EXHIBIT
2.1
STOCK PURCHASE AGREEMENT
by and among
MILES CAPITAL HOLDINGS,
INC.
and
WEST BANCORPORATION, INC.
and
WB CAPITAL MANAGEMENT
INC.
October 1, 2009
TABLE OF
CONTENTS
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Page
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ARTICLE 1
DEFINITIONS
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1
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ARTICLE 2
PURCHASE, SALE AND EXCHANGE OF MEMBERSHIP INTERESTS
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7
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7
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7
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7
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Payment of the
Closing Purchase Price; Exchange of Shares
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7
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES ABOUT SELLER
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7
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7
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8
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES ABOUT THE COMPANY
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8
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Organization,
Power and Authorization
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8
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Binding Effect
and Noncontravention
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9
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Required
Filings and Consents
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9
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Capitalization;
Subsidiaries
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11
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Financial
Statements; Undisclosed Liabilities
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11
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Events
Subsequent to the Latest Balance Sheet
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12
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13
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Investment
Advisers Act Compliance
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13
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16
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17
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17
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25
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Assets Under
Management; Registered and Private Funds
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26
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No Notice of
Diminution of Business
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28
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28
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ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BUYER
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28
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Organization,
Power and Authorization
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28
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Binding Effect
and Noncontravention
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28
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29
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29
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29
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ARTICLE 6
COVENANTS
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29
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29
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Registered Fund
Proxy Statements; Registration Statements.
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32
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33
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33
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34
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Seller’s
Covenant Not to Compete or Solicit
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36
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36
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ARTICLE 7
SURVIVAL AND INDEMNIFICATION
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38
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Survival of
Representations and Warranties
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38
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Indemnification
Obligations of Seller
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38
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Indemnification
Obligations of Buyer
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39
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39
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Indemnification
Procedures
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39
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ARTICLE 8
CONDITIONS TO THE CLOSING
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40
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Conditions of
Buyer’s Obligation
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40
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Conditions of
Seller’s Obligation
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42
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ARTICLE 9
MISCELLANEOUS
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43
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43
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44
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45
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No Third Party
Beneficiaries
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45
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45
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STOCK PURCHASE
AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this
“Agreement”) is made as of October 1, 2009, by and
among Miles Capital Holdings, Inc., a Delaware corporation
(“Buyer”), WB Capital Management Inc., an Iowa
corporation (the “Company”), and West Bancorporation,
Inc., an Iowa corporation (“Seller”). Buyer,
Seller and the Company are each individually referred to in this
Agreement as a “Party” and are collectively referred to
as the “Parties.”
BACKGROUND
WHEREAS, Seller owns 1000 shares of common stock, par
value $.01 per share, of the Company constituting all the issued
and outstanding shares of capital stock of the Company (such shares
being referred to herein as the “Shares”).
WHEREAS, Seller desires to sell, and Buyer desires to
purchase the Shares on the terms and subject to the conditions set
forth in this Agreement;
NOW, THEREFORE , in consideration of the representations,
warranties, and covenants herein contained and other good and
valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the Parties hereby agree as
follows:
ARTICLE 1
DEFINITIONS
For purposes of this Agreement, the following
terms have the meanings set forth below:
“Acquisition Transaction” has the
meaning set forth in Section 6.1(f).
“Advisory Agreement(s)” means all
agreements and arrangements for the performance of investment
advisory services for any Client.
“Advisor Compliance Policies” has
the meaning set forth in Section 4.8.
“Affirmative Consent Client” means
any Client with respect to which affirmative and/or written Consent
is expressly required under such Client’s Advisory Agreement,
as set forth in Section 4.20 of the Disclosure Schedule.
“Affiliate” of any particular Person
means any other Person controlling, controlled by or under common
control with such particular Person. For the purposes of
this definition, “control” means the possession,
directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person whether
through the ownership of voting securities, contract or
otherwise.
“Assets Under Management” means the
assets of Clients under management by the Company pursuant to
Advisory Agreements.
“Business” means the business of the
Company as conducted on the date of this Agreement.
“Business Day” means any day of the
year other than (i) any Saturday or Sunday or (ii) any other day on
which banks located in Des Moines, Iowa generally are closed for
business.
“Buyer” has the meaning set forth in
the preamble.
“Client” means any Person to which
the Company provides investment advisory services pursuant to an
Advisory Agreement.
“Client Notice” has the meaning set
forth in Section 6.1(h).
“Closing” has the meaning set forth
in Section 2.3.
“Closing Date” has the meaning set
forth in Section 2.3.
“Closing Purchase Price” has the
meaning set forth in Section 2.2.
“COBRA” means the requirements of
Part 6 of Subtitle B of Title 1 of ERISA, Section 4980B of the
Code and of any similar state law.
“Code” means the Internal Revenue
Code of 1986, as amended.
“Company” has the meaning set forth
in the preamble.
“Company Benefit Plan” means any
“employee benefit plan” (as such term is defined in
Section 3(3) of ERISA) and any other employee benefit plan,
program or arrangement (including any “nonqualified deferred
compensation plan” subject to Code section 409A) that
the Company maintains or contributes to, or under which any
employee or former employee (or their beneficiaries or dependents)
of the Company has any rights.
“Company Intellectual Property”
means any Intellectual Property owned or used by the
Company.
“Company Permits” has the meaning
set forth in Section 4.7(a).
“Company SEC Documents” has the
meaning set forth in Section 4.7(b).
“Computer Systems” means any
combination of the computer software (including source code,
executable code, databases and related documentation), computer
firmware, computer hardware (whether general or special purpose),
and other similar or related items of automated, computerized,
and/or software systems that are used or relied on by the
Company.
“Consent” means any authorization,
filing, notice, consent or approval.
“Contingency Payments” has the
meaning set forth in Section 2.2.
“Disclosure Schedule” means the
disclosure schedule prepared by Seller attached to this Agreement
which sets forth the exceptions to the representations and
warranties contained in Articles 3 and 4, and certain other
information called for by the Agreement.
“Environmental Laws” means all Legal
Requirements concerning occupational safety and health hazards,
pollution or protection of the environment, including without
limitation all those relating to the presence, use, production,
generation, handling, transportation, treatment, storage, disposal,
distribution, labeling, testing, processing, discharge, release,
threatened release, control, or cleanup of any hazardous materials,
substances or wastes.
“ERISA” means the Employee
Retirement Income Security Act of 1974, as amended.
“ERISA Affiliate” means each entity
that is treated as a single employer with the Company for purposes
of Section 414 of the Code, or Section 4001(a)(14) or 4001(b) of
ERISA.
“Filings” has the meaning set forth
in Section 4.8(c).
“Financial Statements” has the
meaning set forth in Section 4.5.
“FINRA” means the Financial Industry
Regulatory Authority and any predecessors.
“Fund” means any Registered Fund and
Private Fund.
“GAAP” means United States generally
accepted accounting principles as in effect from time to
time.
“Government Entity” means any
(i) nation, principality, state, commonwealth, province,
territory, county, municipality, district or other jurisdiction of
any nature; (ii) federal, state, local, municipal, foreign or
other government; (iii) Government or quasi Government
authority of any nature, including without limitation the SEC or
FINRA; (iv) multi-national organization or body; or
(v) Person exercising, or entitled to exercise, any executive,
legislative, judicial, administrative, regulatory, police, military
or taxing authority or power of any nature.
“Indebtedness” of any Person shall
mean the following, excluding payables incurred in the Ordinary
Course of Business: (a) all indebtedness of such
Person to lending institutions and all other indebtedness for
borrowed money created, incurred or accrued by such Person or
guaranteed by such Person or for which such Person is otherwise
liable or responsible (including an agreement to assume the
indebtedness of others); (b) all obligations of such Person
under capital leases; (c) all liability of such Person in respect
of bankers acceptances or letters of credit; (d) all amounts
owing by such Person under purchase money mortgages, indentures,
deeds of trust or other purchase money liens or conditional sale or
other title retention agreements; (e) all indebtedness secured
by any mortgage, indenture or deed of trust upon any assets of such
Person even though such Person may not have assumed or become
liable for the payment of such indebtedness; (f) all accruals of
management or other fees payable to the Seller or any Affiliate of
the Seller; (g) all liability for deferred taxes; and (h) all
interest, fees and other expenses with respect to any of the
foregoing, excluding, however, any Transaction Expenses.
“Indemnification Claim Notice” has
the meaning set forth in Section 7.5(a).
“Indemnified Party” means a Party
who is seeking indemnification under Section 7.2 or 7.3.
“Indemnifying Party” means a Party
from whom indemnification is being sought under Section 7.2 or
7.3.
“Insurance Policies” has the meaning
set forth in Section 4.15.
“Intellectual Property” means any or
all of the following: (i) patents, patent applications and
patent disclosures; (ii) trademarks, service marks, corporate
names, trade names, slogans, brand names, logos and Internet domain
names, together with goodwill associated with any of the foregoing;
(iii) copyrights and copyrightable works;
(iv) registrations and applications for any of the foregoing;
(v) trade secrets, confidential information, know how and
inventions; (vi) computer software (including all source code
and related documentation); and (vii) all other intellectual
property and proprietary rights.
“Investment Advisers Act” means the
Investment Advisers Act of 1940, as amended.
“Investment Company Act” means the
Investment Company Act of 1940, as amended.
“Knowledge” means, (i) with
respect to an individual, the actual knowledge of such individual;
and (ii) with respect to a Person other than an individual,
the actual knowledge of any individual who is serving as a
director, manager, member or officer (or similar executive) of such
Person. The Company’s Knowledge means the
Knowledge of Doug Gulling, Amy Mitchell, Tom Myers, Marie Roberts,
John McKinney, Vera Lichtenberger, Alice Jensen, David R. Milligan
and Brad L. Winterbottom. The Seller’s Knowledge
means the Knowledge of Doug Gulling.
“Largest Clients of the Company”
means the 26 largest Clients of the Company measured by revenues as
of the six month period ended June 30, 2009 and identified in
Section 4.20(c) to the Disclosure Schedule.
“Latest Balance Sheet” means the
Company’s unaudited balance sheet as of June 30,
2009.
“Legal Requirement” means any law,
statute, legislation, constitution, principle of common law,
resolution, ordinance, code, judgment, order, decree, treaty, rule,
regulation, ruling, determination, charge, direction or other
restriction of an arbitrator, Government Entity or self-regulatory
organization.
“Liability” has the meaning set
forth in Section 4.4.
“Lien” means any mortgage, claim,
pledge, security interest, charge, lien, restriction, reservation,
option or other right to purchase or any other encumbrance
whatsoever.
“Loss” means, with respect to any
Person, any liability, cost, damage, deficiency, penalty, fine,
Lien, fee, or other loss or expense, including court costs and
reasonable attorneys’ fees and expenses, whether or not
arising out of a third party claim, against or affecting such
Person.
“Material Adverse Effect” means any
effect, or series of effects that, individually or in the
aggregate, materially adversely affects, or would be reasonably
likely to materially adversely affect, the Business, operations or
financial condition of the Company.
“Material Contracts” has the meaning
set forth in Section 4.16(a).
“Negative Consent Client” means any
Client with respect to which affirmative and/or written Consent is
not expressly required under such Client’s Advisory
Agreement, the Investment Advisers Act or the Investment Company
Act, as set forth in Section 4.20 of the Disclosure
Schedule.
“Net Working Capital” means current
assets less current liabilities as set forth in Section 4.5 of the
Disclosure Schedule.
“Parties” has the meaning set forth
in the preamble.
“Permitted Liens” means
(i) liens for Taxes or assessments and similar charges, which
are not yet due or delinquent or are being contested in good faith
and by appropriate proceedings, (ii) mechanics’,
materialmen’s or contractors’ liens or encumbrances or
any similar statutory lien or restriction for amounts not yet due
and payable or which are being contested in good faith,
(iii) zoning, entitlement, building and other land use
regulations which do not materially impair, prohibit or restrict
the occupancy or current use of the real property which they
encumber, and (iv) covenants, conditions, restrictions,
easements and other similar matters of record affecting title to
the real property which do not materially impair, prohibit or
restrict the occupancy or current use of the real property which
they encumber.
“Person” means an individual, a
partnership, a corporation, an association, a limited liability
company, a joint stock company, a trust, a joint venture, an
unincorporated organization, an estate, a labor union, or a
Government Entity.
“Prepayment Contingency Amount” has
the meaning set forth in Section 2.2(B).
“Private Fund” means each vehicle
for collective investment (in whatever form of organization,
including, but not limited to, a corporation, company, limited
liability company, partnership association, trust or other entity,
and including each separate portfolio or series of any of the
foregoing) that is not registered or required to be registered with
the SEC as an investment company under the Investment Company Act,
but only during the period with respect to which the Company acted
or acts as the sponsor, general partner, managing member, trustee,
investment manager, investment adviser or in a similar
capacity.
“Proprietary Information Technology
Systems” means the Computer Systems (or portions of Computer
Systems) that the Company (either directly or through a third
Person) have developed, customized or enhanced, or are in the
process of developing, customizing or enhancing.
“Real Property” has the meaning set
forth in Section 4.12.
“Registered Fund” means each vehicle
for collective investment (in whatever form of organization,
including, but not limited to, a corporation, limited liability
company, partnership, association, trust or other entity, and
including each separate portfolio or series of any of the
foregoing) the interests of which are publicly offered and that is
registered or required to be registered with the SEC as an
investment company under the Investment Company Act, but only
during the period with respect to which the Company acted or acts
as sponsor, general partner, managing member, trustee, investment
manager, investment adviser or in a similar capacity.
“Registered Fund Board” means the
board of directors or trustees (or persons performing similar
functions) of a Registered Fund.
“Registered Fund Consent” has the
meaning set forth in Section 6.1.
“SEC” means the United States
Securities and Exchange Commission.
“Securities Act” means the
Securities Act of 1933, as amended.
“Securities Exchange Act” means the
Securities Exchange Act of 1934, as amended, and the rules and
regulations of the SEC thereunder.
“Seller” has the meaning set forth
in the preamble.
“Shares” has the meaning set forth
in the preamble.
“Subsidiaries” means each
corporation, limited liability company, partnership, association,
trust or other business entity of which the Company owns
beneficially or of record any equity security of such person except
for interests held for clients.
“Target Net Working Capital” means
$200,000.
“Tax” or “Taxes” means
any federal, state, local or foreign income, gross receipts,
capital stock, franchise, profits, payroll, employment,
withholding, social security, unemployment, disability, real
property, ad valorem/personal property, stamp, excise, license,
occupation, sales, use, transfer, registration, value added,
alternative minimum, estimated or other tax, including any
interest, penalty or addition thereto, whether disputed or
not.
“Tax Return” means any return,
report, information return or other document relating to
Taxes.
“Third Party Claim” has the meaning
set forth in Section 7.5(a).
“Transaction Documents” means this
Agreement, the Promissory Note, Pledge Agreement, Investment
Advisory Agreement, Transition Services Agreement, Access Agreement
and any other document contemplated by this Agreement.
ARTICLE 2
PURCHASE, SALE AND EXCHANGE OF
SHARES
2.1.
Purchase and Sale . At the Closing, subject to
the terms and conditions set forth in Article 8, Buyer shall
purchase from Seller, and Seller shall sell, convey, assign,
transfer, and deliver to Buyer, all of the right, title and
interest of Seller in and to the Shares.
2.2.
Closing Purchase Price . The aggregate purchase
price for the Shares (the “ Closing Purchase Price
”) shall be as follows: (A) two million dollars
($2,000,000.00) consisting of a two million dollar
($2,000,000.00) seven year promissory note (the “ Note
Consideration ”) in a form reasonably satisfactory to the
Parties (the “ Promissory Note ”) secured by a
pledge of the Shares pursuant to a Pledge Agreement in a form
reasonably satisfactory to the Parties (the “ Pledge
Agreement ”); and (B) contingency payments from Buyer
equal to 20% of the amount that the Company’s annual revenues
in each of the fiscal years ending December 31, 2010, 2011, 2012,
2013 and 2014 exceed $5.0 million (the “ Contingency
Payments ”), except that to the extent that the
Company’s annual revenues in any of these years does not
exceed $5.0 million, the Contingency Payment will not be owed and
will be reduced for subsequent years in an amount equal to 20% of
the amount that the Company’s annual revenues fall below $5.0
million. By way of example only, if on December 31,
2010, the Company’s annual revenues are $4.0 million, then no
Contingency Payment will be owed for 2010, and a $200,000 credit
toward any future Contingency Payment will be carried forward to
subsequent years until exhausted. Buyer may prepay the
Contingency Payment obligation at any time by paying to Seller
$1.17 million in cash less any Contingency Payments previously paid
(the “ Prepayment Contingency Amount
”). Contingency Payments are due on or before
March 15 th
following fiscal year end in which a
Contingency Payment is due.
2.3.
The Closing . The closing of the purchase, sale
and exchange of the Shares and the transactions relating thereto
(the “Closing”), shall take place at the offices of
Seller in West Des Moines, Iowa (or at such other location as the
Parties may agree), commencing at 9:00 a.m. local time, subject to
the provisions of Section 9.1, on the second day following the
satisfaction or waiver of all conditions to the obligations of the
Parties to consummate the transactions contemplated hereby (other
than conditions with respect to actions the Parties shall take at
the Closing). The date and time of the Closing are
referred to as the “Closing Date.”
2.4.
Delivery of Shares . At the Closing, subject to
the satisfaction or waiver of each of the conditions specified in
Article 8, Buyer shall deliver the Promissory Note and Pledge
Agreement to Seller. Seller shall deliver the
certificates representing the Shares duly endorsed for transfer in
blank, or accompanied by stock transfer powers duly executed in
blank by Seller.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
ABOUT SELLER
Except as otherwise set forth on the Disclosure
Schedule:
3.1.
General . Seller represents and warrants to Buyer
that:
(a)
Organization, Power and Authorization . Seller is
duly incorporated and is in good standing under the laws of the
State of Iowa, and (ii) has the requisite power and authority
necessary to enter into, deliver and perform its obligations
pursuant to each of the Transaction Documents to which it is a
party.
(b) Binding Effect and
Noncontravention .
(i) This Agreement
has been duly executed and delivered by Seller and constitutes, and
each other Transaction Document to which such Seller is a party
when executed and delivered will constitute, a valid and binding
obligation of Seller, enforceable against Seller in accordance with
its terms except as such enforceability may be limited by (A)
applicable insolvency, bankruptcy, reorganization, moratorium or
other similar laws affecting creditors’ rights generally, and
(B) applicable equitable principles (whether considered in a
proceeding at law or in equity).
(ii) The execution,
delivery and performance of the Transaction Documents by Seller do
not (A) violate any material Legal Requirement to which Seller is
subject, any provision of its charter or bylaws or equivalent
organizational documents, (B) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create
in any party the right to accelerate, terminate, modify, or cancel,
or require any notice under any material agreement, contract,
lease, license, instrument, or other arrangement to which Seller is
a party or by which Seller is bound or to which Seller’s
assets are subject, (C) result in the creation of any Lien on
Seller’s Shares, or (D) require any Consent by or to any
Person.
3.2.
Ownership Matters
. Seller represents and warrants to Buyer that it holds
of record, owns beneficially, and has good and marketable title to
the Shares, free and clear of all Liens. The Shares
represent all of the issued and outstanding shares of common stock
of the Company and there are no other classes of equity
outstanding. Seller is not a party to any voting trust,
proxy, or other agreement or understanding with respect to the
voting of such Shares.
ARTICLE 4
REPRESENTATIONS AND
WARRANTIES
ABOUT THE COMPANY
Except as otherwise set forth on the Disclosure
Schedule, Seller represents and warrants to Buyer that:
4.1.
Organization, Power and
Authorization . The Company is a corporation, duly
organized, validly existing and in good standing under the laws of
the State of Iowa. The Company is duly authorized to
conduct business and is in good standing under the laws of each
jurisdiction where such qualification is required (with each such
jurisdiction being listed in Section 4.1 of the Disclosure
Schedule), except where the lack of such qualification would not
have a Material Adverse Effect. The Company has the
organizational power to carry on the businesses in which it is
engaged and to own and use the properties owned and used by
it. The Company has the requisite power and authority
necessary to enter into, deliver and perform its obligations
pursuant to each of the Transaction Documents to which it is a
party. Seller has delivered to Buyer true, correct and
complete copies of the articles or certificate of incorporation and
other organizational documents of the Company. Section
4.1 of the Disclosure Schedule lists the officers, directors and
employees of the Company. The Company has no
Subsidiaries.
4.2. Binding
Effect and Noncontravention .
(a) Each
Transaction Document to which the Company is a party, when executed
and delivered, will constitute a valid and binding obligation of
the Company, enforceable against the Company in accordance with its
terms except as such enforceability may be limited by (i)
applicable insolvency, bankruptcy, reorganization, moratorium or
other similar laws affecting creditors’ rights generally, and
(ii) applicable equitable principles (whether considered in a
proceeding at law or in equity).
(b) The execution,
delivery and performance by the Company of the Transaction
Documents to which it is a party do not (i) violate any material
Legal Requirement to which the Company is subject or its
certificate or articles of incorporation, bylaws or equivalent
organizational documents, (ii) conflict with, result in a
breach of, constitute a default under, result in the acceleration
of, create in any party the right to accelerate, terminate, not
renew, modify, or cancel, or require any notice under any material
agreement, contract, lease, license, instrument, or other material
arrangement to which the Company is a party or by which the Company
is bound or to which the Company’s assets are subject, (iii)
result in the creation of any Lien on any assets of the Company, or
(iv) require any Consent by or to any Person except as set forth in
Section 4.2(b) of the Disclosure Schedule with respect to (1)
Consents required from any Government Entity, (2) Consents required
from any Clients, and (3) Consents required under any Material
Contracts.
4.3. Required
Filings and Consents . The execution, delivery and
performance of this Agreement by the Company and the consummation
by the Company of the transactions contemplated by this Agreement
do not and will not require any consent, approval, authorization or
permit of, or filing with or notification to, any international,
foreign, supranational, national, federal, state, provincial or
local Government, regulatory or administrative authority, including
the SEC and any self-regulatory authority (“ SRO
”) (including the New York Stock Exchange, or any successor
entity or entities thereto (collectively, the “ NYSE
”), FINRA, the National Futures Association (the “
NFA ”)), the Municipal Security Rulemaking Board
(“ MSRB ”), or other agency, commission, court,
tribunal or arbitral body, whether domestic or foreign, and in each
case whether legislative, executive, judicial or otherwise other
than: (i) any filings with, and approvals from, relevant state
securities administrators or related to the blue sky laws of Iowa;
(ii) the filings or notices required or contemplated under the
Investment Advisers Act or Investment Company Act; (iii) the
filings or notices required by, and any approvals required under
the rules and regulations of FINRA or other SROs (including the
NYSE, the NFA and MSRB)); and (iv) in such other circumstances
where the failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or
notifications, would not, individually or in the aggregate,
reasonably be expected to have a Company Material Adverse
Effect.
(a) The Company is
and has been since January 1, 2004, in compliance with applicable
Laws, except for such events of non-compliance that would not,
individually or in the aggregate, reasonably be expected to have a
Company Material Adverse Effect.
(b) The Company has
all material licenses, permits, certificates of authority,
authorizations, approvals, registrations and similar consents
granted or issued by any Government Entity to the Company that is
necessary for the conduct of the Business, each of which is listed
in Section 4.3(b) of the Disclosure Schedule (the “
Company Permits ”). All Company
Permits are in full force and effect in all material respects and
are not subject to any suspension, modification or revocation or
proceedings related thereto. The Company has not
received notice or communication asserting any violation of a
Company Permit by the Company. The Company is not in any
material violation, or has not been in material violation since
January 1, 2004, of any Legal Requirements (including any
environmental law or regulation) except those that would not have a
Material Adverse Effect. The Company has not received
any notice or communication since January 1, 2004, asserting any
violation of Legal Requirements (including any environmental law or
regulation) by the Company except those that would not have a
Material Adverse Effect. The consummation of the
transactions contemplated by this Agreement, in and of themselves,
will not cause the revocation, termination or cancellation of any
Company Permit except those that would not have a Material Adverse
Effect.
(c) Except for
normal examinations conducted by any Government Entity in the
regular course of the business of the Company since January 1,
2004, through the date of this Agreement, no Government Entity has,
to the Knowledge of the Company, initiated, and no Government
Entity has provided written notice to the Company of any threatened
proceeding or investigation into the business or operations of the
Company. Except for normal examinations conducted by any
Government Entity in the regular course of the business of the
Company, since the date of this Agreement, no Government Entity
has, to the Knowledge of the Company, initiated, and no Government
Entity has provided written notice to the Company of any threatened
proceeding or investigation into the business or operations of the
Company, except as would not, individually or in the aggregate,
reasonably be expected to have a Company Material Adverse
Effect. There is no deficiency, violation or exception
claimed or asserted in writing since January 1, 2004, through the
date of this Agreement by any Government Entity with respect to any
examination of the Company to the Knowledge of the Company, has not
been resolved in all material respects. Except for
deficiencies, violations or exceptions that would not, individually
or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect, there is no deficiency, violation or
exception claimed or asserted in writing since the date of this
Agreement by any Government Entity with respect to any examination
of the Company.
(d) Each employee
of the Company who is required to be registered or licensed as a
registered representative, investment adviser representative,
salesperson or equivalent with any Government Entity is duly
registered as such and such registration is in full force and
effect, except where the failure to be so registered, individually
or in the aggregate, would not reasonably be expected to
have a Company Material Adverse
Effect.
(e) The Company has
made available to Buyer a true and correct copy of each material
no-action letter and exemptive order issued by the SEC to any of
the Company or any Fund that remains applicable to its respective
business as conducted on the date of this Agreement. The
Company and the Funds are in compliance in all material respects
with any such material no-action letters and exemptive
orders.
4.4.
Capitalization; Subsidiaries .
(a) The Company
currently has 1000 shares of common stock (par value $.01 per
share) issued and outstanding. All of the issued and
outstanding shares of common stock of the Company have been duly
authorized, are validly issued, fully paid, and
nonassessable. There are no (i) pre-emptive rights
outstanding or authorized options, warrants, purchase rights,
subscription rights, conversion rights, exchange rights, or other
contracts or commitments that could require the Company to issue,
sell, or otherwise cause to become outstanding any of its shares of
common stock; or (ii) options, phantom stock, stock
appreciation right, warrant, equity profit participation or similar
right with respect to the Company.
(b) The Company has
no Subsidiaries.
4.5. Financial
Statements; Undisclosed Liabilities . Section 4.5(a)
to the Disclosure Schedule contains the following financial
statements (the “ Financial Statements
”): (i) the Seller’s consolidated audited
balance sheets and related consolidated statements of income,
stockholders’ equity, and statements of cash flows for the
fiscal years ended December 31, 2008, December 31, 2007, and
December 31, 2006; and unaudited financial statements as of June
30, 2009; and (ii) the Company’s unaudited balance sheet
and related statement of income for the fiscal years ended December
31, 2008, December 31, 2007, and December 31, 2006; and for the six
months ended June 30, 2009. The Financial Statements
have been prepared in accordance with GAAP applied on a consistent
basis throughout the periods covered thereby and present fairly, in
all material respects, the financial condition of the Company as of
such dates and the results of operations for the periods specified;
provided , that the unaudited June 30, 2009 Financial
Statements described above are subject to normal year-end
adjustments (which adjustments would not be material, individually
or in the aggregate, and would be of a normal and recurring type)
and absence of footnotes and other presentation items (which notes
would be consistent in all material respects with the notes to the
Seller’s most recent audited Financial
Statements).
The Company has no liability or obligation of
whatever kind or nature (whether asserted or unasserted, absolute
or contingent, accrued or unaccrued, liquidated or unliquidated, or
due or to become due) that would be required by GAAP to be
disclosed on the Financial Statements (“ Liability
”), except for any Liabilities: (i) set forth
on the face of the Financial Statements; (ii) listed in
Section 4.5 of the Disclosure Schedule; (iii) that have
arisen in the ordinary course of business since the date of the
Latest Balance Sheet (which do not result from or arise out of,
does not relate to, is not in the nature of and was not caused by
any breach of contract, breach of warranty, tort, infringement or
violation of applicable law); (iv) under this Agreement or any
ancillary document or in connection with the transactions
contemplated herein or therein; or (v) disclosed as a
Liability in another section of the Disclosure
Schedule. The Company’s Net Working Capital as of
the Latest Balance Sheet Date is stated in Section 4.5(b) of the
Disclosure Schedule along with the account values used in its
determination.
4.6. Events
Subsequent to the Latest Balance Sheet . Since the
date of the Latest Balance Sheet:
(a) except as disclosed in
Section 4.6(a) of the Disclosure Schedule, there has been no event
or occurrence that has resulted in a Material Adverse Effect,
and
(b) except as expressly contemplated
by this Agreement, the Company has not:
(i)
incurred any Indebtedness or incurred or become
subject to any material liabilities (other than liabilities
incurred in the ordinary course of business and liabilities under
contracts entered into in the ordinary course of
business);
(ii) mortgaged,
pledged or become subjected to any Lien (other than Permitted
Liens) on any of its assets;
(iii) sold, assigned,
transferred, leased or licensed any material assets, except in the
ordinary course of business;
(iv) sold,
assigned, transferred, leased or licensed any material Intellectual
Property, except in the ordinary course of business;
(v) suffered
any material extraordinary losses or waived any rights of material
value;
(vi) issued, sold or
transferred any of its equity securities, securities convertible
into its equity securities or other equity securities or warrants,
options or other rights to acquire its equity securities, or any
bonds or debt securities;
(vii) made any material
capital expenditures or commitments therefor, except in the
ordinary course of business;
(viii) declared or made any
payment or distribution of cash or other property to equity holders
other than a $600,000 dividend payable by Company to Seller, or
purchased or redeemed any stock units or other equity securities
;
(ix) made any
material changes in any employee compensation, benefits, severance
or termination agreement, other than routine salary increases in
the ordinary course of business; or
(x) agreed to do
any of the foregoing.
4.7. Title to
Assets . The Company has good and marketable title
to, or a valid leasehold interest in, the tangible personal
property used in the conduct of the Business, free and clear of all
Liens (other than Permitted Liens), except for any tangible
personal property disposed of in the ordinary course of business
after the date hereof. The tangible personal property
owned or used by the Company is free from known material defects
and is in good operating condition and repair (subject to normal
wear and tear). The Company owns or has valid rights to
use all of the tangible personal property reasonably necessary for
the conduct of the Business.
4.8. Investment
Advisers Act Compliance . The Company is registered
as an investment adviser under the Advisers Act and has been since
January 1, 2004, duly registered as an investment adviser under the
Investment Advisers Act. The Company and each investment
adviser representative thereof is, and at all times required by
Legal Requirements has been, duly licensed or qualified in each
state or any other jurisdiction where the conduct of the Business
required such licensing or qualification except where the failure
to be so licensed or qualified would not have a Material Adverse
Effect. Each of the aforementioned registrations,
licenses and qualifications, as of the date hereof, is in full
force and effect in all material respects. The Company
has in effect, and at all times required by Legal Requirements has
had in effect, (i) a written policy regarding insider trading and
the protection of material non-public information, (ii) a written
code of ethics, as required by Rule 204A-1 under the Investment
Advisers Act, (iii) policies and procedures with respect to the
protection of nonpublic personal information about customers,
clients and other third parties designed to assure compliance with
Legal Requirements, (iv) a proxy voting policy as required by Rule
206(4)-6 under the Investment Advisers Act, (v) policies and
procedures with respect to business continuity plans in the event
of business disruptions and (vi) all such other policies and
procedures required by Rule 206(4)-7 under the Investment Advisers
Act (collectively, “Adviser Compliance Policies”), and
has designated and approved an appropriate chief compliance officer
in accordance with Rule 206(4)-7. Copies of all such
Investment Adviser Compliance Policies have been provided or made
available to Buyer. All such Adviser Compliance Policies
comply in all material respects with Legal Requirements, including
Sections 204A and 206 of the Investment Advisers Act, and
there have been no material allegations of violations by any
employee or client of the Company or any of its Affiliates or any
Government Entity of material violations of such Adviser Compliance
Policies since January 1, 2004. The policies of the
Company with respect to avoiding conflicts of interest, to the
extent they are required to be disclosed pursuant to Legal
Requirements, are as set forth in its most recent Form
ADV.
(a) Since January
1, 2004, each Form ADV of the Company, as of the date of filing
with the SEC (and with respect to Form ADV Part II or its
equivalent, its date) did not, as of such respective date, 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 light of the circumstances under which
they were made, not misleading. The Company has
implemented written policies and procedures as required by
applicable Law (including Rule 206(4)-7 under the Investment
Advisers Act), complete and correct copies of which (including any
reports or filings under such policies and procedures since January
1, 2004 relating to compliance by the Company and its employees
subject thereto) have been delivered to Buyer and, except as
otherwise noted in any such reports or filings, the Company has
been in compliance, in all material respects, with such policies
and procedures.
(b) Regulatory
Inspection Letters . The Company has provided Buyer
with a copy of all regulatory audit, inspection or examination
letters from the SEC, FINRA or other federal, state or local
authorities with regulatory jurisdiction over the Company, and the
Company’s responses to each such letter.
(c) Regulatory
Filings . The Company has filed all registrations,
reports, statements, notices and other material filings required to
be filed with the SEC, the FINRA and any other Government Entity,
including all amendments or supplements to any of the above (the
“ Filings ”). The Filings complied
with the requirements of Legal Requirements. The Company
and Seller have listed on Disclosure Schedule 4.8(c) and made
available to Buyer complete and correct copies of all Filings made
by the Company within the past five years (including, but not
limited to, all filings on Form ADV).
(d) Compliance
with Advisory Agreements . The Company has complied
in all material respects with all applicable obligations,
requirements and conditions of each Advisory Agreement, with all
enforceable instructions from Clients and with Legal
Requirements.
(e) “Soft
Dollar” Services . The receipt of soft dollar
brokerage and research benefits and services by the Company
qualifies and has at all times qualified for the safe harbor
afforded by Section 28(e) of the Securities Exchange Act, and the
Company has complied with all related disclosure rules in all
material respects. The Company has satisfied in all
material respects its duty of “best execution” (as such
term is understood under the Investment Advisers Act) for all
Clients for whom it exercises trading discretion.
(f) Anti-Money
Laundering . The Company has a written anti-money
laundering program and a written customer identification program,
copies of which have been made available to Buyer, and has complied
with the terms of such programs and Legal Requirements in all
material respects.
(g)
Registrations . Except for the registration of
the Company as an investment adviser, none of the Company, or its
respective directors, officers or employees is required to be
registered, licensed or qualified as a commodity broker dealer,
broker-dealer commodity pool operator, futures commission agent,
commodity trading advisor, bank, trust company, real estate broker,
insurance company, insurance producer, insurance agent or insurance
broker. The Company has not received notices of, and is
not aware of any basis for, any pending proceeding concerning any
failure to obtain any such registrations.
(h) Performance
Information . To the Company’s Knowledge, all
performance information provided, presented or made available by or
at the direction of the Company to any Client has complied in all
material respects with Legal Requirements. The Company
maintains all documentation necessary to form the basis for,
demonstrate or recreate the calculation of the performance or rate
of return of all accounts that are included in a composite (current
and historical performance results) as required by Legal
Requirements.
(i) Trade
Allocations . The Company has adopted and
implemented procedures or practices for the allocation of
securities purchased for its Clients that comply in all material
respects with Legal Requirements, including procedures or practices
relating to the allocation to Clients or other accounts of
securities in which the Company or any of its officers, directors
employees or Affiliates has an interest.
(j) Directed
Brokerage . The Company has not directly or
indirectly caused a securities transaction to be effected on behalf
of any Client that involved a directed brokerage arrangement that
did not comply in all material respects with Legal
Requirements.
(k) Revenue
Sharing Agreements . Neither the Seller nor the
Company has directly or indirectly been a party to, participated in
or facilitated any revenue sharing practice or agreement that did
not comply in all material respects with Legal
Requirements.
(l) Financial
Products . To the Knowledge of Seller, all financial
products sold, distributed, issued or administered by the Company
have been sold, distributed, issued and administered by the
Company, in all material respects, in accordance with all Legal
Requirements and the terms of the disclosure, selling or offering
documents relating thereto.
(m) Compliance
with Investment Company Act . Each Client’s
account is and has at all times been managed on the basis of the
Client’s individual financial situation and investment
objectives, and in accordance with restrictions, if any, imposed by
the Client on the management of the account. The Company
obtains information about each Client’s financial situation
and investment objectives (including any restrictions that the
Client may wish to impose regarding the management of the account)
at the time the account is opened, contacts the Client not less
frequently than annually to determine whether there have been any
changes regarding that information, and notifies the Client in
person or in writing at least quarterly that the Company should be
contacted if there are any such changes. The Company is
reasonably available to consult with each Client regarding the
management of such Client’s account. Each Client
is, and has been, provided with account statements at least
quarterly containing a description of all activity in the
Client’s account. Each Client retains certain
indicia of ownership of the securities and funds in the
Client’s account, including the right to withdraw such
securities or funds, the right (unless delegated in writing to the
Company) to vote securities in the account, and the right to
proceed directly as a security holder against the issuer of the
securities in the account without the obligation to join other
Clients (or any other person or party) as a condition precedent to
initiating such proceeding.
(n) Pay to Play
Practices . Except as disclosed in Section 4.8(n) of
the Disclosure Schedule, the Company, its officers, directors,
employees or Affiliates have not made political contributions in
excess of $250 per election per candidate to any political
candidate that has or could influence the selection of the Company
as an investment adviser to public pension funds or similar
government plans. Neither the Company nor its officers,
directors, employees or Affiliates have solicited contributions
through third parties or political action committees for elected
officials or political parties that could influence the selection
of the Company as an investment adviser for any
Client. Except as disclosed in Section 4.8(n) of the
Disclosure Schedule, none of the Company, its officers, directors,
employees or Affiliates has paid any Person to solicit public
pension funds or similar Funds for Governmental
Entities.
(o) Custody
. Except as disclosed in Section 4.8(o) to the
Disclosure Schedule, no separate Consent is required from
custodians of Client Assets Under Management other than Consents
described in Section 6.1 hereof.
(p)
Advertising . All advertising, performance
materials, promotional information, marketing and similar
materials, whether oral, written, electronic or otherwise has
complied and complies with the requirements of the Investment
Advisers Act, the Investment Company Act and applicable rules and
requirements of the Global Investment Performance Standards
(“GIPS”).
4.9. Tax
Matters . All federal, state, local and foreign Tax
Returns, including information returns, required to be filed by or
on behalf of the Company through the date hereof have been timely
and properly filed. To the Knowledge of Seller and
Company all such Tax Returns correctly and accurately set forth in
all material respects the amount of any Taxes relating to the
applicable period. All Taxes required to be paid by or
on behalf of the Company either directly, as part of the
consolidated Tax Return of another taxpayer, or otherwise, whether
disputed or not and whether or not shown on any Tax Return, have
been paid in full, except for Taxes which have not
yet accrued or otherwise become due or for which there is an
adequate reserve on the financial statements of the Company as of
the date hereof. No claim has ever been made by an
authority in a jurisdiction where the Company does not file Tax
Returns that it is or may be subject to taxation by that
jurisdiction. There are no liens, charges, claims,
restrictions or encumbrances for Taxes (other than Taxes not yet
due and payable) upon any of the assets of the
Company. All Taxes and other assessments and levies
which the Company was or is required to withhold or collect have
been withheld and collected and have been paid over to the proper
Government authorities. Neither the Company nor Seller
has waived any statute of limitations in respect of Taxes or agreed
to any extension of time with respect to Tax payment, assessment,
deficiency or collection. 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, shareholder, or other third
party. Neither the IRS nor any other taxing authority is
now asserting or, to the knowledge of the Company or Seller,
threatening to assert against the Company any deficiency or claim
for additional Taxes or interest thereon or penalties in connection
therewith in respect of the Company. The Company is not
a party to any Tax allocation, Tax sharing or similar agreement or
arrangement (whether or not written) pursuant to which it will have
any obligation to make any payments after Closing. The
Company has no liability for the taxes of any Person (other than
the Company) under Reg. §1.1502-6 (or any similar provision of
state, local, or foreign law), as a transferee or successor, by
contract, or otherwise. The Seller is not a
“foreign person” within the meaning of
Section 1445 of the Code and Treasury Regulations
Section 1.1445-2. Neither the Company nor any other
Person (including Seller) on behalf of the Company has (i) agreed
to or is required to make any adjustments pursuant to Section
481(a) of the Code or any similar provision of state, local or
foreign law by reason of a change in accounting method initiated by
the Company or has any knowledge that the Internal Revenue Service
has proposed any such adjustment or change in accounting method, or
has any application pending with any taxing authority requesting
permission for any changes in accounting methods that relate to the
business or operations of the Company, or (ii) executed or entered
into a closing agreement pursuant to Section 7121 of the Code or
any predecessor provision thereof or any similar provision of
state, local or foreign law with respect to the Company.
4.10.
Environmental Matters . The Company is in
compliance with all applicable Environmental Laws. The
Company is in compliance with all permits, licenses and other
authorizations that may be required pursuant to the Environmental
Laws. The Company has not received any written notice
from any Government Entity of any actual or alleged violations or
liabilities, including any investigatory, remedial or corrective
obligations, arising under Environmental Laws, and to the
Company’s Knowledge no other Person has alleged any
violations or liabilities of or under any Environmental
Laws. This Section 4.10 contains the sole and exclusive
representations and warranties of Seller with respect to any
matters arising under any Environmental Laws.
4.11.
Intellectual Property .
(a) Set forth on
Section 4.11(a) of the Disclosure Schedule are all of the following
that are owned or used by the Company, together in each case with
the applicable serial number or registration number, the applicable
jurisdictions(s)/territory(ies), and the name of the owner of such
item: (i) patents and patent applications; (ii)
registered trademarks and service marks, applications to register
trademarks and service marks, and material common law marks; (iii)
registered copyrights and applications to register copyrights, and
material unregistered copyrights; (iv) domain names; (v) all
Intellectual Property (except for commercially available
off-the-shelf software where the aggregate value of all licenses of
the same or substantially identical software is less than $10,000)
owned by any Person that the Company uses under any license,
sublicense, grant, or other agreement and that is material to the
Business. With respect to those items scheduled pursuant
to clauses (i)-(iv) of this paragraph, each such item is valid,
subsisting and enforceable.
(b) The Company has
(and at all times when used has had) a valid right to use all
Intellectual Property that has been used in the conduct of the
Business, without any obligation or liability whatsoever to make
any payments by way of royalties, fees or otherwise (other than
pursuant to agreements set forth on Section 4.16 of the Disclosure
Schedule or the non-disclosure of which would not constitute a
misrepresentation under Section 4.16). The Company owns
all of the Intellectual Property purported to be owned by it free
and clear of all Liens other than Permitted Liens. The
consummation of the transactions contemplated by this Agreement
will not alter or impair any ownership or license rights in any
Company Intellectual Property. None of the Company
Intellectual Property is owned in whole or in part by Seller or
employees of the Company. The Company owns or has valid
licenses to all Intellectual Property that is required to operate
the Business as it is presently being conducted as is reasonably
expected to be conducted in the future.
(c) The Company has
not received any claims during the three year period prior to the
date of this Agreement alleging that the Company has infringed,
misappropriated or otherwise violated the Intellectual Property of
any other Person or regarding the validity, enforceability or
ownership of any of the Company Intellectual
Property. No Person is, to the Company’s
Knowledge, infringing upon, misappropriating or otherwise violating
any material Intellectual Property owned or used by the Company,
and the Company has not made any claims or threats alleging any
such infringement, misappropriation or violation by any
Person. The Company is not and has not, to its
knowledge, infringed upon, misappropriated or otherwise violated
the Intellectual Property of any other Person.
(d) Set forth on
Section 4.11(d) of the Disclosure Schedule are all material
Proprietary Information Technology Systems which are either
existing or are under development and identifies the owner of each
material Proprietary Information Technology System. The
Disclosure Schedule also sets forth all other material Computer
Systems used in the Business and identifies who is the owner or
licensee of each material Computer System. The
documentation and the source code with its embedded commentary,
descriptions and indicated authorships, the specifications and the
other informational materials which describe the operation,
functions and technical characteristics applicable to the
Proprietary Information Tech
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