STOCK PURCHASE AGREEMENTStock Purchase Agreement |
|
|
You are currently viewing: This Stock Purchase Agreement involves
INVESTMENT TECHNOLOGY GROUP, INC., | RADICAL CORPORATION. RealDealDocs™ contains millions of easily searchable legal documents and clauses from top law firms. Search for free - click here. |
|
|
|
|
Exhibit 10.5
Execution Copy
STOCK PURCHASE AGREEMENT
dated as of June 11, 2003
by and among
INVESTMENT TECHNOLOGY GROUP, INC.,
RADICAL CORPORATION
and
THE INDIVIDUALS LISTED HEREIN
TABLE OF CONTENTS
ii
iii
iv
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT, dated as of June 11, 2003 (this “ Agreement ”) is made by and among Investment Technology Group, Inc., a Delaware corporation (the “ Purchaser ”), Radical Corporation, a Delaware corporation (the “ Company ”), and the individuals listed on the signature page(s) hereto (collectively, the “ Selling Stockholders ” and each individually, a “ Selling Stockholder ”).
WHEREAS, the Selling Stockholders own an aggregate of 42,160 shares of the Company Common Stock (as hereinafter defined), which shares prior to giving effect to the issuance of the Purchased Shares (as hereinafter defined), constitute 100% of the issued and outstanding shares of Company Common Stock;
WHEREAS, the Purchaser desires to purchase from the Company and the Company desires to issue and sell to the Purchaser 14,053 shares of the Company Common Stock (the “ Purchased Shares ”), which shares upon issuance shall constitute 25% of the issued and outstanding shares of Company Common Stock;
WHEREAS, the Selling Stockholders desire to grant to the Purchaser an option to purchase an aggregate of 42,160 shares of Company Common Stock, which shares after giving effect to the issuance of the Purchased Shares shall constitute 75% of the issued and outstanding shares of Company Common Stock; and
WHEREAS, the Company has entered into an amended and restated software license and network access agreement with the Purchaser’s Affiliate (the “ License Agreement ”) for use of the System (as hereinafter defined) in the form of Exhibit A hereto.
NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth herein, the parties hereto, intending to be legally bound, agree as follows:
SECTION 1.1 . Definitions . For all purposes in this Agreement, the following terms shall have the respective meanings set forth in this Section 1.1 (such definitions to be equally applicable to both the singular and plural forms of the terms herein defined):
“ Additional Option Payment Amounts ” shall have the meaning specified in Section 2.5(a) of this Agreement.
“ Additional Payment Calculation Date ” shall have the meaning specified in Section 2.5(a) of this Agreement.
“ Additional Payment Date ” shall have the meaning specified in Section 2.5(b) of this Agreement.
“ Affiliate ” of a Person shall mean any and all Persons that directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with such Person.
“ Agreement ” shall have the meaning specified in the Preamble of this Agreement.
“ Average Daily Revenue ” shall mean, for any period, the Gross Revenues for such period divided by the number of Business Days in such period.
“ Budget ” shall have the meaning specified in Section 4.2(i) of this Agreement.
“ Business Day ” shall mean any day when all of the New York Stock Exchange, the American Stock Exchange and Nasdaq are open for trading.
“ Change of Control ” shall mean entering into a Contract with respect to any of the following, occurring in a single transaction or as part of a series of related transactions: (a) the direct or indirect acquisition by any Person or group of Persons acting in concert of more than 50% of the voting power of the Purchaser or (b) the acquisition by any Person or group of Persons acting in concert of all or substantially all of the assets of the Purchaser and its subsidiaries, taken as a whole; provided that , a Change of Control shall include any subsequent Change of Control of the Purchaser or a surviving entity if the Purchaser has merged into another entity.
“ Change of Control Event ” shall have the meaning specified in Section 2.6 of this Agreement.
“ Closing ” shall have the meaning specified in Section 2.3 of this Agreement.
“ Closing Date ” shall have the meaning specified in Section 2.3 of this Agreement.
“ Company ” shall have the meaning specified in the Preamble of this Agreement.
“ Company Common Stock ” shall mean the common stock, $.001 par value, of the Company.
2
“ Company Financial Statements ” shall have the meaning specified in Section 3.1(e) of this Agreement.
“ Competing Acquisition ” shall mean the Purchaser or any of its Affiliates entering into a Contract to acquire, directly or indirectly, of any title, interest or right to use, market, distribute, license or sublicense a trading system that competes with the System; provided that , list trading systems will not be considered to compete with the System.“ Competing Acquisition Event ” shall have the meaning specified in Section 2.7 of this Agreement.
“ Confidential Information ” shall have the meaning specified in Section 7.1(a) of this Agreement.
“ Contract ” shall mean any written or oral agreement, contract, understanding, arrangement, instrument, note, insurance policy, benefit plan, commitment, covenant, assurance or undertaking.
“ Disclosing Party ” shall have the meaning specified in Section 7.1(a) of this Agreement.
“ Employment Agreements ” shall have the meaning specified in Section 2.4(c) of this Agreement.
“ Encumbrance ” shall mean any mortgage, pledge, hypothecation, assignment, encumbrance, lien (statutory or other), other charge or security interest, or any preference, priority or other agreement or preferential arrangement of any kind or nature whatsoever.
“ Escrow Agent ” shall mean JPMorgan Chase Bank or any other Person reasonably acceptable to the Purchaser, Hemant Sharma and Thomas George.
“ Escrow Agreement ” shall have the meaning specified in Section 2.4(d) of this Agreement.
“ Expiration Date ” shall have the meaning specified in Section 2.4(b) of this Agreement.
“ Final Payment Date ” shall have the meaning specified in Section 2.5(b) of this Agreement.
“ Fiscal Month ” shall mean, for the first fiscal month of the year, the period beginning on the first day of January, and ending on the last Friday in January and, for each subsequent fiscal month, the period beginning on the day after the last day of the prior fiscal month and ending on the last Friday of such month; provided that , the last fiscal month in any year shall end on December 31 st of such year.
3
“ Fiscal Quarter ” shall mean, for the first fiscal quarter of the year, the period beginning on the first day of January, and ending on the last Friday in March and, for each subsequent fiscal quarter, the period beginning on the day after the last day of the prior fiscal quarter and ending on the last Friday of such quarter; provided that , the last fiscal quarter in any year shall end on December 31 st of such year.
“ GAAP ” shall mean accounting principles generally accepted in the United States in effect from time to time.
“ Governmental Entity ” shall mean any federal, state, local or foreign court, administrative agency or commission or other governmental authority or instrumentality, or self-regulatory organization.
“ Gross Revenue” shall mean, for any period, any and all gross commissions, fees or other remuneration accrued during such period to the ITG Group in respect of trades executed via the System, which amount shall not include any revenues from commissions, fees or other remuneration related to trades executed (a) by the trading desks of the ITG Group or (b) through POSIT by existing ITG Group customers as of the date hereof that have executed trades through POSIT within three months prior to the date hereof or prior to using the System, whichever is earlier, and which amount shall be determined after deduction of volume or other discounts actually granted, soft dollar credits and verified trade differences (including errors and accommodations, as such term is used in the brokerage industry); provided that , any deductions with respect to soft dollar credits shall not include any credits to the ITG Group which are not consistent with the ITG Group’s soft dollar practices and any deductions with respect to any discounts shall not include any discounts which are not consistent with the ITG Group’s ordinary course of business and ITG Group’s practices with respect to discounts.
“ Gross Revenue Statement ” shall have the meaning specified in Section 5.6 of this Agreement.
“ Indemnitee ” shall have the meaning specified in Section 8.1 of this Agreement.
“ Intellectual Property ” shall mean all of the following, in whatever form or medium, anywhere in the world: patents, trademarks, service marks, trade names, corporate names, domain names, copyrights, and copyrighted works; registrations thereof and applications (including provisional applications) therefore; derivatives, continuations, continuations-in-part, extensions, divisionals, re-examinations, reissues and renewals thereof; trade secrets, software (in any form, including source code and object code), firmware, mask works, programs, flow charts, research records, documentation, inventions (whether patentable or unpatentable), utility models, discoveries, proprietary processes, and items of proprietary know-how, information, data (whether or not protected by copyright or other intellectual property), proprietary prospect lists, customer lists, projections, analyses,
4
proprietary market studies and any other intellectual property, including any enhancements or improvements of any of the above.
“ ITG Group ” shall mean the Purchaser and all its direct and indirect Affiliates.
“ Legal Requirement ” shall mean any federal, state, local or foreign statute, law, rule, regulation, ordinance, code, constitution, treaty, or Order or determination of any Governmental Entity.
“ License Agreement ” shall have the meaning specified in the Recitals of this Agreement.
“ Losses ” shall have the meaning specified in Section 8.1 of this Agreement.
“ Material Adverse Effect ” shall mean, with respect to any Person, a material adverse effect on the business, assets, financial condition or results of operation of such Person.
“ Minimum Interest ” shall mean a 20% or more beneficial ownership interest in the aggregate issued and outstanding Company Common Stock.
“ New Escrow Agreement ” shall have the meaning specified in Section 8.6 of this Agreement.
“ Option ” shall have the meaning specified in Section 2.4(a) of this Agreement.
“ Option Closing Date ” shall have the meaning specified in Section 2.4(b) of this Agreement.
“ Option Exercise Date ” shall have the meaning specified in Section 2.4(b) of this Agreement.
“ Option Exercise Notice ” shall have the meaning specified in Section 2.4(b) of this Agreement.
“ Option Exercise Price ” shall have the meaning specified in Section 2.4(a) of this Agreement.
“ Option Shares ” shall have the meaning specified in Section 2.4(a) of this Agreement.
“ Order ” shall mean any order, judgment, injunction, edict, decree, ruling, pronouncement, determination, decision, opinion, arbitration, verdict, sentence, subpoena,
5
writ or award made, entered, rendered or otherwise put into effect by or under the authority of any Governmental Entity or any arbitrator or arbitration panel.
“ Patent Infringement Losses ” shall mean any Losses incurred subsequent to the Option Exercise Date resulting from or arising out of Intellectual Property of the Company infringing any patents issued as of the Option Closing Date (or continuations, continuations-in-part, extensions, divisionals, re-examinations, reissues and renewals thereof) or any patents issued in respect of patent applications published as of the Option Closing Date (or continuations, continuations-in-part, extensions, divisionals, re-examinations, reissues and renewals thereof).
“ Payment Instructions ” shall have the meaning specified in Section 2.4(b) of this Agreement.
“ Permit ” shall mean any permit, license, franchise, concession, variance, exemption, or approval of any Governmental Entity.
“ Permitted Investments ” shall mean obligations denominated in U.S. dollars maturing or capable of redemption by the holder not more than twelve months after the date of acquisition which are (a) issued or guaranteed by the U.S. Government or any agency or instrumentality thereof, (b) demand deposits, time deposits, certificates of deposit or other obligations issued, accepted or guaranteed by a bank having a rating at time of such investment or acquisition of at least A2 from Moody’s Investors Service, Inc. or A from Standard & Poor’s Ratings Services and having a combined capital, surplus and undivided profits (less any undivided losses) of not less than $100 million, or (c) money market funds having a rating from Moody’s Investors Service, Inc. or Standard & Poor’s Ratings Services in the highest investment category granted thereby at the time of acquisition.
“ Person ” shall mean any individual, corporation, partnership, limited liability company, incorporated or unincorporated association, joint venture, joint stock company, estate, trust, unincorporated organization, firm or other enterprise, association, entity or Governmental Entity.
“ Proceeding ” shall have the meaning specified in Section 3.1(i) of this Agreement.
“ Purchase Price ” shall have the meaning specified in Section 2.2 of this Agreement.
“ Purchased Shares ” shall have the meaning specified in the Recitals of this Agreement.
“ Purchaser ” shall have the meaning specified in the Preamble of this Agreement.
6
“ Purchaser Indemnitee ” shall have the meaning specified in Section 8.1 of this Agreement.
“ Receiving Party ” shall have the meaning specified in Section 7.1(a) of this Agreement.
“ Representative ” shall mean, with respect to any party to this Agreement, any officer, director, manager, employee, affiliate, agent, representative or advisor.
“ Restricted Transfer Period ” shall mean the period commencing the date hereof and ending on the earlier of (a) the Option Closing Date and (b) the Expiration Date.
“ Scheduled Patents ” shall mean the patents listed on Schedule 8.4 to this Agreement.
“ Securities Act ” shall mean the Securities Act of 1933, as amended.
“ Sellers’ Representative ” shall have the meaning specified in Section 8.7 of this Agreement.
“ Selling Stockholder ” shall have the meaning specified in the Preamble of this Agreement.
“ Stockholder Indemnitee ” shall have the meaning specified in Section 8.1 of this Agreement.
“ Stockholders ” shall mean the Purchaser and each of the Selling Stockholders.
“ Software ” shall mean any and all computer programs (including any and all software implementations of algorithms, models and methodologies, whether in source code or object code but excluding any off-the-shelf software except off-the-shelf software that is both material and relates to the Company business) and computer databases and computer compilations (including any and all data and collections of data, whether machine readable or otherwise).
“ Source Code Escrow Agreement ” shall have the meaning specified in the License Agreement.
“ Spartan License Agreement ” shall mean the software license agreement between the Company and Spartan Technologies, LLC, dated March 22, 2002.
“ System ” shall mean (i) the “Licensed Product” and/or (ii) the “Radical Network” as defined in the License Agreement.
“ Tag Along Shares ” shall have the meaning specified in Section 5.2(d) of this Agreement.
7
“ Taxes ” shall mean all federal, state, local and foreign income, profits, franchise, gross receipts, payroll, sales, employment, use, property, withholding, excise, occupancy, custom, duty, capital stock, ad valorem, value added, estimated, stamp, alternative and other taxes, governmental duties or governmental assessments of any nature whatsoever, together with all interest, penalties and additions imposed with respect to such amounts.
“ Transaction Agreements ” shall mean (a) this Agreement, (b) the License Agreement, (c) the Source Code Escrow Agreement, (d) the Employment Agreements, (e) the Escrow Agreement, if any, (f) the Spartan Assignment Agreement between the Company and Hemant Sharma and Thomas George, dated the date hereof and (g) the New Escrow Agreement, if any.
“ Transfer ” shall have the meaning specified in Section 5.1 of this Agreement.
“ Transferee ” shall have the meaning specified in Section 5.2(a) of this Agreement.
“ Transfer Notice ” shall have the meaning specified in Section 5.2(a) of this Agreement.
“ Transferring Stockholder ” shall have the meaning specified in Section 5.2(a) of this Agreement.
“ Transfer Shares ” shall have the meaning specified in Section 5.2(a) of this Agreement.
“ Violation ” shall have the meaning specified in Section 3.1(c)(i)(A) of this Agreement.
“ Voting Debt ” shall have the meaning specified in Section 3.1(d) of this Agreement.
SECTION 2.1 . Purchase and Sale . On the date hereof, and upon the terms and subject to the conditions hereinafter set forth, the Company shall issue and sell to the Purchaser the Purchased Shares, and the Purchaser shall purchase from the Company the Purchased Shares.
8
SECTION 2.2. Purchase Price . The purchase price for the Purchased Shares shall be $750,000 (the “ Purchase Price ”), payable by the Purchaser to the Company as provided in Section 2.3 below.
SECTION 2.3. Payment of Purchase Price and Delivery of Shares . On the date hereof (the “ Closing Date ”), the Purchaser shall pay the Purchase Price to the Company in cash by wire transfer of immediately available funds to the Company’s account at JPMorgan Chase Bank, Account Number 305-0671403-65, ABA Routing Number 021000021, the Company shall deliver to the Purchaser a certificate representing the Purchased Shares issued in the Purchaser’s name, and the Selling Stockholders shall deliver the Option Shares, duly endorsed for transfer to the Purchaser or accompanied by stock powers executed in blank to the Company to be held in escrow by it. The consummation of the purchase and sale of the Purchased Shares shall occur at the offices of Boies, Schiller and Flexner LLP, 570 Lexington Avenue, 16 th Floor, New York, New York 10022, or at such other place as the Purchaser and the Company may agree (the “ Closing ”).
SECTION 2.4. Option . (a) On the Closing Date, and upon the terms and subject to the conditions hereinafter set forth, the Selling Stockholders hereby grant to the Purchaser an option, exercisable in whole and not in part in the Purchaser’s sole discretion, to purchase an aggregate of 42,160 shares of Company Common Stock (the “ Option ”) for the Option Exercise Price, which shares represent, after giving effect to the issuance of the Purchased Shares contemplated in Section 2.1 above, 75% of the issued and outstanding shares of Company Common Stock. The number of shares of Company Common Stock to be sold by each Selling Stockholder (in each case, the “ Option Shares ”) upon exercise of the Option is set forth next to such Selling Stockholders’ name in Exhibit B hereto. The “ Option Exercise Price ” for the Option shall be equal to the product of (i) the Average Daily Revenue for the three Fiscal Months immediately prior to the Option Exercise Date and (ii) 252. In the event that the Option Exercise Price as calculated in accordance with the preceding sentence is (A) less than $4,000,000, the Option Exercise Price shall be $4,000,000 or (B) greater than $18,000,000, the Option Exercise Price shall be $18,000,000. Notwithstanding the foregoing, if the Exercise Price is less than $18,000,000, Additional Option Payment Amounts, as set forth in Section 2.5 below, if any, shall be paid to the Selling Stockholders towards the purchase of Option Shares.
(b) In the event that the Purchaser wishes to exercise the Option, the Purchaser shall deliver a written notice to the Company and each of the Selling Stockholders (the “ Option Exercise Notice ”) specifying a date for the exercise of the Option which date shall be one of February 28, 2004, March 27, 2004, May 1, 2004 or May 29, 2004 (each, an “ Option Exercise Date ”). Such notice may be delivered at any time within the 30 day period prior to and including any such Option Exercise Date. If an Option Exercise Notice is not delivered on or prior to May 29, 2004 (the “ Expiration Date” ), the Option shall expire and the parties hereto shall have no further rights or obligations with respect to such Option. Within 10 days of delivery of the Option Exercise Notice, each of the Selling Stockholders shall provide the Purchaser with written payment instructions for their pro rata portion of the Option Exercise Price (the “ Payment Instructions ”) and each of the Selling Stockholders
9
shall provide written notice to the Purchaser of any updates to the representations and warranties set forth in Section 3.1 or 3.2 below, as the case may be, to be made or confirmed on the Option Closing Date pursuant to Section 2.4(c) below which are necessary to make such representations and warranties true and correct on the Option Closing Date, which update may only reflect events that occurred subsequent to, and not prior to, the Closing Date. The closing of the purchase and sale of the Option Shares shall take place at the offices of the Purchaser on the thirtieth day after the Option Exercise Date (or if such date is not a Business Day, the immediately succeeding Business Day) (the “ Option Closing Date ”) unless on or prior to such date the Purchaser determines, in its sole judgment, as a result of any updates to the representations and warranties not to exercise the Option. Failure of one or more Selling Stockholders to provide Payment Instructions shall not affect each such Selling Stockholder’s obligation to deliver the Option Shares on the Option Closing Date. In the event one or more Selling Stockholders (other than Hemant Sharma or Thomas George) fails to provide Payment Instructions, payment will be made by certified check to any such Selling Stockholder as provided in Section 9.1 hereof.
(c) On the Option Closing Date, unless the Purchaser shall have elected not to exercise the Option pursuant to Section 2.4(b) above, the Purchaser shall (i) pay the portion of the Option Exercise Price to each Selling Stockholder in the manner set forth in Section 2.4(d) below on a pro rata basis based on the number of Option Shares sold by each Selling Stockholder and (ii) provide written confirmation that the representations and warranties of the Purchaser set forth in Section 3.3 below are true and correct as if made on the Option Closing Date. Simultaneously, on the Option Closing Date, unless the Purchaser shall have elected not to exercise the Option pursuant to Section 2.4(b) above, (A) the Company shall release from escrow to the Purchaser the Option Shares duly endorsed for transfer to the Purchaser or accompanied by stock powers executed in blank, (B) the Selling Stockholders shall jointly and severally make the representations and warranties set forth in Section 3.1 below as of the Option Closing Date, with such updates as previously disclosed in writing to the Purchaser pursuant to Section 2.4(b) above, (C) each Selling Stockholder shall provide written confirmation that the representations and warranties of each Selling Stockholder set forth in Section 3.2 below are true and correct as if made on the Option Closing Date with such updates as previously disclosed in writing to the Purchaser pursuant to Section 2.4(b) above, and (D) each of Hemant Sharma and Thomas George shall have entered into separate employment agreements with the Purchaser or any of its Affiliates as designated by the Purchaser substantially in the form of Exhibit C hereto (the “ Employment Agreements ”).
(d) The Option Exercise Price shall be paid by the Purchaser to the Selling Stockholders in the following manner: (i) their respective pro rata portion of the first $1,575,000 of the Option Exercise Price shall be paid in cash by certified check or by wire transfer of immediately available funds, and (ii) the remainder of the Option Exercise Price shall be paid in cash by certified check or by wire transfer of immediately available funds to the Escrow Agent to hold in an interest bearing escrow account maintained by the Escrow Agent in accordance with an escrow agreement substantially in the form of Exhibit D hereto (the “ Escrow Agreement ”) for the benefit of each of the Selling Stockholders and shall,
10
subject to the terms of the Escrow Agreement, be released by the Escrow Agent to each of the Selling Stockholders in their respective pro rata shares on the date that is one calendar year from the Option Exercise Date (or if such date is not a Business Day, the immediately succeeding Business Day). Notwithstanding anything to the contrary in this Agreement, but subject to the terms of the Escrow Agreement, after the Option Closing Date, (A) if cumulative Gross Revenues for the period beginning as of the date hereof exceeds (x) $100,000,000, then an amount equal to 25% of the Escrow Fund (as defined in the Escrow Agreement) shall be released by the Escrow Agent to the Selling Stockholders or (y) $150,000,000, then an amount equal to 50% of such remaining Escrow Fund shall be released by the Escrow Agent to the Selling Stockholders, and (B) if there is a Change of Control, an amount equal to 50% of the amounts then in Escrow Fund shall be released by the Escrow Agent to the Selling Stockholders, and in the event of this clause (B), any subsequent Additional Option Payment Amounts, if any, to be paid to the Escrow Agent pursuant to Section 2.5(b) in respect of any Purchaser Claims subsequent to the Change of Control shall instead be paid directly to the Selling Stockholders.
SECTION 2.5. Additional Option Payment Amounts . (a) Subject to Sections 2.6 and 2.7 below, to the extent that the Purchaser has exercised the Option, each of the Selling Stockholders shall be entitled to their pro rata share based on the number of Option Shares sold by each Selling Stockholder of up to four additional payments (together, the “ Additional Option Payment Amounts ”) to be calculated, with respect to the first Additional Option Payment Amount, as of the date that is the last day of the second Fiscal Month after the Fiscal Month in which the Option Exercise Date occurs and, with respect to the second, third, and fourth Additional Option Payment Amounts, as of the date that is the last day of the third Fiscal Month from the previous calculation date (each, an “ Additional Payment Calculation Date ”). Each Additional Option Payment Amount shall be an amount, if any, equal to (i) the product of (A) 25% and (B) the difference between (1) the Gross Revenues during the period from and including the Option Exercise Date to and including the relevant Additional Payment Calculation Date and (2) the Option Exercise Price less (ii) any Additional Option Payment Amounts corresponding to a previous Additional Payment Calculation Date; provided that , in no event shall the aggregate Additional Option Payment Amounts be greater than the difference between (I) $18,000,000 and (II) the Option Exercise Price.
(b) Subject to Sections 2.6 and 2.7 below, the Additional Option Payment Amounts shall be payable in cash as follows: (i) 50% of each Additional Option Payment Amount, if any, shall be payable on the fifteenth day after the corresponding Additional Payment Calculation Date (or if such date is not a Business Day, the immediately preceding Business Day) and (ii) 50% of each of the first, second and third Additional Option Payment Amounts, if any, shall be payable on the fifteenth day after the fourth Additional Payment Calculation Date (or if such date is not a Business Day, the immediately preceding Business Day) and (iii) 50% of the fourth Additional Option Payment Amount, if any, shall be payable no later than 90 days after the fourth Additional Payment Calculation Date (or if such date is not a Business Day, the immediately succeeding Business Day) (the “ Final Payment Date ”, and such Final Payment Date and each such other payment date, an “ Additional Payment
11
Date ”); provided that , the amount to be paid pursuant to clauses (ii) and (iii) above shall be increased or decreased, as the case may be, to reflect any adjustments to the Gross Revenues as reflected in the Purchaser’s books and records during the applicable period; provided further that , at the time of any payment of any Additional Option Payment Amount pursuant to clauses (i), (ii) or (iii) above, to the extent that any Purchaser Claim Amount (as defined in the Escrow Agreement) exceeds the amount of any related Purchaser Reserve (as defined in the Escrow Agreement), any such Additional Payment Amounts to be paid up to an amount equal to any such excess amounts shall be paid to the Escrow Agent and held pursuant to the Escrow Agreement.
SECTION 2.6. Change of Control . In the event of a Change of Control (a) that results in the ITG Group discontinuing or being unable to continue the use, marketing and distribution of the System in a manner substantially similar to the marketing and distribution of the System prior to the Change of Control, or (b) in which the acquiring Person, directly or indirectly, owns a trading system that competes with the System (provided that any list trading system shall not be considered to compete with the System) (each such event, a “ Change of Control Event ”), then:
(i) The Purchaser shall promptly notify the Selling Stockholders of the Change of Control Event in writing.
(ii) To the extent such Change of Control Event has occurred prior to the Expiration Date and the Option has not been exercised, then the Purchaser shall have the right to exercise the Option pursuant to Section 2.4 hereof only within five Business Days of the Change of Control Event, by delivery of a written notice to the Company and each of the Selling Stockholders within five Business Days of the Change of Control Event electing to exercise such Option, which notice shall constitute an Option Exercise Notice.
(A) If the Purchaser elects to exercise the Option, then, notwithstanding anything to the contrary, (1) the Option Exercise Date shall be the date of such Option Exercise Notice, (2) the Option Exercise Price shall be $18,000,000 which entire amount shall be payable on the Option Closing Date directly to the Selling Stockholders, (3) no Additional Option Payment Amounts shall be payable, and (4) the Option Closing Date shall be fifteen days after the Option Exercise Date (or if such date is not a Business Day, the immediately succeeding Business Day).
(B) If the Purchaser does not elect to exercise the Option, then, on the fifth Business Day after the date of the Change of Control Event, notwithstanding anything to the contrary, (1) the License Agreement shall become non-exclusive and terminable by the Company at any time upon six months notice pursuant to Section 2 of the License Agreement, (2) the Purchaser and the Company shall give joint instructions to the source code escrow agent to terminate the Source Code Escrow Agreement, (3) the Option shall terminate and the Expiration Date shall be the last day the Purchaser may elect to exercise such Option pursuant to clause (ii) above, and (4) the
12
Purchaser shall pay a purchase price adjustment to the Company towards the purchase of Purchased Shares as follows:
if the Change of Control Event occurs within
(iii) To the extent such Change of Control Event has occurred prior to the fourth Additional Payment Calculation Date and the Option has been exercised, then
(A) No further Additional Option Payment Amounts shall be paid (including any Additional Option Payment Amounts accrued but unpaid) unless the sum of such unpaid amounts calculated in accordance with Section 2.5 is higher than the amounts paid pursuant to (B) below in which case the difference between the two shall be paid to the Selling Stockholders on the Final Payment Date.
(B) The Purchaser shall pay to each of the Selling Stockholders their pro rata share based on the number of Option Shares sold by each Selling Stockholder:
(1) if the Option Exercise Price was $4 million or more, but less than $6 million, $12 million,
(2) if the Option Exercise Price was $6 million or more, but less than $9 million, 16 million, and
(3) if the Option Exercise Price was $9 million or more, $18 million.
In each case less (x) the Option Exercise Price and (y) any Additional Option Payment Amounts actually paid.
(C) Subject to the terms of the Escrow Agreement, the Escrow Fund shall be released by the Escrow Agent to the Selling Stockholders.
13
SECTION 2.7. Certain Acquisitions . (a) In the event of a Competing Acquisition that results in the ITG Group either (x) discontinuing or being unable to continue the use, marketing and distribution of the System in a manner substantially similar to the marketing and distribution of the System prior to the Competing Acquisition or (y) replacing the use of the System with a competing system (each, a “ Competing Acquisition Event ”), then:
(i) The Purchaser shall promptly notify the Selling Stockholders of the Competing Acquisition Event in writing.
(ii) To the extent such Competing Acquisition Event has occurred prior to the Expiration Date, the Option has not been exercised and no Change of Control Event shall have occurred, then
(A) (1) The License Agreement shall become non-exclusive and shall be terminable by the Company at any time upon six months notice pursuant to Section 2 of the License Agreement, (2) the Purchaser and the Company shall give joint instructions to the source code escrow agent to terminate the Source Code Escrow Agreement, (3) the Option shall terminate and the Expiration Date shall be the date of the Competing Acquisition Event, and (4) the Purchaser shall pay a purchase price adjustment to the Company towards the purchase of Purchased Shares equal to the higher of (x) $1,000,000 and (y) 25% of the aggregate Gross Revenues for the period beginning on the date hereof and ending on the date of the Competing Acquisition Event; provided that , if Gross Revenues have not exceeded $1,250,000 within the first six calendar months, or $2,500,000 within the first nine calendar months, from the Closing Date, as applicable, then no such purchase price adjustment shall be paid.
(B) The Company shall have an option, for six months from the date of the Competing Acquisition Event, to repurchase the Purchased Shares from the Purchaser for $750,000.
(iii) To the extent such Competing Acquisition Event has occurred prior to the fourth Additional Payment Calculation Date, the Option has been exercised and no Change of Control Event shall have occurred, then
(A) No further Additional Option Payment Amounts shall be paid (including any Additional Option Payment Amounts accrued but unpaid) unless the sum of such unpaid amounts calculated in accordance with Section 2.5 is higher than the amounts paid pursuant to (B) below in which case the difference between the two shall be paid to the Selling Stockholders on the Final Payment Date.
(B) The Purchaser shall pay to each of the Selling Stockholders their pro rata share based on the number of Option Shares sold by each Selling Stockholder:
14
(1) if the Option Exercise Price was $4 million or more, but less than $6 million, $12 million,
(2) if the Option Exercise Price was $6 million or more, but less than $9 million, $16 million, and
(3) if the Option Exercise Price was $9 million or more, $18 million.
In each case less (x) the Option Exercise Price and (y) any Additional Option Payment Amounts actually paid.
(C) Subject to the terms of the Escrow Agreement, the Escrow Fund shall be released by the Escrow Agent to the Selling Stockholders.
(b) In the event that ITG Group enters into negotiations (but not a binding contract) for a Competing Acquisition prior to the Expiration Date, the Option has not been exercised and no Change of Control Event shall have occurred, then the Purchaser shall promptly notify the Company of such fact in writing and the License Agreement shall become non-exclusive pursuant to Section 2 of the License Agreement.
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties of the Company . The Company hereby makes the following representations and warranties to the Purchaser:
(a) Organization, Qualification and Corporate Power . The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, with the requisite corporate power and authority to own, lease, operate and use its properties and assets and to carry on its business as currently conducted. The Company does not own any interest in any other Person.
(b) Authorization; Enforcement . The Company has all requisite corporate power and authority to enter into the Transaction Agreements to which it is a party and to consummate the transactions contemplated thereby. The execution and delivery of the Transaction Agreements to which the Company is a party and the consummation of the transactions contemplated thereby have been duly authorized by all necessary corporate action on the part of the Company. The Transaction Agreements to which the Company is a party have been duly executed and delivered by the Company and constitute valid and binding obligations of the Company, enforceable against it in accordance with their terms, except as may be limited by bankruptcy, insolvency or other similar laws affecting the rights
15
and remedies of creditors generally, and subject to general principles of equity, whether applied by a court of law or equity.
(c) No Conflicts; No Consents . (i) The execution and delivery of the Transaction Agreements to which the Company is a party do not, and the consummation of the transactions contemplated thereby and the compliance with the terms thereof will not, (A) conflict with, or result in any violation of, or constitute a default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation, acceleration or increase of any obligation, liability or fee, or the loss of a benefit under (any such conflict, violation, default, right of termination, cancellation, acceleration or increase, or loss, including under any “change of control” provision, a “ Violation ”) any provision of the certificate of incorporation or by-laws of the Company, (B) result in any Violation of any Contract to which the Company is a party or by which any of its properties, assets or businesses are bound or (C) result in any Violation of any Permit, Order or Legal Requirement applicable to the Company or its properties, assets or business or (D) result in the creation or imposition of any Encumbrance on any properties or assets of the Company.
(ii) No consent, waiver, approval, order or authorization of, or registration, declaration or filing with, or notice to, any Person is required in connection with the execution and delivery of the Transaction Agreements by the Company, or the consummation of the transactions contemplated thereby or the compliance with the terms thereof.
(d) Capitalization . The authorized capital stock of the Company consists solely of 10,000,000 shares of Company Common Stock. At the close of business on June 11, 2003, 56,213 shares of Company Common Stock were issued and outstanding, no shares of Company Common Stock were held by the Company in its treasury and, except as set forth on Schedule 3.1(d) hereto, no shares of Company Common Stock were authorized and reserved for issuance. Exhibit B sets forth a true and complete list of the names of each of the holders of the outstanding shares of Company Common Stock and the number of shares of Company Common Stock owned by each such holder. All of the outstanding shares of Company Common Stock have been duly authorized and validly issued and are fully paid and non-assessable, are not subject to any preemptive rights (and were not issued in violation of any preemptive rights) and have been issued in full compliance with all applicable securities laws and other applicable Legal Requirements. No bonds, debentures, notes or other indebtedness having the right to vote on any matters on which holders of the Company Common Stock may vote (“ Voting Debt ”) are issued or outstanding. Except for this Agreement, there are no options, warrants, calls, rights, commitments or agreements of any character to which the Company is a party or by which the Company is bound relating to the issued or unissued capital stock or Voting Debt of the Company, or obligating the Company to issue, transfer, deliver or sell any shares of capital stock or other equity interest or any Voting Debt, or any securities convertible or exchangeable for any capital stock or other equity interest or any Voting Debt, of the Company or obligating the Company to issue, grant, extend or enter into any such option, warrant, call, right, commitment or agreement. There are no outstanding contractual obligations of the Company to repurchase, redeem or otherwise acquire any shares of capital stock of the Company or pursuant to which the
16
Company is or could be required to register shares of Company Common Stock or other securities under the Securities Act. The Company has, and upon delivery of the Purchased Shares by the Company to the Purchaser pursuant to the terms of this Agreement, the Purchaser will acquire, good and valid title to the Purchased Shares free and clear of any Encumbrances.
(e) Financial Statements . The Company has delivered to the Purchaser true and complete copies of the balance sheet of the Company as of May 31, 2003, November 30, 2002, and November 30, 2001, together with statements of operations and changes in stockholders’ equity for the six month period ended May 31, 2003 and for the years ended November 30, 2002 and 2001 (the “ Company Financial Statements ”). The Company Financial Statements (i) comply with all applicable accounting requirements, and (ii) are true and correct and fairly present the financial condition, results of operations, and changes in stockholders’ equity of | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
AGREEMENTS / CONTRACTS
CLAUSES
| Get Email Updates |
