AGREEMENT AND PLAN OF MERGER by and among UNIVERSAL BUSINESS PAYMENT SOLUTIONS ACQUISITION CORPORATION, ADC MERGER SUB, INC., AD COMPUTER CORPORATION PAYROLL TAX FILING SERVICES, INC. THE STOCKHOLDERS OF SELLER ENTITIES and STOCKHOLDERS'...

 

Execution Version

 

AGREEMENT AND PLAN OF MERGER

 

by and among

 

UNIVERSAL BUSINESS PAYMENT SOLUTIONS ACQUISITION CORPORATION,

 

ADC MERGER SUB, INC.,

 

AD COMPUTER CORPORATION

 

PAYROLL TAX FILING SERVICES, INC.

 

THE STOCKHOLDERS OF SELLER ENTITIES

 

and

 

STOCKHOLDERS' REPRESENTATIVE

 

Dated as of July 6, 2012

 

 

Table of Contents

 

		Page
Article I - CERTAIN DEFINITIONS		2
Section 1.1	Certain Definitions	2
Section 1.2	Interpretation	13
Article II - THE MERGER		14
Section 2.1	The Merger	14
Section 2.2	Certificate of Merger	14
Section 2.3	Organizational Documents	14
Section 2.4	Officers	14
Section 2.5	Board of Directors	14
Section 2.6	Effect of Merger on Equity Interests in ADC	15
Section 2.7	Merger Consideration	15
Section 2.8	Cash Merger Consideration Adjustment	16
Section 2.9	Representative	19
Section 2.10	Taking of Necessary Action; Further Action	19
Article III - CLOSING		19
Section 3.1	Closing	19
Section 3.2	Deliveries and Proceedings at Closing	20
Article IV - REPRESENTATIONS AND WARRANTIES OF THE SELLER AGREEMENT PARTIES		20
Section 4.1	Organization and Qualification; Subsidiaries	20
Section 4.2	Authorization	21
Section 4.3	No Conflict	21
Section 4.4	Capitalization	22
Section 4.5	Financial Statements	22
Section 4.6	Absence of Certain Changes or Events	23
Section 4.7	Title	24
Section 4.8	Owned Real Property	24
Section 4.9	Leases	24
Section 4.10	Working Capital Assets	25
Section 4.11	Intellectual Property	25
Section 4.12	Contracts	27
Section 4.13	Litigation	29
Section 4.14	Compliance with Laws	29
Section 4.15	Environmental Matters	29
Section 4.16	Employee Benefit Matters	31
Section 4.17	Taxes	33
Section 4.18	Consents and Approvals	35
Section 4.19	Employee Relations	35
Section 4.20	Transactions with Related Parties	37
Section 4.21	Insurance	37
Section 4.22	Brokers	37

 

 

Section 4.23	Employment Contracts; Compensation Arrangements; Officers and Directors	37
Section 4.24	Suppliers; Customers	38
Section 4.25	Investment Status	38
Section 4.26	Regulatory Compliance	39
Section 4.27	Power of Attorney	39
Section 4.28	Parent Common Stock	39
Section 4.29	Proxy Statement	39
Section 4.30	No Other Representations or Warranties	39
Article V - REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB		39
Section 5.1	Organization	40
Section 5.2	Authorization	40
Section 5.3	No Conflict	40
Section 5.4	Consents	41
Section 5.5	Brokers	41
Section 5.6	SEC Filings	41
Section 5.7	Capitalization.	41
Section 5.8	Litigation	42
Section 5.9	Compliance with Laws	42
Section 5.10	NASDAQ Listing	42
Section 5.11	Solvency	42
Section 5.12	Pro Forma Capitalization of Parent	43
Section 5.13	Confidential Target Information	43
Section 5.14	No Other Representations or Warranties	43
Article VI - COVENANTS AND AGREEMENTS		43
Section 6.1	Access and Information	43
Section 6.2	Conduct of Business by Sellers	44
Section 6.3	Further Assurances	46
Section 6.4	Public Announcements	47
Section 6.5	Consents and Waivers	47
Section 6.6	Post-Closing Obligations of Parent and the Surviving Entity to Certain Employees	48
Section 6.7	Insurance	48
Section 6.8	Proxy Statement; Parent Stockholders' Meeting	49
Section 6.9	Form 8-K Filings	50
Section 6.10	No Claim Against Trust Account	51
Section 6.11	Cash on Hand	51
Section 6.12	Non-competition; Non-solicitation	51
Section 6.13	Exclusivity	52
Section 6.14	Financing	53
Section 6.15	Delivery of Payoff Letters	53
Section 6.16	Piggyback Rights	53
Section 6.17	Tax Matters	55
Section 6.18	Notification of Certain Changes	59
Section 6.19	Transfer of Interests	60

 

 

Article VII - CONDITIONS TO CLOSING AND THE MERGER		60
Section 7.1	Mutual Conditions	60
Section 7.2	Conditions to the Obligations of Parent and Merger Sub	60
Section 7.3	Conditions to the Obligations of the Seller Agreement Parties	62
Article VIII - TERMINATION, AMENDMENT AND WAIVER		63
Section 8.1	Termination.  This Agreement may be terminated at any time prior to the Closing Date:	63
Section 8.2	Manner of Exercise	64
Section 8.3	Effect of Termination	65
Section 8.4	Waiver	65
Article IX - SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION		65
Section 9.1	Survival; Knowledge of Breach	65
Section 9.2	Indemnification	66
Section 9.3	Method of Asserting Claims, etc.	67
Section 9.4	Mitigation	68
Section 9.5	Limitations on Indemnification	69
Section 9.6	Losses Net of Insurance, etc.	70
Section 9.7	Right of Set-Off	70
Section 9.8	Sole Remedy	70
Article X - MISCELLANEOUS		71
Section 10.1	Notices	71
Section 10.2	Exhibits and Schedules	72
Section 10.3	Time of the Essence; Computation of Time	72
Section 10.4	Expenses	72
Section 10.5	Governing Law	73
Section 10.6	Assignment; Successors and Assigns; No Third Party Rights	73
Section 10.7	Counterparts	73
Section 10.8	Titles and Headings	74
Section 10.9	Entire Agreement	74
Section 10.10	Severability	74
Section 10.11	Specific Performance	74
Section 10.12	Waiver of Jury Trial	74
Section 10.13	Failure or Indulgence not Waiver	75
Section 10.14	Amendments	75

 

 

Annexes

 

Annex A         Stockholder Allocation

 

Exhibits

 

Exhibit A - Key Employees' Employment Agreements

Exhibit B - Certificate of Merger

Exhibit C – Waiver and Release

 

 

Execution Version

 

AGREEMENT AND PLAN OF MERGER

 

This Agreement and Plan of Merger (this "Agreement") is dated as of July 6, 2012, among UNIVERSAL BUSINESS PAYMENT SOLUTIONS ACQUISITION CORPORATION, a Delaware corporation ("Parent"), ADC MERGER SUB, INC., a Delaware corporation and a wholly owned subsidiary of Parent ("Merger Sub"), AD COMPUTER CORPORATION, a Pennsylvania Corporation ("ADC"), PAYROLL TAX FILING SERVICES, INC., a Pennsylvania corporation ("PTFS" and together with ADC, hereinafter collectively called "Sellers" or the "Seller Entities"), and ▇▇▇▇▇ AND C. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ AS JOINT TENANTS, C. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, the ▇ ▇ ▇▇▇▇▇▇▇▇▇▇ TRUST and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (collectively, the "Stockholders" and together with Sellers, the "Seller Agreement Parties"), and C. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, as representative of the Stockholders (the "Representative").

 

WHEREAS, Sellers are engaged in the businesses of providing employee services to businesses, including but not limited to payroll processing, tax filing, and related human resource services (collectively, the "Business");

 

WHEREAS, the parties intend to effect the merger of Merger Sub with and into ADC, with ADC continuing as the surviving entity following such merger (such merger being herein collectively called the "Merger");

 

WHEREAS, the respective boards of directors or other governing bodies of Parent, Merger Sub and Sellers have approved the form, terms, execution and delivery of this Agreement and the consummation of the transactions contemplated hereby, upon the terms of and subject to the conditions set forth herein;

 

WHEREAS, the board of directors of Parent has (i) determined that it is in the best interests of Parent and its stockholders to enter into this Agreement, (ii) resolved to submit this Agreement to the stockholders of Parent for their approval, and (iii) resolved to recommend approval of this Agreement and the transactions contemplated hereby by the stockholders of Parent;

 

WHEREAS, concurrently with this Agreement, the Key Employees have entered into the employment agreements attached as Exhibit A hereto;

 

NOW, THEREFORE, in consideration of the mutual covenants contained herein, and intending to be legally bound, the parties hereto agree as follows:

 

 

Article I

 

CERTAIN DEFINITIONS

 

Section 1.1           Certain Definitions. As used in this Agreement, the following terms have the respective meanings set forth below.

 

"401(k) Plan" has the meaning set forth in Section 7.6(d).

 

"Accounting Firm" means KPMG LLP.

 

"Accrued Taxes" means all Taxes of the Seller Entities accrued through the end of the Closing Date,

 

"ADC" has the meaning set forth in the preamble.

 

“ADC Accounting Principles” means GAAP for ADC’s Year-End Financial Statements, and the income tax method of accounting, on an accrual basis, for its Interim Financials.

 

"Affiliate" means, with respect to any Person, any Person directly or indirectly controlling, controlled by, or under common control with, such other Person at any time during the period for which the determination of affiliation is being made; provided, however, that for purposes of this Agreement, Parent and its Subsidiaries, on the one hand, and Sellers and their respective Subsidiaries (if any), on the other hand, shall not be considered Affiliates of one another. For purposes of this definition, the term "control" (including the correlative meanings of the terms "controlled by" and "under common control with"), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of management policies of such Person, whether through the ownership of voting securities or by contract or otherwise.

 

"Agreement" means this Agreement and Plan of Merger.

 

"Ancillary Agreements" means the Key Employment Agreements.

 

"Annual Statements of Operations" has the meaning set forth in Section 4.5(a).

 

"Antitrust Division" means the Antitrust Division of the United States Department of Justice.

 

"Allocation Schedule" has the meaning set forth in Section 6.17(e)(iii).

 

"Assets" has the meaning set forth in Section 4.7(a).

 

"Balance Sheets" has the meaning set forth in Section 4.5(e)

 

"Balance Sheet Date" has the meaning set forth in Section 4.5(e).

 

 

"Benefit Plan" means each (i) "employee benefit plan," as defined in Section 3(3) of ERISA and (ii) all other pension, retirement, supplemental retirement, deferred compensation, excess benefit, profit sharing, bonus, incentive, stock purchase, stock ownership, stock option, stock appreciation right, employment, severance, salary continuation, termination, change-of-control, health, life, disability, group insurance, vacation, holiday and material fringe benefit plan, program, contract, or arrangement (whether written or unwritten) maintained, contributed to, or required to be contributed to, by a Seller or any ERISA Affiliate for the benefit of any current or former employee, director, officer or independent contractor of such Seller or under which such Seller or any ERISA Affiliate has any liability.

 

"Business Day" means any day that is not a Saturday or Sunday, or other day on which commercial banks in the City of New York, New York are required or authorized by Law to be closed.

 

"Business Material Adverse Effect" means a material and adverse effect on the business, properties, assets and liabilities (taken as a whole), financial condition or results of operations of Sellers, taken as a whole, or the ability of Sellers to consummate the transactions contemplated by this Agreement; provided, however, that any such adverse effect arising out of: (a) general economic, business, political or social conditions (or changes therein), including in respect of interest or currency rates, the financial or capital markets or any business in which a Seller operates, (b) any act of terrorism, military action or the escalation thereof, (c) changes in applicable Law (or interpretations thereof) after the date hereof, (d) changes in GAAP (or interpretations thereof) after the date hereof, (e) failure to meet internal or published projections, estimates or forecasts of revenues, earnings or other measures of financial or operating performance (provided, that any underlying circumstance or event contributing to such failure may itself or in combination with other circumstances or events constitute a Business Material Adverse Effect), (f) actions required to be taken pursuant to this Agreement or taken with Parent's consent and (g) the public announcement of the transactions contemplated by this Agreement, shall not constitute or be deemed to constitute a Business Material Adverse Effect and otherwise shall not be taken into account in determining whether a Business Material Adverse Effect has occurred or would reasonably be expected to occur; provided, however, that with respect to the immediately preceding clauses (a) through (d), such circumstance or event does not have a materially disproportionate impact on Sellers relative to other Persons participating in the industry in which Sellers operate.

 

"Business" has the meaning set forth in the recitals.

 

"Business Registered Intellectual Property" has the meaning set forth in Section 4.11(a).

 

"Cap" has the meaning set forth in Section 9.5(a).

 

"Cash and Cash Equivalents" means the sum of the fair market value (expressed in United States dollars) of all cash and cash equivalents of any kind (including bank account balances, marketable securities and short term investments) calculated in accordance with GAAP.

 

 

"Cash Merger Consideration" means sixteen million dollars ($16,000,000), plus (i) the Estimated Closing Net Working Capital Adjustment (which may be a negative number), minus (ii) the Estimated Closing Indebtedness, minus (iii) Estimated Closing Accrued Taxes, minus (iv) Estimated Closing Transaction Expenses, plus (v) the amount of Estimated Closing Indebtedness, Estimated Closing Accrued Taxes and Estimated Closing Transaction Expenses solely to the extent included as current liabilities in the calculation of the Estimated Closing Net Working Capital, all as further adjusted pursuant to Section 2.8(c), (d), (e) and (f), plus (iv) the amount of Estimated Reimbursable Expenses.

 

"Certificate of Merger" has the meaning set forth in Section 2.2.

 

"Change of Control" means (a) the sale, lease, license, distribution, dividend or transfer, in one or a series of related transactions, of 50% or more of the assets of such Person and its subsidiaries taken as a whole, to a Person other than any of the Parent Founders; or (b) a merger, consolidation or other business combination of such Person (or any subsidiary or subsidiaries that alone or together represent all or substantially all of such Person's consolidated business at that time) or any successor or other entity holding all or substantially all of the assets of such Person and its Subsidiaries that results in the stockholders of such Person (or such subsidiary or subsidiaries) or any successor or other entity holding all or substantially all of the assets of such Person and its Subsidiaries or the surviving entity thereof, as applicable, immediately before the consummation of such transaction or a series of related transactions holding, directly or indirectly, less than 50% of the voting power of such Person (or such subsidiary or subsidiaries) or any successor, other entity or surviving entity thereof, as applicable, immediately following the consummation of such transaction or series of related transactions.

 

"Claim Notice" has the meaning set forth in Section 9.3(a).

 

"Closing" has the meaning set forth in Section 3.1.

 

"Closing Date" has the meaning set forth in Section 3.1.

 

"Closing Date Merger Consideration" means, collectively, the Cash Merger Consideration and the Common Stock Merger Consideration.

 

"COBRA" means Part 6 of Subtitle B of Title I of ERISA, Section 4980B of the Code and any similar state law to which a Seller is subject.

 

"Code" means the Internal Revenue Code of 1986, as amended.

 

"Common Stock Merger Consideration" means an aggregate of 1,000,000 shares of Parent Common Stock.

 

"Confidential Target Information" means the identities of the entities in the merger and/or acquisition transactions to which Parent or any of its Subsidiaries is, or on the date hereof expects to be, a party, the pro forma capitalization of Parent set forth in Section 5.13 of the Disclosure Schedule, and the additional documents listed in Section 5.13 of the Disclosure Schedule relating to the mergers or acquisitions contemplated thereby.

 

 

"Confidentiality Agreement" has the meaning set forth in Section 6.1.

 

"Contract" means, with respect to any Person, any agreement, indenture, debt instrument, contract, guarantee, loan, note, mortgage, license, lease, purchase order, delivery order, commitment or other arrangement, understanding or undertaking, whether written or oral, including all amendments, modifications and options thereunder or relating thereto, to which such Person is a party, by which it is bound, or to which any of its assets or properties is subject.

 

"Deferred Merger Consideration" has the meaning set forth in Section 2.7.

 

"DGCL" means the General Corporation Law of the State of Delaware, as amended from time to time.

 

"Disclosure Schedule" means the Confidential Disclosure Schedule delivered in connection with, and constituting a part of, this Agreement.

 

"Disputed Items" has the meaning set forth in Section 2.8(d)

 

"Dispute Notice" has the meaning set forth in Section 2.8(d)

 

"Effective Time" has the meaning set forth in Section 2.2.

 

"Employment Contracts" has the meaning set forth in Section 4.23.

 

"Encumbrances" means any lien, pledge, mortgage, deed of trust, security interest, charge, claim, easement, encroachment, right of first refusal, restriction, option, title defect or other similar encumbrance of any kind, including, without limitation, any conditional sale or other title retention agreement, any lease in the nature thereof and the filing of or agreement to give any financing statement under the Uniform Commercial Code of any jurisdiction and including any lien or charge arising by statute or other laws, which secures the payment of debt (including, without limitation, any Tax) or the performance of an obligation.

 

"Environmental Laws" mean any Laws relating to the protection of the environment, natural resources, pollution, or the treatment, storage, recycling, transportation, disposal, arrangement for treatment, storage, recycling, transportation, or disposal, handling or Release of or exposure to any Hazardous Substances (and including worker health or safety Laws as they relate to occupational exposure to Hazardous Substances).

 

"Environmental Permits" has the meaning set forth in Section 4.15(a)(i).

 

"ERISA" means the Employee Retirement Income Security Act of 1974, as amended.

 

"ERISA Affiliate" means any entity that is considered a single employer with any Seller entity under Section 414 of the Code.

 

"Estimated Closing Accrued Taxes" has the meaning set forth in Section 2.8(a).

 

"Estimated Closing Indebtedness" has the meaning set forth in Section 2.8(a)

 

 

"Estimated Closing Net Working Capital" has the meaning set forth in Section 2.8(a)

 

"Estimated Closing Statement" has the meaning set forth in Section 2.8(a).

 

"Estimated Closing Transaction Expenses" has the meaning set forth in Section 2.8(a).

 

"Estimated Net Working Capital Adjustment" has the meaning set forth in Section 2.8(b).

 

"Estimated Reimbursable Expenses" has the meaning set forth in Section 2.8(a).

 

"Exchange Act" means the Securities Exchange Act of 1934, as amended.

 

"Existing Seller Equity" has the meaning set forth in Section 4.4.

 

"FCPA Laws" means the Foreign Corrupt Practices Act of 1977 and any other comparable Law governing corruption of foreign officials, including laws enacted through or under the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.

 

"Financing" has the meaning set forth in Section 6.14.

 

"Final Adjustment" has the meaning set forth in Section 2.8(f)

 

"Final Closing Statement" has the meaning set forth in Section 2.8(c)

 

"Final Determination" has the meaning set forth in Section 2.8(e)

 

"Financial Information" has the meaning set forth in Section 4.5(b).

 

"GAAP" means generally accepted accounting principles as in effect in the United States.

 

"Governmental Action/Filing" means any franchise, approval, permit, authorization, license, order, registration, certificate, variance, and other similar permit or right obtained from any Government Authority and all pending applications therefor.

 

"Governmental Authority" means any national, federal, state, provincial, county, municipal or local government, foreign or domestic, or the government of any political subdivision of any of the foregoing, or any entity, authority, agency, ministry or other similar body exercising executive, legislative, judicial (including any court or arbitrator (public or private)), regulatory or administrative authority or functions of or pertaining to government, including any authority or other quasi governmental entity established to perform any of such functions.

 

"Hazardous Substances" means: (a) any material, substance, chemical, waste, product, derivative, compound, mixture, solid, liquid, mineral or gas, in each case, whether naturally occurring or manmade, that is hazardous, acutely hazardous, toxic, a pollutant, a contaminant or words of similar import or regulatory effect under Environmental Laws; and (b) any petroleum or petroleum-derived products, radon, radioactive materials or wastes, asbestos in any form, lead or lead-containing materials, urea formaldehyde foam insulation, and polychlorinated biphenyls.

 

 

"Healthcare Reform Law" has the meaning set forth in Section 4.16(d).

 

"Indebtedness" without duplication, means all principal, interest, premiums or other obligations related to (a) all indebtedness for borrowed money, (b) all obligations for the deferred purchase price of property or services (other than trade accounts payable in the ordinary course of business and consistent with past practice), including any earn-out, (c) all obligations evidenced by notes, bonds, debentures or other similar instruments, (d) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired, (e) all obligations as lessee or lessees under leases that are required to be recorded as capital leases under GAAP, (f) all obligations, contingent or otherwise, under acceptance, letter of credit or similar facilities (other than trade accounts payable in the ordinary course of business and consistent with past practice), (g) all obligations owing pursuant to factoring agreements for accounts receivable, (h) all Indebtedness of the type referred to in the immediately preceding clauses (a) through (g) guaranteed directly or indirectly in any manner, or in effect guaranteed directly or indirectly through an agreement (i) to pay or purchase such Indebtedness or to advance or supply funds for the payment or purchase of such Indebtedness, (ii) to purchase, sell or lease (as lessee or lessor) property, or to purchase or sell services, primarily for the purpose of enabling the debtor to make payment of such Indebtedness or to assure the holder of such Indebtedness against loss, (iii) to supply funds to or in any other manner invest in the debtor (including any agreement to pay for property or services irrespective of whether such property is received or such services are rendered) or (iv) otherwise to assure a creditor against loss, (i) all Indebtedness of the type referred to in the immediately preceding clauses (a) through (h) secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any lien on property owned (including accounts and contract rights), even though such Person has not assumed or become liable for the payment of such Indebtedness and (j) all accrued but unpaid interest (or interest equivalent) to the date of determination, any fees and expenses due and all prepayment premiums or penalties, related to any items of Indebtedness of the type referred to in the immediately preceding clauses (a) through (i).

 

"Indemnifiable Taxes" means, without duplication, any and all Tax liabilities with respect to Seller Entities, their assets or operations that are attributable to any Pre-Closing Tax Period. Tax liabilities attributable to any Straddle Period shall be allocated in accordance with Section 6.17(c) hereof.

 

"Indemnified Party" means the party entitled to indemnification pursuant to Article IX.

 

"Indemnifying Party" means the party required to indemnify the other party pursuant to Article IX.

 

"Indemnity Claim" has the meaning set forth in Section 9.3(a).

 

"Initial Adjustment" has the meaning set forth in Section 2.8(b)

 

"Insurance Policies" has the meaning set forth in Section 4.21.

 

 

"Intellectual Property" means all rights arising anywhere in the world in or under: registered and unregistered trademarks and applications for registration of same, service marks, trade names, logos, slogans, trade dress, domain names and other indicators of source (and all goodwill associated with any of the foregoing); copyrights, copyright registrations and applications for copyright registration, including any copyrights arising in computer software or corollary database rights, and mask work rights; patents, patent applications (including all reissues, divisions, continuations, continuations in part and extensions thereof); inventions, invention disclosures, trade secrets, formulae, processes, methodologies, know-how and any other intellectual property or proprietary rights and any licenses related to any of the foregoing.

 

"Interim Balance Sheets" has the meaning set forth in Section 4.5(b).

 

"Interim Financials" has the meaning set forth in Section 4.5(b).

 

"Key Employees" means each of C. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇.

 

"Key Employee Agreement" means each employment agreement with the Key Employees.

 

"Law" means any law, statute, directive, ordinance, regulation, rule, writ, judgment, order, decree or other regulation or legal requirement (including common law) of any Governmental Authority.

 

"Leased Real Property" has the meaning set forth in Section 4.9(a).

 

"Leases" has the meaning set forth in Section 4.9(a).

 

"Legal Proceeding" means any judicial, administrative or arbitral action, complaint, suit, mediation, investigation, proceeding or claim (including counterclaim) by or before a Governmental Authority.

 

"Losses" means losses, claims, damages, injuries, lost opportunities, demands, settlements, judgments, awards, fines, fees (including reasonable attorneys' fees), charges, liabilities, penalties and costs and expenses (including costs of investigation, remediation or other response actions) of any nature.

 

"Merger Consideration" means, collectively, the Cash Merger Consideration, the Common Stock Merger Consideration and the Deferred Merger Consideration.

 

"Merger Sub" has the meaning set forth in the preamble.

 

"Merger" has the meaning set forth in the recitals.

 

"Multiemployer Plan" has the meaning set forth in Section 3(37) of ERISA.

 

"NASDAQ" means the NASDAQ Capital Market.

 

"Net Cash Amount" means, as of any date, the aggregate amount of the Seller Entities' Cash and Cash Equivalents on hand or in bank accounts as of such date, minus the aggregate amount of outstanding and unpaid checks issued by the Seller Entities as of such date.

 

 

"Net Working Capital" means the amount (which may be a negative or positive number) equal to the difference between (a) the sum of all current assets of the Seller Entities (consisting of the Net Cash Amount, accounts receivable, inventory and prepaid expenses) and all Work in Process, and (b) all current liabilities of the Seller Entities (including, without limitation, the current portion of capital lease liability, accounts payable and accrued expenses and the current portion of deferred revenue), in each case, determined on a consolidated basis, in accordance with GAAP applied consistently with the principles applied in the preparation of the Year-End Balance Sheets and excluding current and deferred tax assets and liabilities.

 

"Notice Period" has the meaning set forth in Section 9.3(b).

 

"Organic Dilution Event" has the meaning set forth in Section 2.12.

 

"Other Filings" has the meaning set forth in Section 6.8(a).

 

"Outside Date" has the meaning set forth in Section 8.1(b).

 

"Parent" has the meaning set forth in the preamble.

 

"Parent Common Stock" means the common stock, par value $0.001 per share, of Parent.

 

"Parent Founders" means, collectively, ▇▇▇▇▇ ▇. ▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇.

 

"Parent Indemnified Parties" has the meaning set forth in Section 9.2(a).

 

"Parent Preferred Stock" has the meaning set forth in Section 5.7(a).

 

"Parent SEC Documents" has the meaning set forth in Section 5.6.

 

"Parent Stockholder Approval" has the meaning set forth in Section 6.8(a).

 

"Parent Stockholders' Meeting" has the meaning set forth in Section 6.8(a).

 

"Parent's Knowledge" means the actual knowledge of the individuals, after due inquiry, of the individuals set forth in Section 1.1(a) of the Disclosure Schedule.

 

"Parent's Organizational Documents" means the restated certificate of incorporation and amended and restated by-laws of Parent, as may be amended from time to time.

 

"Payoff Letters" has the meaning set forth in Section 6.15.

 

"Permits" means any franchise, approval, permit, authorization, license, order, registration, certificate, variance and other similar permit or rights obtained from any Governmental Authority necessary or advisable for the operations of the business of a Seller and all pending applications therefor.

 

 

"Permitted Encumbrances" means (a) easements, rights-of-way, restrictions and other similar defects or imperfections of title, charges and encumbrances of record not in the aggregate detracting materially from the use or value of the assets subject thereto, and (b) Encumbrances for Taxes not yet due and payable.

 

"Person" means an individual, partnership, corporation, limited liability company, joint stock company, unincorporated organization or association, trust, joint venture, association or other organization, whether or not a legal entity, or a Governmental Authority.

 

"Piggy-Back Registration" has the meaning set forth in Section 6.16(a).

 

"Post-Closing Tax Period" means any taxable period beginning after the Closing Date and the portion of any Straddle Period beginning the day after the Closing Date.

 

"Pre-Closing Tax Period" means any taxable period ending on or before the Closing Date and the portion of any Straddle Period ending on the Closing Date.

 

"Press Release" has the meaning set forth in Section 6.9.

 

"Prospectus" has the meaning set forth in Section 6.10.

 

"Proxy Statement" has the meaning set forth in Section 6.8(a).

 

"PTFS Accounting Principles" means GAAP for the Year-End Financial Statements of PTFS and the income tax method of accounting, on a cash basis, in the case of its Interim Financials.

 

"PTFS" has the meaning set forth in the preamble.

 

"Release" means any actual or threatened release, spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, abandonment, disposing or allowing to escape or migrate into or through the environment (including ambient air (indoor or outdoor), surface water, groundwater, land surface or subsurface strata or within any building, structure, facility or fixture).

 

"Representative" has the meaning set forth in the recitals.

 

"Required Cash" means a Net Cash Amount equal to $1,000,000.

 

"Restricted Period" has the meaning set forth in Section 6.12.

 

"Section 338 Election" has the meaning set forth in Section 6.17(e).

 

"Securities Act" means the Securities Act of 1933, as amended.

 

"Seller Agreement Party" has the meaning set forth in the preamble.

 

"Seller Entities" means, collectively, ADC and PTFS.

 

"Seller Fundamental Representations" has the meaning set forth in Section 9.1(a)(i).

 

 

"Seller Indemnified Parties" has the meaning set forth in Section 9.2(b).

 

"Sellers' Knowledge" means the actual knowledge, after due inquiry, of the individuals set forth in Section 1.1 of the Disclosure Schedule.

 

"Share Exchange" means the exchange, prior to the Effective Time, of all of the outstanding shares of capital stock in PTFS for newly issued shares of ADC, as a result of which PTFS will become a wholly-owned subsidiary of ADC.

 

"Stock Acquiror" has the meaning set forth in Section 4.25.

 

"Stock Purchase Agreements" means (i) with respect to ADC, a Stockholder's Agreement among C. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ dated December 30, 1994 and the Consent to Stockholders' Agreement dated February 17, 1999 among C. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ as Trustees and the ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ Trust, and (ii) with respect to PTFS, the Stock Purchase Agreement dated February 9, 2005 among C. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, as now or hereafter amended by a letter agreement pursuant to which ▇. ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ will be required to purchase all of ▇▇▇▇ ▇. ▇▇▇▇▇▇▇' shares in PTFS under certain conditions.

 

"Straddle Period" means any taxable period that includes, but does not end on, the Closing Date.

 

"Stockholder Allocation" has the meaning set forth in Section 2.7.

 

"Stockholders" has the meaning set forth in the preamble.

 

"Subsidiary" means, with respect to any Person, any corporation, partnership, association or other business entity of which (a) if a corporation, a majority of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof, or (b) if a partnership, association or other business entity, a majority of the partnership or other similar ownership interests thereof is at the time owned or controlled, directly or indirectly, by any Person or one or more Subsidiaries of that Person or a combination thereof. For purposes hereof, a Person or Persons shall be deemed to have a majority ownership interest in a partnership, association or other business entity if such Person or Persons shall be allocated a majority of partnership, association or other business entity gains or losses or shall be or control the managing director, managing member, general partner or other managing Person of such partnership, association or other business entity.

 

"Surviving Entity" has the meaning set forth in Section 2.1.

 

"Target Net Working Capital" means $1,000,000.

 

 

"Tax" means (a) any and all income taxes (including any tax on or based upon net income, or gross income, or income as specially defined, or earnings, or profits, or selected items of income, earnings, or profits) and all gross receipts, estimated, sales, use, ad valorem, transfer, franchise, license, withholding, payroll, employment, excise, severance, stamp, occupation, premium, property, or windfall profit taxes, environment, alternative, or add-on minimum taxes or other taxes or fees, assessments, or charges in the nature of taxes, (b) any liability in respect of Taxes described in the immediately preceding clause (a) that is payable by reason of contract, assumption, transferee liability, operation of Law, Treasury Regulation Section 1.1502-6 (or any predecessor or successor thereof or any analogous or similar provision under Law) or otherwise, and (c) any interest, penalty or additions to tax or additional amounts imposed with respect to amounts referred to in clauses (a) and (b) hereof, whether disputed or not, in each case imposed by a Governmental Authority, whether computed on a separate, consolidated, unitary, combined or any other basis).

 

"Tax Return" means any return, report, information return or other document (including any related or supporting information), including any schedule or attachment thereto, including any amended Tax Return or declaration of estimated Tax, filed or required to be filed with any Governmental Authority or other authority in connection with the determination, assessment, or collection of any Tax paid or payable or the administration of any laws, regulations, or administrative requirements relating to any such Tax.

 

"Territory" shall mean the United States.

 

"Third Party Claim" has the meaning set forth in Section 9.3(b).

 

"Threshold Amount" has the meaning set forth in Section 9.5(a).

 

"Transaction" means the transactions contemplated by this Agreement and the Ancillary Agreements.

 

"Transaction Form 8-K" has the meaning set forth in Section 6.9.

 

"Transaction Expenses" means the aggregate amount of all expenses incurred on or before the Closing and payable by a Seller to third parties and incurred in connection with the preparation, execution and consummation of the transactions contemplated by this Agreement, including, but not limited to: (i) fees and disbursements of attorneys, accountants, financial advisors and other advisors and service providers (including, without limitation, any broker, finder or similar fee due or payable by a Seller to any Person), and (ii) any sale bonus, stay bonus, retention bonus, change in control bonus or similar bonus, in each case which becomes payable by a Seller in connection with the consummation of the transactions contemplated by this Agreement; provided, however, that fees and disbursements of attorneys and accountants, and other out-of-pocket costs not to exceed $35,000, incurred by a Seller pursuant to Section 6.8 shall be excluded from Transaction Expenses and shall be added to the Cash Merger Consideration or, if this Agreement shall terminate without consummation of the Closing, shall be reimbursed by Parent to such Seller.

 

"Transfer Taxes" means any real property transfer, transfer gains, documentary, sales, use, stamp, registration or similar Taxes, fees or charges (including any penalties and interest) which become payable in connection with the Merger pursuant to this Agreement.

 

"Transferred Employees" means the employees of Sellers as of the Effective Time.

 

 

"Treasury Regulations" means the treasury regulations promulgated under the Code, including any temporary regulations.

 

"Trust Account" has the meaning set forth in Section 6.10.

 

"Trust Account Claim" has the meaning set forth in Section 6.10.

 

"Unresolved Items" has the meaning set forth in Section 2.8(e)

 

"Voting Matters" has the meaning set forth in Section 6.8(a).

 

"Work in Process" means the fees for services rendered by each Seller for any quarterly in which the Closing Date shall occur, to the extent such fees are not accrued or paid as of the Closing Date and are attributable to services rendered on or before the Closing Date. Without limiting the generality of the foregoing, a portion of the annual fees to be accrued by ADC after the Closing Date for preparation of customers' IRS form W-2's are attributable to services rendered by ADC on or before the Closing Date. For purposes hereof, the portion of fees accruing after the Closing Date but not paid which are attributable to services rendered by a Seller on or before the Closing Date shall be deemed to be, for any quarterly period, the product of (i) the quarterly fee less any costs, expenses or other liabilities attributable to such services not yet accrued or paid and (ii) a fraction, the numerator of which is the number of days in such quarterly period through and including the Closing Date and the denominator of which is the total number of days in such quarterly period.

 

"Year-End Balance Sheets" has the meaning set forth in Section 4.5(a).

 

"Year-End Financial Statements" has the meaning set forth in Section 5.5(a).

 

Section 1.2           Interpretation.

 

(a)          References to Articles and Sections are to Articles and Sections of this Agreement unless otherwise specified.

 

(b)          A "month" or a "quarter" means a calendar month or quarter (as the case may be).

 

(c)          References to "$" or "dollars" refer to lawful currency of the United States.

 

(d)          Writing includes typewriting, printing, lithography, photography, email and other modes of representing or reproducing words in a legible and non-transitory form.

 

(e)          The terms "include" and "including" and words of similar import are to be construed as non-exclusive (so that, by way of example, "including" mean "including without limitation").

 

 

(f)          Unless the context of this Agreement otherwise requires (i) words using a singular or plural number also include the plural or singular number, respectively, (ii) the terms "hereof," "herein," "hereby" and any derivative thereof or similar words refer to this entire Agreement, (iii) the masculine gender includes the feminine and neuter genders, (iv) any reference to a Law, an agreement or a document will be deemed also to refer to any amendment, supplement or replacement thereof, and (v) whenever this Agreement refers to a number of days, such number refers to calendar days unless such reference specifies Business Days.

 

(g)          Terms defined in this Agreement by reference to any other agreement, document or instrument have the meanings assigned to them in such agreement, document or instrument whether or not such agreement, document or instrument is then in effect.

 

(h)          The term "foreign" means non-United States.

 

Article II

 

THE MERGER

 

Section 2.1           The Merger. Upon the terms and subject to the conditions of this Agreement, at the Effective Time, pursuant to the provisions of the DGCL, Merger Sub shall be merged with and into ADC, and the separate corporate existence of Merger Sub shall thereupon cease in accordance with the provisions of the DGCL. ADC shall be the surviving entity in the Merger and shall continue to exist as a wholly owned Subsidiary of Parent (the "Surviving Entity"). The Merger shall have the effects specified in the DGCL.

 

Section 2.2           Certificate of Merger. On the Closing Date, the parties hereto shall cause a certificate of merger substantially in the form attached hereto as Exhibit B (the "Certificate of Merger") to be properly executed and filed in accordance with the relevant provisions of the DGCL, and shall make or cause to be made all other filings or recordings required under the DGCL. The Merger shall be effective at such time and on such date as shall be set forth in the Certificate of Merger filed with respect thereto in accordance with the DGCL (the "Effective Time").

 

Section 2.3           Organizational Documents. Except to the extent amended pursuant to the Certificate of Merger, the corporate bylaws of the Merger Sub as in effect immediately prior to the Effective Time shall be the corporate bylaws of the Surviving Entity and shall continue in full force and effect until further amended in the manner prescribed by the provisions of the DGCL.

 

Section 2.4           Officers. The officers of ADC immediately prior to the Effective Time shall be the officers of the Surviving Entity and will hold office in accordance with the bylaws of the Surviving Entity until the earlier of their death, resignation or removal or until their respective successors are duly elected and qualified in the manner provided in the bylaws of the Surviving Entity and otherwise in accordance with applicable Law.

 

Section 2.5           Board of Directors. The directors in office of the Merger Sub immediately prior to the Effective Time shall be the directors of the Surviving Entity and will continue to hold office in accordance with the bylaws of the Surviving Entity and otherwise in accordance with applicable Law.

 

 

Section 2.6           Effect of Merger on Equity Interests in ADC. At the Effective Time, all of the equity interests in ADC that were issued and outstanding immediately prior to the Effective Time shall, by virtue of the Merger and without any action on the part of Parent, Merger Sub, ADC or the Stockholders, be cancelled and automatically deemed for all purposes to represent the right to receive the Merger Consideration, and each Stockholder shall cease to have any other rights in and to either Seller with respect thereto. From and after the Effective Time, any certificates representing interests in ADC shall be deemed for all purposes to represent the right to receive the Merger Consideration, into which such Existing Seller Equity and all ADC shares issued in the Share Exchange, represented thereby, were exchanged in accordance with this Agreement without surrender or exchange of such certificate.

 

Section 2.7           Merger Consideration.

 

(a)          On the Closing Date, Parent shall cause the Closing Date Merger Consideration to be paid or issued to the Stockholders in accordance with the terms and conditions of this Agreement and the allocation of the Merger Consideration set forth on Annex A hereto; provided that such allocation shall be subject to modification, by written notice from ADC to Parent (with written confirmation by ▇▇▇▇ ▇ ▇▇▇▇▇▇▇ or his estate representative) prior to the Closing, in order to reflect consummation of any transactions required by the Stock Purchase Agreements (as may be so modified, the "Stockholder Allocation"). Additionally, on the 24 month anniversary of the Closing Date, Parent shall cause $2,000,000, to be paid in cash to the Stockholders in accordance with the terms and conditions of this Agreement and the allocation of the Merger Consideration set forth on Annex A (the "Deferred Merger Consideration").

 

(b)          Parent or Merger Sub or anyone acting on their behalf shall be entitled to deduct and withhold from the payment of any Merger Consideration or Closing Date Merger Consideration otherwise payable pursuant to this Agreement to any Person such amounts as are required to be deducted and withheld with respect to the making of any such payment under any applicable Tax law. Any sum which is withheld as permitted by this Section 2.7(b) shall be remitted to the appropriate Taxing Authority and Parent shall provide the Stockholders with all appropriate or required reports showing such withholding. To the extent that amounts are so withheld and paid to the proper Governmental Authority pursuant to any applicable Tax law, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to such Person in respect of which such deduction and withholding was made.

 

 

Section 2.8           Cash Merger Consideration Adjustment.

 

(a)          At the Closing, the Cash Merger Consideration shall be subject to adjustment based on the estimated Net Working Capital as of the close of business on the Closing Date, immediately prior to giving effect to the Closing (the "Estimated Closing Net Working Capital"), any Indebtedness of the Seller Entities that has not been paid as of the close of business on the Closing Date immediately prior to giving effect to the Closing (the "Estimated Closing Indebtedness"), the estimated amount of Transaction Expenses that have not been paid as of the close of business on the Closing Date immediately prior to giving effect to the Closing (the "Estimated Closing Transaction Expenses"), the estimated Accrued Taxes as of the close of business on the Closing Date, immediately prior to giving effect to the Closing (the "Estimated Closing Accrued Taxes"), any amounts paid by the Seller Entities, as well as amounts accrued and unpaid, in respect of costs and expenses of a nature referred to in the last sentence of Section 6.8(d) ("Estimated Reimbursable Expenses"), and the amounts of current liabilities included within such Estimated Closing Net Working Capital, Estimated Closing Indebtedness, Estimated Closing Transaction Expenses and Estimated Closing Accrued Taxes. A written statement (the "Estimated Closing Statement") setting forth the calculation of the Cash Merger Consideration, together with (i) a consolidated balance sheet of the Seller Entities as of the close of business on the Closing Date, immediately prior to giving effect to the Closing, prepared in accordance with GAAP applied on a basis consistent with the Year-End Balance Sheets, and (ii) the Sellers' calculations of (t) each Seller's Work in Process, (u) the Estimated Reimbursable Expenses, (v) the Estimated Closing Net Working Capital, (w) Estimated Closing Indebtedness, (x) the Estimated Closing Accrued Taxes, (y) the Estimated Closing Transaction Expenses and (z) the amount of Estimated Closing Accrued Taxes, Estimated Closing Transaction Expenses and Estimated Closing Indebtedness solely to the extent included as current liabilities in the calculation of Estimated Closing Net Working Capital, shall be provided by Seller to the Parent no later than the close of business of the fifth (5th) Business Day preceding the Closing Date. The Estimated Closing Statement and all components thereof (other than Work in Process) shall be prepared in accordance with GAAP applied on a basis consistent with the Year-End Balance Sheets. Parent shall be entitled to review, comment on and request reasonable changes to the Estimated Closing Statement and Sellers shall provide Parent and its representatives with reasonable access following prior notice, to the books and records of the Seller Entities that relate to the Estimated Closing Statement prior to the Closing Date in connection with such review. Sellers shall consider Parent's proposed changes in good faith. If the parties are unable to reach agreement on any of the proposed changes, the Estimated Closing Statement (and the components thereof) as modified by Parent shall control solely for purposes of the payments to be made at Closing and shall not limit or otherwise affect remedies of Sellers or Stockholders under this Agreement or otherwise constitute an acknowledgement by Sellers or Stockholders of the accuracy of the estimate.

 

(b)          If the Estimated Closing Net Working Capital is less than the Target Net Working Capital (meaning a greater negative number than the Target Net Working Capital), the Cash Merger Consideration payable at the Closing shall be reduced by an amount equal to such deficiency. If the Estimated Closing Net Working Capital is greater than the Target Net Working Capital (meaning a smaller negative number than the Target Net Working Capital or a positive number), the Cash Merger Consideration payable at the Closing shall be increased by such excess. The adjustment made pursuant to the two immediately preceding sentences is referred to herein as the "Estimated Net Working Capital Adjustment." The adjustments made to Cash Merger Consideration in this paragraph (b) and based on the Estimated Closing Indebtedness, and the further adjustments to the Cash Merger Consideration for amounts of (i) Estimated Reimbursable Expenses and (ii) Estimated Closing Accrued Taxes, Estimated Closing Indebtedness and Estimated Closing Transaction Expenses solely to the extent included as current liabilities in the calculation of Estimated Closing Net Working Capital, are referred to herein as the "Initial Adjustment" and shall be subject to subsequent adjustment as provided in paragraphs (c), (d), (e) and (f) below.

 

 

(c)          Within 90 days after the Closing Date, the Surviving Entity shall prepare or cause to be prepared, at its own expense, and deliver to the Representative together with all work papers and back-up materials relating thereto, a written statement setting forth the calculation of the Cash Merger Consideration, together with (i) a consolidated balance sheet of the Seller Entities as of the close of business on the Closing Date, immediately prior to giving effect to the Closing, prepared in accordance with GAAP applied on a basis consistent with the Year-End Balance Sheets, and (ii) the Surviving Entity's final calculations of (t) each Seller's Work in Process, (u) the Estimated Reimbursable Expenses, (v) the Estimated Closing Net Working Capital, (w) Estimated Closing Indebtedness, (x) the Estimated Closing Accrued Taxes, (y) the Estimated Closing Transaction Expenses and (z) the amount of Estimated Closing Accrued Taxes, Estimated Closing Transaction Expenses and Estimated Closing Indebtedness solely to the extent included as current liabilities in the calculation of Estimated Closing Net Working Capital (such statement, together with the balance sheet referred to in clause (i) above and the calculations in clause (ii) above, being herein called the "Final Closing Statement").

 

(d)          During the 30-day period immediately following the Representative's receipt of the Final Closing Statement, the Representative and his or her representatives will be permitted to review, during normal business hours and upon reasonable notice, the Surviving Entity's books and records and the working papers related to the preparation of the Final Closing Statement. The Final Closing Statement (including the determinations included therein) will become final, binding and conclusive upon the Surviving Entity and the Representative (a) on the 30th day following the Representative's receipt thereof, unless the Surviving Entity receives from the Representative prior to such 30th day written notice of the Representative's disagreement (a "Dispute Notice") with any amount or determination set forth in the Final Closing Statement or (b) on such earlier date as the Representative notifies the Surviving Entity that it does not dispute the Final Closing Statement. Any Dispute Notice will specify in reasonable detail the nature and dollar amount of any disagreement so asserted (collectively, the "Disputed Items"). The Dispute Notice shall be limited to disputes or objections based on mathematical errors or based on the final calculation of the Cash Merger Consideration, including calculations of the Estimated Closing Net Working Capital, the Estimated Closing Indebtedness, Estimated Closing Accrued Taxes, Estimated Closing Transaction Expenses, the Estimated Reimbursable Expenses or the amounts of Estimated Closing Accrued Taxes, Estimated Closing Transaction Expenses and Estimated Closing Indebtedness solely to the extent included as current liabilities in the final calculations of Estimated Closing Net Working Capital, not being calculated in accordance with the definitions thereof or the terms of this Agreement. If the Representative timely delivers a Dispute Notice, then the determination of the Cash Merger Consideration (in accordance with the resolution described in clause (x) or (y) below, as applicable) will become final, binding and conclusive upon the Surviving Entity and the Representative on the first to occur of (x) the date on which the Surviving Entity and the Representative resolve in writing all differences they have with respect to the Disputed Items or (y) the date on which all of the Disputed Items that are not resolved by the Surviving Entity and the Representative in writing are finally resolved in writing by the Accounting Firm in accordance with Section 2.8(e). The Representative shall be deemed to have agreed with all amounts and items contained in the Final Closing Statement to the extent such amounts and items are not raised in the Dispute Notice.

 

 

(e)          During the 30 days following delivery of a Dispute Notice, the Surviving Entity and the Representative will seek in good faith to resolve in writing any differences that they have with respect to all of the Disputed Items. Any Disputed Item resolved in writing by the Surviving Entity and the Representative will be deemed final, binding and conclusive on Parent and the Stockholders. If the Surviving Entity and the Representative do not reach agreement on all of the Disputed Items during such 30-day period (or such longer period as they shall mutually agree), then at the end of such 30-day (or longer) period the Surviving Entity and the Representative will submit all unresolved Disputed Items (collectively, the "Unresolved Items") to the Accounting Firm to review and resolve such matters. The parties shall instruct the Accounting Firm (i) not to assign a value to any item in dispute greater than the greatest value or lower than the lowest value assigned by the Surviving Entity or the Representative, and (ii) to make a final determination (the "Final Determination") not later than 30 calendar days following submission of the Unresolved Items to the Accounting Firm. The Final Determination will be final, binding and conclusive on the Surviving Entity, the Representative, Parent and the Stockholders effective as of the date the Accounting Firm's written determination is received by the Surviving Entity and the Representative. Each party will bear its own legal, accounting and other fees and expenses of participating in such dispute resolution procedure. The fees and expenses of the Accounting Firm shall be paid jointly, one-half by the Representative (on behalf of the Stockholders) and one-half by the Surviving Entity.

 

(f)          Upon the determination, in accordance with Sections 2.8(c), (d) and (e) above, of the Final Closing Statement and any Final Determination made, the Cash Merger Consideration shall be recalculated using the amounts so determined pursuant to Sections 2.8(d) and 2.8(e) above in lieu of the amounts used in the Initial Adjustment. The adjustment, if any, made pursuant to this paragraph (f) is referred to herein as the "Final Adjustment." If the Cash Merger Consideration as adjusted pursuant to the Final Adjustment is greater than the Cash Merger Consideration as adjusted pursuant to the Initial Adjustment, then Parent shall pay or cause to be paid the amount of such excess to the Representative for distribution among the Stockholders in accordance with the Stockholder Allocation. If the Cash Merger Consideration as adjusted pursuant to the Final Adjustment is less than the Cash Merger Consideration as adjusted pursuant to the Initial Adjustment, then the Representative (on behalf of the Stockholders) shall pay the amount of such deficiency to Parent. Any payment under this paragraph (f) shall be made in cash or same day funds within three (3) Business Days after the determination of the Final Adjustment pursuant to this paragraph (f).

 

 

Section 2.9           Representative. Each of the Seller Agreement Parties hereby agrees that C. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ shall be appointed as the Representative and as the attorney-in-fact for and on behalf of each Stockholder, and the taking by the Representative of any and all actions and the making of any decisions required or permitted to be taken by the Representative under this Agreement or any Ancillary Agreement to which any Stockholder is a party, including the exercise of the power to (a) resolve any Disputed Items with respect to the Final Closing Statement (b) agree to, negotiate, enter into settlements and compromises of and comply with orders of courts with respect to any indemnification claims, (c) resolve any indemnification claims, and (d) take all actions necessary in the judgment of the Representative for the accomplishment of the other terms, conditions and limitations of this Agreement, the Ancillary Agreements and any transactions contemplated herein and therein. The Representative shall no have authority to modify the allocation attached hereto as Annex A without written consent of ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (or his estate representative.) Accordingly, and except as set forth in the immediately preceding sentence, the Representative has the authority and power to act on behalf of each Stockholder with respect to this Agreement or any Ancillary Agreement to which any Stockholder is a party. Each Stockholder will be bound by all actions taken by the Representative in connection with this Agreement and Parent shall only be required to acknowledge or act upon a written communication signed by the Representative. Such agency may be changed with respect to the Representative by the majority of the Stockholders represented thereby; provided, however, that the Representative may not be removed unless any such majority agrees to such removal and to the identity of the substituted agent. Notwithstanding the foregoing, the Representative may resign at any time by providing written notice of intent to resign to each Stockholder, which resignation shall be effective upon the earlier of (i) thirty (30) calendar days following delivery of such written notice or (ii) the appointment of a successor by the relevant majority. No bond shall be required of the Representative and the Representative shall not receive any compensation for its services. The Representative shall not be liable to the Stockholders for any act done or omitted hereunder as the Representative while acting in good faith and in the exercise of reasonable judgment, even if such act or omission constitutes negligence on the part of the Representative. The Representative shall only have the duties expressly stated in this Agreement and shall have no other duty, express or implied. The Representative may engage attorneys, accountants and other professionals and experts. The Representative may in good faith rely conclusively upon information, reports, statements, advice and opinions prepared or presented by such professionals, and any action taken by the Representative based on such reliance shall be deemed conclusively to have been taken in good faith and in the exercise of reasonable judgment. The Stockholders shall jointly and severally indemnify the Representative and hold the Representative harmless against any payment which by the terms of this Agreement is required to be made by the Representative (on behalf of the Stockholders), and against any loss, liability or expense incurred on the part of the Representative (so long as the Representative was acting in good faith in connection therewith) and arising out of or in connection with the acceptance or administration of the Representative's duties hereunder, including the reasonable fees and expenses of any legal counsel retained by the Representative.

 

Section 2.10         Taking of Necessary Action; Further Action. If at any time after the Effective Time any further action is necessary or desirable to carry out the purposes of this Agreement and to vest the Surviving Entity with full right, title and possession to all assets, property, rights, privileges, powers and franchises of Sellers or Merger Sub, the officers and board of directors of the Surviving Entity will be fully authorized in the name of Sellers or Merger Sub, as the case may be, to take and shall take any and all such lawful and necessary action.

 

Article III

 

CLOSING

 

Section 3.1           Closing. The closing of the transactions contemplated hereby (the "Closing") shall take place at the offices of Dechert LLP, ▇▇▇▇ Centre, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, at 10:00 A.M. on the second Business Day following the satisfaction or waiver of the conditions set forth in Article VII (other than those conditions that by their terms cannot be satisfied until the Closing, but subject to the satisfaction or waiver thereof), or on such other date and time and at such other place as Parent and Sellers shall mutually agree. The date of the Closing is herein called the "Closing Date." For financial accounting and Tax purposes, to the extent permitted by Law, the Closing shall be deemed to have become effective as of 11:59 P.M. (New York City time) on the Closing Date.

 

 

Section 3.2           Deliveries and Proceedings at Closing. Subject to the terms and conditions of this Agreement, at the Closing:

 

(a)          the Seller Agreement Parties, as applicable, shall deliver or cause to be delivered to Parent and Merger Sub:

 

(i)          certificates representing (or similar evidence of ownership of) the equity interests (or other ownership interests) of ADC owned by the Stockholders, duly endorsed in blank or accompanied by powers duly executed in blank;

 

(ii)         the certificates and other documents required to be delivered pursuant to Section 7.2; and

 

(iii)        a receipt for the payment and issuance of the Closing Date Merger Consideration duly executed by each Stockholder;

 

(b)          Parent and the Merger Sub shall deliver or cause to be delivered the following:

 

(i)          certificates representing the Common Stock Merger Consideration to each of the Stockholders in accordance with the Stockholder Allocation;

 

(ii)         the Cash Merger Consideration to each of the Stockholders in accordance with the Stockholder Allocation; and

 

(iii)        the certificates and other documents required to be delivered pursuant to Section 7.3.

 

Article IV

 

REPRESENTATIONS AND WARRANTIES OF THE SELLER AGREEMENT PARTIES

 

Subject to Section 9.5(e), Sellers and the Stockholders hereby jointly and severally represent and warrant to Parent and Merger Sub as of the date of this Agreement and as of the Closing Date as follows:

 

Section 4.1           Organization and Qualification; Subsidiaries.  Each Seller Entity is an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its formation or incorporation, and has all requisite entity power and authority to carry on its business as it now is being conducted. Each Seller Entity is duly qualified to do business and is in good standing as a foreign corporation in all jurisdictions listed in Section 4.1 of the Disclosure Schedule, which are the only jurisdictions where the nature of the property owned or leased by it or the nature of the business conducted by it makes such qualification necessary, except where the failure to be so qualified or in good standing would not reasonably be expected to have a Business Material Adverse Effect. Neither Seller has any Subsidiary on the date hereof. On the Closing Date, ADC will have one Subsidiary, PTFS, and will own 100% of the outstanding capital stock and other equity interests thereof, free and clear of all Encumbrances. True and complete copies of the certificate of incorporation, bylaws or other organizational documents of each Seller Entity, as amended to date have been previously delivered to Parent.

 

 

Section 4.2           Authorization. The execution, delivery and performance by each Seller Agreement Party of this Agreement and the Ancillary Agreements to which each Seller Agreement Party is a party and the consummation by each Seller Agreement Party of the transactions contemplated hereby have been duly authorized by all necessary action on the part of each Seller Agreement Party, as the case may be. This Agreement has been, and each Ancillary Agreement to which any Seller Agreement Party is a party will be, duly and validly executed and delivered by each Seller Agreement Party that is a party thereto. Assuming due authorization, execution and delivery by the other parties hereto and thereto, this Agreement constitutes, and each Ancillary Agreement will when executed and delivered constitute, the valid and binding obligation of each Seller Agreement Party that is party thereto, enforceable against such Seller Agreement Party in accordance with its terms, subject to the effect of any applicable bankruptcy, reorganization, insolvency, moratorium, fraudulent conveyance or similar laws relating to or affecting creditors' rights generally and subject, as to enforceability, to the effect of general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).

 

Section 4.3           No Conflict. Except as set forth in Section 4.3 of the Disclosure Schedule, the execution, delivery and performance by each Seller Agreement Party of this Agreement and any Ancillary Agreement to which such Seller Agreement Party is a party, and the consummation by each Seller Agreement Party of the transactions contemplated hereby and thereby, do not and will not, with or without the giving of notice or the lapse of time, or both, (x) violate any provision of Law to which such Seller Agreement Party is subject, (y) violate any provision of the certificate of incorporation, bylaws or other organizational documents of such Seller Agreement Party, or (z) violate or result in a breach of or constitute a default (or an event which would, with the passage of time or the giving of notice, or both, constitute a default) under, or result in or permit the termination or amendment of any provision of or require the consent of any third party under, or result in or permit the acceleration of the maturity or cancellation of performance of any obligation under, or result in the creation or imposition of any Encumbrance of any nature whatsoever upon any asset of any Seller Agreement Party pursuant to, or give to others any interests or rights therein under, any Contract to which any Seller Agreement Party is a party or by which any Seller Agreement Party or Seller Subsidiary may be bound or affected except, in the case of clauses (x) and (z), for any such violations, breaches or defaults, or for any such consents the failure of which to be obtained that, individually or in the aggregate, would not reasonably be expected to have a Business Material Adverse Effect.

 

 

Section 4.4           Capitalization.

 

(a)          Section 4.4(a) of the Disclosure Schedule lists for each Seller Entity, the amount of its authorized capital stock, the amount of its outstanding capital stock and the owners of such outstanding capital stock as of the date hereof and, except for transfers required by the Stock Purchase Agreements, as of the Closing Date (such outstanding capital stock, as so transferred, being herein collectively called the "Existing Seller Equity"). All of the Existing Seller Equity is duly authorized, validly issued, fully paid, and non-assessable, was not issued in violation of the terms of its organizational documents, any agreement or other understanding binding upon the Company, and was issued in compliance with all Law. Except as set forth in Section 4.4(a) of the Disclosure Schedule, there are no outstanding securities convertible into, exchangeable for or carrying the right to acquire equity securities of any Seller Entity, or subscriptions, warrants, options, rights (including preemptive rights), stock appreciation rights, phantom stock interests, or other arrangements or commitments obligating any Seller Entity to issue or dispose of any of its respective equity securities or any ownership interest therein. The consummation of the transactions contemplated hereby will not cause any Encumbrances to be created or suffered on the capital stock of any Seller Entity. Except as set forth in Section 4.4 of the Disclosure Schedule, there are no existing agreements, subscriptions, options, warrants, calls, commitments, trusts (voting or otherwise), or rights of any kind whatsoever between any Seller Entity on the one hand and any Person on the other hand with respect to the Existing Seller Equity of Seller. Other than another Seller Entity pursuant to the Share Exchange, none of the Seller Entities owns, directly or indirectly, any stock of or any other equity interest in any other Person.

 

(b)          Each Stockholder has good and valid title to the number of securities of the Seller Entity set forth beside such Stockholder's name in Section 4.4(b) of the Disclosure Schedule, free and clear of all Encumbrances, except for Encumbrances set forth in Section 4.4(a) or 4.4(b) of the Disclosure Schedule and except for transfers required by the Stock Purchase Agreements after the date hereof. Section 4.4(b) of the Disclosure Schedule set forth, as of the date hereof and as of the Closing Date (giving effect to the Share Exchange and without giving effect to transfers required by the Stock Purchase Agreements), all of the equity interests in each Seller Entity owned by each Stockholder and any subscriptions, warrants, options, or rights to purchase any such equity interests or shares of capital stock (in addition to the purchase rights existing pursuant to the Stock Purchase Agreements) or any securities convertible into or exchangeable for such equity interests or shares of capital stock.

 

Section 4.5           Financial Statements.

 

(a)          Section 4.5 of the Disclosure Schedule sets forth (i) the audited balance sheets of each Seller Entity as of December 31, 2011 (the "Balance Sheets"), 2010 and 2009 (the "Year-End Balance Sheets"), and (ii) the related audited statements of income, stockholders' equity (deficit) and cash flows of each Seller Entity for the fiscal years ended December 31, 2011, 2010 and 2009 (the "Annual Statements of Operations" and, together with the Year-End Balance Sheets, the "Year-End Financial Statements").

 

(b)          Section 4.5 of the Disclosure Schedule sets forth (i) the unaudited balance sheet of each Seller Entity as of May 31, 2012 (the "Interim Balance Sheets"), and (ii) the related unaudited statements of income and stockholders' equity (deficit) of each Seller Entity for the five month period ended May 31, 2012 (collectively, the "Interim Financials" and, together with the Year-End Balance Sheets and the Annual Statements of Operations, the "Financial Information").

 

 

(c)          The Financial Information has been derived from the books and records of the Seller Entities. The Year-End Financial Statements have been prepared in accordance with GAAP, the Interim Financials of ADC have been prepared in accordance with the ADC Accounting Principles, and the Interim Financials of PTFS have been prepared in accordance with the PTFS Accounting Principles. Each of the balance sheets in the Financial Information fairly presents in all material respects the financial condition of each Seller as of its respective date, and the statements of income in the Financial Information fairly present in all material respects the results of operations of each Seller for the period covered thereby.

 

(d)          The statutory books, records and accounts of each Seller Entity have been maintained in accordance with all applicable Laws. The statutory books, records and accounts of each Seller are in the possession (or under the control) of such Seller Entity.

 

(e)          Except as set forth in Section 4.5(e) of the Disclosure Schedule, there exist no liabilities or obligations of any Seller Entity that are required by under the ADC Accounting Principles or PTFS Accounting Principles to be disclosed, reflected or reserved against in the Financial Statements except (i) as disclosed, reflected or reserved against in the Interim Balance Sheets, (ii) for Transaction Expenses, (iii) for liabilities and obligations incurred in the ordinary course of business consistent with past practice since December 31, 2011 (the "Balance Sheet Date"), and (iv) for liabilities that would not, individually or in the aggregate, reasonably be expected to have a Business Material Adverse Effect.

 

(f)          Except as set forth in Section 4.5(f) of the Disclosure Schedules, Sellers maintain a system of internal accounting controls sufficient to provide reasonable assurance that: (i) all assets, liabilities and transactions are accurately and timely recorded in all material respects and as necessary to permit preparation of audited financial statements and to maintain accountability for the assets and (ii) transactions are executed and access to records is permitted only in accordance with management's authorization.

 

Section 4.6           Absence of Certain Changes or Events.

 

(a)          Except as set forth in Section 4.6(a) of the Disclosure Schedule, since the Balance Sheet Date, each Seller Entity has in all material respects conducted the Business in the ordinary course of business consistent with past practice.

 

(b)          Except as set forth in Section 4.6(b) of the Disclosure Schedule, there has been no Business Material Adverse Effect, nor has any event or circumstance or series of related events or circumstances, occurred that would, individually or in the aggregate, reasonably be expected to have a Business Material Adverse Effect.

 

(c)          Without limiting the foregoing, except as set forth in Section 4.6(c) of the Disclosure Schedule, since the Balance Sheet Date, there has not occurred any action, event, development, occurrence or failure to act that, if it had occurred after the date hereof, would have required the consent of Parent pursuant to Section 6.2.

 

 

Section 4.7           Title.  Each Seller Entity has good and marketable title to, or otherwise has the right to use pursuant to a valid and enforceable lease, license, sharing agreement, or similar contractual arrangement, all of its assets and properties (including those reflected on the Interim Balance Sheets, but excluding any such assets and properties sold, consumed, or otherwise disposed of in the ordinary course of business since the Balance Sheet Date) free and clear of all Encumbrances, except for Permitted Encumbrances (collectively, the "Assets"). Except as set forth in Section 4.7 of the Disclosure Schedule, all properties and assets owned or leased by any Seller Entity are in the possession of or under the control of such Seller Entity. The Assets are adequate for the purposes for which they are presently used in the conduct of the Business. Except as set forth on Section 4.7 of the Disclosure Schedule, the Assets will constitute on the Closing Date substantially all of the assets and rights (including employees) necessary to conduct the Business in substantially the same manner as the Business is presently conducted and proposed to be conducted. Except as set forth on Section 4.7 of the Disclosure Schedule, all of the Assets owned or leased by the Seller Entities, including without limitation those that are reflected on the Balance Sheets, which are necessary for the operation of the Business as currently conducted and as proposed to be conducted, are in good operating condition and repair (except for ordinary wear and tear and routine maintenance in the ordinary course of business), and usable in a manner consistent with their respective current use, and comply with applicable laws. To Sellers' Knowledge, there are no facts or conditions (other than expirations of terms of leases) affecting any material Assets that would reasonably be expected, individually or in the aggregate, to interfere with the use, occupancy or operation of such Assets.

 

Section 4.8           Owned Real Property.  No Seller Entity owns, or has owned at any time prior hereto, a freehold estate in any real property.

 

Section 4.9           Leases.

 

(a)          Section 4.9(a) of the Disclosure Schedule sets forth a true, correct and complete list of all leases, subleases, licenses or other agreements (the "Leases") for the use and occupancy of real property to which any Seller Entity is a party (the "Leased Real Property"). True, correct and complete copies of all Leases and all amendments, modifications and supplemental agreements thereto have previously been delivered to Parent. The term and rentals of each Lease are accurately set forth therein. The Leases are in full force and effect, and are binding and enforceable against each Seller Entity and, to the knowledge of the Seller, each of the parties thereto, in accordance with their respective terms and, except as set forth on Section 4.9(a) of the Disclosure Schedule, have not been modified or amended. The Seller Entities have accepted possession of the Leased Real Property demised pursuant to the Leases and are in actual possession thereof and have not sublet, assigned, encumbered or hypothecated their leasehold interest or granted any right of occupancy, possession or enjoyment of any of the Leased Real Property to any other Person. No Seller Entity is obligated to pay any leasing or brokerage commission relating to any Lease that has not already been paid and none will have any obligation to pay any leasing or brokerage commission upon the renewal of any Lease. Except as disclosed in Section 4.9(a) of the Disclosure Schedule, no construction, alteration or other leasehold improvement work required by any of the Leases remains to be paid for or to be performed by any Seller Entity. No Seller Entity has any obligation to provide any deposits, letters of credit or other credit enhancements to retain its rights under any Lease (except as otherwise provided in such Lease) or otherwise operate its business at the applicable Leased Real Property.

 

 

(b)          Except as set forth in Section 4.9(b) of the Disclosure Schedule, each Seller Entity enjoys peaceful and undisturbed possession of the Leased Real Property sufficient for current use and operations. To Sellers' Knowledge except as set forth in Section 4.9(b), (i) there are no material eminent domain, condemnation or other similar proceedings pending or threatened against any Seller Entity or otherwise affecting any portion of the Leased Real Property, and, no Seller Entity has received any notice of the same, (ii) the current use of the Leased Real Property in the conduct of the Business does not violate any instrument of record or agreement affecting the Leased Real Property, and there is no violation of any covenant, condition, restriction, easement or order of any Governmental Authority having jurisdiction over the Leased Real Property, or the use or occupancy thereof, except for such violations as would not materially interfere with the continued use and operations of the Leased Real Property to which they relate or materially adversely affect the value thereof for its current use, (iii) the Leased Real Property is in material compliance with all applicable building, zoning, subdivision, health and safety and other land use and similar applicable laws, rules and regulations affecting the Leased Real Property, and no Seller Entity has received any notice of any material violation or claimed material violation by any of them of any such laws, rules and regulations with respect to the Leased Real Property which have not been resolved, (iv) as of the date hereof, there are no proposed special assessments, or proposed material changes in property tax or land use or other Laws affecting the Leased Real Property, (v) there is no pending or threatened litigation, investigation or other proceeding that would interfere with the use or quiet enjoyment of the Leased Real Property by a Seller Entity prior to or after the Closing, (vi) all Permits required in connection with the operation of the Leased Real Property and all improvements thereon and the conduct of the Business thereon have been duly obtained, are in full force and effect and no proceedings are pending or threatened which could lead to a revocation or other impairment of any thereof, (vii) the water, gas, electricity and other utilities serving the Leased Real Property are adequate to service the normal operations of the applicable Seller Entity at the Leased Real Property, and (viii) the building and other improvements at the Leased Real Property are structurally sound and the systems located therein are in good working order and condition in all material respects, ordinary wear and tear excepted.

 

Section 4.10         Working Capital Assets.  All of the outstanding accounts and notes receivable of any Seller Entity have arisen in the ordinary course of business in connection with bona-fide business transactions, and the amounts of accounts and notes receivable reflected in the Year-End Financial Statements were recorded in accordance with GAAP consistently applied.

 

Section 4.11         Intellectual Property.

 

(a)          Section 4.11(a) of the Disclosure Schedule lists, as of the date hereof, all issued patents, registered trademarks, registered copyrights, mask work registrations, registered domain names and all applications for the registration or issuance of any of the foregoing owned by a Seller Entity (collectively, the "Business Registered Intellectual Property"), indicating as to each item as applicable: (i) the owner; (ii) the jurisdictions in which such item is issued or registered or in which any application for issuance or registration has been filed, (iii) the respective issuance, registration, or application number of the item, and (iv) the dates of application, issuance or registration of the item.

 

 

(b)          Each item of the Business Registered Intellectual Property is (i) subsisting in good standing, and not the subject of any pending or threatened proceeding before any Governmental Authority challenging its extent, validity, enforceability or the respective Seller Entity's ownership thereof, and (ii) to Sellers' Knowledge, valid and enforceable. Each Seller Entity has taken or will take prior to the Closing Date, or has caused or will cause its Affiliates to take prior to the Closing, steps reasonably necessary to cause all necessary registration, maintenance and renewal fees due for payment no later than the Closing Date in connection with such Business Registered Intellectual Property to be paid in a timely manner. All registration, maintenance and renewal documents, declarations, affidavits and other filings due no later than the Closing Date and necessary to maintain such Business Registered Intellectual Property against cancellation or abandonment have been or will be filed, paid or taken in a timely manner with the relevant patent, copyright, trademark or other authorities in the United States or foreign jurisdictions, as the case may be.

 

(c)          Section 4.11(c) of the Disclosure Schedule lists, as of the date hereof, all material written licenses, sublicenses, consents and other agreements:

 

(i)          by which a Seller Entity is authorized to use Intellectual Property that is used by a Seller Entity in its business; and

 

(ii)         by which any Seller Entity authorizes a third party to use any Intellectual Property owned by such Seller Entity.

 

Except as set forth in Section 4.11(c) of the Disclosure Schedule, Seller has delivered or made available to Parent copies of all of the licenses, sublicenses, consents and other agreements described in the preceding clauses (i) and (ii) that are true, correct and complete in all material respects, together with all material amendments thereto.

 

(d)          Each employee and third party contractor, subcontractor, consultant and agent engaged by a Seller Entity in the development of any Intellectual Property used in the Business (including, for the avoidance of doubt, any computer software developed for use in the Business) has executed and delivered to the applicable Seller Entity valid and enforceable assignments of Intellectual Property rights sufficient to vest irrevocably in such Seller Entity all right, title and interest in, including all Intellectual Property rights arising under, any such development.

 

(e)          The Seller Entities have taken commercially reasonable steps to protect the material confidential information and trade secrets of the Business.

 

(f)          Except as set forth in Section 4.11(f) of the Disclosure Schedule Each Seller Entity owns all right, title and interest in and to, or has a valid and enforceable license, sublicense, or right to use, all of the Intellectual Property used in the Business, free and clear of all Encumbrances (other than restrictions on transfer of license and sublicense agreements and of Sellers' rights in Intellectual Property licensed or sublicensed by them).

 

 

(g)          Except as set forth in Section 4.11(g) of the Disclosure Schedule, no computer software owned, purported to be owned, or developed for use in the Business includes, comprises or was developed using any software subject to open source, "copyleft" or similar licensing terms, including the GNU General Public License, where such use or incorporation would (i) dedicate to the public domain such software, (ii) otherwise require the free licensure of such software or public disclosure of the source code of such software to other Persons, or (iii) prevent a Seller Entity from claiming ownership of or otherwise enforcing Intellectual Property rights in such software.

 

(h)          No Seller Entity has any pending, unresolved notice, claim, demand or other assertion from any other Person, including for the avoidance of doubt, any cease and desist letter or offer of license, (i) alleging any infringement, dilution or misappropriation by a Seller Entity of any other Person's Intellectual Property, (ii) challenging or questioning the right of a Seller Entity to use any of the Intellectual Property used in connection with the operation and conduct of the Business or (iii) challenging the ownership, use, validity or enforceability of any Intellectual Property owned by a Seller Entity. Except as set forth in Section 4.11(h) of the Disclosure Schedule, (i) the operation of the Business as currently conducted does not infringe upon, violate or constitute misappropriation of the Intellectual Property of any other Person, and (ii) to Sellers' Knowledge, the Intellectual Property owned or licensed by the Seller Entities or used in the operation of the Business has not been infringed, diluted or misappropriated by any other Person. Except as set forth in Section 4.11(h) of the Disclosure Schedule, no Seller Entity is a party to, and no Intellectual Property owned by a Seller Entity is the subject of, any pending, or to Sellers' Knowledge, threatened proceedings or actions before any Governmental Authority (including the United States Patent and Trademark Office or equivalent authority anywhere in the world) which involves a claim of infringement, unauthorized use, or violation of any Intellectual Property of any third party or a challenge by a third party to the ownership, use, validity or enforceability of any of any such Intellectual Property. Except as set forth in Section 4.11(h) of the Disclosure Schedule, there are no unsatisfied judgments or outstanding orders, injunctions, decrees, stipulations or awards (whether rendered by a court, an administrative agency or by an arbitrator) against any Seller Entity with respect to Intellectual Property owned by or licensed to any Seller Entity, and no Seller Entity is in breach or violation of any such orders, injunctions, decrees, stipulations or awards (whether rendered by a court, an administrative agency or by an arbitrator).

 

Section 4.12         Contracts.   Section 4.12 of the Disclosure Schedule sets forth a complete and accurate list of all of the following Contracts to which any Seller Entity is a party or by which it is bound:

 

(a)          Contracts for the sale of any of the assets of any Seller Entity other than in the ordinary course of business or for the grant to any Person of any preferential rights to purchase any of such assets other than in the ordinary course of business;

 

(b)          Contracts for joint ventures, partnerships or sharing of profits or proprietary information;

 

(c)          Contracts containing covenants not to compete in any line of business or with any Person in any geographical area or not to solicit or hire any Person with respect to employment or covenants of any other Person not to compete with the Seller in any line of business or in any geographical area or not to solicit or hire any Person with respect to employment except, with respect to covenants not to solicit or hire, for any such Contracts in the ordinary course with customers and suppliers;

 

 

(d)          Contracts relating to the acquisition (by merger, purchase of stock or assets or otherwise) of any operating business or substantially all of the assets or the capital stock of any other Person;

 

(e)          Contracts evidencing Indebtedness (whether incurred, assumed, guaranteed or secured by any Asset);

 

(f)          except for standard indemnification provisions in Contracts entered in the ordinary course of business with customers or suppliers, any Contract under which any Seller Entity is required to provide continuing indemnification or a guarantee of obligations of any Person (other than the other Seller Entity) in excess of $5,000;

 

(g)          any Contract under which any Seller Entity has advanced or loaned any amount to any of its managers, directors or executive officers;

 

(h)          any Contract between any Seller Entity, on the one hand, and any of their respective managers, directors or executive officers, on the other hand, other than the Employment Contracts;

 

(i)          Contracts required to be listed in Section 4.11(c) of the Disclosure Schedule;

 

(j)          collective bargaining Contracts;

 

(k)          Contracts with customers or suppliers of any Seller Entity that involve payments in excess of $50,000 per year;

 

(l)          Any Contract with a Governmental Authority;

 

(m)          any Contract under which any Seller Entity is obligated to make any capital commitment or expenditure in excess of $25,000;

 

(n)          Contracts for the storage, treatment, disposal, recycling, investigation, removal or remediation of Hazardous Substances;

 

(o)          Contracts providing for indemnification of any officer or director of a Seller Entity, other than any existing directors' and officers' insurance policy and as provided in bylaws or organizational documents of such Seller Entity, as currently in effect; and

 

(p)          other Contracts (other than those listed in clauses (a) through (n) of this Section 4.12 and other than the Employment Contracts) (A) with a term longer than 90 days from the date hereof that involve payments by any Seller Entity in excess of $25,000 per year; or (B) with a term of less than one (1) year from the date hereof that involve payments by any Seller Entity in excess of $25,000, that are not terminable without liability, premium or penalty on less than 30 days' notice.

 

 

Except as set forth in Section 4.12 of the Disclosure Schedule, and assuming due authorization, execution and delivery by the other parties thereto, each Contract listed in Section 4.12 of the Disclosure Schedule, each Employment Contract and each Lease listed in Section 4.9(a) of the Disclosure Schedule is valid and is binding on each Seller Entity party thereto and, to Sellers' Knowledge, each other party thereto and is in full force and effect. Except as set forth in Section 4.12 of the Disclosure Schedule, no Seller Entity, nor, to Sellers' Knowledge as of the date hereof, any other party thereto is in default or breach in any material respect under the terms of, nor has any Seller Entity received as of the date hereof, any notice of any material default or breach under, any such Contract or Lease, and no event or circumstance has occurred that, with the passage of time or the giving of notice or both, would constitute a material default by a Seller Entity thereunder or would permit material modification, acceleration, or termination by the other party thereto of any such Contract or Lease or the loss of any material benefit of a Seller Entity thereunder. Seller has delivered or made available to Parent true, correct and complete copies of all Contracts listed in Section 4.12 of the Disclosure Schedule and of all Employment Contracts, together with all amendments thereto.

 

Section 4.13         Litigation.  Except as set forth in Section 4.13 of the Disclosure Schedule, as of the date hereof, there is no Legal Proceeding pending or, to Sellers' Knowledge, threatened, against a Seller Entity or any of its assets (or, to Sellers' Knowledge, against any of the officers or directors of any Seller Entity related to their business duties, which interfere with their business duties, or as to which any Seller Entity has any indemnification obligations) at law, in equity or otherwise, in, before, or by, any Governmental Authority. Except as set forth in Section 4.13 of the Disclosure Schedule, there are no material judgments or outstanding orders, injunctions, decrees, stipulations or awards against a Seller Entity or any of its assets, or with respect to the Business.

 

Section 4.14         Compliance with Laws.  Since January 1, 2008, each Seller Entity has been in compliance in all material respects with all applicable Laws. Except as set forth in Section 4.14 of the Disclosure Schedule, since January 1, 2008, no Seller Entity has received any written notice of any violation of applicable Law. Except as set forth in Section 4.14 of the Disclosure Schedule, each Seller Entity has all Permits required to conduct its respective Business. Each Permit is in full force and effect and each Seller Entity is in compliance with each such Permit in all material respects.

 

Section 4.15         Environmental Matters.

 

(a)          Except as set forth in Section 4.15 of the Disclosure Schedule:

 

(i)          Each Seller Entity is and has been in compliance in all material respects with all Environmental Laws, which compliance includes obtaining, maintaining in good standing, applying for timely renewal of and complying in all material respects with all Permits required by applicable Environmental Laws ("Environmental Permits");

 

 

(ii)         No Seller Entity has received any, and to Sellers' Knowledge there are no unresolved written or otherwise unambiguous, notices, citations, summonses, orders, complaints, penalties, claims, investigations, requests for information, demands or reviews by any Governmental Authority or any other Person in connection with the Business (x) with respect to any material violation or alleged violation of or material liability under any applicable Environmental Law, (y) with respect to any alleged failure to have or comply with any material Environmental Permit or (z) with respect to the exposure to, presence, Release, treatment, storage, disposal, transportation, or the making of arrangements for the treatment, storage, disposal or transportation, of any Hazardous Substance, in each case that would reasonably be expected to give rise to any material liability of any Seller Entity under any Environmental Laws and, to Sellers' Knowledge, no such notice, citation, summons, order, complaint, penalty, claim, investigation, request for information, demand or review against or involving any Seller Entity or the Business has been threatened by any Governmental Authority or other Person;

 

(iii)        no Releases of Hazardous Substances by any Seller Entity or, to Sellers' Knowledge, by any other Person, have occurred at or from any Leased Real Property or any property formerly owned, operated or leased by Seller (while owned, operated or leased by any Seller Entity), in each case that would individually or in the aggregate reasonably be expected to result in any material liability of any Seller Entity;

 

(iv)        to Sellers' Knowledge, none of the Seller Entities has expressly assumed or undertaken, or expressly agreed to assume or undertake, responsibility for any known, unknown or contingent liability or obligation (including any obligation for investigation, remediation or other response action) of any other Person relating to or arising out of any actual or alleged (A) violation of Environmental Law, or (B) exposure to or presence or Release of any Hazardous Substance;

 

(v)          the Seller Entities have delivered or made available to Parent complete and correct copies of all studies, reports, surveys, assessments, audits, correspondence, investigations, analyses, tests, and other documents (whether in hard copy or electronic form) in the possession, custody or control of any Seller Entity regarding the presence or alleged presence of, or exposure to, Hazardous Substances or regarding compliance with applicable Environmental Law, that are material to a reasonable understanding of the past, current and future liabilities of Seller; and

 

(vi)        to Sellers' Knowledge, no facts, events, circumstances or conditions exist, or existed, with respect to any Seller Entity, the Business, any Leased Real Property or any real property formerly owned, operated or leased by any Seller Entity or in connection with the Business that would reasonably be expected to result (with or without notice or lapse of time or both) in any Seller Entity incurring a material liability pursuant to Environmental Law or in connection with any Hazardous Substance.

 

(b)          The parties acknowledge and agree that the Seller Entities make no representation or warranty as to environmental matters, Environmental Laws or Hazardous Substances except as set forth in this Section 4.15, Section 4.3, Section 4.5, Section 4.12, Section 4.13 and Section 4.18 and notwithstanding anything to the contrary contained in this Agreement, no other section of this Agreement will be deemed to constitute a representation or warranty as to environmental matters, Environmental Laws or Hazardous Substances.

 

 

Section 4.16         Employee Benefit Matters.

 

(a)          Section 4.16(a) of the Disclosure Schedule sets forth a list of each Benefit Plan. None of the Benefit Plans are maintained, contributed to or required to be contributed to outside the United States.

 

(b)          As applicable with respect to the Benefit Plans, Seller has delivered to Parent, true and complete copies of (i) each Benefit Plan, including all amendments thereto (and in the case of an unwritten Benefit Plan, a written description thereof), (ii) the current summary plan description and each summary of material modifications thereto, (iii) the most recent Internal Revenue Service determination letter, (iv) the three most recently filed annual reports (Form 5500 and all schedules thereto), (v) the three most recent summary annual reports, financial statements and trustee reports, and (vi) all records, notices and filings made, or received, by the Seller Entities or any ERISA Affiliate during the last three years concerning IRS or DOL audits or investigations and "prohibited transactions" within the meaning of Section 406 of ERISA or Section 4975 of the Code.

 

(c)          Each Seller Entity and each ERISA Affiliate is in compliance in all material respects with the provisions of ERISA, the Code and other Laws applicable to the Benefit Plans. Each Benefit Plan has been maintained, operated and administered in compliance in all material respects with its terms and all applicable Laws, including ERISA and the Code. Each Benefit Plan, which is an "employee pension benefit plan" within the meaning of Section 3(2) of ERISA, and which is intended to meet the qualification requirements of Section 401(a) of the Code has received a determination letter from the IRS to the effect that such plan is qualified and exempt from federal income taxes under Sections 401(a) and 501(a), respectively, of the Code and each such Benefit Plan is so qualified and exempt from federal income taxes.

 

(d)          Each Seller Entity and each ERISA Affiliate has complied in all material respects with the notice and continuation coverage requirements of Section 4980B of the Code and the regulations thereunder with respect to each Benefit Plan that is a group health plan within the meaning of Section 5000(b)(1) of the Code. Each Benefit Plan is in material compliance with the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act (collectively, the "Healthcare Reform Law"), to the extent applicable. With respect to any Benefit Plan, no Seller Entity or any ERISA Affiliate has sought reimbursement under the retiree reinsurance program provided for in the Healthcare Reform Law.

 

(e)          Except as set forth in Section 4.16(e) of the Disclosure Schedule, all payments under the Benefit Plans, except those to be made from a trust qualified under Section 401(a) and 501(a) of the Code or through an insurance contract, for any period ending before the Closing Date that are not yet, but will be, required to be made are properly accrued and reflected in the Financial Information.

 

(f)          No Seller Entity, nor any ERISA Affiliate, or, to Sellers' Knowledge, any fiduciary, trustee or administrator of any Benefit Plan, has engaged in or, in connection with the transactions contemplated by this Agreement, will engage in, any transaction with respect to any Benefit Plan which would subject any such Benefit Plan, any Seller Entity, any ERISA Affiliate, Merger Sub, the Surviving Entity or Parent or any of its Affiliates to a tax, penalty or liability for a "prohibited transaction" under Section 406 of ERISA or Section 4975 of the Code.

 

 

(g)          No Benefit Plan is now or at any time has been subject to Part 3, Subtitle B of Title I of ERISA or Title IV of ERISA. No asset of any Seller Entity, and no asset of any ERISA Affiliate which is to be acquired by Parent or any of its Subsidiaries pursuant to this Agreement, is subject to any lien under Code Section 401(a)(29), ERISA Section 302(F), Code Section 412(n) or ERISA Section 4068 or arising out of any action filed under ERISA Section 4301(b).

 

(h)          No Seller Entity nor any ERISA Affiliate thereof has ever contributed to or been required to contribute to, or incurred any withdrawal liability, within the meaning of Section 4201 of ERISA, to any Multiemployer Plan, nor does any Seller Entity or any ERISA Affiliate thereof have any potential withdrawal liability arising from a transaction described in Section 4204 of ERISA.

 

(i)          No Benefit Plan provides benefits, including death or medical benefits, beyond termination of service or retirement other than (i) coverage mandated by law or (ii) death or retirement benefits under a plan qualified under Section 401(a) of the Code.

 

(j)          The execution of, and performance of the transactions contemplated by this Agreement will not either alone or in connection with any other event(s) (i) result in any payment becoming due to any employee, former employee, director, officer, or independent contractor of the Seller Entities, (ii) increase any amount of compensation or benefits otherwise payable under any Benefit Plan, (iii) result in the acceleration of the time of payment, funding or vesting of any benefits under any Benefit Plan, (iv) require any contributions or payments to fund any obligations under any Benefit Plan or (v) limit the right to merge, amend or terminate any Benefit Plan. " No payment which is or may be made by, from or with respect to any Benefit Plan, to any employee, former employee, director, officer or independent contractor of the Seller Entities, either alone or in conjunction with any other payment, event or occurrence, will or could reasonably be characterized as an "excess parachute payment" under Section 280G of the Code. No such employee, former employee, director, officer or independent contractor of Sellers has any "gross up" agreements or other assurance of reimbursement for any Taxes resulting from any such "excess parachute payments."

 

(k)          There are no pending audits or investigations by any Governmental Authority involving any Benefit Plan and no threatened or pending material claims (except for individual claims for benefits payable in the normal operation of the Benefit Plans), suits or proceedings involving any Benefit Plan or asserting any rights or claims to benefits under any Benefit Plan, nor, to Sellers' Knowledge, are there any facts which could reasonably give rise to any material liability in the event of any such audit, investigation, claim, suit or proceeding.

 

(l)          Each Benefit Plan that constitutes a "non-qualified deferred compensation plan" within the meaning of Section 409A of the Code, complies in both form and operation with the requirements of Section 409A of the Code so that no amounts paid pursuant to any such Benefit Plan is subject to tax under Section 409A of the Code.

 

 

(m)          No Seller Entity or any ERISA Affiliate thereof has any commitment to modify or amend any Benefit Plan (except as required by Law or to retain the tax qualified status of any Benefit Plan). No Seller Entity or any ERISA Affiliate thereof has any commitment to establish any new benefit plan, program or arrangement.

 

Section 4.17         Taxes. Except as set forth in Section 4.17 of the Disclosure Schedule:

 

(a)          ADC is and has been an S corporation within the meaning of Section 1361 of the Code and under the Laws of each state in which ADC is subject to income Tax at all times since April 1, 2000 and shall maintain such S status until the Closing Date. PTFS has been (at all times during its existence) an S corporation within the meaning of Section 1361 of the Code and under the Laws of each state in which PTFS is subject to income Tax and shall maintain such S status until the Share Exchange. Each of ADC and PTFS has delivered or caused to be delivered, to Parent documentation from the U.S. Internal Revenue Service and any other Governmental Authority acknowledging receipt of the election by such Seller Entity to be treated as an S corporation as described in this Section 4.17(a).

 

(b)          All Tax Returns required to be filed on or before the Closing Date by or on behalf of each Seller Entity have been or will be timely filed. All such Tax Returns are true, correct and complete in all material respects. All Taxes due and owing by each Seller Entity (whether or not shown on a Tax Return) have been timely paid.

 

(c)          Each Seller Entity has withheld and paid all Taxes required to have been withheld and paid in connection with any amounts paid or owing to any Person, and all forms and Tax Returns required to be prepared in connection therewith have been properly completed and timely provided to or filed with the appropriate Person.

 

(d)          No claim has been made, or to the Knowledge of the Seller Entities, threatened to be made, by any Governmental Authority in any jurisdiction where any Seller Entity does not file Tax Returns that such non-filing entity is, or may be, subject to Tax by that jurisdiction.

 

(e)          No extensions or waivers of statutes of limitations extending the time to collect or assess any Tax have been given or requested with respect to any Taxes of any Seller Entity and no Seller Entity is currently the beneficiary of any extension of time within which to file any Tax Return.

 

(f)          All deficiencies asserted, or assessments made, against any Seller Entity as a result of any audit or examination by any Governmental Authority have been fully paid.

 

(g)          No Seller Entity is currently the subject of a Tax audit or examination, and no Seller Entity has received from any Governmental Authority any (i) written notice or any other notice indicating an intent to open a Tax audit or review of any Tax Return, (ii) request for additional information related to Tax matters; or (iii) notice of deficiency or proposed adjustment for any amount of Tax proposed, asserted, or assessed by any Governmental Authority against any Seller Entity.

 

(h)          There are no Encumbrances for Taxes (other than for current Taxes not yet due and payable) upon any of the assets of any Seller Entity.

 

 

(i)          No Seller Entity is a party to, or is bound by, any Tax indemnity, Tax-sharing or Tax allocation agreement, or is otherwise liable for the Taxes (other than Tax withholding required by Law) of any Person, whether by agreement, under any applicable Law, or otherwise including any terminated agreement as to which any Seller Entity could have any continuing liabilities on or after the Closing Date.

 

(j)          No Seller Entity is, and none of the assets of any Seller Entity is an interest in an entity that is treated as a partnership for Tax purposes, and no Seller Entity is a party to any joint venture, arrangement, or contract that could be treated as a partnership for U.S. federal income Tax purposes.

 

(k)          No Seller Entity 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, and no Governmental Authority has proposed any such adjustment or change in accounting method; (ii) an application pending with any Governmental Authority requesting permission for any changes in accounting methods; or (iii) been the subject of a Tax ruling that would have continuing effect after the Closing Date.

 

(l)          No Seller Entity will be required to include any item of income in, or exclude any item of deduction from, taxable income for any taxable period (or portion thereof) ending after the Closing Date as a result of any (i) change in method of accounting for any taxable period ending on or prior to the Closing Date; (ii) installment or open transaction disposition made on or prior to the Closing Date; or (iii) prepaid amount received or deferred revenue liability recorded on or prior to the Closing Date.

 

(m)          No Seller Entity has engaged in any reportable transaction as defined in Section 6707A(c)(i) of the Code or a listed transaction as defined in Treasury Regulation Section 1.6011-4(b).

 

(n)          No Seller Entity is a party to any agreement, contract, arrangement or plan that has resulted or could result, separately or in the aggregate, in the payment of any "excess parachute payment" within the meaning of Section 280G of the Code (or any similar provision of state, local or foreign Law).

 

(o)          No Seller Entity (i) is a party to any "closing agreements" described in Section 7121 of the Code (or any comparable provision of state, local or foreign Law) or (ii) has requested or received any Tax ruling, in either case, that would have continuing effect after the Closing Date.

 

(p)          No Seller Entity (i) is liable for any Tax under Section 1374 of the Code (or any corresponding or similar provision of state, local, or foreign Law); or (ii) except in connection with the Share Exchange and the election made pursuant to Section 7.2(n) of this Agreement has, in the past ten years, (A) acquired assets from any corporation in a transaction in which the Tax basis was determined, in whole or in part, by reference to the Tax basis of the acquired assets (or any other property) in the hands of the transferor or (B) acquired the stock of any corporation that is a "qualified subchapter S subsidiary" within the meaning of Section 1361(b)(3)(B) of the Code.

 

 

(q)          No Seller Entity has been included in an affiliated group filing a consolidated Tax Return and no Seller Entity has any liability for the Taxes of any Person under Treasury Regulations §1.1502-6 (or any similar provision of state, local or foreign Law) as a transferee or successor, by contract or otherwise..

 

(r)          No Seller Entity is or has been a party to any transaction governed by Section 355 or Section 368 of the Code within the past ten years except as contemplated by this Agreement, including the Share Exchange.

 

(s)          None of the assets of any Seller Entity is an interest in a foreign entity.

 

Section 4.18         Consents and Approvals.  The execution, delivery and performance of this Agreement and the Ancillary Agreements by the Seller Agreement Parties that are party thereto or the validity and effectiveness immediately following the Closing of any Permit of any Seller Entity, do not and will not require any consent, approval, authorization or other action by, or filing with or notification to, any Governmental Authority at or prior to the Closing, except (a) as set forth in Section 4.17(p) of the Disclosure Schedule, (b) for the notification requirements of the HSR Act, (c) for filings, consents, approvals or clearances where the failure to make any such filing or obtain any such consent, approval or clearance would not prevent or materially delay the consummation by the Seller Agreement Parties of the transactions contemplated by this Agreement and the Ancillary Agreements, and (d) as may be necessary as a result of facts or circumstances relating solely to Parent or Merger Sub.

 

Section 4.19         Employee Relations.

 

(a)          Except as set forth in Section 4.19(a) of the Disclosure Schedule, no Seller Entity is: (i) a party to or otherwise bound by any collective bargaining or other type of union agreement; (ii) a party to, involved in, the subject of, or to Sellers' Knowledge, threatened by, any labor dispute, unfair labor practice charge or complaint, grievance or labor arbitration; or (iii) currently negotiating any collective bargaining agreement to which any Seller Entity is or would be a party. No Seller Entity has experienced any strike, lockout, slowdown or work stoppage at any time, nor, to Sellers' Knowledge, is any such action threatened. There is not pending, nor has there ever been, any union election petition, demand for recognition, or, to Sellers' Knowledge, union organizing activity by or for the benefit of the employees of any Seller Entity or otherwise affecting any Seller Entity.

 

 

(b)          Each Seller Entity has been and is in compliance in all material respects with all applicable Laws respecting labor, employment and employment practices, including but not limited to all applicable Laws respecting terms and conditions of employment, wages and hours, unemployment insurance, worker's compensation, equal employment opportunity, discrimination and retaliation, immigration, and the payment and withholding of Taxes. No Seller Entity has been or is engaged in any unfair labor practice. Except as set forth in Section 4.19 of the Disclosure Schedule, there are no pending or to Sellers' Knowledge, threatened, claims against any Seller Entity (whether under regulation, contract, policy or otherwise) asserted by or on behalf of any present or former employee or job applicant of a Seller Entity (including by any Governmental Authority) on account of or for (i) overtime pay, other than overtime pay for work done in the current payroll period, (ii) wages or salary for a period other than the current payroll period, (iii) any amount of vacation pay or pay in lieu of vacation time off, other than vacation time off or pay in lieu thereof earned in or in respect of the current fiscal year, (iv) any amount of severance pay or similar benefits, (v) unemployment insurance benefits, (vi) workers' compensation or disability benefits, (vii) any violation of any statute, ordinance, order, rule or regulation relating to employment terminations or layoffs, including but not limited to the Worker Adjustment and Retraining Notification (WARN) Act and any similar state or local law, (viii) any violation of any statute, ordinance, order, rule or regulation relating to employee "whistleblower" or "right-to-know" rights and protections, (ix) any violation of any statute, ordinance, order, rule or regulations relating to the employment obligations of federal contractors or subcontractors, (x) any violation of any regulation relating to minimum wages or maximum hours of work, (xi) discrimination, retaliation or any other violation of any Law relating to fair employment practices or equal employment opportunities, or (xii) any violation of any other Law relating to labor, employment or employment practices, and no Seller Entity is aware of any such claims which have not been asserted.

 

(c)          Each Seller Entity has properly classified for all purposes (including but not limited to for all Tax purposes and for purposes of determining eligibility to participate in any Benefit Plan) all employees, leased employees, consultants and independent contractors (including nurses and recruiters), and has withheld and paid all applicable Taxes and made all appropriate filings in connection with services provided by such persons to each Seller Entity. Except as set forth in Section 4.19(c) of the Disclosure Schedule, the employment of each employee of a Seller Entity is terminable at will and no employee is entitled to severance pay or other benefits following termination or resignation, except as otherwise provided by applicable Law.

 

(d)          Section 4.19(d) of the Disclosure Schedule accurately sets forth as of the date of this Agreement, by Seller Entity, with respect to each current employee of any Seller Entity (including any employee who is on a leave of absence or on layoff status): (i) the name, title or classification, date of hire and exempt/non-exempt status of each employee; (ii) each employee's annualized base compensation and all bonuses or other incentive compensation paid to such employee for 2011 and paid to or to which such employee (other than any such employee who is a Stockholder) is likely to be entitled for 2012; (iii) the number of hours of sick-time that each employee has accrued as of the date hereof; (iv) the number of hours of vacation and personal time that each employee has accrued as of the date hereof; and (v) whether the employee is receiving workers' compensation or disability payments or is on leave or layoff status.

 

(e)          Section 4.19(e) of the Disclosure Schedule accurately sets forth as of the date hereof the number of employees terminated by any Seller Entity since December 31, 2011, and sets forth as of the date of this Agreement an accurate and complete list of the following information for each employee who has been terminated or laid off, or whose hours of work have been reduced by more than 50% since December 31, 2011: (i) the date of such termination, layoff or reduction in hours; and (ii) the location to which the employee was assigned. No later than the Closing Date, Seller shall, at the request of a Merger Sub, update Section 4.19(e) of the Disclosure Schedule to reflect any employment terminations effected by any Seller Entity between the date hereof and the Closing Date.

 

 

Section 4.20         Transactions with Related Parties.  Except for agreements related to employment with Seller Entities, and except as set forth in Section 4.20 of the Disclosure Schedule, there are no transactions, agreements, arrangements or understandings between any Seller Entity, on the one hand, and any director, officer or stockholder (or Affiliate thereof) of any Seller Entity, on the other hand, that would be required to be disclosed under Item 404 of Regulation S-K promulgated under the Securities Act (if the Securities Act were applicable to such Seller Entity).

 

Section 4.21         Insurance. Section 4.21 of the Disclosure Schedule contains a complete and correct list of all policies and contracts for insurance (including coverage amounts and expiration dates) of which any Seller Entity is the owner, insured or beneficiary or covering any of the assets of any Seller Entity (the "Insurance Policies"), copies of which have been made available or previously delivered to Parent. All premiums due and payable have been timely paid. All Insurance Policies are in full force and effect and no Seller Entity has received any notice of cancellation or non-renewal thereunder. There is no default with respect to any provision contained in any such policy, nor has there been any failure to give any notice or present any claim under any such policy in a timely fashion or in the manner or detail required by the policy. Except as set forth in Section 4.21 of the Disclosure Schedule or in a notice to Parent given pursuant to Section 6.7: (a) all of such coverages are provided on an "occurrence" (as opposed to "claims made") basis; (b) there are no outstanding claims under the Insurance Policies; (c) there are no premiums or claims due under the Insurance Policies which remain unpaid and no such policy is subject to any retroactive, retrospective or other similar type of premium adjustment; and (d) in the past two years, no notice of cancellation or non-renewal with respect to, or disallowance (other than reservation of rights by the insurer) of any claim under, any Insurance Policy has been received, and (e) Seller has not been refused any insurance, nor have any of its coverages been limited by any insurance carrier to which it has applied for insurance or with which has carried insurance during the last two years.

 

Section 4.22         Brokers.  No Seller Agreement Party or any Subsidiary of Seller has retained any broker, finder or investment banking firm to act on their behalf which is entitled to any fee or commission from Parent or any of its Affiliates (including, the Surviving Entity) upon consummation of the transactions contemplated by this Agreement.

 

Section 4.23         Employment Contracts; Compensation Arrangements; Officers and Directors. Seller has provided to Parent a true, correct and complete copy of a schedule setting forth (a) all Contracts to which any Seller Entity is a party or by which it is bound providing for the employment of any individual on a full-time, part-time or consulting or other basis and any such Contracts providing for severance, retention, change in control, transaction bonus or other similar payments to such individuals (the "Employment Contracts"), and (b) as of the date hereof, the names, titles and current annual salary, including any bonus, if applicable, of all present directors, officers, employees, consultants and agents of any Seller Entity, whose rate of annual compensation, including any promised, expected or customary bonus, equals or exceeds $50,000, together with a statement of the full amount of all remuneration paid by such Seller Entity to each such Person during the twelve (12)-month period ending December 31, 2011.

 

 

Section 4.24         Suppliers; Customers.

 

(a)          Seller has provided to Parent a true, correct and complete list setting forth (i) the names and addresses of the twenty largest suppliers of goods or services to the Seller Entities during the twelve-month period ended December 31, 2011 and the dollar amount of such goods or services purchased by the Seller Entities with respect to each such supplier during such period. During the twelve-month period ending on the date hereof, no Seller Entity has received any written notice from any such supplier that any such supplier has terminated or cancelled, or will terminate or cancel, its business relationship with such Seller Entity or will reduce the annual volume of goods or services sold or provided to such Seller Entity by more than 10%. To Sellers' Knowledge as of the date hereof, no such supplier has filed for or is threatened with bankruptcy, insolvency or dissolution or any similar proceedings.

 

(b)          Seller has provided to Parent a true, correct and complete list setting forth (i) the names and addresses of the twenty largest customers that ordered goods or services from the Seller Entities during the twelve-month period ended December 31, 2011 and (ii) the dollar amount of such goods or services sold by the Seller Entity to such customers during such period. During the twelve-month period ending on the date hereof, no Seller Entity has received any written notice from any such customer that any such customer has terminated or cancelled, or will terminate or cancel, its business relationship with such Seller Entity or will reduce the annual volume of goods or services purchased from such Seller Entity by more than 10%. To Sellers' Knowledge as of the date hereof, no such customer has filed for or is threatened with bankruptcy, insolvency or dissolution or any similar proceedings.

 

Section 4.25         Investment Status.  Each of the Stockholders on their own behalf and on behalf of any Affiliate thereof (each a "Stock Acquiror") receiving any Parent Common Stock pursuant to the Transaction represents and warrants as follows:

 

(a)          It is acquiring a beneficial interest in Parent Common Stock for its own account, for investment only and not with a view to, or any present intention of, effecting a distribution of such securities or any part thereof. Such Stock Acquiror acknowledges that the Parent Common Stock to be received in connection with the Transaction has not been registered under the Securities Act or the securities Laws of any state or other jurisdiction and cannot be disposed of unless they are subsequently registered under the Securities Act and any applicable state Laws or an exemption from such registration is available.

 

(b)          Each of the Stock Acquirors (i) has knowledge and experience in financial and business matters such that such Stock Acquiror is capable of evaluating the merits and risks of the investment in the Parent Common Stock, (ii) understands and has taken cognizance of all risk factors related to the investment in the Parent Common Stock, (iii) has been represented by counsel and/or advisors in connection with the execution and delivery of this Agreement, and (iv) is able to bear the economic risk of the investment in the Parent Common Stock.

 

(c)          Such Stock Acquiror is not acquiring the Parent Common Stock as a result of or subsequent to any advertisement, article, notice or other communication published in any newspapers, magazine or similar media or broadcast over television or radio, or presented at any seminar or meeting, or any solicitation of a subscription by a person not previously known to such Stock Acquiror in connection with investments in securities generally.

 

 

Section 4.26         Regulatory Compliance.  No Seller Entity has made voluntary disclosures under any FCPA Laws, or received written notice of any enforcement actions or threats of enforcement actions against it under any FCPA Laws, and no Governmental Authority has notified any Seller Entity in writing of any actual or alleged violation or breach by it. No Seller Entity is undergoing any internal audit, review, inspection, investigation, survey or examination of records (including any internal audit, review, inspection, investigation, survey or examination of records conducted by independent counsel) specifically relating to, and initiated in order to audit, review, inspect, investigate, survey or examine, such Seller Entity's compliance with any FCPA Law. No Seller Entity is party to any Legal Proceedings involving alleged false statements, false claims or other improprieties relating to any Seller Entity's compliance with applicable FCPA Laws.

 

Section 4.27         Power of Attorney.  Except as set forth in Section 4.27 of the Disclosure Schedule, no Person holds a power of attorney to act on behalf of any Seller Entity.

 

Section 4.28         Parent Common Stock.  No Seller Agreement Party or any of Affiliates owns beneficially or of record any shares of Parent Common Stock or any securities convertible into, exchangeable for or carrying the right to acquire, any shares of Parent Common Stock.

 

Section 4.29         Proxy Statement.  The information relating to the Seller Agreement Parties furnished in writing for inclusion in the Proxy Statement will not, as of the date of mailing of the Proxy Statement to the holders of Parent Common Stock or at the time of the Parent Stockholders' Meeting, contain any statement which, at such time and in light of the circumstances under which it is made, is false or misleading with respect to any material fact, or omit to state any material fact required to be stated therein or necessary in order to make the statements therein not false or misleading, except for any change disclosed in writing by or on behalf of a Seller Agreement Party to Parent or its counsel prior to such mailing date pursuant to Section 6.8(a) below.

 

Section 4.30         No Other Representations or Warranties.  EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS AGREEMENT AND ANY ANCILLARY AGREEMENT, NO SELLER AGREEMENT PARTY MAKES ANY OTHER EXPRESS OR IMPLIED REPRESENTATION OR WARRANTY, INCLUDING WITH RESPECT TO VALUE, CONDITION, MERCHANTABILITY OR SUITABILITY, WITH RESPECT TO THE SELLER ENTITIES OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY OTHER RIGHTS OR OBLIGATIONS TO BE TRANSFERRED HEREUNDER OR PURSUANT HERETO.

 

Article V

 

REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB

 

Parent and Merger Sub jointly and severally represent and warrant to the Seller Agreement Parties as of the date of this Agreement and as of the Closing Date as follows:

 

 

Section 5.1           Organization. Parent is a corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware, and has all requisite corporate power and authority to carry on its business as it is now being conducted, and to execute, deliver, and perform this Agreement and the Ancillary Agreements to which it is a party, and to consummate the transactions contemplated hereby and thereby, except as set forth on Section 5.1 of the Disclosure Schedule. Merger Sub is a limited liability company wholly owned by Parent that is duly organized, validly existing, and in good standing under the laws of the State of Delaware, and has all requisite limited liability company power and authority to carry on its business as it is now being conducted, and to execute, deliver, and perform this Agreement and the Ancillary Agreements to which it is a party, and to consummate the transactions contemplated hereby and thereby.

 

Section 5.2           Authorization.  The execution, delivery and performance by Parent and Merger Sub of this Agreement, and each Ancillary Agreement to which Parent or Merger Sub is a party, and the consummation by Parent and Merger Sub of the transactions contemplated hereby have been duly authorized by all necessary corporate or limited liability company action on the part of Parent and Merger Sub. This Agreement has been, and each Ancillary Agreement to which Parent or Merger Sub is a party will be, duly and validly executed and delivered by Parent and Merger Sub and, assuming due authorization, execution and delivery by the other parties hereto and thereto, constitute, or will constitute, the valid and binding obligation of Parent and Merger Sub, enforceable against Parent and Merger Sub in accordance with their respective terms, subject to the effect of any applicable bankruptcy, reorganization, insolvency, moratorium, fraudulent conveyance or similar laws relating to or affecting creditors' rights generally and subject, as to enforceability, to the effect of general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).

 

Section 5.3           No Conflict.  Except as set forth in Section 5.3 of the Disclosure Schedule, the execution, delivery, and performance by Parent and Merger Sub of this Agreement, and any Ancillary Agreement to which Parent or Merger Sub is a party, and the consummation by Parent and Merger Sub of the transactions contemplated hereby and thereby do not and will not, with or without the giving of notice or the lapse of time, or both, (i) violate any provision of Law to which Parent or Merger Sub is subject, (ii) violate any provision of the charter, bylaws, or other organizational documents of Parent or Merger Sub or (iii) violate or result in a breach of or constitute a default (or an event which would, with the passage of time or the giving of notice, or both, constitute a default) under, require the consent of any third party under or result in or permit the termination or amendment of any provision of, or result in or permit the acceleration of the maturity or cancellation of performance of any obligation under, or result in the creation or imposition of any Encumbrance of any nature whatsoever upon any assets or property of Parent or Merger Sub or give to others any rights therein under any Contract to which Parent or Merger Sub is a party or by which it may be bound or affected; except, in the case of clauses (i) and (iii), for violations that, individually or in the aggregate, would not reasonably be expected to have a material adverse effect.

 

 

Section 5.4           Consents.  Except as set forth in Section 5.4 of the Disclosure Schedule, no consent, approval, or authorization of, or exemption by, or filing with, any Governmental Authority is required to be obtained or made by Parent or Merger Sub in connection with the execution, delivery and performance by Parent and Merger Sub of this Agreement or any Ancillary Agreement to which Parent or Merger Sub is a party or the taking by Parent or Merger Sub of any other action contemplated hereby or thereby.

 

Section 5.5           Brokers.  Except as set forth on Section 5.5 of the Disclosure Schedule (whose fees will be paid by Parent), and other than EarlyBirdCapital, Inc. (whose fees will be paid by Parent), neither Parent nor Merger Sub has retained any broker, finder or investment banking firm to act on their behalf which is entitled to any fee or commission from any Seller Agreement Party, any Seller Subsidiary, Parent or Merger Sub upon consummation of the transactions contemplated by this Agreement.

 

Section 5.6           SEC Filings. Parent has filed and furnished in a timely manner all filings, reports, schedules, forms, prospectuses and registration, proxy and other statements, in each case, required to be filed or furnished by it with or to the SEC (collectively, and in each case including all schedules thereto and documents incorporated by reference therein, the "Parent SEC Documents"). As of their respective effective dates (in the case of Parent SEC Documents that are registration statements filed pursuant to the requirements of the Securities Act) and as of the respective dates of the last amendment filed with the SEC (in the case of all other Parent SEC Documents), the Parent SEC Documents complied in all material respects with the requirements of the Exchange Act and the Securities Act, as the case may be, and the rules and regulations of the SEC promulgated thereunder, each as in effect on the applicable date referred to above, applicable to such Parent SEC Documents, and none of the Parent SEC Documents as of such respective dates contained any untrue statement of a material fact or omitted 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.

 

Section 5.7           Capitalization.

 

(a)          As of the date of this Agreement, the authorized capital stock of Parent consists of 100,000,000 shares of Parent Common Stock and 1,000,000 shares of preferred stock, par value $0.001 per share (the "Parent Preferred Stock"), of which 14,319,693 shares of Parent Common Stock, no shares of Parent Preferred Stock, and 18,960,000 Warrants to purchase Parent Common Stock are issued and outstanding, all of which are validly issued, fully paid and nonassessable.

 

(b)          Parent owns either directly or indirectly all of the issued and outstanding shares of capital stock (or other equity securities) in Merger Sub. Except as described in the Parent SEC Documents, there are no outstanding securities convertible into, exchangeable for or carrying the right to acquire equity securities of Parent or Merger Sub, or subscriptions, warrants, options, rights (including preemptive rights), stock appreciation rights, phantom stock interests, or other arrangements or commitments obligating either Parent or Merger Sub to issue or dispose of any of its respective equity securities or any ownership interest therein. The consummation of the transactions contemplated hereby will not cause any Encumbrances to be created or suffered on the capital stock of either Parent or Merger Sub, other than Encumbrances created by Seller. There are no existing agreements, subscriptions, options, warrants, calls, commitments, trusts (voting or otherwise), or rights of any kind whatsoever between Parent or Merger Sub on the one hand and any Person on the other hand with respect to the capital stock of any Subsidiary of Parent or Merger Sub. Other than as listed in Section 5.7(b) of the Disclosure Schedule, neither Parent nor Merger Sub owns, directly or indirectly, any stock of or any other equity interest in any other Person. All shares of Parent Common Stock subject to issuance as aforesaid, upon issuance on the terms and conditions specified in the instrument pursuant to which they are issuable, will be duly authorized, validly issued, fully paid and nonassessable.

 

 

(c)          The shares of Parent Common Stock to be issued pursuant to this Agreement will, upon issuance, be duly authorized, validly issued, fully paid and non-assessable.

 

(d)          Except for rights of holders of Parent Common Stock to convert their shares of Parent Common Stock into cash held in the Trust Account (all of which rights will expire upon the consummation of the Closing), there are no outstanding contractual obligations of Parent or any of its Subsidiaries to repurchase, redeem or otherwise acquire any capital stock of or other equity interests in Parent and/or any of its Subsidiaries.

 

Section 5.8           Litigation.  Except as set forth in Section 5.8 of the Disclosure Schedule there is no Legal Proceeding pending or, to Parent's Knowledge, threatened, against Parent or Merger Sub at law, in equity or otherwise, in, before, or by, any Governmental Authority. There are no material judgments or outstanding orders, injunctions, decrees, stipulations or awards against Parent or Merger Sub.

 

Section 5.9           Compliance with Laws.  The business of Parent and Merger Sub has been conducted in all material respects in accordance with all applicable Laws. Neither Parent nor Merger Sub has received any written notice of any violation of Law. All Governmental Actions/Filings required by Parent and Merger Sub have been obtained or made and are in full force and effect and are being complied with in all material respects, except as set forth on Section 5.9 of the Disclosure Schedule..

 

Section 5.10         NASDAQ Listing.  The Parent Common Stock is listed on NASDAQ. Parent is in compliance in all material respects with the requirements of NASDAQ for continued listing of the Parent Common Stock thereon and there is no action or proceeding pending or, to Parent's Knowledge, threatened against Parent by NASDAQ or the Financial Industry Regulatory Authority with respect to any intention by such entities to prohibit or terminate the listing of the Parent Common Stock on NASDAQ.

 

Section 5.11         Solvency. Immediately after giving effect to the transactions contemplated by this Agreement and the other agreements contemplated by Section 7.2(l) hereof, and any financing arrangements incurred by in connection therewith, Parent and the Surviving Entity and each Subsidiary thereof will be able to pay their respective debts as they become due and will own property that has a fair saleable value greater than the amounts required to pay their respective debts (including a reasonable estimate of the amount of all contingent liabilities). No transfer of property is being made and no obligation is being incurred in connection with the transactions contemplated by this Agreement or the other agreements contemplated by Section 7.2(l) hereof with the intent to hinder, delay or defraud either present or future creditors of Parent, the Surviving Entity or their Subsidiaries.

 

 

Section 5.12         Pro Forma Capitalization of Parent. Section 5.12 of the Disclosure Schedule sets forth the pro forma capitalization of Parent giving effect to the Merger, the terms of all other mergers and/or acquisitions to which Parent or any of its Subsidiaries is a party, and the financing of such other transactions (assuming all such transactions are consummated in accordance with the terms thereof and without giving effect to any redemptions after the date hereof by Parent of shares issued in its IPO). Except as set forth in Section 5.12 of the Disclosure Schedule or in the Parent SEC Documents, as of the day next succeeding the Closing Date, neither Parent nor any Subsidiary of Parent will have outstanding securities convertible into, exchangeable for or carrying the right to acquire equity securities of Parent or any Subsidiary of Parent, or subscriptions, warrants, options, rights (including pre-emptive rights), stock appreciation rights, phantom stock interests or other arrangements or commitments obligating Parent or any Subsidiary of Parent to issue or dispose of any of its respective equity securities or any other ownership interest in Parent or any of its Subsidiaries.

 

Section 5.13         Confidential Target Information.  The Confidential Target Information does not include any information which, as of the date hereof, is, to Parent's Knowledge, false or misleading with respect to any material fact, or, to Parent's Knowledge, omits to state a material fact required to be stated therein or necessary in order to make the statements therein not false or misleading.

 

Section 5.14         No Other Representations or Warranties.  EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS AGREEMENT AND ANY ANCILLARY AGREEMENT, NEITHER PARENT NOR MERGER SUB MAKES ANY OTHER EXPRESS OR IMPLIED REPRESENTATION OR WARRANTY, INCLUDING WITH RESPECT TO VALUE, CONDITION, MERCHANTABILITY OR SUITABILITY, WITH RESPECT TO PARENT, MERGER SUB OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY OTHER RIGHTS OR OBLIGATIONS TO BE TRANSFERRED HEREUNDER OR PURSUANT HERETO.

 

Article VI

 

COVENANTS AND AGREEMENTS

 

Section 6.1           Access and Information.  From the date hereof until the Closing, the Seller Agreement Parties shall, and shall cause each Seller Entity to, permit Parent and Merger Sub and their financing providers, if any, and their respective advisers and other representatives to have reasonable access, during business hours and upon reasonable notice, to Sellers' properties and facilities. From the date hereof until the Closing, Parent and Merger Sub shall permit Sellers and their advisors and other representatives to have reasonable access, during business hours and upon reasonable notice, to Parent's and Merger Sub's properties and facilities. Seller shall furnish, or cause to be furnished, to Parent any financial and operating data and other information (including, without limitation, Tax information) that is available with respect to any Seller Entity as Parent shall from time to time reasonably request, subject to any applicable Law, attorney-client privilege, or contractual restriction. The Seller Agreement Parties shall, and shall cause Sellers to, provide to Parent updated monthly financial statements of Sellers reasonably promptly following each calendar month-end following the date hereof until the Closing Date. No information provided to or obtained by Parent pursuant to this Section 6.1 shall limit or otherwise affect the remedies available hereunder to Parent (including such Parent's right to seek indemnification pursuant to Article IX), or the representations or warranties of, or the conditions to the obligations of, the parties hereto. All information provided to or obtained by any party heretofore or hereafter, including pursuant to this Section 6.1 or pursuant to the Disclosure Schedules, shall be held in confidence by the relevant party in accordance with and subject to the terms of the Mutual Non-Disclosure Agreement, dated May 26, 2011, between Parent and Sellers (the "Confidentiality Agreement") provided, that, Parent may disclose such information to any lenders from whom the Parent is seeking financing if Parent and such lender have entered into a confidentiality agreement on terms substantially similar to those contained in the Confidentiality Agreement.

 

 

Section 6.2           Conduct of Business by Sellers.  Prior to the Closing, and except as otherwise contemplated by this Agreement (including, without limitation, in connection with the Share Exchange), set forth in Section 6.2 of the Disclosure Schedule or consented to or approved by Parent (which consent or approval will not be unreasonably withheld), each of the Seller Agreement Parties covenants and agrees that it shall cause each Seller Entity to operate its business in the ordinary course of business and use commercially reasonable efforts to preserve the properties, business, operations (including officers and employees), goodwill and relationships with suppliers and customers of its business and shall not undertake any of the following:

 

(a)          amend the organizational documents of any Seller Entity;

 

(b)          adopt a plan of complete or partial liquidation or resolutions providing for or authorizing such liquidation or a merger, consolidation, restructuring, recapitalization or other reorganization;

 

(c)          sell, transfer or otherwise dispose of its material tangible personal or real assets, except, in the ordinary course of business consistent with past practice, or create any Encumbrance on any of its material assets, except for Permitted Encumbrances and not in excess of $100,000 for any transaction or series of related transactions;

 

(d)          acquire or agree to acquire (i) by merging or consolidating with, or by purchasing a substantial portion of the assets of, or by any other manner, any Person or business or division thereof or (ii) any material assets, except, with respect to this clause (ii), (A) purchases of inventory or supplies in the ordinary course of business consistent with past practice or (B) other purchases of assets in the ordinary course of business consistent with past practice and not in excess of $100,000 for any purchase or series of related purchases;

 

(e)           create, incur, assume, modify, guarantee, endorse or otherwise become liable or responsible with respect to (whether directly, contingently or otherwise) any Indebtedness other than (i) Accrued Taxes, (ii) Transaction Expenses, and (iii) Indebtedness not in excess of $50,000 and incurred in the ordinary course of business and consistent with past practice;

 

(f)          place any Encumbrance on any of the properties of any Seller Entity, other than Permitted Encumbrances;

 

 

(g)          issue, sell or create any Encumbrance on, (i) the Existing Seller Equity or other equity securities of a Seller (except pursuant to the Share Exchange and except that Existing Seller Equity may be sold or otherwise transferred by a Stockholder to another Stockholder party hereto) or (ii) any securities convertible into, or options with respect to, or warrants to purchase or rights to subscribe for, any membership interests or other equity securities;

 

(h)          split, combine, recapitalize or reclassify any Existing Seller Equity or declare, pay or set aside any non-cash distribution or other non-cash dividend in respect of its Existing Seller Equity;

 

(i)          make any loans, advances or capital contributions to, or investments in, any other Person, except in the ordinary course of business and consistent with past practice and not exceeding $10,000 individually and $50,000 in the aggregate.

 

(j)          lease or sublease any real or personal property to third parties or amend any of the Leases of the Seller Entities;

 

(k)         except as required pursuant to Contracts existing and in force prior to the date of this Agreement described in Section 4.12 or Section 4.23 of the Disclosure Schedule or as otherwise required by applicable Law, (i) grant any increase in the salaries, benefits or other compensation payable or to become payable to, or any advance or loan to, any executive officer or employee (other than increases in salaries for employees other than executive officers in the ordinary course of business and consistent with past practice, and other than bonuses to employees who are Stockholders paid prior to the Closing Date), (ii) enter into, terminate, adopt or amend in any material respect any Benefit Plan or collective bargaining agreement, (iii) make any award or grant under any Benefit Plan, (iv) hire any new employee except in the ordinary course of business and consistent with past practice or (v) fail to make contributions to Benefit Plans in accordance with past practice;

 

(l)          waive, release, assign, settle or compromise any Legal Proceeding;

 

(m)         make any new commitment or increase any commitment for capital expenditures or engage in any new lines of business;

 

(n)         except for any transaction, Contract or commitment which is merely an extension or continuation of any existing transaction, Contract or commitment, enter into any transaction, Contract or commitment that would be required to be disclosed under Item 404 of Regulation S-K promulgated under the Securities Act, as if the Securities Act was applicable to Seller;

 

(o)          enter into any material transaction, Contract or commitment outside the ordinary course of business, amend, modify, assign, or terminate any Contract with the customers and suppliers listed on Section 4.24(a) and Section 4.24(b) of the Disclosure Schedule, respectively, waive or permit the loss of any Permit or right of substantial value or cancel any material debt or claim;

 

 

(p)          amend, modify, assign or terminate any of the employment contracts with the Key Employees attached as Exhibit A hereto;

 

(q)          sell, assign, transfer, license or convey any rights under, or abandon, permit to be cancelled or otherwise dedicate to the public any material Intellectual Property owned by any Seller Entity;

 

(r)          change or modify its credit, collection or payment policies or procedures as in effect on the date hereof in a manner materially adverse to it or its business;

 

(s)          fail to maintain its books of account and records consistent with its past practices and except as required by Law or applicable accounting principles (including GAAP for purposes of the Estimated Closing Statement), change its accounting principles, methods, policies and procedures;

 

(t)          make or change any election with respect to Taxes, change any Tax accounting period, change any method of Tax accounting, file any amendment to any Tax Return, fail to file any Tax Return due on or prior to the Closing Date when due, enter into a closing agreement with any taxing authority or surrender any right to claim a refund for Taxes, consent to an extension of the statute of limitations applicable to any Tax claim or assessment, or take any other similar action;

 

(u)          take or allow any action that would result in a termination of or change in classification for U.S. federal income tax purposes of any Seller Entity;

 

(v)         enter into any Contract with respect to, or otherwise agree or commit to, any of the foregoing.

 

The Sellers shall maintain in effect through the Closing Date the tax qualified defined contribution retirement plan in which Transferred Employees currently participate (the "401(k) Plan") in accordance with applicable law, continue to make all required contributions and distributions thereto or therefrom as and when due and take (or refrain from taking) any action otherwise necessary to preserve the tax-qualified status of the 401(k) Plan.

 

Section 6.3           Further Assurances.

 

(a)          Subject to the terms and conditions of this Agreement and Section 6.3(b) and Section 6.3(c) below, each of the parties hereto shall cooperate with the other parties and use (and shall cause their respective Affiliates to use) their respective reasonable best efforts to promptly (i) take, or cause to be taken, all actions, and do, or cause to be done, and assist and cooperate with the other parties in doing, all things necessary, proper or advisable to cause the conditions to Closing to be satisfied as promptly as reasonably practicable and to consummate and make effective, in the most expeditious manner reasonably practicable, the transactions described herein, including preparing and filing promptly and fully all documentation to effect all necessary filings, notices, petitions, statements, registrations, submissions of information, applications and other documents, (ii) obtain all approvals, consents, registrations, waivers, permits, authorizations, orders and other confirmations from any Governmental Entity or third party necessary, proper or advisable to consummate the transactions described herein, (iii) execute and deliver any additional instruments necessary to consummate the transactions described herein, and (iv) defend or contest any claim, suit, action or other proceeding brought by a third party that would otherwise prevent or materially impede, interfere with, hinder or delay the consummation of the Transaction.

 

 

(b)           Sellers and Parent shall cooperate and use commercially reasonable efforts to make, on a timely basis, all registrations, filings and applications with, give all notices to, and obtain any approvals, orders, qualifications and waivers from a Governmental Authority necessary for the consummation of the transactions contemplated hereby; provided, however, that except as otherwise set forth herein, neither any Seller or any of its Affiliates nor Parent or any of its Affiliates shall be required to commence or be a plaintiff in any litigation or offer or grant any material accommodation (financial or otherwise) to any Person in connection with any such registration, filing, application, notice, approval, order, qualification or waiver. Sellers and Parent each shall pay all fees associated with its own such registrations, filings, applications, notices, approvals, orders, qualifications and waivers.

 

(c)          Notwithstanding the foregoing, nothing contained in this Agreement shall require or obligate any party or its Affiliates (i) to agree or otherwise become subject to any material limitations on (A) the post-Closing right of Parent or its Affiliates effectively to control Sellers, (B) the right of Parent or its Affiliates to acquire or, after consummation of the Closing, to hold Sellers, or (C) the post-Closing right of Parent to exercise full rights of ownership of Sellers or (ii) to agree or otherwise be required to sell or otherwise dispose of, hold separate (through the establishment of a trust or otherwise), or divest itself of all or any portion of the assets or operations of Sellers or any of their Affiliates or Parent or any of its Affiliates.

 

Section 6.4           Public Announcements.  Except as otherwise provided herein, the timing and content of all announcements regarding any aspect of this Agreement, the Merger and the other transactions contemplated hereby to the financial community, Governmental Authorities, or the general public shall be mutually agreed upon in advance by Sellers and Parent; provided, however, that each party hereto may make any such announcement which it in good faith believes, based on advice of counsel, is required by Law. Notwithstanding the foregoing, each party shall use commercially reasonable efforts to consult with the other parties prior to any such announcement to the extent practicable, and shall in any event promptly provide the other parties hereto with copies of any such announcement. This Section 6.4 shall not apply to communications by any party to its counsel, accountants or other advisors or, if the substance of such communication would not reasonably be expected to require Parent to file a Form 8-K and/or make a disclosure under Regulation FD promulgated under the Exchange Act, to employees.

 

Section 6.5           Consents and Waivers.  Any consents, waivers, approvals and notices necessary, proper or advisable to consummate the transactions described herein shall be in form and substance reasonably satisfactory to Sellers and Parent, and executed counterparts of any consents, waivers and approvals shall be delivered to the other party promptly after receipt thereof, and copies of such notices shall be delivered to the other party promptly after the making thereof. Except with respect to costs associated with the Proxy Statement, any costs incurred as payments to any Person with respect to such consents, waivers, approvals and notices shall be borne by the party seeking such consents, waivers, approvals or notices; provided, however, that any such costs shall be borne by Parent only after the Closing. In the event the Closing does not occur, any such costs shall be borne by the Person incurring such costs.

 

 

Section 6.6           Post-Closing Obligations of Parent and the Surviving Entity to Certain Employees.

 

(a)          Parent shall, or shall cause its Affiliates to, continue to provide the Transferred Employees, during the period commencing at the Effective Time and ending on the first anniversary of the date of the Closing (or such earlier date as the applicable Transferred Employee's employment terminates), with annual base pay, annual bonus opportunities and benefits that are no less favorable in the aggregate than those provided by Sellers immediately prior to the Effective Time; provided, however, that Parent and its Affiliates shall not be required to provide equity-based compensation to the Transferred Employees. Parent shall or shall cause its Affiliates to credit Transferred Employees for services performed with Sellers or their Affiliates on and prior to the Effective Time for purposes of vesting and eligibility under any employee benefit plan sponsored by Parent for which Transferred Employees become eligible, provided that the foregoing shall not apply with respect to benefit accrual under any defined benefit pension plan or to the extent that its application would result in a duplication of benefits to any Transferred Employee with respect to the same period of service for such Transferred Employee.

 

(b)          For a period of one (1) year from the Closing Date, the Surviving Entity shall not terminate the employment of any Transferred Employee except for cause, consisting of such Transferred Employee's having (i) engaged in material misconduct (including but not limited to misappropriating any funds or property of a Seller or its clients, or of the Surviving Entity or its clients), (ii) performed his or her duties in a manner that is materially deficient, (iii) neglected or refused to perform the duties assigned to him or her, or (iv) failed to follow a Seller's or the Surviving Entity's policies or the written instructions of his or her superiors. Nothing in this Agreement shall restrict the ability of Parent or its Affiliates to terminate the employment of any Transferred Employee for any reason at any time after the first anniversary of the Closing Date. Nothing in this Section 6.6 or any other provision of this Agreement shall (i) be construed to establish, amend or modify any benefit or compensation plan, program, agreement or arrangement (including any Benefit Plan transferred to Parent or any of its Affiliates) or (ii) limit the ability of Parent or any of its Affiliates (including the Surviving Entity) to amend, modify or terminate any benefit plan, program, agreement or arrangement at any time assumed, established, sponsored or maintained by Parent or any of its Affiliates (including any Benefit Plan transferred to Parent or any of its Affiliates).

 

(c)          Seller shall take all actions necessary in accordance with all applicable Law to provide that the employees listed in Section 6.6(c) of the Disclosure Schedule cease to be employees of Seller prior to the Effective Time.

 

Section 6.7           Insurance.  During the period from and after the date hereof until the Effective Time, the Seller Agreement Parties shall cause Sellers to maintain in full force and effect the policies of insurance listed in Section 4.21 of the Disclosure Schedule, subject only to variations required by the ordinary operation of their businesses, or else will obtain, prior to the lapse of any such policy, the same or, if not available upon commercially reasonable economic terms and conditions, substantially similar coverage with insurers of recognized standing and approved in advance writing by Parent. Sellers shall promptly advise Parent in advance in writing of any change of insurer or material change of type of coverage in respect of the policies listed in Section 4.21 of the Disclosure Schedule.

 

 

Section 6.8           Proxy Statement; Parent Stockholders' Meeting.

 

(a)          As promptly as practicable after the date of this Agreement, Parent shall prepare and file a proxy statement of Parent with the SEC (as such proxy statement is amended or supplemented, the "Proxy Statement") for the purpose of soliciting proxies from Parent's stockholders to obtain the requisite approval of the transactions contemplated hereby and the other matters to be voted on at a meeting of the holders of Parent Common Stock to be called and held for such purpose (the "Parent Stockholders' Meeting"). As promptly as practicable after the execution of this Agreement, Parent shall prepare and file any other filings required under the Exchange Act, the Securities Act or any other Laws relating to the transactions contemplated hereby (collectively, the "Other Filings"). Parent shall notify Sellers promptly upon the receipt of any comments from the SEC or its staff and of any request by the SEC or its staff or any other Governmental Authority for amendments or supplements to the Proxy Statement or any Other Filing or for additional information. As promptly as practicable after receipt thereof, Parent shall provide Sellers and their counsel with copies of all written correspondence between Parent or any of its representatives, on the one hand, and the SEC, or its staff or other government officials, on the other hand, with respect to the Proxy Statement or any Other Filing. Parent shall permit Sellers and their counsel to review the Proxy Statement and any exhibits, amendment or supplement thereto and shall consult with Sellers and their advisors concerning any comments from the SEC with respect thereto and shall not file the Proxy Statement or any exhibits, amendment or supplement thereto or any response letters to any comments from the SEC without the prior written consent of Sellers, such consent not to be unreasonably withheld or delayed; provided, however, that Parent shall be permitted to make such filing or response in the absence of such consent if the basis of Sellers' failure to consent is Sellers' unwillingness to permit the inclusion in such filing or response of information that, based on the advice of outside counsel to Parent, is required by the SEC and United States securities Laws to be included therein. Parent agrees that the Proxy Statement and the Other Filings will comply in all material respects with all applicable Laws and the rules and regulations promulgated thereunder. Whenever any event occurs which would reasonably be expected to result in the Proxy Statement containing any untrue statement of a material fact or omitting to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading, Parent or Sellers, as the case may be, shall promptly inform the other party of such occurrence and cooperate in filing with the SEC or its staff or any other government officials, and/or mailing to stockholders of Parent, an amendment or supplement to the Proxy Statement.

 

(b)          The Proxy Statement will be sent to the stockholders of Parent as soon as practicable following its approval by the SEC for the purpose of soliciting proxies from holders of Parent Common Stock to vote at the Parent Stockholders' Meeting in favor of: (i) the adoption of this Agreement and the approval of the transactions contemplated hereby ("Parent Stockholder Approval"); (ii) the issuance and sale of shares of Parent Common Stock to the extent that such issuance requires stockholder approval under the rules of any stock exchange on which the Parent Common Stock is listed; and (iii) the adjournment of the special meeting (the matters described in clauses (i) through (iii), the "Voting Matters").

 

 

(c)          Parent shall, as soon as reasonably practicable following the date of this Agreement, take all actions necessary to establish a record date for, duly call, give notice of and after mailing of the Proxy Statement, convene and hold the Parent Stockholders' Meeting. For the purpose of approving the Voting Matters, and shall use its reasonable efforts to cause such meeting to occur as soon as reasonably practicable.

 

(d)          Sellers and the Stockholders shall provide Parent, as promptly as reasonably practicable, with such information concerning the Seller Entities reasonably requested by Parent that is necessary for the information concerning the Seller Entities in the Proxy Statement and the Other Filings to comply with all applicable provisions of and rules under the Exchange Act and all applicable provisions of the DGCL in the preparation, filing and distribution of the Proxy Statement, the solicitation of proxies thereunder, and the calling and holding of the Parent Stockholders' Meeting. Without limiting the foregoing, Parent shall ensure that the Proxy Statement does not, as of the date on which it is distributed to the holders of Parent Common Stock, and as of the date of the Parent Stockholders' Meeting, contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading (provided that Parent shall not be responsible for the accuracy or completeness of any information relating to Sellers or any other information furnished in writing by a Seller for inclusion in the Proxy Statement). All legal and accounting fees and disbursements and other out-of-pocket costs and expenses incurred by Sellers in connection with the preparation of the Proxy Statement shall not be included in Transaction Expenses, shall be added to the Cash Merger Consideration to the extent paid by Sellers prior to the Closing or accrued, unpaid and included in the Estimated Closing Net Working Capital, and, upon any termination of this Agreement without consummation of the Closing, shall be reimbursed by Parent to Sellers.

 

(e)          Subject to the fiduciary duties of its board of directors, Parent shall include in the Proxy Statement the recommendation of its board of directors that the holders of Parent Common Stock vote in favor of the adoption of this Agreement and the approval of the Transaction and the other Voting Matters, and shall otherwise use its commercially reasonable efforts to obtain the Parent Stockholder Approval.

 

Section 6.9           Form 8-K Filings.  Parent and Sellers shall cooperate in good faith with respect to the preparation of, and as promptly as practicable after the execution of this Agreement, Parent shall file with the SEC, a Current Report on Form 8-K pursuant to the Exchange Act to report the execution of this Agreement. Parent and Sellers shall cooperate in good faith with respect to the preparation of, and at least five (5) days prior to the Closing, Parent shall prepare a draft Form 8-K announcing the Closing, together with, or incorporating by reference, the financial statements prepared by Sellers and its accountant ("Transaction Form 8-K"). Prior to Closing, Parent and Sellers shall prepare the press release announcing the consummation of the transactions contemplated hereby ("Press Release"). Simultaneously with the Closing, Parent shall file the Transaction Form 8-K with the SEC and distribute the Press Release.

 

 

Section 6.10         No Claim Against Trust Account.  Notwithstanding anything else in this Agreement, the Seller Agreement Parties acknowledge that they have read Parent's final prospectus dated May 9, 2011 (the "Prospectus") and understand that Parent has established the trust account at ▇.▇. ▇▇▇▇▇▇ ▇▇▇▇▇ Bank, N.A. maintained by Continental Stock Transfer & Trust Company (the "Trust Account"), initially set in the amount of $72,720,000, for the benefit of the stockholders of Parent who purchased shares in Parent's initial public offering and any of their transferees and that Parent may disburse monies from the Trust Account only (i) to such stockholders in the event of the redemption of their shares or the liquidation of Parent (ii) to Parent after it consummates an initial Business Combination (as defined in the Prospectus) or (iii) to effect repurchases of up to 50% of the Parent Common Stock issued in Parent's initial public offering . Each of the Seller Agreement Parties hereby agrees that it does not have any right, title, interest or claim of any kind in or to any monies in the Trust Account ("Trust Account Claim") and hereby waives any Trust Account Claim it may have in the future as a result of, or arising out of, any negotiations, contracts or agreements with Parent and will not seek recourse against the Trust Account for any reason whatsoever. This paragraph will survive this Agreement and will not expire and will not be altered in any way without the express written consent of Parent.

 

Section 6.11         Cash on Hand.  The Seller Agreement Parties shall cause ADC to have available the Required Cash at the Closing.

 

Section 6.12         Non-competition; Non-solicitation.

 

(a)          For a period of five years commencing on the Closing Date (the "Restricted Period"), each of the Stockholders shall not, and shall not permit any of their Affiliates to, directly or indirectly, (i) engage in or assist others in engaging in the Business in the Territory except with respect to the Surviving Entity, Parent or their respective Subsidiaries; (ii) have an interest in any Person (other than the Surviving Entity or Parent) that engages directly or indirectly in the Business in the Territory in any capacity, including as a partner, shareholder, member, employee, principal, agent, trustee or consultant; (iii) intentionally interfere in any material respect with the business relationships (whether formed before or after the date of this Agreement) between the Surviving Entity, Parent or their Subsidiaries and customers or suppliers of the Surviving Entity, Parent or their Subsidiaries; or (iv) solicit or attempt to solicit, directly or indirectly, any of the customers or suppliers of the Surviving Entity, Parent or their subsidiaries for the purposes of diverting business or services from the Surviving Entity, Parent or their Subsidiaries. Notwithstanding the foregoing, (i) the Stockholders may own, directly or indirectly, solely as an investment, securities of any Person traded on any national securities exchange if any such Stockholder is not a controlling Person of, or a member of a group which controls, such Person and does not, directly or indirectly, own 5% or more of any class of securities of such Person, and (ii) ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, CPA, ▇▇▇▇▇▇▇ & Cremia, LLC and their respective Affiliates shall be permitted to continue to engage in the accounting profession, serving in some cases clients and customers of the Surviving Entities.

 

 

(b)          During the Restricted Period, each of the Stockholders shall not, and shall not permit any of its Affiliates to, directly or indirectly, hire or solicit any employee of the Surviving Entity, Parent or their Subsidiaries or encourage any such employee to leave such employment or hire any such employee who has left such employment; provided that nothing in this Section 6.12(b) shall prevent any of the Stockholders or any of their Affiliates from hiring (i) any employee whose employment has been terminated by the Surviving Entity, Parent or their Subsidiaries; or (ii) after 180 calendar days from the date of termination of employment, any employee whose employment has been terminated by the employee; or shall prevent the Stockholders from making a general solicitation which is not directed specifically to any Company employees. Notwithstanding anything to the contrary in this Section 6.12(b), after the Closing, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and certain other employees of PTFS shall be permitted to continue to perform services for ▇▇▇▇▇▇▇ & Cremia, LLC so long as doing so shall not interfere with their work for PTFS.

 

(c)          If any of the Stockholders breaches, or threatens to commit a breach of, any of the provisions of this Section 6.12, Parent and the Surviving Entity shall have the right and remedy to have such provision specifically enforced by any court having competent jurisdiction, it being acknowledged and agreed that any such breach or threatened breach will cause irreparable injury to each of Parent, the Surviving Entity or their Subsidiaries and that money damages will not provide an adequate remedy. The foregoing rights and remedies shall be in addition to, and not in lieu of, any other rights and remedies available to Parent and the Surviving Entity under Law or in equity:

 

(d)          The Stockholders acknowledge that the restrictions contained in this Section 6.12 are reasonable and necessary to protect the legitimate interests of the Parent and constitute a material inducement to Parent and Merger Sub to enter into this Agreement and consummate the transactions contemplated by this Agreement. In the event that any covenant contained in this Section 6.12 should ever be adjudicated to exceed the time, geographic, product or service, or other limitations permitted by applicable Law in any jurisdiction, then any court is expressly empowered to reform such covenant, and such covenant shall be deemed reformed, in such jurisdiction to the maximum time, geographic, product or service, or other limitations permitted by applicable Law. The covenants contained in this Section 6.12 and each provision hereof are severable and distinct covenants and provisions. The invalidity or unenforceability of any such covenant or provision as written shall not invalidate or render unenforceable the remaining covenants or provisions hereof, and any such invalidity or unenforceability in any jurisdiction shall not invalidate or render unenforceable such covenant or provision in any other jurisdiction.

 

Section 6.13         Exclusivity.  From the date of this Agreement until the earlier of the Closing and any termination of this Agreement, Sellers will not (and Sellers will not permit any Subsidiaries of Seller, their Affiliates or their Representatives) directly or indirectly: (a) solicit, initiate, or encourage the submission of any proposal or offer from any third party (other than Parent, the Surviving Entity and their designees) relating to the acquisition of any securities of Sellers or its Subsidiaries, or any merger, recapitalization, share exchange, sale of substantial assets (other than sales in the ordinary course of business) or any similar transaction or alternative to the transactions contemplated by this Agreement or (b) participate in any discussions or negotiations regarding, furnish any information with respect to, assist or participate in, or facilitate in any other manner any effort or attempt by any third party (other than Parent, the Surviving Entity and their designees) to do or seek or agree to do or seek any of the foregoing. Sellers will immediately cease and cause to be terminated any existing activities, discussions or negotiations with any parties conducted on or prior to the date of this Agreement heretofore with respect to any of the foregoing.

 

 

Section 6.14         Financing. Parent and Merger Sub shall use commercially reasonable efforts to cause sufficient commitments from financial institutions to provide credit facilities to be available to pay all amounts required to be paid by Parent and Merger Sub at Closing in order to consummate the transactions contemplated in this Agreement (the "Financing"). Upon request of Parent or Merger Sub, Sellers shall provide or cause to be provided reasonable cooperation and assistance to Parent or Merger Sub in connection with the arrangement of the financing contemplated by the Commitment Letter or any Alternate Financing; provided, that such requested cooperation and assistance does not unreasonably interfere with the ongoing business of Sellers.

 

Section 6.15         Delivery of Payoff Letters. At least two Business Days prior to the Closing Date, Sellers shall deliver or cause to be delivered, to Parent a payoff letter executed by each lender of Estimated Closing Indebtedness (excluding any Estimated Closing Indebtedness that consists solely of the Estimated Closing Transaction Expenses or Estimated Closing Accrued Taxes), effective as of the Closing Date and in form and substance reasonably satisfactory to Parent, which shall (i) indicate the total amount required to be paid to fully satisfy all obligations, fees and expenses related to such Estimated Closing Indebtedness as of the Closing Date (including any per diem or similar ticking fee), and (ii) provide for, among other things, the release, discharge, removal and termination of all Encumbrances on the assets of the Seller Entities arising under any applicable credit facility and related agreements upon payment of the amounts set forth therein (such payoff letters collectively, together with the required discharge statements, termination statements and originals of all pledged collateral to be returned to the Sellers, being herein collectively called the "Payoff Letters"). Sellers shall promptly deliver all notices, terminate all commitments and take all other actions reasonably requested by Parent to facilitate the repayment in full and termination of the Estimated Closing Indebtedness (excluding accrued Taxes and Transaction Expenses) and the release of any related Encumbrances, effective as of the Closing.

 

Section 6.16          Piggyback Rights.

 

(a)          If at any time on or after the Closing Date Parent proposes to file a registration statement under the Securities Act with respect to an offering of equity securities, or securities or other obligations exercisable or exchangeable for, or convertible into, equity securities, by Parent for its own account or by shareholders of Parent for their own account, other than a registration statement (i) filed in connection with any employee stock option or other benefit plan, (ii) for an exchange offer or offering of securities solely to Parent existing shareholders, or (iii) for a dividend reinvestment plan, then Parent shall (x) give written notice of such proposed filing to the Stockholders as soon as practicable but in no event less than thirty (30) days before the anticipated filing date, which notice shall describe the amount and type of securities to be included in such offering, the intended method(s) of distribution, and the name of the proposed managing underwriter or underwriters, if any, of the offering, and (y) offer to the Stockholders in such notice the opportunity to register the sale of such number of shares of Common Stock Merger Consideration as the Stockholders may request in writing within twenty (20) days following receipt of such notice (a "Piggy-Back Registration"). Parent shall cause such shares of Common Stock Merger Consideration to be included in such registration and shall use its best efforts to cause the managing underwriter(s) of a proposed underwritten offering to permit the shares of Common Stock Merger Consideration requested to be included in a Piggy-Back Registration to be included on the same terms and conditions as any similar securities of Parent and to permit the sale or other disposition of such shares of Common Stock Merger Consideration in accordance with the intended method(s) of distribution thereof. If the Stockholder proposes to distribute his securities through a Piggy-Back Registration that involves an underwriter(s), the Stockholder shall enter into an underwriting agreement in customary form with the underwriter(s) selected for such Piggy-Back Registration.

 

 

(b)          Notwithstanding any other provision of this Section 6.16, if a Piggy-Back Registration will be an underwritten offering and the managing underwriter(s) determine(s) in good faith that marketing factors require a limitation of the number of shares to be underwritten, then the managing underwriter(s) may exclude shares (including shares of Common Stock Merger Consideration) from the registration and the underwriting, and the number of shares that may be included in the registration and the underwriting shall be allocated, first, to Parent, and second to Stockholders requesting inclusion of their shares of Common Stock Merger Consideration in such Registration Statement on a pro rata basis based on the number of shares of Common Stock Merger Consideration each such Stockholder has requested to be included in the registration. If any Stockholder disapproves of the terms of any such underwriting, such Stockholder may elect to withdraw therefrom by written notice to Parent and the underwriter, delivered at least thirty (30) business days prior to the effective date of the registration statement. Any shares of Common Stock Merger Consideration excluded or withdrawn from such underwriting shall be excluded and withdrawn from the registration. For any Stockholder that is a partnership or corporation, the partners, retired partners and shareholders of such Stockholder, or the estates and family members of any such partners and retired partners and any trusts for the benefit of any of the foregoing persons shall be deemed to be a single "Stockholder," and any pro rata reduction with respect to such "Stockholder" shall be based upon the aggregate amount of shares carrying registration rights owned by all entities and individuals included in such "Stockholder," as defined in this sentence.

 

(c)           Any Stockholder may elect to withdraw his or her request for inclusion of shares of Common Stock Merger Consideration in any Piggy-Back Registration by giving written notice to Parent of such request to withdraw prior to the effectiveness of the registration statement. Parent may also elect to terminate or withdraw a registration statement at any time prior to the effectiveness of the registration statement. Notwithstanding any such withdrawal, Parent shall pay all expenses incurred by a Stockholder in connection with such Piggy-Back Registration as provided in this Section. Except for the obligation to pay registration expenses, Parent will have no liability to any Stockholder in connection with such termination or withdrawal.

 

 

Section 6.17         Tax Matters.

 

(a)          Preparation and Filing of Tax Returns.

 

(i)          The Representative shall prepare, or cause to be prepared, all Tax Returns of the Seller Entities for all taxable periods ending on or prior to the Closing Date which are filed after the Closing Date. The Representative shall provide to Parent for its review copies of such Tax Returns and approval (which approval shall not be unreasonably withheld, conditioned or delayed), sufficiently in advance of the due date (giving effect to extensions) for filing such Tax Returns to provide Parent with a meaningful opportunity to review and reasonably comment on such Tax Returns; provided, that Parent's consent with respect to any federal Tax Return of the Seller Entities prepared on IRS Form 1120S and any comparable state Tax Return shall not be withheld to the extent that a position originally taken by Representative on such Tax Return is reasonable and in accordance with applicable Law. Parent shall cause the Seller Entities to effectuate timely filing of such Tax Returns.

 

(ii)         Parent shall prepare or cause to be prepared and file or cause to be filed any Tax Return of the Seller Entities for any Straddle Period provided that Parent shall deliver copies of such Tax Returns to the Representative for its review and approval (which approval shall not be unreasonably withheld, conditioned or delayed) sufficiently in advance of the due date (giving effect to extensions) for filing such Straddle Period Tax Returns to provide Representative with a meaningful opportunity to review and reasonably comment on such Tax Returns. All such Tax Returns shall be prepared in a manner consistent with past practice of the Seller Entities. The Seller Agreement Parties, through the Representative, shall pay to Parent the amount of any Indemnifiable Taxes reflected as due on any such Straddle Period Tax Returns at least five (5) Business Days prior to the due date thereof (except to the extent included in Estimated Closing Accrued Taxes or included in current liabilities in the Final Closing Statement).

 

(b)          Cooperation on Tax Matters. Parent, the Seller Entities and the Representative shall cooperate fully, as and to the extent reasonably requested by the other party, in connection with the preparation of any Tax Return or any audit or other examination by any taxing authority or any judicial or administrative proceeding relating to Taxes relating to the Seller Entities, and Parent and Seller Entities shall retain (and provide the other party with reasonable access to) all records or information which may be relevant to such Tax Return, audit, examination or proceeding. Notwithstanding anything to the contrary contained in this Agreement, Stockholders shall be entitled to retain copies of all federal Tax Returns of the Seller Entities prepared on IRS Form 1120S and any comparable state Tax Returns related to the income or operations of the Seller Entities and information, records and documents relating to the Taxes reflected on such Tax Returns and the preparation of such Tax Returns.

 

(c)          Allocation of Certain Taxes.

 

(i)          If any of the Seller Entities is permitted but not required under applicable federal, state, local or foreign income Tax Laws to treat the Closing Date as the last day of a taxable period, then the parties shall take and cause their Affiliates to take, such steps as may be reasonably necessary to treat the Closing Date as the last day of a taxable period.

 

(ii)         For all purposes of this Agreement, in the case of Taxes arising in a Straddle Period, except as provided in Section 6.17(c)(iii) and Section 6.17(c)(iv), the allocation of such Taxes between the Pre-Closing Tax Period and the Post-Closing Tax Period portions of such Straddle Period shall be made on the basis of an interim closing of the books as of the end of the Closing Date.

 

 

(iii)        For all purposes of this Agreement, in the case of any Taxes based on capitalization, debt or shares of stock authorized, issued or outstanding, or any real property, personal property or similar ad valorem taxes that are payable for a Straddle Period except as provided in Section 6.17(c)(iv), the portion of such Taxes which relates to the Pre-Closing Tax Period portion of the Straddle Period shall be deemed to be the amount of such Taxes for the entire Straddle Period multiplied by a fraction, the numerator of which is the number of days in the Pre-Closing Tax Period portion of the Straddle Period and the denominator of which is the number of days in the entire Straddle Period, and the balance of such Taxes shall be allocated to the Post-Closing Tax Period; provided, however, that any such Taxes attributable to any property that was owned by the Seller Entities during the Pre-Closing Tax Period, but is not owned by the Seller Entities as of the Closing Date shall be allocated entirely to the Pre-Closing Tax Period, and any such Taxes attributable to any property that was owned by the Seller Entities during the Post-Closing Tax Period, but is not owned by the Seller Entities as of the Closing Date shall be allocated entirely to the Post-Closing Tax Period.

 

(iv)        Notwithstanding anything to the contrary in Section 6.17(c)(ii) or Section 6.17(c)(iii), any Taxes attributable to any transaction engaged in by Parent or the Seller Entities not in the ordinary course of business occurring on the Closing Date after the Closing shall be allocated to the Post-Closing Tax Period or portion of any Straddle Period beginning the day after the Closing Date, as applicable.

 

(d)          Transfer Taxes. All Transfer Taxes incurred in connection with this Agreement shall be borne equally by Parent, on the one hand, and the Stockholders, on the other hand. Parent and Representative shall cooperate in filing, when required by Law, all necessary documentation and Tax Returns with respect to such Transfer Taxes and shall share equally any resulting costs that are incurred.

 

(e)          Section 338(h)(10) Election.

 

(i)          Parent may, in its sole discretion, make an election under Section 338(h)(10) of the Code and/or any similar provision of applicable state or local tax law, with respect to the purchase and sale of common stock of ADC pursuant to the Merger under this Agreement (the "Section 338 Election") provided that Parent shall provide written notice to the Representative within one-hundred eighty (180) days following the Closing Date whether the Section 338 Election will be made. If a Section 338 Election is made by Parent, (a) Parent and the Stockholders shall join in timely making the Section 338 Election and shall join in any filings that may be necessary in order to effect the Section 338 Election (in addition to any documents provided pursuant to Section 7.2(o)), and/or any comparable state or local Tax forms and (b) the Stockholders shall, as promptly as reasonably practicable following the Closing Date, take all actions requested in writing by Parent that are reasonably necessary and appropriate to effect and preserve a timely Section 338 Election. Neither the Parent, the Seller Entities nor any affiliate shall make an election under Section 338 of the Code other than the Section 338 Election with respect to ADC. Parent shall be responsible for the preparation and timely filing of the IRS Form 8023 and any applicable state tax form to effectuate the Section 338 Election. To the extent required by Law, any income, gain, loss or deduction, or other tax item resulting from a deemed sale pursuant to the Section 338 Election shall be included in the Tax Returns of the Seller Entities for the taxable period ending on or prior to the Closing Date.

 

 

(ii)         If the Section 338 Election is made, Parent and the Stockholders agree that the IRS Form 8883 shall be prepared based on the Allocation Schedule described in Section 6.17(e)(iii) and shall allocate the aggregate deemed sales price (within the meaning of Treasury Regulations Section 1.338-4) of the assets deemed sold, and the adjusted grossed-up basis (within the meaning of Treasury Regulations Section 1.338-5) of the assets deemed purchased, in accordance with Treasury Regulations Section 1.338-6 and the other requirements of the Code, including any adjustments thereto required under Treasury Regulations Section 1.338-7, based in each case upon the Allocation Schedule. Parent shall cause the Seller Entities and each of its Affiliates to file and the Stockholders shall file all Tax Returns in a manner consistent with the Allocation Schedule and shall not voluntarily take or permit to be taken any position inconsistent with the Allocation Schedule in any inquiry, assessment, Tax Proceeding or similar event relating to Taxes.

 

(iii)        In anticipation that the Section 338 Election may be made, Parent and the Stockholders agree that for purposes of reporting the effects of the Section 338 Election, the value of the assets deemed sold by "Old T" and deemed purchased by "New T" under (and as defined in) applicable Treasury Regulations under Section 338 of the Code (including the actual or deemed liabilities of ADC and other relevant items) shall be set forth in an allocation schedule attached hereto as Section 6.17 of the Disclosure Schedule, as adjusted to give effect to the adjustments to the Merger Consideration pursuant to Section 2.8 (the "Allocation Schedule"). Any subsequent adjustments to the Merger Consideration shall be made in accordance with the principles set forth in Treasury Regulations under Section 338 of the Code and the Allocation Schedule.

 

(f)          Refunds and Related Matters.

 

(i)          The Stockholders shall be entitled to receive all refunds of or amounts credited or offset against Taxes (without interest thereon other than any interest paid by the relevant Government Authority with respect to such refund, amount credited or offset) of the Seller Entities for all Pre-Closing Tax Periods except to the extent that such refunds, credits or offsets (i) are taken into account in the determination of Final Closing Statement or (ii) result from the utilization (including carry back) of any net operating losses or other Tax attributes related to any Post-Closing Tax Period. Parent shall pay or cause to be paid to the Representative, on behalf of the Stockholders, any such refund or the amount of any such credit or offset within ten (10) days after receipt or entitlement by Parent, the Seller Entities or any of their Affiliates. Upon the reasonable request of the Representative, Parent shall file, or cause the Seller Entities to file, in each case, at the sole cost and expense of the Representative, a claim for refund of any Taxes, including through the filing of amended Tax Returns or otherwise, relating to the Seller Entities (or their assets or operations) for any Pre-Closing Tax Period.

 

(ii)         In applying Section 6.17(f)(i), any refund of Taxes (including any interest thereon) for a Straddle Period shall be allocated between the Pre-Closing Tax Period and the Post-Closing Tax Period in accordance with the principles of Section 6.17(c).

 

 

(iii)        Notwithstanding anything to the contrary in this Section 6.17(f), and in addition to the rights of Parent pursuant to Section 9.7, no payment shall be paid to the Stockholders pursuant to this Section 6.17(f) if, at the time such payment would otherwise be made, any Indemnity Claim asserted by any Parent Indemnified Party against the Seller Agreement Parties pursuant to Section 9.3 hereof remains outstanding and unresolved, and such payment shall only be made to the Stockholders once all such outstanding Indemnity Claims have been resolved in accordance with Section 9.3.

 

(iv)        Amended Tax Returns with respect to any Pre-Closing Tax Period of the Seller Entities may not be filed by the Seller Entities, Parent or any of their Affiliates without the prior written consent of the Representative (which consent shall not be unreasonably withheld, conditioned or delayed).

 

(g)          Tax Contests.

 

(i)          Notices. Parent shall promptly notify the Representative in writing upon receipt by Parent, the Seller Entities or any of their Affiliates of the initiation of any Tax audit, examination, inquiry, contest, assessment or other proceeding relating to any (A) Pre-Closing Tax Period or (B) Straddle Period for which the Stockholders could be liable pursuant to this Agreement or otherwise ("Tax Proceeding"); provided, however, that the failure to give such prompt notice shall not relieve the Stockholders of any of its indemnification obligations under Section 9.2(a), except to the extent that a Stockholder is actually prejudiced thereby. Such notice shall specify in reasonable detail the basis for such Tax Proceeding and shall include a copy of the correspondence received from the Governmental Authority.

 

(ii)         Pre-Closing Periods. The Representative shall have the right to control at its own expense, any Tax Proceeding in respect of the Seller Entities for any taxable period ending on or before the Closing Date, if the Representative timely, but in any event within thirty (30) days after receiving written notice of such Tax Proceeding or such shorter time as required to timely respond to such Tax Proceeding, notifies Parent in writing of its desire to control such Tax Proceeding; provided, further, that if the Representative assumes control of such Tax Proceeding, such written notice acknowledges (on behalf of the Stockholders) the assumption in full of all responsibility for any Losses arising from such Tax Proceeding, subject to the limitations set forth in Article IX. If the Representative elects to control such Tax Proceeding, (i) Parent shall have the right to participate, at its own expense, in such Tax Proceeding with separate legal counsel, (ii) the Representative shall, upon a reasonable request from Parent, provide Parent with a timely and reasonably detailed account of each stage of such Tax Proceeding (including providing copies of all documents and correspondence with any Governmental Authority related thereto), and (iii) the Representative shall not consent to the entry of any judgment or enter into any settlement with respect to such Tax Proceeding without the prior written consent of Parent, which shall not be unreasonably withheld, conditioned or delayed. If the Representative does not elect to control such Tax Proceeding, Parent, at its expense, shall control or cause the applicable Seller Entity to control such Tax Proceeding, provided that (i) the Representative shall have the right to participate, at its own expense, in such Tax Proceeding with separate legal counsel, (ii) Parent shall, upon reasonable request from the Representative from time to time, provide the Representative with a timely and reasonably detailed account of each stage of such Tax Proceeding (including providing copies of all documents and correspondence with any Governmental Authority related thereto) and (iii) neither Parent nor any Seller Entity shall consent to the entry of any judgment or enter into any settlement with respect to such Tax Proceeding without the prior written consent of the Representative, which shall not be unreasonably withheld, conditioned or delayed.

 

 

(iii)        Straddle Periods. Parent shall control any Tax Proceeding for a Straddle Period of the Seller Entities; provided, however, (i) the Representative shall have the right, at its sole cost and expense, to participate in such Tax Proceeding if such Tax Proceeding relates to Indemnifiable Taxes or Taxes in which the Stockholders could otherwise be liable (each a "Straddle Tax Period Proceeding"), (ii) the Parent shall provide Representative with a timely and reasonably detailed account of each stage of such Straddle Period Tax Proceeding (including providing copies of all documents and correspondence with any Governmental Authority related thereto), and (iii) neither Parent nor any Seller Entity shall consent to the entry of any judgment or enter into any settlement with respect to such Straddle Period Tax Proceeding without the prior written consent of Representative, which shall not be unreasonably withheld, conditioned or delayed.

 

(iv)        Retention. Parent and Representative each agree (i) to retain all books and records with respect to Tax matters pertinent to the Seller Entities in their possession relating to any Pre-Closing Tax Period or Straddle Period until the expiration of the statute of limitations (and any extensions thereof) of the respective taxable periods, and to abide by all record retention agreements entered into with any taxing authority, and (ii) to give the other party reasonable written notice prior to transferring, destroying or discarding any such books and records and, if the other Party so requests, to allow the other Party to take possession of such books and records.

 

Section 6.18         Notification of Certain Changes.

 

(a)          During the period from the date hereof to the Closing, the Sellers shall give prompt notice to Parent, and Parent shall give prompt notice to the Sellers, of (i) the occurrence or nonoccurrence of any event which would cause any representation or warranty of any of the Seller Entities, or Parent or Merger Sub, as applicable, in this Agreement to be untrue or inaccurate in any material respect as of the Closing Date and (ii) any material failure by the Seller Entities, or Parent or Merger Sub, as applicable, to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by them hereunder; provided, that the delivery of any notice pursuant to this Section 6.18 shall not limit or otherwise affect the remedies available hereunder to the Party to which such notice is given.

 

 

(b)          From the date of this Agreement until the Closing Date, the Sellers may deliver to Parent supplements or amendments to the Disclosure Schedule with respect to any matter hereafter arising or of which any Seller Entity becomes aware after the date of this Agreement that would have been required to be set forth or described in the Disclosure Schedule or which otherwise would have caused any representation are warranty in Article IV to have been incorrect if such matter had occurred or existed on the date of this Agreement (each a "Disclosure Supplement"). Subject to terms and conditions of this Section 6.18, no such notice shall be deemed to cure any breach or have any effect for the purpose of determining the inaccuracy of the Sellers' or the Company's representations and warranties for purposes of Article VII, Article IX or otherwise or Parent's rights or remedies with respect to any such inaccuracy, regardless of whether the Closing occurs. Notwithstanding the foregoing, if the Sellers notify Parent in writing at the time of the delivery of any Disclosure Supplement that an event, development or occurrence which is the subject of the Disclosure Supplement, and which first arose after the date of this Agreement, constitutes or relates to an event, development or occurrence that would make the condition to close set forth in Section 7.2(a) and Section 7.2(p) incapable of being satisfied, then Parent shall have the right, in its sole discretion to terminate this Agreement. If Parent elects to terminate this Agreement, then Parent and Merger Sub shall be deemed to have irrevocably waived any right to: (a) indemnification under Section 9.2(a) with respect to such event, development or occurrence and (b) bring any claim for any Losses with respect to such matter. In the event the Sellers provide a notice set forth in this Section 6.18 along with an updated Disclosure Schedule, the Sellers shall also promptly provide any additional information relating thereto as Parent may reasonably request.

 

Section 6.19         Transfer of Interests.  The Seller Agreement Parties shall cause all of the issued and outstanding equity interests in PTFS to be transferred to ADC so that ADC shall own 100% of the issued and outstanding interests in PTFS prior to closing pursuant to an agreement in a form reasonably acceptable to Parent.

 

Article VII

 

CONDITIONS TO CLOSING AND THE MERGER

 

Section 7.1           Mutual Conditions.  The respective obligations of each party to this Agreement to consummate and effect Merger shall be subject to the fulfillment at or prior to the Effective Time of each of the following conditions:

 

(a)          No Injunction. At the Effective Time, there shall not have been issued and be in effect any Law that makes the consummation of the Merger illegal.

 

(b)          Parent Stockholder Approval. The Parent Stockholder Approval shall have been obtained.

 

(c)          Parent Common Stock. Holders of less than 87.5% of the shares of Parent Common Stock issued in Parent's initial public offering of securities and outstanding immediately before the Closing shall have exercised their rights to redeem their shares in exchange for a pro rata share of the Trust Account in accordance with Parent's restated certificate of incorporation as currently in effect.

 

Section 7.2           Conditions to the Obligations of Parent and Merger Sub.  The obligations of Parent and Merger Sub to consummate the Merger shall be subject to the fulfillment at or prior to the Effective Time of each of the following conditions, any and all of which may be waived, in whole or in part, by Parent and Merger Sub to the extent permitted by applicable Law:

 

 

(a)          Representations and Warranties. Other than with respect to the Seller Fundamental Representations and Section 4.6(b), the representations and warranties of the Seller Agreement Parties contained in this Agreement, the Disclosure Schedule or any certificates delivered in connection with this Agreement shall be true and correct in all respects (disregarding all qualifications and exceptions contained therein relating to materiality or material adverse effect) as of the date of this Agreement and (except as permitted or contemplated by this Agreement) as of the Closing Date (except those representations and warranties that address matters only as of a specified date, which shall be true and correct in all respects as of that specified date in the manner set forth above), except where the failure of such representations and warranties to be true and correct would not, individually or in the aggregate, have a Business Material Adverse Effect, the representations and warranties set forth in Section 4.6(b) shall be true and correct in all respects as of the date of this Agreement and on the Closing Date and the Seller Fundamental Representations shall be true and correct in all respects (disregarding all qualifications and exceptions contained therein relating to materiality or material adverse effect) as of the date of this Agreement and (except as permitted or contemplated by this Agreement) as of the Closing Date immediately prior to giving effect to the Closing (except those representations and warranties that address matters only as of a specified date, which shall be true and correct in all respects as of that specified date).

 

(b)          Agreements and Covenants. Each of the Seller Agreement Parties shall have performed or complied in all material respects with all agreements and covenants required by this Agreement to be performed or complied with by them on or prior to the Closing Date.

 

(c)          Officer's Certificate. Each of the Seller Agreement Parties shall have delivered a certificate, dated as of the Closing Date and signed by an authorized representative of such Seller Agreement Party, that each of the conditions set forth in Section 7.2(a) and Section 7.2(b) have been satisfied.

 

(d)          Secretary's Certificate. The Seller Agreement Parties shall have delivered to Parent and Merger Sub:

 

(i)          the articles or certificate of incorporation of each Seller Entity, certified by the Secretary of State or other appropriate Governmental Authority of its jurisdiction of organization or incorporation, as applicable; and

 

(ii)         (A) copies of the resolutions of the board of directors or other governing body and of the shareholders of each Seller Entity authorizing and approving this Agreement and all of the transactions and agreements contemplated hereby; (B) the bylaws of each Seller Entity; and (C) the names of the officer or officers of each Seller authorized to execute this Agreement and any and all other documents, agreements and instruments contemplated herein or therein, all certified by any authorized representative of Sellers to be true, correct, complete and in full force and effect as of the Closing Date.

 

(e)          Certain Consents. The Seller Agreement Parties shall have obtained the consents, authorizations or approvals listed on Section 7.2(e) of the Disclosure Schedule in connection with the execution and delivery of this Agreement and the consummation of the Closing hereunder, in each case in substance and form reasonably satisfactory to Parent, and no such consents, authorizations or approvals shall have been revoked.

 

(f)          Required Cash. Sellers shall have available the Required Cash and Parent and the Merger Sub shall have received a certificate to such effect from Sellers signed by an authorized representative of Sellers.

 

 

(g)         FIRPTA. Each Stockholder shall have delivered to Parent a duly and properly executed certification of non-foreign status, in form and substance consistent with Treasury Regulations Section 1.1445-2(b), stating that Seller is not a "Foreign Person" as defined in Section 1445 of the Code.

 

(h)         Waiver and Release. Parent and Merger Sub shall have received a waiver and release of any and all claims against the Surviving Entity from the Seller Agreement Parties in substantially the form set forth on Exhibit C attached hereto.

 

(i)          Payoff Letters. Sellers shall have delivered to Parent the Payoff Letters pursuant to Section 6.17.

 

(j)          Receipt of Financing. Parent or Merger Sub shall have received the Financing.

 

(k)         Other Transactions. The transaction contemplated by that certain Agreement and Plan of Merger by and between Parent, JP Merger Sub, LLC, JetPay, LLC, WLES, L.P. and solely for purposes of Sections 6.12 and 9.9 therein, ▇▇▇▇▇ ▇▇▇▇▇, dated as of July 6, 2012 and that certain Agreement and Plan of Merger by and between Parent, Enzo Merger Sub, Inc, ▇▇▇▇▇▇▇ ▇▇▇▇▇ Corporation d/b/a Electronic Merchant Systems, the stockholders listed on Annex A thereto and ▇▇▇▇▇ ▇▇▇▇▇▇▇, as Representative, dated as of July 6, 2012, shall have been consummated at or prior to the Closing.

 

(l)          Stock Purchase Agreement. ADC shall have delivered to Parent a duly executed copy of the Stock Purchase Agreement.

 

(m)        Transfer of Interests. All of the issued and outstanding equity interests in PTFS shall have been transferred to ADC and ADC shall own 100% of the issued and outstanding interests in PTFS.

 

(n)         Qualified Subchapter S Subsidiary Election. ADC shall have delivered to Parent a copy of the election made with respect to PTFS to treat PTFS as a "qualified subchapter S subsidiary" (within the meaning of Section 1361(b)(3)(B)) of ADC and documentation reasonably acceptable to Parent evidencing that such election was timely filed.

 

(o)         Section 338 Election. Parent and Merger Sub shall have received original IRS Forms 8023 (and comparable state or local Tax forms requested by Parent which are applicable to the Section 338 Election) properly signed and executed by the Stockholders.

 

(p)         Material Adverse Effect. No Business Material Adverse Effect shall have occurred since the date of this Agreement.

 

Section 7.3           Conditions to the Obligations of the Seller Agreement Parties.  The obligations of the Seller Agreement Parties to consummate Merger shall be subject to the fulfillment at or prior to the Effective Time of each of the following conditions, any and all of which may be waived in whole or in part by the Seller Agreement Parties to the extent permitted by applicable Law:

 

 

(a)          Representations and Warranties. The representations and warranties of Parent and Merger Sub contained in this Agreement, the Disclosure Schedule or any certificates delivered in connection with this Agreement shall be true and correct in all respects (disregarding all qualifications and exceptions contained therein relating to materiality or material adverse effect) as of the date of this Agreement and as of the Closing Date (except those representations and warranties that address matters only as of a specified date, which shall be true and correct in all respects as of that specified date in the manner set forth above), except where the failure of such representations and warranties to be true and correct would not, individually or in the aggregate, have a material adverse effect.

 

(b)          Agreements and Covenants. Parent and Merger Sub shall have performed or complied in all material respects with all agreements and covenants required by this Agreement to be performed or complied with by them on or prior to the Closing Date.

 

(c)          Officer's Certificate. Parent and Merger Sub shall have delivered a certificate, dated as of the Closing Date and signed by an authorized officer of each of Parent and Merger Sub, that each of the conditions set forth in Section 7.3(a) and Section 7.3(b) have been satisfied.

 

(d)          Secretary's Certificate. Parent and Merger Sub shall have delivered to the Stockholders:

 

(i)          the certificate of incorporation of Parent and the certificate of incorporation of Merger Sub, in each case certified by the Secretary of State of the State of Delaware; and

 

(ii)         (A) copies of the resolutions of the boards of directors of Parent and the board of directors of Merger Sub, in each case authorizing and approving this Agreement and all of the transactions and agreements contemplated hereby; (B) the bylaws of Parent and Merger Sub; and (C) the names of the officer or officers of Parent and Merger Sub authorized to execute this Agreement and all documents, agreements and instruments contemplated herein, all certified by an authorized representative of Parent and Merger Sub to be true, correct, complete and in full force and effect as of the Closing Date.

 

(e)          SEC Compliance. Immediately prior to Closing, Parent shall be in compliance in all material respects with the reporting requirements applicable to it under the Exchange Act.

 

Article VIII

 

TERMINATION, AMENDMENT AND WAIVER

 

Section 8.1           Termination. This Agreement may be terminated at any time prior to the Closing Date:

 

(a)          by mutual written consent of Parent and Sellers;

 

 

(b)          by either Parent or Sellers, if the Closing has not occurred on or before December 15, 2012 (the "Outside Date"); provided, however, that the right to terminate this Agreement under this Section 8.1(b) shall not be available to any party whose failure to fulfill any material obligation under this Agreement has been the cause of, or resulted in, the failure of the Closing to occur on or before the Outside Date;

 

(c)          by either Parent or Sellers, if a Governmental Authority shall have enacted, issued, promulgated, enforced or entered any Law which has become final and non-appealable, and which permanently restrains, enjoins or otherwise prohibits the transactions contemplated hereby;

 

(d)          by either Parent or Sellers, if, at the Parent Stockholders' Meeting (including any adjournments thereof), this Agreement and the transactions contemplated hereby shall fail to be approved and adopted by the affirmative vote of the holders of Parent Common Stock as required under Parent's restated certificate of incorporation, or the holders of 87.5% or more of the number of shares of Parent Common Stock issued in Parent's initial public offering and outstanding as of the date of the record date of the Parent Stockholders' Meeting exercise their rights to redeem their shares of Parent Common Stock held by them in exchange for cash in accordance with Parent's restated certificate of incorporation;

 

(e)          by Parent, if neither it nor Merger Sub is in material breach of their obligations under this Agreement and if (i) at any time any of the representations and warranties of the Seller Agreement Parties contained herein become untrue or inaccurate such that Section 7.2(a) could not be satisfied (treating such time as if it were the Closing Date for purposes of this Section 8.1(e)); or (ii) there has been a breach on the part of any Seller Agreement Party of any of their covenants or agreements contained in this Agreement such that Section 7.2(b) could not be satisfied (treating such time as if it were the Closing Date for purposes of this Section 8.1(e)), and, in both cases (i) and (ii), such breach has not been cured within 30 days after written notice thereof to Sellers, if curable; or

 

(f)          by Sellers, if neither any Seller nor any of the other Seller Agreement Parties is in material breach of its obligations under this Agreement and if (i) at any time any of the representations and warranties of Parent and Merger Sub contained herein become untrue or inaccurate such that Section 7.3(a) could not be satisfied (treating such time as if it were the Closing Date for purposes of this Section 8.1(f)); or (ii) there has been a breach on the part of Parent and Merger Sub of any of their covenants or agreements contained in this Agreement such that Section 7.3(b) could not be satisfied (treating such time as if it were the Closing Date for purposes of this Section 8.1(f)), and, in both cases (i) and (ii), such breach has not been cured within 30 days after written notice thereof to Parent, if curable.

 

Section 8.2           Manner of Exercise. In the event of termination by Parent or Sellers, or both, in accordance with Section 8.1, written notice thereof shall forthwith be given to the other party by the terminating party and this Agreement shall terminate.

 

 

Section 8.3           Effect of Termination.  If this Agreement is terminated pursuant to Section 8.1, all further obligations of the parties under this Agreement will terminate and become void and of no force and effect, except that (i) the obligations in this Article VIII, the last two sentences of Section 6.1, the last sentence of Section 6.8(d), Section 6.10, Article IX and Article X will survive termination of this Agreement and (i) nothing herein shall relieve any party from liability for any willful breach of this Agreement.

 

Section 8.4           Waiver.  At any time prior to the Closing Date, the parties may (i) extend the time for the performance of any of the obligations or other acts of the other parties hereto, (ii) waive any inaccuracies in the representations and warranties contained herein or in any document delivered pursuant hereto, or (iii) waive compliance with any of the agreements or conditions contained herein. Any such extension or waiver shall be valid only if set forth in a written instrument signed on behalf of such party, but such extension or waiver or failure to insist on strict compliance with an obligation, covenant, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure.

 

Article IX

 

SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION

 

Section 9.1           Survival; Knowledge of Breach.

 

(a)          The representations and warranties of Seller Agreement Parties contained in this Agreement or in any certificate delivered by them pursuant hereto and the representations and warranties of Parent and the Merger Sub contained in this Agreement or in any certificate delivered by them pursuant hereto shall survive the Closing until the date that is the 18 month anniversary of the Closing Date, except for:

 

(i)          the representations and warranties set forth in Section 4.1 (Organization and Qualification; Subsidiaries), Section 4.2 (Authorization), Section 4.4 (Capitalization), Section 4.7 (Title) and Section 4.22 (Brokers) (collectively, the "Seller Fundamental Representations") and in Section 5.2 (Authorization) and Section 5.7 (Capitalization), which shall survive indefinitely; and

 

(ii)         the representations and warranties set forth in Section 4.15 (Environmental Matters), Section 4.16 (Employee Benefit Matters), Section 4.17 (Taxes) and Section 4.29 (Proxy Statement), which shall survive until the date that is 60 days after the expiration of the applicable statute of limitations;

 

provided, however, that (x) any obligations under Section 9.2(a) and Section 9.2(b) shall not terminate with respect to any Losses as to which the Indemnified Party shall have given notice in accordance with Section 9.3 to the Indemnifying Party before the termination of the survival period set forth above, (y) the covenants and agreements contained in this Agreement to be fully performed or complied with at or prior to the Closing shall expire on the 18 month anniversary of the Closing Date and (z) each covenant and agreement contained in this Agreement to be performed or complied with after the Closing shall survive indefinitely.

 

 

(b)          The right to indemnification or any other remedy based on representations, warranties, covenants and agreements in this Agreement shall not be affected by any investigation conducted at any time, or any knowledge acquired (or capable of being acquired) at any time, whether before or after the execution and delivery of this Agreement or the Closing Date, with respect to the accuracy or inaccuracy of or compliance with, any such representation, warranty, covenant or agreement. The waiver of any condition based on the accuracy of any representation, or warranty, or on the performance of or compliance with any such covenant or agreements, will not affect the right to indemnification or any other remedy based on such representations, warranties, covenants and agreements.

 

Section 9.2           Indemnification.

 

(a)          Subject to the other limitations set forth in this Article IX, the Seller Agreement Parties agree to indemnify and hold harmless Parent, the Surviving Entity, their respective Affiliates, successors and assigns and each of their officers, directors, employees, representatives and agents (collectively, the "Parent Indemnified Parties") without duplication against and in respect of any and all Losses of the Parent Indemnified Parties, to the extent resulting or arising from:

 

(i)          any breach of the representations and warranties of the Seller Agreement Parties set forth in this Agreement or any certificate delivered by them hereunder;

 

(ii)         any breach or non-fulfillment of, or failure to comply with, any covenant or agreement of the Seller Agreement Parties set forth in this Agreement; or

 

(iii)        any Indemnifiable Taxes;

 

provided, however, notwithstanding anything in this Agreement to the contrary, none of the Seller Agreement Parties shall be liable for, or shall be required to indemnify any Parent Indemnified Parties for or pay for (A) Transfer Taxes other than Transfer Taxes for which Stockholders are liable for pursuant to Section 6.17(d) ("Parent Taxes"), (B) Taxes if, and to the extent, such Taxes are part of Accrued Taxes, or (C) Taxes of the Seller Entities that arise as a result of the Share Exchange or from the election made pursuant to section 7.2(n); provided that any Taxes resulting from the Share Exchange or the election made pursuant to section 7.2(n) shall remain Indemnifiable Taxes if incurred due to a breach of any representation or warranty of the Seller Agreement Parties.

 

(b)          Subject to the other limitations set forth in this Article IX, Parent and the Surviving Entity agree to indemnify and hold harmless the Seller Agreement Parties, their respective Affiliates, successors, assigns, heirs and personal representatives and each of their officers, directors, employees, representatives and agents (collectively, the "Seller Indemnified Parties") without duplication against and in respect of any and all Losses of Seller Indemnified Parties to the extent resulting or arising from:

 

(i)          any breach of the representations and warranties of Parent and Merger Sub set forth in this Agreement or any certificate delivered by them hereunder;

 

(ii)         any breach or nonfulfillment of, or failure to comply with, any covenant or agreement of Parent or Merger Sub set forth in this Agreement; or

 

 

(iii)        any and all (a) Taxes attributable to any Post-Closing Tax Period of the Surviving Entities or (b) Parent Taxes.

 

(c)          To the extent permitted by Law, any payment pursuant to this Article IX shall be treated as an adjustment to the Merger Consideration.

 

Section 9.3           Method of Asserting Claims, etc.

 

(a)          All claims for indemnification by any Indemnified Party hereunder shall be asserted and resolved as set forth in this Section 9.3. An Indemnified Party entitled to any indemnification provided for under this Agreement in respect of, arising out of or involving a claim or demand made by, or an action, proceeding or investigation instituted by, any Person (whether or not a party to this Agreement) (an "Indemnity Claim"), must notify the Indemnifying Party in writing, and in reasonable detail, of the Indemnity Claim as promptly as practicable after such Indemnified Party learns of the Indemnity Claim; provided, however, that failure to give such notification shall not affect the indemnification provided hereunder unless the Indemnifying Party shall have been actually prejudiced as a result of such failure. Such written notice (the "Claim Notice") shall to the extent reasonably possible, set forth the amount or the estimated amount thereof (which estimate shall not be conclusive of the final amount of such claim and demand) along with copies of all written evidence thereof.

 

 

(b)          If an Indemnity Claim is made against an Indemnified Party by a third party (a "Third Party Claim"), such Indemnified Party shall promptly, but in no event more than 30 days following such Indemnified Party's receipt of such Third Party Claim, deliver a Claim Notice to the Indemnifying Party with respect thereto; provided, however, that failure to provide such notice within the time period required shall not affect the Indemnified Party's right to indemnification hereunder except to the extent that the Indemnifying Party was actually prejudiced as a result of such failure. The Indemnifying Party shall have ten (10) days from the date of personal delivery or mailing of the Claim Notice (the "Notice Period") to notify the Indemnified Party in writing whether or not it shall defend the Indemnified Party against such Third Party Claim; provided that if the Indemnifying Party assumes such defense, such written notice shall include the assumption in full of all responsibility for any Losses arising from such Third Party Claim, subject to the limitations set forth in this Article IX. Notwithstanding the foregoing, without the prior written consent of the Indemnified Party, the Indemnifying Party shall not have the right to assume the defense of any Third Party Claim described in a Claim Notice that (i) seeks an injunction or other equitable relief as a primary remedy, (ii) relates to or arises in connection with any criminal or quasi-criminal allegation, proceeding, action, indictment or investigation, (iii) in the reasonable judgment of the Indemnified Party, is likely to result in aggregate liability that will exceed the then remaining amount of the Cap or (iv) primarily relates to a claim or demand of, or a dispute with, a material customer of Seller. All costs and expenses incurred by the Indemnifying Party in defending such claim or demand shall be a liability of, and shall be paid by, the Indemnifying Party. In the event that the Indemnifying Party notifies the Indemnified Party within the Notice Period that it desires to assume the defense of a Third Party Claim, except as herein provided, the Indemnifying Party shall have the right to do so by appropriate proceedings. If the Indemnifying Party has the right to and elects to assume the defense of a Third Party Claim, the Indemnifying Party shall select counsel, contractors and consultants of recognized standing and competence; and shall diligently pursue the resolution of such Third Party Claim. If the Indemnified Party desires to participate in, but not control, any such defense or settlement, it may do so at its sole cost and expense; provided, however, that the Indemnifying Party shall pay all reasonable fees, costs and expenses of one outside counsel (in addition to local counsel) in connection with such participation (i) if it requests the Indemnified Party to participate or (ii) if in the opinion of outside counsel to the Indemnified Party, a conflict or potential conflict exists between the Indemnified Party and the Indemnifying Party that would make joint representation of the Indemnifying Party and the Indemnified Party impermissible under applicable standards of professional conduct. If the Indemnifying Party chooses to defend or prosecute any Third Party Claim, all of the parties hereto shall reasonably cooperate in the defense or prosecution thereof. Subject to attorney-client privilege, such cooperation shall include the retention and (upon the Indemnifying Party's reasonable request) the provision to the Indemnifying Party of records and information which are relevant to such Third Party Claim, and making employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder; provided, however, that any out-of-pocket cost incurred by the Indemnified Party in connection with such cooperation shall be at the Indemnifying Party's expense. If the Indemnifying Party has assumed the defense of a Third Party Claim, the Indemnifying Party may only settle or compromise a Third Party Claim with the Indemnified Party's prior written consent (which consent shall not be unreasonably withheld or delayed); provided, however, that the Indemnifying Party may settle or compromise such a Third Party Claim without the prior written consent of the Indemnified Party if such settlement or compromise (x) provides solely for the payment of money by the Indemnifying Party and includes a complete and unconditional release of the Indemnified Party from all liability in respect of such Third Party Claim and (y) does not subject the Indemnified Party to any injunctive relief or other equitable remedy. If the Indemnifying Party does not defend the Indemnified Party against a Third Party Claim for which the Indemnifying Party has an indemnification obligation hereunder, whether by not giving the Indemnified Party timely notice as provided above or otherwise, then the Indemnified Party shall have the right to defend and settle such Third Party Claim; provided that the amount of any such Third Party Claim, or, if the same be contested by the Indemnified Party, then that portion thereof as to which such defense is unsuccessful, shall be the liability of the Indemnifying Party hereunder, subject to the limitations set forth in this Article IX, provided that whether or not the Indemnifying Party shall have assumed the defense of a Third Party Claim, the Indemnified Party shall not settle or compromise any Third Party Claim, or consent to the entry of any judgment, without the prior written consent of the Indemnifying Party (which consent shall not be unreasonably withheld or delayed).

 

(c)          If, and to the extent, that the provisions of Section 6.17(g) are inconsistent with this Section 9.3 as to any Tax Proceeding, Section 6.17(g) shall control.

 

Section 9.4           Mitigation.  Each of the parties agrees to take all reasonable steps to mitigate their respective Losses upon and after becoming aware of any event or condition that would reasonably be expected to give rise to any Loss that is indemnifiable hereunder.

 

 

Section 9.5           Limitations on Indemnification.

 

(a)          Except with respect to breaches of the Seller Fundamental Representations and of the representations and warranties in Section 4.15 (Environmental Matters), Section 4.16 (Employment Benefit Matters), Section 4.17 (Taxes) and in Section 4.28 (Proxy Statement), the Stockholders shall not be required to indemnify or hold harmless the Parent Indemnified Parties for Losses under Section 9.2(a)(i) or for Losses under Section 9.2(a)(ii) that are based upon or arise out of the covenants and agreements of Section 6.18 (x) until the aggregate amount of all such Losses with respect to which a Claim Notice was delivered in accordance with Section 9.3 exceeds $100,000 (the "Threshold Amount"), in which event the Parent Indemnified Parties shall be entitled to indemnification for Losses sustained by such Parent Indemnified Parties in excess of the Threshold Amount and (y) if the aggregate Losses of the Parent Indemnified Parties with respect to which a Claim Notice was delivered in accordance with Section 9.3 exceed $2,160,000 (the "Cap").

 

(b)          Notwithstanding anything in this Agreement to the contrary, except with respect to Losses resulting or arising from (i) Indemnifiable Taxes, (ii) breaches of the Seller Fundamental Representations or the representations and warranties in Section 4.17 (Taxes) and (iii) fraud or intentional misrepresentation, the aggregate liability of the Seller Agreement Parties for Losses under Section 9.2(a) shall not in any event exceed the sum of (i) the Cash Merger Consideration and (ii) the aggregate amount of all payments made to the Stockholders pursuant to Section 6.17(f) hereof.

 

(c)          For purposes of this Article IX, except with respect to the representations and warranties set forth in Section 4.6(b), the determination of (i) whether there has been a breach of a representation or warranty and (ii) Losses resulting or arising from such breach shall be made without regard to any materiality qualification (including any reference to Business Material Adverse Effect or material adverse effect).

 

(d)          No right of indemnification hereunder shall be limited by reason of any investigation or audit conducted before or after the Closing or the knowledge of any party of any breach of a representation, warranty or covenant by the other parties at any time. The Indemnified Parties shall have the right, irrespective of any knowledge or investigations to rely fully on the representations warranties and covenants of the Parent and Merger Sub and the Seller Agreement Parties, as applicable, contained herein.

 

(e)          The obligations of Parent and Merger Sub (if the Closing shall not be consummated) and of Parent and the Surviving Entity (if the Closing shall be consummated) shall be joint and several. The obligations of the Seller Agreement Parties, if the Closing shall not be consummated, shall be joint and several, and the obligations of the Stockholders, if the Closing shall be consummated, shall be joint and several, provided, however, that, whether or not the Closing shall be consummated, the liability of ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, his heirs and personal representatives shall be limited to fifteen percent (15%) of the aggregate liability of all Stockholders hereunder, and the liability of all of the other Stockholders shall be limited to eighty-five percent (85%) of the aggregate liability of all Stockholders hereunder. The foregoing proviso shall not apply to the Stockholders' liability in respect of post-Closing adjustments under Section 2.8 of this Agreement. In the event that, prior to the Closing, Parent shall have received written notice from PTFS that the shares of capital stock in PTFS owned by ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ shall have been transferred pursuant to the Stock Purchase Agreements to one or more other Stockholders, then ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ shall be released as a party to this Agreement and relieved of any and all obligations hereunder, and the liability of all remaining Stockholders shall be increased from 85% to 100%. Without limiting the foregoing, if the immediately preceding sentence shall apply, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ shall not be deemed to have made any representation or warranty hereunder and shall be excluded from any obligation under Article IX hereof.

 

 

Section 9.6           Losses Net of Insurance, etc.  Payments for any Loss for which indemnification is provided shall be net of (i) any amounts actually recovered by the Indemnified Party (which shall include a party receiving payment) pursuant to any indemnification or other agreement with any third party, (ii) any insurance proceeds or other cash receipts or sources of reimbursement actually received as an offset against such Loss or any Tax benefit actually realized with respect to such Loss (net of any costs incurred to recover such amounts, proceeds, receipts or benefit and any increases in insurance premiums payable by the Indemnified Party attributable to such Loss). The Indemnified Party shall be required to use commercially reasonable efforts to obtain all amounts described in clauses (i) and (ii) of this Section 9.6. In the event any Parent Indemnified Party receives any payment from or for the account of the Stockholders or any of them (including without limitation by setoff against amounts owing to Stockholders) with respect to any Loss pursuant to Section 9.2, and thereafter Parent or a Parent Indemnified Party receives payment of amounts described in clauses (i) and (ii) of this Section 9.6 from any insurer or other third party in respect of such Loss, Parent shall, and shall cause such Parent Indemnified Parties to, pay such amount (up to the amount received from or for the account of Stockholders or by setoff in respect of such Loss, net of any costs and expenses incurred in connection with such recovery) to the Representative for distribution among the applicable Stockholders. Parent shall provide or cause the Surviving Entity to provide to the Representative such insurance policies in its possession or control as the Representative may request solely for the purpose of determining if the parties obligations under this Section 9.6 have been satisfied; provided that such material shall be treated by the Representative (and the Representative shall cause its representatives to treat such materials) as confidential and the Representative shall not disclose (and shall cause its representatives not to disclose) such materials to any other party except as required by applicable law or court order, and except as necessary or appropriate to perfect claims regarding insurance coverage or other third parties against Parent, the Surviving Entity, any such insurer or third party.

 

Section 9.7           Right of Set-Off.  Each Seller Agreement Party hereby authorizes Parent to set-off from the payment of any amount that may become due to the Seller Agreement Parties hereunder (including, without limitation, any payment of Deferred Merger Consideration, any payments under Section 2.8, Section 2.9 and Section 6.17(f) and any payment to any Seller Indemnified Party under Section 9.2(b)). Such right of set-off shall not be Parent's exclusive remedy hereunder, and nothing herein shall preclude the assertion by Parent of any other rights or remedies provided for in this Agreement.

 

Section 9.8           Sole Remedy.  The parties hereto acknowledge and agree that after the Closing, the indemnities provided in Section 9.2 shall be the sole and exclusive remedy of the parties at law or in equity for any breach of representation, warranty, covenant or agreement or other claim arising out of this Agreement, provided that nothing contained herein shall limit any party's remedies in respect of any fraud or intentional misrepresentation or omission by any other party.

 

 

Article X

 

MISCELLANEOUS

 

Section 10.1         Notices.  All notices or other communications required or permitted hereunder shall be in writing and shall be delivered personally, by facsimile or email to the extent email is listed below, or sent by certified, registered or express air mail, postage prepaid, and shall be deemed given when so delivered personally, or by facsimile upon electronic confirmation of receipt, or if mailed by overnight courier service guaranteeing next day delivery, one Business Day after mailing, or if mailed in any other way, then upon receipt, to the parties at the following addresses (or at such other address for a party as is specified by like notice):

 

If to Parent or Merger Sub, to:

c/o Universal Business Payment Solutions Acquisition Corporation

▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇

▇▇▇▇▇ ▇-▇▇▇

▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇

Attention: Chief Executive Officer

Email: (▇▇▇)-▇▇▇-▇▇▇▇

 

with a copy (which shall not constitute notice) to:

 

Dechert LLP

▇▇▇▇ Centre

▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇

▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇

Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.

Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇

 

If to Sellers, to:

 

AD Computer Corporation

▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇

▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇

Attention: C. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇

Email: ▇▇▇▇.▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇.▇▇▇

 

and to:

 

Payroll Tax Filing Services, Inc.

▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇

▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇

Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇

Email: ▇▇▇▇▇▇▇▇▇▇@▇▇▇.▇▇▇

 

 

with a copy (which shall not constitute notice) to:

 

Cozen ▇'▇▇▇▇▇▇

▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇

▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇

Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, III

Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇

 

If to the Representative, to:

 

C. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇

▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇

▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇

 

with a copy (which shall not constitute notice) to:

 

Cozen ▇'▇▇▇▇▇▇

▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇

▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇

Attention : ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, III

Facsimile : (▇▇▇) ▇▇▇-▇▇▇▇

 

Section 10.2         Exhibits and Schedules.  All exhibits and schedules attached hereto are hereby incorporated in and made a part of this Agreement as if set forth in full herein. Any matter disclosed in any section of the Disclosure Schedule shall be deemed to be disclosed in all other sections of the Disclosure Schedule where it is reasonably apparent on its face that the matters so disclosed are applicable to such other sections. Disclosure of any item in a section of the Disclosure Schedule shall not be deemed an admission that such item represents a material item, fact, exception of fact, event or circumstance or that occurrence or non-occurrence of any change or effect related to such item would result in a Business Material Adverse Effect or a material adverse effect on the ability of any party to consummate any of the transactions contemplated hereby.

 

Section 10.3         Time of the Essence; Computation of Time.  Time is of the essence for each and every provision of this Agreement. Whenever the last day for the exercise of any privilege or the discharge or any duty hereunder shall fall upon a day that is not a Business Day, the party having such privilege or duty may exercise such privilege or discharge such duty on the next succeeding day which is a Business Day.

 

Section 10.4         Expenses.  Regardless of whether the transactions provided for in this Agreement are consummated, except as otherwise provided herein, each party hereto shall pay its own expenses incident to this Agreement and the transactions contemplated herein; provided, however, that, if the Closing is consummated, all accountants fees and expenses incurred by any party hereto in connection with the preparation, filing, amendment and distribution of the Proxy Statement shall be paid by Parent. Any transfer, documentary, sales, use, stamp, registration and other such Taxes, and all conveyance fees, recording charges and other fees and charges payable to any Governmental Authority (including any penalties and interest) incurred in connection with consummation of the transactions contemplated by this Agreement shall be paid, or caused to be paid, by the Surviving Entity and shall not be deducted in calculating the Estimated Net Cash Amount or Estimated Net Working Capital. All necessary Tax Returns and other documentation with respect to all such Transfer Taxes, fees and charges shall be filed by the party required by Law to file them.

 

 

Section 10.5         Governing Law.  This Agreement and the rights and duties of the parties hereto hereunder will be governed by and construed in accordance with the Laws of the Delaware, without giving effect to its principles or rules of conflict of laws to the extent such principles or rules are not mandatorily applicable by statute and would require or permit the application of the Laws of another jurisdiction. The parties irrevocably and unconditionally submit to the exclusive jurisdiction of the United States District Court for the Eastern District of Pennsylvania or, if such court does not have jurisdiction, the Pennsylvania state courts located in Philadelphia, Pennsylvania, in any action arising out of or relating to this Agreement. The parties irrevocably agree that all claims in respect of the interpretation and enforcement of the provisions of this Agreement, and in respect of the transactions contemplated hereby, or with respect to any such action or proceeding, will be heard and determined in such a Pennsylvania federal or state court, and that such jurisdiction of such courts with respect thereto will be exclusive, except solely to the extent that all such courts lawfully decline to exercise such jurisdiction. Each party hereby waives, and agrees not to assert, as a defense in any action, suit or proceeding for the interpretation or enforcement hereof or of any such document or in respect of any such transaction, that it is not subject to such jurisdiction. Each party hereby waives, and agrees not to assert, to the maximum extent permitted by Law, as a defense in any action, suit or proceeding for the interpretation or enforcement hereof or of any such document or in respect of any such transaction, that such action, suit or proceeding may not be brought or is not maintainable in such courts or that the venue thereof may not be appropriate or that this Agreement or any such document may not be enforced in or by such courts. The parties hereby consent to and grant any such court jurisdiction over the person of such parties and over the subject matter of any such dispute and agree that mailing of process or other papers in connection with any such action, suit or proceeding in the manner provided in Section 10.1 or in such other manner as may be permitted by Law, will be valid and sufficient service thereof.

 

Section 10.6         Assignment; Successors and Assigns; No Third Party Rights.  Except as otherwise provided herein, this Agreement may not, without the prior written consent of the other parties hereto, be assigned by operation of Law or otherwise, and any attempted assignment shall be null and void. Subject to the foregoing, this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, successors, permitted assigns and legal representatives. This Agreement shall be for the sole benefit of the parties to this Agreement and their respective heirs, successors, permitted assigns and legal representatives and is not intended, nor shall be construed, to give any Person, other than the Parent Indemnified Parties, the Seller Indemnified Parties, the parties hereto and their respective heirs, successors, assigns and legal representatives, any legal or equitable right, remedy or claim hereunder.

 

Section 10.7         Counterparts.  This Agreement may be executed in two or more counterparts for the convenience of the parties hereto, each of which shall be deemed an original and all of which together will constitute one and the same instrument. Delivery of an executed counterpart of a signature page to this Agreement by facsimile or portable document format shall be effective as delivery of a mutually executed counterpart to this Agreement.

 

 

Section 10.8         Titles and Headings.  The titles, captions and table of contents in this Agreement are for reference purposes only, and shall not in any way define, limit, extend or describe the scope of this Agreement or otherwise affect the meaning or interpretation of this Agreement.

 

Section 10.9         Entire Agreement.  Except as otherwise contemplated herein, this Agreement and the Ancillary Agreements constitute the entire agreement and supersedes all prior agreements and understandings, both written and oral, among the parties, with respect to the subject matter hereof (other than the Confidentiality Agreement). The parties acknowledge that each of the parties hereto participated in the drafting of this Agreement and the Ancillary Agreements and agree that any rule of Law or any legal decision that may or would require interpretation of any alleged ambiguities in this Agreement or the Ancillary Agreements against the party that drafted it has no application and is expressly waived. In the event of a conflict or inconsistency between the terms of this Agreement (including the representations, warranties, covenants and indemnification provisions hereof) and the terms of any other documents (excluding amendments effectuated under Section 10.14) delivered or required to be delivered in connection with the consummation of the transactions contemplated by this Agreement, the parties acknowledge and agree that the terms of this Agreement (as so amended) shall supersede such conflicting or inconsistent terms in such other documents and the terms of this Agreement shall define the rights and obligations of the parties and their respective officers, directors, employees, stockholders and Affiliates with respect to the subject matter of such conflict or inconsistency.

 

Section 10.10         Severability.  The invalidity of any portion hereof shall not affect the validity, force or effect of the remaining portions hereof. If it is ever held that any restriction hereunder is too broad to permit enforcement of such restriction to its fullest extent, such restriction shall be enforced to the maximum extent permitted by Law.

 

Section 10.11         Specific Performance.  The parties agree that irreparable damage would occur if any provision of this Agreement were not performed in accordance with the terms hereof and that the parties will be entitled to an injunction or injunctions to prevent breaches of this Agreement or to enforce specifically the performance of the terms and provisions hereof in any court specified in Section 10.5, in addition to any other remedy to which they are entitled at Law or in equity.

 

Section 10.12         Waiver of Jury Trial.  Each of the parties hereto waives any right it may have to trial by jury in respect of any litigation based on, arising out of, under or in connection with this Agreement or any course of conduct, course of dealing, verbal or written statement or action of any party hereto.

 

 

Section 10.13         Failure or Indulgence not Waiver.  No failure or delay on the part of any party hereto in the exercise of any right hereunder shall impair such right or be construed to be waiver of, or acquiescence in, any breach of any representation, warranty or agreement herein, nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or any other right. Except as provided in Section 9.6, All rights and remedies existing under this Agreement are cumulative to, and not exclusive of, any rights or remedies otherwise available.

 

Section 10.14         Amendments.  This Agreement may be amended, at any time prior to the Effective Time, by action taken by Parent and Sellers, and after the Closing by the Representative, Parent and the Surviving Entity. This Agreement (including the provisions of this Section 10.14) may not be amended or modified except by an instrument in writing signed on behalf of all of the parties required pursuant to the preceding sentence.

 

[SIGNATURE PAGES FOLLOW]

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Merger Agreement to be duly executed as of the day and year first above written.

 

	UNIVERSAL BUSINESS PAYMENT SOLUTIONS ACQUISITION CORPORATION
	By:
		Name:
		Title:
	ADC MERGER SUB, INC.
	By:
		Name:
		Title:

  

 

PAYROLL TAX FILING SERVICES, INC.			AD COMPUTER CORPORATION
By:			By:
	Name:			Name:
	Title:			Title:
			STOCKHOLDERS:
			▇▇▇▇▇ AND C. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, AS JOINT TENANTS
			▇▇▇▇▇ ▇▇▇▇▇▇
			C. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
			▇▇▇▇ ▇▇▇▇▇▇
			▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
			▇ ▇ ▇▇▇▇▇▇▇▇▇▇ TRUST
			▇▇▇▇ ▇. ▇▇▇▇▇▇▇
			REPRESENTATIVE:
			C. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇

 

[Signature Page to ADC Merger Agreement]

 

 

Execution Version

 

ANNEX A

 

Name of Stockholder		Percentage of Merger Consideration
C. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Joint Tenants			40.448	%
C. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇			12.941	%
▇▇▇▇▇ ▇. ▇▇▇▇▇▇			12.943	%
▇▇▇▇ ▇▇▇▇▇▇			9.334	%
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇			6.782	%
▇.▇. ▇▇▇▇▇▇▇▇▇▇ Trust			2.552	%
▇▇▇▇ ▇. ▇▇▇▇▇▇▇			15.000	%
Total			100.000	%