LLC Membership Agreement

EXHIBIT 10.1

 

 

LLC MEMBERSHIP INTEREST

PURCHASE AGREEMENT

 

by and among

 

PIPER JAFFRAY COMPANIES,

 

VIE FINANCIAL GROUP, INC.

 

and

 

VIE SECURITIES, LLC

 

September 21, 2004

 

 

EXECUTION COPY

 

TABLE OF CONTENTS

 

 

 

 

Schedules

 

Disclosure Schedule

 

INDEX OF DEFINED TERMS

 

 

 

LLC MEMBERSHIP INTEREST

PURCHASE AGREEMENT

 

This LLC MEMBERSHIP INTEREST PURCHASE AGREEMENT (this “ Agreement ”), dated September 21, 2004, is made and entered into by and among the Piper Jaffray Companies, a Delaware corporation (“ Buyer ”), Vie Securities, LLC, a Delaware limited liability company (the “ Company ”) and Vie Financial Group, Inc., a Delaware corporation and the owner of 100% of the outstanding economic interest of the Company (“ Seller ”).

 

WHEREAS, Seller owns 100% of the economic interest of the Company and all of the outstanding membership interest of the Company except for the Manager Interest (as defined below) (the “ Equity Interest ”), such Equity Interest constituting all of the issued and outstanding membership interests which carry the right to participate in the allocation of the profits and losses of the Company;

 

WHEREAS, Dean Stamos, the current manager member of the Company, owns a non-economic equity interest in the Company (the “ Manager Interest ”) and he has agreed to transfer his Manager Interest to Buyer for the sum of $1.00 at the Closing (as defined in Section 1.3 of the Agreement);

 

WHEREAS, SOFTBANK Capital Partners LLC, a Delaware limited liability company (“ SOFTBANK ”), the Investment Committee of the Draper Fisher Jurvetson ePlanet Entities (“ DFJ ”), (a committee empowered to make investment decisions on behalf of Draper Fisher Jurvetson ePlanet Ventures LP, Draper Fisher Jurvetson ePlanet Partners Fund, LLC and Draper Fisher Jurvetson ePlanet Ventures GmbH & Co. KG) and OptiMark Innovations, Inc., a Delaware corporation (“ Innovations ” and, together with SOFTBANK and DFJ, the “ Controlling Stockholders ”) control the voting power of approximately 86% of the voting capital stock of Seller;

 

WHEREAS, the respective Boards of Directors of Buyer and Seller and the Executive Committee of the Company (the “ Executive Committee ”) have determined that it is advisable and in the best interests of their respective entities and their stockholders and members, as applicable, that Buyer acquire all of the outstanding Equity Interest of the Company in exchange for cash (the “ Equity Acquisition ” or “Acquisition” ) in accordance with the General Corporation Law of the State of Delaware (the “ Delaware Law ”) and the terms of this Agreement;

 

WHEREAS, the Controlling Stockholders have entered, effective with the execution of this Agreement, an irrevocable written action and irrevocable proxies related thereto consenting to the sale of the Equity Interest to Buyer and to the adoption of this agreement by the Controlling Stockholders of Seller (collectively, the “ Joint Written Action ”);

 

WHEREAS, Buyer has agreed to provide interim financing, upon the execution of this Agreement by all parties and the execution of the Joint Written Action, pursuant to the terms of a Promissory Note and a Security Agreement entered into by Buyer and Seller as of the date hereof; and

 

WHEREAS, Buyer, Seller and the Company desire to make certain representations, warranties, covenants, and agreements in connection with, and establish various conditions precedent to, the Acquisition.

 

NOW, THEREFORE, in consideration of the representations, warranties, covenants and agreements set forth in this Agreement, the parties hereto hereby agree as follows:

 

Article I

The Acquisition

 

1.1 Purchase and Sale of Equity Interest . Upon the terms and subject to the conditions contained herein, at the Closing (as defined in Section 1.3 hereof), Seller shall sell, transfer and deliver to Buyer, and Buyer shall purchase and accept from Seller, the Equity Interest, which Equity Interest shall comprise in the aggregate all the outstanding membership interests of the Company, other than the Manager Interest, that will be issued and outstanding on the Closing Date (as defined in Section 1.3 hereof), free and clear of any and all liens, security interests, claims, pledges, charges or other encumbrances or restrictions of any kind (collectively, “ Liens ”).

 

1.2 Purchase Price . Subject to the terms and conditions of this Article I, the total purchase price (the “ Purchase Price ”) to be paid by Buyer for the Equity Interest shall be an amount equal to $15,000,000 in cash.

 

1.3 Closing Transactions .

 

(a) The closing of the transactions contemplated by this Agreement (the “ Closing ”) shall take place at the offices of Dorsey & Whitney LLP, Suite 1500, 50 South Sixth Street, Minneapolis, Minnesota as soon as is reasonably practical after the date on which the last of the conditions to the Closing set forth in Article VII, other than the requirement that certain documents be delivered at or prior to the Closing, shall have been satisfied or waived, or at such other place and on such other date as is mutually agreeable to the parties (“ Closing Date ”).

 

(b) At the Closing:

 

(i) Buyer shall pay the Purchase Price (minus any amounts funded pursuant to Section 6.15) to Seller by wire transfer of immediately available funds, as set forth below, against delivery of duly executed documents of transfer of the Equity Interest in a form satisfactory to Buyer as follows:

 

(x) Buyer shall wire a portion of the Purchase Price equal to $1,425,562.70 to RGC International Investors, LDC on behalf of the Seller; and

 

(y) Buyer shall wire the balance of the Purchase Price to Seller in accordance with wire instructions provided to Buyer and Seller; and

 

(ii) Immediately prior to the Closing, Seller shall be entitled to cause the Company to distribute to Seller an amount equal to $622,417 less the sum of (x) all amounts previously distributed to Seller by the Company pursuant to Section 5.1(b)(iv)

 

after the date hereof, and (y) the amount of cash necessary to be retained by the Company to satisfy its capital requirements as set forth in Section 5.3; and

 

(iii) The Company and Seller shall deliver to Buyer the documents required to be delivered to Buyer under Section 7.2(f) below, and Buyer shall deliver to Seller the documents required to be delivered to Seller under Section 7.3(d)below.

 

1.4 Purchase Price Allocation . Buyer shall prepare an allocation of the Purchase Price (and all other capitalized costs) among assets of the Company in accordance with Section 1060 of the Internal Revenue Code of 1986, as amended (the “ Code ”), and the Treasury Regulations thereunder (and any similar provision of state or local law), which allocation shall be binding on Seller (the “ Purchase Price Allocation ”). Seller and the Company shall timely and properly prepare, execute, file and deliver all documents, forms and other information as Buyer may reasonably request to prepare the Purchase Price Allocation. Buyer shall deliver the Purchase Price Allocation to Seller within 60 days after the Closing Date. Buyer and Seller shall file IRS Form 8594 (and, if necessary, any amendments thereto) on a basis consistent with the Purchase Price Allocation, and neither party shall take any contrary position (whether in audits, Tax Returns or otherwise) unless required to do so by applicable law.

 

1.5 Taking of Necessary Action; Further Action . Buyer, Seller and the Company, respectively, shall each use commercially reasonable efforts to take all such action as may be necessary or appropriate to effectuate the Acquisition at the time specified in Section 1.3 hereof.

 

Article II

Representations and Warranties of Seller

 

Seller hereby represents and warrants to Buyer, and acknowledges that Buyer is relying upon the following representations and warranties in connection with the purchase of the Equity Interest that, except as set forth in the Disclosure Schedule delivered by the Seller and the Company to Buyer on the date hereof (provided that any information set forth in one section of the Disclosure Schedule in such a way as to make its relevance to a representation made elsewhere in this Agreement or information called for by another section of the Disclosure Schedule reasonably apparent on the face thereof shall be deemed to apply to such other Section or subsection thereof) (the “ Disclosure Schedule ”) or as similarly disclosed in the Seller’s annual report on Form 10-K for the fiscal year ended March 31, 2004 (the “ 10-K ”) or in the Seller’s quarterly report on Form 10-Q for the quarter ended June 30, 2004 (together with the 10-K, the “ Parent SEC Reports ”) or as otherwise specifically required to be performed by Seller of the Company after the date hereof pursuant to the specific terms of this Agreement or the Loan Agreement:

 

2.1 Incorporation and Corporate Power . Seller is a corporation duly incorporated, validly existing and in good standing under Delaware Law, with the requisite corporate power and authority to enter into this Agreement and perform its obligations hereunder.

 

2.2 Title to Equity Interest . Seller has good, valid and marketable title to and is the sole lawful owner of all of the Equity Interest, free and clear of any Liens. Except as set forth in Section 2.2 of the Disclosure Schedule, there are no agreements or restrictions which in any way

 

limit or restrict the transfer to Buyer of any of the Equity Interest, and there are no member agreements, voting trusts or other agreements or understandings with respect to the voting of any portion of the Equity Interest.

 

2.3 Execution, Delivery; Valid and Binding Agreement . Seller has all requisite corporate power and authority to execute and deliver, and perform its obligations under this Agreement and to consummate the transactions contemplated hereby. The execution, delivery and performance of this Agreement by Seller and the consummation of the transactions contemplated hereby have been duly and validly authorized by all requisite corporate action and, except for the notice required under Section 228 of the Delaware Law, no other corporate proceedings on Seller’s part are necessary to authorize the execution, delivery or performance of this Agreement. This Agreement has been duly and validly executed and delivered by Seller and constitutes the valid and binding obligation of Seller, enforceable against Seller in accordance with its terms, and the other documents contemplated hereby, when executed and delivered by Seller, will constitute the valid and binding obligations of Seller, enforceable against Seller in accordance with their respective terms, in each case, except to the extent that their enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors’ rights generally and by general equitable principles.

 

2.4 No Violations . The execution, delivery and performance of this Agreement by Seller do not, and the consummation of the transactions contemplated hereby will not: (a) contravene any provision of the Certificate of Incorporation or Bylaws of Seller; (b) violate or conflict in any material respect with any federal, state, local or foreign law, statute, ordinance, rule or regulation (a “ Law ”) or any decree, writ, injunction, judgment or order of any court or administrative or other governmental body or of any arbitration award which is either applicable to, binding upon or enforceable against Seller; (c) conflict with, result in any breach of any of the provisions of, or constitute a default (or any event which would, with the passage of time or the giving of notice or both, constitute a default) under, result in a violation of, result in the creation of a right of termination, amendment, modification, abandonment or acceleration under any indenture, hypothecation, mortgage, lease, license, loan agreement or other material agreement or instrument which is either binding upon or enforceable against Seller; (d) result in the creation of any Lien upon the Equity Interest; or (e) require any authorization, consent, approval, exemption or other action by or notice to any court, commission, governmental body, regulatory authority, agency or tribunal wherever located (a “ Governmental Entity ”) or any other third party, other than (i) such consents, waivers, approvals, orders, authorizations, registrations, declarations and filings as may be required under applicable federal or state securities Laws, including the filing with the Securities and Exchange Commission (the “ SEC ”) of an amendment of Forms BD and similar filings with, or consents of, various state Governmental Entities; (ii) such approvals and consents of the National Association of Securities Dealers, Inc. (the “ NASD ”), if required pursuant to NASD Rule 1017 (which Seller or the Company undertakes to obtain prior to the Closing Date); and (iii) consents set forth in Section 2.4 of the Disclosure Schedule (which Seller undertakes to obtain prior to the Closing Date).

 

Article III

Representations and Warranties Regarding the Company

 

Seller and the Company hereby represent and warrant to Buyer, and acknowledge that Buyer is relying upon the following representations and warranties in connection with the purchase of the Equity Interest that, except as set forth in the Disclosure Schedule or as similarly disclosed in the Parent SEC Reports or as otherwise specifically required to be performed by Seller of the Company after the date hereof pursuant to the specific terms of this Agreement or the Loan Agreement:

 

3.1 Formation; Power and Authority .

 

(a) The Company is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite power and authority and all authorizations, licenses, permits and certifications necessary to carry on its business as now being conducted and presently proposed to be conducted and to own, lease and operate its assets. The Company is duly qualified as a foreign limited liability company to do business in every jurisdiction in which the nature of its business or its ownership of property requires it to be so qualified, except for those jurisdictions in which the failure to be so qualified would not, individually or in the aggregate, have a Material Adverse Effect (as defined below). Section 3.1 of the Disclosure Schedule sets forth a true and complete list of all jurisdictions in which the Company is qualified and in good standing. “ Material Adverse Effect ” means any change, effect or circumstance that (i) has or could reasonably be expected to have a material adverse effect on the business, financial condition or results of operations of the Company, other than such changes, effects or circumstances reasonably attributable to: (A) economic conditions generally in the United States; (B) conditions generally affecting the industry in which the Company participates; provided , with respect to clauses (A) and (B), the changes, effects or circumstances do not have a materially disproportionate effect (relative to other industry participants) on the Company; or (C) the announcement of the Acquisition; or (ii) prevents Buyer, Seller or the Company, as applicable, from consummating the Acquisition and the other transactions contemplated by this Agreement; provided that, with respect to clause (ii), neither Buyer nor Seller or the Company, as applicable, caused the change, effect or circumstance that prevents such party from consummating the Acquisition and the other transactions contemplated by this Agreement.

 

(b) The Company is not in violation of any of the provisions of its Limited Liability Company Operating Agreement effective as of March 13, 2001 (the “ LLC Agreement ”), Certificate of Formation or other applicable charter document (any such document hereinafter referred to as its “ Charter Documents ”) or other applicable governing document (any such documents hereinafter referred to as its “ Governing Documents ”). The Company has delivered to Buyer accurate and complete copies of its Charter Documents and Governing Documents, as currently in effect.

 

3.2 Capitalization .

 

(a) Except as set forth in the Disclosure Schedule under the caption referencing Section 3.2, all of the issued and outstanding Equity Interest of the Company is owned by Seller

 

free and clear of all Liens. The membership interests comprising the Equity Interest are duly authorized, validly issued, fully paid and nonassessable, and are free of preemptive rights or any other third party rights. All issued and outstanding Equity Interest have been offered, sold and delivered by the Company in compliance with applicable securities and corporate Laws. No portion of the Equity Interest has been issued in violation of any preemptive rights, rights of first refusal or similar rights. The rights and privileges of the Equity Interest and the Manager Interest are fully set forth in the LLC Agreement.

 

(b) As of the date hereof, the Company has not made any commitment or otherwise has any obligation to issue, transfer or sell any portion of the Equity Interest. No Membership Interests of the Company have been transferred since the Company changed its name to Vie Securities, LLC, other than to transfer ownership of the Manager Interest to Dean Stamos.

 

3.3 [ Reserved ] .

 

3.4 Execution, Delivery; Valid and Binding Agreement . The Company has all requisite power and authority to execute and deliver, and perform its obligation under, this Agreement and to consummate the transactions contemplated hereby. The execution, delivery and performance of this Agreement by the Company and the consummation of the transactions contemplated hereby have been duly and validly authorized by all requisite limited liability company action and no other proceedings on the Company’s part are necessary to authorize the execution, delivery or performance of this Agreement. This Agreement has been duly and validly executed and delivered by the Company and constitutes the valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, and the other documents contemplated hereby, when executed and delivered by the Company, will constitute the valid and binding obligations of the Company, enforceable against the Company in accordance with their respective terms, in each case except to the extent that their enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors’ rights generally and by general equitable principles.

 

3.5 No Violations, Regulatory Filings and Consents . The execution, delivery and performance of this Agreement by the Company does not and the consummation of the transactions contemplated hereby will not: (a) contravene any provision of its Charter Documents or Governing Documents; (b) violate or conflict in any material respect with any federal, state or local Law or any decree, writ, injunction, judgment or order of any court or administrative or other governmental body or of any arbitration award which is either applicable to, binding upon or enforceable against the Company, or the business or any assets of the Company; (c) conflict with, result in any breach of any of the provisions of, or constitute a default (or any event which would, with the passage of time or the giving of notice or both, constitute a default) under, result in a violation of, result in the creation of a right of termination, amendment, modification, abandonment or acceleration under any indenture, hypothecation, mortgage, lease, license, loan agreement or other material agreement or instrument which is either binding upon or enforceable against the Company; (d) result in the creation of any Lien upon the Company or any of the assets of the Company; or (e) require any authorization, consent, approval, exemption or other action by or notice to any Governmental Entity or any other third party, other than (i) such consents, waivers, approvals, orders, authorizations,

 

registrations, declarations and filings as may be required under applicable federal or state securities Laws, including the filing with the SEC of an amendment of Forms BD and similar filings with, or consents of, various state Governmental Entities; (ii) such approvals and consents of the NASD, if required pursuant to NASD Rule 1017 (which Seller or the Company undertakes to obtain prior to the Closing Date); and (iii) consents set forth in Section 3.5 of the Disclosure Schedule.

 

3.6 Financial Statements .

 

(a) Since January 1, 2001: (i) the Company has filed all forms, reports, statements and other documents required to be “filed with the SEC” (as defined below) including, without limitation, all FOCUS reports and all amendments and supplements to all such reports (collectively, the “ Company SEC Reports ”), (ii) the Company has filed all forms, reports, statements and other documents required to be filed with any Governmental Entities including, without limitation, state authorities regulating the business of broker-dealers and securities firms and the purchase and sale of securities, (iii) all trade reports, filings, amendments to forms and other documents required by the NASD (all such forms, reports, statements and other documents in clauses (i), (ii) and (iii) of this Section 3.6(a) being collectively referred to as the “ Company Reports ”). The Company Reports did not at the time they were filed (after giving effect to any amendments filed before the date hereof) contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were or will be made, not misleading. As used herein, “filed with the SEC” shall mean either filed directly with the SEC or with the NASD pursuant to an understanding that the NASD shall transmit copies of the applicable portions of the reports, statements or other documents to the SEC pursuant to a plan submitted to and declared effective by the SEC.

 

(b) The Company has delivered to Buyer true and complete copies of (i) the audited consolidated balance sheets, as of December 31, 2003, of the Company (the “ Audited Balance Sheet ”) and the audited statements of income and cash flows of the Company for the year ended December 31, 2003 (collectively, the “ Annual Financial Statements ”), and (ii) the unaudited consolidated balance sheet, as of August 31, 2004, of the Company and the unaudited consolidated statements of income and cash flows of the Company for the eight-month period ended August 31, 2004, (such unaudited statements and unaudited balance sheets being herein referred to as the “ Latest Financial Statements ”).

 

(c) The Annual Financial Statements and the Latest Financial Statements are based upon the information contained in the books and records of the Company and fairly present in all material respects the financial condition of the Company as of the dates thereof and results of operations for the periods referred to therein. The Annual Financial Statements have been prepared in accordance with GAAP. The Latest Financial Statements have been prepared on a basis consistent with the Annual Financial Statements and in accordance with GAAP applicable to unaudited interim financial statements (and thus may not contain all notes and may not contain prior period comparative data which are required to be prepared in accordance with GAAP), and reflect all adjustments necessary to a fair statement of the results for the interim period(s) presented (except for normally recurring year-end adjustments).

 

(d) Pro Forma Balance Sheet . The pro forma balance sheet of the Company attached to the Disclosure Schedule as Section 3.6(d) and dated as of August 20, 2004 (the “ Pro Forma Balance Sheet ”), accurately reflects, in all material respects, the assets, liabilities and financial condition of the Company as of such date on a pro forma basis to (i) reflect the transfers of assets and liabilities into and out of the Company consistent with Seller’s obligations under this Agreement and (ii) establish the maximum amount of cash that Seller may cause to be withdrawn from the Company between the date hereof and the Closing Date pursuant to the terms of this Agreement.

 

(e) Section 3.6(e) of the Disclosure Schedule lists, and Seller has delivered to Buyer copies of the documentation creating or governing, all “off-balance sheet arrangements” (as defined in Item 303(a) of the Regulation S-K of the SEC) effected by the Company since April 1, 2003.

 

(f) Seller and the Company are not aware of any significant deficiencies or material weaknesses existing in the design or operation of the internal controls over financial reporting of the Company that adversely affects the Company’s ability to record, process, summarize and report to management or the Board of Directors of Seller material financial information relating to the Company. Since January 1, 2004, no fraud, whether or not material, that involves management or other employees who have a significant role in the preparation of financial reports of the Company, as a whole, has been disclosed to Seller’s auditors, Board of Directors or executive management.

 

3.7 Absence of Undisclosed Liabilities . The Company has no liabilities (whether accrued, absolute, contingent, unliquidated or otherwise, whether due or to become due, whether known or unknown, and regardless of when asserted) and the Company is not a party to or bound by any agreement of guarantee, support, indemnification, assumption or endorsement of, or any similar commitment with respect to the obligations, liabilities (contingent or otherwise) or indebtedness of any person, arising out of transactions or events heretofore entered into, or any action or inaction, or any state of facts existing, with respect to or based upon transactions or events heretofore occurring, except (a) as reflected in the Audited Balance Sheet, (b) liabilities which have arisen after the date of the Audited Balance Sheet (the “ Balance Sheet Date ”) in the ordinary course of business (none of which is a material uninsured liability for breach of contract, breach of warranty, tort, infringement, claim or lawsuit), or (c) as otherwise set forth in the Disclosure Schedule under the caption referencing this Section 3.7.

 

3.8 Absence of Certain Developments . Except as set forth on the Disclosure Schedule under the caption referencing Section 3.8, since the Balance Sheet Date, the Company has not:

 

(a) hypothecated, mortgaged, pledged or subjected to any Lien, any of its assets, except (i) Liens for current Taxes not yet due and payable or being contested in good faith in appropriate proceedings, (ii) Liens in respect of pledges or deposits under workers’ compensation Laws or (iii) Liens set forth under the caption referencing this Section 3.8(a)in the Disclosure Schedule (collectively, the “ Permitted Liens ”);

 

(b) discharged or satisfied any Lien or paid any liability, other than current liabilities paid in the ordinary course of business;

 

(c) sold, assigned or transferred (including, without limitation, transfers to any employees, affiliates or equityholders) any tangible assets of its business, or canceled any debts or claims except in the ordinary course of business;

 

(d) sold, assigned, transferred or granted (including, without limitation, transfers to any employees, affiliates or equityholders) any licenses, patents, trademarks, trade names, domain names, copyrights, trade secrets or other intangible assets;

 

(e) disclosed, to any Person other than Buyer and authorized representatives of Buyer, any proprietary confidential information, other than pursuant to a confidentiality agreement limiting the use or further disclosure of such information, which agreement is identified in the Disclosure Schedule under the caption referencing this Section 3.8(e) and is in full force and effect on the date hereof;

 

(f) waived any rights of material value, whether or not in the ordinary course of business or consistent with past practice;

 

(g) issued, sold or transferred any of its equity securities, securities convertible into or exchangeable for its equity securities or warrants, options or other rights to acquire its equity securities, or any bonds or debt securities;

 

(h) suffered any material theft, damage, destruction or loss of or to any property or properties owned or used by it, whether or not covered by insurance, except as would not have a Material Adverse Effect;

 

(i) entered into or materially modified any employment, severance or similar agreements or arrangements with, or granted any bonuses, salary or benefits increases, severance or termination pay to, any employee other than in the ordinary course of business and consistent with past practice, or to any officer, managing member or consultant;

 

(j) adopted or amended any bonus, profit sharing, compensation, stock option, pension, retirement, deferred compensation or other employee benefit plan, trust, fund or group arrangement for the benefit or welfare of any employees, officer, managing member, member of the Executive Committee or affiliate except as required by Law;

 

(k) made any material capital expenditure or commitment therefor;

 

(l) made any loans or advances to, or guarantees for the benefit of, any Persons;

 

(m) acquired (by merger, exchange, consolidation, acquisition of stock or assets or otherwise) any corporation, partnership, limited liability company, joint venture or other business organization or division or material assets thereof;

 

(n) made any change in accounting principles or practices from those utilized in the preparation of the Annual Financial Statements; or

 

(o) filed any notice, or been informed by the SEC or the NASD that a notice must be filed, with the SEC pursuant to Rule 17a-11(g) of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”).

 

3.9 Title to Properties .

 

( a) The Company does not own any real property. The real property covered by the lease (the “ Lease ”) described under the caption referencing this Section3.9 in the Disclosure Schedule constitutes all of the real property rented, used or occupied by the Company (the “ Real Property ”).

 

(b) The Lease is in full force and effect, and the Company holds a valid and existing leasehold interest under the Lease for the term set forth under such caption referencing Section 3.9 in the Disclosure Schedule. The Company has made available to Buyer a complete and accurate copy of its Lease, and the Lease has not been modified in any respect, except to the extent that such modifications are disclosed by the copies delivered to the Company. The Company is not in default in any material respect, and no circumstances exist which, if unremedied, would, either with or without notice or the passage of time or both, result in such default under the Lease; nor, to the knowledge of the Company, is any other party to the Lease in default in any material respect thereunder.

 

(c) The Company owns good and marketable title to each of the tangible properties and tangible assets reflected on the Audited Balance Sheet or acquired since the date thereof, and will own, on and after the date of transfer thereof, good and marketable title to each of the tangible properties and tangible assets reflected on the Pro Forma Balance Sheet, in each case, free and clear of all Liens, except for (i) Permitted Liens, (ii) the Real Property subject to the Lease, (iii) personal property used by the Company and subject to lease, all of which leases are identified in the Disclosure Schedule under the caption referencing this Section 3.9, and (iv) assets disposed of since the Balance Sheet Date in the ordinary course of business.

 

3.10 Accounts Receivable . The accounts receivable reflected on the Latest Financial Statements are valid receivables, have arisen from bona fide transactions in the ordinary course of business, are not subject to valid counterclaims or setoffs, and, to the Company’s knowledge, are collectible in accordance with their respective terms.

 

3.11 Tax Matters .

 

(a) Except as set forth in the Disclosure Schedule under the caption referencing Section 3.11(a), each of the Company and Seller has (i) timely filed (or has had timely filed on its behalf) all returns, declarations, reports, estimates, information returns and statements (“ Returns ”) required to be filed or sent by it in respect of any Taxes (as defined in subsection (h) below), each of which in all material respects was correctly completed and accurately reflected any liability for Taxes of the Company and Seller covered by such Tax Return; (ii) timely and properly paid (or has had paid on its behalf) all Taxes shown to be due and payable on such Tax Returns; (iii) established on its books, in accordance with GAAP and consistent with past practices, adequate reserves for the payment of any Taxes not yet due and payable; and

 

(iv) complied in all material respects with all Laws relating to the withholding of Taxes and the payment thereof.

 

(b) All Taxes of the Company and Seller that will be due and payable for all Tax periods and portions thereof ending on or prior to the Closing Date will have been paid by or on behalf of the Company and Seller or will be reflected, in a manner consistent with past practices, on the Company’s and Seller’s books as an accrued Tax liability, either current or deferred.

 

(c) There are no Liens for Taxes upon any the assets of the Company, except Permitted Liens.

 

(d) No material deficiency for any Taxes has been proposed, asserted or assessed against the Company or Seller that has not been resolved and paid in full. No waiver, extension or comparable consent given by the Company or Seller regarding the application of the statute of limitations with respect to any Taxes or Tax Returns is outstanding, nor is any request for any such waiver or consent pending. There has been no Tax audit or other administrative proceeding or court proceeding with regard to any material Taxes or Tax Returns of the Company or Seller for any Tax year subsequent to the year ended 2000, nor is any such Tax audit or other proceeding pending, nor has there been any written notice to the Company or Seller by any Governmental Entity regarding any such Tax, audit or other proceeding, or, to the knowledge of Seller or the Company, is any such Tax audit or other proceeding threatened.

 

(e) No claim has been made with respect to the Company or Seller by an authority in a jurisdiction where the Company or Seller does not file a Tax Return that it is or may be subject to taxation by that jurisdiction.

 

(f) Neither the Company nor Seller has engaged in any transaction that is subject to disclosure under present or former Treasury Regulation Sections 1.6011-4 or 1.6011-4T, as applicable.

 

(g) The Company is, and at all times has been, taxable as an entity disregarded as separate from its owner for federal income tax purposes, and no Person other than Seller has ever owned an economic interest in the Company.

 

(h) For purposes of this Agreement, the term “ Tax ” or “ Taxes ” means all taxes, charges, fees, levies or other assessments or impositions of any kind payable to any Governmental Entity, including, without limitation, all net income, profits, gross income, gross receipts, minimum, alternative minimum, sales, use, service, occupation, ad valorem, net worth, value added, transfer, franchise, license, payroll, employment, social security, Medicare, unemployment, withholding, disability, workers’ compensation, excise, estimated, severance, stamp, occupation, property, premium or other taxes or customs duties, fees, assessments, or charges of any kind whatsoever, including, without limitation, all interest and penalties thereon, and additions to tax or additional amounts imposed by any Governmental Entity.

 

3.12 Contracts and Commitments .

 

(a) The Disclosure Schedule, under the caption referencing this Section 3.12, lists the following contracts, whether oral or written, of an amount or value in excess of $25,000 (other

 

than with respect to the contracts identified in clauses (v) and (viii) below, which shall be disclosed without regard for amount or value) to which the Company is a party and which are in effect as of the date hereof (the “ Contracts ”):

 

(i) all employment, agency or consulting agreements, all contracts or commitments providing for severance, termination or similar payments, including on a change of control of the Company;

 

(ii) all contracts terminable by any other party thereto upon a change of control of the Company or upon the failure of the Company to satisfy financial or performance criteria specified in such contract as provided therein;

 

(iii) all contracts between or among the Company, Seller or any affiliate of Seller, any member of the Executive Committee, officer, managing member or employee of the Company or any member of his or her immediate family or any entity affiliated with any such person relating in any way to the Company;

 

(iv) all contracts relating to the performance and payment of any surety bond or letter of credit required to be maintained by the Company;

 

(v) all confidentiality or non-disclosure agreements;

 

(vi) all agreements or indentures relating to the borrowing of money or to mortgaging, pledging or otherwise placing a Lien on any of the assets of the Company;

 

(vii) all contracts for the provision of the Company’s services to any third party (a “ Client ”);

 

(viii) all contracts containing exclusivity or noncompetition provisions or which would otherwise prohibit the Company from freely engaging in business anywhere in the world;

 

(ix) all license agreements, transfer or joint-use agreements or other agreements providing for the payment or receipt of royalties or other compensation by the Company in connection with the Company Intellectual Property (as defined in Section 3.13 hereof);

 

(x) all agreements providing for the development or use of any products, software or Intellectual Property by or for any third party;

 

(xi) all agreements providing for the clearing by third parties of securities transactions effected or introduced by the Company; and

 

(xii) any and all other agreements of the Company not entered into in the ordinary course of business or that are material to the business, financial condition, results of operation or prospects of the Company.

 

(b) The Company has performed in all material respects all obligations required to be performed by it in connection with the Contracts and is not in receipt of any claim of default under any such Contract. Each Contract is in full force and effect.

 

c) Prior to the date of this Agreement, the Company has made available to Buyer a true and complete copy of each written Contract, and a written description of each oral Contract, together with all amendments, waivers or other changes thereto.

 

3.13 Intellectual Property . The Company owns or has the right to use, whether through ownership, licensing or otherwise, all intellectual property material to the businesses of the Company in substantially the same manner as such businesses are conducted on the date hereof (“ Company Intellectual Property ”). Those items specifically identified on Section 3.13 of the Disclosure Schedule under the heading “Intellectual Property” are considered part of the Company Intellectual Property and shall be assigned to the Company before the Closing Date. Except as set forth in the Company Disclosure Schedule identified in Section 3.13: (a) no such Company Intellectual Property is the subject of any pending action, suit, claim, investigation, arbitration or other proceeding; (b) no person has given written notice to the Company, and Seller and the Company otherwise have no knowledge, that the use of any Company Intellectual Property by the Company or any licensee is infringing or has infringed any domestic or foreign patent, trademark, service mark, trade name, or copyright or design right, or that the Company or any licensee has misappropriated or improperly used or disclosed any trade secret, confidential information or know-how; (c) the execution, delivery and performance of this Agreement by the Company and the consummation of the transactions contemplated hereby will not materially breach, violate or conflict with any instrument or agreement concerning any Company Intellectual Property and will not cause the forfeiture or termination or give rise to a right of forfeiture or termination of any Company Intellectual Property; (d) the Company has the right to require the inventor or author of any Company Intellectual Property which constitutes an application for registration, including, but not limited to, all patent applications, trademark applications, service mark applications and copyright applications to transfer ownership, including all right, title and interest in and to (including any moral rights), to the Company of the application and of the registration once it issues; (e) the Company has no knowledge of any third party interfering with, infringing upon, misappropriating, or using without authorization any Company Intellectual Property, and has no knowledge that any employee or former employee of the Company has interfered with, infringed upon, misappropriated, used without authorization, or otherwise come into conflict with any Company Intellectual Property; (f) the Company has taken all reasonable action to maintain and protect each item of Company Intellectual Property; and (g) to its knowledge, the Company has the right to use all of the Company Intellectual Property in all jurisdictions in which the Company currently conducts business.

 

3.14 Litigation . There are no actions, arbitrations, mediations, suits, proceedings, orders or investigations pending or, to the knowledge of the Company, threatened against the Company, at law or in equity, or before or by any federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality.

 

3.15 Employees .

 

(a) Section 3.15(a) of the Disclosure Schedule sets forth the names and total number of all employees of the Company on the date of this Agreement and correctly reflects their salaries or hourly rates, any other compensation payable to them (including compensation payable pursuant to bonus, deferred compensation or commission arrangements), their dates of employment and their positions. All employees are U.S. citizens. To the knowledge of the Seller and Company, no employee of the Company separately identified by Buyer and listed in the Disclosure Schedule under the caption referencing this Section 3.15(a)(collectively, the “ Key Employees ”) has any plans to terminate his or her employment prior to the Closing . The Seller and Company have complied in all material respects with all Laws relating to the employment of labor, including provisions thereof relating to wages, hours, equal opportunity, collective bargaining and the payment of social security and other Taxes. The Seller and Company have no material labor relations problem pending, or to the knowledge of the Seller and Company, threatened. Except as set forth on Section 3.15(a) of the Disclosure Schedule, there are no workers’ compensation claims pending against the Seller or Company, nor is the Seller or Company aware of any facts that would give rise to such a claim. No Key Employee of the Company is subject to any secrecy or noncompetition agreement or any other agreement or restriction of any kind that would impede in any way t