchase and sale of the Assets
(the "Closing") will take place at the offices of Buyer, 1700 Pacific Avenue,
Suite 1400, Dallas, TX 75214, or at such other place as Buyer and the Company
mutually agree, at 10:00 a.m. local time no later than the third (3rd) Business
Day following the satisfaction or waiver of all conditions to the obligations of
the parties to consummate the transactions contemplated hereby (other than
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conditions with respect to actions the respective parties will take at the
Closing itself) or such other date as the parties may mutually determine (the
date on which the Closing takes place, the "Closing Date").
Section 3.04. Closing Deliveries by the Company. At the Closing, the
Company Stockholders and/or the Company shall deliver or cause to be delivered
to Buyer:
(a) a receipt for the payment of the Closing Date Payment
(b) an executed Bill of Sale, Assignment and Assumption Agreement in
substantially the form attached hereto as Exhibit B (the "Bill of Sale
Assignment and Assumption Agreement"); and
(c) the certificates and other documents required to be delivered
pursuant to Section 7.01.
Section 3.05. Closing Deliveries by Buyer. At the Closing, Buyer shall
deliver to the Company Stockholders:
(a) the Closing Date Payment by wire transfer of immediately
available funds to the bank accounts specified by the Company in a written
notice at least five (5) Business Days prior to Closing;
(b) an executed Bill of Sale, Assignment and Assumption Agreement;
and
(c) the certificates and other documents required to be delivered
pursuant to Section 7.02.
Section 3.06. Purchase Price Adjustment.
(a) Revised Balance Sheet. Within one hundred twenty (120) Business
Days after the Closing Date, Buyer shall deliver to the Stockholders'
Representative a balance sheet (including the related notes and schedules
thereto) of the Company as of the Effective Time, together with a
calculation of the Final Closing Date Payment, including in detail the
amounts underlying the calculation (the "Revised Balance Sheet"). The
Revised Balance Sheet shall be prepared in accordance with the Initial
Balance Sheet using the same principles as were used in preparing the
Initial Balance Sheet and making the initial calculation of the Closing
Date Payment based thereon.
(b) Notice of Disagreement. The Stockholders' Representative shall
notify Buyer in writing (such notice, a "Notice of Disagreement") within
ten (10) Business Days after receiving the Revised Balance Sheet if the
Stockholders' Representative disagrees with Buyer's calculation of the
Revised Balance Sheet, which Notice of Disagreement shall set forth in
reasonable detail the basis for such dispute, the U.S. Dollar amounts
involved and the Stockholders' Representative's own good faith estimate of
the Revised Balance Sheet. Any item not specifically disputed by the
Stockholders' Representative shall be deemed accepted by all of the
Company Stockholders and shall become part of the Final Balance Sheet. If
the Stockholders' Representative does not deliver a Notice of
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Disagreement to Buyer within such ten (10) Business Day period, then the
Revised Balance Sheet shall be deemed to have been accepted by all of the
Company Stockholders, shall become final and binding upon the parties and
shall be the Final Balance Sheet.
(c) Dispute Resolution. During the ten (10) Business Day period
immediately following the delivery of a Notice of Disagreement, the
Stockholders' Representative and Buyer shall seek in good faith to resolve
any differences that they may have with respect to any matter specified in
the Notice of Disagreement. If at the end of such ten (10) Business Day
period the Stockholders' Representative and Buyer have been unable to
agree upon a Final Balance Sheet, then the Stockholders' Representative
and Buyer shall (within five (5) Business Days after the end of such ten
(10) Business Day period) submit to the Accounting Firm for review and
resolution any and all matters that remain in dispute with respect to the
Notice of Disagreement. Buyer and the Stockholders' Representative shall
cause EDO Seidman, LLP (the "Accounting Firm") to use commercially
reasonable efforts to make a final determination (which determination
shall be binding on the parties hereto) of the Revised Balance Sheet
within fifteen (15) Business Days from such submission, and such final
determination shall be the Final Balance Sheet. The cost of the Accounting
Firm's review and determination shall be split between and paid by Buyer,
on the one hand, and the Company Stockholders, on the other hand, on a
proportionate basis, based upon the relative amount by which the
determination of the Revised Pro Forma Balance Sheet of each of them
differed from that determined by the Accounting Firm. During the fifteen
(15) Business Day review by the Accounting Firm, Buyer and the Company
Stockholders shall each make available to the Accounting Firm such
individuals and such information, Books and Records as may be reasonably
required by the Accounting Firm to make its final determination. The
Revised Balance Sheet as accepted by the Company Stockholders without
Notice of Disagreement, or as adjusted pursuant to agreement between Buyer
and the Stockholders' Representative, or as adjusted pursuant to
Accounting Firm's determination, shall be final and binding on the parties
(the "Final Balance Sheet").
(d) Adjustment, (i) If the Final Closing Date Payment set forth in
the Final Balance Sheet is higher than the Closing Date Payment, then
Buyer shall pay to the Company Stockholders an amount equal to such
excess, in cash or other immediately available funds, within five (5)
Business Days after the Final Balance Sheet becomes final and binding on
the parties hereto as provided in the previous paragraph. If the Final
Closing Date Payment set forth in the Final Balance Sheet is less than the
Closing Date Payment, then the Company Stockholders shall be obligated
jointly and severally to pay, and shall pay, to Buyer an amount equal to
such shortfall, in cash or other immediately available funds, within five
(5) Business Days after the Final Balance Sheet becomes final and binding
on the parties hereto as provided in the previous paragraph. If Final
Closing Date Payment set forth in the Final Balance Sheet is equal to the
Closing Date Payment, then neither Buyer nor the Company Stockholders
shall owe any amount to the other party pursuant to this Section 3.06(d).
(e) Accounting Books, Records, Policies and Procedures. Buyer agrees
that following the Closing through the date on which payment, if any, is
made by either party
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pursuant to this Section 3.06, or if the Final Balance Sheet indicates
that no such payment is required, then through the date on which such
Final Balance Sheet becomes final and binding on the parties hereto, Buyer
will not take any actions with respect to any accounting books, records,
policies or procedures on which the Initial Balance Sheet was based or the
Final Balance Sheet is to be based that would make it impossible or
impracticable to calculate the Final Balance Sheet in the manner and
utilizing the methods required hereby and that the Stockholders'
Representative shall have such access to the Company's Books and Records
as may be reasonably necessary in connection with its review of the
Revised Balance Sheet or conduct of the dispute resolution process set
forth in this Article III.
Section 3.07. Right of Offset. The Company and the Company Stockholders
hereby expressly acknowledge and agree that Buyer shall have the right, at its
election and without notice of any kind to any Person, to fully and completely
offset against any or all Contingent Payments payable or becoming payable, by
Buyer pursuant to Article XI (i) any and all amounts owed to any Buyer
Indemnified Party pursuant to Article X (or any portion thereof), (ii) any and
all amounts owed to Buyer pursuant to Section 3.06 and (iii) any and all amounts
otherwise owed by the Company or the Company Stockholders to Buyer pursuant to
this Agreement or any other Ancillary Agreement (or any portion thereof). Any
such offset shall be made against the Contingent Payment due to the Company.
Section 3.08. Accounts Receivable. Buyer shall use commercially reasonable
efforts to collect any accounts receivable set forth, and labeled as such, on
the Initial Balance Sheet; provided, however, that Buyer shall not be required
to institute suit or otherwise resort to any legal proceedings in connection
with such efforts. On the first Business Day following the date that is one
hundred eighty (180) days following the Closing Date (the "Receivables
Settlement Date"), Buyer shall provide the Stockholders' Representative with a
list of each such account receivable and the related amount that remains
uncollected as of the Receivables Settlement Date ("Uncollected Receivables").
If the aggregate Uncollected Receivables exceeds the reserve shown in the
Initial Balance Sheet with respect to accounts receivables, as such reserve may
be finally adjusted on the Final Balance Sheet (the "Receivables Reserve"),
within five (5) Business Days following the Settlement Date, the Company shall
purchase from Buyer all Uncollected Receivables for a purchase price equal to
the amount of such excess, such purchase price to be paid by the Company in the
following manner: first, by offsetting such amount against the Contingent
Payments, if any, due to the Company at the end of the first Earnout Year and
second, in the event such Contingent Payments are inadequate to satisfy the
offset of such amount for any reason, by payment at such time in cash by the
Company equal to the amount of such shortfall. If the Receivables Reserve
exceeds the aggregate Uncollected Receivables, within five (5) Business Days
following the Settlement Date Buyer shall pay to the Company the amount of such
excess.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY
STOCKHOLDERS AND THE COMPANY
Each of the Company and each Company Stockholder hereby represents and
warrants to Buyer, as of the date hereof and as of the Closing Date, as follows:
Section 4.01. Company Organization. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization and has all requisite corporate power and
authority to carry on its business as now being conducted. The Company is duly
qualified or licensed to do business in each jurisdiction in which the property
owned, leased or operated by it or the nature of the business conducted by it
makes such qualification or licensing necessary, except where the failure to be
so qualified or so licensed would not reasonably be expected to result in a
Material Adverse Effect. True, correct and complete copies of the certificate of
incorporation and by-laws of the Company, as most recently amended, have been
made available to Buyer.
Section 4.02. Company Stockholder Organization. Schedule 4.02 contains a
complete and accurate list of the jurisdiction of incorporation or formation of
each Company Stockholder that is not a natural person and Epoch and any other
jurisdictions in which such Company Stockholder or Epoch is qualified to do
business as a foreign corporation or limited partnership as a result of the
activities of the Company. Each such Company Stockholder and Epoch is a
corporation or limited partnership, as the case may be, duly organized, validly
existing and in good standing, as applicable, under the Laws of the jurisdiction
of its respective organization and each such Company Stockholder has all
requisite corporate or limited partnership, as the case may be, power and
authority to carry on its business, to own and use the properties and assets
that it purports to own or use and to perform all its obligations under this
Agreement.
Section 4.03. Authority. Each of the Company and each Company Stockholder
has all requisite standing, power and authority (individual, corporate or
otherwise) to execute, deliver and perform its respective obligations under this
Agreement and the Ancillary Agreements and to consummate the transactions
contemplated hereby and thereby. This Agreement and the Ancillary Agreements
have been duly executed and delivered by the Company and each Company
Stockholder, as appropriate, and constitute valid and binding obligations of
thereof, enforceable against the Company and such Company Stockholder in
accordance with their respective terms.
Section 4.04. No Conflicts. Except as set forth on Schedule 4.04, none of
the execution, delivery and performance of this Agreement or the Ancillary
Agreements by the Company or the Company Stockholders, as applicable, or the
consummation by the Company or the Company Stockholders, as applicable, of the
transactions contemplated hereby and thereby does or will (a) conflict with or
violate any organizational document of the Company or any Company Stockholder,
(b) require any consent, approval, authorization or permit of, or filing with or
notification to, any foreign, federal, state or local government or subdivision
thereof, or governmental, judicial, legislative, executive, administrative or
regulatory authority, agency, commission, tribunal or body, SRO, clearing
organization or non-governmental regulating body
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(each, a "Governmental Entity") to the extent that the rules, regulations or
orders of such body are binding upon any Company Stockholder or the Company or
otherwise have the effect of law, (c) require any consent, waiver or approval
or, with or without the giving of notice or lapse of time or both, result in a
default or breach by any Company Stockholder or the Company (or give rise to any
right of termination, cancellation, modification or acceleration) under any of
the terms, conditions or provisions of any Contract to which any Company
Stockholder or the Company is a party or by which any Company Stockholder or the
Company or any of the assets of any Company Stockholder or the Company may be
bound or is a third party beneficiary of, (d) result in the creation or
imposition of any Lien on any asset of the Company or (e) conflict with or
violate any Law applicable to any Company Stockholder or the Company or by which
any of the assets of any Company Stockholder or the Company are bound.
Section 4.05. No Subsidiaries. Except as set forth on Schedule 4.05. the
Company does not have and never has had any Subsidiaries and does not own,
directly or indirectly, any debt, shares or other equity interest or securities
in any corporation, partnership, joint venture or other Person, and has no
agreement or commitment to purchase any such interest.
Section 4.06. Capitalization; Title to the Shares. As of the date hereof,
the authorized capital stock of the Company consists of Five Million (5,000,000)
shares of Company Common Stock and, upon the filing and effectiveness of the COI
Amendment with the Secretary of State of the State of Delaware, the authorized
capital stock of the Company shall consist of Six Million (6,000,000) shares of
Company Common Stock. Five Million Seven Hundred Twenty Eight Thousand Two
Hundred Fifty Six (5,728,256) such shares are issued and outstanding and are
owned legally, beneficially and of record by the Company Stockholders and Epoch
in the amounts and percentages set forth on Annex A and, as of the Closing Date,
such shares shall constitute the Shares. Except for the Shares, there are no
shares of capital stock or other equity securities of the Company issued,
reserved for issuance or outstanding. All of the Shares have been duly
authorized and validly issued and are fully paid and nonassessable. There is no
security, option, warrant, right, call, subscription agreement, commitment or
understanding of any nature whatsoever to which any Company Stockholder or the
Company is a party that, directly or indirectly, (a) calls for the issuance,
sale, pledge or other disposition of any Company Common Stock or any securities
convertible into, or other rights to acquire, any Company Common Stock or any
other equity security of, or interest in, the Company, (b) obligates any Company
Stockholder or the Company to grant, offer or enter into any of the foregoing or
(c) relates to the voting or control of such Company Common Stock, equity
securities or interests, or other rights. Each Company Stockholder has good and
marketable title to the Shares held thereby, free and clear of any Liens.
Section 4.07. Financial Statements, (a) The Company Stockholders have
delivered to Buyer copies of each of (i) the audited balance sheets of the
Company (including all related notes and schedules thereto) at December 31, 2004
and the audited statements of income, stockholder's equity and cash flows of the
Company (including any related notes and schedules thereto) for the fiscal year
ended December 31, 2004 (collectively, the "Audited Financial Statements"), (ii)
the unaudited balance sheets (including all related notes and schedules thereto)
and the unaudited statements of income, stockholder's equity and cash flows
(including any related notes and schedules thereto) of the Company for each
calendar quarter during the
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calendar year 2005 (collectively, the "Unaudited Financial Statements", and
together with the Audited Financial Statements, the "Financial Statements") and
(iii) the Initial Balance Sheet.
(b) The Financial Statements and the Initial Balance Sheet have been
prepared in accordance with GAAP (except as may be set forth in the notes
thereto), and fairly present in all material respects the financial
position of the Company as of the dates indicated and the results of
operations and cash flows of the Company for the periods indicated. The
Financial Statements were prepared in accordance with the Books and
Records of the Company.
(c) The Books and Records of the Company: (i) reflect all items of
the Company's income and expense and all the Company's assets and
liabilities required to be reflected therein in accordance with GAAP, (ii)
are in all material respects complete and correct, and do not contain or
reflect any material inaccuracies or discrepancies and (iii) have been
maintained in accordance with good business and accounting practices.
(d) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are
executed in accordance with management's general or specific
authorization; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to
maintain asset accountability; (iii) access to assets is permitted only in
accordance with management's general or specific authorization and (iv)
the recorded accountability for assets is compared with the existing
assets at reasonable intervals and appropriate action is taken with
respect to any differences.
Section 4.08. No Undisclosed Liabilities. Except as set forth on Schedule
4.08, there are no Liabilities of the Company other than Liabilities (i)
expressly reflected or reserved against on the Financial Statements or (ii)
incurred in the ordinary course of business, consistent with the past practice
of the Company since the respective dates thereof.
Section 4.09. Receivables. All trade accounts, notes receivable and other
receivables of the Company that are reflected in the Books and Records of the
Company represent valid obligations arising from sales actually made in the
ordinary course of business, and, to the Company's or any Company Stockholder's
Knowledge, are collectible net of any reserve shown on the Initial Balance
Sheet.
Section 4.10. Absence of Material Adverse Change; Conduct of Business.
Except as set forth on Schedule 4.10, since December 31, 2004, the Company has
conducted its business only in the ordinary course consistent with past
practice and there has been (a) no change or event that, individually or
together with other changes or events, (i) has had or could reasonably be
expected to have a Material Adverse Effect on the Company, (ii) prevent or
materially delay the Closing or (iii) make any of the representations and
warranties of the Company Stockholders or the Company false or inaccurate as of
the Closing Date, (b) no declaration, setting aside or payment of any dividend
or other distribution with respect to, or any direct or indirect redemption or
acquisition of, any of the capital stock or any convertible security of the
Company, (c) no waiver of any material right of the Company or cancellation of
any material Debt or claim held by the Company, (d) no entering into, adoption
or amendment of any material
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agreement with any employee or consultant of the Company or any employee benefit
plan or arrangement and no material increase in the compensation paid or payable
to any officer, director, employee or agent of the Company, (e) no material
loss, destruction or damage to any property of the Company, whether or not
insured, (f) no material labor dispute involving the Company and no material
change in the personnel of the Company or the terms and conditions of their
employment, (g) no acquisition or disposition, assignment, license, mortgage,
pledge of, or otherwise subject to a Lien, any material assets (or any Contract
or arrangement therefor) of the Company, including, any of the Company
Intellectual Property Rights, except in the ordinary course of business, (h) no
change in accounting methods or practices of the Company, (i) no loss, or any
development that is expected to result in a loss, of any significant supplier,
customer, distributor or account of the Company (other than the completion in
the ordinary course of business of specific projects for customers), (j) no
amendment or termination of any Material Contract or other material agreement to
which the Company is a party or by which the Company or any of its Subsidiaries
is bound or any of the Company's organizational documents, (k) no incurrence,
assumption, guarantee or prepayment of any indebtedness for borrowed money or
amendment of the terms relating to any such indebtedness, or the issuance or
sale of any debt securities by the Company and (1) no agreement or commitment
(contingent or otherwise) to do any of the foregoing.
Section 4.11. Permits; Compliance. The Company is in possession of all
material franchises, grants, authorizations, licenses, permits, easements,
variances, exceptions, consents, certificates, approvals and orders of any
Governmental Entity legally necessary for it to carry on its business and
operations as they are now being conducted (the "Company Permits"), and no
suspension or cancellation of any Company Permit is pending or, to the Knowledge
of any of the Company Stockholders or the Company, threatened. Except as set
forth on Schedule 4.11, the Company is not in conflict with, or in default or
violation of, nor, with the giving of notice or lapse of time or both, would be
in conflict with, or in default or violation of, (a) any Law applicable thereto
or by which any property or asset thereof is bound or (b) any of the Company
Permits.
Section 4.12. Taxes. Except as set forth on Schedule 4.12.
(a) All Tax Returns required to have been filed on or before the
Closing Date by or with respect to the Company or any affiliated,
combined, consolidated, unitary or similar group of which the Company is
or was a member (a "Relevant Group") with any Taxing Authority have been
duly and timely filed (with due regard to extensions) in accordance with
all applicable laws, and each such Tax Return correctly and completely
reflects the income, franchise or other Tax liability and all other
information required to be reported thereon. All Taxes owed by the Company
or any member of a Relevant Group, whether or not shown on any Tax Return,
have been paid.
(b) The provisions for Taxes due by the Company (as opposed to any
reserve for deferred Taxes established to reflect timing differences
between book and Tax income) in the Financial Statements were, as of the
closing date of the applicable Financial Statement, sufficient for all
unpaid Taxes, being current Taxes not yet due and payable, of the Company.
As of the Closing Date, such provisions, as adjusted for the
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passage of time through the Closing Date, will be sufficient for the
then-unpaid Taxes, being current Taxes not yet due and payable, of the
Company.
(c) All Tax Returns filed with respect to taxable years of the
Company through the taxable year ended June 30, 2001, have been examined
and closed or are Tax Returns with respect to which the applicable period
for assessment under applicable law, after giving effect to extensions or
waivers, has expired. The Company is not a party or subject to any
agreement extending the time within which to file any Tax Return due on or
before the Closing Date that has not been filed. No waiver or extension of
any statute of limitations is in effect with respect to any Tax Return or
the payment of Taxes nor has any extension of time with respect to the
payment of any Tax assessment or deficiency been requested or granted
(other than with respect to limitation periods that have since expired).
No power of attorney has been executed or filed with respect to the
Company, with any Taxing Authority. The Company is not subject to any
written ruling or agreement with any Taxing Authority regarding Taxes.
(d) Schedule 4.12(d) contains a list of states, territories and
jurisdictions (foreign or domestic) to which any Tax is properly payable
by the Company. No claim has ever been made by any Taxing Authority in a
jurisdiction in which the Company does not file Tax Returns that it is or
may be subject to taxation by that jurisdiction.
(e) No Taxing Authority is threatening to assess any additional
Taxes against or in respect of the Company for any past period. No
dispute, claim, audit, action, suit, proceeding or investigation
concerning any Tax liability of the Company is now pending or threatened.
No issues have been raised with any Company Stockholder or the Company in
any examination by any Taxing Authority which reasonably could be expected
to result in a proposed deficiency with respect to the Company for any
Post- Closing Period. Schedule 4.12(e) attached hereto lists all federal,
state, local and foreign income Tax Returns filed by or with respect to
the Company for all taxable periods ended on or after December 31, 2001,
indicates those Tax Returns, if any, that have been audited, and indicates
those Tax Returns that currently are the subject of audit. The Company has
delivered to Buyer complete and correct copies of all federal, state,
local and foreign income Tax Returns filed by, and all Tax examination
reports and statements of deficiencies assessed against or agreed to by,
the Company since December 31, 2001.
(f) There are no Liens on any of the assets of Company that arose in
connection with any failure (or alleged failure) to pay any Tax, other
than liens for Taxes not yet due and payable.
(g) The Company has withheld and paid all Taxes required to have
been withheld and paid and has complied with all information reporting and
backup withholding requirements, including maintenance of required records
with respect thereto, in connection with amounts paid or owing to any
employee, former employee, creditor, independent contractor, stockholder,
customer, supplier or other third party.
(h) The Company is not a party to any "safe harbor lease" that is
subject to the provisions of Section 168(f)(8) of the Internal Revenue
Code as in effect prior to the Tax
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Reform Act of 1986, or to any "long-term contract" within the meaning of
Section 460 of the Code. None of the assets or properties of the Company
constitutes tax-exempt use property under Section 168 of the Code. The
Company is not a party to any joint venture, partnership or other
arrangement that is treated as a partnership for federal income tax
purposes. Neither any Company Stockholder nor Epoch is a "foreign person"
as used in Section 1445 of the Code, and Buyer is not required to withhold
tax on the acquisition of the Shares by reason of Section 1445 of the
Code. The Company has not made, is not obligated to make and is not a
party to any agreement that under any circumstances could require it to
make any payments that are not deductible under Sections 162(m) or 280G of
the Code or that would result in an excise tax to the recipient of such
payment under Section 4999 of the Code. The Company has not participated
in an international boycott as defined in Code Section 999. The Company is
not required to make any adjustment under Code Section 481 (a) by reason
of a change in accounting method or otherwise. The Company has not been
the "distributing corporation" (within the meaning of Section 355(c)(2) of
the Code) with respect to a transaction described in Section 355 of the
Code. Neither the Company nor any Relevant Group has participated in a
reportable transaction, as such term is defined by Untied States Treasury
Regulation Section 1.6011-4(b).
(i) The Company is not a party to any Tax allocation or sharing
agreement, other than the agreement described on Schedule 4.12(i), which
shall be terminated and of no further effect from and after the Closing
Date. The Company (i) has not been a member of an affiliated group, as
defined in Section 1504(a) of the Code and (ii) has no liability for the
Taxes of any Person other than the Company under (A) Treas. Reg. Section
1.1502-6 (or any similar provision of state, local, or foreign law), (B)
as a transferee or successor, (C) by Contract or (D) otherwise.
(j) The Company was included as a member of a Relevant Group of
which Acument was the parent, for federal income tax purposes, from
October 1, 1999, through and including June 30, 2003. The Company had net
operating loss carryforwards as of the date that it was no longer a member
of such Relevant Group, for United States federal income tax purposes, of
at least Fourteen Million Dollars ($14,000,000), and the Tax Returns of
the Company and such Relevant Group shall be filed in a manner that
reflects such net operating loss carryforwards. The estimated amount, for
federal and applicable state and local Tax purposes, of the Company's net
operating loss and net capital loss carryforwards, and the Company's
unused investment or other credits, unused foreign tax credits, and excess
charitable contributions, are as set forth in Schedule 4.12(j). Except as
set forth in Schedule 4.12(j), the Company has no net operating losses or
other tax attributes presently subject to limitation under Sections 279,
382, 383 or 384 of the Code or any similar provisions of state or local
tax law.
Section 4.13. Absence of Litigation. Except as disclosed on Schedule 4.13,
none of any Company Stockholder (with respect to the Company), the Company nor
any of their respective officers, directors or employees in their respective
capacities as such (a) is subject to any outstanding injunctions, judgments,
orders or decrees of any Governmental Entity or (b) is a party to or, to the
Knowledge of any Company Stockholder or the Company, threatened to be made a
party to, or the subject of, any Litigation.
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Section 4.14. Investment Securities. The Company has good and marketable
title to all securities held by it (except securities sold under repurchase
agreements or held in any fiduciary or agency capacity), free and clear of any
Liens (other than Permitted Liens), except to the extent such securities are
pledged in the ordinary course of business consistent with prudent business
practices to secure obligations of the Company. Such securities are valued on
the books of the Company in accordance with GAAP. From December 31, 2004 to the
date hereof, the Company has not incurred any material and unusual or
extraordinary losses (other than trading losses in the ordinary course of
business) in its investment portfolio.
Section 4.15. Derivative Instruments. Except as set forth on Schedule
4.15, the Company is not a party to or a beneficiary of any swaps, caps, floors,
futures, forward contracts, option agreements or any other derivative financial
instruments, contracts or arrangements, whether entered into for the account of
the Company, any customer or otherwise.
Section 4.16. Customer Agreements and Related Documentation. The Company
has in its possession, and has delivered true, complete and correct copies to
Buyer of, the valid, binding and enforceable documentation necessary to maintain
each customer's account and to perform brokerage and related services for its
customers, in a manner consistent with its activities on behalf of such
customers. Each transaction effected by the Company in an account on behalf of a
customer has been duly authorized and was performed in accordance with the terms
of the customer agreement or other documentation and applicable federal and
state securities and commodities Laws.
Section 4.17. Disclosure of All Matters Relating To Regulatory Approval of
the Change-of-Control and Licensing. Except as disclosed on Schedule 4.17, none
of the Company or any Company Stockholder is aware of any facts or circumstances
that would (a) cause any Governmental Entity to not approve the transfer of the
Assets of the Company to Buyer or (b) cause any Governmental Entity to revoke or
restrict the Company's license or licenses to operate as a broker-dealer after
the transfer of the Assets.
Section 4.18. Tangible Property. The Company has good title to, or a valid
lease, license or right to use, the tangible properties and assets used by it in
the conduct of its business. Such tangible properties and assets owned by the
Company are held free and clear of any Liens other than Permitted Liens.
Section 4.19. Material Contracts. Set forth on Schedule 4.19 is a complete
list of all Contracts to which the Company is a party or by which the Company or
any of its assets is bound which (i) involves aggregate payments of more than
Fifty Thousand Dollars ($50,000) over any twelve (12) month period, (ii) is with
any of the Company's officers, directors, employees or consultants performing
professional services related to the core business of the Company, (iii) is or
could reasonably be expected to be material to the Company, (iv) is a
confidentiality or standstill agreement, other than agreements entered into in
the ordinary course of business containing confidentiality or standstill
provisions, which agreements do not otherwise fall within clause (iii) above,
(v) is a clearing or services agreement or (vi) is a noncompetition,
non-solicitation and agreements with similar restrictions (each such agreement
in clauses (i) through (vi) above, a "Material Contract"). Each Material
Contract is valid, in full force and effect and enforceable in accordance with
its terms. Except as set forth on
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Schedule 4.19, (x) the Company has not received any written notice of any
default under any Material Contract and (y) no event has occurred or
circumstance exists (with or without notice or lapse of time or both) may
contravene, conflict with or result in a violation or breach of, or give any
Person other than the Company the right to declare a default or exercise any
remedy under, or to accelerate the maturity or performance of, or to cancel,
terminate or modify, any Material Contract.
Section 4.20. Employee Benefit Plans.
(a) Schedule 4.20(a) lists (i) each "employee benefit plan" (within
the meaning of Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), whether or not subject thereto) contributed
to, maintained or sponsored by any Company Stockholder, the Company or any
of their respective Affiliates, or with respect to which, the Company has
any material Liability or potential Liability and (ii) each other
retirement, savings, deferred compensation, severance, stock, performance,
bonus, incentive, employment, vacation or other compensation or employee
benefit plan, policy, or agreement of any kind, contributed to, maintained
or sponsored by any Company Stockholder, the Company or any of their
respective Affiliates, or with respect to which any of them is a party or
with respect to which the Company has any Liability or potential Liability
(collectively, the "Benefit Plans"). Schedule 4.20(a) also specifies which
Benefit Plans are sponsored or maintained solely by the Company solely for
the benefit of Business Employees (the "Company Plans"). Each Benefit Plan
that is not a Company Plan is hereinafter referred to as a "Seller Plan",
including any Benefit Plan that is sponsored or maintained by any Company
Stockholder or any of its Affiliates, other than the Company, or with
respect to which any Company Stockholder or any of its Affiliates, other
than the Company, is a party.
(b) With respect to each Benefit Plan, the Company Stockholders and
the Company have made available to Buyer a true and correct copy of (i)
the most recent annual report (e.g., Form 5500), (ii) such Benefit Plan,
(iii) each trust agreement relating to each Benefit Plan, (iv) any written
summaries of such Benefit Plan, (v) the most recent actuarial report or
valuation, if any, relating to a Benefit Plan and (vi) the most recent
determination letter, if any, issued by the IRS with respect to any
Benefit Plan intended to be qualified under Section 401 (a) of the Code.
(c) No event has occurred and, to the Knowledge of any Company
Stockholder or the Company, there exists no condition or set of
circumstances in connection with which Buyer or the Company could be
subject to any actual or contingent Liability under the terms of any
Benefit Plans, ERISA, the Code or any other applicable Law.
(d) None of the Company, any Company Stockholder, or any of their
Affiliates is a party to any collective bargaining or other labor union
Contract applicable to the Business Employees, and no collective
bargaining agreement is being negotiated with respect to any employee
(whether active or on leave of absence) of the Company (the "Business
Employees"). As of the date hereof, there is no labor dispute, strike or
work stoppage against the Company, any Company Stockholder or any of their
Affiliates
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pending or, threatened in writing which may interfere with the respective
business activities of the Company. As of the date hereof, to the
Knowledge of the Company Stockholders and the Company, none of the
Company, any Company Stockholder or any of their respective Affiliates, or
any of their respective representatives or employees has committed any
unfair labor practices or violated any Law relating to the employment of
labor, including any provisions thereof relating to wages, hours
collective bargaining, the payment of payroll taxes, equal employment
opportunity, employment discrimination and employee safety, in connection
with the operation of the business of the Company, and there is no charge
or complaint against the Company, any Company Stockholder or any of their
respective Affiliates relating thereto pending, or to the Knowledge of the
Company Stockholders or the Company, threatened.
(e) Each Benefit Plan that is intended to be qualified under Section
401 (a) of the Code is so qualified and has received a favorable
determination letter from the IRS and, to the Knowledge of any Company
Stockholder or the Company, no circumstance exists that is reasonably
likely to result in the revocation or denial of any such favorable
determination letter.
(f) Except as disclosed on Schedule 4.20(f), no compensation or
benefit under any Benefit Plan will become established, payable, increased
or accelerated by reason of this Agreement or consummation of the
transactions contemplated hereby, including the Post-Closing Transaction,
either alone or in conjunction with another event (e.g., termination of
employment).
(g) Except as set forth on Schedule 4.20(g), no Company Plan (i) is
subject to ERISA, (ii) is in the nature of a defined benefit pension plan
or (iii) provides health or welfare benefits beyond an employee's
termination of employment, except as required by Law. Each Company Plan
has been maintained and operated in material compliance with its terms and
with all applicable Laws.
Section 4.21. Intellectual Property. (a) Schedule 4.21(a) sets forth a
complete and correct list of all registered Company Intellectual Property
Rights. Except as set forth on Schedule 4.21(a):
(i) With respect to each of the Company Intellectual Property
Rights, the Company either (A) is the sole and exclusive owner of such Company
Intellectual Property Right free and clear of any royalty or other payment
obligation or Lien or (B) has sufficient rights to use such Company Intellectual
Property Right in the conduct of the business of the Company as such business is
currently conducted, under a valid and enforceable license agreement. There are
no restrictions on the direct or indirect transfer of any Company Intellectual
Property Rights. The Company Intellectual Property Rights represent all of the
Intellectual Property Rights utilized by the Company in the conduct of its
business or necessary therefor.
(ii) (A) The Company Intellectual Property Rights are valid
and enforceable, (B) the Company Intellectual Property Rights and the products
and services of the Company do not infringe or misappropriate the Intellectual
Property Rights of any Person and no
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litigation or claim that the Company Intellectual Property infringes or
misappropriates the Intellectual Property Rights of any other person currently
exists, is pending or has been threatened and (C) all material maintenance
taxes, annuities and renewal and maintenance fees have been paid with respect to
the Company Intellectual Property Rights, and all other necessary actions to
maintain the validity and effectiveness of the Company Intellectual Property
Rights have been taken through the date hereof.
(iii) The Company has taken reasonable steps to protect the
Company Intellectual Property Rights and, where applicable, to preserve the
confidentiality of the Company Intellectual Property Rights.
(iv) The Company has not received any written notice or claim
that any of the Company Intellectual Property Rights have expired or are not
valid or enforceable.
(v) The Company has not given any written notice of
infringement to any third Person with respect to any of the Company Intellectual
Property Rights, nor does any Company Stockholder or the Company have any
Knowledge of the infringement by any third Person of any of the Company
Intellectual Property Rights.
(vi) To the extent customary and appropriate, certificates of
registration and renewal, letters patent and copyright registration certificates
and all other instruments evidencing ownership of the Company Intellectual
Property Rights owned by the Company are, or as of the Closing will be, in the
possession or control of the Company.
(b) Schedule 4.2l(b) sets forth a list of all Internet domain names
used by the Company in its business (collectively, the "Domain Names").
The Company owns, and after the Closing Date the Company will own, a
current registration of each Domain Name and the right to continue to
conduct the Company's business as currently conducted under the Domain
Names.
Section 4.22. Environmental Matters. There are no legal, administrative,
arbitral or other proceedings, claims, actions, causes of action, private
environmental investigations or remediation activities or governmental
investigations of any nature seeking to impose, or that could reasonably result
in the imposition of, any Liability on the Company arising under common law or
under any local, state or federal environmental statute, regulation or
ordinance, including the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, which are pending or, to the Knowledge of any
Company Stockholder or the Company, threatened against the Company. There is no
reasonable basis for any such proceeding, claim, action or governmental
investigation that could reasonably result in the imposition on the Company of
any such Liability.
Section 4.23. Broker-Dealer.(a) As of December 31, 2005, and at all times
up to and including such date since its inception, the Company has been duly and
validly registered as a broker-dealer with the SEC and a duly qualified member
of the NASD and each other SRO of which it at any time was required to be a
member. Schedule 4.23(a) sets forth a complete list of each jurisdiction in
which the Company is duly qualified or registered as a broker-dealer. Except as
set forth on Schedule 4.23(a), the Company is not, and at no time since its
inception has it
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been, required to obtain any registration as a broker-dealer, an investment
adviser, a commodity trading advisor, a commodity pool operator, a futures
commission merchant, an insurance agent, a sales person or in any similar
capacity with the SEC, the NASD, the Commodity Futures Trading Commission, state
or Governmental Entity that has not been properly and timely obtained.
(b) The Company has not exceeded in any material respect the
business activities enumerated in any membership agreements or other
limitations imposed in connection with its registrations, forms (including
Form BDs) and reports filed with the NASD or any Governmental Entity.
Except as set forth on Schedule 4.23(b), the Company has filed all
reports, registrations and statements, together with any amendments
required to be made with respect thereto, that they were required to file
since January 1, 2000 with any Governmental Entity, and all other reports
and statements required to be filed by it have been filed including any
report or statement required to be filed pursuant to the laws, rules or
regulations of the United States, any state or any Governmental Entity and
the Company has paid all fees and assessments due and payable in
connection therewith. The information contained in such registrations,
forms and reports was true and complete in all material respects as of the
date of the filing thereof. Except for normal examinations conducted by a
SRO in the regular course of the business of the Company, no SRO has
initiated any proceeding or investigation into the business or operations
of the Company or any of its employees, agents, brokers or
representatives. There is no unresolved violation, criticism, or exception
by any SRO with respect to any report or statement relating to any
examination of the Company.
(c) To the Knowledge of the Company Stockholders and the Company,
each of the Company's employees that is required to be registered or
licensed as a registered principal, registered representative or a
salesperson with the SEC, the securities commission of any state or
foreign jurisdiction or any SRO is duly registered or licensed to act in
their respective capacities, and all such registrations and licenses are
in full force and effect. All federal, state and foreign registration
requirements have been complied with in all respects and such
registrations as currently filed, and all periodic reports required to be
filed with respect thereto, are accurate and complete in all respects.
(d) Except as set forth on Schedule 4.23(d), neither the Company nor
any of its Affiliates is subject to any cease-and-desist or other order or
enforcement action issued by, or a party to any written agreement, consent
agreement or memorandum of understanding with, or a party to any
commitment letter or similar undertaking to, or is subject to any order or
directive by, or has been ordered to pay any civil penalty by, or is a
recipient of any supervisory letter from, or has adopted a board
resolution at the request or suggestion of, any regulatory authority or
other Governmental Entity that restricts the conduct of its business or
that in any manner relates to its capital adequacy, its ability to pay
dividends, its credit or risk management policies, its management or its
business (each, a "Regulatory Agreement"), nor has the Company or any of
its Affiliates been advised in writing or otherwise by any regulatory
authority or Governmental Entity that it is considering issuing or
requesting any such Regulatory Agreement nor is there any pending or, to
the Knowledge of the Company Stockholders or the Company, threatened
regulatory investigation. Neither the Company nor any of its affiliated
persons, as
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defined in Section 2(a)(3) of the Investment Company Act of 1940, as
amended (the "1940 Act"), has been convicted within the past ten (10)
years of any felony or misdemeanor described in Section 9(a)(l) of the
1940 Act, or is, by reason of any misconduct, permanently or temporarily
enjoined from acting in the capacities, or engaging in the activities,
described in Section 9(a)(2) of the 1940 Act.
(e) The Company (i) has implemented policies and procedures that are
reasonably designed to comply with the applicable federal and state
securities and commodities laws, rules and regulations including those
relating to anti-money laundering, advertising, licensing, sales
practices, market conduct, maintenance of net capital, supervision, books
and records, risk assessment and continuing education and the rules of any
SRO having jurisdiction (collectively, the "Company Policies and
Procedures") and (ii) none of any Company Stockholder or the Company has
any Knowledge of any noncompliance with the Company Policies and
Procedures.
(f) The Company is not required to be registered as an investment
adviser under the Investment Advisers Act of 1940, as amended (the
"Investment Advisers Act"), and the transaction contemplated by this
Agreement will not require the Company, its Affiliates or customers to
obtain the consent of any person under Section 205 of the Investment
Advisers Act.
(g) None of the activities of the Company requires it to be
registered as an exchange or transfer agent, a clearing agency, an
alternative trading system, a government securities dealer, a commodity
trading advisor or commodity pool operator.
(h) To the Knowledge of any Company Stockholder or the Company, in
each case based on information available thereto, no employee of the
Company is or has been (as applicable):
(i) subject to a statutory disqualification specified in
Section 3(a)(39) of the Exchange Act, Sections 203(e) or (f) of the Investment
Advisers Act, or any substantially equivalent foreign (A) expulsion or
suspension from membership, (B) bar or suspension from association, (C) denial
of trading privileges, (D) order denying, suspending, or revoking registration
or barring or suspending association or (E) finding with respect to causing any
such effective foreign suspension, expulsion or order;
(ii) convicted of any foreign offense, enjoined from any
foreign act, conduct or practice, or found to have committed any foreign act
substantially equivalent to any of those listed in Sections 15(b)(4)(B), (C),
(D) or (E) of the Exchange Act; and
(iii) found to have made or caused to be made any false
foreign statement or omission substantially equivalent to any of those listed in
Section 3(a)(39)(E) of the Exchange Act.
(i) The Company Stockholders and the Company have made available to
Buyer true, correct and complete copies of the governing plan documents
and related agreements, forms and contracts for each retirement plan,
arrangement and account, including individual retirement accounts under
Section 408 or 408(A) of the Code,
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education savings accounts under Section 530 of the Code, simplified
employee pension plans under Section 408(k) of the Code, savings incentive
match plans for employees under Section 408(p) of the Code, plans intended
to be qualified under Section 401(a) of the Code, custodial accounts under
Section 403(b) of the Code, with respect to which the Company acts as a
custodian, trustee and/or prototype sponsor, and the governing plan
documents and related agreements, forms and contracts for each retirement
plan, arrangement and account for which the Company provides services
(each a "Plan" or collectively, the "Plans") and other related agreements
or materials provided to or made available to customers. Neither the
Company Stockholders, the Company or any Affiliate thereof has any
liability with respect to any transaction involving a Plan in violation of
Section 406 of ERISA or any "prohibited transaction" as defined in Section
4975(c)(1) of the Code, for which no exemption exists under Section 408 of
ERISA or Section 4975(c)(2) of the Code or on which an excise tax could be
payable under Section 4975 of the Code or a civil penalty under Section
502(i) of ERISA.
(j) The Company does not serve or has ever served during the past
seven (7) years as a custodian, trustee and/or prototype sponsor or issuer
for any retirement plan, arrangement or account other than those
referenced in paragraph (j) above, including individual retirement
annuities under Section 408(b) of the Code, or plans intended to meet the
requirements of Section 457 of the Code. Notwithstanding anything to the
contrary herein, none of the Company nor any ERISA Affiliate of the
Company serves or has served during the past seven years as trustee of any
Plan that is a retirement plan intended to be qualified under Section 401
(a) of the Code.
(k) The Company does not permit or has permitted during the past
seven (7) years individuals to maintain margin accounts for the purpose of
trading securities in connection with any Plans for which it serves as
custodian or trustee.
(l) The Company does not provide or has provided during the past
seven (7) years recordkeeping services to any employee pension benefit
plan as defined under Section 3(2) of ERISA, including any profit sharing,
401(k) or money purchase pension plan, or any cash balance or defined
benefit pension plan.
(m) The Company does not provide or has provided during the past
seven (7) years services, including any design, management or
administrative services, to any qualified defined contribution plans that
are either a stock bonus plan, or a combination stock bonus and money
purchase plan that invest primarily in employer securities, including any
employee stock ownership plan under Section 409 of the Code, or any
employee stock purchase plan under Section 423 of the Code.
(n) The Company does not provide or has provided during the past
seven (7) years services, including any design, management or
administrative services, to any qualified tuition program under Section
529 of the Code.
(o) The Company does not provide or has provided during the past
seven (7) years services, including any design, management or
administrative services, to any employee welfare benefit plan as defined
under Section 3(1) of ERISA, or any Archer
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medical savings account under Section 220 of the Code, health savings
account under Section 223 of the Code, health reimbursement arrangement,
flexible spending account, or cafeteria plan under Section 125 of the
Code.
(p) The form of the Plans and the conduct of the Company
Stockholders and the Company with respect to the Plans has been and are in
compliance with applicable Law, including ERISA and the Code, and the
Company has not incurred and is not reasonably expected to incur any
liability under either ERISA or the Code relating to the Plans.
(q) All governmental reports required by the Company for acts
completed prior to the Closing Date with respect to the Plans, other than
reports with respect to distributions and contributions in 2004 reportable
on IRS Forms 1099-R and 5498 made from or to the Plans prior to the
Closing Date, have been timely filed.
(r) To the extent applicable, the Company has obtained a favorable
opinion letter from the IRS on changes to the Code and Treasury
regulations, including those made by the Economic Growth and Tax Relief
Reconciliation Act of 2001 (or filed by applicable deadlines imposed by
the IRS and are awaiting receipt of such opinion letter) and all prior
legislation with respect to each Plan for which the Company serves as a
prototype sponsor. No event has occurred that would be reasonably likely
to negatively impact reliance on such opinion letter.
(s) The Company has not received notice of or been advised of any
investigations by any Governmental Authority with respect to any Plan and
there are no other claims, suits or proceedings pending or, to the
Knowledge of the Company Stockholders or the Company, threatened against
the Company with respect to any Plan.
Section 4.24. Insurance. Schedule 4.24 is a complete list as of the date
hereof of all fidelity bonds and policies of fire, directors and officers,
general liability, property and other forms of liability insurance and/or
fidelity bonds owned, held by or applicable to the Company, its assets or
business. All such policies are in full force and effect, all premiums with
respect to such policies covering all periods up to and including the Closing
Date have been paid, and no notice of cancellation or termination has been
received with respect to any such policy. Schedule 4.24 includes an accurate
list as of the date hereof of all claims involving a potential loss in excess of
Fifty Thousand Dollars ($50,000) that have been made by the Company since
December 31, 2004 under the policies listed on Schedule 4.24 applicable to the
Company or any of its assets or properties. Such claim information includes the
following information with respect to each accident, loss or other event: (i)
the identity of the claimant and (ii) the date of the occurrence.
Section 4.25. Bank Accounts. Schedule 4.25 is a complete list of the names
and locations of each bank or other financial institution at which the Company,
any Company Stockholder or any Affiliate thereof on behalf of the Company has an
account or safe deposit box, together with the applicable account or box number.
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Section 4.26. No Improper Payments. To the Knowledge of any Company
Stockholder or the Company, neither the Company nor any Person acting on its
behalf has made, paid or received any bribes, kickbacks or other similar
payments to or from any Person. Except for those that comply with applicable
laws, rules and regulations, no contributions have been made by the Company,
directly or indirectly, to a domestic or foreign political party or candidate.
Section 4.27. Brokers. None of any Company Stockholder, the Company or any
of their respective Affiliates has employed any financial advisor or finder or
incurred any liability for any financial advisory or finders' fees in connection
with this Agreement or the transactions contemplated by this Agreement.
Section 4.28. Customers. (a) The Company Stockholders have provided to
certain representatives of Buyer a list of the Qualifying Customers. None of any
Company Stockholder or the Company has received any notice or has, to the
Knowledge of any Company Stockholder or the Company, any reason to believe that
any Qualifying Customer has ceased, or will cease, to use the products or
services of the Company, or has substantially reduced the use of such products
or services at any time other than as a result of general market conditions.
(b) The Company's customer lists and related data have not been
integrated into any database of any Company Stockholder or any Affiliate
(other than the Company), and no Company Stockholder or any of its
Affiliates (other than the Company) has solicited any customers to become
brokerage customers of such Company Stockholder or any of its Affiliates
(other than the Company) using the Company's customer lists or related
data.
Section 4.29. Computer Systems. The computer hardware and Software and
related materials used by the Company are in satisfactory operating condition
for use in the conduct of the Company's business as such business is currently
conducted. Except as set forth in Schedule 4.29, the use of such computer
hardware and Software and related materials by the Company has not resulted in
the termination of any Material Contract or any material reduction in the
services provided to any of them, warranties available to any of them, or rights
of any of them under any Material Contract.
Section 4.30. Affiliate Transactions. (a) Except for the contracts
specifically disclosed as affiliate transactions in Schedule 4.19 or as
disclosed in Schedule 4.30(a), during the two (2) years prior to the date of
this Agreement, (i) there have been no intercompany Liabilities between the
Company, on the one hand, and any Company Stockholder, Epoch or any of their
respective Affiliates, officers or directors, on the other, (ii) neither any
such Company Stockholder nor any such Affiliate, officer, director has provided
or caused to be provided any assets, services or facilities to the Company and
(iii) the Company has not provided or caused to be provided any assets, services
or facilities to such Company Stockholder or any such officer, director or
Affiliate.
(b) Except for the contracts specifically disclosed as affiliate
transactions in Schedule 4.19 or as disclosed in Schedule 4.30(b), each of
the Liabilities and transactions listed in Schedule 4.30(a) was incurred
or engaged in, as the case may be, on an arm's-length basis.
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(c) Except as disclosed on Schedule 4.30(c) or provided herein,
since December 31, 2004, there have been no settlements of intercompany
Liabilities or allocations of any intercompany expenses between the
Company, on the one hand, and any Company Stockholder, Epoch, any of the
Company's other Affiliates or any of their respective officers or
directors, on the other. Schedule 4.30(c) sets forth all amounts paid or
accrued by the Company to any Company Stockholder, Epoch or to any of the
Company's officers, directors or other Affiliates for the twelve (12)
month period ended on December 31, 2004 and for the period commencing on
January 1, 2005 through the date of the most recent Unaudited Financial
Statements.
Section 4.31. No Guaranties. Except as disclosed in Schedule 4.31, none of
the obligations or Liabilities of the Company is guaranteed by or subject to any
letter of credit, surety bond or other similar contingent obligations of any
other Person, nor has the Company guaranteed or become subject to a similar
contingent obligation in respect of the obligations or Liabilities of any other
Person.
Section 4.32. Real Property. The Company does not own any real property or
interest therein. Schedule 4.32 contains a true, correct and complete list of
(i) all real property leased by the Company (the "Leased Real Property") and
(ii) each real property lease with respect to each such parcel of Leased Real
Property (each, a "Real Property Lease"). Except as set forth on Schedule 4.32,
(x) each Real Property Lease is in full force and effect and constitutes a valid
and binding obligation of the Company and (y) no event or condition which, with
or without the giving of notice or the lapse of time or both, would constitute a
material default or termination event or uncured material default by the Company
under any Real Property Lease exists or has occurred and no event or condition
attributable any other Person which, with or without the giving of notice or the
lapse of time or both, would constitute a material default or termination event
or uncured material default under any Real Property Lease exists or has
occurred. Except as set forth on Schedule 4.32, the leasehold interest of the
Company in each Real Property Lease is held free and clear of all Liens. The
Company Stockholders and the Company have delivered to the Purchaser true,
correct and complete copies of all Real Property Leases. The Leased Real
Property constitutes all real property used or occupied by the Company in
connection with the conduct of its business.
Section 4.33. Sufficiency of Assets. The assets (including equipment and
Company Intellectual Property Rights) of the Company (i) constitute all of the
assets, tangible and intangible, of any nature whatsoever, which are used to
operate and conduct the business of the Company in the manner presently operated
by the Company, (ii) correspond to the Financial Statements and (iii) are the
only assets required for such operation and conduct.
Section 4.34. Disclosure. No representation or warranty or other statement
made by any Company Stockholder or the Company in this Agreement, the Ancillary
Agreements or otherwise in connection with the transactions contemplated hereby
contains any untrue statement or omits to state a material fact necessary to
make any of them, in light of the circumstances in which it was made, not
misleading. No Company Stockholder or the Company knows of any fact that has
specific application to the Company (other than general economic or industry
conditions) and that may materially adversely affect the assets, business,
prospects, financial
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condition or results of operations of the Company that has not been set forth in
this Agreement, the Ancillary Agreements or the Schedules attached hereto and
thereto.
ARTICLE V
REPRESENTATIONS AND WARRANTIES REGARDING BUYER
Buyer represents and warrants to the Company and each Company Stockholder,
as of the date hereof and as of the Closing Date, as follows:
Section 5.01. Organization of Buyer. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization and has all requisite corporate power and
authority to carry on its business as now being conducted. Buyer is duly
qualified or licensed to do business in each jurisdiction in the United States
in which the property owned, leased or operated by it or the nature of the
business conducted by it makes such qualification or licensing necessary, except
where the failure to be so qualified or so licensed would not reasonably be
expected to have a Buyer Material Adverse Effect.
Section 5.02. Authority. Buyer has all requisite power and authority to
execute, deliver and perform its obligations under this Agreement and the
Ancillary Agreements to which it is party and to consummate the transactions
contemplated hereby and thereby. This Agreement and the Ancillary Agreements
have been duly executed and delivered by Buyer and constitute valid and binding
obligations of Buyer, enforceable against Buyer in accordance with their
respective terms.
Section 5.03. No Conflicts. Except as disclosed on Schedule 5.03, none of
the execution, delivery and performance of this Agreement or the Ancillary
Agreements by Buyer or the consummation by Buyer of the transactions
contemplated hereby and thereby does or will (a) conflict with or violate any
organizational document of Buyer, (b) require any consent, approval,
authorization or permit of, or filing with or notification to, any Governmental
Entity, to the extent that the rules, regulations or orders of such body are
binding upon Buyer or otherwise have the effect of law, (c) require any consent,
waiver or approval or, with or without the giving of notice or lapse of time or
both, result in a default or breach (or give rise to any right of termination,
cancellation, modification or acceleration) under any of the terms, conditions
or provisions of any note, license, agreement, Contract, indenture or other
instrument or obligation to which Buyer or any of its Subsidiaries is a party or
by which Buyer or any of its Subsidiaries or any of the assets of Buyer or any
of its Subsidiaries may be bound, except for such consents, approvals and
authorizations that have been obtained or (d) conflict with or violate any Law
applicable to Buyer or any of its Subsidiaries or by which any of the assets of
Buyer or any of its Subsidiaries are bound.
Section 5.04. Brokers. Neither Buyer nor any of its Affiliates has
employed any financial advisor or finder or incurred any liability for any
financial advisory or finders' fees in connection with this Agreement or the
transactions contemplated by this Agreement.
Section 5.05. Absence of Litigation. Buyer is not (a) subject to any
outstanding injunctions, judgments, orders or decrees of any Governmental Entity
or (b) a party to or, to the
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Knowledge of Buyer, threatened to be made a party to, or the subject of, any
Litigation; in each case other than as would not reasonably be expected to
result in a Buyer Material Adverse Effect.
Section 5.06. Financial Statements. Prior to the date hereof, Buyer has
delivered to the Company and representatives of the Company Stockholders true
and accurate copies of the audited, consolidated balance sheet of Penson at
December 31, 2004 and the audited, consolidated statements of income,
stockholders equity and cash flows of Penson for the fiscal year ended December
2004.
ARTICLE VI
COVENANTS AND OTHER AGREEMENTS OF THE PARTIES
Section 6.01. Conduct of Business. Except as specifically set forth on
Schedule 6.01, until the Closing, the Company shall conduct, and the Company
Stockholders shall cause the business of the Company to be conducted, in the
ordinary course, consistent with prior practice, and, in any event, without the
prior written consent of Buyer the Company shall not, and the Company
Stockholders shall not, in connection with the conduct of the business of the
Company, and shall not permit the Company to:
(a) amend the Company's certificate of incorporation, by-laws or
other comparable organizational documents;
(b) declare or pay any dividend or make any other distribution to
its stockholders whether or not upon or in respect of any shares of the
Company's capital stock;
(c) redeem or otherwise acquire any shares of the Company's capital
stock or issue any capital stock of the Company or any option, warrant or
right relating thereto or any securities convertible into or exchangeable
for any shares of capital stock of the Company;
(d) acquire by merging or consolidating with, or by purchasing a
substantial portion of the assets of, or by any other manner, any business
or any corporation, limited liability company, partnership, joint venture,
association or Person or other business organization or division thereof;
(e) commence an action or proceeding against a customer of the
Company;
(f) acquire or lease any assets material to the Company or its
business or acquire or lease any real property;
(g) sell, lease, license, mortgage or otherwise subject to any Lien
(other than Permitted Liens) or dispose of any of its properties or assets
that are material to the Company or its business;
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(h) incur or assume any Debt, other than in the ordinary course and
consistent with past practice;
(i) enter into any Contract which would be a Material Contract, or
modify, amend or terminate any Material Contract or waive, release, cancel
or assign any material rights or claims thereunder, including the waiver,
release, cancellation or assignment of any material Debt owing to the
Company or the prepayment of any principal or interest on any Debt;
(j) make any change to its accounting systems, methods, policies,
principles or practices, except as may be required by GAAP, or make any
Tax election, settle or compromise or change any Tax method, except as
required by Tax law;
(k) except as required by the terms and provisions of written
contracts between the Company, on the one hand, and a Business Employee,
on the other hand, as in existence on the date of this Agreement and
listed in the Schedules or to comply with any applicable Law, (i) adopt or
amend any Benefit Plan or (ii) materially increase in any manner the
aggregate compensation or benefits (including commissions) of any officer,
director, Business Employee or independent contractor of the Company other
than, in the case of clause (ii), increases in compensation granted to
Business Employees who are not officers or directors of the Company in the
ordinary course of business consistent with past practice;
(l) terminate any Business Employee;
(m) engage in any transactions with any of its Affiliates or any
Affiliates of any Company Stockholder other than on an arm's-length basis;
(n) fail to comply with the minimum net capital requirements as set
forth in Rule 15c3-l promulgated under the Exchange Act;
(o) demolish or materially alter any of its property (owned or
leased);
(p) take any action which has, or could reasonably be expected to
have, the effect of preventing or materially delaying the Closing or
making any of the representations and warranties of any of the Company
Stockholders or the Company false or inaccurate as of the Closing Date;
(q) otherwise take any action resulting, or which could reasonably
be expected to result, in the occurrence of any of the events set forth in
clauses (a) through (1) of Section 4.10; or
(r) authorize, or commit or agree to take, any of the foregoing
actions.
Section 6.02. Access to Information. Subject to any applicable legal
restrictions, each Company Stockholder and the Company shall, and shall cause
its Affiliates to, upon reasonable notice during normal business hours during
the period prior to and after the Closing, afford to Buyer and its accountants,
counsel and other representatives reasonable access to all of the
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personnel, properties, Contracts, Books and Records (including Tax Returns and
work papers, whether prepared by employees, consultants or independent auditors)
of the Company, shall furnish promptly to Buyer any information concerning the
Company as Buyer may reasonably request and shall assist Buyer in communicating
with Persons having business relationships, agreements and arrangements with the
Company regarding the transactions contemplated by this Agreement, including the
auditors, consultants and other financial and legal advisors of the Company and
the Company Stockholders; provided that such access does not disrupt the normal
operations of the Company or result in the likely coordination of pricing or
other competitively-sensitive activities.
Section 6.03. Confidentiality. (a) Buyer acknowledges that the information
being provided to it in connection with this Agreement and the consummation of
the transactions contemplated hereby is subject to the Confidentiality
Agreement, the terms of which are incorporated herein by reference. Effective
upon, and only upon, the Closing, the obligations of Buyer and Penson under the
Confidentiality Agreement with respect to information relating solely to the
Company shall terminate; provided that Buyer acknowledges that any and all other
information provided to it by the Company Stockholders or their representatives
concerning the Company Stockholders shall remain subject to the terms and
conditions of the Confidentiality Agreement after the date of the Closing and
therefore, in furtherance of the foregoing, (i) each of Buyer and each Company
Stockholder agrees to join, and hereby joins, as a party to the Confidentiality
Agreement as if Buyer or such Company Stockholder, as the case may be, was an
original party thereto and as a result thereof each of Buyer and such Company
Stockholder hereby agrees to be subject to and bound by all of the terms and
conditions thereof and (ii) the terms of the Confidentiality Agreement shall be
modified accordingly hereby, mutatis mutandis.
(b) Each Company Stockholder acknowledges that prior to the
Closing Date, such Company Stockholder has had, and will continue to have,
access to confidential information of the Company which is not generally
known to the public. Each Company Stockholder agrees that following the
Closing it shall not, and shall cause its Affiliates to not, without the
prior express written permission of Buyer, disclose to any other Person or
use in any way any confidential or proprietary information of the Company
which such Company Stockholder or its Affiliates may have obtained at any
time, whether prior to the Closing Date or otherwise.
Section 6.04. Maintenance of Records. Except as otherwise provided in
Section 9.06, from and after the Closing, the Company agrees (a) to hold all of
its Books and Records existing on the Closing Date and not to destroy or dispose
of any thereof as required by Section 17(a) of the Exchange Act and Rules 17a-3
and 17a-4 promulgated thereunder, and thereafter, if it desire to destroy or
dispose of such Books and Records, to offer first in writing at least sixty (60)
days prior to such destruction or disposition to surrender them to the Buyer and
(b) to afford the Buyer, its accountants and legal counsel, during normal
business hours, upon reasonable request, at any time, full access to such Books
and Records and to the employees of the Company to the extent that such access
may be reasonably necessary for any legitimate purpose related to the Company at
no cost to any such party so requesting (other than for reasonable out-of-pocket
expenses of the Company).
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Section 6.05. No Negotiation. Until such time as this Agreement shall be
terminated pursuant to Section 8.01, none of any Company Stockholder or the
Company shall directly or indirectly solicit, initiate, encourage or consider
any inquiries or proposals from, discuss or negotiate with, provide any
nonpublic information to or consider the merits of any inquiries or proposals
from any Person (other than Buyer) relating to any sale of equity securities or
assets of the Company, any business combination transaction involving the
Company or the merger or consolidation of the Company.
Section 6.06. Commercially Reasonable Efforts; Obtaining Consents; Further
Action. (a) Each of the parties hereto agrees to use its commercially reasonable
efforts to take, and to cause its officers, employees, representatives, advisors
and agents to take, all action and to do, or cause to be done, all things
necessary, proper or advisable to consummate and make effective as promptly as
practicable the transactions contemplated by this Agreement and to cooperate
with each other in connection with the foregoing, including using commercially
reasonable efforts (i) to obtain promptly all necessary waivers, consents and
approvals from other parties to material agreements, leases and other Contracts
or agreements, (ii) to make promptly all filings and obtain promptly all
necessary consents, approvals and authorizations as are required to be obtained
under any Law, (iii) to defend all lawsuits or other legal proceedings
challenging this Agreement or the consummation of the transactions contemplated
hereby, (iv) to cause to be lifted or rescinded any injunction or restraining
order or other order adversely affecting the ability of the parties to
consummate the transactions contemplated by this Agreement and (v) to cause and
facilitate the prompt satisfaction of all conditions in Article VII. The
Company, the Company Stockholders and Buyer, respectively, each agree to make,
or to cause to be made, any filing or notification required by any applicable
Law, in each case, with respect to the transactions contemplated by this
Agreement (x) with respect to the NASD and any securities exchange of which the
Company is a member, within fifteen (15) Business Days after the date of this
Agreement and (y) with respect to all others required under any Law, as soon as
practicable after the date of this Agreement and to supply promptly any
additional information and documentary material that may be requested pursuant
to applicable Law.
(b) The parties shall keep each other apprised of the status of
matters relating to the completion of the transactions contemplated hereby
and work cooperatively in connection with obtaining the requisite
approvals, consents or orders of each applicable Governmental Entity,
including:
(i) cooperating with each other in connection with required
filings;
(ii) furnishing to the other party all information within its
possession that is required for any application or other filing to be made by
the other party in connection with the transactions contemplated by this
Agreement;
(iii) promptly notifying each other of any communications from
or with any Governmental Entity with respect to the transactions contemplated by
this Agreement;
(iv) not agreeing to participate in any meeting or discussion
with any Governmental Entity in connection with proceedings relating to the
transactions contemplated by this Agreement unless it consults with the other
party in advance, and, to the extent permitted by
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such Governmental Entity, gives the other party the opportunity to attend and
participate thereat; and
(v) consulting and cooperating with one another in
connection with all analyses, appearances, presentations, memoranda, briefs,
arguments, opinions and proposals made or submitted by or on behalf of any party
hereto in connection with proceedings before any Governmental Entity relating to
the transactions contemplated by this Agreement.
(c) If any party or any Affiliate thereof receives a request for
additional information or documentary material from any Governmental
Entity with respect to this Agreement or the transactions contemplated by
this Agreement, then such party, in good faith, as soon as practicable and
after consultation with the other party, shall make an appropriate
response to such request.
(d) At any time and from time to time, each party to this
Agreement agrees, subject to the terms and conditions of this Agreement,
to take such actions and to execute and deliver such documents as may be
necessary to effectuate the purposes of this Agreement at the earliest
practicable time.
Section 6.07. Notifications. Until the Closing, each party shall promptly
notify the other parties in writing of (a) any fact, change, condition,
circumstance or occurrence or nonoccurrence of any event of which it is aware
that will or is reasonably likely to result in any of the conditions set forth
in Article VII becoming incapable of being satisfied or (b) a breach of a
representation or warranty.
Section 6.08. Public Announcements; Customer Communications. (a) Except as
may otherwise be required by applicable Law, prior to the Closing, Buyer and the
Stockholders' Representative will consult with each other in advance of Buyer,
the Company or any Company Stockholder issuing, or permitting any agent or
Affiliate to issue, any press releases or otherwise making, or permitting any
agent or Affiliate to make, any public statements with respect to this Agreement
or the transactions contemplated hereby.
(b) Immediately after the date of this Agreement, the Company and
Buyer shall jointly prepare, and the Company shall deliver, to each
customer of the Company, a communication regarding the acquisition of the
Assets of the Company by Buyer in accordance with the terms of this
Agreement and the consequences of such transaction to such customer. The
Company and the Company Stockholders shall, and the Company Stockholders
shall cause the Company to, assist Buyer, as and when Buyer may reasonably
request, in Buyer's initial contact with each such customer. Except as may
otherwise be required by applicable Law, prior to the Closing, the Company
Stockholders and the Company shall not, and shall not permit any agent or
Affiliate to, send any other communication to any customer of the Company
regarding this Agreement or the transactions contemplated hereby without
the prior written consent of Buyer.
Section 6.09. Conduct of Company Stockholders. No Company Stockholder
shall (i) except as expressly contemplated hereby, sell, lease, mortgage or
otherwise subject to any Lien or enter into any transaction of any kind or
character with respect to, the Shares held by such
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Company Stockholder or (ii) take any action which has, or could reasonably be
expected to have, the effect of preventing or materially delaying the Closing or
making any of the representations and warranties of any of the Company
Stockholders or the Company false or inaccurate as of the Closing Date.
Section 6.10. Certain Employee Matters.
(a) Continuation of Employment. Set forth on Schedule 6.10(a) is a
list showing the names of all Business Employees and their respective
positions and salary levels. The Company Stockholders and the Company
shall provide updates to the list prior to the Closing to reflect new
hires and terminations and to reflect any agreed-upon additions or
deletions thereto (and the term Business Employee shall reflect all such
updates that occur prior to the Closing). Buyer shall continue the employ
of each Business Employee whose employer, immediately prior to the
Closing, is the Company, conditional upon completion of background checks
and security clearance that are reasonably satisfactory to Buyer and
execution of Buyer's standard employee agreement, or if applicable, a Key
Employment Agreement. For at least a period of one year from the Closing
Date, each Business Employee employed by Buyer or any of its Affiliates
shall be allowed to participate in those benefit plans that Buyer or its
Affiliates may offer to similarly situated employees from time to time.
Any Business Employee who is determined by Buyer prior to the Closing to
have failed such background check and security clearance shall not be
offered employment or continued employment, and the Company Stockholders
and the Company will cause the employment of any such Business Employee by
the Company to be terminated prior to the Closing Date without Liability
to the Company. Promptly after the date hereof, the Company Stockholders
and the Company shall provide, and the Company Stockholders shall cause
the Company or its Affiliates to provide, reasonable access to the
Business Employees and shall assist Buyer in enabling it to obtain
employment applications from each such Business Employee prior to Closing
and, to the extent permitted by applicable Law, such information regarding
such employees as is contained in personnel records. Effective as of the
Closing Date, the Company agrees, without cost to Buyer, to terminate any
outstanding employment agreements, whether written or oral, for each
Business Employee to whom employment is offered by Buyer.
(b) Seller Plans. Neither Buyer nor any of its Affiliates shall
adopt, become a sponsoring employer of, or have any obligations under or
with respect to any compensation or benefit plan, policy, arrangement or
agreement (including any Seller Plans or workers compensation programs)
other than the Company Plans, and the Company and the Company Stockholders
shall be solely responsible for any and all Liabilities which have arisen
or may arise in connection with any such compensation or benefit plan,
policy, arrangement or agreement (other than the Company Plans), including
Liabilities arising from income or excise Tax assessments, participant
benefit claims, fiduciary conduct, or under Title IV of ERISA.
(c) No Employee Rights; Termination/Modification of Plans. Nothing
in this Section 6.10, express or implied (including anything contained in
Section 6.10(a), which shall be subject in all respects to this Section
6.10(c)), shall confer upon any Business
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Employee, or legal representative or beneficiary thereof, any rights or
remedies, including any right to employment, or continued employment for
any specified period, or compensation or benefits of any nature or kind
whatsoever under or by reason of this Agreement. Nothing in this Section
6.10, express or implied (including anything contained in Section 6.10(a),
which shall be subject in all respects to this Section 6.10(c)), shall be
construed to prevent Buyer or any of its Affiliates from terminating the
employment of any Business Employee or modifying to any extent or in any
respect the terms and conditions of such employment (including any benefit
plan that Buyer or any of its Affiliates may establish or maintain).
Section 6.11. Non-Competition. (a) Except as specifically set forth to the
contrary on Schedule 6.11, for a period of five (5) years from the Closing Date,
each of the Company and each Company Stockholder shall not, and shall cause each
of their respective Affiliates not to, directly or indirectly, engage in
activities or businesses which engage in any of (i) the Competitive Business,
(ii) soliciting any former or present customer or prospective customer of the
Company to purchase any such services referred to in clause (i) offered by the
Company from anyone, or (iii) assisting any Person in any way to do, or attempt
to do, anything prohibited by clauses (i) or (ii) above (the activities referred
to in the foregoing clauses (i), (ii) and (iii) being called "Competitive
Activities").
(b) Notwithstanding anything to the contrary contained in this
Section 6.11, the foregoing covenant shall not be breached as a result of
only the ownership or other right to acquire by the Company, any Company
Stockholder or their respective Affiliates (for their own account) of not
more than an aggregate of five percent (5%) of any class of stock of a
Person engaged, directly or indirectly, in Competitive Activities.
(c) The parties hereto recognize that the Laws and public policies
of the various States of the United States of America may differ as to the
validity and enforceability of covenants similar to those set forth in
this Section 6.11. It is the intention of the parties that the provisions
of this Section 6.11 be enforced to the fullest extent permissible under
the Laws and policies of each jurisdiction in which enforcement may be
sought, and that the unenforceability (or the modification to conform to
such Laws or policies) of any provisions of this Section 6.11 shall not
render unenforceable or impair the remainder of the provisions of this
Section 6.11. Accordingly, if at the time of enforcement of any provision
of this Section 6.11, a court of competent jurisdiction holds that the
restrictions stated herein are unreasonable under circumstances then
existing, the parties hereto agree that the maximum period, scope or
geographic area reasonable under such circumstances will be substituted
for the stated period, scope or geographical area and that such court
shall be allowed to revise the restrictions contained herein to cover the
maximum period, scope and geographical area permitted by Law.
(d) Each of the Company and each Company Stockholder expressly
acknowledges that the restrictive covenants set forth in this Section
6.11, including the geographic scope and duration of such covenants, are
necessary in order to protect and maintain the proprietary interests and
other legitimate business interests of Buyer and its Affiliates, and that
any violation thereof would result in irreparable injury to Buyer and its
Affiliates that would not be readily ascertainable or compensable in terms
of money,
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and therefore Buyer and its Affiliates shall be entitled to obtain from
any court of competent jurisdiction temporary, preliminary and permanent
injunctive relief as well as damages, which rights shall be cumulative and
in addition to any other rights or remedies to which it may be entitled.
Each of the Company and each Company Stockholder further agrees that if it
is determined that it has willfully breached the terms of this Section
6.11, Buyer and its Affiliates shall be entitled to recover from such
breaching party all costs and reasonable attorneys' fees incurred as a
result of its attempts to redress such breach or to enforce its rights and
protect its legitimate interests.
Section 6.12. Non-Solicitation; Non-Disparagement. (a) For a period of
five (5) years following the Closing Date, none of the Company, the Company
Stockholder or any of the respective Affiliates thereof will, directly or
indirectly, (i) solicit for employment (or any similar arrangement) any employee
of the Company or any Business Employee, (ii) persuade, induce or attempt to
persuade or induce any employee of the Company or any Business Employee to leave
his, her or its employment or to refrain from providing services to Buyer, the
Company or their Affiliates, (iii) solicit or induce, or in any manner attempt
to solicit or induce, or cause or authorize any other Person to solicit or
induce any Person to cease doing business with the Buyer, the Company or their
Affiliates or (iv) disparage the Buyer, the Company or their Affiliates to any
employee of the Buyer, the Company or their Affiliates or any customer or client
or prospective customer or client of the Buyer, the Company or their Affiliates,
or encourage any customer or client or prospective customer or client not to
continue to retain the services of the Buyer, the Company or their Affiliates.
(b) Notwithstanding anything to the contrary contained in this
Section 6.12, the foregoing covenant shall not be breached by (i) any
Company Stockholder or its Affiliates engaging in general employment
solicitation (by use of advertising) so long as such solicitation does not
target the employees of the Buyer, the Company or any Business Employee or
(ii) any Company Stockholder or its Affiliates engaging in any of the
conduct specified in Section 6.12(a) with respect to any employee of the
Buyer, the Company or Business Employee who has been terminated by Buyer
or the Company.
(c) The parties hereto recognize that the Laws and public policies
of the various States of the United States of America may differ as to the
validity and enforceability of covenants similar to those set forth in
this Section 6.12. It is the intention of the parties that the provisions
of this Section 6.12 be enforced to the fullest extent permissible under
the Laws and policies of each jurisdiction in which enforcement may be
sought, and that the unenforceability (or the modification to conform to
such Laws or policies) of any provisions of this Section 6.12 shall not
render unenforceable or impair the remainder of the provisions of this
Section 6.12. Accordingly, if at the time of enforcement of any provision
of this Section 6.12, a court of competent jurisdiction holds that the
restrictions stated herein are unreasonable under circumstances then
existing, the parties hereto agree that the maximum period, scope or
geographic area reasonable under such circumstances will be substituted
for the stated period, scope or geographical area and that such court
shall be allowed to revise the restrictions contained herein to cover the
maximum period, scope and geographical area permitted by Law.
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(d) Each of the Company and each Company Stockholder expressly
acknowledges that the restrictive covenants set forth in this Section
6.12, including the geographic scope and duration of such covenants, are
necessary in order to protect and maintain the proprietary interests and
other legitimate business interests of Buyer, the Company and their
Affiliates, and that any violation thereof would result in irreparable
injury to Buyer, the Company and their Affiliates that would not be
readily ascertainable or compensable in terms of money, and therefore
Buyer, the Company and their Affiliates shall be entitled to obtain from
any court of competent jurisdiction temporary, preliminary and permanent
injunctive relief as well as damages, which rights shall be cumulative and
in addition to any other rights or remedies to which it may be entitled.
Each of the Company and each Company Stockholder further agrees that if it
is determined that it has willfully breached the terms of this Section
6.12, Buyer, the Company and their Affiliates shall be entitled to recover
from such breaching party all costs and reasonable attorneys' fees
incurred as a result of its attempts to redress such breach or to enforce
its rights and protect its legitimate interests.
Section 6.13. Reimbursement of NSCC Deposit. Immediately upon the
Company's receipt of its NSCC deposit, the Company shall remit payment of
$500,000 to Buyer. Notwithstanding the preceding sentence, should the Company
not receive its NSCC deposit prior to the commencement of Earnout Year 4, Buyer
shall have the right to offset any remaining Company payment obligations under
this Section 6.13 against any Contingent Payments due to the Company after such
date, pro rata over any remaining scheduled payments. Such payments shall remain
an obligation of the Company until paid to Buyer, regardless of when the Company
receives its NSCC deposit, or in what amount.
Section 6.14. Reimbursement of DTC Deposit. Immediately upon the Company's
receipt of its DTC deposit, the Company shall remit payment of $25,000 to Buyer.
Notwithstanding the preceding sentence, should the Company not receive its DTC
deposit prior to the commencement of Earnout Year 4, Buyer shall have the right
to offset any remaining Company payment obligations under this Section 6.13
against any Contingent Payments due to the Company after such date, pro rat over
any remaining scheduled payments. Such payments shall remain an obligation of
the Company until paid to Buyer, regardless of when the Company receives its DTC
deposit, or in what amount.
Section 6.15. Further Assurances. At any time or from time to time after
the Closing, each of the Company and each Company Stockholder shall execute and
deliver to Buyer such other documents and instruments, provide such materials
and information and take such other actions as Buyer may reasonably request to
fulfill the Company's or the Company Stockholders' respective obligations under
this Agreement and consummate the transactions contemplated hereby.
ARTICLE VII
CONDITIONS
Section 7.01. Conditions Precedent to Closing Obligation of Buyer. The
obligation of Buyer to consummate the transactions contemplated by this
Agreement at the Closing is subject
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to the satisfaction at or prior to the Closing of each of the following
conditions (unless satisfaction of any such condition is expressly waived by
Buyer in a writing delivered by Buyer to the Stockholders' Representative):
(a) (i) Each of the representations and warranties of the Company
Stockholders and the Company contained in this Agreement shall be true and
correct in all material respects as of the Closing (without giving effect
to any exception for "Material Adverse Effect" or other qualifier using
the term "material" or any variation thereof) with the same force and
effect as if made as of the Closing (other than such representations and
warranties as are made as of another date, which shall be true and correct
as of such date), (ii) the covenants and agreements contained in this
Agreement to be performed or complied with by the Company, the Company
Stockholders or any of their Affiliates on or before the Closing shall
have been performed or complied with in all material respects and (iii)
Buyer shall have received a certificate of the Company Stockholders as to
the matters set forth in clauses (i) and (ii) above;
(b) no action or proceeding by any Governmental Entity shall have
been instituted or threatened which enjoins or prohibits, or would be
reasonably expected to enjoin or prohibit, any provision of this Agreement
or the consummation of the transactions contemplated hereby, including the
Post-Closing Transaction, and no action or proceeding by any other Person
shall have been instituted that has resulted in any order or injunction
that prohibits or enjoins any provision of this Agreement or the
transactions contemplated hereby, including the Post-Closing Transaction;
(c) no Law shall be in effect that prohibits or declares illegal
the transactions contemplated by this Agreement;
(d) all material consents, waivers, approvals, authorizations,
exemptions, registrations, licenses, declarations or filings from or with
a Governmental Entity (including the NASD), the receipt or making of which
is required for the consummation of the transactions contemplated by this
Agreement, and each of the consents listed on Schedule 4.04 shall have
been obtained or made, and all waiting periods specified under applicable
Law and all extensions thereof, the passing of which is necessary for such
consummation, shall have passed;
(e) each Key Employee set forth on Annex B shall have executed and
delivered to Buyer his or her Key Employment Agreement and such Key
Employment Agreement shall be in full force and effect;
(f) there shall not have occurred a Material Adverse Effect;
(g) the Company Stockholders shall have duly executed and
delivered to Buyer each of the Ancillary Agreements to which any of them
is a party;
(h) Buyer shall have received the certificate described in Section
9.09 of this Agreement;
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(i) each Person who is an employee of both Glendale Securities or
any of its Affiliates and the Company or any of its Affiliates, shall
resign from his or her position with Glendale Securities or its
Affiliates, and shall owe no further employment-related duties to any such
Person as of the Closing Date. It is agreed that the foregoing restriction
shall not prevent any such Person from owning a passive equity interest in
Glendale Securities or any of its Affiliates;
(j) Buyer shall have received documentary evidence reasonably
satisfactory to it that the Consulting Agreement, dated as of March 27,
2003, between the Company and Epoch has been terminated without any
Liability to the Company, and that the Company has no further obligations
thereunder;
(k) Buyer shall have received documentary evidence reasonably
satisfactory to it that the Company and Acument have filed all previously
unfiled Tax Returns with respect to the 2004 tax year;
(l) Each of Schedule 1.01-3: Initial Balance Sheet and Schedule
4.12(e): Tax Returns shall have been attached hereto in form and substance
satisfactory to Buyer;
(m) Buyer shall have received an opinion of counsel for the
Company to Buyer dated the Closing Date, in substantially the form
attached hereto as Exhibit C.
(n) Buyer shall have received all documents, instruments and other
items to be delivered pursuant to Section 3.04; and
(o) all other documents or certificates that Buyer may reasonably
request.
Section 7.02. Conditions Precedent to Closing Obligation of the Company.
The obligation of the Company to consummate the transactions contemplated by
this Agreement at the Closing is subject to the satisfaction at or prior to the
Closing of each of the following conditions (unless satisfaction of any such
condition is expressly waived by the Company in a writing delivered to Buyer):
(a) (i) Each of the representations and warranties of Buyer
contained in this Agreement shall be true and correct in all material
respects as of the Closing (without giving effect to any exception for
"Material Adverse Effect" or other qualifier using the term "material" or
any variation thereof) with the same force and effect as if made as of the
Closing (other than such representations and warranties as are made as of
another date, which shall be true and correct as of such date), (ii) the
covenants and agreements contained in this Agreement to be performed or
complied with by Buyer on or before the Closing shall have been performed
or complied with in all material respects and (iii) the Company
Stockholders shall have received a certificate from Buyer as to the
matters set forth in clauses (i) and (ii) above;
(b) no action or proceeding by any Governmental Entity shall have
been instituted or threatened which enjoins or prohibits, or would be
reasonably expected to enjoin or prohibit, any provision of this Agreement
or the consummation of the transactions contemplated hereby, and no action
or proceeding by any other Person shall
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have been instituted that has resulted in any order or injunction that
prohibits or enjoins any provision of this Agreement or the transactions
contemplated hereby;
(c) no Law shall be in effect that prohibits or declares illegal
the transactions contemplated by this Agreement;
(d) all material consents, waivers, approvals, authorizations,
exemptions, registrations, licenses, declarations or filings from or with
a Governmental Entity (including the NASD), the receipt or making of which
is required for the consummation of the transactions contemplated by this
Agreement and all waiting periods specified under applicable Law and all
extensions thereof, the passing of which is necessary for such
consummation, shall have passed;
(e) Buyer and each of its Affiliates, as applicable, shall have
duly executed and delivered to the Company each of the Ancillary
Agreements to which any of them is a party; and
(f) the Company shall have received all documents, instruments and
other items to be delivered pursuant to Section 3.05.
ARTICLE VIII
TERMINATION; EFFECT OF TERMINATION
Section 8.01. Termination. This Agreement may be terminated before the
Closing:
(a) by mutual written consent of the Company and Buyer;
(b) by either the Company or Buyer by written notice of
termination, if the Closing has not occurred by the close of business on
December 31, 2006; provided, however, that the right to terminate this
Agreement under this Section 8.01(b) shall not be available to a party
whose failure to fulfill any of its obligations contained in this
Agreement has been the cause of, or resulted in, the failure of the
Closing to have occurred on or prior to such date; or
(c) by Buyer or the Company, if any condition set forth in Section
7.01 or 7.02, as the case may be, to such party's Closing obligations
shall become incapable of being satisfied by the date set forth in Section
8.01(b) and is not waived; provided that the right to terminate this
Agreement pursuant to this Section 8.01(c) shall not be available to any
party that has not used the efforts required by this Agreement to cause
such condition to be satisfied.
Section 8.02. Effect of Termination. If this Agreement is terminated in
accordance with Section 8.01, then this Agreement shall become null and void and
of no further force or effect except for this Section 8.02, Section 6.03,
Articles IX, X and XII and all applicable definitions set forth in Article I
which shall survive such termination. In addition, the Confidentiality Agreement
and all claims arising thereunder shall survive any termination of this
Agreement. Nothing in this Section 8.02 shall be deemed to release any party
from any liability for any
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breach by such party of the terms and provisions of this Agreement or to impair
the right of any party to compel specific performance by any other party of its
obligations under this Agreement.
ARTICLE IX
TAX MATTERS
Section 9.01. Tax Indemnification. (a) Regardless of any disclosure of any
kind made on or prior to the date hereof, in the future or contained in this
Agreement, any Ancillary Agreement or any Schedule or Exhibit hereto or thereto,
the Company and the Company Stockholders shall, jointly and severally, indemnify
and hold Buyer and its Affiliates (each, a "Tax Indemnitee") harmless from and
against:
(i) any Tax imposed upon or relating to (A) the Assets for
the Pre-Closing Period; (B) the Company Stockholders, Epoch or any Affiliate
thereof for any period and (C) any party other than the Company Stockholders,
Epoch, Buyer or their respective Affiliates for a Pre-Closing Period, including,
in each case, any such Tax for which the Company may be liable, (W) under
Section 1.1502-6 of the Treasury regulations (or any similar provision of state,
local or foreign law), (X) as a transferee or successor by operation of law, (Y)
by Contract or (Z) otherwise;
(ii) any Tax imposed upon or relating to the Company for any
Pre-Closing Period (excluding any Tax reflected in the calculation of Book
Value);
(iii) any Tax arising directly or indirectly from a breach of
a representation or warranty set out in Section 4.12;
(iv) any incremental Liability for Tax in a Post-Closing
Period arising from an action taken by the Company, the Company Stockholders,
Epoch or an Affiliate thereof with respect to a Tax Return for a Pre-Closing
Period;
(v) any Liabilities, costs, expenses (including reasonable
expenses of investigation and attorneys' fees and expenses), losses, damages,
assessments, settlements or judgments arising out of or incident to the
imposition, assessment or assertion of any Tax, including those incurred in the
good faith contest of the imposition, assessment or assertion of any Tax;
(vi) any Liability as transferee; and
(vii) any Liability in any way related to, or arising out of
or in connection with, the Company's 1099-S filings for the years 2000 and 2001.
(b) Except as otherwise provided in Section 9.04, payment in full
of any amount due from the Company and/or the Company Stockholders under
this Section 9.01 shall be a joint and several obligation of the Company
and the Company Stockholders and shall made by the Company and/or the
Company Stockholders to Buyer in immediately available funds at least five
(5) Business Days before the date payment of the Taxes to which such
payment relates is due.
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Section 9.02. Allocation of Certain Taxes.
(a) In the case of Taxes arising in a taxable period of the
Company that includes but does not end on the Closing Date, except as
provided in Section 9.02(b), the allocation of such Taxes between the
Pre-Closing Period and the Post-Closing Period shall be made on the basis
of an interim closing of the books as of the end of the Closing Date. For
purposes of this Agreement, any Tax resulting from the departure of the
Company from any Relevant Group (resulting from the triggering into income
of deferred intercompany transactions or excess loss accounts or
otherwise) is attributable to the Pre-Closing Period.
(b) Buyer shall indemnify and hold each Company Stockholder
harmless from and against any Tax imposed upon or relating to the Company
for any Post-Closing Period, except as provided in Section 9.01(a)(iv).
Section 9.03. Transfer Tax and Other Closing Expenses. The Company and the
Company Stockholders shall be obligated, jointly and severally to pay, and shall
pay directly, or reimburse Buyer promptly upon demand and delivery of proof of
payment for, all excise, sales, transfer, documentary, filing, recordation and
other similar taxes, levies, fees and charges, if any (including all real estate
transfer taxes and conveyance and recording fees, if any), that may be imposed
upon, or payable or collectible or incurred in connection with, this Agreement
and the transactions contemplated hereby. All other expenses of Closing will be
paid by the party incurring such expense.
Section 9.04. Contests. If any claim for Tax is asserted in a Contest
against any Tax Indemnitee that would result in the indemnification of any such
Tax Indemnitee by the Company and/or the Company Stockholders pursuant to this
Article IX, then the following provisions of this Section 9.04 will apply to the
handling of such claim. For purposes of this Agreement, "Contest" means any
audit, court proceeding or other dispute with respect to any Tax matter that
affects the Company. Each party shall, at no cost to any other party, cooperate
with the other parties hereto and the other parties' representatives in a prompt
and timely manner in connection with any Contest. Such cooperation shall
include, but not be limited to, making available to the other party, during
normal business hours, all books, records, returns, documents, files, other
information (including working papers and schedules), officers or employees
(without substantial interruption of employment) or other relevant information
necessary or useful in connection with any Contest requiring any such books,
records and files. The Stockholders' Representative shall, at its election, have
the right to represent the interests of the Company in any Contest relating to a
Tax matter for which the Company Stockholders may be required to make a payment
pursuant to Section 9.01(a), to employ counsel of the Stockholders'
Representative' choice at the expense of the Stockholders' Representative and to
control the conduct of such Contest, including settlement or other disposition
thereof; provided that any settlement that would be adverse to Buyer or the
Company shall require Buyer's prior written consent. Buyer may, at its election,
attend and participate in any defense, prosecution, settlement or compromise of
any Contest relating to a Tax matter and shall bear its own expenses and costs
with respect thereto.
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Section 9.05. Tax Returns. (a) The Company Stockholders shall include the
income of the Company for all periods through and after the Closing Date
(including any deferred amounts triggered into income under Section 1.1502-13 of
the Treasury regulations and any excess loss account taken into income under
Section 1.1502-19 of the Treasury regulations) on the consolidated federal
income Tax Returns of the applicable Relevant Group. The Company Stockholders
shall pay any federal income Taxes attributable to such income. The Company
Stockholders will allow Buyer an opportunity to review and comment upon such Tax
Returns (including any amended Tax Returns) to the extent that they relate to
the Assets. The principles of this Section 9.05(a) shall apply to any state or
local income Tax for which the Company files a combined, consolidated, unitary
or similar Tax Return with any Affiliate of the Company Stockholders.
(b) The Company Stockholders shall file or cause to be filed all
separate Tax Returns of the Company for all taxable periods that end on or
before the Closing Date. The Company Stockholders shall pay or cause to be
paid all Tax liabilities shown by such Tax Returns to be due.
(c) The Company Stockholders shall be responsible for the
preparation and timely filing of all Tax Returns of the Company for all
taxable periods.
(d) With respect to a Tax Return of the Company for any taxable
period that begins on or before the Closing Date and ends after the
Closing Date, at least twenty (20) days prior to the due date (giving
effect to any extension thereof) of such Tax Return, Buyer shall cause to
be presented to the Company Stockholders for the Company Stockholders'
approval (such approval not to be unreasonably withheld) a copy of such
Tax Return accompanied by an allocation of the Taxes shown to be due
thereon between the portion of such period up to and including the Closing
Date and the portion of such period beginning after the Closing Date. Not
later than ten (10) days before the due date (giving effect to any
extension thereof) of such Tax Return, the Company Stockholders shall pay
to the Company the portion of the Taxes so allocated to the portion of
such period up to and including the Closing Date.
Section 9.06. Cooperation.
(a) Each party hereto shall, and shall cause its Affiliates to,
provide to each of the other parties hereto such cooperation and
information as any of them reasonably may request in filing any Tax
Return, amended Tax Return or claim for refund, determining a liability
for Taxes or a right to refund of Taxes or in conducting any audit or
other proceeding in respect of Taxes. Such cooperation and information
shall include (i) the retention of all returns, schedules and work papers,
material records or other documents relating to any tax matters of the
Company for the first taxable period after the Closing Date, and all prior
taxable periods until the later of (A) the expiration of the applicable
statute of limitations or (B) six (6) years after the due date without
extension for such returns, including copies of all relevant portions of
relevant Returns, together with relevant accompanying schedules and
relevant work papers, relevant documents relating to rulings or other
determinations by Taxing Authorities and relevant records concerning the
ownership and Tax basis of property, which any such party may possess and
(ii)
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(upon the other party's request) the provision of such returns, schedules,
work papers, records or other documents. The Company and the Company
Stockholders and their respective Affiliates each agree (A) to abide by
all record retention agreements entered into with any Taxing Authority and
(B) to give Buyer reasonable written notice prior to transferring,
destroying or discarding any such books and records, and if Buyer so
requests to allow Buyer to take possession of such books and records. Each
party shall make its employees reasonably available on a mutually
convenient basis at its cost to provide explanation of any documents or
information so provided. Subject to the preceding sentence, each party
required to file Tax Returns pursuant to this Agreement shall bear all
costs of filing such Tax Returns.
(b) The Company Stockholders agree, upon request, to use their
best efforts to obtain any certificate or other document from any
governmental authority or customer or of the Company as may be necessary
to mitigate, reduce or eliminate any Tax that could be imposed (including
with respect to the transactions contemplated by this Agreement).
Section 9.07. Survival. All obligations under this Article IX shall
survive the Closing hereunder and continue until sixty (60) days following the
expiration of the applicable statute of limitations on assessment of the
relevant Tax, including extensions.
Section 9.08. Characterization as Purchase Price Adjustment. All amounts
paid pursuant to this Article IX and Article X by one party to another party
shall be treated by such parties as an adjustment of the Purchase Price.
Section 9.09. Absence of Withholding Tax Liability. On or before the
Closing Date, the Company Stockholders shall deliver to Buyer a certificate
complying with the Code and Treasury regulations, in form and substance
satisfactory to Buyer, certifying that the transactions contemplated hereby are
exempt from withholding under Section 1445 of the Code.
Section 9.10. Termination of Tax Sharing Agreements. Any and all Tax
allocation or sharing agreements or other agreements or arrangements binding the
Company shall be terminated with respect to the Company as of the day before the
Closing Date and, from and after the Closing Date, the Company shall not be
obligated to make any payment to the Company Stockholders, any Affiliate of the
Company Stockholders, or any Taxing Authority or other person pursuant to any
such agreement or arrangement for any past or future period.
Section 9.11. Conflict. In the event of a conflict between the provisions
of this Article IX and any other provision of this Agreement, the provisions of
this Article IX shall control.
ARTICLE X
INDEMNIFICATION
Section 10.01. Survival of Representations and Warranties. The
representations, warranties, covenants and agreements set forth in or made
pursuant to this Agreement and the Ancillary Agreements or in any certificate
delivered pursuant hereto shall survive as follows:
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(i) indefinitely with respect to the representations and
warranties contained in Sections 4.01, 4.02, 4.06, 5.01 and 5.02 and the
covenants contained in Sections 6.03 and 6.08;
(ii) until sixty (60) days following the expiration of all
applicable statutes of limitation (including all periods of tolling or other
extension, whether automatic or permissive) with respect to matters covered by
Sections 4.12 and 4.20 and Article IX;
(iii) until the thirty (30) month anniversary of the Closing
Date in the case of all other representations and warranties and any covenant or
agreement contained in this Agreement to be performed in whole or in part on or
prior to the Closing Date; or
(iv) with respect to each other covenant or agreement
contained in this Agreement, indefinitely.
Notwithstanding the foregoing, any representation, warranty, covenant or
agreement that would otherwise terminate in accordance with clause (ii) or (iii)
above will continue to survive if a claim notice shall have been timely given on
or prior to such termination date, until the related claim for indemnification
has been satisfied or otherwise resolved.
Section 10.02. Indemnification by the Company and the Company
Stockholders. Regardless of any disclosure of any kind made on or prior to the
date hereof, in the future or contained in this Agreement, any Ancillary
Agreement or any Schedule or Exhibit hereto or thereto, but subject to the
provisions of Section 10.04, the Company and the Company Stockholders agree to
indemnify, jointly and severally, each of the Buyer Indemnified Parties against,
and agrees to hold each of them harmless from any and all Losses incurred or
suffered by them relating to or arising out of or in connection with any of the
following:
(a) any breach of or any inaccuracy in any representation or
warranty of the Company Stockholders or the Company contained in Article
IV (other than Section 4.12) made as of the date hereof and as though
restated on and as of the Closing Date, as may be qualified by the
Schedules thereto;
(b) any breach of or failure by the Company Stockholders, Epoch or
the Company to perform any agreement, covenant or obligation of the
Company Stockholders or the Company contained in this Agreement (other
than Article IX) or any document delivered by the Company, the Company
Stockholders or Epoch to Buyer at the Closing;
(c) the conduct and operation of the business of the Company, on
or prior to the Closing Date, including any litigation, action,
proceeding, arbitration or regulatory investigation arising out of or
relating to or in connection with events occurring on or prior to the
Closing Date, regardless of when such claim is asserted;
(d) any Liability in any way related to, or arising out of or in
connection with, any and all pending or threatened Litigation to which the
Company is a party or with which it has been threatened, including all
such matters set forth (or which should have been set forth) on Schedule
4.13;
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(e) any Liability in any way related to, or arising out of or in
connection with, any Subsidiary of the Company and/or the dissolution
thereof;
(f) any Liability in any way related to, or arising out of or in
connection with, any transaction involving the Company, any other Company
Stockholder and Epoch in respect of Epoch's equity position in, or other
involvement with, the Company;
(g) any Liability in any way related to, or arising out of or in
connection with, the employment by Glendale Securities or its Affiliates
of any Person employed by the Company or any of its Affiliates and/or the
resignation or termination of such employment by Glendale Securities or
any of its Affiliates;
(h) any Liability in any way related to, or arising out of or in
connection with the Boston Lease; and
(i) any Liability in any way related to, or arising out of or in
connection with any Litigation, pending or threatened and whenever
arising, relating to the Company's business relationship with Savvis
Communications Corporation, including any Contract therewith or the
termination thereof, prior to the Closing Date.
Section 10.03. Indemnification by Buyer. Subject to the provisions of
Sections 10.01 and 10.04, Buyer agrees to indemnify each Stockholder Indemnified
Party against, and agrees to hold each of them harmless from, any and all Losses
incurred or suffered by them relating to or arising out of or in connection with
any of the following:
(a) any breach of or any inaccuracy in any representation or
warranty made by Buyer contained in Article V made as of the date hereof
or as though restated on and as of the Closing Date; or
(b) any breach of or failure by Buyer to perform any agreement,
covenant or obligation of Buyer contained in this Agreement or in any
document delivered by Buyer to the Company Stockholders at the Closing.
Section 10.04. Limitations on Indemnification.
(a) General. The amount of any Losses incurred or suffered by any
Indemnified Person shall be calculated after giving effect to (i) any
insurance proceeds received by the Indemnified Person or any of its
Affiliates with respect to such Losses and (ii) any recoveries obtained by
the Indemnified Person or any of its Affiliates from any third Persons
with respect to such Losses; provided that the obligation of any
Indemnifying Person to make any payment to an Indemnified Person shall not
be stayed or delayed pending any determination as to whether an insurance
carrier will make any payment with respect to all or part of any Losses or
whether the Indemnified Person or any of its Affiliates will recover from
any third Person with respect to all or part of any Losses. If any such
proceeds or recoveries are received by an Indemnified Person or any of its
Affiliates with respect to any Losses after an Indemnifying Person has
made a payment to the Indemnified Person with respect thereto, the
Indemnified Person or such
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Affiliate shall pay to the Indemnifying Person the amount of such proceeds
or recoveries (up to the amount of the Indemnifying Person's payment).
(b) Limitation on Buyer's Right of Indemnification.
(i) No amounts of indemnity shall be payable by the Company
nor by any Company Stockholder as a result of any claims under Section 10.02(a)
or (c):
(x) unless and until the Buyer Indemnitees have
suffered, incurred, sustained or become subject to Losses in excess
of Fifty Thousand Dollars ($50,000) in the aggregate, in which case
the Buyer Indemnitees shall be entitled to seek indemnity for all
Losses from the first dollar forward; and
(y) with regard to each Company Stockholder, in excess
of the aggregate portion of the Purchase Price paid to such Company
Stockholder;
provided, that, (1) the foregoing clause (x) shall not apply to (A) any claims
based upon breaches of representation or warranty contained in Section 4.01,
4.02, 4.03, 4.05, 4.06, 4.14, 4.20, 4.22, 4.23, 4.30 or 4.34 (as Section 4.34
relates to such sections), (B) to any claims based upon fraud or willful
misconduct or (C) any matter described on Schedule 4.13,4.23(d) or any other
item that, to the Knowledge of any Company Stockholder, should otherwise appear
on either Schedule and (2) the foregoing clause (y) shall not apply to (A) any
claims based upon breaches of representation or warranty contained in Section
4,02, 4.03, 4.05,4.06, 4.30 or 4.34 (as Section 4.34 relates to such Sections)
or (B) to any claims based upon fraud or willful misconduct.
(ii) The indemnification obligations of each Company
Stockholder under the Agreement, other than Acument shall not extend to any
breach of or inaccuracy in any representation or warranty, or any breach,
nonfulfillment in the performances of any covenant or agreement, on the part of
any other Company Stockholder not caused in whole or in part by such Company
Stockholder or Epoch and shall be satisfied solely by recourse to such Company
Stockholder's Proportionate Percentage of the Purchase Price; provided, that,
the foregoing limitations shall not (x) apply in the event that any Company
Stockholder had Knowledge of any such breach or inaccuracy on the part of any
other Company Stockholder or Epoch on or prior to the Closing Date or (y) to any
claims based upon fraud or willful misconduct. For the avoidance of doubt, it is
hereby agreed that Acument shall jointly and severally be liable for any and all
claims made by any Buyer Indemnitee hereunder without application of any
limitation set forth in this Section 10.04(b)(ii).
Section 10.05. Claims. As soon as is reasonably practicable after becoming
aware of a claim for indemnification under this Agreement not involving a claim,
or the commencement of any suit, action or proceeding, of the type described in
Section 10.06, the Indemnified Person shall promptly give notice to the
Indemnifying Person of such claim and the amount (to the extent then
determinable) that, subject to Section 10.04, the Indemnified Person will be
entitled to receive hereunder from the Indemnifying Person; provided that the
failure of the Indemnified Person to give notice shall not relieve the
Indemnifying Person of its obligations under this
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Article X except to the extent (if any) that the Indemnifying Person shall have
been prejudiced in any material respect thereby.
Section 10.06. Notice of Third Party Claims; Assumption of Defense. The
Indemnified Person shall give notice as promptly as is reasonably practicable to
the Indemnifying Person of the assertion of any claim, or the commencement of
any suit, action or proceeding, by any Person not a party hereto in respect of
which indemnity may be sought under this Agreement; provided that the failure of
the Indemnified Person to give notice shall not relieve the Indemnifying Person
of its obligations under this Article X except to the extent (if any) that the
Indemnifying Person shall have been prejudiced in any material respect thereby.
The Indemnifying Person may, at its own expense, (a) participate in the defense
of any such claim, suit, action or proceeding and (b) upon notice to the
Indemnified Person and the Indemnifying Person's delivering to the Indemnified
Person a written agreement that the Indemnified Person is entitled to
indemnification pursuant to Section 10.02 or 10.03 for all Losses arising out of
such claim, suit, action or proceeding and that the Indemnifying Person shall be
liable, subject to Section 10.04, for the entire amount of any Loss, at any time
during the course of any such claim, suit, action or proceeding, assume control
of the defense thereof; provided that (i) the Indemnifying Person's counsel is
reasonably satisfactory to the Indemnified Person and (ii) the Indemnifying
Person shall thereafter consult with the Indemnified Person upon the Indemnified
Person's reasonable request for such consultation from time to time with respect
to such claim, suit, action or proceeding. If the Indemnifying Person assumes
such defense, the Indemnified Person shall have the right (but not the duty) to
participate in the defense thereof and to employ counsel, at its own expense,
separate from the counsel employed by the Indemnifying Person. If, however, the
Indemnified Person reasonably determines in its judgment that representation by
the Indemnifying Person's counsel of both the Indemnifying Person and the
Indemnified Person would present such counsel with a conflict of interest, then
such Indemnified Person may employ separate counsel to represent or defend it in
any such claim, action, suit or proceeding and the Indemnifying Person shall pay
the reasonable fees and disbursements of such separate counsel. Whether or not
the Indemnifying Person chooses to defend or prosecute any such claim, suit,
action or proceeding, all of the parties hereto shall cooperate in the defense
or prosecution thereof.
Section 10.07. Settlement. (a) Any settlement or compromise made or caused
to be made by the Indemnified Person or the Indemnifying Person, as the case may
be, of any claim, suit, action or proceeding of the kind referred to in Section
10.06 shall also be binding upon the Indemnifying Person or the Indemnified
Person, as the case may be, in the same manner as if a final judgment or decree
had been entered by a court of competent jurisdiction in the amount of such
settlement or compromise. If the defense of such claim, suit, action or
proceeding is not assumed by the Indemnifying Person, the Indemnifying Person
will not be subject to any liability for any settlement or compromise made
without its consent, but such consent may not be unreasonably withheld; provided
that it shall not be unreasonable for an Indemnifying Person to withhold its
consent to any settlement or compromise involving the imposition of equitable
remedies or involving the imposition of any material obligations on the
Indemnifying Person other than monetary obligations for which the Indemnified
Person will be indemnified hereunder. If the Indemnifying Person assumes the
defense of such claim, suit, action or proceeding, the Indemnifying Person shall
have the right to enter into a settlement or compromise of such claim, suit,
action or proceeding without the consent of the Indemnified
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Person; provided that the Indemnifying Person shall be required to obtain such
consent if the settlement or compromise involves the imposition of equitable
remedies or involves the imposition of any material obligations (monetary or
otherwise) on the Indemnified Person other than monetary obligations for which
the Indemnified Person will be indemnified hereunder; provided, however, if such
consent is not obtained, such settlement or compromise shall be null and void on
the Indemnified Party.
(b) The Indemnified Person shall give the Indemnifying Person at
least twenty (20) Business Days' notice of any proposed settlement or
compromise of any claim, suit, action or proceeding it is defending,
during which time the Indemnifying Person may reject such proposed
settlement or compromise; provided that from and after such rejection, the
Indemnifying Person shall be obligated to assume the defense of and full
and complete liability and responsibility for such claim, suit, action or
proceeding. Any and all Losses suffered by the Indemnified Person in
connection with such claim, suit, action or proceeding for which the
Indemnified Person is not otherwise entitled to indemnification under
this Agreement shall be paid by the Indemnifying Person to the extent they
exceed the unindemnified Losses that would have been suffered by the
Indemnified Person under the proposed settlement that was so rejected.
Section 10.08. Failure of Indemnifying Person to Act. In the event that
the Indemnifying Person does not elect to assume the defense of any claim, suit,
action or proceeding, then any failure of the Indemnified Person to defend or to
participate in the defense of any such claim, suit, action or proceeding or to
cause the same to be done, shall not relieve the Indemnifying Person of its
obligations hereunder.
Section 10.09. Exclusive Remedy. After the Closing, and other than with
respect to claims based upon breaches of Section 6.11 or Section 6.12, the
remedies available pursuant to the provisions of this Article X and Article IX
shall be the sole and exclusive remedy for monetary damages for any breach of
representations, warranties, covenants or agreements herein, provided, however,
the foregoing shall not limit the right to seek recovery for fraud or willful
misconduct or to seek specific performance, injunctive relief or other available
equitable remedies.
ARTICLE XI
CONTINGENT PAYMENT
Section 11.01. Contingent Payment.
(a) In addition to the Closing Date Payment, Buyer, as part of the
Purchase Price, agrees to pay to the Company the Contingent Payment with
respect to the Qualifying Revenue actually received during each of the
four (4) Earnout Years unless extended for a longer period pursuant to the
terms of Section 11.01 (g) below. The Contingent Payment shall be payable
quarterly in arrears during each Earnout Year.
(b) Each Company Stockholder's Contingent Payment shall consist of
cash equal to forty percent (40%) of such Company Stockholder's
Proportionate Percentage of
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such Contingent Payment and such number of shares of Penson Stock as is
equal to sixty percent (60%) of such Company Stockholder's Proportionate
Percentage of such Contingent Payment (as calculated in accordance with
the Penson Valuation or the valuation of a share of Penson Stock as
determined pursuant to Section 11.01 (d), as applicable). No fractional
shares of Penson Stock shall be issued. Each Company Stockholder shall be
entitled to receive in lieu of any fractional shares of Penson Stock to
which such Company Stockholder otherwise would have been entitled to
pursuant to this Section 11.01 (b) a cash payment in an amount equal to
the product of (a) the fractional interest of a share of Penson Stock to
which such Company Stockholder would otherwise have been entitled and (b)
either the Penson Valuation or the valuation of a share of Penson Stock as
determined pursuant to Section 11.01 (e), as applicable.
(c) Anything herein to the contrary notwithstanding (including
anything contained in the foregoing paragraph (b)), the issuance of Penson
Stock to the Company hereunder is expressly conditional upon the Company
(i) certifying as to its status as an "accredited investor" as that term
is defined in Rule 501 (a) of Regulation D promulgated under the
Securities Act and/or to such other matters as may be requested or
required by Buyer or Penson pursuant to the Securities Act, other
applicable Law or Penson or Buyer practice or policy and (ii) executing
and delivering Penson's then-standard Stockholders Agreement, the current
forms of which have been previously provided to the Company, and such
other agreements or instruments as may be required by Buyer, Penson or
Penson's underwriters from stockholders of Penson (including lock-up
agreements). In the event that the Company is unwilling or unable to
comply with the provisions of this paragraph, all Contingent Payments to
which the Company may be entitled hereunder shall be made one hundred
percent (100%) in cash.
(d) Anything herein to the contrary notwithstanding (including
anything contained in the foregoing paragraph (b)), no shares of Penson
Stock shall be actually issued pursuant to this Section 11.01 unless and
until Penson has completed an IPO. In the event that Penson does not
complete an IPO on or before June 30, 2006, Penson shall issue on or
promptly after such date all accrued but unissued shares of Penson Stock
required to be issued hereunder at a valuation per share as of the Closing
Date determined by BDO Seidman, LLP or such other qualified firm as may be
agreed upon by Buyer and the Stockholders' Representative.
(e) For purposes of this Agreement:
"Bonus Account" shall mean an account designated in writing by the
Stockholders' Representative.
"Bonus Committee" shall mean Richard Barber, Tan Anas and Steve
Worcester.
"Contingent Payment" shall mean aggregate value (whether in cash or
in Penson Stock, as the case may be) equal to the following percentages
with respect to the Qualifying Revenues received during the applicable
period: (i) Earnout Year 1 equals twenty-five percent (25%); (ii) Earnout
Year 2 equals thirty percent (30%); (iii) Earnout Year 3 equals
twenty-five percent (25%) and (iv) Earnout Year 4 equals twenty percent
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(20%). The term "Contingent Payment" shall also include a single payment of
$240,000 which, notwithstanding the payment schedule set forth in Section 11.01
(a), shall be made at the Closing Date.
"Earnout Year" shall mean a twelve (12) calendar month period the first
day of which shall be November 1, 2005.
"IPO" shall mean an underwritten initial public offering of equity
securities of Penson pursuant to an effective registration statement under the
Securities Act.
"Management Group" shall mean Richard Barber, Tan Anas, Steve Worcester,
Cass Smith and Al Laubenstein.
"Penson Stock" shall mean the Common Stock, par value $.01 per share, of
Penson.
"Penson Valuation" shall mean the lowest valuation per share contained
within the valuation range established by Penson and its underwriters for Penson
Stock with respect to an IPO (as adjusted from time to time to reflect any stock
dividend, stock split, reclassification or other similar capitalization change
of Penson).
"Qualifying Customer" shall mean those introducing broker customers of the
Company listed on Schedule 11.01(e)-1. Such term may also include:
(i) those introducing broker customer prospects listed on Schedule
11.01(e)-2; provided that any such prospect becomes a Qualifying Customer either
(x) prior to the Closing Date, with the procuring cause of such Qualifying
Customer being a Business Employee or (y) within one (1) year after the Closing
Date, with the procuring cause of such Qualifying Customer being Robert T.
Angle; or
(ii) certain Persons who become introducing broker customers of the
Company, Buyer or any of Buyer's Affiliates after the Closing Date as a result
of marketing efforts, coordinated in advance with Buyer and Penson, that were
made by Robert T. Angle and that were the procuring cause of any such customer
during the period following the Closing Date.
In the event that any such Person becomes a Qualifying Customer pursuant to the
terms of the foregoing clauses (i) or (ii), Qualifying Revenue from such
additional Qualifying Customer will be calculated during each of the four (4)
Earnout Years following the date on which any such Person becomes a Qualifying
Customer with the Contingent Payment in respect of such Qualifying Revenue from
such additional Qualifying Customer being twenty-five percent (25%) in each such
Earnout Year. All payments in respect of any such future Qualifying Customer
shall be made one hundred percent (100%) in cash.
"Qualifying Revenue" shall mean solely those gross revenues generated by
the Company, Buyer or any of Buyer's affiliates, as the case may be, in respect
of the Qualifying Customers during each applicable period. For the avoidance of
doubt, it is agreed that no revenues associated with any Excluded Litigation
shall constitute
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Qualifying Revenue. For avoidance of doubt, the calculation of Qualifying
Revenue shall be performed consistently throughout all applicable Earnout Years
in accordance with GAAP as applied in the preparation of the Audited Financial
Statements.
(f) Notwithstanding anything to the contrary in this Article XI, if the
Qualifying Revenue received during any individual Earnout Year exceeds Thirteen
Million Five Hundred Thousand Dollars ($13,500,000) there shall be an additional
payment (the "Additional Contingent Payment") equal to ten percent (10%) of any
such excess during any such period. All Additional Contingent Payments will be
made solely in cash. Section 11.02 shall apply to Additional Contingent
Payments, if any, mutatis mutandis.
(g) Anything herein to the contrary notwithstanding, each of Buyer
and/or Penson or the applicable Affiliate thereof shall determine in its sole
and absolute discretion whether to accept or reject any introducing broker
customer, whether introduced or procured by Robert T. Angle or a Business
Employee in accordance with the terms and provisions hereof or otherwise, and
whether prior to or after the Closing Date.
(h) Notwithstanding anything to the contrary set forth in Section 11.01
(b) or Section 11.O1(f), the Company Stockholders hereby agree as follows:
A. CREATION AND FUNDING OF MANAGEMENT GROUP BONUS ACCOUNT.
1. From Contingent Payment. An amount equal to two and one-half percent
(2.5%) of any Contingent Payment otherwise payable to each Company
Stockholder shall not be considered part of the Purchase Price but shall
instead be paid to the Bonus Account. No fractional shares of Penson Stock
shall be paid to the Bonus Account and the Stockholders' Representative
shall direct Buyer to deposit, in lieu thereof, an amount equal to the
product of (a) the fractional interest of a share of Penson Stock which
would otherwise be allocated to the Bonus Account and (b) either the
Penson Valuation or the valuation of a share of Penson Stock as determined
pursuant to Section 11.01(d), as applicable. Such amount shall be taken
from the cash portion of any Additional Contingent Payment otherwise
payable to the Company Stockholders.
2. From Additional Contingent Payment. An amount equal to twenty (20%)
of any Additional Contingent Payment otherwise payable to each Company
Stockholder shall not be considered part of the Purchase Price but shall
instead be paid to the Bonus Account.
B. DETERMINATION, MANNER AND METHOD OF ANY DISTRIBUTION FROM THE BONUS
POOL
1. Determination. The balance of the Bonus Account may be distributed
to the members of the Management Group as, if and to the
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extent determined in the sole and absolute discretion of the Bonus
Committee. Nothing in this Agreement grants, is intended to grant, or
shall be construed to grant any member of the Management Group any right
to be awarded any amounts from the Bonus Account other than in the sole
and absolute discretion of the Bonus Committee.
2. Distributions. Any distributions from the Bonus Account to the
Management Group shall be made within 90 days of the date of any deposit
to the Bonus Account.
3. Withholding; Other Deductions. The Company shall deduct all
applicable withholding and other resulting Tax payments from any bonuses
paid to the Management Group.
4. No Standing. No member of the Management Group shall have any
standing under this Agreement to challenge any distributions from the
Bonus Account that may be authorized by the Bonus Committee or the
calculation of any deposit thereto.
5. No Alienation. No member of the Management Committee shall have any
right to pledge, hypothecate, anticipate or in any way create a lien upon
the Bonus Account or any amounts that the Bonus Committee may determine
are payable from the Bonus Account, and no amounts that may be payable
from the Bonus Account shall be assignable in anticipation of payment
either by voluntary or involuntary acts, or by operation of law.
Section 11.02. Disputes. (a) Upon the making of each Contingent Payment
or, if the Contingent Payment is zero, on the date the Contingent Payment would
have been made had it not been zero, Buyer shall deliver to the Stockholders'
Representative a statement of the Qualifying Revenue for the applicable period
(the "Preliminary Statement"). Buyer shall grant the Stockholders'
Representative and its agents access to the Books and Records supporting the
Preliminary Statement as necessary for the Stockholders' Representative review
thereof. The Preliminary Statement as delivered to the Stockholders'
Representative shall be final and binding on the parties for purposes of
determining the Contingent Payment in accordance herewith unless, within ninety
(90) days after delivery thereof to the Stockholders' Representative, the
Stockholders' Representative shall deliver to Buyer a written notice specifying
the items on the Preliminary Statement which the Stockholders' Representative
disagrees with and the reasons therefor (the "Dispute Notice"). Thereafter,
Buyer and the Stockholders' Representative shall promptly negotiate in good
faith with respect to the subject of the Dispute Notice, and if they are unable
to reach an agreement within ten (10) Business Days after receipt by Buyer of
the Dispute Notice, the dispute shall be settled by submitting the dispute to
arbitration. Thereafter, within five (5) Business Days, such arbitration shall
be initiated by the parties, by submitting the matter to the Accounting Firm to
act as arbitrator. The arbitrator's decision shall be final and binding on the
parties. The arbitrator shall be directed to issue its decision in writing
within fifteen (15) Business Days of submission of the dispute to arbitration.
The arbitration fees and expenses of the arbitrator shall be borne by Buyer, on
one hand, and the Company, on the other hand, in
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inverse proportion as they may prevail on matters resolved by the arbitrator,
which proportionate allocation shall also be determined by the arbitrator at the
time the determination of the arbitration is rendered on the merits of the
maters submitted. The Preliminary Statement as accepted by the Stockholders'
Representative without submission of a Dispute Notice, or as adjusted pursuant
to agreement between Buyer and the Stockholders' Representative, or as adjusted
pursuant to the arbitration decision, in any case pursuant to this paragraph,
shall be final and binding on the parties (the "Final Statement").
(b) The Contingent Payment shall be calculated based on the Final
Statement. If the Contingent Payment based on the Final Statement is
greater than the Contingent Payment paid by Buyer to the Company pursuant
to Section 11.01, then Buyer shall pay the Company the difference in cash
or other immediately available funds within five (5) Business Days of such
final determination. If the Contingent Payment based on the Final
Statement is less than the Contingent Payment paid by the Buyer to the
Company pursuant to Section 11.01 of the Agreement, then the Company shall
pay Buyer the difference in cash or other immediately available funds
within five (5) Business Days of such final determination.
Section 11.03. Buyer Discretion. Notwithstanding any other provision of
this Agreement, including Section 11.01(g), Buyer retains the right, in its
sole discretion, to refuse to enter into any agreement, understanding or
arrangement that might or would lead to Qualifying Revenue if it determines in
its good faith business judgment that it is not in Buyer's interest to do so,
and in any event to determine the terms of any such understanding or arrangement
in its sole discretion.
ARTICLE XII
MISCELLANEOUS
Section 12.01. Headings. The section headings herein are for convenience
of reference only, do not constitute part of this Agreement and will not be
deemed to limit or otherwise affect any of the provisions hereof. References to
Sections, unless otherwise indicated, are references to Sections of this
Agreement.
Section 12.02. Notices. All notices to be given pursuant to this Agreement
to any party must be in writing and will be deemed to have been validly given if
delivered personally, sent by confirmed facsimile transmission or sent by
overnight courier (providing proof of delivery), to such party at its address
given below. Notices shall be deemed given (i) if delivered personally or by
overnight courier, upon delivery or (ii) if sent by facsimile transmission, upon
confirmation of transmission thereof.
The address of each party for the purposes of this Agreement is as
follows:
If to the Company or to the Stockholders' Representative, to
the Stockholders' Representative at the address provided for
notices thereby on the signature pages hereto
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with a copy to:
Keesal, Young & Logan
400 Oceangate
Long Beach, CA 90802
Attention: Robert J. Stemler, Esq.
Fax: (562)436-7416
If to any Company Stockholder, to such Company Stockholder at
the address provided for notices thereby on the signature
pages hereto
with a copy to:
Keesal, Young & Logan
400 Oceangate
Long Beach, CA 90802
Attention: Robert J. Stemler, Esq.
Fax: (562)436-7416
If to Buyer or Penson, to it at:
Penson Worldwide, Inc.
1700 Pacific Avenue
Suite 1400
Dallas, TX 75201
Attention: General Counsel
Fax: (214) 217-5096 and (214) 765-1164
Any party may by notice to the others change its address for notice
and will so change its address for notice whenever its existing address for
notice ceases to be adequate for delivery both by hand or overnight courier and
by facsimile.
Section 12.03. Assignment. The rights and obligations under this Agreement
may be transferred only with the written consent of the other parties hereto.
Any transfer in violation of this Section 12.03 shall be null and void;
provided, however, that Buyer may assign any of its rights and obligations
hereunder to any of its Affiliates, it being understood that Buyer shall remain
liable for the performance of any such obligations. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto, and their
respective successors and permitted assigns.
Section 12.04. Governing Law; Jurisdiction; Waiver of Jury Trial. (a) This
Agreement shall be governed by and construed in accordance with the laws of the
State of New York.
(b) To the fullest extent permitted by applicable law, each party
hereto (i) agrees that any claim, action or proceeding by such party
seeking any relief whatsoever arising out of, or in connection with, this
Agreement or the transactions contemplated hereby (except with respect to
the matters governed by Section 11.02 and Section
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3.06(d), which shall be resolved in accordance with the provisions
thereof) shall be brought in any state or federal court of competent
jurisdiction sitting in New York County in the State of New York and not
in any other state or federal court in the United States of America or any
court in any other country, (ii) agrees to submit to the exclusive
jurisdiction of such courts described in clause (i) for purposes of all
legal proceedings arising out of, or in connection with, this Agreement or
the transactions contemplated hereby, (iii) waives and agrees not to
assert any objection that it may now or hereafter have to the laying of
the venue of any such proceeding brought in such a court or any claim that
any such proceeding brought in such a court has been brought in an
inconvenient forum and (iv) agrees that a final judgment in any such
action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by
applicable Law.
(c) EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY
WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS
AGREEMENT OR THE TRANSACTIONS AND FOR ANY COUNTERCLAIM RELATING THERETO.
Section 12.05. Severability. In the event that any provision of this
Agreement shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby as long as the remaining provisions do not fundamentally alter
the relations among the parties.
Section 12.06. Entire Agreement; Amendment; No Waiver. (a) This Agreement,
together with the Ancillary Agreements and the Confidentiality Agreement, sets
forth the entire understanding and agreement between the parties with respect to
the subject matter hereof and thereof and supersede and replace any prior
understanding, agreement or statement of intent, in each case written or oral,
of any kind and every nature with respect hereto. Any provision of this
Agreement, the Ancillary Agreements or the Confidentiality Agreement may be
amended, modified or waived in whole or in part at any time by an agreement in
writing among the parties thereto.
(b) The waiver by any party hereto of a breach of any provision of
this Agreement shall not operate or be construed as a further or
continuing waiver of such breach or as a waiver of any other or subsequent
breach. Except as otherwise expressly provided herein, no failure on the
part of any party to exercise, and no delay in exercising, any right,
power or remedy hereunder, or otherwise available in respect hereof at law
or in equity, shall operate as a waiver thereof, nor shall any single or
partial exercise of such right, power or remedy by such party preclude any
other or further exercise thereof or the exercise of any other right,
power or remedy.
Section 12.07. Expenses. Except as otherwise expressly set forth in this
Agreement, Buyer, on the one hand, and the Company and the Company Stockholders,
on the other hand, shall each pay their respective expenses (including legal,
investment banking, finder's, broker's and accounting fees) incurred in
connection with the origination, negotiation and execution of, and the closing
of the transactions contemplated by, this Agreement and the Ancillary
Agreements.
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Section 12.08. Obligations Joint and Several. Each Company Stockholder
hereby acknowledges and agrees that all obligations of every kind and character
of the Company Stockholders to make payment of any amount hereunder or in any
Ancillary Agreement shall be a joint and several obligation of the Company
Stockholders.
Section 12.09. Schedules and Exhibits. All Annexes, Exhibits and Schedules
to this Agreement are hereby incorporated by reference and made a part of this
Agreement. Any fact or item which is disclosed on any Schedule that is referred
to in a representation or warranty in this Agreement shall not be deemed to be
an exception to any other representation or warranty in this Agreement, or to be
disclosed on any other Schedule, unless specified on such other Schedule by a
cross-reference or otherwise. Any fact or item disclosed on any Annex, Schedule
or Exhibit to this Agreement shall not by reason only of such inclusion be
deemed to be material and shall not be employed as a point of reference in
determining any standard of materiality under this Agreement.
Section 12.10. No Third Party Beneficiaries. Except as expressly provided
herein, nothing herein shall create or establish any third-party beneficiary
hereto nor confer upon any Person not a party to this Agreement any rights or
remedies of any nature or kind whatsoever under or by reason of this Agreement.
Section 12.11. Counterparts. This Agreement may be executed by facsimile
and in any number of counterparts, each of which when so executed shall be
deemed to be an original but all of which together shall constitute one and the
same instrument.
Section 12.12. Stockholders' Representative.
(a) Each Company Stockholder and the Company hereby irrevocably
designates and appoints Robert T. Angle as the Stockholders' Representative (the
"Stockholders' Representative") to represent and act for him, her or it for all
purposes in his, her or its capacity as a Company Stockholder or the Company
under this Agreement and any Ancillary Agreement, but only for the specific
purposes specified in this Agreement and any Ancillary Agreement, subject only
to the terms and conditions hereof and thereof (each such purpose, a "Designated
Purpose"). The Stockholders' Representative hereby accepts such designation and
appointment and agrees to represent and act for the Company Stockholders and the
Company under this Agreement, and any Ancillary Agreement, with respect to each
Designated Purpose in accordance with the terms and conditions set forth herein
and therein.
(b) In discharging its duties and responsibilities with respect to
each Designated Purpose hereunder and under any Ancillary Agreement, the
Stockholders' Representative shall have all rights and powers necessary and
incident to the proper discharge thereof, and any decision or act of the
Stockholders' Representative with respect to each Designated Purpose shall be
conclusive and absolutely binding upon each and all of the Stockholders and the
Company.
(c) The Stockholders and the Company hereby authorize the
Stockholders' Representative, at its sole discretion, to employ attorneys,
accountants and others to assist it in
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the performance of its duties and responsibilities with respect to each
Designated Purpose under this Agreement and the Ancillary Agreements.
(d) The Stockholders and the Company hereby authorize the
Stockholders' Representative with respect to each Designated Purpose to (i)
interpret and construe the provisions of this Agreement and the Ancillary
Agreements and (ii) determine, resolve, settle or contest any action, suit,
proceeding or arbitration that may arise under this Agreement and any Ancillary
Agreement with respect to any Designated Purpose in any manner the Stockholders'
Representative deems appropriate under the circumstances. Any settlement by the
Stockholders' Representative of an action, suit, proceeding or arbitration with
respect to any Designated Purpose or any final order or judgment or award of a
court or tribunal of competent jurisdiction resulting from an action, suit,
proceeding or arbitration by Buyer or any other Buyer Indemnified Party against
the Stockholders' Representative with respect to any Designated Purpose shall be
binding upon and enforceable against each of the Company Stockholders and the
Company.
(e) Upon the death, disability or resignation of the Stockholders'
Representative, a successor Stockholders' Representative shall be appointed by
the Company Stockholders. A successor Stockholders' Representative shall become
such upon notice of appointment delivered to Buyer.
(f) Notwithstanding any provision of this Section 12.12 which
defines or limits the authority of the Stockholders' Representative, the
decisions, acts and instructions of the Stockholders' Representative or the
contesting of any actions shall be final, binding and conclusive upon each of
the Company Stockholders and the Company; and the Buyer and any other Buyer
Indemnified Party may rely upon any such decision, act or instruction of the
Stockholders' Representative as being the decision, act or instruction of each
and all of the Company Stockholders and the Company without the necessity of
investigating or determining whether or not such Stockholders' Representative
has acted within the scope of the powers given to it under this Agreement.
Notices or communications to or from the Stockholders' Representative shall
constitute notice to or from each and all of the Company Stockholders and the
Company. The Buyer and any other Buyer Indemnified Party are hereby released and
discharged from any Liability to any Company Stockholder or the Company for any
acts done by the Buyer and any other Buyer Indemnified Party in accordance with
such decision, act or instruction of the Stockholders' Representative.
(g) The Stockholders hereby authorize the Stockholders'
Representative, at its sole discretion, to approve changes, modifications and
amendments to this Agreement, the Disclosure Schedules and the Ancillary
Agreements and to execute and deliver any and all instruments and documents in
connection therewith on behalf of such Stockholders.
Signature Page Follows
62
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of the
day and year first above written.
BUYER:
SAI HOLDINGS, INC.
By: /s/ Philip A. Pendergraft
--------------------------------------------
Name: PHILIP A. PENDERGRAFT
Title: EXECUTIVE VICE PRESIDENT
THE COMPANY:
COMPUTER CLEARING SERVICES, INC.
By: /s/ Richard W. Barber
--------------------------------------------
Name: RICHARD W. BARBER
Title: PRESIDENT
THE COMPANY STOCKHOLDERS:
________________________________________________
Robert T. Angle,
individually and as Stockholders' Representative
Address for Notices:
________________________________________________
________________________________________________
________________________________________________
Signature Page to Asset Purchase Agreement
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of the
day and year first above written.
BUYER:
SAI HOLDINGS, INC.
By: ____________________________________________
Name:
Title:
THE COMPANY:
COMPUTER CLEARING SERVICES, INC.
By: ____________________________________________
Name:
Title:
THE COMPANY STOCKHOLDERS:
/s/ Robert T. Angle
------------------------------------------------
Robert T. Angle,
individually and as Stockholders' Representative
Address for Notices:
c/o c/o Acument Holding, Inc.
Pier 23
Embarcadero
San Francisco, CA 94111
Signature Page to Asset Purchase Agreement
<PAGE>
ACUMENT HOLDING, INC.
By: /s/ Robert T. Angle
--------------------------------------------
Name: Robert T. Angle
Title: President
Address for Notices:
Acument Holding, Inc.
Pier 23
Embarcadero
SaN Francisco, CA 94111
________________________________________________
Richard W. Barber
Address for Notices:
________________________________________________
________________________________________________
________________________________________________
________________________________________________
Michael Bolgatz
Address for Notices:
________________________________________________
________________________________________________
________________________________________________
________________________________________________
Tanveer Anas
Address for Notices:
________________________________________________
________________________________________________
________________________________________________
Signature Page to Asset Purchase Agreement
<PAGE>
ACUMENT HOLDING, INC.
By: ____________________________________________
Name:
Title:
Address for Notices:
________________________________________________
________________________________________________
________________________________________________
/s/ Richard W. Barber
------------------------------------------------
Richard W. Barber
Address for Notices:
Penson Financial
1700 PACIFIC AVE SUITE 1400
DALLAS, TEXAS 75201
________________________________________________
Michael Bolgatz
Address for Notices:
________________________________________________
________________________________________________
________________________________________________
/s/ Tanveer Anas
------------------------------------------------
Tanveer Anas
Address for Notices:
1308 DALHART DRIVE
ALLEN, TX 75013
Signature Page to Asset Purchase Agreement
<PAGE>
ACUMENT HOLDING, INC.
By: ____________________________________________
Name:
Title:
Address for Notices:
________________________________________________
________________________________________________
________________________________________________
________________________________________________
Richard W. Barber
Address for Notices:
________________________________________________
________________________________________________
________________________________________________
/s/ Michael Bolgatz
------------------------------------------------
Michael Bolgatz
Address for Notices:
2625 Alcafraz AUE #521
Berkeley CA 94705
________________________________________________
Tanveer Anas
Address for Notices:
________________________________________________
________________________________________________
________________________________________________
Signature Page to Asset Purchase Agreement
<PAGE>
/s/ Stephen S. Worcester
------------------------------------------------
Stephen S. Worcester
Address for Notices:
13773 VISTA GRANDE DR.
CHINO HILLS, CA.91709
/s/ Albert Laubenstein
------------------------------------------------
Albert Laubenstein
Address for Notices:
5503 DIVERSEY DRIVE
RANCHO PALOS VERDES,CA
90275
FINANCIAL TECHNOLOGY PARTNERS L.L.C.
By: ____________________________________________
Name:
Title:
Address for Notices:
________________________________________________
________________________________________________
________________________________________________
Signature Page to Asset Purchase Agreement
<PAGE>
FINANCIAL TECHNOLOGY PARTNERS L.L.C.
By: /s/ Steven J. Mclaughlin
--------------------------------------------
Name: STEVEN J MCLAUGHLIN
Title: MANAGING PARTNER
Address for Notices:
601 California Street
22nd Floor
SF, CA 94108
Signature Page to Asset Purchase Agreement