STOCK PURCHASE AGREEMENT

EXHIBIT 10.1

E XECUTION C OPY

 

STOCK PURCHASE AGREEMENT

among

UMB FUND SERVICES, INC.,

a Wisconsin corporation,

JEFFREY D. CLARK ,

BONNIE J. CLARK ,

MICHELLE JENSEN ,

CHAD J. ALLEN ,

JERRY A. WRIGHT ,

JILL L. CALTON ,

and, solely with respect to Section 10.2(c),

UMB FINANCIAL CORPORATION,

a Missouri corporation

Dated as of May 7, 2009

 

TABLE OF CONTENTS

 

 

i

 

ii

 

 

iii

Disclosure Schedules:

 

 

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STOCK PURCHASE AGREEMENT

THIS STOCK PURCHASE AGREEMENT (this “ Agreement ”) is made as of May 7, 2009, by and among UMB Fund Services, Inc., a Wisconsin corporation (“ Purchaser ”), Jeffrey D. Clark, an individual resident of Utah, Bonnie J. Clark, an individual resident of Utah (collectively, the “ Principal Shareholders ”), Michelle Jensen, Chad J. Allen, Jerry A. Wright, Jill L. Calton (collectively, the “ Managing Directors ” and, together with the Principal Shareholders, the “ Selling Shareholders” ), Jeffrey D. Clark, in his capacity as Shareholders’ Representative, and, solely with respect to Section 10.2(c) of this Agreement, UMB Financial Corporation, a Missouri corporation (the “ Parent ” and, together with Purchaser, the “ Purchaser Parties ”).

R ECITALS

A. The Selling Shareholders desire to sell all of the issued and outstanding shares of capital stock of J.D. Clark & Co., Inc., a Utah corporation (the “ Company ”), as set forth in Schedule 5.2 to this Agreement (the “ Purchased Stock ”).

B. Purchaser wishes to acquire the Purchased Stock from the Selling Shareholders, for the consideration and on the terms set forth in this Agreement.

C. The Purchased Stock represents 100% of the outstanding equity interests in the Company.

A GREEMENT

In consideration of the representations, warranties, covenants and agreements contained herein and the other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Purchaser and the Selling Shareholders, intending to be legally bound, agree as follows:

Section 1. Defined Terms.

1.1 Definitions. For purposes of this Agreement (including the Disclosure Schedules) the following terms have the meanings ascribed to them in this Section 1.1:

“ Accounting Arbitrator ” has the meaning specified in Section 2.3.

“ Additional Purchase Price Amount ” shall have the meaning specified in Exhibit C.

“ Agreement ” has the meaning specified above in the introductory paragraph to this Agreement.

“ Annual Financial Statements ” means the internally prepared unaudited balance sheet as of December 31, 2006, December 31, 2007 and the audited balance sheet as of December 31, 2008, and the related internally prepared unaudited statements of income for the years ended December 31, 2006 and December 31, 2007, and the audited statements of income, stockholders equity and cash flows for the year ended December 31, 2008, of the Company.

“ Arcstone ” has the meaning specified in Section 5.21.

“ Breach ” means any breach of, or any inaccuracy in, any representation or warranty, or any breach or nonfulfillment of any covenant or obligation in or of this Agreement.

“ Business Day ” means any day other than a Saturday, Sunday or a day in which banks in New York are not open for business.

“ Claim Notice ” has the meaning specified in Section 10.5.

“ Claimant ” has the meaning specified in Section 10.5.

“ Closing ” has the meaning specified in Section 4.1.

“ Closing Cash Payment ” has the meaning specified in Section 2.1(a).

“ Closing Date ” means the time and date on which the Closing actually takes place.

“ Closing Date Balance Sheet ” has the meaning specified in Section 2.3.

“ Closing Date Fixed Assets ” means the book value of the furniture and fixtures of the Company, net of depreciation, as of the Closing Date, as determined in accordance with GAAP.

“ Closing Date Net Working Capital ” means the following as of 12:00 A.M. Mountain time on the Closing Date: (a) the sum of the current assets of the Company, including cash equivalents and accounts receivable, minus (b) the sum of the current liabilities of the Company, in each case determined in accordance with GAAP.

“ Closing Financial Statements Delivery Date ” has the meaning specified in Section 2.3.

“ Code ” means the Internal Revenue Code of 1986, as amended.

“ Common Stock ” has the meaning specified in Section 5.2.

“ Company ” has the meaning specified above in the introductory paragraph to this Agreement.

“ Company Intellectual Property ” means all Intellectual Property listed on Schedule 5.8(a) and any other Intellectual Property owned by the Company.

“ Consent ” means any approval, consent, ratification, waiver or other authorization (including any authorization from a Governmental Body).

“ Contemplated Transactions ” means the transactions contemplated by this Agreement and the other Transaction Agreements.

“ Contract ” means any agreement, contract, obligation, promise or undertaking (whether written or oral and whether express or implied) that is legally binding.

 

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“ Core Representations ” has the meaning specified in Section 10.1.

“ Customer Contracts ” has the meaning specified in Section 5.10.

“ Damages ” means, collectively, all losses, liabilities, damages (including incidental but excluding consequential damages and diminution in value), demands, claims, suits, actions, causes of action, judgments, assessments, costs and expenses, including interest, penalties, reasonable attorneys’ fees, any and all reasonable expenses incurred in investigating, preparing or defending against any litigation, commenced or threatened, and any and all amounts paid in settlement of any claim or litigation, whether or not involving a third-party claim; provided, however, that, with respect to a third-party claim, incidental and consequential damages and diminution in value damages awarded pursuant to a final non-appealable court order shall be considered Damages to the extent of such third-party claim, and provided further , that for purposes of computing the amount of Damages incurred by any Person under Section 10 of this Agreement, there shall be deducted:

1. the net amount of any Tax benefit actually received by such Person or any of such Person’s affiliates in connection with such Damages; and

2. the net amount actually recovered pursuant to any insurance policy that is actually received by such Person in connection with such Damages, less any deductible payments, premium increases or costs of enforcement arising from such Damages.

“ Deductible Amount ” has the meaning specified in Section 10.3.

“ Determination Date ” has the meaning specified in Section 2.3.

“ Disclosure Schedules ” means the Disclosure Schedules delivered by the Selling Shareholders to Purchaser concurrently with the execution and delivery of the Agreement and attached to the Agreement.

“ Discussion Period ” shall have the meaning specified in Section 2.3(a).

“ Earn-out Amount ” means the sum of the Incentive Bonus Pool Amount and the Additional Purchase Price Amount.

“ Employee Plans ” has the meaning specified in Section 5.20.

“ Encumbrance ” means any lien, pledge, hypothecation, charge, mortgage, security interest, encumbrance, equity, trust, equitable interest, claim, preference, right of possession, lease, tenancy, license, encroachment, covenant, infringement, interference, Order, proxy, option, right of first refusal, preemptive right, community property interest, defect, impediment, exception, reservation, limitation, impairment, imperfection of title, condition or restriction of any nature (including any restriction on the voting of any security, any restriction on the transfer of any security or other asset, any restriction on the receipt of any income derived from any asset, any restriction on the use of any asset and any restriction on the possession, exercise or transfer of any other attribute of ownership of any asset), other than a Permitted Encumbrance.

 

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“ Entity ” means any corporation (including any non-profit corporation), general partnership, limited partnership, limited liability partnership, joint venture, estate, trust, cooperative, foundation, society, political party, union, company (including any limited liability company or joint stock company), firm or other enterprise, association, organization or entity.

“ Environmental Laws ” has the meaning specified in Section 5.16.

“ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended, or any successor law, and rules and regulations issued pursuant to that Act or any successor law.

“ ERISA Affiliates ” has the meaning specified in Section 5.20(a).

“ Excluded Assets ” has the meaning specified in Section 8.1.

“ Financial Statements ” has the meaning specified in Section 5.11.

“ GAAP ” means generally accepted accounting principles for financial reporting in the United States, applied on a consistent basis.

“ Governmental Body ” means any nation, principality, state, commonwealth, province, territory, county, city, town, village, municipality, district or other jurisdiction of any nature; any federal, state, local, municipal, foreign or other government; any governmental or quasi-governmental authority of any nature (including any governmental division, subdivision, department, agency, bureau, branch, office, commission, council, board, instrumentality, officer, official, representative, organization, unit, body or Entity and any court or other tribunal); any multi-national organization or body; and/or individual, Entity or body exercising, or entitled to exercise, any executive, legislative, judicial, administrative, regulatory, police, military or taxing authority or power of any nature.

“ Incentive Bonus Plan ” means the incentive bonus plan as agreed upon by the parties.

“ Incentive Bonus Pool Amount ” shall have the meaning specified in Exhibit C.

“ Income Tax ” means any federal, state or local Tax determined with respect to the net income (taking into account capital gains) of the taxpayer.

“ Income Tax Return ” means any return, declaration, report, claim for refund, or information return or statement relating to Income Taxes, including any schedule or attachment thereto.

“ Indebtedness ” means, without duplication: (a) all indebtedness or other obligations for borrowed money, whether current, short-term or long-term, secured or unsecured, including all overdrafts and negative cash balances, (b) all indebtedness for the deferred purchase price for purchase of property or services that is not evidenced by trade payables, such as reimbursement and other obligations for surety bonds and letters of credit, (c) obligations evidenced by notes, bonds, debentures or similar instruments, (d) all lease obligations under leases that are capital leases in accordance with GAAP, (e) all off-balance sheet financing, including synthetic leases and project financing, (f) any negative cash position in any bank account, (g) all payment obligations in respect of banker’s

 

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acceptances or letters of credit (other than stand-by letters of credit in support of ordinary course trade payables), (h) all liability with respect to interest rate swaps, collars, caps and similar hedging obligations, and (i) all indebtedness referred to in clauses (a) through (h) above of any other Person that is either guaranteed by, or secured by an Encumbrance upon any property owned by, the Company, and (j) accrued and unpaid interest on, and prepayment premiums, penalties or similar contractual changes arising as a result of the discharge of, any such foregoing obligation, in each case constituting a Liability of the Company.

“ Indemnified Party ” has the meaning specified in Section 10.6.

“ Indemnifying Party ” has the meaning specified in Section 10.6.

“ Integris ” has the meaning specified in Section 5.21.

“ Intellectual Property ” means any intellectual or industrial property and other proprietary rights that may exist or be created under the laws of any jurisdiction throughout the world, and any applications for registration and registrations of the foregoing property and the foregoing rights (whether pending, existing, abandoned or expired), including, without limitation:

1. all registered or unregistered trademarks, service marks, trade names and general intangibles of a similar nature (including corporate names, logos, trade dress, slogans, and product names), and the goodwill associated therewith, and all rights in Internet web sites, Internet domain names, uniform resource locators, and keywords and purchased search terms;

2. all patents and patent applications (including originals, divisions, continuations, continuations-in-part, re-examinations, extensions or reissues thereof), and all inventions and discoveries (whether patentable or unpatentable and whether or not reduced to practice) and all improvements thereto;

3. all copyrightable works and registered and unregistered copyrights in both published and unpublished works and all sui generis rights in data and databases, and all moral rights therein; and

4. all information that derives economic value from not being generally known to other Persons, and any other information that is proprietary or confidential to the Company or its subsidiaries, including, without limitation, know-how, ideas, processes, documentation, information, formulas, data, customer and supplier lists business, and marketing plans, pricing and cost information, software (in both object code and source code form), data, process technology, plans, drawings, designs, and specifications (collectively, “ Proprietary Information ”).

“ Interim Financial Statements ” mean the internally prepared balance sheet as of April 30, 2009, and the related internally prepared statement of income for the three (3) month period ended April 30, 2009, of the Company.

“ IRS ” means the United States Internal Revenue Service.

 

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“ Key Company Employees ” means the Company employees set forth on Exhibit E.

“ Knowledge ” means actual knowledge after reasonable inquiry or any knowledge that a Person should have acquired as a result of his or her position as an officer or owner of the Company.

“ Leases ” has the meaning specified in Section 5.17(d).

“ Legal Requirement ” means any federal, state, local, municipal, foreign or other law, statute, legislation, constitution, principle of common law, resolution, ordinance, code, edict, decree, proclamation, treaty, convention, rule, regulation, ruling, directive, pronouncement, requirement, specification, determination, decision, opinion or interpretation that is, has been or may in the future be issued, enacted, adopted, passed, approved, promulgated, made, implemented or otherwise put into effect by or under the authority of any Governmental Body.

“ Liability ” means any obligation or liability of any nature (including any known, unknown, undisclosed, unaccrued, unasserted, contingent, indirect, conditional, implied, vicarious, derivative, joint, several or secondary liability), due or to become due, regardless of whether such obligation, duty or liability would be required to be disclosed on a balance sheet, regardless of whether such debt, obligation, duty or liability is immediately due and payable, including but not limited to Indebtedness of the Company.

“ Licensed Intellectual Property ” means all Intellectual Property that is used by the Company pursuant to a license or other right granted by a third party.

“ License Effective Date ” shall mean the first day following Closing.

“ Material Adverse Change ” means any event, change, development, effect, condition or occurrence that, either individually or in the aggregate with all other such events, changes, developments, effects, conditions or occurrences, has had, or with the passage of time, could reasonably be expected to have, a material adverse effect on the condition (financial or otherwise), operations, business, properties or assets of the Company, other than any event, change, development or occurrence relating to (a) changes in general economic conditions, financial markets or interest rates, (b) a declaration of war, major hostilities, acts of terrorism or other national calamity, or (c) changes in general in the condition of the industries in which the Company operates.

“ Matter ” means any claim, demand, dispute, action, suit, examination, audit, proceeding, investigation, inquiry or other similar matter.

“ Managing Directors ” has the meaning specified above in the introductory paragraph of this Agreement.

“ Minimum Fixed Assets ” means the book value of the furniture and fixture assets, net of depreciation, of at least $1.25 million, as determined in accordance with GAAP.

“ Multiemployer Plan ” has the meaning specified in Section 5.20(f).

 

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“ Multiple Employer Plan ” has the meaning specified in Section 5.20(f).

“ Net Negative Working Capital Payment ” has the meaning specified in Section 2.3(b).

“ Net Positive Working Capital Payment ” has the meaning specified in Section 2.3(c).

“ Objection Period ” shall have the meaning specified in Section 2.3.

“ Order ” means any order, judgment, injunction, edict, decree, ruling, pronouncement, determination, decision, opinion, verdict, sentence, subpoena, writ or award that is, has been or may in the future be issued, made, entered, rendered or otherwise put into effect by or under the authority of any court, administrative agency or other Governmental Body or any arbitrator or arbitration panel; or any contract with any Governmental Body that is, has been or may in the future be entered into in connection with any Proceeding.

“ Parent ” has the meaning specified above in the introductory paragraph to this Agreement.

“ Parent Financial Statements ” has the meaning specified in Section 7.13.

“ Permit ” means all permits, licenses, registrations, certificates, orders, clearances or approvals of any Governmental Body that are required for the Company to conduct its business as currently conducted.

“ Permitted Encumbrance ” means any (i) liens for Taxes for the current tax year not yet due and payable, (ii) liens for Taxes that are being contested in good faith through appropriate proceedings, all as set forth on Schedule 1.1 attached hereto, (iii) purchase money indebtedness as set forth on Schedule 1.1 attached hereto; and (iv) the security interest in favor of the landlord under the Office Lease Agreement between Property Reserve, Inc., by and through its authorized agent Zions Securities Corporation and Company , dated as of April 27, 2006 and First Lease Amendment, dated as of April 22, 2008.

“ Person ” means any individual, corporation, association, general partnership, limited partnership, venture, trust, association, firm, organization, company, business, Entity, union, society, government (or political subdivision thereof) or governmental agency, authority or instrumentality.

“ Post-Closing Adjustment ” shall have the meaning specified in Section 2.3.

“ Post-Closing Period Tax Returns ” has the meaning specified in Section 8.5(b).

“ Post-Closing Tax Period ” has the meaning specified in Section 8.5(b).

“ Praesideo ” has the meaning specified in Section 8.1.

“ Praesideo Software ” has the meaning specified in the SALA.

“ Pre-Closing Period Tax Returns ” has the meaning specified in Section 8.5(a).

 

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“ Pre-Closing Tax Period ” has the meaning specified in Section 8.5(b).

“ Proceeding ” means any action, suit, litigation, arbitration, proceeding (including any civil, criminal, administrative, investigative or appellate proceeding and any informal proceeding), prosecution, contest, hearing, inquiry, inquest, audit, examination or investigation that is, has been or may in the future be commenced, brought, conducted or heard by or before, or that otherwise has involved or may involve, any Governmental Body or any arbitrator or arbitration panel; provided, however, that, except solely for the purposes of the representation made in Section 5.14(b) and for purposes of the first sentence of Section 10.6(b), the term “Proceeding” shall not include any administrative or judicial action, proceeding, audit, examination or investigation with respect to any Tax.

“ Profit Sharing Plan ” means the Company Profit Sharing Plan (effective January 1, 1992), as amended.

“ Purchase Price ” has the meaning specified in Section 2.1.

“ Purchased Stock ” has the meaning specified in the Recitals.

“ Purchaser ” has the meaning specified above in the introductory paragraph to this Agreement.

“ Purchaser Financial Statements ” has the meaning specified in Section 7.13.

“ Purchaser Parties ” has the meaning specified above in the introductory paragraph to this Agreement.

“ Purchaser Indemnified Party ” has the meaning specified in Section 10.2.

“ Real Property ” has the meaning specified in Section 5.17.

“ Representatives ” of a Person shall include:

(a) such Person’s affiliates, shareholders, directors, officers, employees, agents, attorneys, accountants and representatives; and

(b) all shareholders, directors, officers, employees, agents, attorneys, accountants and representatives of each of such Person’s affiliates.

“ Response Period ” has the meaning specified in Section 10.6(b).

“ Retirement Plan ” has the meaning specified in Section 8.8.

“ Retirement Plan Service Contract ” has the meaning specified in Section 8.8.

“ SALA ” means the software license and assignment agreement between Praesideo and the Company in the form agreed upon by the parties.

 

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“ Section 338(h)(10) Election ” has the meaning specified in Section 8.6(a).

“ Section 338 Forms ” has the meaning specified in Section 8.6(a).

“ Seller Indemnified Party ” has the meaning specified in Section 10.2.

“ Selling Shareholders ” has the meaning specified above in the introductory paragraph to this Agreement.

“ Shareholders’ Representative ” has the meaning specified in Section 9.1.

“ Straddle Period Tax Returns ” has the meaning specified in Section 8.5(b).

“ Target Net Working Capital ” means $652,000; provided, however, that the Target Net Working Capital will be increased or decreased, as appropriate, for each dollar by which the Company’s May and June 2009 billings are less than or greater than $1,500,000 in the aggregate. The Target Net Working Capital will be increased by any employer taxes (FICA and Medicare) attributable to pre-Closing compensation that have not been paid, including, but not limited to, taxes for Company stock and bonus payments issued to employees. For the purposes of the above provisions, the Company’s May and June 2009 billings shall be equal to the sums properly billed between the Closing Date and June 30, 2009 and either collected during the period or reasonably believed to be fully collectible.

“ Tax ” means any tax (including any income tax, franchise tax, capital gains tax, estimated tax, gross receipts tax, license value added tax, surtax, excise tax, ad valorem tax, transfer tax, stamp tax, sales tax, use tax, transfer tax, registration tax, value added tax, property tax, business tax, occupation tax, inventory tax, occupancy tax, withholding tax, social security tax (or similar), unemployment tax, disability tax, or payroll tax), escheat tax or unclaimed property liability, any related charge or amount (including any fine, penalty or interest) and including any obligations to indemnify or otherwise assume or succeed to the Tax liability of any other Person.

“ Tax Return ” means any return (including any information return), report, statement, declaration, estimate, schedule, notice, notification, form, election, certificate or other document or information required to be filed with or submitted to, any Governmental Body in connection with the determination, assessment, collection or payment of any Tax.

“ Transaction Agreements ” mean:

1. this Agreement;

2. the Incentive Bonus Plan in the form agreed upon by the parties;

3. an employment, non-competition and non-solicitation agreement between the Company and Jeffrey D. Clark in the form agreed upon by the parties (the “ Jeff Clark Employment Agreement ”);

 

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4. a non-competition and non-solicitation agreement between the Company and Bonnie J. Clark in the form agreed upon by the parties (the “ Bonnie J. Clark Non-Competition and Non-Solicitation Agreement ”);

5. a retention bonus and non-competition agreement signed by each of the Managing Directors in the form agreed upon by the parties (the “ Managing Directors’ Retention Agreements ”);

6. a release signed by each Selling Shareholders in the form agreed upon by the parties (the “ Selling Shareholders’ Release ”);

7. the retention bonus and non-solicitation agreement signed by each of the Key Company Employees in the form agreed upon by the parties (the “ Key Company Employees’ Retention Agreements ”); and

8. the SALA.

Section 2. Sale and Purchase of Stock.

2.1 Purchase Price. On the basis of the representations, warranties and agreements contained herein, Purchaser will purchase from each of the Selling Shareholders, and the Selling Shareholders shall sell to the Purchaser, the respective number of shares of Purchased Stock set forth on Schedule 5.2 hereto opposite such Selling Shareholder’s name. The aggregate purchase price (the “ Purchase Price ”) payable by Purchaser for the Purchased Stock shall be the sum of:

(a) $23,054,256 (the “ Closing Cash Payment ”), (which, for explanatory purposes only, was calculated based upon an amount equal to 50% of a mutually agreed upon purchase price that will be based upon 4.5 times annual revenue calculated in accordance with GAAP and based upon the Company’s quarterly run rate for the three (3) months ended March 31, 2009, multiplied by four (4), and excluding Hall, Cannell, Family Office and any revenue generated from known fund closings but including new business known as of the Closing Date as long as there was a signed contract and the customer had been billed on or prior to March 30, 2009); plus or minus , as applicable,

(b) the Post-Closing Adjustment; plus

(c) the Additional Purchase Price Amounts.

2.2 Payment of Purchase Price. The Purchase Price shall be paid as follows:

(a) At the Closing, Purchaser shall deliver the Closing Cash Payment to the Shareholders’ Representative, and the Shareholders’ Representative shall pay directly to third parties the transaction costs listed in the flow of funds memorandum delivered by the Shareholders’ Representative to the Purchaser. After the payments described in the preceding sentence, the Shareholders’ Representative shall deliver to each Selling Shareholder his or her pro rata share of the remaining Closing Cash Payment (which in the case of the Managing Directors, shall be reduced for the applicable withholding amounts that are to be paid by the Shareholders’ Representative to the Company to enable the Company to make payment to the appropriate taxing

 

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authorities), and each Selling shareholder’s pro rata share of the remaining Closing Cash Payment shall be based upon a ratio, the numerator of which is the total number of shares of Purchased Stock sold by such Selling Shareholder at Closing as specified opposite such Selling Shareholder’s name on Schedule 5.2 hereto, and the denominator of which is the total number of all outstanding shares of Common Stock of the Company (whether or not sold at Closing) (the “Shares”). In exchange therefore, each Selling Shareholder shall deliver to Purchaser stock certificate(s) representing the number of shares of Purchased Stock opposite such Selling Shareholder’s name on Schedule 5.2 hereto and accompanied by a separate stock assignment duly endorsed by such Selling Shareholder, unqualifiedly assigning all such shares of Purchased Stock to Purchaser;

(b) The Post-Closing Adjustment shall be paid in accordance with Section 2.3 below; and

(c) Subject to Purchaser’s right of setoff in Section 10.3, the Additional Purchase Price Amounts, if any, shall be calculated and payable in accordance with Exhibit C.

(d) Except as expressly provided, all payments under this Agreement to the Selling Shareholders shall be allocated among the Selling Shareholders in accordance with the proportionate interests set forth in Schedule 5.2.

2.3 Post-Closing Adjustment.

(a) As promptly as practicable, but not more than seventy five (75) days after the Closing Date (the date on which the Closing Date Balance Sheet is delivered, the “ Closing Financial Statements Delivery Date ”), the Purchaser shall cause the Company to prepare and deliver to the Selling Shareholders a balance sheet of the Company (the “ Closing Date Balance Sheet ”) as of the Closing Date and a calculation of Closing Date Net Working Capital and the Closing Date Fixed Assets and the resulting adjustments to the Purchase Price specified in this Section 2.3(a) and proration of any rents, prepaid items (including client fees) and other applicable items as of the Closing Date (the “ Post-Closing Adjustment ”). The Closing Date Balance Sheet and such calculations shall be accompanied by a certificate of the Purchaser’s Chief Financial Officer to the effect that (x) the Closing Date Balance Sheet presents fairly, in all material respects in accordance with GAAP, the financial condition of the Company as of the Closing Date and (y) the Closing Date Fixed Assets and Closing Date Net Working Capital were calculated in accordance with GAAP and the provisions of this Agreement. The Selling Shareholders and their Representatives shall be entitled to reasonable access during normal business hours to the relevant records, personnel and working papers, and shall be entitled to copies of such records and working papers, of the Company to aid in the review of the Closing Date Balance Sheet and the calculations of the Closing Date Fixed Assets and Closing Date Net Working Capital. The Closing Date Balance Sheet and the calculation of the Closing Date Fixed Assets and Closing Date Net Working Capital shall be deemed to be accepted by the Selling Shareholders and shall be conclusive for the purposes of the adjustment described in Section 2.3(b) except in the event that the Selling Shareholders shall have delivered, within thirty (30) days after the Closing Financial Statements Delivery Date (the “ Objection Period ”), a written notice to the Purchaser setting forth objections thereto. If a change proposed by the Selling Shareholders is disputed by Purchaser then the Selling Shareholders and Purchaser shall negotiate in good faith to

 

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resolve such dispute. If, after a period of thirty (30) days following the date on which the Selling Shareholders deliver to Purchaser notice of proposed changes (the “ Discussion Period ”), any such proposed change still remains disputed, then Purchaser and the Selling Shareholders hereby agree that both parties will make presentations to a mutually agreed upon independent accounting firm (the “ Accounting Arbitrator ”), which shall resolve any remaining disputes. The Accounting Arbitrator shall act as an arbitrator to make a determination with respect to the issues that are disputed by the parties, based on the presentations by both the Selling Shareholders and the Purchaser, and by independent review by the Accounting Arbitrator if deemed necessary in the sole discretion of the Accounting Arbitrator, which determination shall be limited to only those issues that remain in dispute. The decision of the Accounting Arbitrator shall be made within thirty (30) days following submission of the dispute to the Accounting Arbitrator and shall be final and binding. The fees and expenses of the Accounting Arbitrator, if any, shall be split between the Purchaser and the Selling Shareholders. The date (the “ Determination Date ”) on which Closing Date Net Working Capital is finally determined pursuant to this Section 2.3(a) shall be deemed to be the earliest of the following dates: (i) the date of expiration of the Objection Period if the Selling Shareholders have not delivered written notice of objection thereto prior to such date; (ii) the date of expiration of the Discussion Period if Purchaser and the Selling Shareholders have resolved all disputed amounts prior to such date; or (iii) the date on which the Accounting Arbitrator determines the disputed amounts.

(b) In the event that the Target Net Working Capital exceeds the Closing Date Net Working Capital (such excess being the “ Net Negative Working Capital Payment ”), then the Selling Shareholders shall pay to Purchaser an amount equal to the Net Negative Working Capital Payment.

(c) In the event that the Closing Date Net Working Capital exceeds the Target Net Working Capital (such excess being the “ Net Positive Working Capital Payment ”), then Purchaser shall pay to the Shareholder’s Representative an amount equal to the Net Positive Working Capital Payment, and the Shareholder’s Representative shall pay each of the Selling Shareholders his or her share of the Net Positive Working Capital Payment, on a pro rata basis (in accordance with the ratios described in Section 2.2(a)).

(d) Any payments required to be made by the Selling Shareholders or Purchaser pursuant to this Section 2.3 shall be made within seven (7) Business Days following the Determination Date by wire transfer of immediately available funds to an account designated by the recipient of such payment.

Section 3. Other Transactions and Agreements.

3.1 The Incentive Bonus Plan. The Company shall enter into the Incentive Bonus Plan substantially in the form agreed upon by the parties.

3.2 Jeffrey D. Clark Employment, Non-Competition and Non-Solicitation Agreement. At the Closing, the Company and Jeffrey D. Clark shall enter into the Jeff Clark Employment Agreement.

 

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3.3 Bonnie J. Clark Non-Competition and Non-Solicitation Agreement. At the Closing, Bonnie J. Clark shall enter into the Bonnie J. Clark Non-Competition and Non-Solicitation Agreement.

3.4 Software Assignment and License Agreement. At the Closing, Praesideo and the Company shall enter into the SALA and Praesideo shall deliver to the Company the Source Code as required thereunder.

Section 4. Closing.

4.1 Date and Time of Closing. The closing of the Contemplated Transactions (the “ Closing ”) shall take place by exchanging documents via electronic mail, facsimile or overnight courier at 1:00 p.m. (MST) on May 7, 2009, or at such other time and place as Purchaser and the Selling Shareholders may agree.

4.2 Actions to be Taken at the Closing. At the Closing:

(a) the Selling Shareholders shall deliver to Purchaser the stock certificates representing the Purchased Stock in accordance with Section 2.2 hereof, free and clear of all liens and Encumbrances (other than transfer restrictions under applicable federal and state securities laws);

(b) Purchaser shall pay the Closing Cash Payment in accordance with Section 2.2 hereof;

(c) Bonnie J. Clark shall resign from her positions as a director and officer of the Company; and

(d) The Principal Shareholders shall deliver, or cause to be delivered, to Purchaser the following documents:

(i) a certificate of good standing of the Company issued by the Secretary of State of the State of Utah dated not more than one Business Day prior to Closing;

(ii) the Jeff Clark Employment Agreement;

(iii) the Bonnie J. Clark Non-Competition and Non-Solicitation Agreement;

(iv) the Selling Shareholder Releases;

(v) the Managing Directors’ Retention Agreements executed by the Managing Directors;

(vi) evidence of a tail policy for errors and omissions and professional liability insurance for periods prior to Closing in accordance with Section 8.7 hereto;

 

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(vii) evidence of the transfer to the Company by Praesideo Technologies, LLC, free and clear of all liens and Encumbrances, of certain assets listed on Schedule 5.8(a) attached hereto;

(viii) evidence of the termination of the lease by the Company of the aircraft with registration number N600DE;

(ix) evidence of the Company’s adoption of the Incentive Bonus Plan for the Managing Directors and the Key Company Employees to take effect as of the first day immediately following the Closing Date;

(x) the SALA, executed by the signatories thereto;

(xi) pay-off letters, lien discharges, releases of guarantees and any other documents as are reasonably required by Purchaser in order to satisfy all Indebtedness of the Company simultaneously with Closing;

(xii) An IRS Form 8023 prepared by the Purchaser to the satisfaction of the Company and signed by each of the Selling Shareholders;

(xiii) A letter of good standing from the Utah State Tax Commission certifying that the Company has filed all State of Utah franchise and income tax returns and paid all State of Utah income and franchise taxes due as of April 22, 2009;

(xiv) All of the Company’ corporate records books and stock transfer ledgers;

(xv) The Landlord Consent to Tenant Reorganization between the Company and Property Reserve, Inc.;

(xvi) The Landlord Consent to Sublease between the Company and Property Reserve, Inc.;

(xvii) Evidence of a minimum of $1.25 million in Minimum Fixed Assets of the Company, as determined in accordance with GAAP, as of and immediately following the Closing; and

(xviii) such other documents and instruments as shall reasonably be required by Purchaser to be executed and delivered by any Selling Shareholder or the Company in order to fully and effectively consummate the Contemplated Transactions.

 

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Section 5. Representations and Warranties of Selling Shareholders. Subject to the limitations set forth in Section 10 and this Section 5 of this Agreement, each of the Selling Shareholders, jointly and severally, represents and warrants to Purchaser as follows, except as disclosed in the Disclosure Schedules by reference to the applicable section number below or where it is clearly apparent that disclosure set forth in a different section of the Disclosure Schedules was intended.

5.1 Good Standing and Corporate Power of Company. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Utah. The Company has all requisite corporate power and authority to own, lease, use and operate its properties and to conduct the business in which it is currently, and as it is currently proposed to be, engaged and has all requisite corporate power and authority to execute, deliver and perform its obligations under the Transaction Agreements to which it is a party. The Company is duly qualified and in good standing to transact business in the jurisdictions set forth in Schedule 5.1, which are the only jurisdictions in which the nature of its business or its other activities, or the properties that it owns, leases or operates, requires it to qualify to do business as a foreign corporation. The Company has not received any written notice, or, to the Knowledge of the Selling Shareholders, any verbal notice, within the three (3) years prior to the Closing Date from any official of any Governmental Body in any jurisdiction to the effect that the Company is required to be qualified or authorized to do business in such jurisdiction, in which the Company is not so qualified or has not obtained such authorization.

5.2 Capitalization and Voting Rights.

(a) The authorized capital stock of the Company consists solely of (i) Two Thousand (2,000) shares of common stock, with a par value of $.10 per share (“ Common Stock ”), of which 1,053 shares are issued and outstanding, and none are held in Treasury.

(b) The Selling Shareholders own beneficially and of record all of the Common Stock constituting the Purchased Stock, which is all of the issued and outstanding capital stock of the Company. The number of shares owned by each of the Selling Shareholders is set forth in Schedule 5.2.

(c) Each share of Common Stock, including the Purchased Stock, has been duly authorized and validly issued and is fully paid and nonassessable. No shares of Common Stock, including the Purchased Stock, were issued in violation of any preemptive or similar rights. The issuance and sale of all securities of the Company have been in full compliance with all applicable state and federal laws concerning the issuance of securities.

(d) There are no outstanding subscriptions, options, warrants, puts, calls, purchase rights (including conversion or preemptive rights), agreements, understandings, claims or other commitments or rights of any type relating to the issuance, sale or transfer by the Company or any Selling Shareholder of any securities of the Company, nor are there outstanding any securities which are convertible into or exchangeable for shares of capital stock or equity interests of the Company. The Company does not have any obligation of any kind to issue additional securities or to pay for any securities of any predecessor. There are no outstanding or authorized stock appreciation, phantom stock, profit participation or similar rights with respect to the Company’s capital stock or equity interests.

 

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5.3 Subsidiaries/Other Ownership Interests. The Company has, and during the five-year period prior to the date of this Agreement, has (a) had, no subsidiaries, and (b) not owned or controlled, directly or indirectly, any interest in any other corporation, association, or other business entity. The Company is not a participant in any joint venture or partnership. The Company is not, directly or indirectly, subject to any obligation or requirement to provide funds to, or invest (in the form of a loan, capital contribution or otherwise) in any company, partnership, association, joint venture or similar non corporate business enterprise.

5.4 Authorization. The execution, delivery and performance of this Agreement by each Selling Shareholder have been duly authorized by all necessary action on the part of each Selling Shareholder, and no other action on the part of such Selling Shareholder is necessary to authorize the execution, delivery and performance of the Transaction Agreements and the consummation of the Contemplated Transactions. This Agreement has been duly and validly executed and delivered by each Selling Shareholder and constitutes, and upon the execution and delivery by such Selling Shareholder of the Transaction Agreements to which he or she is a party, such Transaction Agreements shall constitute, legal, valid and binding obligations of such Selling Shareholder enforceable against such Selling Shareholder in accordance with their terms, except as enforceability may be limited by bankruptcy, insolvency, reorganizations, moratorium or other laws affecting creditors’ rights generally.

5.5 No Conflicts. Except as set forth in Schedule 5.5, the execution and delivery by each Selling Shareholder of the Transaction Agreements to which he or she is a party, the performance of his or her obligations under such Transaction Agreements and the consummation of the Contemplated Transactions do not and shall not:

(a) conflict with, contravene or result in a violation or breach of any of (i) the terms, conditions or provisions of the Company’s articles of incorporation or bylaws, or (ii) any resolutions adopted by the directors or shareholders of the Company;

(b) conflict with, contravene or result in a violation or breach of, or give any Governmental Body or other Person the right to challenge any of the Contemplated Transactions or to exercise any remedy or obtain any relief under, any term or provision of any law or Order applicable to the Company or any Selling Shareholder, or any assets owned or used by the Company;

(c) conflict with or result in a violation or breach of, or constitute a default under, any Contract or license to which the Company or any Selling Shareholder is a party or by which any of the Company’s assets and properties is bound;

(d) contravene, conflict with, or result in a violation of any of the terms or requirements of, or give any Governmental Body the right to revoke, withdraw, suspend, cancel, terminate, or modify, any material Permit that is held by the Company or that otherwise relates to the business of, or any of the material assets owned or used by the Company;

 

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(e) contravene, conflict with, or result in a violation or Breach of any provision of, or give any Person 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 Customer Contract or other Contract; or

(f) result in the imposition or creation of any Encumbrance upon or with respect to any of the assets owned by the Company.

5.6 Consents. Except as set forth in Schedule 5.6, no Consent, approval, Order or authorization of, or registration, qualification, designation, declaration or filing with, any Governmental Body or any Person on the part of the Company or any Selling Shareholder is required in connection with the execution and delivery of this Agreement or the consummation of any of the Contemplated Transactions.

5.7 Litigation. Except as noted in Schedule 5.7, there are no (and over the last five years there have been no) Proceedings pending or, to the Knowledge of the Selling Shareholders, threatened against the Company (or any of its employees, officers or directors in connection with the business or affairs of the Company), before any federal, state, local or foreign court or Governmental Body in which the amount in dispute exceeds (or exceeded) $10,000 or that has resulted or could reasonably be expected to result in liability or loss for the Company of more than $10,000. Except as noted in Schedule 5.7, there exist no disputes or conflicts that the Selling Shareholders reasonably expect to result in any Proceeding to which the Company is a party and that has resulted or could reasonably be expected to result in liability or loss for the Company of more than $10,000. There are no Proceedings pending or, to the Knowledge of the Selling Shareholders, threatened for the purpose of enjoining or preventing this Agreement or the Contemplated Transactions or otherwise challenging the validity or propriety of the transactions contemplated by this Agreement. The Company is not subject to any judgment, Order or decree, or governmental restrictions specifically naming the Company.

5.8 Intellectual Property. With respect to the Praesideo Software, and all Intellectual Property, Company Intellectual Property and Company Licensed Intellectual Property therein and thereto, the representations and warranties of the Selling Shareholders under this Section 5.8 and the disclosures set forth on Schedule 5.8(a) shall be made as of the License Effective Date.

(a) Schedule 5.8(a) sets forth a true and complete list of (i) all registered Company Intellectual Property, (ii) all software assigned to the Company or licensed to the Company pursuant to the SALA, and (iii) all unregistered trademarks that are material to the Company’s business as it is currently operated but excluding trademarks specifically associated with the software assigned or to be licensed under the SALA. The Company has not received any written notice of infringement upon or conflict with the asserted rights of others as to Intellectual Property. Except as set forth in Schedule 5.8(a), the Company has the right to use the Company Intellectual Property, including the Proprietary Information, free and clear of any rights, liens, encumbrances or claims of others, except for Permitted Encumbrances and except for the rights of third parties in independently developed Proprietary Information similar or identical to that of the Company and not Known to the Selling Shareholders or derived from any Proprietary Information of the Company or Praesideo and disclosed to such third parties by Company, Praesideo or its agents or contractors.

 

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(b) To the Knowledge of the Selling Shareholders, the Company Intellectual Property and the Licensed Intellectual Property include all of the Intellectual Property used in the operation of the business of the Company as of the date hereof.

(c) The Company is the exclusive owner of the entire right, title and interest in and to the Company Intellectual Property (other than the Praesideo Software), and, as between the Company and the third parties who have provided Licensed Intellectual Property to the Company, has a valid right to use the Licensed Intellectual Property in connection with the Company’s business as it is currently operated, subject only to (i) the terms of the license agreements required to be disclosed in Schedule 5.9 and any other license agreements applicable to the Licensed Intellectual Property (the “License Agreements”), and to (ii) any third party patent rights not Known to the Selling Shareholders. To the Knowledge of the Selling Shareholders, the Company Intellectual Property has not been adjudged invalid or unenforceable in whole or in part and is valid, subsisting and enforceable.

(d) The conduct of the Company’s business as currently conducted does not infringe, conflict with, dilute, misappropriate, or otherwise violate the trade secrets or copyrights of any third person, and to the Knowledge of the Selling Shareholders, the conduct of the Company’s business as currently conducted does not infringe, conflict with, dilute, misappropriate, or otherwise violate the Intellectual Property of any third Person, and, to the Knowledge of the Selling Shareholders, no action, claim, inquiry, or proceeding alleging any of the foregoing is pending against the Company, and, to the Knowledge of the Selling Shareholders, no claim, suit or action has been threatened or asserted against the Selling Shareholders or the Company alleging any of the foregoing. To the Knowledge of the Selling Shareholders, no Person is engaging in any activity that infringes the Company Intellectual Property.

(e) No Company Intellectual Property or, to the Knowledge of the Selling Shareholders, Licensed Intellectual Property is subject to any outstanding decree, order, injunction, judgment or ruling involving the Company and materially restricting the use of such Company Intellectual Property or Licensed Intellectual Property or that would impair the validity or enforceability of such Company Intellectual Property. The consummation of the Contemplated Transactions will not result in the termination or impairment of any Company Intellectual Property or, by the terms of any agreement to which any Licensed Intellectual Property is subject, any Licensed Intellectual Property.

(f) The Company does not utilize any inventions of any of the employees of the Company (or people the Company currently intends to hire) or consultants made prior to their employment by the Company, in the conduct of the Company’s business as currently conducted, except for inventions that have been assigned or licensed to the Company as of the date hereof. The Company has taken reasonable steps to promote and preserve the security and confidentiality of its Proprietary Information.

(g) All ownership and other rights relating to the Praesideo intellectual property set forth on Schedule 5.8 attached hereto have been properly transferred to the Company prior to the Closing Date pursuant to the SALA.

 

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(h) Company has utilized industry standard anti-virus software to ensure that the Software (as defined in the SALA), does not contain any virus, disabling code, worm, trap door, back door, timer, clock, counter or other limiting routine, instruction or design that would damage data or cause the Software to become inoperable or incapable of being used in manner currently used in the business.

5.9 Contracts.

(a) Schedule 5.9(a) contains a complete and accurate list of all Contracts to which the Company is a party or bound by (other than Customer Contracts, which are listed in Schedule 5.10 as described below):

(i) that involve any lease (whether of real or personal property) that involve annual rentals of $10,000 or more;

(ii) that involve any payments or commitments for the purchase or sale by the Company of materials, supplies, goods, services, equipment or other assets providing for aggregate payments by the Company of $25,000 or more;

(iii) that are material to the condition, operations, assets or business of the Company;

(iv) that constitute any partnership, joint venture or other similar agreement involving the Company;

(v) that relate to the acquisition or disposition of any business (whether by merger, sale of stock, sale of assets or otherwise);

(vi) that includes any covenants limiting or in any way purporting to restrict the freedom of the Company to compete in any line of business in any geographic area or to employ or otherwise engage any Person;

(vii) with any present or former director, shareholder or officer of the Company, or any Person related by blood or marriage to any such Person, or any Person controlling, controlled by or under common control with any such Person, or with any employee, agent or consultant of the Company not terminable by the Company at will;

(viii) that relates to the securities of the Company or rights in connection therewith;

(ix) that constitutes any Contract pursuant to which any Intellectual Property Rights are licensed or sublicensed to or from the Company;

(x) that constitutes any Contract under which the Company has loaned money or promised to lend money, or made any other loan or advance to, or other investment in, any other Person, or that involves Indebtedness or guaranties of Indebtedness, in each case in excess of $5,000;

 

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(xi) that constitutes any collective bargaining agreement or similar labor related Contract;

(xii) that extend beyond one year, unless cancelable by the Company or sixty (60) days’ or fewer notice without liability, penalty or premium in excess of $5,000;

(xiii) that provide for the future purchase by the Company of any materials, equipment, services or supplies in excess of $5,000 per year and that continue for a period of more than twelve (12) months including periods covered by any option to renew by either party) or provide for a price in excess of current market prices or is in excess of normal operating requirements over its remaining term;

(xiv) that includes any obligation or commitment that materially limits the freedom of the Company to sell, lease, license or otherwise distribute any product, service, client information or software system or program (including any agreement, Contract, or other arrangement or understanding with any vendor that obligates the Company to distribute, exclusively, products supplied by such vendor or any client information or software system or program); or

(xv) that sets forth any obligation or commitment providing for indemnification or responsibility for the obligations or losses of any Person.

True, correct and complete copies of all such written (and summaries of all such oral or implied) Contracts have been delivered to Purchaser.

(b) Except as disclosed in Schedule 5.9(b): (i) each of such Contracts is valid and binding, in full force and effect and enforceable in accordance with its respective terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally; (ii) neither the Company nor, to the Knowledge of the Selling Shareholders, any other party thereto is in violation of, in default or breach in any respect under the terms of any such Contract; (iii) to the Knowledge of the Selling Shareholders no event has occurred that, with the passing of time or the giving of notice or both would result in a default or breach of any such Contract, or allow for termination or cancellation thereof; and (iv) the Company has not received any written notice from any party to any such Contract listed in Schedule 5.9 of any intention to terminate, cancel or otherwise fail to perform any obligations of such party under any such Contract.

5.10 Customer Contracts. Set forth on Schedule 5.10 hereto is a complete and accurate list of all the Company’s Contracts with customers (the “ Customer Contracts ”). Each such Customer Contract is valid and binding, in full force and effect, and enforceable in accordance with its terms, except to the extent that such enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, and by laws relating to the availability of specific performance, injunctive relief or other equitable remedies. The Company has performed and is in compliance with all of the material terms of the Customer Contracts and all instruments and agreements relating thereto and no default or event of default, or event or condition which with notice or lapse of time or both would constitute such a default or event of default, on its part or, to the Knowledge of the Selling Shareholders, on the part of any other party thereto exists with respect to any such Customer Contract. To the Knowledge of the Selling Shareholders, no such Customer Contract contains any material contractual requirement with which there is a reasonable likelihood the Company will be unable to comply.

 

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5.11 Financial Statements.

(a) The Company has delivered to Purchaser (i) the Annual Financial Statements, and (ii) the Interim Financial Statements (collectively, the “ Financial Statements ”). Except as described in Section 5.11(c) with respect to the 2006 annual financial statements, the Financial Statements have been prepared in accordance with GAAP, on a consistent basis through the periods indicated, and fairly present in all material respects the financial condition and results of operation of the Company, subject, in the case of the Interim Financial Statements, to normal recurring year end adjustments (the effect of which will not, individually or in the aggregate, be materially adverse). No financial statements of any Person other than the Company are required, under GAAP, to be included in the consolidated financial statements of the Company. There have been no material adverse changes in the assets, liabilities or financial condition of the Company since the date of the Interim Financial Statements.

(b) The audited balance sheet of the Company as of December 31, 2008, and the related audited statements of income, stockholders equity and cash flows of the Company for the year ended December 31, 2008, fairly present in all material respects the financial condition and the results of operation of the Company as of and for the twelve month period then ended all in accordance with GAAP.

(c) The accounting methodologies set forth in Schedule 5.11(c) fully and accurately reflect the methods used by the Company to prepare its financial statements prior to the 2007 audited financial statements.

5.12 Liabilities. Except as set forth in Schedule 5.12, the Company has no Liabilities or obligations of any nature (whether obsolete, accrued, contingent or otherwise) of a nature required to be disclosed on a balance sheet in accordance with GAAP, other than (i) Liabilities incurred in the ordinary course of business subsequent to December 31, 2008, and (ii) obligations under Contracts incurred in the ordinary course of business so long as such Contract is either disclosed in Schedule 5.9 or 5.10 or is not required by the terms of Section 5.9 to be disclosed. Schedule 5.12 lists all Liabilities and obligations of the Company that by their terms require payment or performance in an aggregate amount in excess of $25,000 that are not included in the Financial Statements or otherwise relate to the Company’s provision of services in the ordinary course of business under the Contracts disclosed in Schedule 5.9 and 5.10. The Company has no Indebtedness except as disclosed in Schedule 5.12.

5.13 Changes. Except as disclosed in Schedule 5.13, since December 31, 2008, there has not been:

(a) any Material Adverse Change in the Company;

 

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(b) any material Damages or destruction or loss, whether or not covered by insurance, adversely affecting the assets, properties, financial condition, operating results or business of the Company;

(c) any waiver by the Company of a material right or of a material Indebtedness owed to it;

(d) any satisfaction or discharge of any material Encumbrance or payment of any material obligation by the Company;

(e) any material waiver, change, amendment, release, rescission or termination of, or accord or satisfaction with respect to, any terms, conditions or provisions of any Contract required to be set forth on Schedule 5.9 or 5.10 by which the Company or any of its assets or properties is bound or subject;

(f) any change in any compensation or benefit arrangement or agreement with any employee, director, officer, shareholder, consultant or agent of the Company;

(g) any change in the Company’s authorized or issued capital stock or capital structure or any issuance of stocks, bonds or other securities of the Company;

(h) any loans made to the Company;

(i) other than any distributions to cover any Tax liabilities of the Selling Shareholders and any distributions of the Excluded Assets, including cash, any payment of any dividend or other distribution of the Company’s assets in respect of any of the Company’s capital stock;

(j) any sale, assignment or transfer of any Intellectual Property or Proprietary Information of the Company other than in the ordinary course of business; provided, however, in any event, that there has been no such sale, assignment or transfer of Fast Pro, Deal Manager or Hedge Fund Pro (including the Investor Relation Manager features of Hedge Fund Pro);

(k) any transaction to which the Company is a party other than in the ordinary course of business;

(l) any resignation or termination of any officer, key employee or group of employees of the Company; and the Company, to the Knowledge of the Selling Shareholders, does not know of the impending resignation or termination of employment of any such officer, key employee or group of employees;

(m) any direct or indirect loans, advances or capital contributions made by the Company to any shareholder, employee, officer or director of the Company or to any other Person;

(n) any labor dispute or labor organization activity related to the Company;

 

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(o) any Indebtedness incurred, assumed or guaranteed by the Company, except those for amounts incurred in the ordinary course of business and less than $5,000 in the aggregate;

(p) any material change in the Company’s method of doing business or any change in accounting principles or practices or its method of application of such principles or practices;

(q) any sale of Company furniture or equipment except as permitted pursuant to Section 8.1;

(r) any Encumbrance imposed or agreed to be imposed on the property or assets of the Company except for Permitted Encumbrances; or

(s) any agreement or commitment by the Company to do any of the things described in this Section 5.13.

5.14 Taxes and Tax Returns.

(a) The Company has filed all Tax Returns required to be filed by it and has paid all Taxes due and owing by the Company, whether or not shown on such return. All such Tax Returns were correct and complete in all respects and were prepared in substantial compliance with all applicable laws and regulations.

(b) To the Knowledge of the Selling Shareholders, the Company is not currently, and during the last five years has not been, subject to any audit or examination, no administrative or judicial Tax Proceedings are pending with respect to any Tax Return previously filed by the Company, and no notice of deficiency or proposed adjustment involving Tax has been issued to the Company by any Taxing authority.

(c) The Company has not waived any statute of limitations or agreed to any extension of time that is currently in effect in respect of any Taxes or agreed to any extension of time with respect to any Tax deficiency.

(d) The Company is not a party to a Tax sharing agreement or any other agreement to indemnify any Person for any Tax liability.

(e) The Company has been a validly electing “S corporation” within the meaning of sections 1361 and 1362 of the Code at all times since March 5, 1992 and will be an S corporation up to and including the Closing Date.

(f) The Company has never been a member of an affiliated group of corporations within the meaning of section 1504 of the Code and does not have any Liability for the Taxes of any Person (other than the Company or its predecessor corporation) under Treas. Reg. § 1.1502-6 (or any similar provision of state, local or foreign law) or as a transferee or successor, by contract or otherwise.

 

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(g) No claim has even been made by an authority in a jurisdiction where the Company does not file Tax Returns that the Company is or may be subject to taxation by that jurisdiction. There are no Encumbrances for Taxes (other than Permitted Encumbrances) upon any of the assets of the Company.

(h) The Company has withheld and paid all Taxes required to have been withheld and paid in connection with any amounts paid or owing to any employee, independent contractor, creditor, stockholder, or other third party.

(i) The Company has not received from any foreign, federal, state, or local taxing authority (including jurisdictions where the Company has not filed Tax Returns) any (i) notice indicating an intent to open an audit or other review, or (ii) request for information related to Tax matters.

(j) Schedule 5.14(j) lists all federal, state, local, and foreign income Tax Returns filed with respect to the Company for taxable periods ended on or after December 31, 2004 and, indicates those Tax Returns that have been audited. The Company has delivered to Purchaser correct and complete copies of all federal income Tax Returns, examination reports, and statements of deficiencies assessed against or agreed to by the Company filed or received since December 31, 2004.

(k) The Company is not a party to any agreement, Contract, arrangement or plan that has resulted or could result, separately or in the aggregate, in the payment of (i) any “excess parachute payment” within the meaning of Code § 280G (or any corresponding provision of state, local or foreign Tax law), or (ii) any amount that will not be fully deductible as a result of Code § 162(m) (or any corresponding provision of state, local or foreign Tax law).

(l) The Company has not been a United States real property holding corporation within the meaning of Code § 897(c)(2) during the applicable period specified in Code § 897(c)(1)(A)(ii).

(m) The unpaid Taxes of the Company (A) did not, as of the date of the Interim Financial Statements, exceed the reserve for Tax Liability (rather than any reserve for deferred Taxes established to reflect timing differences between book and Tax income) set forth on the face of the Interim Financial Statements (rather than in any notes thereto), and (B) do not exceed that reserve as adjusted for the passage of time through the Closing Date in accordance with the past custom and practice of the Company in filing its Tax Returns. Since the d