As filed with the Securities and Exchange Commission on June 24, 2019
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
AssetMark Financial Holdings, Inc.
(Exact name of registrant as specified in its charter)
Delaware | 7389 | 30-0774039 | ||
(State or other jurisdiction of
incorporation or organization) |
(Primary Standard Industrial
Classification Code Number) |
(I.R.S. Employer
Identification Number) |
1655 Grant Street, 10 th Floor
Concord, California, 94520
(925) 521-2200
(Address, including zip code, and telephone number, including area code, of registrants principal executive offices)
Charles Goldman
Chief Executive Officer
AssetMark Financial Holdings, Inc.
1655 Grant Street, 10 th Floor
Concord, California 94520
(925) 521-2200
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies to:
Alan F. Denenberg
Davis Polk & Wardwell LLP 1600 El Camino Real Menlo Park, California 94025 (650) 752-2000 |
Ted Angus
AssetMark Financial Holdings, Inc. 1655 Grant Street, 10 th Floor Concord, California 94520 (925) 521-2200 |
Eric C. Jensen
John T. McKenna Mark Medearis Cooley LLP 3175 Hanover Street Palo Alto, California 94304 (650) 843-5000 |
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this registration statement.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ☐
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of large accelerated filer, accelerated filer, smaller reporting company, and emerging growth company in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ | Accelerated filer ☐ | Non-accelerated filer ☒ | Smaller reporting company ☐ | |||
Emerging growth company ☒ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐
CALCULATION OF REGISTRATION FEE
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Title of each class of
securities to be registered |
Proposed
maximum aggregate offering price (1)(2) |
Amount of
registration fee |
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Common Stock, $0.001 par value per share |
$100,000,000 | $12,120 | ||
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(1) | Estimated solely for the purpose of computing the amount of the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended. Includes aggregate offering price of additional shares that the underwriters have the option to purchase. |
(2) | Includes the offering price of any additional shares that the underwriters have the option to purchase. |
The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
Subject to completion, dated June 24, 2019
Preliminary prospectus
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shares |
Common stock
This is an initial public offering of shares of common stock of AssetMark Financial Holdings, Inc. We are offering shares of our common stock. The selling stockholder identified in this prospectus is offering an additional shares of our common stock. We will not receive any proceeds from the sale of common stock by the selling stockholder. We anticipate that the initial public offering price will be between $ and $ per share.
Prior to this offering, there has been no public market for our common stock. We have applied to list our common stock on the New York Stock Exchange (the NYSE) under the symbol AMK.
We are an emerging growth company as defined in the Jumpstart Our Business Startups Act and will be subject to reduced public-company reporting requirements. We will be a controlled company within the meaning of the corporate governance rules of the NYSE. See the section titled ManagementControlled company.
Per share | Total | |||||||
Initial public offering price |
$ | $ | ||||||
Underwriting discounts and commissions (1) |
$ | $ | ||||||
Proceeds to AssetMark Financial Holdings, Inc. before expenses |
$ | $ | ||||||
Proceeds to the selling stockholder before expenses |
$ | $ |
(1) |
See the section titled Underwriting (conflict of interest) for a description of the compensation payable to the underwriters. |
The selling stockholder has granted the underwriters an option, for a period of 30 days from the date of this prospectus, to purchase up to additional shares of common stock from the selling stockholder at the initial public offering price less the underwriting discount.
Investing in our common stock involves a high degree of risk. See the section titled Risk factors beginning on page 24 of this prospectus.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.
The underwriters expect to deliver the shares to investors on or about , 2019.
Joint Book-Running Managers:
J.P. Morgan | Goldman Sachs & Co. LLC | |
Credit Suisse |
Huatai Securities (USA) |
Co-Managers:
BMO Capital Markets | Raymond James | William Blair |
Prospectus dated , 2019
OUR MISSIONDedicated to making a difference in the lives of advisers and their clients FOCUSED ON A CONSISTENT STRATEGY Fully Integrated Compelling Technology Personalized and Scalable Service Curated Investment Platform $50B Platform assets 87% Platform growth attributed to net flows2 99% Of total revenue is recurring in nature 17% Total revenue CAGR3 10.3% Net income margin4 36.3% Adjusted EBITDA margin5 1 As of March 31, 2019.2 From January 1, 2016 to December 31, 2018. See Managements discussion and analysis of financial condition and results of operationsKey operating metrics for an explanation of how we measure net flows.3 From the year ended December 31, 2014 to the year ended December 31, 2018.4 For the year ended December 31, 2018.5 For the year ended December 31, 2018. See Prospectus summarySummary consolidated financial and other data for the definition of adjusted EBITDA margin and a reconciliation of net income margin to adjusted EBITDA margin.
Track record of growth and innovation Platform Assets GPS Launched Guided Portfolios Solutions, diversified, all-in-one portfolios Launched Business Consulting services $20B Platform Assets Launched proprietary investment framework, Investing Evolved Acquired Clarks TAMP assets Acquired Aris Introduced Multi Strategy Accounts Sales team transformation Current management team in place Launched state of the art portfolio analytics tool, PortfolioEngine $30B Platform Assets Launched Insured Cash Deposit Program Launched Ensemble Team Launched Platinum Service Team Launched Smarter Account Setup Platform Assets Platform Assets Launched High Yield Cash Launched goals based digital advice solution, WealthBuilder Launched modern client engagement experience, InvestorPortal Launched end-to-end retirement solutions, Guided Income Solutions Acquired GFPC For internal use only. AssetMark April 2019
Our community1 7,600+ Advisers 137,000+ Investor Households 600+ Employees Supported by strong values Heart Integrity Excellence Respect 1 As of March 31, 2019 And conducted in a culture of compliance
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F-1 |
In this prospectus, AssetMark, AssetMark Financial Holdings, Inc., the Company, we, us and our refer to AssetMark Financial Holdings, Inc. and its consolidated subsidiaries.
Neither we, the selling stockholder nor the underwriters have authorized anyone to provide you with any information other than that, or to make any representations other than those, contained in this prospectus or in any free writing prospectuses we have prepared. Neither we, the selling stockholder nor the underwriters take any responsibility for, and cannot provide any assurance as to the reliability of, any other information that others may provide you. We, the selling stockholder and the underwriters are offering to sell, and seeking offers to buy, shares of common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus or in
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any applicable free writing prospectus is current only as of the date of this prospectus or of any such free writing prospectus, as applicable, regardless of its time of delivery or of the time of any sale of the shares of our common stock. Our results of operations, financial condition or business may have changed since that date.
Neither we, the selling stockholder nor any of the underwriters have taken any action to permit a public offering of our common stock or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons who come into possession of this prospectus in a jurisdiction outside the United States are required to inform themselves about and to observe any restrictions relating to this offering and the distribution of this prospectus applicable to that jurisdiction.
Through and including , 2019 (the 25th day after the date of this prospectus), all dealers that buy, sell or trade our common stock, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.
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This summary highlights information contained elsewhere in this prospectus. This summary may not contain all of the information that you should consider before deciding to invest in our common stock. You should read this entire prospectus carefully, including the Risk factors section and the consolidated financial statements and the notes to those statements.
AssetMark Financial Holdings, Inc.
Overview
AssetMark is a leading provider of extensive wealth management and technology solutions that power independent financial advisers and their clients. Our platform enables advisers to outsource high-cost and specialty services that would otherwise require significant investments of time and moneyhelping to level the playing field for independent financial advisers of all sizes. We provide an end-to-end experience, spanning nearly all elements of an advisers engagement with his or her clientfrom initial conversations to ongoing financial planning discussions, including performance reporting and billing. In addition, our platform provides tools and capabilities for advisers to better manage their day-to-day business activities, giving them more time for meaningful conversations with investors.
We believe that independent financial advisers who have a deep understanding of their communities and put the needs of investors first provide the best path for investors to achieve their long-term financial goals. We empower these adviser-entrepreneurs to start, run and grow independent advisory businesses.
The compelling value of our tools for advisers and their clients has facilitated our rapid growth. From December 31, 2014 to March 31, 2019, our platform assets (1) grew from $25 billion to $50 billion, representing a compounded annual growth rate of 17%, and more recently grew 45% from March 31, 2017 to March 31, 2019. Further, our investors value the services they receive from advisers as evidenced by the growth in our net flows (2) from $2.4 billion in 2016 to $5.9 billion in 2018, representing 8% and 14% of beginning platform assets, respectively. As of March 31, 2019, our platform served approximately 137,000 investor Households (as defined in the section titled Managements discussion and analysis of financial condition and results of operationsKey operating metrics) through our approximately 7,600 adviser relationships.
Our platform provides advisers with an integrated suite of products and services that facilitates growth, streamlines workflows and provides scale to advisers businesses so they can better serve their clients, who are large and small investors. Highlights of our platform include:
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Fully integrated technology platform : Our integrated platform is built for advisers, providing advisers access to a broad range of highly automated processes, including new account opening, portfolio construction, streamlined financial planning, customer billing, investor reporting, progress |
(1) | We define platform assets as all assets on the AssetMark platform whether these are assets for which we provide advisory services, referred to as assets under management, or non-advisory assets under administration, assets held in cash accounts or assets otherwise not managed. |
(2) | We define net flows for a period as production (the amount of new assets that are added to existing and new client accounts in the period) minus redemptions (the amount of assets that are terminated or withdrawn from client accounts in the period), excluding the impact of changes in the market value of investments held in client accounts and fees charged to advisers and end-investors. |
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to goal analysis and client activity tracking. Our dual focus on technology utility and design has resulted in a platform that is accessible, easy-to-use, intuitive and expansive. |
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Personalized and scalable adviser service : We surround our advisers with highly experienced consulting and service support. We provide a full spectrum of services for many aspects of the advisers firm. These services include high-value day-to-day business support from field professionals, operations and service support teams and specialty teams including business management consultants, investment specialists and retirement consultants. Our offering is guided by extensive intellectual capital and well-established business performance benchmarking tools and responsive back- and middle-office outsourcing support from highly tenured service and operations professionals. We aim for every adviser to feel that their AssetMark service and consulting team is an integral part of their business. |
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Curated investment platform : We provide independent advisers with a curated set of over 20 thoroughly vetted specialty and leading third-party asset managers, in addition to our two proprietary investment providers. Our due diligence team narrows the universe of potential investment solutions to a select group of time-tested and emerging investment choices. In effect, we equip each adviser with a team of skilled investment professionals that act as a virtual extension of their investment staff, who deliver our solutions through an array of technology-enabled tools that assist in the creation and monitoring of goal-based portfolios. Further, the flexibility and breadth of our platform allows us to offer custom portfolios designed to meet the unique needs of investors, specifically mass-affluent and high-net-worth investors. |
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Our offerings distinctive combination of a compelling technology platform, extensive and scalable value-added services and curated investment solutions has been a key driver of our market share expansion from 8% to 10% from December 31, 2014 to December 31, 2018. We define our market share based on assets managed by third-party vendors as calculated by Cerulli Associates (Cerulli), excluding non-advisory assets managed by Schwabs Marketplace and Fidelitys Separate Account Network, and, for SEI Investments, including only assets reported in Advisor Network, their third-party asset management segment. Additionally, our platform can act as a critical accelerant for the success of our advisers businesses, which in turn can result in an increase in assets on our platform; the success of our advisers is reflected in our record $5.9 billion in net flows in 2018. Further, given that our platform and services are tightly integrated into our advisers businesses, we believe that we have engendered and will continue to engender deep loyalty from our advisers.
Our revenue model is almost entirely composed of fees that are recurring in nature, which provides a high level of visibility into our near-term financial performance. The two main components of our
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revenue are asset-based revenue and spread-based revenue. We generate asset-based revenue from fees billed to investors on a bundled basis in advance of each quarter. The quarterly nature of our asset-based revenue provides significant visibility into near-term revenue and helps minimize unexpected revenue fluctuations stemming from market volatility. Our spread-based revenue is driven by interest rates on the cash assets held by investors at our proprietary trust company. In the year ended December 31, 2018, we generated $338.0 million in asset-based revenue and $20.4 million in spread-based revenue. In the year ended December 31, 2018, we generated $221.3 million in asset-based net revenue and $18.7 million in spread-based net revenue.
In the year ended December 31, 2018, we generated total revenue of $363.6 million, net revenue of $245.2 million, net income of $37.4 million, adjusted EBITDA of $88.9 million and adjusted net income of $60.8 million. We generated total revenue of $92.3 million, net revenue of $63.7 million, net income of $2.8 million, adjusted EBITDA of $22.7 million and adjusted net income of $12.7 million in the three months ended March 31, 2019 compared with $84.5 million, $57.4 million, $9.8 million, $21.0 million and $15.1 million for the three months ended March 31, 2018. From January of 2015, the first full year in which the members of our current senior management team were together at our company, to December 31, 2018, our total revenue and net income have grown at compounded annual growth rates of 17% and 55%, respectively.
We believe that net revenue is a useful measure of our growth and business performance due to the large amount of payments that we collect on behalf of third parties providing services on our platform that have no impact on our profitability. See the section titled Summary consolidated financial and other data for the definitions of asset-based net revenue, spread-based net revenue, net revenue, adjusted EBITDA and adjusted net income and reconciliations of asset-based revenue to asset-based net revenue, spread-based revenue to spread-based net revenue, total revenue to net revenue, net income to adjusted EBITDA and net income to adjusted net income.
Market opportunity
We serve fee-based, independent advisers who provide wealth management advice to U.S. investors. The wealth management market is large and has a long history of rapid growth fueled by several secular trends. According to Cerulli, in aggregate across the United States, 311,305 advisers managed $20.3 trillion in assets as of December 31, 2017, and total industry assets have grown at a compounded annual growth rate of 9% over the five years ended December 31, 2017. Cerulli expects these assets to grow to $25.5 trillion by 2022. Our current offering and growth plans are built to capitalize on favorable industry trends, which we expect will continue to support our growth.
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Total U.S. investible wealth is massive and growing, accelerated by a shifting retirement segment : According to Cerulli, U.S. households had $96.6 trillion in net worth as of December 31, 2017, which has grown at a compounded annual growth rate of 8.3% over the five years ended December 31, 2017. As of December 31, 2017, advisers managed $20.3 trillion (approximately 21%) of this wealth, indicating ample runway for future growth of the financial advisory industry. As the U.S. population has aged and Baby Boomers have moved into retirement, employer-sponsored retirement plan assets have shifted into individual retirement accounts (IRAs), fueling growth of the retail asset segment. Cerulli estimates that this movement of assets will result in approximately $4.0 trillion of new IRA assets from 2016 to 2022. |
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Investor demand for financial advisers is expanding : As investors have aged and their financial goals have become more complex, the demand for financial advice has expanded. According to Cerulli, demand for financial advice has increased from 38% to 44% from 2013 to 2017, measured by the percentage of investor households surveyed receiving assistance or direction from financial advisers relative to investor households self-managing their financial affairs. |
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Advisers are transitioning to an independent model, and we expect this trend to continue : The U.S. wealth management industry consists primarily of two types of channels, independent and traditional. We consider the independent channel to comprise registered investment advisers (RIAs), hybrid and independent broker-dealers and insurance broker-dealer advisers, and the traditional channel to comprise national and regional broker-dealers, bank broker-dealers and wirehouse advisers. According to Cerulli data and internal estimates of expected growth of the wealth management industry, from 2012 to 2017, independent channels have grown faster than traditional channels in terms of market share measured by assets, expanding by nearly 11% annually at the expense of traditional channels. This trend is expected to continue, with independent assets forecasted to grow from $8.4 trillion in 2017 to $12.1 trillion in 2022, from 42% to 48% of total adviser-managed assets over the same period. |
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Shift from commissions to fee-based models : According to PriceMetrix, in 2018, advisers received over 60% of their total revenue from fees, which represented a record level relative to commissions. The long-term adviser trend towards a fiduciary standard of advice, catalyzed in part by the 2016 Department of Labor (DOL) rule (later vacated) that expanded the definition of fiduciary investment advice to include all financial professionals providing retirement advice, has helped drive this shift to a fee-based revenue model. |
Notes: Based on data from The State of Retail Wealth Management, PriceMetrix, 2016, 2017 and 2018.
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Advisers are increasingly reliant on technology to remain price competitive and achieve scale while serving evolving client needs : Individual investors are increasingly turning to independent financial advisers for their wealth management and investment needs. From 2013 to 2016, the average number of investors served by an RIA adviser increased by 20% according to Fidelity. |
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Advisers are increasingly relying on technology to meet the needs of an expanding client base while continuing to scale their advisory businesses, as indicated by a 24% increase in the average number of software solutions used by advisers from 2013 to 2017, according to the 2017 InvestmentNews Adviser Technology Study. Investor preferences for service models delivered via mobile applications and online portals are also increasing advisers focus on the quality of their technology. 61% of investors surveyed recently stated that they prefer an advice model that combines human and digital elements to one that is either purely digital or limited to direct interaction with an adviser, according to the Fidelity 2017 Digital Advisor Adoption Study Update. |
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Advisers are rapidly expanding their use of model portfolios : Advisers are increasingly choosing to outsource key components of the asset management aspect of their role as financial advisers, including the choice of investment manager. As such, the use of model portfolios (which we define as mutual fund advisory, ETF-advisory, unified managed account and separate account assets) among financial advisers grew at a compounded annual growth rate of 15% from 2012 to 2017, based on data from Cerulli and internal estimates. |
Our offering is built around technology, investment solutions and expert support, positioning us to benefit from these trends. Combined with our scalable, fee-based platform and services that help advisers put investors needs first, we believe that these favorable industry trends will give us the opportunity to continue to gain market share. Our gains in market share since 2014 have been due largely to organic growth, an area on which we plan to continue to focus.
Our offering and business model
AssetMarks purpose
Our over 600 employees come to work focused on our mission: to make a difference in the lives of our advisers and the investors they serve. Our mission is guided by a singular focus on successful outcomes for our investors. We strive to execute our mission through our stated corporate values of heart, integrity, excellence and respect, in everything that we do.
The AssetMark offering to advisers and investors
We provide independent financial advisers with an array of tools and services designed to streamline their workflow, help them develop and expand their businesses and provide goal-oriented investment solutions. We believe that the quality of our offering, coupled with our deep relationships with our advisers, has generated significant adviser satisfaction, as measured by our exceptional Net Promoter Score (NPS) of 65 as of June 30, 2018. Our offering is defined by solutions in three focus areas:
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Fully integrated technology platform : Independent financial advisers and their teams are faced with a multitude of marketing, administrative and business management tasks. We offer a compelling technology suite that fully integrates leading third-party technology solutions with our core proprietary technology and helps advisers perform these tasks. Our solution helps advisers streamline their operations while providing a superior experience for their staff and investors. The combined capabilities of our technology platform support advisers throughout the investor life cycle, from initial prospecting and onboarding through ongoing service and reporting, and replace a complex array of technologies with a single, streamlined solution. With less time spent navigating multiple systems and technologies, advisers are able to focus on enhancing productivity. As |
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advisers come to rely on our integrated platform, it becomes integral to their daily practices. This reliance, in conjunction with high adviser satisfaction due to our platforms ability to optimize adviser workflow, has contributed to our strong growth in assets and net flows. |
We are dedicated to innovation and strive to continually improve our offering through the development of new tools and services. From January 1, 2015 to March 31, 2019, we invested $153 million in technology development and our dedicated technology team, and we have a proven track record of delivering innovative solutions that deepen our advisers offerings to their investors while also enhancing advisers scale. Recent innovations include a new portfolio construction and analysis tool that assists advisers in creating and monitoring investor portfolios, a streamlined account opening solution that reduces the time to onboard new accounts on our platform, a goals-based investor portal that serves as a hub for communications between advisers and their clients and a fully automated digital advice tool that connects our advisers with their clients.
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Personalized and scalable adviser service : Providing advisers access to high-quality service is a critical component of our value proposition. We develop deep, multi-level relationships with advisers firms, helping to ensure that, at all levels, advisers and their teams are connected with AssetMark. We tailor our services to the size of the adviser, allowing us to provide high service levels to a wide-range of adviser business sizes while also maintaining our operating leverage. |
The Regional Consultant is the centerpiece of an advisers relationship with AssetMark. Our highly experienced Regional Consultants ensure that advisers can draw from a wide array of resources and institutional knowledge as they build and grow their businesses. These professionals are the single point of contact for the adviser and bring in expertise to help the adviser grow and compete. As of March 31, 2019, our Regional Consultants in the field and phone-based consultants served approximately 7,600 advisers. Depending on the advisers business needs, our consultants introduce advisers to investment experts, business development professionals, retirement consultants and business consultants who can help the adviser reach his or her goals. For example, investment experts provide advisers with insights into portfolio construction and how specific
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investments help investors reach their goals. Our team of business consultants helps advisers build more efficient and scalable businesses. This relationship model provides each adviser with a trusted colleague whom the adviser can contact with questions and who can provide access to an array of specialty resources. The value our clients place on our sales model is reflected in our high Sales NPS of 63 as of June 30, 2018.
The Relationship Manager is at the heart of the back-office professionals relationship with us. Our Relationship Managers work to ensure operational activity is accurately executed and seek to promptly resolve any issues investors may encounter. We feature high-touch, accurate and rapid client servicing from dedicated teams who strive to enhance the responsiveness of the advisers back office. In addition, our Relationship Managers provide productivity and client-service best practices, gained through deep industry experience, to the advisers back office teams. Like our Regional Consultants, our Relationship Managers are go-to resources for our advisers and their offices. Depending on the size of the office, we offer a range of service models. Our largest advisers receive support from a dedicated Relationship Manager, while smaller offices are served by a centralized team of professionals. Our service model is highly valued by advisers of all sizes, as demonstrated by our high Service NPS of 66 as of June 30, 2018. Further, approximately 81% of those advisers who were identified as promoters of our services in the NPS surveys from June 30, 2018 selected service as a key reason for their high satisfaction with us.
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Curated investment solutions : Financial planning is the core competency and value proposition for most wealth managers. The various investment management functions that compose this role, such as formulating capital market assumptions, conducting manager due diligence, constructing portfolios and monitoring markets, managers and portfolios, can take time away from advisers ability to help their investors stay on track to reach their goals. As a result, many advisers outsource these activities to independent platforms like AssetMark. |
We perform this challenging work for the adviser through our dedicated team of investment professionals who assess markets, conduct due diligence on asset managers and construct model portfolios for advisers to offer to their clients. We deliver these capabilities through a portfolio construction methodology that can be broadly described in three categories:
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Core markets Strategies that provide exposure to growth in domestic and global economies. |
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Tactical strategies Supplemental equity strategies that can augment core performance or provide risk mitigation in periods of market decline. |
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Diversifying strategies Equity alternative or bond / bond alternative strategies that offer lower volatility or lower correlation to help smooth portfolio performance or allow for greater equity exposure. |
Our portfolios feature a wide range of investment vehicles including ETFs, mutual funds, equities, individual bonds and options strategies. In addition, we provide turnkey solutions for advisers who would prefer to fully outsource a selection of investments, and portfolio components and construction tools for advisers who would prefer to build or customize portfolios themselves using our curated list of strategists.
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The AssetMark business model
To achieve our mission, we have built a business model that allows us to reinvest in our advisers and their investors success. Our business model has delivered a track record of attractive revenue growth and EBITDA margin expansion, both driven by strong fundamentals including:
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Strong asset growth : We have experienced (1) platform asset growth from existing clients of approximately 32% from December 31, 2014 to March 31, 2019, (2) $15.4 billion in assets attracted from new advisers to the platform over the same period and (3) $3.5 billion in assets added to our platform through acquisitions of competitors over the same period, measured at the date of acquisition. Subsequently, in April 2019, we closed our acquisition of Global Financial Private Capital for a cash purchase price of $35.9 million, which added another $3.8 billion in platform assets. |
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Recurring and resilient revenue model : In the year ended December 31, 2018, 99% of our total revenue was recurring in nature (based on revenue generated from assets that are under contract and not dependent on trading activity) and derived from either asset-based revenue or spread-based revenue from investor cash held at our proprietary custodian. In the year ended December 31, 2018, 93% of our total revenue was derived from asset-based revenue and 6% of our total revenue was derived from spread-based revenue. Since asset-based revenue is influenced by sector, asset class and market returns, while spread-based revenue is influenced by Federal Reserve movements and the amount of cash investors hold, our two sources of revenue are relatively uncorrelated, which has helped us establish a sustainable business model through various market fluctuations. |
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Attractive margin profile driven by a mix of proprietary and third-party solutions : Our open-architecture technology, investment solutions and custodial platform offer choice and superior capabilities for advisers. In addition, since we offer a balance of third-party and proprietary solutions, we capture incremental economics, which has led to enhanced margins. By offering proprietary solutions alongside third-party technology, asset management and custody solutions, we foster competition across our offering. This competition drives participants (including us) to improve their offerings or risk losing favor with advisers. Each solution competes on its own value proposition and merits, and we do not promote or advantage our proprietary offerings above those of third parties. Our trust company held approximately 72% of our platform assets, and our proprietary strategists served 20% of our platform assets as of March 31, 2019, evidencing the strength of our proprietary offerings. |
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Consistently strong and growing net flows : Because our platform offers an array of solutions to advisers and our technology is deeply integrated into advisers businesses, our net flows grew from $1.5 billion in 2014 to $5.9 billion in 2018, representing 7% and 14% of beginning platform assets, respectively. |
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Significant operating leverage : Our purpose-built platform and upfront investments in our business have positioned us to benefit from upside growth and continued scale with meaningful operating leverage. The power of the operating leverage in our model is apparent both from our declining cost per Household and our ability to expand our relationships with advisers over time. We have decreased our cost per Household by 6.6% from December 31, 2014 to December 31, 2018, while delivering enhanced platform capabilities and solutions to advisers. Our net income margin was |
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33.5% for the year ended December 31, 2017 and 10.3% for the year ended December 31, 2018. Our net income for the year ended December 31, 2017 was impacted by a non-recurring $90.1 million benefit related to the Tax Cuts and Jobs Act of 2017. Adjusted EBITDA margin (defined as adjusted EBITDA divided by net revenue) expanded from 30.0% for the year ended December 31, 2017 to 36.3% for the year ended December 31, 2018. |
Our strengths
For more than 20 years, we have focused on providing solutions that enhance and simplify the lives of our advisers and the investors they serve. We believe that this approach distinguishes us from many of our competitors. The following strengths underpin our competitive advantage:
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Our mission-driven, client-focused culture : We believe that our exceptional client-centric culture has driven our historical performance. The AssetMark team is dedicated to its mission of making a difference in the lives of advisers and investors through a culture that rests on our core pillars of heart, integrity, excellence and respect. We are also committed to helping advisers and the communities they serve. Through our Summer of Service and Community Inspiration Awards we seek to ensure that our firms and our advisers communities benefit from our charitable contributions. We believe that our focus on doing the right thing while also running a great business not only results in higher adviser loyalty and referrals, but also increases our employee tenure. |
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A deep understanding of fee-based, independent advisers : Our frequent, value-added interactions with our diverse group of advisers help us tailor offerings to meet their needs, at scale and in the context of their business opportunities and challenges. We also benefit from tracking and evaluating advisers extensive activity in our ecosystem. This allows us to create responsive service models, operational processes and solutions that help advisers reduce the time associated with administrative tasks. In addition, members of our community of advisers have access to each others best practices as well as data about their specific business activity, which helps our advisers grow their businesses and drives our extensive best practices library. |
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Proven ability to execute superior outsource solutions facilitated by a leading technology offering : We create outsource solutions that transform advisers businesses. We believe the transformation that we enable for the advisers on our platform is the result of our deeply integrated service model and robust, user-friendly technology, which together help advisers improve responsiveness to investors. Collectively, our outsource offerings optimize advisers time and, as a result, help improve investor outcomes. |
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We are a scale provider : We are an established leader as an outsource service provider for independent, fee-based financial advisers. Our scale and access enable us to establish favorable partnerships with technology and asset management institutions and provide attractive pricing for our advisers clients. In addition, our feature-rich technology solution scales to serve a broad-range of business sizes, from solo practices to ensemble firms. The scope and scale of our offering has made us an essential part of our advisers businesses, in turn making us the third largest outsource provider of the components of a managed account platform (known in the industry as a Turnkey Asset Management Program, or TAMP) in terms of platform assets in 2017, according to WealthAdvisors 2018 Americas Best TAMPs report. As of December 31, 2018, our market share among U.S. TAMPs was 10%. |
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We are a disciplined acquirer : Growth through acquisition of small, subscale, outsource providers is a core competency of our business. Our value creation through acquisition is generated by purchase price discipline and our ability to grow relationships formed through these acquisitions. In 2014 and 2015, respectively, we acquired two firms that collectively added $3.5 billion in assets to our platform at the time of acquisition. On average, three years post-acquisition, these acquired assets had grown by 17% compounded annually. Subsequently, in April 2019, we closed our acquisition of Global Financial Private Capital for a cash purchase price of $35.9 million, which added another $3.8 billion in platform assets. |
Our growth strategy
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Increase the adviser base : Through our marketing efforts and the outreach of our more than 100-person field force, we expect to continue building on our existing relationships with advisers and growing business from new relationships. |
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Expand share of wallet from existing adviser clients : According to our internal share of wallet study, as of March 31, 2019, we had approximately 33% of the total assets and 61% of the total advisory assets of our advisers with at least $5 million in positive net flows on our platform over the life of our relationship with them. We plan to work with existing advisers to add investment solutions to our platform that they otherwise obtain elsewhere. This work aims to help advisers further their operational efficiencies and improve their investor experience by shifting an increasing portion of their business to AssetMark. |
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Help advisers grow their businesses : Our turnkey, holistic platform and adviser engagement model are designed to help advisers grow and build sustainable businesses. We plan to continue to help advisers grow through our deep business consulting engagements and comprehensive platform support. |
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Expand our services to new segments : We are focused on introducing new products and enhancing services and capabilities in areas including cash management, business consulting and trading to further expand our reach into the RIA market, retirement services and the high-net-worth segment. We believe that these solutions will enhance our offering to existing advisers while also deepening and extending our relationships with high-growth segments of advisers. |
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Continue to pursue strategic transactions : We expect to continue to selectively pursue acquisitions that we believe will enhance the scale and operating leverage of our business. In addition, we may pursue acquisitions that expand the appeal of our offering to independent, fee-based advisers and the investors they serve. |
Risk factors
Before you invest in our common stock, you should carefully consider all the information in this prospectus, including matters set forth in Risk factors. The principal risks we face include but are not limited to the following:
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Our revenue can fluctuate from period to period, which could cause our share price to fluctuate; |
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We operate in an intensely competitive industry, and this competition could hurt our financial performance; |
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We derive nearly all of our revenue from clients in the financial advisory industry and our revenue could suffer if that industry experiences a downturn; |
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Our clients that pay us an asset-based fee may seek to negotiate a lower fee percentage, choose to use lower-revenue products or cease using our services, which could limit the growth of our revenue or cause our revenue to decrease; |
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Investors may redeem or withdraw their investment assets generally at any time. Significant changes in investing patterns could have a material adverse effect on our business; |
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Changes in market and economic conditions could lower the value of assets on which we earn revenue and could decrease the demand for our investment solutions and services; |
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We must continue to introduce new investment solutions and services, and a failure to do so could have a material adverse effect on our results of operations, financial condition or business; |
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We are exposed to data and cyber-security risks that could result in data breaches, service interruptions, harm to our reputation or significant liability; |
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Our controlling stockholder is subject to supervision by regulatory authorities in the PRC and must comply with certain PRC laws and regulations that may influence our controlling stockholders decisions relating to our business; |
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Control by our principal stockholder could adversely affect our other stockholders; and |
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We are subject to extensive government regulation in the United States, and our failure or inability to comply with these regulations or regulatory action against us could adversely affect our results of operations, financial condition or business. |
Our controlling stockholder
In April 2016, Huatai Securities Co., Ltd. (HTSC), a Chinese securities group with brokerage and investment services, acquired our collective businesses from Aquiline Capital Partners and Genstar Capital. Through the acquisition, HTSC became the ultimate parent company of our collective businesses through its subsidiary Huatai International Investment Holdings Limited, a company organized under the laws of the Cayman Islands (HIIHL). Following completion of the transactions described in the section titled Restructuring, upon completion of this offering, HIIHL will own % of our outstanding common stock, or % if the underwriters exercise their option to purchase additional shares in full, and will continue to control our management and affairs, including determining the outcome of all matters requiring stockholder approval. See the section titled Risk factors Risks related to our controlling stockholders ultimate parent being a PRC company with stock listed in Hong Kong and Shanghai and Risk factors Risks related to our common stock and this offering for risks related to our controlling stockholder.
Restructuring
In connection with this offering, we and our immediate parent company, AssetMark Holdings LLC, will undergo a restructuring transaction prior to the completion of this offering. Prior to this offering, all of our outstanding capital stock was held by AssetMark Holdings LLC. 98.59% of AssetMark Holdings LLCs equity interests were held by HIIHL and the remaining 1.41% was held by members of our senior management.
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The diagram below depicts our organizational structure prior to this offering.
In connection with the restructuring, we will effect a -for-one forward stock split of our common stock, following which AssetMark Holdings LLC will liquidate and dissolve and distribute shares of our common stock to its members as follows: each holder of Class A Common Units and each holder of Class B Common Units of AssetMark Holdings LLC will receive shares of our common stock per Class A Common Unit or Class B Common Unit, and holders of Class C Common Units of AssetMark Holdings LLC will receive restricted stock awards (RSAs) with a weighted average of shares of our common stock per Class C Common Unit. Immediately following this restructuring, shares of our common stock will be issued and outstanding. Following this restructuring, upon completion of this offering, HIIHL will own approximately % of our outstanding common stock, or approximately % if the underwriters exercise their option to purchase additional shares in full.
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The diagram below depicts our organizational structure immediately following this offering, assuming no exercise of the underwriters option to purchase additional shares, and before giving effect to the issuance of new RSAs to employees and options to certain members of our management not in connection with the restructuring, which we expect to issue upon the pricing of this offering.
Emerging growth company status
As a company with less than $1.07 billion in revenue during our last fiscal year, we qualify as an emerging growth company as defined in the Jumpstart Our Business Startups Act of 2012 (the JOBS Act). For as long as we are an emerging growth company, we will not be required to comply with certain requirements that are applicable to other public companies that are not emerging growth companies, including the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (as amended, the Sarbanes-Oxley Act), and may also take advantage of the reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and the exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. In addition, for so long as we are an emerging growth company, we may take advantage of certain reduced reporting obligations, including a requirement to have only two years of audited financial statements and only two years of related managements discussion and analysis of financial condition and results of operations disclosure. We may choose to take advantage of some but not all of these reduced burdens. We have taken advantage of many of these reduced burdens in this prospectus, and intend to do so in future filings. As a result, the information that we provide stockholders may be different than you might get from other public companies in which you hold equity.
We will remain an emerging growth company until the earliest to occur of: the last day of the fiscal year in which we have more than $1.07 billion in annual revenue; the date we qualify as a large accelerated filer; the date on which we have, during the previous three-year period, issued more than $1 billion in non-convertible debt securities; and the last day of the fiscal year in which the fifth anniversary of our initial public offering occurs.
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In addition, Section 107 of the JOBS Act provides that an emerging growth company can use the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended (the Securities Act), for complying with new or revised accounting standards. This permits an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We are not choosing to opt out of such extended transition period and, as a result, we will not be required to comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for public non-emerging growth companies.
For a description of the qualifications and other requirements applicable to emerging growth companies, please read Risk factorsRisks related to our common stock and this offeringWe are an emerging growth company and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors.
Corporate information
AssetMark was founded in 1996 and AssetMark Financial Holdings, Inc. was incorporated in the State of Delaware on March 25, 2013. Our principal executive offices are located at 1655 Grant Street, 10 th Floor, Concord, California, 94520 and our telephone number is (925) 521-2200. Our Internet site is www.assetmark.com. Our website and the information contained therein or accessible through it are not incorporated into this prospectus or the registration statement of which it forms a part.
AssetMark, the AssetMark design logo and other AssetMark tradenames and service marks in use generally and included in this prospectus are the property of AssetMark Financial Holdings, Inc. and certain of our subsidiaries. Trade names, trademarks and service marks of other companies appearing in this prospectus are the property of the respective holders.
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Common stock offered by us |
shares |
Common stock offered by the selling stockholder |
shares |
Underwriters option to purchase additional shares from the selling stockholder |
shares |
Common stock to be outstanding after this offering |
shares |
Use of proceeds |
We estimate that the net proceeds to us from this offering will be approximately $ million, or approximately $ million if the underwriters exercise their option to purchase additional shares in full, assuming an initial public offering price of $ per share (the midpoint of the price range set forth on the cover page of this prospectus), after deducting underwriting discounts and commissions and estimated offering expenses payable by us. We intend to use approximately $125 million of the net proceeds to us from this offering to repay a portion of our Term Loan (as defined in the section titled Managements discussion and analysis of financial condition and results of operationsLiquidity and capital resources) and the remainder of the net proceeds to us from this offering for general corporate purposes, including working capital, operating expenses and capital expenditures. As of March 31, 2019, we had $249.4 million of debt outstanding under the Term Loan, which bears interest at a variable rate, initially LIBOR plus a margin of 3.50% or the Alternate Base Rate, as specified in the Term Loan, plus a margin of 2.50%. We may also use a portion of the net proceeds to acquire or invest in complementary businesses, technologies or other assets, although we currently have no agreements or understandings with respect to any acquisitions or investments. |
We will not receive any proceeds from the sale of common stock by the selling stockholder. |
See the section titled Use of proceeds for additional information. |
Directed share program |
At our request, the underwriters have reserved up to 5% of the shares offered by this prospectus for sale at the initial public offering price for our directors, officers, certain of our employees and certain other persons associated with us who have expressed an interest in purchasing common stock in this offering. For additional information, see the section titled Underwriting (conflict of interest). |
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Proposed NYSE symbol |
AMK |
Dividend policy |
See the section titled Dividend policy for a discussion of our policy on paying dividends. |
Controlled company |
Upon completion of this offering and the transactions described in the section titled Restructuring, HTSC, through its subsidiary HIIHL, will control approximately % of the voting power of our outstanding common stock, assuming no exercise of the underwriters option to purchase additional shares. As a result, we will be a controlled company under the NYSE governance standards. Under these standards, a company of which more than 50% of the voting power is held by an individual, group or another company is a controlled company and may elect not to comply with certain corporate governance standards. See the section titled Risk factorsRisks related to our common stock and this offering for more information. |
Conflict of interest |
We and Huatai Securities (USA), Inc., an underwriter in this offering, are under common control by HTSC. As such, Huatai Securities (USA), Inc. is deemed to have a conflict of interest under Rule 5121(f)(5)(B) of the Financial Industry Regulatory Authority, Inc. (FINRA). In addition, affiliates of Huatai Securities (USA), Inc. and Credit Suisse Securities (USA) LLC will each receive more than 5% of the net offering proceeds from this offering and will each be deemed to have a conflict of interest pursuant to FINRA Rule 5121(f)(5)(C). Accordingly, this offering is being made in compliance with the requirements of FINRA Rule 5121, pursuant to which the appointment of a qualified independent underwriter is not required in connection with this offering as the FINRA members primarily responsible for managing the public offering do not have a conflict of interest, are not affiliates of any FINRA member that has a conflict of interest and meet the requirements of FINRA Rule 5121(f)(12)(E). See the section titled Underwriting (conflict of interest) for more information. |
Risk factors |
See the section titled Risk factors and the other information included in this prospectus for a discussion of risks you should carefully consider before investing in our common stock. |
The number of shares of our common stock set forth above is based on shares of our common stock outstanding as of March 31, 2019, assuming completion of the transactions described in the section titled Restructuring, and does not include:
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shares of common stock issuable upon the exercise of options to be granted immediately following the pricing of this offering with an exercise price equal to the initial public offering price per share; |
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shares of common stock subject to RSAs to be granted under our 2019 Equity Incentive Plan immediately following the pricing of this offering; |
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shares of common stock subject to restricted stock units (RSUs) to be granted under our 2019 Equity Incentive Plan immediately following the pricing of this offering; and |
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additional shares of common stock reserved for future issuance under our 2019 Equity Incentive Plan, which will become effective in connection with this offering. |
Unless we specifically state otherwise or as the context may otherwise require, the information in this prospectus assumes (i) no exercise of the underwriters option to purchase additional shares, (ii) the filing and effectiveness of our amended and restated certificate of incorporation prior to the closing of this offering, including the effectiveness of the -for-one forward stock split of our common stock, and (iii) the completion of the transactions described in the section titled Restructuring.
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Summary consolidated financial and other data
The following summary consolidated financial data of AssetMark Financial Holdings, Inc. should be read in conjunction with, and are qualified by reference to, Managements discussion and analysis of financial condition and results of operations and the consolidated financial statements and notes thereto included elsewhere in this prospectus. The consolidated statements of income data for the years ended December 31, 2018 and 2017 and the consolidated balance sheet data as of December 31, 2018 and 2017 are derived from, and qualified by reference to, the audited consolidated financial statements of AssetMark Financial Holdings, Inc. included elsewhere in this prospectus and should be read in conjunction with those consolidated financial statements and notes thereto. The consolidated statements of income data for the three months ended March 31, 2019 and 2018 and the consolidated balance sheet data as of March 31, 2019 and 2018 are derived from, and qualified by reference to, the unaudited interim condensed consolidated financial statements of AssetMark Financial Holdings, Inc. included elsewhere in this prospectus and should be read in conjunction with those unaudited interim condensed consolidated financial statements and notes thereto. The unaudited interim condensed consolidated financial statements have been prepared on the same basis as our annual audited consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal, recurring adjustments, that are necessary to present fairly the unaudited interim condensed consolidated financial statements. Results for historical periods may not be indicative of results expected for future periods, and our interim results are not necessarily indicative of the results to be expected for the full year or any other period.
Year ended December 31, | Three months ended March 31, | |||||||||||||||
(in thousands, except per share
data) |
2018 | 2017 | 2019 | 2018 | ||||||||||||
Statements of income data: |
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Asset-based revenue |
$ | 338,031 | $ | 282,966 | $ | 83,063 | $ | 79,076 | ||||||||
Spread-based revenue |
20,403 | 10,430 | 7,549 | 3,749 | ||||||||||||
Other income |
5,200 | 2,121 | 1,702 | 1,708 | ||||||||||||
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Total revenue |
363,634 | 295,517 | 92,314 | 84,533 | ||||||||||||
Total expenses |
309,071 | 276,174 | 86,063 | 70,870 | ||||||||||||
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Income before income taxes |
54,563 | 19,343 | 6,251 | 13,663 | ||||||||||||
Provision for (benefit from) income taxes |
17,137 | (79,635 | ) | 3,440 | 3,872 | |||||||||||
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Net income |
$ | 37,426 | $ | 98,978 | $ | 2,811 | $ | 9,791 | ||||||||
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Pro forma basic and diluted net income per share |
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Pro forma weighted average common shares outstanding |
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Other data: |
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Capital expenditures |
$ | 17,414 | $ | 15,652 | $ | 4,712 | $ | 4,214 |
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Year ended December 31, | Three months ended March 31, | |||||||||||||||
(in thousands, except per share
data) |
2018 | 2017 | 2019 | 2018 | ||||||||||||
Net cash provided by operating activities |
61,662 | 45,612 | 2,769 | 8,562 | ||||||||||||
Net cash used in investing activities |
(17,714 | ) | (15,652 | ) | (5,020 | ) | (4,214 | ) | ||||||||
Net cash provided by financing activities |
11,259 | | (625 | ) | | |||||||||||
Non-GAAP financial metrics: |
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Asset-based net revenue (1) |
221,268 | 184,565 | 54,961 | 52,271 | ||||||||||||
Spread-based net revenue (1) |
18,732 | 9,454 | 7,071 | 3,388 | ||||||||||||
Net revenue (1) |
245,200 | 196,140 | 63,734 | 57,367 | ||||||||||||
Adjusted EBITDA (1) |
88,945 | 58,879 | 22,730 | 21,007 | ||||||||||||
Adjusted net income (1) |
60,758 | 34,347 | 12,723 | 15,105 | ||||||||||||
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(1) | We define asset-based net revenue as asset-based revenue less asset-based expenses, such as payments to strategists, asset managers and other third parties for services provided by those third parties on our platform. We define spread-based net revenue as spread-based revenue less spread-based expenses, which consist of expenses paid to the third-party administrator of AssetMark Trust Company, our proprietary custodian subsidiary, for administering AssetMark Trust Companys insured cash deposit program. We define net revenue as total revenue less asset-based expenses and spread-based expenses. We define adjusted EBITDA as EBITDA (net income plus interest expense, income tax expense, depreciation and amortization and less interest income), further adjusted to exclude certain non-cash charges and other adjustments such as non-recurring items. We define adjusted net income as net income before: (a) share-based compensation expense, (b) amortization of intangible assets, (c) acquisition and related integration expenses, (d) restructuring and conversion costs and (e) certain other non-recurring expenses. |
Asset-based net revenue, spread-based net revenue, net revenue, adjusted EBITDA and adjusted net income are not recognized terms under U.S. GAAP and should not be considered as alternatives to asset-based revenue, spread-based revenue, total revenue, net income (loss) or other measures of financial performance or liquidity derived in accordance with U.S. GAAP.
We believe that asset-based net revenue, spread-based net revenue, net revenue, adjusted EBITDA and adjusted net income provide useful information to investors about us and our financial condition and results of operations for the following reasons: (i) asset-based net revenue, spread-based net revenue and net revenue are useful measures of our growth and business performance due to the large amount of payments that we collect on behalf of third parties providing services on our platform that have no impact on our profitability; (ii) adjusted EBITDA and adjusted net income are among the measures used by our management team to evaluate our operating performance and make day-to-day operating decisions; and (iii) adjusted EBITDA and adjusted net income are frequently used by securities analysts, investors and other interested parties as a common performance measure to compare results or estimate valuations across companies in our industry.
Asset-based net revenue, spread-based net revenue, net revenue, adjusted EBITDA and adjusted net income have limitations as analytical tools, and you should not consider such measures either in isolation or as a substitute for asset-based revenue, spread-based revenue, total revenue, net income (loss), cash flow or other methods of analyzing our results as reported under U.S. GAAP. Some of these limitations are:
a. | asset-based net revenue, spread-based net revenue and net revenue include only costs directly attributable to revenue generation and that are variable with the underlying related assets; |
b. | asset-based net revenue, spread-based net revenue and net revenue do not include all costs of revenue, such as employee compensation and fixed-contract third-party services, which are required to generate revenue; |
c. | adjusted EBITDA and adjusted net income do not reflect all cash expenditures, future requirements for capital expenditures or contractual commitments; |
d. | adjusted EBITDA and adjusted net income do not reflect changes in, or cash requirements for, working capital; |
e. | adjusted EBITDA does not reflect interest expense on our debt or the cash requirements necessary to service interest or principal payments; and |
f. | other companies in the financial services industry may calculate asset-based net revenue, spread-based net revenue, net revenue, adjusted EBITDA or adjusted net income differently than we do, limiting their usefulness as comparative measures. |
Because of these limitations, asset-based net revenue, spread-based net revenue, net revenue, adjusted EBITDA and adjusted net income should not be considered as discretionary cash available to us to reinvest in the growth of our business or as measures of cash that will be available to us to meet our obligations.
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The following table provides a reconciliation of asset-based revenue, the most directly comparable U.S. GAAP financial measure, to asset-based net revenue:
Year ended December 31, | Three months ended March 31, | |||||||||||||||
(in thousands) | 2018 | 2017 | 2019 | 2018 | ||||||||||||
Asset-based revenue |
$ | 338,031 | $ | 282,966 | $ | 83,063 | $ | 79,076 | ||||||||
Less: Asset-based expenses |
116,763 | 98,401 | 28,102 | 26,805 | ||||||||||||
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Asset-based net revenue |
$ | 221,268 | $ | 184,565 | $ | 54,961 | $ | 52,271 | ||||||||
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The following table provides a reconciliation of spread-based revenue, the most directly comparable U.S. GAAP financial measure, to spread-based net revenue:
Year ended December 31, | Three months ended March 31, | |||||||||||||||
(in thousands) | 2018 | 2017 | 2019 | 2018 | ||||||||||||
Spread-based revenue |
$ | 20,403 | $ | 10,430 | $ | 7,549 | $ | 3,749 | ||||||||
Less: Spread-based expenses |
1,671 | 976 | 478 | 361 | ||||||||||||
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Spread-based net revenue |
$ | 18,732 | $ | 9,454 | $ | 7,071 | $ | 3,388 | ||||||||
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The following table provides a reconciliation of total revenue, the most directly comparable U.S. GAAP financial measure, to net revenue:
Year ended December 31, | Three months ended March 31, | |||||||||||||||
(in thousands) | 2018 | 2017 | 2019 | 2018 | ||||||||||||
Total revenue |
$ | 363,634 | $ | 295,517 | $ | 92,314 | $ | 84,533 | ||||||||
Less: Asset-based expenses |
116,763 | 98,401 | 28,102 | 26,805 | ||||||||||||
Spread-based expenses |
1,671 | 976 | 478 | 361 | ||||||||||||
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Net revenue |
$ | 245,200 | $ | 196,140 | $ | 63,734 | $ | 57,367 | ||||||||
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The following table provides a reconciliation of net income, the most closely comparable U.S. GAAP financial measure, to adjusted EBITDA:
Year ended December 31, | Three months ended March 31, | |||||||||||||||
(in thousands) | 2018 | 2017 | 2019 | 2018 | ||||||||||||
Net income |
$ | 37,426 | $ | 98,978 | $ | 2,811 | $ | 9,791 | ||||||||
Income tax |
17,137 | (79,635 | ) | 3,440 | 3,872 | |||||||||||
Interest income |
(2,433 | ) | (268 | ) | (892 | ) | (310 | ) | ||||||||
Interest expense |
1,920 | | 4,024 | | ||||||||||||
Amortization/depreciation |
26,104 | 22,981 | 6,896 | 6,037 | ||||||||||||
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EBITDA |
80,154 | 42,056 | 16,279 | 19,390 | ||||||||||||
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Share-based compensation (1) |
6,568 | 6,920 | 5,226 | 1,296 | ||||||||||||
IPO readiness (2) |
1,182 | | 568 | 51 | ||||||||||||
Reorganization and integration costs (3) |
1,041 | 3,266 | 657 | 270 | ||||||||||||
Strategic initiatives (4) |
| 2,026 | | | ||||||||||||
Settlement costs related to a non-routine legal dispute (5) |
| 2,000 | | | ||||||||||||
Acquisition expenses (6) |
| 1,339 | | | ||||||||||||
Retention bonus related to our 2016 sale to HTSC (7) |
| 1,215 | | | ||||||||||||
Transition services payment for 2015 acquisition (8) |
| 57 | | | ||||||||||||
|
|
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Adjusted EBITDA |
$ | 88,945 | $ | 58,879 | $ | 22,730 | $ | 21,007 | ||||||||
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(1) | Share-based compensation represents granted share-based compensation in the form of Class C Common Units (which are incentive units) of AssetMark Holdings LLC, our parent company, to certain of our directors and employees. Although this expense occurred in each measurement period, we have added the expense back in our calculation of adjusted EBITDA because of its non-cash impact. |
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(2) | IPO readiness includes professional fees related to our preparation to become a public company. These expenses primarily include services for financial and human resources systems implementation, executive compensation assessments and other consulting services. Although these expenses occurred in both 2018 and the first quarter of 2019, these expenses are non-recurring as they are limited to our public-company readiness preparation and do not include ongoing public-company compliance costs. |
(3) | Reorganization and integration costs includes costs related to our functional reorganization within our Operations, Technology and Retirement functions as well as duplicate costs related to the outsourcing of back-office operations functions. While we have incurred such expenses in all periods measured, these expenses serve varied reorganization and integration initiatives, each of which is non-recurring. We do not consider these expenses to be part of our core operations. |
(4) | Strategic initiatives includes costs related to one-time investments for exploratory work regarding potential business opportunities in 2017. These strategic initiatives were part of the initial strategic review performed by HTSC in late 2016. These costs included research into such areas as RIA expansion, international products, retirement products and cash solutions. Such costs were non-recurring. |
(5) | Settlement costs related to a non-routine legal dispute are costs related to the settlement of an unusual legal dispute with a technology vendor. We consider this settlement to be non-recurring. |
(6) | Acquisition expenses includes legal fees and other professional fees related to a single significant acquisition effort in 2017 that was ultimately unsuccessful. We consider such costs to be non-recurring due to the extent that we invested in that particular effort. |
(7) | Retention bonus related to our 2016 sale to HTSC includes retention incentives paid to certain of our directors as an incentive to retain their services after HTSC acquired our company in 2016. This expense was a one-time incentive provided by HTSC to such directors. |
(8) | Transition services payment for 2015 acquisition represents a 2017 expense related to a final payment pursuant to a one-time transition services agreement and is therefore non-recurring. |
The following table provides a reconciliation of net income, the most closely comparable U.S. GAAP financial measure, to adjusted net income:
Year ended December 31, | Three months ended March 31, | |||||||||||||||
(in thousands) | 2018 | 2017 | 2019 | 2018 | ||||||||||||
Net income |
$ | 37,426 | $ | 98,978 | $ | 2,811 | $ | 9,791 | ||||||||
Tax adjustments (1) |
| (90,055 | ) | | | |||||||||||
Acquisition related amortization |
20,432 | 20,432 | 5,108 | 5,108 | ||||||||||||
Expense adjustments (2) |
2,221 | 9,903 | 1,225 | 322 | ||||||||||||
Share-based compensation |
6,568 | 6,920 | 5,226 | 1,296 | ||||||||||||
Tax effect of adjustments (3) |
(5,889 | ) | (11,831 | ) | (1,647 | ) | (1,412 | ) | ||||||||
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Adjusted net income |
$ | 60,758 | $ | 34,347 | $ | 12,723 | $ | 15,105 | ||||||||
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(1) | Represents a non-recurring non-cash decrease in our deferred tax liability in connection with the lower federal tax rate attributable to the Tax Cuts and Jobs Act of 2017. |
(2) | Consists of the adjustments to EBITDA listed in the adjusted EBITDA reconciliation table above other than share-based compensation. |
(3) | Reflects the tax impact of expense adjustments and acquisition-related amortization. |
As of December 31, 2018 | As of March 31, 2019 | |||||||||||||||||||||||
(in thousands) | Actual | Pro forma |
Pro forma as
adjusted |
Actual | Pro forma |
Pro forma as
adjusted |
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Balance sheet data: |
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Cash and cash equivalents |
$ | 105,354 | $ | 105,354 | $ | $ | 102,478 | $ | 102,478 | $ | ||||||||||||||
Working capital (1) |
77,521 | 77,521 | 86,863 | 86,863 | ||||||||||||||||||||
Total assets |
1,147,275 | 1,147,275 | 1,146,191 | 1,146,191 | ||||||||||||||||||||
Total liabilities |
448,264 | 448,264 | 439,127 | 439,127 | ||||||||||||||||||||
Stockholders equity |
699,011 | 699,011 | 707,064 | 707,064 | ||||||||||||||||||||
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(1) | Current assets less current liabilities. |
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Pro forma amounts give effect to the transactions described in the section titled Restructuring. Pro forma as adjusted amounts give further effect to the issuance and sale of shares of common stock by us in this offering at an assumed initial public offering price of $ per share (the midpoint of the price range set forth on the cover page of this prospectus), after deducting underwriting discounts and commissions and estimated offering expenses payable by us.
A $1.00 increase (decrease) in the assumed initial public offering price of $ per share would increase (decrease), on a pro forma as adjusted basis, each of cash and cash equivalents, working capital, total assets and stockholders equity by approximately $ million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us. We may also increase or decrease the number of shares we are offering. Each increase (decrease) of 1,000,000 in the number of shares we are offering would increase (decrease), on a pro forma as adjusted basis, each of cash and cash equivalents, working capital, total assets and stockholders equity by approximately $ million, assuming the assumed initial public offering price per share remains the same, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. The pro forma as adjusted information is illustrative only, and will depend on the actual initial public offering price, number of shares offered and other terms of this offering determined at pricing.
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You should carefully consider the following risks and all of the other information set forth in this prospectus before deciding to invest in shares of our common stock. If any of the following risks actually occurs, our business, financial condition or results of operations would likely suffer. In such case, the trading price of our common stock could decline due to any of these risks, and you may lose all or part of your investment.
Risks related to our business and operations
Our revenue may fluctuate from period to period, which could cause our share price to fluctuate.
Our revenue may fluctuate from period to period in the future due to a variety of factors, many of which are beyond our control. Factors relating to our business that may contribute to these fluctuations include the following events, as well as other factors described elsewhere in this prospectus:
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a decline or slowdown of the growth in the value of financial market assets or changes in the mix of assets on our platform, which may reduce the value of assets under management and administration and therefore our revenue and cash flows; |
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significant fluctuations in securities prices affecting the value of assets on our platform; |
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negative public perception and reputation of the financial services industry, which would reduce demand for our investment solutions and services; |
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unanticipated shifts in client investment preferences to lower-fee options; |
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downward pressure on fees we charge our clients, which would reduce our revenue; |
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changes in laws or regulations that could impact our ability to offer investment solutions and services; |
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failure to obtain new clients or retain existing clients on our platform, or changes in the mix of clients on our platform; |
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failure by our financial adviser clients to obtain new investor clients or retain their existing investor clients; |
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failure to adequately protect our proprietary technology and intellectual property rights; |
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reduction in the suite of investment solutions and services made available to existing clients; |
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reduction in fee percentage or total fees for future periods, which may have a delayed impact on our results given that our asset-based fees are billed to advisers in advance of each quarter; |
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changes in our pricing policies or the pricing policies of our competitors to which we have to adapt; or |
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general domestic and international economic and political conditions that may decrease investor demand for financial advisers or investment services. |
As a result of these and other factors, our results of operations for any quarterly or annual period may differ materially from our results of operations for any prior or future quarterly or annual period and should not be relied upon as indications of our future performance.
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We operate in an intensely competitive industry, with many firms competing for business from financial advisers on the basis of the quality and breadth of investment solutions and services, ability to innovate, reputation and the prices of services, among other factors, and this competition could hurt our financial performance.
We compete with many different types of companies that vary in size and scope, including other TAMPs. In addition, some of our adviser clients have developed or may develop the in-house capability to provide the technology or investment advisory services they have retained us to perform. These clients may also offer internally developed services to their financial advisers, obviating the need to hire us, and they may offer these services to third-party financial advisers or financial institutions, thereby competing directly with us for that business.
Some of our competitors have greater name recognition or greater resources than we do, and may offer a broader range of services across more markets. These resources may allow our competitors to respond more quickly to new technologies or changes in demand for investment solutions and services, devote greater resources to developing and promoting their services and make more attractive offers to potential clients and strategic partners, which could hurt our financial performance. Further, some of our competitors operate in a different regulatory environment than we do, which may give them certain competitive advantages in the services they offer.
We compete on a number of bases including the performance of our technology, the level of fees charged, the quality of our services, our reputation and position in the industry, our ability to adapt to technological developments or unforeseen market entrants and our ability to address the complex and changing needs of our clients. Our failure to successfully compete on the basis of any of these factors could result in a significant decline in market share, revenue and net income.
We derive nearly all of our revenue from the delivery of investment solutions and services to clients in the financial advisory industry and our revenue could suffer if that industry experiences a downturn.
We derive nearly all of our revenue from the delivery of investment solutions and services to clients in the financial advisory industry and we are therefore subject to the risks affecting that industry. A decline or lack of growth in demand for financial advisory services would adversely affect our clients and, in turn, our results of operations, financial condition or business. For example, the availability of free or low-cost investment information and resources, including research and information relating to publicly traded companies and mutual funds available on the Internet or on company websites, could lead to lower demand by investors for the services provided by financial advisers. In addition, demand for our investment solutions and services among financial advisers could decline for many reasons. Consolidation or limited growth in the financial advisory industry could reduce the number of our clients and potential clients. Events that adversely affect our clients businesses, rates of growth or the numbers of customers they serve, including decreased demand for our clients products and services, adverse conditions in our clients markets or adverse economic conditions generally, could decrease demand for our investment solutions and services and thereby decrease our revenue. Any of the foregoing could have a material adverse effect on our results of operations, financial condition or business.
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Investors that pay us an asset-based fee may seek to negotiate a lower fee percentage, choose to use lower revenue products or cease using our services, which could limit the growth of our revenue or cause our revenue to decrease.
We derive a significant portion of our revenue from asset-based fees. Individual advisers or clients may seek to negotiate a lower asset-based fee percentage. In addition, clients may elect to use products that generate lower revenue, which may result in lower total fees being paid to us. As competition among financial advisers increases, our clients may be required to lower the fees they charge to their clients, which could cause them to seek lower fee options on our platform or to more aggressively negotiate the fees we charge. Further, any reduction in asset-based fees could persist beyond the near term given the recurring quarterly nature of our asset-based fee arrangements. Any of these factors could result in a fluctuation or decline in our asset-based revenue, which would have a material adverse effect on our results of operations, financial condition or business.
Investors may redeem or withdraw their investment assets generally at any time. Significant changes in investing patterns or large-scale withdrawal of investment funds could have a material adverse effect on our results of operations, financial condition or business.
The clients of our financial advisers are generally free to change financial advisers, forgo the advice and other services provided by financial advisers or withdraw the funds they have invested with financial advisers. These clients of financial advisers may elect to change their investment strategies, including by withdrawing all or a portion of their assets from their accounts to avoid securities markets-related risks. These actions by investors are outside of our control and could materially adversely affect the market value of the investment assets that our clients manage, which could materially adversely affect the asset-based revenue we receive.
Changes in market and economic conditions could lower the value of assets on which we earn revenue and could decrease the demand for our investment solutions and services.
Asset-based revenue makes up a significant portion of our revenue, representing 93% and 90% of our total revenue for the year ended December 31, 2018 and the three months ended March 31, 2019, respectively. In addition, given our fee-based model, we expect that asset-based revenue will continue to account for a significant percentage of our total revenue in the future. Spread-based revenue accounted for 6% and 8% of our total revenue for the year ended December 31, 2018 and the three months ended March 31, 2019, respectively. Significant fluctuations in securities prices, as well as recent and anticipated increases in interest rates, may materially affect the value of the assets managed by our clients and may also influence financial adviser and investor decisions regarding whether to invest in, or maintain an investment in, one or more of our investment solutions. If such market fluctuation led to less investment in the securities markets, our revenue and earnings derived from asset-based and spread-based revenue could be simultaneously materially adversely affected.
We provide our investment solutions and services to the financial services industry. The financial markets, and in turn the financial services industry, are affected by many factors, such as U.S. and foreign economic conditions and general trends in business and finance that are beyond our control, which could be adversely affected by changes in the equity or debt marketplaces, unanticipated changes in currency exchange rates, interest rates, inflation rates, the yield curve, financial crises, war, terrorism, natural disasters and other factors that are difficult to predict. In the event that the U.S. or international financial markets suffer a severe or prolonged downturn, investments may lose value and investors may choose to withdraw assets from financial advisers and use the assets to pay
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expenses or transfer them to investments that are perceived to be more secure, such as bank deposits and Treasury securities. Any prolonged downturn in financial markets, or increased levels of asset withdrawals could have a material adverse effect on our results of operations, financial condition or business.
We must continue to introduce new investment solutions and services, and enhancements thereon, to address our clients changing needs, market changes and technological developments, and a failure to do so could have a material adverse effect on our results of operations, financial condition or business.
The market for our investment solutions and services is characterized by shifting client demands, evolving market practices and, for many of our investment solutions and services, rapid technological change, including an increased use of and reliance on web and social network properties. Changing client demands (including increased reliance on technology), new market practices or new technologies can render existing investment solutions and services obsolete and unmarketable. As a result, our future success will continue to depend upon our ability to develop and enhance investment solutions and services that address the future needs of our target markets and respond to technological and market changes. We may not be able to accurately estimate the impact of new investment solutions and services on our business or how their benefits will be perceived by our clients. Further, we may not be successful in developing, introducing and marketing our new investment solutions or services or enhancements on a timely and cost effective basis, or at all, and our new investment solutions and services and enhancements may not adequately meet the requirements of the marketplace or achieve market acceptance. In addition, clients may delay purchases in anticipation of new investment solutions or services or enhancements. Any of these factors could materially adversely affect our results of operations, financial condition or business.
We could face liability or incur costs to remediate operational errors or to address possible customer dissatisfaction.
Operational risk generally refers to the risk of loss resulting from our operations, including, but not limited to, improper or unauthorized execution and processing of transactions, deficiencies in our operating systems, business disruptions and inadequacies or breaches in our internal control processes. We operate in diverse markets and are reliant on the ability of our employees and systems to process large volumes of transactions often within short time frames. In the event of a breakdown or improper operation of systems, human error or improper action by employees, we could suffer financial loss, regulatory sanctions or damage to our reputation. In addition, there may be circumstances when our customers are dissatisfied with our investment solutions and services, even in the absence of an operational error. In such circumstances, we may elect to make payments or otherwise incur increased costs or lower revenue to maintain customer relationships. In any of the forgoing circumstances, our results of operations, financial condition or business could be materially adversely affected.
We may be subject to liability for losses that result from a breach of our fiduciary duties.
Certain of our investment advisory services involve fiduciary obligations that require us to act in the best interests of our clients, and we may be sued and face liabilities for actual or claimed breaches of our fiduciary duties. Because we provide investment advisory services with respect to substantial assets, we could face substantial liability to our clients if it is determined that we have breached our
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fiduciary duties. In certain circumstances, which generally depend on the types of investment solutions and services we are providing, we may enter into client agreements jointly with advisers and retain third-party investment money managers and strategists on behalf of clients. We are responsible for conducting due diligence on the investment solutions and strategies offered by such third parties with whom we partner, and a failure to adequately conduct due diligence could subject us to liability for misstatements or omissions contained in marketing and other materials describing the investment solutions and strategies offered by such third parties to our investor clients. As such, we may be included as a defendant in lawsuits against financial advisers, strategists and third-party investment money managers that involve claims of breaches of the duties of such persons, and we may face liabilities for the improper actions and/or omissions of such advisers and third-party investment money managers and strategists. In addition, we may face claims based on the results of our investment advisory services, even in the absence of a breach of our fiduciary duty. Such claims and liabilities could therefore have a material adverse effect on our results of operations, financial condition or business.
If our reputation is harmed, our results of operations, financial condition or business could be materially adversely affected.
Our reputation, which depends on earning and maintaining the trust and confidence of our clients, is critical to our business. Our reputation is vulnerable to many threats that can be difficult or impossible to control, and costly or impossible to remediate. Regulatory inquiries or investigations, lawsuits initiated by our clients, employee misconduct, perceptions of conflicts of interest and rumors, among other developments, could substantially damage our reputation, even if they are baseless or satisfactorily addressed. Potential, perceived and actual conflicts of interest are inherent in our business activities and could give rise to client dissatisfaction or litigation. In particular, we offer proprietary mutual funds and portfolios of mutual funds as well as custodial services, and financial advisers or their clients could conclude that we favor our proprietary investment products or services over those of third parties. In addition, any perception that the quality of our investment solutions and services may not be the same or better than that of other providers can also damage our reputation. Any damage to our reputation could harm our ability to attract and retain clients, which could materially adversely affect our results of operations, financial condition or business.
If our investment solutions and services fail to perform properly due to undetected errors or similar problems, our results of operations, financial condition or business could be materially adversely affected.
Investment solutions and services we develop or maintain may contain undetected errors or defects despite testing. Such errors can exist at any point in the life cycle of our investment solutions or services, but are typically found after introduction of new investment solutions and services or enhancements to existing investment solutions or services. We continually introduce new investment solutions and services and new versions of existing solutions and services. Our third-party providers, including asset managers whose products our clients access through our platform, could fail to detect errors or defects in the offered products that our clients use. Despite internal testing and testing by current and prospective clients, our current and future investment solutions and services may contain serious defects or malfunctions. If we detect any errors before release, we might be required to delay the release of the investment solution or service for an extended period of time while we address the problem. We might not discover errors that affect our new or current investment solutions, services or enhancements until after they are deployed, and we may need to provide enhancements to correct
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such errors. Errors may occur that could have a material adverse effect on our results of operations, financial condition or business and could result in harm to our reputation, lost sales, delays in commercial release, third-party claims, contractual disputes, contract terminations or renegotiations or unexpected expenses and diversion of management and other resources to remedy errors. In addition, negative public perception and reputational damage caused by such claims would adversely affect our client relationships and our ability to enter into new contracts. Any of these problems could have a material adverse effect on our results of operations, financial condition or business.
Our failure to successfully execute the conversion of our clients assets from their existing technology platform to our platform in a timely and accurate manner could have a material adverse effect on our results of operations, financial condition or business.
When we begin working with a new client, or acquire new client assets through an acquisition or other transaction, we may be required to convert the new assets from the clients existing technology platform to our technology platform. These conversions sometimes present significant technological and operational challenges, can be time-consuming, may result in the loss of the target companys clients and may divert managements attention from other operational challenges. If we fail to successfully complete our conversions in a timely and accurate manner, we may be required to expend more time and resources than anticipated, which could erode the profitability of the client relationship. In addition, any such failure may harm our reputation and may cause investors to move their assets off of our platform or make it less likely that prospective clients will commit to working with us. Any of these risks could materially adversely affect our results of operations, financial condition or business.
Our business relies heavily on computer equipment, electronic delivery systems and the Internet. Any failures or disruptions could result in reduced revenue and the loss of customers.
The success of our business depends upon our ability to deliver time-sensitive, up-to-date data and information. Our business relies heavily on computer equipment (including servers), electronic delivery systems and the Internet, but these technologies are vulnerable to disruptions, failures or slowdowns caused by fire, earthquake, power loss, telecommunications failure, terrorist attacks, wars, Internet failures, cyber-attacks and other events beyond our control. Furthermore, we rely on agreements with our suppliers, such as our current data hosting and service providers, to provide us with access to certain computer equipment, electronic delivery systems and the Internet. We are unable to predict whether a future contractual dispute may arise with one of our suppliers that could cause a disruption in service, or whether our agreements with our suppliers can be obtained or renewed on acceptable terms, or at all. An unanticipated disruption, failure or slowdown affecting our key technologies or facilities may have significant ramifications, such as data-loss, data corruption, damaged software codes or inaccurate processing of transactions. We maintain off-site back-up facilities for our electronic information and computer equipment, but these facilities could be subject to the same interruptions that may affect our primary facilities. Any significant disruptions, failures, slowdowns, data-loss or data corruption could have a material adverse effect on our results of operations, financial condition or business and result in the loss of customers.
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If government regulation of the Internet changes, or if consumer attitudes towards the Internet change, we may need to change the manner in which we conduct our business or incur greater operating expenses.
We rely heavily on the Internet in conducting our business. The adoption, modification or interpretation of laws or regulations relating to the Internet could adversely affect the manner in which we conduct our business. Such laws and regulations may cover sales practices, taxes, user privacy, data protection, pricing, content, copyrights, distribution, electronic contracts, consumer protection, broadband residential Internet access and the characteristics and quality of services. Moreover, it is not clear how existing laws governing these matters apply to the Internet. If we are required to comply with new regulations or legislation or new interpretations of existing regulations or legislation, we may be required to incur additional expenses or alter our business model, either of which could have a material adverse effect on our results of operations, financial condition or business.
Inadequacy or disruption of our disaster recovery plans and procedures in the event of a catastrophe could adversely affect our business.
We have made a significant investment in our infrastructure, and our operations are dependent on our ability to protect the continuity of our infrastructure against damage from catastrophe or natural disaster, breach of security, cyber-attack, loss of power, telecommunications failure or other natural or man-made events. A catastrophic event could have a direct negative impact on us by adversely affecting our advisers, employees or facilities, or an indirect impact on us by adversely affecting the financial markets or the overall economy. While we have implemented business continuity and disaster recovery plans and maintain business interruption insurance, it is impossible to fully anticipate and protect against all potential catastrophes. If our business continuity and disaster recovery plans and procedures were disrupted, inadequate or unsuccessful in the event of a catastrophe, we could experience a material adverse interruption of our operations.
We serve our clients and their customers using third-party data centers and cloud services. While we have electronic access to the infrastructure and components of our platform that are hosted by third parties, we do not control the operation of these facilities. Consequently, we may be subject to service disruptions as well as failures to provide adequate support for reasons that are outside of our direct control. These data centers and cloud services are vulnerable to damage or interruption from a variety of sources, including earthquakes, floods, fires, power loss, system failures, cyber-attacks, physical or electronic break-ins, human error or interference (including by employees, former employees or contractors), and other catastrophic events. Our data centers may also be subject to local administrative actions, changes to legal or permitting requirements and litigation to stop, limit or delay operations. Despite precautions taken at these facilities, such as disaster recovery and business continuity arrangements, the occurrence of a natural disaster or an act of terrorism, a decision to close the facilities without adequate notice or other unanticipated problems at these facilities could result in interruptions or delays in our services, impede our ability to scale our operations or have other adverse impacts upon our business.
We are reliant on our relationships with certain broker-dealers and strategists, the loss of which could adversely affect our results of operations, financial condition or business.
We maintain relationships with certain broker-dealers who serve clients on our platform. The loss of these relationships likely would result in a loss of adviser and investor clients. Likewise, we engage strategists who offer certain investment products on our platform. The loss of certain strategists and
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their investment products could cause our investor clients to leave our platform to follow such strategists and investment products to our competitors or otherwise. Additionally, the engagement contracts governing our relationships with these broker-dealers and strategists are terminable by either us or the broker-dealer or strategist, as applicable, upon short-notice with or without cause. Loss of our investor clients, whether due to termination of a significant number of engagement contracts or otherwise, may have a material adverse effect on our financial condition and result in harm to our business.
We are dependent on third-party service providers in our operations.
We utilize numerous third-party service providers in our operations, including for the development of new product offerings, the provision of custodial, strategy and other services and the maintenance of our proprietary systems. A failure by a third-party service provider could expose us to an inability to provide contractual services to our clients in a timely manner. Additionally, if a third-party service provider is unable to provide these services, we may incur significant costs to either internalize some of these services or find a suitable alternative. We serve as the investment adviser for several of the products offered through our investment management programs and utilize the services of investment sub-advisers to manage many of these assets. A failure in the performance of our due diligence processes and controls related to the supervision and oversight of these firms in detecting and addressing conflicts of interest, fraudulent activity, data breaches and cyber-attacks, noncompliance with relevant securities and other laws could cause us to suffer financial loss, regulatory sanctions or damage to our reputation.
We are dependent on third-party pricing services for the valuation of securities invested in our investment products.
The majority of the securities held by our investment products are valued using quoted prices from active markets gathered by external third-party pricing services. Securities for which market prices are not readily available are valued in accordance with procedures applicable to that investment product. These procedures may utilize unobservable inputs that are not gathered from any active markets and involve considerable judgment. If these valuations prove to be inaccurate, our revenue and earnings from assets under management or administration could be adversely affected.
We rely on our key personnel and principals.
We depend on the efforts of our executive officers, other management team members, employees and principals. Our executive officers, in particular, play an important role in the stability and growth of our business, and our future success depends, in part, on our ability to continue to attract and retain highly skilled personnel. The loss of any key personnel could have a material adverse effect on our results of operations, financial condition or business.
Principal, employee or third-party provider misconduct could expose us to significant legal liability and reputational harm.
We are vulnerable to reputational harm because we and our investment adviser clients operate in an industry in which personal relationships, integrity and the confidence of clients are of critical importance. Our management team and employees, as well as the management teams and employees at our investment adviser clients or our third-party service providers, could engage in misconduct that adversely affects our business. For example, if a member of management or an employee were to
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engage in illegal or suspicious activities, we or our investment adviser clients could be subject to regulatory sanctions and we could suffer serious harm to our reputation (as a consequence of the negative perception resulting from such activities), our financial position or our or our investment adviser clients client relationships and ability to attract new clients. In addition, certain of our third-party providers may engage in illegal activities, which could result in disruptions to our platform or solutions, subject us to liability, fines, penalties, regulatory orders or reputational harm or require us to be involved in regulatory investigations. Further, our business and that of our investment adviser clients often require that we deal with confidential information, personal information and other sensitive data. If principals, employees or third-party providers were to improperly use or disclose this information, even if inadvertently, we or our investment adviser clients could be subject to legal or regulatory investigations or action and suffer serious harm to our reputation, financial position and current and future business relationships or those of our investment adviser clients. It is not always possible to deter misconduct, and the precautions we take to detect and prevent this activity may not always be effective. Misconduct by management, employees or third-party providers, or even unsubstantiated allegations of misconduct, could result in an adverse effect on our reputation and our business.
We could face liability related to our storage of personal information about our users.
We store extensive amounts of personal investment and financial information for our advisers clients, including portfolio holdings, on our systems. We could be subject to liability if we were to inappropriately disclose any personal information or if third parties were able to penetrate our network security or otherwise access or misappropriate any personally identifiable information or portfolio holdings. Any such disclosure, security incident or breach could subject us to claims for financial loss, impersonation or other similar fraud claims, claims under data protection laws, claims for other misuses of personal information, such as unauthorized marketing or unauthorized access to personal portfolio information, or indemnity claims by our clients for fines, penalties or other assessments arising from third-party claims. Further, any real or perceived defects, errors or vulnerabilities in our security systems could harm our reputation or adversely impact or business, financial position and results of operations.
We could face liability for certain information we provide, including information based on data we obtain from other parties.
We may be subject to claims for securities law violations, negligence, breach of fiduciary duties or other claims relating to the information we provide. For example, individuals may take legal action against us if they rely on information we have provided and it contains an error. In addition, we could be subject to claims based upon the content that is accessible from our website through links to other websites. Moreover, we could face liability based on inaccurate information provided to us by others. Defending any such claims could be expensive and time-consuming, and any such claim could materially adversely affect our results of operations, financial condition or business.
We are exposed to data and cyber-security risks that could result in data breaches, service interruptions, harm to our reputation or significant liability.
A failure to safeguard the integrity, confidentiality, availability and authenticity of personal information, client data and our proprietary data from cyber-attacks, unauthorized access, fraudulent activity ( e.g. , check kiting or fraud, wire fraud or other dishonest acts), data breaches and other security incidents that we, our third-party service providers or our clients may experience may lead to modification,
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destruction, loss of availability or theft of critical and sensitive data pertaining to us or our clients. We have established a strategy designed to protect against threats and vulnerabilities containing preventive and detective controls including, but not limited to, firewalls, intrusion detection systems, computer forensics, vulnerability scanning, server hardening, penetration testing, anti-virus software, data leak prevention, encryption and centralized event correlation monitoring. Such protective measures, as well as additional measures that may be required to comply with rapidly evolving privacy and security standards and protocols imposed by law, regulation, industry standards or contractual obligations, have and will continue to create uncertainty and cause us to incur substantial expenses.
Despite our efforts to ensure the integrity, confidentiality, availability, and authenticity of our proprietary systems and information, it is possible that we may not be able to anticipate or to implement effective preventive measures against all cyber threats. No security solution, strategy, or measures can address all possible security threats or block all methods of penetrating a network or otherwise perpetrating a security incident. The risk of unauthorized circumvention of our security measures or those of our third-party providers, clients and partners has been heightened by advances in computer and software capabilities and the increasing sophistication of hackers who employ complex techniques involving the theft or misuse of personal and financial information, counterfeiting, phishing or social engineering incidents, account takeover attacks, denial or degradation of service attacks, malware, fraudulent payment and identity theft. Because the techniques used by hackers change frequently, we may be unable to anticipate these techniques or implement adequate preventive measures. Improper access to our systems or databases could result in the theft, publication, deletion or modification of confidential end-user information. An actual or perceived breach of our security systems or those of our third-party service providers may require notification under applicable data privacy regulations or contractual obligations.
Security incidents or disruptions of our proprietary systems or those of our service providers could also impact our ability to provide services to our clients, which could expose us to liability for damages which may not be covered by insurance, result in the loss of customer business, damage our reputation, subject us to regulatory scrutiny or expose us to protracted and costly civil litigation. In addition, the failure to timely upgrade or maintain computer systems, software and networks as necessary could also make us or our third-party service providers susceptible to breaches and unauthorized access and misuse. Data security breaches may also result from non-technical means, for example, employee misconduct or human error. We may be required to expend significant additional resources to modify, investigate or remediate vulnerabilities or other exposures arising from data and cyber-security risks. Data security breaches, acts of fraud involving our solutions or adverse findings in security audits or examinations could result in reputational damage to us, which could reduce the use and acceptance of our solutions, cause our customers to cease doing business with us or have a significant adverse impact on our revenue and future growth prospects. Furthermore, even if not directed at us specifically, attacks on other financial institutions could disrupt the overall functioning of the financial system or lead to additional regulation and oversight by federal and state agencies, which could impose new and costly compliance obligations.
If we are not able to satisfy data protection, security, privacy and other government- and industry-specific requirements or regulations, our results of operations, financial condition or business could be harmed.
Personal privacy, data protection, information security and other regulations are significant issues in the United States. Our handling of data is subject to a variety of laws and regulations, including
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regulation by various government agencies. The U.S. federal government and various state governments have adopted or proposed limitations on the collection, distribution, use and storage of personally identifiable information of individuals. We also may find it necessary or desirable to join industry or other self-regulatory bodies or other information security or data protection-related organizations that require compliance with their rules pertaining to information security and data protection. We also may be bound by additional, more stringent contractual obligations relating to our collection, use and disclosure of personal, financial and other data.
The data protection landscape is rapidly evolving, and we expect that there will continue to be new proposed laws, regulations and industry standards concerning privacy, data protection, information security and telecommunications services, and we cannot yet determine the impact such future laws, regulations and standards may have on our business. For example, on June 28, 2018, California enacted the California Consumer Privacy Act (the CCPA), which takes effect on January 1, 2020. The CCPA gives California residents expanded rights to access and delete their personal information, opt out of certain personal information sharing, and receive detailed information about how their personal information is used. The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches that is expected to increase data breach litigation. The CCPA may increase our compliance costs and potential liability. Some observers have noted that the CCPA could mark the beginning of a trend toward more stringent privacy legislation in the U.S., which could increase our potential liability and adversely affect our business.
Evolving and changing definitions of personal data and personal information, especially relating to the classification of IP addresses, machine identification, location data and other information, may limit or inhibit our ability to operate or expand our business, including limiting the sharing of data. Even the perception of privacy concerns, whether or not valid, may harm our reputation, inhibit adoption of our products by current and future customers, or adversely impact our ability to attract and retain workforce talent. In addition, changes in laws or regulations that adversely affect the use of the Internet, including laws impacting net neutrality, could impact our business. We expect that existing laws, regulations and standards may be interpreted in new manners in the future. Future laws, regulations, standards and other obligations, and changes in the interpretation of existing laws, regulations, standards and other obligations could require us to modify our solutions, restrict our business operations, increase our costs and impair our ability to maintain and grow our adviser base and increase our revenue.
Although we work to comply with applicable laws and regulations, industry standards, contractual obligations and other legal obligations, such laws, regulations, standards and obligations are evolving and may be modified, interpreted and applied in an inconsistent manner from one jurisdiction to another, and may conflict with one another. In addition, they may conflict with other requirements or legal obligations that apply to our business or the features and services that our adviser clients and their investor clients expect from our products and services. As such, we cannot assure ongoing compliance with all such laws, regulations, standards and obligations. Any failure by us to comply with applicable laws and regulations, or to comply fully with employee, client and other data privacy and data security requirements pursuant to contract and our stated privacy notice(s), could result in enforcement actions against us, including fines, imprisonment of company officials and public censure, claims for damages by customers and other affected individuals, damage to our reputation and loss of goodwill (in relation to both existing and prospective clients), any of which could have a material adverse effect on our operations, financial performance and business. Any inability to adequately address privacy and security concerns, even if unfounded, or comply with applicable laws, regulations, standards and obligations, could result in additional cost and liability to us, damage
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our reputation, inhibit sales and materially and adversely affect our results of operations, financial condition or business.
If third parties infringe upon our intellectual property or if we were to infringe upon the intellectual property of third parties, we may expend significant resources enforcing or defending our rights or suffer competitive injury.
Our success depends in part on our proprietary technology. We rely on a combination of copyright, trademark and trade secret laws, confidentiality, nondisclosure, non-interference and invention assignment agreements and other contractual and technical security measures to establish and protect our proprietary rights. If we fail to successfully enforce, monitor, police or defend our intellectual property rights, or if we were to infringe on the intellectual property rights of others, our competitive position, operations, financial condition or business could suffer.
We license certain trademark and web domain rights from third parties and may be subject to claims of infringement if such parties do not possess the necessary intellectual property rights. In addition, we may face additional risk of infringement or misappropriation claims if we hire an employee who possesses third-party proprietary information who decides to use such information in connection with our investment solutions, services or business processes without such third partys authorization. Furthermore, third parties may in the future assert intellectual property infringement claims against our customers, which, in certain circumstances, we have agreed to indemnify.
In some instances, litigation may be necessary to enforce our intellectual property rights and protect our proprietary information, or to defend against claims by third parties that we have infringed their intellectual property rights. Any litigation or claims brought by or against us, whether with or without merit, could result in substantial costs to us and divert the attention of our management, which could harm our results of operations, financial condition or business. In addition, any intellectual property litigation or claims against us could result in the loss or compromise of our intellectual property and proprietary rights, subject us to significant liabilities or require us to seek licenses on unfavorable terms or make changes to the investment services and solutions we offer, any of which could harm our results of operations, financial condition or business.
Confidentiality agreements with employees, consultants and others may not adequately prevent disclosure of trade secrets and other proprietary information.
We have devoted substantial resources to the development of our proprietary technologies, investment solutions and services. To protect our proprietary rights, we enter into confidentiality, nondisclosure, non-interference and invention assignment agreements with our employees, consultants and independent contractors. These agreements may not effectively prevent unauthorized disclosure of confidential information or unauthorized parties from copying aspects of our technologies, investment solutions or products or obtaining and using information that we regard as proprietary. Moreover, these agreements may not provide an adequate remedy in the event of such unauthorized disclosures of confidential information and we cannot assure you that our rights under such agreements will be enforceable. In addition, others may independently discover trade secrets and proprietary information, and in such cases we could not assert any trade secret rights against such parties. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our proprietary rights, and failure to obtain or maintain trade secret protection could reduce any competitive advantage we have developed and cause us to lose customers or otherwise harm our business.
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The use of open source code in investment solutions may expose us to additional risks and harm our intellectual property rights.
We rely on open source code to some extent to develop our investment solutions and support our internal systems and infrastructure. While we monitor our use of open source code to attempt to avoid subjecting our investment solutions to conditions we do not intend, such use could occur. Additionally, if a third-party software provider has incorporated certain types of open source code into software we license from such third party for our investment solutions, we could, under certain circumstances, be required to disclose the source code for our investment solutions. This could harm our intellectual property position and have a material adverse effect on our results of operations, financial condition or business.
We may become subject to liability based on the use of our investment solutions and services by our clients.
Our investment solutions and services support the investment processes of our clients, which, in the aggregate, manage billions of dollars of assets. Our client agreements have provisions designed to limit our exposure to potential liability claims brought by our adviser clients, their clients or other third parties based on the use of our investment solutions and services. However, these provisions have certain exceptions and could be invalidated by unfavorable judicial decisions or by federal, state, foreign or local laws. Use of our products as part of the investment process creates the risk that clients, or the parties whose assets are managed by our clients, may pursue claims against us for significant dollar amounts. Any such claim, even if the outcome were to be ultimately favorable to us, would involve a significant commitment of our management, personnel, financial and other resources and could have a negative impact on our reputation. Such claims and lawsuits could therefore have a material adverse effect on our results of operations, financial condition or business.
Furthermore, our clients may use our investment solutions and services together with software, data or products from other companies. As a result, when problems occur, it might be difficult to identify the source of the problem. Even when our investment solutions and services do not cause these problems, the existence of these errors might cause us to incur significant costs and divert the attention of our management and technical personnel, any of which could materially adversely affect our results of operations, financial condition or business.
Lack of liquidity or access to capital could impair our business and financial condition.
We expend significant resources investing in our business, particularly with respect to our technology and service platforms. In addition, we must maintain certain levels of required capital. As a result, reduced levels of liquidity could have a significant negative effect on us. Some potential conditions that could negatively affect our liquidity include diminished access to debt or capital markets, unforeseen or increased cash or capital requirements, adverse legal settlements or judgments or illiquid or volatile markets.
The capital and credit markets continue to experience varying degrees of volatility and disruption. In some cases, the markets have exerted downward pressure on availability of liquidity and credit capacity for businesses similar to ours. Such market conditions may limit our ability to satisfy statutory capital requirements, generate fee and other market-related revenue to meet liquidity needs and access the capital necessary to grow our business. As such, we may be forced to delay raising capital, issue different types of capital than we would otherwise, less effectively deploy such capital or
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bear an unattractive cost of capital, which could decrease our profitability and significantly reduce our financial flexibility.
In the event that our current resources are insufficient to satisfy our needs, we may need to rely on financing sources such as bank debt. The availability of additional financing will depend on a variety of factors such as market conditions, the general availability of credit, the volume of trading activities, the overall availability of credit to the financial services industry, our credit ratings and credit capacity and the possibility that our stockholders, advisers or lenders could develop a negative perception of our long- or short-term financial prospects if the level of our business activity decreases due to a market downturn. Similarly, our access to funds may be impaired if regulatory authorities or rating organizations take negative actions against us.
We may not be able to generate sufficient cash to service our indebtedness and may be forced to take other actions to satisfy our obligations under our Credit Facility, which may not be successful.
As of March 31, 2019, we had total indebtedness of $249.4 million. Our ability to make scheduled payments on or to refinance our indebtedness depends on our financial condition and operating performance, which are subject to prevailing economic and competitive conditions and certain financial, business and other factors beyond our control. We may not be able to maintain a level of cash flow from operating activities sufficient to permit us to pay the principal and interest on our indebtedness. If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay acquisitions and capital expenditures, sell assets, seek additional capital or restructure or refinance our indebtedness. Our ability to restructure or refinance indebtedness will depend on the condition of the capital markets and our financial condition at such time. Any refinancing of indebtedness could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations. The terms of existing or future debt instruments may restrict us from adopting some of these alternatives. In addition, any failure to make payments of interest and principal on our outstanding indebtedness on a timely basis could harm our ability to incur additional indebtedness. In the absence of sufficient cash flows and capital resources, we could face substantial liquidity problems and might be required to dispose of material assets or operations to meet our debt service and other obligations. Our Credit Facility (as defined in the section titled Managements discussion and analysis of financial condition and results of operationsLiquidity and capital resources) currently restricts our ability to dispose of assets and our use of the proceeds from such disposition. We may not be able to consummate those dispositions, and the proceeds of any such disposition may not be adequate to meet any debt service obligations then due. Any of these circumstances could adversely affect our results of operations, financial condition or business.
Restrictions in our existing and future debt agreements could limit our growth and our ability to engage in certain activities.
Our Credit Facility contains a number of covenants that impose operating and financial restrictions on us, including restrictions on our ability to incur additional indebtedness, create liens, make acquisitions, dispose of assets and make restricted payments, among others. In addition, our Credit Facility may require us to maintain certain financial ratios. These restrictions may also limit our ability to obtain future financings, to withstand a future downturn in our business or the economy in general, or to otherwise conduct necessary corporate activities. We may also be prevented from taking advantage of acquisitions or other business opportunities that arise because of the limitations that the restrictive covenants under our Credit Facility impose on us. A breach of any covenant in our Credit
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Facility would result in a default under the applicable agreement after any applicable grace periods. A default, if not waived, could result in acceleration of the indebtedness outstanding under the Credit Facility and our inability to borrow under the Revolver (as defined in the section titled "Managements discussion and analysis of financial condition and results of operationsLiquidity and capital resources"). The accelerated indebtedness would become immediately due and payable. If that occurs, we may not be able to make all of the required payments or borrow on short notice sufficient funds to refinance such indebtedness. Even if new financing were available at that time, it may not be on terms that are acceptable to us.
We may make future acquisitions which may be difficult to integrate, divert management resources, result in unanticipated costs or dilute our stockholders.
We may choose to grow our business in part through acquisitions, which could pose a number of risks to our operations. We may not be able to complete acquisitions or integrate the operations, products, technologies or personnel gained through any such acquisition, such as our recent acquisition of Global Financial Private Capital, without a material adverse effect on our results of operations, financial condition or business. Assimilating the acquired businesses may divert significant management attention and financial resources from our other operations and could disrupt our ongoing business. We may have difficulty integrating the acquired operations, products, technologies or personnel, and may incur substantial unanticipated integration costs. Financing an acquisition could result in dilution from issuing equity securities or a weaker balance sheet from using cash or incurring debt, and we may fail to realize the potential cost savings or other financial benefits of the acquisition. In addition, acquisitions, including our recent acquisition of Global Financial Private Capital, may result in the loss of key employees or customers, particularly those of the acquired operations. Acquisitions, including our recent acquisition of Global Financial Private Capital, could further adversely affect our existing business relationships with third parties and/or cause us to incur regulatory, legal or other liabilities from the acquired businesses, including claims for infringement of intellectual property rights, for which we may not be indemnified in full or at all.
Our insurance coverage may be inadequate or expensive.
We maintain voluntary and required insurance coverage, including, among others, general liability, property, director and officer, errors and omissions, network cyber-security and privacy, employee practices liability, fidelity bond and fiduciary liability insurance and insurance required under the Employee Retirement Income Security Act of 1974, as amended (ERISA). Recently in the insurance industry, premiums and deductible costs associated with certain insurance coverage have increased, and the number of insurers has decreased. While we endeavor to purchase coverage that is appropriate to our assessment of our risk, we are unable to predict with certainty the frequency, nature or magnitude of claims for direct or consequential damages. Our business may be negatively affected if in the future our insurance proves to be inadequate or unavailable. In addition, insurance claims may harm our reputation or divert management resources away from operating our business.
Our controls and procedures may fail or be circumvented, our risk management policies and procedures may be inadequate and operational risks could adversely affect our reputation and financial condition.
We have adopted policies and procedures to identify, monitor and manage our operational risk. These policies and procedures, however, may not be fully effective. Some of our risk evaluation methods
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depend upon information provided by others and public information regarding markets, clients or other matters that are otherwise accessible by us. If our policies and procedures are not fully effective or we are not successful in capturing all risks to which we are or may be exposed, we may suffer harm to our reputation or be subject to litigation or regulatory actions that could have a material adverse effect on our business, results of operations or financial condition.
Risks related to our controlling stockholders ultimate parent being a PRC company with stock listed in Hong Kong and Shanghai.
Our controlling stockholder is subject to supervision by regulatory authorities in the PRC and must comply with certain PRC laws and regulations that may influence our controlling stockholders decisions relating to our business.
As a Delaware corporation with revenue and operations exclusively within the United States, we are not subject to regulation by foreign authorities. However, because our controlling stockholder is an enterprise incorporated under the laws of the Peoples Republic of China (PRC), our controlling stockholder is subject to and must comply with PRC laws and regulations promulgated by PRC governmental authorities. Such regulations may influence the decisions of our controlling stockholder, as well as those of its director appointees serving on our board of directors, regarding our business and operations. Certain of these regulations require our controlling stockholder to approve specific corporate actions taken by us, including any amendment to our certificate of incorporation; certain mergers, acquisitions, asset sales and divestments that we may seek to undertake; and any related-party transactions in which we are involved. In addition, certain PRC regulations require our controlling stockholder to file with or obtain approval from various PRC regulators before approving certain of our corporate actions, including:
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obtaining approval from or filing with the China National Development and Reform Commission (the NDRC), for certain debt issuances by us, or certain investments we seek to make involving a sensitive industry, country or region, as defined by the NDRC; and |
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filing with the China Securities Regulatory Commission (the CSRC), and registering with the State Administration of Foreign Exchange, to provide us with financing or to guarantee our obligations. |
In addition, PRC regulations require our controlling stockholder to ensure that our business focuses on securities, futures, asset management, broker-dealer services, financial information services, financial information technology system services, back-office support services for specific financial businesses or products or other financial-related businesses. A failure by our controlling stockholder to comply with these or other existing or future PRC laws or regulations could result in the imposition of administrative or financial sanctions against our controlling stockholder by PRC authorities. These laws and regulations could cause our controlling stockholder and its director appointees serving on our board of directors to act in a manner that may not be perceived to be in the best interests of our other stockholders. Likewise, any failure by our controlling stockholder to obtain certain approvals, make requisite filings or otherwise comply with PRC laws and regulations could materially limit our ability to raise debt financing or make certain investments, any of which could have a material adverse effect on our financial condition or business.
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Our controlling stockholder is required by the stock exchanges on which its shares are listed to disclose and obtain approval from its board of directors or shareholders for certain corporate actions that we undertake.
HTSC is listed on The Shanghai Stock Exchange and The Stock Exchange of Hong Kong Limited, and is therefore subject to the Rules Governing the Listing of Stocks on The Shanghai Stock Exchange (the SSE Listing Rules), and the Rules Governing the Listing of Securities on The Hong Kong Stock Exchange (the HKEX Listing Rules). Under the SSE Listing Rules and the HKEX Listing Rules, HTSC must obtain approval from its board of directors or shareholders for certain major transactions in which we, as a subsidiary of HTSC, engage, including the purchase or sale of assets, mergers and acquisitions, lending, leasing of assets, donation or acceptance of assets, debt restructuring, license agreements, research and development joint ventures, and related-party transactions, the value of which exceeds certain financial thresholds established by the applicable listing rules. In addition, the HKEX Listing Rules require our controlling stockholder to obtain shareholder approval for (i) any issuance of shares by us that results in a reduction of HTSCs equity interest in us in excess of a specified dilution threshold, (ii) the implementation of a share option scheme involving the issuance of new shares by us and (iii) any issuance of debt by us outside the ordinary course of our business.
There can be no assurance that HTSC will obtain the requisite approvals if we desired to enter into any of the above transactions, and a failure to do so would restrict our ability to engage in such transactions. Furthermore, PRC regulators including the CSRC, The Shanghai Stock Exchange or The Hong Kong Stock Exchange could impose additional restrictions or approval requirements that could impact our ability to undertake certain corporate actions. We cannot guarantee that our controlling stockholder will be able to successfully or timely obtain any of the approvals needed to permit us to undertake any of the corporate actions described above, and the failure to do so may have a material adverse effect on our results of operations, financial condition or business.
The Committee on Foreign Investment in the United States (CFIUS) may modify, delay or prevent our future acquisition or investment activities.
For so long as HTSC retains a material ownership interest in us, we will be deemed a foreign person under the regulations relating to CFIUS. As such, acquisitions of or investments in U.S. businesses or foreign businesses with U.S. subsidiaries that we may wish to pursue may be subject to CFIUS review, the scope of which was recently expanded by the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA), to include certain non-passive, non-controlling investments (including certain investments in entities that hold or process personal information about U.S. nationals), certain acquisitions of real estate even with no underlying U.S. business, transactions the structure of which is designed or intended to evade or circumvent CFIUS jurisdiction and any transaction resulting in a change in the rights of a foreign person in a U.S. business if that change could result in either control of the business or a covered non-controlling investment. FIRRMA also subjects certain categories of investments to mandatory filings. If a particular proposed acquisition or investment in a U.S. business falls within CFIUSs jurisdiction, we may determine that we are required to make a mandatory filing or that we will submit to CFIUS review on a voluntary basis, or to proceed with the transaction without submitting to CFIUS and risk CFIUS intervention, before or after closing the transaction. CFIUS may decide to block or delay an acquisition or investment by us, impose conditions with respect to such acquisition or investment or order us to divest all or a portion of a U.S. business that we acquired without first obtaining CFIUS approval, which may limit the attractiveness of or prevent us from pursuing certain acquisitions or investments that we believe would otherwise be beneficial to us and our stockholders. In addition, among other things, FIRRMA
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authorizes CFIUS to prescribe regulations defining foreign person differently in different contexts, which could result in less favorable treatment for investments and acquisitions by companies from countries of special concern. If such future regulations impose additional burdens on acquisition and investment activities involving PRC and PRC-controlled entities, our ability to consummate transactions falling within CFIUSs jurisdiction that might otherwise be beneficial to us and our stockholders may be hindered.
Risks related to regulation and litigation
We are subject to extensive government regulation in the United States, and our failure or inability to comply with these regulations or regulatory action against us could adversely affect our results of operations, financial condition or business.
The financial services industry is among the most extensively regulated industries in the United States. We operate investment advisory, broker-dealer, mutual fund and custodial businesses, each of which is subject to a specific and extensive regulatory scheme. In addition, we are subject to numerous state and Federal laws and regulations of general application. It is very difficult to predict the future impact of the legislative and regulatory requirements affecting our business and our clients businesses.
Certain of our subsidiaries are registered as investment advisers with the Securities and Exchange Commission (the SEC) under the Investment Advisers Act of 1940 (as amended, the Advisers Act) and are regulated thereunder. In addition, many of our investment advisory services are conducted pursuant to the nonexclusive safe harbor from the definition of an investment company provided under Rule 3a-4 under the Investment Company Act of 1940 (as amended, the 1940 Act). If Rule 3a-4 were to cease to be available, or if the SEC were to modify the rule or its interpretation of how the rule is applied, our business could be adversely affected. Certain of our registered investment adviser subsidiaries provide advice to mutual fund clients. Mutual funds are registered as investment companies under the 1940 Act. The Advisers Act and the 1940 Act, together with related regulations and interpretations of the SEC, impose numerous obligations and restrictions on investment advisers and mutual funds, including requirements relating to the safekeeping of client funds and securities, limitations on advertising, disclosure and reporting obligations, prohibitions on fraudulent activities, restrictions on transactions between an adviser and its clients, and between a mutual fund and its advisers and affiliates, and other detailed operating requirements, as well as general fiduciary obligations.
Our subsidiary AssetMark, Inc. is a commodity pool operator registered with the Commodity Futures Trading Commission (CFTC), and is a member of the National Futures Association (the NFA). As such, it is subject to regulatory requirements under the Commodity Exchange Act (the CEA), CFTC regulations and NFA by-laws and regulations. These include disclosure and reporting requirements, restrictions on advertising, registration and licensing of certain personnel and conduct and anti-fraud requirements, among others.
In addition, AssetMark Brokerage, LLC, our limited purpose broker-dealer subsidiary, is subject to regulatory restrictions and requirements imposed by applicable statutes, regulations and policies in the jurisdictions in which we operate. U.S. government agencies and self-regulatory organizations, including U.S. state securities commissions, are empowered to enforce the regulatory restrictions and requirements applicable to us and conduct administrative proceedings that can result in censure, fine, the issuance of cease-and-desist orders or the suspension or expulsion of a broker-dealer from registration or membership. AssetMark Brokerage, LLC is registered with the SEC and with all 53 U.S.
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states and jurisdictions as a limited purpose broker-dealer providing mutual fund distribution and underwriting, and is a member of FINRA, a securities industry self-regulatory organization that supervises and regulates the conduct and activities of its members. As a registered broker-dealer, AssetMark Brokerage, LLC is subject to periodic examinations and investigations by FINRA. Further, broker-dealers are subject to regulations which cover all applicable aspects of their business, which may include sales practices, anti-money laundering, handling of material non-public information, safeguarding data, recordkeeping, reporting and the conduct and qualifications of directors, officers, employees, representatives and other associated persons.
Further, AssetMark Brokerage, LLC, along with our mutual fund businesses, are subject to the Bank Secrecy Act (the BSA), as amended by the USA PATRIOT Act of 2001 (the PATRIOT Act), and the implementing regulations thereunder, which require financial institutions, including broker-dealers, to establish anti-money laundering compliance programs, file suspicious activity and other reports with the U.S. government and maintain certain records. Broker-dealers and mutual funds must also implement related customer identification procedures and beneficial ownership identification procedures.
Additionally, AssetMark Trust Co., our wholly owned trust company subsidiary licensed with and regulated by the Arizona Department of Financial Institutions (ADFI), is one of several custodians on our platform that offers integrated custodial, brokerage and related services to clients of our adviser clients.
All of the foregoing laws and regulations are complex and we are required to expend significant resources to monitor and maintain our compliance with such laws and regulations. Any failure on our part to comply with these and other applicable laws and regulations could result in regulatory fines, suspensions of personnel or other sanctions, including revocation of our registration or that of our subsidiaries as an investment adviser, broker-dealer, commodity pool operator or trust company, as the case may be, which could, among other things, require changes to our business practices and scope of operations or harm our reputation, which, in turn could have a material adverse effect on our results of operations, financial condition or business.
Changes to the laws or regulations applicable to us or to our financial adviser clients could adversely affect our results of operations, financial condition or business.
We may be adversely affected as a result of new or revised legislation or regulations imposed by the SEC or other U.S. or foreign governmental regulatory authorities or self-regulatory organizations that supervise the financial markets around the world. In addition, we may be adversely affected by changes in the interpretation or enforcement of existing laws and rules by these governmental authorities and self-regulatory organizations. For example, on April 18, 2018, the SEC proposed a package of rulemakings and interpretations that, if adopted, would (i) require broker-dealers to act in the best interest of retail customers when making a recommendation, without placing the financial or other interests of the broker-dealer ahead of the interest of the retail customer, (ii) require the delivery to retail investors of a short-form disclosure document describing the firms relationship with and duties to the customer, (iii) restrict the use of the term adviser or advisor by broker-dealers who are not also registered as investment advisers and (iv) clarify the SECs views on the fiduciary duty that investment advisers owe to their clients. Any legislative or regulatory actions and any required changes to our business operations resulting from such legislation and regulations, as well as any deficiencies in our compliance with such legislation and regulation, could result in significant loss of revenue, limit our ability to pursue business opportunities in which we might otherwise consider engaging or otherwise adversely affect our businesses.
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It is impossible to determine the extent of the impact of any new laws, regulations or initiatives that may be proposed, or whether any current proposals will become law, and it is difficult to predict how any changes or potential changes could affect our business. Changes to laws or regulations could increase our potential liability in connection with the investment solutions and services that we provide. The introduction of any new laws or regulations could make our ability to comply with applicable laws and regulations more difficult and expensive. Any of the foregoing could have a material adverse effect on our results of operations, financial condition or business.
In 2017 we identified material weaknesses in our internal controls over financial reporting. If we experience material weaknesses or otherwise fail to maintain an effective system of internal controls in the future, we may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect investor confidence in us and, as a result, the value of our common stock.
In connection with the audit of our consolidated financial statements, we identified material weaknesses in our internal controls over financial reporting and were required to restate our financial statements for the year ended December 31, 2017. A material weakness is a deficiency, or combination of deficiencies, in internal controls over financial reporting such that there is a reasonable possibility that a material misstatement of a companys annual or interim financial statements will not be prevented or detected on a timely basis. The material weaknesses related to our procedures and controls for the review and approval of journal entries, recognition of valuation allowance for deferred tax assets and the accounting treatment of performance-vesting share-based employee compensation. We implemented measures designed to improve our internal controls over financial reporting to remediate these material weaknesses, including the engagement of technical accounting consulting resources, plans to hire additional finance department employees and the implementation of more formal policies and procedures related to critical accounting policies. No material weaknesses were identified in the year ended December 31, 2018.
We cannot assure you that the measures we have taken will be sufficient to avoid potential future material weaknesses. Accordingly, there could continue to be a possibility that a material misstatement of our financial statements would not be prevented or detected on a timely basis.
If we fail to identify or remediate any future material weaknesses in our internal controls over financial reporting, if we are unable to comply with the requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner, if we are unable to conclude that our internal controls over financial reporting are effective or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal controls over financial reporting when we are no longer an emerging growth company, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could be negatively affected. As a result of such failures, we could also become subject to investigations by the NYSE, the SEC or other regulatory authorities, and become subject to litigation from investors and stockholders, which could harm our reputation and financial condition or divert financial and management resources from our regular business activities.
Failure to comply with ERISA and Internal Revenue Code regulations could result in penalties against us.
We are subject to ERISA and Sections 4975(c)(1)(A), (B), (C) and (D) of the Internal Revenue Code of 1986, as amended (the Internal Revenue Code) and to regulations promulgated thereunder, insofar
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as we act as a fiduciary under ERISA with respect to benefit plan clients or otherwise deal with benefit plan clients. ERISA and applicable provisions of the Internal Revenue Code impose duties on persons who are fiduciaries under ERISA, prohibit specified transactions involving ERISA plan clients (including, without limitation, employee benefit plans (as defined in Section 3(3) of ERISA), individual retirement accounts and Keogh plans) and impose monetary penalties for violations of these prohibitions. Our failure to comply with these requirements could result in significant penalties against us that could have a material adverse effect on our business (or, at worst, severely limit the extent to which we could act as a fiduciary for any plans under ERISA).
We are subject to litigation and regulatory examinations and investigations.
The financial services industry faces substantial regulatory risks and litigation. Like many firms operating within the financial services industry, we are experiencing a difficult regulatory environment across our markets. Our current scale and reach as a provider to the financial services industry, the increased regulatory oversight of the financial services industry generally, new laws and regulations affecting the financial services industry and ever-changing regulatory interpretations of existing laws and regulations have made this an increasingly challenging and costly regulatory environment in which to operate. These examinations or investigations, including any enforcement action brought by the SEC against us relating to any failure to comply with our settlement agreement dated August 25, 2016 (relating to allegations of misleading performance advertisements created by F-Squared Investments, Inc., one of our former investment strategists) could result in the identification of matters that may require remediation activities or enforcement proceedings by the regulator. The direct and indirect costs of responding to these examinations, or of defending ourselves in any litigation could be significant. Additionally, actions brought against us may result in settlements, awards, injunctions, fines and penalties. The outcome of litigation or regulatory action is inherently difficult to predict and could have an adverse effect on our ability to offer some of our products and services.
Failure to properly disclose conflicts of interest could harm our reputation, results of operations or business.
We are party to certain compensation arrangements pursuant to which we receive payments based on client assets invested in certain investment products, including ETFs, proprietary mutual funds and third-party mutual funds. In certain circumstances, such arrangements allow us to receive payments from multiple parties based on the same client asset. Further, we operate as an investment adviser; our status as a registered investment adviser subjects us to a legal obligation to operate under the fiduciary standard. The SEC and other regulators have increased their scrutiny of potential conflicts of interest, and we have implemented policies and procedures to mitigate such conflicts of interest. However, if we fail to fully disclose conflicts of interest or if our policies and procedures are not effective, we could face reputational damage, litigation or regulatory proceedings or penalties, any of which may adversely affect our reputation, results of operations or business.
In the event of a change of control of our company, we may be required to obtain FINRA approval and the consent of our advisory clients to the change of control, and any failure to obtain these consents could adversely affect our results of operations, financial condition or business.
As required by the Advisers Act, the investment advisory agreements entered into by our investment adviser subsidiaries provide that an assignment of the agreement may not be made without the clients consent. Under the 1940 Act, advisory agreements with registered funds provide that they
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terminate automatically upon assignment and the board of directors and the shareholders of the registered funds must approve a new agreement for advisory services to continue. Under both the Advisers Act and the 1940 Act, a change of ownership may constitute such an assignment if it is a change of control. For example, under certain circumstances, an assignment may be deemed to occur if a controlling block of voting securities is transferred, if any party acquires control, or, in certain circumstances, if a controlling party gives up control. Under the 1940 Act, a 25% voting interest is presumed to constitute control. Upon the completion of this offering, HTSC, through its indirect subsidiary HIIHL, will hold a % voting interest in us, or % if the underwriters exercise their option to purchase additional shares in full. While we have concluded that this offering does not constitute such an assignment or a change of control, an assignment or a change of control could be deemed to occur in the future if we, or one of our investment adviser subsidiaries, were to gain or lose a controlling person, or in other situations that may depend significantly on facts and circumstances. In any such case we would seek to obtain the consent of our advisory clients, including any funds, to the assignment. To the extent of any failure to obtain these consents, our results of operations, financial condition or business could be adversely affected.
Further, our U.S. broker-dealer subsidiary, AssetMark Brokerage, LLC, is a member of FINRA and subject to FINRA rules, which could impede or delay a change of control. FINRAs NASD Rule 1017 generally provides that FINRA approval must be obtained in connection with any transaction resulting in a single person or entity acquiring or controlling, directly or indirectly, 25% or more of a FINRA member firms or its parent companys equity.
Risks related to our common stock and this offering
Control by our principal stockholder could adversely affect our other stockholders.
HTSC, through its indirect subsidiary HIIHL, owns a majority of the units of AssetMark Holdings LLC and will, following completion of the transactions described in the section titled Prospectus summaryRestructuring, own a majority of our capital stock, on a fully diluted basis. Upon the completion of this offering, HTSC will own approximately % of our outstanding shares of common stock, or % if the underwriters exercise their option to purchase additional shares in full, and will continue to control our management and affairs, including determining the outcome of matters requiring stockholder approval. So long as HTSC continues to own a significant amount of the outstanding shares of our common stock, even if such amount is less than a majority, HTSC will continue to be able to strongly influence or effectively control our decisions, including matters requiring approval by our stockholders (including the election of directors and the approval of mergers or other extraordinary transactions), regardless of whether or not other stockholders believe that the transaction is in their own best interests. Such concentration of voting power could also have the effect of delaying, deterring or preventing a change of control or other business combination that might otherwise be beneficial to our stockholders, could deprive our stockholders of an opportunity to receive a premium for their common stock as part of a sale of our company and might ultimately affect the market price of our common stock.
Further, HTSC and its affiliates engage in a broad spectrum of activities, including investments in the financial services industry in particular. In the ordinary course of their businesses, HTSC and its affiliates may engage in activities where their interests conflict with our interests or those of our stockholders. In addition, HTSC or an affiliate may pursue acquisition opportunities that may be complementary to our business, and, as a result, those acquisition opportunities may not be available to us. Further, although we will become a stand-alone public company following this offering, a
45
subsidiary of HTSC will remain our majority stockholder and may from time to time make strategic decisions that may be different from the decisions that we would have made on our own. HTSCs decisions with respect to us or our business may be resolved in ways that favor HTSC and therefore HTSCs own stockholders, which may not coincide with the interests of our stockholders. After the completion of this offering, our audit committee will review and approve all proposed related party transactions, including any transactions between us and HTSC. However, we may not be able to resolve certain conflicts of interest, or the resolution may be less favorable to us and our stockholders.
We expect that our stock price will fluctuate significantly, and you may not be able to resell your shares at or above the initial public offering price.
The trading price of our common stock is likely to be volatile and subject to wide price fluctuations in response to various factors, including:
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market conditions in the broader stock market in general, or in our industry in particular; |
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actual or anticipated fluctuations in our quarterly financial and operating results; |
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introduction of new products and services by us or our competitors; |
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issuance of new or changed securities analysts reports or recommendations; |
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sales of large blocks of our stock by our controlling stockholder or the perception that our controlling stockholder will sell our stock; |
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additions or departures of key personnel; |
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regulatory developments; |
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litigation and governmental investigations; and |
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economic, political and geopolitical conditions or events. |
These and other factors may cause the market price and demand for our common stock to fluctuate substantially, which may limit or prevent investors from readily selling their shares of common stock and may otherwise negatively affect the liquidity of our common stock. In addition, in the past, when the market price of a stock has been volatile, holders of that stock have often instituted securities class action litigation against the company that issued the stock. If any of our stockholders brought a lawsuit against us, we could incur substantial costs defending the lawsuit. Such a lawsuit could also divert the time and attention of our management from our business.
An active market for our common stock may not develop, which may inhibit the ability of our stockholders to sell common stock following this offering.
Prior to this offering, there has been no public market for shares of our common stock. We cannot predict the extent to which investor interest in our company will lead to the development of a trading market on the NYSE for our common stock or how liquid that market may become. If an active trading market does not develop, you may have difficulty selling any of our common stock that you purchase. The initial public offering price of shares of our common stock is, or will be, determined by negotiation between us and the underwriters and may not be indicative of prices that will prevail following the completion of this offering. The market price of shares of our common stock may decline below the initial public offering price, and you may not be able to resell your shares of our common stock at or above the initial public offering price.
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New investors in our common stock will experience immediate and substantial dilution after this offering.
The initial public offering price of our common stock will be substantially higher than the pro forma net tangible book value per share of the outstanding common stock immediately after this offering. Based on an assumed initial public offering price of $ per share (the midpoint of the price range set forth on the cover of this prospectus) and our pro forma net tangible book value as of March 31, 2019 (which assumes completion of the transactions described in the section titled Prospectus summaryRestructuring), if you purchase our common stock in this offering you will pay more for your shares than the amounts paid by our existing stockholders for their shares and you will suffer immediate dilution of approximately $ per share. As a result of this dilution, investors purchasing stock in this offering may receive significantly less than the full purchase price that they paid for the shares purchased in this offering in the event of a liquidation.
If a substantial number of shares become available for sale and are sold in a short period of time, the market price of our common stock could decline.
If our existing stockholders sell substantial amounts of our common stock in the public market following this offering, the market price of our common stock could decrease significantly. The perception in the public market that our existing stockholders might sell shares of common stock could also depress our market price. Upon completion of this offering, we will have shares of common stock outstanding, including the shares sold in this offering and after giving effect to the transactions described in the section titled Prospectus summaryRestructuring. Of these shares, the shares of common stock sold in this offering (including the shares sold through the directed share program described in the section titled Underwriting (conflict of interest) to participants other than our directors and executive officers), plus any shares sold pursuant to the underwriters option to purchase additional shares, will be immediately and freely tradable, without restriction, in the public market, unless they are purchased in this offering by our affiliates, as that term is defined in Rule 144. Our directors, executive officers and additional other holders of our common stock will be subject to the lock-up agreements described in the section titled Underwriting (conflict of interest) and the Rule 144 holding period requirements described in the section titled Shares eligible for future sale. After all of these lock-up periods have expired and the holding periods have elapsed, up to additional shares will be eligible for sale in the public market.
In addition, the holders of shares of common stock will have the right, subject to certain exceptions and conditions, to require us to register their shares of common stock under the Securities Act, and they will have the right to participate in future registrations of securities by us. Registration of any of these outstanding shares of common stock would result in such shares becoming freely tradable without compliance with Rule 144 upon effectiveness of the registration statement. Further, we intend to file one or more registration statements on Form S-8 under the Securities Act to register shares of our common stock or securities convertible into or exchangeable for shares of our common stock issued pursuant to our 2019 Equity Incentive Plan. Any such Form S-8 registration statements will automatically become effective upon filing, and shares registered under such registration statements will be available for sale in the open market. The market price of shares of our common stock may drop significantly when the restrictions on resale by our existing stockholders lapse or upon registration of our common stock on Form S-8. A decline in the price of shares of our common stock might impede our ability to raise capital through the issuance of additional shares of our common stock or other equity securities.
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The foregoing share counts assume (i) no exercise by the underwriters of their option to purchase additional shares and (ii) an initial public offering price of $ per share (the midpoint of the price range set forth on the cover of this prospectus), and exclude shares underlying stock options, RSUs and additional RSAs that we intend to grant immediately following the pricing of this offering as set forth elsewhere in this prospectus.
If securities or industry analysts do not publish research or reports about our business, or if they change their recommendations regarding our stock adversely, our stock price and trading volume could decline.
The trading market for our common stock will be influenced by the research and reports that industry or securities analysts publish about us or our business. If one or more of the analysts who cover us downgrade our stock or describe us or our business in a negative manner, our stock price would likely decline. If one or more of these analysts cease coverage of our company or fails to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline. In addition, if we fail to meet the expectations and forecasts for our business provided by securities analysts, our stock price could decline.
Management may apply our net proceeds from this offering to uses that do not increase our market value or improve our operating results.
We intend to use the net proceeds to us from this offering for working capital and general corporate purposes, as discussed in greater detail in the section titled Use of proceeds. The timing and amount of our use of the proceeds to us from this offering will be based on many factors, including the amount of our cash flows from operations and the anticipated growth of our business. Our management will have considerable discretion in applying our net proceeds and you will not have the opportunity, as part of your investment decision, to assess whether we are using our net proceeds appropriately. Until the net proceeds we receive are used, they may be placed in investments that do not produce income or that lose value. We may use our net proceeds for purposes that do not result in any increase in our results of operations, which could cause the price of our common stock to decline.
We are a controlled company within the meaning of the NYSE listing standards and, as a result, will qualify for, and intend to rely on, exemptions from certain corporate governance requirements. You will not have the same protections afforded to stockholders of companies that are subject to such requirements.
Upon the completion of this offering, HTSC, through its indirect subsidiary HIIHL, will continue to control a majority of the voting power of our common stock. As a result, we will be a controlled company within the meaning of the NYSE listing standards. Under these rules, a company of which more than 50% of the voting power is held by an individual, a group or another company is a controlled company and may elect not to comply with certain corporate governance requirements of the NYSE, including (1) the requirement that a majority of the board of directors consist of independent directors, (2) the requirement that we have a nominating and corporate governance committee that is composed entirely of independent directors with a written charter addressing the committees purpose and responsibilities and (3) the requirement that we have a compensation committee that is composed entirely of independent directors with a written charter addressing the committees purpose and responsibilities. Following this offering, we intend to rely on some or all of
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these exemptions. As a result, we will not have a majority of independent directors and our compensation and nominating and corporate governance committees will not consist entirely of independent directors. Accordingly, you will not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of the NYSE.
We are an emerging growth company and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors.
We are an emerging growth company as defined in the JOBS Act, and we intend to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act and reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements. We cannot predict whether investors will find our common stock less attractive if we rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.
The requirements of being a public company may strain our resources and distract our management, which could make it difficult to manage our business, particularly after we are no longer an emerging growth company.
Following the completion of this offering, we will be required to comply with various regulatory and reporting requirements, including those required by the SEC. Complying with these reporting and other regulatory requirements will be time-consuming and will result in increased costs to us and could have a negative effect on our results of operations, financial condition or business.
As a public company, we will be subject to the reporting requirements of the Securities Exchange Act of 1934 (as amended, the Exchange Act) and the requirements of the Sarbanes-Oxley Act. These requirements may place a strain on our systems and resources. The Exchange Act requires that we file annual, quarterly and current reports with respect to our business and financial condition. The Sarbanes-Oxley Act requires that we maintain effective disclosure controls and procedures and internal controls over financial reporting. To maintain and improve the effectiveness of our disclosure controls and procedures, we will need to commit significant resources, hire additional staff and provide additional management oversight. We will be implementing additional procedures and processes for the purpose of addressing the standards and requirements applicable to public companies. Sustaining our growth also will require us to commit additional management, operational and financial resources to identify new professionals to join our firm and to maintain appropriate operational and financial systems to adequately support expansion. These activities may divert managements attention from other business concerns, which could have a material adverse effect on our results of operations, financial condition or business.
As an emerging growth company as defined in the JOBS Act, we intend to take advantage of certain temporary exemptions from various reporting requirements including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act and reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements. We may also delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies, as permitted by the JOBS Act.
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When these exemptions cease to apply, we expect to incur additional expenses and devote increased management effort toward ensuring compliance with them. We cannot predict or estimate the amount of additional costs we may incur as a result of becoming a public company or the timing of such costs.
Some provisions of Delaware law and our certificate of incorporation and bylaws may deter third parties from acquiring us.
Our amended and restated certificate of incorporation and our amended and restated bylaws to be adopted in connection with this offering will provide for, among other things:
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a staggered board and restrictions on the ability of our stockholders to fill a vacancy on the board of directors; |
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the authorization of undesignated preferred stock, the terms of which may be established and shares of which may be issued without stockholder approval; |
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advance notice requirements for stockholder proposals; |
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certain limitations on convening special stockholder meetings; and |
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the amendment of certain provisions of our certificate of incorporation and bylaws only by the affirmative vote of the holders of at least two-thirds in voting power of all outstanding shares of our stock entitled to vote thereon, voting together as a single class, if HTSC owns less than 50% in voting power of our stock entitled to vote generally in the election of directors. |
These anti-takeover defenses could discourage, delay or prevent a transaction involving a change in control of our company. These provisions could also discourage proxy contests and make it more difficult for you and other stockholders to elect directors of your choosing and cause us to take other corporate actions than you desire.
Delaware law may delay or prevent a change in control, and may discourage bids for our common stock at a premium over its market price.
We are subject to the provisions of Section 203 of the Delaware General Corporation Law (the DGCL). These provisions prohibit large stockholders, in particular a stockholder owning 15% or more of the outstanding voting stock, from consummating a merger or combination with a corporation unless this stockholder receives board approval for the transaction or 66 2/3% of the shares of voting stock not owned by the stockholder approve the merger or transaction. These provisions of Delaware law may have the effect of delaying, deferring or preventing a change in control, and may discourage bids for our common stock at a premium over its market price.
Our amended and restated certificate of incorporation that will be in effect upon the consummation of this offering will designate the Court of Chancery of the State of Delaware and, to the extent enforceable, the federal district courts of the United States as the sole and exclusive forums for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees or agents.
Our amended and restated certificate of incorporation that will be in effect upon consummation of this offering will provide that, unless we consent in writing to the selection of an alternative forum, the
50
Court of Chancery of the State of Delaware will, to the fullest extent permitted by applicable law, be the sole and exclusive forum for the following types of actions or proceedings under Delaware statutory or common law: (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, employees, agents or trustees to us or our stockholders, (iii) any action asserting a claim against us or any director or officer or other employee of ours arising pursuant to any provision of the DGCL, our amended and restated certificate of incorporation or our amended and restated bylaws or (iv) any action asserting a claim against us or any director or officer or other employee of ours that is governed by the internal affairs doctrine, in each such case subject to such Court of Chancery having personal jurisdiction over the indispensable parties named as defendants therein. This provision would not apply to suits brought to enforce a duty or liability created by the Exchange Act or any other claim for which the U.S. federal courts have exclusive jurisdiction.
Our amended and restated certificate of incorporation that will be in effect upon consummation of this offering will provide that, to the fullest extent permitted by law, unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States will be the sole and exclusive forum for resolving any complaint asserting a cause of action arising under the federal securities laws of the United States, subject to and contingent upon a final adjudication in the State of Delaware of the enforceability of such exclusive forum provision. Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock will be deemed to have notice of, and consented to, the provisions of our amended and restated certificate of incorporation described in the preceding sentences.
These exclusive-forum provisions may limit a stockholders ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, employees or agents, which may discourage such lawsuits against us and such persons. If any court of competent jurisdiction were to find either exclusive-forum provision in our amended and restated certificate of incorporation to be inapplicable or unenforceable, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our results of operations or financial condition. For example, the Court of Chancery of the State of Delaware recently determined that a provision stating that U.S. federal district courts are the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act is not enforceable. However, this decision may be reviewed and ultimately overturned by the Delaware Supreme Court.
We are a holding company and rely on dividends, distributions and other payments, advances and transfers of funds from our subsidiaries to meet our debt service and other obligations.
We have no direct operations and derive all of our cash flow from our subsidiaries. Because we conduct our operations through our subsidiaries, we depend on those entities for dividends and other payments or distributions to meet any existing or future debt service and other obligations. The deterioration of the earnings from, or other available assets of, our subsidiaries for any reason could limit or impair their ability to pay dividends or other distributions to us. In addition, SEC and FINRA regulations may under certain circumstances restrict the payment of dividends by a registered broker-dealer. Compliance with this regulation may impede our ability to receive dividends from AssetMark Brokerage, LLC.
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Special note regarding forward-looking statements
We have made statements under Prospectus summary, Risk factors, Managements discussion and analysis of financial condition and results of operations, Business and in other sections of this prospectus that are forward-looking statements. In some cases, you can identify these statements by forward-looking words such as may, might, will, should, expects, plans, anticipates, believes, estimates, predicts, potential or continue, the negative of these terms and other comparable terminology. These forward-looking statements, which are subject to risks, uncertainties and assumptions about us, may include projections of our future financial performance and financial results, our anticipated growth strategies and anticipated trends in our business and our expectations regarding our industry outlook, market position, liquidity and capital resources, acquisition targets, addressable market, investments in new products, services and capabilities, ability to close and execute on strategic transactions and ability to comply with existing, modified and new laws and regulations applying to our business. These statements are only predictions based on our current expectations and projections about future events. There are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by the forward-looking statements, including those factors discussed in Risk factors. You should specifically consider the numerous risks outlined under Risk factors.
Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of any of these forward-looking statements. We are under no duty to update any of these forward-looking statements after the date of this prospectus to conform our prior statements to actual results or revised expectations, except as required by law.
In addition, we believe and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this prospectus, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements as predictions of future events.
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Unless otherwise indicated, information contained in this prospectus concerning our industry and the markets in which we operate, including our general expectations and market position, market opportunity and market size, is based on information from various sources, on assumptions that we have made that are based on those data and other similar sources, and on our knowledge of the markets for our solutions. This information involves a number of assumptions and limitations and is inherently imprecise, and you are cautioned not to give undue weight to these estimates. In addition, the industry in which we operate, as well as the projections, assumptions and estimates of our future performance and the future performance of the industry in which we operate, are subject to a high degree of uncertainty and risk due to a variety of factors, including those described in the section titled Risk factors and elsewhere in this prospectus, that could cause results to differ materially from those expressed in these publications and reports. We believe that these external sources and estimates are reliable, but have not independently verified them.
Some of the information contained in this prospectus is based on information from various sources, including independent industry publications by Cerulli Associates, Inc. and Fidelity Investments Inc., data compiled by a third party or other publicly available information. The sources of these publications, data and information include:
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Cerulli Associates: The Cerulli EdgeU.S. Managed Accounts 2015 and 2018 |
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Cerulli Associates: The Cerulli ReportAdvisor Metrics 2017 |
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Cerulli Associates: U.S. Intermediary Distribution 2018 |
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Cerulli Associates: U.S. Managed Accounts 2018 |
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Cerulli Associates: U.S. Retail Investor Products and Platforms 2018 |
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Cerulli Associates: U.S. Retirement Markets 2017 |
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Cerulli Associates Lodestar U.S. Retail Investor Database |
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Cerulli Associates Lodestar U.S. Intermediary Distribution Database |
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Fidelity Investments Inc.: 2017 Financial Advisor Community Digital Advisor Adoption Study Update |
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InvestmentNews: 2017 Adviser Technology Study |
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PriceMetrix: The State of Retail Wealth Management 2016, 2017 and 2018 |
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WealthAdvisor: 2018 Americas Best TAMPS |
The content of the foregoing sources, except to the extent specifically set forth in this prospectus, does not constitute a portion of this prospectus and is not incorporated herein.
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We estimate that the net proceeds to us from this offering will be approximately $ million, or approximately $ million if the underwriters exercise their option to purchase additional shares in full, assuming an initial public offering price of $ per share (the midpoint of the price range set forth on the cover page of this prospectus), after deducting underwriting discounts and commissions and estimated offering expenses payable by us.
Each $1.00 increase (decrease) in the public offering price per share would increase (decrease) our net proceeds, after deducting underwriting discounts and commissions and estimated offering expenses payable by us, by $ million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same. Similarly, each increase (decrease) of 1.0 million shares in the number of shares of common stock offered by us would increase (decrease) the net proceeds to us from this offering by approximately $ million, assuming no change to the assumed initial public offering price of $ per share and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us.
We intend to use approximately $125 million of the net proceeds to us from this offering to repay a portion of our Term Loan and the remainder for general corporate purposes, including working capital, operating expenses and capital expenditures. As of March 31, 2019, we had $249.4 million of debt outstanding under our Term Loan. The Term Loan matures in November 2025 and bears interest at a variable rate, initially LIBOR plus a margin of 3.50% or the Alternate Base Rate, as specified in the Term Loan, plus a margin of 2.50%. The Term Loan was incurred in November 2018, and we used the proceeds from the Term Loan to make a one-time distribution to AssetMark Holdings LLC, as described in the section titled Dividend policy, and for working capital purposes. Additionally, we may use a portion of the net proceeds to acquire or invest in complementary businesses, technologies or other assets. For example, we closed our acquisition of Global Financial Private Capital in April 2019, and we may consider other acquisitions in the TAMP space, although we currently have no agreements or understandings with respect to any acquisitions or investments.
The expected use of net proceeds from this offering represents our intentions based upon our present plans and business conditions. We cannot predict with certainty all of the particular uses for the proceeds of this offering or the amounts that we will actually spend on the uses set forth above. Accordingly, our management will have broad discretion in applying the net proceeds of this offering. The timing and amount of our actual expenditures will be based on many factors, including cash flows from operations and the anticipated growth of our business. Pending their application, we intend to invest the net proceeds in short-term, interest-bearing, investment-grade investments, certificates of deposit or guaranteed obligations of the U.S. government.
We will not receive any proceeds from the sale of common stock by the selling stockholder.
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In the fourth quarter of 2018, we made a one-time cash distribution to AssetMark Holdings LLC, in the amount of $234 million, consisting of a $76 million dividend payment and a $158 million return of capital. We currently intend to retain all available funds and any future earnings for use in the operation of our business and do not anticipate paying any dividends on our common stock in the foreseeable future. Any future determinations relating to our dividends and earning retention policies will be made at the discretion of our board of directors, who will review such policies from time to time in light of our earnings, cash flow generation, financial position, results of operations, the terms of our indebtedness and other contractual restrictions, capital requirements, business prospects and other factors our board of directors may deem relevant. The terms of our debt agreements limit our ability to pay dividends on our common stock.
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The following table sets forth our cash, cash equivalents and capitalization as of March 31, 2019:
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on an actual basis; |
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on a pro forma basis to give effect to the transactions described in the section titled Prospectus summaryRestructuring and the filing of our amended and restated certificate of incorporation; and |
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on a pro forma as adjusted basis to further reflect the sale by us of shares of common stock in this offering, at an assumed initial public offering price of $ per share (the midpoint of the price range set forth on the cover page of this prospectus), after deducting underwriting discounts and commissions and estimated offering expenses payable by us, and the application of approximately $125 million of the net proceeds to us from this offering to repay a portion of our Term Loan as set forth in the section titled Use of proceeds. |
This table should be read in conjunction with the sections titled Use of proceeds and Managements discussion and analysis of financial condition and results of operations, and the consolidated financial statements and notes thereto appearing elsewhere in this prospectus.
As of March 31, 2019 | ||||||||||||
(in thousands, except unit and share data) | Actual | Pro forma |
Pro forma as
adjusted |
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Cash and cash equivalents |
$ | 102,478 | $ | 102,478 | $ | |||||||
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Long-term debt (1) |
$ | 242,358 | $ | 242,358 | $ | |||||||
Stockholders equity: |
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Common stock of AssetMark Financial Holdings, Inc., $0.01 par value per share ($0.001 per share pro forma and pro forma as adjusted), 1,000 shares authorized, 100 shares outstanding, actual; shares authorized, shares outstanding, pro forma; and shares authorized, shares outstanding, pro forma as adjusted |
* | |||||||||||
Additional paid-in capital |
640,388 | 640,388 | ||||||||||
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Retained earnings |
66,657 | 66,657 | ||||||||||
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Accumulated other comprehensive income, net of tax |
19 | 19 | ||||||||||
|
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Total stockholders equity |
707,064 | 707,064 | ||||||||||
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Total capitalization |
$ | 949,422 | $ | 949,422 | $ | |||||||
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* | Not meaningful. |
(1) | Net of unamortized discount and debt issuance costs. |
Each $1.00 increase (decrease) in the public offering price per share would increase (decrease) our total stockholders equity and total capitalization by $ million (assuming the number of shares offered by us remains the same). Each increase (decrease) of 1,000,000 shares in the number of shares we are offering would increase (decrease) each of cash and cash equivalents, additional paid-in capital, total stockholders equity and total capitalization by $ , assuming the assumed initial public offering price of $ per share (the midpoint of the price range set forth on the cover of this prospectus) remains the same, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us. The pro forma as adjusted information is illustrative only, and will depend on the actual initial public offering price, number of shares offered and other terms of this offering determined at pricing.
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The number of shares of our common stock set forth in the table above is based on shares of our common stock outstanding as of March 31, 2019, assuming completion of the transactions described in the section titled Prospectus summaryRestructuring, and does not include:
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shares of common stock issuable upon the exercise of options to be granted immediately following the pricing of this offering with an exercise price equal to the initial public offering price per share; |
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shares of common stock subject to RSAs to be granted under our 2019 Equity Incentive Plan immediately following the pricing of this offering; |
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shares of common stock subject to RSUs to be granted under our 2019 Equity Incentive Plan immediately following the pricing of this offering; and |
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additional shares of common stock reserved for future issuance under our 2019 Equity Incentive Plan, which will become effective in connection with this offering. |
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If you invest in our common stock in this offering, your ownership interest will be diluted immediately to the extent of the difference between the initial public offering price per share of our common stock and the pro forma as adjusted net tangible book value per share of our common stock immediately after the closing of this offering.
Our pro forma net tangible book value, which assumes completion of the transactions described in the section titled Prospectus summaryRestructuring, as of March 31, 2019 was $ or $ per share of common stock. After giving effect to the sale by us of shares of common stock in this offering, at an assumed initial public offering price of $ per share (the midpoint of the price range set forth on the cover page of this prospectus), and the receipt and application of the net proceeds to us, our pro forma as adjusted net tangible book value as of March 31, 2019, assuming completion of the transactions described in the section titled Prospectus summaryRestructuring, would have been $ or $ per share. This represents an immediate increase in pro forma net tangible book value to existing stockholders of $ per share and an immediate dilution to new investors of $ per share. Dilution per share represents the difference between the price per share to be paid by new investors for the shares of common stock sold in this offering and the pro forma net tangible book value per share immediately after this offering. The following table illustrates this per share dilution:
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Assumed initial public offering price per share |
$ | |||||||
Pro forma net tangible book value per share as of March 31, 2019 |
$ | |||||||
Increase in pro forma net tangible book value per share attributable to new investors purchasing shares in this offering |
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Pro forma as adjusted net tangible book value per share after this offering |
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Dilution per share to new investors |
$ | |||||||
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Each $1.00 increase (decrease) in the assumed initial public offering price of $ per share (the midpoint of the price range set forth on the cover of this prospectus) would increase (decrease) our pro forma as adjusted net tangible book value after this offering by $ per share and would decrease (increase) dilution to new investors purchasing shares in this offering by $ per share, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting underwriting discounts and commissions and estimated offering expenses payable by us. We may also increase or decrease the number of shares we are offering. Assuming the assumed initial public offering price of $ per share remains the same, after deducting underwriting discounts and commissions, each increase (decrease) of 1,000,000 shares in the number of shares we are offering would increase (decrease) our pro forma as adjusted net tangible book value by $ per share, and would decrease (increase) dilution to new investors purchasing shares in this offering by $ per share.
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The following table sets forth, on a pro forma basis, immediately prior to the consummation of this offering, the number of shares of common stock purchased from us, the total consideration paid, or to be paid, and the average price per share paid, or to be paid, by existing stockholders and by the new investors, at an assumed initial public offering price of $ per share (the midpoint of the price range set forth on the cover page of this prospectus), before deducting underwriting discounts and commissions and estimated offering expenses payable by us:
Shares purchased | Total consideration |
Average
price per share |
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Number | Percent | Amount | Percent | |||||||||||||||||
Existing stockholders |
% | $ | % | $ | ||||||||||||||||
New investors |
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Total |
100% | $ | 100% | |||||||||||||||||
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The dilution information above is for illustration purposes only. Our pro forma as adjusted net tangible book value following the consummation of this offering is subject to adjustment based on the actual initial public offering price of our shares and other terms of this offering determined at pricing. We will not receive any proceeds from the sale of shares of our common stock by the selling stockholder in this offering. Accordingly, there will be no dilutive impact as a result of such sales.
The number of shares of our common stock reflected in the tables above is based on shares of our common stock outstanding as of March 31, 2019, assuming completion of the transactions described in the section titled Prospectus summaryRestructuring, and does not include:
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shares of common stock issuable upon the exercise of options to be granted immediately following the pricing of this offering with an exercise price equal to the initial public offering price per share; |
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shares of common stock subject to RSAs to be granted under our 2019 Equity Incentive Plan immediately following the pricing of this offering; |
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shares of common stock subject to RSUs to be granted under our 2019 Equity Incentive Plan immediately following the pricing of this offering; and |
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additional shares of common stock reserved for future issuance under our 2019 Equity Incentive Plan, which will become effective in connection with this offering. |
To the extent that additional options or other securities are issued under our equity incentive plans, or we issue additional shares of common stock in the future, there will be further dilution to investors participating in this offering. In addition, we may choose to raise additional capital because of market conditions or strategic considerations, even if we believe that we have sufficient funds for our current or future operating plans. If we raise additional capital through the sale of equity or convertible debt securities, the issuance of these securities could result in further dilution to our stockholders.
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Selected consolidated financial data
The following selected consolidated financial data of AssetMark Financial Holdings, Inc. should be read in conjunction with, and are qualified by reference to, Managements discussion and analysis of financial condition and results of operations and the consolidated financial statements and notes thereto included elsewhere in this prospectus. The consolidated statements of income data for the years ended December 31, 2018 and 2017 and the consolidated balance sheet data as of December 31, 2018 and 2017 are derived from, and qualified by reference to, the audited consolidated financial statements of AssetMark Financial Holdings, Inc. included elsewhere in this prospectus and should be read in conjunction with those consolidated financial statements and notes thereto. The consolidated statements of income data for the three months ended March 31, 2019 and 2018 and the consolidated balance sheet data as of March 31, 2019 and 2018 are derived from, and qualified by reference to, the unaudited interim condensed consolidated financial statements of AssetMark Financial Holdings, Inc. included elsewhere in this prospectus and should be read in conjunction with those unaudited interim condensed consolidated financial statements and notes thereto. The unaudited interim condensed consolidated financial statements have been prepared on the same basis as our annual audited consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal, recurring adjustments, that are necessary to present fairly the unaudited interim condensed consolidated financial statements. Results for historical periods may not be indicative of results expected for future periods, and our interim results are not necessarily indicative of the results to be expected for the full year or any other period.
Year ended December 31, | Three months ended March 31, | |||||||||||||||
(in thousands, except per share data) | 2018 | 2017 | 2019 | 2018 | ||||||||||||
Statements of income data: |
||||||||||||||||
Asset-based revenue |
$ | 338,031 | $ | 282,966 | $ | 83,063 | $ | 79,076 | ||||||||
Spread-based revenue |
20,403 | 10,430 | 7,549 | 3,749 | ||||||||||||
Other income |
5,200 | 2,121 | 1,702 | 1,708 | ||||||||||||
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Total revenue |
363,634 | 295,517 | 92,314 | 84,533 | ||||||||||||
Total expenses |
309,071 | 276,174 | 86,063 | 70,870 | ||||||||||||
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Income before income taxes |
54,563 | 19,343 | 6,251 | 13,663 | ||||||||||||
Provision for (benefit from) income taxes |
17,137 | (79,635 | ) | 3,440 | 3,872 | |||||||||||
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Net income |
$ | 37,426 | $ | 98,978 | $ | 2,811 | $ | 9,791 | ||||||||
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Pro forma basic and diluted net income per share (1) |
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Pro forma weighted average common shares outstanding (1) |
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Other data: |
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Capital expenditures |
$ | 17,414 | $ | 15,652 | $ | 4,712 | $ | 4,214 | ||||||||
Net cash provided by operating activities |
61,662 | 45,612 | 2,769 | 8,562 | ||||||||||||
Net cash used in investing activities |
(17,714 | ) | (15,652 | ) | (5,020 | ) | (4,214 | ) | ||||||||
Net cash provided by financing activities |
11,259 | | (625 | ) | | |||||||||||
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(1) | Pro forma amounts give effect to the transactions described in the section titled Prospectus summaryRestructuring. |
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As of December 31, | As of March 31, | |||||||||||
(in thousands, interim data unaudited) | 2018 | 2017 | 2019 | |||||||||
Balance sheet data: |
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Cash and cash equivalents |
$ | 105,354 | $ | 50,147 | $ | 102,478 | ||||||
Working capital (1) |
77,521 | 20,091 | 86,863 | |||||||||
Total assets |
1,147,275 | 1,097,741 | 1,146,191 | |||||||||
Total liabilities |
448,264 | 211,783 | 439,127 | |||||||||
Stockholders equity |
699,011 | 885,958 | 707,064 | |||||||||
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(1) | Current assets less current liabilities. |
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Managements discussion and analysis of financial condition and results of operations
You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and the related notes and other financial information included elsewhere in this prospectus. Some of the information contained in this discussion and analysis or set forth elsewhere in this prospectus, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. You should review Special note regarding forward-looking statements and Risk factors for a discussion of forward-looking statements and important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. Our fiscal year ends on December 31 each year.
Overview
AssetMark is a leading provider of extensive wealth management and technology solutions that power independent financial advisers and their clients. Our platform enables advisers to outsource high-cost and specialty services that would otherwise require significant investments of time and moneyhelping to level the playing field for independent financial advisers of all sizes. We provide an end-to-end experience, spanning nearly all elements of an advisers engagement with his or her clientfrom initial conversations to ongoing financial planning discussions, including performance reporting and billing. In addition, our platform provides tools and capabilities for advisers to better manage their day-to-day business activities, giving them more time for meaningful conversations with investors.
We believe that independent financial advisers who have a deep understanding of their communities and put the needs of investors first provide the best path for investors to achieve their long-term financial goals. We empower these adviser-entrepreneurs to start, run and grow independent advisory businesses. The compelling value of our tools for advisers and their clients has facilitated our rapid growth. From December 31, 2014 to March 31, 2019, our platform assets grew from $25 billion to $50 billion, representing a compounded annual growth rate of 17%.
Our experienced and committed executive team has provided stable leadership and a continued focus on growth. Further, our history of platform innovation and strategic acquisitions has resulted in strong growth of our platform assets. Highlights in our history including the following:
Fully integrated technology platform
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2018: Launched WealthBuilder, a goals-based digital advice solution |
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2018: Launched investor portal, a modern client engagement experience |
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2017: Launched Smarter Account Setup, a streamlined account opening process |
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2016: Launched PortfolioEngine, a state-of-the-art portfolio analytics tool |
Personalized and scalable adviser service
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2018: Launched segmented business consulting offering, to scale and expand our business consulting services |
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2017: Launched ensemble team, a team sales and service approach designed to provide advisers with tools and resources to grow their businesses |
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2016: Launched Platinum Service Desk, a concierge service model for our top advisers |
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2015: Launched new sales model, including a team designed to target new advisers and expand share of wallet with existing advisers |
Curated investment platform
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2016-2018: Expanded Custom High-Net-Worth Solutions, a bespoke solution tailored to investor needs, as well as low-cost institutional investment offerings |
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2016: Launched Investing Evolved, our proprietary investment framework |
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2016: Launched Insured Cash Deposit Program, a program to safeguard a portion of assets in an FDIC-insured interest-bearing liquid vehicle |
Mergers and acquisitions
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2019: Acquired Global Financial Private Capital, a provider of a broad suite of integrated wealth management services for institutional and individual investors |
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2015: Acquired Clark Capitals TAMP |
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2014: Acquired Aris, a wealth management firm proving retirement and trust services, to augment retirement offering |
Key factors affecting our performance
Expansion of our existing financial adviser base
We are focused on attracting new advisers to our platform with our end-to-end wealth management offering, composed of a fully integrated technology platform, high-touch sales and service support and a curated investment platform. Our extensive offering is built to enhance adviser efficiency so that advisers of all sizes can compete and grow. We also strive to increase our share of wallet, or portion of an advisers fee-based business that is invested on our platform, by providing a holistic platform for advisers and surrounding advisers with the tools they need to better serve their clients. Our business will depend in part on our ability to drive higher usage of our platform by financial advisers and their client bases.
Increase of new financial advisers on our platform
Within the wealth management industry, the percentage of assets served by independent financial advisers is forecasted to grow from 42% in 2017 to 48% in 2022, based on our internal estimates and Cerulli data on expected industry growth. We seek to capitalize on this trend and attract new financial advisers to our platform by continuing to invest in our technology platform, sales and service standards and curated investment offering. Our annual cohort of new producing advisers grew 66% from 548 new producing advisers in 2014 to 910 in 2018. Our business will depend in part on our ability to continue to attract new advisers to our platform.
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Technology development
We invested $153 million in the development of our technology and our dedicated technology team from January 1, 2015 to March 31, 2019. We intend to continue to invest in our technology platform to address the needs of our advisers and their investors. Our revenue growth will depend, in part, on our ability to continue to launch new offerings and deliver solutions to our advisers efficiently. While these investments may delay or reduce our profitability, we believe they will enable us to grow our revenue meaningfully in the long term.
Investments in growth
We have made and expect to continue to make substantial investments across our business, including those related to increasing our total employee base, to support our continued growth. We intend to continue to expand our sales capacity and further improve sales productivity to drive additional revenue and support the growth of our client base. We may incur increased general and administrative expenses to support our growth and operations. Our results of operations will depend in part on our ability to continue to manage such expenses, as well as on the effectiveness of our investments. We expect to continue managing such expenses and investments to support our EBITDA margin.
Competition
We compete with a broad range of wealth management firms that offer services to independent investment advisers. Our competitive landscape is defined by three primary factors: 1) technology capabilities, 2) consulting and back office servicing and 3) investment solutions. We may compete on these factors based on products, services or fees. While we anticipate that we will see increased competition and experience fee pressure, we believe that our technology platform, along with our personalized service and curated investment solutions, will continue to drive revenue expansion.
Value of platform assets
Our revenue is subject to fluctuations due to changes in general economic conditions, including market conditions and the changing interest rate environment. Most of our revenue is based on the value of assets invested in products on our platform, which is heavily influenced by general economic conditions. Fluctuations in securities prices may affect the value of such assets and may also influence an investors decision to select, grow, maintain or reduce an investment. We generate asset-based revenue from fees billed in advance of each quarter, providing visibility into near-term revenue and helping to minimize revenue fluctuations stemming from market volatility. In addition, we realize spread-based revenue, which represents a growing portion of our revenue. Spread-based revenue is subject to change based on interest rate changes and the amount of cash held by investors at our proprietary trust company.
Acquisitions
Our ability to pursue and execute strategic transactions may impact our assets and revenue. From 2014 to 2018, we acquired two firms, which collectively have added $3.5 billion in assets. Subsequently, in April 2019, we closed our acquisition of Global Financial Private Capital following CFIUS clearance and FINRA approval, for a total cash purchase price of $35.9 million. This acquisition added another $3.8 billion in platform assets. We expect to continue to selectively seek acquisitions
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that will enhance our scale, operating leverage and capabilities to further deepen our offering to advisers and investors.
Key operating metrics
In addition to our GAAP financials, we regularly review the following key metrics to measure performance, identify trends, formulate financial projections, compensate our employees and monitor our business. While we believe that these metrics are useful in evaluating our business, other companies may not use similar metrics or may not calculate similarly titled metrics in a consistent manner.
Key metrics for the years ended December 31, 2018 and 2017 and the three months ended March 31, 2019 and 2018 include the following:
Year ended December 31, | Three months ended March 31, | |||||||||||||||
2018 | 2017 | 2019 | 2018 | |||||||||||||
Operational metrics: |
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Platform assets (at period-end) (millions of dollars) |
$ | 44,855 | $ | 42,385 | $ | 49,695 | $ | 43,462 | ||||||||
Net flows (millions of dollars) |
$ | 5,916 | $ | 5,863 | $ | 1,409 | $ | 1,667 | ||||||||
Net flows (% of beginning platform assets) |
14.0 | % | 18.2 | % | 3.1 | % | 3.9 | % | ||||||||
Market impact net of fees (millions of dollars) |
$ | (3,446 | ) | $ | 4,271 | $ | 3,431 | $ | (590 | ) | ||||||
Advisers (at period-end) |
7,573 | 7,184 | 7,615 | 7,262 | ||||||||||||
Engaged advisers (at period-end) |
1,840 | 1,743 | 1,967 | 1,793 | ||||||||||||
Assets from engaged advisers (at period-end) (millions of dollars) |
$ | 38,499 | $ | 36,368 | $ | 43,277 | $ | 37,427 | ||||||||
Households (at period-end) |
134,173 | 114,460 | 137,749 | 119,491 | ||||||||||||
New producing advisers |
910 | 911 | 198 | 211 | ||||||||||||
Production lift from existing advisers (%) |
22.1 | % | 27.6 | % | 24.0 | % | 23.9 | % | ||||||||
Net flows lift from existing advisers (%) |
10.8 | % | 14.0 | % | 11.4 | % | 14.3 | % | ||||||||
ATC client cash (millions of dollars) |
$ | 1,612 | $ | 1,146 | $ | 1,411 | $ | 1,170 | ||||||||
Financial metrics: |
||||||||||||||||
Total revenue (millions of dollars) |
364 | 296 | 92 | 85 | ||||||||||||
Net income margin (%) |
10.3 | % | 33.5 | % | 3.0 | % | 11.6 | % | ||||||||
Capital expenditure (millions of dollars) |
$ | 17 | $ | 16 | $ | 5 | $ | 4 | ||||||||
Non-GAAP financial metrics: |
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Asset-based net revenue (millions of dollars) |
$ | 221 | $ | 185 | $ | 55 | $ | 52 | ||||||||
Spread-based net revenue (millions of dollars) |
$ | 19 | $ | 9 | $ | 7 | $ | 3 | ||||||||
Net revenue (millions of dollars) |
$ | 245 | $ | 196 | $ | 64 | $ | 57 | ||||||||
Organic net revenue growth (%) |
25.0 | % | 15.6 | % | 11.1 | % | 30.0 | % | ||||||||
Adjusted EBITDA (millions of dollars) |
$ | 88.9 | $ | 58.9 | $ | 22.7 | $ | 21.0 | ||||||||
Adjusted net income (millions of dollars) |
$ | 60.8 | $ | 34.3 | $ | 12.7 | $ | 15.1 | ||||||||
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Platform assets (at period-end)
We believe that the amount of assets on our platform is an important indicator of the strength and growth of our business, our increased customer footprint and the market acceptance of our platform.
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We define platform assets as all assets on the AssetMark platform whether these are assets for which we provide advisory services, referred to as regulatory assets under management (AUM), or non-advisory assets under administration, assets held in cash accounts or otherwise not managed (Other Assets). There is generally no material economic difference to our financial results whether assets are considered AUM or Other Assets. We view our platform assets as reflective of our revenue growth and potential for future growth. We had platform assets of $42,385 million and $44,855 million as of December 31, 2017 and December 31, 2018, respectively and $43,462 million and $49,695 million as of March 31, 2018 and March 31, 2019, respectively. Our regulatory AUM totaled $28,303 million and $29,959 million as of December 31, 2017 and December 31, 2018, respectively, and $28,909 million and $32,719 million as of March 31, 2018 and March 31, 2019, respectively. We intend to continue growing our platform assets with enhancements to our technology, services and investment solutions. We expect the growth in our platform assets will remain a significant indicator of our business momentum and results of operations as existing advisers and new advisers realize the benefits of our platform. Our platform assets in any period may continue to fluctuate as a result of several factors, including our adviser satisfaction with the functionality, features, performance or pricing of our offering, overall fluctuations in the securities markets and other factors, a number of which are beyond our control.
Net flows and market impact net of fees
The changes in our platform assets from period to period are primarily driven by the amount of new assets that are added to existing and new client accounts, which we refer to as production, and the amount of assets that are withdrawn from client accounts, which we refer to as redemptions. We refer to the difference between production and redemptions as net flows. Positive net flows indicate that the amount of assets added to client accounts exceeds the amount of assets that have been terminated or withdrawn from client accounts.
In addition to net flows, the change in the market value of investments held in client accounts between the beginning and end of a period, which we define as market impact, also influences platform assets. For each period, we show the market impact on platform assets net of the fees paid to financial advisers, AssetMark custodians and certain fees embedded in investment vehicles.
The following table provides information regarding the degree to which production, redemptions, net flows and changes in the market value of existing assets contributed to changes in assets on our platform in the periods indicated.
Year ended December 31, |
Three months ended March 31, |
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(in millions) | 2018 | 2017 | 2019 | 2018 | ||||||||||||
Beginning platform assets |
$ | 42,385 | $ | 32,251 | $ | 44,855 | $ | 42,385 | ||||||||
Production |
10,843 | 10,399 | 2,838 | 2,682 | ||||||||||||
Redemptions |
(4,927 | ) | (4,536 | ) | (1,429 | ) | (1,015 | ) | ||||||||
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Net flows |
5,916 | 5,863 | 1,409 | 1,667 | ||||||||||||
Market impact net of fees |
(3,446 | ) | 4,271 | 3,431 | (590 | ) | ||||||||||
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Ending platform assets |
$ | 44,855 | $ | 42,385 | $ | 49,695 | $ | 43,462 | ||||||||
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Advisers (at period-end)
Adviser count reflects the total number of advisers who had at least one investor account on our platform at the end of the given period.
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Engaged advisers (at period-end)
Engaged advisers are advisers with at least $5 million in platform assets.
Assets from engaged advisers (at period-end)
Assets from engaged advisers are total platform assets attributable to engaged advisers.
Households (at period-end)
We define a Household as one or more client accounts that are grouped together based on a relationship identification code as determined by the financial adviser.
New producing advisers
New producing advisers (NPAs) for a given period represents the number of advisers that invested their first client assets on our platform in that period.
Production lift from existing advisers
Existing advisers for a given period are defined as those who had invested client assets on our platform as of the beginning of the period. Production lift from existing advisers for a given period is calculated by dividing production attributable to existing advisers for such period by platform assets as of the beginning of the period. This metric represents both the organic growth of these advisers as well as any incremental share of wallet of the advisers business that is added to our platform.
Net flows lift from existing advisers
Net flows lift from existing advisers for a given period is calculated by dividing net flows attributable to existing advisers for such period by the platform assets as of the beginning of the period. This metric represents both the organic growth of these advisers as well as any incremental share of wallet of the advisers business that joins our platform, less redemptions from the clients of existing advisers.
ATC client cash
In general, all accounts with AssetMark Trust Company (ATC) are required to have cash at a minimum level ranging from of 1.5% to 5% of invested assets. In addition to this minimum amount, strategists and advisers have the discretion to hold additional invested assets in cash. We refer to the aggregate amount of cash held at ATC as ATC client cash. As of December 31, 2018 and March 31, 2019, ATC client cash accounted for 5% and 4%, respectively, of the total assets in custody at ATC. As of December 31, 2018 and March 31, 2019, 86% and 87%, respectively, of the ATC client cash was placed with the ATC-insured cash deposit program and was the primary source of spread-based revenue for our business.
Total revenue
Total revenue includes all revenue that we recognize, including asset-based revenue, spread-based revenue and other revenue.
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Net income margin
Net income margin is defined as net income divided by total revenue.
Capital expenditure
Capital expenditure represents the long-term investments that we make on an annual basis. Capital expenditure primarily reflects investments in technology, the development of new products and services and other intangible assets but also includes investments in property and equipment such as technology support and office space.
Non-GAAP financial metrics:
Asset-based net revenue, spread-based net revenue, net revenue, adjusted EBITDA and adjusted net income are non-GAAP financial metrics.
Asset-based net revenue
Asset-based net revenue is calculated as asset-based revenue less asset-based expenses related to that revenue, as such terms are defined in Components of results of operations.
Our product pricing methodology charges one fee to the end-investor, which is inclusive of (i) our platform fee or advisory fee and, in most cases, (ii) a custody fee and (iii) either a strategist, investment manager or sub-advisory fee. Under U.S. GAAP, we recognize as revenue fees paid by end-investors to strategists, investment managers, sub-advisers and third-party custodians, and such fees are recorded as both asset-based revenue and asset-based expenses when paid to third parties. Approximately 91% of our asset-based expenses for the year ended December 31, 2018 related to fees paid to strategists, investments managers, sub-advisers and third-party custodians. The remaining 9% of our asset-based expenses in the year ended December 31, 2018 were fees paid to other third parties that are not explicitly a component of our product pricing. Asset-based net revenue reflects asset-based revenue excluding all asset-based expenses. As such, we believe asset-based net revenue is a useful indicator of the asset-based profit on our products, in addition to and not in lieu of asset-based revenue, due to the large amount of payments that we collect on behalf of third parties providing services on our platform.
Asset-based net revenue has limitations as an analytical tool and should not be considered in isolation to, or as a substitute for, analysis of our results as reported under U.S. GAAP. Some of these limitations are:
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asset-based net revenue includes only costs directly attributable to revenue generation that are variable with the underlying related assets; and |
|
asset-based net revenue does not include all costs of revenue, such as employee compensation and fixed-contract third-party services, which are required to generate revenue. |
Set forth below is a reconciliation from asset-based revenue to asset-based net revenue for the years ended December 31, 2018 and 2017 and the three months ended March 31, 2019 and 2018.
Year ended December 31, | Three months ended March 31, | |||||||||||||||
(in thousands) | 2018 | 2017 | 2019 | 2018 | ||||||||||||
Asset-based revenue |
$ | 338,031 | $ | 282,966 | $ | 83,063 | $ | 79,076 | ||||||||
Less: Asset-based expenses |
116,763 | 98,401 | 28,102 | 26,805 | ||||||||||||
|
|
|||||||||||||||
Asset-based net revenue |
$ | 221,268 | $ | 184,565 | $ | 54,961 | $ | 52,271 | ||||||||
|
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Spread-based net revenue
Spread-based net revenue is calculated as spread-based revenue less spread-based expenses, as such terms are defined in Components of results of operations.
We believe that spread-based net revenue is a useful measure of the growth of our business and the performance of or our interest income activities, in addition to and not in lieu of spread-based revenue, due to the large amount of payments we make to third parties providing services on our platform that have no impact on profitability.
Spread-based net revenue has limitations as an analytical tool and should not be considered in isolation to, or as a substitute for, analysis of our results as reported under U.S. GAAP. Some of these limitations are:
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spread-based net revenue includes only costs directly attributable to revenue generation that are variable with the underlying related assets; and |
|
spread-based net revenue does not include all costs of revenue, such as employee compensation and fixed-contract third-party services, which are required to generate revenue. |
Set forth below is a reconciliation from spread-based revenue to spread-based net revenue for the years ended December 31, 2018 and 2017 and the three months ended March 31, 2019 and 2018.
Year ended December 31, | Three months ended March 31, | |||||||||||||||
(in thousands) | 2018 | 2017 | 2019 | 2018 | ||||||||||||
Spread-based revenue |
$ | 20,403 | $ | 10,430 | $ | 7,549 | $ | 3,749 | ||||||||
Less: Spread-based expenses |
1,671 | 976 | 478 | 361 | ||||||||||||
|
|
|||||||||||||||
Spread-based net revenue |
$ | 18,732 | $ | 9,454 | $ | 7,071 | $ | 3,388 | ||||||||
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Net revenue
Net revenue is calculated as total revenue less asset-based expenses and spread-based expenses.
We believe that net revenue is a useful measure of the growth and performance of our business, in addition to and not in lieu of total revenue, due to the large amount of payments that we collect on behalf of third parties providing services on our platform that have no impact on profitability.
Net revenue has limitations as an analytical tool and should not be considered in isolation to, or as a substitute for, analysis of our results as reported under U.S. GAAP. Some of these limitations are:
|
net revenue includes only costs directly attributable to revenue generation that are variable with the underlying related assets; and |
|
net revenue does not include all costs of revenue, such as employee compensation and fixed-contract third-party services, which are required to generate revenue. |
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Set forth below is a reconciliation from total revenue to net revenue for the years ended December 31, 2018 and 2017 and the three months ended March 31, 2019 and 2018.
Year ended December 31, | Three months ended March 31, | |||||||||||||||
(in thousands) | 2018 | 2017 | 2019 | 2018 | ||||||||||||
Total revenue |
$ | 363,634 | $ | 295,517 | $ | 92,314 | $ | 84,533 | ||||||||
Less: Asset-based expenses |
116,763 | 98,401 | 28,102 | 26,805 | ||||||||||||
Spread-based expenses |
1,671 | 976 | 478 | 361 | ||||||||||||
|
|
|||||||||||||||
Net revenue |
$ | 245,200 | $ | 196,140 | $ | 63,734 | $ | 57,367 | ||||||||
|
Organic net revenue growth
Organic net revenue growth is the growth rate of our net revenue excluding the impact of any acquisitions during the relevant period as compared to the corresponding period of the prior year.
We believe that organic net revenue growth is a useful measure of the growth and performance of our business, in addition to and not in lieu of total revenue, due to the large amount of payments that we collect on behalf of third parties providing services on our platform that have no impact on profitability.
Organic net revenue growth has limitations as an analytical tool and should not be considered in isolation to, or as a substitute for, analysis of our results as reported under U.S. GAAP. Some of these limitations are:
|
organic net revenue growth includes only costs directly attributable to revenue generation that are variable with the underlying related assets; and |
|
organic net revenue growth does not include all costs of revenue, such as employee compensation and fixed-contract third-party services, which are required to generate revenue. |
Set forth below is a reconciliation from total revenue growth to organic net revenue growth for the years ended December 31, 2018 and 2017 and the three months ended March 31, 2019 and 2018.
Year ended December 31, | Three months ended March 31, | |||||||||||||||
(in thousands) | 2018 | 2017 | 2019 | 2018 | ||||||||||||
Total revenue growth |
$ | 68,117 | $ | 47,933 | $7,781 | $ | 18,013 | |||||||||
Less: impact of asset-based expenses and spread-based expenses |
19,057 | 21,409 | 1,414 | 4,758 | ||||||||||||
|
|
|||||||||||||||
Net revenue growth |
$ | 49,060 | $ | 26,524 | $6,367 | $ | 13,255 | |||||||||
Less: total revenue growth attributable to acquisitions |
0 | 0 | 0 | 0 | ||||||||||||
|
|
|||||||||||||||
Organic net revenue growth |
$ | 49,060 | $ | 26,524 | $6,367 | $ | 13,255 | |||||||||
|
|
|||||||||||||||
Organic net revenue growth (%) |
25.0% | 15.6% | 11.1% | 30.0% | ||||||||||||
|
Adjusted EBITDA
Adjusted EBITDA is defined as EBITDA (net income plus interest expense, income tax expense, depreciation and amortization and less interest income), further adjusted to exclude certain non-cash charges and other adjustments set forth below. Adjusted EBITDA is a useful financial metric in assessing our operating performance from period to period by excluding certain items that we believe
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are not representative of our core business, such as certain material non-cash items and other adjustments such as share-based compensation, strategic initiatives and reorganization and integration costs.
We believe that adjusted EBITDA, viewed in addition to, and not in lieu of, our reported GAAP results, provides useful information to investors regarding our performance and overall results of operations for various reasons, including:
|
non-cash equity grants made to employees at a certain price and point in time do not necessarily reflect how our business is performing at any particular time; as such, stock-based compensation expense is not a key measure of our operating performance; and |
|
costs associated with acquisitions and the resulting integrations, debt refinancing, restructuring, litigation and conversions can vary from period to period and transaction to transaction; as such, expenses associated with these activities are not considered a key measure of our operating performance. |
We use adjusted EBITDA:
|
as a measure of operating performance; |
|
for planning purposes, including the preparation of budgets and forecasts; |
|
to allocate resources to enhance the financial performance of our business; |
|
to evaluate the effectiveness of our business strategies; |
|
in communications with our board of directors concerning our financial performance; and |
|
as a consideration in determining compensation for certain employees. |
Adjusted EBITDA has limitations as an analytical tool, and should not be considered in isolation to, or as a substitute for, analysis of our results as reported under GAAP. Some of these limitations are:
|
Adjusted EBITDA does not reflect all cash expenditures, future requirements for capital expenditures or contractual commitments; |
|
Adjusted EBITDA does not reflect changes in, or cash requirements for, working capital needs; and |
|
Adjusted EBITDA does not reflect interest expense on our debt or the cash requirements necessary to service interest or principal payments. |
In addition, the definition of adjusted EBITDA can differ significantly from company to company and as a result has limitations when comparing similarly titled measures across companies.
Set forth below is a reconciliation from net income to adjusted EBITDA for the years ended December 31, 2018 and 2017 and the three months ended March 31, 2019 and 2018.
Year ended December 31, | Three months ended March 31, | |||||||||||||||
(in thousands) | 2018 | 2017 | 2019 | 2018 | ||||||||||||
Net income |
$ | 37,426 | $ | 98,978 | $ | 2,811 | $ | 9,791 | ||||||||
Provision for (benefit from) income tax |
17,137 | (79,635 | ) | 3,440 | 3,872 | |||||||||||
Interest income |
(2,433 | ) | (268 | ) | (892 | ) | (310 | ) | ||||||||
Interest expense |
1,920 | | 4,024 | | ||||||||||||
Amortization/depreciation |
26,104 | 22,981 | 6,896 | 6,037 | ||||||||||||
|
|
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Year ended December 31, | Three months ended March 31, | |||||||||||||||
(in thousands) | 2018 | 2017 | 2019 | 2018 | ||||||||||||
EBITDA |
80,154 | 42,056 | 16,279 | 19,390 | ||||||||||||
|
|
|||||||||||||||
Share-based compensation (1) |
6,568 | 6,920 | 5,226 | 1,296 | ||||||||||||
IPO readiness (2) |
1,182 | | 568 | 51 | ||||||||||||
Reorganization and integration costs (3) |
1,041 | 3,266 | 657 | 270 | ||||||||||||
Strategic initiatives (4) |
| 2,026 | | | ||||||||||||
Settlement costs related to a non-routine legal dispute (5) |
| 2,000 | | | ||||||||||||
Acquisition expenses (6) |
| 1,339 | | | ||||||||||||
Retention bonus related to our 2016 sale to HTSC (7) |
| 1,215 | | | ||||||||||||
Transition services payment for 2015 acquisition (8) |
| 57 | | | ||||||||||||
|
|
|||||||||||||||
Adjusted EBITDA |
$ | 88,945 | $ | 58,879 | $ | 22,730 | $ | 21,007 | ||||||||
|
(1) | Share-based compensation represents granted share-based compensation in the form of Class C Common Units (which are incentive units) of AssetMark Holdings LLC, our parent company, to certain of our directors and employees. Although this expense occurred in each measurement period, we have added the expense back in our calculation of adjusted EBITDA because of its non-cash impact. |
(2) | IPO readiness includes professional fees related to our preparation to become a public company. These expenses primarily include services for financial and human resources systems implementation, executive compensation assessments and other consulting services. Although these expenses occurred in both 2018 and the first quarter of 2019, these expenses are non-recurring as they are limited to our public-company readiness preparation and do not include ongoing public-company compliance costs. |
(3) | Reorganization and integration costs includes costs related to our functional reorganization within our Operations, Technology and Retirement functions as well as duplicate costs related to the outsourcing of back-office operations functions. While we have incurred such expenses in all periods measured, these expenses serve varied reorganization and integration initiatives, each of which is non-recurring. We do not consider these expenses to be part of our core operations. |
(4) | Strategic initiatives includes costs related to one-time investments for exploratory work regarding potential business opportunities in 2017. These strategic initiatives were part of the initial strategic review performed by HTSC in late 2016. These costs included research into such areas as RIA expansion, international products, retirement products and cash solutions. Such costs were non-recurring. |
(5) | Settlement costs related to a non-routine legal dispute are costs related to the settlement of an unusual legal dispute with a technology vendor. We consider the settlement non-recurring. |
(6) | Acquisition expenses includes legal fees and other professional fees related to a single significant acquisition effort in 2017 that was ultimately unsuccessful. We consider such costs to be non-recurring due to the extent that we invested in that particular effort. |
(7) | Retention bonus related to our 2016 sale to HTSC includes retention incentives paid to certain of our directors as an incentive to retain their services after HTSC acquired our company in 2016. This expense was a one-time incentive provided by HTSC to such directors. |
(8) | Transition services payment for 2015 acquisition represents a 2017 expense related to a final payment pursuant to a one-time transition services agreement and is therefore non-recurring. |
Adjusted net income
Adjusted net income represents net income before: (a) share-based compensation expense, (b) amortization of acquisition-related intangible assets, (c) acquisition and related integration expenses, (d) restructuring and conversion costs and (e) certain other expenses. Reconciled items are tax effected using the income tax rates in effect for the applicable period, adjusted for any potentially non-deductible amounts.
We prepared adjusted net income to eliminate the effects of items that we do not consider indicative of our core operating performance. We have historically not used adjusted net income for internal management reporting and evaluation purposes; however, we believe that adjusted net income,
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viewed in addition to, and not in lieu of, our reported GAAP results, provides useful information to investors regarding our performance and overall results of operations for various reasons, including the following:
|
non-cash equity grants made to employees at a certain price and point in time do not necessarily reflect how our business is performing at any particular time; as such, stock-based compensation expense is not a key measure of our operating performance; |
|
costs associated with acquisitions and related integrations, debt refinancing, restructuring and conversions can vary from period to period and transaction to transaction; as such, expenses associated with these activities are not considered a key measure of our operating performance; and |
|
amortization expenses can vary substantially from company to company and from period to period depending upon each companys financing and accounting methods, the fair value and average expected life of acquired intangible assets and the method by which assets were acquired; as such, the amortization of intangible assets obtained in acquisitions is not considered a key measure of our operating performance. |
Adjusted net income does not purport to be an alternative to net income (loss) or cash flows from operating activities. The term adjusted net income is not defined under GAAP, and adjusted net income is not a measure of net income (loss), operating income or any other performance or liquidity measure derived in accordance with GAAP. Therefore, adjusted net income has limitations as an analytical tool and should not be considered in isolation to, or as a substitute for, analysis of our results as reported under GAAP. Some of these limitations are:
|
Adjusted net income does not reflect all cash expenditures, future requirements for capital expenditures or contractual commitments; |
|
Adjusted net income does not reflect changes in, or cash requirements for, working capital needs; and |
|
Other companies in the financial services industry may calculate adjusted net income differently than we do, limiting its usefulness as a comparative measure. |
Set forth below is a reconciliation from net income to adjusted net income for the years ended December 31, 2018 and 2017 and the three months ended March 31, 2019 and 2018.
Year ended December 31, | Three months ended March 31, | |||||||||||||||
(in thousands) | 2018 | 2017 | 2019 | 2018 | ||||||||||||
Net income |
$ | 37,426 | $ | 98,978 | $ | 2,811 | $ | 9,791 | ||||||||
Tax adjustments (1) |
| (90,055 | ) | | | |||||||||||
Acquisition-related amortization |
20,432 | 20,432 | 5,108 | 5,108 | ||||||||||||
Expense adjustments (2) |
2,221 | 9,903 | 1,225 | 322 | ||||||||||||
Share-based compensation |
6,568 | 6,920 | 5,226 | 1,296 | ||||||||||||
Tax effect of adjustments (3) |
(5,889 | ) | (11,831 | ) | (1,647 | ) | (1,412 | ) | ||||||||
Adjusted net income |
$ | 60,758 | $ | 34,347 | $ | 12,723 | $ | 15,105 | ||||||||
|
(1) | Represents a non-recurring non-cash decrease in our deferred tax liability in connection with the lower federal tax rate attributable to the Tax Cuts and Jobs Act of 2017. |
(2) | Consists of the adjustments to EBITDA listed in the adjusted EBITDA reconciliation table above other than share-based compensation. |
(3) | Reflects the tax impact of expense adjustments and acquisition-related amortization. |
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Components of results of operations
Revenue
Asset-based revenue
A majority of our revenue is derived from the fees we charge as a percentage of platform assets. We record this revenue as asset-based revenue. Our asset-based revenue varies based on the types of investment solutions and services that financial advisers utilize for their clients. Asset-based revenue accounted for approximately 95.8% and 93.0% of our total revenue for the years ended December 31, 2017 and 2018, respectively, and approximately 93.5% and 90.0% of our total revenue for the three months ended March 31, 2018 and 2019, respectively. The percentage of our total revenue represented by asset-based revenue declined in the periods under review principally due to increased spread-based revenue from an improved interest rate environment. In future periods, the percentage of our total revenue attributable to asset-based revenue is expected to vary based primarily on changes in platform assets and interest rate returns received from our spread-based revenue. As of December 31, 2018 and March 31, 2019, approximately $44.9 billion and $49.7 billion, respectively, of platform assets subject to asset-based fees were managed or administered utilizing our technology platform by approximately 134,000 and 137,000 Households, respectively.
The level of fees we charge varies based on the nature of the investment solutions and services we provide, as well as the specific investment manager, fund and/or custodian chosen by the financial adviser. A portion of our revenue from AUM or Other Assets includes amounts paid by us to third parties for sub-advisory, strategist, third-party custodian or investment management fees. These expenses are recorded as asset-based expenses.
For the substantial majority of our revenue from platform assets, we bill the end-investor at the beginning of each quarter based on the market value of assets on our technology platform as of the end of the prior quarter. Platform fees are deducted from the clients account at the beginning of each quarter. For example, using this method, revenue from platform assets recognized during the fourth quarter of 2018 was generally based on the market value of assets as of September 30, 2018.
Spread-based revenue
Our spread-based revenue consists of the interest rate return earned on cash assets custodied through ATC. ATC is one of our wholly owned subsidiaries and one of several custodians offered on our platform. ATC utilizes third-party banks to invest client cash and uses the proceeds from those investments to credit client accounts and earn spread-based revenue for us.
Other income
Other income consists primarily of interest earned on operating cash held by us. Other one-time income items are reported under Other Income, as discussed elsewhere in this section.
Expenses
Asset-based expenses
Asset-based expenses primarily relate to costs incurred directly from the generation of asset-based revenue, including strategist, investment manager and sub-advisory fees, custody fees paid to our
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third-party custodian partners, payments to our broker-dealer partners and business development allowance payments for our premier advisers.
These expenses are typically calculated based upon a contractual percentage of the market value of assets held in customer accounts measured as of the end of each fiscal quarter.
Spread-based expenses
Our spread-based expenses consist of expenses paid to ATCs third-party administrator for administering ATCs insured cash deposit program.
Employee compensation expenses
Employment and compensation expenses include salaries, commissions, non-cash stock-based compensation, profit sharing, benefits and employer-related taxes. We expect that the majority of any increase in employee and compensation expenses in the next 12 months will arise in connection with additional non-cash stock-based compensation and increased headcount to support our growth strategy.
General and operating expenses
General and operating expenses include occupancy expenses and expenses relating to trading, events, communications services, research and data services, website and systems development, marketing, legal services and travel and entertainment. We expect general and operating expenses to increase in absolute dollars in future periods as a result of increased costs associated with being a publicly traded company upon completion of this offering, including significant increased legal and accounting costs related to compliance with rules and regulations implemented by the SEC and NYSE, as well as additional insurance, investor relations and other costs associated with being a public company.
Professional fee expenses
Professional fee expenses primarily relate to the fees we pay to the third-party administrator of AssetMark Retirement Services, Inc., our wholly owned subsidiary that operates our retirement business, as well as fees associated with the outsourcing of administrative operations functions, audit costs and expenses related to this offering and public-company readiness.
Depreciation and amortization
Amortization expense reflects the amortization of our intangible technology assets and our other assets such as trade names, broker-dealer licenses and ATC regulatory status, from the fair value established at the date of our sale to HTSC in 2016. Depreciation expense reflects the ongoing cost of annual usage of property and equipment.
Interest income and other income (expense) net
We earn interest income on our operating cash and cash equivalents (cash and available-for-sale investments), which may fluctuate over time.
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Results of operations
Three months ended March 31, 2019 compared to three months ended March 31, 2018
The following discussion presents an analysis of our results of operations for the three months ended March 31, 2019 and 2018. Where appropriate, we have identified specific events and changes that affect comparability or trends and, where possible and practical, have quantified the impact of such items.
For the three months
|
||||||||||||||||
(dollars in thousands) | 2019 | 2018 | $ Change | % Change | ||||||||||||
Revenue |
||||||||||||||||
Asset-based revenue |
$ | 83,063 | $ | 79,076 | $ | 3,987 | 5.0 | |||||||||
Spread-based revenue |
7,549 | 3,749 | 3,800 | 101.4 | ||||||||||||
Other income |
1,702 | 1,708 | (6 | ) | (0.4 | ) | ||||||||||
|
|
|||||||||||||||
Total revenue |
92,314 | 84,533 | 7,781 | 9.2 | ||||||||||||
Expenses |
||||||||||||||||
Asset-based expenses |
28,102 | 26,805 | 1,297 | 4.8 | ||||||||||||
Spread-based expenses |
478 | 361 | 117 | 32.4 | ||||||||||||
Employee compensation |
31,885 | 24,740 | 7,145 | 28.9 | ||||||||||||
General and operating expenses |
12,292 | 10,651 | 1,641 | 15.4 | ||||||||||||
Professional fees |
2,386 | 2,276 | 110 | 4.8 | ||||||||||||
Interest |
4,024 | | 4,024 | * | ||||||||||||
Depreciation and amortization |
6,896 | 6,037 | 859 | 14.2 | ||||||||||||
|
|
|||||||||||||||
Total expenses |
86,063 | 70,870 | 15,193 | 21.4 | ||||||||||||
Income (loss) before income taxes |
6,251 | 13,663 | (7,412 | ) | (54.2 | ) | ||||||||||
Provision for (benefit from) income taxes |
3,440 | 3,872 | (432 | ) | (11.2 | ) | ||||||||||
|
|
|||||||||||||||
Net income (loss) |
2,811 | 9,791 | (6,980 | ) | (71.3 | ) | ||||||||||
Other comprehensive income, net of tax |
||||||||||||||||
Unrealized gain (loss) on available for sale investments, net of tax |
16 | (2 | ) | 18 | * | |||||||||||
|
|
|||||||||||||||
Net comprehensive income (loss) |
$ | 2,827 | $ | 9,789 | $ | (6,962 | ) | (71.1 | ) | |||||||
|
* | Not meaningful. |
Asset-based revenue
Asset-based revenue increased $4.0 million, or 5.0%, from $79.1 million in the three months ended March 31, 2018 to $83.1 million in the three months ended March 31, 2019. This increase is primarily related to increased platform fees of $2.6 million associated with growth in platform assets and advisory fee revenue of $1.6 million associated with the growth of proprietary mutual funds on the platform. Administrative service fees from ATC also increased by $0.4 million due to growth in mutual fund assets. The increase was offset in part by a $0.7 million decrease in custodial support payments from our third-party custodians related to a 2018 renegotiated contract, which also resulted in us paying lower custody fees.
Spread-based revenue
Spread-based revenue increased $3.8 million, or 101.4%, from $3.7 million in the three months ended March 31, 2018 to $7.5 million in the three months ended March 31, 2019. This increase was primarily due to higher cash balances held at ATC and increased interest rates on cash invested through ATCs insured cash deposit program.
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Other income
Other income decreased $6 thousand, or 0.4%, for the three months ended March 31, 2019 compared to the three months ended March 31, 2018. This decrease primarily related to the recognition of $0.9 million due to us as a result of a legal settlement in 2018, offset in part by an increase in interest income of $0.6 million attributed to higher interest rates and higher cash balances generated from our operating activities and higher termination fees collected at ATC.
Asset-based expenses
Asset-based expenses increased $1.3 million, or 4.8%, from $26.8 million in the three months ended March 31, 2018 to $28.1 million in the three months ended March 31, 2019. This increase, primarily related to increased subadvisor fees of $1.0 million, was driven by growth in our proprietary funds, and $0.9 million related to increased strategist and investment management due to growth in platform assets. We also experienced an increase in asset-based broker-dealer payments of $0.3 million driven by growth in platform assets. These increases were offset in part by lower negotiated custody fees charged by third-party custodians.
Spread-based expenses
Spread-based expenses increased $0.1 million, or 32.4%, from $0.4 million in the three months ended March 31, 2018 to $0.5 million in the three months ended March 31, 2019. This increase was due in part to increased expenses paid to ATCs third-party administrator for ATCs insured cash deposit program due to increased interest rates and higher cash balances at ATC.
Employee compensation expenses
Employee compensation expenses increased $7.1 million, or 28.9%, from $24.7 million in the three months ended March 31, 2018 to $31.9 million in the three months ended March 31, 2019. This increase primarily related to an increase in share-based compensation of $3.9 million attributed to the growth in our valuation; an increase of $2.5 million in salaries and related expenses attributable to increased associate headcount required to support our growth; and an increase of $0.6 million related to higher variable compensation related to higher associate headcount. The balance of the increase related to a $0.1 million increase in sales incentive compensation.
General and operating expenses
General and operating expenses increased $1.6 million, or 15.4%, from $10.7 million in the three months ended March 31, 2018 to $12.3 million in the three months ended March 31, 2019. This increase was primarily related to expanded promotional events for our top advisers and increased employee travel expenses of $1.2 million. We also experienced an increase of $0.3 million related to higher IT-related subscriptions attributed to growth in associate headcount.
Professional fee expenses
Professional fee expenses increased $0.1 million, or 4.8%, from $2.3 million in the three months ended March 31, 2018 to $2.4 million in the three months ended March 31, 2019. This increase is primarily related to increased audit costs.
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Interest expense
Interest expense increased from $0 in the three months ended March 31, 2018 to $4.0 million in the three months ended March 31, 2019. This increase related to the interest we paid on our long-term debt issued in November 2018.
Depreciation and amortization expense
Depreciation and amortization expense increased $0.9 million, or 14.2%, from $6.0 million in the three months ended March 31, 2018 to $6.9 million in the three months ended March 31, 2019. This increase related to the incremental assets placed in service during 2018. When HTSC acquired us on October 31, 2016, all intangible assets were fair valued, and those assets with definite-lives commenced amortization schedules ranging from five- to 20-year schedules. Because less than three years had elapsed since the 2016 acquisition, we had minimal fully amortized asset run-off in 2017 and 2018 with which to offset the incremental assets recently placed in service.
Provision for (benefit from) income taxes
Provision for income taxes decreased $0.4 million from $3.9 million in the three months ended March 31, 2018 to $3.4 million in the three months ended March 31, 2019. This decrease was due to the decrease in our income before income taxes, and was offset in part by the increase to share-based compensation, which is not deductible for tax purposes, and the effect of discrete items unrelated to our current-year business operations.
Other comprehensive income
Other comprehensive income increased $18 thousand for the three months ended March 31, 2018 compared to the three months ended March 31, 2019. This increase relates to the fair market valuation of our available-for-sale investments related to seed funding of certain proprietary funds that we established.
Net comprehensive income (loss)
Net comprehensive income decreased $7.0 million, or 71.1%, from $9.8 million in the three months ended March 31, 2018 to $2.8 million in the three months ended March 31, 2019, despite a 9.2% growth in total revenue over the same period, due in part to a $5.5 million loss of market value in platform assets in the fourth quarter of 2018 as a result of market volatility. The decrease in net comprehensive income was also due to increased expenses incurred in the quarter ended March 31, 2019, including (i) a $3.9 million increase in the carrying value of share-based compensation expenses attributed to the growth in our valuation, (ii) $4 million in interest expense incurred in the quarter ended March 31, 2019 resulting from our draw down on our Credit Facility to make a one-time distribution to AssetMark Holdings LLC and (iii) an increase in our effective tax rate from 28.3% in the quarter ended March 31, 2018 to 55% in the quarter ended March 31, 2019 due to the fact that share-based compensation is not deductible, which resulted in our tax expenses remaining relatively constant over the same period despite lower pre-tax income in the quarter ended March 31, 2019.
Year ended December 31, 2018 compared to year ended December 31, 2017
The following discussion presents an analysis of our results of operations for the years ended December 31, 2018 and 2017. Where appropriate, we have identified specific events and changes
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that affect comparability or trends and, where possible and practical, have quantified the impact of such items.
For the years ended
December 31 |
||||||||||||||||
(dollars in thousands) | 2018 | 2017 | $ Change | % Change | ||||||||||||
Revenue |
||||||||||||||||
Asset-based revenue |
$ | 338,031 | $ | 282,966 | $ | 55,065 | 19.5 | |||||||||
Spread-based revenue |
20,403 | 10,430 | 9,973 | 95.6 | ||||||||||||
Other income |
5,200 | 2,121 | 3,079 | 145.2 | ||||||||||||
Total revenue |
363,634 | 295,517 | 68,117 | 23.1 | ||||||||||||
Expenses |
||||||||||||||||
Asset-based expenses |
116,763 | 98,401 | 18,362 | 18.7 | ||||||||||||
Spread-based expenses |
1,671 | 976 | 695 | 71.2 | ||||||||||||
Employee compensation |
107,091 | 105,413 | 1,678 | 1.6 | ||||||||||||
General and operating expenses |
45,383 | 38,781 | 6,602 | 17.0 | ||||||||||||
Professional fees |
10,139 | 9,622 | 517 | 5.4 | ||||||||||||
Interest |
1,920 | | 1,920 | * | ||||||||||||
Depreciation and amortization |
26,104 | 22,981 | 3,123 | 13.6 | ||||||||||||
Total expenses |
309,071 | 276,174 | 32,897 | 11.9 | ||||||||||||
Income before income taxes |
54,563 | 19,343 | 35,220 | 182.1 | ||||||||||||
Provision for (benefit from) income taxes |
17,137 | (79,635 | ) | 96,772 | 121.5 | |||||||||||
Net income |
$ | 37,426 | $ | 98,978 | $ | (61,552 | ) | (62.2 | ) | |||||||
Other comprehensive income, net of tax |
||||||||||||||||
Unrealized gain (loss) on available for sale investments, net of tax |
(5 | ) | 8 | (13 | ) | (162.5 | ) | |||||||||
Net comprehensive income |
$ | 37,421 | $ | 98,986 | $ | (61,565 | ) | (62.2 | ) | |||||||
|
* | Not meaningful. |
Asset-based revenue
Asset-based revenue increased 19.5% from $283.0 million in the year ended December 31, 2017 to $338.0 million in the year ended December 31, 2018. The increase was primarily due to increased platform fees of $50.8 million from growth in platform assets, primarily driven by positive net flows and strong market conditions. Administrative service fees also increased by $4.4 million due to growth in mutual fund assets.
Spread-based revenue
Spread-based revenue increased 95.6% from $10.4 million in the year ended December 31, 2017 to $20.4 million in the year ended December 31, 2018. The increase was primarily due to higher cash balances held at ATC and increased interest rates on cash invested through ATCs insured cash deposit program.
Other income
Other income increased 145.2% from $2.1 million in the year ended December 31, 2017 to $5.2 million in the year ended December 31, 2018. The increase was primarily due to an increase in
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interest income of $2.2 million attributable to higher interest rates and higher cash balances generated from operating activities and the establishment of a receivable from a settled legal matter.
Asset-based expenses
Asset-based expenses increased 18.7% from $98.4 million in the year ended December 31, 2017 to $116.8 million in the year ended December 31, 2018. The increase was primarily due to a $16.0 million increase in strategist and investment management fees attributed to growth in platform assets, a $2.0 million increase in asset-based broker-dealer payments driven by growth in platform assets, a $0.7 million increase in sub-adviser fees associated with the expansion of our proprietary mutual funds and a $0.5 million increase in business development allowance provided due to growth in our largest platform advisers, partially offset by lower custody fees from improved negotiated rates with third-party custodians.
Spread-based expenses
Spread-based expenses increased 71.2% from $1.0 million in the year ended December 31, 2017 to $1.7 million in the year ended December 31, 2018. The increase was primarily due to increased expenses paid to ATCs third-party administrator for ATCs insured cash deposit program attributable to increased interest rates and higher cash balances at the custodian.
Employee compensation
Employee compensation increased 1.6% from $105.4 million in the year ended December 31, 2017 to $107.1 million in the year ended December 31, 2018. The increase was primarily due to a $7.3 million increase in salaries and related expenses from an increased associate headcount to support our ongoing growth. Salaries for the year ended December 31, 2017 included adjusted expenses, which included $1.7 million higher reorganization and integration costs than for the year ended December 31, 2018, and $0.9 million related to strategic initiatives. Salaries for the year ended December 31, 2018 included adjusted expenses of $0.2 million related to our preparation for becoming a public company. The increase in employee compensation expenses from the year ended December 31, 2017 to the year ended December 31, 2018 was offset in part by (i) a $2.3 million decrease in sales incentive compensation expense in the year ended December 31, 2018 as a result of sales in the year ended December 31, 2017 exceeding projections, requiring higher incentive compensation payouts in 2017; (ii) a $2.8 million decrease in contractor liability costs in the year ended December 31, 2018; (iii) $1.2 million in retention bonuses related to our sale to HTSC in 2016 that we incurred in 2017; and (iv) a $0.4 million decrease in share-based compensation from the year ended December 31, 2017. The balance of the increase in employee compensation expense from the year ended December 31, 2017 to the year ended December 31, 2018 related to $0.8 million in higher variable compensation expense in 2018 related to the performance of our business and $0.2 million related to higher overall employee count and lower capitalization of employee time.
General and operating expenses
General and operating expenses increased 17.0% from $38.8 million in the year ended December 31, 2017 to $45.4 million in the year ended December 31, 2018. This increase was primarily due to a $2.5 million increase in expenses related to events for our top advisers and higher travel expense, a $2.1 million increase in subscription-based software expenditures and a $2.2 million increase in legal fees
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associated with actual and prospective mergers and acquisitions activity, strategic projects and preparation for becoming a public company. General and operating expenses for the year ended December 31, 2017 included $1.7 million of expenses that we added back to our adjusted earnings for the year ended December 31, 2017, including $1.0 million in acquisition-related expenses, $0.4 million in reorganization and integration costs and $0.2 million in strategic initiatives. General and operating expenses for the year ended December 31, 2018 included $0.1 million of expenses that we added back to our adjusted earnings for the year ended December 31, 2018 related to our preparation for becoming a public company
Professional fees
Professional fee expenses increased 5.4% from $9.6 million in the year ended December 31, 2017 to $10.1 million in the year ended December 31, 2018. Professional fees in the year ended December 31, 2017 included $3.5 million of expenses that were added back to our adjusted earnings for the year ended December 31, 2017, including $2.0 million related to settlement costs related to non-routine litigation, $0.9 million in strategic initiatives, $0.3 million in reorganization and integration costs and $0.3 million in acquisition-related expenses. The balance of our adjusted expenses in the year ended December 31, 2017 related to a transition services payment to Clark Capital Management Group in connection with our purchase of the TAMP assets of Clark Capital Management Group in 2015. Professional fees in the year ended December 31, 2018 included $1.1 million of expenses that we added back to our adjusted earnings for the year ended December 31, 2018, including $0.9 million related to our preparation for becoming a public company and $0.2 million in reorganization and integration costs. Excluding all adjusted expenses, professional fees increased $2.9 million from December 31, 2017 to December 31, 2018. The increase was attributed primarily to $1.1 million related to the outsourcing of certain back-end operations functions, a $0.7 million increase in third-party administrator fees related to our retirement business and $0.7 million in increased audit costs and costs associated with platform enhancements made within our investments, marketing and technology functions.
Interest expense
Interest expense increased from $0 in the year ended December 31, 2017 to $1.9 million in the year ended December 31, 2018. The increase related to the interest paid for long-term debt incurred in November 2018.
Depreciation and amortization expense
Depreciation and amortization expense increased 13.6% from $23.0 million in the year ended December 31, 2017 to $26.1 million in the year ended December 31, 2018. The increase was primarily due to incremental assets placed in service during 2017 and 2018. When HTSC acquired us on October 31, 2016, all intangible assets were adjusted to fair value, and assets with definite lives commenced amortization schedules ranging from 3- to 20-years. Due to the short amount of time that has passed since the 2016 acquisition, we had minimal fully amortized asset run-off in 2017 and 2018, to offset the incremental assets recently placed in service.
Provision for (benefit from) income taxes
Provision for income taxes increased $96.8 million in the year ended December 31, 2018 compared to the year ended December 31, 2017. Our tax expense for the year ended December 31, 2017 included
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a $90.1 million decrease in our deferred tax liability in connection with the lower federal tax rate attributable to the Tax Cuts and Jobs Act of 2017, which did not recur in the year ended December 31, 2018. The remaining increase related to higher pre-tax income in the year ended December 31, 2018 as compared to the prior year.
Other comprehensive income
Other comprehensive income decreased $13 thousand for the year ended December 31, 2018 compared to the year ended December 31, 2017. The decrease relates to the fair market valuation of our available for sale investments related to seed funding of certain proprietary funds that we established.
Liquidity and capital resources
Liquidity
Since 2016, our operations have been financed primarily through cash flows from operations and we generated positive cash flows in eleven of the twelve quarters through the quarter ended December 31, 2018. In November of 2018, we also established a credit facility consisting of a $250.0 million term loan and a $20.0 million revolving credit facility with Credit Suisse AG, Cayman Islands Branch (Credit Suisse). As of December 31, 2017 and December 31, 2018, we had cash and cash equivalents of $50.1 million and $105.4 million, respectively, and restricted cash of $7.0 million and $7.0 million, respectively. Over the next twelve months, we expect that our cash and liquidity needs will continue to be met by cash generated by our ongoing operations as well as our credit facility. To the extent that existing cash, cash from operations and our credit facility are not sufficient to fund our future operations, we may need to raise additional funds through public or private equity or additional debt financing. Although we currently are not a party to any agreement and do not have any understanding with any third parties with respect to potential investments in, or acquisitions of, businesses or technologies, we may enter into these types of arrangements in the future, which could also require us to seek additional equity or debt financing. We cannot assure you that such additional financing will be available on terms acceptable to us, or at all. In addition, we may opportunistically seek to raise additional capital to fund our continued growth. To the extent that we are unsuccessful in additional debt or equity financings, our plans for continued growth may be curtailed.
Credit facility
In November 2018, we entered into a credit agreement with Credit Suisse AG, Cayman Islands Branch, as administrative agent and collateral agent (collectively, the Agent), and the lenders party thereto (the Credit Agreement), consisting of a $250.0 million term loan (the Term Loan) and a $20.0 million revolving credit facility (the Revolver, and together with the Term Loan, collectively, the Credit Facility). Our obligations under the Credit Facility are guaranteed by our parent company, AssetMark Holdings LLC, and certain of our subsidiaries and are secured by substantially all of our assets, AssetMark Holdings LLC and certain of our subsidiaries, subject to certain exceptions. As of December 31, 2018, $250.0 million aggregate principal amount of the Term Loan remained outstanding and the Revolver was undrawn.
The Term Loan matures in November 2025 and requires quarterly amortization payments equal to $625,000, subject to prepayment adjustment. The Revolver matures in November 2023 with outstanding loans thereunder payable within 364 days of the applicable drawdown date. Both the
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Term Loan and the Revolver bear interest at (x) the London InterBank Offered Rate (LIBOR) plus a margin of 3.50%, with a step down to 3.25% or (y) the Alternate Base Rate, as specified in the Credit Agreement, plus a margin of 2.50%, with a step down to 2.25%, in each case based on our achievement of a specified first-lien leverage ratio. Additionally, the Term Loans margin will be reduced by 0.25% following our initial public offering. With respect to the Revolver, a quarterly fee of 0.50% is due for the unused amounts thereunder with a stepdown to 0.375% based on our achievement of a specified first-lien leverage ratio. The Credit Agreement includes a process by which a successor rate to LIBOR will be determined in the event that LIBOR is no longer available in the market, whereby we and the Agent will endeavor to establish an alternative rate of interest giving consideration to the then-prevailing market conditions for syndicated loans in the United States.
The Credit Agreement contains customary affirmative and negative covenants, including reporting requirements and restrictions, subject to various exceptions, on the incurrence of additional indebtedness, the creation of liens, the making of acquisitions and investments, the disposal of assets and the making of restricted payments. Additionally, the Revolver includes a springing financial covenant, which provides that if, on the last day of a fiscal quarter, the principal amount of our revolving loans and letters of credit, subject to certain exceptions, exceeds $6.0 million, our total leverage ratio shall not exceed 4.75 to 1.00 for the fiscal quarters between March 31, 2019 and December 31, 2019 or 4.50 to 1.00 for the fiscal quarters ending on or after March 31, 2020. As of December 31, 2018, we were in compliance with all applicable covenants.
The Credit Agreement also contains customary events of default, which could result in acceleration of amounts due under the Credit Facility. Such events of default include, subject to the grace periods specified therein, our failure to pay principal or interest when due, our failure to satisfy or comply with covenants, a change of control, the imposition of certain judgments and the invalidation of liens we have granted.
We intend to use approximately $125 million of the net proceeds to us from this offering to repay a portion of our Term Loan. See the section titled Use of proceeds for additional information regarding our intended use of our net proceeds from this offering.
Cash flows
The following table presents information regarding our cash flows, cash, cash equivalents and restricted cash for the periods indicated:
Year ended
December 31, |
Three months
ended March 31, |
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(in thousands) | 2018 | 2017 | 2019 | 2018 | ||||||||||||
Cash flow from operating activities |
$ | 61,662 | $ | 45,612 | $ | 2,769 | $ | 8,562 | ||||||||
Cash used in investing activities |
(17,714 | ) | (15,652 | ) | (5,020 | ) | (4,214 | ) | ||||||||
Cash flow from financing activities |
11,259 | | (625 | ) | | |||||||||||
Net change in cash, cash equivalents and restricted cash |
55,207 | 29,960 | (2,876 | ) | 4,348 | |||||||||||
Cash, cash equivalents and restricted cash at beginning of period |
57,147 | 27,187 | 112,354 | 57,147 | ||||||||||||
Cash, cash equivalents and restricted cash at end of period |
$ | 112,354 | $ | 57,147 | $ | 109,478 | $ | 61,495 | ||||||||
|
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Cash flows from operating activities
Cash flows from operating activities increased by $16.1 million in the year ended December 31, 2018 compared to the same period in 2017, primarily due to adjustments to net income related to deferred income taxes of $90.1 million and depreciation and intangible amortization of $3.1 million. Such increases were partially offset by a decrease in net income of $61.5 million, decreases in adjustments related to the timing of payables, receivables and current income taxes of $15.6 million and a decrease in share-based compensation of $0.3 million.
Cash flows from operating activities decreased by $5.8 million in the three months ended March 31, 2019 compared to the same period in 2018, primarily due to a decrease in net income, adjustments related to the timing of receivables of $2.1 million and income tax payable of $1.3 million. Such decreases were partially offset by an increase of adjustments to net income related to share-based compensation expense of $3.9 million, and depreciation and amortization of $0.9 million.
Cash used in investing activities
Cash used in investing activities increased by $2.1 million in the year ended December 31, 2018 compared to the same period in 2017, primarily due to a $1.8 million increase in capital expenditures and $0.3 million in purchases of available-for-sale investments.
Cash used in investing activities increased by $0.8 million in the three months ended March 31, 2019 compared to the same period in 2018, primarily due to a $0.5 million increase in capital expenditures and $0.3 million in purchases of available-for-sale investments.
Cash flows from financing activities
Cash flows from financing activities increased by $11.3 million in the year ended December 31, 2018 compared to the same period in 2017 primarily due to net proceeds received of $245.1 million related to the Term Loan. The increase was partially offset by a one-time distribution to AssetMark Holdings LLC of $234 million through a $76 million dividend payment and $158 million return of capital.
Cash flows from financing activities decreased by $0.6 million in the three months ended March 31, 2019 compared to the same period in 2018, primarily due to principal payments made of $0.6 million related to the Term Loan.
Contractual obligations
The following table describes our contractual obligations as of December 31, 2018:
Payments due by period
|
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(in thousands) | Total | Less than 1 year | 1-3 years | 3-5 years | More than 5 years | |||||||||||||||
Operating lease obligations (1) |
$ | 16,467 | $ | 3,431 | $ | 10,386 | $ | 2,650 | | |||||||||||
Purchase obligations (2) |
8,697 | 4,573 | 4,124 | | | |||||||||||||||
Debt principal and interest (3) |
348,348 | 17,244 | 50,744 | 280,360 | | |||||||||||||||
|
|
|||||||||||||||||||
Total contractual obligations |
$ | 373,512 | $ | 25,248 | $ | 65,254 | $ | 283,010 | | |||||||||||
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(1) | Represents minimum operating lease payments under operating leases for office facilities, excluding potential lease renewals. |
(2) | Represents future minimum payments under non-cancelable purchase commitments. For those agreements with variable terms, we do not estimate what the total obligation may be beyond any minimum quantities and/or pricing. |
(3) | Debt principal and interest includes payments under the Term Loan. Interest payments were calculated using the forecasted rate as of December 31, 2018. |
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Off-balance sheet arrangements
As of March 31, 2019, we had no off-balance sheet arrangements.
Critical accounting policies and estimates
Our financial statements are prepared in accordance with GAAP. The preparation of consolidated financial statements in accordance with GAAP requires certain estimates, assumptions and judgments to be made that may affect our consolidated financial statements. Accounting policies that have significant impact on our results are described in Note 2 to our consolidated financial statements included elsewhere in this prospectus. The accounting policies discussed in this section are those that we consider to be the most critical. We consider an accounting policy to be critical if the policy is subject to a material level of judgment and if changes in those judgments are reasonably likely to materially impact our results.
Valuation of goodwill, purchased intangible assets and impairment of long-lived assets
Goodwill is not amortized but is tested for impairment annually, and whenever events or changes in circumstances indicate the varying value of goodwill may not be recoverable. Triggering events that may indicate impairment include, but are not limited to, a significant adverse change in client asset values or a significant decrease in expected cash flows.
Purchased intangible assets related to trade names, the AssetMark broker-dealer license and the regulatory status of ATC are amortized over their estimated useful life. The estimated useful life for these assets is twenty years.
Definite-lived intangible assets are tested for impairment when their carrying value may not be recoverable and can be initially based on undiscounted cash flows, which requires the use of estimates and judgment, and, if impaired, can be written down to fair value. There were no impairments of definite-lived intangibles for any periods presented.
Intangible assets with indefinite lives are tested at least annually for impairment based on comparing the current carrying value to fair value and written down to fair value if the carrying value exceeds the fair value.
Income tax
We use the asset-and-liability method of accounting for income taxes. Under this method, we recognize deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial reporting and tax basis of assets and liabilities, as well as for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates that are expected to apply to taxable income for the years in which those tax assets and liabilities are expected to be realized or settled.
We record a valuation allowance to reduce our deferred tax assets to the net amount that we believe is more likely than not to be realized. In assessing the need for a valuation allowance, we consider our historical levels of income, expectations of future taxable income and ongoing tax planning strategies.
We recognize and measure tax benefits from uncertain tax positions using a two-step approach. The first step is to evaluate the tax position taken or expected to be taken by determining if the weight of available evidence indicates that it is more likely than not that the tax position will be sustained in an
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audit, including resolution of any related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement. Significant judgment is required to evaluate uncertain tax positions.
Although we believe that we have adequately reserved for our uncertain tax positions, we can provide no assurance that the final tax outcome of these matters will not be materially different. We evaluate our uncertain tax position on a regular basis and evaluations are based on a number of factors, including changes in facts and circumstances, changes in tax law, correspondence with tax authorities during the course of an audit and effective settlement of issues.
Recent accounting pronouncements
In November 2016, the FASB issued ASU 2016-18, Restricted Cash, which requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash and restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. ASU 2016-18 is effective for us for annual periods beginning after December 15, 2017. The ASU was adopted as of January 1, 2018 using a retrospective transition method.
In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, which simplifies several aspects of the accounting for employee share-based payment transactions. ASU 2016-09 requires all companies to (1) recognize excess tax benefits and tax deficiencies in the income statement (i.e., the standard eliminates the APIC pool) and (2) present excess tax benefits as an operating activity in the statement of cash flows. The standard also allows all companies to (1) elect whether to use an estimated forfeiture rate or to recognize forfeitures as they occur and (2) withhold up to the maximum individual statutory tax rate without classifying the awards as a liability. Nonpublic companies can elect to (1) use a practical expedient to determine the expected term of certain share-based payment awards and (2) change the measurement basis for all liability-classified awards to intrinsic value on adoption. ASU 2016-09 is effective for us for annual periods in fiscal years beginning after December 15, 2017. Companies must adopt all amendments at the same time and follow the transition methods as outlined in the standard. The ASU was adopted as of January 1, 2018 and did not have a significant impact on our consolidated financial statements and related disclosures.
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which requires a company to recognize revenue when the company transfers control of promised goods and services to the customer. Revenue is recognized in an amount that reflects the consideration a company expects to receive in exchange for those goods or services. A company also is required to disclose sufficient quantitative and qualitative information to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The FASB also has issued several amendments to the standard, which are intended to promote a more consistent interpretation and application of the principles outlined in the standard.
Companies are permitted to adopt the standard using a retrospective transition method (i.e., restate all prior periods presented) or a cumulative effect method (i.e., recognize the cumulative effect of initially applying the guidance at the date of initial application with no restatement of prior periods). However, both methods allow companies to elect certain practical expedients on transition that will help to simplify how a company restates its contracts. We have evaluated our recognition of revenue as principal or agent. Beginning on January 1, 2018, we recognized certain service fee revenues on a
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net basis related to contracts with investment advisers in which we are the agent and the delivery of advisory services is controlled by the investment advisers. Adopting this ASU on January 1, 2018 did not affect our retained earnings. There was a decrease of $173,422 to both asset-based revenue and asset-based expenses for the year ended December 31, 2017.
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which requires lessees to recognize leases on-balance sheet and disclose key information about leasing arrangements. The new standard establishes a right of use (ROU) model that requires a lessee to recognize an ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months. Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement. The new standard is effective for non-emerging growth companies on January 1, 2019, with early adoption permitted. We are currently evaluating the effect that ASU 2016-02 will have on our consolidated financial statements and we plan to adopt the new standard on January 1, 2020.
In August 2016, the FASB issued ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments, which clarifies how to classify certain types of cash payments and receipts on the statement of cash flows. The following amendments in ASU 2016-15 are or may be relevant to us: (1) debt prepayment or extinguishment costs should be classified as financing cash outflows; (2) cash consideration payments made soon after an acquisitions consummation date (approximately three months or less) should be classified as cash outflows for investing activities. Payments made thereafter should be classified as cash outflows for financing activities up to the amount of the original contingent consideration liability. Payments made in excess of the amount of the original contingent consideration liability should be classified as cash outflows for operating activities; (3) proceeds from the settlement of insurance claims should be classified on the basis of the nature of the loss (or each component loss, if an entity receives a lump-sum settlement); (4) for distributions received from equity method investments, companies may elect either a cumulative earnings approach or the nature of distribution approach to determine whether distributions received from the equity method investees are returns on investment (operating cash inflows) or returns of investment (investing cash inflows); and (5) in the absence of specific guidance, companies determine each separately identifiable cash source and classify the receipt or payment based on the nature of the cash flow. ASU 2016-15 was effective for non-emerging growth companies on January 1, 2018, and required retrospective application. Companies were required to adopt all amendments at the same time. We adopted this ASU on January 1, 2019, and it did not have a significant impact on our consolidated financial statements and related disclosures.
In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, which makes targeted improvements to the accounting for, and presentation and disclosure of, financial instruments. ASU 2016-01 requires that most equity investments be measured at fair value, with subsequent changes in fair value recognized in net income. ASU 2016-01 does not affect the accounting for investments that would otherwise be consolidated or accounted for under the equity method. The new standard also affects financial liabilities under the fair value option and the presentation and disclosure requirements for financial instruments. The provisions of ASU 2016-01 were effective for non-emerging growth companies on January 1, 2018. The provisions of ASU 2016-01 were effective for us in fiscal years beginning after December 15, 2018. We will adopt this ASU in 2019, and we do not expect it to have a significant impact on our consolidated financial statements and related disclosures.
In August 2018, the FASB issued ASU 2018-15, Intangibles, Goodwill and OtherInternal-Use Software (Subtopic 350-40), which provides guidance to evaluate the accounting for fees paid by a
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customer in a cloud computing arrangement. If a cloud computing arrangement includes a license to internal-use-software, then the software license is accounted for by the customer in accordance with Subtopic ASC 350-40. An intangible asset is recognized for the software license and a liability is also recognized. The new standard is effective for non-emerging growth companies on January 1, 2020, with early adoption permitted. We are currently evaluating the effect that ASU 2018-15 will have on our consolidated financial statements and we plan to adopt the new standard on January 1, 2021.
Quantitative and qualitative disclosure about market risk
Market risk
Our exposure to market risk is directly related to revenue from service and management fees earned based upon a percentage of assets on our platform. In the years ended December 31, 2017 and 2018, 96% and 93% of our total revenue, respectively, was based on the market value of assets on the platform and were recurring in nature. We expect this percentage to vary over time. A 1% decrease in the aggregate value of assets on the platform for the years ended December 31, 2017 and 2018 would have caused our net revenue to decline by 1% and 1%, respectively, and would have caused our pre-tax income to decline by 10% and 4%, respectively.
Interest rate risk
Changes in interest rates will impact our spread-based revenue. As of December 31, 2018, client cash assets participating in the insured cash deposit program at ATC totaled $1.4 billion. A change in short-term interest rates of 1% would result in an increase or decrease in income before income taxes of approximately $14.0 million on an annual basis (based on total client cash assets at December 31, 2018 and subject to any changes to interest credited to the end-investor). Actual impacts may vary depending on interest rate levels and the significance of change.
Additionally, changes to interest rates will impact the cost of our borrowing. Borrowing under both the Term Loan and the Revolver bears interest at (x) LIBOR plus a margin of 3.50%, with a step down to 3.25% or (y) the Alternate Base Rate, as specified in the Credit Agreement, plus a margin of 2.50%, with a stepdown to 2.25%, in each case based on our achievement of a specified first-lien leverage ratio. Additionally, the Term Loans margin will be reduced by 0.25% following our initial public offering. With respect to the Revolver, a quarterly fee of 0.50% is due for the unused amounts thereunder, with a stepdown to 0.375% based on our achievement of a specified first-lien leverage ratio. If LIBOR-based interest rates increased by 1% of this amount, our interest expense on an annualized basis would increase by approximately $2.5 million based on amounts drawn down under the Term Loan as of December 31, 2018 and assuming no draw down of the Revolver.
Operational risk
Operational risk generally refers to the risk of loss resulting from our operations, including, but not limited to, improper or unauthorized execution and processing of transactions, deficiencies in our technology or financial operating systems and inadequacies or breaches in our control processes. We operate in diverse markets and are reliant on the ability of our employees and systems to process a large number of transactions. These risks are less direct and quantifiable than market risk, but managing them is critical, particularly in a rapidly changing environment with increasing transaction volumes. In the event of a breakdown or improper operation of systems or improper action by employees or advisers, we could suffer financial loss, regulatory sanctions and damage to our
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reputation. Business continuity plans exist for critical systems, and redundancies are built into the systems as deemed appropriate. To mitigate and control operational risk, we have developed and continue to enhance specific policies and procedures that are designed to identify and manage operational risk at appropriate levels throughout our organization and within various departments. These control mechanisms attempt to ensure that operational policies and procedures are being followed and that our employees operate within established corporate policies and limits.
JOBS Act
We are an emerging growth company under the JOBS Act. The JOBS Act provides that an emerging growth company can delay adopting new or revised accounting standards until such time as those standards apply to private companies. We are not choosing to opt out of such extended transition period and, as a result, we will not be required to comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for public non-emerging growth companies.
Subject to certain conditions set forth in the JOBS Act, if, as an emerging growth company, we choose to rely on certain exemptions we may not be required to, among other things, (i) provide an auditors attestation report on our system of internal controls over financial reporting pursuant to Section 404, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the auditors report providing additional information about the audit and the financial statements (auditor discussion and analysis) or (iv) disclose certain executive compensation-related items such as the correlation between executive compensation and performance and comparisons of the CEOs compensation to median employee compensation. These exemptions will apply until the earliest to occur of: the last day of the fiscal year in which we have more than $1.07 billion in annual revenue; the date on which we qualify as a large accelerated filer; the date on which we have, during the previous three-year period, issued more than $1 billion in non-convertible debt securities; and the last day of the fiscal year in which the fifth anniversary of our initial public offering occurs.
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Chief Executive Officer
Each and every day, we come to work to make a difference in the lives of advisers and their clients. That is our mission and the bright shining light that guides our actions.
We run AssetMark on four simple ideas:
1. | Be mission driven : Come to work to make a difference in the world by being a part of something bigger and more important than any of us can be as individuals. |
2. | Deliver on that mission through our strategic pillars : We design and align our strategy to the things that matter most to clients and that differentiate us in the marketplace. |
3. | Act with intent through articulated values : Hire and manage to values that are intended to ensure that we, as an organization, live up to the highest standards. |
4. | Build a great culture : Create and manage a culture that puts clients at the center of all decisions, fosters fact-based debate and delivers executional excellence. |
How we started
AssetMark was founded in 1996 by financial advisers for financial advisers. Three advisers who were working together realized that they did not have the skills, technology or time to deliver world class solutions to their retail clients. So as is often the motivation for entrepreneurs, these three individuals started a company to try to solve this challenge.
Our founders also saw that fee-based advice, delivered by independent fiduciary advisers, was the future. Those trends dominate our industry today.
Who we serve
Advisers help families plan for the future. They see themselves as financial planners, not asset managers or technologists. Advisers are relationship builders who know how to help families, across the wealth spectrum, develop and plan for goals such as college, travel, retirement and legacy. Advisers take the time to work with each family to articulate these dreams and to convert them into hard numbers. Those numbers become implementable plans by informing decisions about savings, spending, risk tolerance, investments, insurance, estate planning and more.
Advisers are also there to support families through challenging times, whether it is providing peace of mind to a couple nearing retirement or helping a single mother save so that her kids can go to college. In other words, advisers have a full-time job even before they get to investments, technology, running a business and driving growth.
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AssetMark today
Our prospectus should give you a clear vision of what we do. In summary, we are an outsource platform serving the large and growing market for independent financial advice. Our platform provides advisers with capabilities and scale that would be almost impossible for all but the largest advisers to build on their own. Our scale and capabilities allow advisers to focus on their true value proposition: working with families to achieve their dreams. Our capabilities include:
1. | Fully integrated technology platform : We provide a compelling, fully integrated technology platform that allows advisers to do research and portfolio analysis, create proposals, open and maintain accounts, implement investments and meet reporting obligations. |
2. | Personalized and scalable service: We deliver our platform and solutions through people who get to know our clients. We become an integral part of our advisers everyday lives, enabling us to build deep, long-lasting relationships. We empower our employees with tools that allow them to serve our advisers more efficiently. |
3. | Curated investment solutions : We provide access to a diligenced, curated platform of investment options in an intuitive investment framework. |
We believe that what we do is differentiated and valuable. But it is the how we do it that makes AssetMark special.
The how is all about values and culture .
We share our values and culture with our clients and our employees every chance we get. We want our values and culture to be at the top of mind when we hire, train, and promote, when clients choose and interact with us, and when we make decisions.
Values
Our values are:
We start with Heart because we are in the dreams and fears business. We connect with our advisers at the emotional level, understanding that they are going through challenges in their own lives and businesses while trying to navigate the fears and aspirations of the families they serve. Starting with emotions, instead of tasks, technology or investments, connects us at a very personal level with our clients.
We are responsible for significant investor savings so Integrity is paramount. For advisers, we are responsible in many ways for the success of their businesses, and we feel great responsibility for the success of the families that our advisers serve. These responsibilities mean that we have to do the
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right thing every time. To ensure that we deliver on integrity, we hire carefully, manage the details, live by a culture of compliance and hold ourselves accountable to the highest standards of behavior.
Excellence is where the rubber meets the road. Our business is complex and everything is urgent. We strive at all times to get it right and to do it quickly, and we believe that differentiates us from many of our competitors. More importantly, as a value, excellence is an expectation that our clients needs come before ours. We are driven to be better every day.
Respect is our way of saying that we need diversity in our company and industry. We understand that we must be a part of making society better. We also understand that our industry must reflect and respect the heritage, perspectives and beliefs of the investors we serve. We believe that the way to focus on diversity is to respect and encourage different ideas and perspectives making AssetMark a welcoming place for everyone willing to put the client first.
Culture
The other component of how is our culture . We understand that culture cant be managed. However, articulating culture, and sharing that articulation with clients, employees and shareholders, holds us accountable to a way of working together that gives us the best chance to accomplish our mission.
Our culture is designed around the client:
We know that it is easy to say that the client comes first and it is hard to make that a reality. At AssetMark, we live this idea by putting the client at the center of our interactions. Client outcomes matter most and are at the center of our decisions.
Core to our interactions are being in it together , which means we are one team focusing on client outcomes; designing clear decision rights so that our teams know who is empowered to make decisions , which drives speed; engaging with each other in honest and respectful conversations and debate that drive fact-based decisions , which helps us get to better answers; and driving to excellence in execution , which, again, is where the rubber meets the road.
The path forward
As we embark on our journey as a public company, we intend to manage as we always have by putting the client first. We will strive to focus on our mission, design and implement strategies that are differentiating and deliver through our values and culture, while focusing on driving growth and financial returns.
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We will continue to help advisers do the best work that they can to make a difference for the families they serve.
On behalf of our associates, clients, and stockholders, we look forward to investing in our future together.
Sincerely,
Charles Goldman | President & CEO
AssetMark Financial Holdings, Inc.
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Overview
AssetMark is a leading provider of extensive wealth management and technology solutions that power independent financial advisers and their clients. Our platform enables advisers to outsource high-cost and specialty services that would otherwise require significant investments of time and moneyhelping to level the playing field for independent financial advisers of all sizes. We provide an end-to-end experience, spanning nearly all elements of an advisers engagement with his or her clientfrom initial conversations to ongoing financial planning discussions, including performance reporting and billing. In addition, our platform provides tools and capabilities for advisers to better manage their day-to-day business activities, giving them more time for meaningful conversations with investors.
We believe that independent financial advisers who have a deep understanding of their communities and put the needs of investors first provide the best path for investors to achieve their long-term financial goals. We empower these adviser-entrepreneurs to start, run and grow independent advisory businesses.
The compelling value of our tools for advisers and their clients has facilitated our rapid growth. From December 31, 2014 to March 31, 2019, our platform assets grew from $25 billion to $50 billion, representing a compounded annual growth rate of 17%, and more recently, grew 45% from March 31, 2017 to March 31, 2019. Further, our investors value the services they receive from advisers as evidenced by the growth in our net flows from $2.4 billion in 2016 to $5.9 billion in 2018, representing 8% and 14% of beginning platform assets, respectively. As of March 31, 2019, our platform served approximately 137,000 investor Households through our approximately 7,600 adviser relationships.
Our platform provides advisers with an integrated suite of products and services that facilitates growth, streamlines workflows and provides scale to advisers businesses so they can better serve their clients, who are large and small investors. Highlights of our platform include:
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Fully integrated technology platform : Our integrated platform is built for advisers, providing advisers access to a broad range of highly automated processes, including new account opening, portfolio construction, streamlined financial planning, customer billing, investor reporting, progress to goal analysis and client activity tracking. Our dual focus on technology utility and design has resulted in a platform that is accessible, easy-to-use, intuitive and expansive. |
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Personalized and scalable adviser service : We surround our advisers with highly experienced consulting and service support. We provide a full spectrum of services for many aspects of the advisers firm. These services include high-value day-to-day business support from field professionals, operations and service support teams and specialty teams including business management consultants, investment specialists and retirement consultants. Our offering is guided by extensive intellectual capital and well-established business performance benchmarking tools and responsive back- and middle-office outsourcing support from highly tenured service and operations professionals. We aim for every adviser to feel that their AssetMark service and consulting team is an integral part of their business. |
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Curated investment platform : We provide independent advisers with a curated set of over 20 thoroughly vetted specialty and leading third-party asset managers, in addition to our two proprietary investment providers. Our due diligence team narrows the universe of potential investment solutions to a select group of time-tested and emerging investment choices. In effect, |
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we equip each adviser with a team of skilled investment professionals that act as a virtual extension of their investment staff, who deliver our solutions through an array of technology-enabled tools that assist in the creation and monitoring of goal-based portfolios. Further, the flexibility and breadth of our platform allows us to offer custom portfolios designed to meet the unique needs of investors, specifically mass-affluent and high-net-worth investors. |
Our offerings distinctive combination of a compelling technology platform, extensive and scalable value-added services and curated investment solutions has been a key driver of our market share expansion from 8% to 10% from December 31, 2014 to December 31, 2018. We define our market share based on assets managed by third-party vendors as calculated by Cerulli, excluding non-advisory assets managed by Schwabs Marketplace and Fidelitys Separate Account Network, and, for SEI Investments, including only assets reported in Advisor Network, their third-party asset management segment. Additionally, our platform can act as a critical accelerant for the success of our advisers businesses, which in turn can result in an increase in assets on our platform; the success of our advisers is reflected in our record $5.9 billion in net flows in 2018. Further, given that our platform and services are tightly integrated into our advisers businesses, we believe that we have engendered and will continue to engender deep loyalty from our advisers.
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Our revenue model is almost entirely composed of fees that are recurring in nature, which provides a high level of visibility into our near-term financial performance. The two main components of our revenue are asset-based revenue and spread-based revenue. We generate asset-based revenue from fees billed to investors on a bundled basis in advance of each quarter. The quarterly nature of our asset-based revenue provides significant visibility into near-term revenue and helps minimize unexpected revenue fluctuations stemming from market volatility. Our spread-based revenue is driven by interest rates on the cash assets held by investors at our proprietary trust company. In the year ended December 31, 2018, we generated $338.0 million in asset-based revenue and $20.4 million in spread-based revenue (excluding interest income). In the year ended December 31, 2018, we generated $221.3 million in asset-based net revenue and $18.7 million in spread-based net revenue (excluding interest income).
In the year ended December 31, 2018, we generated total revenue of $363.6 million, net revenue of $245.2 million, net income of $37.4 million, adjusted EBITDA of $88.9 million and adjusted net income of $60.8 million. We generated total revenue of $92.3 million, net revenue of $63.7 million, net income of $2.8 million, adjusted EBITDA of $22.7 million and adjusted net income of $12.7 million in the three months ended March 31, 2019 compared with $84.5 million, $57.4 million, $9.8 million, $21.0 million and $15.1 million for the three months ended March 31, 2018. From January of 2015, the first full year in which the members of our current senior management team were together at our company, to December 31, 2018, our total revenue and net income have grown at compounded annual growth rates of 17% and 55%, respectively.
We believe that net revenue is a useful measure of our growth and business performance due to the large amount of payments that we collect on behalf of third parties providing services on our platform that have no impact on our profitability. See the section titled Prospectus summarySummary consolidated financial and other data for the definitions of asset-based net revenue, spread-based net revenue, net revenue, adjusted EBITDA and adjusted net income and reconciliations of asset-based revenue to asset-based net revenue, spread-based revenue to spread-based net revenue, total revenue to net revenue, net income to adjusted EBITDA and net income to adjusted net income.
Market opportunity
We serve fee-based, independent advisers who provide wealth management advice to U.S. investors. The wealth management market is large and has a long history of rapid growth fueled by several secular trends. According to Cerulli, in aggregate across the United States, 311,305 advisers managed $20.3 trillion in assets as of December 31, 2017, and total industry assets have grown at a compounded annual growth rate of 9% over the five years ended December 31, 2017. Cerulli expects these assets to grow to $25.5 trillion by 2022. Our current offering and growth plans are built to capitalize on favorable industry trends, which we expect will continue to support our growth.
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Total U.S. investible wealth is massive and growing, accelerated by a shifting retirement segment : According to Cerulli, U.S. households had $96.6 trillion in net worth as of December 31, 2017, which has grown at a compounded annual growth rate of 8.3% over the five years ended December 31, 2017. As of December 31, 2017, advisers managed $20.3 trillion (approximately 21%) of this wealth, indicating ample runway for future growth of the financial advisory industry. As the U.S. population has aged and Baby Boomers have moved into retirement, employer-sponsored retirement plan assets have shifted into IRAs, fueling growth of the retail asset segment. Cerulli estimates that this movement of assets will result in approximately $4.0 trillion of new IRA assets from 2016 to 2022. |
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Investor demand for financial advisers is expanding : As investors have aged and their financial goals have become more complex, the demand for financial advice has expanded. According to Cerulli, demand for financial advice has increased from 38% to 44% from 2013 to 2017, measured by the percentage of investor households surveyed receiving assistance or direction from financial advisers relative to investor households self-managing their financial affairs. |
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Advisers are transitioning to an independent model, and we expect this trend to continue : The U.S. wealth management industry consists primarily of two types of channels, independent and traditional. We consider the independent channel to comprise RIAs, hybrid and independent broker-dealers and insurance broker-dealer advisers, and the traditional channel to comprise national and regional broker-dealers, bank broker-dealers and wirehouse advisers. According to Cerulli data and internal estimates of expected growth of the wealth management industry, from 2012 to 2017, independent channels have grown faster than traditional channels in terms of market share measured by assets, expanding by nearly 11% annually at the expense of traditional channels. This trend is expected to continue, with independent assets forecasted to grow from $8.4 trillion in 2017 to $12.1 trillion in 2022, from 42% to 48% of total adviser-managed assets over the same period. |
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Shift from commissions to fee-based models : According to PriceMetrix, in 2018, advisers received over 60% of their total revenue from fees, which represented a record level relative to commissions. The long-term adviser trend towards a fiduciary standard of advice, catalyzed in part by the DOLs 2016 rule (later vacated) that expanded the definition of fiduciary investment advice to include all financial professionals providing retirement advice, has helped drive this shift to a fee-based revenue model. |
Notes: | Based on data from The State of Retail Wealth Management, PriceMetrix, 2016, 2017 and 2018. |
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Advisers are increasingly reliant on technology to remain price competitive and achieve scale while serving evolving client needs : Individual investors are increasingly turning to independent financial advisers for their wealth management and investment needs. From 2013 to 2016, the average number of investors served by an RIA adviser increased by 20% according to Fidelity. Advisers are increasingly relying on technology to meet the needs of an expanding client base while continuing to scale their advisory businesses, as indicated by a 24% increase in the average |
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number of software solutions used by advisers from 2013 to 2017, according to the 2017 InvestmentNews Adviser Technology Study. Investor preferences for service models delivered via mobile applications and online portals are also increasing advisers focus on the quality of their technology. 61% of investors surveyed recently stated that they prefer an advice model that combines human and digital elements to one that is either purely digital or limited to direct interaction with an adviser, according to the Fidelity 2017 Digital Advisor Adoption Study Update. |
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Advisers are rapidly expanding their use of model portfolios : Advisers are increasingly choosing to outsource key components of the asset management aspect of their role as financial advisers, including the choice of investment manager. As such, the use of model portfolios (which we define as mutual fund advisory, ETF-advisory, unified managed account and separate account assets) among financial advisers grew at a compounded annual growth rate of 15% from 2012 to 2017, based on data from Cerulli and internal estimates. |
Our offering is built around technology, investment solutions and expert support, positioning us to benefit from these trends. Combined with our scalable, fee-based platform and services that help advisers put investors needs first, we believe that these favorable industry trends will give us the opportunity to continue to gain market share. Our gains in market share since 2014 have been due largely to organic growth, an area on which we plan to continue to focus.
Our offering and business model
AssetMarks purpose
Our over 600 employees come to work focused on our mission: to make a difference in the lives of our advisers and the investors they serve. Our mission is guided by a singular focus on successful outcomes for our investors. We strive to execute our mission through our stated corporate values of heart, integrity, excellence and respect, in everything that we do.
The AssetMark offering to advisers and investors
We provide independent financial advisers with an array of tools and services designed to streamline their workflow, help them develop and expand their businesses and provide goal-oriented investment solutions. We believe that the quality of our offering, coupled with our deep relationships with our advisers, has generated significant adviser satisfaction, as measured by our exceptional NPS of 65 as of June 30, 2018. Our offering is defined by solutions in three focus areas:
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Fully integrated technology platform : Independent financial advisers and their teams are faced with a multitude of marketing, administrative and business management tasks in addition to the work involved in simultaneously providing customized client solutions to meet evolving investor preferences and scaling their businesses. Independent advisers, as defined by Cerulli, spend on average 45% of their working time on non-client-facing activities, and consequently devote less time to value-added services that deepen client relationships. We offer a compelling technology suite that fully integrates leading third-party technology solutions with our core proprietary technology and helps advisers perform these tasks. |
Our solution helps advisers streamline their operations while providing a superior experience for their staff and investors. The combined capabilities of our technology platform support advisers throughout the investor life cycle, from initial prospecting and onboarding through ongoing service and reporting, and replace a complex array of technologies with a single, streamlined solution. With
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less time spent navigating multiple systems and technologies, advisers are able to focus on enhancing productivity. As advisers come to rely on our integrated platform, it becomes integral to their daily practices. This reliance, in conjunction with high adviser satisfaction due to our platforms ability to optimize adviser workflow, has contributed to our strong growth in assets and net flows.
Our technology suite is composed of a core proprietary technology platform, eWealthManager, as well as modules that focus on specific aspects of an advisers workflow, all designed to simplify and support the investor lifecycle, from prospecting and client acquisition to ongoing business administration.
Prospecting and client acquisition. The adviser relationship starts with outreach from the adviser to the investor, followed by a set of discussions during which the adviser lays out a detailed proposal and financial plan. Advisers typically spend a meaningful amount of time preparing marketing, investment materials and proposals for these initial discussions. Our technology resources streamline and automate the advisers marketing and investor acquisition strategies to support an informative and engaging conversation with prospects and clients. These tools include:
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Marketing portal: Allows advisers to customize and order high-quality printed marketing materials to support conversations with clients and prospects. |
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Portfolio analytics: Our proprietary tool, PortfolioEngine, visually illustrates portfolio dynamics in various market conditions to help advisers guide investor conversations about risk and return to meet investor objectives at their level of risk. Using PortfolioEngine, advisers can compare an illustrative portfolio to existing investor holdings and benchmarks. |
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Proposal: Our proprietary proposal engine allows advisers to create customizable goals-based proposals that highlight investor goals, the probability of success given a particular investing strategy, scenarios that increase or decrease these probabilities and before and after portfolio comparisons. |
Account opening and management. Once the investor agrees to work with an adviser, the adviser will need to open one or more accounts depending on the investors needs and the details
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of the plan. Account opening and management activities have historically been extremely inefficient for advisers, often requiring multiple systems, manual data entry and various forms and signatures.
Our platform offers advisers a streamlined process that meaningfully reduces the amount of time spent on operational tasks, enabling them to focus on their clients. Our streamlined Smarter Account Setup allows advisers to easily create client profiles and auto-fill data, upload new account documents and ensure documents are in good order. These capabilities minimize errors, reduce account paperwork and speed the account opening process. For advisers using our proprietary custodian, our streamlined solution has facilitated a meaningful reduction in account paperwork based on client feedback.
Portfolio review and construction. Once an investor has been brought on to the platform, the adviser constructs a portfolio to meet the investors stated needs and risk profile. We help simplify this process by providing advisers the flexibility and resources to deliver a unique client experience, including detailed investment research and multiple portfolio construction options, all delivered via a scalable digital platform. Our tools serve as an extension of the advisers investment resources and enable advisers to hold informed and meaningful conversations with their clients.
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Investment research: A hub where advisers can easily locate a standard set of materials about each strategy and manager available on the platform, including portfolio manager commentary, fact sheets, video overviews, research, presentations and performance metrics. |
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Portfolio construction: Our advisers can choose to fully outsource investment management or build their own portfolios using our curated set of strategists, providing advisers with both flexibility and control. |
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Digital advice: Our proprietary technology and planning solution, WealthBuilder, enables an adviser-assisted digital investment experience. It streamlines and scales businesses, while offering clients personalized, goals-based advice using diversified portfolios constructed to meet varying risk tolerances. |
Reporting and client-directed activity management. After assets have been invested in the constructed portfolios, advisers are responsible for providing their investors with ongoing reporting on the portfolios performance. As technology has evolved, investors increasingly view customization and digital delivery of these reports as a standard requirement. Our tools provide advisers with a digital platform from which to view and provide quarterly and on-demand reports to investors and enable advisers to customize their engagement, tailoring to the particular needs of each client, while driving efficiency through our user-friendly, modern interface.
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Investor portal: The centralized hub enhances investor engagement by allowing investors to monitor investments and progress towards goals, and facilitates and stores key documents. |
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Quarterly investment and on-demand reporting: Our quarterly investment reviews and on-demand reports are constructed to feature the advisers brand and may be tailored by the adviser based on investor conversations. These reports provide investors with an overview of their performance, cash flow and holdings and help advisers understand and communicate performance and goal-tracking. We believe our offering enables advisers to have meaningful conversations with investors that help investors stay the course over the long-term. |
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Investor activity: eWeathManagers Client Center provides advisers with real-time visibility into all client-directed activity including contributions, withdrawals, investments and new accounts. |
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At any time, our advisers can monitor activity and see the status of each client request. Advisers are fully aware of their clients accounts and can engage with clients knowledgeably. |
Adviser administration. We provide advisers with tools designed to enhance their productivity, improve their business strategy and drive the growth of their businesses. Our continued administration support, including but not limited to billing and trading, and accessible business resources help enable advisers to maximize their time and practices.
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Fee calculation and billing: Our technology supports a wide range of fee and billing structures, including breakpoint pricing. Our fees aggregate investor assets held by the same Household and lower fees are applied as assets meet thresholds. |
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Trading and rebalancing: Our in-house trading team reviews and executes trade orders and reallocates strategist models offered on our platform, thereby minimizing administrative tasks for advisers and allowing advisers to optimize client-facing activities. |
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Business tools and resources: Advisers can elevate their business strategies, optimize their firms and grow their businesses by utilizing our proprietary tools and benchmarking. |
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Business assessment tool: Our proprietary business assessment technology gives advisers a fulsome analysis of their business performance, peer benchmarks and valuation insights, allowing advisers to make informed business decisions that maximize enterprise value. |
Third-party integrations . We believe in offering our advisers choice and flexibility, particularly in areas of specialty technology. Our open-architecture platform supports seamless integrations with leading technology providers for financial planning, risk assessment and customer relationship management. These integrations aim to streamline adviser operations and help advisers scale their businesses. Our goal is to provide our advisers with best in class technology solutions that help simplify their experiences so they can spend more time delivering value to their clients.
We are dedicated to innovation and strive to continually improve our offering through the development of new tools and services. From January 1, 2015 to March 31, 2019, we invested $153 million in technology development and our dedicated technology team, and we have a proven track record of delivering innovative solutions that deepen our advisers offerings to their investors while also enhancing advisers scale. Recent innovations include a new portfolio construction and analysis tool that assists advisers in creating and monitoring investor portfolios, a streamlined account opening solution that reduces the time to onboard new accounts on our platform, a goals-based investor portal that serves as a hub for communications between advisers and their clients and a fully automated digital advice tool that connects our advisers with their clients. We are committed to continuing our technology development and innovation efforts to help ensure that our advisers are well-positioned for growth and scale.
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Personalized and scalable adviser service . Providing advisers access to high-quality service is a critical component of our value proposition. We develop deep, multi-level relationships with advisers firms, helping to ensure that, at all levels, advisers and their teams are connected with AssetMark. We tailor our services to the size of the adviser, allowing us to provide high service levels to a wide-range of adviser business sizes while also maintaining our operating leverage. |
AssetMark field support. Our experienced and knowledgeable field support acts as the extension of our advisers businesses. The Regional Consultant is the centerpiece of an advisers relationship with AssetMark. Our highly experienced Regional Consultants ensure that advisers can draw from a wide array of resources and institutional knowledge as they build and grow their businesses. These professionals are the single point of contact for the adviser and bring in expertise to help the adviser grow and compete. Our over 100 field experts as of March 31, 2019 provide initial and ongoing platform support to further cultivate strong relationships and accelerate adviser growth. The value our clients place on our sales model is reflected in our high Sales NPS of 63 as of June 30, 2018.
AssetMark service and operations teams. Our service and operations teams go to great lengths to support advisers so advisers can focus on what matters mostserving clients and helping them achieve their goals. We segment our teams to provide tailored service at each stage of the AssetMark journey. During the first year, advisers receive expert hands-on guidance from our New Adviser Team, providing specialized training and servicing, opening new accounts and completing asset transfers to help ensure a smooth transition. Ongoing service levels are tailored based on the size of the adviser to help ensure we are meeting the needs of advisers regardless of business size. As our advisers businesses grow, so does the level of support they receive. Our services range from a team supporting broad-based needs to a dedicated Relationship Manager providing customized adviser support.
The Relationship Manager is at the heart of the back-office professionals relationship with us. Our Relationship Managers work to ensure operational activity is accurately executed and seek to promptly resolve any issues investors may encounter. We feature high-touch, accurate and rapid client servicing from dedicated teams who strive to enhance the responsiveness of the advisers back office. In addition, our Relationship Managers provide productivity and client-service best practices, gained through deep industry experience, to the advisers back office teams. Like our
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Regional Consultants, our Relationship Managers are go-to resources for our advisers and their offices. Our service model is highly valued by advisers of all sizes, as demonstrated by our high Service NPS of 66 as of June 30, 2018. Further, approximately 81% of those advisers who were identified as promoters of our services in the NPS surveys from June 30, 2018 selected service as a key reason for their high satisfaction with us.
AssetMark specialty teams. Depending on the advisers business needs, our consultants introduce advisers to investment experts, business development professionals, retirement consultants and business consultants who can help the adviser reach his or her goals. Our investment specialists help advisers better understand our curated investment platform and our specialized due diligence philosophy and process. For example, investment experts provide advisers with insights into portfolio construction and how specific investments help investors reach their goals. In addition to our investment experts, our team of business consultants helps advisers build more efficient and scalable businesses. These consultants specialize in providing customized, strategic solutions for optimizing day-to-day operations, building marketing strategies and driving sustainable business growth. Our specialty teams are dedicated to creating an end-to-end solution that enables advisers to have informed investor conversations and to build scalable businesses.
AssetMark senior leadership. Our engagement model provides advisers with access to our senior executives through myriad educational programs and events we offer. Our leadership team is highly engaged with our advisers, allowing our leadership to better understand and support adviser needs. Our executives listen to advisers challenges, perspectives and preferences to continually construct a platform built for advisers and their businesses. Open communication and ongoing interaction foster deep relationships between our executives and our advisers.
Custody. We provide our advisers with an open-architecture custodial platform that allows investors to select among our third-party custodial options or ATC, our proprietary trust company. We offer custody service through ATC, which has provided independent advisers and their clients with custodial and recordkeeping services since 1994. Our proprietary custodial solutions offer streamlined recordkeeping and cash management solutions. As of March 31, 2019, ATC had $35.6 billion in assets under custody, or approximately 72% of our platform assets. Assets under custody at ATC grew 117.0% from March 31, 2015 to March 31, 2019. Our spread-based revenue is driven by interest rates on the cash assets held by investors at our proprietary trust company, ATC.
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Curated investment solutions . Financial planning is the core competency and value proposition for most wealth managers. The various investment management functions that compose this role, such as formulating capital market assumptions, conducting manager due diligence, constructing portfolios and monitoring markets, managers and portfolios, can take time away from advisers ability to help their investors stay on track to reach their goals. As a result, many advisers outsource these activities to independent platforms like AssetMark. |
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We perform this challenging work for the adviser through our dedicated team of investment professionals who assess markets, conduct due diligence on asset managers and construct model portfolios for advisers to offer to their clients. Our framework, Investing Evolved, can help determine the right mix for investors to meet their goals, feel comfortable with the amount of risk and work to achieve their long-term financial goals. We deliver these capabilities through a portfolio construction methodology that can be broadly described in three categories:
With our approach, advisers are equipped to help investors understand what to expect from each strategy in various market conditions.
Investment team. Our investment solutions are backed by careful due diligence, research and analysis. We have an experienced and dedicated team of investment professionals that act as a virtual extension of the advisers investment staff, including Chartered Financial Analyst (CFA) charter holders and Chartered Alternative Investment Analyst (CAIA) charter holders.
Our investment team is divided into two groups: due diligence and portfolio management. Our due diligence team conducts searches for new strategies and performs ongoing monitoring with deliverables on a monthly, quarterly and annual basis. Through this research, the team evaluates which strategies meet expectations and which warrant a more in-depth review. Our portfolio management team utilizes fundamental research and an in-house quantitative research team to construct holistic portfolios designed to meet client goals. The work that both teams provide helps enable advisers to spend less time sifting through the entire investment universe and more time deeply understanding their investments and delivering value to their clients.
Investment solutions. We offer an open-architecture investment platform that features an extensively vetted set of third-party and proprietary investment solutions. Our third-party strategists include asset managers who offer a variety of managed portfolios, including ETF wrap, mutual fund wrap, unified managed accounts, separately managed accounts and fixed income. We believe in giving our advisers choice, thus we do not promote or advantage our proprietary offerings above those of third parties. Our proprietary strategists include Savos and AssetMark. Assets have grown 24% compounded annually from December 31, 2016 to March 31, 2019 and net flows have grown from $443.8 million to $1.4 billion from the year ended December 31, 2016 to the year ended December 31, 2018 for proprietary strategists. Through our proprietary offerings, we strive to create value for investors by reducing total cost, while maintaining our EBITDA margin by capturing more of the value chain.
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Portfolio construction. There are two ways advisers can work with AssetMark: using our turnkey portfolios or building their own portfolios. Advisers who prefer to fully outsource portfolio construction may select from among our Guided Portfolio Solutions (GPS). These diversified strategies incorporate our best thinking into a complete, professionally managed portfolio designed to enhance returns and limit losses. Our GPS portfolios have seen assets grow from $1.4 billion to $2.3 billion, representing a compound annual growth rate of 26% from December 31, 2016 to March 31, 2019. Alternatively, advisers who prefer to be more directly involved in portfolio construction may construct portfolios using proprietary and/or leading third-party strategists on our curated investment platform. These solutions serve investors spanning the wealth spectrum. For high-net-worth investors we also offer custom solutions. Our proprietary and leading third-party strategists work in conjunction with our sales team to provide high-touch, quality service to advisers and can accommodate for a wide array of investor situations and preferences. Our wealth management solution includes tailored investments, cash management and wealth transfer and tax tools. We help to ensure our advisers are competitive across all investor wealth tiers, from mass affluent to high-net-worth. In addition, we offer advisers investment flexibility by allowing them to build their own portfolios using our open-design investment platform tailored to their clients goals and needs.
The AssetMark business model
To achieve our mission, we have built a business model that allows us to reinvest in our advisers and their investors success. Our business model has delivered a track record of attractive revenue growth and EBITDA margin expansion, both driven by strong fundamentals including:
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Strong asset growth : We have experienced (1) platform asset growth from existing clients of approximately 32% from December 31, 2014 to March 31, 2019, (2) $15.4 billion in assets attracted from new advisers to the platform over the same period and (3) $3.5 billion in assets added to our platform through acquisitions of competitors over the same period, measured at the date of acquisition. Subsequently, in April 2019, we closed our acquisition of Global Financial Private Capital for a cash purchase price of $35.9 million, which added another $3.8 billion in platform assets. |
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Recurring and resilient revenue model : In the year ended December 31, 2018, 99% of our total revenue was recurring in nature (based on revenue generated from assets that are under contract and not dependent on trading activity) and derived from either asset-based revenue or spread-based revenue from investor cash held at our proprietary custodian. In the year ended December 31, 2018, 93% of our total revenue was derived from asset-based revenue and 6% of our total revenue was derived from spread-based revenue. Since asset-based revenue is influenced by sector, asset class and market returns, while spread-based revenue is influenced by Federal Reserve movements and the amount of cash investors hold, our two sources of revenue are relatively uncorrelated, which has helped us establish a sustainable business model through various market fluctuations. |
Revenue d ynamics.
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Asset-based r evenue. Asset-based revenue is primarily driven by fees earned from investors on their assets invested on our platform. The amount of revenue generated from any given investor varies based on several factors. First, the investment solution selected by the adviser for an investor varies based on the investors needs and risk tolerances. We offer a broad array of |
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investment solutions on our platform to satisfy those varied needs and risk tolerances, enabling us to capture a greater share of the investors wallet and to deepen our relationship with advisers and investors. Our fee rates for our solutions vary depending on the complexity of the solution, with strategic fixed income typically at the low end and complex personal portfolios typically at the high end of the range. Second, our asset-based revenue is influenced by the size of the investors account and Household size. As account and Household sizes increase, our pricing declines to encourage deeper client relationships. Lastly, mix shift between asset categories may impact asset-based revenue. As of December 31, 2018, our platform asset mix was 57% equities, 36% fixed income, 5% other and 2% cash, and our weighted average asset-based fee rate across all of our platform assets for the three months ended March 31, 2019 was 74.1 bps annualized. However, this asset mix may shift over time depending on investor preferences, which can be influenced by economic conditions, prevailing interest rates and other factors. |
The amount of platform assets and, consequently, our asset-based revenue for a given period may fluctuate with market conditions. Market conditions and competitive factors may also affect our advisers choice of investment solutions for their clients and the fee rates we charge for particular solutions, any of which may affect our asset-based revenue for a given period.
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Spread-based revenue. Spread-based revenue is driven by the amount of client cash held at our proprietary custodian, ATC. This revenue is primarily influenced by two factors: total cash balances held at ATC and the Federal Funds Rate. As of March 31, 2019, 72% of the assets on our platform were held at our proprietary custodian and ATC client cash accounted for 4% of total assets in custody at ATC. Changes in the number of advisers selecting our proprietary custodian and, consequently, changes in our cash balances could impact our spread-based revenue. Variations in interest rates may also impact spread-based revenue positively or negatively, depending on the interest rate environment. The combination of these two factors may partially mitigate spread-based revenue fluctuations in either direction. Our average total revenue yield for the three months ended March 31, 2019 was 82.3 bps annualized. |
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Attractive margin profile driven by a mix of proprietary and third-party solutions : Our open-architecture technology, investment solutions and custodial platform offer choice and superior capabilities for advisers. In addition, since we offer a balance of third-party and proprietary solutions, we capture incremental economics, which has led to enhanced margins. By offering proprietary solutions alongside third-party technology, asset management and custody solutions, we foster competition across our offering. This competition drives participants (including us) to improve their offerings or risk losing favor with advisers. Each solution competes on its own value proposition and merits, and we do not promote or advantage our proprietary offerings above those of third parties. Our trust company held approximately 72% of our platform assets, and our proprietary strategists served 20% of our platform assets as of March 31, 2019, evidencing the strength of our proprietary offerings. |
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Consistently strong and growing net flows : Because our platform offers an array of solutions to advisers and our technology is deeply integrated into advisers businesses, our net flows grew from $1.5 billion in 2014 to $5.9 billion in 2018, representing 7% and 14% of beginning platform assets, respectively. |
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Significant operating leverage : Our purpose-built platform and upfront investments in our business have positioned us to benefit from upside growth and continued scale with meaningful operating leverage. The power of the operating leverage in our model is apparent both from our declining cost per Household and our ability to expand our relationships with advisers over time. We have |
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decreased our cost per Household by 6.6% from December 31, 2014 to December 31, 2018, while delivering enhanced platform capabilities and solutions to advisers. Our net income margin was 33.5% for the year ended December 31, 2017 and 10.3% for the year ended December 31, 2018. Our net income for the year ended December 31, 2017 was impacted by a non-recurring $90.1 million benefit related to the Tax Cuts and Jobs Act of 2017. Adjusted EBITDA margin (defined as adjusted EBITDA divided by net revenue) expanded from 30.0% for the year ended December 31, 2017 to 36.3% for the year ended December 31, 2018. |
Our strengths
For more than 20 years, we have focused on providing solutions that enhance and simplify the lives of our advisers and the investors they serve. We believe that this approach distinguishes us from many of our competitors. The following strengths underpin our competitive advantage:
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Our mission-driven, client-focused culture : We believe that our exceptional client-centric culture has driven our historical performance. The AssetMark team is dedicated to its mission of making a difference in the lives of advisers and investors through a culture that rests on our core pillars of heart, integrity, excellence and respect. We are also committed to helping advisers and the communities they serve. Through our Summer of Service and Community Inspiration Awards we seek to ensure that our firms and our advisers communities benefit from our charitable contributions. We believe that our focus on doing the right thing while also running a great business not only results in higher adviser loyalty and referrals, but also increases our employee tenure. |
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A deep understanding of fee-based, independent advisers : Our frequent, value-added interactions with our diverse group of advisers help us tailor offerings to meet their needs, at scale and in the context of their business opportunities and challenges. We also benefit from tracking and evaluating advisers extensive activity in our ecosystem. This allows us to create responsive service models, operational processes and solutions that help advisers reduce the time associated with administrative tasks. In addition, members of our community of advisers have access to each others best practices as well as data about their specific business activity, which helps our advisers grow their businesses and drives our extensive best practices library. |
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Proven ability to execute superior outsource solutions facilitated by a leading technology offering : We create outsource solutions that transform advisers businesses. We believe the transformation that we enable for the advisers on our platform is the result of our deeply integrated service model and robust, user-friendly technology, which together help advisers improve responsiveness to investors. Collectively, our outsource offerings optimize advisers time and, as a result, help improve investor outcomes. |
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We are a scale provider : We are an established leader as an outsource service provider for independent, fee-based financial advisers. Our scale and access enable us to establish favorable partnerships with technology and asset management institutions and provide attractive pricing for our advisers clients. In addition, our feature-rich technology solution scales to serve a broad-range of business sizes, from solo practices to ensemble firms. The scope and scale of our offering has made us an essential part of our advisers businesses, in turn making us the third largest outsource provider of the components of a managed account platform (known in the industry as a Turnkey Asset Management Program, or TAMP) in terms of platform assets in 2017, according to WealthAdvisors 2018 Americas Best TAMPs report. As of December 31, 2018, our market share among U.S. TAMPs was 10%. |
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We are a disciplined acquirer : Growth through acquisition of small, subscale, outsource providers is a core competency of our business. Our value creation through acquisition is generated by purchase price discipline and our ability to grow relationships formed through these acquisitions. In 2014 and 2015, respectively, we acquired two firms that collectively added $3.5 billion in assets to our platform at the time of acquisition. On average, three years post-acquisition, these acquired assets had grown by 17% compounded annually. Subsequently, in April 2019, we closed our acquisition of Global Financial Private Capital for a cash purchase price of $35.9 million, which added another $3.8 billion in platform assets. |
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Our experienced and committed management team : Our experienced and committed senior leadership team has provided stable leadership for our business since 2014. Our management team has played a significant role in almost doubling the size of our business (measured by platform assets) while also expanding our net income margin from 3.4% in the year ended December 31, 2014 to 10.3% in the year ended December 31, 2018. Our executives have strong relationships in the wealth management industry and with our clients, and are aligned with future stockholders through their significant equity ownership in our company. |
Our growth strategy
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Increase the adviser base : Through our marketing efforts and the outreach of our more than 100-person field force, we expect to continue building on our existing relationships with advisers and growing business from new relationships. |
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Expand share of wallet from existing adviser clients : According to our internal share of wallet study, as of March 31, 2019, we have approximately 33% of the total assets and 61% of the total advisory assets of our advisers with at least $5 million in positive net flows on our platform over the life of our relationship with them. We plan to work with existing advisers to add investment solutions to our platform that they otherwise obtain elsewhere. This work aims to help advisers further their operational efficiencies and improve their investor experience by shifting an increasing portion of their business to AssetMark. |
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Help advisers grow their business es: Our turnkey, holistic platform and adviser engagement model are designed to help advisers grow and build sustainable businesses. We plan to continue to help advisers grow through our deep business consulting engagements and comprehensive platform support. |
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Expand our services to new segments : We are focused on introducing new products and enhancing services and capabilities in areas including cash management, business consulting and trading to further expand our reach into the RIA market, retirement services and the high-net-worth segment. We believe that these solutions will enhance our offering to existing advisers while also deepening and extending our relationships with high-growth segments of advisers. |
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Continue to pursue strategic transactions : We expect to continue to selectively pursue acquisitions that we believe will enhance the scale and operating leverage of our business. In addition, we may pursue acquisitions that expand the appeal of our offering to independent, fee-based advisers and the investors they serve. |
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Competition
We compete with a broad range of wealth management firms that offer services to independent investment advisers. Our value proposition is built upon the quality and breadth of the integrated technology, scalable services and curated investment solutions we provide to advisers and the investors they serve. Our dedicated, client-focused culture is designed to deepen adviser relationships and drive adviser engagement on our platform. We believe that these strengths, among others, differentiate us from our competitors. The principal bases on which participants in our industry compete are the breadth of technological capabilities, the quality of consulting and back-office servicing and the quality of investment solutions. We believe that we compete favorably on each of these factors. As a holistic wealth platform, we offer advisers a solution set that adheres to exacting quality standards and offers an extensive suite of services that provide advisers a turnkey platform with which to build and grow their businesses.
Our competitors offer a variety of products and services that compete with one or more of the investment solutions and services provided through our platform. Our principal competitors include:
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Other turnkey asset management platform providers: Most providers of turnkey asset management platforms typically provide financial advisers with one or more types of products and services, and vary in the number of choices offered in terms of custodians, technology features, investments and quality of service. |
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Independent broker-dealer proprietary wealth platforms: Many broker-dealers provide integrated proprietary wealth management platforms that offer an array of asset management solutions to their affiliated financial advisers. |
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Providers of specific service applications: Several of our competitors provide financial advisers with a product or service designed to address one or a limited number of specific needs, such as financial planning or performance reporting. |
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Adviser-built solutions: Some financial advisers have developed in-house solutions that overlap with some or all of the technology or services that we currently provide, including portfolio construction, portfolio analytics and model management. |
We believe that our broad set of solutions featuring a fully integrated technology platform, extensive suite of technology features, personalized and scalable service, curated investment offerings and high quality service differentiate us from other competitors in the marketplace. With our continued focus on enhancing our platform and the services we provide to advisers, we believe that we will continue to compete favorably.
Employees
As of March 31, 2019, we had over 620 full-time employees, all of whom are located in the United States. None of our employees is represented by a labor union or subject to a collective bargaining agreement governing employment with us, and we have never experienced a work stoppage.
Corporate structure
In April 2016, HTSC, a Chinese securities group with brokerage and investment services, acquired our collective businesses from Aquiline Capital Partners and Genstar Capital. Through the acquisition, HTSC became the ultimate parent company of our collective businesses through its subsidiary HIIHL,
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a company organized under the laws of the Cayman Islands. HIIHL holds 98.59% of the equity interests in our parent company, AssetMark Holdings LLC, with the remaining 1.41% held by members of our senior management. In turn, AssetMark Holdings LLC holds 100% of the equity interests in our company.
In connection with this offering, AssetMark Holdings LLC will be liquidated and dissolved and the members of AssetMark Holdings LLC will become our stockholders. See the section titled Prospectus summaryRestructuring for more information.
AssetMark Financial Holdings, Inc. is a holding company for AssetMark Financial, Inc., which in turn holds our separate operating business units. Our limited purpose broker-dealer, AssetMark Brokerage, LLC, was formed in 2013 and provides mutual fund underwriting and distribution services for our GuideMark, GuidePath and Savos mutual funds. ATC, which was formed in 1994, is an integrated custodian that provides trust and custodial services to our advisers clients. Through AssetMark, Inc., our investment adviser subsidiary that was formed in 1999, we operate our TAMP platform and provide investment advisory services for certain assets on the platform. Finally, AssetMark Retirement Services, Inc., which was acquired as part of our acquisition of Aris Corporation of America in early 2015, provides recordkeeping and administrative services for retirement accounts.
In addition to Aris Corporation, we have grown our business through a number of opportunistic acquisitions. Most recently, we acquired Global Financial Private Capital, a provider of a broad suite of integrated wealth management services for institutional and individual investors. We expect this acquisition to strengthen our turnkey asset management services and add assets to our platform.
Regulation
Overview
The financial services industry is among the most extensively regulated industries in the United States. We operate investment advisory, broker-dealer, custodian and mutual fund businesses, each of which is subject to a specific regulatory scheme. Our subsidiaries are subject to regulation primarily at the federal level, including regulation by the SEC under the Advisers Act and the 1940 Act, the CFTC, the NFA, the DOL under ERISA and by the SEC, FINRA and the Financial Crimes Enforcement Network of the Department of the Treasury for our broker-dealer subsidiary. Our proprietary custodian, ATC, is an Arizona trust company regulated by the ADFI.
The Advisers Act and the 1940 Act
AssetMark, Inc., our investment adviser subsidiary, is registered with the SEC under the Advisers Act. The Advisers Act imposes numerous obligations on registered investment advisers, including fiduciary duties to clients, compliance and disclosure obligations, recordkeeping requirements and operational requirements, as well as regulations related to receipt of performance fees, solicitation arrangements, conflicts of interest, advertising, agency cross and principal transactions between the adviser and advisory clients and general anti-fraud provisions. In addition, certain of our investment adviser subsidiaries sponsor registered funds in the United States. These activities subject those subsidiaries to additional regulatory requirements, including regulation by the SEC under the 1940 Act. The 1940 Act imposes significant requirements and limitations on a registered fund, including with respect to its capital structure, investments and transactions. The registered funds that are advised by our investment adviser subsidiaries are subject to oversight and management by each funds board of
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directors. Under the 1940 Act, a majority of the directors of registered funds must not be interested persons with respect to us (sometimes referred to as the independent director requirement) in order to rely on certain exemptive rules under the 1940 Act relevant to the operation of registered funds. The responsibilities of the funds board include, among other things, approving the investment advisory agreement, approving other service providers, determining the method of valuing assets and monitoring transactions involving affiliates. The 1940 Act also imposes on the investment adviser to a registered fund a fiduciary duty with respect to the receipt of the advisers investment management fees. That fiduciary duty may be enforced by the SEC, administrative action or litigation by investors in the fund pursuant to a private right of action. In addition, many state securities commissions impose filing requirements on investment advisers that operate or have places of business in their states. Similarly, many states require certain client-facing employees of registered investment advisers and FINRA-registered broker-dealers to become state licensed.
The SEC is authorized to institute proceedings and impose sanctions for violations of the Advisers Act and the 1940 Act, ranging from fines and censure to termination of an investment advisers registration. Non-compliance with the Advisers Act or other federal and state securities laws and regulations could result in investigations, sanctions, disgorgement, fines or other similar consequences. Though we believe we are in compliance in all material respects with the requirements of the Advisers Act and the 1940 Act and the rules and interpretations promulgated thereunder, our failure to comply with such laws, rules and interpretations could have a material adverse effect on us.
Under the Advisers Act and the 1940 Act, certain offerings of our shares could be deemed a change of control of our investment adviser subsidiaries, and unless our investment adviser subsidiaries clients consent to the change of control, our investment advisory agreements with such clients could be terminated. See the section titled Risk factorsRisks related to regulation and litigationIn the event of a change of control of our company, we may be required to obtain FINRA approval and the consent of our advisory clients to the change of control, and any failure to obtain these consents could adversely affect our results of operations, financial condition or business. While we have concluded that this offering does not constitute an assignment or change of control, an assignment or change of control could be deemed to occur in the future if we or one of our investment adviser subsidiaries were to gain or lose a controlling person, or in other situations that may depend significantly on particular facts and circumstances. In any such case we would seek to obtain the consent of our investment adviser subsidiaries advisory clients, including any funds, to the assignment.
Broker-dealer regulation
Our subsidiary AssetMark Brokerage, LLC is a limited purpose SEC-registered broker-dealer that distributes and underwrites mutual funds. Broker-dealers and their personnel are regulated, to a large extent, by the SEC and self-regulatory organizations, principally FINRA. In addition, state blue sky commissions have supervisory authority over broker-dealer activities conducted in their states. Broker-dealers are subject to regulations which cover virtually all aspects of their business, including sales practices, trading practices, order handling, best execution, use and safekeeping of clients funds and securities, anti-money laundering, handling of material non-public information, safeguarding data, recordkeeping, reporting and the conduct and qualifications of directors, officers, employees, representatives and other associated persons.
Broker-dealers are also subject to net capital rules that mandate that they maintain certain levels of capital. The SECs net capital rule specifies the minimum level of net capital a broker-dealer must
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maintain and also requires that a significant part of a broker-dealers assets be kept in relatively liquid form. The SEC and various self-regulatory organizations impose rules that require notification when net capital falls below certain predefined criteria, limit the ratio of subordinated debt to equity in the regulatory capital composition of a broker-dealer and constrain the ability of a broker-dealer to expand its business under certain circumstances. Additionally, the SECs uniform net capital rule and FINRA regulations impose certain requirements that may have the effect of prohibiting a broker-dealer from distributing or withdrawing capital and requiring prior notice to the SEC and FINRA for certain withdrawals of capital.
ERISA regulation
Certain of our subsidiaries, including AssetMark, Inc. and AssetMark Retirement Services, Inc., are also subject to regulation by the DOL under ERISA and related regulations with respect to investment advisory and management, recordkeeping and administrative services provided with regard to retirement plans covered by ERISA and IRAs. Among other requirements, ERISA imposes duties on persons who are fiduciaries under ERISA and prohibits certain transactions between plans and related parties. A failure to comply with the requirements of ERISA could result in significant monetary penalties and could limit the ability of our subsidiaries to act as fiduciaries.
CFTC regulation
Our subsidiary AssetMark, Inc. is registered with the CFTC as a commodity pool operator with respect to some of the funds it manages. AssetMark, Inc. is also a member of the NFA. The CFTC is a federal independent agency responsible for implementing and enforcing the CEA, which governs commodity derivative markets, including those for swaps and futures, and intermediaries operating in those markets. The NFA is a self-regulatory organization to which the CFTC has delegated some of its authority under the CEA, including the administration and enforcement of registration requirements for commodity pool operators and other intermediaries and the regulation of the conduct of its members. As a registered commodity pool operator, AssetMark, Inc. is subject to regulation by the NFA and CFTC and is subject to legal requirements and restrictions under the CEA, CFTC regulations and NFA rules and by-laws. These include, among others, reporting and disclosure requirements, investor protection requirements, conduct requirements, anti-fraud prohibitions and recordkeeping requirements. AssetMark, Inc. is also subject to periodic inspections and audits by the NFA.
From time to time, our subsidiaries have provided, and in certain cases continue to provide, information and documents to the various regulators specified above regarding our compliance with commodities, securities and other laws and regulations regarding the conduct of our businesses.
In the event of noncompliance, the CFTC, NFA or other governmental regulatory authorities may institute administrative or judicial proceedings that may result in censure, fines, the issuance of cease-and-desist orders, trading prohibitions, the suspension or expulsion of a member, its officers, registered representatives or employees or other similar sanctions against AssetMark, Inc.
Trust company regulation
ATC, our wholly owned state-licensed trust company subsidiary that acts as a custodian for client investment assets, is an Arizona licensed trust company subject to regulation and examination by the ADFI. As a bank, for the purposes of the Exchange Act, effectuating securities transactions in a fiduciary capacity, ATC is exempt from registration as a broker-dealer under the Exchange Act, but is
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subject to Arizona state trust company laws, as well as certain federal laws including those related to anti-money laundering.
As an Arizona regulated trust company, ATC is subject to annual examination by the ADFI staff. Arizona requirements also include minimum capital requirements, limitations regarding declaration of dividends, requirements regarding maintenance of a fidelity bond, recordkeeping requirements, certain required audits and maintenance of disaster recovery and business continuity plans. ATC is also subject to reporting requirements with the U.S. Internal Revenue Service regarding activity of its clients investment assets, and must comply with Internal Revenue Code requirements when acting as trustee for its clients IRAs.
Because ATC is not a bank under the Bank Holding Company Act of 1956 (as amended, the BHCA), our affiliation with ATC does not cause us to be regulated as a bank holding company or financial holding company under the BHCA.
Anti-money laundering
ATC, AssetMark Brokerage, LLC (our U.S. broker-dealer subsidiary) and the mutual funds advised by AssetMark, Inc. are subject to the BSA, as amended by the PATRIOT Act, and implementing regulations, which require financial institutions, including custodians and broker-dealers, to establish anti-money laundering compliance programs, file suspicious activity and other reports with the U.S. government and maintain certain records. A financial institutions anti-money laundering compliance program generally must include policies, procedures and controls reasonably designed to achieve compliance with the BSA and its implementing regulations and to detect and report suspicious activity, the training of relevant employees, the designation of an anti-money laundering compliance officer, periodic independent audits to test the effectiveness of the program, and customer due diligence and ongoing monitoring. Certain financial institutions, including trust companies, broker-dealers and mutual funds, are also required to implement customer identification procedures and beneficial ownership identification procedures. We have established policies, procedures and systems designed to comply with these regulations.
Privacy
Regulatory activity in the areas of privacy and data protection continues to grow worldwide and is generally being driven by the growth of technology and related concerns about the rapid and widespread dissemination and use of information. To the extent applicable, we must comply with federal and state information-related laws and regulations in the United States, including the Gramm-Leach-Bliley Act of 1999, which requires financial institutions to disclose their privacy policies and practices related to sharing customer information with affiliates and non-affiliates and give customers the ability to opt out of having non-public information disclosed to third parties or receiving marketing solicitations from affiliates and non-affiliates based on non-public information received from financial institutions. Further, to the extent applicable, we must comply with additional privacy-related regulations including the Fair Credit Reporting Act of 1970, as amended by the 2003 Fair and Accurate Credit Transactions Act, Regulation S-P under the Gramm-Leach-Bliley Act, Regulation S-ID and the California Consumer Privacy Act, and may also be subject to new federal and state requirements in the future.
In particular, Regulation S-P requires that we (i) safeguard the security and confidentiality of all client records and information, (ii) protect against any anticipated threats or hazards to the security or
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integrity of client records and information and (iii) protect against any unauthorized access or use of such information that could result in substantial harm or inconvenience to any client, and we must install and abide by appropriate policies, procedures and practices to meet these requirements. Such procedures include physical and structural safeguards that prevent data from being accessed by affiliates or any third party except where properly protected and necessary for the delivery of services to the client. In addition, we maintain strict policies to prevent the sharing of data outside of the United States, including to prevent the sharing of data with HTSC. We operate as an independent firm separate from HTSC; we maintain network separation from HTSC; and we do not share client information or technology with HTSC. Further, we undergo regular third-party audits of our security protocols to help ensure the ongoing integrity of our data protection and privacy measures.
PRC and Hong Kong regulations
Our ultimate parent company and controlling stockholder, HTSC, which is incorporated in the PRC and listed on The Shanghai Stock Exchange and The Stock Exchange of Hong Kong Limited, is subject to regulations governing PRC-incorporated companies, as well as the listing rules of both stock exchanges. Certain of these rules and regulations require our controlling stockholder to file with or obtain approval from various PRC regulators or HTSCs shareholders or board of directors before approving certain of our corporate actions. See the section titled Risk factorsRisks related to our controlling stockholders ultimate parent being a PRC company with stock listed in Hong Kong and Shanghai.
Additional regulatory reform
Our subsidiaries are subject to the numerous regulatory reform initiatives in the United States. New laws or regulations, or changes in enforcement of existing laws or regulations, could have a material and adverse impact on the scope or profitability of our business activities or require us to change business practices and incur additional costs as well as potential reputational harm. For example, on April 18, 2018, the SEC proposed a package of rulemakings and interpretations that, if adopted, would (i) require broker-dealers to act in the best interest of retail customers when making a recommendation, without placing the financial or other interests of the broker-dealer ahead of the interest of the retail customer, (ii) require the delivery to retail investors of a short-form disclosure document describing the firms relationship with and duties to the customer, (iii) restrict the use of the term adviser or advisor by broker-dealers who are not also registered as investment advisers and (iv) clarify the SECs views on the fiduciary duty that investment advisers owe to their clients. Any legislative or regulatory actions and any required changes to our business operations, or the business operations of our adviser clients, resulting from such legislation and regulations, as well as any deficiencies in our compliance with such legislation and regulation, could result in significant loss of revenue, limit our ability to pursue business opportunities in which we might otherwise consider engaging or otherwise adversely affect our businesses.
In addition, financial regulators are increasing their enforcement and examination attention across a wide range of activities and business practices, including disclosure, conflicts of interest, cyber-security, business continuity and succession planning. Such enhanced scrutiny may increase the likelihood of enforcement actions or violation findings or cause us or our subsidiaries to change business practices or incur additional costs. It is also not possible to predict how such changes may impact the businesses of our competitors and the competitive dynamics of the industry.
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Intellectual property
We rely on a combination of trademark, copyright and trade secret laws to protect our proprietary technology and intellectual property. We have registered certain of our trademarks and service marks in the United States with the U.S. Patent and Trademark Office, including the mark ASSETMARK. In addition, we have registered our domain names, including www.assetmark.com and www.ewealthmanager.com, with MarkMonitor. We believe the AssetMark name and the marks associated with it are of significant value and are important to our business. Accordingly, as a general policy, we monitor the use of our marks and vigorously oppose any unauthorized use of the marks. We rely on common law protection of our copyrighted works. Such copyrighted materials are not material to our business.
We seek to control access to and distribution of our proprietary information, including our algorithms, implementation and business on-boarding functions and applications software. We enter into confidentiality, nondisclosure, non-interference and invention assignment agreements with our employees, consultants, customers and vendors that generally provide that any confidential or proprietary information developed by us or on our behalf be kept confidential, and we limit access to our confidential and proprietary information to a need to know basis. In the normal course of business, we provide our intellectual property to third parties through licensing or restricted use agreements. We have established a system of security measures to help protect our computer systems from security breaches and computer viruses. We have employed various technology and process-based methods, such as clustered and multi-level firewalls, intrusion detection mechanisms, vulnerability assessments, content filtering, antivirus software and access control mechanisms. We also use encryption techniques for data transmission.
Facilities
Our headquarters are located in Concord, California and consist of approximately 72,536 square feet of leased space. Our lease on this space expires on August 31, 2022. We lease an additional combined 97,348 square feet of office space in Phoenix, Arizona; Chicago, Illinois; State College, Pennsylvania; Encino, California; Atlanta, Georgia and Sarasota, Florida. We believe that our headquarters and other offices are adequate for our immediate needs and that additional or substitute space is available if needed to accommodate growth and expansion.
Legal proceedings
We are, from time to time, involved in various legal proceedings, litigation and regulatory matters that arise in the normal course of our business. We do not believe that the resolutions of any such matters we are currently involved in, individually or in the aggregate, will have a material adverse impact on our financial condition or results of operations. However, we can provide no assurance that any pending or future matters will not have a material effect on our financial condition or results of operations in the future.
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The following table sets forth information regarding the executive officers and directors of AssetMark Financial Holdings, Inc. as of May 31, 2019:
Name | Age | Position | ||
Charles Goldman |
58 | Director, President and Chief Executive Officer | ||
Gary Zyla |
47 | EVP, Chief Financial Officer | ||
Ted Angus |
48 | EVP, General Counsel | ||
Jeremiah Chafkin |
60 | EVP, Chief Investment Officer | ||
Carrie Hansen |
48 | EVP, Chief Operating Officer | ||
Michael Kim |
49 | EVP, Chief Client Officer | ||
Mukesh Mehta |
53 | EVP, Chief Information Officer | ||
Natalie Wolfsen |
49 | EVP, Chief Solutions Officer | ||
Xiaodan Liu |
46 | Chairman of the Board | ||
Rohit Bhagat |
55 | Director | ||
Patricia Guinn |
64 | Director | ||
Bryan Lin |
49 | Director | ||
Ying Sun |
43 | Director | ||
Yi Zhou |
50 | Director | ||
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Executive officers and directors
Charles Goldman has served as our President and Chief Executive Officer since 2014 and as a director since 2013. Prior to joining our company, he served as Senior Advisor at Bain & Company from 2010 to 2014 and President of Fidelity Investments, Custody & Clearing from 2009 to 2010. From 2001 to 2008, Mr. Goldman served in various senior roles at The Charles Schwab Corporation, including head of Schwab Institutional, Chief Operating Officer of Schwab Institutional and head of Strategy, M&A and Venture Capital. From 1996 to 2000, he served as President of Paramount Farms, Inc. From 1991 to 1996, Mr. Goldman was a consultant with The Boston Consulting Group, prior to which he spent two years with Bankers Trust Company. Mr. Goldman holds a B.S. degree in finance, magna cum laude , from the University of Southern California and an M.B.A. degree, with honors, from the University of California, Los Angeles. We believe Mr. Goldman is qualified to serve as a member of our board of directors because of the perspective he brings as our Chief Executive Officer and his experience in senior management positions.
Gary Zyla has served as our Chief Financial Officer since 2011. From 2004 to 2011, Mr. Zyla served in the Corporate and Retirement and Protection segments at Genworth Financial, Inc., where he led the Capital Management team and served as Vice President of Financial Planning & Analysis. Mr. Zyla holds a B.S. degree in Computer Science-Mathematics and a B.A. degree in History from the State University of New York-Binghamton and an M.B.A. from the University of Maryland.
Ted Angus has served as our General Counsel since joining us in 2013. From 2010 to 2013, Mr. Angus served as the General Counsel at Genworth Financial Wealth Management, and from 2000
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to 2010 he served in various roles at The Charles Schwab Corporation, including as Vice President and Associate General Counsel. From 1998 to 2000, Mr. Angus was an Associate in the securities litigation group at the law firm Brobeck, Phleger & Harrison LLP, and from 1995 to 1998, he was an Associate at Keesal, Young & Logan. Mr. Angus holds B.A. degrees in History and Economics from the University of California, Los Angeles and a J.D. from the University of California, Hastings College of the Law.
Jeremiah Chafkin has served as our Chief Investment Officer since 2014. Prior to joining our company, Mr. Chafkin served as the President and Chief Executive Officer at AlphaSimplex Group, an investment management firm, from 2008 to 2014. From 2006 to 2007, Mr. Chafkin was the Chief Executive Officer at IXIS Asset Management U.S., L.P. From 1991 to 2006, Mr. Chafkin held a range of leadership roles with The Charles Schwab Corporation, including Executive Vice President of the Advised Investor Division (2002 2006), President of Charles Schwab Investment Management (1991-2001) and Executive Vice President of Asset Management Products and Services (1999-2001). Mr. Chafkin began his career at Bankers Trust Company, where he spent almost fifteen years in a variety of asset management roles, including Chief Executive Officer of the Structured Investment Management business (1997-1999) and President of Japan Bankers Trust (1994-1996). Mr. Chafkin holds a B.A. degree in Economics from Yale University and an M.B.A. degree from Columbia Business School.
Carrie Hansen joined our company in 2000, and has served as our Chief Operating Officer since 2008 and as President of our Mutual Funds division since 2007. Prior to becoming our Chief Operating Officer, Ms. Hansen served as our Chief Financial Officer (2003-2006) and Chief Compliance Officer (2004-2008). From 1998 to 2000, Ms. Hansen served as head of the Investment Operations Group in the Tokyo office of Barclays Global Investors, prior to which she spent over four years at Coopers & Lybrand Consulting, finishing her career there as an Audit Manager. Ms. Hansen holds a B.S. degree in Business Administration from the University of California, Berkeley.
Michael Kim joined our company in 2010 and has served as our Chief Client Officer and National Sales Leader since January 2018. Prior to becoming our Chief Client Officer, Mr. Kim served as our National Sales Manager from 2014 to 2018, and Head of our RIA Channel from 2010 to 2014. Prior to joining our company, Mr. Kim spent over twelve years with Fidelity Investments, Inc., including as a Senior Vice President from 1998 to 2010. From 1995 to 1998, Mr. Kim served as Senior Vice President at Transamerica, and from 1991 to 1995, Mr. Kim was a Senior Associate at Coopers & Lybrand Consulting. Mr. Kim holds a B.A. degree in Economics from the University of California, Los Angeles.
Mukesh Mehta has served as our Chief Information Officer since joining our company in 2017. From 2014 to 2017, Mr. Mehta served as the Chief Information and Technology Officer at Cetera Financial Group, a shared services organization serving a family of affiliated independent broker-dealers. From 2010 to 2013, Mr. Mehta served as Chief Information Officer at TD Ameritrade, a brokerage firm, where he also served as a Managing Director in Business Technologies from 2009 to 2010. From 2002 to 2008, Mr. Mehta served as Senior Vice President and Chief Information Officer at Schwab Institutional, Platform Development & Technology, prior to which he served as a Vice President of Finance & Corporate Administration Technology at The Charles Schwab Corporation from 1999 to 2002. Mr. Mehta has also held positions with Bankers Trust (Vice President, Defined Contribution & Participant Services, 1995-1999), Kwasha Lipton (Pension Design & Systems Consultant, 1987-1994), ER Keller & Co. (Investment Account Manager, 1987) and Bell Communications Research (Analyst, 1984-1987). Mr. Mehta holds a B.A. degree in Mathematics & Economics from Rutgers University and is a graduate of the Stanford University Graduate School of Business Executive Program.
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Natalie Wolfsen joined our company in 2014 and has served as our Chief Solutions Officer since January 2018, prior to which she served as our Chief Commercialization Officer from May 2014 to December 2017. Prior to joining our company, Ms. Wolfsen served as head of Marketing and Product Development for First Eagle Investment Management, an investment management company, from 2011 to 2014. From 2009 to 2011, Ms. Wolfsen served as head of Product Management and Development for Pershing LLC. From 1999 to 2009, Ms. Wolfsen held numerous roles with The Charles Schwab Corporation, including Senior Marketing Manager (1999-2000), Senior Manager and Director of Technology (2000-2001), Director of Segment Management (2002-2004), Vice President of Strategy (2004-2007), Vice President of Product Management and Development (2007-2008) and Vice President of Equity Product Management and Development (2008-2009). Ms. Wolfsen holds a B.A. degree in Political Science from the University of California, Berkeley and an M.B.A. degree from the University of California, Los Angeles.
Non-employee directors
Xiaodan Liu has served as the Chairman of our board of directors since 2016. Ms. Liu has served as President of Huatai United Securities Co., Ltd., the specialized investment banking subsidiary of HTSC and one of our affiliates, since 2010 and as Chairperson of Huatai United Securities Co., Ltd. since 2017. Ms. Liu also served as a member of the M&A and Restructuring Committee of the China Securities Regulatory Committee from 2012 to 2016. Ms. Liu has over 16 years of experience in the investment banking industry, including time at HolyHigh Investment Advisory and Hantang Securities, and has participated in the drafting and revisions of Chinese regulations on M&A and restructuring practices in China. Ms. Liu graduated from Peking University with a Masters degree in Law. Ms. Lius qualifications to serve on our board of directors are primarily based on her two years of experience as a member of our board of directors, her knowledge of Chinese regulations and authorities gained through her time with the CSRC and working in the financial industry in China, and her knowledge of the investment banking industry gained through her 16 years of experience.
Rohit Bhagat has served as a director of our company since 2017. Mr. Bhagat is currently a Managing Director at Mukt Capital LLC, an investment advisory firm, a position he has held since 2014. He was previously a Senior Partner at the Boston Consulting Group from 1992 to 2005, Global Chief Operating Officer of Barclays Global Investors from 2005 to 2009 and Chairman, Asia Pacific of BlackRock, Inc. from 2009 to 2012. Mr. Bhagat currently serves on the boards of Axis Bank Limited (since 2013), Zentific Investment Management (since 2015), Franklin Templeton ETF Trust (since 2016), Capital Float Financial Services Pvt. Ltd. (since 2018) and FreeCharge Payment Technologies Pvt. Ltd. (since 2018). He also serves as a Senior Advisor to B Capital Group (since 2017), Advisor to Social Finance, Inc. (since 2017) and Advisor to Optimal Asset Management Inc. (since 2016). Mr. Bhagat received a B. Tech. (Mechanical Engineering) degree from the Indian Institute of Technology, Delhi, an M.Sc. (Engineering) degree from the University of Texas at Austin and a Masters in Finance, Marketing and Managerial Economics degree, with honors, from the Kellogg School of Business at Northwestern University. Mr. Bhagats qualifications to serve on our board of directors are primarily based on his significant corporate governance experience, including his year of experience serving as a member of our board of directors and nine years of experience serving as a director of other companies (including service on audit, risk management, nomination, compensation and mergers and acquisitions committees), his knowledge of the financial services industry, his experience working with regulators in multiple jurisdictions while at Barclays and BlackRock and his education in finance, marketing and managerial economics.
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Patricia Guinn has served as a director of our company since 2019. From 1976 to 2019, Ms. Guinn held various positions at Willis Towers Watson (formerly Towers Watson and Towers Perrin), a global advisory, brokerage and solutions company, including Chief Risk Officer from 2017 to 2019 and Managing Director of the Risk and Financial Services Segment from 2001 to 2015. Ms. Guinn currently serves as a member of the board of directors of Reinsurance Group of America, Inc., a global life and health reinsurance firm, and is a member of its audit and FIRM (finance, investment and risk management) committees, positions she has held since 2016. She also served as a director of Allied World Assurance Company Holdings AG from 2015 to 2017. Ms. Guinn currently serves as an Association Member of Bupa, an international healthcare group, an Emeritus Trustee of The Actuarial Foundation, a member of the Social Security Advisory Boards 2019 Technical Panel on Assumptions and Methods, a governance fellow of the National Association of Corporate Directors, a fellow of the Society of Actuaries and a member of the American Academy of Actuaries, and is a Chartered Enterprise Risk Analyst. Ms. Guinn holds a B.A. degree in Mathematics from Hendrix College. Ms. Guinns qualifications to serve on our board of directors are primarily based on her significant professional and leadership experience in the advisory and brokerage industries and her experience as a director of other financial services companies, including as an audit committee member.
Bryan Lin has served as a director of our company since 2019. Mr. Lin is currently the CEO of Huatai Securities (USA), Inc., a wholly owned U.S.-based indirect subsidiary of HTSC, a position he has held since March 2018. Prior to joining Huatai Securities (USA), Inc., Mr. Lin spent over eleven years, from 2006 to 2017, as a senior private equity investment professional with The Carlyle Group, where he focused on various infrastructure sections including transportation and logistics, energy and utilities. Prior to joining The Carlyle Group, Mr. Lin spent over nine years, from 1997 to 2006, as an investment banker with Citigroup, where he focused on financial advisory and capital raising for clients in the infrastructure and energy sectors. Mr. Lin started his career as a banking analyst at the Federal Reserve of New York, where he spent two years working in the areas of bank supervision and regulation. Mr. Lin served on the board of directors at several portfolio companies of The Carlyle Group, serving on various executive, audit and compensation committees. Mr. Lin holds a B.S. in Business Management from State University of New York at Binghampton and an M.B.A. degree from the University of Chicago, Booth School of Business, and is a CFA charter holder. Mr. Lins qualifications to serve on our board of directors are primarily based on his significant professional experience in the financial industry, including in private equity, investment banking and financial regulation, as well as his experience serving on executive, audit and compensation committees of the boards of directors of various portfolio companies.
Ying Sun has served as a director of our company since 2016. Ms. Sun currently serves as a Managing Director and Head of Corporate Development of our parent company, HTSC, positons she has held since December 2014. Prior to joining HTSC, she worked in capital markets and cross-border mergers and acquisitions at Citigroup Asia Investment Banking (2013 through 2014) and Deutsche Bank Asia (2005 to 2012). Ms. Sun currently serves as a director of HIIHL, a subsidiary of our ultimate parent company HTSC. She has held this directorship since 2016. Ms. Sun holds a Bachelors degree in Economics from Peking University. Ms. Suns qualifications to serve on our board of directors are primarily based on her two years of experience as a member of our board of directors and two years serving as a director for other companies, as well as her knowledge of the financial industry acquired through her experience at Citigroup Asia and Deutsche Bank Asia.
Yi Zhou has served as a director of our company since 2016. Mr. Zhou has been the Executive Director and President of HTSC since 2007 and Chairman of the board of HTSC since 2016. Prior to joining HTSC, Mr. Zhou worked in technology management for the Jiangsu Posts &
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Telecommunications Bureau, an affiliated department of the Jiangsu Provincial government, from 1998 to 1999 and in administrative management at Jiangsu Mobile Communication Co., Ltd., a state-owned communications company in Jiangsu province, from 1999 to 2000. From 2005 to 2006, Mr. Zhou was the Deputy General Manager of Shanghai Beier Fortune Communications Company. Mr. Zhou has served on the boards of directors of Jiangsu Beier Co., Ltd. (from April to July 2000), Nanjing Xinwang Technology Co., Ltd. (from 2000 to 2005), Jiangsu Province Emerging Industry Investment Management Limited (an investment management company that invests primarily in the Jiangsu Province equity market) (from 2013 to 2018), Huatai Securities (Shanghai) Assets Management Ltd., one of our affiliates (from 2014 to 2018), and Huatai International Financial Holdings Company Limited, our direct parent (from 2017 to 2018), and continues to serve on the boards of Huatai Financial Holdings (Hong Kong) Limited (an HTSC subsidiary engaged in investment banking, asset management and wealth management businesses) (since 2006) and CSOP Asset Management Limited (a fund management company located in Hong Kong) (since 2017). Mr. Zhou graduated from Nanjing University of Posts and Telecommunications with a Bachelors degree in Computer Communications. Mr. Zhous qualifications to serve on our board of directors are primarily based on his two years of experience as a member of our board of directors and 11 years of experience as a member of the boards of other entities, his knowledge of investment services gained through his 11 years with Huatai affiliates, and his knowledge of PRC-related regulations gained through his extensive experience working with Chinese entities, both in management and as a director.
Family relationships
There are no family relationships among any of our executive officers or directors.
Controlled company
Upon completion of this offering, HTSC will continue to control a majority of the voting power of our outstanding common stock through its indirect subsidiary HIIHL. As a result, we will be a controlled company under the NYSE corporate governance standards. As a controlled company, we will be exempt from certain NYSE corporate governance requirements, including the requirements:
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that a majority of our board of directors consists of independent directors, as defined under the NYSE rules; |
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that the compensation of our executive officers be determined, or recommended to the board of directors for determination, by majority vote of the independent directors or by a compensation committee composed solely of independent directors; and |
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that director nominees be selected, or recommended to the board of directors for selection, by majority vote of the independent directors or by a nomination committee composed solely of independent directors. |
Accordingly, you may not have the same protections afforded to stockholders of companies that are subject to all of the NYSE corporate governance requirements. In the event that we cease to be a controlled company, we will be required to comply with these provisions within the transition periods specified in the NYSE rules.
These exemptions do not modify the independence requirements for our audit committee, and we expect to satisfy the member independence requirement for the audit committee by the end of the
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transition period provided under the NYSE listing standards and SEC rules and regulations for companies completing their initial public offering. See the section titled Board committeesAudit committee.
Board structure and compensation of directors
Upon completion of this offering, our board of directors will consist of seven members. Our board of directors has undertaken a review of the independence of the directors and considered whether any director has a material relationship with us that could compromise his or her ability to exercise independence judgment in carrying out his or her responsibilities. Based upon information requested from and provided by each director concerning such directors background, employment and affiliations, including family relationships, our board of directors has determined that each of Rohit Bhagat and Patricia Guinn is independent under applicable NYSE rules.
Our directors will be divided into three classes serving staggered three-year terms. Class I, Class II and Class III directors will serve until our annual meetings of stockholders in 2020, 2021 and 2022 respectively. At each annual meeting of stockholders, directors will be elected to succeed the class of directors whose terms have expired. This classification of our board of directors could have the effect of increasing the length of time necessary to change the composition of a majority of the board of directors. In general, at least two annual meetings of stockholders will be necessary for stockholders to effect a change in a majority of the members of the board of directors.
Directors who are also full-time officers or employees of our company will receive no additional compensation for serving as directors. All independent directors will receive an annual retainer of $ . In addition, the chairman of the audit committee (if independent) will receive an annual fee of $ , the chairman of the compensation committee (if independent) will receive an annual fee of $ and the chairman of the nominating and corporate governance committee (if independent) will receive an annual fee of $ . Each independent director also will receive an annual grant of RSUs with one-year cliff vesting under our 2019 Equity Incentive Plan having a fair market value (as defined in the plan) of $ .
Board committees
Audit committee
The members of our audit committee are Patricia Guinn, Rohit Bhagat, and Bryan Lin. Patricia Guinn is the chairman of our audit committee. We will phase-in to the independence requirements of the NYSE corporate governance rules, which require us to have one independent audit committee member upon the listing of our common stock on the NYSE, a majority of independent audit committee members within 90 days of listing and an audit committee consisting entirely of independent members within one year of listing. Our board of directors has determined that Patricia Guinn and Rohit Bhagat satisfy the independence requirements of the NYSE and the Exchange Act. Each member of our audit committee is financially literate. In addition, our board of directors has determined that Patricia Guinn and Rohit Bhagat are qualified as audit committee financial experts as defined in Item 407(d)(5)(ii) of Regulation S-K promulgated under the Securities Act. This designation does not impose any duties, obligations or liabilities that are greater than are generally imposed on members of our audit committee and our board of directors. Our audit committee is directly responsible for, among other things:
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selecting a firm to serve as the independent registered public accounting firm to audit our financial statements; |
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ensuring the independence and qualifications of the independent registered public accounting firm; |
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discussing the scope and results of the audit with the independent registered public accounting firm and reviewing, with management and that firm, our interim and year-end operating results; |
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establishing procedures for employees to anonymously submit concerns about questionable accounting or audit matters; |
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considering the adequacy of our internal controls and internal audit function; |
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reviewing material related party transactions or those that require disclosure; and |
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approving or, as permitted, pre-approving all audit and non-audit services to be performed by the independent registered public accounting firm. |
Compensation committee
The members of our compensation committee are Ying Sun, Patricia Guinn and Bryan Lin. Ying Sun
is the chairman of our compensation committee. We intend to avail ourselves of certain exemptions afforded to controlled companies under NYSE corporate governance rules, which will exempt us from the requirement that we have a compensation committee composed entirely of independent directors. Our compensation committee is responsible for, among other things:
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reviewing and approving, or recommending that our board of directors approve, the compensation of our executive officers; |
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reviewing and recommending to our board of directors the compensation of our directors; |
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administering our stock and equity incentive plans; |
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reviewing and approving, or making recommendations to our board of directors with respect to, incentive compensation and equity plans; and |
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reviewing our overall compensation philosophy. |
Nominating and governance committee
The members of our nominating and governance committee are Rohit Bhagat, Charles Goldman and Ying Sun. Rohit Bhagat is the chairman of our nominating and governance committee. We intend to avail ourselves of certain exemptions afforded to controlled companies under NYSE corporate governance rules, which will exempt us from the requirement that we have a nominating and governance committee composed entirely of independent directors. Our nominating and governance committee is responsible for, among other things:
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identifying and recommending candidates for membership on our board of directors; |
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reviewing and recommending our corporate governance guidelines and policies; |
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reviewing proposed waivers of the code of conduct for directors and executive officers; |
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overseeing the process of evaluating the performance of our board of directors; and |
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assisting our board of directors on corporate governance matters. |
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Code of business conduct and ethics
In connection with this offering, our board of directors will adopt a code of business conduct ethics that applies to all of our employees, officers and directors, including our President and Chief Executive Officer, Chief Financial Officer and other executive and senior financial officers. Upon completion of this offering, the full text of our code of business conduct and ethics will be posted on the investor relations section of our website. We intend to disclose future amendments to our code of business conduct and ethics, or any waivers of such code, on our website or in public filings.
Compensation committee interlocks and insider participation
None of our executive officers currently serves, or in the past year has served, as a member of a board of directors or compensation committee of any other entity that has an executive officer serving as a member of our board of directors or compensation committee.
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We are currently considered an emerging growth company for purposes of the SECs executive compensation disclosure rules. In accordance with such rules, we are required to provide a Summary Compensation Table and an Outstanding Equity Awards at Fiscal Year End Table, as well as certain limited narrative disclosures. Further, our reporting obligations extend only to the individuals serving as our chief executive officer and our two other most highly compensated executive officers. For fiscal year 2018, our named executive officers were:
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Charles G. Goldman, President and Chief Executive Officer; |
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Jeremiah H. Chafkin, Executive Vice President and Chief Investment Officer; and |
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Michael Kim, Executive Vice President and Chief Client Officer. |
Summary compensation table
The following table sets forth information concerning the compensation paid to our named executive officers for the fiscal year ended December 31, 2018.
Name and principal
position |
Year |
Salary
($) |
Bonus
($) |
Stock
awards ($) |
Non-equity
incentive plan compensation ($) |
Nonqualified
deferred compensation earnings ($) |
All other
compensation ($) |
Total
($) |
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Charles Goldman, |
2018 | 510,000 | 660,000 | | | | 324,603 | (1) | 1,494,603 | |||||||||||||||||||||||
Chief Executive Officer |
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Jeremiah Chafkin, |
2018 | 500,000 | 564,300 | | | | 16,072 | (2) | 1,080,372 | |||||||||||||||||||||||
Chief Investment Officer (5) |
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Michael Kim, |
2018 | 350,000 | (3) | 649,761 | (3) | | | | 31,706 | (4) | 1,031,467 | |||||||||||||||||||||
Chief Client Officer (5) |
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(1) | Includes: $102,902 for payments under an arrangement related to the sale of AssetMark, matching contributions totaling $13,750 under our 401(k) plan and $205,209 for employer-paid commuting expenses from his home in Colorado to our headquarters in Concord, California. |
(2) | Includes matching contributions totaling $13,750 under our 401(k) plan. |
(3) | Mr. Kim elected to defer a total of $609,355 from his salary and bonus for 2018 under our NQDC Plan, discussed in Pension benefits and nonqualified deferred compensation. |
(4) | Includes $15,831 for payments under an arrangement related to the sale of our company and matching contributions totaling $13,750 under our 401(k) plan. |
(5) | Mr. Chafkin and Mr. Kim are officers of AssetMark Financial, Inc., one of our subsidiaries, and will become officers of the Company prior to the consummation of this offering. |
Employment agreements
Charles Goldman
We are party to an employment agreement with Charles Goldman that was originally dated as of January 10, 2014. This agreement was last amended as of October 31, 2016 in connection with HTSCs acquisition of our collective businesses from Aquiline Capital Partners and Genstar Capital, and will remain in effect until October 31, 2019, the third anniversary of the closing of that acquisition,
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or, if earlier, the termination of Mr. Goldmans employment. The following narrative summarizes the key terms of that agreement:
Performance of services . Mr. Goldman will serve as our President and Chief Executive Officer, and as a member of our board of directors. Mr. Goldman is required to devote his full business time, attention and skill to performance of his duties, but is allowed to serve on the boards of directors of non-competing businesses, with the prior written consent of our board of directors. Mr. Goldman will work primarily out of our headquarters in Concord, California, but will not be required to relocate from his home in Boulder, Colorado.
Compensation package . During the term of the agreement, Mr. Goldman will receive (i) an annual salary, initially $500,000, subject to annual review by our board of directors and increases as may be determined by our board of directors in its sole discretion; (ii) an annual incentive bonus with a target opportunity of 150% of base salary, payable based on the achievement of company and individual performance objectives, as determined by the board of directors; (iii) health insurance, retirement and other benefits provided to our executives; (iv) reimbursement on an after-tax basis for travel between his Boulder, Colorado residence and our headquarters in Concord, California; and (iv) life insurance in the amount of $5,000,000, subject to Mr. Goldmans insurability at standard or better rates, which we will exert reasonable business efforts to acquire.
Severance pay and benefits . Mr. Goldman will be entitled to certain payments and benefits under his employment agreement in connection with termination of his employment.
Termination of employment due to death or disability . Upon termination of employment due to death or disability, Mr. Goldman, or his estate or beneficiaries as the case may be, would be entitled to a pro-rated bonus for the fiscal year of termination to the extent that the performance conditions for that bonus are satisfied, along with any bonus earned but not yet paid for the fiscal year ending before the date of termination.
Termination for cause or resignation without good reason . Upon termination of Mr. Goldmans employment for cause or his resignation without good reason, Mr. Goldman would not be entitled to any payments under his employment agreement other than any amounts already accrued and payable for services through the date of termination.
For purposes of Mr. Goldmans employment agreement, cause includes (i) material acts of personal dishonesty in connection with his responsibilities that have, or could be reasonably expected to have, an adverse impact on performance of duties; (ii) willful misconduct in the course of employment; (iii) willful failure or refusal to perform duties or responsibilities in any material respect; (iv) misappropriation (or attempted misappropriation) of assets or material business opportunities; (v) embezzlement or fraud committed or attempted, whether by Mr. Goldman, at his direction or with his prior actual knowledge; (vi) conviction of or pleading guilty or no contest to, (x) a felony or (y) any other criminal charge that has (or could be reasonably expected to have) an adverse impact on the performance of duties or result in material injury to our reputation or business; (vii) material violation of our written policies (unless curable and cured within thirty (30) days of written notice), including but not limited to those relating to sexual harassment or business conduct, that has (or could be reasonably expected to have), an adverse impact on performance of duties or otherwise result in material injury to our reputation or business; or (viii) material breach of any confidentiality or restrictive covenant.
If, within ninety days after termination of Mr. Goldmans employment for any reason other than cause, we determine that his employment could have been terminated for cause based on misappropriation,
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embezzlement or fraud or material violation of our written policies, as described above, Mr. Goldman would be treated as if he had been terminated for cause, and would be required to disgorge all amounts received on account of his termination that would not have been payable on termination for cause.
Termination without cause or resignation for good reason . Upon termination of Mr. Goldmans employment without cause or his resignation for good reason, Mr. Goldman will be entitled to: (w) a pro-rated bonus for the fiscal year that includes the date of termination, to the extent that the performance conditions for that bonus are satisfied; (x) any bonus earned but not yet paid for the fiscal year that ends before the date of termination; (y) continued payment of his salary for a severance period of twelve months (24 months if termination occurs after January 10, 2019) after termination; and (z) a monthly payment equal to the monthly COBRA premium cost (on an after-tax basis) during the severance period described above, to the extent he enrolls in and remains eligible for COBRA.
For purposes of Mr. Goldmans agreement, good reason includes (i) a substantial and material diminution in base salary, annual bonus target, title, duties or responsibilities and (ii) our material breach of a material term of the employment agreement, in each case unless we cure the failure in questions within 40 days of notice. In order to resign for good reason Mr. Goldman would need to provide us with 30 days advance written notice of his resignation setting forth the event that constitutes good reason within 60 days after the occurrence of such event.
Conditions to severance payments . Our obligation to provide the payments and benefits described above, other than any amounts accrued and payable for services through the date of termination, is conditioned on Mr. Goldmans general release of claims in our favor. In addition, any obligation we may have to provide these payments and benefits shall immediately terminate if Mr. Goldman breaches any provision of his non-interference agreement with us, described further below.
Confidentiality, non-interference and invention assignment agreement. Mr. Goldman has also entered into a Confidentiality, Non-Interference and Invention Assignment Agreement, which includes his agreements: (x) not to disclose or use our confidential information without our written authorization, both during employment and thereafter; (y) to assign to us all rights to any intellectual property conceived of, developed or reduced to practice during the executives service; and (z) not to compete with us, or solicit or interfere with our employees or clients for twelve months after termination of employment.
Offer letters with other named executive officers
We have entered into offer letters with each of our other named executive officers. The offer letters generally provide for at-will employment and describe the executives initial base salary, target variable compensation, and eligibility for employee benefits.
The agreement with Mr. Chafkin also sets forth the terms of initial equity grants and severance benefits on a qualifying termination. Upon Mr. Chafkins termination without cause prior to vesting of all equity grants, Mr. Chafkin will receive severance of one year of base salary (paid according to normal payroll practices), a prorated bonus and an additional one year of bonus payments (paid one year after separation).
Mr. Chafkin has also entered into a Non-Solicitation Agreement, under which he has agreed, during his employment and for a period of one year after termination, not to (x) solicit, or interfere with our
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relationship with, any of our employees, representatives or contractors; or (y) induce any person or company with whom he had contact as our employee to cease to do business with us.
Mr. Kim has entered into a Non-Solicitation Agreement under which he has agreed, during his employment and for a period of one year after termination, not to (x) solicit, or interfere with our relationship with, any of our employees, representatives or contractors; (y) use our confidential information to provide products or services substantially similar to ours; or (z) induce any person or company with whom he had contact as our employee to cease to do business with us.
Severance plan
Additionally, we maintain a broad-based severance plan under which each of our named executive officers is eligible for benefits in the event that his or her position is eliminated in connection with a layoff.
Benefits for any eligible executive officers under this plan would include: (x) two weeks of advance notice prior to elimination of the named executive officers position; (y) a lump sum severance payment equal to the sum of (i) one week of base salary for each year of continuous service, plus (ii) $2,500; and (z) at our discretion, accelerated vesting of all or a portion of the equity payment for the year of termination, which will be pro-rated based on the timing of termination of employment within the calendar year. The minimum payment under clause (y)(1) of the previous sentence is eight weeks of base salary. Payment of these severance benefits is conditioned on the executive officers delivery and non-revocation of a general release of claims in our favor.
Variable incentive compensation program
We currently maintain a Variable Incentive Compensation Program that rewards our executive officers for our performance against business goals, and each executive officer for performance against his or her individual goals. Our board of directors establishes performance goals for this program each year and evaluates performance to these established goals to determine the amount of each award. This program is based on performance over a calendar year and provides for a cash benefit payable on or before March 15 of the following year, subject to the executives continued service through the payment date. The award for our chief executive officer under this program is subject to board discretion. All other awards under this program are subject to management discretion.
Pension benefits and nonqualified deferred compensation
We currently maintain a 401(k) retirement savings plan for our employees, including our named executive officers, who satisfy certain eligibility requirements. The 401(k) plan is intended to qualify as a tax-qualified plan under Section 401(k) of the Internal Revenue Code. Our named executive officers are eligible to participate in the 401(k) plan on the same basis as our other employees. The Internal Revenue Code allows eligible employees to defer a portion of their compensation, within prescribed limits, on a pre-tax basis through contributions to the 401(k) plan. For 2017 and 2018, we provided matching contributions under our 401(k) Plan representing 100% of participant contributions up to 5% of eligible compensation.
We also maintain a Deferred Compensation Plan (the NQDC Plan), for the benefit of our named executive officers and other officers and senior employees. Each of our named executive officers may elect to defer from 5% to 75% of their eligible compensation under this plan, without regard to the 401(k) plans prescribed limits, and the resulting deferrals will be allocated to the officers individual
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plan account. In addition, we reserve the right to make non-elective contributions to this plan, in our sole discretion, to be allocated to participant accounts according to our determination. A participant in the NQDC Plan vests in the non-elective contributions allocated to his or her account upon attaining three years of service. Accounts in this plan will accrue earnings based on the performance of a market basket of predetermined investment benchmarks. Each participant may elect the investment benchmarks used to determine earnings on his or her individual account. Each participant may also elect the timing of distributions from their NQDC Plan account, including whether distribution upon separation from service will be in a lump sum or installments, and whether payment should be triggered upon a change in control.
We believe that providing a vehicle for tax-deferred retirement savings though our 401(k) plan and NQDC Plan adds to the overall desirability of our executive compensation package and further incentivizes our employees, including our named executive officers, in accordance with our compensation policies.
Outstanding equity awards at fiscal year end
The following table sets forth information concerning unexercised options, stock that has not vested and equity incentive plan awards for the executive officers named in the Summary Compensation Table during 2018.
Option awards | Stock awards | |||||||||||||||||||||||||||||||||||
Name |
Numbers of
securities underlying unexercised options (#) exercisable |
Numbers of
securities underlying unexercised options (#) unexercisable |
Equity
incentive plan awards: number of securities underlying unexercised unearned options (#) |
Option
exercise price ($) |
Option
expiration date |
Number of
shares or units of stock that have not vested (#) (1) |
Market
value of shares or units of stock that have not vested ($) (2) |
Equity
incentive plan awards: number of unearned shares, units or other rights that have not vested (#) (3) |
Equity
incentive plan awards: market or payout value of unearned shares, units or other rights that have not vested * ($) (2) |
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Charles Goldman |
| | | | | 1,692 | 9,573,690 | 1,692 | 9,573,690 | |||||||||||||||||||||||||||
Jeremiah Chafkin |
| | | | | 333 | 1,886,453 | 333 | 1,886,453 | |||||||||||||||||||||||||||
Michael Kim |
| | | | | 250 | 1,414,832 | 250 | 1,414,832 | |||||||||||||||||||||||||||
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(1) | Represents the number of outstanding time-vesting incentive unit awards in AssetMark Holdings LLC, vesting in three equal installments on the third, fourth and fifth anniversaries of October 31, 2016, as discussed in Additional narrative disclosure relating to incentive unit awards. |
(2) | Amounts shown are based on an estimated intrinsic value of the incentive unit awards as of December 31, 2018, assuming that the target goals for the applicable period will be met, and that the target (and maximum) amount of such securities will vest. |
(3) | Represents the number of outstanding performance-vesting incentive unit awards in AssetMark Holdings LLC for which vesting is evaluated annually over a five-year period on the first February 1 to follow each of the fourth, fifth, sixth, seventh and eighth anniversaries of October 1, 2016, based on satisfaction of certain internal rate of return goals through the date of vesting, as discussed in Additional narrative disclosure relating to incentive unit awards. |
Additional narrative disclosure relating to incentive unit awards
Each of the named executive officers has received incentive unit awards that were initially structured as awards of Class C Common Units in AssetMark Holdings LLC, and designed as profits interest
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awards. A profits interest award provides the award holder with value only if and to the extent that we grow in value following the grant of the award.
Incentive unit awardscurrent terms and conditions
One-half of the incentive units granted to each recipient, referred to here as time-vesting units, are scheduled to vest in three (3) equal installments on the third, fourth and fifth anniversaries of October 31, 2016, subject to the recipients continued employment through the applicable vesting date.
The other half of the incentive units granted to each recipient, referred to here as performance-vesting units, are eligible to vest over a five-year period on the 1st of February that occurs immediately following the fourth, fifth, sixth, seventh and eighth anniversaries of October 31, 2016, subject to the recipients continued employment through the applicable vesting date, and subject to our satisfaction of designated performance goals relating to our internal rate of return (IRR), net of any dilution from incentive unit awards, through the date of vesting, with threshold and target goals of 8% and 12%, respectively. The amount, if any, that vests on each vesting date will be based on the attainment of our IRR measured as of that date, with 50% of the award vesting on the first vesting date on which our IRR equals 8% and 100% of any unvested portion of the award vesting on the first vesting date on which our IRR equals or exceeds 12%.
Upon a change in control as defined under the incentive unit award agreements while the recipient is performing services, all time vesting units that are unvested would vest and all performance vesting units that are unvested would vest to the extent that the designated performance goals are satisfied by the IRR realized by HTSC in that transaction. For purposes of these agreements, a change in control is defined as (i) the sale or disposition, in one or a series of related transactions, of all or substantially all of our assets to any person or group other than HTSC or any of its affiliates, or any group or persons that includes HTSC or any of its affiliates; (ii) any person or group other than HTSC or one or more other permitted holders becomes the beneficial owner of more than 50% of the total units of AssetMark Holdings LLC or 50% of our equity securities including by way of merger, recapitalization, reorganization, redemption, issuance of capital stock, consolidation, tender or exchange offer or otherwise; or (iii) the merger of AssetMark Holdings LLC or us with or into another person (other than one of the permitted holders) in which members of the merger cease to hold at least 50% of the units of AssetMark Holdings LLC or 50% of our equity securities immediately following such merger.
Incentive unit awardsconversion in connection with this offering
In connection with this offering, we intend to convert the value of all time vesting units and performance vesting units into restricted share awards of AssetMark Financial Holdings, Inc., referred to here as RSAs, in connection with the transactions described in the section titled Prospectus summaryRestructuring. In converting performance-vesting units, we intend to take into account actual performance through the date of the offering to their pre-established goals. We expect that our internal rate of return at the time of this offering will be greater than the target goal of 12%, and, as a result, the full value of outstanding performance vesting units will be converted to time vested RSAs.
We expect that RSAs issued in connection with this conversion will be subject to the same vesting schedule as the incentive units they replace, with RSAs issued with respect to time-vesting units scheduled to vest in three (3) equal installments on the third, fourth and fifth anniversaries of October 31, 2016 and RSAs issued with respect to performance-vesting units scheduled to vest in full
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on February 2021, the first vesting opportunity for those awards. The termination and change in control provisions for the converted awards will remain the same.
Equity awards upon this offering
In connection with this offering, we intend to provide certain of our officers and employees with equity awards, which may include options and restricted stock awards.
Director compensation
The following table summarizes all compensation awarded to, earned by or paid to each of our non-employee directors during 2018.
Name |
Fees
earned or paid in cash ($) |
Stock
awards ($) |
Option
awards ($) |
Non-equity
incentive plan compensation ($) |
Non-qualified
deferred compensation earnings ($) |
All other
compensation ($) |
Total
($) |
|||||||||||||||||||||
Rohit Bhagat |
50,000 | | (2) | | | | 22,710 | (3) | 72,710 | |||||||||||||||||||
Xiaodan Liu |
75,226 | (1) | | | | | 8,772 | (3) | 83,998 | |||||||||||||||||||
Ying Sun |
| | | | | | | |||||||||||||||||||||
Yi Zhou |
| | | | | | | |||||||||||||||||||||
|
(1) | We generally do not compensate directors for service representing HTSCs interests on our board of directors. However, under an arrangement with HTSC, we provided Ms. Liu with a stipend at an annual rate of $150,000 for her services while she was working in the United States for part of 2017 and 2018. The figure provided represents a pro-rated amount of that stipend paid for the portion of 2018 during which she worked in the United States. |
(2) | Mr. Bhagat held 66.67 unvested Class C Common Units, valued at $339,903, as of December 31, 2018. |
(3) | Represents the cost to us of certain welfare benefits extended to Ms. Liu and Mr. Bhagat. |
We have two outside directors, Mr. Rohit Bhagat and Ms. Patricia Guinn, who joined our board of directors in 2018 and 2019, respectively. For service on our board of directors, Mr. Bhagat receives an annual retainer of $50,000, along with certain medical, dental and vision insurance benefits. In connection with Ms. Guinns election to our board of directors and appointment as chairman of the Audit Committee in 2019, our board of directors approved compensation for Ms. Guinn including a retainer of $ per year for service on our board of directors, a retainer of $ per year for service as chairman of the Audit Committee and, on the effective date of the registration statement of which this prospectus forms a part, an award valued at $130,000, which we will pay in either cash or restricted stock units.
Our directors Ms. Liu, Mr. Lin, Ms. Sun and Mr. Zhou all represent the interests of HTSC on our board of directors. We generally do not provide compensation to directors for service on our board of directors representing HTSCs interests. However, under an arrangement with HTSC, we provided Ms. Liu with a stipend for her services while she was working in the United States for part of 2017 and 2018, along with certain welfare benefits. We do not expect to pay any compensation to any board members who represent HTSC on our board of directors after this offering.
Following this offering, directors who are also full-time officers or employees of our company will receive no additional compensation for serving as directors. All independent directors will receive an annual retainer of $ . In addition, the chairman of the audit committee (if independent) will receive an annual fee of $ , the chairman of the compensation committee (if independent) will receive an annual fee of $ and the chairman of the nominating and corporate governance committee (if independent) will receive an annual fee of $ . Each independent director will also
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receive an annual grant of RSUs with one-year cliff vesting under our 2019 Equity Incentive Plan having a fair market value (as defined in the plan) of $ .
Compensation following this offering
2019 Equity Incentive Plan
We anticipate that our board of directors will adopt and our stockholder will approve a 2019 Equity Incentive Plan (the 2019 Plan) on or before the effective date of the registration statement of which this prospectus forms a part, which will become effective in connection with this offering, subject to approval by our stockholder. The 2019 Plan will provide for grants of equity-based awards to our employees, certain of our non-employee directors and consultants or advisers.
Administration. The 2019 Plan will be administered by the compensation committee of our board of directors (unless another committee is designated by our board of directors), which will have the authority to determine when awards will be granted under the 2019 Plan, eligible participants, the types of awards to be granted, the number of shares covered by awards, the terms and conditions of awards (and amendments to any terms and conditions thereof) and the methods by which awards may be settled, exercised, cancelled, forfeited or suspended, and to make any other determination and take any other action that it deems necessary or desirable for the administration of the 2019 Plan and due compliance with applicable laws, stock market or exchange rules and regulations or accounting or tax rules and regulations. Anyone involved in the administration of the 2019 Plan as a member of the board of directors or applicable committee thereof or due to a delegation of authority under the 2019 Plan shall be indemnified against any liability resulting from any action, claim or proceeding arising from such administration.
Shares available for awards. The maximum number of shares of our common stock available for issuance under the 2019 Plan as of the effectiveness of the registration statement of which this prospectus forms a part will be shares. Any shares underlying awards outstanding under the 2019 Plan that are forfeited, cancelled, expired, terminated or are otherwise lapsed or settled in cash, in whole or in part, including any shares underlying awards that are tendered or withheld in respect of taxes or to pay the exercise price of an award, will become available for future grant under the 2019 Plan.
In the event the administrator of the 2019 Plan determines that, as a result of certain changes in our corporate structure, including any extraordinary dividend or other distribution, recapitalization, stock split, reorganization, merger, consolidation, spin-off or similar corporate transaction or event affecting our common stock, or changes in applicable laws, regulations or accounting principles, an adjustment is appropriate to prevent dilution or enlargement of the benefits intended to be made available under the 2019 Plan, then the administrator will make equitable adjustments to prevent undue enrichment or harm to the number and type of shares that thereafter may be made the subject of awards, the number and type of shares subject to outstanding awards and the grant, purchase, exercise or hurdle price of any outstanding awards.
The maximum number of shares available for issuance under the 2019 Plan with respect to incentive stock options (ISOs) is the maximum number of shares of our common stock available for issuance under the 2019 Plan.
Stock options. The 2019 Plan permits the grant of ISOs to employees and/or nonstatutory stock options (NSOs) to all eligible participants. The exercise price of stock options will be determined by
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the administrator. However, except in the case of substitute awards, the exercise price may not be less than the fair market value of our common stock on the grant date. The administrator may determine the terms and conditions applicable to each grant of stock options, including the term of the options (which may not exceed 10 years), the time or times at which options become vested and exercisable and the method of payment of the exercise price. The terms of any award of ISOs are required to comply in all respects with the provisions of Section 422 of the Internal Revenue Code of 1986, as amended.
Stock appreciation rights. The 2019 Plan permits the grant of stock appreciation rights (SARs), which entitle the holder to receive shares of our common stock or cash having an aggregate value equal to the appreciation in the fair market value of our common stock between the grant date and the exercise date, times the number of shares subject to the SAR. SARs may be granted to participants either alone or in tandem with other awards granted under the 2019 Plan. The exercise price of a SAR will be determined by the administrator. However, except in the case of substitute awards, the exercise price may not be less than the fair market value of our common stock on the grant date. The administrator may determine the terms and conditions applicable to each grant of SARs, including the term of the SARs (which may not exceed 10 years) and the time or times at which a SAR may be exercised or settled.
Restricted stock awards and RSUs. The 2019 Plan permits the grant of restricted stock awards and RSUs. Restricted stock awards are grants of shares of our common stock, subject to certain conditions and restrictions as specified in the applicable award agreement. RSUs represent the right to receive shares of our common stock (or a cash amount equal to the value of our common stock) on future dates as specified in the applicable award agreement.
Performance awards. The 2019 Plan permits the grant of performance awards that are payable upon the achievement of performance goals determined by the administrator. The administrator may, in its discretion, increase or reduce the amount of a settlement otherwise to be made in connection with a performance award. Performance goals may include one or more of the following performance measures with respect to our company: net flows; platform assets; new producing advisers; production lift from existing advisers; net flows lift from existing advisers; total or net revenue; revenue growth; operating income; income or loss (before or after allocation of corporate overhead and bonus); net earnings; earnings per share; net income or loss; return on equity; total shareholder return; return on assets or net assets; appreciation in and/or maintenance of share price; market share; gross profits; earnings or loss (including earnings or loss before taxes, before interest and taxes or before earnings before interest, taxes, depreciation and amortization, with or without adjustments); economic value-added models or equivalent metrics; comparisons with various stock market indices; reductions in costs; cash flow or cash flow per share (before or after dividends); return on capital (including return on total capital or return on invested capital); cash flow return on investment; improvement in or attainment of expense levels or working capital levels (including cash and accounts receivable); operating margin; gross margin; cash margin; year-end cash; debt reduction; shareholder equity; operating efficiencies; market share; customer satisfaction; customer growth or household growth; employee satisfaction; research and development achievements; financial ratios, including those measuring liquidity, activity, profitability or leverage; cost of capital or assets under management; financing and other capital raising transactions (including sales of our equity or debt securities; factoring transactions; sales or licenses of our assets, including our intellectual property, whether in a particular jurisdiction or territory or globally; or through partnering transactions); implementation, completion or attainment of measurable objectives with respect to research, development, products or services, acquisitions or divestitures; factoring transactions; recruiting or maintaining personnel; or
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such other performance measures as may be determined by the administrator from time to time. Performance criteria may be measured on an absolute (e.g., plan or budget) or relative basis; before or after taxes; and may be established on a corporate-wide basis or with respect to one or more business units, divisions, subsidiaries or business segments. Performance may be measured against a group of peer companies, a financial market index or other acceptable objective and quantifiable indices. An award agreement may provide that if the administrator determines that a change in our business, operations, corporate structure or capital structure, or the manner in which the administrator conducts its business, or other events or circumstances render the performance objectives unsuitable, the administrator may modify the performance objectives or the related minimum acceptable level of achievement, in whole or in part, as the administrator deems appropriate and equitable. Performance measures may vary from performance award to performance award, respectively, and from participant to participant, and may be established on a stand-alone basis, in tandem or in the alternative.
Other cash-based awards and other stock-based awards. The 2019 Plan permits the grant of other cash-based and other stock-based awards, the terms and conditions of which will be determined by the administrator.
Effect of termination of service or a change in control on awards. In the event of a participants termination of service, the administrator may determine the extent to which an award may be exercised, settled, vested, paid or forfeited prior to the end of a performance period, or the vesting, exercise or settlement of such award. In the event of a change in control of our company (as defined in the 2019 Plan), the administrator may, in its discretion, take certain actions with respect to outstanding awards, including the continuation or assumption of awards, substitution or replacement of awards by a successor entity, acceleration of vesting and lapse of restrictions, determination of the attainment of performance conditions for performance awards or cancellation of awards in consideration of a payment.
Amendment and termination. Our board of directors has the authority to amend, alter, suspend, discontinue or terminate the 2019 Plan, provided that no such action may be taken without stockholder approval, if the approval is necessary to comply with applicable law or stock exchange rules, or without the consent of the affected participant, if such action would materially adversely affect the rights of such participant (unless such action is taken to cause the 2019 Plan to comply with applicable laws, stock market or exchange rules and regulations or accounting or tax rules and regulations or to impose any recoupment provisions on an award).
No repricing. Except pursuant to an adjustment by the administrator permitted under the 2019 Plan, no action may directly or indirectly reduce the exercise or hurdle price of any award established at the time of grant without stockholder approval.
Term of the 2019 Plan. No awards may be granted under the 2019 Plan after the earliest of (i) the 10-year anniversary of the effectiveness of the registration statement, (ii) the maximum number of shares of our common stock available for issuance under the 2019 Plan has been issued or (iii) our board of directors terminates the 2019 Plan.
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Certain relationships and related party transactions
We describe below transactions and series of similar transactions, since January 1, 2016 or currently proposed, in which:
|
we or any of our subsidiaries have been or will be a participant; |
|
the amounts involved exceeded or will exceed $120,000; and |
|
any of our directors, executive officers or beneficial holders of more than 5% of any class of our capital stock, or any immediate family member of, or person sharing a household with, any of these individuals, had or will have a direct or indirect material interest. |
Other than as described below, there have not been, nor are there any currently proposed, transactions or series of similar transactions meeting this criteria to which we have been or will be a party other than compensation and employment arrangements, which are described where required under Management and Executive compensation.
Distribution to AssetMark Holdings LLC
In the fourth quarter of 2018, we made a one-time cash distribution to AssetMark Holdings LLC in the amount of $234 million, consisting of a $76 million dividend payment and a $158 million return of capital. As members of AssetMark Holdings LLC, the following persons had a beneficial interest in such distribution in the amounts set forth below:
Name | Interest | |||
Huatai International Investment Holdings Limited |
$ | 230,525,739 | ||
Charles Goldman (Director, President and Chief Executive Officer) |
1,480,471 | |||
Jeremiah Chafkin (EVP, Chief Investment Officer) |
298,523 | |||
Carrie Hansen (EVP, Chief Operating Officer) |
208,142 | |||
Natalie Wolfsen (EVP, Chief Solutions Officer) |
150,654 | |||
|
Credit facility
In November 2018, we, AssetMark Holdings LLC and certain of our subsidiaries entered into a Credit Agreement with Credit Suisse as administrative agent and collateral agent and the lenders party thereto, which provides for a $250.0 million term loan and a $20.0 million revolving credit facility. Our obligations under the Credit Agreement are guaranteed by AssetMark Holdings LLC and such subsidiaries and are secured by substantially all of our assets and all of the assets of AssetMark Holdings LLC and such subsidiaries, subject to certain exceptions. As of March 31, 2019, $249.4 million aggregate principal amount of the term loan remained outstanding and the revolving credit facility was undrawn. See the section titled Managements discussion and analysis of financial condition and results of operationsLiquidity and capital resourcesCredit facility for more information on the Credit Agreement.
Altegris Holdings, Inc. promissory notes
Prior to being acquired by HTSC in 2016, we were owned by AqGen Liberty, LLC (AqGen), a Delaware limited liability company. From December 2013 until the HTSC acquisition closed on October 31, 2016, we held two promissory notes totaling $6.6 million (one for $5.0 million, the other
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for $1.6 million) issued by Altegris Holdings, Inc., an alternative investment provider and subsidiary of AqGen. Each note carried an annual interest rate of 6.5%. Aggregate interest income on the two notes was $358,000 from the period January 1, 2016 to October 31, 2016. In April 2016, we wrote off both notes as bad debt (recorded in the financial statements under general and operating expense), due to Altegris inability to pay either note. As of November 1, 2016, Altegris was no longer a related party of ours.
Altegris Holdings, Inc. marketing payments
We have provided and continue to provide certain marketing services for Altegris Holdings, Inc. investment products offered on the AssetMark platform. For the years ended December 31, 2018, December 31, 2017 and December 31, 2016 Altegris Holdings, Inc. paid AssetMark Financial Holdings, Inc. $543,000, $467,000 and $464,000, respectively. As of November 1, 2016, Altegris was no longer a related party of ours.
Registration rights agreement
In connection with this offering, we will enter into a Registration Rights Agreement (the Registration Rights Agreement) with HIIHL. The Registration Rights Agreement grants HIIHL demand and piggyback registration rights pursuant to which HIIHL may demand that we file a registration statement or request that its shares of common stock be covered by a registration statement that we are otherwise filing. We will be required to pay the registration expenses in connection with such registrations, other than any underwriting discounts or commissions and internal administrative and similar costs of the selling stockholder. For a more detailed description of these registration rights, which will continue after the closing of this offering, see the section titled Description of Capital StockRegistration Rights.
Indemnification
Our amended and restated certificate of incorporation that will be in effect upon completion of this offering will contain provisions limiting the liability of directors, and our amended and restated bylaws that will be in effect upon completion of this offering will provide that we will indemnify each of our directors, officers, employees and other agents to the fullest extent permitted under Delaware law. In addition, in connection with this offering, we will enter into an indemnification agreement with each of our directors and executive officers, which will require us to indemnify them. For more information regarding these agreements, see the section titled Description of Capital StockLimitation of liability of directors and officers and Description of Capital StockIndemnification and Insurance.
Policies and procedures for related party transactions
In connection with this offering, we have adopted a written related party transaction policy pursuant to which a director or executive officer who is in any way interested in a contract or transaction with us, including through an immediate family member, will declare the nature of his or her interest to our corporate secretary via written notice. Such written notice must include the name of the related person, the basis on which such person constitutes a related person, the related persons interest in the transaction with us, the approximate dollar value involved in the transaction, the approximate dollar value of the related persons interest in the transaction and any other information regarding the transaction or the related person that could be material to the board in light of the particular facts and circumstances. Our corporate secretary will present any new or proposed related party transactions
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to the audit committee, and the audit committee must review such transactions on an annual basis to determine whether they should be approved or continue. In reviewing the transaction, the audit committee will consider all relevant facts and circumstances, including without limitation the commercial reasonableness of the terms, the benefit or perceived benefit (or lack thereof) to us, the opportunity costs of alternate transactions, the materiality and character of the related persons direct or indirect interest in the transaction and the actual or apparent conflict of interest of the related person. The audit committee cannot approve or ratify a related party transaction unless it has determined that, upon consideration of all relevant information the transaction is in, or not inconsistent with, the best interests of us and our stockholders. In addition, our written code of business conduct and ethics that will be in effect upon completion of this offering requires that directors and executive officers make appropriate disclosure of potential conflicts of interest situations to our General Counsel, who must then notify our nominating and corporate governance committee.
Prior to this offering, we have not had a written policy for the review and approval of transactions with related persons. However, our board of directors has reviewed and approved any transaction where a director or executive officer had a financial interest, including the transactions described above. Prior to approving such a transaction, the material facts as to a directors or an officers relationship or interest as to the agreement or transaction were disclosed to our board of directors. Our board of directors would take this information into account when evaluating the transaction and in determining whether such transaction was fair to us and in the best interest of all of our stockholders.
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Principal and selling stockholders
The following table sets forth information regarding beneficial ownership of our common stock as of March 31, 2019, on a pro forma basis to give effect to the liquidation and dissolution of AssetMark Holdings LLC and the issuance of securities by us to the former holders of equity interests in AssetMark Holdings LLC, as described in the section titled Prospectus summaryRestructuring, by:
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each person whom we know to own beneficially more than 5% of our common stock; |
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each of our directors; |
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each of our named executive officers; |
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all of our directors and executive officers as a group; and |
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the selling stockholder. |
In accordance with the rules of the SEC, beneficial ownership includes voting or investment power with respect to securities and includes any shares issuable pursuant to stock options that are exercisable within 60 days of March 31, 2019. Shares issuable pursuant to stock options are deemed outstanding for computing the percentage of the person holding such options but are not outstanding for computing the percentage of any other person. The percentage of beneficial ownership for the following table is based on shares of common stock outstanding as of March 31, 2019 on a pro forma basis to give effect to the liquidation and dissolution of AssetMark Holdings LLC as described under Prospectus summaryRestructuring, and shares of common stock outstanding after the completion of this offering, assuming no exercise of the underwriters option to purchase additional shares and based on an assumed initial public offering price of $ per share (the midpoint of the price range set forth on the cover of this prospectus) and excluding any shares of our common stock that our directors and executive officers may purchase through the directed share program described in the section titled Underwriting (conflict of interest). Unless otherwise indicated, the address for each listed beneficial owner is: c/o AssetMark Financial Holdings, Inc., 1655 Grant Street, 10 th Floor, Concord, California, 94520. To our knowledge, except as indicated in the footnotes to this table and pursuant to applicable community property laws, the persons named in the table have sole voting and investment power with respect to all shares of common stock.
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Pro forma shares
beneficially owned before this offering |
Number of shares sold
in this offering |
Shares beneficially owned after this offering | ||||||||||||||||||||||||||||||
Name and address of
beneficial owner |
Number |
Percent
(%) |
Excluding
exercise of option to purchase additional shares |
Including
exercise of option to purchase additional shares |
Excluding exercise of
option to purchase additional shares |
Including exercise of
option to purchase additional shares |
||||||||||||||||||||||||||
Number |
Percent
(%) |
Number |
Percent
(%) |
|||||||||||||||||||||||||||||
5% or greater stockholders and selling stockholder: |
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Huatai International Investment Holdings Limited (1) |
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Directors and Named Executive Officers |
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Charles Goldman |
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Rohit Bhagat |
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Patricia Guinn |
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Bryan Lin |
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Xiaodan Liu |
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Ying Sun |
| |||||||||||||||||||||||||||||||
Yi Zhou |
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Jeremiah Chafkin |
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Michael Kim |
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All Directors and Executive Officers as a Group (14 persons) |
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* | Represents beneficial ownership of less than 1%. |
(1) | HIIHL has sole voting and dispositive power over the shares it holds. The principal business address of HIIHL is PO Box 309 Ugland House, Grand Cayman, KY1-1104, Cayman Islands. |
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The following descriptions are summaries of the material terms of our capital stock, as expected to be in effect upon the pricing of this offering. We expect to adopt an amended and restated certificate of incorporation and amended and restated bylaws in connection with the pricing of this offering, and this description summarizes the provisions that are expected to be included in such documents. Reference is made to the more detailed provisions of, and the descriptions are qualified in their entirety by reference to, these documents, copies of which are filed with the SEC as exhibits to the registration statement of which this prospectus is a part, and applicable law.
General
Following this offering, our authorized capital stock will consist of shares of common stock, par value $0.001 per share.
Common stock
Common stock outstanding . As of March 31, 2019 there were 7,794,876.4281 units in AssetMark Holdings LLC outstanding which were held of record by 40 unitholders. Immediately following the consummation of this offering, we will have shares of common stock outstanding, after giving effect to the transactions described under Prospectus summaryRestructuring and the sale of the shares of common stock offered hereby, assuming no exercise of the underwriters option to purchase additional shares. The shares of common stock that will be outstanding upon completion of this offering will be fully paid and non-assessable.
Voting rights . The holders of common stock are entitled to one vote per share on all matters to be voted upon by the stockholders.
Dividend rights . Subject to preferences that may be applicable to any outstanding preferred stock, the holders of common stock are entitled to receive ratably such dividends, if any, as may be declared from time to time by the board of directors out of funds legally available therefor. See the section titled Dividend policy.
Rights upon liquidation . In the event of our liquidation, dissolution or winding up, the holders of our common stock are entitled to share ratably in all assets remaining after payment of liabilities, subject to prior distribution rights of preferred stock, if any, then outstanding.
Other rights . The holders of our common stock have no preemptive or conversion rights or other subscription rights. There are no redemption or sinking fund provisions applicable to the common stock.
Preferred stock
Our board of directors has the authority to issue the preferred stock in one or more series and to fix the rights, preferences, privileges and restrictions thereof, including dividend rights, dividend rates, conversion rights, voting rights, terms of redemption, redemption prices, liquidation preferences and the number of shares constituting any series or the designation of such series, without further vote or action by the stockholders.
The issuance of preferred stock may have the effect of delaying, deferring or preventing a change in control of AssetMark without further action by the stockholders and may adversely affect the voting
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and other rights of the holders of common stock. At present, we have no plans to issue any of the preferred stock.
Registration rights
The Registration Rights Agreement to be in effect on or prior to the closing of this offering grants to HIIHL, a holder of more than 5% of our outstanding capital stock and an affiliate of certain of our directors, certain registration rights with respect to its shares of our common stock (the registrable securities), subject to certain exceptions. All shares of our common stock held by HIIHL upon completion of the transactions described in the section titled Prospectus summaryRestructuring and upon completion of this offering (assuming no exercise by the underwriters of their option to purchase additional shares) are entitled to the registration rights described below. The registration of shares of our common stock pursuant to the exercise of such registration rights would enable HIIHL to sell these shares without restriction under the Securities Act when the applicable registration statement is declared effective. We will pay the registration expenses, other than underwriting discounts and commissions and internal administrative and similar costs of the selling stockholder, of HIIHL associated with the registrable securities registered pursuant to the demand and piggyback registration rights described below.
Generally, in an underwritten offering, the managing underwriter, if any, has the right, subject to specified conditions, to limit the number of shares such holders may include. The demand and piggyback registration rights described below will expire on the first date on which neither HIIHL nor an HIIHL affiliate to which HIIHL has transferred or assigned all or a portion of its rights under the Registration Rights Agreement holds any registrable shares.
Demand registration rights . At any time following the pricing of this offering, parties to the Registration Rights Agreement holding in the aggregate at least 25% of the registrable securities then outstanding may request that we file a registration statement to register the offer and sale of their registrable securities. We are not required to effect a demand registration unless the aggregate gross proceeds expected to be received from the sale of the registrable shares by the requesting holders equals or exceeds $60,000,000, and we are not required to support more than one demand registration in any rolling six-month period or more than four demand registrations in total (other than demand registrations to be effected pursuant to a registration statement on Form S-3, for which an unlimited total number of demand registrations are permitted). We have the right to defer a demand registration in certain circumstances once during any period of six consecutive months and for not more than 180 days in any 12-month period.
Piggyback registration rights . If, at any time following the pricing of this offering, we propose to register the offer and sale of shares of our common stock or other equity securities under the Securities Act, other than with respect to a demand registration, a registration statement on Form S-4, Form S-8 or similar forms, and certain other exceptions, the holders of registrable securities are entitled to notice of the registration and have the right to include their registrable securities in such registration, subject to certain marketing and other limitations, including limitations that the underwriters may impose on the number of share included in the offering.
The foregoing summary is qualified in its entirety by reference to the Registration Rights Agreement, the form of which is filed as an exhibit to the registration statement of which this prospectus forms a part.
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Anti-takeover provisions
Some provisions of our amended and restated certificate of incorporation and amended and restated bylaws could make the following more difficult:
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acquisition of control of us by means of a proxy contest or otherwise, or |
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removal of our incumbent officers and directors. |
These provisions, as well as our ability to issue preferred stock, are designed to discourage coercive takeover practices and inadequate takeover bids. These provisions are also designed to encourage persons seeking to acquire control of us to first negotiate with our board of directors. We believe that the benefits of increased protection give us the potential ability to negotiate with the proponent of an unfriendly or unsolicited proposal to acquire or restructure us, and that the benefits of this increased protection outweigh the disadvantages of discouraging those proposals, because negotiation of those proposals could result in an improvement of their terms.
Election of directors; no cumulative voting. Our board of directors will consist of between three and directors. The exact number of directors will be fixed from time to time by resolution of the board. Under Delaware law, the right to vote cumulatively does not exist unless the certificate of incorporation specifically authorizes cumulative voting. Our amended and restated certificate of incorporation does not authorize cumulative voting.
Removal of directors; vacancies. Our amended and restated certificate of incorporation provides that directors may only be removed for cause, and only by the affirmative vote of holders of at least two-thirds in voting power of all outstanding shares of stock of our company entitled to vote thereon, voting together as a single class. Any vacancy occurring on the board of directors and any newly created directorship may be filled only by a majority of the remaining directors in office.
Staggered board. In connection with this offering, our board of directors will be will be divided into three classes serving staggered three-year terms. Class I, Class II and Class III directors will serve until our annual meetings of stockholders in 2020, 2021 and 2022 respectively. At each annual meeting of stockholders, directors will be elected to succeed the class of directors whose terms have expired. This classification of our board of directors could have the effect of increasing the length of time necessary to change the composition of a majority of the board of directors. In general, at least two annual meetings of stockholders will be necessary for stockholders to effect a change in a majority of the members of the board of directors.
Limits on written consents. Our amended and restated certificate of incorporation and our amended and restated bylaws provide that holders of our common stock will not be able to act by written consent without a meeting unless such consent is unanimous, at any time when HTSC and any of its affiliates collectively own less than 50% in voting power of the stock of our company entitled to vote generally in the election of directors.
Special stockholder meetings. Our amended and restated certificate of incorporation and our amended and restated bylaws provide that special meetings of our stockholders may be called only by the chairman of our board of directors or a majority of the directors, and specifically deny any power of any other person to call a special stockholder meeting; provided, however, so long as HTSC and any of its affiliates collectively own at least 50% in voting power of the stock of our company entitled to vote generally in the election of directors, special meetings of our stockholders may also be called by the board of directors at the request of a stockholder affiliated with HTSC. Our amended
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and restated bylaws prohibit the conduct of any business at a special meeting other than as specified in the notice for such meeting.
Amendment of certificate of incorporation. The provisions of our amended and restated certificate of incorporation described under Election of directors; no cumulative voting, Removal of directors; vacancies, Staggered board, Limits on written consents, Special stockholder Meetings and the voting thresholds described in this section may be amended, altered, repealed or rescinded only by the affirmative vote of the holders of at least two-thirds in voting power of all outstanding shares of stock of our company entitled to vote thereon, voting together as a single class. The affirmative vote of holders of at least a majority of the voting power of our outstanding shares of stock will generally be required to amend other provisions of our certificate of incorporation.
Amendment of bylaws. Any amendment, alteration, rescission or repeal of certain provisions of our amended and restated bylaws will require either (i) the affirmative vote of a majority of directors present at any regular or special meeting of the board of directors called for that purpose, provided that any alteration, amendment or repeal of, or adoption of any bylaw inconsistent with, specified provisions of the bylaws, including those related to special and annual meetings of stockholders, action of stockholders by written consent, classification of the board of directors, nomination of directors, special meetings of directors, removal of directors, committees of the board of directors and indemnification of directors and officers, requires the affirmative vote of at least two-thirds of all directors in office at a meeting called for that purpose; or (ii) the affirmative vote of the holders of two-thirds of the voting power of our outstanding shares of voting stock, voting together as a single class.
Delaware business combination statute. From and after the time at which HTSC and its affiliates own, in the aggregate, less than 50% of the voting power of all outstanding shares of the stock of our company entitled to vote generally in the election of directors, we will elect to be subject to Section 203 of the DGCL, which regulates corporate acquisitions. Section 203 prevents an interested stockholder, which is defined generally as a person owning 15% or more of a corporations voting stock, or any affiliate or associate of that person, from engaging in a broad range of business combinations with the corporation for three years after becoming an interested stockholder unless:
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the board of directors of the corporation had previously approved either the business combination or the transaction that resulted in the stockholders becoming an interested stockholder; |
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upon completion of the transaction that resulted in the stockholders becoming an interested stockholder, that person owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, other than statutorily excluded shares; or |
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following the transaction in which that person became an interested stockholder, the business combination is approved by the board of directors of the corporation and holders of at least two-thirds of the outstanding voting stock not owned by the interested stockholder. |
Under Section 203, the restrictions described above also do not apply to specific business combinations proposed by an interested stockholder following the announcement or notification of designated extraordinary transactions involving the corporation and a person who had not been an interested stockholder during the previous three years or who became an interested stockholder with the approval of a majority of the corporations directors, if such extraordinary transaction is approved or not opposed by a majority of the directors who were directors prior to any person becoming an interested stockholder during the previous three years or were recommended for election or elected to succeed such directors by a majority of such directors.
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Section 203 may make it more difficult for a person who would be an interested stockholder to effect various business combinations with a corporation for a three-year period. Section 203 also may have the effect of preventing changes in our management and could make it more difficult to accomplish transactions which our stockholders may otherwise deem to be in their best interests.
Other limitations on stockholder actions. Our amended and restated bylaws will also impose some procedural requirements on stockholders, other than HTSC or its affiliates, who wish to:
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make nominations in the election of directors; |
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propose that a director be removed; |
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propose any repeal or change in our bylaws; or |
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propose any other business to be brought before an annual or special meeting of stockholders. |
Under these procedural requirements, to bring a proposal before a meeting of stockholders, a stockholder must deliver timely notice of a proposal pertaining to a proper subject for presentation at the meeting to our corporate secretary along with the following:
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a description of the business or nomination to be brought before the meeting and the reasons for conducting such business at the meeting; |
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the stockholders name and address; |
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any material interest of the stockholder in the proposal; |
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the number of shares beneficially owned by the stockholder and evidence of such ownership; and |
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the names and addresses of all persons with whom the stockholder is acting in concert and a description of all arrangements and understandings with those persons, and the number of shares such persons beneficially own. |
To be timely, a stockholder must generally deliver notice:
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in connection with an annual meeting of stockholders, not less than 120 nor more than 180 days prior to the date on which the annual meeting of stockholders was held in the immediately preceding year, but in the event that the date of the annual meeting is more than 30 days before or more than 60 days after the anniversary date of the preceding annual meeting of stockholders, a stockholder notice will be timely if received by us not later than the close of business on the later of (1) the 120th day prior to the annual meeting and (2) the 10th day following the day on which we first publicly announce the date of the annual meeting; or |
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in connection with the election of a director at a special meeting of stockholders, not less than 40 nor more than 60 days prior to the date of the special meeting, but in the event that less than 55 days notice or prior public disclosure of the date of the special meeting of the stockholders is given or made to the stockholders, a stockholder notice will be timely if received by us not later than the close of business on the 10th day following the day on which a notice of the date of the special meeting was mailed to the stockholders or the public disclosure of that date was made. |
To submit a nomination for our board of directors, a stockholder must also submit any information with respect to the nominee that we would be required to include in a proxy statement, as well as some other information. If a stockholder fails to follow the required procedures, the stockholders proposal or nominee will be ineligible and will not be voted on by our stockholders.
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Limitation of liability of directors and officers
Our amended and restated certificate of incorporation will provide that no director will be personally liable to us or our stockholders for monetary damages for breach of fiduciary duty as a director, except as required by applicable law, as in effect from time to time. Currently, Delaware law requires that liability be imposed for the following:
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any breach of the directors duty of loyalty to our company or our stockholders; |
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any act or omission not in good faith or which involved intentional misconduct or a knowing violation of law; |
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unlawful payments of dividends or unlawful stock repurchases or redemptions as provided in Section 174 of the DGCL; and |
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any transaction from which the director derived an improper personal benefit. |
Any amendment to, or repeal of, these provisions will not eliminate or reduce the effect of these provisions in respect of any act, omission or claim that occurred or arose prior to that amendment or repeal. If the DGCL is amended to provide for further limitations on the personal liability of directors of corporations, then the personal liability of our directors will be further limited to the greatest extent permitted by the DGCL.
As a result, neither we nor our stockholders have the right, through stockholders derivative suits on our behalf, to recover monetary damages against a director for breach of fiduciary duty as a director, including breaches resulting from grossly negligent behavior, except in the situations described above.
Such limitation of liability does not apply to liabilities arising under federal securities laws and does not affect the availability of equitable remedies such as injunctive relief or rescission.
Indemnification and insurance
Our amended and restated bylaws will provide that, to the fullest extent permitted by law, we will indemnify any officer or director of our company against all damages, claims and liabilities arising out of the fact that the person is or was our director or officer, or served any other enterprise at our request as a director, officer, employee, agent or fiduciary. Amending this provision will not reduce our indemnification obligations relating to actions taken before an amendment.
Further, our amended and restated certificate of incorporation will provide that we will indemnify, to the fullest extent permitted by law, any person who is or was a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he or she is or was one of our directors, officers, employees or agents or is or was serving at our request as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise. Our amended and restated bylaws that will be in effect upon completion of this offering will also provide that we must advance expenses incurred by or on behalf of a director, and that we may advance expenses incurred by or on behalf of an officer, employee, trustee or agent, in advance of the final disposition of any civil or criminal action, suit or proceeding. In addition, we intend to enter into an indemnification agreement with each of our directors and executive officers. With certain exceptions, these agreements will provide for indemnification for related expenses including attorneys fees, judgments, fines and settlement amounts incurred by any of these individuals in any action or proceeding. We
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believe that these provisions in our amended and restated certificate of incorporation and our amended and restated bylaws and indemnification agreements are necessary to attract and retain qualified persons as directors and officers.
We also maintain standard policies of insurance under which coverage is provided to our directors and officers against loss rising from claims made by reason of breach of duty or other wrongful act, and to us with respect to payments which may be made by us to such directors and officers pursuant to the above indemnification provision or otherwise as a matter of law.
The indemnification provisions in our amended and restated certificate of incorporation and amended and restated bylaws may discourage stockholders from bringing a lawsuit against our directors for breach of their fiduciary duty. They may also reduce the likelihood of derivative litigation against our directors and officers, even though an action, if successful, might benefit us and other stockholders. Further, a stockholders investment may be adversely affected to the extent that we pay the costs of settlement and damage awards against directors and officers as required by these indemnification provisions.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted for directors, executive officers or persons controlling us, we have been informed that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
Forum selection
The Court of Chancery of the State of Delaware will, to the fullest extent permitted by applicable law, be the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of fiduciary duty owed by any of our directors, officers, employees, agents or trustees to us or our stockholders, (iii) any action asserting a claim against us or any director or officer or other employee of ours arising pursuant to any provision of the DGCL, our amended and restated certificate of incorporation or our amended and restated bylaws or (iv) any action asserting a claim against us or any director or officer or other employee of ours that is governed by the internal affairs doctrine, in each case subject to such Court of Chancery having personal jurisdiction over the indispensable parties named as defendants therein. This exclusive forum provision would not apply to suits brought to enforce a duty or liability created by the Exchange Act or any other claim for which the U.S. federal courts have exclusive jurisdiction.
Our amended and restated certificate of incorporation will further provide that, to the fullest extent permitted by applicable law, the federal district courts of the United States will be the exclusive forum for resolving any complaint asserting a cause of action arising under the federal securities laws of the United States, subject to and contingent upon a final adjudication in the State of Delaware regarding the enforceability of such exclusive forum provision. The Court of Chancery of the State of Delaware recently determined that a provision stating that U.S. federal district courts are the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act is not enforceable. However, this decision may be reviewed and ultimately overturned by the Delaware Supreme Court.
Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock will be deemed to have notice of and consented to the foregoing forum selection provisions. These exclusive-forum provisions may limit a stockholders ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, employees or agents, which may discourage such lawsuits against us and such persons.
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Listing
We have applied to list our common stock on the NYSE under the symbol AMK.
Transfer agent and registrar
The transfer agent and registrar for our common stock will be Computershare Trust Company, N.A. The transfer agent and registrars address is 250 Royall Street, Canton, Massachusetts 02021-1011.
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Material U.S. federal tax considerations for non-U.S. holders of common stock
The following is a discussion of the material U.S. federal income and estate tax consequences of the ownership and disposition of our common stock by a non-U.S. holder. A non-U.S. holder is a beneficial owner of a share of our common stock that is, for U.S. federal income tax purposes:
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a non-resident alien individual, other than a former citizen or resident of the United States subject to U.S. tax as an expatriate, or |
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a foreign estate or trust. |
If a partnership or other pass-through entity (including an entity or arrangement treated as a partnership or other type of pass-through entity for U.S. federal income tax purposes) owns our common stock, the tax treatment of a partner or beneficial owner of the entity may depend upon the status of the owner, the activities of the entity and certain determinations made at the partner or beneficial owner level. Partners and beneficial owners in partnerships or other pass-through entities that own our common stock should consult their own tax advisers as to the particular U.S. federal income and estate tax consequences applicable to them.
This discussion is based on the Internal Revenue Code, and administrative pronouncements, judicial decisions and final, temporary and proposed Treasury Regulations, changes to any of which subsequent to the date of this prospectus may affect the tax consequences described herein (possibly with retroactive effect). This discussion does not address all aspects of U.S. federal income and estate taxation that may be relevant to non-U.S. holders in light of their particular circumstances and does not address any tax consequences arising under the laws of any state, local or foreign jurisdiction. Prospective holders are urged to consult their tax advisers with respect to the particular tax consequences to them of owning and disposing of our common stock, including the consequences under the laws of any state, local or foreign jurisdiction.
Dividends
As discussed in Dividend policy above, we made a one-time cash distribution to AssetMark Holdings LLC in the fourth quarter of 2018 in the amount of $234 million. Any future determinations relating to our dividends and earnings retention policies will be made at the discretion of our board of directors, who will review such policies from time to time in light of our earnings, cash flow generation, financial position, results of operations, the terms of our indebtedness and other contractual restrictions, capital requirements, business prospects and other factors our board of directors may deem relevant. In the event that we do pay dividends out of our current or accumulated earnings and profits (as determined under U.S. federal income tax principles), such dividends paid to a non-U.S. holder generally will be subject to U.S. federal withholding tax at a 30% rate, or a reduced rate specified by an applicable income tax treaty, subject to the discussion of Foreign Account Tax Compliance Act (FATCA) withholding taxes below. To obtain a reduced rate of withholding under an applicable income tax treaty, a non-U.S. holder generally will be required to provide a properly executed IRS Form W-8BEN or IRS Form W-8BEN-E, as applicable, certifying its entitlement to benefits under the treaty. This certification must be provided to us or our withholding agent before the payment of dividends and must be updated periodically.
No amounts in respect of U.S. federal withholding tax will be withheld from dividends paid to a non-U.S. holder if the dividends are effectively connected with the non-U.S. holders conduct of a
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trade or business within the United States (and, if required by an applicable income tax treaty, are attributable to a permanent establishment or fixed base maintained by the non-U.S. holder in the United States) and the non-U.S. holder provides a properly executed IRS Form W-8ECI. Instead, the effectively connected dividends will generally be subject to regular U.S. income tax as if the non-U.S. holder were a U.S. person as defined under the Internal Revenue Code. A non-U.S. holder that is a treated as a corporation for U.S. federal income tax purposes receiving effectively connected dividends may also be subject to an additional branch profits tax imposed at a rate of 30% (or a lower treaty rate) on its effectively connected earnings and profits (subject to certain adjustments).
Gain on disposition of common stock
Subject to the discussions of backup withholding and FATCA withholding taxes below, a non-U.S. holder generally will not be subject to U.S. federal income tax on gain realized on a sale or other disposition of our common stock unless:
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the gain is effectively connected with a trade or business of the non-U.S. holder in the United States, subject to an applicable income tax treaty providing otherwise, in which case the gain will be subject to U.S. federal income tax generally in the same manner as effectively connected dividend income as described above; |
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the non-U.S. holder is an individual present in the United States for 183 days or more in the taxable year of disposition and certain other conditions are met, in which case the gain (net of certain U.S.-source losses) generally will be subject to U.S. federal income tax at a rate of 30% (or a lower treaty rate); or |
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we are or have been a United States real property holding corporation (as described below), at any time within the five-year period preceding the disposition or the non-U.S. holders holding period, whichever period is shorter, and either (i) our common stock is not regularly traded on an established securities market prior to the beginning of the calendar year in which the sale or disposition occurs or (ii) the non-U.S. holder has owned or is deemed to have owned, at any time within the five year period preceding the disposition or the non-U.S. holders holding period, whichever period is shorter, more than 5% of our common stock. |
We will be a United States real property holding corporation at any time that the fair market value of our United States real property interests, as defined in the Internal Revenue Code and applicable Treasury Regulations, equals or exceeds 50% of the aggregate fair market value of our worldwide real property interests and our other assets used or held for use in a trade or business (all as determined for U.S. federal income tax purposes). We believe that we are not, and do not anticipate becoming in the foreseeable future, a United States real property holding corporation.
Information reporting requirements and backup withholding
Information returns are required to be filed with the IRS in connection with payments of dividends. A non-U.S. holder may have to comply with certification procedures to establish that it is not a United States person to avoid additional information reporting and backup withholding. The certification procedures required to claim a reduced rate of withholding under a treaty will generally satisfy the certification requirements necessary to avoid backup withholding as well. The amount of any backup withholding from a payment to a non-U.S. holder will be allowed as a credit against the non-U.S. holders U.S. federal income tax liability and may entitle the non-U.S. holder to a refund, provided that the required information is furnished to the IRS in a timely manner.
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FATCA withholding taxes
Payments to certain foreign entities of dividends on and, subject to the discussion below, the gross proceeds of dispositions of common stock of a U.S. issuer will be subject to a withholding tax (separate and apart from, but without duplication of, the withholding tax described above) at a rate of 30%, unless various U.S. information reporting and due diligence requirements (generally relating to ownership by U.S. persons of interests in or accounts with those entities) have been satisfied or an exemption from these rules applies. Under applicable Treasury Regulations, this withholding tax currently applies to payments of dividends on our common stock, although under recently proposed Treasury Regulations (the preamble to which specifies that taxpayers are permitted to rely on them pending their finalization), no withholding will apply to payments of gross proceeds from a sale or other disposition of our common stock. An intergovernmental agreement between the United States and an applicable foreign country may modify these requirements. Non-U.S. holders should consult their tax advisers regarding the possible implications of this withholding tax on their investment in our common stock.
Federal estate tax
Individual non-U.S. holders (as specifically defined for U.S. federal estate tax purposes) and entities the property of which is potentially includible in such an individuals gross estate for U.S. federal estate tax purposes (for example, a trust funded by such an individual and with respect to which the individual has retained certain interests or powers) should note that our common stock will be treated as U.S. situs property subject to U.S. federal estate tax, unless an applicable estate tax treaty provides otherwise.
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Shares eligible for future sale
Prior to this offering, there has been no market for our common stock. Future sales of substantial amounts of our common stock in the public market could adversely affect market prices prevailing from time to time. Furthermore, because only a limited number of shares will be available for sale shortly after this offering due to existing contractual and legal restrictions on resale as described below, there may be sales of substantial amounts of our common stock in the public market after the restrictions lapse. This may adversely affect the prevailing market price and our ability to raise equity capital in the future.
Upon completion of this offering, we will have shares of common stock outstanding. Of these shares, shares, or shares if the underwriters exercise their option to purchase additional shares in full, sold in this offering will be freely transferable without restriction or registration under the Securities Act, except for any shares purchased by one of our existing affiliates, as that term is defined in Rule 144 under the Securities Act, and any shares purchased in this offering by our directors and executive officers in the directed share program described in the section titled Underwriting (conflict of interest) or by other participants who are otherwise restricted from selling such shares by Rule 144 under the Securities Act. The remaining shares of common stock existing are restricted shares as defined in Rule 144. Restricted shares may be sold in the public market only if registered or if they qualify for an exemption from registration, including under Rules 144 or 701 of the Securities Act. As a result of the contractual 180-day lock-up period described below and the provisions of Rules 144 and 701 of the Securities Act, these shares will be available for sale in the public market as follows:
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all the shares of common stock sold in this offering, except for any shares sold to our affiliates, will be eligible for immediate sale upon the closing of this offering; and |
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the remaining shares of common stock will be eligible for sale in the public market upon expiration of lock-up agreements 180 days after the date of this prospectus, subject in certain circumstances to the volume, manner of sale and other limitations under Rule 144 and Rule 701. |
Rule 144
In general, a person who has beneficially owned restricted shares of our common stock for at least six months would be entitled to sell such securities in reliance upon Rule 144, provided that (i) such person is not deemed to have been one of our affiliates at the time of, or at any time during the 90 days preceding, a sale and (ii) we are subject to the Exchange Act periodic reporting requirements for at least 90 days before the sale. Persons who have beneficially owned restricted shares of our common stock for at least six months but who are our affiliates at the time of, or any time during the 90 days preceding, a sale, would be subject to additional restrictions, by which such person would be entitled to sell within any three month period only a number of securities that does not exceed the greater of either of the following:
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1% of the number of shares of our common stock then outstanding, which will equal approximately shares immediately after this offering, assuming no exercise of the underwriters option to purchase additional shares; or |
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the average weekly trading volume of our common stock on the NYSE during the four calendar weeks preceding the filing of a notice on Form 144 with respect to the sale; |
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provided, in each case, that we are subject to the Exchange Act periodic reporting requirements for at least 90 days before the sale. Such sales both by affiliates and by non-affiliates must also comply with the manner of sale, current public information and notice provisions of Rule 144 to the extent applicable.
The foregoing share counts assume an initial public offering price of $ per share (the midpoint of the price range set forth on the cover of this prospectus).
Rule 701
In general, under Rule 701, any of our employees, directors, officers, consultants or advisers who purchases shares from us in connection with a compensatory stock or option plan or other written agreement before the effective date of this offering is entitled to resell such shares 90 days after the effective date of this offering in reliance on Rule 144, without having to comply with the holding period requirements or other restrictions contained in Rule 701.
The SEC has indicated that Rule 701 will apply to typical stock options granted by an issuer before it becomes subject to the reporting requirements of the Exchange Act, along with the shares acquired upon exercise of such options, including exercises after the date of this prospectus. Securities issued in reliance on Rule 701 are restricted securities and, subject to the contractual restrictions described above, beginning 90 days after the date of this prospectus, may be sold by persons other than affiliates, as defined in Rule 144, subject only to the manner of sale provisions of Rule 144 and by affiliates under Rule 144 without compliance with its one-year minimum holding period requirement.
Registration rights
Upon completion of this offering, HIIHL, the holder of shares of our common stock, and its transferees will be entitled to various rights with respect to the registration of these shares under the Securities Act described in the section titled Description of capital stockRegistration rights. Registration of these shares under the Securities Act would result in these shares becoming freely tradable without restriction under the Securities Act immediately upon the effectiveness of the registration, except for shares purchased by affiliates.
Restricted stock awards and stock options
As of March 31, 2019, no options to purchase units of AssetMark Holdings LLC or our common stock were outstanding. Upon and following the pricing of this offering, we will issue options to purchase shares of our common stock, RSUs covering shares of our common stock and RSAs covering shares of our common stock to certain of our employees and directors. All of the shares subject to such options, RSUs and RSAs will be subject to lock-up agreements. An additional shares of common stock will be available for future grants under our stock plans.
Upon completion of this offering, we intend to file a registration statement under the Securities Act covering all shares of common stock subject to outstanding options or issuable pursuant to our 2019 Equity Incentive Plan. Subject to Rule 144 volume limitations applicable to affiliates, shares registered under any registration statements will be available for sale in the open market, beginning 90 days after the date of the prospectus, except to the extent that the shares are subject to vesting restrictions with us or the contractual restrictions described below.
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Lock-up agreements
All of our directors and executive officers and substantially all of our stockholders have agreed, subject to certain exceptions, not to offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, or enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any shares of common stock or any securities convertible into or exercisable or exchangeable for shares of our or certain of our affiliates equity securities for a period of 180 days after the date of this prospectus, without the prior written consent of the representatives of the underwriters. See the section titled Underwriting (conflict of interest).
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Underwriting (conflict of interest)
We and the selling stockholder are offering the shares of common stock described in this prospectus through a number of underwriters. J.P. Morgan Securities LLC and Goldman Sachs & Co. LLC are acting as joint book-running managers of the offering and as representatives of the underwriters. We and the selling stockholder have entered into an underwriting agreement with the underwriters. Subject to the terms and conditions of the underwriting agreement, we and the selling stockholder have agreed to sell to the underwriters, and each underwriter has severally agreed to purchase, at the public offering price less the underwriting discounts and commissions set forth on the cover page of this prospectus, the number of shares of common stock listed next to its name in the following table:
Name | Number of shares | |||
J.P. Morgan Securities LLC |
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Goldman Sachs & Co. LLC |
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Credit Suisse Securities (USA) LLC |
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Huatai Securities (USA), Inc. |
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BMO Capital Markets Corp. |
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Raymond James & Associates, Inc. |
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William Blair & Company, L.L.C. |
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Total |
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The underwriters are committed to purchase all the shares of common stock offered by us and the selling stockholder if they purchase any shares. The underwriting agreement also provides that if an underwriter defaults, the purchase commitments of non-defaulting underwriters may be increased or the offering may be terminated. The offering of the shares by the underwriters is subject to receipt and acceptance and subject to the underwriters right to reject any order in whole or in part.
The underwriters propose to offer the shares of common stock directly to the public at the initial public offering price set forth on the cover page of this prospectus and to certain dealers at that price less a concession not in excess of $ per share. Any such dealers may resell shares to certain other brokers or dealers at a discount of up to $ per share from the initial public offering price. After the initial offering of the shares to the public, if all of the shares of common stock are not sold at the initial public offering price, the underwriters may change the offering price and the other selling terms. Sales of shares made outside of the United States may be made by affiliates of the underwriters.
The underwriters have an option to buy up to additional shares of common stock from the selling stockholder to cover sales of shares by the underwriters which exceed the number of shares specified in the table above. The underwriters have 30 days from the date of this prospectus to exercise this option to purchase additional shares. If any shares are purchased with this option to purchase additional shares, the underwriters will purchase shares in approximately the same proportion as shown in the table above. If any additional shares of common stock are purchased, the underwriters will offer the additional shares on the same terms as those on which the shares are being offered.
At our request, the underwriters have reserved up to 5% of the shares offered by this prospectus for sale at the initial public offering price for our directors, officers, certain of our employees and certain other persons associated with us who have expressed an interest in purchasing common stock in this offering. The sales will be made at our direction by J.P. Morgan Securities LLC and its affiliates through a directed share program. The number of shares available for sale to the general public in this
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offering will be reduced to the extent that such participants purchase the reserved shares. Any reserved shares not so purchased will be offered by the underwriters to the general public on the same terms as the other shares offered by this prospectus. Our directors and executive officers who are participating in this program have agreed that any shares purchased through this program will be subject to a 180-day lock-up restriction on the terms described below; other participants in this program will not be subject to lock-up restrictions with the underwriters or with us with respect to any shares purchased through the program. We have agreed to indemnify the underwriters against certain liabilities and expenses, including liabilities under the Securities Act, in connection with the sale of the shares reserved for the directed share program.
The underwriting fee is equal to the public offering price per share of common stock less the amount paid by the underwriters to us and the selling stockholder per share of common stock. The underwriting fee is $ per share. The following table shows the per share and total underwriting discounts and commissions to be paid to the underwriters assuming both no exercise and full exercise of the underwriters option to purchase additional shares.
Per share |
Total without
exercise of option to purchase additional shares |
Total with full
exercise of option to purchase additional shares |
||||||||||
Shares sold by us |
$ | $ | $ | |||||||||
Shares sold by the selling stockholder |
$ | $ | $ | |||||||||
|
We and the selling stockholder estimate that the total expenses of this offering payable by us, including registration, filing and listing fees, printing fees and legal and accounting expenses, but excluding the underwriting discounts and commissions, will be approximately $ . We have also agreed to reimburse the underwriters for reasonable fees and expenses of counsel related to the review by FINRA of the terms of sale of the shares of common stock offered hereby in an amount not to exceed $ .
A prospectus in electronic format may be made available on the web sites maintained by one or more underwriters, or selling group members, if any, participating in the offering. The underwriters may agree to allocate a number of shares to underwriters and selling group members for sale to their online brokerage account holders. Internet distributions will be allocated by the representatives to underwriters and selling group members that may make Internet distributions on the same basis as other allocations.
We have agreed, subject to specified limited exceptions, that we will not (i) offer, pledge, announce the intention to sell, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase or otherwise dispose of, directly or indirectly, or file with the SEC a registration statement under the Securities Act relating to, any shares of our common stock or securities convertible into or exchangeable or exercisable for any shares of our common stock, or publicly disclose the intention to make any offer, sale, pledge, disposition or filing, or (ii) enter into any swap or other arrangement that transfers all or a portion of the economic consequences associated with the ownership of any shares of common stock or any such other securities (regardless of whether any of these transactions are to be settled by the delivery of shares of common stock or such other securities, in cash or otherwise), in each case without the prior written consent of J.P. Morgan Securities LLC and Goldman Sachs & Co. LLC, during the period ending on and including the 180th day after the date of this prospectus.
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Our directors and executive officers, the selling stockholder and holders of substantially all of our outstanding stock and securities convertible into or exchangeable or exercisable for our common stock have entered into lock-up agreements with the underwriters prior to the commencement of this offering pursuant to which each of these persons or entities, with specified limited exceptions, for a period of 180 days after the date of this prospectus, may not, without the prior written consent of J.P. Morgan Securities LLC and Goldman Sachs & Co. LLC, (1) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any shares of our or certain of our affiliates equity securities or any securities convertible into or exercisable or exchangeable for our or certain of our affiliates equity securities (including, without limitation, common stock or such other securities, which may be deemed to be beneficially owned by such directors, executive officers, managers and members in accordance with the rules and regulations of the SEC and securities which may be issued upon exercise of a stock option or warrant), (2) enter into any swap or other agreement that transfers, in whole or in part, any of the economic consequences of ownership of the common stock or such other securities, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of common stock or such other securities, in cash or otherwise, or (3) make any demand for or exercise any right with respect to the registration of any shares of our or certain of our affiliates equity securities, or any security convertible into or exercisable or exchangeable for our or certain of our affiliates equity securities.
We and the selling stockholder have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act.
We have applied to have our common stock approved for listing on the NYSE under the symbol AMK.
In connection with this offering, the underwriters may engage in stabilizing transactions, which involves making bids for, purchasing and selling shares of common stock in the open market for the purpose of preventing or retarding a decline in the market price of the common stock while this offering is in progress. These stabilizing transactions may include making short sales of the common stock, which involves the sale by the underwriters of a greater number of shares of common stock than they are required to purchase in this offering, and purchasing shares of common stock on the open market to cover positions created by short sales. Short sales may be covered shorts, which are short positions in an amount not greater than the underwriters option to purchase additional shares referred to above, or may be naked shorts, which are short positions in excess of that amount. The underwriters may close out any covered short position either by exercising their option to purchase additional shares, in whole or in part, or by purchasing shares in the open market. In making this determination, the underwriters will consider, among other things, the price of shares available for purchase in the open market compared to the price at which the underwriters may purchase shares through the option to purchase additional shares. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the common stock in the open market that could adversely affect investors who purchase in this offering. To the extent that the underwriters create a naked short position, they will purchase shares in the open market to cover the position.
The underwriters have advised us that, pursuant to Regulation M of the Securities Act, they may also engage in other activities that stabilize, maintain or otherwise affect the price of the common stock, including the imposition of penalty bids. This means that if the representatives of the underwriters purchase common stock in the open market in stabilizing transactions or to cover short sales, the
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representatives can require the underwriters that sold those shares as part of this offering to repay the underwriting discount received by them.
These activities may have the effect of raising or maintaining the market price of the common stock or preventing or retarding a decline in the market price of the common stock, and, as a result, the price of the common stock may be higher than the price that otherwise might exist in the open market. If the underwriters commence these activities, they may discontinue them at any time. The underwriters may carry out these transactions on the NYSE, in the over-the-counter market or otherwise.
Prior to this offering, there has been no public market for our common stock. The initial public offering price will be determined by negotiations between us, the selling stockholder and the representatives of the underwriters. In determining the initial public offering price, we, the selling stockholder and the representatives of the underwriters expect to consider a number of factors including:
|
the information set forth in this prospectus and otherwise available to the representatives; |
|
our prospects and the history and prospects for the industry in which we compete; |
|
an assessment of our management; |
|
our prospects for future earnings; |
|
the general condition of the securities markets at the time of this offering; |
|
the recent market prices of, and demand for, publicly traded common stock of generally comparable companies; and |
|
other factors deemed relevant by the underwriters and us. |
Neither we, the selling stockholder nor the underwriters can assure investors that an active trading market will develop for our shares of common stock, or that the shares will trade in the public market at or above the initial public offering price.
Conflict of interest
We and Huatai Securities (USA), Inc., an underwriter in this offering, are under common control by HTSC. As such, Huatai Securities (USA), Inc. is deemed to have a conflict of interest under Rule 5121(f)(5)(B) of FINRA. In addition, affiliates of Huatai Securities (USA), Inc. and Credit Suisse Securities (USA) LLC will each receive more than 5% of the net offering proceeds from this offering and will each be deemed to have a conflict of interest pursuant to FINRA Rule 5121(f)(5)(C). Accordingly, this offering is being made in compliance with the requirements of FINRA Rule 5121, pursuant to which the appointment of a qualified independent underwriter is not required in connection with this offering as the FINRA members primarily responsible for managing the public offering do not have a conflict of interest, are not affiliates of any FINRA member that has a conflict of interest and meet the requirements of FINRA Rule 5121(f)(12)(E). Neither Huatai Securities (USA), Inc. nor Credit Suisse Securities (USA) LLC will confirm sales of common stock to any account over which they exercise discretionary authority without the specific written approval of the account holder.
Other relationships
The underwriters and their respective affiliates are full service financial institutions engaged in various activities, which may include sales and trading, commercial and investment banking, advisory, investment management, investment research, principal investment, hedging, market making, brokerage and other financial and non-financial activities and services. Certain of the underwriters and
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their respective affiliates have provided, and may in the future provide, a variety of these services to the issuer and to persons and entities with relationships with the issuer, for which they received or will receive customary fees and expenses. For example, Credit Suisse AG, Cayman Islands Branch, an affiliate of Credit Suisse Securities (USA) LLC, serves as administrative agent and collateral agent under our Credit Facility and will receive a portion of the net proceeds received by us in this offering due to the use of proceeds from this offering contemplating the repayment of indebtedness incurred under the Term Loan.
In the ordinary course of their various business activities, the underwriters and their respective affiliates, officers, directors and employees may purchase, sell or hold a broad array of investments and actively trade securities, derivatives, loans, commodities, currencies, credit default swaps and other financial instruments for their own account and for the accounts of their customers, and such investment and trading activities may involve or relate to assets, securities and/or instruments of the issuer (directly, as collateral securing other obligations or otherwise) and/or persons and entities with relationships with the issuer. The underwriters and their respective affiliates may also communicate independent investment recommendations, market color or trading ideas and/or publish or express independent research views in respect of such assets, securities or instruments and may at any time hold, or recommend to clients that they should acquire, long and/or short positions in such assets, securities and instruments.
Selling restrictions
Other than in the United States, no action has been taken by us, the selling stockholder or the underwriters that would permit a public offering of the securities offered by this prospectus in any jurisdiction where action for that purpose is required. The securities offered by this prospectus may not be offered or sold, directly or indirectly, nor may this prospectus or any other offering material or advertisements in connection with the offer and sale of any such securities be distributed or published in any jurisdiction, except under circumstances that will result in compliance with the applicable rules and regulations of that jurisdiction. Persons into whose possession this prospectus comes are advised to inform themselves about and to observe any restrictions relating to the offering and the distribution of this prospectus. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities offered by this prospectus in any jurisdiction in which such an offer or a solicitation is unlawful.
Notice to prospective investors in Canada
The shares may be sold only to purchasers purchasing, or deemed to be purchasing, as principal that are accredited investors, as defined in National Instrument 45-106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario), and are permitted clients, as defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Any resale of the shares must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus requirements of applicable securities laws.
Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this prospectus (including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchasers province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchasers province or territory for particulars of these rights or consult with a legal advisor.
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Pursuant to section 3A.3 of National Instrument 33-105 Underwriting Conflicts (NI 33-105), the underwriters are not required to comply with the disclosure requirements of NI 33-105 regarding underwriter conflicts of interest in connection with this offering.
Notice to prospective investors in the European Economic Area
In relation to each Member State of the European Economic Area (each, a Relevant Member State), no offer of shares may be made to the public in that Relevant Member State other than:
|
to any legal entity which is a qualified investor as defined in the Prospectus Directive; |
|
to fewer than 150 natural or legal persons (other than qualified investors as defined in the Prospectus Directive), as permitted under the Prospectus Directive, subject to obtaining the prior consent of the representatives; or |
|
in any other circumstances falling within Article 3(2) of the Prospectus Directive, provided that no such offer of shares shall require us or the representatives to publish a prospectus pursuant to Article 3 of the Prospectus Directive or supplement a prospectus pursuant to Article 16 of the Prospectus Directive. |
Each person in a Relevant Member State who initially acquires any shares or to whom any offer is made will be deemed to have represented, acknowledged and agreed to and with each of the representatives and us that it is a qualified investor within the meaning of the law in that Relevant Member State implementing Article 2(1)(e) of the Prospectus Directive. In the case of any shares being offered to a financial intermediary as that term is used in Article 3(2) of the Prospectus Directive, each such financial intermediary will be deemed to have represented, acknowledged and agreed that the shares acquired by it in the offer have not been acquired on a non-discretionary basis on behalf of, nor have they been acquired with a view to their offer or resale to, persons in circumstances which may give rise to an offer of any shares to the public other than their offer or resale in a Relevant Member State to qualified investors as so defined or in circumstances in which the prior consent of the representatives has been obtained to each such proposed offer or resale.
We, the selling stockholder, the representatives and their respective affiliates will rely upon the truth and accuracy of the foregoing representations, acknowledgements and agreements.
This prospectus has been prepared on the basis that any offer of shares in any Relevant Member State will be made pursuant to an exemption under the Prospectus Directive from the requirement to publish a prospectus for offers of shares. Accordingly any person making or intending to make an offer in that Relevant Member State of shares which are the subject of the offering contemplated in this prospectus may only do so in circumstances in which no obligation arises for us or any of the underwriters to publish a prospectus pursuant to Article 3 of the Prospectus Directive in relation to such offer. Neither we, the selling stockholder nor the underwriters have authorized, nor do they authorize, the making of any offer of shares in circumstances in which an obligation arises for us or the underwriters to publish a prospectus for such offer.
For the purposes of this provision, the expression an offer of shares to the public in relation to any shares in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the shares to be offered so as to enable an investor to decide to purchase or subscribe the shares, as the same may be varied in the Relevant Member State by any measure implementing the Prospectus Directive in the Relevant Member State and the expression Prospectus Directive means Directive 2003/71/EC (as amended by Directive 2010/73/EU), and includes any relevant implementing measure in the Relevant Member State.
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Notice to prospective investors in the United Kingdom
In addition, in the United Kingdom, this document is being distributed only to, and is directed only at, and any offer subsequently made may only be directed at persons who are qualified investors (as defined in the Prospectus Directive) (i) who have professional experience in matters relating to investments falling within Article 19 (5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the Order), and/or (ii) who are high net worth companies (or persons to whom it may otherwise be lawfully communicated) falling within Article 49(2)(a) to (d) of the Order (all such persons together being referred to as relevant persons) or otherwise in circumstances which have not resulted and will not result in an offer to the public of the shares in the United Kingdom within the meaning of the Financial Services and Markets Act 2000.
Any person in the United Kingdom that is not a relevant person should not act or rely on the information included in this document or use it as basis for taking any action. In the United Kingdom, any investment or investment activity that this document relates to may be made or taken exclusively by relevant persons.
Notice to prospective investors in Switzerland
The shares may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange, or SIX, or on any other stock exchange or regulated trading facility in Switzerland. This document does not constitute a prospectus within the meaning of, and has been prepared without regard to the disclosure standards for issuance prospectuses under, art. 652a or art. 1156 of the Swiss Code of Obligations or the disclosure standards for listing prospectuses under art. 27 ff. of the SIX Listing Rules or the listing rules of any other stock exchange or regulated trading facility in Switzerland. Neither this document nor any other offering or marketing material relating to the shares or the offering may be publicly distributed or otherwise made publicly available in Switzerland.
Neither this document nor any other offering or marketing material relating to the offering, the Company or the shares has been or will be filed with or approved by any Swiss regulatory authority. In particular, this document will not be filed with, and the offer of shares will not be supervised by, the Swiss Financial Market Supervisory Authority (FINMA), and the offer of shares has not been and will not be authorized under the Swiss Federal Act on Collective Investment Schemes, or CISA. The investor protection afforded to acquirers of interests in collective investment schemes under the CISA does not extend to acquirers of shares.
Notice to prospective investors in Hong Kong
The shares have not been offered or sold and will not be offered or sold in Hong Kong, by means of any document, other than (a) to professional investors as defined in the Securities and Futures Ordinance (Cap. 571) of Hong Kong and any rules made under that Ordinance; or (b) in other circumstances which do not result in the document being a prospectus as defined in the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32) of Hong Kong or which do not constitute an offer to the public within the meaning of that Ordinance. No advertisement, invitation or document relating to the shares has been or may be issued or has been or may be in the possession of any person for the purposes of issue, whether in Hong Kong or elsewhere, which is directed at, or the contents of which are likely to be accessed or read by, the public of Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to shares which are or are intended to be disposed of only to persons outside Hong Kong or only to
159
professional investors as defined in the Securities and Futures Ordinance and any rules made under that Ordinance.
Notice to prospective investors in Singapore
This prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of shares may not be circulated or distributed, nor may the shares be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore (the SFA), (ii) to a relevant person pursuant to Section 275(1), or any person pursuant to Section 275(1A), and in accordance with the conditions, specified in Section 275 of the SFA or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.
Where the shares are subscribed or purchased under Section 275 of the SFA by a relevant person which is:
(a) | a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or |
(b) | a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an accredited investor, |
securities (as defined in Section 239(1) of the SFA) of that corporation or the beneficiaries rights and interest (howsoever described) in that trust shall not be transferred within six months after that corporation or that trust has acquired the shares pursuant to an offer made under Section 275 of the SFA except:
(a) | to an institutional investor or to a relevant person defined in Section 275(2) of the SFA, or to any person arising from an offer referred to in Section 275(1A) or Section 276(4)(i)(B) of the SFA; |
(b) | where no consideration is or will be given for the transfer; |
(c) | where the transfer is by operation of law; |
(d) | as specified in Section 276(7) of the SFA; or |
(e) | as specified in Regulation 32 of the Securities and Futures (Offers of Investments) (Shares and Debentures) Regulations 2005 of Singapore. |
Notice to prospective investors in Japan
The shares have not been and will not be registered pursuant to Article 4, Paragraph 1 of the Financial Instruments and Exchange Act. Accordingly, none of the shares nor any interest therein may be offered or sold, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan (which term, as used herein, means any person resident in Japan, including any corporation or other entity organized under the laws of Japan), or to others for re-offering or resale, directly or indirectly, in Japan or to or for the benefit of a resident of Japan, except pursuant to an exemption from the registration requirements of, and otherwise in compliance with, the Financial Instruments and Exchange Act and any other applicable laws, regulations and ministerial guidelines of Japan in effect at the relevant time.
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Notice to prospective investors in the Peoples Republic of China
This prospectus may not be circulated or distributed in the PRC and the shares may not be offered or sold, and will not offer or sell to any person for re-offering or resale directly or indirectly to any resident of the PRC except pursuant to applicable laws, rules and regulations of the PRC. For the purpose of this paragraph only, the PRC does not include Taiwan and the special administrative regions of Hong Kong and Macau.
Notice to prospective investors in Taiwan
The shares have not been and will not be registered with the Financial Supervisory Commission of Taiwan pursuant to relevant securities laws and regulations and may not be sold, issued or offered within Taiwan through a public offering or in circumstances which constitutes an offer within the meaning of the Securities and Exchange Act of Taiwan that requires a registration or approval of the Financial Supervisory Commission of Taiwan. No person or entity in Taiwan has been authorized to offer, sell, give advice regarding or otherwise intermediate the offering and sale of the shares in Taiwan.
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The validity of the issuance of the shares of common stock offered hereby will be passed upon for AssetMark Financial Holdings, Inc. and the selling stockholder by Davis Polk & Wardwell LLP, Menlo Park, California. Cooley LLP, Palo Alto, California is representing the underwriters.
The consolidated financial statements of AssetMark Financial Holdings, Inc. and its subsidiaries as of December 31, 2017 and for the year then ended included in this prospectus have been so included in reliance on the report of Crowe LLP, independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.
The consolidated financial statements of AssetMark Financial Holdings, Inc. and its subsidiaries as of December 31, 2018, and for the year then ended, have been included herein in reliance upon the report of KPMG LLP, independent registered public accounting firm, appearing elsewhere herein, and upon the authority of said firm as experts in accounting and auditing.
Where you can find more information
We have submitted with the SEC a registration statement on Form S-1 under the Securities Act with respect to the common stock offered hereby. This prospectus does not contain all of the information set forth in the registration statement and the exhibits and schedules thereto. For further information with respect to our company and our common stock, reference is made to the registration statement and the exhibits and any schedules filed therewith. Statements contained in this prospectus as to the contents of any contract or other document referred to are not necessarily complete and in each instance, if such contract or document is filed as an exhibit, reference is made to the copy of such contract or other document filed as an exhibit to the registration statement, each statement being qualified in all respects by such reference. The SEC maintains an Internet site at www.sec.gov, which contains reports and other information about issuers that, like us, file electronically with the SEC. Interested persons can visit www.sec.gov to electronically access such reports and information, as well as the registration statement of which this prospectus constitutes a part, including the exhibits and any schedules thereto.
As a result of the offering, we will be required to file periodic reports, proxy and information statements and other information with the SEC. These periodic reports, proxy and information statements and other information will be available for inspection and copying at the website of the SEC referred to above.
We also maintain an Internet site at www.assetmark.com. Our website and the information contained in or accessible through our website shall not be deemed to be incorporated into this prospectus or the registration statement of which it forms a part, and the inclusion of our website address in this prospectus is only as an inactive textual reference.
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AssetMark Financial Holdings, Inc.
Index to Consolidated Financial Statements
Audited Consolidated Financial Statements for the Years Ended December 31, 2018 and 2017
Pages | ||||
Report of KPMG LLP, Independent Registered Public Accounting Firm |
F-2 | |||
Report of Crowe LLP, Independent Registered Public Accounting Firm |
F-3 | |||
Consolidated Financial Statements |
||||
F-4 | ||||
F-5 | ||||
F-6 | ||||
F-7 | ||||
F-8 |
Unaudited Interim Condensed Consolidated Financial Statements for the Three Months Ended March 31, 2019 and 2018:
Condensed Consolidated Financial Statements |
||||
F-27 | ||||
F-28 | ||||
F-29 | ||||
F-30 | ||||
Notes to Unaudited Condensed Consolidated Financial Statements |
F-31 |
F-1
Report of KPMG LLP, Independent Registered Public Accounting Firm
To the Shareholder and the Board of Directors
AssetMark Financial Holdings, Inc.:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheet of AssetMark Financial Holdings, Inc. and its subsidiaries (the Company) as of December 31, 2018, the related consolidated statements of income and comprehensive income, changes in stockholders equity, and cash flows for the year ended December 31, 2018, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018, and the results of its operations and its cash flows for the year ended December 31, 2018, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These consolidated financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.
/s/ KPMG LLP
We have served as the Companys auditor since 2007.
Los Angeles, California
March 11, 2019
F-2
Report of Crowe LLP, Independent Registered Public Accounting Firm
Board of Directors of AssetMark Financial Holdings, Inc.
Concord, California
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of AssetMark Financial Holdings, Inc. (the Company) as of December 31, 2017, the related consolidated statements of income and comprehensive income, changes in stockholders equity, and cash flows for the year ended December 31, 2017, and the related notes to the consolidated financial statements (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on the Companys financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Companys internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
/s/ Crowe LLP
We were engaged in 2018 to audit the 2017 financial statements.
New York, New York
March 11, 2019
F-3
AssetMark Financial Holdings, Inc.
December 31, | ||||||||
(in thousands except share data and par value) | 2018 | 2017 | ||||||
Assets |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 105,354 | $ | 50,147 | ||||
Restricted cash |
7,000 | 7,000 | ||||||
Available-for-sale investments, at fair value |
333 | 38 | ||||||
Fees and other receivables |
8,760 | 7,311 | ||||||
Federal income tax receivable |
586 | | ||||||
State income tax receivable |
332 | 670 | ||||||
Other current assets |
4,391 | 3,367 | ||||||
|
|
|||||||
Total current assets |
126,756 | 68,533 | ||||||
Property and equipment, net of accumulated depreciation of $3,817 and $1,754, respectively |
7,040 | 7,068 | ||||||
Capitalized software, net of accumulated amortization of $40,191 and $20,185, respectively |
72,644 | 77,271 | ||||||
Intangible assets, net of accumulated amortization of $8,740 and $4,706, respectively |
642,420 | 646,454 | ||||||
Goodwill |
298,415 | 298,415 | ||||||
|
|
|||||||
Total assets |
$ | 1,147,275 | $ | 1,097,741 | ||||
|
|
|||||||
Liabilities and stockholders equity |
||||||||
Current liabilities: |
||||||||
Accounts payable |
$ | 730 | $ | 2,292 | ||||
Accrued expenses and other current liabilities |
38,200 | 31,956 | ||||||
Payable to AssetMark Holdings LLC |
| 3,040 | ||||||
Federal income tax payable |
| 3,154 | ||||||
Current portion of long-term debt |
2,305 | | ||||||
Current portion of acquisition earn-out |
8,000 | 8,000 | ||||||
|
|
|||||||
Total current liabilities |
49,235 | 48,442 | ||||||
Long-term debt |
242,817 | | ||||||
Other long-term liabilities |
5,097 | 14,224 | ||||||
Deferred income tax liabilities, net |
151,115 | 149,117 | ||||||
|
|
|||||||
Total long-term liabilities |
399,029 | 163,341 | ||||||
Total liabilities |
$ | 448,264 | $ | 211,783 | ||||
|
|
|||||||
Commitments and contingencies |
||||||||
Stockholders equity: |
||||||||
Common stock $0.01 par value (1,000 shares authorized, and 100 shares issued) |
| | ||||||
Additional paid-in capital |
635,162 | 784,530 | ||||||
Retained earnings |
63,846 | 101,420 | ||||||
Accumulated other comprehensive income, net of tax |
3 | 8 | ||||||
|
|
|||||||
Total stockholders equity |
699,011 | 885,958 | ||||||
|
|
|||||||
Total liabilities and stockholders equity |
$ | 1,147,275 | $ | 1,097,741 | ||||
|
See accompanying notes to the consolidated financial statements.
F-4
AssetMark Financial Holdings, Inc.
Consolidated Statements of Income and Comprehensive Income
For the Years ended December 31, | ||||||||
(in thousands) | 2018 | 2017 | ||||||
Revenue |
||||||||
Asset-based revenue |
$ | 338,031 | $ | 282,966 | ||||
Spread based-revenue |
20,403 | 10,430 | ||||||
Other revenue |
5,200 | 2,121 | ||||||
|
|
|||||||
Total revenue |
363,634 | 295,517 | ||||||
Expenses |
||||||||
Asset-based expenses |
116,763 | 98,401 | ||||||
Spread-based expenses |
1,671 | 976 | ||||||
Employee compensation |
107,091 | 105,413 | ||||||
General and operating expenses |
45,383 | 38,781 | ||||||
Professional fees |
10,139 | 9,622 | ||||||
Interest |
1,920 | | ||||||
Depreciation and amortization |
26,104 | 22,981 | ||||||
|
|
|||||||
Total expenses |
309,071 | 276,174 | ||||||
Income before income taxes |
54,563 | 19,343 | ||||||
Provision for (benefit from) income taxes |
17,137 | (79,635 | ) | |||||
|
|
|||||||
Net income |
$ | 37,426 | $ | 98,978 | ||||
Other comprehensive income, net of tax |
||||||||
Unrealized (loss) gain on available for sale investments, net of tax |
(5 | ) | 8 | |||||
|
|
|||||||
Net comprehensive income |
$ | 37,421 | $ | 98,986 | ||||
|
See accompanying notes to the consolidated financial statements.
F-5
AssetMark Financial Holdings, Inc.
Consolidated Statements of Changes in Stockholders Equity
For the Years ended December 31, 2018 and 2017
Common stock |
Additional
paid-in capital |
Retained
earnings |
Accumulated
other comprehensive income |
Total
stockholders equity |
||||||||||||||||||||
(in thousands except share
data) |
Shares | Amount | ||||||||||||||||||||||
Balance at December 31, 2016 |
100 | $ | | $ | 777,610 | $ | 2,442 | $ | | $ | 780,052 | |||||||||||||
Net income |
| | | 98,978 | | 98,978 | ||||||||||||||||||
Other comprehensive income, net |
| | | | 8 | 8 | ||||||||||||||||||
Share-based employee compensation |
| | 6,920 | | | 6,920 | ||||||||||||||||||
|
|
|||||||||||||||||||||||
Balance at December 31, 2017 |
100 | | 784,530 | 101,420 | 8 | 885,958 | ||||||||||||||||||
Net income |
| | | 37,426 | | 37,426 | ||||||||||||||||||
Other comprehensive income, net |
| | | | (5 | ) | (5 | ) | ||||||||||||||||
Share-based employee compensation |
| | 6,568 | | | 6,568 | ||||||||||||||||||
Capital contribution |
| | 2,910 | | | 2,910 | ||||||||||||||||||
Return of capital |
| | (158,846 | ) | | | (158,846 | ) | ||||||||||||||||
Dividends |
| | | (75,000 | ) | | (75,000 | ) | ||||||||||||||||
|
|
|||||||||||||||||||||||
Balance at December 31, 2018 |
100 | $ | | $ | 635,162 | $ | 63,846 | $ | 3 | $ | 699,011 | |||||||||||||
|
See accompanying notes to the consolidated financial statements.
F-6
AssetMark Financial Holdings, Inc.
Consolidated Statements of Cash Flows
For the Years ended December 31, | ||||||||
(in thousands) | 2018 | 2017 | ||||||
Cash flows from operating activities: |
||||||||
Net income |
$ | 37,426 | $ | 98,978 | ||||
Adjustment to reconcile net income to net cash provided by operating activities: |
||||||||
Depreciation and amortization |
26,104 | 22,981 | ||||||
Deferred income taxes |
1,736 | (88,688 | ) | |||||
Share-based compensation |
6,568 | 6,920 | ||||||
Change in certain assets and liabilities: |
||||||||
Fees and other receivables |
(1,449 | ) | (43 | ) | ||||
Payable to AssetMark Holdings LLC |
(130 | ) | 225 | |||||
Other current assets |
(1,024 | ) | (730 | ) | ||||
Accounts payable, accrued expenses and other current liabilities |
(4,167 | ) | 2,228 | |||||
Income tax receivable and payable |
(3,402 | ) | 3,741 | |||||
|
|
|||||||
Net cash provided by operating activities |
61,662 | 45,612 | ||||||
Cash flows from investing activities: |
||||||||
Purchase of available-for-sale investments |
(300 | ) | | |||||
Purchase of property and equipment |
(2,034 | ) | (2,709 | ) | ||||
Purchase of computer software |
(15,380 | ) | (12,943 | ) | ||||
|
|
|||||||
Net cash used in investing activities |
(17,714 | ) | (15,652 | ) | ||||
Cash flows from financing activities: |
||||||||
Capital distributions |
(158,846 | ) | | |||||
Dividends paid |
(75,000 | ) | | |||||
Proceeds from issuance of long-term debt |
245,105 | | ||||||
|
|
|||||||
Net cash provided by financing activities |
11,259 | | ||||||
Net change in cash, cash equivalents, and restricted cash |
55,207 | 29,960 | ||||||
Cash, cash equivalents, and restricted cash at beginning of period |
57,147 | 27,187 | ||||||
|
|
|||||||
Cash, cash equivalents, and restricted cash at end of period |
$ | 112,354 | $ | 57,147 | ||||
|
|
|||||||
Supplemental cash flow information |
||||||||
Income taxes paid |
$ | 19,497 | $ | 4,773 | ||||
Interest paid |
$ | 1,258 | $ | | ||||
|
See accompanying notes to the consolidated financial statements.
F-7
AssetMark Financial Holdings, Inc.
Notes to Consolidated Financial Statements
For the Years ended December 31, 2018 and 2017
All dollar amounts presented are in thousands other than per share and per unit amounts.
(1) Organization and Nature of Business
These consolidated financial statements include AssetMark Financial Holdings, Inc. and its subsidiaries, which include AssetMark Financial, Inc., which is the parent company of AssetMark, Inc., AssetMark Trust Company, AssetMark Brokerage, LLC, and AssetMark Retirement Services, Inc. (collectively, the Company).
The Companys legal entity structure as of December 31, 2018 and 2017:
The Company is a wholly owned subsidiary of AssetMark Holdings LLC (AssetMark Holdings), which was organized for the purpose of acquiring the Company effective October 31, 2016. AssetMark Holdings is 98.58% owned by affiliates of Huatai Securities (Huatai) and 1.42% owned by management. The Company was acquired from the private equity firms Aquiline Capital Partners LLC and Genstar Capital LLC.
The Company offers a broad array of wealth management solutions to individual investors through financial advisers by providing an open-architecture product platform along with tailored client advice, asset allocation options, practice management, support services and technology to the financial adviser channel.
AssetMark, Inc. (AMI) is a Registered Investment Advisory firm located in Concord, CA and was incorporated under the laws of the State of California on May 13, 1999. AMI offers a broad array of
F-8
wealth management solutions to individual investors through financial advisers by providing an open-architecture product platform along with tailored client advice, asset allocation options, practice management, support services and technology to the financial adviser channel.
AMI serves as investment adviser to the proprietary GuideMark Funds, GuidePath Funds and the Savos Dynamic Hedging Fund. The GuideMark and GuidePath Funds and the Savos Dynamic Hedging Fund are mutual funds offered to clients of financial advisers.
AssetMark Trust Company (AssetMark Trust) is a licensed trust company incorporated under the laws of the State of Arizona on August 24, 1994 and regulated by the Arizona Department of Financial Institutions. AssetMark Trust provides custodial recordkeeping services primarily to investor clients of registered investment advisers (including AMI) located throughout the United States.
AssetMark Brokerage, LLC is a limited-purpose broker-dealer located in Concord, CA and was incorporated under the laws of the State of Delaware on September 25, 2013. Its primary function is to distribute the mutual funds of the Company and to sponsor the FINRA licensing of those AssetMark associates who provide distribution support through promotion of the AssetMark programs and strategies that employ the Companys mutual funds.
AssetMark Retirement Services, Inc. (ARS), formerly known as Aris Corporation of America, was incorporated under the laws of the State of Pennsylvania on April 30, 1974. ARS serves as the record-keeper and third-party administrator for the Aris Retirement product, which are 401(k) or 403(b) investment offerings utilized by small businesses.
(2) Summary of Significant Accounting Policies
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP).
Certain prior year balances have been reclassified to conform with the current year presentation. Service and management fee revenue consists primarily of fees assessed against customer account values based on selling agent agreements. These fee revenues were re-classified as asset-based revenue and spread-based revenue during 2018. Custodial fees are primarily based on percentages of the market value of the assets in custody. These fees were re-classified as asset-based revenue during 2018.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. On an ongoing basis, the Company evaluates its estimates, including those related to intangible assets and goodwill, useful lives of intangible assets and property and
F-9
equipment, internal use software, income taxes and contingent liabilities, among others. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities.
Segment Information
The Company operates as one operating segment. The Companys chief operating decision maker is its Chief Executive Officer, who reviews financial information presented on a consolidated basis for purposes of making operating decisions, assessing financial performance, and allocating resources.
Concentration of Credit Risk and Significant Clients and Suppliers
The Companys financial instruments that are exposed to concentration of credit risk consist primarily of cash and cash equivalents and accounts receivable. The Company deposits its cash primarily with one financial institution, and accordingly, such deposits regularly exceed federally insured limits.
Geographic Information
All of the Companys revenue was generated in the United States.
All of the Companys property and equipment was located in the United States.
No single customer accounted for more than 10% of the Companys revenue in any of the periods presented. There were two customers that represented 43% and 51% of the Companys accounts receivable balance as of December 31, 2018 and 2017, respectively.
Cash, Cash Equivalents, and Restricted Cash
Certificates of deposit, money market funds and other time deposits with original maturities of three months or less are considered cash equivalents.
Restricted cash consists of certificate of deposits the Company maintains in liquid capital in accordance to Arizona Revised Statutes requirements governing trust companies. See note 13 for details regarding capital requirements.
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same such amounts shown in the consolidated statements of cash flows:
December 31,
2018 |
December 31,
2017 |
|||||||
Cash and cash equivalents |
$ | 105,354 | $ | 50,147 | ||||
Restricted cash |
7,000 | 7,000 | ||||||
|
|
|||||||
Total cash, cash equivalents and restricted cash shown in the statements of cash flows |
$ | 112,354 | $ | 57,147 | ||||
|
Investment Securities
The Companys investments comprise equity investment and alternative investment securities funds. The Company determined the appropriate classification of its investment securities at the time of
F-10
purchase and reevaluates such designation at each balance sheet date. The Company has classified and accounted for its investments as available for sale securities as the Company may sell these securities at any time for use in its current operations or for other purposes, even prior to maturity. Available-for-sale investment securities are recorded at fair value. Unrealized holding gains and losses, net of the related tax effect, are reported as a separate component of accumulated other comprehensive income until realized. Realized gains and losses from the sales are determined on a specific-identification basis. Dividend and interest income are recognized when earned.
Fees and Other Receivables and Allowances
Fee and other receivables represent service fees and advisory fees receivable, as well as custody fees in arrears. Fee and other receivables are recorded at the invoiced amount, net of allowances. These allowances are based on historical experience and evaluation of potential risk of loss associated with delinquent accounts. There were $85 and $0 allowance for doubtful accounts recorded as of December 31, 2018 and 2017.
Fair Value Measurements
The carrying amounts of the Companys financial instruments, which include cash and cash equivalents, restricted cash, accounts receivable, accounts payable, and other accrued expense, approximate their fair values due to their relatively short maturity, and in the case of leases, market interest rates.
The accounting guidance for fair value measurements establishes a three-tier hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value as follows:
|
Level 1 Observable inputs that reflect quoted prices for identical assets or liabilities in active markets. |
|
Level 2 Inputs that are directly or indirectly observable in the marketplace. |
|
Level 3 unobservable inputs that are supported by little or no market activity. |
As of each reporting period, all assets recorded at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company has marketable exchange-traded funds and equity securities that were carried at fair value of $338 and $38 as of December 31, 2018 and 2017, respectively, and these investments were classified as Level 1. The Company does not have any assets or liabilities that utilize Level 2 or Level 3 (unobservable) inputs.
Business Combinations
When the Company acquires a business, management allocates the purchase price to the net tangible and identifiable intangible assets acquired. Any residual purchase price is recorded as goodwill. The allocation of the purchase price requires management to make significant estimates in determining the fair values of assets acquired and liabilities assumed, especially with respect to intangible assets. These estimates can include, but are not limited to, the cash flows that an asset is expected to generate in the future, the appropriate weighted average cost of capital, and the cost savings expected to be derived from acquiring an asset. These estimates are inherently uncertain and unpredictable.
F-11
Goodwill, Acquired Intangible Assets and Impairment of Long-Lived Assets
Goodwill represents the excess purchase consideration of an acquired business over the fair value of the net tangible and identifiable intangible assets. Goodwill is evaluated for impairment annually on October 31, and whenever events or changes in circumstances indicate the carrying value of goodwill may not be recoverable. Triggering events that may indicate impairment include, but are not limited to, a significant adverse change in customer demand or business climate or a significant decrease in expected cash flows. An impairment loss is recognized to the extent that the carrying amount exceeds the reporting units fair value. The Company has the option to first assess qualitative factors to determine whether events or circumstances indicate that it is more likely than not that the fair value of a reporting unit is less than its carrying amount and determine whether further action is needed. If after assessing the totality of events or circumstances, the Company determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test is unnecessary. No impairment charges were recorded during the years ended December 31, 2018 and 2017. See note 3 for additional information related to goodwill.
AssetMarks broad array of wealth management solutions are sold to individual investors through financial advisers associated with broker-dealers. The Company has long-standing, established relationships with these broker-dealers that are expected to result in future revenue and profit. While the relationships with the broker-dealers are contractual and may be terminated pursuant to the terms of the relevant agreements, the agreements have no fixed expiration dates or renewal terms, and there have been no instances of terminated agreements by either side to date. Based on the foregoing, the acquired relationships with broker-dealers are identified and valued as a discrete indefinite-lived intangible asset. Indefinite-lived intangible assets are tested for impairment annually. An impairment exists if the carrying value of the indefinite-lived intangible asset exceeds its fair value.
Acquired definite-lived intangible assets consist of trade names, the AssetMark broker-dealer license, and the AssetMark Trust regulatory status, resulting from the Companys acquisitions. Acquired definite-lived intangible assets are recorded at fair value on the date of acquisition and amortized over their estimated useful lives on a straight-line basis.
The carrying amounts of long-lived assets, including property and equipment, capitalized internal-use software, and acquired definite-lived intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of these assets may not be recoverable or that the useful life is shorter than originally estimated. Recoverability of assets to be held and used is measured by comparing the carrying amount of an asset to the future undiscounted cash flows that the assets or the asset group are expected to generate. If the carrying value of the assets are not recoverable, the impairment recognized is measured as the amount by which the carrying value exceeds its fair value. There were no events or changes in circumstances identified that indicated that the carrying amount of the long-lived assets were not recoverable during the years ended December 31, 2018 and 2017.
See note 3 for additional information related to intangible assets.
Property and Equipment
Property and equipment consist primarily of hardware, furniture and equipment and leasehold improvements. Depreciation is calculated on a straight-line basis over the estimated useful lives of the related asset, generally three to ten years. Leasehold improvements are depreciated over the shorter of the economic useful life of the improvement or the remaining lease term. Depreciation expense for the years ended December 31, 2018 and 2017 was $2,063 and $1,513, respectively.
F-12
The following table shows balances of major classes of depreciable assets as of the date shown:
December 31,
2018 |
December 31,
2017 |
|||||||
Computer software and equipment |
$ | 5,271 | $ | 4,202 | ||||
Furniture and equipment |
2,603 | 2,043 | ||||||
Leasehold improvements |
2,983 | 2,577 | ||||||
|
|
|||||||
Total property and equipment |
10,857 | 8,822 | ||||||
Less: accumulated depreciation |
(3,817 | ) | (1,754 | ) | ||||
|
|
|||||||
Property and equipment, net |
$ | 7,040 | $ | 7,068 | ||||
|
Capitalized InternalUse Software
The Company capitalizes certain costs incurred during the application development stage in connection with software development for its platform. Costs related to the preliminary project activities and post-implementation activities are expensed as incurred. Capitalized costs are recorded as part of intangible assets. Maintenance and training costs are expensed as incurred.
Capitalized internal-use software costs are amortized on a straight-line basis over the software estimated useful life, which is generally five years. The Company records amortization related to capitalized internal-use software within depreciation and amortization expense in the consolidated statements of income and comprehensive income. The Company evaluates the useful lives of these assets on an annual basis and tests for impairment whenever events or changes in circumstances occur that could impact the recoverability of these assets. There were no impairments of internally developed software during the years ended December 31, 2018 and 2017.
Amortization expense for the years ended December 31, 2018 and 2017 was $19,935 and $17,434, respectively.
Revenue Recognition
On January 1, 2018, the Company adopted ASC Topic 606, Revenue from Contracts with Customers, using the full retrospective transition method. As such, results for reporting periods prior to January 1, 2018 are presented under Topic 606.
The Company recognizes revenue from services related to asset-based revenue, spread-based revenue and other revenue.
|
Asset-based revenueThe Company primarily derives revenue from fees assessed against customers assets under management or administration for services the Company provides to its customers. Such services include investment manager due diligence and research, portfolio diagnostics, proposal generation, investment model management, rebalancing and trading, portfolio performance reporting and monitoring solutions, billing, and back office and middle-office operations and custody services. Investment decisions for assets under management or administration are made by the Companys customers. The fee arrangements are based on a percentage applied to the customers assets under management or administration. The performance obligation is satisfied over time because the customer is receiving and consuming the benefits as they are provided by the Company. Fees are received monthly and quarterly, and are recognized as revenue at the time the services are provided in the period. Fees related to assets |
F-13
under management or administration increase or decrease based on values of existing customer accounts. The values are affected by inflows or outflows of customer funds and market fluctuations. As part of the services the Company provides, the Company collects all fees from end-investors on behalf of both itself and third-party advisers who have separate contractual services and fees included within the transaction price paid by the end-investors. The Company does not record any revenue or expense for providing this service. Asset-based fees relate to revenue for services provided to end-investors by the Company, and the net fees collected and remitted on behalf of third-party advisers are recorded as a liability in the Accrued expenses and other current liabilities line item in the Companys consolidated financial statements, as the Company is acting as an agent with regard to fees collected on behalf of third-party advisers. |
|
Spread-based revenueSpread-based revenue consists of the interest rate return earned on cash assets custodied through AssetMark Trust, one of several custodians offered on the Companys platform. AssetMark Trust utilizes third-party banks to invest customer cash and uses the proceeds from those investments to credit customer accounts and earn spread income for the Company. |
|
Other revenueOther revenue consists primarily of interest earned on operating cash held by the Company. |
Asset-Based Expenses
Asset-based expenses are costs incurred by the Company directly related to the generation of asset-based revenue. Fees paid to third-party strategists, investment managers, proprietary fund sub-advisers, investment advisers and third-party custodians are calculated based on a percentage of the customers assets under management or administration. As a practical expedient, these costs are paid monthly and quarterly, and expensed as incurred over the period of time that the services are expected to be provided to customers, since the amortization of costs are in one year or less. See note 6 for a breakout of these costs.
Spread-Based Expenses
The Company recognizes spread-based expenses when costs are incurred. Spread-based expenses relate to expenses paid to AssetMark Trusts third-party administrator for administering the custodians insured cash deposit program.
Share-Based Compensation
Share-based compensation issued to certain employees of the Company under the terms of the Amended & Restated Limited Liability Company Agreement of AssetMark Holdings LLC (the LLC Agreement) is measured based on the grant date fair value of the award and recognized as an expense over the requisite service and performance period for the Class C common units.
The Companys use of a Monte Carlo simulation to estimate the fair value of the Class C common units requires the input of various estimates and assumptions. The assumptions and estimates are as follows:
|
Fair value The fair value of the shares underlying the Class C common units had been established by the Company based in part upon a valuation provided by a third-party valuation firm. |
|
Risk free rate The Company uses the U.S. Treasury yield that corresponds with the expected term. |
|
Expected volatility Expected volatility is a measure of the amount by which the stock price is expected to fluctuate. Since the Company does not have sufficient trading history of its common |
F-14
stock, it estimates the expected volatility of its stock options at their grant date by taking the weighted-average historical volatility of a group of comparable publicly traded companies over a period equal to the expected life of options. |
|
Dividend yield The Company utilizes a dividend yield of zero, given no expectations of or actual dividends to date on the Class C common units. |
|
Discount for lack of marketabilityThe discount in value for lack of marketability was estimated using generally accepted valuation practices provided by a third-party valuation firm. |
The Company accounts for forfeitures as they occur.
Income Taxes
The Company uses the asset-and-liability method of accounting for income taxes. Under this method, the Company recognizes deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial reporting and tax basis of assets and liabilities, as well as for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates that are expected to apply to taxable income for the years in which those tax assets and liabilities are expected to be realized or settled.
The Company records a valuation allowance to reduce its deferred tax assets to the net amount that the Company believes is more likely than not to be realized. In assessing the need for a valuation allowance, the Company has considered its historical levels of income, existence of available offsetting deferred tax liabilities, expectations of future taxable income and ongoing tax planning strategies.
The Company recognizes and measure tax benefits from uncertain tax positions using a two-step approach.
The first step is to evaluate the tax position taken or expected to be taken by determining if the weight of available evidence indicates that it is more likely than not that the tax position will be sustained in an audit, including resolution of any related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement. Significant judgment is required to evaluate uncertain tax positions.
Although the Company believes that it has adequately reserved for its uncertain tax positions, it can provide no assurance that the final tax outcome of these matters will not be materially different. The Company evaluates its uncertain tax position on a regular basis and evaluations are based on a number of factors, including changes in facts and circumstances, changes in tax law, correspondence with tax authorities during the course of an audit and effective settlement of issues.
Recent Accounting PronouncementsCurrent Adoptions
In November 2016, the FASB issued ASU 2016-18, Restricted Cash, which requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents and amounts generally described as restricted cash and restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. ASU 2016-18 is effective for the Company for annual periods beginning after December 15, 2017. The Company adopted the ASU as of January 1, 2018 using a retrospective transition method.
F-15
In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting , which simplifies several aspects of the accounting for employee share-based payment transactions. ASU 2016-09 requires all companies to (1) recognize excess tax benefits and tax deficiencies in the income statement (i.e., the standard eliminates the APIC pool) and to (2) present excess tax benefits as an operating activity in the statement of cash flows. The standard also allows all companies to (1) elect whether to use an estimated forfeiture rate or to recognize forfeitures as they occur and (2) withhold up to the maximum individual statutory tax rate without classifying the awards as a liability. Nonpublic companies can elect to (1) use a practical expedient to determine the expected term of certain share-based payment awards and (2) change the measurement basis for all liability-classified awards to intrinsic value on adoption. ASU 2016-09 is effective for the Company for annual periods in fiscal years beginning after December 15, 2017. Companies must adopt all amendments at the same time and follow the transition methods as outlined in the standard. The Company adopted the ASU as of January 1, 2018 and the ASU did not have a significant impact on the Companys consolidated financial statements and related disclosures.
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers , which requires a company to recognize revenue when the company transfers control of promised goods and services to the customer. Revenue is recognized in an amount that reflects the consideration a company expects to receive in exchange for those goods or services. A company also is required to disclose sufficient quantitative and qualitative information to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The FASB also has issued several amendments to the standard, which are intended to promote a more consistent interpretation and application of the principles outlined in the standard.
Companies are permitted to adopt the standard using a retrospective transition method (i.e., restate all prior periods presented) or a cumulative effect method (i.e., recognize the cumulative effect of initially applying the guidance at the date of initial application with no restatement of prior periods). However, both methods allow companies to elect certain practical expedients on transition that will help to simplify how a company restates its contracts. The Company has evaluated its recognition of revenue as principal or agent. Beginning on January 1, 2018, the Company recognized certain service fee revenue on a net basis related to contracts with investment advisers in which the Company is the agent and the delivery of advisory services is controlled by the investment advisers. There is no effect to retained earnings from adopting this ASU on January 1, 2018. There was a decrease of $173,422 to both asset-based revenue and asset-based expenses for the year ended December 31, 2017.
Recent Accounting PronouncementsIssued but Not Effective
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) , which requires lessees to recognize leases on-balance sheet and disclose key information about leasing arrangements. The new standard establishes a right of use (ROU) model that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months. Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement. The new standard is effective for the Company on January 1, 2020, with early adoption permitted. The Company is currently evaluating the effect that ASU 2016-02 will have on its consolidated financial statements.
In August 2016, the FASB issued ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments , which clarifies how to classify certain types of cash payments and receipts on the
F-16
statement of cash flows. The following amendments in ASU 2016-15 are or may be relevant to the Company: (1) debt prepayment or extinguishment costs should be classified as financing cash outflows; (2) cash consideration payments made soon after an acquisitions consummation date (approximately three months or less) should be classified as cash outflows for investing activities. Payments made thereafter should be classified as cash outflows for financing activities up to the amount of the original contingent consideration liability. Payments made in excess of the amount of the original contingent consideration liability should be classified as cash outflows for operating activities; (3) proceeds from the settlement of insurance claims should be classified on the basis of the nature of the loss (or each component loss, if an entity receives a lump-sum settlement); (4) for distributions received from equity method investments, companies may elect either a cumulative earnings approach or the nature of distribution approach to determine whether distributions received from the equity method investees are returns on investment (operating cash inflows) or returns of investment (investing cash inflows); and (5) in the absence of specific guidance, companies determine each separately identifiable cash source and classify the receipt or payment based on the nature of the cash flow. ASU 2016-15 is effective for the Company in fiscal years beginning after December 15, 2018, and requires retrospective application. Companies must adopt all amendments at the same time. The Company does not believe that this ASU will have a significant impact on the Companys consolidated financial statements and related disclosures.
In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities , which makes targeted improvements to the accounting for, and presentation and disclosure of, financial instruments. ASU 2016-01 requires that most equity investments be measured at fair value, with subsequent changes in fair value recognized in net income. ASU 2016-01 does not affect the accounting for investments that would otherwise be consolidated or accounted for under the equity method. The new standard also affects financial liabilities under the fair value option and the presentation and disclosure requirements for financial instruments. The provisions of ASU 2016-01 are effective for the Company for annual periods in fiscal years beginning after December 15, 2018. The Company will adopt the new standard on January 1, 2019, and is currently evaluating the effect that ASU 2016-01 will have on its consolidated financial statements.
In August 2018, the FASB issued ASU 2018-15, Intangibles, Goodwill and Other, Internal-Use Software (Subtopic 350-40), which provides guidance to evaluate the accounting for fees paid by a customer in a cloud computing arrangement. If a cloud computing arrangement includes a license to internal-use-software, then the software license is accounted for by the customer in accordance with Subtopic ASC 350-40. An intangible asset is recognized for the software license and a liability also recognized. The new standard is effective for the Company beginning December 15, 2020, with early adoption permitted. The Company is currently evaluating the effect that ASU 2018-15 will have on its consolidated financial statements.
(3) Goodwill and Intangible Assets
Goodwill
The Companys goodwill balance was $298,415 as of both December 31, 2018 and 2017. The Company, which has one reporting unit, performed an annual test for goodwill impairment in October of the year ended December 31, 2018 and determined that goodwill was not impaired. In addition, there have been no significant events or circumstances affecting the valuation of goodwill subsequent to the Companys annual assessment.
F-17
Intangible Assets
Information regarding the Companys intangible assets is as follows:
Gross carrying
amount |
Accumulated
amortization |
Net carrying
amount |
||||||||||
Indefinite-lived intangible assets: |
||||||||||||
Broker-dealer relationships |
$ | 570,480 | $ | | $ | 570,480 | ||||||
Definite-lived intangible assets: |
||||||||||||
Trade names |
45,830 | (4,965 | ) | 40,865 | ||||||||
Broker-dealer license |
11,550 | (1,251 | ) | 10,299 | ||||||||
AssetMark Trust regulatory status |
23,300 | (2,524 | ) | 20,776 | ||||||||
|
|
|||||||||||
December 31, 2018 |
$ | 651,160 | $ | (8,740 | ) | $ | 642,420 | |||||
|
Gross carrying
amount |
Accumulated
amortization |
Net carrying
amount |
||||||||||
Indefinite-lived intangible assets: |
||||||||||||
Broker-Dealer Relationships |
$ | 570,480 | $ | | $ | 570,480 | ||||||
Definite-lived intangible assets: |
||||||||||||
Trade Names |
45,830 | (2,673 | ) | 43,157 | ||||||||
Broker-Dealer License |
11,550 | (674 | ) | 10,876 | ||||||||
AssetMark Trust Regulatory Status |
23,300 | (1,359 | ) | 21,941 | ||||||||
|
|
|||||||||||
December 31, 2017 |
$ | 651,160 | $ | (4,706 | ) | $ | 646,454 | |||||
|
The weighted average estimated remaining useful life at December 31, 2018 was 17.8 years for trade names, broker-dealer license and AssetMark Trust regulatory status. Amortization expense for both years ended December 31, 2018 and 2017 was $4,034.
Estimated amortization expense for definite-lived intangible assets for future years is as follows:
Estimated
amortization |
||||
Year ended December 31, |
|
|||
2019 |
$ | 4,034 | ||
2020 |
4,034 | |||
2021 |
4,034 | |||
2022 |
4,034 | |||
2023 and thereafter |
55,804 | |||
|
|
|||
Total |
$ | 71,940 | ||
|
F-18
(4) Accrued Expenses and Other Current Liabilities
The following table shows the breakdown of accrued expenses and other current liabilities:
December 31,
2018 |
December 31,
2017 |
|||||||
Accrued bonus |
$ | 14,553 | $ | 14,712 | ||||
Compensation and benefits payable |
5,882 | 3,711 | ||||||
Asset-based payables |
4,041 | 4,882 | ||||||
Other accrued expenses |
13,724 | 8,651 | ||||||
|
|
|||||||
Total |
$ | 38,200 | $ | 31,956 | ||||
|
(5) Other Long-Term Liabilities
Other long-term liabilities consisted of the following:
December 31,
2018 |
December 31,
2017 |
|||||||
Contractor liability |
$ | 3,825 | $ | 5,022 | ||||
Deferred rent |
1,272 | 1,202 | ||||||
Earn-out liability |
| 8,000 | ||||||
|
|
|||||||
Total |
$ | 5,097 | $ | 14,224 | ||||
|
(6) Asset-Based Expenses
Asset-based expenses incurred by the Company relating to the generation of asset-based revenue are:
Year ended
December 31, 2018 |
Year ended
December 31, 2017 |
|||||||
Strategist and manager fees |
$ | 93,385 | $ | 77,013 | ||||
Premier broker-dealer fees |
8,107 | 6,084 | ||||||
Custody fees |
6,208 | 7,106 | ||||||
Fund advisory fees |
5,701 | 4,969 | ||||||
Marketing allowance |
2,573 | 2,066 | ||||||
External managers |
788 | 1,151 | ||||||
Other |
1 | 12 | ||||||
|
|
|||||||
Total asset-based expenses |
$ | 116,763 | $ | 98,401 | ||||
|
(7) Debt
On November 14, 2018, the Company executed a Credit Agreement with Credit Suisse for a $250,000 term loan and a revolving line of credit that permits the Company to borrow up to $20,000. Interest on amounts borrowed under the term loan and the revolving line of credit accrues at LIBOR plus 3.50% and is paid quarterly. Payments of principal on the outstanding amounts borrowed under the term loan of 0.25% are due quarterly with a maturity date of November 14, 2025. Outstanding amounts borrowed under the revolving line of credit have a maturity date of November 14, 2023. There was no amount borrowed under the revolving line of credit as of December 31, 2018.
F-19
(8) Income Taxes
The income tax provision (benefit) was as follows:
Year ended
December 31, 2018 |
Year ended
December 31, 2017 |
|||||||
Current provision |
||||||||
Federal |
$ | 12,921 | $ | 7,902 | ||||
State |
2,480 | 1,151 | ||||||
|
|
|||||||
Subtotal |
15,401 | 9,053 | ||||||
|
|
|||||||
Deferred provision (benefit) |
||||||||
Federal |
(1,846 | ) | (88,913 | ) | ||||
State |
3,582 | 225 | ||||||
|
|
|||||||
Subtotal |
1,736 | (88,688 | ) | |||||
|
|
|||||||
Total income tax expense (benefit) |
$ | 17,137 | $ | (79,635 | ) | |||
|
Income taxes paid were $19,497 and $4,773 for the years ended December 31, 2018 and 2017, respectively.
The reconciliation of the federal statutory tax rate to the effective income tax rate was as follows:
Year ended
December 31, 2018 |
Year ended
December 31, 2017 |
|||||||
Statutory U.S. federal income tax rate: |
21.00% | 35.00% | ||||||
Increase in rate resulting from: |
||||||||
Non-deductible meals & entertainment |
0.44% | 1.01% | ||||||
Equity compensation |
2.53% | 12.52% | ||||||
State income tax, net of federal income tax effect |
8.51% | 4.50% | ||||||
Federal deferred re-measurement due to change in federal tax rate |
0.00% | -465.57% | ||||||
Valuation allowance change |
| | ||||||
Research & development tax credit |
-1.48% | 0.00% | ||||||
Other, net |
0.41% | 0.84% | ||||||
|
|
|||||||
Effective rate |
31.41% | -411.70% | ||||||
|
The Tax Cuts and Jobs Act of 2017 (the Tax Act) was signed into law on December 22, 2017. Under the Tax Act, the corporate income tax rate is reduced from a maximum marginal rate of 35% to a flat 21% rate. Under ASC Topic 740, Income Taxes , total effect of tax rate changes on deferred tax balances is recorded as a component of the income tax provision related to continuing operations for the period in which the law is enacted, even if the assets and liabilities relate to other components of the financial statements, such as discontinued operations, a prior period business combination, or items of accumulated other comprehensive income. As a result, the Companys deferred tax assets and liabilities were revalued using the enacted tax rate of 21% and the total tax effect on deferred tax balances was a tax benefit of $(90,055) during the year ended December 31, 2017. The Tax Act includes other provisions with effective dates for the Company beginning January 1, 2018 and beyond. The Company accounted for these provisions with changes to business-related income, exclusions, deductions and/or credits based on currently available information that is subject to interpretation and continues to evolve. Accounting for these items may be impacted by a number of
F-20
additional considerations, including but not limited to the state-level income tax impacts of the Tax Act, clarifications of or changes to the Tax Act (including the issuance of final regulations) and additional guidance issued by the Securities and Exchange Commission or the Financial Accounting Standards Board.
The components of the net deferred income tax liability were as follows:
December 31, 2018 | December 31, 2017 | |||||||
Assets: |
||||||||
Accrued expenses |
$ | 6,156 | $ | 6,131 | ||||
Federal benefit of state tax expense |
4,094 | 3,098 | ||||||
State net operating loss carrryforwards |
14,231 | 15,822 | ||||||
Tax credit carryforwards |
961 | | ||||||
Earn-out liability |
2,117 | 4,160 | ||||||
Other |
884 | 1,366 | ||||||
|
|
|||||||
Gross deferred income tax assets |
28,443 | 30,577 | ||||||
Valuation allowance |
| | ||||||
|
|
|||||||
Total deferred income tax assets |
$ | 28,443 | $ | 30,577 | ||||
|
|
|||||||
Liability: |
||||||||
Other intangible assets |
159,095 | 158,855 | ||||||
Property and equipment, and capitalized software |
20,237 | 20,815 | ||||||
Other |
226 | 24 | ||||||
|
|
|||||||
Total deferred income tax liabilities |
179,558 | 179,694 | ||||||
|
|
|||||||
Net deferred income tax liability |
$ | 151,115 | $ | 149,117 | ||||
|
In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the period in which those temporary differences become deductible. The Company considers projected future taxable income and tax planning strategies in making this assessment. During 2018 and 2017, the Company evaluated realizability of its net deferred tax assets based on available positive and negative evidence. The Company concluded that it is more likely than not that all of the benefits of the deferred tax assets will be realized. As a result, the Company has not established a valuation allowance.
The Companys state net operating loss carryforwards amounted to $279,444 and $297,661 as of December 31, 2018 and 2017, respectively. It is expected that the utilization limitations of Internal Revenue Code Section 382 will cause $113,873 of the Companys state net operating loss carryforwards to expire unused, and these amounts are not included in the Companys gross deferred income tax asset. If unused, the Companys state net operating loss carryforwards will expire beginning in 2027. The Company had state tax credit carryforwards of $831 as of December 31, 2018, which do not expire and can be carried forward indefinitely.
The Company had unrecognized tax benefits of $530 as of December 31, 2018 solely related to research and development tax credits. The total amount of unrecognized tax benefits that, if recognized, would affect the Companys effective tax rate was $495 as of December 31, 2018.
F-21
The consolidated statements of operations for the years ended December 31, 2018 and December 31, 2017 include no amounts for interest or penalties related to unrecognized tax benefits, and no such amounts were recognized as components of income tax expense.
The Company files U.S. Federal income tax returns and various state and local tax returns. The Company is no longer subject to U.S. Federal or state tax examinations for years through 2013.
(9) Stockholders Equity
The holder of common stock is entitled to one vote per share, and to receive dividends and, upon liquidation or dissolution, is entitled to receive all assets available for distribution to such holder. The holder has no preemptive or other subscription rights and there are no redemption or sinking fund provisions with respect to such shares. As of both December 31, 2018 and 2017, AssetMark Holdings owned 100 shares of common stock.
The following information represents the equity information of AssetMark Holdings and does not impact the outstanding common shares of the Company. Such information is presented because the Company recognizes share-based compensation expense related to the Class C common units described below pursuant to the service member unit issuance agreements between employees of the Company and AssetMark Holdings.
Under the terms of the Amended & Restated Limited Liability Company Agreement of AssetMark Holdings LLC (the LLC Agreement), approved by all AssetMark Holdings common members in October 2016, three common unit classes were authorized and issued as follows:
|
Class A and B common units have equal rights and voting privileges |
|
Class C common units are non-voting units that were issued to AssetMark directors and employees as part of a share-based employee compensation arrangement. (see note 10) |
F-22
|
The table below shows by unit class the number of units outstanding and the related capital contribution as of December 31, 2018 and 2017. Service members are directors and employees of the Company. |
Huatai
International Investment Holdings Ltd. |
Service Members | Total | ||||||||||
Class A common units |
||||||||||||
Capital contribution |
$ | | $ | 4,069 | $ | 4,069 | ||||||
Common units |
| 40,693 | 40,693 | |||||||||
Class B common units |
||||||||||||
Capital contribution |
$ | 768,419 | $ | 6,980 | $ | 775,399 | ||||||
Common units |
7,684,191 | 69,993 | 7,754,184 | |||||||||
Class C common units |
||||||||||||
Capital contribution |
$ | | $ | 14,540 | $ | 14,540 | ||||||
Common units |
| 8,817 | 8,817 | |||||||||
|
|
|||||||||||
Total capital contribution |
$ | 794,008 | ||||||||||
(less capital contributions held at parent) |
(158,846 | ) | ||||||||||
|
|
|||||||||||
Total Paid-In Capital for Company at December 31, 2018 |
$ | 635,162 | ||||||||||
|
|
|||||||||||
Class A common units |
||||||||||||
Capital contribution |
$ | | $ | 4,069 | $ | 4,069 | ||||||
Common units |
| 40,693 | 40,693 | |||||||||
Class B common units |
||||||||||||
Capital contribution |
$ | 768,419 | $ | 7,110 | $ | 775,529 | ||||||
Common units |
7,684,191 | 71,093 | 7,755,284 | |||||||||
Class C common units |
||||||||||||
Capital contribution |
$ | | $ | 7,972 | $ | 7,972 | ||||||
Common units |
8,550 | 8,550 | ||||||||||
|
|
|||||||||||
Total capital contribution |
$ | 787,570 | ||||||||||
(less capital contributions held at parent) |
(3,040 | ) | ||||||||||
|
|
|||||||||||
Total Paid-In Capital for Company at December 31, 2017 |
$ | 784,530 | ||||||||||
|
(10) Share-Based Employee Compensation
AssetMark Holdings granted share-based compensation in the form of Class C common units (or incentive units) to certain directors and employees of the Company pursuant to the terms of the LLC Agreement.
The incentive units have both service and performance vesting provisions. The incentive units are divided into two tranches: one tranche consists of time vesting units with a service condition while the other tranche consists of performance vesting units with both service and market conditions. The fair value of both time vesting units and performance vesting units is measured on grant date and remeasured to fair value at the end of each reporting period. Compensation cost for the time vesting units and performance vesting units is recognized on a straight-line basis over a 5-year requisite
F-23
service period for 50% of the units and over an 8-year requisite service period for the remaining 50% of the units. An implied service period of 8 years is inferred from the performance condition of the performance vesting units because the performance conditions may be met at multiple dates (i.e. following the 4 th , 5 th , 6 th , 7 th and 8 th anniversaries of the issuance date). The requisite service period is based on the longer of the derived service period, implicit or explicit service periods.
The Company recorded share-based compensation expense of $6,568 and $6,920 for the years ended December 31, 2018 and 2017, respectively. These amounts were included in employee compensation in the accompanying consolidated statements of income and comprehensive income.
For purposes of determining the fair value of the share-based payment awards on the date of the grant and at the end of each reporting period, the Company used a Monte Carlo simulation to evaluate a number of possible outcomes. While the Class C common units have no expiration date, the Company forecasted the possible value of the common units 8 years in the future. Management will periodically evaluate the assumption and methodologies used to calculate the fair value of the share-based compensation. Circumstances may change and additional data may become available over time, which could result in changes to these assumptions and methodologies.
2018 | 2017 | |||||||
Valuation assumptions: |
||||||||
Risk free rate |
2.49% | 2.32% | ||||||
Expected volatility |
35.0% | 37.2% | ||||||
Dividend yield |
0% | 0% | ||||||
Discount for lack of marketability |
15.2% | 18.4% | ||||||
|
Incentive unit activity during the years ended December 31, 2018 and 2017 is as follows:
Number of units |
Weighted
average remaining contractual term |
|||||||
Balance at December 31, 2016 |
8,075.04 | 7.80 | ||||||
Granted |
623.35 | 7.37 | ||||||
Forfeited |
(148.26 | ) | 6.83 | |||||
|
|
|||||||
Balance at December 31, 2017 |
8,550.13 | 6.87 | ||||||
|
|
|||||||
Granted |
283.37 | 7.47 | ||||||
Forfeited |
(16.67 | ) | 7.58 | |||||
|
|
|||||||
Balance at December 31, 2018 |
8,816.83 | 5.93 | ||||||
|
There was $29,051 and $37,199 of total unrecognized compensation cost related to unvested incentive units granted under the plan as of December 31, 2018 and 2017, respectively. These costs are expected to be recognized over a weighted average period of 5.93 and 6.87 years as of December 31, 2018 and 2017, respectively. The total fair value of incentive units vested was zero during both the years ended December 31, 2018 and 2017.
(11) Employee Benefit Plan
The Company has a tax-qualified defined contribution plan (the Plan). All full-time and part-time employees are eligible to participate in the Plan upon hire. The Plan provides retirement benefits,
F-24
including provisions for early retirement and disability benefits, as well as a tax-deferred savings feature. Participants must attain two years of service to reach full vesting on Company matching contributions. The Company contributed $3,334 and $2,985 to the Plan for the years ended December 31, 2018 and 2017, respectively.
(12) Commitments and Contingencies
Litigation
The Company faces the risk of litigation and regulatory investigations and actions in the ordinary course of operating its business, including the risk of class action lawsuits. The Companys pending legal and regulatory actions include proceedings specific to the Company and others generally applicable to business practices in the industries in which the Company operates. Plaintiffs in class action and other lawsuits against the Company may seek very large or indeterminate amounts which may remain unknown for substantial periods of time. The Company is also subject to litigation arising out of its general business activities such as the Companys contractual and employment relationships. In addition, the Company is also subject to various regulatory inquiries, such as information requests, subpoenas, books and record examinations and market conduct and financial examinations from state, federal and other authorities. A substantial legal liability or a significant regulatory action against the Company could have an adverse effect on its business, financial condition and results of operations. Moreover, even if the Company ultimately prevails in the litigation, regulatory action or investigation, the Company could suffer significant reputational harm, which could have an adverse effect on the Companys business, financial condition or results of operations.
The Company has accrued a loss contingency of $2,000 related to a legal dispute with a vendor and this amount is included in accounts payable and accrued expenses in the accompanying consolidated balance sheet as of December 31, 2017. The case was settled and $2,000 was paid in 2018.
The Company is subject to various other legal proceedings. In the opinion of management, after discussions with legal counsel, the ultimate resolution of these matters is not likely to have a material effect on the consolidated financial condition, results of operations or cash flows of the Company.
Operating Lease Obligations
The Company has various lease obligations for field offices throughout the United States. These obligations are part of a normal business function. As of December 31, 2018, aggregate minimum future rental commitments under these leases are as follows:
Cash obligations | ||||
Year ended December 31, |
|
|||
2019 |
$ | 3,431 | ||
2020 |
3,539 | |||
2021 |
3,679 | |||
2022 |
3,168 | |||
2023 and thereafter |
2,650 | |||
|
|
|||
Total |
$ | 16,467 | ||
|
F-25
Total rental expense of $3,126 and $2,858 under operating leases were charged to operations for the years ended December 31, 2018 and 2017, respectively, and was included in general and operating expenses in the consolidated statements of income and comprehensive income.
(13) Net Capital and Minimum Capital Requirements
AssetMark Trust, regulated by the Arizona Department of Financial Institutions (ADFI) is required by state regulation 6-856 to maintain $5,750 and $5,250 in liquid capital (as defined by the ADFI) based on asset levels as of December 31, 2018 and 2017, respectively.
AssetMark Brokerage, LLC, regulated by the Securities and Exchange Commission (the SEC) is required to maintain $18 and $5 in net capital (as defined by the SEC) as of December 31, 2018 and 2017, respectively.
As of December 31, 2018 and 2017, these entities have met the liquid capital requirements set forth by their respective regulatory authority.
(14) Related Party Transactions
As of December 31, 2017, the Company maintains a liability payable to AssetMark Holdings of $3,040, which represents the cash collected as part of a Regulation D offering by AssetMark Holdings of Class B common units to employees. The amount was settled in 2018 through an investment of $2,910 in the Company by AssetMark Holdings.
In December 2018, the Company paid cash dividends and return of capital to AssetMark Holdings totaling $233,846.
Additionally, due to the outstanding Class C common units being accounted for as a liability-classified award, AssetMark Holdings maintains an investment in the Company and an offsetting share-based compensation liability of $14,014 and $7,444 as of December 31, 2018 and 2017, respectively, which represents the estimated value of the share-based employee compensation. The Company recorded these amounts as expense and an increase to paid-in capital.
See note 10 for more detail on the share-based employee compensation.
(15) Subsequent Events
On August 11, 2018, the Company entered into a unit purchase agreement to acquire Global Financial Private Capital for $55,000, subject to a purchase price adjustment based on a client attrition calculation and closing conditions that include the approval from the Committee on Foreign Investment in the United States (CFIUS). The closing conditions have not been met and the closing has not occurred as of March 11, 2019.
F-26
AssetMark Financial Holdings, Inc.
Unaudited Condensed Consolidated Balance Sheets
(in thousands except share data and par value) |
March 31,
2019 |
December 31,
2018 |
||||||
Assets |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 102,478 | $ | 105,354 | ||||
Restricted cash |
7,000 | 7,000 | ||||||
Available-for-sale investments, at fair value |
657 | 333 | ||||||
Fees and other receivables |
12,515 | 8,760 | ||||||
Federal income tax receivable |
| 586 | ||||||
State income tax receivable |
| 332 | ||||||
Other current assets |
5,206 | 4,391 | ||||||
|
|
|||||||
Total current assets |
127,856 | 126,756 | ||||||
Property and equipment, net of accumulated depreciation of $4,287 and $3,817, respectively |
6,663 | 7,040 | ||||||
Capitalized software, net of accumulated amortization of $45,608 and $40,191, respectively |
71,846 | 72,644 | ||||||
Intangible assets, net of accumulated amortization of $9,749 and $8,740, respectively |
641,411 | 642,420 | ||||||
Goodwill |
298,415 | 298,415 | ||||||
|
|
|||||||
Total assets |
$ | 1,146,191 | $ | 1,147,275 | ||||
|
|
|||||||
Liabilities and stockholders equity |
||||||||
Current liabilities: |
||||||||
Accounts payable |
$ | 22 | $ | 730 | ||||
Accrued expenses and other current liabilities |
28,519 | 38,200 | ||||||
Federal income tax payable |
1,884 | | ||||||
State income tax payable |
257 | | ||||||
Current portion of long-term debt |
2,311 | 2,305 | ||||||
Current portion of acquisition earn-out |
8,000 | 8,000 | ||||||
|
|
|||||||
Total current liabilities |
40,993 | 49,235 | ||||||
Long-term debt |
242,358 | 242,817 | ||||||
Other long-term liabilities |
4,793 | 5,097 | ||||||
Deferred income tax liabilities, net |
150,983 | 151,115 | ||||||
|
|
|||||||
Total long-term liabilities |
398,134 | 399,029 | ||||||
Total liabilities |
439,127 | 448,264 | ||||||
|
|
|||||||
Commitments and contingencies |
||||||||
Stockholders equity: |
||||||||
Common stock $0.01 par value (1,000 shares authorized, and 100 shares issued) |
| | ||||||
Additional paid-in capital |
640,388 | 635,162 | ||||||
Retained earnings |
66,657 | 63,846 | ||||||
Accumulated other comprehensive income, net of tax |
19 | 3 | ||||||
|
|
|||||||
Total stockholders equity |
707,064 | 699,011 | ||||||
|
|
|||||||
Total liabilities and stockholders equity |
$ | 1,146,191 | $ | 1,147,275 | ||||
|
See accompanying notes to the unaudited condensed consolidated financial statements.
F-27
AssetMark Financial Holdings, Inc.
Unaudited Condensed Consolidated Statements of Comprehensive Income
For the three months ended March 31, | ||||||||
(in thousands) | 2019 | 2018 | ||||||
Revenue |
||||||||
Asset-based revenue |
$ | 83,063 | $ | 79,076 | ||||
Spread-based revenue |
7,549 | 3,749 | ||||||
Other revenue |
1,702 | 1,708 | ||||||
|
|
|||||||
Total revenue |
92,314 | 84,533 | ||||||
Expenses |
||||||||
Asset-based expenses |
28,102 | 26,805 | ||||||
Spread-based expenses |
478 | 361 | ||||||
Employee compensation |
31,885 | 24,740 | ||||||
General and operating expenses |
12,292 | 10,651 | ||||||
Professional fees |
2,386 | 2,276 | ||||||
Interest |
4,024 | | ||||||
Depreciation and amortization |
6,896 | 6,037 | ||||||
|
|
|||||||
Total expenses |
86,063 | 70,870 | ||||||
Income before income taxes |
6,251 | 13,663 | ||||||
Provision for income taxes |
3,440 | 3,872 | ||||||
|
|
|||||||
Net income |
2,811 | 9,791 | ||||||
Other comprehensive income, net of tax |
||||||||
Unrealized gain (loss) on available for sale investments, net of tax |
16 | (2 | ) | |||||
|
|
|||||||
Net comprehensive income |
$ | 2,827 | $ | 9,789 | ||||
|
See accompanying notes to the unaudited condensed consolidated financial statements.
F-28
AssetMark Financial Holdings, Inc.
Unaudited Condensed Consolidated Statements of Changes in Stockholders Equity
For the three months ended March 31, 2019 and 2018
Common stock |
Additional
paid-in
|
Retained
earnings (deficit) |
Accumulated
other comprehensive income |
Total
stockholders equity |
||||||||||||||||||||
(in thousands except share
data) |
Shares | Amount | ||||||||||||||||||||||
Balance at December 31, 2017 |
100 | $ | | $ | 784,530 | $ | 101,420 | 8 | $ | 885,958 | ||||||||||||||
Net income |
| | | 9,791 | | 9,791 | ||||||||||||||||||
Other comprehensive loss |
| | | | (2 | ) | (2 | ) | ||||||||||||||||
Share-based employee compensation |
| | 1,296 | | | 1,296 | ||||||||||||||||||
|
|
|||||||||||||||||||||||
Balance at March 31, 2018 |
100 | $ | | $ | 785,826 | $ | 111,211 | $ | 6 | $ | 897,043 | |||||||||||||
|
|
|||||||||||||||||||||||
Balance at December 31, 2018 |
100 | $ | | 635,162 | 63,846 | 3 | 699,011 | |||||||||||||||||
Net income |
| | | 2,811 | | 2,811 | ||||||||||||||||||
Other comprehensive income |
| | | | 16 | 16 | ||||||||||||||||||
Share-based employee compensation |
| | 5,226 | | | 5,226 | ||||||||||||||||||
|
|
|||||||||||||||||||||||
Balance at March 31, 2019 |
100 | $ | | $ | 640,388 | $ | 66,657 | $ | 19 | $ | 707,064 | |||||||||||||
|
See accompanying notes to the unaudited condensed consolidated financial statements.
F-29
AssetMark Financial Holdings, Inc.
Unaudited Condensed Consolidated Statements of Cash Flows
For the three months ended March 31, | ||||||||
(in thousands) | 2019 | 2018 | ||||||
Cash flows from operating activities: |
||||||||
Net income |
$ | 2,811 | $ | 9,791 | ||||
Adjustment to reconcile net income to net cash provided by (used in) operating activities: |
||||||||
Depreciation and amortization |
6,896 | 6,037 | ||||||
Interest |
172 | |||||||
Deferred income taxes |
(132 | ) | (57 | ) | ||||
Shared-based compensation |
5,226 | 1,296 | ||||||
Change in certain assets and liabilities: |
||||||||
Fees and other receivables, net |
(3,755 | ) | (1,614 | ) | ||||
Payable to AssetMark Holdings LLC |
| (2 | ) | |||||
Other current assets |
(815 | ) | (87 | ) | ||||
Accounts payable, accrued expenses and other current liabilities |
(10,694 | ) | (11,198 | ) | ||||
Income tax receivable and payable |
3,060 | 4,396 | ||||||
|
|
|||||||
Net cash provided by operating activities |
2,769 | 8,562 | ||||||
Cash flows from investing activities: |
||||||||
Purchase of certificate of deposit (restricted cash) |
| | ||||||
Purchase of available for sale investments |
(308 | ) | ||||||
Purchase of property and equipment |
(93 | ) | (26 | ) | ||||
Purchase of computer software |
(4,619 | ) | (4,188 | ) | ||||
|
|
|||||||
Net cash used in investing activities |
(5,020 | ) | (4,214 | ) | ||||
Cash flows from financing activities: |
||||||||
Payments on long-term debt |
(625 | ) | | |||||
|
|
|||||||
Net cash used in financing activities |
(625 | ) | | |||||
Net change in cash, cash equivalents, and restricted cash |
(2,876 | ) | 4,348 | |||||
Cash, cash equivalents, and restricted cash at beginning of period |
112,354 | 57,147 | ||||||
|
|
|||||||
Cash, cash equivalents, and restricted cash at end of period |
$ | 109,478 | $ | 61,495 | ||||
|
|
|||||||
Supplemental cash flow information |
||||||||
Income taxes paid |
$ | | $ | 3 | ||||
|
See accompanying notes to the unaudited condensed consolidated financial statements.
F-30
AssetMark Financial Holdings, Inc.
Notes to Unaudited Interim Condensed Consolidated Financial Statements
For the three months ended March 31, 2019 and 2018
All dollar amounts presented are in thousands other than per share and per unit amounts.
(1) Organization and Nature of Business
These consolidated financial statements include AssetMark Financial Holdings, Inc. and its subsidiaries, which include AssetMark Financial, Inc., which is the parent company of AssetMark, Inc., AssetMark Trust Company, AssetMark Brokerage, LLC, and AssetMark Retirement Services, Inc. (collectively, the Company).
The Companys legal entity structure as of March 31, 2019:
The Company is a wholly owned subsidiary of AssetMark Holdings LLC (AssetMark Holdings), which was organized for the purpose of acquiring the Company effective October 31, 2016. AssetMark Holdings is 98.58% owned by affiliates of Huatai Securities (Huatai) and 1.42% owned by management. The Company was acquired from the private equity firms Aquiline Capital Partners LLC and Genstar Capital LLC.
The Company offers a broad array of wealth management solutions to individual investors through financial advisers by providing an open-architecture product platform along with tailored client advice, asset allocation options, practice management, support services and technology to the financial advisor channel.
F-31
AssetMark Trust Company (AssetMark Trust) is a licensed trust company incorporated under the laws of the State of Arizona on August 24, 1994 and regulated by the Arizona Department of Financial Institutions. AssetMark Trust provides custodial recordkeeping services primarily to investor clients of registered investment advisers (including AMI) located throughout the United States.
AssetMark Brokerage, LLC is a limited-purpose broker-dealer located in Concord, California and was incorporated under the laws of the State of Delaware on September 25, 2013. Its primary function is to distribute the mutual funds of the Company and to sponsor the FINRA licensing of those AssetMark associates who provide distribution support through promotion of the AssetMark programs and strategies that employ the Companys mutual funds.
AssetMark Retirement Services, Inc., formerly known as Aris Corporation of America, was incorporated under the laws of the State of Pennsylvania on April 30, 1974. ARS serves as the record-keeper and third-party administrator for the Aris Retirement product, which are 401(k) or 403(b) investment offerings utilized by small businesses.
(2) Summary of Significant Accounting Policies
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP) for interim financial statements and pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments, consisting of only normal recurring adjustments, considered necessary for fair presentation have been included. The unaudited interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statement and footnotes thereto included elsewhere in this registration statement for the years ended December 31, 2018 and 2017. There have been no significant changes to those policies during the three months ended March 31, 2019.
Recent Accounting Pronouncements Current Adoptions
In August 2016, the FASB issued ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments , which clarifies how to classify certain types of cash payments and receipts on the statement of cash flows. The following amendments in ASU 2016-15 are or may be relevant to the Company: (1) debt prepayment or extinguishment costs should be classified as financing cash outflows; (2) cash consideration payments made soon after an acquisitions consummation date (approximately three months or less) should be classified as cash outflows for investing activities. Payments made thereafter should be classified as cash outflows for financing activities up to the amount of the original contingent consideration liability. Payments made in excess of the amount of the original contingent consideration liability should be classified as cash outflows for operating activities; (3) proceeds from the settlement of insurance claims should be classified on the basis of the nature of the loss (or each component loss, if an entity receives a lump-sum settlement); (4) for distributions received from equity-method investments, companies may elect either a cumulative-earnings approach or the nature-of-distribution approach to determine whether distributions received from the equity method investees are returns on investment (operating cash inflows) or returns of investment (investing cash inflows); and (5) in the absence of specific guidance, companies determine each separately identifiable cash source and classify the receipt or payment based on the nature of the cash flow. ASU 2016-15 was effective for non-emerging growth companies on January 1, 2018, and required retrospective application. Companies were required to adopt all amendments at the
F-32
same time. The Company adopted this ASU on January 1, 2019, and it did not have a significant impact on the Companys consolidated financial statements and related disclosures.
Recent Accounting Pronouncements Not Yet Adopted
In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities , which makes targeted improvements to the accounting for, and presentation and disclosure of, financial instruments. ASU 2016-01 requires that most equity investments be measured at fair value, with subsequent changes in fair value recognized in net income. ASU 2016-01 does not affect the accounting for investments that would otherwise be consolidated or accounted for under the equity method. The new standard also affects financial liabilities under the fair value option and the presentation and disclosure requirements for financial instruments. The provisions of ASU 2016-01 are effective for the Company in fiscal years beginning after December 15, 2018. The Company will adopt this ASU in 2019, and does not expect it to have a significant impact on its consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) , which requires lessees to recognize leases on-balance sheet and disclose key information about leasing arrangements. The new standard establishes a right of use (ROU) model that requires a lessee to recognize an ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months. Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement. The new standard is effective for non-emerging growth companies on January 1, 2019, with early adoption permitted. The Company is currently evaluating the effect that ASU 2016-02 will have on its consolidated financial statements and plans to adopt the new standard on January 1, 2020.
In August 2018, the FASB issued ASU 2018-15, Intangibles, Goodwill and Other, Internal-Use Software (Subtopic 350-40) , which provides guidance to evaluate the accounting for fees paid by a customer in a cloud computing arrangement. If a cloud computing arrangement includes a license to internal-use-software, then the software license is accounted for by the customer in accordance with Subtopic ASC 350-40. An intangible asset is recognized for the software license and a liability is also recognized. The new standard is effective for non-emerging growth companies on January 1, 2020, with early adoption permitted. The Company is currently evaluating the effect that ASU 2018-15 will have on its consolidated financial statements and plans to adopt the new standard on January 1, 2021.
(3) Goodwill and Intangible Assets
Goodwill
The Companys goodwill balance was $298,415 as of March 31, 2019 and December 31, 2018. The Company, which has one reporting unit, performed an annual test for goodwill impairment in December of the years ended December 31, 2018 and 2017 and determined that goodwill was not impaired. There have been no significant events or circumstances affecting the valuation of goodwill subsequent to the Companys annual assessment.
F-33
Intangible Assets
Information regarding our intangible assets is as follows:
Gross carrying
amount |
Accumulated
amortization |
Net carrying
amount |
||||||||||
Indefinite-lived intangible assets: |
||||||||||||
Broker-dealer relationships |
$ | 570,480 | $ | | $ | 570,480 | ||||||
Definite-lived intangible assets: |
||||||||||||
Trade names |
45,830 | (5,538 | ) | 40,292 | ||||||||
Broker-dealer license |
11,550 | (2,815 | ) | 8,735 | ||||||||
AssetMark Trust regulatory status |
23,300 | (1,396 | ) | 21,904 | ||||||||
|
|
|||||||||||
March 31, 2019 |
$ | 651,160 | $ | (9,749 | ) | $ | 641,411 | |||||
|
Gross carrying
amount |
Accumulated
amortization |
Net carrying
amount |
||||||||||
Indefinite-lived intangible assets: |
||||||||||||
Broker-dealer relationships |
$ | 570,480 | $ | | $ | 570,480 | ||||||
Definite-lived intangible assets: |
||||||||||||
Trade names |
45,830 | (4,965 | ) | 40,865 | ||||||||
Broker-dealer license |
11,550 | (1,251 | ) | 10,299 | ||||||||
AssetMark Trust regulatory status |
23,300 | (2,524 | ) | 20,776 | ||||||||
|
|
|||||||||||
December 31, 2018 |
$ | 651,160 | $ | (8,740 | ) | $ | 642,420 | |||||
|
The weighted average estimated remaining useful life is 17.5 years for trade names, the broker-dealer license and AssetMark Trust regulatory status as of March 31, 2019. Amortization expense was $1,009 for the three months ended March 31, 2019 and 2018. The Company performed an annual test for intangible assets impairment in December of the years ended December 31, 2018 and 2017 and determined that intangible assets were not impaired. There have been no significant events or circumstances affecting the valuation of intangible assets subsequent to the Companys annual assessment.
(4) Accrued Expenses and Other Current Liabilities
The following table shows the breakdown of accrued expenses and other current liabilities:
March 31,
2019 |
December 31,
2018 |
|||||||
Compensation and benefits payable |
$ | 6,152 | $ | 5,882 | ||||
Accrued bonus |
5,955 | 14,553 | ||||||
Asset-based payables |
2,041 | 4,041 | ||||||
Other accrued expenses |
14,371 | 13,724 | ||||||
|
|
|||||||
Total |
$ | 28,519 | $ | 38,200 | ||||
|
F-34
(5) Other Long-Term Liabilities
Other long-term liabilities consisted of the following:
March 31,
2019 |
December 31,
2018 |
|||||||
Contractor liability |
$ | 3,576 | $ | 2,825 | ||||
Deferred rent |
1,217 | 1,272 | ||||||
|
|
|||||||
Total |
$ | 4,793 | $ | 5,097 | ||||
|
(6) Asset-Based Expenses
Asset-based expenses incurred by the Company relating to the generation of asset-based revenues are:
Three months
ended March 31, |
||||||||
2019 | 2018 | |||||||
Strategist and manager fees |
$ | 22,460 | $ | 21,516 | ||||
Premier broker-dealer fees |
2,092 | 1,793 | ||||||
Custody fees |
1,174 | 2,077 | ||||||
Fund advisory fees |
1,718 | 661 | ||||||
Marketing allowance |
515 | 539 | ||||||
External managers |
142 | 218 | ||||||
Other |
1 | 1 | ||||||
|
|
|||||||
Total asset-based expenses |
$ | 28,102 | $ | 26,805 | ||||
|
(7) Debt
On November 14, 2018, the Company executed a Credit Agreement with Credit Suisse AG for a $250,000 term loan and a revolving line of credit that permits the Company to borrow up to $20,000. Interest on amounts borrowed under the term loan and line of credit is incurred at a variable rate, initially LIBOR plus 3.50% or the Alternate Base Rate (as defined in the Credit Agreement) plus 2.50%, and is paid quarterly. Principal payments on the outstanding amounts borrowed under the term loan of 0.25% are due quarterly. The term loan matures on November 14, 2025 and the revolving line of credit matures on November 14, 2023. As of March 31, 2019, $249.4 million aggregate principal amount of the term loan remained outstanding and the revolving line of credit was undrawn.
(8) Commitments and Contingencies
Litigation
The Company faces the risk of litigation and regulatory investigations and actions in the ordinary course of operating its businesses, including the risk of class action lawsuits. The Companys pending legal and regulatory actions include proceedings specific to the Company and others generally applicable to business practices in the industries in which the Company operates. Plaintiffs in class action and other lawsuits against the Company may seek very large or indeterminate amounts which may remain unknown for substantial periods of time. The Company is also subject to litigation arising out of its general business activities such as its contractual and employment relationships. In addition,
F-35
the Company is subject to various regulatory inquiries, such as information requests, subpoenas, books and record examinations and market conduct and financial examinations from state, federal and other authorities. A substantial legal liability or a significant regulatory action against the Company could have an adverse effect on its business, financial condition and results of operations. Moreover, even if the Company ultimately prevails in the litigation, regulatory action or investigation, the Company could suffer significant reputational harm, which could have an adverse effect on its business, financial condition or results of operations.
(9) Related Party Transactions
Due to the outstanding Class C common units being accounted for as a liability-classified award, AssetMark Holdings maintains an investment in the Company and an offsetting share-based compensation liability of $19,766 as of March 31, 2019, which represents the estimated value of the share-based employee compensation. The Company recorded these amounts as an expense and an increase to paid-in capital.
(10) Subsequent Events
On August 11, 2018, the Company entered into a unit purchase agreement to acquire Global Financial Private Capital for $55,000, subject to a purchase price adjustment based on a client attrition calculation and closing conditions that included approval from the Committee on Foreign Investment in the United States (CFIUS). On April 16, 2019, the Company closed the acquisition and paid a final purchase price of $35,906, net of the client attrition and working capital adjustments.
Any material subsequent events have been considered for disclosure through May 30, 2019, the date on which the financial statements were made available.
F-36
Part II
Information not required in prospectus
Item 13. Other expenses of issuance and distribution
The following table sets forth all costs and expenses, other than underwriting discounts and commissions, payable by us in connection with the sale of the common stock being registered. All amounts shown are estimates except for the SEC registration fee, the FINRA filing fee and the listing fee.
Amount to
Be Paid |
||||
SEC registration fee |
$ | 12,120 | ||
FINRA filing fee |
15,500 | |||
Listing fee |
* | |||
Transfer agents fees |
* | |||
Printing and engraving expenses |
* | |||
Legal fees and expenses |
* | |||
Accounting fees and expenses |
* | |||
Blue Sky fees and expenses |
* | |||
Miscellaneous |
* | |||
|
|
|||
Total |
$ | * | ||
|
* | To be completed by amendment. |
Each of the amounts set forth above, other than the registration fee and the FINRA filing fee, is an estimate.
Item 14. Indemnification of directors and officers
Section 145 of the Delaware General Corporation Law provides that a corporation may indemnify directors and officers as well as other employees and individuals against expenses (including attorneys fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with any threatened, pending or completed actions, suits or proceedings in which such person is made a party by reason of such person being or having been a director, officer, employee or agent to the registrant. The Delaware General Corporation Law provides that Section 145 is not exclusive of other rights to which those seeking indemnification may be entitled under any bylaw, agreement, vote of stockholders or disinterested directors or otherwise. Article VIII of the registrants Certificate of Incorporation provides for indemnification by the registrant of its directors, officers and employees to the fullest extent permitted by the Delaware General Corporation Law. Immediately prior to the consummation of this offering, the registrant will have entered into indemnification agreements with each of its current directors and executive officers to provide these directors and executive officers additional contractual assurances regarding the scope of the indemnification set forth in the registrants amended and restated certificate of incorporation and amended and restated bylaws and to provide additional procedural protections. There is no pending litigation or proceeding involving a director or executive officer of the registrant for which indemnification is sought.
Section 102(b)(7) of the Delaware General Corporation Law permits a corporation to provide in its certificate of incorporation that a director of the corporation shall not be personally liable to the
II-1
corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the directors duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) for unlawful payments of dividends or unlawful stock repurchases, redemptions or other distributions or (iv) for any transaction from which the director derived an improper personal benefit. The registrants amended and restated certificate of incorporation provides for such limitation of liability.
The registrant maintains standard policies of insurance under which coverage is provided (a) to its directors and officers against loss rising from claims made by reason of breach of duty or other wrongful act, and (b) to the registrant with respect to payments which may be made by the registrant to such officers and directors pursuant to the above indemnification provision or otherwise as a matter of law.
The proposed form of underwriting agreement filed as Exhibit 1.1 to this registration statement provides for indemnification of directors and officers of the registrant by the underwriters against certain liabilities.
Item 15. Recent sales of unregistered securities
Since January 1, 2016, the registrant has sold no securities without registration under the Securities Act of 1933, as amended (the Securities Act). Since January 1, 2016, AssetMark Holdings LLC has sold the following securities without registration under the Securities Act:
Class A and B unit issuances
On November 1, 2016, a total of 8 employees of the Company who are accredited investors (as defined in Rule 501 of Regulation D under the Securities Act) purchased an aggregate of 40,692.5630 Class A Common Units and 40,692.5630 Class B Common Units in AssetMark Holdings LLC at a price of $100 per unit for an aggregate consideration of $8,138,512.61 pursuant to that certain Rollover Agreement by and between Huatai International Finance Ltd. and each such employee.
On December 15, 2016, AssetMark Holdings LLC sold to a total of 33 employees of the Company who are accredited investors (as defined in Rule 501 of Regulation D under the Securities Act) an aggregate of 28,150 Class B Common Units in AssetMark Holdings LLC at a price of $100 per unit for an aggregate consideration of $2,815,000 pursuant to a series of subscription agreements by and between AssetMark Holdings LLC and each such employee or affiliate.
On March 27, 2017, AssetMark Holdings LLC sold to one executive officer who joined the Company who is an accredited investor (as defined in Rule 501 of Regulation D under the Securities Act) an aggregate of 3,000 Class B Common Units in AssetMark Holdings LLC at a price of $100 per unit for an aggregate consideration of $300,000 pursuant to a subscription agreement by and between AssetMark Holdings LLC and the executive officer.
Class C unit issuances
On November 18, 2016, AssetMark Holdings LLC granted to 52 executive officers and service providers of the Company an aggregate of 8,056.79 Class C Common Units in AssetMark Holdings LLC. On March 27, 2017, AssetMark Holdings LLC granted to one executive officer of the Company an aggregate of 500 Class C Common Units in AssetMark Holdings LLC. On November 1, 2017,
II-2
AssetMark Holdings LLC granted to five employees of the Company an aggregate of 123.35 Class C Common Units in AssetMark Holdings LLC. On January 31, 2018, AssetMark Holdings LLC granted to one director of the Company an aggregate of 66.67 Class C Common Units in AssetMark Holdings LLC. On August 21, 2018, AssetMark Holdings LLC granted to 10 employees of the Company an aggregate of 216.70 Class C Common Units in AssetMark Holdings LLC. On January 18, 2019, AssetMark Holdings LLC granted to seven employees of the Company an aggregate of 120.02 Class C Common Units in AssetMark Holdings LLC. All such grants were made pursuant to those certain Service Member Unit Issuance Agreements by and between AssetMark Holdings LLC and each such director, executive officer or service provider. Since November 1, 2016, AssetMark Holdings LLC has recalled an aggregate of 146.68 Class C Common Units.
The sales, offers and issuances of the above securities were deemed to be exempt from registration under the Securities Act in reliance upon Section 4(a)(2) of the Securities Act or Regulation D promulgated thereunder as transactions by an issuer not involving a public offering, Section 3(a)(9) of the Securities Act as exchange transactions involving securities exchanged by the issuer with its existing securityholders exclusively where no commission or other remuneration is paid or given for soliciting such exchange, or Rule 701 promulgated under Section 3(b) of the Securities Act as transactions by an issuer not involving any public offering under compensatory benefit plans and contracts relating to compensation. The recipients of the securities in each of these transactions represented their intentions to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof. Appropriate legends were affixed to the securities issued in these transactions.
Item 16. Exhibits and financial statement schedules
(a) | Exhibits. |
See the Exhibit Index prior to the signature page below for a list of exhibits filed as part of this registration statement on Form S-1, which Exhibit Index is incorporated herein by reference.
(b) | Financial statement schedules. |
No schedules are included in the consolidated financial statements that form part of this registration statement.
Item 17. Undertakings
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the provisions referenced in Item 14 of this registration statement or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered hereunder, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
II-3
The undersigned registrant hereby undertakes that:
(1) | For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. |
(2) | For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. |
II-4
Exhibit index
II-5
Exhibit
|
Description |
|
10.13 | AssetMark Layoff Plan Summary, dated October 25, 2016, as currently in effect | |
10.14 | Amended and Restated Employment Agreement by and between the Company and Charles Goldman, dated October 31, 2016 | |
10.15 | Offer Letter with Jeremiah Chafkin, dated July 30, 2014 | |
10.16 | Offer Letter with Michael Kim, dated July 12, 2013 | |
21.1 | Subsidiaries of the Company | |
23.1 | Consent of Crowe LLP, independent registered certified public accounting firm | |
23.2 | Consent of KPMG LLP, independent registered certified public accounting firm | |
23.3* | Consent of Davis Polk & Wardwell LLP (included in Exhibit 5.1) | |
24.1 | Power of Attorney (see page II-7 of this registration statement) |
* | To be filed by amendment. |
| Indicates management contract or compensatory plan. |
+ | Portions of this exhibit have been omitted as the registrant has determined that (i) the omitted information is not material and (ii) the omitted information would likely cause competitive harm to the registrant if publicly disclosed. |
II-6
Pursuant to the requirements of the Securities Act, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-1 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Concord, State of California, on the 24th day of June, 2019.
AssetMark Financial Holdings, Inc. | ||
By: |
/s/ Charles Goldman |
|
Name: | Charles Goldman | |
Title: | Chief Executive Officer |
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Charles Goldman and Gary Zyla, and each of them, as his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement and any and all additional registration statements pursuant to Rule 462(b) of the Securities Act, as amended, and all post-effective amendments thereto, and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto each said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as full to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or either of them or their or his substitute or substitutes may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
Signature | Title | Date | ||
/s/ Charles Goldman Charles Goldman |
Director and Chief Executive Officer
(principal executive officer) |
June 24, 2019 | ||
/s/ Gary Zyla Gary Zyla |
Chief Financial Officer
(principal financial officer) |
June 24, 2019 | ||
/s/ John Hahn John Hahn |
Senior Vice President, Finance
(principal accounting officer) |
June 24, 2019 | ||
/s/ Xiaodan Liu Xiaodan Liu |
Chairman of the Board | June 24, 2019 | ||
/s/ Rohit Bhagat Rohit Bhagat |
Director | June 24, 2019 |
II-7
Signature | Title | Date | ||
/s/ Patricia Guinn Patricia Guinn |
Director | June 24, 2019 | ||
/s/ Bryan Lin Bryan Lin |
Director | June 24, 2019 | ||
/s/ Ying Sun Ying Sun |
Director | June 24, 2019 | ||
/s/ Yi Zhou Yi Zhou |
Director | June 24, 2019 | ||
|
II-8
Exhibit 3.1
I, JEFFREY W. BULLOCK, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF INCORPORATION OF AQGEN LIBERTY MANAGEMENT II, INC., FILED IN THIS OFFICE ON THE TWENTY-FIFTH DAY OF MARCH, A.D. 2013, AT 12:42 OCLOCK P.M.
A FILED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE COUNTY RECORDER OF DEEDS.
CERTIFICATE OF INCORPORATION
OF
AQGEN LIBERTY MANAGEMENT II, INC.
********
ARTICLE I.
The name of the corporation (the Corporation ) is: AqGen Liberty Management II, Inc.
ARTICLE II.
The address of the registered office of the Corporation in the State of Delaware is 1209 Orange Street, City of Wilmington, County of New Castle, Delaware, 19801. The name of the registered agent of the Corporation at such address is The Corporation Trust Company.
ARTICLE III.
The nature of the business or purposes to be conducted or promoted by the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware.
ARTICLE IV.
The total number of shares of stock which the Corporation shall have authority to issue is 1000 shares of Common Stock, each of which shall have a par value of $0.01 per share.
ARTICLE V.
The name and mailing address of the Incorporator is as follows:
Jonathan R. Scott
Willkie Farr & Gallagher LLP
787 Seventh Avenue
New York, New York 10019-6099
ARTICLE VI.
In furtherance and not in limitation of the powers conferred by statute, the by-laws of the Corporation may be made, altered, amended or repealed by the stockholders or by a majority of the entire board of directors of the Corporation (the Board ).
ARTICLE VII.
Elections of directors need not be by written ballot.
ARTICLE VIII.
(a) The Corporation shall indemnify to the fullest extent permitted under and in accordance with the laws of the State of Delaware any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that the person is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by the person in connection with such action, suit or proceeding if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe the persons conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which the person reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that the persons conduct was unlawful.
(b) The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that the person is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys fees) actually and reasonably incurred by the person in connection with the defense or settlement of such action or suit if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the Corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper.
(c) Expenses incurred in defending a civil or criminal action, suit or proceeding shall (in the case of any action, suit or proceeding against a director of the Corporation) or may (in the case of any action, suit or proceeding against an officer, trustee, employee or agent) be paid by the Corporation in advance of the final disposition of such action, suit or proceeding as authorized by the Board upon receipt of an undertaking by or on behalf of the indemnified person to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Corporation as authorized in this Article.
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(d) The indemnification and other rights set forth in this Article VIII shall not be exclusive of any provisions with respect thereto in the by-laws of the Corporation or any other contract or agreement between the Corporation and any officer, director, employee or agent of the Corporation.
(e) Neither the amendment nor repeal of this Article VIII, nor the adoption of any provision of this Certificate of Incorporation inconsistent with Article VIII, shall eliminate or reduce the effect of this Article VIII in respect of any matter occurring before such amendment, repeal or adoption of an inconsistent provision or in respect of any cause of action, suit or claim relating to any such matter which would have given rise to a right of indemnification or right to receive expenses pursuant to this Article VIII if such provision had not been so amended or repealed or if a provision inconsistent therewith had not been so adopted.
(f) No director shall be personally liable to the Corporation or any stockholder for monetary damages for breach of fiduciary duty as a director; provided , however , that the foregoing shall not eliminate or limit the liability of a director:
(i) for any breach of the directors duty of loyalty to the Corporation or its stockholders;
(ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;
(iii) under Section 174 of the General Corporation Law of the State of Delaware; or
(iv) for any transaction from which the director derived an improper personal benefit.
If the General Corporation Law of the State of Delaware is amended after the date hereof to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the General Corporation Law of the State of Delaware, as so amended.
(g) Notwithstanding anything contained in this Certificate of Incorporation to the contrary, to the fullest extent permitted by the General Corporation Law of the State of Delaware, the Corporation acknowledges that: (i) each (1) director employed by, or affiliated with, Aquiline Capital Partners LLC or Genstar Capital Partners LLC or one of their respective affiliates, (2) officer employed by, or affiliated with, Aquiline Capital Partners LLC or Genstar Capital Partners LLC or one of their respective affiliates and (3) any other officer or director of the Corporation specifically designated by Aquiline Capital Partners LLC or Genstar Capital Partners LLC or one of their respective affiliates (collectively, the Exempted Persons ) shall have no duty (contractual or otherwise) not to, directly or indirectly, engage in the same or similar business activities or lines of business as the Corporation or any of its subsidiaries, including those deemed to be competing with the Corporation or any of its subsidiaries; and (ii) in the event that any Exempted Person acquires knowledge of a potential transaction or matter that may be a corporate opportunity for the Corporation, then such Exempted Person shall have
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no duty (contractual or otherwise) to communicate or present such corporate opportunity to the Corporation or any of its subsidiaries, as the case may be, and shall not be liable to the Corporation or its affiliates or stockholders for breach of any duty (contractual or otherwise) by reason of the fact that such Exempted Person, directly or indirectly, pursues or acquires such opportunity for itself, directs such opportunity to another person, or does not present such opportunity to the Corporation.
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THE UNDERSIGNED, being the Incorporator hereinbefore named, for the purpose of forming a Corporation pursuant to the General Corporation Law of the State of Delaware makes this Certificate, hereby declaring and certifying that this is his act and deed and the facts herein stated are true and, accordingly, has hereunto set his hand this 25th day of March, 2013.
|
Jonathan R. Scott |
Sole Incorporator |
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Delaware | PAGE 1 | |||
The First State |
I, JEFFREY W. BULLOCK, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT OF AQGEN LIBERTY MANAGEMENT II, INC., CHANGING ITS NAME FROM AQGEN LIBERTY MANAGEMENT II, INC. TO ASSETMARK FINANCIAL HOLDINGS, INC., FILED IN THIS OFFICE ON THE ELEVENTH DAY OF DECEMBER, A.D. 2013, AT 1:29 OCLOCK P.M.
A FILED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE COUNTY RECORDER OF DEEDS.
|
|
|||
Jeffrey W. Bullock, Secretary of State | ||||
5308921 8100
|
AUTHENTICATION: 1047701
|
|||
131413756 |
DATE: 01-09-14 |
You may verify this certificate online
at corp.delaware.gov/authver.shtml
From: | 12/11/2013 11:41 | #090 P. 003/003 |
State of Delaware Secretary of State Division of Corporations Delivered 01:29 PM 12/11/2013 FILED 01:29 PM 12/11/2013 SRV 131413756 - 5308921 FILE |
STATE OF DELAWARE
CERTIFICATE OF AMENDMENT
OF CERTIFICATE OF INCORPORATION
December 4, 2013
The corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware does hereby certify:
FIRST: The Board of Directors of AqGen Liberty Management II, Inc. resolutions (obtained pursuant to Section 141 of the General Corporation Law of the State of Delaware) were duly adopted setting forth a proposed amendment of the Certificate of Incorporation of said corporation, declaring said amendment to be advisable and for stockholder of said corporation for consideration thereof. The resolution setting forth the proposed amendment is as follows:
RESOLVED, that the Certificate of Incorporation of this corporation be amended by changing the Article thereof numbered I so that, as amended, said Article shall be and read as follows:
The name of the corporation (the Corporation) is: AssetMark Financial Holdings, Inc.
SECOND: That thereafter, pursuant to resolution of its Board of Directors, and in accordance with Section 228 of the General Corporation Law of the State of Delaware, the written consent of the stockholders in favor of the amendment (in lieu of a meeting), was obtained.
THIRD: That said amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF , said corporation has caused this Certificate to be signed this 4 th day of December, 2013.
|
Gurinder S. Ahluwalia |
President |
|
Naomi J. McKean |
Assistant Secretary |
AQGEN LIB MANAGEMENT II - S/H RES NAME CHANGE 11/25/2013
Exhibit 3.3
BYLAWS
OF
AQGEN LIBERTY MANAGEMENT II, INC.
(a Delaware corporation)
ARTICLE I
Stockholders
SECTION 1. Annual Meetings . The annual meeting of stockholders for the election of directors and for the transaction of such other business as may properly come before the meeting shall be held each year at such date and time, within or without the State of Delaware, as the Board of Directors shall determine.
SECTION 2. Special Meetings . Special meetings of stockholders for the transaction of such business as may properly come before the meeting may be called by order of the Board of Directors or by stockholders holding together at least a majority of all the shares of AqGen Liberty Management II, Inc. (the Corporation) entitled to vote at the meeting, and shall be held at such date and time, within or without the State of Delaware, as may be specified by such order. Whenever the directors shall fail to fix such place, the meeting shall be held at the principal executive office of the Corporation.
SECTION 3. Notice of Meetings . Written notice of all meetings of the stockholders, stating the place, date and hour of the meeting and the place within the city or other municipality or community at which the list of stockholders may be examined, shall be mailed or delivered to each stockholder not less than ten (10) nor more than sixty (60) days prior to the meeting. Notice of any special meeting shall state in general terms the purpose or purposes for which the meeting is to be held.
SECTION 4. Stockholder Lists . The officer who has charge of the stock ledger of the Corporation shall prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present.
The stock ledger shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list required by this section or the books of the Corporation, or to vote in person or by proxy at any meeting of stockholders.
SECTION 5. Quorum . Except as otherwise provided by law or the Corporations Certificate of Incorporation, a quorum for the transaction of business at any meeting of stockholders shall consist of the holders of record of a majority of the issued and outstanding shares of the capital stock of the Corporation entitled to vote at the meeting, present in person or by proxy. At all meetings of the stockholders at which a quorum is present, all matters, except as otherwise provided by law or the Certificate of Incorporation, shall be decided by the vote of the holders of a majority of the shares entitled to vote thereat present in person or by proxy. If there be no such quorum, the holders of a majority of such shares so present or represented may adjourn the meeting from time to time, without further notice, until a quorum shall have been obtained. When a quorum is once present it is not broken by the subsequent withdrawal of any stockholder.
SECTION 6. Organization . Meetings of stockholders shall be presided over by the Chairman, if any, or if none or in the Chairmans absence the Vice-Chairman, if any, or if none or in the Vice-Chairmans absence the President, if any, or if none or in the Presidents absence a Vice-President, or, if none of the foregoing is present, by a chairman to be chosen by the stockholders entitled to vote who are present in person or by proxy at the meeting. The Secretary of the Corporation, or in the Secretarys absence an Assistant Secretary, shall act as secretary of every meeting, but if neither the Secretary nor an Assistant Secretary is present, the presiding officer of the meeting shall appoint any person present to act as secretary of the meeting.
SECTION 7. Voting; Proxies; Required Vote . (a) At each meeting of stockholders, every stockholder shall be entitled to vote in person or by proxy appointed by instrument in writing, subscribed by such stockholder or by such stockholders duly authorized attorney-in-fact, and, unless the Certificate of Incorporation provides otherwise, shall have one vote for each share of stock entitled to vote registered in the name of such stockholder on the books of the Corporation on the applicable record date fixed pursuant to these Bylaws. At all elections of directors the voting may but need not be by ballot and a plurality of the votes cast there shall elect. Except as otherwise required by law or the Certificate of Incorporation, any other action shall be authorized by a majority of the votes cast.
(b) Any action required or permitted to be taken at any meeting of stockholders may, except as otherwise required by law or the Certificate of Incorporation, be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of record of a number of the issued and outstanding shares of capital stock of the Corporation representing the number of votes necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted, Prompt notice of the taking of corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing.
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SECTION 8. Inspectors . The Board of Directors, in advance of any meeting, may, but need not, appoint one or more inspectors of election to act at the meeting or any adjournment thereof. If an inspector or inspectors are not so appointed, the person presiding at the meeting may, but need not, appoint one or more inspectors. In case any person who may be appointed as an inspector fails to appear or act, the vacancy may be filled by appointment made by the directors in advance of the meeting or at the meeting by the person presiding thereat. Each inspector, if any, before entering upon the discharge of his or her duties, shall take and sign an oath faithfully to execute the duties of inspector at such meeting with strict impartiality and according to the best of his ability. The inspectors, if any, shall determine the number of shares of stock outstanding and the voting power of each, the shares of stock represented at the meeting, the existence of a quorum, and the validity and effect of proxies, and shall receive votes, ballots or consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate all votes, ballots or consents, determine the result, and do such acts as are proper to conduct the election or vote with fairness to all stockholders. On request of the person presiding at the meeting, the inspector or inspectors, if any, shall make a report in writing of any challenge, question or matter determined by such inspector or inspectors and execute a certificate of any fact found by such inspector or inspectors.
ARTICLE II
Board of Directors
SECTION 1. General Powers . The business, property and affairs of the Corporation shall be managed by, or under the direction of, the Board of Directors.
SECTION 2. Qualification; Number; Term; Remuneration . (a) Each director shall be at least 18 years of age. A director need not be a stockholder, a citizen of the United States, or a resident of the State of Delaware. The number of directors constituting the entire Board shall be the number fixed from time to time by affirmative vote of a majority of the Directors then in office. The use of the phrase entire Board herein refers to the total number of directors which the Corporation would have if there were no vacancies.
(b) Directors who are elected at an annual meeting of stockholders, and directors who are elected in the interim to fill vacancies and newly created directorships, shall hold office until the next annual meeting of stockholders and until their successors are elected and qualified or until their earlier resignation or removal.
(c) Directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a fixed sum for attendance at each meeting of the Board of Directors or a stated salary as director. No such payment shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings.
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SECTION 3. Quorum and Manner of Voting . Except as otherwise provided by law, a majority of the entire Board shall constitute a quorum. A majority of the directors present, whether or not a quorum is present, may adjourn a meeting from time to time to another time and place without notice. The vote of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors.
SECTION 4. Places of Meetings . Meetings of the Board of Directors may be held at any place within or without the State of Delaware, as may from time to time be fixed by resolution of the Board of Directors, or as may be specified in the notice of meeting.
SECTION 5. Action by Communications Equipment . Members of the Board of Directors or any committee thereof may participate in a meeting of such Board of Directors or committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation shall constitute presence in person at such meeting.
SECTION 6. Annual Meeting . Following the annual meeting of stockholders, the newly elected Board of Directors shall meet for the purpose of the election of officers and the transaction of such other business as may properly come before the meeting. Such meeting may be held without notice immediately after the annual meeting of stockholders at the same place at which such stockholders meeting is held.
SECTION 7. Regular Meetings . Regular meetings of the Board of Directors shall be held at such times and places as the Board of Directors shall from time to time by resolution determine. Notice need not be given of regular meetings of the Board of Directors held at times and places fixed by resolution of the Board of Directors.
SECTION 8. Special Meetings . Special meetings of the Board of Directors shall be held whenever called by the Chairman of the Board of Directors, President or by a majority of the directors then in office.
SECTION 9. Notice of Meetings . A notice of the place, date and time and the purpose or purposes of each meeting of the Board of Directors shall be given to each director by mailing the same at least two days before the special meeting, or by telegraphing or telephoning the same or by delivering the same personally not later than the day before the day of the meeting. Notice of any meeting of the Board of Directors need not be given to any director, however, if waived by him in writing whether before or after such meeting be held, or if he shall be present at such meeting, and any meeting of the Board of Directors shall be a legal meeting without any notice thereof having been given, if all the directors then in office shall be present thereat.
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SECTION 10. Organization . At all meetings of the Board of Directors, the Chairman, if any, or if none or in the Chairmans absence or inability to act the President, or in the Presidents absence or inability to act any Vice-President who is a member of the Board of Directors, or in such Vice-Presidents absence or inability to act a chairman chosen by the directors, shall preside. The Secretary of the Corporation shall act as secretary at all meetings of the Board of Directors when present, and, in the Secretarys absence, the presiding officer may appoint any person to act as secretary.
SECTION 11. Resignation . Any director may resign at any time upon written notice to the Corporation and such resignation shall take effect upon receipt thereof by the President or Secretary, unless otherwise specified in the resignation. Any or all of the directors may be removed, with or without cause, by the holders of a majority of the shares of stock outstanding and entitled to vote for the election of directors.
SECTION 12. Vacancies . Unless otherwise provided in these Bylaws, vacancies on the Board of Directors, whether caused by resignation, death, disqualification, removal, an increase in the authorized number of directors or otherwise, may be filled by the affirmative vote of a majority of the remaining directors, although less than a quorum, or by a sole remaining director, or at a special meeting of the stockholders, by the holders of shares entitled to vote for the election of directors.
SECTION 13. Action by Written Consent . Any action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting if all the directors consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board of Directors.
ARTICLE III
Committees
SECTION 1. Appointment . From time to time the Board of Directors by a resolution adopted by a majority of the entire Board may appoint any committee or committees for any purpose or purposes, to the extent lawful, which shall have powers as shall be determined and specified by the Board of Directors in the resolution of appointment.
SECTION 2. Procedures, Quorum and Manner of Acting . Each committee shall fix its own rules of procedure, and shall meet where and as provided by such rules or by resolution of the Board of Directors. Except as otherwise provided by law, the presence of a majority of the then appointed members of a committee shall constitute a quorum for the transaction of business by that committee, and in every case where a quorum is present the affirmative vote of a majority of the members of the committee present shall be the act of the committee. Each committee shall keep minutes of its proceedings, and actions taken by a committee shall be reported to the Board of Directors.
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SECTION 3. Action by Written Consent . Any action required or permitted to be taken at any meeting of any committee of the Board of Directors may be taken without a meeting if all the members of the committee consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the committee.
SECTION 4. Term; Termination . In the event any person shall cease to be a director of the Corporation, such person shall simultaneously therewith cease to be a member of any committee appointed by the Board of Directors.
ARTICLE IV
Officers
SECTION 1. Election and Qualifications . The Board of Directors shall elect the officers of the Corporation, which shall include a President and a Secretary, and may include, by election or appointment, one or more Vice-Presidents (any one or more of whom may be given an additional designation of rank or function), a Treasurer and such Assistant Secretaries, such Assistant Treasurers and such other officers as the Board of Directors may from time to time deem proper. Each officer shall have such powers and duties as may be prescribed by these Bylaws and as may be assigned by the Board of Directors or the President.
SECTION 2. Term of Office and Remuneration . The term of office of all officers shall be one year and until their respective successors have been elected and qualified, but any officer may be removed from office, either with or without cause, at any time by the Board of Directors. Any vacancy in any office arising from any cause may be filled for the unexpired portion of the term by the Board of Directors. The remuneration of all officers of the Corporation may be fixed by the Board of Directors or in such manner as the Board of Directors shall provide.
SECTION 3. Resignation; Removal . Any officer may resign at any time upon written notice to the Corporation and such resignation shall take effect upon receipt thereof by the President or Secretary, unless otherwise specified in the resignation. Any officer shall be subject to removal, with or without cause, at any time by vote of a majority of the entire Board.
SECTION 4. Chairman of the Board . The Chairman of the Board of Directors, if there be one, shall preside at all meetings of the Board of Directors and shall have such other powers and duties as may from time to time be assigned by the Board of Directors.
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SECTION 5. President and Chief Executive Officer . The President shall be the chief executive officer of the Corporation, and shall have such duties as customarily pertain to that office. The President shall have general management and supervision of the property, business and affairs of the Corporation and over its other officers; may appoint and remove assistant officers and other agents and employees; and may execute and deliver in the name of the Corporation powers of attorney, contracts, bonds and other obligations and instruments.
SECTION 6. Vice-President . A Vice-President may execute and deliver in the name of the Corporation contracts and other obligations and instruments pertaining to the regular course of the duties of said office, and shall have such other authority as from time to time may be assigned by the Board of Directors or the President.
SECTION 7. Treasurer . The Treasurer shall in general have all duties incident to the position of Treasurer and such other duties as may be assigned by the Board of Directors or the President.
SECTION 8. Secretary . The Secretary shall in general have all the duties incident to the office of Secretary and such other duties as may be assigned by the Board of Directors or the President.
SECTION 9. Assistant Officers . Any assistant officer shall have such powers and duties of the officer such assistant officer assists as such officer or the Board of Directors shall from time to time prescribe.
ARTICLE V
Books and Records
SECTION 1. Location . The books and records of the Corporation may be kept at such place or places within or outside the State of Delaware as the Board of Directors or the respective officers in charge thereof may from time to time determine. The record books containing the names and addresses of all stockholders, the number and class of shares of stock held by each and the dates when they respectively became the owners of record thereof shall be kept by the Secretary as prescribed in the Bylaws and by such officer or agent as shall be designated by the Board of Directors.
SECTION 2. Addresses of Stockholders . Notices of meetings and all other corporate notices may be delivered personally or mailed to each stockholder at the stockholders address as it appears on the records of the Corporation.
SECTION 3. Fixing Date for Determination of Stockholders of Record .
(a) In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the Board of Directors may fix a record date, which record date shall not precede the date
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upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting. If no record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.
(b) In order that the Corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which date shall not be more than ten (10) days after the date upon which the resolution fixing the record date is adopted by the Board of Directors. If no record date has been fixed by the Board of Directors, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is required, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Corporation by delivery to its registered office in this State, its principal place of business, or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the Corporations registered office shall be by hand or by certified or registered mail, return receipt requested. If no record date has been fixed by the Board of Directors and prior action by the Board of Directors is required by this chapter, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the day on which the Board of Directors adopts the resolution taking such prior action.
(c) In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than sixty (60) days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.
ARTICLE VI
Certificates Representing Stock
SECTION 1. Certificates; Signatures . The shares of the Corporation shall be represented by certificates or shall be uncertificated. Every holder of stock
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represented by certificates and upon request every holder of uncertificated shares shall be entitled to have a certificate, signed by or in the name of the Corporation by the Chairman or Vice-Chairman of the Board of Directors, or the President or Vice-President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the Corporation, representing the number of shares registered in certificate form. Any and all signatures on any such certificate may be facsimiles. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. The name of the holder of record of the shares represented thereby, with the number of such shares and the date of issue, shall be entered on the books of the Corporation.
SECTION 2. Transfers of Stock . The shares of stock of the Corporation shall be transferable on the books of the Corporation by the holders thereof in person, or by their duly authorized attorneys or legal representatives, on delivery of an assignment or power of transfer. A record shall be made of each transfer.
SECTION 3. Lost, Stolen or Destroyed Certificates . The Corporation may issue a new certificate of stock in place of any certificate, theretofore issued by it, alleged to have been lost, stolen or destroyed, and the Board of Directors may require the owner of any lost, stolen or destroyed certificate, or his legal representative, to give the Corporation a bond sufficient to indemnify the Corporation against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of any such new certificate.
ARTICLE VII
Dividends
Subject always to the provisions of law and the Certificate of Incorporation, the Board of Directors shall have full power to determine whether any, and, if any, what part of any, funds legally available for the payment of dividends shall be declared as dividends and paid to stockholders; the division of the whole or any part of such funds of the Corporation shall rest wholly within the lawful discretion of the Board of Directors, and it shall not be required at any time, against such discretion, to divide or pay any part of such funds among or to the stockholders as dividends or otherwise; and before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the Board of Directors from time to time, in its absolute discretion, thinks proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for such other purpose as the Board of Directors shall think conducive to the interest of the Corporation, and the Board of Directors may modify or abolish any such reserve in the manner in which it was created.
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ARTICLE VIII
Ratification
Any transaction, questioned in any law suit on the ground of lack of authority, defective or irregular execution, adverse interest of director, officer or stockholder, non-disclosure, miscomputation, or the application of improper principles or practices of accounting, may be ratified before or after judgment, by the Board of Directors or by the stockholders, and if so ratified shall have the same force and effect as if the questioned transaction had been originally duly authorized. Such ratification shall be binding upon the Corporation and its stockholders and shall constitute a bar to any claim or execution of any judgment in respect of such questioned transaction.
ARTICLE IX
Corporate Seal
The Corporation shall have no corporate seal.
ARTICLE X
Fiscal Year
The fiscal year of the Corporation shall be fixed, and shall be subject to change, by the Board of Directors. Unless otherwise fixed by the Board of Directors, the fiscal year of the Corporation shall be the calendar year.
ARTICLE XI
Waiver of Notice
Whenever notice is required to be given by these Bylaws or by the Certificate of Incorporation or by law, a written waiver thereof, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent to notice.
ARTICLE XII
Bank Accounts, Drafts, Contracts, Etc.
SECTION 1. Bank Accounts and Drafts . In addition to such bank accounts as may be authorized by the Board of Directors, the primary financial officer or any person designated by said primary financial officer, whether or not an employee of the Corporation, may authorize such bank accounts to be opened or maintained in the name and on behalf of the Corporation as he may deem necessary or appropriate, payments from such bank accounts to be made upon and according to the check of the Corporation in accordance with the written instructions of said primary financial officer, or other person so designated by the Treasurer.
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SECTION 2. Contracts . The Board of Directors may authorize any person or persons, in the name and on behalf of the Corporation, to enter into or execute and deliver any and all deeds, bonds, mortgages, contracts and other obligations or instruments, and such authority may be general or confined to specific instances.
SECTION 3. Proxies; Powers of Attorney; Other Instruments . The Chairman, the President or any other person designated by either of them shall have the power and authority to execute and deliver proxies, powers of attorney and other instruments on behalf of the Corporation in connection with the rights and powers incident to the ownership of stock by the Corporation. The Chairman, the President or any other person authorized by proxy or power of attorney executed and delivered by either of them on behalf of the Corporation may attend and vote at any meeting of stockholders of any company in which the Corporation may hold stock, and may exercise on behalf of the Corporation any and all of the rights and powers incident to the ownership of such stock at any such meeting, or otherwise as specified in the proxy or power of attorney so authorizing any such person. The Board of Directors, from time to time, may confer like powers upon any other person.
SECTION 4. Financial Reports . The Board of Directors may appoint the primary financial officer or other fiscal officer or any other officer to cause to be prepared and furnished to stockholders entitled thereto any special financial notice and/or financial statement, as the case may be, which may be required by any provision of law.
ARTICLE XIII
Electronic Transmission
The Corporation is authorized to use electronic transmissions as defined in the General Corporation Law of the State of Delaware to the full extent allowed by the General Corporation Law of the State of Delaware, including, but not limited to the purposes of notices, proxies, waivers, resignations, and any other purpose for which electronic transmissions are permitted. Any reference in these Bylaws to the delivery of consents, approvals or waivers or to the taking of any other actions by a writing, shall be satisfied by use of an electronic transmission. An electronic transmission by a stockholder consenting to an action to be taken is considered to be written, signed, and dated for the purposes of this article if the transmission sets forth or is delivered with information from which the Corporation can determine that the transmission was transmitted by the stockholder and the date on which the stockholder transmitted the transmission. The date of transmission is the date on which the consent was signed. Consent given by electronic transmission may not be considered delivered until the consent is reproduced in paper form and the paper form is delivered to the Corporation at its registered office in this state or its principal place of business, or to an officer or agent of the Corporation having custody of the book in which proceedings of stockholder
11
meetings are recorded. Notwithstanding the foregoing limitations on delivery, consent given by electronic transmission may be delivered to the principal place of business of the Corporation or to an officer or agent of the Corporation having custody of the book in which proceedings of stockholder meetings are recorded to the extent and in the manner provided by resolution of the Board of Directors of the Corporation.
ARTICLE XIV
Amendments
The Board of Directors shall have power to adopt, amend or repeal Bylaws. Bylaws adopted by the Board of Directors may be repealed or changed, and new Bylaws made, by the stockholders, and the stockholders may prescribe that any Bylaw made by them shall not be altered, amended or repealed by the Board of Directors.
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Delaware | PAGE 1 | |||
The First State |
I, JEFFREY W. BULLOCK, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT OF AQGEN LIBERTY MANAGEMENT II, INC., CHANGING ITS NAME FROM AQGEN LIBERTY MANAGEMENT II, INC. TO ASSETMARK FINANCIAL HOLDINGS, INC., FILED IN THIS OFFICE ON THE ELEVENTH DAY OF DECEMBER, A.D. 2013, AT 1:29 OCLOCK P.M.
A FILED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE COUNTY RECORDER OF DEEDS.
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Jeffrey W. Bullock, Secretary of State | ||||
5308921 8100
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AUTHENTICATION: 1047701
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131413756 |
DATE: 01-09-14 |
You may verify this certificate online
at corp.delaware.gov/authver.shtml
From: | 12/11/2013 11:41 | #090 P. 003/003 |
State of Delaware Secretary of State Division of Corporations Delivered 01:29 PM 12/11/2013 FILED 01:29 PM 12/11/2013 SRV 131413756 - 5308921 FILE |
STATE OF DELAWARE
CERTIFICATE OF AMENDMENT
OF CERTIFICATE OF INCOPORATION
December 4, 2013
The corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware does hereby certify:
FIRST: The Board of Directors of AqGen Liberty Management II, Inc. resolutions (obtained pursuant to Section 141 of the General Corporation Law of the State of Delaware) were duly adopted setting forth a proposed amendment of the Certificate of Incorporation of said corporation, declaring said amendment to be advisable and for stockholder of said corporation for consideration thereof. The resolution setting forth the proposed amendment is as follows:
RESOLVED, that the Certificate of Incorporation of this corporation be amended by changing the Article thereof numbered I so that, as amended, said Article shall be and read as follows:
The name of the corporation (the Corporation) is: AssetMark Financial Holdings, Inc.
SECOND: That thereafter, pursuant to resolution of its Board of Directors, and in accordance with Section 228 of the General Corporation Law of the State of Delaware, the written consent of the stockholders in favor of the amendment (in lieu of a meeting), was obtained.
THIRD: That said amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF , said corporation has caused this Certificate to be signed this 4 th day of December, 2013.
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Gurinder S. Ahluwalia |
President |
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Naomi J. McKean |
Assistant Secretary |
AQGEN LIB MANAGEMENT II - S/H RES NAME CHANGE 11/25/2013
Exhibit 4.2
REGISTRATION RIGHTS AGREEMENT
by and between
AssetMark Financial Holdings, Inc.
and
Huatai International Investment Holdings Limited
Dated as of [ ], 2019
T ABLE OF C ONTENTS
P AGE | ||||||
Section 1. |
Certain Definitions | 1 | ||||
Section 2. |
Demand Registration | 5 | ||||
Section 3. |
Piggyback Registrations | 8 | ||||
Section 4. |
Lock-up Arrangements | 9 | ||||
Section 5. |
Participating in Underwritten Offering | 10 | ||||
Section 6. |
Registration Procedures | 10 | ||||
Section 7. |
Registration Expenses | 14 | ||||
Section 8. |
Indemnification | 15 | ||||
Section 9. |
Securities Act Restrictions | 17 | ||||
Section 10. |
Transfers of Rights | 17 | ||||
Section 11. |
Miscellaneous |
18 |
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THIS REGISTRATION RIGHTS AGREEMENT, dated as of [ ], 2019, is by and between AssetMark Financial Holdings, Inc., a Delaware corporation (the Company ), and Huatai International Investment Holdings Limited, a company organized under the laws of the Cayman Islands ( Huatai ).
WHEREAS, in connection with the Companys initial public offering (the IPO ) of its shares of common stock, par value $0.001 per share (the Common Stock ), the parties desire to enter into this Agreement to grant certain registration rights to Huatai on the terms and conditions set forth below;
NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained and other good and valid consideration, the receipt and sufficiency of which are hereby acknowledged, the parties to this Agreement hereby agree as follows:
Section 1. Certain Definitions .
(a) The following terms shall have the following meanings:
Affiliate of any Person means any other Person that, directly or indirectly through one or more intermediaries, controls, is controlled by or is under common control with such Person. The term control (including the terms controlling, controlled and under common control with) as used with respect to any Person means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise.
Agreement means this Registration Rights Agreement, including all amendments, modifications and supplements and any exhibits or schedules to any of the foregoing, and shall refer to this Registration Rights Agreement as the same may be in effect at the time such reference becomes operative.
beneficially own means, with respect to any Person, securities of which such Person or any of such Persons Affiliates, directly or indirectly, has beneficial ownership as determined pursuant to Rule 13d-3 and Rule 13d-5 of the Exchange Act, including securities beneficially owned by others with whom such Person or any of its Affiliates has agreed to act together for the purpose of acquiring, holding, voting or disposing of such securities; provided that a Person shall not be deemed to beneficially own (i) securities tendered pursuant to a tender or exchange offer made by such Person or any of such Persons Affiliates until such tendered securities are accepted for payment, purchase or exchange, (ii) any security as a result of an oral or written agreement, arrangement or understanding to vote such security if such agreement, arrangement or understanding: (a) arises solely from a revocable proxy given in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the applicable provisions of the Exchange Act, and (b) is not also then reportable by such Person on Schedule 13D under the Exchange Act (or any comparable or successor report). Without limiting the foregoing, a Person shall be deemed to be the beneficial owner of all Registrable Shares owned of record by any majority-owned subsidiary of such Person.
Common Stock has the meaning set forth in the second Recital hereto.
Company has the meaning set forth in the first paragraph of this Agreement.
Damages has the meaning set forth in Section 8(a).
Demand Registration has the meaning set forth in Section 2(a).
Exchange Act means the Securities Exchange Act of 1934, as amended.
Form S-1 means a registration statement on Form S-1 under the Securities Act or such successor forms thereto permitting registration of securities under the Securities Act.
Form S -3 means a registration statement on Form S-3 under the Securities Act or such successor forms thereto permitting registration of securities under the Securities Act.
Governmental Entity means any national, federal, state, municipal, local, territorial, foreign or other government or any department, commission, board, bureau, agency, regulatory authority or instrumentality thereof, or any court, judicial, administrative or arbitral body or public or private tribunal.
Holder means Huatai or any Transferee.
Huatai has the meaning set forth in the first paragraph of this Agreement. References herein to Huatai shall apply to Transferees, provided that for purposes of all thresholds and limitations herein, the actions of the Transferees shall be aggregated.
Inspectors has the meaning set forth in Section 6(a)(viii).
IPO has the meaning set forth in the second Recital hereto.
Lock-Up Agreement has the meaning set forth in Section 4(a).
Maximum Offering Size has the meaning set forth in Section 2(b).
Minimum Amount means $60,000,000.
Non-Requesting Holder has the meaning set forth in Section 2(a)(i).
Permitted Transferee means any Person that is an Affiliate of Huatai.
Person means any individual, sole proprietorship, partnership, limited liability company, joint venture, trust, incorporated organization, association, corporation, institution, public benefit corporation, Governmental Entity or any other entity.
Piggyback Registration has the meaning set forth in Section 3(a).
Prospectus means the prospectus or prospectuses (whether preliminary or final) included in any Registration Statement and relating to Registrable Shares, as amended or supplemented and including all material incorporated by reference in such prospectus or prospectuses.
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Records has the meaning set forth in Section 6(a)(viii).
Registering Holder has the meaning set forth in Section 2(a)(i).
Registrable Shares means, at any time, (i) the shares of Common Stock received by Huatai pursuant to the dissolution of AssetMark Holdings LLC in connection with the IPO and (ii) any securities issued by the Company after the date hereof in respect of the Common Stock by way of conversion, exchange, stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization, but excluding (iii) any and all Common Stock referred to in clauses (i) and (ii) that at any time after the date hereof (a) have been disposed of pursuant to an effective registration statement as declared effective by the SEC, (b) have been sold pursuant to Rule 144 under the Securities Act, (c) have been sold in a transaction where a subsequent public distribution of such securities would not require registration under the Securities Act, (d) are eligible for sale pursuant to Rule 144 under the Securities Act without limitation thereunder on volume or manner of sale, (e) are not outstanding or (f) have been transferred in violation of Section 9 hereof, or to a Person that is not a Permitted Transferee (or any combination of clauses (a), (b), (c), (d), (e) and (f)). It is understood and agreed that, once a security of the kind described in clause (i) or (ii) above becomes a security of the kind described in clause (iii) above, such security shall cease to be a Registrable Share for all purposes of this Agreement and the Companys obligations regarding Registrable Shares hereunder shall cease to apply with respect to such security.
Registration Expenses has the meaning set forth in Section 7(a).
Registration Statement means any registration statement of the Company which covers any of the Registrable Shares pursuant to the provisions of this Agreement, including the Prospectus, amendments and supplements to such Registration Statement, including post-effective amendments, all exhibits and all documents incorporated by reference in such Registration Statement.
Requesting Holders has the meaning set forth in Section 2(a)(i).
SEC means the Securities and Exchange Commission or any successor agency.
Securities Act means the Securities Act of 1933, as amended.
Shares means shares of Common Stock and, if at any time Registrable Shares includes securities of the Company other than Common Stock, the class or classes of such other securities of the Company.
Shelf Registration has the meaning set forth in Section 2(e).
Suspension Period has the meaning set forth in Section 2(c)(iv).
Termination Date means the first date on which neither Huatai nor a Transferee holds any Registrable Shares.
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Transferee means any Permitted Transferee to which Huatai has transferred or assigned all or a portion of its rights hereunder pursuant to Section 10.
underwritten offering means a registered offering in which Shares of the Company are sold to one or more underwriters on a firm-commitment basis for reoffering to the public pursuant to an effective registration statement under the Securities Act, other than pursuant to a registration statement on Form S-4 or S-8 or any similar or successor form.
(b) Other Definitional and Interpretative Provisions . Unless the context requires otherwise:
(i) references to any statute, regulation, rule or form as of any time shall mean such statute, regulation, rule or form as amended or modified and shall also include any successor statute, regulation, rule or form from time to time;
(ii) references to any agreement or contract are to that agreement or contract as amended, modified or supplemented from time to time in accordance with the terms hereof and thereof;
(iii) including shall be construed as inclusive without limitation, in each case notwithstanding the absence of any express statement to such effect, or the presence of such express statement in some contexts and not in others;
(iv) any singular term in this Agreement shall be deemed to include the plural, and any plural term the singular;
(v) Writing, written and comparable terms refer to printing, typing and other means of reproducing words (including electronic media) in a visible form;
(vi) references to Section are references to Sections of this Agreement;
(vii) words such as herein, hereof, hereunder and words of like import when used in this Agreement refer to this Agreement as a whole;
(viii) captions herein are included for convenience of reference only and shall be ignored in the construction or interpretation hereof;
(ix) references to business day mean any day except Saturday, Sunday, any day that is a legal holiday and any day on which banking institutions in the State of New York generally are authorized or required by law or other governmental action to close;
(x) references from or through any date mean, unless otherwise specified, from and including or through and including, respectively; and
(xi) references to dollars and $ mean U.S. dollars.
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Section 2. Demand Registration .
(a) Right to Request Registration .
(i) Subject to the provisions hereof, if, at any time following the date of the pricing of the IPO until the Termination Date, a Holder or group of Holders holding at least 25% of the Registrable Shares held by all Holders (the Requesting Holders ) requests registration under the Securities Act of all or part of the Registrable Shares held by such Requesting Holders (a Demand Registration ), then the Company shall promptly give notice of such requested registration, at least 20 business days prior to the anticipated filing date of the Registration Statement relating to such Demand Registration, to each Holder who did not make such request (the Non-Requesting Holders ) and thereupon shall use its reasonable best efforts to effect, as promptly as practicable, the registration under the Securities Act of (i) all Registrable Shares for which the Requesting Holders have requested registration under this Section 2(a) and (ii) subject to the restrictions set forth in Section 2(a)(ii), Section 2(c) and Section 3, all Registrable Shares that any Non-Requesting Holder has requested the Company to register by request received by the Company not more than 10 business days after such Non-Requesting Holder receives the Companys notice of the Demand Registration (such Non-Requesting Holders, together with the Requesting Holders, the Registering Holders ).
(ii) Promptly after the expiration of the 10-business day-period referred to in Section 2(a)(i), the Company shall notify all Registering Holders of the identities of the other Registering Holders and the number of Registrable Shares requested to be included therein. At any time prior to the effective date of the Registration Statement relating to such Demand Registration, the Requesting Holders may revoke such request, without liability to any of the other Registering Holders, by providing a notice to the Company revoking such request.
(iii) If any of the Registrable Shares covered by a Demand Registration are to be sold in an underwritten offering, the Company shall have the right to select the managing underwriter or underwriters to lead the offering.
(iv) The Company shall be liable for and pay all Registration Expenses in connection with any Demand Registration, regardless of whether such Registration is effected.
(b) Priority on Demand Registration . If such Demand Registration is an underwritten offering and the managing underwriters of the requested Demand Registration advise the Company and the Requesting Holders that in their opinion the number of Shares proposed to be included in the Demand Registration (including any securities that the Company proposes to include that are not Registrable Shares) exceeds the largest number of Shares which can be sold in such underwritten offering without having an adverse effect on such offering (including the price per share of the Shares proposed to be sold in such underwritten offering) (the Maximum Offering Size ), the Company shall include in such Demand Registration, in the priority listed below, up to the Maximum Offering Size:
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(i) first, all Registrable Shares requested to be registered by the Requesting Holders (in the case of multiple Requesting Holders, allocated, if necessary for the offering not to exceed the Maximum Offering Size, pro rata among such Requesting Holders on the basis of the relative number of Registrable Shares so requested to be included in such Demand Registration by each);
(ii) second, all Registrable Shares requested to be included in such registration by any other Registering Holder (in the case of multiple other Registering Holders, allocated, if necessary for the offering not to exceed the Maximum Offering Size, pro rata among such other Registering Holders on the basis of the relative number of Registrable Shares so requested to be included in such Demand Registration by each such Registering Holder); and
(iii) third, any Shares proposed to be registered by any other Persons (including the Company), with such priorities among them as the Company shall determine.
(c) Restrictions on Demand Registration .
(i) Subject to Section 2(c)(iii), the Company shall not be obligated to effect more than four Demand Registrations in total, other than Demand Registrations to be effected pursuant to a Registration Statement on Form S-3, for which an unlimited total number of Demand Registrations shall be permitted, and in no event shall the Company be required to effect more than one Demand Registration hereunder within any six-month period.
(ii) Neither Huatai nor any Transferee shall be entitled to request a Demand Registration (i) within six months after Huatai or any Transferee has sold Shares in a Piggyback Registration or (ii) at any time when the Company is diligently pursuing a primary or secondary underwritten offering.
(iii) The Company shall not be obligated to effect a Demand Registration unless the aggregate gross proceeds expected to be received from the sale of the Registrable Shares by the Requesting Holders equals or exceeds the Minimum Amount (based on the then-current market prices).
(iv) The Company may postpone effecting a Registration Statement pursuant to this Section 2 and, if it so chooses, withdraw any Registration Statement that has been filed, on one occasion during any period of six consecutive months for a reasonable time specified in the notice but not exceeding 90 days, if (1) an investment banking firm of recognized national standing shall advise the Company and the Requesting Holders in writing that effecting the registration would materially and adversely affect an offering of securities of the Company the preparation of which had then been commenced, (2) the Company is in possession of material non-public information the disclosure of which during the period specified in such notice the Company reasonably believes would not be in the best interests of the Company, or (3) the Company determines, in good faith and in its sole discretion, that the registration or offering to be delayed would, if not delayed,
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adversely affect the Company and its subsidiaries taken as a whole or interfere with, or jeopardize the success of, any pending or proposed material transaction, including any debt or equity financing, any acquisition or disposition, any recapitalization or reorganization or any other material transaction, whether due to commercial reasons or any other reason. Any period during which the Company has delayed effecting a Registration Statement pursuant to this Section 2(c)(iv) is herein referred to as a Suspension Period . If, pursuant to this Section 2(c)(iv), the Company delays or withdraws a Demand Registration requested by the Requesting Holders, the Requesting Holders shall be entitled to withdraw such request and, if so withdrawn, such request shall not count as a registration for purposes of this Section 2. The Company shall provide prompt written notice to the Registering Holders of the commencement and termination of any Suspension Period (and any withdrawal of a registration statement pursuant to this Section 2(c)(iv)), but shall not be obligated under this Agreement to disclose the reasons therefor. The Registering Holders receiving such notice shall keep the existence of each Suspension Period confidential and refrain from making offers and sales of Registrable Shares (and direct any other Persons making such offers and sales to refrain from doing so) during each Suspension Period. In no event shall a Suspension Period or Suspension Periods be in effect for an aggregate of more than 180 days in any calendar year.
(d) Effective Demand Registration . A Demand Registration shall not be deemed to have occurred:
(i) unless the Registration Statement relating thereto (1) has become effective under the Securities Act and (2) has remained effective for a period of at least 60 days (or such shorter period in which all Registrable Shares of the Registering Holders included in such registration have actually been sold thereunder); provided that such Registration Statement shall not be considered a Demand Registration if (x) after such Registration Statement becomes effective, such Registration Statement or the related offer, sale or distribution of Registrable Shares thereunder is interfered with by any stop order, injunction or other order or restriction imposed by the SEC or any other Governmental Entity for any reason not attributable to the Registering Holders and such interference is not thereafter eliminated so as to permit the completion of the contemplated distribution of Registrable Shares or (y) in the case of an underwritten offering, the conditions specified in the related underwriting agreement, if any, are not satisfied or waived for any reason not attributable to the Registering Holders; and as a result of any such circumstances described in clause (x) or (y), less than 75% of the Registrable Shares covered by such Registration Statement have been sold thereunder; or
(ii) if the Maximum Offering Size is reduced in accordance with Section 2(b) such that less than 50% of the Registrable Shares of the Requesting Holders sought to be included in such registration are included.
(e) Shelf Registration . At any time when the Company is eligible to use Form S-3 prior to the Termination Date, upon the request of the Requesting Holders, the Company shall use its reasonable best efforts to file a shelf registration statement (the Shelf Registration ) with respect to the Registrable Shares and to cause such Shelf Registration to become effective
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and to keep such Shelf Registration in effect until the earlier of (x) the three-year anniversary of the most recent effective date of such Shelf Registration and (y) the date the Registering Holders cease to hold any of the Registrable Shares covered by such Shelf Registration. Any offer or sale of Registrable Shares pursuant to the Shelf Registration in any underwritten offering shall be deemed to be a Demand Registration subject to the provisions of this Section 2. The Company may, in its sole discretion, elect to effectuate a Demand Registration pursuant to a Shelf Registration if, at the time the request for such Demand Registration was made, the Company had in effect a Shelf Registration pursuant to which such offering can be effected.
Section 3. Piggyback Registrations .
(a) Right to Piggyback . If, at any time following the IPO at which any Holder owns any Registrable Shares (but prior to the Termination Date), the Company proposes to register any Shares under the Securities Act (other than on a registration statement on Form S-8, F-8, S-4 or F-4 or any other registration relating to Shares issuable upon exercise or vesting of employee equity grants or in connection with any employee benefit plan of the Company or in connection with a direct or indirect acquisition by the Company of another Person), whether for its own account or for the account of one or more holders of Shares (other than the Holders), the Company shall, each such time, give prompt notice at least 10 business days prior to the anticipated filing date of the registration statement relating to such registration to each Holder (to the extent such Holder holds any Registrable Shares on the date such notice is to be sent), which notice shall set forth such Holders rights under this Section 3 and shall offer such Holder the opportunity to include in such registration statement the number of Registrable Shares such Holder may request (a Piggyback Registration ), subject to the provisions of Section 3(b). Upon the request of a Holder made within 5 business days after its receipt of notice from the Company, or such shorter time as is reasonably specified by the Company in light of the circumstances in the case of a primary offering but in no event less than two business days (which request shall specify the number of Registrable Shares requested to be registered in such Piggyback Registration), the Company shall use its reasonable best efforts to effect the registration under the Securities Act of all Registrable Shares with respect to which the Company has received a written request for inclusion therein from such Holder; provided that (i) any Holder requesting to include its Registrable Shares in the Companys registration must sell its Registrable Shares on the same terms and conditions provided for in the underwriting or other distribution arrangements approved by the Company and that apply to the Company or the other holders of Shares involved in the registration, as applicable, and (ii) if, at any time after giving notice of its intention to register any Shares pursuant to this Section 3(a) and prior to the effective date of the Registration Statement filed in connection with such registration, the Company shall determine for any reason not to register such securities, the Company shall give notice to each Holder that requested its Registrable Shares to be included therein and, thereupon, shall be relieved of its obligation to register any Registrable Shares in connection with such registration. No registration effected under this Section 3 shall relieve the Company of its obligations to effect a Demand Registration to the extent required by Section 2. The Company shall pay all Registration Expenses in connection with each Piggyback Registration.
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(b) Priority on Primary Piggyback Registrations . If a Piggyback Registration is initiated as a primary underwritten offering on behalf of the Company and the managing underwriters advise the Company that in their opinion the number of Shares proposed to be included in such offering exceeds the Maximum Offering Size, the Company shall include in such registration and offering, in the following priority, up to the Maximum Offering Size (i) first, the number of Shares that the Company proposes to sell, and (ii) second, the number of Shares requested to be included therein by holders of Shares, including the Holders (to the extent such Holders have requested to include Registrable Shares in such Piggyback Registration), pro rata among all such holders on the basis of the number of Shares requested to be included therein by such holders or as such holders and the Company may otherwise agree.
(c) Priority on Secondary Piggyback Registrations . If a Piggyback Registration is initiated as an underwritten registration on behalf of a holder of Shares other than a Holder, and the managing underwriters advise the Company that in their opinion the number of Shares proposed to be included in such registration exceeds the Maximum Offering Size, then the Company shall include in such registration (i) first, the number of Shares requested to be included therein by the holder(s) requesting such registration, (ii) second, the number of Shares requested to be included therein by other holders of Shares including the Holders (to the extent such Holders have requested to include Registrable Shares in such Piggyback Registration), pro rata among such holders on the basis of the number of Shares requested to be included therein by such holders or as such holders and the Company may otherwise agree and (iii) third, the number of Shares that the Company proposes to sell.
(d) Selection of Underwriters . If any Piggyback Registration is a primary or secondary underwritten offering, the Company shall have the right to select the managing underwriter or underwriters to administer such offering.
Section 4. Lock-up Arrangements .
(a) If the Company sells Shares or other securities convertible into or exchangeable for (or otherwise representing a right to acquire) Shares in a primary underwritten offering pursuant to any registration statement under the Securities Act (whether or not any Holder is given an opportunity to participate), or if any other Person sells Shares in a secondary underwritten offering pursuant to a Piggyback Registration, and if the managing underwriters for such offering advise the Company (in which case the Company promptly shall notify the Holders), or if the Company determines in its sole discretion, that a public sale or distribution of Shares outside such offering would adversely affect such offering, then, if requested by the Company, neither the Company nor any Holder shall sell, transfer, pledge, issue, grant or otherwise dispose of, directly or indirectly (including by means of any short sale), or request the registration of, any Registrable Shares or former Registrable Shares (or any securities of any Person that are convertible into or exchangeable for, or otherwise represent a right to acquire, any such shares) (except as part of such underwritten offering or with the consent of the underwriters in such offering) (such agreement not to sell, a Lock-Up Agreement ) during the period beginning 7 days prior to, and extending through the 90 th day after, the effective date of the applicable registration statement (or, in the case of an offering on a delayed or continuous basis pursuant to Rule 415 (or any successor rule) under the Securities Act, the date that the applicable public offering commences), or such earlier time as the Company and the managing underwriters shall agree. Notwithstanding the foregoing, no Holder shall be obligated to execute a Lock-Up Agreement unless the Company and each other selling stockholder, if any, in such offering also executes agreements substantially similar to such Lock-Up Agreement. The provisions of this Section 4 shall apply as long as any Holder is the beneficial owner of any Registrable Shares or any Shares that were but have ceased to be Registrable Shares.
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(b) Notwithstanding any other provision of this Agreement, the Company shall not be obligated to take any action hereunder that would violate any lock-up or similar restriction binding on the Company in connection with a prior or pending registration or underwritten offering.
Section 5. Participating in Underwritten Offering . No Holder may participate in any underwritten offering hereunder unless such Holder (i) agrees to sell such Holders Registrable Shares on the basis provided in any underwriting arrangements approved by the Persons entitled hereunder to approve such arrangements and (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements and the provisions of this Agreement in respect of registration rights, including without limitation arranging for any necessary opinions of counsel with respect to such Holder and its Registrable Shares.
Section 6. Registration Procedures .
(a) Whenever a Holder requests that any Registrable Shares be registered pursuant to this Agreement, subject to the provisions of this Agreement, the Company shall use its reasonable best efforts to effect the registration and the sale of such Registrable Shares in accordance with the intended methods of disposition thereof as soon as practical as provided herein, and, pursuant thereto, the Company shall, as soon as practical as provided herein:
(i) use its reasonable best efforts to prepare and file with the SEC a Registration Statement on any form for which the Company then qualifies or that counsel for the Company shall deem appropriate and which form shall be available for the sale of the Registrable Shares to be registered thereunder in accordance with the intended method of distribution thereof and cause such Registration Statement to become effective (unless it is automatically effective upon filing);
(ii) use its reasonable best efforts to prepare and file with the SEC such amendments and supplements to such Registration Statement and the Prospectus used in connection therewith as may be necessary to comply with the applicable requirements of the Securities Act and to keep such Registration Statement effective for the relevant period required hereunder, but no longer than is necessary to complete the distribution of the Shares covered by such Registration Statement; and before filing such Registration Statement or Prospectus used in connection therewith or any amendments or supplements thereto, if requested, furnish to the Registering Holders and their counsels copies of all such documents proposed to be filed, including documents incorporated by reference in the Prospectus and one set of the exhibits incorporated by reference, and such Holders and their counsels shall have a reasonable opportunity to review and comment on any information pertaining to such Holders that is contained in such Registration Statement or Prospectus (or amendment or supplement thereto);
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(iii) furnish to each Registering Holder and each managing underwriter, if any, without charge, conformed copies of each Registration Statement and amendment thereto and copies of each supplement thereto promptly after they are filed with the SEC (but only one set of exhibits thereto need be provided) and deliver, without charge, such number of copies of the preliminary and final Prospectus and any supplement thereto as the Registering Holders may reasonably request to facilitate the disposition of the Registrable Shares covered by such Registration Statement in conformity with the requirements of the Securities Act;
(iv) promptly notify the Registering Holders of any stop order issued or threatened by the SEC or any state securities commission and take all reasonable actions required to prevent the entry of such stop order, or to remove or withdraw any order suspending the effectiveness of any Registration Statement, or lift any suspension of the qualification or exemption from qualification of any Registrable Shares for sale in any jurisdiction in the United States;
(v) use reasonable best efforts to register or qualify such Registrable Shares under such other securities or blue sky laws of such U.S. jurisdictions as the Registering Holders reasonably request (in light of such Holders intended plan of distribution) and continue such registration or qualification in effect in such jurisdictions for as long as the applicable Registration Statement may be required to be kept effective under this Agreement; provided that the Company will not be required to (x) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this subparagraph, (y) subject itself to taxation in any such jurisdiction or (z) consent to general service of process in any such jurisdiction;
(vi) promptly notify the Registering Holders, at any time when a Prospectus relating thereto would be required under the Securities Act to be delivered by such distributor, of the occurrence of any event as a result of which the Prospectus included in such Registration Statement contains an untrue statement of a material fact or omits a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, and the Company shall use its reasonable best efforts to prepare, as soon as practical, a supplement or amendment to such Prospectus so that, as thereafter delivered to any prospective purchasers of such Registrable Shares, such Prospectus shall not contain an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The Registering Holders agree that, upon receipt of any notice form the Company of the happening of any event of the kind described in this subparagraph, the Registering Holders shall immediately discontinue (and direct any other Persons making offers and sales of Registrable Shares to immediately discontinue) offers and sales of the Registrable Shares pursuant to the Registration Statement covering such Registrable Share until the Registering Holders are advised in writing by the Company that the use of the Prospectus may be resumed or it is furnished with a supplemented or amended Prospectus and, if so directed by the Company, the Registering Holders will deliver to the Company all copies, other than permanent file copies then in any Registering Holders possession, of the Prospectus covering such Registrable Shares as of the time of receipt of such notice from the Company;
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(vii) in the case of an underwritten offering in which a Holder participates pursuant to a Demand Registration or a Piggyback Registration, enter into customary agreements (including an underwriting agreement in customary form), and take all such other customary and reasonable actions as are reasonably required to expedite or facilitate the disposition of such Registrable Shares (including making members of senior management of the Company available at reasonable times and places to participate in road shows, investor calls and similar marketing efforts);
(viii) upon execution of confidentiality agreements in form and substance reasonably satisfactory to the Company (should the Company, in its sole discretion, require such confidentiality agreements), make available for inspection by the Registering Holders and any managing underwriter participating in any disposition pursuant to a Registration Statement being filed by the Company pursuant to this Agreement and any attorney, accountant or other professional retained by the Registering Holders or such managing underwriter (collectively, the Inspectors ), all financial and other records, pertinent corporate documents and properties of the Company (collectively, the Records ) as shall be reasonably necessary or desirable to enable them to exercise their due diligence responsibility, and cause the Companys officers, directors and employees to supply all information reasonably requested by any Inspector in connection with such Registration Statement. Records that the Company determines, in good faith, to be confidential and that it notifies the Inspectors are confidential shall not be disclosed by the Inspectors unless (1) the disclosure of such Records is necessary to avoid or correct a misstatement or omission in such Registration Statement or (2) the release of such Records is ordered pursuant to a subpoena or other order from a court of competent jurisdiction; provided that in no event shall the Company be required to disclose Records the disclosure of which is prohibited by applicable law or pre-existing applicable contractual restrictions. Each Holder agrees that information obtained by it as a result of such inspections shall be deemed confidential and shall not be used by it or its Affiliates as the basis for any market transactions in the Registrable Shares unless and until such information is made generally available to the public. Each Holder further agrees that, upon learning that disclosure of such Records is sought in a court of competent jurisdiction, it shall give notice to the Company and allow the Company, at its expense, to undertake appropriate action to prevent disclosure of the Records deemed confidential;
(ix) use its reasonable best efforts to cause all such Registrable Shares to be listed on any securities exchange or quotation system on which any of the Registrable Shares are then listed or traded;
(x) provide a transfer agent and registrar for all such Registrable Shares not later than the effective date of such Registration Statement;
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(xi) furnish to each managing underwriter, if any, a signed counterpart, addressed to such managing underwriter, of (1) an opinion or opinions of counsel to the Company and (2) a comfort letter or comfort letters from the Companys independent public accountants, each in customary form and covering such matters of the kind customarily covered by opinions or comfort letters, as the case may be, as the managing underwriter reasonably requests;
(xii) make generally available to its stockholders a consolidated earnings statement (which need not be audited) for a period of 12 months beginning after the effective date of the Registration Statement as soon as reasonably practicable after the end of such period, which earnings statement shall satisfy the requirements of an earnings statement under Section 11(a) of the Securities Act and Rule 158 thereunder; and
(xiii) promptly notify the Registering Holders and the managing underwriter of any underwritten offering, if any:
(1) when the Registration Statement, any pre-effective amendment, the Prospectus or any Prospectus supplement or any post-effective amendment to the Registration Statement has been filed and, with respect to the Registration Statement or any post-effective amendment, when the same has become effective;
(2) of any request by the SEC for amendments or supplements to the Registration Statement or the Prospectus or for any additional information regarding Huatai and/or any Transferee; and
(3) of the receipt by the Company of any notification with respect to the suspension of the qualification of any Registrable Shares for sale under the applicable securities or blue sky laws of any jurisdiction.
For the avoidance of doubt, the provisions of clauses (vii), (viii), (xii) and (xiii) of this Section 6(a) shall apply only in respect of an underwritten offering and only if (based on market prices at the time the offering is requested by Huatai and/or any Transferee) the number of Registrable Shares to be sold in the offering would reasonably be expected to yield gross proceeds to the Requesting Holders of at least the Minimum Amount.
(b) At all times after the Company has filed a registration statement with the SEC pursuant to the requirements of the Securities Act that covers any Registrable Shares and until the Termination Date, the Company shall use reasonable best efforts to continuously maintain in effect the registration statement of Common Stock under Section 12 of the Exchange Act and to use reasonable best efforts to file all reports required to be filed by it under the Securities Act and the Exchange Act and the rules and regulations adopted by the SEC thereunder, all to the extent required to enable the Holders to be eligible to sell Registrable Shares (if any) pursuant to Rule 144 under the Securities Act.
(c) The Company may require, and each Holder agrees to provide, information regarding the Holders and any distributor of the Registrable Shares and the distribution of such securities as the Company may from time to time reasonably request. Notwithstanding anything to the contrary in this Agreement, the Company shall not be required to file a Registration Statement or include Registrable Shares in a Registration Statement unless it has received from the Registering Holders, at least five days prior to the anticipated filing date of the Registration Statement, requested information required to be provided by Huatai and/or any Transferee for inclusion therein.
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(d) The Company may prepare and deliver an issuer free-writing prospectus (as such term is defined in Rule 405 under the Securities Act) in lieu of any supplement to a prospectus, and references herein to any supplement to a Prospectus shall include any such issuer free-writing prospectus. No Holder or any other seller of Registrable Shares may use a free-writing prospectus to offer or sell any such shares without the Companys prior written consent.
(e) It is understood and agreed that any failure of the Company to file a Registration Statement or any amendment or supplement thereto or to cause any such document to become or remain effective or usable within or for any particular period of time as provided in this Agreement, due to reasons that are not reasonably within its control, or due to any refusal of the SEC to permit a registration statement or prospectus to become or remain effective or to be used because of unresolved SEC comments thereon (or on any documents incorporated therein by reference) despite the Companys good faith and reasonable best efforts to resolve those comments, shall not be a breach of this Agreement.
(f) It is further understood and agreed that the Company shall not have any obligations under this Section 6 at any time on or after the Termination Date, unless an underwritten offering in which a Holder participates has been priced but not closed prior to the Termination Date, in which event the Companys obligations hereunder shall continue with respect to such offering until it is so closed (but not more than 60 days after the commencement of the offering).
Section 7. Registration Expenses .
(a) Subject to the next sentence, all expenses incident to the Companys performance of or compliance with this Agreement, including all registration and filing fees; fees and expenses of compliance with securities or blue sky laws; FINRA fees; listing application fees; expenses in connection with the preparation and printing of any Registration Statements, Prospectuses and other documents in connection therewith and any amendments or supplements thereto; cost of distributing Prospectuses in preliminary and final form as well as any supplements thereto; transfer agents and registrars fees; and fees and disbursements of counsel for the Company and all independent certified public accountants and other Persons retained by the Company (all such expenses being herein referred to as Registration Expenses ) (but not including any underwriting discounts or commissions attributable to the sale of Registrable Shares or fees and expenses of counsel and any other advisor representing any underwriters or other distributors), shall be borne by the Company. The Registering Holders shall bear all underwriting discounts and commissions associated with any sale of Registrable Shares and shall pay all of their costs and expenses, including all fees and expenses of any counsel (and any other advisers) representing the Holders and any expenses in connection with the Stock Exchange of Hong Kong Limited, the Shanghai Stock Exchange or the China Securities Regulatory Commission as well as any stock transfer taxes.
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(b) The obligation of the Company to bear the expenses described in Section 7(a) shall apply irrespective of whether a registration, once properly demanded or requested, becomes effective or is withdrawn or suspended; provided , however , that Registration Expenses for any Registration Statement withdrawn solely at the request of a Holder (unless withdrawn following commencement of a Suspension Period pursuant to Section 2(c)(iv)) shall be borne by the Holders.
Section 8. Indemnification .
(a) The Company shall indemnify, to the fullest extent permitted by law, each Holder and each Person who controls a Holder (within the meaning of the Securities Act) against all losses, claims, damages, liabilities, judgments, costs (including reasonable costs of investigation) and expenses (including reasonable attorneys fees) ( Damages ) arising out of or based upon any untrue or alleged untrue statement of a material fact contained in any Registration Statement or Prospectus relating to the Registrable Shares or any amendment thereof or supplement thereto or arising out of or based upon any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such Damages arise out of or are based upon information furnished to the Company by or on behalf of a Holder expressly for use therein. In connection with an underwritten offering in which a Holder participates conducted pursuant to a registration effected hereunder, the Company shall indemnify each participating underwriter and each Person who controls such underwriter (within the meaning of the Securities Act) to the same extent as provided in this Section 8(a) with respect to the indemnification of the Holders, mutatis mutandis .
(b) Each Holder holding Registrable Shares included in any Registration Statement shall jointly and severally indemnify, to the fullest extent permitted by law, the Company, its officers and directors and each Person (other than Holders) who controls the Company (within the meaning of the Securities Act) against all Damages arising out of or based upon any untrue or alleged untrue statement of material fact contained in such Registration Statement or related Prospectus, or any amendment or supplement thereto, or any preliminary or free writing prospectus, or arising out of or based upon any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, but only insofar as such Damages arise out of or are based upon information furnished to the Company by or on behalf of a Holder expressly for use therein. In connection with an underwritten offering in which a Holder participates conducted pursuant to a registration effected hereunder, each Holder holding Registrable Shares included in any Registration Statement shall jointly and severally indemnify each participating underwriter and each Person who controls such underwriter (within the meaning of the Securities Act) to the same extent as provided in this Section 8(b) with respect to the Holders indemnification of the Company. No Holder shall be liable under this Section 8(b) for any Damages in excess of the aggregate net proceeds realized by the Holders in the sale of Registrable Shares to which such Damages relate.
(c) Any Person entitled to indemnification hereunder shall (i) give prompt written notice to the indemnifying Person of any claim with respect to which it seeks indemnification and (ii) permit such indemnifying Person to assume the defense of such claim with counsel reasonably satisfactory to the indemnified Person. Failure so to notify the indemnifying Person shall not relieve the indemnifying Person from any liability that it may have to an indemnified Person except to the extent that the indemnifying Person is materially and adversely prejudiced thereby. The indemnifying Person shall not be subject to any liability for any settlement made by
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the indemnified Person without its consent (but such consent may not be unreasonably withheld). An indemnifying Person who is entitled to, and elects to, assume the defense of a claim shall not be obligated to pay the fees and expenses of more than one counsel (in addition to one local counsel, if applicable) for all Persons indemnified (hereunder or otherwise) by such indemnifying Person with respect to such claim (and all other claims arising out of the same circumstances), unless in the reasonable judgment of any indemnified Person there may be one or more legal or equitable defenses available to such indemnified Person which are in addition to or may conflict with those available to another indemnified Person with respect to such claim, in which case such maximum number of counsel for all indemnified Persons shall be two rather than one. If an indemnifying Person is entitled to, and elects to, assume the defense of a claim, the indemnified Person shall continue to be entitled to participate in the defense thereof, with counsel of its own choice, but, except as set forth above, the indemnifying Person shall not be obligated to reimburse the indemnified Person for the costs thereof. The indemnifying Person shall not consent to the entry of any judgment or enter into or agree to any settlement relating to a claim or action for which any indemnified Person would be entitled to indemnification by any indemnified Person hereunder unless such judgment or settlement imposes no ongoing obligations on any such indemnified Person and includes as an unconditional term the giving, by all relevant claimants and plaintiffs to such indemnified Person, a release, satisfactory in form and substance to such indemnified Person, from all liabilities in respect of such claim or action for which such indemnified Person would be entitled to such indemnification. The indemnifying Person shall not be liable hereunder for any amount paid or payable or incurred pursuant to or in connection with any judgment entered or settlement effected with the consent of an indemnified Person unless the indemnifying Person has also consented to such judgment or settlement.
(d) The indemnification provided for under this Agreement shall remain in full force and effect regardless of any investigation made by or on behalf of the indemnified Person or any officer, director or controlling Person of such indemnified Person and shall survive the transfer of Registrable Shares and the Termination Date but only with respect to offers and sales of Registrable Shares made before the Termination Date or during the period following the Termination Date referred to in Section 6(f).
(e) If the indemnification provided for in or pursuant to this Section 8 is due in accordance with the terms hereof, but is held by a court to be unavailable or unenforceable in respect of any losses, claims, Damages, liabilities or expenses referred to herein, then each applicable indemnifying Person, in lieu of indemnifying such indemnified Person, shall contribute to the amount paid or payable by such indemnified Person as a result of such losses, claims, Damages, liabilities or expenses in such proportion as is appropriate to reflect the relative fault of the indemnifying Person on the one hand and of the indemnified Person on the other in connection with the statements or omissions which result in such losses, claims, damages, liabilities or expenses as well as any other relevant equitable considerations. The relative fault of the indemnifying Person on the one hand and of the indemnified Person on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the indemnifying Person or by the indemnified Person, and by such Persons relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. In no event shall the liability of the indemnifying Person be greater in amount than the amount for which such indemnifying Person would have been obligated to pay by way of indemnification if the indemnification provided for under Section 8(a) or Section 8(b) hereof had been available under the circumstances.
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Section 9. Securities Act Restrictions .
The Registrable Shares are restricted securities under the Securities Act and may not be offered or sold except pursuant to an effective registration statement or an available exemption from registration under the Securities Act. Accordingly, Huatai and any Transferee shall not, directly or through others, offer or sell any Registrable Shares except pursuant to a Registration Statement as contemplated herein or pursuant to Rule 144 or another exemption from registration under the Securities Act, if available. Prior to any transfer of Registrable Shares other than pursuant to an effective registration statement, Huatai or a Transferee, as applicable, shall notify the Company of such transfer and the Company may require Huatai or the Transferee, as applicable, to provide, prior to such transfer, such evidence that the transfer will comply with the Securities Act (including written representations or an opinion of counsel) as the Company may reasonably request. The Company may impose stop-transfer instructions with respect to any Registrable Shares that are to be transferred in contravention of this Agreement. Any certificates representing the Registrable Shares may bear a legend (and the Companys share registry may bear a notation) referencing the restrictions on transfer contained in this Agreement until such time as such securities have ceased to be (or are to be transferred in a manner that results in their ceasing to be) Registrable Shares. Subject to the provisions of this Section 9, the Company will replace any such legended certificates with unlegended certificates promptly upon surrender of the legended certificates to the Company or its designee, to facilitate a lawful transfer or at any time after such shares cease to be Registrable Shares.
Section 10. Transfers of Rights .
(a) None of the rights of Huatai under this Agreement shall be transferrable to any other Person except for Permitted Transferees. If Huatai transfers any rights under this Agreement to a Permitted Transferee, such Permitted Transferee shall, together with all other such Permitted Transferees and Huatai (to the extent Huatai continues to hold Registrable Shares), have the rights of Huatai under this Agreement, but only if the Permitted Transferee signs and delivers to the Company a written acknowledgment (in form and substance satisfactory to the Company) that it has joined with Huatai and the other Permitted Transferees as a party to this Agreement and has assumed the rights and obligations of Huatai hereunder with respect to the rights transferred to it by Huatai. Each such transfer shall be effective when (but only when) the Permitted Transferee has signed and delivered such written acknowledgment to the Company. Upon any such effective transfer, the Permitted Transferee shall automatically have the rights and obligations so transferred, and Huatais obligations under this Agreement and the rights not so transferred shall continue. Notwithstanding any other provision of this Agreement, no Person who acquires securities transferred in violation of this Agreement or who acquires securities that are not or upon acquisition cease to be Registrable Shares (including any securities acquired in an underwritten offering or pursuant to Rule 144), shall have any rights under this Agreement with respect to such securities, and such securities shall not have the benefits afforded hereunder to Registrable Shares.
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Section 11. Miscellaneous .
(a) Notices . Any notice or communication to the Company or Huatai and/or any Transferee by the other shall be duly given if sent by facsimile or in writing and delivered in person or mailed by first-class mail, postage prepaid, addressed as follows:
If to the Company:
AssetMark Financial Holdings, Inc.
1655 Grant Street, 10 th Floor
Concord, California 94520
Attention: Ted Angus, General Counsel
E-mail: ted.angus@assetmark.com
Telephone: (925) 521-2237
If to any Holder:
Huatai International Investment Holdings Limited
Unit 5801-05, 58/F, The Center, 99 Queens Road Central
Hong Kong
Attention: Gene Liu, Business Development
E-mail: geneliu.htsc.com
Telephone: (+852) 3658 6109
The Company, on the one hand, and the Holders, on the other hand, may by notice to the other designate additional or different addresses for subsequent notices or communications.
(b) No Waivers . No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.
(c) Assignment. Neither this Agreement nor any right, remedy, obligation nor liability arising hereunder or by reason hereof shall be assignable by any party hereto without the prior written consent of the other parties, and any attempt to assign any right, remedy, obligation or liability hereunder without such consent shall be void, except (i) an assignment, in the case of a merger or consolidation where such party is not the surviving entity, or a sale of substantially all of its assets, to the entity which is the survivor of such merger or consolidation or the purchaser in such sale or (ii) an assignment by Huatai to a Permitted Transferee in accordance with the terms hereof.
(d) No Third-Party Beneficiaries . Nothing contained in this Agreement, expressed or implied, is intended to confer upon any person or entity other than the Company and Huatai (and any Transferee), any benefits, rights, or remedies (except as specified in Section 8 hereof).
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(e) Governing Law; Submission to Jurisdiction; Waiver of Jury Trial. This Agreement will be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and to be performed entirely within such State. Each of the parties hereto agrees (a) to submit to the non-exclusive personal jurisdiction of the State or Federal courts in the Borough of Manhattan, The City of New York, (b) that non-exclusive jurisdiction and venue shall lie in the State or Federal courts in the State of New York, and (c) that notice may be served upon such party at the address and in the manner set forth for such party in Section 11(a). To the extent permitted by applicable law, each of the parties hereto hereby unconditionally waives trial by jury in any legal action or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby.
(f) Counterparts . This Agreement may be executed in any number of counterparts (including by e-mail, PDF or facsimile) and by different parties hereto in separate counterparts, with the same effect as if all parties had signed the same document. All such counterparts shall be deemed an original, shall be construed together and shall constitute one and the same instrument.
(g) Entire Agreement . This Agreement contains the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes and replaces all other prior agreements, written or oral, among the parties hereto with respect to the subject matter hereof.
(h) Severability . If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such a determination, the parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner such that the transactions contemplated hereby be consummated as originally contemplated to the fullest extent possible.
(i) Amendments . The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given without the prior written consent of the Company and Huatai.
[Signature Pages Follow]
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IN WITNESS WHEREOF, this Agreement has been duly executed by each of the parties hereto as of the date first written above.
ASSETMARK FINANCIAL HOLDINGS, INC. | ||
By: | ||
Name: | ||
Title: | ||
HUATAI INTERNATIONAL INVESTMENT HOLDINGS LIMITED | ||
By: | ||
Name: | ||
Title: |
[ Signature Page to Registration Rights Agreement ]
Exhibit 10.1
OFFICE LEASE
1655 GRANT STREET, CONCORD, CALIFORNIA
SFG O WNER A, LLC
a Delaware limited liability company,
as Landlord,
and
G ENWORTH F INANCIAL W EALTH M ANAGEMENT , I NC .,
a California corporation,
as Tenant
1655 Grant Street |
Genworth Financial Wealth Management, Inc. |
TABLE OF CONTENTS
Page | ||||
ARTICLE 1 PREMISES, BUILDING, PROJECT, AND COMMON AREAS |
1 | |||
ARTICLE 2 LEASE TERM; OPTION TERMS |
2 | |||
ARTICLE 3 BASE RENT |
7 | |||
ARTICLE 4 ADDITIONAL RENT |
7 | |||
ARTICLE 5 USE OF PREMISES |
9 | |||
ARTICLE 6 SERVICES AND UTILITIES |
11 | |||
ARTICLE 7 REPAIRS |
14 | |||
ARTICLE 8 ADDITIONS AND ALTERATIONS |
15 | |||
ARTICLE 9 COVENANT AGAINST LIENS |
17 | |||
ARTICLE 10 INDEMNIFICATION AND INSURANCE |
17 | |||
ARTICLE 11 DAMAGE AND DESTRUCTION |
21 | |||
ARTICLE 12 NONWAIVER |
23 | |||
ARTICLE 13 CONDEMNATION |
24 | |||
ARTICLE 14 ASSIGNMENT AND SUBLETTING |
24 | |||
ARTICLE 15 SURRENDER OF PREMISES; OWNERSHIP AND REMOVAL OF TRADE FIXTURES |
28 | |||
ARTICLE 16 HOLDING OVER |
29 | |||
ARTICLE 17 ESTOPPEL CERTIFICATES |
29 | |||
ARTICLE 18 SUBORDINATION, NON-DISTURBANCE & ATTORNMENT |
30 | |||
ARTICLE 19 DEFAULTS; REMEDIES |
31 | |||
ARTICLE 20 COVENANT OF QUIET ENJOYMENT |
34 | |||
ARTICLE 21 INTENTIONALLY OMITTED |
34 | |||
ARTICLE 22 INTENTIONALLY OMITTED |
34 |
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Genworth Financial Wealth Management, Inc. |
(i)
ARTICLE 23 SIGNS |
34 | |||
ARTICLE 24 COMPLIANCE WITH LAW |
35 | |||
ARTICLE 25 LATE CHARGES |
36 | |||
ARTICLE 26 LANDLORDS RIGHT TO CURE DEFAULT; PAYMENTS BY TENANT |
36 | |||
ARTICLE 27 ENTRY BY LANDLORD |
36 | |||
ARTICLE 28 TENANT PARKING |
37 | |||
ARTICLE 29 MISCELLANEOUS PROVISIONS |
39 |
EXHIBITS |
||
EXHIBIT A - |
LEGAL DESCRIPTION OF PROPERTY | |
EXHIBIT B - |
TENANT WORK LETTER | |
EXHIBIT C - |
OPERATING EXPENSE DEFINITIONS AND CALCULATION PROCEDURES | |
EXHIBIT D - |
RULES AND REGULATIONS | |
EXHIBIT E - |
FORM OF TENANTS ESTOPPEL CERTIFICATE | |
EXHIBIT F - |
NOTICE OF LEASE TERM DATES | |
EXHIBIT G - |
FORM OF SNDA | |
EXHIBIT H - |
JANITORIAL SERVICES | |
EXHIBIT I - |
CRITICAL ENVIRONMENTS |
1655 Grant Street |
Genworth Financial Wealth Management, Inc. |
(ii)
Accountant |
9 | |||
Additional Rent |
7 | |||
Alterations |
15 | |||
Applicable Laws |
35 | |||
Award |
6 | |||
Bank |
10 | |||
Base Building |
15 | |||
Base Rent |
7 | |||
Base Year |
1 | |||
Brokers |
43 | |||
Building |
1 | |||
Building Common Areas, |
2 | |||
Building Common Areas |
2 | |||
Building Hours |
11 | |||
CAP Process |
10 | |||
CEWA Work |
10 | |||
Comparable Deals |
3 | |||
Comparable Term |
4 | |||
Control, |
27 | |||
Cosmetic Alterations |
15 | |||
Cost Pools |
9 | |||
Critical Environments |
10 | |||
Direct Expenses |
1 | |||
Estimate |
9 | |||
Estimate Statement |
9 | |||
Estimated Excess |
9 | |||
Excess |
9 | |||
Exercise Notice |
4 | |||
Expense Year |
1 | |||
Force Majeure |
42 | |||
Garage |
3 | |||
Handbook |
10 | |||
Holidays |
11 | |||
HVAC |
11 | |||
Interest Rate |
36 | |||
Landlord |
1 | |||
Landlord Parties |
17 | |||
Landlords Option Rent Calculation |
4 | |||
Lease |
1 | |||
Lease Commencement Date |
2 | |||
Lease Expiration Date |
2 | |||
Lease Term |
2 | |||
Lines |
45 | |||
Market Rent |
3 |
1655 Grant Street |
Genworth Financial Wealth Management, Inc. |
(iii)
MPOE |
13 | |||
Neutral Arbitrator |
5 | |||
Operating Expenses |
1 | |||
Option Rent |
3 | |||
Option Term |
3 | |||
Option Term Improvement Allowance |
4 | |||
Other Improvements |
45 | |||
Outside Agreement Date |
5 | |||
Parking Rules |
37 | |||
Permitted Transferee |
27 | |||
Permitted Use |
2 | |||
Premises |
1 | |||
Project |
1 | |||
Project Common Areas |
2 | |||
Project Common Areas, |
2 | |||
Proposition 13 |
8 | |||
Renovations |
44 | |||
Rent Concessions |
3 | |||
Rent |
7 | |||
Review Period |
8 | |||
Rules and Regulations |
10 | |||
Statement |
9 | |||
Summary |
1 | |||
Swift Plaza |
1 | |||
Tax Expenses |
7 | |||
Tenant |
1 | |||
Tenant Parties |
18 | |||
Tenant Response Notice |
4 | |||
Tenants Option Rent Calculation |
4 | |||
Tenants Share |
8 | |||
Third Party Contractor |
21 | |||
Transfer |
27 | |||
Transfer Premium |
26 | |||
Transferee |
24 | |||
Transfers |
24 | |||
Work Letter |
1 |
1655 Grant Street |
Genworth Financial Wealth Management, Inc. |
(iv)
Execution Version
1655 GRANT STREET
SWIFT PLAZACONCORD, CALIFORNIA
OFFICE LEASE
This Office Lease (this Lease ), dated as of the date set forth in Section 1 of the Summary of Basic Lease Information (the Summary ), below, is made by and between SFG Owner A, LLC, a Delaware limited liability company ( Landlord ), and Genworth Financial Wealth Management, Inc., a California corporation ( Tenant ).
SUMMARY OF BASIC LEASE INFORMATION
1655 Grant Street |
Summary P-1 | Genworth Financial Wealth Management, Inc. |
3.3 | Lease Expiration Date: | The last day of the calendar month in which the date which is ninety-four (94) months after the Lease Commencement Date occurs; provided, however, to the extent the Lease Commencement Date occurs on the first day of a calendar month, then the Lease Expiration Date shall be the day immediately preceding the date which is ninety-four (94) months after the Lease Commencement Date. For example, if the Lease Commencement Date is September 1 st , 2013 the Lease Expiration Date will be June 30 th , 2021 and if the Lease Commencement Date is between September 2 nd , 2013 and September 30 th , 2013 the Lease Expiration Date will be July 31 st , 2021. | ||||
3.4 | Option Term(s): | Two (2) five (5)-year option(s) to renew, as more particularly set forth in Section 2.2 of this Lease. |
4. |
Base Rent (Article 3) : |
Period During Lease Term |
Annual
Base Rent |
Monthly
Installment of Base Rent |
Monthly
Rental Rate per Rentable Square Foot |
|||||||||
Months 01 - 10 |
$ | 0.00 | $ | 0.00 | $ | 0.00 | ||||||
Months 11 - 22 |
$ | 1,097,318.40 | $ | 91,443.20 | $ | 1.90 | ||||||
Months 23 - 34 |
$ | 1,126,195.20 | $ | 93,849.60 | $ | 1.95 | ||||||
Months 35 - 46 |
$ | 1,155,072.00 | $ | 96,256.00 | $ | 2.00 | ||||||
Months 47 - 58 |
$ | 1,183,948.80 | $ | 98,662.40 | $ | 2.05 | ||||||
Months 59 - 70 |
$ | 1,212,825.60 | $ | 101,068.80 | $ | 2.10 | ||||||
Months 71 - 82 |
$ | 1,241,702.40 | $ | 103,475.20 | $ | 2.15 | ||||||
Months 83 - 94 |
$ | 1,270,579.20 | $ | 105,881.60 | $ | 2.20 |
5. |
Base Year ( Exhibit C ): |
Calendar year 2014. | ||
6. |
Tenants Share ( Exhibit C ): |
16.48%. | ||
7. |
Permitted Use ( Article 5 ): |
Tenant shall use the Premises solely for general office use and uses incidental thereto (the Permitted Use ); provided, however, that notwithstanding anything to the contrary set forth hereinabove, and as more particularly set forth in the Lease, Tenant shall be responsible for operating and maintaining the Premises pursuant to, and in no event may Tenants Permitted Use violate, (A) Landlords Rules and Regulations, as that term is set forth in Article 5 of this Lease, (B) all Applicable Laws, as that term is set forth |
1655 Grant Street |
Summary P-2 | Genworth Financial Wealth Management, Inc. |
in Article 24 of this Lease, (C) all applicable zoning, building codes and the CC&Rs, as that term is set forth in Article 1 of this Lease, and (D) the character of the Building as a first-class office building. | ||||
8. | Security Deposit | |||
( Article 21 ) : | $0.00. | |||
9. |
Parking ( Article 28 ): |
A total of two hundred forty one (241) unreserved parking passes for the five (5) level parking structure located at 1575 Grant Street between Clayton Road and Oak Street (the Garage ). Additionally, two (2) reserved parking spaces and five (5) visitor spaces identified as designated for Tenant. | ||
10. |
Legal Notice Address of Tenant ( Section 29.16 ): |
Genworth Financial Wealth Management, Inc. 6620 West Broad Street, Building I Richmond, VA 23230 Attention: Sarah Bagby |
||
with a copy to: | ||||
Genworth Financial Wealth Management, Inc. 1655 Grant Street Concord, CA 94520 Attention: Ted F. Angus |
||||
11. | Legal Notice Address of Landlord | |||
( Section 29.16 ): |
SFG Owner A, LLC c/o Swift Realty Partners LLC 260 California Street, Suite 300 San Francisco, California 94111 Attention: Craig Firpo
with a copy to:
Orrick, Herrington & Sutcliffe, LLP 405 Howard Street San Francisco, California 94605 Attention: MJ. Pritchett |
1655 Grant Street |
Summary P-3 | Genworth Financial Wealth Management, Inc. |
12. | Broker(s) | |||
( Section 29.20 ): | ||||
Representing Landlord: | ||||
Representing Tenant: | Cornish & Carey Commercial | |||
Peter R. McGill, Cassidy Turley | Newmark Knight Frank | |||
Mark McNally, Cassidy Turley | Breck Lutz | |||
13. | Moving Allowance: | |||
None |
1655 Grant Street |
Summary P-4 | Genworth Financial Wealth Management, Inc. |
Execution Version
ARTICLE 1
PREMISES, BUILDING, PROJECT, AND COMMON AREAS
1.1 Premises, Building, Project and Common Areas .
1.1.1 The Premises . Landlord hereby leases to Tenant and Tenant hereby leases from Landlord the premises set forth in Section 2.2 of the Summary (the Premises ). The outline of the Premises is set forth in Exhibit A-1 attached hereto and the Premises has approximately the number of rentable square feet as set forth in Section 2.2 of the Summary. The parties hereto agree that the lease of the Premises is upon and subject to the terms, covenants and conditions (the TCCs ) herein set forth, and Tenant covenants as a material part of the consideration for this Lease to keep and perform each and all of such TCCs by it to be kept and performed and that this Lease is made upon the condition of such performance. The parties hereto hereby acknowledge that the purpose of Exhibit A-1 is to show the location of the Premises in the Building , as that term is defined in Section 1.1.2, below, only, and such Exhibit is not meant to constitute an agreement, representation or warranty as to the construction of the Premises, the precise area thereof or the specific location of the Common Areas , as that term is defined in Section 1.1.3 , below, or the elements thereof or of the accessways to the Premises or the Project , as that term is defined in Section 1.1.2 , below. Except as specifically set forth in this Lease and in the Work Letter attached hereto as Exhibit B (the Work Letter ), Landlord shall not be obligated to provide or pay for any improvement work or services related to the improvement of the Premises. Tenant also acknowledges that neither Landlord nor any agent of Landlord has made any representation or warranty regarding the condition of the Premises, the Building or the Project or with respect to the suitability of any of the foregoing for the conduct of Tenants business, except as specifically set forth in this Lease and the Work Letter.
1.1.2 The Building and The Project . The Premises are a part of the building set forth in Section 2.1 of the Summary (the Building ). The Building is located on a legal parcel of land described on Exhibit A-2 (the Property ). The Property is operated as part of an office project known as Swift Plaza which includes four office buildings and a parking structure. The term Project , as used in this Lease, shall mean (i) the Building, (ii) the Property, (iii) the adjacent properties included in the Project, which are owned by others, and which are 1755 Grant Street, 2000 Clayton Road and 2001 Clayton Road and the five-level parking structure commonly known as 1575 Grant Street, and (iv) at Landlords discretion, any additional real property, areas, land, buildings or other improvements added thereto. The Project is subject to a recorded Reciprocal Easements, Covenants, Conditions and Restrictions Agreement as amended (the CC&Rs ) which governs the operation of the exterior common areas, certain mechanical systems and the parking structure. Swift Realty Partners, LLC is currently the Project Manager and Garage Operator under the CC&Rs.
1.1.3 Common Areas . Tenant shall have the non-exclusive right to use in common with other tenants in the Building or the Project, and subject to the rules and regulations referred to in Article 5 of this Lease, those portions of the Building, the Property and the Project which are provided, from time to time, for use in common by Landlord, Tenant
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and any other tenants of Building or the Project (such areas, together with such other portions of the Project designated by Landlord, in its discretion, including certain areas designated for the exclusive use of certain tenants (provided such use does not materially and adversely impact Tenants access to or Permitted Use of the Premises or the shared common areas), or to be shared by Landlord and certain tenants, are collectively referred to herein as the Common Areas ). The Common Areas shall consist of the Project Common Areas and the Building Common Areas , all of which shall be operated in manner consistent with other Class A office buildings in the Concord BART Submarket. The term Project Common Areas , as used in this Lease, shall mean the portion of the Project designated as Exterior Common Areas in the CC&Rs. The term Building Common Areas , as used in this Lease, shall mean the portions of the Building designated as common areas by Landlord. The manner in which the Building Common Areas are maintained and operated shall be at the sole discretion of Landlord and the use thereof shall be subject to such rules, regulations and restrictions as Landlord may make from time to time, provided that such rules, regulations and restrictions do not unreasonably interfere with the rights granted to Tenant under this Lease and the permitted use granted under Article 5 , below. Landlord reserves the right to close temporarily, make alterations or additions to, or change the location of elements of the Building and the Common Areas; provided that no such changes shall be permitted which materially reduce Tenants rights or access hereunder. Tenant shall have the right of access to the Premises, the Building, the Property and, subject to TCCs of Article 28 , the Garage twenty-four (24) hours per day, seven (7) days per week during the Lease Term, as that term is defined in Article 2 .
1.2 Stipulation of Rentable Square Feet of Premises and Building . For purposes of this Lease, rentable square feet of the Premises shall be deemed as set forth in Section 2.2 of the Summary and the rentable square feet of the Building shall be deemed as set forth in Section 2.1 of the Summary.
ARTICLE 2
LEASE TERM; OPTION TERMS
2.1 Initial Lease Term . The TCCs and provisions of this Lease shall be effective as of the date of this Lease. The term of this Lease (the Lease Term ) shall be as set forth in Section 3.1 of the Summary, shall commence on the date set forth in Section 3.2 of the Summary (the Lease Commencement Date ), and shall terminate on the date set forth in Section 3.3 of the Summary (the Lease Expiration Date ) unless this Lease is sooner terminated as hereinafter provided. Within ninety (90) days following commencement of the Lease Term, Landlord shall deliver to Tenant a notice in the form as set forth in Exhibit F , attached hereto, as a confirmation only of the information set forth therein, which Tenant shall execute and return to Landlord. Should Tenant fail to do so within forty five (45) days after Landlords delivery of the notice, the information set forth in the confirmation notice shall be conclusively presumed to be correct.
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2.2 Option Term(s) .
2.2.1 Option Right . Landlord hereby grants the originally named Tenant and its Permitted Transferees, as that term is set forth in Section 14.6 of this Lease, two (2) options to extend the Lease Term for the entire Premises each by a period of five (5) years (each, an Option Term ). Such option shall be exercisable only by Notice delivered by Tenant to Landlord as provided below, provided that, as of the date of delivery of such Notice, (i) Tenant is not then in default under this Lease (beyond any applicable notice and cure periods), (ii) Tenant has not been in monetary or any other material default under this Lease (beyond any applicable notice and cure periods) more than once during the prior twelve (12) month period, and (iii) Tenant has not been in monetary or any other material default under this Lease (beyond any applicable notice and cure periods) more than three (3) times during the Lease Term. Upon the proper exercise of such option to extend, and provided that, as of the end of the then applicable Lease Term, (A) Tenant is not in default under this Lease (beyond any applicable notice and cure periods), (B) Tenant has not been in monetary or any other material default under this Lease (beyond any applicable notice and cure periods) more than once during the prior twelve (12) month period, and (C) Tenant has not been in monetary or any other material default under this Lease (beyond any applicable notice and cure periods) more than three (3) times during the Lease Term, then the Lease Term, as it applies to the entire Premises, shall be extended for a period of five (5) years. The rights contained in this Section 2.2 shall only be exercised by the originally named Tenant or its Permitted Transferee (and not any other assignee, sublessee or other transferee of the originally named Tenants interest in this Lease).
2.2.2 Option Rent . The Rent payable by Tenant during the Option Term (the Option Rent ) shall be equal to the Market Rent as set forth below. For purposes of this Lease, the term Market Rent shall mean rent (including additional rent, and considering (x) any base year or expense stop applicable thereto, as well as (y) the inclusion of any utility expenses as a part thereof), including all escalations, at which tenants, as of the commencement of the applicable term are, pursuant to transactions completed within the twenty-four (24) months prior to the first day of the applicable Option Term, leasing non-sublease, non-encumbered, non-synthetic, non-equity space (unless such space was leased pursuant to a definition of fair market comparable to the definition of Market Rent) comparable in size, location and quality to the Premises for a Comparable Term, as that term is defined in this Section 2.2.2 (the Comparable Deals ), which comparable space is located in the Comparable Buildings, as that term is defined in this Section 2.2.2 , giving appropriate consideration to the annual rental rates per rentable square foot, the standard of measurement by which the rentable square footage is measured, the ratio of rentable square feet to usable square feet, and taking into consideration only, and granting only, the following concessions (provided that the rent payable in Comparable Deals in which the terms of such Comparable Deals are determined by use of a discounted fair market rate formula shall be equitably increased in order that such Comparable Deals will not reflect a discounted rate) (collectively, the Rent Concessions ): (a) rental abatement concessions or build-out periods, if any, being granted such tenants in connection with such comparable spaces; (b) improvements or allowances provided or to be provided for such comparable space, taking into account the value of the existing improvements in the Premises, such value to be based upon the age, quality and layout of the improvements and the extent to which the same could be utilized by general office users as contrasted with this specific Tenant, and (c) all other monetary concessions, if any, being granted such tenants in connection with
1655 Grant Street |
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such comparable space; provided, however, that notwithstanding anything to the contrary herein, no consideration shall be given to the fact that Landlord is or is not required to pay a real estate brokerage commission in connection with the applicable term or the fact that the Comparable Deals do or do not involve the payment of real estate brokerage commissions. The term Comparable Term shall refer to the length of the lease term, without consideration of options to extend such term, for the space in question. If in determining the Market Rent, Tenant is entitled to a improvement or comparable allowance for the improvement of the Premises (the Option Term Improvement Allowance ), Landlord may, at Landlords sole option, elect any or a portion of the following: (A) to grant some or all of the Option Term Improvement Allowance to Tenant in the form as described above ( i.e. , as an improvement allowance), and/or (B) to reduce the rental rate component of the Market Rent to be an effective rental rate which takes into consideration that Tenant will not receive the total dollar value of such excess Option Term Improvement Allowance (in which case the Option Term Improvement Allowance evidenced in the effective rental rate shall not be granted to Tenant). The term Comparable Buildings shall mean the Building and other first-class institutionally-owned office buildings which are comparable to the Building in terms of age (based upon the date of completion of construction or major renovation as to the building containing the portion of the Premises in question), quality of construction, level of services and amenities (including the type ( e.g. , surface, covered, subterranean) and amount of parking), size and appearance, and are located in the Comparable Area , which is the Concord BART Submarket (defined below) in the East Bay portion of the San Francisco Bay Area. The Concord BART Submarket in the East Bay portion of the San Francisco Bay Area shall be the area containing Comparable Buildings having reasonably comparable access to the Bay Area Rapid Transit ( BART ) system as well as reasonably comparable freeway access as the Project, and located within the City of Concord.
2.2.3 Exercise of Option . The option contained in this Section 2.2 shall be exercised by Tenant, if at all, only in the manner set forth in this Section 2.2.3 . Tenant shall deliver notice (the Exercise Notice ) to Landlord not more than fifteen (15) months nor less than nine (9) months prior to the expiration of the then Lease Term, stating that Tenant is exercising its option. Landlord shall then deliver notice (the Landlord Response Notice ) to Tenant on or before the date which is thirty (30) days after Landlords receipt of the Exercise Notice, which Landlord Response Notice shall contain Landlords calculation of the Market Rent (the Landlords Option Rent Calculation ). Tenant shall deliver notice (the Tenant Response Notice ) to Landlord on or before the date which is fifteen (15) days after Tenants receipt of the Landlord Response Notice and Landlords Option Rent Calculation, stating that Tenant is (A) accepting Landlords Option Rent Calculation as the Market Rent, (B) rejecting Landlords Option Rent Calculation and setting forth Tenants calculation of the Market Rent so as to proceed with the process of extending the Lease Term (the Tenants Option Rent Calculation ), or (C) withdrawing and rescinding its Exercise Notice. If Tenant does not timely respond within such fifteen (15) day period, Landlord may send a second notice, including a prominently displayed, conspicuous caption stating that Tenants failure to respond within five (5) business days shall be deemed to constitute Tenants acceptance of Landlords Option Rent Calculation. If following such second notice, Tenant fails to respond within such five (5) business day period, Tenant shall be deemed to have accepted Landlords Option Rent Calculation. If Tenant timely sends notice of its election to withdraw its Exercise Notice
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-4-
pursuant to clause (C) above, such Exercise Notice shall be rescinded without liability or obligation; provided, however, if Tenant does not timely withdraw its Exercise Notice pursuant to clause (C), such Exercise Notice from Tenant shall be irrevocable and the parties will proceed in accordance with the TCCs of this Section 2.2. Within ten (10) business days of its receipt of the Tenant Response Notice and Tenant Option Rent Calculation, Landlord may, at its option, accept the Market Rent contained in the Tenants Option Rent Calculation. If Landlord does not affirmatively accept or Landlord rejects the Market Rent specified in the Tenants Option Rent Calculation, the parties shall follow the procedure, and the Market Rent shall be determined as set forth in Section 2.2.4 .
2.2.4 Determination of Market Rent . In the event Landlord rejects or is deemed to have rejected the Market Rent contained in Tenants Option Rent Calculation, Landlord and Tenant shall attempt to agree upon the Market Rent using reasonable good-faith efforts. If Landlord and Tenant fail to reach agreement within thirty (30) days following Landlords rejection or deemed rejection of the Tenants Option Rent Calculation (the Outside Agreement Date ), then, within two (2) business days following such Outside Agreement Date, (x) Tenant may reestablish the Tenants Option Rent Calculation by delivering written notice thereof to Landlord, and (y) Landlord may reestablish the Landlords Option Rent Calculation by delivering written notice thereof to Tenant. If Landlord and Tenant thereafter fail to reach agreement within seven (7) business days of the Outside Agreement Date, then in connection with the Option Rent, Landlords Option Rent Calculation and Tenants Option Rent Calculation, each as most recently delivered to the other party pursuant to the TCCs of this Section 2.2 , shall be submitted to the Neutral Arbitrator, as that term is defined in Section 2.2.4.1 of this Lease, pursuant to the TCCs of this Section 2.2.4 . The submittals shall be made concurrently with the selection of the Neutral Arbitrator pursuant to this Section 2.2.4 and shall be submitted to arbitration in accordance with Section 2.2.4.1 through 2.2.4.5 of this Lease, but subject to the conditions, when appropriate, of Section 2.2.3 .
2.2.4.1 Landlord and Tenant shall mutually, reasonably appoint one (1) arbitrator who shall by profession be a real estate broker or appraiser who shall have been active over the five (5) year period ending on the date of such appointment in the leasing or the appraisal of (as the case may be) of first-class commercial office properties in the Comparable Area (the Neutral Arbitrator ). The determination of the Neutral Arbitrator shall be limited solely to the issue of whether Landlords Option Rent Calculation or Tenants Option Rent Calculation, each as submitted to the Neutral Arbitrator pursuant to Section 2.2.4. above, is the closest to the actual Market Rent as determined by such Neutral Arbitrator, taking into account the requirements of Section 2.2.2 of this Lease. Such Neutral Arbitrator shall be appointed within fifteen (15) days after the applicable Outside Agreement Date. Neither the Landlord or Tenant may, directly or indirectly, consult with the Neutral Arbitrator prior to subsequent to his or her appearance. The Neutral Arbitrator shall be retained via an engagement letter jointly prepared by Landlords counsel and Tenants counsel.
2.2.4.2 The Neutral Arbitrator shall, within thirty (30) days of his/her appointment, reach a decision as to Market Rent and determine whether the Landlords Option Rent Calculation or Tenants Option Rent Calculation, each as submitted to the Neutral Arbitrator pursuant to Section 2.2.4. above, is closest to Market Rent as determined by such
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Neutral Arbitrator and simultaneously publish a ruling ( Award ) indicating whether Landlords Option Rent Calculation or Tenants Option Rent Calculation is closest to the Market Rent as determined by such Neutral Arbitrator. Following notification of the Award, the Landlords Option Rent Calculation or Tenants Option Rent Calculation, whichever is selected by the Neutral Arbitrator as being closest to Market Rent, shall become the then applicable Option Rent.
2.2.4.3 The Award issued by such Neutral Arbitrator shall be binding upon Landlord and Tenant.
2.2.4.4 If Landlord and Tenant fail to appoint the Neutral Arbitrator within fifteen (15) days after the applicable Outside Agreement Date, either party may petition the presiding judge of the Superior Court of Contra Costa County to appoint such Neutral Arbitrator subject to the criteria in Section 2.2.4.1 of this Lease, or if he or she refuses to act, either party may petition any judge having jurisdiction over the parties to appoint such Neutral Arbitrator.
2.2.4.5 The cost of arbitration shall be paid by Landlord and Tenant equally.
2.3 Option to Early Terminate . Notwithstanding anything to the contrary herein, Tenant shall have the right, which may be exercised in its sole and absolute discretion (but once exercised as provided below shall be binding and irrevocable), to terminate the Lease Term under this Lease, effective as of the last day of the seventieth (70 th ) month after the Lease Commencement Date (such early termination date, the Early Termination Date ) by providing written notice (the Early Termination Notice ) to Landlord on or before the last day of the sixty-first (61 st ) month after the Lease Commencement Date. The Termination Notice must be accompanied by a termination payment ( Termination Fee ) equal to $1,000,000.00. Upon the timely receipt of the Termination Notice and the Termination Fee, the Lease Expiration Date will become the Early Termination Date and the Lease Term will expire on the Early Termination Date for all purposes of this Lease.
2.4 Completion of Tenant Improvements . Landlord acknowledges that, pursuant to that certain Lease, dated October 18 th , 1999, as amended from time to time, between Pleasant Hill Holdings, Inc., as landlord, and Tenant, as successor in interest to AssetMark Investment Services, Inc., as tenant, Tenant may become subject to monthly incremental holdover rent, i.e., the amount in excess of Tenants current monthly rent under such lease ( Incremental Holdover Rent ), in the event that Tenant does not vacate the premises under such lease prior to September 30, 2013. In the event that the Premises are not Ready For Occupancy on or prior to September 1, 2013 (provided that such date shall be extended on a day-for-day basis by any delays caused by or arising out of the matters described in Sections 5.2.1-5.2.7 of the Work Letter or Force Majeure events), upon delivery by Tenant to Landlord of satisfactory documentation, Landlord shall provide Tenant with a credit against Tenants future Base Rent obligations under this Lease in an amount equal to the Incremental Holdover Rent actually paid by Tenant for the period between September 30, 2013, and the date on which the Premises are Ready For Occupancy; provided that such credit shall be subject to a maximum of $50,000 per month of Incremental Holdover Rent. In the event that the Premises are not Ready For Occupancy on or prior to December 1, 2013 (provided that such date shall be extended on a day-for-day basis by any delays caused by or arising out of the matters described in Sections 5.2.1-5.2.7 of the Work Letter or Force Majeure events), Tenant shall have the right to terminate this Lease without penalty upon written notice to Landlord.
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ARTICLE 3
BASE RENT
Tenant shall pay, without prior notice or demand, to Landlord or Landlords agent at the management office of the Building, or, at Landlords option, at such other place as Landlord may from time to time designate in writing, by a check or electronic funds transfer for currency which, at the time of payment, is legal tender for private or public debts in the United States of America, base rent ( Base Rent ) as set forth in Section 4 of the Summary, payable in equal monthly installments as set forth in Section 4 of the Summary in advance on or before the first day of each and every calendar month during the Lease Term, without any setoff or deduction whatsoever. The Base Rent for the first full month of the Lease Term which occurs after the expiration of any free rent period shall be paid on or prior to the Lease Commencement Date. If any payment of Base Rent is for a period which is shorter than one month, the Base Rent for any such fractional month shall accrue on a daily basis during such fractional month and shall total an amount equal to the product of (i) a fraction, the numerator of which is the number of days in such fractional month and the denominator of which is the actual number of days occurring in such calendar month, and (ii) the then-applicable Monthly Installment of Base Rent. All other payments or adjustments required to be made under the TCCs of this Lease that require proration on a time basis shall be prorated on the same basis.
ARTICLE 4
ADDITIONAL RENT
4.1 In General . In addition to paying the Base Rent specified in Article 3 of this Lease, Tenant shall pay Tenants Share of the annual Direct Expenses , as those terms are defined in Sections 1.1.6 and 1.1.2 , respectively, of Exhibit C attached to this Lease, which are in excess of the amount of Direct Expenses applicable to the Base Year, as that term is defined in Section 1.1.1 of Exhibit C ; provided, however, that in no event shall any decrease in Direct Expenses for any Expense Year below Direct Expenses for the Base Year entitle Tenant to any decrease in Base Rent or any credit against sums due under this Lease. Such payments by Tenant, together with any and all other amounts payable by Tenant to Landlord pursuant to the TCCs of this Lease, other than payments of Base Rent, are hereinafter collectively referred to as the Additional Rent , and the Base Rent and the Additional Rent are herein collectively referred to as Rent . All amounts due under this Article 4 and Exhibit C as Additional Rent shall be payable for the same periods and in the same manner as the Base Rent; provided, however, the parties hereby acknowledge that the first monthly installment of Tenants Share of any Estimated Excess, as that term is set forth in, and pursuant to the terms and conditions of, Section 1.3.2 of Exhibit C , shall first be due and payable for the calendar month occurring immediately following the expiration of the Base Year. Without limitation on other obligations of Tenant which survive the expiration of the Lease Term, the obligations of Tenant to pay the Additional Rent provided for in this Article 4 and Exhibit C shall survive the expiration of the Lease Term.
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4.2 Taxes and Other Charges for Which Tenant Is Directly Responsible .
4.2.1 Tenant shall be liable for and shall pay prior to delinquency, taxes levied against Tenants equipment, furniture, fixtures and any other personal property located in or about the Premises. If any such taxes on Tenants equipment, furniture, fixtures and any other personal property are levied against Landlord or Landlords property or if the assessed value of Landlords property is increased by the inclusion therein of a value placed upon such equipment, furniture, fixtures or any other personal property and if Landlord pays the taxes based upon such increased assessment, which Landlord shall have the right to do regardless of the validity thereof but only under proper protest if requested by Tenant, Tenant shall upon demand repay to Landlord the taxes so levied against Landlord or the proportion of such taxes resulting from such increase in the assessment, as the case may be.
4.2.2 If the improvements in the Premises (other than those installed by Landlord pursuant to the Lease and/or Work Letter), whether installed and/or paid for by Landlord or Tenant and whether or not affixed to the real property so as to become a part thereof, are assessed for real property tax purposes at a valuation higher than the valuation at which improvements conforming to Landlords building standard in other space in the Building are assessed, then the Tax Expenses levied against Landlord or the property by reason of such excess assessed valuation shall be deemed to be taxes levied against personal property of Tenant and shall be governed by the provisions of Section 4.2.1 , above.
4.2.3 Notwithstanding any contrary provision herein, Tenant shall pay prior to delinquency any (i) rent tax or sales tax, service tax, transfer tax or value added tax, or any other applicable tax on the rent or services herein or otherwise respecting this Lease, (ii) taxes assessed upon or with respect to the possession, leasing, operation, management, maintenance, alteration, repair, use or occupancy by Tenant of the Premises or any portion of the Project, including the Garage; or (iii) taxes assessed upon this transaction or any document to which Tenant is a party creating or transferring an interest or an estate in the Premises.
4.3 Landlords Books and Records . Upon Tenants written request given not more than ninety (90) days after Tenants receipt of a Statement for a particular Expense Year, and provided that Tenant is not then in default under this Lease beyond any applicable cure period provided in this Lease, specifically including, but not limited to, the timely payment of Additional Rent (whether or not the same is subject of the dispute), Landlord shall furnish Tenant with such reasonable supporting documentation in connection with said Direct Expenses as Tenant may reasonably request. Landlord shall provide said information to Tenant within sixty (60) days after Tenants written request therefor. Within two hundred forty (240) days after receipt of a Statement by Tenant (the Review Period ), if Tenant disputes the amount of Additional Rent set forth in the Statement, an employee of Tenant or its affiliate, or a third party providing lease administration services (which is not working on a contingency fee basis) or an independent certified public accountant (which accountant (A) is a member of a nationally or regionally recognized accounting firm which has previous experience in reviewing financial operating records of landlords of office buildings, (B) shall not already be providing primary
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accounting and/or lease administration services to Tenant and shall not have provided primary accounting and/or lease administration services to Tenant in the past three (3) years, (C) is not working on a contingency fee basis [ i.e., Tenant must be billed based on the actual time and materials that are incurred by the accounting firm in the performance of the audit], and (D) shall not currently or in the future be providing accounting and/or lease administration services to another tenant in the Building and/or the Project in connection with a review or audit by such other tenant of Direct Expenses) designated and paid for by Tenant, may, after reasonable notice to Landlord and at reasonable times, inspect Landlords records with respect to the Statement at Landlords corporate offices, provided that ( i ) Tenant is not then in default under this Lease (beyond any applicable notice and cure periods), ( ii ) Tenant has paid all amounts required to be paid under the applicable Estimate Statement and Statement, as the case may be, and ( iii ) , unless an employee of Tenant is performing the audit, a copy of the audit agreement between Tenant and its particular auditor has been delivered to Landlord prior to the commencement of the audit. In connection with any such inspection, Tenant and Tenants agents must agree in advance to follow Landlords reasonable rules and procedures regarding inspections of Landlords records, and shall execute a commercially reasonable confidentiality agreement regarding such inspection. At the request of Tenant, such auditor shall be provided office space to perform such audit and shall be permitted to make copies of relevant documents (subject to commercially reasonable requirements to ensure the preserved confidentiality of any audited materials, including without limitation the requirement that all such copies be returned to Landlord or destroyed). Any audit report prepared by Tenants auditors shall be delivered concurrently to Landlord and Tenant within the two hundred forty (240) day period referenced above. Excepting the Base Year Statement, Tenants failure to dispute the amount of Additional Rent set forth in any Statement within the Review Period shall be deemed to be Tenants approval of such Statement and Tenant, thereafter, waives the right or ability to dispute the amounts set forth in such Statement. If after such inspection, Tenant still disputes such Additional Rent, a determination as to the proper amount shall be made, at Tenants expense, by an independent certified public accountant (the Accountant ) selected by Landlord and subject to Tenants reasonable approval; provided that if such determination by the Accountant proves that Direct Expenses for the applicable Expense Year were overstated by more than five percent (5%), then the cost of the Accountant and any other out-of-pocket, third-party Tenant costs of such determination shall be paid for by Landlord. Tenant hereby acknowledges that Tenants sole right to inspect Landlords books and records and to contest the amount of Direct Expenses payable by Tenant shall be as set forth in this Section 4.3 , and Tenant hereby waives any and all other rights pursuant to applicable law to inspect such books and records and/or to contest the amount of Direct Expenses payable by Tenant.
ARTICLE 5
USE OF PREMISES
5.1 Permitted Use . Tenant shall use the Premises solely for the Permitted Use, as that term is defined in Section 7 of the Summary, and Tenant shall not use or permit the Premises to be used for any other purpose or purposes whatsoever without the prior written consent of Landlord, which may be withheld in Landlords sole and absolute discretion. Tenant shall not
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allow occupancy density of use of the Premises which is greater than the seven (7) persons per 1,000 rentable square feet of space located in the Premises or which would exceed any maximum densities permitted by applicable law or governmental authority. Tenant covenants and agrees that it shall not use, or suffer or permit any person or persons to use, the Premises or any part thereof for any use or purpose contrary to the rules and regulations promulgated by Landlord from time to time ( Rules and Regulations ), the current set of which (as of the date of this Lease) is attached to this Lease as Exhibit D ; or in violation of the laws of the United States of America, the State of California, or the ordinances, regulations or requirements of the local municipal or county governing body or other lawful authorities having jurisdiction over the Building, or in a manner otherwise inconsistent with the character of the Building as a first-class office building. Tenant shall faithfully observe and comply with the Rules and Regulations. Tenant shall comply with all recorded covenants, conditions, and restrictions currently affecting the Project including the CC&Rs. Additionally, Tenant acknowledges that the Project may be subject to any future CC&Rs which Landlord, in Landlords discretion, deems reasonably necessary or desirable, and which do not violate the terms of this Lease or its Permitted Use, and Tenant agrees that this Lease shall be subject and subordinate to such CC&Rs and Tenant shall promptly recognize such CC&Rs by executing a commercially reasonable form of recognition.
5.2 CAP Process . Tenant acknowledges that during the Lease Term, Bank of America, National Association (the Bank ) will be conducting operations critical to the Banks business within portions of the Property as shown on Exhibit I hereto (such portions, as the same may be modified from time to time by written notice from Landlord to Tenant, the Critical Environments ). Tenant agrees that it will not perform, or allow any utility provider, vendor, or other third party to perform, any Alterations as that term is defined in Section 8.1, below, or any construction, repair, maintenance, testing, or other work that requires entry into the Critical Environments, or that could potentially impact or interrupt the Banks operations within the Critical Environments (e.g., outdoor activities that produce vibration (such as jack hammering), airborne particulates, or the release of water) (collectively, CEWA Work ) unless it complies with and causes the utility providers, vendors, and other third parties performing the CEWA Work to comply with, the Banks Critical Awareness Process ( CAP Process ), as set forth in the Banks Critical Awareness Learning Guide (the Handbook ). Tenant hereby acknowledges receipt of the current Handbook. Landlord shall notify Tenant of any changes to the Handbook and/or the CAP Process after the Lease Commencement Date, which changes shall not materially affect Tenants obligations under the CAP Process existing as of the date of this Lease. Landlord shall coordinate communications between Tenant and the Bank regarding the CAP Process. Bank may pay certain costs incurred by Tenant in implementing the CAP Process. Landlord will use good faith efforts to coordinate the Banks payment of Tenants implementation costs, but will have no liability for Tenants costs of compliance with the CAP Process. Tenant also agrees to obtain the prior written consent of Landlord to such CEWA Work, which consent shall be requested by Tenant not less than thirty (30) days prior to the commencement thereof, and which consent shall not be unreasonably withheld by Landlord, provided that it shall be deemed reasonable for Landlord to withhold its consent to any CEWA Work that may result in Landlord being in breach or default under the Banks lease.
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ARTICLE 6
SERVICES AND UTILITIES
6.1 Standard Tenant Services . Landlord shall provide the following services on all days (unless otherwise stated below) during the Lease Term.
6.1.1 Subject to reasonable changes implemented by Landlord and all governmental rules, regulations and guidelines applicable thereto, Landlord shall provide heating and air conditioning ( HVAC ) when necessary for normal comfort for normal office use in the Premises from 7:00 A.M. to 6:00 P.M. Monday through Friday (collectively, the Building Hours ), except for the date of observation of New Years Day, Presidents Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, Christmas Day (collectively, the Holidays ). The daily time periods identified hereinabove are sometimes referred to as the Business Hours .
6.1.2 On a twenty-four (24) hour, seven (7)-day a week basis, Landlord shall provide adequate electrical equipment to bring electricity to the Premises for lighting, convenience outlets and for other normal office use.
6.1.3 Landlord shall replace lamps, starters and ballasts for Building standard lighting fixtures within the Premises with new, unused fixtures that are in good working order. Tenant shall bear the cost of replacement of lamps, starters and ballasts for non-Building standard lighting fixtures within the Premises, except as provided in the Work Letter.
6.1.4 Landlord shall provide city water from the regular Building outlets for drinking, lavatory and toilet purposes on a twenty-four (24) hour, seven (7) day a week basis.
6.1.5 Landlord shall provide janitorial services in accordance with the specifications of Exhibit H attached hereto. Such service shall occur, after normal business hours, five (5) days per week, consistent with other first class office buildings in the vicinity of the Project, in and about the Premises. Landlord shall provide window washing services in a manner consistent with other comparable buildings in the vicinity of the Project.
6.1.6 Landlord shall provide nonexclusive, non-attended automatic passenger elevator service during the Building Hours. At least one elevator shall be available at all other times, including the Holidays.
6.1.7 Landlord shall provide on-site access control equipment, personnel, procedures and systems consistent with other first class office buildings in the vicinity of the Project.
6.1.8 Subject to Landlords rules, regulations, and restrictions and the terms of this Lease, Landlord shall permit Tenant to utilize the existing Building risers, raceways, shafts and conduit to the extent (i) there is available space in the Building risers, raceways, shafts and/or conduit for Tenants use, which availability shall be determined by Landlord in Landlords sole and absolute discretion, and (ii) Tenants requirements are consistent with the requirements of a typical general office user. Tenant may only use vendors approved by Landlord, which approval shall not be unreasonably withheld, to provide services to Tenant through the use of the Building risers, raceways, shafts and conduit.
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6.1.9 Landlord shall provide on-site security guards and closed circuit surveillance cameras, including but not limited to: an on-site security officer located at the front desk of the Building during normal business hours and roving security guard(s) to patrol the outside of the Building and the Project, as provided in the CC&Rs, with not less than one on-duty security guard to be provided for the Project on a 24-hour, 7-day a week basis.
Tenant shall cooperate fully with Landlord at all times and abide by all regulations and requirements that Landlord may reasonably prescribe for the proper functioning and protection of the security, life safety, HVAC, electrical, mechanical and plumbing systems.
6.2 Overstandard Tenant Use . Excepting those improvements described in the Work Letter, Tenant shall not, without Landlords prior written consent, use heat-generating machines, machines other than normal office machines, or equipment or lighting other than Building standard lights in the Premises, which may affect the temperature otherwise maintained by the air conditioning system or increase the water normally furnished for the Premises by Landlord pursuant to the terms of Section 6.1 of this Lease. If such consent is given, Landlord shall have the right, at the time of consent, to require installation of supplementary air conditioning units or other facilities in the Premises, including supplementary or additional metering devices, and the cost thereof, including the cost of installation, operation and maintenance, increased wear and tear on existing equipment and other similar charges, shall be paid by Tenant to Landlord upon billing by Landlord. If Tenant uses water, electricity, heat or air conditioning in excess of that supplied by Landlord pursuant to Section 6.1 of this Lease, Tenant shall pay to Landlord, upon billing, the cost of such excess consumption, the cost of the installation, operation, and maintenance of equipment which is installed in order to supply such excess consumption, and the cost of the increased wear and tear on existing equipment caused by such excess consumption; and Landlord may install devices to separately meter (or sub-meter) any increased use and in such event Tenant shall pay the increased cost directly to Landlord, on demand, at the rates charged by the public utility company furnishing the same, including the cost of such additional metering (or sub-metering) devices. Tenants use of electricity shall never exceed the capacity of the feeders to the Building or the risers or wiring installation, and shall be subject to the terms of Section 29.26 below. If Tenant desires to use heat, ventilation or air conditioning during hours other than those for which Landlord is obligated to supply such utilities pursuant to the terms of Section 6.1 of this Lease, Tenant shall give Landlord such prior notice, if any, as Landlord shall from time to time establish as appropriate, of Tenants desired use in order to supply such utilities, and Landlord shall supply such utilities to Tenant at such hourly cost to Tenant (which shall be treated as Additional Rent) as Landlord shall from time to time establishes as its Building standard rate; provided, however, that if no Event of Default exists, Landlord shall abate the first $11,000 of such amount during each calendar year. If Tenant utilizes a specialized or dedicated cooling unit within the Premises (in or adjacent to a Tenant server room or otherwise), notwithstanding any provision hereof to the contrary, Tenant shall be solely responsible the maintenance and repair of such unit and for the cost of electricity for such unit; provided, however, if applicable, Landlord shall install separate metering in connection with such unit at Landlords cost.
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6.3 Interruption of Use . Tenant agrees that, except to the extent caused by Landlords or Landlords agents, contractors or employees negligence or willful misconduct, Landlord shall not be liable for damages, by abatement of Rent or otherwise, for failure to furnish or delay in furnishing any service (including telephone and telecommunication services), or for any diminution in the quality or quantity thereof, when such failure or delay or diminution is occasioned, in whole or in part, by breakage, repairs, replacements, or improvements, by any strike, lockout or other labor trouble, by inability to secure electricity, gas, water, or other fuel at the Building, Property or Project after reasonable effort to do so, by any riot or other dangerous condition, emergency, accident or casualty whatsoever, by act or default of Tenant or other parties, or by any other cause beyond Landlords reasonable control; and such failures or delays or diminution shall never be deemed to constitute an eviction or disturbance of Tenants use and possession of the Premises or relieve Tenant from paying Rent or performing any of its obligations under this Lease; provided however, that if such interruption of service is the result of Landlords or Landlords agents, contractors or employees negligence or willful misconduct, and if such interruption of service makes the Premises or any material portion thereof unsuitable for occupancy or Tenants Permitted Use, Landlord shall allow Tenant a proportionate abatement of Rent, during the time and to the extent the Premises are unsuitable, and not occupied by Tenant as a result thereof, and additionally, if such interruption of service makes the Premises unfit for the Permitted Use for a period continuing for one hundred eighty (180) days, then Tenant shall have the right to terminate this Lease upon written notice to Landlord within thirty (30) days thereafter. Furthermore, Landlord shall not be liable under any circumstances for a loss of, or injury to, property or for injury to, or interference with, Tenants business, including, without limitation, loss of profits, however occurring, through or in connection with or incidental to a failure to furnish any of the services or utilities as set forth in this Article 6 .
6.4 Use of Shafts and Utility Connections . Landlord shall have reasonable access, and shall be entitled to allow other tenants reasonable access, through existing Building shafts to other portions of the Building (including the roof and mechanical floors), or to utility connections outside the Building, for the installation, repair, and maintenance of ducts, pipes, connections, and equipment for cables, conduits, transmitters, receivers, and other office, computer, communications and word and data processing equipment and facilities, including any technological devices not yet developed, whether similar or dissimilar to the foregoing, which may hereafter become necessary or desirable for any permitted use of the Property; provided , however , that to the extent such shafts or utility connections are located within the Premises, such access shall not materially interfere with Tenants occupancy of the Premises.
6.5 Main Point of Entry . Tenant acknowledges all telecommunication services must be routed through the Main Point of Entry located on the ground floor of the Building (the MPOE ). Landlord shall coordinate access to the MPOE for Tenants telecommunications service providers.
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ARTICLE 7
REPAIRS
Tenant shall, at Tenants own expense, keep the Premises, including all improvements, fixtures, equipment, window coverings, and furnishings therein, in good order, repair and condition at all times during the Lease Term. In addition, Tenant shall, at Tenants own expense, but under the supervision and subject to the prior approval of Landlord, and within any reasonable period of time specified by Landlord, promptly and adequately repair all damage to the Premises and repair all damaged, broken, or worn fixtures and appurtenances, except for damage caused by ordinary wear and tear, or beyond the reasonable control of Tenant; provided however, that, at Landlords option, or if Tenant fails to make such repairs, Landlord may, after written notice to Tenant and Tenants failure to repair or commence and diligently proceed to repair within ten (10) days thereafter, but need not, make such repairs and replacements, and Tenant shall pay Landlord the cost thereof, including a percentage of the cost thereof (to be uniformly established for the Building and not to exceed seven percent (7%)) sufficient to reimburse Landlord for all overhead, general conditions, fees and other costs or expenses arising from Landlords involvement with such repairs and replacements forthwith upon being billed for same. Notwithstanding the foregoing, Landlord shall be responsible for (i) maintaining the Building Common Areas in a manner consistent with the character of the Building as a first-class office building, and (ii) repairs to the exterior windows, walls, floor slabs, foundation and roof of the Building, the structural portions of the floors of the Building, and the systems and equipment including without limitation (except as expressly provided to the contrary herein) all mechanical, electrical, plumbing and HVAC of the Building, except to the extent that such repairs are required due to the negligence or willful misconduct of Tenant; provided, however, that if such repairs are due to the negligence or willful misconduct of Tenant, Landlord shall nevertheless make such repairs at Tenants expense, or, if covered by Landlords insurance, Tenant shall only be obligated to pay any deductible in connection therewith. Landlord may, but shall not be required to, enter the Premises at all reasonable times to make such repairs, alterations, improvements or additions to the Premises or to the Building or to any equipment located in the Building as Landlord shall desire or deem necessary or as Landlord may be required to do by governmental or quasi-governmental authority or court order or decree; provided, however, except for (i) emergencies, (ii) repairs, alterations, improvements or additions required by governmental or quasi-governmental authorities or court order or decree, or (iii) repairs which are the obligation of Tenant hereunder, any such entry into the Premises by Landlord shall be performed in a manner so as not to materially interfere with Tenants use of, or access to, the Premises; provided that, with respect to items (ii) and (iii) above, Landlord shall use commercially reasonable efforts to provide reasonable notice and to not materially interfere with Tenants use of, or access to, the Premises. If Landlord fails to make such repair, Tenant may, after written notice to Landlord and Landlords failure to repair or commence to repair within ten (10) business days thereafter, but need not, make such repairs and replacements, and Landlord shall pay Tenant the cost thereof upon being billed for same. If Landlords failure to perform such required repair makes the Premises unfit for the Permitted Use for a period continuing for one hundred eighty (180) days beyond notice to Landlord, then Tenant shall have the right to terminate this Lease upon written notice to Landlord within thirty (30) days thereafter. Tenant hereby waives any and all rights under and benefits of subsection 1 of Section 1932 and Sections 1941 and 1942 of the California Civil Code or under any similar law, statute, or ordinance now or hereafter in effect.
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ARTICLE 8
ADDITIONS AND ALTERATIONS
8.1 Landlords Consent to Alterations . With the exception of cosmetic alterations totaling less than ten thousand dollars ($10,000.00) per instance, and which do not impact any mechanical, HVAC, plumbing, structural or building facilities or systems, Tenant may not make any improvements, alterations, additions or changes to the Premises or any mechanical, plumbing or HVAC facilities or systems in the Building pertaining to the Premises (collectively, the Alterations ) without first procuring the prior written consent of Landlord to such Alterations, which consent shall be requested by Tenant not less than fifteen (15) business days prior to the commencement thereof, and which consent shall not be unreasonably withheld by Landlord, provided it shall be deemed reasonable for Landlord to withhold its consent to any Alteration which may result in Landlord being in breach or default under the Banks lease, or may adversely affect the structural portions or the systems or equipment of the Building, or is visible from the exterior of the Building. Notwithstanding the foregoing, Tenant shall be permitted to make Alterations following ten (10) business days notice to Landlord, but without Landlords prior consent, to the extent that such Alterations do not (i) adversely affect the systems and equipment of the Building, exterior appearance of the Building, or structural aspects of the Building; (ii) adversely affect the value of the Premises or Building; or (iii) constitute CEWA Work as defined in Section 5.2 of the Lease (the Cosmetic Alterations ). The construction of the initial improvements to the Premises shall be governed by the terms of the Work Letter and not the terms of this Article 8 . Landlord may impose, as a condition of its consent (to the extent such consent is required hereunder) to any and all Alterations or repairs of the Premises or about the Premises, such requirements as Landlord in its reasonable discretion may deem desirable, including, but not limited to, the requirement that Tenant utilize for such purposes only contractors reasonably approved by Landlord. If Landlord shall give its consent, the consent shall be deemed conditioned upon Tenant acquiring a permit to do the work from appropriate governmental agencies, the furnishing of a copy of such permit to Landlord prior to the commencement of the work, and the compliance by Tenant with all conditions of said permit in a prompt and expeditious manner. If such Alterations will involve the use of or disturb hazardous materials or substances existing in the Premises, Tenant shall comply with Landlords rules and regulations concerning such hazardous materials or substances. Tenant shall construct such Alterations and perform such repairs in a good and workmanlike manner, in conformance with any and all applicable federal, state, county or municipal laws, rules and regulations and pursuant to a valid building permit, issued by the City of Concord, all in conformance with Landlords construction rules and regulations. In the event Tenant performs any Alterations in the Premises which require or give rise to governmentally required changes to the Base Building, as that term is defined below, then Landlord shall, at Tenants expense, make such changes to the Base Building. The Base Building shall include the structural portions of the Building, and the public restrooms, elevators, exit stairwells and the systems and equipment, including without limitation all mechanical, electrical, plumbing and HVAC systems and equipment, located in the internal core of the Building on the floor or floors on which the Premises are located. In performing the work of any such Alterations, Tenant shall have the work performed in such manner so as not to obstruct access to the Project or any portion thereof, by any other tenant of the Project, and so as not to obstruct the business of Landlord or other
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tenants in the Project. In addition to Tenants obligations under Article 9 of this Lease, upon completion of any Alterations, Tenant agrees to cause a Notice of Completion to be recorded in the office of the Recorder of the County of Contra Costa in accordance with Section 3093 of the Civil Code of the State of California or any successor statute, and as a condition precedent to the enforceability and validity of Landlords consent, Tenant shall deliver to the management office for the Project a reproducible copy of the as built and CAD drawings of the Alterations, to the extent applicable, as well as all permits, approvals and other documents issued by any governmental agency in connection with the Alterations.
8.2 Payment for Improvements . If payment is made directly to contractors, Tenant shall (i) comply with Landlords requirements for final lien releases and waivers in connection with Tenants payment for work to contractors, and (ii) sign Landlords standard contractors rules and regulations. If Tenant orders any work directly from Landlord, Tenant shall pay to Landlord an amount equal to four percent (4%) of the cost of such work to compensate Landlord for all overhead, general conditions, fees and other costs and expenses arising from Landlords involvement with such work. If Tenant does not order any work directly from Landlord, Tenant shall reimburse Landlord for Landlords reasonable, actual, out-of-pocket costs and expenses actually incurred in connection with Landlords review of such work. Notwithstanding the foregoing, this Section 8.2 shall not apply to Landlords work as contemplated in the Work Letter (including any repair of elements therof by Landlord to the extent provided in the Work Letter), and only the first sentence of this Section 8.2 shall apply to any Tenants improvements, Alterations or work conducted prior to the Lease Commencement Date.
8.3 Construction Insurance . In addition to the requirements of Article 10 of this Lease, in the event that Tenant makes any Alterations, prior to the commencement of such Alterations, Tenant shall provide Landlord with evidence that Tenant carries Builders All Risk insurance in an amount reasonably approved by Landlord covering the construction of such Alterations, and such other insurance as Landlord may reasonably require, it being understood and agreed that all of such Alterations shall be insured by Tenant pursuant to Article 10 of this Lease immediately upon completion thereof.
8.4 Landlords Property . Landlord and Tenant hereby acknowledge and agree that (i) all Alterations, improvements, fixtures, equipment and/or appurtenances which may be installed or placed in or about the Premises (excluding Tenants removable trade fixtures, personal property, furniture or non-affixed office equipment), from time to time, shall be at the sole cost of Tenant (except as otherwise provided in the Work Letter) and shall be and become part of the Premises and the property of Landlord, and (ii) the Improvements to be constructed in the Premises pursuant to the TCCs of the Work Letter shall, upon completion of the same, be and become a part of the Premises and the property of Landlord. For any improvements or Alterations other than those contemplated in the Work Letter, Landlord may, by written notice to Tenant given prior to or at the time of Landlords consent or notice of the same, require Tenant, at Tenants expense, to remove any Alterations or improvements in the Premises, and to repair any damage to the Premises and Building caused by such removal and return the affected portion of the Premises to a building standard improved condition as determined by Landlord. If Tenant fails to complete such removal and/or to repair any damage caused by the removal of any Alterations or improvements in the Premises, and return the affected portion of the Premises to a
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building standard improved condition as determined by Landlord, then Landlord may do so and may charge the cost thereof to Tenant. Tenant hereby protects, defends, indemnifies and holds Landlord harmless from any liability, cost, obligation, expense or claim of lien in any manner relating to the installation, placement, removal or financing of any such Alterations, improvements, fixtures and/or equipment in, on or about the Premises, which obligations of Tenant shall survive the expiration or earlier termination of this Lease.
ARTICLE 9
COVENANT AGAINST LIENS
Tenant shall keep the Premises and Property free from any liens or encumbrances arising out of the work performed, materials furnished or obligations incurred by or on behalf of Tenant, and shall protect, defend, indemnify and hold Landlord harmless from and against any claims, liabilities, judgments or costs (including, without limitation, reasonable attorneys fees and costs) arising out of same or in connection therewith. Tenant shall remove any such lien or encumbrance by bond or otherwise within five (5) business days after notice by Landlord, and if Tenant shall fail to do so, Landlord may pay the amount necessary to remove such lien or encumbrance, without being responsible for investigating the validity thereof. The amount so paid shall be deemed Additional Rent under this Lease payable upon demand, without limitation as to other remedies available to Landlord under this Lease. Notwithstanding any such payment or removal by Landlord, Tenant shall have the right but not the obligation to contest any such lien, and if Tenants contest ultimately results in any portion of Landlords payment being refunded to Landlord, to the extent that Tenant has already paid the Additional Rent to Landlord on account of such amount, Landlord shall pay over such amount to Tenant.
ARTICLE 10
INDEMNIFICATION AND INSURANCE
10.1 Indemnification and Waiver . Except to the extent of the negligence or willful misconduct of the Landlord or the Landlord Parties (as that term is defined below), Tenant hereby assumes all risk of damage to property or injury to persons in, upon or about the Premises from any cause whatsoever and agrees that Landlord, its members, managers, partners, subpartners and their respective owners, investors, principals, officers, agents, servants, employees, and independent contractors (collectively, Landlord Parties ) shall not be liable for, and are hereby released from any responsibility for, any damage either to person or property or resulting from the loss of use thereof, which damage is sustained by Tenant or by other persons claiming through Tenant. Other than to the extent arising out of the negligence or willful misconduct of the Landlord or the Landlord Parties, Tenant shall indemnify, defend, protect, and hold harmless the Landlord Parties from any and all loss, cost, damage, expense and liability (including without limitation court costs and reasonable attorneys fees) incurred in connection with or arising from: (a) any causes in, on or about the Premises or the Project; (b) the use or occupancy of the Premises or the Project by Tenant or any person claiming under Tenant; (c) any activity, work, or thing done, or permitted or suffered by Tenant in or about the Premises or the Project; (d) any acts, omission, or negligence of Tenant or any person claiming
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under Tenant, or its members, managers, partners, subpartners and their respective owners, investors, principals, officers, agents, servants, employees, contractors, invitees, or visitors (collectively, Tenant Parties ); (e) any breach, violation, or non-performance by Tenant or any person claiming under Tenant or the employees, agents, contractors, invitees, or visitors of Tenant or any such person of any term, covenant, or provision of this Lease or any law, ordinance, or governmental requirement of any kind; (f) any injury or damage to the person, property, or business of Tenant, its employees, agents, contractors, invitees, visitors, or any other person entering upon the Premises or the Project under the express or implied invitation of Tenant; or (g) the placement by any Tenant Parties of any personal property or other items within the Premises or the Project. Landlord shall indemnify, defend, protect, and hold harmless the Tenant Parties from any and all loss, cost, damage, expense and liability (including without limitation court costs and reasonable attorneys fees) incurred as a result of Landlords gross negligence or willful misconduct. Should Landlord be named as a defendant in any suit brought against Tenant in connection with or arising out of Tenants occupancy of the Premises or use of the Project, Tenant shall pay to Landlord its costs and expenses incurred in such suit, including without limitation, its actual professional fees such as appraisers, accountants and attorneys fees. Further, the parties agreements to indemnify each other pursuant to this Section 10.1 are not intended and shall not relieve any insurance carrier of its obligations under policies required to be carried by either party pursuant to the provisions of this Lease, to the extent such policies cover the matters subject to such partys indemnification obligations; nor shall they supersede any inconsistent agreement of the parties set forth in any other provision of this Lease. The provisions of this Section 10.1 shall survive the expiration or sooner termination of this Lease with respect to any claims or liability arising in connection with any event occurring prior to such expiration or termination.
10.2 Tenants Compliance With Landlords Fire and Casualty Insurance . Tenant shall, to the extent Tenant is made aware, and at Tenants expense, comply with Landlords insurance company requirements pertaining to the use of the Premises (which requirements shall not prohibit the Permitted Use). If Tenants conduct or use of the Premises causes any increase in the premium for such insurance policies then Tenant shall reimburse Landlord for any such increase. Tenant, at Tenants expense, shall comply with all rules, orders, regulations or requirements of the American Insurance Association (formerly the National Board of Fire Underwriters) and with any similar body.
10.3 Tenants Insurance . Tenant shall maintain the following coverages in the following amounts. The required evidence of coverage must be delivered to Landlord on or before the date required under Section 10.4(I) sub-sections (x) and (y) , or Section 10.4(II) below (as applicable). Such policies shall be for a term of at least one (1) year, or the length of the remaining term of this Lease, whichever is less.
10.3.1 Commercial General Liability Insurance, including Broad Form contractual liability covering the insured against claims of bodily injury, personal injury and property damage (including loss of use thereof) based upon or arising out of Tenants operations, occupancy or maintenance of the Premises and all areas appurtenant thereto. Such insurance shall be written on an occurrence basis. Landlord and any other party the Landlord so specifies that has a material financial interest in the Project, including Landlords managing
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agent, ground lessor and/or lender, if any, shall be named as additional insureds as their interests may appear using Insurance Service Organizations form CG2011 or a comparable form approved by Landlord. Tenant shall provide an endorsement or policy excerpt showing that Tenants coverage is primary with respect to the Premises except in the case of an insured loss resulting from Landlords negligence, in which case Landlords insurance shall be primary (without imposing any liability or obligation on Landlord in the event that Landlords insurance does not cover such loss), or as otherwise expressly provided in this Lease. With respect to any primary coverage by Tenant, any insurance carried by Landlord shall be excess and non-contributing. The coverage shall also be extended to include damage caused by heat, smoke or fumes from a hostile fire. The policy shall not contain any intra-insured exclusions as between insured persons or organizations. This policy shall include coverage for all liabilities assumed under this Lease as an insured contract for the performance of all of Tenants indemnity obligations under this Lease. The limits of said insurance shall not, however, limit the liability of Tenant nor relieve Tenant of any obligation hereunder. Limits of liability insurance shall not be less than the following; provided, however, such limits may be achieved through the use of an Umbrella/Excess Policy:
Bodily Injury and Property Damage Liability | $3,000,000 each occurrence | |
Personal Injury and Advertising Liability | $3,000,000 each occurrence |
10.3.2 Property Insurance covering (i) all office furniture, personal property, business and trade fixtures, office equipment, free-standing cabinet work, movable partitions, merchandise and all other items of Tenants business personal property on the Premises installed by, for, or at the expense of Tenant, (ii) the Tenant Improvements and any other improvements existing in the Premises as of the date of this Lease (excluding the Base Building), and (iii) all Alterations performed in the Premises. Such insurance shall be written on a Special Form basis, for the full replacement cost value (subject to reasonable deductible amounts), without deduction for depreciation of the covered items and in amounts that meet any co-insurance clauses of the policies of insurance and shall include coverage for (a) all perils included in the CP 10 30 04 02 Coverage Special Form, (b) water damage from any cause whatsoever, including, but not limited to, backup or overflow from sprinkler leakage, bursting, leaking or stoppage of any pipes, explosion, and backup of sewers and drainage, and (c) terrorism (to the extent such terrorism insurance is available as a result of the Terrorism Risk Insurance Act of 2002 (Pub. L. 107-297, 116 Stat. 2322), the Terrorism Risk Insurance Program Reauthorization Act of 2005 (Pub. 1. 109-144), and the Terrorism Risk Insurance Program Reauthorization Act of 2007 (Pub. L. 110-160, 121 Stat. 183), any successor statute or regulation, or is otherwise available at commercially reasonable rates).
10.3.3 Workers Compensation or other similar insurance pursuant to all applicable state and local statutes and regulations, and Employers Liability with minimum limits of not less than $1,000,000 each accident/employee/disease.
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10.3.4 Commercial Automobile Liability Insurance covering all Owned (if any), Hired, or Non-owned vehicles with limits not less than $1,000,000 combined single limit for bodily injury and property damage.
10.3.5 Adjacent Premises . Tenant shall pay for any increase in the premiums for the property insurance of the Building if said increase is caused by Tenants acts, omissions, use or occupancy of the Premises other than as permitted by the TCCs of this Lease.
10.3.6 Property Damage . Tenant may, but shall not be obligated to (without prejudice to the provisions of Article 7), use the proceeds from any such insurance for the replacement of personal property, trade fixtures and Alterations.
10.3.7 No representation of Adequate Coverage . Landlord makes no representation that the limits or forms of coverage of insurance specified herein are adequate to cover Tenants property, business operations or obligations under this Lease.
10.3.8 Property Insurance Subrogation . Landlord and Tenant intend that their respective property loss risks shall be borne by insurance carriers to the extent herein provided, and Landlord and Tenant hereby agree to look solely to, and seek recovery only from, their respective insurance carriers in the event of a property loss to the extent that such coverage is agreed to be provided hereunder. The parties each hereby waive all rights and claims against each other for such losses, and waive all rights of subrogation of their respective insurers. Landlord and Tenant hereby represent and warrant that their respective all risk property insurance policies include a waiver of (i) subrogation by the insurers, and (ii) all rights based upon an assignment from its insured, against Landlord and/or any of the Landlord Parties or Tenant and/or any of the Tenant Parties (as the case may be) in connection with any property loss risk thereby insured against. Tenant will cause all other occupants of the Premises claiming by, under, or through Tenant to execute and deliver to Landlord a waiver of claims similar to the waiver in this Section 10.3.3 and to obtain such waiver of subrogation rights endorsements. If either party hereto fails to maintain the waivers set forth in items (i) and (ii) above, the party not maintaining the requisite waivers shall indemnify, defend, protect, and hold harmless the other party for, from and against any and all claims, losses, costs, damages, expenses and liabilities (including, without limitation, court costs and reasonable attorneys fees) arising out of, resulting from, or relating to, such failure.
10.4 Form of Policies . The minimum limits of policies of insurance required of Tenant and Landlord under this Lease shall in no event limit the liability of Tenant or Landlord, respectively, under this Lease. Such insurance shall (i) be issued by an insurance company having an AM Best rating of not less than A-X or a Fitch rating of not less than AA, or which is otherwise reasonably acceptable to Landlord and licensed to do business in the State of California, (ii) be in form and content reasonably acceptable to Landlord and complying with the requirements of Section 10.3 (including, Sections 10.3.1 through 10.3.5 ) with respect to Tenant or Section 10.7 with respect to Landlord, (iii) neither Tenant nor Landlord shall do or permit to be done anything which invalidates their respective required insurance policies, and (iv) provide that said insurance shall not be canceled or coverage changed unless thirty (30) days prior written notice shall have been given to Landlord and any mortgagee of Landlord, the identity of whom has been provided to Tenant in writing. Tenant shall deliver said policy or policies or
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certificates thereof and applicable endorsements which meet the requirements of this Article 10 to Landlord on or before (I) the earlier to occur of: (x) the Lease Commencement Date, and (y) the date Tenant and/or its employees, contractors and/or agents first enter the Premises for occupancy, construction of improvements, alterations, or any other move-in activities, and (II) five (5) business days after the renewal of such policies. In the event Tenant shall fail to procure such insurance, or to deliver such policies or certificates and applicable endorsements, Landlord may, at its option, after written notice to Tenant and Tenants failure to obtain such insurance within five (5) days thereafter, procure such policies for the account of Tenant and the sole benefit of Landlord, and the cost thereof shall be paid to Landlord after delivery to Tenant of bills therefor.
10.5 Additional Insurance Obligations . Tenant shall carry and maintain during the entire Lease Term, at Tenants sole cost and expense, the amounts of the insurance required to be carried by Tenant pursuant to this Article 10 and such other commercially reasonable types of insurance coverage and in such commercially reasonable amounts covering the Premises and Tenants operations therein. Any additional insurance amounts may only be imposed by Landlord in connection with Tenant exercising an extension option under Section 2.2 of this Lease or ROFR under Section 29.33 of this Lease. Any and all insurance obligations shall be consistent with common market practices in the Concord BART Submarket.
10.6 Third-Party Contractors . Tenant shall obtain and deliver to Landlord, Third Party Contractors certificates of insurance and applicable endorsements at least seven (7) business days prior to the commencement of work in or about the Premises by any vendor or any other third-party contractor (collectively, a Third Party Contractor ). All such insurance shall (a) name Landlord as an additional insured under such partys liability policies as required by Section 10.3.1 above and this Section 10.6 , (b) provide a waiver of subrogation in favor of Landlord under such Third Party Contractors commercial general liability insurance, (c) be primary and any insurance carried by Landlord shall be excess and non-contributing, and (d) comply with Landlords minimum insurance requirements.
10.7 Landlords Insurance . Landlord shall cause the Building Common Areas to be covered by a policy or policies of commercial general liability insurance and, to the extent that Landlord has any employees, workers compensation insurance, in such amounts as are customarily carried by reasonably prudent landlords of buildings similar to the Building or as may be required under the CC&Rs or by law. Additionally, Landlord shall maintain all risk property insurance on the Base Building in an amount equal to the full replacement value thereof, subject to Landlords deductable amount, provided however that Landlord may, but has no obligation to carry earthquake or business income insurance.
ARTICLE 11
DAMAGE AND DESTRUCTION
11.1 Repair of Damage to Premises by Landlord . If the Premises or any Building Common Areas serving or providing access to the Premises shall be damaged by fire or other casualty (collectively, a Casualty ), Landlord shall promptly and diligently, subject to reasonable delays for insurance adjustment or other matters beyond Landlords reasonable
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control, and subject to all other terms of this Article 11 , restore the base, shell and core of the Premises and such Common Areas. Such restoration shall be to substantially the same condition of the base, shell and core of the Premises and Building Common Areas prior to the casualty, except for modifications required by zoning and building codes and other laws or by the holder of a mortgage on the Building, or any other modifications to the common areas deemed desirable by Landlord, provided access to the Premises and any common restrooms serving the Premises shall not be materially impaired. Additionally, if any Casualty occurs with respect to the Garage, Landlord will use commercially reasonable efforts to cause the owner of the Garage to restore such damage. Notwithstanding any other provision of this Lease, upon the occurrence of any damage to the Premises, Tenant shall assign to Landlord (or to any party designated by Landlord) all insurance proceeds payable to Tenant under Tenants insurance required to be carried under Section 10.3.2(ii) and 10.3.2(iii) of this Lease, and Landlord shall repair any injury or damage to the improvements installed in the Premises and shall return such improvements to their original condition; provided that if the cost of such repair by Landlord exceeds the amount of insurance proceeds received by Landlord from Tenants insurance carrier, as assigned by Tenant, the deficiency in the cost of such repairs shall be paid by Tenant to Landlord prior to Landlords repair of the damage. In connection with such repairs and replacements, Tenant shall, prior to the commencement of construction, submit to Landlord, for Landlords review and approval, all plans, specifications and working drawings relating thereto, and Landlord shall select the contractors to perform such improvement work. Landlord shall not be liable for any inconvenience or annoyance to Tenant or its visitors, or injury to Tenants business resulting in any way from such damage or the repair thereof; provided however, that if such Casualty shall have damaged the Premises or common areas necessary to Tenants occupancy, and if such damage is not the result of the willful misconduct of Tenant or Tenants employees, contractors, licensees, or invitees, Landlord shall allow Tenant a proportionate abatement of Rent, during the time and to the extent the Premises are unfit for occupancy for the purposes permitted under this Lease, and not occupied by Tenant as a result thereof.
11.2 Landlords Option to Repair . Notwithstanding the terms of Section 11.1 of this Lease, Landlord may elect not to rebuild and/or restore the Premises and/or Building and instead terminate this Lease by notifying Tenant in writing of such termination within sixty (60) days after the date of discovery of such damage, such notice to include a termination date giving Tenant ninety (90) days to vacate the Premises, but Landlord may so elect only if the Building shall be damaged by Casualty or other cause, whether or not the Premises are affected, and one or more of the following conditions is present: (i) repairs cannot reasonably be completed within one hundred eighty (180) days of the date of discovery of damage (when such repairs are made without the payment of overtime or other premiums); (ii) the holder of any mortgage on the Building shall require that the insurance proceeds or any portion thereof be used to retire the mortgage debt; or (iii) the damage is not fully covered, except for deductible amounts, by Landlords insurance policies. Additionally, in the event of a Casualty that renders the Premises unfit for occupancy for the Permitted Purpose, or the Garage unfit for use by Tenant as provided hereunder, if the repair thereof (to the extent necessary to make the Premises fit for the Permitted Use or the Garage fit for Tenants use, as the case may be) cannot, in the reasonable opinion of Landlord, be completed within two hundred seventy (270) days, Landlord shall, immediately upon such determination made within the two hundred seventy (270) day period, provide written
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notice to Tenant and Tenant shall have the option to terminate this Lease upon written notice to Landlord delivered within thirty (30) days of Landlords notice to Tenant of such determination. If no cure has been completed and no notice has been received by Tenant within the two hundred seventy (270) day period, Tenant shall have the option to terminate this Lease upon written notice to Landlord delivered within thirty (30) days thereafter. Notwithstanding the foregoing, Landlord may in its sole discretion elect to provide alternative convenient parking for Tenant during any period following a Casualty affecting the Garage, and for purposes of the preceding two sentences, such provision of alternate parking shall be deemed equivalent to restoring the Garage. In addition, in the event that the Premises or the Building is destroyed or damaged to any substantial extent during the last twelve (12) months of the Lease Term, then notwithstanding anything contained in this Article 11 , Landlord and Tenant shall each individually have the option to terminate this Lease by giving written notice to the other of the exercise of such option within thirty (30) days after the date of such damage or destruction, in which event this Lease shall cease and terminate as of the date of such notice. Upon any such termination of this Lease pursuant to this Section 11.2 , Tenant shall pay the Base Rent and Additional Rent, properly apportioned up to such date of termination, and both parties hereto shall thereafter be freed and discharged of all further obligations hereunder, except as provided for in provisions of this Lease which by their terms survive the expiration or earlier termination of the Lease Term.
11.3 Waiver of Statutory Provisions . The provisions of this Lease, including this Article 11 , constitute an express agreement between Landlord and Tenant with respect to any and all damage to, or destruction of, all or any part of the Premises, the Building or any other portion of the Project, and any statute or regulation of the state in which the Building is located, including, without limitation, Sections 1932(2) and 1933(4) of the California Civil Code, with respect to any rights or obligations concerning damage or destruction in the absence of an express agreement between the parties, and any other statute or regulation, now or hereafter in effect, shall have no application to this Lease or any damage or destruction to all or any part of the Premises, the Building or any other portion of the Project.
ARTICLE 12
NONWAIVER
No waiver of any provision of this Lease shall be implied by any failure of Landlord or Tenant to enforce any remedy on account of the violation of such provision, even if such violation shall continue or be repeated subsequently, any waiver by Landlord or Tenant of any provision of this Lease may only be in writing, and no express waiver shall affect any provision other than the one specified in such waiver and that one only for the time and in the manner specifically stated. No receipt of monies by Landlord from Tenant or by Tenant from Landlord after the termination of this Lease shall in any way alter the length of the Lease Term or of Tenants or Landlords right of possession hereunder or after the giving of any notice shall reinstate, continue or extend the Lease Term or affect any notice given Tenant or Landlord prior to the receipt of such monies, it being agreed that after the service of notice or the commencement of a suit or after final judgment for possession of the Premises, Tenant may pay and Landlord may receive and collect any Rent due, and the payment and/or receipt of said Rent shall not waive or affect said notice, suit or judgment.
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ARTICLE 13
CONDEMNATION
If the whole or any material part of the Premises, Garage (unless Landlord elects in its sole discretion to provide alternate convenient parking to Tenant) or Building shall be taken by power of eminent domain or condemned by any competent authority for any public or quasi-public use or purpose, or if any adjacent property or street shall be so taken or condemned, or reconfigured or vacated by such authority in such manner as to require the use, reconstruction or remodeling of the whole or any material part of the Premises, Garage (unless Landlord elects in its sole discretion to provide alternate convenient parking to Tenant) or Building, or if Landlord shall grant a deed or other instrument in lieu of such taking by eminent domain or condemnation, this Lease shall automatically terminate as of the date possession is required to be surrendered to the applicable authority. Tenant shall not because of such taking assert any claim against Landlord or the authority for any compensation because of such taking and Landlord shall be entitled to the entire award or payment in connection therewith, except that Tenant shall have the right to file any separate claim available to Tenant for any taking of Tenants personal property and fixtures belonging to Tenant and removable by Tenant upon expiration of the Lease Term pursuant to the terms of this Lease. All Rent shall be apportioned as of the date of such termination. Tenant hereby waives any and all rights it might otherwise have pursuant to Section 1265.130 of The California Code of Civil Procedure.
ARTICLE 14
ASSIGNMENT AND SUBLETTING
14.1 Transfers . Tenant shall not, without the prior written consent of Landlord, assign, mortgage, pledge, hypothecate, encumber, or permit any lien to attach to, or otherwise transfer, this Lease or any interest hereunder, permit any assignment, or other transfer of this Lease or any interest hereunder by operation of law, sublet the Premises or any part thereof, or enter into any license or concession agreements or otherwise permit the occupancy or use of the Premises or any part thereof by any persons other than Tenant and its employees and contractors (all of the foregoing are hereinafter sometimes referred to collectively as Transfers and any person to whom any Transfer is made or sought to be made is hereinafter sometimes referred to as a Transferee and the Premises or portion thereof to be transferred hereinafter referred to as the Subject Space ). In connection with any such transfer contemplated by Tenant, Tenant shall submit a written request for consent notice to Landlord, together with any information reasonably required by Landlord which will enable Landlord to determine (i) the financial responsibility, character, and reputation of the proposed transferee, (ii) the nature of such transferees business, (iii) the proposed use of the applicable portion of the Premises, and (iv) any other reasonable consent parameters. Any transfer made without Landlords prior written consent shall, at Landlords option, be null, void and of no effect, and shall, at Landlords option, constitute a default by Tenant under this Lease. Whether or not Landlord consents to any
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proposed transfer, Tenant shall pay Landlords reasonable, internal review and processing fees not to exceed two thousand five hundred dollars ($2,500), as well as any reasonable, out-of-pocket third-party fees (including, without limitation, attorneys, accountants, architects, engineers and consultants fees) incurred by Landlord, within forty five (45) days after written request by Landlord.
14.2 Landlords Consent . Landlord shall not unreasonably withhold its consent to any proposed Transfer of the Subject Space to the Transferee on the terms specified in the Transfer Notice. If Landlord does not respond to the Transfer Notice within fifteen (15) days, Tenant may send a second copy of the Transfer Notice, containing a prominently displayed, bold-faced caption stating that failure to respond to such second notice within an additional fifteen (15) day period will result in the deemed approval of the Transfer contemplated in the Transfer Notice. If Landlord fails to respond to such second Transfer Notice within fifteen (15) days thereafter, the applicable Transfer shall be deemed approved. Without limitation as to other reasonable grounds for withholding consent, the parties hereby agree that it shall be reasonable under this Lease and under any applicable law for Landlord to withhold consent to any proposed Transfer where one or more of the following apply: (i) transferee is of a character or reputation or engaged in a business which is not consistent with the quality of the Building or the Project; (ii) transferee is not a party of reasonable financial worth and/or financial stability in light of the responsibilities to be undertaken in connection with the transfer on the date consent is requested; (iii) transferee intends to use the applicable portion(s) of the Premises for purposes which are not permitted under this Lease; (iv) transferee is either a governmental agency or instrumentality thereof; (v) the proposed transfer would cause a violation of another lease for space in the Project, or would give an occupant of the Project a right to cancel its lease; or (vi) either the proposed transferee, or any person or entity which directly or indirectly, controls, is controlled by, or is under common control with, the proposed transferee, (A) occupies space in the Project at the time of the request for consent, or (B) is negotiating or has negotiated with Landlord to lease space in the Project within the previous six (6) months. Notwithstanding anything to the contrary in this Lease, if Tenant or any proposed transferee claims that Landlord has unreasonably withheld or delayed its consent under this Section 14.2 or otherwise has breached or acted unreasonably under this Article 14 , their sole remedies shall be a declaratory judgment and an injunction for the relief sought without any monetary damages, and Tenant hereby waives all other remedies, including, without limitation, any right at law or equity to terminate this Lease, on its own behalf and, to the extent permitted under all applicable laws, on behalf of the proposed Transferee. Tenant shall indemnify, defend and hold harmless Landlord from any and all liability, losses, claims, damages, costs, expenses, causes of action and proceedings involving any third party or parties (including without limitation Tenants proposed subtenant or assignee) who claim they were damaged by Landlords wrongful withholding or conditioning of Landlords consent.
14.3 Transfer Premium . If Landlord consents to a proposed transfer, as a condition thereto which the parties hereby agree is reasonable, Tenant shall pay to Landlord fifty percent (50%) of any Transfer Premium, as that term is defined in this Section 14.3 , received by Tenant from such Transferee. Transfer Premium shall mean all rent, additional rent or other consideration payable by such transferee in connection with the Transfer in excess of the Rent
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and Additional Rent payable by Tenant under this Lease during the term of the Transfer (on a per rentable square foot basis if less than all of the Premises is transferred); provided, however, such Transfer Premium shall also include, but not be limited to, key money, bonus money or other cash consideration paid by transferee to Tenant in connection with such transfer, and any payment in excess of fair market value for services rendered by Tenant to transferee or for assets, fixtures, inventory, equipment, or furniture transferred by Tenant to transferee in connection with such Transfer, and shall be reduced dollar for dollar (on a straight-line amortized basis over the term of the applicable sublease or the remaining Lease Term other than with respect to a sublease) by any reasonable, out-of-pocket expenses incurred by Tenant in connection with such Transfer. No Transfer Premium shall apply for any transaction not requiring Landlord consent under this Article 14 .
14.4 Landlords Option as to Subject Space . Notwithstanding anything to the contrary contained in this Article 14 , Landlord shall have the option, by giving written notice to Tenant within thirty (30) days after receipt of Tenants written request for consent to so transfer, to recapture the corresponding portion of the Premises. Such recapture notice shall cancel and terminate this Lease with respect to such portion of the Premises as of the effective date of the proposed transfer. In the event of a recapture by Landlord, if this Lease shall be canceled with respect to less than the entire Premises, the Rent reserved herein shall be prorated on the basis of the number of rentable square feet retained by Tenant in proportion to the number of rentable square feet contained in the Premises, and this Lease as so amended shall continue thereafter in full force and effect, and upon request of either party, the parties shall execute written confirmation of the same. If Landlord declines, or fails to elect in a timely manner to recapture the Subject Space under this Section 14.4 , then, provided Landlord has consented to the proposed transfer, Tenant shall be entitled to proceed to transfer the Subject Space to the proposed transferee, subject to provisions of this Article 14 . Landlord shall have no option to recapture space under this Section 14.4 as a result of any transaction not requiring Landlord consent under this Article 14 .
14.5 Effect of Transfer . If Landlord consents to a transfer, (i) the TCCs of this Lease shall in no way be deemed to have been waived or modified, (ii) such consent shall not be deemed consent to any further transfer by either Tenant or a transferee, (iii) Tenant shall deliver to Landlord, promptly after execution, an original executed copy of all documentation pertaining to the transfer in form reasonably acceptable to Landlord, (iv) Tenant shall furnish upon Landlords request a complete statement, certified by an independent certified public accountant, or Tenants chief financial officer, setting forth in detail the computation of any Transfer Premium Tenant has derived and shall derive from such Transfer, and (v) no Transfer relating to this Lease or agreement entered into with respect thereto, whether with or without Landlords consent, shall relieve Tenant or any guarantor of the Lease from any liability under this Lease, including, without limitation, in connection with the Subject Space. Landlord or its authorized representatives shall have the right at all reasonable times to audit the books, records and papers of Tenant relating to any Transfer, and shall have the right to make copies thereof. If the Transfer Premium respecting any Transfer shall be found understated, Tenant shall, within forty five (45) days after demand, pay the deficiency, and if understated by more than four percent (4%), Tenant shall pay Landlords costs of such audit.
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14.6 Permitted Transfers . Notwithstanding the foregoing, Tenant shall have the right to assign this Lease in whole or in part, or to sublet any portion or all of the Premises, by operation of law or otherwise, without the requirement to obtain Landlords consent, but upon written notice, and without the need to provide any form of transfer fee, premium or other fees and costs payable to Landlord and with no right of recapture of any kind on the part of Landlord (i) to any entity controlling, controlled by, or under common control with Tenant), (ii) to any entity into or with which Tenant may be merged or consolidated, or (iii) to any entity that has acquired, or is concurrently therewith acquiring, ownership or control of all or substantially all of the assets of and/or ownership interest in Tenant; provided that Tenant notifies Landlord of any such assignment or sublease and promptly supplies Landlord with any documents or information reasonably requested by Landlord regarding such assignment or sublease or such affiliate, and further provided that such assignment or sublease is not a subterfuge by Tenant to avoid its obligations under this Lease or otherwise effectuate any release by Tenant of such obligations and such Permitted Transferee shall thereafter become liable under this Lease, on a joint and several basis, with Tenant. The transferee under a transfer specified in items (i), (ii) or (iii) above shall be referred to as a Permitted Transferee . Control , as used in this Section 14.6 , shall mean the ownership, directly or indirectly, of at least fifty-one percent (51%) of the voting securities of, or possession of the right to vote, in the ordinary direction of its affairs, of at least fifty-one percent (51%) of the voting interest in, any person or entity. Notwithstanding any provision of this Lease to the contrary (including Section 14.7 below), the recently announced potential sale transaction, pursuant to which, if consummated, ownership interests in AssetMark Holdings, Inc. (Tenants corporate parent) would be transferred to a partnership owned by Aquiline Capital Partners and Genstar Capital, will not be deemed a Transfer hereunder, and therefore no prior notice or fee obligations, consent, cost reimbursement or recapture rights will arise in connection therewith; provided, however, Tenant shall notify Landlord in the event that such potential sale is consummated. In addition, notwithstanding anything herein to the contrary, Tenant shall not mortgage, give as security, pledge or encumber this Lease, in whole or in part, without Landlords prior written consent, which consent may be withheld by Landlord in its sole and absolute discretion.
14.7 Additional Transfers . For purposes of this Lease, the term Transfer shall also include (i) if Tenant is a partnership or limited liability company, the withdrawal or change, voluntary, involuntary or by operation of law, of more than fifty percent (50%) or more of the partners or members, or transfer of more than fifty percent (50%) or more of partnership or membership interests, within a twelve (12)-month period, or the dissolution of the partnership without immediate reconstitution thereof, and (ii) if Tenant is a closely held corporation (i.e., whose stock is not publicly held and not traded through an exchange or over the counter), (A) the dissolution, merger, consolidation or other reorganization of Tenant or (B) the sale or other transfer of an aggregate of more than fifty percent (50%) or more of the voting shares of Tenant (other than to immediate family members by reason of gift or death), within a twelve (12)-month period, or (C) the sale, mortgage, hypothecation or pledge of an aggregate of more than fifty percent (50%) or more of the value of the unencumbered assets of Tenant within a twelve (12)-month period.
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14.8 Occurrence of Default . Any Transfer hereunder shall be subordinate and subject to the provisions of this Lease, and if this Lease shall be terminated during the term of any Transfer, Landlord shall have the right to: (i) treat such Transfer as cancelled and repossess the Subject Space by any lawful means, or (ii) require that such Transferee attorn to and recognize Landlord as its landlord under any such Transfer. If Tenant shall be in default under this Lease beyond any applicable cure period, Landlord is hereby irrevocably authorized, as Tenants agent and attorney-in-fact, to direct any Transferee to make all payments under or in connection with the Transfer directly to Landlord (which Landlord shall apply towards Tenants obligations under this Lease) until such default is cured. Such Transferee shall rely on any representation by Landlord that Tenant is in default hereunder, without any need for confirmation thereof by Tenant. Upon any assignment, the assignee shall assume in writing all obligations and covenants of Tenant thereafter to be performed or observed under this Lease. No collection or acceptance of rent by Landlord from any Transferee shall be deemed a waiver of any provision of this Article 14 or the approval of any Transferee or a release of Tenant from any obligation under this Lease, whether theretofore or thereafter accruing. In no event shall Landlords enforcement of any provision of this Lease against any Transferee be deemed a waiver of Landlords right to enforce any term of this Lease against Tenant or any other person. If Tenants obligations hereunder have been guaranteed, Landlords consent to any Transfer shall not be effective unless the guarantor also consents to such Transfer.
ARTICLE 15
SURRENDER OF PREMISES; OWNERSHIP AND
REMOVAL OF TRADE FIXTURES
15.1 Surrender of Premises . No act or thing done by Landlord or any agent or employee of Landlord during the Lease Term shall be deemed to constitute an acceptance by Landlord of a surrender of the Premises unless such intent is specifically acknowledged in writing by Landlord. The delivery of keys to the Premises to Landlord or any agent or employee of Landlord shall not constitute a surrender of the Premises or effect a termination of this Lease, whether or not the keys are thereafter retained by Landlord, and notwithstanding such delivery Tenant shall be entitled to the return of such keys at any reasonable time upon request until this Lease shall have been properly terminated. The voluntary or other surrender of this Lease by Tenant, whether accepted by Landlord or not, or a mutual termination hereof, shall not work a merger, and at the option of Landlord shall operate as an assignment to Landlord of all subleases or subtenancies affecting the Premises or terminate any or all such sublessees or subtenancies.
15.2 Removal of Tenant Property by Tenant . Upon the expiration of the Lease Term, or upon any earlier termination of this Lease, Tenant shall, subject to the provisions of this Article 15 , quit and surrender possession of the Premises to Landlord in as good order and condition as when Tenant took possession and as thereafter improved by Landlord and/or Tenant, reasonable wear and tear, Casualty, Condemnation and repairs which are specifically made the responsibility of Landlord hereunder excepted (it being acknowledged that the provisions of Article 7 shall apply with respect to any Casualty). Upon such expiration or termination, Tenant shall, without expense to Landlord, remove or cause to be removed from the Premises all debris and rubbish, and such items of furniture, equipment, business and trade
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fixtures, free-standing cabinet work, movable partitions and other articles of personal property owned by Tenant or installed or placed by Tenant at its expense in the Premises, and such similar articles of any other persons claiming under Tenant, and Tenant shall repair at its own expense all damage to the Premises and Building resulting from such removal.
ARTICLE 16
HOLDING OVER
If Tenant holds over after the expiration of the Lease Term or earlier termination thereof, with or without the express or implied consent of Landlord, such tenancy shall be from month-to-month only, and shall not constitute a renewal hereof or an extension for any further term, and in such case Rent shall be payable at a monthly rate equal to the product of (i) the Rent applicable during the last rental period of the Lease Term under this Lease, and (ii) a percentage equal to one hundred fifty percent (150%). Such month-to-month tenancy shall be subject to every other applicable term, covenant and agreement contained herein. Nothing contained in this Article 16 shall be construed as consent by Landlord to any holding over by Tenant, and Landlord expressly reserves the right to require Tenant to surrender possession of the Premises to Landlord as provided in this Lease upon the expiration or other termination of this Lease. The provisions of this Article 16 shall not be deemed to limit or constitute a waiver of any other rights or remedies of Landlord provided herein or at law. If Tenant fails to surrender the Premises upon the termination or expiration of this Lease, in addition to any other liabilities to Landlord accruing therefrom, Tenant shall protect, defend, indemnify and hold Landlord harmless from all loss, costs (including reasonable attorneys fees) and liability resulting from such failure, including, without limiting the generality of the foregoing, any claims made by any succeeding tenant founded upon such failure to surrender and any lost profits to Landlord resulting therefrom.
ARTICLE 17
ESTOPPEL CERTIFICATES
Within ten (10) business days following a request in writing by Landlord or Tenant (the Requesting Party ), the other party (the Delivering Party ) shall execute, acknowledge and deliver to the Requesting Party an estoppel certificate, which, as submitted by the Requesting Party, if the Requesting Party is Landlord, shall be substantially in the form of Exhibit E attached hereto (or such other form as may be required by any prospective mortgagee or purchaser of the Project, or any portion thereof), or, if the Requesting Party is Tenant, in a form reasonably agreeable to Landlord and Tenant and consistent with commercially reasonable market practices for landlords and tenants similarly situated to Landlord and Tenant, in either case indicating therein any exceptions thereto that may exist at that time, and shall also contain any other information concerning this Lease reasonably requested by the Requesting Party or its mortgagee or prospective mortgagee. Any such certificate may be relied upon solely by any prospective mortgagee or purchaser of all or any portion of the Project or transferee of Tenant, as the case may be. Tenant shall execute and deliver whatever other instruments may be reasonably required for such purposes. At any time during the Lease Term (but not more frequently than
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once annually, twice during the initial Lease Term or twice during any Option Term), Landlord may require Tenant to provide Landlord with a current financial statement and financial statements of the two (2) years prior to the current financial statement year. Such statements shall be prepared in accordance with generally accepted accounting principles, certified by an officer of Tenant and, if such is the normal practice of Tenant, shall be audited by an independent certified public accountant. Failure of Tenant to timely execute, acknowledge and deliver such estoppel certificate shall constitute an acceptance of the Premises and an acknowledgment by Tenant that statements included in the estoppel certificate are true and correct, without exception.
ARTICLE 18
SUBORDINATION, NON-DISTURBANCE & ATTORNMENT
This Lease shall be subject and subordinate to all present and future ground or underlying leases of the Building or Project and to the lien of any mortgage, trust deed or other encumbrances now or hereafter in force against the Building or Project or any part thereof, if any, and to all renewals, extensions, modifications, consolidations and replacements thereof, and to all advances made or hereafter to be made upon the security of such mortgages or trust deeds, unless the holders of such mortgages, trust deeds or other encumbrances, or the lessors under such ground lease or underlying leases, require in writing that this Lease be superior thereto; provided, however, any such lessor or lender shall enter into an SNDA as provided below or otherwise agree, as set forth in the SNDA, not to disturb Tenants possession, occupancy, access or quiet enjoyment of the Premises under this Lease. Tenant covenants and agrees in the event any proceedings are brought for the foreclosure of any such mortgage or deed in lieu thereof (or if any ground lease is terminated), to attorn, without any deductions or set-offs whatsoever, to the lienholder or purchaser or any successors thereto upon any such foreclosure sale or deed in lieu thereof (or to the ground lessor), if so requested to do so by such purchaser or lienholder or ground lessor, and to recognize such purchaser or lienholder or ground lessor as the lessor under this Lease, provided such lienholder or purchaser or ground lessor shall agree to accept this Lease and not disturb Tenants occupancy, so long as Tenant timely pays the rent and observes and performs the TCCs of this Lease to be observed and performed by Tenant. Landlords interest herein may be assigned as security at any time to any lienholder. Tenant shall, within ten (10) business days of request by Landlord, execute a subordination, non-disturbance and attornment agreement in form and content substantially comparable to that attached to this Lease as Exhibit G, and otherwise reasonably acceptable to Landlords mortgage-holder and to Tenant (an SNDA ) to evidence or confirm the subordination or superiority of this Lease to the lien of any such mortgages, trust deeds, ground leases or underlying leases. Tenant waives the provisions of any current or future statute, rule or law which may give or purport to give Tenant any right or election to terminate or otherwise adversely affect this Lease and the obligations of the Tenant hereunder in the event of any foreclosure proceeding or sale.
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ARTICLE 19
DEFAULTS; REMEDIES
19.1 Tenant Events of Default . The occurrence of any of the following shall constitute an Event of Default by Tenant:
19.1.1 Any failure by Tenant to pay any Rent or any other charge required to be paid under this Lease, or any part thereof, when due unless such failure is cured within five (5) days after notice; or
19.1.2 Except where a specific time period is otherwise set forth for Tenants performance in this Lease, in which event the failure to perform by Tenant within such time period shall be a default by Tenant under this Section 19.1.2 , any failure by Tenant to observe or perform any other provision, covenant or condition of this Lease to be observed or performed by Tenant where such failure continues for thirty (30) days after written notice thereof from Landlord to Tenant; provided that if the nature of such default is such that the same cannot reasonably be cured within a thirty (30) day period, Tenant shall not be deemed to be in default if it diligently commences such cure within such period and thereafter diligently proceeds to rectify and cure such default, but in no event exceeding a period of time in excess of sixty (60) days after written notice thereof from Landlord to Tenant; or
19.1.3 To the extent permitted by law, a general assignment by Tenant or any guarantor of this Lease for the benefit of creditors, or the taking of any corporate action in furtherance of bankruptcy or dissolution whether or not there exists any proceeding under an insolvency or bankruptcy law, or the filing by or against Tenant or any guarantor of any proceeding under an insolvency or bankruptcy law, unless in the case of a proceeding filed against Tenant or any guarantor the same is dismissed within sixty (60) days, or the appointment of a trustee or receiver to take possession of all or substantially all of the assets of Tenant or any guarantor, unless possession is restored to Tenant or such guarantor within thirty (30) days, or any execution or other judicially authorized seizure of all or substantially all of Tenants assets located upon the Premises or of Tenants interest in this Lease, unless such seizure is discharged within thirty (30) days; or
19.1.4 The failure by Tenant to observe or perform according to the provisions of Articles 5 , 14 , 17 or 18 of this Lease where such failure continues for more than two (2) business days after notice from Landlord.
The notice periods provided herein are in lieu of, and not in addition to, any notice periods provided by law.
19.2 Remedies Upon Tenant Default . Upon the occurrence of any Event of Default by Tenant, Landlord shall have, in addition to any other remedies available to Landlord at law or in equity (all of which remedies shall be distinct, separate and cumulative), the option to pursue any one or more of the following remedies, each and all of which shall be cumulative and nonexclusive, without any notice or demand whatsoever.
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19.2.1 Terminate this Lease, in which event Tenant shall immediately surrender the Premises to Landlord, and if Tenant fails to do so, Landlord may, without prejudice to any other remedy which it may have for possession or arrearages in rent, enter upon and take possession of the Premises and expel or remove Tenant and any other person who may be occupying the Premises or any part thereof, without being liable for prosecution or any claim or damages therefor; and Landlord may recover from Tenant the following:
(a) The worth at the time of award of any unpaid rent which has been earned at the time of such termination; plus
(b) The worth at the time of award of the amount by which the unpaid rent which would have been earned after termination until the time of award exceeds the amount of such rental loss that Tenant proves could have been reasonably avoided; plus
(c) The worth at the time of award of the amount by which the unpaid rent for the balance of the Lease Term after the time of award exceeds the amount of such rental loss that Tenant proves could have been reasonably avoided; plus
(d) Any other amount necessary to compensate Landlord for the detriment proximately caused by Tenants failure to perform its obligations under this Lease, specifically including but not limited to, brokerage commissions and advertising expenses incurred; and
(e) At Landlords election, such other amounts in addition to or in lieu of the foregoing as may be permitted from time to time by applicable law.
The term rent as used in this Section 19.2 shall be deemed to be and to mean all sums of every nature required to be paid by Tenant pursuant to the terms of this Lease to Landlord. As used in Sections 19.2.1(a) and (b) , above, the worth at the time of award shall be computed by allowing interest at the Interest Rate. As used in Section 19.2.1(c) , above, the worth at the time of award shall be computed by discounting such amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of award plus one percent (1%).
19.2.2 Landlord shall have the remedy described in California Civil Code Section 1951.4 (lessor may continue lease in effect after lessees breach and abandonment and recover rent as it becomes due, if lessee has the right to sublet or assign, subject only to reasonable limitations). Accordingly, if Landlord does not elect to terminate this Lease on account of any Event of Default by Tenant, Landlord may, from time to time, without terminating this Lease, enforce all of its rights and remedies under this Lease, including the right to recover all rent as it becomes due.
19.2.3 Landlord shall at all times have the rights and remedies (which shall be cumulative with each other and cumulative and in addition to those rights and remedies available under Sections 19.2.1 and 19.2.2 , above, or any law or other provision of this Lease), without prior demand or notice except as required by applicable law, to seek any declaratory, injunctive or other equitable relief, and specifically enforce this Lease, or restrain or enjoin a violation or breach of any provision hereof.
19.3 Subleases of Tenant . Whether or not Landlord elects to terminate this Lease on account of any Event of Default by Tenant, as set forth in this Article 19 , Landlord shall have the right to terminate any and all subleases, licenses, concessions or other consensual arrangements for possession entered into by Tenant and affecting the Premises or may, in Landlords sole discretion, succeed to Tenants interest in such subleases, licenses, concessions or arrangements.
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In the event of Landlords election to succeed to Tenants interest in any such subleases, licenses, concessions or arrangements, Tenant shall, as of the date of notice by Landlord of such election, have no further right to or interest in the rent or other consideration receivable thereunder.
19.4 Mitigation of Damages . Landlord acknowledges and agrees that, with respect to any Event of Default, to the extent that Landlord fails to make any effort required by applicable law to mitigate its damages resulting from such Event of Default, the damages to which Landlord may be entitled to receive pursuant to Section 19.2 may be reduced according to applicable law.
19.5 Efforts to Relet . No re-entry or repossession, repairs, maintenance, changes, alterations and additions, reletting, appointment of a receiver to protect Landlords interests hereunder, or any other action or omission by Landlord shall be construed as an election by Landlord to terminate this Lease or Tenants right to possession, or to accept a surrender of the Premises, nor shall same operate to release Tenant in whole or in part from any of Tenants obligations hereunder, unless express written notice of such intention is sent by Landlord to Tenant.
19.6 Landlord Default . Notwithstanding anything to the contrary set forth in this Lease, Landlord shall be in default in the performance of any obligation required to be performed by Landlord pursuant to this Lease if Landlord fails to perform such obligation within thirty (30) days after the receipt of notice from Tenant specifying in detail Landlords failure to perform (except in the case of an emergency that presents an immediate and material threat of harm to Tenants property, the Premises or persons therein, in which case such thirty (30) day period shall be reduced to a reasonable period required for Landlord to act); provided, however, if the nature of Landlords obligation is such that more than thirty (30) days are required for its performance, then, during a period not to exceed one hundred twenty (120) additional days, Landlord shall not be in default under this Lease if it shall commence such performance within such thirty (30) day period and thereafter diligently pursue the same to completion. Upon any such default by Landlord under this Lease, Tenant may, except as otherwise specifically provided in this Lease to the contrary, exercise any of its rights provided at law or in equity, subject to the TCCs of this Lease, including the right to perform Landlords obligation at Landlords expense, which shall be billed to Landlord. Any award from a court or arbitrator in favor of Tenant requiring payment by Landlord which is not paid by Landlord within the time period directed by such award, may be offset by Tenant from Rent next due and payable under this Lease; provided, however, Tenant may not deduct the amount of the award against more than fifty percent (50%) of Base Rent next due and owing (until such time as the entire amount of such judgment is deducted) unless the remaining Lease Term and/or Base Rent payable during the same is inadequate to satisfy such reward (in which case such deductions shall be straight-line amortized over the remaining Lease Term).
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ARTICLE 20
COVENANT OF QUIET ENJOYMENT
Landlord covenants that Tenant, on paying the Rent, charges for services and other payments herein reserved and on keeping, observing and performing all the other TCCs, provisions and agreements herein contained on the part of Tenant to be kept, observed and performed, shall, during the Lease Term, peaceably and quietly have, hold and enjoy the Premises subject to the TCCs, provisions and agreements hereof without interference by any persons lawfully claiming by or through Landlord. The foregoing covenant is in lieu of any other covenant of quiet enjoyment express or implied.
ARTICLE 21
INTENTIONALLY OMITTED
ARTICLE 22
INTENTIONALLY OMITTED
ARTICLE 23
SIGNS
23.1 Full Floors . Subject to Landlords prior written approval in its reasonable discretion, and provided all signs are in keeping with the quality, design and style of the Building and Project, Tenant, if the Premises comprise an entire floor of the Building, at its sole cost and expense, may install identification signage anywhere in such entire floor in the Premises, including in the elevator lobby of the Premises. The installation of any such sign shall be subject to the TCC of Article 8 of this Lease.
23.2 Interior and Monument Signage . Landlord shall provide Tenant with identifying signage to be included in the Building standard directory at Landlords cost, and on any free-standing monument signage at Landlords cost; provided however, if at the request of Tenant such monument signage includes elements in excess of Landlords standard monument signage, Tenant shall be responsible for any corresponding incremental cost or expense. Such signage shall be comparable to that used by Landlord for other similar floors in the Building and shall comply with Landlords Building standard signage program.
23.3 Building Top Signage . Provided such sign is in keeping with the quality, design and style of the Building and Project, Tenant shall be given the right to one building top or eyebrow sign on the Building, to be placed in a location of Tenants choosing and subject to Landlords reasonable approval and any governmental regulation or code requirement. The cost and of the production and installation of the building top or eyebrow sign shall be at Tenants expense. The installation of any such sign shall be subject to the TCC of Article 8 of this Lease.
23.4 Multi-Tenant Floors . If other tenants occupy space on any floor on which the Premises is located, Tenants identifying signage on such floor shall be provided by Landlord, at Tenants costs, and such signage shall be comparable to that used by Landlord for other similar floors in the Building and shall comply with Landlords Building standard signage program.
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23.5 Prohibited Signage and Other Items . Any signs, notices, logos, pictures, names or advertisements which are installed and that have not been separately approved by Landlord may be removed without notice by Landlord at the sole expense of Tenant. Tenant may not install any signs on the exterior or roof of the Project or the Common Areas other than signs installed in accordance with the TCCs of Article 23 . Any signs, window coverings or blinds (even if the same are located behind the Landlord-approved window coverings for the Building), or other items displayed in the windows of the Premises which are visible from the ground-level, exterior of the Premises, shall be in keeping with the quality, design and style of the Building and Project and shall be subject to the prior approval of Landlord, in its reasonable discretion.
23.6 Building Name . Landlord shall not name the Building after any of the following competitors of Tenant: Envestnet, Inc.; SEI Investments Company; or Avantria Consultants, LLC (or any of their respective affiliates whose names are derivative of the same). In the event that any of such parties changes its name, or is the subject of a merger or similar transaction and is the surviving party thereof, Tenant may inform Landlord of the new name of such entity and the prohibition of this Section 23.5 shall apply to such new name. Subject to the foregoing, Landlord shall retain all rights with respect to the name of the Building and may select or change such name in its sole discretion.
ARTICLE 24
COMPLIANCE WITH LAW
Landlord shall comply with all Applicable Laws relating to the Base Building, provided that compliance with such Applicable Laws is not the responsibility of Tenant under this Lease, and provided further that Landlords failure to comply therewith would prohibit Tenant from obtaining or maintaining a certificate of occupancy for the Premises, or would unreasonably and materially affect the safety of Tenants employees or create a significant health hazard for Tenants employees. Landlord shall be permitted to include in Operating Expenses any costs or expenses incurred by Landlord under this Article 24 to the extent consistent with the terms of Section 1.1.4 of Exhibit C . Tenant shall not do anything or suffer anything to be done in or about the Premises which will in any way conflict with any law, statute, ordinance or other governmental rule, regulation or requirement now in force or which may hereafter be enacted or promulgated (collectively, Applicable Laws ). At its sole cost and expense, Tenant shall promptly comply with all such governmental measures (including the making of any alterations to the Premises required by Applicable Laws) excluding changes to fire and life/safety requirements and structural changes to the Building or Premises. Should any standard or regulation now or hereafter be imposed on Tenant by a state, federal or local governmental body charged with the establishment, regulation and enforcement of occupational, health or safety standards for employers, employees, landlords or tenants, then Tenant agrees, at its sole cost and expense, to comply promptly with such standards or regulations.
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ARTICLE 25
LATE CHARGES
If Tenant fails to pay any installment of Rent or any other sum due from Tenant within five (5) business days following the date such amount is due, then, Landlord shall provide notice to Tenant in writing of such failure, and without prejudice to any other right or remedy available to Landlord, including without limitation pursuant to Article 29 , Tenant shall pay to Landlord a late charge equal to five percent (5%) of the overdue amount plus any attorneys fees incurred by Landlord by reason of Tenants failure to pay Rent and/or other charges when due hereunder; provided, however, with regard to the first such failure in any twelve (12) month period, Landlord will waive such late charge to the extent Tenant cures such failure within three (3) business days following Tenants receipt of written notice from Landlord that the same was not received when due. The late charge shall be deemed Additional Rent and the right to require it shall be in addition to all of Landlords other rights and remedies hereunder or at law and shall not be construed as liquidated damages or as limiting Landlords remedies in any manner. In addition to the late charge described above, any Rent or other amounts owing by either party hereunder which are not paid within ten (10) business days after the date they are due shall bear interest from the date when due until paid at the Interest Rate. For purposes of this Lease, the Interest Rate shall be an annual rate equal to the lesser of (i) six percent (6%), and (ii) the highest rate permitted by applicable law.
ARTICLE 26
LANDLORDS RIGHT TO CURE DEFAULT; PAYMENTS BY TENANT
All covenants and agreements to be kept or performed by Tenant under this Lease shall be performed by Tenant at Tenants sole cost and expense and without any reduction of Rent, except as may be expressly provided herein. If Tenant shall fail to perform any of its obligations under this Lease, within the time period applicable for the same to become a default beyond all applicable notice and cure periods, or such shorter time period specified herein as the case may be, Landlord may, but shall not be obligated to, after reasonable prior notice to Tenant, make any such payment or perform any such act on Tenants part without waiving its right based upon any default of Tenant and without releasing Tenant from any obligations hereunder. Except as may be specifically provided to the contrary in this Lease, Tenant shall pay to Landlord, within forty five (45) days after delivery by Landlord to Tenant of statements therefore: (i) sums equal to expenditures reasonably made and obligations incurred by Landlord in connection with the remedying by Landlord of Tenants defaults pursuant to the provisions of this Article 26 ; (ii) sums equal to all losses, costs, liabilities, damages and expenses referred to in Article 10 of this Lease; and (iii) sums equal to all expenditures made and obligations incurred by Landlord in collecting or attempting to collect the Rent or in enforcing or attempting to enforce any rights of Landlord under this Lease or pursuant to law, including, without limitation, all legal fees and other amounts so expended. Tenants obligations under this Article 26 shall survive the expiration or sooner termination of the Lease Term.
ARTICLE 27
ENTRY BY LANDLORD
Landlord reserves the right at all reasonable times and upon reasonable notice to the Tenant to enter the Premises to (i) inspect them; (ii) show the Premises to prospective purchasers, mortgagees or tenants, or to the ground or, during the last nine (9) months of the Lease Term, underlying lessors; (iii) post notices of non-responsibility; or (iv) alter, improve or
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repair the Premises or the Building if necessary to comply with current building codes or other applicable laws, or for structural alterations, repairs or improvements to the Building. Notwithstanding anything to the contrary contained in this Article 27 , Landlord may enter the Premises at any time to (A) with reasonable prior notice, perform services required of Landlord; (B) take possession due to any breach of this Lease in the manner provided herein; and (C) perform any covenants of Tenant which Tenant fails to perform. Any such entries shall be without the abatement of Rent and shall include the right to take such reasonable steps as required to accomplish the stated purposes. Tenant hereby waives any claims for damages or for any injuries or inconvenience to or interference with Tenants business, lost profits, any loss of occupancy or quiet enjoyment of the Premises, and any other loss occasioned thereby. For each of the above purposes, Landlord shall at all times have a key with which to unlock all the doors in the Premises, excluding Tenants vaults, safes and special security areas designated from time to time in writing by Tenant. In an emergency, Landlord shall have the right to use any means that Landlord may deem proper to open the doors in and to the Premises. Any entry into the Premises in the manner hereinbefore described shall not be deemed to be a forcible or unlawful entry into, or a detainer of, the Premises, or an actual or constructive eviction of Tenant from any portion of the Premises.
ARTICLE 28
TENANT PARKING
28.1 In General . During the Lease Term, Tenant shall lease from Landlord and Landlord shall lease to Tenant, the number and type of parking passes set forth on Section 9 of the Summary. This right to park in the Garage shall be on a free, unreserved, nonexclusive, first come, first served basis, for passenger-size automobiles and is subject to the following terms and conditions:
28.1.1 Tenant shall at all times abide by and shall cause each of Tenants Parties to abide by any rules and regulations ( Parking Rules ) for use of the Garage that are established from time to time pursuant to the CC&Rs, and otherwise agrees to use the Garage in a safe and lawful manner. Landlord will provide Tenant with two (2) reserved stalls and five (5) visitor parking spaces marked as designated for Tenant in the Garage subject to the CC&Rs and the Parking Rules. Tenant acknowledges that the Parking Rules governing the use of the Garage may be modified from time to time including any key-card, sticker or other identification or entrance system and hours of operation. Landlord or the Garage Operator may refuse to permit any person who violates such Parking Rules to park in the Garage, and any violation of the Parking Rules shall subject the car to removal from the Garage in accordance with Section 28.2 below. Landlord will provide Tenant with one (1) keycard to access the Garage for each parking space provided hereunder at no expense; provided that any replacement access cards will be subject to Landlords standard charge therefor.
28.1.2 Except for Tenants two (2) reserved parking spaces and five (5) designated visitor parking spaces, the parking spaces hereunder shall be provided on a non-designated first-come, first-served basis. Landlord and the Garage Operator reserves the right to assign specific spaces, and to reserve spaces for visitors, small cars, disabled persons or for
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other tenants or guests, and Tenant shall not park and shall not allow Tenants Parties to park in any such assigned or reserved spaces. The Garage has designated visitor parking and Tenant may validate visitor parking by such method as Landlord may approve, at the validation rate from time to time generally applicable to visitor parking. Tenant acknowledges that the Garage may be closed entirely or in part in order to make repairs or perform maintenance services, or to alter, modify, re-stripe or renovate the Garage, or if required by casualty, strike, condemnation, act of God, governmental law or requirement or other reason beyond the operators reasonable control. In the event that the Garage is closed due to Landlords negligence, Landlord shall provide alternate convenient parking for Tenants use during such closing period.
28.1.3 Tenant acknowledges that to the fullest extent permitted by law, Landlord shall have no liability for any damage to property or other items located in the Garage (including without limitation, any loss or damage to tenants automobile or the contents thereof due to theft, vandalism or accident), nor for any personal injuries or death arising out of the use of the Garage by Tenant or any Tenants Parties, unless such loss or damage results from the gross negligence or willful misconduct of Landlord, its agents, employees or contractors. Without limiting the foregoing, if Landlord arranges for the parking areas to be operated by an independent contractor not affiliated with Landlord, Tenant acknowledges that Landlord shall have no liability for claims arising through acts or omissions of such independent contractor. Except for loss or damage resulting from the gross negligence or willful misconduct of Landlord, its agents, employees or contractors, Tenant and Tenants Parties each hereby voluntarily releases, discharges, waives and relinquishes any and all actions or causes of action for personal injury or property damage occurring to Tenant or any of Tenants Parties arising as a result of parking in the Garage, or any activities incidental thereto, wherever or however the same may occur, and further agrees that Tenant will not prosecute any claim for personal injury or property damage against Landlord or any of its officers, agents, servants or employees for any said causes of action and in all events, Tenant agrees to look first to its insurance carrier and to require that Tenants Parties look first to their respective insurance carriers for payment of any losses sustained in connection with any use of the Garage. Tenant hereby waives on behalf of its insurance carriers all rights of subrogation against Landlord or Landlords agents.
28.1.4 Tenants right to park as described in this Article 28 and this Lease is exclusive to Tenant and its Permitted Transferees and shall not pass to any assignee or sublessee without the express written consent of Landlord, not to be unreasonably withheld, conditioned or delayed.
28.1.5 In the event any surcharge or regulatory fee is at any time imposed by any governmental authority with reference to parking, Tenant shall (commencing after two (2) weeks notice to Tenant) pay, per parking pass, such surcharge or regulatory fee to Landlord in advance on the first day of each calendar month concurrently with the month installment of rent due under this Lease. Landlord will enforce any surcharge or fee in an equitable manner amongst the Building tenants.
28.2 Violation . If Tenant violates any of the terms and conditions of this Article 28 , the Garage Operator shall have the right to remove from the Garage any vehicles hereunder which shall have been involved or shall have been owned or driven by parties involved in causing such violation, without liability therefor whatsoever, provided however the Garage
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Operator shall notify Tenant or the owner of such vehicle of any such removal. In addition, Landlord shall have the right to cancel any individual users (including any Tenant Partys) right to use the Garage pursuant to this Article upon ten (10) days written notice, unless within such ten (10) day period, Tenant or such user cures any applicable default. Such cancellation right shall be cumulative and in addition to any other rights or remedies available to Landlord at law or equity, or provided under this Lease.
ARTICLE 29
MISCELLANEOUS PROVISIONS
29.1 Binding Effect . Subject to all other provisions of this Lease, each of the covenants, conditions and provisions of this Lease shall extend to and shall, as the case may require, bind or inure to the benefit not only of Landlord and of Tenant, but also of their respective heirs, personal representatives, successors or assigns, provided this clause shall not permit any assignment by Tenant contrary to the provisions of Article 14 of this Lease.
29.2 Generator . Subject to Landlords prior approval of all plans and specifications, which approval shall not be unreasonably withheld, and otherwise subject to the TCC of Article 8 and the CC&Rs, Tenant shall have the right to install and maintain, at Tenants sole cost and expense, a backup generator in a location to be agreed to by Landlord and Tenant (with due consideration given to the visibility and noise of such generator). Such backup generator shall be used by Tenant only during (i) testing and regular maintenance, and (ii) any period of electrical power outage in the Building. Tenant shall be entitled to operate the generator for testing and regular maintenance only upon reasonable advance notice to Landlord and at times reasonably approved by Landlord. Tenant shall submit the specifications for design, operation, installation and maintenance of the generator for Landlords consent, which consent shall not be unreasonably withheld or delayed and may be conditioned on Tenant complying with such reasonable requirements imposed by Landlord, based on the advice of Landlords structural and mechanical engineers, so that the Buildings systems and equipment are not adversely affected. In addition, Tenant shall ensure that the backup generator does not result in any hazardous substances being introduced to the Building or Project. Further, Tenant shall be responsible for ensuring that the backup generator does not unreasonably interfere with the use of the Building or Project by other tenants. Tenant shall ensure that the design and installation of the backup generator is performed in a manner so as to minimize any excessive noise or vibration caused by such generator. Any generator installed by Tenant shall remain the personal property of Tenant throughout the Lease Term. Landlord may, by written notice to Tenant at the time of Landlords approval only, and as a condition of such approval, require Tenant to remove and repair any damage caused by such removal of the generator.
29.3 No Air Rights . No rights to any view or to light or air over any property, whether belonging to Landlord or any other person, are granted to Tenant by this Lease. If at any time any windows of the Premises are temporarily darkened or the light or view therefrom is obstructed by reason of any repairs, improvements, maintenance or cleaning in or about the Project, the same shall be without liability to Landlord and without any reduction or diminution of Tenants obligations under this Lease.
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29.4 Omitted .
29.5 Transfer of Landlords Interest . Tenant acknowledges that Landlord has the right to transfer all or any portion of its interest in the Project or Building and in this Lease, and Tenant agrees that in the event of any such transfer, Landlord shall automatically be released from all liability under this Lease arising after the effective date of such transfer, and Tenant agrees to look solely to such transferee for the performance of Landlords obligations hereunder after the date of transfer and such transferee shall be deemed to have fully assumed and be liable for all obligations of this Lease to be performed by Landlord (including the return of any security deposit, if applicable at any time under this Lease), and Tenant shall attorn to such transferee. Tenant further acknowledges that Landlord may assign its interest in this Lease to a mortgage lender as additional security and agrees that such an assignment shall not release Landlord from its obligations hereunder and that Tenant shall continue to look to Landlord for the performance of its obligations hereunder.
29.6 Prohibition Against Recording or Publication . Neither this Lease, nor any memorandum, affidavit or other writing with respect thereto, shall be recorded or otherwise published by Tenant or by anyone acting through, under or on behalf of Tenant.
29.7 Landlords Title . Landlords title is and always shall be paramount to the title of Tenant. Nothing herein contained shall empower Tenant to do any act which can, shall or may encumber the title of Landlord.
29.8 Application of Payments . Landlord shall have the right to apply payments received from Tenant pursuant to this Lease, regardless of Tenants designation of such payments, to satisfy any obligations of Tenant hereunder, in such order and amounts as Landlord, in its sole discretion, may elect; provided, however, if Tenant designates any amount as a payment to cure any continuing default under this Lease, Landlord shall not apply such payment toward any amount not yet due and delinquent under this Lease in lieu of the obligation designated by Tenant.
29.9 Tenants Right to Go Dark . At any time during the Lease Term, Tenant shall have the right to cease operations in and close any or all of the Premises and to remove any and all furniture and equipment therefrom in accordance with the TCC of this Lease, provided that (i) Tenant notifies Landlord in advance or immediately thereafter, (ii) Tenant continues to pay all Rent as and when due and otherwise to satisfy all of its obligations under this Lease, and (iii) Tenant complies with Landlords reasonable closing requirements.
29.10 Time of Essence . Time is of the essence with respect to the performance of every provision of this Lease in which time of performance is a factor.
29.11 Partial Invalidity . If any term, provision or condition contained in this Lease shall, to any extent, be invalid or unenforceable, the remainder of this Lease, or the application of such term, provision or condition to persons or circumstances other than those with respect to which it is invalid or unenforceable, shall not be affected thereby, and each and every other term, provision and condition of this Lease shall be valid and enforceable to the fullest extent possible permitted by law.
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29.12 No Warranty . In executing and delivering this Lease, Tenant has not relied on any representations, including, but not limited to, any representation as to the amount of any item comprising Additional Rent or the amount of the Additional Rent in the aggregate or that Landlord is furnishing the same services to other tenants, at all, on the same level or on the same basis, or any warranty or any statement of Landlord which is not set forth herein or in one or more of the exhibits attached hereto.
29.13 Landlord Exculpation . The liability of Landlord or the Landlord Parties to Tenant for any default by Landlord under this Lease or arising in connection herewith or with Landlords operation, management, leasing, repair, renovation, alteration or any other matter relating to the Project or the Premises shall be limited solely and exclusively to the interest of Landlord in the Building, provided that in no event shall such liability extend to any sales or insurance proceeds received by Landlord or the Landlord Parties in connection with the Project, Building or Premises. Neither Landlord, nor any of the Landlords Parties or Tenants Parties shall have any personal liability therefor, and both Landlord and Tenant hereby expressly waive and release such personal liability on behalf of itself and all persons claiming by, through or under Landlord or Tenant. The limitations of liability contained in this Section 29.13 shall inure to the benefit of Landlords and the Landlord Parties and Tenants and Tenants Parties present and future partners, beneficiaries, officers, directors, trustees, shareholders, agents and employees, and their respective partners, heirs, successors and assigns. Under no circumstances shall any present or future partner of Landlord (if Landlord is a partnership) or Tenant (if Tenant is a partnership), or trustee or beneficiary (if Landlord or any partner of Landlord is a trust) or Tenant (if Tenant or any partner of Tenant is a Trust), have any liability for the performance of Landlords or Tenants obligations under this Lease. Notwithstanding any contrary provision herein, neither Landlord nor the Landlord Parties nor Tenant nor Tenant Parties shall be liable under any circumstances for injury or damage to, or interference with, Landlords business or operation or Tenants business, including but not limited to, loss of profits, loss of rents or other revenues, loss of business opportunity, loss of goodwill or loss of use, consequential and/or punitive or otherwise, in each case, however occurring.
29.14 Entire Agreement . It is understood and acknowledged that there are no oral agreements between the parties hereto affecting this Lease and this Lease constitutes the parties entire agreement with respect to the leasing of the Premises and supersedes and cancels any and all previous negotiations, arrangements, brochures, agreements and understandings, if any, between the parties hereto or displayed by Landlord to Tenant with respect to the subject matter thereof, and none thereof shall be used to interpret or construe this Lease. None of the terms, covenants, conditions or provisions of this Lease can be modified, deleted or added to except in writing signed by the parties hereto.
29.15 Right to Lease . Landlord reserves the absolute right to effect such other tenancies in the Project as Landlord in the exercise of its sole business judgment shall determine to best promote the interests of the Building or Project. Tenant does not rely on the fact, nor does Landlord represent, that any specific tenant or type or number of tenants shall, during the Lease Term, occupy any space in the Building or Project.
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29.16 Force Majeure . Any prevention, delay or stoppage due to strikes, lockouts, labor disputes, acts of God, inability to obtain services, labor, or materials or reasonable substitutes therefor, governmental actions, civil commotions, fire or other casualty, and other causes beyond the reasonable control of the party obligated to perform, except with respect to the obligations imposed with regard to Rent and other charges to be paid by Tenant pursuant to this Lease and except as to Tenants obligations under Articles 5 and Landlords and Tenants obligations under Section 24 of this Lease (collectively, a Force Majeure ), notwithstanding anything to the contrary contained in this Lease, shall excuse the performance of such party for a period equal to the period of any such prevention, delay or stoppage and, therefore, if this Lease specifies a time period for performance of an obligation of either party, that time period shall be extended by the period of any delay in such partys performance caused by a Force Majeure.
29.17 Waiver of Redemption by Tenant . Tenant hereby waives, for Tenant and for all those claiming under Tenant, any and all rights now or hereafter existing to redeem by order or judgment of any court or by any legal process or writ, Tenants right of occupancy of the Premises after any termination of this Lease.
29.18 Notices . All notices, demands, statements or communications (collectively, Notices ) given or required to be given by either party to the other hereunder shall be in writing, shall be (A) delivered by a nationally recognized overnight courier, or (B) delivered personally. All Notices shall be deemed to have been duly given either (a) immediately upon hand delivery, or (b) the next business day after being deposited (in time for delivery by such service on such business day) with Federal Express or another national courier service, for delivery or (c) two (2) business days after having been mailed, postage prepaid, by U.S. certified mail, for delivery to the parties at the following addresses (which such addresses may be changed by either party by giving written notice thereof to the other): (i) to Tenant at the appropriate address set forth in Section 10 of the Summary; or (ii) to Landlord at the addresses set forth in Section 11 of the Summary. If Tenant is notified of the identity and address of Landlords mortgagee or ground or underlying lessor, Tenant shall give to such mortgagee or ground or underlying lessor written notice of any default by Landlord under the terms of this Lease, and such mortgagee or ground or underlying lessor shall be given a reasonable opportunity to cure such default prior to Tenants exercising any remedy available to Tenant. The party delivering Notice shall use commercially reasonable efforts to provide a courtesy copy of each such Notice to the receiving party via electronic mail.
29.19 Authority . Tenant hereby represents and warrants that Tenant is a duly formed and existing entity qualified to do business in California and that Tenant has full right and authority to execute and deliver this Lease and that each person signing on behalf of Tenant is authorized to do so.
29.20 Attorneys Fees . In the event that either Landlord or Tenant should bring suit for the possession of the Premises, for the recovery of any sum due under this Lease, or because of the breach of any provision of this Lease or for any other relief against the other, then all costs and expenses, including reasonable attorneys fees, incurred by the prevailing party therein shall be paid by the other party, which obligation on the part of the other party shall be deemed to have accrued on the date of the commencement of such action and shall be enforceable whether or not the action is prosecuted to judgment.
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29.21 Governing Law; WAIVER OF TRIAL BY JURY . This Lease shall be construed and enforced in accordance with the laws of the State of California. IN ANY ACTION OR PROCEEDING ARISING HEREFROM, LANDLORD AND TENANT HEREBY CONSENT TO (I) THE JURISDICTION OF ANY COMPETENT COURT WITHIN THE STATE OF CALIFORNIA, (II) SERVICE OF PROCESS BY ANY MEANS AUTHORIZED BY CALIFORNIA LAW, AND (III) IN THE INTEREST OF SAVING TIME AND EXPENSE, TRIAL WITHOUT A JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER OF THE PARTIES HERETO AGAINST THE OTHER OR THEIR SUCCESSORS IN RESPECT OF ANY MATTER ARISING OUT OF OR IN CONNECTION WITH THIS LEASE, THE RELATIONSHIP OF LANDLORD AND TENANT, TENANTS USE OR OCCUPANCY OF THE PREMISES, AND/OR ANY CLAIM FOR INJURY OR DAMAGE, OR ANY EMERGENCY OR STATUTORY REMEDY. IN THE EVENT LANDLORD COMMENCES ANY SUMMARY PROCEEDINGS OR ACTION FOR NONPAYMENT OF BASE RENT OR ADDITIONAL RENT, TENANT SHALL NOT INTERPOSE ANY COUNTERCLAIM OF ANY NATURE OR DESCRIPTION (UNLESS SUCH COUNTERCLAIM SHALL BE MANDATORY) IN ANY SUCH PROCEEDING OR ACTION, BUT SHALL BE RELEGATED TO AN INDEPENDENT ACTION AT LAW.
29.22 Brokers . Landlord and Tenant hereby warrant to each other that they have had no dealings with any real estate broker or agent in connection with the negotiation of this Lease, excepting only the real estate brokers or agents specified in Section 12 of the Summary (the Brokers), and that they know of no other real estate broker or agent who is entitled to a commission in connection with this Lease. Landlord shall pay the Brokers pursuant to the terms of separate commission agreements. Each party agrees to indemnify and defend the other party against and hold the other party harmless from any and all claims, demands, losses, liabilities, lawsuits, judgments, costs and expenses (including without limitation reasonable attorneys fees) with respect to any leasing commission or equivalent compensation alleged to be owing on account of any dealings with any real estate broker or agent, other than the Brokers, occurring by, through, or under the indemnifying party.
29.23 Independent Covenants . This Lease shall be construed as though the covenants herein between Landlord and Tenant are independent and not dependent and Tenant hereby expressly waives the benefit of any statute to the contrary and agrees that if Landlord fails to perform its obligations set forth herein, Tenant shall not be entitled to any setoff of the Rent or other amounts owing hereunder against Landlord except as may be expressly in this Lease.
29.24 Counterparts . This Lease may be executed in counterparts with the same effect as if both parties hereto had executed the same document. Both counterparts shall be construed together and shall constitute a single lease.
29.25 Confidentiality . Tenant acknowledges that the content of this Lease and any related documents are confidential information. Tenant shall keep such confidential information strictly confidential and shall not disclose such confidential information to any person or entity other than Tenants financial, legal, and space planning consultants or as otherwise required by court of law or state or Federal regulator. As a result of entering the Premises pursuant to any provision of the Lease, Landlord and its agents may become aware of certain confidential, non-public and proprietary information about the Tenant and the Tenants customers. Landlord
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agrees that (i) it shall keep all such information confidential, (ii) it shall require, by way of contractual obligation or otherwise, that its employees, contractors, and agents do the same, and (iii) it shall use reasonable efforts to enforce such contractual or other obligations of its employees, contractors, and agents. Landlord agrees to indemnify, defend, and hold Tenant harmless from damages, losses, and expenses incurred by Tenant in connection with a breach by Landlord of its obligations set forth in the preceding sentence.
29.26 Building Renovations . It is specifically understood and agreed that Landlord has made no representation or warranty to Tenant and has no obligation and has made no promises to alter, remodel, improve, renovate, repair or decorate the Premises, Building, or any part thereof and that no representations respecting the condition of the Premises or the Building have been made by Landlord to Tenant except as specifically set forth herein or in the Work Letter. However, Tenant hereby acknowledges that Landlord may during the Lease Term renovate, improve, alter, or modify (collectively, the Renovations ) the Project, the Building and/or the Premises including without limitation the parking structure, common areas, systems and equipment, roof, and structural portions of the same, which Renovations may include, without limitation, (i) installing sprinklers in the Building common areas and tenant spaces, (ii) modifying the common areas and tenant spaces to comply with applicable laws and regulations, including regulations relating to the physically disabled, seismic conditions, and building safety and security, and (iii) installing new floor covering, lighting, and wall coverings in the Building common areas, and in connection with any Renovations, Landlord may, among other things, erect scaffolding or other necessary structures in the Building, limit or eliminate access to portions of the Project, including portions of the common areas, or perform work in the Building, which work may create noise, dust or leave debris in the Building. Tenant hereby agrees that such Renovations and Landlords actions in connection with such Renovations shall in no way constitute a constructive eviction of Tenant nor entitle Tenant to any abatement of Rent, subject to the provisions of Section 6.3 and Article 11 , which shall apply if such Renovations materially impair Tenants access to the Premises or render the Premises unsuitable for the Permitted Use. Landlord shall have no responsibility or for any reason be liable to Tenant for any direct or indirect injury to or interference with Tenants business arising from the Renovations, nor shall Tenant be entitled to any compensation or damages from Landlord for loss of the use of the whole or any part of the Premises or of Tenants personal property or improvements resulting from the Renovations or Landlords actions in connection with such Renovations, or for any inconvenience or annoyance occasioned by such Renovations or Landlords actions.
29.27 No Violation . Tenant hereby warrants and represents that neither its execution of nor performance under this Lease shall cause Tenant to be in violation of any agreement, instrument, contract, law, rule or regulation by which Tenant is bound, and Tenant shall protect, defend, indemnify and hold Landlord harmless against any claims, demands, losses, damages, liabilities, costs and expenses, including, without limitation, reasonable attorneys fees and costs, arising from Tenants breach of this warranty and representation.
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29.28 Communications and Computer Lines . Tenant may install, maintain, replace, remove or use any communications or computer wires and cables (collectively, the Lines ) in the Premises or in the Building which serve the Premises, provided that (i) Tenant shall obtain Landlords prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed, and use an experienced and qualified contractor reasonably designated by Landlord and mutually acceptable to both Landlord and Tenant, and comply with all of the other provisions of Articles 7 and 8 of this Lease, (ii) an acceptable number of spare Lines and space for additional Lines shall be maintained for existing and future occupants of the Building, as determined in Landlords reasonable opinion, (iii) the Lines therefor (including riser cables) shall be (x) appropriately insulated to prevent excessive electromagnetic fields or radiation, (y) surrounded by a protective conduit reasonably acceptable to Landlord, and (z) identified in accordance with the Identification Requirements, as that term is set forth hereinbelow, (iv) any new or existing Lines servicing the Premises shall comply with all applicable governmental laws and regulations, and (v) except as otherwise provided for in this Lease, Tenant shall pay all costs in connection therewith. All Lines shall be clearly marked with adhesive plastic labels (or plastic tags attached to such Lines with wire) to show Tenants name, suite number, telephone number and the name of the person to contact in the case of an emergency (A) every four feet (4) outside the Premises (specifically including, but not limited to, the electrical room risers and other Common Areas), and (B) at the Lines termination point(s) (collectively, the Identification Requirements ). Upon the expiration of the Lease Term, or immediately following any earlier termination of this Lease, Tenant shall, at Tenants sole cost and expense, remove all Lines installed by Tenant, and repair any damage caused by such removal. In the event that Tenant fails to complete such removal and/or fails to repair any damage caused by the removal of any Lines, Landlord may do so and may charge the cost thereof to Tenant. Landlord reserves the right to require that Tenant remove any Lines located in or serving the Premises which are installed by Tenant in violation of these provisions, or which are at any time (1) are in violation of any Applicable Laws, (2) are inconsistent with then-existing industry standards (such as the standards promulgated by the National Fire Protection Association (e.g., such organizations 2002 National Electrical Code)), or (3) otherwise represent a dangerous or potentially dangerous condition.
29.29 Development of the Project .
29.29.1 Subdivision . Landlord reserves the right to further subdivide all or a portion of the Property or the Project. Tenant agrees to execute and deliver, upon demand by Landlord and in the form requested by Landlord, any additional documents needed to conform this Lease to the circumstances resulting from such subdivision.
29.29.2 The Other Improvements . If portions of the Project or property adjacent to the Project (collectively, the Other Improvements ) are owned by an entity other than Landlord, Landlord, at its option, may enter into an agreement with the owner or owners of any or all of the Other Improvements to provide (i) for reciprocal rights of access and/or use of the Property and the Other Improvements, (ii) for the common management, operation, maintenance, improvement and/or repair of all or any portion of the Property and the Other Improvements, (iii) for the allocation of a portion of the Direct Expenses to the Other Improvements and the operating expenses and taxes for the Other Improvements to the Property (in which event Tenants Share shall be adjusted to reflect the inclusion of the rentable square footage of the Other Improvements in the calculation thereof), and (iv) for the use or improvement of the Other Improvements and/or the Property in connection with the
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improvement, construction, and/or excavation of the Other Improvements and/or the Property. Nothing contained herein shall be deemed or construed to limit or otherwise affect Landlords right to convey all or any portion of the Property or any other of Landlords rights described in this Lease including rights under Section 1.1.4(ix) of Exhibit C.
29.29.3 Construction of Project and Other Improvements . Tenant acknowledges that portions of the Property and/or the Other Improvements may be under construction following Tenants occupancy of the Premises, and that such construction may result in levels of noise, dust, obstruction of access, etc. which are in excess of that present in a fully constructed project. Tenant hereby waives any and all rent offsets or claims of constructive eviction which may arise in connection with such construction.
29.30 Hazardous Substances . Tenant shall not cause or permit any hazardous materials to be generated, produced, brought upon, used, stored, treated or disposed of in or about the Premises, the Property or the Project by Tenant, its agents, employees, contractors, affiliates, sublessees or invitees. However, notwithstanding the preceding sentence, Landlord agrees that Tenant may use, store and properly dispose of commonly available household cleaners and chemicals to maintain the Premises and Tenants routine office operations (such as printer toner and copier toner). At any time following Tenants receipt of a request from Landlord, Tenant shall promptly complete a hazardous materials questionnaire using the form then-provided by Landlord. Landlord shall be responsible at its sole cost and expense for any hazardous materials and any asbestos-containing materials existing in the Premises, Building or Project as of the Lease Commencement Date.
29.31 Joint and Several . If there is more than one Tenant, the obligations imposed upon Tenant under this Lease shall be joint and several.
29.32 Green Cleaning/Recycling Program . Tenant shall cooperate if and to the extent Landlord implements a green cleaning program and/or recycling program for the Property, and hereby agrees that the reasonable costs associated with any such green cleaning and/or recycling program shall be included in Operating Expenses. In accordance with the definition of Operating Expenses set forth in Exhibit C, Landlord shall adjust Tenants Base Year with the inclusion of any such program.
29.33 Right of First Refusal . Landlord grants to Tenant a right of first refusal ( ROFR ) with respect to any or all leasable space located on the eighth (8 th ) or eleventh (11 th ) floors of the Building (the ROFR Space ) on the TCC set forth in this Section 29.33 .
29.33.1 Superior Rights . Tenant acknowledges that certain other tenants at the Project under existing leases (together with their successors and assigns, the Existing ROFO Holders ) hold rights of first offer (the Existing ROFOs ), with respect to the ROFR Space (i.e., the right to receive and accept a first offer from Landlord as to the covered space, prior to Landlord entering into a lease for the covered space on terms preferable to those in the first offer). Except for the Existing ROFOs held by the Existing ROFO Holders, no other tenant at the Project currently holds preferential rights with respect to the ROFR Space. Tenants ROFR, and the provisions of this Section 29.33 , shall be subordinate and subject in all respect to the Existing ROFOs held by the Existing ROFO Holders.
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29.33.2 Procedure for Offer . If Landlord desires to enter into a new lease or expansion of space under an existing lease with one or more prospective tenants for ROFR Space, Landlord shall provide Tenant with written notice ( ROFR Notice ) of such circumstance. Tenant, following its receipt of a ROFR Notice, may (i) exercise its ROFR in accordance with the procedures set forth in Section 29.33.3 below, or (ii) decline to exercise its ROFR. If Tenant fails to exercise its ROFR within the time period provided below, Landlord may proceed to lease the ROFR Space to the prospective tenant(s) on terms acceptable to Landlord in its sole discretion.
29.33.3 Procedure for Acceptance . If Tenant wishes to exercise Tenants ROFR with respect to the ROFR, then within ten (10) business days of delivery of the ROFR Notice to Tenant, Tenant shall deliver notice (the ROFR Exercise Notice ) to Landlord of Tenants election to exercise its ROFR with respect to the entire ROFR Space on the terms determined pursuant to Section 29.33.4 below. If Tenant does not so notify Landlord within the seven (7) business day period, then Tenant shall be deemed to have declined to exercise its ROFR. Notwithstanding anything to the contrary contained herein, Tenant must elect to exercise its ROFR, if at all, with respect to all of the ROFR Space offered by Landlord to Tenant at any particular time, and Tenant may not elect to lease only a portion thereof.
29.33.4 ROFR Space Terms . In the event the ROFR is exercised in accordance with Section 29.31.3 above, the terms of Tenants lease of the ROFR Space will be determined as follows:
(a) If the ROFR is exercised on or prior to the second (2 nd ) anniversary of the Lease Commencement Date, the lease of the ROFR Space will be on the same TCC as included in this Lease (including, without limitation, rental rate per rentable square foot); provided, however, that any Landlord allowances or inducements provided herein will be prorated for the remaining term at such time and will be proportional to the rental square feet of the applicable ROFR Space and the term shall be co-terminous with the Lease Term;
(b) If the ROFR is exercised following the second (2 nd ) anniversary of the Lease Commencement Date, the lease of the ROFR Space will be on then-current market terms as determined under the procedures described in Section 2.2.2 above; provided, however, that the term shall be co-terminous with the Lease Term;
(c) In any case: (i) Tenant shall have not less than 120 days prior to the earlier of rent commencement or occupancy in which to arrange for the improvement of the ROFR Space; and (ii) if fewer than three (3) years remain in the Lease Term at the rent commencement date for the ROFR Space, the Lease Term shall be extended for a period so that three (3) years remain (with respect to both the Premises and the ROFR Space), with the terms of such extension determined under the procedures described in Section 2.2.2 above.
29.33.5 Construction In ROFR Space . Except to the extent otherwise provided pursuant to Section 29.33.4 above, Tenant shall take the ROFR Space in its then as is condition, and the construction of improvements in the ROFR Space shall comply with the terms of Article 8 of this Lease.
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29.33.6 Amendment . If Tenant timely exercises Tenants ROFR, Landlord and Tenant shall within twenty (20) days thereafter negotiate in good faith and execute an amendment to this Lease adding such ROFR Space to the Premises upon the terms set forth in this Section 29.
29.33.7 Restriction on ROFR . The ROFR shall be exercisable only by the originally named Tenant and any of its Permitted Transferees (and not any other assignee, sublessee or transferee of Tenants interest in this Lease). The originally named Tenant or its Permitted Transferee may exercise the ROFR only if that Tenant (and/or its Permitted Transferee) occupies the entire Premises as of the date of the ROFR Notice. Tenant shall not have the right to lease ROFR Space, as provided in this Section 29.31 , if, as of the date of the attempted exercise by Tenant, an Event of Default shall have occurred.
29.34 Conference Room . The first floor of the Building currently contains a conference center (the Conference Center ). To the extent that no other tenant in the Building holds exclusive or superior rights to the use of such Conference Center as of the date of this Lease, Tenant shall be allowed to access and use the Conference Center, provided that Tenant will be required to (i) schedule use of the Conference Center with Landlords property manager or other designated representative and (ii) abide by such reasonable rules and procedures as Landlord may from time to time adopt with respect to use of the Conference Center. Upon reasonable prior written notice by Tenant, Landlord shall provide Tenant with conference space for Tenants all-employee meetings of up to 200 people, within the Project or within a reasonable distance from the Project. To the extent such conference space is provided outside of the Project, the provision of such space shall be at Landlords cost; provided that such all-employee meetings do not occur more frequently than five (5) times per calendar year (and Tenant shall be responsible for the costs of all-employee meetings occurring more frequently).
29.35 Government Incentive Programs . Landlord shall cooperate with Tenant, at Tenants sole cost, to obtain any local, State or Federal incentives that may be available to Tenant by virtue of its organization, operations or business ( Tenant Benefits ). To the extent that any such Tenant Benefits in the form of cash payments are required by the applicable governmental agency or authority to be paid to Landlord, Landlord shall pay over such Tenant Benefits to Tenant. Any taxes, assessments or other charges resulting from such Tenant Benefits shall be the sole responsibility of Tenant, and Tenant shall reimburse and hold harmless Landlord from the same.
[signature page follows]
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IN WITNESS WHEREOF, Landlord and Tenant have caused this Lease to be executed the day and date first above written.
LANDLORD: | ||||
SFG Owner A, LLC, a Delaware limited liability company |
||||
By: | Swift Realty Partners, LLC, a Delaware limited partnership its Managing Agent | |||
By: |
|
|||
Name: | Craig Firpo | |||
Its: | Vice President |
TENANT: | ||
Genworth Financial Wealth Management, Inc., a California corporation |
By: | ||
Name: | ||
Its: |
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IN WITNESS WHEREOF, Landlord and Tenant have caused this Lease to be executed the day and date first above written.
LANDLORD: | ||||
SFG Owner A, LLC, a Delaware limited liability company |
||||
By: | Swift Realty Partners, LLC, a Delaware limited partnership its Managing Agent | |||
By: | ||||
Name: | Craig Firpo | |||
Its: | Vice President |
TENANT: | ||
Genworth Financial Wealth Management, Inc., a California corporation |
By: |
|
|
Name: | Gurinder S. Ahluwalia | |
Its: | CEO + President |
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EXHIBIT A-1
FLOOR PLAN OF THE PREMISES
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EXHIBIT A-2
1655 GRANT
LEGAL DESCRIPTION OF PROPERTY
Parcel 3, as shown on the map of subdivision 6388, Concord Center filed October 25, 1984, in Book 284 of Maps, at Pages 7, 8, 9, 10 and 11, Contra Costa Records
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EXHIBIT B
1655 GRANT
WORK LETTER
This Work Letter shall set forth the terms and conditions relating to the construction of the tenant improvements in the Premises. This Work Letter is essentially organized chronologically and addresses the issues of the construction of the Premises, in sequence, as such issues will arise during the actual construction of the Premises. All references in this Work Letter to Articles or Sections of this Lease shall mean the relevant portion of Articles 1 through 29 of the Office Lease to which this Work Letter is attached as Exhibit B and of which this Work Letter forms a part, and all references in this Work Letter to Sections of this Work Letter shall mean the relevant portion of Sections 1 through 6 of this Work Letter.
SECTION 1
CONSTRUCTION DRAWINGS FOR THE PREMISES
Landlord shall, at its sole cost and expense, construct the improvements in the Premises pursuant to that certain space plan, a copy of which is attached hereto on Schedule 1 (the Space Plan ). Promptly following the full execution and delivery of this Lease, Tenant shall cooperate in good faith with Landlords architects and engineers to supply the necessary information, if any, required to allow the Landlords architects and engineers to complete any additional architectural and engineering drawings for the Premises in a form, as approved by Tenant (such approval not to be unreasonably withheld or delayed), which is complete to allow subcontractors to bid on the work and to obtain all applicable permits and in a manner consistent with, and which are a logical extension of, the Space Plan (collectively, the Approved Working Drawings ). Landlord shall, at its sole cost and expense, construct the improvements in the Premises (the Tenant Improvements ) pursuant to the Approved Working Drawings and in accordance with Building standard methods, materials and finishes described on Schedule 2 attached hereto unless such specific fixtures are called for in the Approved Working Drawings. Tenant shall make no changes or modifications to the Approved Working Drawings without the prior written consent of Landlord, which consent may be withheld in Landlords sole discretion if such change or modification would directly or indirectly delay the Substantial Completion, as that term is defined in Section 5.1 of this Work Letter, of the Premises or, unless the incremental cost of such change or modification is paid for 100% by Tenant, increase the cost of designing or constructing the Tenant Improvements.
SECTION 2
OVER-ALLOWANCE AMOUNT
In the event that after Tenants execution of this Lease, any revisions, changes, or substitutions shall be made to (i) the Space Plan, (ii) the Approved Working Drawings (once the same are completed), or (iii) the Tenant Improvements, or in the event that Tenant requests revisions, changes, or substitutions which cause the Approved Working Drawings to not be a logical extension of the Space Plan, then any additional costs which arise in connection with such revisions, changes or substitutions shall be paid by Tenant to Landlord promptly following Landlords request.
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SECTION 3
CONTRACTORS WARRANTIES AND GUARANTIES
Landlord hereby assigns to Tenant all warranties and guaranties by the contractor who constructs the Tenant Improvements (the Contractor ) relating to the Tenant Improvements, and Tenant hereby waives all claims against Landlord relating to, or arising out of the construction of, the Tenant Improvements (it being acknowledged that such waiver is not intended and shall not be interpreted to in any way limit or waive the liability of any contractor or third party under a warranty or guaranty described above).
SECTION 4
TENANTS COVENANTS
Tenant hereby protects, defends, indemnifies and holds Landlord harmless for any loss, claims, damages or delays arising from the actions of Tenants space planner/architect (to the extent Tenant, as opposed to Landlord, engages any such space planner or architect) on the Premises or in the Building. In addition, immediately after the Substantial Completion of the Premises, Landlord shall have prepared and delivered to the Tenant a copy of the record set of plans and specifications (including all working drawings) for the Tenant Improvements.
SECTION 5
COMPLETION OF THE TENANT IMPROVEMENTS;
LEASE COMMENCEMENT DATE
5.1 Ready for Occupancy . The Premises shall be deemed Ready for Occupancy upon the Substantial Completion of the Premises. For purposes of this Lease, Substantial Completion of the Premises shall occur upon the completion of construction of the Tenant Improvements in the Premises pursuant to the Approved Working Drawings, with the exception of any Punch List Items (hereinafter defined) and any tenant fixtures, work-stations, built-in furniture, or equipment to be installed by Tenant or under the supervision of Contractor. Tenant shall have a period of thirty (30) days from Tenants receipt of notification from Landlord of the Substantial Completion of the Premises to provide Landlord with a written list of any defects or any incomplete or unsatisfactory items with respect to the Tenant Improvements ( Punch List Items ). Landlord will then be obligated within a reasonable period of time, not to exceed thirty (30) days after receipt of Tenants written notice, to cure any such Punch List Items (unless such Punch List Items, due to their nature, cannot reasonably be cured within thirty (30) days, in which case Landlord shall promptly commence to cure same and diligently pursue same to completion). This time provision shall not apply to latent defects in the Tenant Improvements, and Landlord shall promptly repair the same in a good and workmanlike manner, provided that Tenant delivers written notice to Landlord specifying such latent defect prior to the date that is twelve (12) months following the Substantial Completion of the Premises.
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5.2 Tenant Delay of the Substantial Completion of the Premises . Except as provided in this Section 5.2 , the Lease Commencement Date shall occur as set forth in Article 2 of the Lease and Section 5.1 , above. If there shall be a delay or there are delays in the Substantial Completion of the Premises or in the occurrence of any of the other conditions precedent to the Lease Commencement Date, as set forth in Article 2 of the Lease, as a result of any of the following (a Tenant Delay ):
5.2.1 Changes by Tenant in or additions to the Approved Working Drawings after the same have been approved by Tenant;
5.2.2 Tenants failure to approve or disapprove any matter requiring Tenants approval within five (5) business days (or Tenants unreasonable delay or withholding of approval for any such matter); including delays in the submission, revision or re-submission of changes or in the giving by Tenant of authorizations or approvals as set forth herein;
5.2.3 A breach by Tenant of the terms of this Work Letter or the Lease;
5.2.4 Any physical interference with the performance of the construction of the Base Building Work or Tenant Improvements by Tenant or any of its employees, agents or contractors, to the extent that such interference does, in fact, cause a delay;
5.2.5 Tenants request for materials, components, finishes or improvements, other than those specifically contemplated in the Approved Working Drawings, and which are not available in a commercially reasonable time given the anticipated date of Substantial Completion of the Tenant Improvements, and which are different from, or not included in, Landlords standard improvement package items for the Building;
5.2.6 Changes to the base, shell and core of the Building, other than as specified in the Approved Working Drawings;
5.2.7 Any delays resulting from errors or omissions contained in Tenants requests for changes to the Approved Working Drawings which directly cause a delay; or
5.2.8 Any delay otherwise due to acts or inaction by Tenant or any of its employees, agents or contractors, provided Landlord has provided written notice to Tenant and Tenant has failed to cure such delay within a reasonable time period;
then, notwithstanding anything to the contrary set forth in the Lease or this Work Letter and regardless of the actual date of the Substantial Completion of the Premises, the Substantial Completion of the Premises shall be deemed to be the date the Substantial Completion of the Premises would have occurred if no Tenant Delays had occurred.
Landlord shall notify Tenant of any Tenant Delay, or the reasonable likelihood of a Tenant Delay, within three (3) business days after Landlord first becomes aware of such Tenant Delay or reasonable likelihood thereof. Landlord and Tenant shall cooperate to obtain the necessary bids and pricing for the Tenant Improvements and to determine the availability of
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materials that could cause a Tenant Delay. For those items identified by Landlord as a Tenant Delay, Tenant shall, within five (5) business days after such determination, notify Landlord that it will either (i) accept such items as Tenant Delay items or (ii) substitute or remove materials, components, finishes, or improvements in order to eliminate such delay.
Notwithstanding the foregoing, any such delay in Substantial Completion shall not be deemed to be a Tenant Delay if Landlord could have avoided such delay through commercially reasonable efforts without incurring any additional cost or expense (not including any cost or expense that Landlord passes on to Tenant pursuant to the terms of this Work Letter or the Lease) or potential liability.
SECTION 6
MISCELLANEOUS
6.1 Tenants Entry Into the Premises Prior to Substantial Completion . Thirty (30) days prior to the anticipated Lease Commencement Date, and provided that Tenant and its agents do not interfere with Contractors work in the Building and the Premises, Contractor shall allow Tenant access to the Premises prior to the Substantial Completion of the Premises for the purpose of Tenant installing overstandard equipment or fixtures (including Tenants data and telephone equipment) in the Premises. Prior to Tenants entry into the Premises as permitted by the terms of this Section 6.1 , Tenant shall submit a schedule to Landlord and Contractor, for their approval, which schedule shall detail the timing and purpose of Tenants entry. Tenant shall hold Landlord harmless from and indemnify, protect and defend Landlord against any loss or damage to the Building or Premises and against injury to any persons caused by Tenants actions pursuant to this Section 6.1 . During such thirty (30) days period, subject to the CC&Rs and the Parking Rules, Landlord shall provide reasonable, free access to parking spaces in the Garage for Tenants contractors, subcontractors, and agents for the purpose of moving and installing Tenants furniture, fixtures and equipment and generally preparing the Premises for Tenants Use and occupancy (it being acknowledged that the Garage may not be able to accommodate specialized or above-standard sized trucks or vans).
6.2 Tenants Representative . Tenant has designated Gurinder Ahluwalia as its sole representative with respect to the matters set forth in this Work Letter, who, until further notice to Landlord, shall have full authority and responsibility to act on behalf of the Tenant as required in this Work Letter.
6.3 Landlords Representative . Landlord has designated Willard Lund as its representative with respect to the matters set forth in this Work Letter, who, until further notice to Tenant, shall have full authority and responsibility to act on behalf of the Landlord as required in this Work Letter.
6.4 Tenants Agents . All subcontractors, laborers, materialmen, and suppliers retained directly by Tenant shall all be union labor in compliance with the then existing master labor agreements.
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6.5 Time of the Essence in this Work Letter . Unless otherwise indicated, all references herein to a number of days shall mean and refer to calendar days. In all instances where Tenant is required to approve or deliver an item, if no written notice of approval is given or the item is not delivered within the stated time period, at Landlords sole option, at the end of such period the item shall automatically be deemed approved or delivered by Tenant and the next succeeding time period shall commence.
6.6 Tenants Lease Default . Notwithstanding any provision to the contrary contained in this Lease, if an Event of Default as described in Section 19.1 of the Lease or Work Letter, has occurred at any time on or before the Substantial Completion of the Premises, then (i) in addition to all other rights and remedies granted to Landlord pursuant to the Lease, Landlord shall have the right to cause Contractor to cease the construction of the Premises (in which case, Tenant shall be responsible for any delay in the Substantial Completion of the Premises caused by such work stoppage as set forth in Section 5 of this Work Letter), and (ii) all other obligations of Landlord under the terms of this Work Letter shall be forgiven until such time as such Event of Default or default is cured pursuant to the terms of the Lease.
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WORK LETTER
SCHEDULE 1 SPACE PLAN
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WORK LETTER
SCHEDULE 2 BUILDING STANDARD SPECIFICATIONS
OFFICE FINISHES
CARPET | TANDUS - INCLINE COLLECTION 04122 | |
PAINT | SHERWIN-WILLIAMS - COLOR LOW LUSTER | |
BASE | BURKE RUBBER WALLBASE - UNI-COLOR 701/BLACK | |
VCT | ARMSTRONG - STANDARD EXCELON | |
LAMINATE | WILSONART | |
ELECTRICAL | ||
FIXTURE & LAMPS: | 2x 2 LUNERA LED FIXTURE, 3500K | |
BALLAST: | 277 ELECTRONIC BALLAST | |
WHIP SYSTEM: | AFC #12AWG 277/480V 20AMP | |
LIGHT SENSORS: | WATT STOPPER W-500A OR SAME STYLE FOR PROPER SQFT | |
RELAY PACK: | WATT STOPPER MODEL# B277EP | |
EXIT LIGHTS: | SURE LITE MD# U.S.E.T. 911-B 277V DC BACKUP RED LETTERS PASS ELEV. LOBBY IS LITHONIA MD# LQM SW3R 120/277ELN | |
WATT METER: | REPLACE WITH LIKE | |
CEILING | ||
GRID: | FINELINE 1/8 STANDARD METAL T-BAR. 2x2 GRID PATTERN | |
TILE: | ARMSTRONG DUNE (1775) OR EQUIVALENT | |
DOORS | SLICED WHITE OAK 3 - 0" X 1 3/4" THK. FULL HEIGHT SOLID CORE (height 83") | |
PARTITION | ||
STANDARD: | 2 1/2" 25GA METAL STUD, 5/8" GYPSUM BOARD, SLAB TO CEILING | |
DEMISING: | 3 5/8" 20GA METAL STUD, 5/8" GYPSUM BOARD, SLAB TO STRUCTURE ABOVE. BATT INSULATION IN CAVITY |
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EXHIBIT C
1655 GRANT
OPERATING EXPENSE DEFINITIONS AND CALCULATION PROCEDURES
1.1 Definitions of Key Terms Relating to Additional Rent . As used in this Exhibit C , the following terms shall have the meanings hereinafter set forth:
1.1.1 Base Year shall mean the period set forth in Section 5 of the Summary.
1.1.2 Direct Expenses shall mean Operating Expenses and Tax Expenses; provided, however, that during any Expense Year, any Operating Expenses that are for controllable spending items (i.e., all Operating Expenses other than real estate taxes, personal property taxes and other governmental assessments, electrical utilities, insurance, required association costs, and impositions) ( Controllable Expenses ) more than five percent (5%) higher than the amount of Controllable Expenses for the immediately prior Expense Year shall not be considered Direct Expenses.
1.1.3 Expense Year shall mean each calendar year in which any portion of the Lease Term falls, through and including the calendar year in which the Lease Term expires, provided that Landlord, upon notice to Tenant, may change the Expense Year from time to time to any other twelve (12) consecutive month period, and, in the event of any such change, Tenants Share of Direct Expenses shall be equitably adjusted for any Expense Year involved in any such change.
1.1.4 Operating Expenses shall mean all expenses, costs and amounts of every kind and nature which Landlord pays or accrues during any Expense Year because of or in connection with the ownership, management, maintenance, security, repair, replacement, restoration or operation of the Building, the Property or the Project, or any portion thereof, in accordance with sound real estate management and accounting practices, consistently applied. Without limiting the generality of the foregoing, Operating Expenses shall specifically include any and all of the following: (i) the cost of supplying all utilities to the Building, the cost of operating, repairing, maintaining, replacing, and renovating the utility, telephone, mechanical, sanitary, storm drainage, and elevator systems, and the cost of maintenance and service contracts in connection therewith; (ii) the cost of licenses, certificates, permits and inspections and the cost of contesting any governmental enactments which may affect Operating Expenses, and the costs incurred in connection with a governmentally mandated transportation system management program or similar program; (iii) the cost of all insurance carried by Landlord in connection with the Building, the Property or the Project; (iv) the cost of landscaping, relamping, and all supplies, tools, equipment and materials used in the operation, repair and maintenance of the Building, or any portion thereof; (v) costs incurred in connection with the Garage; (vi) fees and other costs, including management fees not to exceed three (3%) percent of gross revenue, consulting fees, legal fees and accounting fees, of all contractors and consultants in connection with the management, operation, maintenance, replacement, renovation and repair of the Building, the Property or the Project; (vii) payments under any equipment rental agreements and the fair rental value of any management office space; (viii) wages, salaries and other compensation and
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benefits, including taxes levied thereon, of all persons (other than persons generally considered to be higher in rank than the position of Senior Asset Manager) to the extent such person is engaged in the operation, maintenance and security of the Building; (ix) all costs incurred by Landlord under the CC&Rs for the Project, including, but not limited to Landlords share of costs related to the operation and maintenance of the Project Common Areas and the Garage; any shared electrical, mechanical, plumbing and life safety systems which provide services to the Building or the Project and costs of the project manager and the garage manager; (x) operation, repair, maintenance, renovation and replacement of all systems and equipment and components thereof of the Building; (xi) the cost of janitorial, alarm, security and other services, replacement of wall and floor coverings, ceiling tiles and fixtures in common areas, maintenance and replacement of curbs and walkways, repair to roofs and re-roofing; (xii) amortization of the cost of acquiring or the rental expense of personal property used in the maintenance, operation and repair of the Building, or any portion thereof (which amortization calculation shall include interest at the Interest Rate, as that term is set forth in Article 25 of this Lease); (xiii) the cost of capital improvements or other costs incurred in connection with the Building or the Project (A) which advantageously effect economies in the operation or maintenance of the Building or the Project, or any portion thereof, (B) that are required to comply with present or anticipated conservation programs required by law, (C) which are replacements or modifications of nonstructural items located in the Common Areas required to keep the Common Areas in good order or condition, or (D) that are required under any governmental law or regulation by a federal, state or local governmental agency, except for capital repairs, replacements or other improvements to remedy a condition existing prior to the Lease Commencement Date which an applicable governmental authority, if it had knowledge of such condition prior to the Lease Commencement Date, would have then required to be remedied pursuant to then-current governmental laws or regulations in their form existing as of the Lease Commencement Date and pursuant to the then-current interpretation of such governmental laws or regulations by the applicable governmental authority as of the Lease Commencement Date; provided, however, that any capital expenditure shall be amortized with interest at the Interest Rate as defined in Article 25 over its useful life determined in accordance with sound real estate management and accounting practices; (xiv) costs, fees, charges or assessments imposed by, or resulting from any mandate imposed on Landlord by, any federal, state or local government for fire and police protection, trash removal, community services, or other services which do not constitute Tax Expenses as that term is defined in Section 1.1.5.1 , below; (xv) payments under any easement, license, operating agreement, declaration, restrictive covenant, or instrument pertaining to the sharing of costs by the Building, and (xvi) costs of any additional services not provided to the Building and/or the Project as of the Lease Commencement Date but which are thereafter provided by Landlord in connection with its prudent management of the Building and/or the Project. Notwithstanding the foregoing, for purposes of this Lease, Operating Expenses shall not, however, include:
(a) costs, including marketing costs, association dues (other than BOMA), legal fees, space planners fees, advertising and promotional expenses, brokerage fees and leasing commissions incurred in connection with the original construction or development, or original or future leasing rent concessions, allowances, space planning, lease takeover obligations, and other inducements, costs, disbursements and expenses incurred in connection
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with leasing space in the Building, and costs, including permit, license and inspection costs, incurred with respect to the installation of improvements made for new tenants initially occupying space in the Building after the Lease Commencement Date or incurred in renovating or otherwise improving, decorating, painting or redecorating vacant space for tenants or other occupants of the Building (excluding, however, such costs relating to any Building Common Areas of the Project or parking facilities);
(b) except as set forth in items (xii), (xiii), and (xiv) above, depreciation, interest and principal payments on mortgages, deeds of trust and other debt costs, equity distributions, participation fees, returns on investment kickers, or similar costs and expenses incurred in connection with alternatively structured financing, or any, penalties and interest of any kind whatsoever;
(c) except as expressly provided Section 1.14 of this Exhibit C to Lease, any and all costs of a capital nature, incurred in connection with the Project, the Garage, or the Building as determined under GAAP, but excluding items which, though capital for accounting purposes according to GAAP, are properly considered maintenance and repair items, such as painting of Common Areas, replacement of carpet in elevator lobbies and like items;
(d) costs for which the Landlord is reimbursed by any tenant or occupant of the Building or by insurance by its carrier (excepting deductibles) or any tenants carrier or by anyone else, and electric power costs for which any tenant directly contracts with the local public service company;
(e) costs incurred because the Landlord violated the terms of any lease, or any penalties for which Landlord becomes liable pursuant to the terms of any lease or any bad debt loss, rent loss, or reserves for bad debts or rent loss;
(f) costs, fines and penalties incurred because Landlord violated governmental law, rule or authority;
(g) costs associated with the operation of the business of the partnership or entity which constitutes the Landlord, as the same are distinguished from the costs of operation of the Building (which shall specifically include, but not be limited to, accounting costs associated with the operation of the Building). Costs associated with the operation of the business of the partnership or entity which constitutes the Landlord include costs of partnership accounting and legal matters, costs of defending any lawsuits with any mortgagee (except as the actions of the Tenant may be in issue), costs of selling, syndicating, financing, mortgaging or hypothecating any of the Landlords interest in the Building, and costs incurred in connection with any disputes between Landlord and its employees, between Landlord and Building management, or between Landlord and other tenants or occupants, and Landlords general corporate overhead and general and administrative expenses;
(h) Landlord and Property Managers general corporate overhead, including payroll administration and external asset management and legal services unrelated to day-to-day operations;
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(i) the wages and benefits and other compensation of any employee who does not devote substantially all of his or her employed time to the Building unless such wages and benefits are prorated to reflect time spent on operating and managing the Building vis-a-vis time spent on matters unrelated to operating and managing the Building; provided, that in no event shall Operating Expenses for purposes of this Lease include wages and/or benefits attributable to personnel above the level of Senior Asset Manager; or any and all bonuses paid to persons above the level of Senior Asset Manager, or otherwise outside of the ordinary course of business;
(j) rent or any amount paid as ground rental pursuant to any ground lease or underlying lease(s), for the Property by the Landlord;
(k) overhead and profit increment paid to the Landlord or to subsidiaries or affiliates of the Landlord for services in the Project to the extent the same exceeds the costs of such services rendered by qualified, first-class unaffiliated third parties on a competitive basis;
(l) any compensation paid to clerks, attendants or other persons in commercial concessions operated by the Landlord, provided that any compensation paid to any concierge or parking attendants at the Project shall be includable as an Operating Expense;
(m) rentals and other related expenses incurred in leasing air conditioning systems, elevators or other equipment which if purchased the cost of which would be excluded from Operating Expenses as a capital cost, except equipment not affixed to the Project which is used in providing janitorial or similar services and, further excepting from this exclusion such equipment rented or leased to remedy or ameliorate an emergency or temporary condition in the Project;
(n) all items and services for which Tenant or any other tenant in the Building reimburses Landlord or which Landlord provides selectively to one or more tenants (other than Tenant) without reimbursement;
(o) costs for the purchase of sculpture, paintings fountains or other objects of art following the Lease Commencement Date;
(p) any costs expressly excluded from Operating Expenses elsewhere in this Lease;
(q) cost of repairs or replacements covered by insurance (or required to be covered by insurance pursuant to the terms of this Lease), warranty, litigation or settlement proceeds;
(r) costs incurred by Landlord to the extent that Landlord is reimbursed;
(s) rent for any office space occupied by Building management personnel to the extent the size or rental rate of such office space exceeds the size or fair market rental value of office space occupied by management personnel of the Comparable Buildings in the vicinity of the Building, with adjustment where appropriate for the size of the applicable project;
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(t) costs to the extent arising from the gross negligence or willful misconduct of Landlord or its agents, employees, vendors, contractors, or providers of materials or services;
(u) costs associated with the correction of defects (patent or latent) in the Building, Project, or any other improvements;
(v) costs incurred to comply with laws relating to the removal of hazardous material (as defined under applicable law) which was in existence in the Building or on the Project prior to the Lease Commencement Date, and was of such a nature that a federal, State or municipal governmental authority, if it had then had knowledge of the presence of such hazardous material, in the state, and under the conditions that then existed in the Building or on the Project, would have then required the removal of such hazardous material or other remedial or containment action with respect thereto but only to the extent those laws were then being actively enforced by the applicable government authority; and costs incurred to remove, remedy, contain, or treat hazardous material, which hazardous material is brought into the Building or onto the Project after the date hereof by Landlord or any other tenant of the Project and is of such a nature, at that time, that a federal, State or municipal governmental authority, if it had then had knowledge of the presence of such hazardous material, in the state, and under the conditions that then exist in the Building or on the Project, would have then required the removal of such hazardous material or other remedial or containment action with respect thereto, but only to the extent those laws were then being actively enforced by the applicable government authority; or
(w) costs incurred to test, survey, cleanup, contain, abate, remove or otherwise remedy hazardous substances or asbestos-containing materials (excepting the cost of such activities to the extent part of the normal operation and maintenance of a project similar to the Project) and those expenses related to investigating and correction of building conditions associated with what the real estate industry refers to as Sick Building conditions, to include such examples as mold, chemical fumes, etc.; provided, however, if and to the extent that Tenant is liable to Landlord pursuant to Section 28.25, then Tenant shall remain directly liable to Landlord for any such costs
(x) legal fees, costs and disbursements (w) based upon or resulting from Landlords negligence or other tortious conduct, (x) relating to the enforcement of any lease provisions except for enforcing any lease provisions for the benefit of the Building tenants generally, (y) relating to the defense of Landlords title to or interest in the Land, the Building or the Garage, (z) relating to the negotiation and preparation of tenant leases and related documents, or related to either the Landlords or its property management companys business entity as distinguished from the costs of operating the Building, including accounting and legal costs of defending lawsuits with any mortgagee, or costs of selling or financing any of Landlords interests in, or any equity participations in, the Project
(y) reserves of any kind for future Landlord;
(z) costs incurred by Landlord in discharging its obligations under the Work Letter pertaining to this Lease;
(aa) impositions paid pursuant to Section 1.1.5 below;
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(bb) membership dues not associated with BOMA and any franchise fees whether imposed on the project, Landlords business entity, or Property Managers business entity;
(cc) charitable, political, and civic contributions of the Landlord or Property Manager;
(dd) Late payment fees incurred by the Landlord and the Property Manager, as well as any payment discounts made available by any entity, both private and public, which the Landlord and Property Manager fail to take advantage of;
(ee) legal fees and other costs incurred by Landlord and the Property Manager, (i) in the preparation or negotiation of any lease in the Building and/or any amendment thereto, and/or (ii) in connection with disputes with prospective tenants, employees, purchasers or mortgagees of the Project or any part thereof;
(ff) any cost which the Landlord is reimbursed under any insurance policy or warranty of a third-party; provided, however, Landlord shall be obligated to use reasonable efforts to claim any reimbursements to which it is entitled under any insurance policy or warranty of a third-party;
(gg) any profit increment paid to either the Landlord or Property Manager, or to subsidiaries or affiliates of the Landlord or Property Manager, for services in the Building or to the Project to the extent that the amounts exceed the market costs of such services rendered by comparable unaffiliated third parties on an arms length competitive basis;
(hh) travel costs associated with the on-site management personnel attending social events;
(ii) costs incurred in connection with the sale, financing (whether debt or equity), refinancing, mortgaging, selling, or change of ownership of the Project, or any part thereof, or the Landlord;
(jj) losses sustained from bad debt, rent loss, or the cost of establishing reserves for any such losses;
(kk) fees for licenses and permits required to be obtained by or for Landlord in connection with Tenants use of the Premises for the Permitted Use (including the use and operation of the Garage), but excluding fees for licenses and permits required in connection with any activity other than the Permitted Use;
(ll) costs associated with parties, gifts, and awards for personnel above the level of Senior Asset Manager;
(mm) payments to vendors, contractors, etc., that are not specifically authorized by the contracts with those parties such as, for the purpose of illustration, holiday bonuses, gifts, etc.;
(nn) commissions or fees of any kind in connection with the use of an employment placement agency or similar service; provided, however, that this exclusion shall not be deemed to apply to advertising costs incurred in connection with attempting to hire personnel;
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(oo) all other costs and expenses that under GAAP would not be considered maintenance, repair, or operating costs; and
(pp) all consultant fees and application or certification costs related to initially qualifying the Project, Garage and Building for any form of LEED designation.
If Landlord is not furnishing any particular work or service (the cost of which, if performed by Landlord, would be included in Operating Expenses) to a tenant who has undertaken to perform such work or service in lieu of the performance thereof by Landlord, Operating Expenses shall be deemed to be increased by an amount equal to the additional Operating Expenses which would reasonably have been incurred during such period by Landlord if it had at its own expense furnished such work or service to such tenant. If the Building is not at least one hundred percent (100%) occupied during all or a portion of the Base Year or any Expense Year, Landlord shall make an appropriate adjustment to the components of Operating Expenses for such year to determine the amount of Operating Expenses that would have been incurred had the Building been one hundred percent (100%) occupied; and the amount so determined shall be deemed to have been the amount of Operating Expenses for such year. To the extent that any amenity or service is provided following the Base Year, the cost of which would be included as an Operating Expense, Landlord shall make a good faith, building standard adjustment to the Base Year to incorporate both the costs and any cost savings that would have been incurred and/or realized during the Base Year had such service or amenity been provided at the time. Landlord shall not (i) make a profit by charging items to Operating Expenses that are otherwise also charged separately to others and (ii) subject to Landlords right to adjust the components of Operating Expenses described above in this paragraph, collect Operating Expenses from Tenant and all other tenants in the Building in an amount in excess of what Landlord incurs for the items included in Operating Expenses.
During the term of the Banks lease of space in the Building, Tenant will pay for the actual cost of the electricity provided to the Premises (including electricity related to chilled water usage), the cost of electricity will not be included in Operating Expenses and Tenant will receive a credit against the Base Rent equal to such electricity payments. If not separately metered, the cost of electricity provided to the Premises will be based on a reasonable estimate by a third party engineer of usage by Tenant and other tenants in the Building, including Bank. Upon the termination of the Banks lease, the cost of electricity will be included in Operating Expenses and the Base Year Operating Expenses will be adjusted to reflect the inclusion of electricity in Operating Expenses.
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1.1.5 Taxes .
1.1.5.1 Tax Expenses shall mean all federal, state, county, or local governmental or municipal taxes, fees, charges or other impositions of every kind and nature, whether general, special, ordinary or extraordinary, (including, without limitation, real estate taxes, general and special assessments, transit taxes, leasehold taxes or taxes based upon the receipt of rent, including gross receipts or sales taxes applicable to the receipt of rent, unless required to be paid by Tenant, personal property taxes imposed upon the fixtures, machinery, equipment, apparatus, systems and equipment, appurtenances, furniture and other personal property used in connection with the Project, or any portion thereof), which shall be paid or accrued during any Expense Year (without regard to any different fiscal year used by such governmental or municipal authority) because of or in connection with the ownership, leasing and operation of the Project, or any portion thereof.
1.1.5.2 Tax Expenses shall include, without limitation: (i) Any tax on the rent, right to rent or other income from the Building, or any portion thereof, or as against the business of leasing the Building, or any portion thereof; (ii) Any assessment, tax, fee, levy or charge in addition to, or in substitution, partially or totally, of any assessment, tax, fee, levy or charge previously included within the definition of real property tax, it being acknowledged by Tenant and Landlord that Proposition 13 was adopted by the voters of the State of California in the June 1978 election ( Proposition 13 ) and that assessments, taxes, fees, levies and charges may be imposed by governmental agencies for such services as fire protection, street, sidewalk and road maintenance, refuse removal and for other governmental services formerly provided without charge to property owners or occupants, and, in further recognition of the decrease in the level and quality of governmental services and amenities as a result of Proposition 13, Tax Expenses shall also include any governmental or private assessments or the Buildings contribution towards a governmental or private cost-sharing agreement for the purpose of augmenting or improving the quality of services and amenities normally provided by governmental agencies; (iii) Any assessment, tax, fee, levy, or charge allocable to or measured by the area of the Premises or the Rent payable hereunder, including, without limitation, any business or gross income tax or excise tax with respect to the receipt of such rent, or upon or with respect to the possession, leasing, operating, management, maintenance, alteration, repair, use or occupancy by Tenant of the Premises, or any portion thereof; and (iv) Any assessment, tax, fee, levy or charge, upon this transaction or any document to which Tenant is a party, creating or transferring an interest or an estate in the Premises.
1.1.5.3 Any costs and expenses (including, without limitation, reasonable attorneys fees) incurred in attempting to protest, reduce or minimize Tax Expenses shall be included in Tax Expenses in the Expense Year such expenses are paid. Except as set forth in Section 1.1.5.4 , below, refunds of Tax Expenses shall be credited against Tax Expenses and refunded to Tenant regardless of when received, based on the Expense Year to which the refund is applicable. If Tax Expenses for any period during the Lease Term or any extension thereof are increased after payment thereof for any reason, including, without limitation, error or reassessment by applicable governmental or municipal authorities, Tenant shall pay Landlord upon demand Tenants Share of any such increased Tax Expenses included by Landlord as Building Tax Expenses pursuant to the TCCs of this Lease. Notwithstanding anything to the
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contrary contained in this Section 1.1.5 (except as set forth in Section 1.1.5.4 , below), there shall be excluded from Tax Expenses (i) all excess profits taxes, franchise taxes, gift taxes, capital stock taxes, inheritance and succession taxes, estate taxes, federal and state income taxes, and other taxes to the extent applicable to Landlords general or net income (as opposed to rents, receipts or income attributable to operations at the Building), (ii) any items included as Operating Expenses, and (iii) any items paid by Tenant under Section 4.2 of the Lease.
1.1.6 Tenants Share shall mean the percentage set forth in Section 6 of the Summary.
1.2 Allocation of Direct Expenses .
1.2.1 Method of Allocation . The parties acknowledge that the Property is part of the Project and that significant costs and expenses incurred in connection with the Project are shared between the owners of the properties in the Project as provided in the CC&Rs and the portion allocated to Landlord is included in the Direct Expenses to be paid by Tenant. The expenses under the CC&Rs may be allocated on a building by building basis, based on occupied square footage or on rentable square footage and Tenant agrees to be bound by the allocation of expenses to Landlord under the CC&Rs.
1.2.2 Cost Pools . Landlord shall have the right, from time to time, to equitably allocate some or all of the Direct Expenses for the Building among different portions or occupants of the Project (the Cost Pools ), in Landlords discretion. Such Cost Pools may include, but shall not be limited to, the office space tenants of the Building, and the retail space tenants of the Building. The Direct Expenses allocable to each such Cost Pool shall be allocated to such Cost Pool and charged to the tenants within such Cost Pool in an equitable manner.
1.3 Calculation and Payment of Additional Rent . If for any Expense Year ending or commencing within the Lease Term, Tenants Share of Direct Expenses for such Expense Year exceeds Tenants Share of Direct Expenses applicable to the Base Year, then Tenant shall pay to Landlord, in the manner set forth in Section 1.3.1 , below, and as Additional Rent, an amount equal to the excess (the Excess ).
1.3.1 Statement of Actual Direct Expenses and Payment by Tenant . Landlord shall give to Tenant following the end of each Expense Year, a statement (the Statement ) which shall state in general major categories the Direct Expenses incurred or accrued for the Base Year or such preceding Expense Year, as applicable, and which shall indicate the amount of the Excess. Landlord shall use commercially reasonable efforts to deliver such Statement to Tenant on or before May 1 following the end of the Expense Year to which such Statement relates. Upon receipt of the Statement for each Expense Year commencing or ending during the Lease Term, if an Excess is present, Tenant shall pay, within thirty (30) days after receipt of the Statement, the full amount of the Excess for such Expense Year, less the amounts, if any, paid during such Expense Year as Estimated Excess, as that term is defined in Section 1.3.2 , below, and if Tenant paid more as Estimated Excess than the actual Excess, Tenant shall receive a credit in the amount of Tenants overpayment against Rent next due under this Lease. The failure of Landlord to timely furnish the Statement for any Expense Year shall not prejudice Landlord or Tenant from enforcing its rights under this Exhibit C . Even though the Lease Term has expired and Tenant has vacated the Premises, when the final determination is
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made of Tenants Share of Direct Expenses for the Expense Year in which this Lease terminates, if an Excess is present, Tenant shall, within thirty (30) days after receipt of the Statement, pay to Landlord such amount, and if Tenant paid more as Estimated Excess than the actual Excess, Landlord shall, within thirty (30) days, deliver a check payable to Tenant in the amount of the overpayment. The provisions of this Section 1.3.1 shall survive the expiration or earlier termination of the Lease Term. Notwithstanding the immediately preceding sentence, Tenant shall not be responsible for Tenants Share of any Direct Expenses attributable to any Expense Year which are first billed to Tenant more than one (1) calendar year after the Lease Expiration Date, provided that in any event Tenant shall be responsible for Tenants Share of Direct Expenses which were levied by any governmental authority or by any public utility companies.
1.3.2 Statement of Estimated Direct Expenses . In addition, Landlord shall give Tenant a yearly expense estimate statement (the Estimate Statement ) which shall set forth in general major categories Landlords reasonable estimate (the Estimate ) of what the total amount of Direct Expenses for the then-current Expense Year shall be and the estimated excess (the Estimated Excess ) as calculated by comparing the Direct Expenses for such Expense Year, which shall be based upon the Estimate, to the amount of Direct Expenses for the Base Year. Landlord shall use commercially reasonable efforts to deliver such Estimate Statement to Tenant on or before May 1 following the end of the Expense Year to which such Estimate Statement relates. The failure of Landlord to timely furnish the Estimate Statement for any Expense Year shall not preclude Landlord from enforcing its rights to collect any Additional Rent under this Exhibit C , nor shall Landlord be prohibited from revising any Estimate Statement or Estimated Excess theretofore delivered to the extent necessary. Thereafter, Tenant shall pay, within thirty (30) days after receipt of the Estimate Statement, a fraction of the Estimated Excess for the then-current Expense Year (reduced by any amounts paid pursuant to the second to last sentence of this Section 1.3.2 ). Such fraction shall have as its numerator the number of months which have elapsed in such current Expense Year, including the month of such payment, and twelve (12) as its denominator. Until a new Estimate Statement is furnished (which Landlord shall have the right to deliver to Tenant at any time), Tenant shall pay monthly, with the monthly Base Rent installments, an amount equal to one-twelfth (1/12) of the total Estimated Excess set forth in the previous Estimate Statement delivered by Landlord to Tenant. Throughout the Lease Term Landlord shall maintain books and records with respect to Direct Expenses in accordance with generally accepted real estate accounting and management practices, consistently applied.
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EXHIBIT D
1655 GRANT
RULES AND REGULATIONS
Tenant shall endeavor to observe and comply with the following Rules and Regulations. Landlord shall not be responsible to Tenant for the nonperformance of any of said Rules and Regulations by or otherwise with respect to the acts or omissions of any other tenants or occupants of the Building.
1. Tenant shall not alter any lock or install any new or additional locks or bolts on any doors or windows of the Premises without obtaining Landlords prior written consent, which consent shall not be unreasonably withheld or delayed. Tenant shall bear the cost of any lock changes or repairs required by Tenant. Two keys will be furnished by Landlord for the Premises, and any additional keys required by Tenant must be obtained from Landlord at a reasonable cost to be established by Landlord. Upon the termination of this Lease, Tenant shall restore to Landlord all keys of stores, offices, and toilet rooms, either furnished to, or otherwise procured by, Tenant and in the event of the loss of keys so furnished, Tenant shall pay to Landlord the reasonable cost of replacing same or of changing the lock or locks opened by such lost key if Landlord shall deem it necessary to make such changes.
2. All doors opening to public corridors shall be kept closed at all times except for normal ingress and egress to the Premises. Tenant shall not obstruct any sidewalks, halls, passages, exits, entrances, elevators, or stairways. No tenant and no employee or invitee of any tenant shall go upon the roof of the Building.
3. Landlord reserves the right to close and keep locked all entrance and exit doors of the Building during such hours as are customary for comparable buildings in the Concord, California area. Tenant, its employees and agents must use reasonable care in ensuring that the doors to the Building are closed and secured when leaving the Premises if it is after the normal hours of business for the Building. Any tenant, its employees, agents or any other persons entering or leaving the Building at any time when it is so locked, or any time when it is considered to be after normal business hours for the Building, may be required to sign the Building register. Access to the Building may be refused unless the person seeking access has proper identification or has a previously arranged pass for access to the Building. Landlord will furnish passes to persons for whom Tenant requests same in writing. Tenant shall be responsible for all persons for whom Tenant requests passes and shall be liable to Landlord for all acts of such persons. The Landlord and his agents shall in no case be liable for damages for any error with regard to the admission to or exclusion from the Building of any person. In case of invasion, mob, riot, public excitement, or other commotion, Landlord reserves the right to prevent access to the Building or the Project during the continuance thereof by any means it deems appropriate for the safety and protection of life and property.
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4. No furniture, freight or equipment of a material size or quantity shall be brought into the Building without prior notice to Landlord. All moving activity into or out of the Building shall be scheduled with Landlord and done only at such time and in such manner as Landlord reasonably designates. Landlord shall have the right to prescribe the weight, size and position of all safes and other heavy property brought into the Building and also the times and manner of moving the same in and out of the Building. Safes and other heavy objects shall, if considered necessary by Landlord, stand on supports of such thickness as is necessary to properly distribute the weight. Landlord will not be responsible for loss of or damage to any such safe or property in any case. Any damage to any part of the Building, its contents, occupants or visitors by moving or maintaining any such safe or other property shall be the sole responsibility and expense of Tenant.
5. No furniture, packages, supplies, equipment or merchandise will be received in the Building or carried up or down in the elevators, except between such hours, in such specific elevator and by such personnel as shall be designated by Landlord.
6. The requirements of Tenant will be attended to only upon application at the management office for the Project or at such office location designated by Landlord. Employees of Landlord shall not perform any work or do anything outside their regular duties unless under special instructions from Landlord. Tenant requests for services must be submitted to the management office by an authorized individual designated by Tenant.
7. Excepting signage as contemplated in Article 23 of the Lease, no sign, advertisement, notice or handbill shall be exhibited, distributed, painted or affixed by Tenant on any part of the Premises or the Building without the prior written consent of the Landlord, which consent shall not be unreasonably withheld or delayed. Landlord shall have the right to remove, at Tenants expense and without notice, any sign installed or displayed in violation of this rule. All approved signs or lettering on doors and walls shall be printed, painted, affixed or inscribed at Tenants expense by a vendor designated or approved by Landlord. Any directory of the Project, if provided, will be exclusively for the display of the name and location of tenants only and Landlord reserved the right to exclude any other names.
8. Tenant shall not disturb, solicit, peddle, or canvass any occupant of the Project and shall cooperate with Landlord and its agents of Landlord to prevent same. Canvassing, soliciting, distribution of handbills or any other written material in the Project is prohibited and each tenant shall cooperate to prevent the same. No tenant shall solicit business from other tenants or permit the sale of any good or merchandise in the Project without the written consent of Landlord.
9. The toilet rooms, urinals, wash bowls and other apparatus shall not be used for any purpose other than that for which they were constructed, and no foreign substance of any kind whatsoever shall be thrown therein. The expense of any breakage, stoppage or damage resulting from the violation of this rule shall be borne by the tenant who, or whose servants, employees, agents, visitors or licensees shall have caused same.
10. Tenant shall not place a load upon the floor of the Premises which exceeds the load per square foot which such floor was designed to carry and which is allowed by law. Heavy objects shall stand on such platforms as determined by Landlord to be necessary to properly distribute the weight. Except in the case of cosmetic alterations, Tenant shall not mark, drive nails or screws, or drill into the partitions, woodwork or drywall or in any way deface the Premises or any part thereof without Landlords prior written consent, which consent shall not be unreasonably withheld or delayed.
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11. Tenant shall not install, maintain or operate upon the Premises any vending machine without Landlords prior written consent.
12. Tenant shall not use, bring or keep upon the Premises any flammable, combustible, explosive, foul or noxious fluid, chemical or substance (except for those substances incidental to general office use including, but not limited to copier toner, cleaning materials, etc., in customary quantities), or do or permit anything to be done in the leased Premises, or bring or keep anything therein, which shall in any way increase the rate of fire insurance on the Building or Project, or on the property kept therein, or obstruct or interfere with the rights of other tenants, or in any way injure or annoy them, or conflict with the regulations of the Fire Department or the fire laws, or with any insurance policy upon the Building or Project, or any part thereof, or with any rules and ordinances established by the Board of Health or other governmental authority. Upon request, Tenant shall provide material safety data sheets for any hazardous material used or kept on the Premises.
13. Tenant shall not without the prior written consent of Landlord use any method of heating or air conditioning other than that supplied by Landlord.
14. Tenant shall not use, keep or permit to be used or kept, any foul or noxious gas or substance in or on the Premises, or permit or allow the Premises to be occupied or used in a manner offensive or objectionable to Landlord or other occupants of the Project by reason of noise, odors, or vibrations, or interfere with other tenants or those having business therein, whether by the use of any musical instrument, radio, phonograph, or in any other way. Tenant shall not throw anything out of doors, windows or skylights or down passageways.
15. Tenant shall not bring into or keep within the Project, the Building or the Premises any firearms, animals (other than service animals), birds, aquariums, or, except in areas designated by Landlord, bicycles or other vehicles.
16. No commercial cooking shall be done or permitted on the Premises, nor shall the Premises be used for the storage of merchandise, for lodging or for any purpose not consistent with general office use or the character or nature of the Building or Project. Notwithstanding the foregoing, Underwriters laboratory-approved equipment and microwave ovens may be used in the Premises for heating food and brewing coffee, tea, hot chocolate and similar beverages for employees and visitors, provided that such use is in accordance with all applicable federal, state, county and city laws, codes, ordinances, rules and regulations.
17. The Premises shall not be used for manufacturing or for the storage of merchandise except as such storage may be incidental to the use of the Premises provided for in the Summary. Tenant shall not occupy or permit any portion of the Premises to be used for the manufacture or sale of liquor, narcotics, or tobacco in any form, or as a medical office, or as an employment bureau without the express prior written consent of Landlord. Tenant shall not engage or pay any employees on the Premises except those actually working for such tenant on the Premises nor advertise for laborers giving an address at the Premises.
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18. Landlord reserves the right to exclude or expel from the Project any person who, in the judgment of Landlord, is intoxicated or under the influence of liquor or drugs, or who shall in any manner do any act in violation of any of these Rules and Regulations.
19. Tenant, its employees and agents shall not loiter in or on the entrances, corridors, sidewalks, lobbies, courts, halls, stairways, elevators, vestibules or any Common Areas, nor in any way obstruct such areas, and shall use them only as a means of ingress and egress for the Premises.
20. Tenant shall use reasonable care to not waste electricity, water or air conditioning and agrees to reasonably cooperate with Landlord to ensure the most effective operation of the Buildings heating and air conditioning system, and shall endeavor to prevent any of its personnel from attempting to adjust any controls.
21. Tenant shall store all its trash and garbage within the interior of the Premises. No material shall be placed in the trash boxes or receptacles if such material is of such nature that it may not be disposed of in the ordinary and customary manner of removing and disposing of trash and garbage in Concord, California without violation of any law or ordinance governing such disposal. Tenant shall participate in any recycling program provided by Landlord, so long as such program does not create an unreasonable burden or cost to Tenant. All trash, garbage and refuse disposal shall be made only through entry-ways and elevators provided for such purposes at such times as Landlord shall designate. If the Premises is or becomes infested with vermin as a result of any misuse or neglect of the Premises by Tenant, its agents, servants, employees, contractors, visitors or licensees, Tenant shall forthwith, at Tenants expense, cause the Premises to be exterminated from time to time to the reasonable satisfaction of Landlord and shall employ such licensed exterminators as shall be approved in writing in advance by Landlord.
22. Tenant shall comply with all safety, fire protection and evacuation procedures established by Landlord or any governmental agency.
23. All cleaning and janitorial services for the Project and the Premises shall be provided exclusively through Landlord. Tenant shall not cause any unnecessary labor by carelessness or indifference to the good order and cleanliness of the Premises or the Project.
24. Without Landlords consent, which shall not be unreasonably withheld, conditioned or delayed, no awnings or other projection shall be attached to the outside walls of the Building without the prior written consent of Landlord, and no curtains, blinds, shades or screens shall be attached to or hung in, or used in connection with, any window or door of the Premises other than Landlord standard window coverings. All electrical ceiling fixtures hung in the Premises or spaces along the perimeter of the Building must be of a quality, type, design approved by Landlord. Neither the interior nor exterior of any windows shall be coated or otherwise sunscreened without the prior written consent of Landlord.
25. The sashes, sash doors, skylights, windows, and doors that reflect or admit light and air into the halls, passageways or other public places in the Building shall not be covered or obstructed by Tenant, and Tenant shall endeavor prevent its personnel from placing any bottles, parcels or other articles on the windowsills.
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26. Tenant must comply with requests by the Landlord concerning the informing of their employees of items of importance to the Landlord.
27. Tenant must comply with any City of Concord NO-SMOKING ordinances. If Tenant is required by governmental law or code to adhere to a written smoking policy, a copy of said policy shall be on file in the office of the Building. In addition, no smoking of any substance shall be permitted within the Building, Property or Project except in specifically designated outdoor areas. Within such designated outdoor areas, all remnants of consumed cigarettes and related paraphernalia shall be deposited in ash trays and/or waste receptacles. No cigarettes shall be extinguished and/or left on the ground or any other surface of the Project. Cigarettes shall be extinguished only in ashtrays. Furthermore, in no event shall Tenant, its employees or agents smoke tobacco products or other substances (x) within any interior areas of the Building, or (y) to the extent posted, within two hundred feet (200) of the main entrance of the Building, or (z) to the extent posted, within seventy-five feet (75) of any other entryways into the Building.
28. Tenant hereby acknowledges that Landlord shall have no obligation to provide guard service or other security measures for the benefit of the Premises, the Building or the Project, except for those services as specified in Article 6 of this Lease. Tenant hereby assumes all responsibility for the protection of Tenant and its agents, employees, contractors, invitees and guests, and the property thereof, from acts of third parties, including keeping doors locked and other means of entry to the Premises closed. Tenant further assumes the risk that any safety and security devices, services and programs which Landlord elects, in its sole discretion, to provide may not be effective, or may malfunction or be circumvented by an unauthorized third party, and Tenant shall, in addition to its other insurance obligations under this Lease, obtain its own insurance coverage to the extent Tenant desires protection against losses related to such occurrences. Tenant shall cooperate in any reasonable safety or security program developed by Landlord or required by law.
29. All office equipment of any electrical or mechanical nature shall be placed by Tenant in the Premises in areas mutually agreeable to Landlord and Tenant, to absorb or prevent any vibration, noise and annoyance.
30. Tenant shall not use in any space or in the public halls of the Building, any hand trucks except those equipped with rubber tires and rubber side guards, nor shall any hand trucks be used in the passenger elevators. All carts and hand trucks must be transported in the service elevator.
31. No auction, liquidation, fire sale, going-out-of-business or bankruptcy sale shall be conducted in the Premises without the prior written consent of Landlord.
32. No tenant shall use or permit the use of any portion of the Premises for living quarters, sleeping apartments or lodging rooms.
33. Tenant shall not purchase towels, janitorial or maintenance or other similar services from any company or persons not approved by Landlord. Landlord shall approve a sufficient number of sources of such services to provide Tenant with a reasonable selection, but only in such instances and to such extent as Landlord in its judgment shall consider consistent with the security and proper operation of the Building.
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Landlord reserves the right at any time to change or rescind any one or more of these Rules and Regulations, or to make such other and further reasonable Rules and Regulations as in Landlords reasonable judgment may from time to time be necessary for the management, safety, care and cleanliness of the Premises, Building, the Common Areas and the Project, and for the preservation of good order therein, as well as for the convenience of other occupants and tenants therein. Landlord shall notify Tenant in writing of any changes made to these Rules and Regulations which pertain to Tenant. Landlord may waive any one or more of these Rules and Regulations for the benefit of any particular tenants, but no such waiver by Landlord shall be construed as a waiver of such Rules and Regulations in favor of any other tenant, nor prevent Landlord from thereafter enforcing any such Rules or Regulations against any or all tenants of the Project. Tenant shall be deemed to have read these Rules and Regulations and to have agreed to abide by them as a condition of its occupancy of the Premises.
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EXHIBIT E
1655 GRANT
FORM OF TENANTS ESTOPPEL CERTIFICATE
The undersigned as Tenant under that certain Office Lease (the Lease) made and entered into as of , 20 by and between as Landlord, and the undersigned as Tenant, for Premises on the floor(s) of the office building located at , , California , certifies as follows as of the date hereof:
1. Attached hereto as Exhibit A is a true and correct copy of the Lease and all amendments and modifications thereto. The documents contained in Exhibit A represent the entire agreement between the parties as to the Premises.
2. The undersigned currently occupies the Premises described in the Lease, the Lease Term commenced on , and the Lease Term expires on , and the undersigned has no option to terminate or cancel the Lease under the presently-existing circumstances (other than the termination right provided in Section 2.3 [ANY OTHER THEN-EXISTING TERMINATION RIGHTS TO BE INCLUDED] of the Lease) or to purchase all or any part of the Premises, the Building and/or the Project.
3. Base Rent became payable on .
4. To Tenants actual knowledge, the Lease is in full force and effect and has not been modified, supplemented or amended in any way except as provided in Exhibit A .
5. Tenant has not transferred, assigned, or sublet any portion of the Premises nor entered into any license or concession agreements with respect thereto except as follows:
6. All monthly installments of Base Rent, all Additional Rent and all monthly installments of estimated Additional Rent have been paid when due through . The current monthly installment of Base Rent is $ .
7. All conditions of the Lease to be performed by Landlord necessary to the enforceability of the Lease have been satisfied and, to Tenants actual knowledge, Landlord is not in default thereunder. In addition, the undersigned has not delivered any notice to Landlord regarding a default by Landlord thereunder.
8. No rental has been paid more than thirty (30) days in advance and no security has been deposited with Landlord except as provided in the Lease.
9. As of the date hereof, to Tenants actual knowledge, there are no existing defenses, offsets or claims or any basis for a claim, that Tenant has against Landlord.
10. If Tenant is a corporation or partnership, Tenant is a duly formed and existing entity qualified to do business in California and that Tenant has full right and authority to execute and deliver this Estoppel Certificate and that each person signing on behalf of Tenant is authorized to do so.
1655 Grant Street |
EXHIBIT E | Genworth Financial Wealth Management, Inc. |
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11. There are no actions pending against the undersigned under the bankruptcy or similar laws of the United States or any state.
12. Other than in compliance with all applicable laws and incidental to the ordinary course of the use of the Premises, the undersigned has not used or stored any hazardous substances in the Premises other than as permitted in accordance with the Lease.
13. To the undersigneds actual knowledge, all improvement work to be performed by Landlord under the Lease has been completed in accordance with the Lease and has been accepted by the undersigned and all reimbursements and allowances due to the undersigned under the Lease in connection with any improvement work have been paid in full.
The undersigned acknowledges that this Estoppel Certificate may be delivered to Landlord or to a prospective mortgagee or prospective purchaser, and acknowledges that said prospective mortgagee or prospective purchaser will be relying upon the statements contained herein in making the loan or acquiring the property of which the Premises are a part and that receipt by it of this certificate is a condition of making such loan or acquiring such property.
Executed at on the day of , 20 .
Tenant: | ||||
, |
a | ||||
By: | ||||
Its: | ||||
By: | ||||
Its: |
1655 Grant Street |
EXHIBIT E | Genworth Financial Wealth Management, Inc. |
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EXHIBIT F
1655 GRANT
NOTICE OF LEASE TERM DATES
To: | ||
Re: |
Office Lease dated , 20 between , a (Landlord), and , a (Tenant) concerning Suite on floor(s) of the office building located at , , California. |
Ladies and Gentlemen:
In accordance with the Office Lease (the Lease), we wish to advise you and/or confirm as follows:
1. |
The Lease Term shall commence on or has commenced on for a term of ending on . |
2. |
Rent commenced to accrue on , in the amount of . |
3. |
If the Lease Commencement Date is other than the first day of the month, the first billing will contain a pro rata adjustment. Each billing thereafter shall be for the full amount of the monthly installment as provided for in the Lease. |
4. |
Your rent checks should be made payable to at . |
5. |
The exact number of rentable square feet within the Premises is square feet. |
1655 Grant Street |
EXHIBIT F | Genworth Financial Wealth Management, Inc. |
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Landlord: | ||||
a |
By: | ||||
Its: |
Agreed to and Accepted
as of , 20 .
Tenant: | ||||
a |
By: | ||||
Its: |
1655 Grant Street |
EXHIBIT F | Genworth Financial Wealth Management, Inc. |
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EXHIBIT G
Form of SNDA
[attached]
1655 Grant Street |
EXHIBIT G | Genworth Financial Wealth Management, Inc. |
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RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
WELLS FARGO BANK, NATIONAL ASSOCIATION
GROUP NAME (AU #AU NO.)
OFFICE ADDRESS
Attn: LOAN ADMINISTRATORS NAME HERE
Loan No. LOAN NO.
SUBORDINATION AGREEMENT; ACKNOWLEDGMENT OF LEASE ASSIGNMENT, ESTOPPEL,
ATTORNMENT AND NON-DISTURBANCE AGREEMENT
(Lease To Deed of Trust)
NOTICE: |
THIS SUBORDINATION AGREEMENT RESULTS IN YOUR SECURITY INTEREST IN THE PROPERTY BECOMING SUBJECT TO AND OF LOWER PRIORITY THAN THE LIEN OF SOME OTHER OR LATER SECURITY INSTRUMENT. |
THIS SUBORDINATION AGREEMENT; ACKNOWLEDGMENT OF LEASE ASSIGNMENT, ESTOPPEL, ATTORNMENT AND NON-DISTURBANCE AGREEMENT (Agreement) is made DATE OF DOCUMENTS by and between BORROWER NAME, a general partnership (Owner or Lessor), NAME OF LESSEE HERE (Lessee) and WELLS FARGO BANK, NATIONAL ASSOCIATION (Lender).
R E C I T A L S
A. |
Pursuant to the terms and provisions of a lease dated DATE OF LEASE HERE (Lease), Owner, as Lessor, granted to Lessee a leasehold estate in and to a portion of the property described on Exhibit A attached hereto and incorporated herein by this reference (which property, together with all improvements now or hereafter located on the property, is defined as the Property). |
B. |
Owner has executed, or proposes to execute, a deed of trust with absolute assignment of leases and rents, security agreement and fixture filing (Deed of Trust) securing, among other things, a promissory note (Note) in the principal sum of LOAN AMOUNT AND NO/100THS DOLLARS ($LOAN AMOUNT NOS.), dated DATE OF DOCUMENTS, in favor of Lender, which Note is payable with interest and upon the terms and conditions described therein (Loan). The Deed of Trust has been recorded prior to the date of this Agreement or is to be recorded concurrently herewith. |
C. |
As a condition to making the Loan secured by the Deed of Trust, Lender requires that the Deed of Trust be unconditionally and at all times remain a lien on the Property, prior and superior to all the rights of Lessee under the Lease and that the Lessee specifically and unconditionally subordinate the Lease and the to the lien of the Deed of Trust. |
D. |
Owner and Lessee have agreed to the subordination, attornment and other agreements herein in favor of Lender. |
Page 1 of 7
LOAN NO.
NOW THEREFORE, for valuable consideration and to induce Lender to make the Loan, Owner and Lessee hereby agree for the benefit of Lender as follows:
1. |
SUBORDINATION . Owner and Lessee hereby agree that: |
1.1 |
Prior Lien . The Deed of Trust securing the Note in favor of Lender, and any modifications, renewals or extensions thereof (including, without limitation, any modifications, renewals or extensions with respect to any additional advances made subject to the Deed of Trust), shall unconditionally be and at all times remain a lien on the Property prior and superior to the Lease; |
1.2 |
Subordination . Lender would not make the Loan without this agreement to subordinate; and |
1.3 |
Whole Agreement . This Agreement shall be the whole agreement and only agreement with regard to the subordination of the Lease to the lien of the Deed of Trust and shall supersede and cancel, but only insofar as would affect the priority between the Deed of Trust and the Lease, any prior agreements as to such subordination, including, without limitation, those provisions, if any, contained in the Lease which provide for the subordination of the Lease to a deed or deeds of trust or to a mortgage or mortgages. |
AND FURTHER, Lessee individually declares, agrees and acknowledges for the benefit of Lender, that:
1.4 |
Use of Proceeds . Lender, in making disbursements pursuant to the Note, the Deed of Trust or any loan agreements with respect to the Property, is under no obligation or duty to, nor has Lender represented that it will, see to the application of such proceeds by the person or persons to whom Lender disburses such proceeds, and any application or use of such proceeds for purposes other than those provided for in such agreement or agreements shall not defeat this agreement to subordinate in whole or in part; |
1.5 |
Waiver, Relinquishment and Subordination . Lessee intentionally and unconditionally waives, relinquishes and subordinates all of Lessees right, title and interest in and to the Property to the lien of the Deed of Trust and understands that in reliance upon, and in consideration of, this waiver, relinquishment and subordination, specific loans and advances are being and will be made by Lender and, as part and parcel thereof, specific monetary and other obligations are being and will be entered into which would not be made or entered into but for said reliance upon this waiver, relinquishment and subordination. |
2. |
ASSIGNMENT . Lessee acknowledges and consents to the assignment of the Lease by Lessor in favor of Lender. |
3. |
ESTOPPEL . Lessee acknowledges and represents that: |
3.1 |
Lease Effective . The Lease has been duly executed and delivered by Lessee and, subject to the terms and conditions thereof, the Lease is in full force and effect, the obligations of Lessee thereunder are valid and binding and there have been no modifications or additions to the Lease, written or oral; |
3.2 |
No Default . To the best of Lessees knowledge, as of the date hereof: (i) there exists no breach, default, or event or condition which, with the giving of notice or the passage of time or both, would constitute a breach or default under the Lease; and (ii) there are no existing claims, defenses or offsets against rental due or to become due under the Lease; |
3.3 |
Entire Agreement . The Lease constitutes the entire agreement between Lessor and Lessee with respect to the Property and Lessee claims no rights with respect to the Property other than as set forth in the Lease; and |
3.4 |
No Prepaid Rent . No deposits or prepayments of rent have been made in connection with the Lease, except as follows: (if none, state None) . |
3.5 |
No Broker Liens . Lessee has not incurred any fee or commission with any real estate broker which would give rise to any lien right under state or local law, except as follows (if none, state None): LIST OF EXISTING CLAIMS HERE |
Page 2 of 7
LOAN NO.
4. |
ADDITIONAL AGREEMENTS . Lessee covenants and agrees that, during all such times as Lender is the Beneficiary under the Deed of Trust: |
4.1 |
Modification, Termination and Cancellation . Lessee will not consent to any modification, amendment, termination or cancellation of the Lease (in whole or in part) without Lenders prior written consent which shall not be unreasonably withheld, conditioned or delayed, and will not make any payment to Lessor in consideration of any modification, termination or cancellation of the Lease (in whole or in part) without Lenders prior written consent which shall not be unreasonably withheld, conditioned or delayed. Lenders consent shall be deemed given if no response is received from Lender within ten (10) business days following Lenders receipt of such written notification and request for consent, together with a copy of such modification, amendment, termination or cancellation and such additional information as Lender requires in order to determine whether to give its consent; |
4.2 |
Notice of Default . Lessee will notify Lender in writing concurrently with any notice given to Lessor of any default by Lessor under the Lease, and Lessee agrees that Lender has the right (but not the obligation) to cure any breach or default specified in such notice within the time periods set forth below and Lessee will not declare a default of the Lease, as to Lender, if Lender cures such default within fifteen (15) days from and after the expiration of the time period provided in the Lease for the cure thereof by Lessor; |
4.3 |
No Advance Rents . Lessee will make no payments or prepayments of rent more than one (1) month in advance of the time when the same become due under the Lease; and |
4.4 |
Assignment of Rents . Upon receipt by Lessee of written notice from Lender that Lender has elected to terminate the license granted to Lessor to collect rents, as provided in the Deed of Trust, and directing the payment of rents by Lessee to Lender, Lessee shall comply with such direction to pay and shall not be required to determine whether Lessor is in default under the Loan and/or the Deed of Trust. |
5. |
ATTORNMENT . In the event of a foreclosure under the Deed of Trust, Lessee agrees for the benefit of Lender (including for this purpose any transferee of Lender or any transferee of Lessors title in and to the Property by Lenders exercise of the remedy of sale by foreclosure under the Deed of Trust) as follows: |
5.1 |
Payment of Rent . Lessee shall pay to Lender all rental payments required to be made by Lessee pursuant to the terms of the Lease for the duration of the term of the Lease; |
5.2 |
Continuation of Performance . Lessee shall be bound to Lender in accordance with all of the provisions of the Lease for the balance of the term thereof, and Lessee hereby attorns to Lender as its landlord, such attornment to be effective and self-operative without the execution of any further instrument immediately upon Lender succeeding to Lessors interest in the Lease and giving written notice thereof to Lessee; |
5.3 |
No Offset . Lender shall not be liable for, nor subject to, any offsets or defenses which Lessee may have by reason of any act or omission of Lessor under the Lease, nor for the return of any sums which Lessee may have paid to Lessor under the Lease as and for security deposits, advance rentals or otherwise, except to the extent that such sums are actually delivered by Lessor to Lender; and |
5.4 |
Subsequent Transfer . If Lender, by succeeding to the interest of Lessor under the Lease, should become obligated to perform the covenants of Lessor thereunder, then, upon any further transfer of Lessors interest by Lender, all of such obligations shall terminate as to Lender. |
6. |
NON-DISTURBANCE . In the event of a foreclosure under the Deed of Trust, so long as there shall then exist no breach, default, or event of default on the part of Lessee under the Lease beyond any applicable notice and cure period, Lender agrees for itself and its successors and assigns that the leasehold interest of Lessee under the Lease shall not be extinguished or terminated by reason of such foreclosure, but rather the Lease shall continue in full force and effect and Lender shall recognize and accept Lessee as tenant under the Lease subject to the terms and provisions of the Lease except as modified by this Agreement; provided , however , that Lessee and Lender agree that the following provisions of the Lease (if any) shall not be binding on Lender: any option to purchase with respect to the Property; any right of first refusal with respect to the Property except as contained in the Lease; any provision regarding the use of insurance proceeds or condemnation proceeds with respect to the Property which is inconsistent with the terms of the Deed of Trust. |
Page 3 of 7
LOAN NO.
7. |
MISCELLANEOUS . |
7.1 |
Heirs, Successors, Assigns and Transferees . The covenants herein shall be binding upon, and inure to the benefit of, the heirs, successors and assigns of the parties hereto; and |
7.2 |
Notices . All notices or other communications required or permitted to be given pursuant to the provisions hereof shall be deemed served upon delivery or, if mailed, upon the first to occur of receipt or the expiration of three (3) days after deposit in United States Postal Service, certified mail, postage prepaid and addressed to the address of Lessee or Lender appearing below: |
OWNER
BORROWER NAME
STREET ADDRESS
CITY, STATE ZIP
LENDER
WELLS FARGO BANK, NATIONAL ASSOCIATION
GROUP NAME (AU #AU NO.)
OFFICE ADDRESS
Attn: LOAN ADMINISTRATORS NAME HERE
Loan No. LOAN NO.
LESSEE
NAME OF LESSEE HERE
LESSEES ADDRESS (STACKED) HERE
provided , however , any party shall have the right to change its address for notice hereunder by the giving of written notice thereof to the other party in the manner set forth in this Agreement; and
7.3 |
Counterparts . This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute and be construed as one and the same instrument; and |
7.4 |
Remedies Cumulative . All rights of Lender herein to collect rents on behalf of Lessor under the Lease are cumulative and shall be in addition to any and all other rights and remedies provided by law and by other agreements between Lender and Lessor or others; and |
7.5 |
Paragraph Headings . Paragraph headings in this Agreement are for convenience only and are not to be construed as part of this Agreement or in any way limiting or applying the provisions hereof. |
INCORPORATION . Exhibit A attached hereto and incorporated herein by this reference.
Page 4 of 7
LOAN NO.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.
NOTICE: |
THIS SUBORDINATION AGREEMENT CONTAINS A PROVISION WHICH ALLOWS THE PERSON OBLIGATED ON YOUR REAL PROPERTY SECURITY TO OBTAIN A LOAN A PORTION OF WHICH MAY BE EXPENDED FOR OTHER PURPOSES THAN IMPROVEMENT OF THE LAND. |
IT IS RECOMMENDED THAT, PRIOR TO THE EXECUTION OF THIS AGREEMENT, THE PARTIES CONSULT WITH THEIR ATTORNEYS WITH RESPECT HERETO.
OWNER | ||
BORROWING ENTITY | ||
By: |
|
|
Its: |
|
|
LENDER | ||
WELLS FARGO BANK, NATIONAL ASSOCIATION |
||
By: |
|
|
Signees Name | ||
Its: | Signees Title | |
LESSEE | ||
NAME OF LESSEE HERE | ||
LESSEE SIGNATURE BLOCK HERE |
(ALL SIGNATURES MUST BE ACKNOWLEDGED)
Page 5 of 7
EXHIBIT A
LOAN NO.
DESCRIPTION OF PROPERTY
EXHIBIT A to Subordination Agreement; Acknowledgment of Lease Assignment, Estoppel, Attornment and Non-Disturbance Agreement dated as of DATE OF DOCUMENTS, executed by BORROWER NAME, a general partnership as Owner, NAME OF LESSEE HERE, as Lessee, and WELLS FARGO BANK, NATIONAL ASSOCIATION, as Lender.
All that certain real property located in the County of PROPERTY COUNTY, State of California, described as follows:
APN
Page 6 of 7
STATE OF CALIFORNIA
COUNTY OF ss.
On before me, (insert name and title of the officer), personally appeared , who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.
WITNESS my hand and official seal
Signature
My commission expires .
Page 7 of 7
EXHIBIT H
Janitorial Services
[attached]
1655 Grant Street |
EXHIBIT H | Genworth Financial Wealth Management, Inc. |
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SCOPE OF WORK
LOBBIES, CORRIDORS, AND ENTRIES
Nightly Services (5 Nights Per Week)
|
Clean and remove smudges from entry door glass. |
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Polish all entry handles, door plates and metal trim. |
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Wipe clean all glass, wood, or metal doors and door jambs. |
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Empty all ashtrays and wipe clean and polish |
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Screen all sand urns of butts and debris. Clean container and add sand as needed |
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Empty all trash receptacles, clean container with clean damp cloth and replace plastic liner. |
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Remove all debris from interior pots and planters. Clean and polish planters. (Report missing or dead plants). |
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Dust clean all horizontal surfaces under (7) feet. |
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Vacuum all carpet areas completely and remove spots. |
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Dust mop and damp mop hard surface floors. |
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Clean and remove smudges and marks from walls and wall-coverings. |
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Clean, polish and sanitize all drinking fountains. |
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Wipe clean all directory boards (exterior) with clean, soft cloth and alcohol only. (Report burned out lights). |
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Wipe clean all fire extinguisher cabinets and glass. (Report broken glass or missing extinguishers). |
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Clean and sanitize all public telephone and enclosures. (Neatly arrange all phone books). |
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Clean and polish all elevator doors, jambs, call plates. |
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Clean, polish and straighten all furniture as needed. |
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Dust and clean all lobby and corridor signage. |
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Report any lights burned out. |
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Clean all smudges and spots from mailroom walls and mailboxes. |
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Secure all doors and turn off appropriate lights upon completion of work assignments. |
Weekly Services (One Time Per Week)
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Clean and polish all entry metal and sills. |
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Dust and clean or polish all baseboards. |
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Dust all ledges and exit signs. |
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Detail clean all security entrance equipment. |
Monthly Services (One Time Per Month)
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Machine scrub all ceramic, brick or stone floors. |
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Clean, reseal or refinish common area floors. |
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Dust and clean all lobby fire doors inside and out. Polish door floor plates. |
Quarterly Service (Every Three Months)
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Clean all ceiling vents and grills. |
OFFICES/CUBICLES
Daily Services (Fives Days Per Week)
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Empty all wastebaskets and carry trash to designated areas for removal or retention. Replace plastic liners as needed. (Liners to be provided by client). Report any areas that need special cleaning. |
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Police carpeting on non-scheduled floors. |
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Remove hand spots or smudges from entry doors. |
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Using a dustless mop, sweep all non-carpeted areas. |
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Properly position furniture in offices. |
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Remove fingerprints and smudges from all walls, partitions and doors. |
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Spot clean all partition glass and mirrors. |
OFFICES/CUBICLES - Continued
Weekly Services (One Time Per Week)
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Vacuum carpeted areas. |
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Dust all desks, ornaments, phones and machines. Do not dust desk, conference tables or counters which are cluttered with paper work. |
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Brush all fabric furniture. |
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Damp mop all tile and hardwood floor areas. |
Bi-Weekly Services (Every Other Week)
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Dust all windowsills and ledges. |
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Dust all horizontal surfaces under 7 feet, furniture and equipment. |
Monthly Services (One Time Per Month)
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Damp wipe with a treated cloth all interior doors. |
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Vacuum all furniture or wipe vinyl furniture clean. |
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Dust all lower parts of furniture. |
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Dust all ledges, walls, moldings, picture shelves, etc., over 10 feet. |
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Clean all baseboards |
Quarterly Services (Every Three Months Or As Needed)
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Brush down and clean all vents and grills. |
RESTROOMS
Daily Services (Five Days Per Week)
|
Dust and clean restroom signage and doors. |
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Vacuum all restrooms vestibules and remove spots. |
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Wet mop and disinfect tile floors, paying particular attention to areas under urinals and toilet bowls. |
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Clean alkaline deposits and soap spills from floor tile grout. |
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Wash and disinfect all basins, urinals, toilet bowls nightly, removing scale and stains. |
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Clean underside rims of urinals and toilet bowls. |
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Wash both sides of toilet seats with soap and water and disinfect. Leave all seats in an upright position. |
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Empty, clean, sanitize and polish all paper dispensers, replacing liners as necessary. |
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Clean and polish all mirrors. |
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Dust ledges and baseboards. |
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Damp wipe, polish and shine all chromes, metal fixtures, hand plates, kick plates, utility covers, plumbing, clean out covers and door knobs. |
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Spot clean with disinfectant all partitions and tile walls. (Report any graffiti and remove if possible). |
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Fill all toilet tissue, seat covers, soap, towel and sanitary napkin dispensers as necessary. (Supplies to be provided by Owner). |
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Restroom doors will be propped open with a rubber stop and sign indicating restroom closed for cleaning, placed outside. |
Semi-Weekly Services (Two Times Per Week)
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Pour clean water down floor drains where required, to prevent sewer gases from escaping. |
Weekly Services (One Time Per Week)
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Wash all waste containers and disinfect. |
RESTROOMS - Continued
Monthly Services (One Time Per Month)
|
Clean and polish all doors, door plates and hardware. |
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Scrub all ceramic tile floors and strip as needed, protecting carpeting areas from seepage at restroom entrances. |
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Detail all toilet compartments and fixtures. |
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Brush and clean all grills and vents as needed. |
Bi-Monthly Services (Every Two Months)
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Wash down all walls and partitions inside and out and disinfect. (Report any graffiti and clean if possible.) |
ELEVATORS
Daily Services (Five Days Per Week)
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Vacuum and spot clean all carpeted cab floors. |
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Sweep and mop all hard surface cab floors. |
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Brush and spot clean carpeted wall covering. |
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Dust and clean baseboards. |
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Damp wipe and remove all spots and fingerprints from doors and walls (Interior and exterior). |
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Dust and clean elevator ceilings and lights. |
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Remove gum, stains or debris from ceilings, handrails or elevator tracks. |
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Dust and clean emergency phone and security compartments. |
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Clean and call buttons, call plates and signage. |
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Report any burned out lights or malfunctions of elevators. |
Weekly Services (One Time Per Week)
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Clean and polish elevator track. |
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Detail all call buttons and call plates. |
|
Disinfect emergency phones. |
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Shampoo/Extract as needed all carpeted cab floors. |
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Clean and refinish as needed all hard surface cab floors |
STAIRWELLS
Weekly Services (One Time Per Week)
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Police entire stairwell, removing all trash, cigarette butts, etc. |
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Report any exit signs that are burned out. |
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Report any lights burned out. |
Monthly Services (One Time Per Month)
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Sweep down all stairs and landings. |
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Dust all handrails, banisters and ledges. |
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Clean all walls of fingerprints and smudge marks, etc.. |
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Dust and clean all stairwell signage. |
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Dust and clean all emergency phones. |
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Wipe clean all stairwell doors and door jambs. |
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Wet mop all stairs and stair landings. (Clean baseboards if applicable). |
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Dust and clean all lights and fixtures. |
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Dust and clean all emergency fire equipment and plumbing. |
Bi-Monthly Services (Every Other Month)
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Scrub and refinish lower level stairwell landings. |
EXHIBIT I
Critical Environments
[attached]
1655 Grant Street |
EXHIBIT I | Genworth Financial Wealth Management, Inc. |
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Building A, third floor
FIRST AMENDMENT TO OFFICE LEASE
This FIRST AMENDMENT TO OFFICE LEASE ( First Amendment ) is made and entered into as of the 13 th day of May, 2015, by and between SFG OWNER A, LLC, a Delaware limited liability company ( Landlord ), and ASSETMARK, INC., a California corporation ( Tenant ).
R E C I T A L S :
A. Landlord and Tenant (formerly known as Genworth Financial Wealth Management, Inc., a California corporation) entered into that certain Office Lease dated May 29, 2013 (the Lease ), whereby Landlord leased to Tenant and Tenant leased from Landlord those certain premises consisting of a total of 48,128 rentable square feet ( Existing Premises ) commonly known as Suites 900 and 1000 and located on the ninth (9 th ) and tenth (10 th ) floors, respectively, of that certain office building located at 1655 Grant Street, Concord, California ( Building ).
B. Landlord and Tenant acknowledge that (i) Landlord delivered a ROFR Notice, as that term is defined in Section 29.33.2 of the Lease, to Tenant dated January 26, 2015 in accordance with the terms set forth in Section 29.33 of the Lease, with respect to space consisting of 24,408 rentable square feet of space commonly known as Suite 1100 and located on the eleventh (11 th ) floor of the Building, as delineated on Exhibit A attached hereto and made a part hereof (the Expansion Premises ), (ii) Tenant thereafter timely exercised its ROFR, as that term is defined in Section 29.33 of the Lease, with respect to the Expansion Premises by delivering a ROFR Exercise Notice, as that term is defined in Section 29.33.3 of the Lease, to Landlord dated February 4, 2015, and (iii) each party now desires to document the addition of the Expansion Premises to the Existing Premises, and in connection therewith, Landlord and Tenant desire to amend the Lease as hereinafter provided.
A G R E E M E N T :
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:
1. Capitalized Terms . All capitalized terms when used herein shall have the same meaning as is given such terms in the Lease unless expressly superseded by the terms of this First Amendment.
2. Modification of Premises . Effective as of October 1, 2015 (the Expansion Commencement Date ), Tenant shall lease from Landlord and Landlord shall lease to Tenant the Expansion Premises. Consequently, effective upon the Expansion Commencement Date, the Existing Premises shall be increased to include the Expansion Premises. Landlord and Tenant hereby acknowledge that such addition of the Expansion Premises to the Existing Premises shall, effective as of the Expansion Commencement Date, increase the size of the Premises to 72,536 rentable square feet. The Existing Premises and the Expansion Premises may hereinafter collectively be referred to as the Premises .
|
1655 GRANT STREET [First Amendment] [AssetMark, Inc.] |
3. Lease Term .
3.1. Extension of Lease Term with Respect to the Existing Premises . Landlord and Tenant acknowledge that Tenants lease of the Existing Premises is scheduled to expire on July 31, 2021, pursuant to the terms of the Lease. Notwithstanding any provision to the contrary in the Lease, the Lease Term with respect to the Existing Premises shall be extended to August 31, 2022 (the Lease Expiration Date ), unless sooner terminated as provided in the Lease, as hereby amended.
3.2. Expansion Term . The term of Tenants lease of the Expansion Premises (the Expansion Term ) shall commence on the Expansion Commencement Date and shall expire coterminously with Tenants lease of the Existing Premises on the Lease Expiration Date (i.e., August 31, 2022), unless sooner terminated as provided in the Lease, as hereby amended.
4. Base Rent .
4.1. Existing Premises . Notwithstanding anything to the contrary in the Lease as hereby amended, Tenant shall continue to pay Base Rent for the Existing Premises in accordance with the terms of Article 3 of the Lease, provided that for the period commencing on September 1, 2021 and ending on the Lease Expiration Date, Tenant shall pay Base Rent for the Existing Premises in an amount equal to $2.70 per rentable square foot per month (i.e., $129,945.60 per month and $1,559,347.20 per year).
4.2. Expansion Premises . Commencing on the Expansion Commencement Date and continuing throughout the Expansion Term, Tenant shall pay to Landlord monthly installments of Base Rent for the Expansion Premises as follows:
Period During Expansion Term |
Annual Base Rent |
Monthly Installment
of Base Rent |
Monthly Rental Rate
per Rentable Square Foot |
|||||||||
October 1, 2015 July 31, 2016 |
$ | 571,147.20 | $ | 47,595.60 | $ | 1.95 | * | |||||
August 1, 2016 July 31, 2017 |
$ | 585,792.00 | $ | 48,816.00 | $ | 2.00 | ||||||
August 1, 2017 July 31, 2018 |
$ | 600,436.80 | $ | 50,036.40 | $ | 2.05 | ||||||
August 1, 2018 July 31, 2019 |
$ | 615,081.60 | $ | 51,256.80 | $ | 2.10 | ||||||
August 1, 2019 July 31, 2020 |
$ | 629,726.40 | $ | 52,477.20 | $ | 2.15 | ||||||
August 1, 2020 August 31, 2021 |
$ | 644,371.20 | $ | 53,697.60 | $ | 2.20 | ||||||
September 1, 2021 August 31, 2022 |
$ | 790,819.20 | $ | 65,901.60 | $ | 2.70 |
* |
Notwithstanding the foregoing Base Rent schedule or any contrary provision of this Lease, but subject to the terms of Section 4.3 , below, Tenant shall not be obligated to pay Base Rent attributable to the Premises during the period commencing on October 1, 2015 and ending on April 14, 2016. |
-2- |
1655 GRANT STREET [First Amendment] [AssetMark, Inc.] |
On or before the Expansion Commencement Date, Tenant shall pay to Landlord the Base Rent payable for the Expansion Premises for the first full month of the Expansion Term.
4.3. Abated Base Rent . Provided that Tenant is not then in default of the Lease (as hereby amended), then during the period commencing on October 1, 2015 and ending on April 14, 2016 (the Rent Abatement Period ), Tenant shall not be obligated to pay any Base Rent otherwise attributable to the Expansion Premises during such Rent Abatement Period (the Rent Abatement ). Landlord and Tenant acknowledge that the aggregate amount of the Rent Abatement equals $307,068.39. Tenant acknowledges and agrees that the foregoing Rent Abatement has been granted to Tenant as additional consideration for entering into this First Amendment, and for agreeing to pay the Rent and performing the terms and conditions otherwise required under the Lease (as hereby amended). If Tenant shall be in default under this Lease, and shall fail to cure such default within the notice and cure period, if any, permitted for cure pursuant to terms and conditions of the Lease, or if this Lease is terminated for any reason other than Landlords breach of this Lease, casualty or condemnation, then the dollar amount of the unapplied portion of the Rent Abatement as of the date of such default or termination, as the case may be, shall be converted to a credit to be applied to the Base Rent applicable at the end of the Lease Term and Tenant shall immediately be obligated to begin paying Base Rent for the Premises in full.
5. Tenants Share of Direct Expenses .
5.1. Existing Premises . Tenant shall continue to pay Tenants Share of Direct Expenses in connection with the Existing Premises in accordance with the terms of Article 4 and Exhibit C of the Lease.
5.2. Expansion Premises . Except as specifically set forth in this Section 5.2 , commencing on the Expansion Commencement Date, Tenant shall pay Tenants Share of Direct Expenses in connection with the Expansion Premises in accordance with the terms of Article 4 and Exhibit C of the Lease, provided that with respect to the calculation of Tenants Share of Direct Expenses in connection with the Expansion Premises, Tenants Share shall equal 8.36%.
-3- |
1655 GRANT STREET [First Amendment] [AssetMark, Inc.] |
6. Expansion Improvements . Except as specifically set forth herein, Landlord shall not be obligated to provide or pay for any improvement work or services related to the improvement of the Expansion Premises, and Tenant shall accept the Expansion Premises in its presently existing, as-is condition. Landlord shall construct the improvements in the Expansion Premises pursuant to the terms of the Tenant Work Letter attached hereto as Exhibit B . For purposes of Section 1938 of the California Civil Code, Landlord hereby discloses to Tenant, and Tenant hereby acknowledges, that the Project, Building and Premises have not undergone inspection by a Certified Access Specialist (CASp).
7. Notices . Notwithstanding anything to the contrary set forth in the Lease, effective as of the date of this First Amendment, any Notices to Landlord and Tenant must be sent, transmitted, or delivered, as the case may be, to the following addresses:
If to Landlord :
SFG Owner A, LLC
260 California Street, Suite 300
San Francisco, California 94111
Attention: Craig Firpo
with a copy to:
Allen Matkins Leek Gamble Mallory & Natsis LLP
1901 Avenue of the Stars, Suite 1800
Los Angeles, California 90067
Attention: Anton N. Natsis, Esq.
If to Tenant:
Ted Angus
General Counsel
1655 Grant Street, 10 th Floor
Concord, CA 94520
Attention: Ted Angus
8. Broker . Landlord and Tenant hereby warrant to each other that they have had no dealings with any real estate broker or agent in connection with the negotiation of this First Amendment other than Newmark Cornish & Carey (representing both Landlord and Tenant) (the Broker ), and that they know of no other real estate broker or agent who is entitled to a commission in connection with this First Amendment. Each party agrees to indemnify and defend the other party against and hold the other party harmless from and against any and all claims, demands, losses, liabilities, lawsuits, judgments, and costs and expenses (including, without limitation, reasonable attorneys fees) with respect to any leasing commission or equivalent compensation alleged to be owing on account of the indemnifying partys dealings with any real estate broker or agent, other than the Broker, occurring by, through, or under the indemnifying party. The terms of this Section 8 shall survive the expiration or earlier termination of the term of the Lease, as hereby amended.
-4- |
1655 GRANT STREET [First Amendment] [AssetMark, Inc.] |
9. Parking . Effective as of the Expansion Commencement Date and continuing throughout the Expansion Term, Tenant shall lease seventy-four (74) unreserved parking passes in the Garage in connection with Tenants lease of the Expansion Premises (the Expansion Parking Passes ); provided that Tenant shall have the right to convert one (1) of the Expansion Parking Passes to a reserved parking space and three (3) of the Expansion Parking Passes to three (3) visitor parking spaces marked as designated for Tenant in the Garage (the Converted Parking Passes ), all subject to the CC&Rs, Parking Rules and Article 28 of the Lease. The Expansion Parking Passes (including the Converted Parking Passes) shall be free of charge during the Expansion Term (subject to the terms of Section 28.1.5) . In addition, subject to availability, and on a month-to-month basis, Tenant shall have the right to lease up to an additional twenty (20) unreserved parking passes ( Additional Expansion Parking Passes ), free of charge (subject to the terms of Section 28.1.5 of the Lease). Tenant shall lease the Expansion Parking Passes in accordance with the provisions of Article 28 of the Lease.
10. ROFR . As of the date hereof, Tenants ROFR shall no longer apply to the eleventh (11 th ) floor of the Building (i.e., the Expansion Premises).
11. Option to Early Terminate . As of the date hereof, Section 2.3 of the Lease is amended and restated as follows. Notwithstanding anything to the contrary herein, Tenant shall have the right, which may be exercised in its sole an absolute discretion (but once exercised as provided below shall be binding and irrevocable), to terminate Tenants lease of the Existing Premises, effective as of the last day of the eighty-second (82 nd ) month after the Lease Commencement Date (such early termination date, the Early Termination Date ) by providing written notice (the Early Termination Notice ) to Landlord on or before the last day of the seventy-third (73 rd ) month after the Lease Commencement Date. The Early Termination Notice must be accompanied by a termination payment ( Termination Fee ) equal to $1,000,000.00. Upon the timely receipt of Early Termination Notice and the Termination Fee, the Lease Expiration Date for the Existing Premises only shall become the Early Termination Date and Tenants lease of the Existing Premises will expire on the Early Termination Date for all purposes of the Lease.
12. No Further Modification . Except as set forth in this First Amendment, all of the terms and provisions of the Lease shall apply with respect to the Expansion Premises and shall remain unmodified and in full force and effect.
[signatures follow on next page]
-5- |
1655 GRANT STREET [First Amendment] [AssetMark, Inc.] |
IN WITNESS WHEREOF, this First Amendment has been executed as of the day and year first above written.
LANDLORD | TENANT | |||||||||
SFG OWNER A, LLC a Delaware limited liability company |
ASSETMARK, INC., a California corporation |
|||||||||
By: | Swift Realty Partners, LLC, |
a Delaware limited liability company, its Managing Agent |
By: |
|
By: |
|
Its: | CEO |
Name: Craig Firpo | ||||||||||
Its: Vice President |
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1655 GRANT STREET [First Amendment] [AssetMark, Inc.] |
EXHIBIT A
1655 GRANT STREET
OUTLINE OF EXPANSION PREMISES
EXHIBIT A -1- |
1655 GRANT STREET [First Amendment] [AssetMark, Inc.] |
EXHIBIT B
1655 GRANT STREET
TENANT WORK LETTER
This Tenant Work Letter shall set forth the terms and conditions relating to the construction of the tenant improvements in the Expansion Premises. This Tenant Work Letter is essentially organized chronologically and addresses the issues of the construction of the Expansion Premises, in sequence, as such issues will arise during the actual construction of the Expansion Premises. All references in this Tenant Work Letter to Articles or Sections of this First Amendment shall mean the relevant portion of the First Amendment to which this Tenant Work Letter is attached as Exhibit B and of which this Tenant Work Letter forms a part. All references in this Tenant Work Letter to Articles or Sections of this Lease shall mean the relevant portion of the Lease, as that term is defined in the First Amendment, all references in this Tenant Work Letter to Sections of this Tenant Work Letter shall mean the relevant portion of Sections 1 through 6 of this Tenant Work Letter, and, unless otherwise expressly set forth to the contrary, all references in this Tenant Work Letter to the Premises shall mean the Expansion Premises.
SECTION 1
CONSTRUCTION DRAWINGS FOR THE PREMISES
Following the full execution and delivery of this First Amendment, Tenant shall retain its architect/space planner to prepare a space plan for the Premises which is mutually acceptable to Landlord and Tenant (the Space Plan ). Promptly following the parties approval of the Space Plan, Tenant shall work with its architect to allow the architects to complete the architectural and engineering drawings for the Premises, and the final architectural working drawings in a form which is complete to allow subcontractors to bid on the work and to obtain all applicable permits and in a manner consistent with, and which are a logical extension of, the Space Plan (collectively, the Approved Working Drawings ). Tenant shall construct the tenant improvements in the Premises (the Tenant Improvements ) pursuant to the Approved Working Drawings and in accordance with Building standard methods, materials and finishes described on Schedule 1 attached hereto unless such specific fixtures are called for in the Approved Working Drawings. Tenant shall make no material changes or modifications to the Approved Working Drawings once completed without the prior written consent of Landlord, which consent will not be unreasonably withheld, delayed or conditioned.
EXHIBIT B -1- |
1655 GRANT STREET [First Amendment] [AssetMark, Inc.] |
SECTION 2
TENANT IMPROVEMENT ALLOWANCE
2.1 Tenant Improvement Allowance . Tenant shall be entitled to a one-time tenant improvement allowance (the Tenant Improvement Allowance ), in an amount equal to Nine Hundred Ninety-Nine Thousand Two Hundred Sixty-Three and 52/100 Dollars ($999,263.52) (i.e., $40.94 per rentable square foot multiplied by 24,408 rentable square feet of the Premises), for the costs relating to the initial design and construction of the Tenant Improvements. In no event shall Landlord be obligated to make disbursements pursuant to this Tenant Work Letter in a total amount which exceeds the Tenant Improvement Allowance. In the event that the Tenant Improvement Allowance is not fully disbursed by Landlord to, or on behalf of, Tenant on or before the date which is the first (1 st ) anniversary of Expansion Commencement Date, then such unused amounts shall revert to Landlord, and Tenant shall have no further rights with respect thereto. All Tenant Improvements for which the Tenant Improvement Allowance has been made available shall be deemed Landlords property under the terms of the Lease, as amended.
2.2 Disbursement of the Tenant Improvement Allowance . Except as otherwise set forth in this Tenant Work Letter, the Tenant Improvement Allowance shall be disbursed by Landlord (each of which disbursements shall be made pursuant to Landlords disbursement process described at 2.3 below) only for the following items and costs (collectively, the Tenant Improvement Allowance Items ):
2.2.1 Payment of the fees of Tenants architect and engineers, and the cost of documents and materials supplied by, Tenants consultants in connection with the preparation and review of the Space Plan and the Approved Working Drawings;
2.2.2 The payment of plan check, permit and license fees relating to construction of the Tenant Improvements;
2.2.3 The cost of construction of the Tenant Improvements, including, without limitation, testing and inspection costs, and contractors fees and general conditions;
2.2.4 The cost of any changes in the base, shell and core when such changes are required by the Approved Working Drawings (including if such changes are due to the fact that such work is prepared on an unoccupied basis), such cost to include all direct architectural and/or engineering fees and expenses incurred in connection therewith;
2.2.5 The cost of any changes to the Approved Working Drawings or Tenant Improvements required by all applicable building codes (the Code );
2.2.6 The cost of connection of the Premises to the Buildings energy management systems;
2.2.7 The cost of the Landlord Supervision Fee, as that term is defined below;
EXHIBIT B -2- |
1655 GRANT STREET [First Amendment] [AssetMark, Inc.] |
2.2.8 Sales and use taxes and Title 24 fees; and
2.2.9 All other costs to be expended in connection with the construction of the Tenant Improvements.
Tenant shall supervise and manage the construction of the Tenant Improvements. In recognition of the support being offered by Landlord and engineers employed by Landlord who will assist with matters ancillary to the Tenant Improvements, Tenant shall pay a construction supervision and management fee (the Landlord Supervision Fee ) to Landlord in an amount equal to two percent (2%) of the Tenant Improvement Allowance.
2.3 Landlords Disbursement Process . Tenant shall be directly invoiced and be responsible for payment of invoices pursuant to the contractual relationships Tenant has entered into with architects, the general contractor and structural engineers. Tenant shall forward each invoice to Landlord (by email to Willard Lund - lund@swiftrp.com and Elyse Cartmell - cartmell@swiftrp.com ), and Landlord shall reimburse Tenant within thirty (30) days of receipt of each invoice, up to the Tenant Improvement Allowance, less the Landlord Supervision Fee (ie $999,263.52 less $19,985.27).
2.4 Core Upgrade . In addition to the Tenant Improvement Allowance, Landlord shall reimburse Tenant for the costs associated with the following upgrades:
2.4.1: Upgraded lighting in the elevator lobby (to the current standard on the 9 th and 10 th floors);
2.4.2: Reconfiguration of the womens and mens rest rooms, to meet ADA compliancy requirements; and
2.4.3: Eight replacement toilets with water saving dual function handles (to the current standard in the 9 th and 10 th floor restrooms).
SECTION 3
CONTRACTORS WARRANTIES AND GUARANTIES
Intentionally omitted.
SECTION 4
TENANTS COVENANTS
Tenant hereby indemnifies Landlord for any loss, claims, damages or delays arising from the actions of Tenants space planner/architect (to the extent Tenant, as opposed to Landlord, engages any such span planner or architect) on the Premises or in the Building. In addition, immediately after the completion of the Premises, Tenant shall have prepared and delivered to the Building a copy of the record set of plans and specifications (including all working drawings) for the Tenant Improvements.
EXHIBIT B -3- |
1655 GRANT STREET [First Amendment] [AssetMark, Inc.] |
SECTION 5
MISCELLANEOUS
5.1 Tenants Representative . Tenant has designated Erich Elleson as its sole representative with respect to the matters set forth in this Tenant Work Letter, who, until further notice to Landlord, shall have full authority and responsibility to act on behalf of the Tenant as required in this Tenant Work Letter.
5.2 Landlords Representative . Landlord has designated Willard Lund as its sole representative with respect to the matters set forth in this Tenant Work Letter, who, until further notice to Tenant, shall have full authority and responsibility to act on behalf of the Landlord as required in this Tenant Work Letter.
5.3 Time of the Essence in This Tenant Work Letter . Unless otherwise indicated, all references herein to a number of days shall mean and refer to calendar days. In all instances where Tenant is required to approve or deliver an item, if no written notice of approval is given or the item is not delivered within the stated time period, at Landlords sole option, at the end of such period the item shall automatically be deemed approved or delivered by Tenant and the next succeeding time period shall commence.
5.4 Tenants Lease Default . Notwithstanding any provision to the contrary contained in this Lease, if an Event of Default as described in Section 19.1 of the Lease, or a default by Tenant under this Tenant Work Letter, has occurred at any time on or before the completion of the Premises, then (i) in addition to all other rights and remedies granted to Landlord pursuant to this Lease, Landlord shall have the right to cause Contractor to cease the construction of the Premises, and (ii) all other obligations of Landlord under the terms of this Tenant Work Letter shall be forgiven until such time as such default is cured pursuant to the terms of this Lease (in which case, Tenant shall be responsible for any delay in the completion of the Premises caused by such inaction by Landlord).
EXHIBIT B -4- |
1655 GRANT STREET [First Amendment] [AssetMark, Inc.] |
Schedule 1 to Exhibit B
Building Standard Specifications
SWIFT PLAZA
1655 GRANT STREET
BUILDING STANDARD SPECIFICATIONS
NOTE: THIS LIST IS A GUIDLINE ONLY AND SOME PRODUCTS AND/OR EQUIPMENT ARE STILL BEING VERIFIED ; SPECIFICATIONS MAY CHANGE FROM TIME TO TIME, OR AN EQUIVALENT PRODUCT MAY BE USED, AT LANDLORDS SOLE DISCRETION; VERIFY ALL MATERIALS WITH THE BUILDING ENGINEER PRIOR TO COMMENCEMENT OF ANY WORK
OFFICE FINISHES
CARPET | TANDUS / INLINE (04122) or Shaw Cost Equivalent | |
PAINT | KELLY MOORE | |
BASE | BURKE | |
VCT | MANNINGTON OR Armstrong - Standard Excelon Cost Equivalent | |
LAMINATE |
WILSONART | |
ELECTRICAL | ||
FIXTURE & LAMPS: |
GE - LUMINATION LED LUMINAIRES BT22 DIMMABLE SERIES 2x2 TROFFER - LED MODULE |
|
BALLAST: | 277 ELECTRONIC BALLAST | |
WHIP SYSTEM: | ||
LIGHT SENSORS: | ||
RELAY PACK: | ||
EXIT LIGHTS: | LITHONIA - EDG (Surface mounted LED edge-lit) | |
WATT METER: | REPLACE WITH LIKE | |
LIFE SAFETY | ||
PULL STATION: | SERVICED & MONITORED BY HONEYWELL | |
STROBE: | SERVICED & MONITORED BY HONEYWELL | |
SPEAKER: | SERVICED & MONITORED BY HONEYWELL | |
FIRE BELL: | SERVICED & MONITORED BY HONEYWELL |
1 of 3 | Building Standards REVISED 4 8 15 | |||
Schedule 2 to Exhibit B -1- |
1655 GRANT STREET [First Amendment] [AssetMark, Inc.] |
2 of 3 | Building Standards REVISED 4 8 15 | |||
Schedule 2 to Exhibit B -2- |
1655 GRANT STREET [First Amendment] [AssetMark, Inc.] |
RESTROOMS | ||
SINKS: | MATCH EXISTING | |
FAUCETS: |
SLOAN OPTIMA SYSTEMS - Sensor Operated Faucet (EBF615-1213) |
|
SOAP DISP: | AUTOSOAP - Automatic soap system (MSC#000042) | |
PAPER TOWEL DISP: | GEORGIA PACIFIC ENMOTION | |
SEAT COVER DISP: | REPLACE WITH LIKE | |
TOILET PAPER DISP: | GEORGIA PACIFIC ENMOTION | |
FLUSH KIT: |
SLOAN DUAL-FLUSH FLUSHOMETER (WES-111 - TOILET) SLOAN ROYAL MODEL FLUSHMETER (186-HEU - URINAL) |
|
TOILET: | SLOAN ST-2059-A UNIVERSAL CLOSET | |
URINAL: | SLOAN SU-7009-A UNIVERSAL HIGH EFFICIENCY URINAL | |
PARTITIONS: | REPLACE WITH LIKE | |
PLUMBING: | ALL copper pipe and fittings for plumbing fixtures to be plumbed in type L Copper |
3 of 3 | Building Standards REVISED 4 8 15 | |||
Schedule 2 to Exhibit B -3- |
1655 GRANT STREET [First Amendment] [AssetMark, Inc.] |
SECOND AMENDMENT TO OFFICE LEASE
This SECOND AMENDMENT TO OFFICE LEASE (this Second Amendment ) is made and entered into as of the 14 th day of March, 2018 by and between SFG OWNER A, LLC, a Delaware limited liability company ( Landlord ), and ASSETMARK, INC., a California corporation ( Tenant ).
R E C I T A L S :
A. Landlord and Tenant (formerly known as Genworth Financial Wealth Management, Inc., a California corporation) entered into that certain Office Lease dated May 29, 2013 (the Office Lease ) , as amended by that certain First Amendment to Office Lease dated May 13, 2015 (the First Amendment ) , whereby Landlord leased to Tenant and Tenant leased from Landlord those certain premises consisting of a total of 72,536 rentable square feet ( Premises ) commonly known as Suites 900, 1000 and 1100 and located on the ninth (9 th ), tenth (10 th ) and eleventh (11 th ) floors, respectively, of that certain office building located at 1655 Grant Street, Concord, California ( Building ). The Office Lease and the First Amendment are, collectively, the Lease .
B. Landlord and Tenant desire to amend the Lease as hereinafter provided.
A G R E E M E N T :
NOW, THEREFORE, in consideration of the foregoing recitals (which are incorporated herein by reference) and the mutual covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:
1. Capitalized Terms . All capitalized terms when used herein shall have the same meaning as is given such terms in the Lease unless expressly superseded by the terms of this Second Amendment.
2. Landlord Contribution to Tenants Furniture . Landlord hereby agrees to a one time contribution of $7,000.00 (the Landlord Furniture Contribution ) towards the purchase of chairs and accompanying storage carts to be procured by Tenant for use during certain all-employee meetings to be held as a part of Tenants business operations. In connection therewith, Landlord hereby agrees to reimburse Tenant up to the Landlord Furniture Contribution within thirty (30) days of Landlords receipt of invoices marked paid, or other evidence of the amounts incurred and actually paid by Tenant in connection with the purchase of such chairs and storage carts, as reasonably requested by Landlord.
3. Lease Modification . Effective as of the date of this Second Amendment, Section 29.34 of the Office Lease is hereby deleted in its entirety and replaced with the following:
29.34 Conference Room . The first floor of the Building currently contains a conference center (the Conference Center ). To the extent that no other tenant in the Building holds exclusive or superior rights to the use of such Conference Center as of the date of this Lease, Tenant shall be allowed to access and use the Conference Center, provided that Tenant will be required to (i) schedule use of the Conference Center with Landlords property manager or other designated representative and (ii) abide by such reasonable rules and procedures as Landlord may from time to time adopt with respect to use of the Conference Center. In the event Tenant has completely built out the 11 th Floor with private offices and cubicles such that there is no remaining space for an all-employee meeting, and upon reasonable written notice by Tenant, Landlord shall provide Tenant with conference space for Tenants all-employee meetings of up to 200 people, within the Project or within a reasonable distance from the Project. To the extent such conference space is provided within the Project, Tenant shall supply
EXHIBIT A -1- |
1655 GRANT STREET [Second Amendment] [AssetMark, Inc.] |
chairs for the meeting at no cost to Landlord. To the extent such conference space is provided outside of the Project, the provision of such space shall be at Landlords cost; provided that such all-employee meetings do not occur more frequently than five (5) times per calendar year (and Tenant shall be responsible for the costs of all-employee meetings occurring more frequently).
4. California Accessibility Disclosure . For purposes of Section 1938 of the California Civil Code, Landlord hereby discloses to Tenant, and Tenant hereby acknowledges, that the Premises has not undergone inspection by a Certified Access Specialist (CASp). As required by Section 1938(e) of the California Civil Code, Landlord hereby states as follows: A Certified Access Specialist (CASp) can inspect the subject premises and determine whether the subject premises comply with all of the applicable construction-related accessibility standards under state law. Although state law does not require a CASp inspection of the subject premises, the commercial property owner or lessor may not prohibit the lessee or tenant from obtaining a CASp inspection of the subject premises for the occupancy or potential occupancy of the lessee or tenant, if requested by the lessee or tenant. The parties shall mutually agree on the arrangements for the time and manner of the CASp inspection, the payment of the fee for the CASp inspection, and the cost of making any repairs necessary to correct violations of construction-related accessibility standards within the premises. In furtherance of the foregoing, Landlord and Tenant hereby agree as follows: (a) any CASp inspection requested by Tenant shall be conducted, at Tenants sole cost and expense, by a CASp designated by Landlord, subject to Landlords reasonable rules and requirements; (b) Tenant, at its sole cost and expense, shall be responsible for making any improvements or repairs within the Premises to correct violations of construction-related accessibility standards; and (c) if anything done by or for Tenant in its use or occupancy of the Premises shall require any improvements or repairs to the Building or Project (outside the Premises) to correct violations of construction-related accessibility standards, then Tenant shall reimburse Landlord upon demand, as Additional Rent, for the cost to Landlord of performing such improvements or repairs.
5. No Broker . Landlord and Tenant hereby warrant to each other that they have had no dealings with any real estate broker or agent in connection with the negotiation of this Second Amendment and that they know of no real estate broker or agent who is entitled to a commission in connection with this Second Amendment. Each party agrees to indemnify and defend the other party against and hold the other party harmless from any and all claims, demands, losses, liabilities, lawsuits, judgments, and costs and expenses (including, without limitation, reasonable attorneys fees) with respect to any leasing commission or equivalent compensation alleged to be owing on account of the indemnifying partys dealings with any real estate broker or agent. The terms of this Section 6 shall survive the expiration or earlier termination of the term of the Lease, as hereby amended.
6. No Further Modification; Lease in Full Force and Effect . Except as set forth in this Second Amendment, all of the terms and provisions of the Lease are hereby ratified and confirmed and shall remain unmodified and in full force and effect. This Second Amendment contains the entire understanding between the parties with respect to the matters contained herein. In the event of any conflict between the terms and conditions of the Lease and the terms and conditions of this Second Amendment, the terms and conditions of this Second Amendment shall prevail. Landlord and Tenant acknowledge and agree that to each partys actual knowledge, neither party is in default or violation of any covenant, provision, obligation, agreement or condition contained in the Lease. No representations, warranties, covenants or agreements have been made concerning or affecting the subject matter of this Second Amendment, except as are contained herein and in the Lease. This Second Amendment may not be changed orally, but only by an agreement in writing signed by the party against whom enforcement of any waiver, change or modification or discharge is sought.
[signatures contained on following page]
IN WITNESS WHEREOF, this Second Amendment has been executed as of the day and year first written above.
LANDLORD | TENANT | |||||||||
SFG OWNER A, LLC | ASSETMARK, INC., | |||||||||
a Delaware limited liability company | a California corporation | |||||||||
By: | Swift Realty Partners, LLC, | By: |
|
|||||||
a Delaware limited liability company, | Its: | CFO, EVP | ||||||||
its Managing Agent | ||||||||||
By: |
|
|||||||||
Name: Craig Firpo | ||||||||||
Its: Vice President |
Exhibit 10.2
CREDIT AGREEMENT
dated as of
November 14, 2018,
among
ASSETMARK FINANCIAL HOLDINGS, INC.,
as Borrower,
ASSETMARK HOLDINGS LLC,
as Holdings,
THE LENDERS PARTY HERETO
and
CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH,
as Administrative Agent and Collateral Agent
CREDIT SUISSE LOAN FUNDING LLC,
as Sole Lead Arranger and Bookrunner
TABLE OF CONTENTS
Page | ||||||
ARTICLE I | ||||||
DEFINITIONS | ||||||
Section 1.01 |
Defined Terms | 1 | ||||
Section 1.02 |
Terms Generally | 49 | ||||
Section 1.03 |
Pro Forma and Other Calculations | 49 | ||||
Section 1.04 |
Classification of Loans and Borrowings | 52 | ||||
Section 1.05 |
Divisions | 52 | ||||
ARTICLE II | ||||||
THE CREDITS | ||||||
Section 2.01 |
Commitments | 52 | ||||
Section 2.02 |
Loans | 53 | ||||
Section 2.03 |
Borrowing Procedure | 54 | ||||
Section 2.04 |
Evidence of Debt; Repayment of Loans | 55 | ||||
Section 2.05 |
Fees | 56 | ||||
Section 2.06 |
Interest on Loans | 56 | ||||
Section 2.07 |
Default Interest | 57 | ||||
Section 2.08 |
Alternate Rate of Interest | 57 | ||||
Section 2.09 |
Termination and Reduction of Commitments | 58 | ||||
Section 2.10 |
Conversion and Continuation of Borrowings | 59 | ||||
Section 2.11 |
Repayment of Term Borrowings | 60 | ||||
Section 2.12 |
Optional Prepayment | 61 | ||||
Section 2.13 |
Mandatory Prepayments | 64 | ||||
Section 2.14 |
Reserve Requirements; Change in Circumstances | 67 | ||||
Section 2.15 |
Change in Legality | 68 | ||||
Section 2.16 |
Breakage | 69 | ||||
Section 2.17 |
Pro Rata Treatment | 69 | ||||
Section 2.18 |
Sharing of Setoffs | 70 | ||||
Section 2.19 |
Payments | 70 | ||||
Section 2.20 |
Taxes | 71 | ||||
Section 2.21 |
Assignment of Commitments Under Certain Circumstances; Duty to Mitigate | 75 | ||||
Section 2.22 |
Letters of Credit | 76 | ||||
Section 2.23 |
Incremental Term Loans and Incremental Revolving Credit Commitments | 81 | ||||
Section 2.24 |
[Intentionally Omitted] | 87 | ||||
Section 2.25 |
Loan Modification Offers | 87 | ||||
Section 2.26 |
Defaulting Lenders | 88 |
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ARTICLE III | ||||||
REPRESENTATIONS AND WARRANTIES | ||||||
Section 3.01 |
Organization; Powers | 89 | ||||
Section 3.02 |
Authorization | 89 | ||||
Section 3.03 |
Enforceability | 90 | ||||
Section 3.04 |
Financial Statements | 90 | ||||
Section 3.05 |
No Material Adverse Change | 90 | ||||
Section 3.06 |
Title to Properties; Possession Under Leases | 90 | ||||
Section 3.07 |
Subsidiaries | 91 | ||||
Section 3.08 |
Litigation; Compliance with Laws | 91 | ||||
Section 3.09 |
Agreements | 91 | ||||
Section 3.10 |
Federal Reserve Regulations | 92 | ||||
Section 3.11 |
Investment Company Act | 92 | ||||
Section 3.12 |
Tax Returns | 92 | ||||
Section 3.13 |
No Material Misstatements; Beneficial Ownership Certification | 92 | ||||
Section 3.14 |
Employee Benefit Plans | 93 | ||||
Section 3.15 |
Environmental Matters | 93 | ||||
Section 3.16 |
Security Documents | 93 | ||||
Section 3.17 |
Intellectual Property; Licenses, etc | 94 | ||||
Section 3.18 |
Labor Matters | 94 | ||||
Section 3.19 |
Solvency | 95 | ||||
Section 3.20 |
Sanctioned Persons; PATRIOT Act; FCPA | 95 | ||||
Section 3.21 |
Insurance | 96 | ||||
Section 3.22 |
Use of Proceeds | 96 | ||||
ARTICLE IV | ||||||
CONDITIONS OF LENDING | ||||||
Section 4.01 |
All Credit Events | 96 | ||||
Section 4.02 |
First Credit Event | 97 | ||||
ARTICLE V | ||||||
AFFIRMATIVE COVENANTS | ||||||
Section 5.01 |
Existence; Compliance with Laws; Businesses and Properties | 100 | ||||
Section 5.02 |
Insurance | 100 | ||||
Section 5.03 |
Obligations and Taxes | 101 | ||||
Section 5.04 |
Financial Statements, Reports, etc | 102 | ||||
Section 5.05 |
Notices | 104 | ||||
Section 5.06 |
Information Regarding Collateral | 104 | ||||
Section 5.07 |
Maintaining Records; Access to Properties and Inspections; Maintenance of Ratings | 105 | ||||
Section 5.08 |
Use of Proceeds | 105 |
iii
Section 5.09 |
Compliance with Environmental Laws | 105 | ||||
Section 5.10 |
Further Assurances | 106 | ||||
Section 5.11 |
Post-Closing Obligations | 107 | ||||
Section 5.12 |
Quarterly Lender Calls | 107 | ||||
Section 5.13 |
Designation of Subsidiaries | 107 | ||||
ARTICLE VI | ||||||
NEGATIVE COVENANTS | ||||||
Section 6.01 |
Indebtedness | 108 | ||||
Section 6.02 |
Liens | 111 | ||||
Section 6.03 |
Sale and Lease-Back Transactions | 114 | ||||
Section 6.04 |
Investments | 114 | ||||
Section 6.05 |
Mergers, Consolidations and Sales of Assets | 117 | ||||
Section 6.06 |
Restricted Payments; Restrictive Agreements | 119 | ||||
Section 6.07 |
Transactions with Affiliates | 121 | ||||
Section 6.08 |
Business of Holdings, the Borrower and the Other Subsidiaries | 121 | ||||
Section 6.09 |
Other Indebtedness and Agreements | 122 | ||||
Section 6.10 |
Maximum Total Leverage Ratio | 123 | ||||
Section 6.11 |
Fiscal Year | 123 | ||||
ARTICLE VII | ||||||
EVENTS OF DEFAULT | ||||||
Section 7.01 |
Event of Default | 124 | ||||
Section 7.02 |
Equity Cure | 127 | ||||
ARTICLE VIII | ||||||
AGENCY | ||||||
Section 8.01 |
Appointment and Authority | 128 | ||||
Section 8.02 |
Rights as a Lender | 129 | ||||
Section 8.03 |
Exculpatory Provisions | 129 | ||||
Section 8.04 |
Reliance by Agents | 130 | ||||
Section 8.05 |
Delegation of Duties | 130 | ||||
Section 8.06 |
Resignation of Agents | 130 | ||||
Section 8.07 |
Non-Reliance on Administrative Agent and Other Lenders | 131 | ||||
Section 8.08 |
No Other Duties, etc | 132 | ||||
Section 8.09 |
Administrative Agent May File Proofs of Claim | 132 | ||||
Section 8.10 |
Collateral and Guaranty Matters | 132 | ||||
Section 8.11 |
Certain ERISA Matters | 133 | ||||
Section 8.12 |
Intercreditor Agreements | 134 |
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ARTICLE IX | ||||||
MISCELLANEOUS | ||||||
Section 9.01 |
Notices; Electronic Communications | 134 | ||||
Section 9.02 |
Survival of Agreement | 138 | ||||
Section 9.03 |
Binding Effect | 138 | ||||
Section 9.04 |
Successors and Assigns | 138 | ||||
Section 9.05 |
Expenses; Indemnity; Damage Waivers | 144 | ||||
Section 9.06 |
Right of Setoff | 146 | ||||
Section 9.07 |
Applicable Law | 146 | ||||
Section 9.08 |
Waivers; Amendments | 146 | ||||
Section 9.09 |
Interest Rate Limitation | 151 | ||||
Section 9.10 |
Entire Agreement | 152 | ||||
Section 9.11 |
WAIVER OF JURY TRIAL | 152 | ||||
Section 9.12 |
Severability | 152 | ||||
Section 9.13 |
Counterparts; Electronic Execution | 153 | ||||
Section 9.14 |
Headings | 153 | ||||
Section 9.15 |
Jurisdiction; Consent to Service of Process | 153 | ||||
Section 9.16 |
Confidentiality | 154 | ||||
Section 9.17 |
Lender Action | 154 | ||||
Section 9.18 |
USA PATRIOT Act Notice | 155 | ||||
Section 9.19 |
Release of Collateral and Guarantees | 155 | ||||
Section 9.20 |
Acknowledgement and Consent to Bail-In of EEA Financial Institutions | 156 |
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SCHEDULES
Schedule 1.01(a) | - | Mortgaged Property | ||
Schedule 2.01 | - | Lenders and Commitments | ||
Schedule 3.07 | - | Subsidiaries | ||
Schedule 3.08 | - | Litigation | ||
Schedule 3.16(a) | - | UCC Filing Offices | ||
Schedule 3.16(c) | - | Mortgage Filing Offices | ||
Schedule 5.11 | - | Post-Closing Obligations | ||
Schedule 6.01 | - | Existing Indebtedness | ||
Schedule 6.02 | - | Existing Liens | ||
Schedule 6.04 | - | Existing Investments | ||
Schedule 6.07 | - | Existing Contracts with Affiliates |
EXHIBITS
Exhibit A | - | Form of Administrative Questionnaire | ||
Exhibit B-1 | - | Form of Assignment and Acceptance | ||
Exhibit B-2 | - | Form of Affiliated Lender Assignment and Assumption | ||
Exhibit C | - | Form of Borrowing Request | ||
Exhibit D | - | Form of Mortgage | ||
Exhibit E-1 | - | Form of Term Promissory Note | ||
Exhibit E-2 | - | Form of Revolving Promissory Note | ||
Exhibit F-1 | - | Form of U.S. Tax Compliance Certificate | ||
Exhibit F-2 | - | Form of U.S. Tax Compliance Certificate | ||
Exhibit F-3 | - | Form of U.S. Tax Compliance Certificate | ||
Exhibit F-4 | - | Form of U.S. Tax Compliance Certificate | ||
Exhibit G | - | Form of Solvency Certificate | ||
Exhibit H | - | Form of Compliance Certificate |
vi
CREDIT AGREEMENT dated as of November 14, 2018 (this Agreement ), among ASSETMARK FINANCIAL HOLDINGS, INC., a Delaware corporation (the Borrower ), ASSETMARK HOLDINGS LLC, a Delaware limited liability company ( Holdings ), the Lenders (such term and each other capitalized term used but not defined in this introductory statement having the meaning given it in Article I) and CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH, as administrative agent (in such capacity, including any successor thereto, the Administrative Agent ) and as collateral agent (in such capacity, including any successor thereto, the Collateral Agent ) for the Lenders.
The Borrower has requested that the Lenders extend credit in the form of (a) Term Loans on the Closing Date in an aggregate principal amount of $250,000,000 (the Term Facility ) and (b) Revolving Loans from time to time after the Closing Date and prior to the Revolving Credit Maturity Date in an aggregate principal amount at any time outstanding not in excess of $20,000,000 (the Revolving Facility ).
The Lenders are willing to extend such credit to the Borrower on the terms and subject to the conditions set forth herein. Accordingly, the parties hereto agree as follows:
ARTICLE I
Definitions
SECTION 1.01 Defined Terms . As used in this Agreement, the following terms shall have the meanings specified below:
ABR , when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Alternate Base Rate.
Acceptable Intercreditor Agreement means an intercreditor agreement the terms of which are (i) market terms governing security arrangements for the sharing of liens or arrangements relating to the distribution of payments, as applicable, at the time the intercreditor agreement is established in light of the type of indebtedness subject thereto or (ii) reasonably satisfactory to the Administrative Agent and the Borrower.
Accepting Lenders shall have the meaning assigned to such term in Section 2.25(a).
Acquired Entity shall have the meaning assigned to such term in Section 6.04(g).
Adjusted LIBO Rate shall mean, with respect to any Eurodollar Borrowing for any Interest Period, an interest rate per annum equal to the product of (a) the LIBO Rate in effect for such Interest Period and (b) Statutory Reserves. Notwithstanding the foregoing, the Adjusted LIBO Rate shall not be less than 0.00%.
Adjustment Date means the date of delivery of financial statements required to be delivered pursuant to Section 5.04(a) or Section 5.04(b), as applicable.
1
Administrative Agent shall have the meaning assigned to such term in the introductory statement hereto.
Administrative Agent Fees shall have the meaning assigned to such term in Section 2.05(b).
Administrative Questionnaire shall mean an Administrative Questionnaire in the form of Exhibit A, or such other form as may be supplied from time to time by the Administrative Agent.
Affected Class shall have the meaning assigned to such term in Section 2.25(a).
Affiliate shall mean, when used with respect to a specified person, another person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the person specified.
Affiliated Lender shall mean Holdings, the Borrower or any Subsidiary of the Borrower.
Affiliated Lender Assignment and Assumption means an assignment and assumption entered into by a Lender and an Affiliated Lender (pursuant to the terms and conditions of Section 2.12 and Section 9.04, as applicable) and accepted by the Administrative Agent in the form of Exhibit B-2 or any other form approved by the Administrative Agent and the Borrower.
Agent Parties shall have the meaning assigned to such term in Section 9.01(g).
Agents shall have the meaning assigned to such term in Section 8.01.
Aggregate Revolving Credit Exposure shall mean the sum of the Revolving Credit Exposures of all the Revolving Credit Lenders.
Agreement shall have the meaning assigned to such term in the introductory statement.
Agreement Value shall mean, for each Hedging Agreement, on any date of determination, the maximum aggregate amount (giving effect to any netting agreements) that the Borrower or any other Restricted Subsidiary would be required to pay if such Hedging Agreement were terminated on such date.
AHYDO Payment means any mandatory prepayment or redemption pursuant to the terms of any Indebtedness that is intended or designed to cause such Indebtedness not to be treated as an applicable high yield discount obligation within the meaning of Section 163(i) of the Code.
Alternate Base Rate shall mean, for any day (or, if such day is not a Business Day, the immediately preceding Business Day), a rate per annum equal to the greatest of (a) the Prime Rate in effect on such day, (b) the Federal Funds Effective Rate in effect on such day plus 1 ⁄ 2 of 1% per annum, (c) the Adjusted LIBO Rate in effect on such day (or if such day is not a Business Day, the immediately preceding Business Day) for a one-month Interest Period
2
commencing on the second Business Day after such date, plus 1.00% and (d) 1.00% per annum. If the Administrative Agent shall have determined (which determination shall be conclusive absent manifest error) that it is unable to ascertain the Federal Funds Effective Rate for any reason, including the inability or failure of the Administrative Agent to obtain sufficient quotations in accordance with the terms of the definition thereof, the Alternate Base Rate shall be determined without regard to clause (b) of the preceding sentence until the circumstances giving rise to such inability no longer exist. Any change in the Alternate Base Rate due to a change in the Prime Rate, the Federal Funds Effective Rate or the Adjusted LIBO Rate shall be effective on the effective date of such change in the Prime Rate, the Federal Funds Effective Rate or the Adjusted LIBO Rate, as the case may be.
Anticipated Cure Deadline shall have the meaning assigned to such term in Section 7.02(a).
Applicable Discount shall have the meaning assigned to such term in Section 2.12(c).
Applicable Margin shall mean (a) initially, 3.50% with respect to any Eurodollar Loans and 2.50% with respect to any ABR Loans, and (b) following each Adjustment Date, commencing with the Adjustment Date with respect to the fiscal quarter ending March 31, 2019, the applicable percentage specified below based on the First Lien Leverage Ratio as of the last day of the most recent Test Period:
Category |
First Lien Leverage Ratio | Loans | ||
I |
Greater than 2.20 to 1.00 | ABR Loan: 2.50% | ||
Eurodollar Loan: 3.50% | ||||
II |
Less than or equal to 2.20 to 1.00 | ABR Loan: 2.25% | ||
Eurodollar Loan: 3.25% |
The Applicable Margin with respect to Loans shall be adjusted quarterly on a prospective basis on each Adjustment Date based upon the First Lien Leverage Ratio in accordance with the table above; provided , that if financial statements are not delivered when required pursuant to Section 5.04(a) or Section 5.04(b), as applicable, the Applicable Margin with respect to the Loans shall be the percentage set forth above in Category I until the date on which such financial statements are delivered.
Notwithstanding the foregoing, upon completion of a Qualified Public Offering and thereafter, the Applicable Margin with respect to Term Loans shall be the applicable percentage as determined based on the foregoing, minus 0.25%.
Approved Fund shall mean, with respect to any Lender, any person (other than a natural person) that is engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its activities and is administered, advised or managed by (i) such Lender, (ii) an Affiliate of such Lender or (iii) an entity or an Affiliate of an entity that administers, advises or manages such Lender.
3
Arranger shall mean Credit Suisse Loan Funding LLC.
Asset Sale shall mean the sale, transfer or other disposition (by way of merger, casualty, condemnation or otherwise) by the Borrower or any other Restricted Subsidiary to any person other than a Loan Party of (a) any Equity Interests of any of the Subsidiaries (other than directors qualifying shares) or (b) any other assets of the Borrower or any other Restricted Subsidiary, other than, in the case of either (a) or (b), as applicable:
(i) |
inventory, cash and Cash Equivalents disposed of in the ordinary course of business, |
(ii) |
damaged, obsolete, surplus or worn out assets and assets that are no longer useful in the business of the Borrower or its Subsidiaries, |
(iii) |
dispositions between or among Restricted Subsidiaries that are not Loan Parties, |
(iv) |
assets disposed of in transactions constituting Investments permitted under Section 6.04, Restricted Payments permitted under Section 6.06 and/or Liens permitted by Section 6.02, |
(v) |
dispositions made to comply with any order of any Governmental Authority or any applicable law, |
(vi) |
dispositions of Investments in joint ventures to the extent required by, or made pursuant to, buy/sell arrangements between joint venture or similar parties as set forth in the relevant joint venture arrangements or similar binding arrangements, |
(vii) |
dispositions of assets that do not constitute Collateral, in each case, having an aggregate fair market value as determined in good faith by the Borrower of up to $3,000,000, |
(viii) |
dispositions of non-core assets acquired before (but not more than 90 days prior to) or after the Closing Date in connection with any Investment permitted hereunder and that, within 90 days of the date of such Investment (or within 90 days of the Closing Date, in the case of an Investment consummated prior to the Closing Date), are designated in writing to the Administrative Agent as being held for sale and not for the continued operation of the Borrower or any of the other Restricted Subsidiaries or any of their respective businesses, |
(ix) |
dispositions of accounts receivable in the ordinary course of business (including to insurers that have provided insurance as to the collection thereof and any discount or forgiveness thereof) or in connection with the collection or compromise thereof, |
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(x) |
sale, transfer or other disposition of the Equity Interests of an Unrestricted Subsidiary, |
(xi) |
any Qualified Public Offering, |
(xii) |
any undertaking or consummation of any IPO Reorganization Transactions, |
(xiii) |
licenses or sublicenses, in each case in the ordinary course of business and that do not materially interfere with the business of the Borrower and the Restricted Subsidiaries, taken as a whole, |
(xiv) |
the unwinding of any Hedging Agreement pursuant to its terms, and |
(xv) |
any sale, transfer or other disposition or series of related sales, transfers or other dispositions, in each case, having a fair market value (as determined by the Borrower in good faith) not in excess of the greater of (x) $3,000,000 and (y) 3.0% of Consolidated EBITDA as of the last day of the most recently ended Test Period. |
Assignment and Acceptance shall mean an assignment and acceptance entered into by a Lender and an Eligible Assignee, in substantially the form of Exhibit B-1 or such other form as shall be approved by the Administrative Agent.
Auction shall have the meaning assigned to such term in Section 2.12(c).
Auction Amount shall have the meaning assigned to such term in Section 2.12(c).
Auction Notice shall have the meaning assigned to such term in Section 2.12(c).
Available Amount shall mean, at any date, the excess, if any, of
(a)
(i) the Cumulative Retained Excess Cash Flow Amount at such date, plus
(ii) the fair market value (as determined by the Borrower in good faith) of any cash, securities or other property received by Holdings as capital contributions or in respect of issuances of Qualified Capital Stock of Holdings (in each case other than any Specified Equity Contribution), and in each case contributed by Holdings, as common equity to the Borrower, during the period from and including the Business Day immediately following the Closing Date through and including such date, plus
(iii) in the event that the Available Amount has previously been reduced as a result of an Investment made pursuant to Section 6.04(i) in connection with the designation of a Restricted Subsidiary as an Unrestricted Subsidiary, the acquisition of Equity Interests of an Unrestricted Subsidiary or the making of any other Investment, an amount equal to the aggregate amount received by the Borrower or any other Restricted Subsidiary in cash (in each case, except to the
5
extent included in Consolidated EBITDA and, together with any related amounts under clause (iv) below, not in excess of the original investment made using the Available Amount) from (x) the sale (other than to the Borrower or any other Restricted Subsidiary) of any such Equity Interests of any such Unrestricted Subsidiary or any such other Investment, or (y) any dividend or other distribution by any such Unrestricted Subsidiary or received in respect of any such other Investment, or (z) interest, returns of principal, repayments and similar payments by any such Unrestricted Subsidiary or received in respect of any such other Investment, plus
(iv) without duplication of any amounts included in clause (iii) above, in the event that the Available Amount has previously been reduced as a result of an Investment made pursuant to Section 6.04(i) in connection with the designation of a Restricted Subsidiary as an Unrestricted Subsidiary, in the event any such Unrestricted Subsidiary has been re-designated as a Restricted Subsidiary or has been merged, consolidated or amalgamated with or into, or transfers or conveys its assets to, or is liquidated into, the Borrower or any other Restricted Subsidiary, an amount equal to (but not, together with any related amounts under clause (iii) above, in excess of the original investment made using the Available Amount) the fair market value of the investments of the Borrower and the other Restricted Subsidiaries in such Unrestricted Subsidiary at the time of such redesignation, combination or transfer (or of the assets transferred or conveyed, as applicable), plus
(v) the aggregate principal amount of any Indebtedness or Disqualified Stock, in each case, of the Borrower or any other Restricted Subsidiary issued after the Closing Date (other than Indebtedness or such Disqualified Stock issued to the Borrower or any other Restricted Subsidiary), which has been converted into or exchanged for Qualified Capital Stock of the Borrower, Holdings or any parent company of Holdings, together with the fair market value of any Cash Equivalents and the fair market value (as determined by the Borrower in good faith) of any property or assets received by the Borrower or such other Restricted Subsidiary upon such exchange or conversion, in each case, during the period from and including the day immediately following the Closing Date through and including such time, plus
(vi) the amount of any Declined Proceeds, plus
(vii) the greater of (x) $20,000,000 and (y) 22% of Consolidated EBITDA as of the last day of the most recently ended Test Period,
over
(b) the aggregate amounts expended by Holdings, the Borrower and the other Restricted Subsidiaries on or prior to such date to make Investments pursuant to Section 6.04(i), to make Restricted Payments pursuant to Section 6.06(a)(v) or to prepay, redeem, repurchase, retire or otherwise acquire Indebtedness pursuant to Section 6.09(b)(B), in each case during the period from and including the Business Day immediately following the Closing Date through the date of such determination (without taking account of the intended usage of the Available Amount on such date).
6
Bail-In Action means the exercise of any Write-Down and Conversion Powers by the applicable EEA Resolution Authority in respect of any liability of an EEA Financial Institution.
Bail-In Legislation means, with respect to any EEA Member Country implementing Article 55 of Directive 2014/59/EU of the European Parliament and of the Council of the European Union, the implementing law for such EEA Member Country from time to time which is described in the EU Bail-In Legislation Schedule.
Bankruptcy Code shall mean the provisions of Title 11 of the United States Code, 11 U.S.C. § 101 et seq .
Beneficial Ownership Certification shall mean a certification regarding beneficial ownership as required by the Beneficial Ownership Regulation.
Beneficial Ownership Regulation means 31 C.F.R. § 1010.230.
Benefit Plan means any of (a) an employee benefit plan (as defined in ERISA) that is subject to Title I of ERISA, (b) a plan as defined in Section 4975 of the Code or (c) any person whose assets include (for purposes of ERISA Section 3(42) or otherwise for purposes of Title I of ERISA or Section 4975 of the Code) the assets of any such employee benefit plan or plan.
Board shall mean the Board of Governors of the Federal Reserve System of the United States of America.
Borrower shall have the meaning assigned to such term in the introductory statement
hereto.
Borrower Materials shall have the meaning assigned to such term in Section 9.01(g).
Borrowing shall mean Loans of the same Class and Type made, converted or continued on the same date and, in the case of Eurodollar Loans, as to which a single Interest Period is in effect.
Borrowing Request shall mean a request by the Borrower in accordance with the terms of Section 2.03 and substantially in the form of Exhibit C, or such other form as shall be approved by the Administrative Agent.
Breakage Event shall have the meaning assigned to such term in Section 2.16.
Business Day shall mean any day other than a Saturday, Sunday or any other day on which banks in New York City are authorized or required by law to close; provided, however , that when used in connection with a Eurodollar Loan, the term Business Day shall also exclude any day on which banks are not open for dealings in Dollar deposits in the London interbank market.
7
Capital Lease Obligations of any person shall mean the obligations of such person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP; provided , that all obligations of any person that are or would be characterized as an operating lease as determined in accordance with GAAP as in effect on the Closing Date (whether or not such operating lease was in effect on such date) shall continue to be considered an operating lease (and not a capital lease or Capital Lease Obligation) for purposes of this Agreement regardless of any change in GAAP following the Closing Date that would otherwise require such obligation to be recharacterized as a capital lease or Capital Lease Obligation. For purposes of Section 6.02, a Capital Lease Obligation shall be deemed to be secured by a Lien on the property being leased and such property shall be deemed to be owned by the lessee.
Cash Collateralize shall mean to pledge and deposit with or deliver to the Administrative Agent, for the benefit of the Issuing Bank and the Lenders, as collateral for L/C Exposure, cash or, if the Administrative Agent and the Issuing Bank shall agree in their sole discretion, other credit support, in each case pursuant to documentation in form and substance reasonably satisfactory to the Administrative Agent and the Issuing Bank. Cash Collateral and Cash Collateralized shall have meanings correlative to the foregoing and shall include the proceeds of such cash collateral and other credit support.
Cash Equivalents shall mean:
(a) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America (or by any agency thereof to the extent such obligations are backed by the full faith and credit of the United States of America), in each case maturing within one year from the date of issuance thereof;
(b) currencies held from time to time in the ordinary course of business;
(c) investments in commercial paper maturing within 270 days from the date of issuance thereof and having, at such date of acquisition, the highest credit rating obtainable from S&P or from Moodys;
(d) investments in certificates of deposit, bankers acceptances and time deposits maturing within one year from the date of acquisition thereof issued or guaranteed by or placed with, and money market deposit accounts issued or offered by, the Administrative Agent or any domestic office of any commercial bank organized under the laws of the United States of America or any State thereof that has a combined capital and surplus and undivided profits of not less than $500,000,000 and that issues (or the parent of which issues) commercial paper rated at least Prime-2 (or the then equivalent grade) by Moodys or A-2 (or the then equivalent grade) by S&P;
8
(e) fully collateralized repurchase agreements with a term of not more than 30 days for securities described in clause (a) above and entered into with a financial institution satisfying the criteria of clause (d) above;
(f) investments in money market funds within the meaning of Rule 2a-7 of the Investment Company Act of 1940, as amended, substantially all of whose assets are invested in investments of the type described in clauses (a) through (e) above;
(g) securities with average maturities of 24 months or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States of America, by any political subdivision or taxing authority of any such state, commonwealth or territory having an investment grade rating from either S&P or Moodys (or the equivalent thereof);
(h) investments with average maturities of 12 months or less from the date of acquisition in mutual funds rated AAA- (or the equivalent thereof) or better by S&P or Aaa3 (or the equivalent thereof) or better by Moodys; and
(i) investment funds investing substantially all of their assets in securities of the types (including as to credit quality and maturity) described in clauses (a) through (h) above.
CFC shall mean any controlled foreign corporation within the meaning of Section 957, but only if a U.S. Person that is a Loan Party or an Affiliate of a Loan Party is, with respect to such person, a United States shareholder (within the meaning of Section 951(b)) described in Section 951(a)(1). For purposes of this definition, all Section references are to the Code.
Change in Control shall mean the occurrence of any of the following:
(a) prior to a Qualified Public Offering, the Permitted Investors shall fail to beneficially own, directly or indirectly, shares representing at least a majority of the aggregate ordinary voting power represented by the issued and outstanding Equity Interests of the Borrower,
(b) pursuant to or after a Qualified Public Offering, any person or group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act), other than the Permitted Investors (and excluding any employee benefit plan and/or Person acting as the trustee, agent or other fiduciary or administrator thereof), shall beneficially own, directly or indirectly, shares representing more than the greater of (i) 35% of the aggregate ordinary voting power represented by the issued and outstanding Equity Interests of the Borrower and (ii) the percentage of the then-existing aggregate ordinary voting power represented by the issued and outstanding Equity Interests of the Borrower beneficially owned, directly or indirectly, by the Permitted Investors, unless the Permitted Investors have, at such time, the right or the ability by voting power, contract or otherwise to elect or designate for election at least a majority of the board of directors of the Borrower,
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(c) any change in control (or similar event, however denominated) with respect to Holdings, the Borrower or any other Restricted Subsidiary shall occur under and as defined in any indenture or agreement in respect of Material Indebtedness to which Holdings, the Borrower or any other Restricted Subsidiary is a party, or
(d) prior to a Qualified Public Offering, Holdings shall cease to directly own 100% of the issued and outstanding Equity Interests of the Borrower.
Change in Law shall mean the occurrence, after the date of this Agreement, of any of the following: (a) the adoption or taking effect of any law, rule, regulation or treaty, (b) any change in any law, rule, regulation or treaty or in the administration, interpretation, implementation or application thereof by any Governmental Authority or (c) the making or issuance of any request, rule, guideline or directive (whether or not having the force of law) by any Governmental Authority; provided that notwithstanding anything herein to the contrary, (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith and (y) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to be a Change in Law, regardless of the date enacted, adopted or issued.
Charges shall have the meaning assigned to such term in Section 9.09.
Class , when used with respect to (a) any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are Initial Term Loans, Incremental Term Loans of any series established as a separate Class pursuant to Section 2.23, Term Loans of any series established as a separate Class pursuant to Section 2.25 or Section 9.08(d)(i), Initial Revolving Loans, Incremental Revolving Loans of any series established as a separate Class pursuant to Section 2.23 or Revolving Loans of any series established as a separate Class pursuant to Section 2.25 or Section 9.08(d)(ii), (b) any Commitment, refers to whether such Commitment is an Initial Term Loan Commitment, an Initial Revolving Credit Commitment, an Incremental Revolving Credit Commitment of any series established as a separate Class pursuant to Section 2.23, a Revolving Credit Commitment of any series established as a separate Class pursuant to Section 2.25 or Section 9.08(d)(ii), (c) any Lender, refers to whether such Lender has a Loan or Commitment of a particular Class and (d) any Revolving Credit Exposure, refers to whether such Revolving Credit Exposure is attributable to a Revolving Credit Commitment of a particular Class.
Closing Date shall mean November 14, 2018.
Code shall mean the Internal Revenue Code of 1986, as amended.
Collateral shall mean all the Collateral as defined in each Security Document and shall also include the Mortgaged Properties.
Collateral Agent shall have the meaning assigned to such term in the introductory statement hereto.
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Commitment shall mean, with respect to any Lender, such Lenders Revolving Credit Commitment, Term Loan Commitment, Incremental Revolving Credit Commitment and Incremental Term Loan Commitment.
Commitment Fee shall have the meaning assigned to such term in Section 2.05(a).
Commitment Percentage Fee shall mean (a) initially, for any day, 0.50% and (b) following each Adjustment Date, commencing with the Adjustment Date with respect to the fiscal quarter of the Borrower ending March 31, 2019, the applicable percentage specified below based on the First Lien Leverage Ratio.
Category |
First Lien Leverage Ratio |
Commitment Fee Percentage | ||||
I |
Greater than 2.20 to 1.00 | 0.50 | % | |||
II |
Less than or equal to 2.20 to 1.00 | 0.375 | % |
The Commitment Percentage Fee shall be adjusted quarterly on a prospective basis on each Adjustment Date based on the First Lien Leverage Ratio in accordance with the table above; provided that, if financial statements are not delivered when required pursuant to Section 5.04(a) or Section 5.04(b), as applicable, the Commitment Percentage Fee shall be the percentage set forth above in Category I until the date on which such financial statements are delivered.
Communications shall have the meaning assigned to such term in Section 9.01(g)(ii).
Company Competitor shall mean any operating company that is a competitor of the Borrower and/or any of its Subsidiaries.
Competitor Debt Fund Affiliate shall mean, with respect to any Company Competitor or any Affiliate thereof, any debt fund, investment vehicle, regulated bank entity or unregulated lending entity that is (i) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of business and (ii) managed, sponsored or advised by any person that is controlling, controlled by or under common control with the relevant Company Competitor or Affiliate thereof, but only to the extent that no personnel involved with the investment in the relevant Company Competitor makes (or has the right to make or participate with others in making) investment decisions on behalf of, or otherwise cause the direction of the investment policies of, such debt fund, investment vehicle, regulated bank entity or unregulated entity with respect to decisions involving any investment in debt of the Borrower or any of its Subsidiaries.
Compliance Certificate shall mean a compliance certificate of a Financial Officer of the Borrower or Holdings in the form of Exhibit H or another form reasonably acceptable to the Administrative Agent.
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Connection Income Taxes shall mean Other Connection Taxes that are imposed on or measured by net income (however denominated) or that are franchise Taxes or branch profits Taxes.
Consolidated EBITDA shall mean, for any period, Consolidated Net Income for such period plus
(a) without duplication and to the extent deducted in determining such Consolidated Net Income, the sum of:
(i) Consolidated Interest Expense for such period,
(ii) provision for taxes based on income, profits or capital and sales taxes, including federal, foreign, state, franchise, business license, value added, excise and similar taxes paid or accrued during such period (including in respect of repatriated funds),
(iii) all amounts attributable to depreciation and amortization for such period,
(iv) any aggregate net loss during such period arising from the sale, exchange or other disposition of assets outside of the ordinary course of business,
(v) any Public Company Costs,
(vi) any fees and expenses (including any transaction or retention bonus) incurred during such period, or any amortization thereof during such period, in connection with any acquisition or Investment, asset disposition, issuance or repayment of debt, issuance of equity securities, refinancing transaction or amendment or other modification of or waiver or consent relating to any debt instrument (in each case, including Transaction Costs and any such transaction undertaken but not completed),
(vii) up to $6,000,000 in an aggregate amount for any Test Period of unusual or non-recurring charges (including any unusual or non-recurring expenses directly attributable to the implementation of cost savings initiatives), severance, relocation costs, integration and facilities opening costs, retention or completion bonuses, transition costs and costs related to closure/consolidation of facilities and curtailments or modifications to pension and other post-retirement employee benefit plans (including any settlement of pension liabilities) (in each case, other than those referred to in clause (viii) below) in any period incurred during such period; provided that the aggregate cumulative amount for all items added pursuant to this clause (vii) or clause (viii) below shall not exceed, when aggregated with the aggregate amount added to or included in Consolidated EBITDA pursuant to any pro forma adjustments during such period pursuant to clause (ii) of Section 1.03(d), 25.0% of Consolidated EBITDA (giving effect to such adjustments) for such Test Period,
(viii) up to $8,000,000 in an aggregate amount for any Test Period of restructuring charges and expenses for such period; provided that aggregate cumulative amount for all items added pursuant to this clause (viii) and clause (vii) above shall not exceed, when aggregated with the aggregate amount added to or included in Consolidated EBITDA pursuant to any pro forma adjustments during such period pursuant to clause (ii) of Section 1.03(d), 25.0% of Consolidated EBITDA (giving effect to such adjustments) for such Test Period,
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(ix) any non-cash charges or losses that have been deducted in determining Consolidated Net Income for such period in accordance with GAAP, to the extent of such deduction (other than any such non-cash charge or loss in respect of an item that increased Consolidated EBITDA in a prior period that began after the Closing Date and any such non-cash charge or loss that results from the write-down or write-off of current assets),
(x) the amount of any net losses from discontinued operations,
(xi) the amount of any minority interest income consisting of subsidiary income attributable to minority equity interests of third parties in any Subsidiary that is not a Wholly Owned Subsidiary deducted from (and not added back in such period to) Consolidated Net Income,
(xii) any extraordinary losses for such period,
(xiii) stock-based compensation award expenses,
(xiv) any loss attributable to deferred compensation plans or trusts,
(xv) to the extent covered by insurance and actually reimbursed, or if there is reasonable evidence that such amount will in fact be reimbursed by a third party insurer (and only to the extent that such amount is in fact reimbursed) within 180 days of the date of such determination (with a deduction in the applicable future period for any amount so excluded to the extent not so reimbursed within such 180 days), expenses, charges or losses with respect to business interruption (and if such expenses, charges or losses are added to Consolidated Net Income in determining Consolidated EBITDA, such insurance proceeds shall be excluded from Consolidated EBITDA),
(xvi) all costs, fees and expenses of the board of directors of the Borrower and Holdings that are actually reimbursed by the Borrower,
(xvii) charges attributable to, and payments of, legal settlements, fines, judgments or orders, and
(xviii) any net pension or other post-employment benefit costs representing amortization of unrecognized prior service costs, actuarial losses, including amortization of such amounts arising in prior periods, amortization of the unrecognized net obligation (and loss or cost) existing at the date of initial application of FASB Accounting Standards Codification 715, and any other items of a similar nature; and
minus (b) without duplication, and to the extent included in determining such Consolidated Net Income, the sum of:
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(i) all cash payments made during such period on account of reserves, restructuring charges and other non-cash charges added to Consolidated Net Income pursuant to clause (a)(viii) or (a)(ix) above in a previous period,
(ii) any extraordinary gains and all non-cash items of income for such period,
(iii) any aggregate net gain during such period arising from the sale, exchange or other disposition of assets outside of the ordinary course of business,
(iv) the amount of any net gains from discontinued operations,
(v) the amount of any minority interest losses consisting of subsidiary losses attributable to minority equity interests of third parties in any Subsidiary that is not a Wholly Owned Subsidiary added back to (and not deducted in such period from) Consolidated Net Income and
(vi) any gain attributable to deferred compensation plans or trusts, all determined on a consolidated basis in accordance with GAAP;
provided that, for purposes of calculating the First Lien Leverage Ratio and the Total Leverage Ratio, (A) the Consolidated EBITDA of any Acquired Entity acquired by the Borrower or any other Restricted Subsidiary pursuant to a Permitted Acquisition or similar Investment during such period shall, to the extent reasonably determinable on a going concern basis, be included on a pro forma basis for such period (assuming the consummation of such acquisition and the incurrence or assumption of any Indebtedness in connection therewith occurred as of the first day of such period and including the pro forma adjustments described in Section 1.03) and (B) the Consolidated EBITDA attributable to any Asset Sale by the Borrower or any other Restricted Subsidiary during such period shall be excluded for such period (assuming the consummation of such Asset Sale and the repayment of any Indebtedness in connection therewith and including the pro forma adjustments described in Section 1.03 with respect to such period).
Consolidated Interest Expense shall mean, for any period, the sum of (a) the interest expense (including imputed interest expense in respect of Capital Lease Obligations and Synthetic Lease Obligations) of the Borrower and the other Restricted Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP, plus (b) any interest accrued during such period in respect of Indebtedness of the Borrower or any other Restricted Subsidiary that is required to be capitalized rather than included in consolidated interest expense for such period in accordance with GAAP. For purposes of the foregoing, interest expense shall be determined after giving effect to any net payments made or received by the Borrower or any other Restricted Subsidiary with respect to interest rate Hedging Agreements.
Consolidated Net Income shall mean, for any period, the net income or loss of the Borrower and the other Restricted Subsidiaries for such period determined on a consolidated basis in accordance with GAAP; provided that there shall be excluded:
(a) the income of any Restricted Subsidiary (other than the Borrower) to the extent that the declaration or payment of dividends or similar distributions by such Restricted Subsidiary of that income is not at the time permitted by operation of the terms of its charter or any agreement, instrument, judgment, decree, statute, rule or governmental regulation applicable to such Restricted Subsidiary,
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(b) the income or loss of any person accrued prior to the date it becomes a Restricted Subsidiary or is merged into or consolidated with the Borrower or any other Restricted Subsidiary or the date that such persons assets are acquired by the Borrower or any other Restricted Subsidiary,
(c) the income of any person in which any other person (other than the Borrower or any other Restricted Subsidiary that is a Wholly Owned Subsidiary of the Borrower or any director holding qualifying shares in accordance with applicable law) has a joint interest, except to the extent of the amount of dividends or other distributions actually paid to the Borrower or any other Restricted Subsidiary that is a Wholly Owned Subsidiary of the Borrower by such person during such period,
(d) the cumulative effect of a change in accounting principles during such period to the extent included in net income or loss as determined in accordance with GAAP,
(e) any income (loss) for such period attributable to the early extinguishment of Indebtedness, hedging agreements or other derivative instruments and
(f) the effects of acquisition method accounting, including applying acquisition method accounting to inventory, property and equipment, leases, software and other intangible assets and deferred revenue (including deferred costs related thereto and deferred rent) required or permitted by GAAP and related authoritative pronouncements (including the effects of such adjustments pushed down to the Borrower or any other Restricted Subsidiary), as a result of any Permitted Acquisition (or other Investment permitted hereunder) or the amortization or write-off of any amounts thereof.
Control shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a person, whether through the ownership of voting securities, by contract or otherwise, and the terms Controlling and Controlled shall have meanings correlative thereto.
Credit Agreement Refinancing Indebtedness shall mean any refinancings and/or replacements of Indebtedness incurred under Section 6.01(b) (including other Credit Agreement Refinancing Indebtedness); provided that:
(a) the aggregate principal amount of any Credit Agreement Refinancing Indebtedness shall not exceed the aggregate principal amount of the Indebtedness being refinanced or replaced ( plus the amount of accrued interest and premium thereon, underwriting discounts, fees (including upfront fees and original issue discount), commissions and expenses associated therewith);
(b) (x) no Credit Agreement Refinancing Indebtedness may have a final maturity date (or have scheduled commitment reductions) prior to the final maturity date of the relevant Indebtedness being refinanced or replaced at the time of such refinancing or replacement and (y) any Credit Agreement Refinancing Indebtedness that refinances or replaces Term Loans shall not
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have a shorter weighted average life to maturity than the Term Loans being refinanced or replaced at the time of the such refinancing or replacement; provided that the requirements set forth in the foregoing clauses (b)(x) and (b)(y) shall not apply to Credit Agreement Refinancing Indebtedness in the form of one-year bridge loans that are convertible or exchangeable without conditions into other instruments meeting the requirements set forth in the foregoing clauses (b)(x) and (b)(y) (but for the avoidance of doubt, such requirement shall apply to any loans, securities or other debt into which such bridge loans are exchanged or that otherwise replace such bridge loans);
(c) any Credit Agreement Refinancing Indebtedness may be pari passu with or junior to any then-existing Obligations in right of payment and pari passu with or junior to any then-existing Obligations with respect to the Collateral (in which case it shall be subject to an Acceptable Intercreditor Agreement), or be unsecured, and shall be incurred under and pursuant to documentation other than this Agreement; and any such Indebtedness consisting of term loans that are pari passu with the Term Loans in right of payment and secured by the Collateral on a pari passu basis with the Term Loans may participate on a pro rata basis or a less than pro rata basis (but not on a greater than pro rata basis) in any mandatory prepayment in respect of the Initial Term Loans (and any other Term Loans then subject to ratable repayment requirements), in each case as the Borrower and the relevant lender or holder may agree; provided , further , that any Credit Agreement Refinancing Indebtedness that is junior to the Term Loans shall not be entitled to participate ratably in any such mandatory prepayment;
(d) any Credit Agreement Refinancing Indebtedness that is secured may not be secured by any assets other than all or any portion of the Collateral;
(e) any Credit Agreement Refinancing Indebtedness that is guaranteed may not be guaranteed by any person other than one or more Loan Parties;
(f) any Credit Agreement Refinancing Indebtedness may have pricing (including interest, fees and premiums) and, subject to the preceding clause (c), optional prepayment and redemption terms as the Borrower and the lenders or holders providing such Credit Agreement Refinancing Indebtedness may agree;
(g) the other terms and conditions of any Credit Agreement Refinancing Indebtedness (excluding pricing, interest, fees, rate floors, premiums, optional prepayment or redemption terms, security and maturity, subject to preceding paragraphs (a) through (f)) are either (i) no more favorable (taken as a whole) (as reasonably determined by the Borrower) to the lenders or holders providing such Credit Agreement Refinancing Indebtedness than, those applicable to the Indebtedness being refinanced (other than covenants or other provisions applicable only to periods after the later of the Latest Term Maturity Date and the Latest Revolving Maturity Date (in each case, as of the date of incurrence of the relevant Credit Agreement Refinancing Indebtedness)) or (ii) then-current market terms (as reasonably determined by the Borrower) for the applicable type of Indebtedness; and
(h) the commitments in respect of the relevant Indebtedness being refinanced or replaced shall be terminated, and all loans outstanding thereunder and all fees then due and payable in connection therewith shall be paid in full, in each case on the date any Credit Agreement Refinancing Indebtedness is implemented.
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Credit Event shall have the meaning assigned to such term in Section 4.01.
Credit Facilities shall mean the revolving credit, letter of credit and term loan facilities provided for by this Agreement.
Cumulative Retained Excess Cash Flow Amount shall mean, as of any date of determination, for each fiscal year of the Borrower (commencing with the fiscal year ending December 31, 2019) with respect to which a Compliance Certificate has been delivered in connection with the delivery of annual financial statements pursuant to Section 5.04(a), an amount (in no event less than zero) equal to the sum of the Retained Percentage of Excess Cash Flow for all such fiscal years covered by such Compliance Certificates.
Cure Right shall have the meaning assigned to such term in Section 7.02(a).
Current Assets shall mean, at any time, the consolidated current assets (other than cash and Cash Equivalents) of the Borrower and the other Restricted Subsidiaries at such time, but excluding the current portion of deferred tax assets.
Current Liabilities shall mean, at any time, the consolidated current liabilities of the Borrower and the other Restricted Subsidiaries at such time, but excluding, without duplication, (a) the current portion of any long-term Indebtedness, (b) outstanding Revolving Loans and Letters of Credit, (c) the current portion of interest and (d) the current portion of current and deferred income taxes.
Debtor Relief Laws shall mean the Bankruptcy Code of the United States of America, and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief laws of the United States or other applicable jurisdictions from time to time in effect.
Declined Proceeds shall have the meaning in Section 2.13(h).
Declining Lender shall have the meaning in Section 2.13(h).
Default shall mean any event or condition which upon notice, lapse of time or both would constitute an Event of Default.
Defaulting Lender shall mean any Revolving Credit Lender that (a) has failed, within two Business Days of the date required to be funded or paid unless such Lender notifies the Administrative Agent and the Borrower in writing that such failure is the result of such Lenders determination that one or more conditions precedent to funding (each of which conditions precedent, together with any applicable default, shall be specifically identified in such writing) has not been satisfied, (i) to fund any portion of its Loans or participations in Letters of Credit or (ii) to pay to any Loan Party any other amount required to be paid by it hereunder, (b) has notified Holdings, the Borrower, the Administrative Agent, any Issuing Bank or any Lender in writing that it does not intend to comply with any of its funding obligations under this
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Agreement or has made a public statement to the effect that it does not intend to comply with its funding obligations under this Agreement or under other agreements in which it commits to extend credit, (c) has failed, within three Business Days after request by the Administrative Agent, to confirm in writing that it will comply with the terms of this Agreement relating to its obligations to fund prospective Loans or participations in then outstanding Letters of Credit; provided that such Lender shall cease to be a Defaulting Lender pursuant to this clause (c) upon receipt of such written confirmation by the Administrative Agent and the Borrower, (d) has, or has a direct or indirect parent company that has, (i) become the subject of a proceeding under any Debtor Relief Law or (ii) had appointed for it a receiver, custodian, conservator, trustee, administrator, assignee for the benefit of creditors or similar person charged with reorganization or liquidation of its business or assets, including the Federal Deposit Insurance Corporation or any other state or federal regulatory authority acting in such a capacity or (e) has, or has a direct or indirect parent company that has, become the subject of a Bail-In Action; provided that a Lender shall not be a Defaulting Lender solely by virtue of the ownership or acquisition of any equity interest in that Lender or any direct or indirect parent company thereof by a Governmental Authority so long as such ownership interest does not result in or provide such Lender with immunity from the jurisdiction of courts within the United States or from the enforcement of judgments or writs of attachment on its assets or permit such Lender (or such Governmental Authority) to reject, repudiate, disavow or disaffirm any contracts or agreements made with such Lender. Any determination by the Administrative Agent that a Lender is a Defaulting Lender under clauses (a) through (e) above shall be conclusive and binding absent manifest error, and such Lender shall be deemed to be a Defaulting Lender upon delivery of written notice of such determination to the Borrower and each Lender.
Designated Non-Cash Consideration shall mean the fair market value of non-cash consideration received by the Borrower or any other Restricted Subsidiary in connection with an Asset Sale pursuant to Section 6.05(b) that is designated as Designated Non-Cash Consideration pursuant to a certificate of a Financial Officer of the Borrower, setting forth the basis of such valuation less the amount equal to the cash or Cash Equivalents received in connection with a subsequent sale or other disposition of the Designated Non-Cash Consideration.
Discount Range shall have the meaning assigned to such term in Section 2.12(c).
Disqualified Institutions shall mean (a) those certain banks, financial institutions and other institutional lenders, in each case, as have been previously identified in writing to the Arranger on or prior to the initial syndication of the Credit Facilities prior to the Closing Date, (b) any Company Competitor that is identified in writing (i) to the Arranger on or prior to the Closing Date or (ii) to the Administrative Agent on or after the Closing Date and (c) any Affiliate of any Person described in clause (a) or (b) above (other than, with respect to clause (b) above, any Competitor Debt Fund Affiliate) that is (i) either identified in writing to the Administrative Agent or (ii) readily identifiable on the basis of such Affiliates name; provided that any Person that is a Lender or Participant and subsequently becomes a Disqualified Institution (but was not a Disqualified Institution at the time it became a Lender or a Participant, as applicable) shall be deemed to not be a Disqualified Institution hereunder (in the case of any such Participant that is not a Lender, solely with respect to the participations held by such Participant).
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Disqualified Stock shall mean any Equity Interest that, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event, (a) matures (excluding any maturity as the result of an optional redemption by the issuer thereof) or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable at the option of the holder thereof, in whole or in part, or requires the payment of any cash dividend or any other scheduled payment constituting a return of capital, in each case (x) at any time on or prior to the 91st day following the Latest Maturity Date in effect at the time such Equity Interest is issued and (y) in the case of any such redeemable Equity Interests, redeemable other than for Equity Interests not constituting Disqualified Stock and cash for fractional shares, or (b) is convertible into or exchangeable (other than at the sole option of the issuer thereof) for (i) debt securities or (ii) any Equity Interest referred to in clause (a) above, in each case at any time prior to the 91st day following the Latest Maturity Date in effect at the time such Equity Interest is issued; provided , however , that (i) an Equity Interest in any Person that would not constitute Disqualified Stock but for terms thereof giving holders thereof the right to require such Person to redeem or purchase such Equity Interest upon the occurrence of an asset sale or a change of control shall not constitute a Disqualified Stock if any such requirement becomes operative only after repayment in full of all the Loans and all other Loan Document Obligations that are accrued and payable, the cancellation or expiration of all Letters of Credit and the termination of the Commitments and (ii) if an Equity Interest in any Person is issued pursuant to any plan for the benefit of current or former officers, directors, employees or consultants of Holdings (or any direct or indirect parent thereof) or any of its Subsidiaries or by any such plan to such officers, directors, employees or consultants, such Equity Interest shall not constitute Disqualified Stock solely because it may be required to be repurchased by Holdings (or any direct or indirect parent company thereof) or any of its Subsidiaries in order to satisfy applicable statutory or regulatory obligations of such Person.
Disregarded Domestic Person shall mean any Domestic Subsidiary that holds no material assets other than equity (including any debt instrument treated as equity for U.S. federal income tax purposes) of one or more CFCs.
Dollars or $ shall mean lawful money of the United States of America.
Domestic Subsidiaries shall mean all Subsidiaries incorporated or organized under the laws of the United States of America, any State thereof or the District of Columbia (each individually a Domestic Subsidiary ).
ECF Payment Amount shall have the meaning assigned to such term in Section 2.13(c).
ECF Percentage shall mean 50% (or, if the First Lien Leverage Ratio as of the last day of the applicable fiscal year of the Borrower shall have been (x) equal to or less than 2.20 to 1.00 but greater than 1.70 to 1.00, 25% or (y) equal to or less than 1.70 to 1.00, 0%).
EEA Financial Institution means (a) any credit institution or investment firm established in any EEA Member Country which is subject to the supervision of an EEA Resolution Authority, (b) any entity established in an EEA Member Country which is a parent of an institution described in clause (a) of this definition, or (c) any financial institution established in an EEA Member Country which is a subsidiary of an institution described in clauses (a) or (b) of this definition and is subject to consolidated supervision with its parent;
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EEA Member Country means any of the member states of the European Union, Iceland, Liechtenstein, and Norway.
EEA Resolution Authority means any public administrative authority or any person entrusted with public administrative authority of any EEA Member Country (including any delegee) having responsibility for the resolution of any EEA Financial Institution.
Electronic Signature means an electronic sound, symbol or process attached to, or associated with, a contract or other record and adopted by a person with the intent to sign, authenticate or accept such contract or record.
Eligible Assignee shall mean (a) a Lender, an Affiliate of any Lender or any Approved Fund, (b) an Affiliated Lender solely to the extent contemplated by Section 9.04(l) and (c) any commercial bank, insurance company, investment or mutual fund or other entity that is an accredited investor (as defined in Regulation D under the Securities Act) that extends credit or invests in bank loans as one of its businesses; provided that in any event, Eligible Assignee shall not include: (i) any Disqualified Institution (unless the Borrower otherwise agrees in its sole discretion and provided that upon inquiry by any Lender to the Administrative Agent as to whether a specified potential assignee or participant is on the list of Disqualified Institutions, the Administrative Agent shall be permitted to disclose to such Lender whether such specific potential assignee or participant is on the list of Disqualified Institutions) or (ii) any natural person or any entity owned and operated for the primary benefit of a natural person.
Environmental Laws shall mean all federal, state, local and foreign laws (including statutory and common law), treaties, regulations, rules, ordinances, codes, decrees, injunctions, judgments, governmental restrictions or requirements, directives, orders (including consent orders), permits and agreements in each case, relating to the environment, the preservation or reclamation of natural resources, endangered or threatened species, protection of the climate, human health and safety or the presence or Release of, exposure to, or the generation, distribution, use, treatment, storage, transport, recycling, disposal or handling of, or the arrangement for such activities with respect to, Hazardous Materials.
Environmental Liability shall mean all liabilities, obligations, damages, losses, claims, actions, suits, judgments, orders, fines, penalties, fees, indemnities, expenses and costs (including administrative oversight costs, natural resource damages, costs of medical monitoring, remediation costs and reasonable fees and expenses of attorneys and consultants), whether contingent or otherwise, arising out of or relating to (a) compliance or non-compliance with any Environmental Law, (b) the generation, use, handling, distribution, recycling, transportation, storage, treatment or disposal (or the arrangement for such activities) of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the Release of any Hazardous Materials or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.
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Environmental Permits shall mean any permit, license or other approval required under any Environmental Law.
Equity Interests shall mean shares of capital stock, partnership interests, membership interests in a limited liability company, beneficial interests in a trust or other equity interests in any person, and any option, warrant or other right entitling the holder thereof to purchase or otherwise acquire any such equity interest.
ERISA shall mean the Employee Retirement Income Security Act of 1974, as amended.
ERISA Affiliate shall mean any trade or business (whether or not incorporated) that, together with Holdings or any Restricted Subsidiary, is treated as a single employer under Section 414(b) or (c) of the Code, or, solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code. For the avoidance of doubt, when any provision of this Agreement relates to a past event or period of time, the term ERISA Affiliate includes any person who was, as to the time of such past event or period of time, an ERISA Affiliate within the meaning of the preceding sentence.
ERISA Event shall mean (a) any reportable event, as defined in Section 4043 of ERISA, with respect to a Plan (other than an event for which the 30-day notice period is waived by regulation), (b) the failure of any Plan to satisfy the minimum funding standard applicable to such Plan within the meaning of Section 412 of the Code or Section 302 of ERISA), whether or not waived, (c) the filing pursuant to Section 412(c) of the Code or Section 302(c) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan, (d) a determination that any Plan is, or is expected to be, in at risk status (as defined in Section 303(i)(4) of ERISA or Section 430(i)(4) of the Code), (e) the incurrence by Holdings, the Borrower, any other Restricted Subsidiary, or any of their ERISA Affiliates of any liability under Title IV of ERISA with respect to the termination of any Plan or the withdrawal or partial withdrawal of Holdings, the Borrower, any other Restricted Subsidiary, or any of their ERISA Affiliates from any Plan or Multiemployer Plan, (f) the receipt by Holdings or any of its ERISA Affiliates from the PBGC or the administrator of any Plan or Multiemployer Plan of any notice relating to the intention to terminate any Plan or Multiemployer Plan or to appoint a trustee to administer any Plan, (g) the adoption of any amendment to a Plan that would require the provision of security pursuant to Section 436(f) of the Code or Section 206 of ERISA, (h) the receipt by Holdings, the Borrower, any other Restricted Subsidiary, or any of their ERISA Affiliates of any notice, or the receipt by any Multiemployer Plan from Holdings, the Borrower, any other Restricted Subsidiary, or any of their ERISA Affiliates of any notice, concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in endangered or critical status within the meaning of Title IV of ERISA, (i) the occurrence of a non-exempt prohibited transaction with respect to which Holdings, the Borrower, any other Restricted Subsidiary, or any of their ERISA Affiliates is a disqualified person (within the meaning of Section 4975 of the Code) or with respect to which Holdings, the Borrower, any other Restricted Subsidiary, or any of their ERISA Affiliates could otherwise be liable, or (j) any other event or condition with respect to a Plan or Multiemployer Plan that could result in liability of Holdings, the Borrower, any other Restricted Subsidiary, or any of their ERISA Affiliates.
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EU Bail-In Legislation Schedule means the EU Bail- In Legislation Schedule published by the Loan Market Association (or any successor person), as in effect from time to time.
Eurodollar , when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Adjusted LIBO Rate.
Event of Default shall have the meaning assigned to such term in Article VII.
Excess Cash Flow shall mean, for any fiscal year of the Borrower, the excess of:
(a) the sum, without duplication, of:
(i) Consolidated EBITDA for such fiscal year, and
(ii) reductions to noncash working capital of the Borrower and the other Restricted Subsidiaries for such fiscal year ( i.e. , the absolute value of the decrease, if any, in Current Assets minus Current Liabilities from the beginning to the end of such fiscal year; provided that, for purposes of calculating Excess Cash Flow, increases or decreases in working capital shall exclude (A) any changes in Current Assets or Current Liabilities solely as a result of acquisitions or dispositions by the Borrower and the other Restricted Subsidiaries during the applicable period and (B) any reclassification in accordance with GAAP of assets or liabilities, as applicable, between current and noncurrent)
over
(b) the sum, without duplication, of:
(i) the amount of any Taxes payable in cash by the Borrower and the other Restricted Subsidiaries with respect to such fiscal year,
(ii) Consolidated Interest Expense for such fiscal year paid in cash,
(iii) capital expenditures made in cash during such fiscal year to the extent financed with internally generated cash flow,
(iv) permanent repayments of Indebtedness (other than mandatory prepayments of Loans under Section 2.13 and prepayments and repurchases of Loans referred to in clause (B) of Section 2.13(c)) made in cash by the Borrower or any other Restricted Subsidiary during such fiscal year, but only to the extent that the Indebtedness so prepaid by its terms cannot be reborrowed or redrawn and such prepayments do not occur in connection with a refinancing of all or any portion of such Indebtedness,
(v) all amounts added back to Consolidated Net Income in calculating Consolidated EBITDA pursuant to clause (a)(vi), (a)(xvi), or to the extent paid in cash during such fiscal year, (a)(vii) or (a)(viii) of the definition of Consolidated EBITDA,
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(vi) additions to noncash working capital for such fiscal year ( i.e. , the increase, if any, in Current Assets minus Current Liabilities from the beginning to the end of such fiscal year),
(vii) (A) cash consideration paid during such fiscal year (or, at the option of the Borrower, committed to be paid prior to the date the Borrower is required to make a payment of Excess Cash Flow in respect of such fiscal year) by the Borrower or any other Restricted Subsidiary to make Permitted Acquisitions or other similar Investments (other than (1) in Holdings or a Restricted Subsidiary and (2) in Cash Equivalents) permitted under Section 6.04 and (B) Restricted Payments made in cash during such fiscal year (or, at the option of the Borrower, committed to be paid prior to the date the Borrower is required to make a payment of Excess Cash Flow in respect of such fiscal year) by the Borrower or any Restricted Subsidiary (other than to Holdings or any Restricted Subsidiary) permitted under Section 6.06(a) (other than Section 6.06(a)(v)) (except, in each case to the extent funded with the proceeds of long-term Indebtedness (other than revolving Indebtedness)); provided that amounts described in this clause (vii) will not reduce Excess Cash Flow in subsequent periods and, to the extent not so paid, will increase Excess Cash Flow in the subsequent period, and
(viii) payments made in cash by the Borrower or any other Restricted Subsidiary during such fiscal year (except to the extent deducted in calculating Consolidated Net Income or Consolidated EBITDA) in satisfaction of noncurrent liabilities (excluding any payments of Indebtedness for borrowed money) to the extent financed with internally generated cash flow.
Exchange Act means the United States Securities Exchange Act of 1934.
Excluded Subsidiary shall mean each of the following:
(a) any Domestic Subsidiary that is a direct or indirect subsidiary of a CFC,
(b) any Foreign Subsidiary,
(c) any Disregarded Domestic Person,
(d) any Subsidiary (i) constituting a mutual fund, unregistered investment fund or other investment company (including any statutory trust constituted for such purpose) or (ii) that is a CFTC-registered introducing broker or a FINRA-member broker-dealer,
(e) any Unrestricted Subsidiary,
(f) any Subsidiary to the extent that the provision by such Subsidiary of a Guarantee in respect of the Obligations (i) is prohibited or restricted by (A) applicable law, rule or regulation or (B) any contractual obligation existing on the Closing Date (or, with respect to any Subsidiary acquired after the Closing Date, on the date such Subsidiary is so acquired, so long as such Contractual Obligation was not incurred in contemplation of such Investment) or (ii) would require governmental (including regulatory) consent, approval, license or authorization unless such consent, approval, license or authorization has been received,
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(g) any Subsidiary that is not a Wholly Owned Subsidiary of Holdings,
(h) any Immaterial Subsidiary,
(i) upon the request of the Borrower, any Subsidiary for which the burden or cost to such Subsidiary of providing a Guarantee of the Obligations is excessive in relation to the value afforded to the Lenders thereby, as reasonably determined by the Borrower and Administrative Agent,
(j) any Subsidiary with respect to which providing a Guarantee would result in material adverse tax consequences as reasonably determined by the Borrower,
(k) not-for-profit subsidiaries, captive insurance subsidiaries and special purposes entities used for permitted securitization facilities,
(l) solely in the case of any obligation under any Secured Hedging Agreement that constitutes a swap within the meaning of Section 1(a)(47) of the Commodity Exchange Act (after giving effect to a customary keepwell provision applicable under the Guaranty), any subsidiary of Holdings that is not an Eligible Contract Participant as defined under the Commodity Exchange Act, and
(m) without limiting clauses (f) and (j) above, any subsidiary acquired by the Borrower or any Restricted Subsidiary that, at the time of the relevant acquisition, is an obligor in respect of assumed indebtedness that is permitted by this Agreement to the extent (and for so long as) the documentation governing the applicable assumed Indebtedness prohibits such subsidiary from providing the Guarantee and the relevant prohibition was not incurred in contemplation of such acquisition;
provided , that , notwithstanding the foregoing clauses (a) through (o), the Borrower may, at its option and with the consent of the Administrative Agent (such consent not to be unreasonably withheld or delayed), cause any domestic Restricted Subsidiary that would otherwise be an Excluded Subsidiary pursuant to the foregoing definition to be deemed not to be an Excluded Subsidiary for purposes of the Loan Documents.
Excluded Taxes shall mean any of the following Taxes imposed on or with respect to a Recipient or required to be withheld or deducted from a payment to a Recipient, (a) Taxes imposed on or measured by net income (however denominated), franchise Taxes, and branch profits Taxes, in each case, (i) imposed as a result of such Recipient being organized under the laws of, or having its principal office or, in the case of any Lender, its applicable lending office located in, the jurisdiction imposing such Tax (or any political subdivision thereof) or (ii) that are Other Connection Taxes, (b) in the case of a Lender, U.S. federal withholding Taxes imposed on amounts payable to or for the account of such Lender with respect to an applicable interest in a Loan or Commitment pursuant to a law in effect on the date on which (i) such Lender acquires such interest in the Loan or Commitment (other than pursuant to an assignment request by the Borrower under Section 2.21(a)) or (ii) such Lender changes its lending office, except in each
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case to the extent that, pursuant to Section 2.20, amounts with respect to such Taxes were payable either to such Lenders assignor immediately before such Lender became a party hereto or to such Lender immediately before it changed its lending office, (c) Taxes attributable to such Recipients failure to comply with Section 2.20(f) and (d) any withholding Taxes imposed under FATCA.
Failed Auction shall have the meaning assigned to such term in Section 2.12(c)(i)(C).
FATCA shall mean Sections 1471 through 1474 of the Code, as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof, any agreements entered into pursuant to Section 1471(b) of the Code and any fiscal or regulatory legislation, rules or practices adopted pursuant to any intergovernmental agreement, treaty or convention among Governmental Authorities and implementing such Sections of the Code.
FCPA shall mean the United States Foreign Corrupt Practices Act of 1977, as amended.
Federal Funds Effective Rate shall mean, for any day, the rate calculated by the Federal Reserve Bank of New York based on such days federal funds transactions by depository institutions (as determined in such manner as the Federal Reserve Bank of New York shall set forth on its public website from time to time) and published on the next succeeding Business Day by the Federal Reserve Bank of New York as the federal funds effective rate, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for the day for such transactions received by the Administrative Agent from three depository institutions of recognized standing selected by it; provided that if such rate shall be less than zero, such rate shall be deemed to be zero for all purposes of this Agreement.
Fees shall mean the Commitment Fees, the Administrative Agent Fees, the L/C Participation Fees and the Issuing Bank Fees.
Financial Covenant Facility shall mean the Revolving Facility and each Incremental Revolving Facility or Replacement Revolving Facility (other than any Incremental Revolving Facility or Replacement Revolving Facility for which the applicable Lenders have agreed in the applicable Incremental Assumption Agreement or Refinancing Amendment that such Incremental Revolving Facility or Replacement Revolving Facility shall not have the direct benefit of Section 6.10).
Financial Covenant Acceleration shall have the meaning assigned to such term in Section 7.01(d).
Financial Covenant Event of Default shall have the meaning assigned to such term in Section 7.01(d).
Financial Officer of any person shall mean the chief financial officer, principal accounting officer, treasurer or controller of such person.
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First Lien Leverage Ratio shall mean the ratio of (i) Total First Lien Debt on such date to (ii) Consolidated EBITDA for the most recently ended Test Period.
Fixed Amounts shall have the meaning assigned to such term in Section 1.03(f).
Flood Hazard Property means any Mortgaged Property that includes a Building (as defined in 12 CFR Chapter III, Section 339.2) that on the relevant date of determination is located in an area identified by the Federal Emergency Management Agency (or any successor agency) as a special flood hazard area.
Flood Insurance Documents means, with respect to any Mortgaged Property that is a Flood Hazard Property, (a) the applicable Loan Partys written acknowledgment of receipt of written notification from the Administrative Agent as to the fact that such Mortgaged Property is a Flood Hazard Property and as to whether the community in which each such Flood Hazard Property is located is participating in the National Flood Insurance Program and (b) provided the Flood Hazard Property is located in a participating in the National Flood Insurance Program, copies of the applicable Loan Partys application for a flood insurance policy, together with proof of premium payment, (i) a declaration page confirming that flood insurance has been issued or (ii) such other evidence of flood insurance in compliance with Flood Insurance Laws as shall be reasonably satisfactory to the Administrative Agent and the Collateral Agent.
Flood Insurance Laws means, collectively, (a) National Flood Insurance Reform Act of 1994 (which comprehensively revised the National Flood Insurance Act of 1968 and the Flood Disaster Protection Act of 1973), as now or hereafter in effect or any successor statute thereto,
(b) the Flood Insurance Reform Act of 2004, as now or hereafter in effect or any successor statute thereto, (c) the Biggert-Waters Flood Insurance Reform Act of 2012, as now or hereafter in effect or any successor statute thereto, and (d) Regulation H of the Board of Governors.
Foreign Lender shall mean a Lender that is not a U.S. Person.
Foreign Subsidiary shall mean any Subsidiary that is not a Domestic Subsidiary.
Fronting Exposure shall mean, at any time there is a Defaulting Lender, with respect to the Issuing Bank, such Defaulting Lenders Pro Rata Percentage of the outstanding L/C Exposure with respect to Letters of Credit issued by the Issuing Bank other than L/C Exposure as to which such Defaulting Lenders participation obligation has been reallocated to other Lenders or Cash Collateralized in an amount not less than the Minimum Collateral Amount.
GAAP shall mean United States generally accepted accounting principles applied on a basis consistent with the financial statements referenced in Section 3.04.
Governmental Authority shall mean the government of the United States of America or any other nation, or of any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, self-regulatory organization, including but not limited to the Financial Industry Regulatory Authority, Inc. ( FINRA ), court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supranational bodies such as the European Union or the European Central Bank).
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Granting Lender shall have the meaning assigned to such term in Section 9.04(j).
Guarantee of or by any person shall mean any obligation, contingent or otherwise, of such person guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation of any other person (the primary obligor ) in any manner, whether directly or indirectly, and including any obligation of such person, direct or indirect, (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation or to purchase (or to advance or supply funds for the purchase of) any security for the payment of such Indebtedness or other obligation, (b) to purchase or lease property, securities or services for the purpose of assuring the owner of such Indebtedness or other obligation of the payment of such Indebtedness or other obligation or (c) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation; provided that the term Guarantee shall not include endorsements for collection or deposit in the ordinary course of business.
Guarantee and Collateral Agreement shall mean the Guarantee and Collateral Agreement, dated as of the date hereof, among the Loan Parties and the Collateral Agent for the benefit of the Secured Parties, together with all supplements thereto.
Guarantors shall mean Holdings and the Subsidiary Guarantors (each, individually a Guarantor ).
Hazardous Materials shall mean (a) any petroleum products or byproducts and all other hydrocarbons, coal ash, radon gas, asbestos, urea formaldehyde foam insulation, polychlorinated biphenyls, chlorofluorocarbons and all other ozone-depleting substances and (b) any chemical, material, substance or waste that is prohibited, limited or regulated by or pursuant to any Environmental Law.
Hedging Agreement shall mean any interest rate protection agreement, foreign currency exchange agreement, commodity price protection agreement or other interest or currency exchange rate or commodity price hedging arrangement.
Holdings shall have the meaning assigned to such term in the introductory statement hereto.
HTSC shall mean Huatai Securities and any of its Affiliates.
Immaterial Owned Real Property shall have the meaning set forth in Section 5.10.
Immaterial Subsidiary shall mean, at any date, unless otherwise designated by Holdings in a written notice to the Administrative Agent or unless such Subsidiary is a Loan Party on the Closing Date, any Subsidiary that, together with such Subsidiarys consolidated Subsidiaries, (a) does not, as of the end of the most recently ended Test Period, have assets with a fair market value in excess of 2.5% of Total Assets and (b) did not, for the most recently ended Test Period, have revenues exceeding 2.5% of the total revenues of Holdings and the Subsidiaries on a consolidated basis; provided that the aggregate assets or revenues of all Immaterial Subsidiaries, determined in accordance with GAAP, as of the end of or for any Test
27
Period, may not exceed 5.0% of Total Assets or consolidated revenues, respectively, of Holdings and its Subsidiaries on a consolidated basis (and Holdings will designate in writing to the Administrative Agent from time to time as necessary the Subsidiaries that will cease to be Immaterial Subsidiaries in order to comply with the foregoing limitation).
Incremental Assumption Agreement shall mean an Incremental Assumption Agreement among, and in form and substance reasonably satisfactory to, the Borrower, the Administrative Agent and one or more lenders providing the relevant Incremental Term Facilities or Incremental Revolving Credit Commitments, as the case may be.
Incremental Equivalent Debt means Indebtedness in the form of secured or unsecured notes or loans or commitments in respect of any of the foregoing issued, incurred or implemented in lieu of loans that would otherwise be permitted to be incurred pursuant to Section 2.23 in an amount not to exceed the Incremental Facility Amount; provided that:
(a) subject to clause (h) below, on the date that such notes or loans or commitments are issued, incurred or implemented, the representations and warranties of the Loan Parties set forth in this Agreement and the other Loan Documents shall be true and correct in all material respects on and as of such date with the same effect as though such representations and warranties had been made on and as of such date; provided that, to the extent that any representation and warranty specifically refers to an earlier date, it shall be true and correct in all material respects as of such earlier date; provided , further , that representations and warranties that are qualified by material, material adverse effect or a similar term shall be true and correct in all respects;
(b) subject to clause (h) below, no Event of Default under Sections 7.01(b), 7.01(c), 7.01(g) or 7.01(h) exists or would exist immediately after giving effect to such notes or loans;
(c) the weighted average life to maturity applicable to any such Indebtedness in the form of notes or term loans is no shorter than the remaining weighted average life to maturity of the then-existing Term Loans (without giving effect to any prepayments thereof); provided that this requirement shall not apply to Incremental Equivalent Debt in the form of one-year bridge loans that are convertible or exchangeable without conditions into other instruments meeting the requirements set forth in this definition (but for the avoidance of doubt, this requirement shall apply to any loans, securities or other debt into which such bridge loans are exchanged or that otherwise replace such bridge loans);
(d) the final maturity date with respect to such notes or loans is no earlier than the Latest Term Loan Maturity Date on the date of the issuance or incurrence, as applicable, thereof; provided that this requirement shall not apply to Incremental Equivalent Debt in the form of one-year bridge loans that are convertible or exchangeable without conditions into other instruments meeting the requirements set forth in this definition (but for the avoidance of doubt, this requirement shall apply to any loans, securities or other debt into which such bridge loans are exchanged or that otherwise replace such bridge loans);
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(e) in the case of any such Indebtedness in the form of term loans that are pari passu with the Initial Term Loans with respect to security, the Yield applicable thereto (as determined on the date of initial incurrence thereof) will not be more than 0.50% per annum higher than the Yield in respect of the Initial Term Loans (as determined on such date) unless the Yield with respect to the Initial Term Loans is adjusted to be equal to such Yield applicable to such Indebtedness, minus 0.50% per annum; provided that any increase in Yield with respect to the Initial Term Loans due to the application of an Adjusted LIBO Rate floor or Alternate Base Rate floor on any Incremental Equivalent Debt shall be effected solely through an increase in (or implementation of, as applicable) the Adjusted LIBO Rate floor or Alternate Base Rate floor applicable to such Initial Term Loans;
(f) (i) any such notes or loans rank pari passu with or junior to the Initial Term Loans in right of payment and rank pari passu with or junior to the Initial Term Loans (or any other existing Class of Term Loans) with respect to security or are unsecured, (ii) to the extent such notes or loans rank pari passu with the Initial Term Loans (or any other existing Class of Term Loans) with respect to security, they shall be subject to an Acceptable Intercreditor Agreement and, (iii) to the extent such notes or loans are subordinated to the Initial Term Loans (or any other existing Class of Term Loans) in right of payment or security, they shall be subject to an Acceptable Intercreditor Agreement; and (iv) any such notes or loans that are pari passu with the Term Loans in right of payment and secured by the Collateral on a pari passu basis with the Term Loans may participate on a pro rata basis or a less than pro rata basis (but not on a greater than pro rata basis) in any mandatory prepayment in respect of the Initial Term Loans (and any other Term Loans then subject to ratable repayment requirements), in each case as the Borrower and the relevant lender may agree; provided , further , that any such notes or loans that are junior to the Term Loans shall not be entitled to participate ratably in any such mandatory prepayment;
(g) no such Indebtedness may be (x) guaranteed by any Person that is not a Loan Party or (y) secured by any assets other than all or a portion of the Collateral; and
(h) notwithstanding anything to the contrary in this definition or in any other provision of any Loan Document, if the proceeds of any Incremental Equivalent Debt are intended to be applied to finance an acquisition or other Investment that is permitted under this Agreement, the conditions to entering into and availability of such Incremental Equivalent Debt (including applicability of customary SunGard or other certain funds conditionality but without in any way limiting the other applicable conditions to Incremental Equivalent Debt specified in this definition), and the timing of satisfaction or waiver of any such conditions (as between being satisfied or waived upon execution of an agreement evidencing such Incremental Equivalent Debt or upon the making of any notes or loans thereunder), shall be as agreed among the Borrower and the lenders in respect of such Incremental Equivalent Debt; provided that there shall be conditions requiring (x) the accuracy of Specified Representations and (y) that no Event of Default under Sections 7.01(b), 7.01(c), 7.01(g) or 7.01(h) exists or would exist immediately after giving effect to such Incremental Equivalent Debt.
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Incremental Facility Amount shall mean, at any time, the sum of:
(a) the sum of:
(1) the greater of (i) $80,000,000 and (ii) 100% of Consolidated EBITDA for the most recently ended Test Period, plus
(2) (x) the amount of any voluntary prepayment of the Term Loans (including any Incremental Term Loans) and/or any permanent reduction of the Revolving Credit Commitments (including any Incremental Revolving Credit Commitments) and (y) the cash amount paid in respect of any reduction in the outstanding principal amount of the Term Loans (including any Incremental Term Loans) resulting from assignments to (and purchases by) the Borrower or any Restricted Subsidiary (in the case of each of clauses (x) and (y), other than any Incremental Indebtedness incurred pursuant to clause (b) below); provided , that the relevant prepayment or assignment and purchase (I) is not funded with long-term Indebtedness (other than revolving Indebtedness) and (II) is not funded with the proceeds of any Incremental Indebtedness incurred in reliance on clause (a)(1) above, minus
(3) the aggregate amount of all Incremental Term Facilities, Incremental Revolving Credit Commitments and Incremental Equivalent Debt (collectively, Incremental Indebtedness ) established prior to such time in reliance on this clause (a), plus
(b) such other amount, so long as, for the purposes of this clause (b), after giving pro forma effect to the incurrence or issuance of any Incremental Indebtedness entered into in reliance on this clause (b) and any Permitted Acquisition consummated simultaneously therewith and the pro forma adjustments described in Section 1.03, (i) in the case of any Incremental Indebtedness that is secured by a Lien on the Collateral on a pari passu basis with the Obligations, the First Lien Leverage Ratio, after giving effect to the incurrence of such Incremental Indebtedness (which shall assume that the full amount of any Incremental Revolving Credit Commitment (or the equivalent thereof in the form of Incremental Equivalent Debt) being established at such time is fully drawn) and the use of proceeds thereof, on a pro forma basis (but without giving effect to any simultaneous incurrence of any Incremental Indebtedness pursuant to the foregoing clause (a)), does not exceed 2.75 to 1.00 and (ii) in the case of any Incremental Indebtedness that is secured by a Lien on the Collateral on a junior basis to the Obligations or that is unsecured, the Total Leverage Ratio, after giving effect to the incurrence of such Incremental Indebtedness (which shall assume that the full amount of any Incremental Revolving Credit Commitment (or the equivalent thereof in the form of Incremental Equivalent Debt) being established at such time is fully drawn) and the use of proceeds thereof, on a pro forma basis (but without giving effect to any simultaneous incurrence of any Incremental Indebtedness pursuant to the foregoing clause (a)), does not exceed 4.00 to 1.00. For purposes of determining the Incremental Facility Amount, (1) any Incremental Indebtedness shall be deemed to have been incurred first, in reliance on clause (b) above to the extent available and second, in reliance on clause (a) above to
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the extent thereof and (2) any Incremental Indebtedness incurred in reliance on clause (a) above shall be reclassified, as the Borrower may elect from time to time, as incurred under clause (b) above if the Borrower satisfies the applicable leverage ratio under clause (b) above at such time on a pro forma basis, and if the applicable leverage ratio under clause (b) above would be satisfied on a pro forma basis as of the end of any fiscal quarter after the initial incurrence of such Incremental Indebtedness, such reclassification shall automatically occur if not previously elected by the Borrower.
Incremental Indebtedness shall have the meaning assigned to such term in the definition of Incremental Facility Amount.
Incremental Revolving Credit Commitment shall have the meaning assigned to such term in Section 2.23(a).
Incremental Revolving Facility shall mean any Class of Incremental Revolving Credit Commitments or Incremental Revolving Loans other than the Revolving Facility.
Incremental Revolving Loan Maturity Date shall mean the final maturity date of any Incremental Revolving Loan, as set forth in the applicable Incremental Assumption Agreement.
Incremental Revolving Loans shall mean Revolving Loans made pursuant to Section 2.01 by one or more Lenders to the Borrower pursuant to their Incremental Revolving Credit Commitments.
Incremental Term Borrowing shall mean a Borrowing comprised of Incremental Term Loans.
Incremental Term Facility shall have the meaning assigned to such term in Section 2.23(a).
Incremental Term Loan Commitment shall mean the commitment of any Lender, established pursuant to Section 2.23, to make Incremental Term Loans to the Borrower.
Incremental Term Loan Maturity Date shall mean the final maturity date of any Incremental Term Loan, as set forth in the applicable Incremental Assumption Agreement.
Incremental Term Loan Repayment Dates shall mean the dates scheduled for the repayment of principal of any Incremental Term Loan, as set forth in the applicable Incremental Assumption Agreement.
Incremental Term Loans shall mean Term Loans made by one or more Lenders to the Borrower pursuant to Section 2.01(b), either in the form of (i) additional Initial Term Loans or (ii) to the extent permitted by Section 2.23 and provided for in the relevant Incremental Assumption Agreement, other Term Loans.
Incurrence-Based Amounts shall have the meaning assigned to such term in Section 1.03(f).
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Indebtedness of any person shall mean, without duplication, (a) all obligations of such person for borrowed money or with respect to deposits or advances of any kind, (b) all obligations of such person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such person upon which interest charges are customarily paid, (d) all obligations of such person under conditional sale or other title retention agreements relating to property or assets purchased by such person, (e) all obligations of such person issued or assumed as the deferred purchase price of property or services (excluding (i) trade accounts payable and accrued obligations incurred in the ordinary course of business, (ii) any earn-out obligation, purchase price adjustment or similar obligation until such obligation (x) becomes a liability on the balance sheet of such person in accordance with GAAP and (y) is not paid within 30 days after becoming due and payable and (iii) liabilities associated with customer prepayments and deposits), (f) all Indebtedness of others 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 or acquired by such person, whether or not the obligations secured thereby have been assumed, (g) all Guarantees by such person of Indebtedness of others, (h) all Capital Lease Obligations of such person, (i) all Synthetic Lease Obligations of such person, (j) net obligations of such person under any Hedging Agreement, valued at the Agreement Value thereof, (k) all obligations of such person to purchase, redeem, retire, defease or otherwise make any payment in respect of any Disqualified Stock of such person or any other person or any warrants, rights or options to acquire such Disqualified Stock, valued, in the case of redeemable preferred interests, at the greater of its voluntary or involuntary liquidation preference plus accrued and unpaid dividends, (l) all obligations of such person as an account party in respect of letters of credit and (m) all obligations of such person in respect of bankers acceptances. The Indebtedness of any person shall include the Indebtedness of any partnership in which such person is a general partner; provided that Indebtedness shall not include (i) deferred or prepaid revenue arising in the ordinary course of business or (ii) purchase price holdbacks in respect of a portion of the purchase price of an asset to satisfy warranty, indemnity or other unperformed obligations of the seller of such asset, but only to the extent such holdback is funded at the time of the closing of the applicable purchase transaction and such funds are held with a third party escrow agent. The amount or principal amount of any Indebtedness at any time of determination represented by any Guarantee referred to in clause (g) shall be an amount equal to the stated or determinable amount of the primary obligation in respect of which such Guarantee is made or, if not stated or determinable, the maximum monetary exposure in respect thereof as of such date as determined reasonably and in good faith by a Financial Officer of the Borrower.
Indemnified Taxes shall mean (a) Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by or on account of any obligation of any Loan Party under any Loan Document and (b) to the extent not otherwise described in clause (a), Other Taxes.
Indemnitee shall have the meaning assigned to such term in Section 9.05(b).
Information shall have the meaning assigned to such term in Section 9.16.
Initial Revolving Credit Commitments shall mean the Revolving Credit Commitments made available to the Borrower pursuant to Section 2.01(a)(ii) on the Closing Date, as the same may be (a) reduced from time to time pursuant to Section 2.09, (b) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 9.04 or (c) increased from time to time pursuant to Section 2.23. The aggregate amount of the Initial Revolving Credit Commitments as of the Closing Date is $20,000,000.
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Initial Term Loans shall mean the Term Loans made to the Borrower pursuant to Section 2.01(a)(i) on the Closing Date as the same may be increased from time to time pursuant to Section 2.23.
Interest Payment Date shall mean (a) with respect to any ABR Loan, the last Business Day of each March, June, September and December, and (b) with respect to any Eurodollar Loan, the last day of the Interest Period applicable to the Borrowing of which such Loan is a part and, in the case of a Eurodollar Borrowing with an Interest Period of more than three months duration, each day that would have been an Interest Payment Date had successive Interest Periods of three months duration been applicable to such Borrowing.
Interest Period shall mean, with respect to any Eurodollar Borrowing, the period commencing on the date of such Borrowing and ending on the numerically corresponding day (or, if there is no numerically corresponding day, on the last day) in the calendar month that is 1, 2, 3 or 6 months (or 12 months or periods of less than 1 month, if at the time of the relevant Borrowing or conversion or continuation thereof, all applicable Lenders agree to make interest periods of such duration available) thereafter, as the Borrower may elect; provided , however , that (a) if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day, (b) any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period and (c) no Interest Period for any Loan shall extend beyond the maturity date of such Loan. Interest shall accrue from and including the first day of an Interest Period to but excluding the last day of such Interest Period. For purposes hereof, the date of a Borrowing initially shall be the date on which such Borrowing is made and thereafter shall be the effective date of the most recent conversion or continuation of such Borrowing.
Interpolated Rate shall mean, with respect to the LIBO Rate for any Loan, the rate which results from interpolating on a linear basis between: (a) the LIBO Screen Rate for the longest period for which the LIBO Screen Rate is available which is less than the Interest Period and (b) the LIBO Screen Rate for the shortest period for which the LIBO Screen Rate is available which exceeds the Interest Period, in each case as of approximately 11:00 A.M. (London time) on the date that is two Business Days prior to the commencement of such Interest Period.
Investment shall mean, as to any Person, any direct or indirect acquisition or investment by such Person, whether by means of (a) the purchase or other acquisition of Equity Interests or Indebtedness or other securities of another Person, (b) a loan, advance or capital contribution to, Guarantee or assumption of Indebtedness of, or purchase or other acquisition of any other Indebtedness or equity participation or interest in, another Person, including any partnership or joint venture interest in such other Person (excluding, in the case of the Borrower and the Restricted Subsidiaries, intercompany loans, advances or Indebtedness having a term not
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exceeding 364 days (inclusive of any rollover or extensions of terms) and made in the ordinary course of business) or (c) the purchase or other acquisition (in one transaction or a series of transactions) of all or substantially all of the property and assets or business of another Person or assets constituting a business unit, line of business or division of such Person.
The amount, as of any date of determination, of:
(i) any Investment in the form of a loan or an advance shall be the principal amount thereof outstanding on such date, without any adjustment for writedowns or write-offs (including as a result of forgiveness of any portion thereof) with respect to such loan or advance after the date thereof,
(ii) any Investment in the form of a Guarantee shall be equal to the stated or determinable amount of the related primary obligation, or portion thereof, in respect of which such Guarantee is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof, as determined in good faith by a Financial Officer,
(iii) any Investment in the form of a transfer of Equity Interests or other non-cash property by the investor to the investee, including any such transfer in the form of a capital contribution, shall be the fair market value of such Equity Interests or other property as of the time of the transfer, minus any payments actually received by such investor representing a return of capital of, or dividends or other distributions in respect of, such Investment (to the extent such payments do not exceed, in the aggregate, the original amount of such Investment and without duplication of amounts increasing the Available Amount), but without any other adjustment for increases or decreases in value of, or write-ups, write-downs or write-offs with respect to, such Investment after the date of such Investment, and
(iv) any Investment (other than any Investment referred to in clause (i) , (ii) or (iii) above) by the specified Person in the form of a purchase or other acquisition for value of any Equity Interests, evidences of Indebtedness or other securities of any other Person shall be the original cost of such Investment (including any Indebtedness assumed in connection therewith), plus (A) the cost of all additions thereto and minus (B) the amount of any portion of such Investment that has been repaid to the investor in cash as a repayment of principal or a return of capital, and of any cash payments actually received by such investor representing interest, dividends or other distributions in respect of such Investment (to the extent the amounts referred to in clause (B) do not, in the aggregate, exceed the original cost of such Investment plus the costs of additions thereto and without duplication of amounts increasing the Available Amount), but without any other adjustment for increases or decreases in value of, or write-ups, write-downs or write-offs with respect to, such Investment after the date of such Investment.
For purposes of Section 6.04 , if an Investment involves the acquisition of more than one Person, the amount of such Investment shall be allocated among the acquired Persons in accordance with GAAP; provided that pending the final determination of the amounts to be so allocated in accordance with GAAP, such allocation shall be as reasonably determined by a Financial Officer.
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IPO Reorganization Transactions shall mean, collectively, the internal restructuring transactions taken in connection with and reasonably related to consummating a Qualified Public Offering and not for the purpose of (i) circumventing any covenant set forth in this Agreement or (ii) permitting the release of any Collateral or the guarantee of any Guarantor, and so long as such transactions, when taken as a whole, do not have a material and adverse impact on the Liens on the Collateral granted by the Loan Parties in favor of the Secured Parties.
IP Rights shall have the meaning assigned to such term in Section 3.17.
IP Security Agreements shall have the meaning assigned to such term in the Guarantee and Collateral Agreement.
IRS shall mean the United States Internal Revenue Service.
Issuing Bank shall mean, as the context may require, (a) Credit Suisse AG, Cayman Islands Branch, acting through any of its Affiliates or branches, in its capacity as an issuer of Letters of Credit hereunder and (b) any other Lender that may become an Issuing Bank pursuant to Section 2.22(i) or 2.22(k), with respect to Letters of Credit issued by such Lender. Each Issuing Bank may, in its discretion, arrange for one or more Letters of Credit to be issued by Affiliates or branches of the Issuing Bank, in which case the term Issuing Bank shall include any such Affiliate or branch with respect to Letters of Credit issued by such Affiliate or branch.
Issuing Bank Fees shall have the meaning assigned to such term in Section 2.05(c).
Junior Financing shall have the meaning assigned to such term in Section 6.09(a).
L/C Commitment shall mean the commitment of the Issuing Banks to issue Letters of Credit as set forth on Schedule 2.01 pursuant to Section 2.22.
L/C Commitment Maturity Date shall mean the date that is 30 days prior to the Revolving Credit Maturity Date.
L/C Disbursement shall mean a payment or disbursement made by the Issuing Bank pursuant to a Letter of Credit.
L/C Exposure shall mean at any time the sum of (a) the aggregate undrawn amount of all outstanding Letters of Credit at such time and (b) the aggregate amount of all L/C Disbursements that have not yet been reimbursed by or on behalf of the Borrower at such time. The L/C Exposure of any Revolving Credit Lender at any time shall equal its Pro Rata Percentage of the aggregate L/C Exposure at such time. For all purposes of this Agreement, if on any date of determination a Letter of Credit has expired by its terms but any amount may still be drawn thereunder by reason of the operation of Rule 3.14 of the International Standby Practices (ISP98), such Letter of Credit shall be deemed to be outstanding in the amount so remaining available to be drawn. Unless otherwise specified herein, the amount of a Letter of Credit at any time shall be deemed to be the stated amount of such Letter of Credit in effect at such time; provided that, except for purposes of Section 2.05(c)(ii), with respect to any Letter of Credit that, by its terms or the terms of any document related thereto, provides for one or more automatic increases in the stated amount thereof, the amount of such Letter of Credit shall be deemed to be the maximum stated amount of such Letter of Credit after giving effect to all such increases, whether or not such maximum stated amount is in effect at such time.
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L/C Maturity Date shall mean the date that is five (5) Business Days prior to the Revolving Credit Maturity Date.
L/C Participation Fee shall have the meaning assigned to such term in Section 2.05(c).
L/C Sublimit shall mean an amount equal to the lesser of (a) $5,000,000 and (b) the aggregate amount of the Revolving Credit Commitments. The L/C Sublimit is part of, and not in addition to, the Revolving Facility.
Latest Maturity Date shall mean, at any date of determination, the then-latest final maturity date applicable to any Loan or Commitment outstanding at such time.
Latest Revolving Maturity Date shall mean, at any date of determination, the then-latest final maturity date applicable to any Revolving Loan outstanding at such time.
Latest Term Maturity Date shall mean, at any date of determination, the then-latest final maturity date applicable to any Term Loan outstanding at such time.
Lenders shall mean (a) the persons listed on Schedule 2.01 (other than any such person that has ceased to be a party hereto pursuant to an Assignment and Acceptance) and (b) any person that has become a party hereto as a Lender pursuant to an Assignment and Acceptance or an Incremental Assumption Agreement.
Letter of Credit shall mean any standby letter of credit issued pursuant to Section 2.22.
LIBO Rate shall mean, with respect to any Eurodollar Borrowing for any Interest Period, the LIBO Screen Rate at approximately 11:00 a.m. (London time) on the date that is two Business Days prior to the commencement of such Interest Period; provided that, to the extent that an interest rate is not ascertainable pursuant to the foregoing provisions of this definition, the LIBO Rate shall be the Interpolated Rate, for a period equal in length to the Interest Period of the Loan.
LIBO Screen Rate shall mean, for any day and time, with respect to any Eurodollar Borrowing for any Interest Period, the rate per annum determined by the Administrative Agent by reference to the London interbank offered rate as administered by ICE Benchmark Administration (or any other person that takes over the administration of such rate) for deposits in Dollars (as set forth on Reuters Screen LIBOR01 (or any successor thereto) or, in the event such rate does not appear on a page of the Reuters screen, as set forth on the appropriate page of such other information service selected by the Administrative Agent in its reasonable discretion from time to time that has been nominated by the ICE Benchmark Administration (or such successor person) as an authorized information vendor for the purpose of displaying such rates) for a period equal to such Interest Period.
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Lien shall mean, with respect to any asset, (a) any mortgage, deed of trust, lien (statutory or other), pledge, encumbrance, hypothecation, assignment, deposit arrangement, charge or security interest in or on such asset, (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset and (c) in the case of securities, any purchase option, call or similar right of a third party with respect to such securities.
Loan Document Obligations shall mean all obligations defined as Loan Document Obligations in the Guarantee and Collateral Agreement and the other Security Documents.
Loan Documents shall mean this Agreement, the Letters of Credit, the Security Documents, each Incremental Assumption Agreement, each Refinancing Amendment, any Loan Modification Agreement and, except for the purposes of Section 9.08 , the promissory notes, if any, executed and delivered pursuant to Section 2.04(e).
Loan Modification Agreement shall mean a Loan Modification Agreement in form and substance reasonably satisfactory to the Administrative Agent, the Borrower and the Accepting Lenders party thereto.
Loan Modification Offer shall have the meaning assigned to such term in Section 2.25(a).
Loan Parties shall mean Holdings, the Borrower and the Subsidiary Guarantors (each individually a Loan Party ).
Loans shall mean the Revolving Loans and the Term Loans.
Majority in Interest , when used in reference to Lenders of any Class, shall mean, at any time, (a) in the case of Revolving Credit Lenders of any Class, Lenders having Revolving Credit Exposure and unused Revolving Credit Commitments representing more than 50% of the sum of all the Revolving Credit Exposure and unused Revolving Credit Commitments of such Class outstanding at such time and (b) in the case of the Term Lenders of any Class, Lenders holding outstanding Term Loans of such Class representing more than 50% of all Term Loans of such Class outstanding at such time; provided that the Revolving Credit Exposure and unused Revolving Credit Commitments of any Defaulting Lender shall be disregarded in the determination of Majority in Interest for purposes of clause (a) at any time.
Margin Stock shall have the meaning assigned to such term in Regulation U.
Material Adverse Effect shall mean a material adverse effect on (i) the business, assets, financial condition or results of operations, in each case, of the Borrower and its Restricted Subsidiaries, taken as a whole, (ii) the rights and remedies (taken as a whole) of the Administrative Agent or the Lenders under the Loan Documents or (iii) the ability of the Loan Parties (taken as a whole) to perform their payment obligations under the Loan Documents.
Material Indebtedness shall mean any Indebtedness (other than the Loans and Letters of Credit) or obligations in respect of one or more Hedging Agreements, of Holdings, the Borrower or any other Restricted Subsidiary in an aggregate principal amount exceeding $20,000,000. For purposes of determining Material Indebtedness, the principal amount of the obligations of Holdings, the Borrower or any Subsidiary in respect of any Hedging Agreement at any time shall be the Agreement Value of such Hedging Agreement at such time.
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Material Subsidiary shall mean any Restricted Subsidiary, other than any Immaterial Subsidiary, but including, at all times, the Borrower.
Maturity Date shall mean the Revolving Credit Maturity Date, the Term Loan Maturity Date, the Incremental Revolving Loan Maturity or the Incremental Term Loan Maturity Date, as the context may require.
Maximum Rate shall have the meaning assigned to such term in Section 9.09.
MFN Conditions shall have the meaning assigned to such term in Section 2.23(c).
Minimum Collateral Amount shall mean, at any time, (i) with respect to Cash Collateral consisting of cash or deposit account balances, an amount equal to 103% of the Fronting Exposure of the Issuing Bank with respect to Letters of Credit issued and outstanding at such time and (ii) otherwise, an amount determined by the Administrative Agent and the Issuing Bank in their sole discretion.
Moodys shall mean Moodys Investors Service, Inc., or any successor thereto.
Mortgaged Properties shall mean, initially, the owned real properties of the Loan Parties specified on Schedule 1.01(a), and shall include each other parcel of real property and improvements thereto with respect to which a Mortgage is granted pursuant to Section 5.10 or 5.11.
Mortgages shall mean the mortgages, deeds of trust, assignments of leases and rents, modifications and other security documents delivered pursuant to clause (i) of Section 4.02(k) or pursuant to Section 5.10 or 5.11, each substantially in the form of Exhibit D with such changes thereto as shall be reasonably acceptable to the Collateral Agent, including all such changes as may be required to account for local law matters.
Multiemployer Plan shall mean a multiemployer plan as defined in Section 4001(a)(3) of ERISA, to which Holdings, the Borrower, any other Restricted Subsidiary, or any of their ERISA Affiliates contributes to, or has within any of the preceding six years contributed.
Net Cash Proceeds shall mean (a) with respect to any Asset Sale, the cash proceeds (including (i) casualty insurance settlements and condemnation awards and (ii) cash proceeds subsequently received (as and when received) in respect of noncash consideration initially received) from such Asset Sale, net of (i) selling expenses (including reasonable brokers fees or commissions, legal fees, transfer and all other Taxes, including, without duplication, the Borrowers good faith estimate of income Taxes paid or payable in connection with such sale), (ii) amounts provided as a reserve by the Borrower and the other Restricted Subsidiaries, in accordance with GAAP, against any liabilities under any indemnification obligations or purchase price adjustment associated with such Asset Sale ( provided that, to the extent and at the time any such amounts are released from such reserve, such amounts shall constitute Net Cash Proceeds) and (iii) the principal amount, premium or penalty, if any, interest and other amounts on any
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Indebtedness which is secured by the asset sold in such Asset Sale and which is required to be repaid with such proceeds (other than any such Indebtedness assumed by the purchaser of such asset); provided , however , that, if (x) the Borrower shall deliver a certificate of a Financial Officer to the Administrative Agent promptly following the receipt thereof setting forth the Borrowers intent to reinvest such proceeds in productive assets of a kind then used or usable in the business of the Borrower and the other Restricted Subsidiaries within 12 months of receipt of such proceeds and (y) no Event of Default shall have occurred and shall be continuing at the time of such certificate or at the proposed time of the application of such proceeds, such proceeds shall not constitute Net Cash Proceeds except to the extent (A) not so used (or committed to be used) at the end of such twelve-month period or (B) if committed to be used within such 12-month period, not so used within 180 days after the end of such 12-month period, at which time such proceeds shall be deemed to be Net Cash Proceeds and (b) with respect to any issuance or incurrence of Indebtedness, the cash proceeds thereof, net of all Taxes and customary fees, commissions, costs and other expenses incurred in connection therewith.
Non-Consenting Lender shall mean any Lender that does not approve any consent, waiver or amendment that (a) requires the approval of all Lenders or all affected Lenders (or of any other Class or group of Lenders other than the Required Lenders) in accordance with the terms of Section 9.08 and (b) has been approved by, as applicable, the Required Lenders (or the Lenders holding Loans or Commitments of such Class or group representing more than 50% of the sum of the total Loans and unused Commitments of such Class or group at such time).
Non-Defaulting Lender shall mean, at any time, each Lender that is not a Defaulting Lender at such time.
Obligations shall mean all obligations defined as Obligations in the Guarantee and Collateral Agreement and the other Security Documents.
OFAC shall have the meaning assigned to such term in Section 3.20.
Other Connection Taxes shall mean, with respect to any Recipient, Taxes imposed as a result of a present or former connection between such Recipient and the jurisdiction imposing such Taxes (other than connections arising from such Recipient having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to or enforced any Loan Document, or sold or assigned an interest in any Loan or Loan Document).
Other Taxes shall mean all present or future stamp, court or documentary, intangible, recording, filing or similar Taxes that arise from any payment made under, from the execution, delivery, performance, enforcement or registration of, from the receipt or perfection of a security interest under, or otherwise with respect to, any Loan Document, except any such Taxes that are Other Connection Taxes imposed with respect to an assignment (other than an assignment made pursuant to Section 2.21).
Parent Company means (a) Holdings and (b) any other Person of which the Borrower is a direct or indirect Wholly Owned Subsidiary.
Participant shall have the meaning assigned to such term in clause (f) of Section 9.04.
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Participant Register shall have the meaning assigned to such term in clause (g) of Section 9.04.
PBGC shall mean the Pension Benefit Guaranty Corporation referred to and defined in ERISA and any successor entity performing similar functions.
Perfection Certificate shall mean the Perfection Certificate substantially in the form of Exhibit B to the Guarantee and Collateral Agreement.
Permitted Acquisition shall have the meaning assigned to such term in Section 6.04(g).
Permitted Amendments shall have the meaning assigned to such term in Section 2.25(c).
Permitted Investors shall mean HTSC.
Permitted Liens shall mean any Liens expressly permitted by Section 6.02.
Permitted Refinancing Indebtedness shall have the meaning assigned to such term in Section 6.01(m).
Person or person shall mean any natural person, corporation, business trust, joint venture, association, company, limited liability company, partnership, Governmental Authority or other entity.
Plan shall mean any employee pension benefit plan (other than a Multiemployer Plan, but including any multiple employer pension plan within the meaning of Sections 4063 and 4064 of ERISA) subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA, and in respect of which Holdings, the Borrower, any other Restricted Subsidiary or any of their ERISA Affiliates is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an employer (as defined in Section 3(5) of ERISA) or contributing sponsor (as defined in Section 4001(a)(13) of ERISA).
Platform shall have the meaning assigned to such term in Section 9.01(g).
Pledged Collateral shall have the meaning assigned to such term in the Guarantee and Collateral Agreement.
Prime Rate shall mean the rate of interest per annum determined from time to time by the Credit Suisse AG, as its prime rate in effect at its principal office in New York City and notified to the Borrower. The prime rate is a rate set by Credit Suisse AG based upon various factors including Credit Suisse AGs costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such rate.
Pro Rata Percentage of any Revolving Credit Lender at any time shall mean the percentage of the Total Revolving Credit Commitment represented by such Revolving Credit Lenders Revolving Credit Commitment. In the event the Revolving Credit Commitments shall have expired or been terminated, the Pro Rata Percentages shall be determined on the basis of the Revolving Credit Commitments most recently in effect, giving effect to any subsequent assignments.
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PTE means a prohibited transaction class exemption issued by the U.S. Department of Labor, as any such exemption may be amended from time to time
Public Company Costs means any charge, expense or cost associated with, or in anticipation of, or preparation for, compliance with the requirements of the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated in connection therewith or relating to compliance with the provisions of the Securities Act and the Exchange Act (or, in each case, similar requirements of law under other jurisdictions), or the rules of national securities exchange companies with listed equity or debt securities, in each case as applicable to companies with equity or debt securities held by the public, including such requirements of law and rules relating to directors or managers compensation, fees and expense reimbursement, and including any charge, expense or cost relating to investor relations, shareholder meetings and reports to shareholders or debtholders, directors and officers insurance and other executive costs, related legal and other professional fees and listing fees.
Public Lender shall have the meaning assigned to such term in Section 9.01(g).
Qualified Capital Stock of any person shall mean any Equity Interest of such person that is not Disqualified Stock.
Qualified Public Offering shall mean (a) the initial underwritten public offering of common Equity Interests of the Borrower or any direct or indirect parent of the Borrower pursuant to an effective registration statement filed with the Securities and Exchange Commission in accordance with the Securities Act that results in at least $50,000,000 of net cash proceeds to the Borrower or (b) the acquisition, purchase, merger or combination of the Borrower or any direct or indirect parent of the Borrower, by, or with, a publicly traded special acquisition company that (x) is an entity organized or existing under the laws of the United States, any state thereof or the District of Columbia, (y) prior to the Qualified Public Offering, shall have engaged in no business or activities in any material respect other than activities related to becoming and acting as a publicly traded special acquisition company and entry into the Qualified Public Offering and (z) immediately prior to the Qualified Public Offering, shall have no material assets other than cash and Cash Equivalents.
Qualifying Bids shall have the meaning assigned to such term in Section 2.12(c).
Qualifying Lender shall have the meaning assigned to such term in Section 2.12(c).
Recipient shall mean (a) the Administrative Agent, (b) any Lender and (c) any Issuing Bank, as applicable.
Refinanced Indebtedness shall have the meaning assigned to such term in Section 6.01(m).
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Refinancing Amendment shall mean an amendment to this Agreement that is reasonably satisfactory to the Administrative Agent and the Borrower executed by (a) Holdings, the Borrower and the Subsidiary Guarantors, (b) the Administrative Agent and (c) each Lender that agrees to provide all or any portion of the Replacement Term Loans or the Replacement Revolving Facility, as applicable, being incurred pursuant thereto and in accordance with Section 9.08(d).
Register shall have the meaning assigned to such term in Section 9.04(d).
Regulation T shall mean Regulation T of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof.
Regulation U shall mean Regulation U of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof.
Regulation X shall mean Regulation X of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof.
Related Parties shall mean, with respect to any specified person, such persons Affiliates and the respective directors, trustees, officers, employees, agents and advisors of such person and their respective Affiliates.
Release shall mean any release, spill, emission, leaking, dumping, injection, pouring, deposit, disposal, discharge, dispersal, leaching or migration into or through the environment or within or upon any building, structure, facility or fixture.
Removal Effective Date shall have the meaning assigned to such term in Section 8.06(b).
Repayment Date shall have the meaning assigned to such term in Section 2.11(a).
Replaced Revolving Facility shall have the meaning assigned to such term in Section 9.08(d)(ii).
Replaced Term Loans shall have the meaning set forth in section 9.08(d)(i).
Replacement Revolving Facility shall have the meaning assigned to such term in Section 9.08(d)(ii).
Replacement Term Loans shall have the meaning assigned to such term in Section 9.08(d)(i).
Reply Amount shall have the meaning assigned to such term in Section 2.12(c).
Reply Discount Price shall have the meaning assigned to such term in Section 2.12(c).
Repricing Event shall have the meaning assigned to such term in Section 2.12(e).
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Required Lenders shall mean, at any time, Lenders having Term Loans, Revolving Credit Exposure and unused Commitments representing more than 50% of the sum of the Aggregate Revolving Credit Exposure, outstanding Term Loans and unused Commitments at such time; provided that the Revolving Credit Exposure and unused Revolving Credit Commitments of any Defaulting Lender shall be disregarded in the determination of the Required Lenders at any time.
Required Financial Covenant Lenders shall mean, at any time, Revolving Credit Lenders having Revolving Credit Exposure and unused Revolving Credit Commitments representing more than 50% of the sum of the Aggregate Revolving Credit Exposure and unused Revolving Credit Commitments at such time; provided that (i) the Revolving Credit Exposure and unused Revolving Credit Commitments of any Defaulting Lender shall be disregarded in the determination of the Required Lenders at any time and (ii) if the applicable Incremental Assumption Agreement or Refinancing Amendment provides that the Lenders providing an Incremental Revolving Facility or Replacement Revolving Facility shall not have the direct benefit of the financial maintenance covenant contained in Section 6.10, then such Incremental Revolving Facility or Replacement Revolving Facility, as applicable, shall be disregarded in the determination of the Required Lenders.
Required Revolving Lenders shall mean, at any time, Revolving Credit Lenders having Revolving Credit Exposure and unused Revolving Credit Commitments representing more than 50% of the sum of the Aggregate Revolving Credit Exposure and unused Revolving Credit Commitments at such time; provided that the Revolving Credit Exposure and unused Revolving Credit Commitments of any Defaulting Lender shall be disregarded in the determination of the Required Lenders at any time.
Resignation Effective Date shall have the meaning assigned to such term in Section 8.06(a).
Responsible Officer of any person shall mean any executive officer or Financial Officer of such person and any other officer or similar official thereof responsible for the administration of the obligations of such person in respect of this Agreement.
Restricted Amount shall have the meaning set forth in Section 2.13(g).
Restricted Debt Payment shall have the meaning set forth in Section 6.09(b).
Restricted Payment shall mean any dividend or other distribution (whether in cash, securities or other property (other than Qualified Capital Stock)) with respect to any Equity Interests in Holdings, the Borrower or any other Restricted Subsidiary, or any payment (whether in cash, securities or other property (other than Qualified Capital Stock)), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any Equity Interests in Holdings, the Borrower or any other Restricted Subsidiary.
Restricted Subsidiary shall mean, collectively, (i) any existing or future direct or indirect subsidiary of the Borrower, other than any Unrestricted Subsidiary and (ii) at all times, the Borrower.
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Retained Percentage shall mean, with respect to any fiscal year of the Borrower, (a) 100% minus (b) the ECF Percentage with respect to such fiscal year.
Return Bid shall have the meaning assigned to such term in Section 2.12(c).
Revolving Credit Commitment shall mean, with respect to each Lender, the commitment of such Lender to make Revolving Loans hereunder (and to acquire participations in Letters of Credit as provided for herein) as set forth on Schedule 2.01, or in the Refinancing Amendment, Incremental Assumption Agreement or Assignment and Acceptance pursuant to which such Lender assumed its Revolving Credit Commitment, as applicable, as the same may be (a) reduced from time to time pursuant to Section 2.09, (b) increased from time to time pursuant to Section 2.23 and (c) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 9.04. Unless the context shall otherwise require, the term Revolving Credit Commitment shall include any Incremental Revolving Credit Commitments.
Revolving Credit Exposure shall mean, with respect to any Lender at any time, the aggregate principal amount at such time of all outstanding Revolving Loans of such Lender, plus the aggregate amount at such time of such Lenders L/C Exposure.
Revolving Credit Lender shall mean a Lender with a Revolving Credit Commitment or an outstanding Revolving Loan.
Revolving Credit Maturity Date shall mean November 14, 2023.
Revolving Facility shall have the meaning assigned to such term in the introductory statement hereto.
Revolving Loan shall mean the revolving loans made by the Lenders to the Borrower pursuant to Section 2.01. Unless the context shall otherwise require, the term Revolving Loans shall include any Incremental Revolving Loans.
S&P shall mean S&P Global Ratings, a division of S&P Global Inc., or any successor thereto.
Secured Parties shall have the meaning assigned to such term in the Guarantee and Collateral Agreement.
Securities Act means the United States Securities Act of 1933.
Security Documents shall mean the Mortgages, the Guarantee and Collateral Agreement, the IP Security Agreements and each of the security agreements, mortgages and other instruments and documents executed and delivered pursuant to any of the foregoing or pursuant to Section 5.10 or 5.11.
Similar Business shall mean any business and any services, activities or businesses (including technologies) incidental, or reasonably related or similar to, complementary or corollary to any line of business engaged in by the Borrower and its Restricted Subsidiaries on the Closing Date or any business activity that is a reasonable extension, development or expansion thereof or ancillary thereto.
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Special Dividend shall mean the special cash dividend to be paid by the Borrower to the holders of capital stock of the Borrower in the aggregate amount of up to $200,000,000 within 90 days following the Closing Date.
Specified Equity Contribution shall have the meaning assigned to such term in Section 7.02(a).
Specified Representations shall mean the representations and warranties set forth in Sections 3.01 (other than 3.01(c)), 3.02(a), 3.02(b)(i)(B) (with respect to the organizational documents of any Loan Party), 3.03, 3.10, 3.11, 3.16, 3.19 and 3.20 (with respect to the use of proceeds hereunder).
Specified Transaction shall mean any acquisition or other Investment, disposition or other specified transaction (including, for the avoidance of doubt, acquisitions occurring prior to the Closing Date), restructurings, cost savings initiatives and other similar initiatives.
SPV shall have the meaning assigned to such term in Section 9.04(j).
Statutory Reserves shall mean a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the aggregate of the maximum reserve percentages (including any marginal, special, emergency or supplemental reserves) established by the Board and any other banking authority, domestic or foreign, to which the Administrative Agent or any Lender (including any branch, Affiliate or other fronting office making or holding a Loan) is subject for Eurocurrency Liabilities (as defined in Regulation D of the Board). Eurodollar Loans shall be deemed to constitute Eurocurrency Liabilities and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Lender under such Regulation D. Statutory Reserves shall be adjusted automatically on and as of the effective date of any change in any reserve percentage.
subsidiary shall mean, with respect to any person (herein referred to as the parent ), any corporation, partnership, limited liability company, association or other business entity (a) of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or more than 50% of the general partnership interests are, at the time any determination is being made, owned, Controlled or held, or (b) that is, at the time any determination is made, otherwise Controlled, by the parent or one or more subsidiaries of the parent or by the parent and one or more subsidiaries of the parent.
Subsidiary shall mean any subsidiary of Holdings, including, at all times, the Borrower.
Subsidiary Guarantor shall mean each Restricted Subsidiary, other than the Borrower and any Excluded Subsidiary.
Successor Borrower shall have the meaning assigned to such term in Section 6.05(a).
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Synthetic Lease shall mean, as to any person, any lease (including leases that may be terminated by the lessee at any time) of any property (whether real, personal or mixed) (a) that is accounted for as an operating lease under GAAP and (b) in respect of which the lessee retains or obtains ownership of the property so leased for U.S. federal income Tax purposes, other than any such lease under which such person is the lessor.
Synthetic Lease Obligations shall mean, as to any person, an amount equal to the capitalized amount of the remaining lease payments under any Synthetic Lease that would appear on a balance sheet of such person in accordance with GAAP if such obligations were accounted for as Capital Lease Obligations.
Taxes shall mean all present or future taxes, levies, imposts, duties, deductions, withholdings (including backup withholding), assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.
Term Borrowing shall mean a Borrowing comprised of Term Loans.
Term Facility shall have the meaning assigned to such term in the introductory statement hereto.
Term Lender shall mean a Lender with a Term Loan Commitment or an outstanding Term Loan.
Term Loan Commitment shall mean, with respect to each Lender, the commitment of such Lender to make Term Loans hereunder as set forth on Schedule 2.01, or in the Incremental Assumption Agreement, Refinancing Amendment or Assignment and Acceptance pursuant to which such Lender assumed its Term Loan Commitment, as applicable, as the same may be (a) reduced from time to time pursuant to Section 2.09 and (b) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 9.04. Unless the context shall otherwise require, the term Term Loan Commitments shall include the Incremental Term Commitments and commitments to make Replacement Term Loans.
Term Loan Maturity Date shall mean November 14, 2025.
Term Loan Repayment Dates shall mean the Repayment Dates and the Incremental Term Loan Repayment Dates.
Term Loans shall mean the term loans made by the Lenders to the Borrower pursuant to clause (a) of Section 2.01. Unless the context shall otherwise require, the term Term Loans shall include any Incremental Term Loans.
Test Period shall mean, at any time, the most recent period of four consecutive fiscal quarters of the Borrower ended on or prior to such time (taken as one accounting period) in respect of which financial statements for each quarter or fiscal year in such period have been (or were required to be) delivered pursuant to Section 5.04(a) or 5.04(b), as applicable.
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Total Assets shall mean, at any date, the amount that would, in conformity with GAAP, be set forth opposite the caption total assets (or any like caption) on a consolidated balance sheet of the Borrower and the other Restricted Subsidiaries on such date.
Total Debt shall mean, at any time, the total Indebtedness of Holdings, the Borrower and the other Restricted Subsidiaries at such time consisting only of Indebtedness for borrowed money, notes, bonds, debentures, drawn but unreimbursed obligations under letters of credit, letters of guaranty and bankers acceptances, obligations in respect of Capital Lease Obligations and purchase money indebtedness (other than trade accounts payable in the ordinary course of business).
Total First Lien Debt shall mean, at any time, the aggregate amount of the Total Debt that is secured by a first priority Lien on any asset or property of Holdings, the Borrower or any other Restricted Subsidiary.
Total Leverage Ratio shall mean, on any date, the ratio of (a) Total Debt on such date to (b) Consolidated EBITDA for the most recently ended Test Period.
Total Revolving Credit Commitment shall mean, at any time, the aggregate amount of the Revolving Credit Commitments, as in effect at such time. The initial Total Revolving Credit Commitment is $20,000,000.
Transactions shall mean, collectively, (a) the execution, delivery and performance by the Loan Parties of the Loan Documents to which they are a party and the making of the Borrowings hereunder, (b) the payment of the Special Dividend and (c) the payment of all fees, costs and expenses incurred or payable by Holdings, the Borrower or any other Subsidiary in connection with the foregoing (the Transaction Costs ).
Transaction Costs shall have the meaning set forth in the definition of Transactions .
Transformative Acquisition shall have the meaning set forth in section 2.12(e).
Type , when used in respect of any Loan or Borrowing, shall refer to the Rate by reference to which interest on such Loan or on the Loans comprising such Borrowing is determined. For purposes hereof, the term Rate shall mean the Adjusted LIBO Rate and the Alternate Base Rate.
U.S. Person shall mean any person that is a United States person as defined in Section 7701(a)(30) of the Code.
U.S. Tax Compliance Certificate shall have the meaning given such term in paragraph (f) of Section 2.20.
Uniform Commercial Code shall have the meaning assigned to such term in the Guarantee and Collateral Agreement.
Uniform Customs shall have the meaning assigned to such term in Section 9.07.
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Unrestricted Subsidiary shall mean (a) any Subsidiary designated by the Borrower as an Unrestricted Subsidiary pursuant to Section 5.13 subsequent to the Closing Date and (b) any subsidiary of an Unrestricted Subsidiary; provided that in no event shall the Borrower be an Unrestricted Subsidiary.
USA PATRIOT Act shall mean The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (Title III of Pub. L. No. 107-56 (signed into law October 26, 2001)).
Wholly Owned Subsidiary of any person shall mean a subsidiary of such person of which securities (except for directors qualifying shares) or other ownership interests representing 100% of the Equity Interests are, at the time any determination is being made, owned, Controlled or held by such person or one or more wholly owned Subsidiaries of such person or by such person and one or more wholly owned Subsidiaries of such person.
Withdrawal Liability shall mean liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA.
Withholding Agent shall mean each Loan Party and the Administrative Agent.
Write-Down and Conversion Powers means, with respect to any EEA Resolution Authority, the write-down and conversion powers of such EEA Resolution Authority from time to time under the Bail-In Legislation for the applicable EEA Member Country, which write-down and conversion powers are described in the EU Bail-In Legislation Schedule.
Yield means, as to any Indebtedness, the effective yield applicable thereto calculated by the Administrative Agent in consultation with the Borrower in a manner consistent with generally accepted financial practices, taking into account (a) interest rate margins, (b) interest rate floors (subject to the proviso set forth below), (c) any amendment to the relevant interest rate margins and interest rate floors prior to the applicable date of determination and (d) original issue discount and upfront or similar fees (based on an assumed four- year average life to maturity or lesser remaining average life to maturity), but excluding (i) any bona fide customary arrangement, commitment, structuring, underwriting, ticking or similar fees paid or payable to one or more arrangers (or their affiliates) in their capacities as such (regardless of whether any such fees are paid to or shared in whole or in part with any or all lenders) and (ii) customary consent fees paid generally to consenting lenders; provided , however , that (A) to the extent that the LIBO Rate (with an Interest Period of three months) or Alternate Base Rate (without giving effect to any floor specified in the definition thereof) is less than any floor applicable to loans in respect of which the Yield is being calculated on the date on which the Yield is determined, the amount of the resulting difference will be deemed added to the interest rate margin applicable to the relevant Indebtedness for purposes of calculating the Yield and (B) to the extent that the LIBO Rate (for a period of three months) or Alternate Base Rate (without giving effect to any floor specified in the definition thereof) is greater than any applicable floor on the date on which the Yield is determined, the floor will be disregarded in calculating the Yield.
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SECTION 1.02 Terms Generally . The definitions in Section 1.01 shall apply equally to both the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words include, includes and including shall be deemed to be followed by the phrase without limitation. The word will shall be construed to have the same meaning and effect as the word shall. The words asset and property shall be construed as having the same meaning and effect and to refer to any and all types of tangible and intangible assets and properties, including cash, securities, accounts and contract rights. The words herein, hereto, hereof and hereunder and words of similar import when used in any Loan Document shall refer to such Loan Document as a whole and not to any particular provision thereof. The word law shall be construed as referring to all statutes, rules, regulations, codes and other laws (including official rulings and interpretations thereunder having the force of law or with which affected persons customarily comply), and all judgments, orders, writs and decrees, of all Governmental Authorities. All references herein to Articles, Sections, Exhibits and Schedules shall be deemed references to Articles and Sections of, and Exhibits and Schedules to, this Agreement unless the context shall otherwise require. Except as otherwise expressly provided herein, (a) any reference in this Agreement to any Loan Document shall mean such document as amended, restated, supplemented or otherwise modified from time to time, in each case, in accordance with the express terms of this Agreement, (b) any definition of or reference to any statute, rule or regulation shall be construed as referring thereto as from time to time amended, supplemented or otherwise modified (including by succession of comparable successor laws) and (c) all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time; provided , however , that if Holdings notifies the Administrative Agent that Holdings wishes to amend any covenant in Article VI or any related definition to eliminate the effect of any change in GAAP occurring after the date of this Agreement on the operation of such covenant (or if the Administrative Agent notifies the Borrower that the Required Lenders wish to amend Article VI or any related definition for such purpose), then Holdings compliance with such covenant shall be determined on the basis of GAAP in effect immediately before the relevant change in GAAP became effective, until either such notice is withdrawn or such covenant is amended in a manner satisfactory to Holdings and the Required Lenders.
SECTION 1.03 Pro Forma and Other Calculations . (a) Notwithstanding anything to the contrary herein, the Total Leverage Ratio, First Lien Leverage Ratio and Consolidated EBITDA shall be calculated in the manner prescribed by this Section; provided that, when calculating any such ratio or amount (i) for purposes of the definition of ECF Percentage and (ii) for the purposes of actual compliance with the financial maintenance covenant contained in Section 6.10 (as opposed to a pro forma calculation for purposes of another provision), the events described in Sections 1.03(b), 1.03(c) and 1.03(d) below that occurred subsequent to the end of the Test Period shall not be given pro forma effect.
(b) For purposes of calculating the First Lien Leverage Ratio, the Total Leverage Ratio and Consolidated EBITDA, Specified Transactions (including, for the avoidance of doubt, the Transactions) that have been completed by Holdings or any of its Restricted Subsidiaries during the applicable Test Period or subsequent to the end of such Test Period, and prior to or simultaneously with the event with respect to which the calculation of any such ratio is being made, shall be calculated on a pro forma basis assuming that all such Specified Transactions had occurred on the first day of the applicable Test Period. If since the beginning of any such Test
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Period any person that subsequently became a Restricted Subsidiary or was merged, amalgamated or consolidated with or into the Borrower or any other Restricted Subsidiary since the beginning of such Test Period shall have completed any Specified Transaction that would have required adjustment pursuant to this Section, then the First Lien Leverage Ratio and the Total Leverage Ratio shall be calculated giving pro forma effect thereto for such period as if such Specified Transaction occurred at the beginning of the applicable Test Period. Notwithstanding the foregoing, at the election of the Borrower, such pro forma adjustment shall not be required to be determined for any acquired entity or business to the extent the aggregate consideration paid in connection with such acquisition is less than $5,000,000.
(c) In the event that Holdings or any Restricted Subsidiary incurs, assumes, guarantees, redeems, repays, retires or extinguishes any Indebtedness included in the definition of Total Debt (other than Indebtedness incurred or repaid under any revolving credit facility unless all such Indebtedness has been permanently repaid and no such amount has been replaced), subsequent to the end of the Test Period with respect to which the First Lien Leverage Ratio or the Total Leverage Ratio, as the case may be, is being calculated, and prior to or simultaneously with the event with respect to which the calculation of any such ratio is being made, the First Lien Leverage Ratio or the Total Leverage Ratio, as the case may be, shall be calculated giving pro forma effect to such incurrence, assumption, guarantee, redemption, repayment, retirement or extinguishment of Indebtedness and the resulting proceeds therefrom, as if the same had occurred on the last day of the applicable Test Period.
(d) All pro forma calculations permitted or required to be made pursuant to this Agreement (i) may include those adjustments permitted by and calculated in accordance with Article 11 of Regulation S-X under the Securities Act and (ii) may include pro forma run rate cost savings, operating expense reductions and synergies (net of actual amounts realized) related to any Specified Transaction that are projected by such Person in good faith to result from actions that have been taken or with respect to which substantial steps have been taken or are expected to be taken (in the good faith determination of such Person) and realized within 24 months after such Specified Transaction; provided that all such adjustments shall be set forth in a reasonably detailed certificate of a Financial Officer of the Borrower certifying that such adjustments have been prepared in good faith based upon assumptions believed to be reasonable, using, for purposes of making such calculations, the historical consolidated financial statements of the Borrower (which shall be reformulated as if such Specified Transaction, and any other Specified Transaction that has been consummated during the period, had been consummated on the first day of the applicable period); provided further that the aggregate amount added to or included in Consolidated EBITDA pursuant to clause (ii) above or clauses (a)(vii) or (a)(viii) of the definition of Consolidated EBITDA for any Test Period, shall not exceed 25.0% of Consolidated EBITDA (giving effect to such adjustments) for such Test Period.
(e) For purposes of determining pro forma compliance with the financial maintenance covenant set forth in Section 6.10, with respect to any Test Period ending prior to March 31, 2019, the ratio applicable to the Test Period ending March 31, 2019 shall be applicable.
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(f) Notwithstanding anything to the contrary herein, with respect to any amounts incurred or transactions entered into (or consummated) in reliance on a provision of this Agreement that does not require compliance with a financial ratio (any such amounts, the Fixed Amounts ) substantially concurrently with any amounts incurred or transactions entered into (or consummated) in reliance on a provision of this Agreement that requires compliance with a financial ratio (including Section 6.10 hereof, any First Lien Leverage Ratio test or any Total Leverage Ratio test) (any such amounts, the Incurrence-Based Amounts ), it is understood and agreed that the Fixed Amounts shall be disregarded in the calculation of the financial ratio or test applicable to any substantially concurrent utilization of the Incurrence-Based Amounts.
(g) For purposes of determining the permissibility of any action, change, transaction or event that requires a calculation of any financial ratio or test (including any leverage ratio or the amount of Consolidated EBITDA), such financial ratio or test shall be calculated at the time such action is taken, such change is made, such transaction is consummated or such event occurs (or at such other time elected by the Borrower in accordance with Section 1.03(h) below), as the case may be, and no default or event of default shall be deemed to have occurred solely as a result of a change in such financial ratio or test occurring after the time such action is taken, such change is made, such transaction is consummated or such event occurs (or at such time elected by the Borrower in accordance with Section 1.03(h) below), as the case may be.
(h) Notwithstanding anything in this Agreement or any other Loan Document to the contrary, to the extent that this Agreement or any other Loan Document requires (i) compliance with any financial ratio or test (including the financial maintenance covenant set forth in Section 6.10 hereof), (ii) accuracy of representations and warranties (other than Specified Representations), (iii) the absence of a Default or Event of Default (or any type of Default or Event of Default) or (iv) testing availability under baskets set forth herein (including compliance with the Incremental Facility Amount or any cap expressed as a percentage of Consolidated EBITDA), in each case, as a condition to (x) the consummation of any transaction in connection with any acquisition or similar Investment, (y) the making of any Restricted Payment and/or (z) the making of any Restricted Debt Payment, the determination of whether the relevant condition is satisfied may be made, at the election of the Borrower: (A) in the case of any acquisition or similar Investment, at the time of the execution of the definitive agreement with respect to the relevant acquisition or Investment, after giving effect to the acquisition or Investment and any related Indebtedness and Liens on a pro forma basis, (B) in the case of any Restricted Payment, at the time of the declaration of such Restricted Payment, after giving effect to the relevant Restricted Payment on a pro forma basis or (C) in the case of any Restricted Debt Payment, at the time of delivery of irrevocable (which may be conditional) notice with respect to such Restricted Debt Payment, after giving effect to the relevant Restricted Debt Payment on a pro forma basis. If the Borrower makes any such election to determine whether the relevant condition is satisfied at the times set forth in the foregoing clauses (A), (B) or (C), for purposes of calculating the availability under any basket hereunder in connection with any action or transaction following such time and prior to the earlier of the date on which such acquisition or other Investment, Restricted Payment or Restricted Debt Payment, as applicable, is consummated or the date that the definitive agreement or date for Restricted Debt Payment or Restricted Payment specified in the notice or declaration therefor is terminated, expires or passes, as applicable, without consummation thereof, any such basket shall be determined or tested giving pro forma effect to such acquisition or other Investment, Restricted Payment or Restricted Debt Payment, as applicable, and any actions or transactions related thereto (including the incurrence of any Indebtedness in connection therewith).
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SECTION 1.04 Classification of Loans and Borrowings . For purposes of this Agreement, Loans may be classified and referred to by Class ( e.g. , a Revolving Loan ) or by Type ( e.g. , a Eurodollar Loan ) or by Class and Type ( e.g ., a Eurodollar Revolving Loan ). Borrowings also may be classified and referred to by Class ( e.g ., a Revolving Borrowing ) or by Type ( e.g., a Eurodollar Borrowing ) or by Class and Type ( e.g. , a Eurodollar Revolving Borrowing ).
SECTION 1.05 Divisions . For all purposes under the Loan Documents, in connection with any division or plan of division under Delaware law (or any comparable event under a different jurisdictions laws): (a) if any asset, right, obligation or liability of any Person becomes the asset, right, obligation or liability of a different Person, then it shall be deemed to have been transferred from the original Person to the subsequent Person, and (b) if any new Person comes into existence, such new Person shall be deemed to have been organized on the first date of its existence by the holders of its Equity Interests at such time.
ARTICLE II
The Credits
SECTION 2.01 Commitments . (a) Subject to the terms and conditions and relying upon the representations and warranties herein set forth, each Lender agrees, severally and not jointly, (i) to make a Term Loan to the Borrower on the Closing Date in a principal amount not to exceed its Term Loan Commitment, and (ii) to make Revolving Loans to the Borrower, at any time and from time to time after the date hereof, and until the earlier of the Revolving Credit Maturity Date and the termination of the Revolving Credit Commitment of such Lender in accordance with the terms hereof, in an aggregate principal amount at any time outstanding that will not result in such Lenders Revolving Credit Exposure exceeding such Lenders Revolving Credit Commitment. Subject to the terms, conditions and limitations set forth herein, the Borrower may borrow, pay or prepay and reborrow Revolving Loans. Amounts paid or prepaid in respect of Term Loans may not be reborrowed.
(b) Each Lender having an Incremental Term Loan Commitment, severally and not jointly, hereby agrees, subject to the terms and conditions and relying upon the representations and warranties set forth herein and in the applicable Incremental Assumption Agreement, to make Incremental Term Loans to the Borrower, in an aggregate principal amount not to exceed its Incremental Term Loan Commitment. Amounts paid or prepaid in respect of Incremental Term Loans may not be reborrowed.
(c) Each Lender having an Incremental Revolving Credit Commitment, severally and not jointly, hereby agrees, subject to the terms and conditions and relying upon the representations and warranties set forth herein and in the applicable Incremental Assumption Agreement, to make Incremental Revolving Loans to the Borrower, in an aggregate principal amount not to exceed its Incremental Revolving Credit Commitment. The Borrower may borrow, pay or prepay and reborrow Revolving Loans.
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SECTION 2.02 Loans . (a) Each Loan shall be made as part of a Borrowing consisting of Loans made by the Lenders ratably in accordance with their applicable Commitments; provided, however , that the failure of any Lender to make any Loan shall not in itself relieve any other Lender of its obligation to lend hereunder (it being understood, however, that except as otherwise expressly provided herein, no Lender shall be responsible for the failure of any other Lender to make any Loan required to be made by such other Lender). Except for Loans deemed made pursuant to Section 2.02(f), the Loans comprising any Borrowing shall be in an aggregate principal amount that is (i) an integral multiple of $1,000,000 and not less than $5,000,000 (except, with respect to any Incremental Term Borrowing, to the extent otherwise provided in the related Incremental Assumption Agreement) or (ii) equal to the remaining available balance of the applicable Commitments.
(b) Subject to Sections 2.02(f), 2.08 and 2.15, each Borrowing shall be comprised entirely of ABR Loans or Eurodollar Loans as the Borrower may request pursuant to Section 2.03. Each Lender may at its option make any Eurodollar Loan by causing any domestic or foreign branch or Affiliate of such Lender to make such Loan; provided that any exercise of such option shall not affect the obligation of the Borrower to repay such Loan in accordance with the terms of this Agreement. Borrowings of more than one Type may be outstanding at the same time; provided , however , that the Borrower shall not be entitled to request any Borrowing that, if made, would result in more than eight Eurodollar Borrowings outstanding hereunder at any time. For purposes of the foregoing, Borrowings having different Interest Periods, regardless of whether they commence on the same date, shall be considered separate Borrowings.
(c) Except with respect to Loans made pursuant to Section 2.02(f), each Lender shall make each Loan to be made by it hereunder on the proposed date thereof by wire transfer of immediately available funds to such account in New York City, as the Administrative Agent may designate, not later than 1:00 p.m., New York City time, and the Administrative Agent shall promptly credit the amounts so received to an account designated by the Borrower in the applicable Borrowing Request or, if a Borrowing shall not occur on such date because any condition precedent herein specified shall not have been met, return the amounts so received to the respective Lenders.
(d) Unless the Administrative Agent shall have received notice from a Lender prior to the date of any Borrowing that such Lender will not make available to the Administrative Agent such Lenders portion of such Borrowing, the Administrative Agent may assume that such Lender has made such portion available to the Administrative Agent on the date of such Borrowing in accordance with paragraph (c) above and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If the Administrative Agent shall have so made funds available, then, to the extent that such Lender shall not have made such portion available to the Administrative Agent, such Lender and the Borrower severally agree to repay to the Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the Borrower to but excluding the date such amount is repaid to the Administrative Agent at (i) in the case of the Borrower, a rate per annum equal to the interest rate applicable at the time to the Loans comprising such Borrowing and (ii) in the case of such Lender, a rate determined by the Administrative Agent to represent its cost of overnight or short-term funds (which determination shall be conclusive absent manifest error). If such Lender shall repay to the Administrative Agent such corresponding amount, such amount shall constitute such Lenders Loan as part of such Borrowing for purposes of this Agreement.
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(e) Notwithstanding any other provision of this Agreement, the Borrower shall not be entitled to request any Borrowing of Revolving Loans if the Interest Period requested with respect thereto would end after the Revolving Credit Maturity Date.
(f) If the Issuing Bank shall not have received from the Borrower the payment required to be made by Section 2.22(e) within the time specified in such Section, the Issuing Bank will promptly notify the Administrative Agent of the L/C Disbursement and the Administrative Agent will promptly notify each Revolving Credit Lender of such L/C Disbursement and its Pro Rata Percentage thereof. Each Revolving Credit Lender shall pay by wire transfer of immediately available funds to the Administrative Agent not later than 2:00 p.m., New York City time, on such date (or, if such Revolving Credit Lender shall have received such notice later than 12:00 (noon), New York City time, on any day, not later than 10:00 a.m., New York City time, on the immediately following Business Day), an amount equal to such Lenders Pro Rata Percentage of such L/C Disbursement (it being understood that (i) if the conditions precedent to borrowing set forth in Sections 4.01(b) and (c) have been satisfied, such amount shall be deemed to constitute an ABR Revolving Loan of such Lender and, to the extent of such payment, the obligations of the Borrower in respect of such L/C Disbursement shall be discharged and replaced with the resulting ABR Borrowing of Revolving Loans, and (ii) if such conditions precedent to borrowing have not been satisfied, then any such amount paid by any Revolving Credit Lender shall not constitute a Loan and shall not relieve the Borrower from its obligation to reimburse such L/C Disbursement), and the Administrative Agent will promptly pay to the Issuing Bank amounts so received by it from the Revolving Credit Lenders. The Administrative Agent will promptly pay to the Issuing Bank any amounts received by it from the Borrower pursuant to Section 2.22(e) prior to the time that any Revolving Credit Lender makes any payment pursuant to this paragraph (f); any such amounts received by the Administrative Agent thereafter will be promptly remitted by the Administrative Agent to the Revolving Credit Lenders that shall have made such payments and to the Issuing Bank, as their interests may appear. If any Revolving Credit Lender shall not have made its Pro Rata Percentage of such L/C Disbursement available to the Administrative Agent as provided above, the Borrower and such Lender (severally with respect to the Borrower) agree to pay interest on such amount, for each day from and including the date such amount is required to be paid in accordance with this paragraph to but excluding the date such amount is paid, to the Administrative Agent for the account of the Issuing Bank at (i) in the case of the Borrower, a rate per annum equal to the interest rate applicable to Revolving Loans pursuant to Section 2.06(a), and (ii) in the case of such Lender, for the first such day, the Federal Funds Effective Rate, and for each day thereafter, the Alternate Base Rate.
SECTION 2.03 Borrowing Procedure . In order to request a Borrowing (other than a deemed Borrowing pursuant to Section 2.02(f), as to which this Section 2.03 shall not apply), the Borrower shall notify the Administrative Agent of such request by telephone (a) in the case of a Eurodollar Borrowing, not later than 12:00 (noon), New York City time, three Business Days before a proposed Borrowing, and (b) in the case of an ABR Borrowing, not later than 12:00 (noon), New York City time, on the Business Day of a proposed Borrowing. Each such telephonic Borrowing Request shall be irrevocable, and shall be confirmed promptly by hand delivery or fax to the Administrative Agent of a written Borrowing Request and shall specify the following information: (i) whether the Borrowing then being requested is to be a Term Borrowing, an Incremental Term Borrowing or a Revolving Borrowing, and whether such
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Borrowing is to be a Eurodollar Borrowing or an ABR Borrowing; (ii) the date of such Borrowing (which shall be a Business Day); (iii) the number and location of the account to which funds are to be disbursed; (iv) the amount of such Borrowing; and (v) if such Borrowing is to be a Eurodollar Borrowing, the Interest Period with respect thereto; provided , however , that, notwithstanding any contrary specification in any Borrowing Request, each requested Borrowing shall comply with the requirements set forth in Section 2.02. If no election as to the Type of Borrowing is specified in any such notice, then the requested Borrowing shall be an ABR Borrowing. If no Interest Period with respect to any Eurodollar Borrowing is specified in any such notice, then the Borrower shall be deemed to have selected an Interest Period of one months duration. The Administrative Agent shall promptly advise the applicable Lenders of any notice given pursuant to this Section 2.03 (and the contents thereof), and of each Lenders portion of the requested Borrowing.
SECTION 2.04 Evidence of Debt; Repayment of Loans . (a) The Borrower hereby unconditionally promises to pay to the Administrative Agent for the account of each applicable Lender (i) the then unpaid principal amount of the applicable Class of Term Loans of such Lender as provided in Section 2.11 and (ii) the then unpaid principal amount of each Revolving Loan of such Lender on the Revolving Credit Maturity Date.
(b) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to such Lender resulting from each Loan made by such Lender from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time under this Agreement.
(c) The Administrative Agent shall maintain accounts in which it will record (i) the amount of each Loan made hereunder, the Class and Type thereof and, if applicable, the Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder from the Borrower or any Guarantor and each Lenders share thereof.
(d) The entries made in the accounts maintained pursuant to paragraphs (b) and (c) above shall be prima facie evidence of the existence and amounts of the obligations therein recorded absent manifest error; provided , however , that the failure of any Lender or the Administrative Agent to maintain such accounts or any error therein shall not in any manner affect the obligations of the Borrower to repay the Loans in accordance with their terms.
(e) Any Lender may request that Loans made by it hereunder be evidenced by a promissory note. In such event, the Borrower shall execute and deliver to such Lender a promissory note payable to such Lender and its registered assigns and in the form of Exhibit E-1 or E-2, as applicable. Notwithstanding any other provision of this Agreement, in the event any Lender shall request and receive such a promissory note, the interests represented by such note shall at all times (including after any assignment of all or part of such interests pursuant to Section 9.04) be represented by one or more promissory notes payable to the payee named therein or its registered assigns.
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SECTION 2.05 Fees . (a) The Borrower agrees to pay to each Revolving Credit Lender (which is not a Defaulting Lender), through the Administrative Agent, on the last Business Day of March, June, September and December in each year and on each date on which any Revolving Credit Commitment of such Lender shall expire or be terminated as provided herein, a commitment fee (the Commitment Fee ) equal to the Commitment Percentage Fee, per annum, on the average daily unused amount of the Revolving Credit Commitment of such Lender during the preceding quarter (or other period commencing with the date hereof or ending with the Revolving Credit Maturity Date or the date on which the Revolving Credit Commitments of such Lender shall expire or be terminated). All Commitment Fees shall be computed on the basis of the actual number of days elapsed in a year of 360 days.
(b) The Borrower agrees to pay to the Administrative Agent, for its own account, the administrative fees at the times and in the amounts separately agreed upon between the Borrower and the Administrative Agent (the Administrative Agent Fees ).
(c) The Borrower agrees to pay (i) to each Revolving Credit Lender (which is not a Defaulting Lender), through the Administrative Agent, on the last Business Day of March, June, September and December of each year and on the date on which the Revolving Credit Commitment of such Lender shall be terminated as provided herein, a fee (an L/C Participation Fee ) calculated on such Lenders Pro Rata Percentage of the daily aggregate L/C Exposure (excluding the portion thereof attributable to unreimbursed L/C Disbursements) during the preceding quarter (or shorter period commencing with the date hereof or ending with the Revolving Credit Maturity Date or the date on which all Letters of Credit have been canceled or have expired and the Revolving Credit Commitments of all Lenders shall have been terminated) at a rate per annum equal to the Applicable Margin from time to time used to determine the interest rate on Revolving Credit Borrowings comprised of Eurodollar Loans pursuant to Section 2.06, (ii) to the applicable Issuing Bank with respect to each Letter of Credit issued by such Issuing Bank, a fronting fee in the amount agreed with such Issuing Bank (but in no event more than 0.125% per annum) of the L/C Exposure (the Issuing Bank Fees ) and (iii) customary issuance and administration fees. All L/C Participation Fees and Issuing Bank Fees shall be computed on the basis of the actual number of days elapsed in a year of 360 days.
(d) [Intentionally Omitted].
(e) All Fees shall be paid on the dates due, in immediately available funds, to the Administrative Agent for distribution, if and as appropriate, among the Lenders, except that the Issuing Bank Fees shall be paid directly to the Issuing Bank. Once paid, none of the Fees shall be refundable under any circumstances.
SECTION 2.06 Interest on Loans . (a) Subject to the provisions of Section 2.07, the Loans comprising each ABR Borrowing shall bear interest (computed on the basis of the actual number of days elapsed over a year of 360 days (or, in the case of ABR Loans the interest payable on which is then based on the Prime Rate, over a year of 365 or 366 days, as applicable) and calculated from and including the date of such Borrowing to but excluding the date of repayment thereof) at a rate per annum equal to the Alternate Base Rate plus the Applicable Margin.
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(b) Subject to the provisions of Section 2.07, the Loans comprising each Eurodollar Borrowing shall bear interest (computed on the basis of the actual number of days elapsed over a year of 360 days) at a rate per annum equal to the Adjusted LIBO Rate for the Interest Period in effect for such Borrowing plus the Applicable Margin.
(c) Interest on each Loan shall be payable in arrears on the Interest Payment Dates applicable to such Loan except as otherwise provided in this Agreement. The applicable Alternate Base Rate or Adjusted LIBO Rate for each Interest Period or day within an Interest Period, as the case may be, shall be determined by the Administrative Agent, and such determination shall be conclusive absent manifest error.
SECTION 2.07 Default Interest . Notwithstanding the foregoing, if upon the occurrence and during the continuance of any Event of Default under paragraph (b), (c), (g) or (h) of Section 7.01, any principal of or interest on any Loan or any fee or other amount payable by the Borrower hereunder is not paid when due, whether at stated maturity, upon acceleration or otherwise, then, until such overdue amount shall have been paid in full, to the extent permitted by law, all overdue amounts outstanding under this Agreement and the other Loan Documents shall bear interest (after as well as before judgment), payable on demand, (a) in the case of principal or interest, at the rate otherwise applicable to such Loan (or in the case of interest, the Loan to which such interest relates) pursuant to Section 2.06 plus 2.00% per annum and (b) in all other cases, at a rate per annum (computed on the basis of the actual number of days elapsed over a year of 360 days) equal to the rate that would be applicable to an ABR Revolving Loan plus 2.00% per annum.
SECTION 2.08 Alternate Rate of Interest . (a) In the event, and on each occasion, that on the day that is two Business Days prior to the commencement of any Interest Period for a Eurodollar Borrowing, (i) the Administrative Agent shall have determined that dollar deposits in the principal amounts of the Loans comprising such Borrowing are not generally available in the London interbank market, (ii) the Administrative Agent is advised by a Majority in Interest of the Lenders of the Class making or maintaining such Eurodollar Loans that the Adjusted LIBO Rate will not adequately and fairly reflect the cost to such Lenders of making or maintaining such Eurodollar Loans during such Interest Period or (iii) the Administrative Agent shall have determined that adequate and reasonable means do not exist for ascertaining the Adjusted LIBO Rate (including because the LIBO Screen Rate is not available or published on a current basis) for such Interest Period, the Administrative Agent shall, as soon as practicable thereafter, give written or fax notice of such determination to the Borrower and the Lenders. In the event of any such determination, until the Administrative Agent shall have advised the Borrower and the Lenders that the circumstances giving rise to such notice no longer exist, any request by the Borrower for a Eurodollar Borrowing pursuant to Section 2.03 or 2.10 shall be deemed to be a request for an ABR Borrowing. Each determination by the Administrative Agent under this Section 2.08(a) shall be conclusive absent manifest error.
(b) If at any time the Administrative Agent determines (which determination shall be conclusive absent manifest error) that (i) the circumstances set forth in clause (a)(iii) of this Section have arisen and such circumstances are unlikely to be temporary or (ii) the circumstances set forth in paragraph (a)(iii) of this Section have not arisen but either (w) the supervisor for the administrator of the LIBO Screen Rate has made a public statement that the administrator of the
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LIBO Screen Rate is insolvent (and there is no successor administrator that will continue publication of the LIBO Screen Rate), (x) the administrator of the LIBO Screen Rate has made a public statement identifying a specific date after which the LIBO Screen Rate will permanently or indefinitely cease to be published by it (and there is no successor administrator that will continue publication of the LIBO Screen Rate), (y) the supervisor for the administrator of the LIBO Screen Rate has made a public statement identifying a specific date after which the LIBO Screen Rate will permanently or indefinitely cease to be published or (z) the supervisor for the administrator of the LIBO Screen Rate or a Governmental Authority having jurisdiction over the Administrative Agent has made a public statement identifying a specific date after which the LIBO Screen Rate may no longer be used for determining interest rates for loans, then the Administrative Agent and the Borrower shall endeavor to establish an alternate rate of interest to the LIBO Rate that gives due consideration to the then prevailing market convention for determining a rate of interest for syndicated loans in the United States denominated in Dollars at such time, and the Administrative Agent, Holdings and the Borrower shall enter into an amendment to this Agreement to reflect such alternate rate of interest and such other related changes to this Agreement as may be applicable (but, for the avoidance of doubt, such related changes shall not include a reduction of the Applicable Rate); provided that, if such alternate rate of interest as so determined would be less than zero, such rate shall be deemed to be zero for all purposes of this Agreement. Notwithstanding anything to the contrary in Section 9.08, such amendment shall become effective without any further action or consent of any other party to this Agreement so long as the Administrative Agent shall not have received, within five Business Days of the date a copy of such amendment is provided to the Lenders, a written notice from the Required Lenders stating that the Required Lenders object to such amendment. Until an alternate rate of interest shall be determined in accordance with this clause (b) (but, in the case of the circumstances described in clause (ii) of the first sentence of this Section 2.08(b), only to the extent the LIBO Screen Rate for such Interest Period is not available or published at such time on a current basis), any request by the Borrower for a Eurodollar Borrowing pursuant to Section 2.03 or 2.10 shall be deemed to be a request for an ABR Borrowing.
SECTION 2.09 Termination and Reduction of Commitments . (a) The Term Loan Commitments (other than any Incremental Term Loan Commitments, which shall terminate as provided in the related Incremental Assumption Agreement) shall automatically terminate upon the making of the Term Loans on the Closing Date. The Revolving Credit Commitments (other than any Incremental Revolving Credit Commitments of a different Class than the Revolving Facility, which shall terminate as provided in the related Incremental Assumption Agreement) shall automatically terminate on the Revolving Credit Maturity Date. The L/C Commitment shall automatically terminate on the earlier to occur of (i) the termination of all Initial Revolving Credit Commitments and (ii) the L/C Commitment Maturity Date.
(b) Upon at least three Business Days prior irrevocable written or fax notice to the Administrative Agent, the Borrower may at any time in whole permanently terminate, or from time to time in part permanently reduce, the Term Loan Commitments or the Revolving Credit Commitments; provided , however , that (i) each partial reduction of the Term Loan Commitments or the Revolving Credit Commitments shall be in an integral multiple of $1,000,000 and in a minimum amount of $5,000,000 and (ii) the Total Revolving Credit Commitment shall not be reduced to an amount that is less than the Aggregate Revolving Credit Exposure at the time. A notice of termination or reduction may state that such notice is conditioned upon the effectiveness of other credit facilities, indentures or similar agreements or other transactions, in which case such notice may be revoked by the Borrower (by notice to the Administrative Agent on or prior to the specified effective date) if such condition is not satisfied.
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(c) Each reduction in the Term Loan Commitments or the Revolving Credit Commitments hereunder shall be made ratably among the Lenders in accordance with their respective applicable Commitments. The Borrower shall pay to the Administrative Agent for the account of the applicable Lenders, on the date of each termination or reduction, the Commitment Fees on the amount of the Revolving Credit Commitments so terminated or reduced accrued to but excluding the date of such termination or reduction.
SECTION 2.10 Conversion and Continuation of Borrowings . The Borrower shall have the right at any time upon prior irrevocable notice to the Administrative Agent (a) not later than 12:00 (noon), New York City time, on the Business Day of conversion, to convert any Eurodollar Borrowing into an ABR Borrowing, (b) not later than 12:00 (noon), New York City time, three Business Days prior to conversion or continuation, to convert any ABR Borrowing into a Eurodollar Borrowing or to continue any Eurodollar Borrowing as a Eurodollar Borrowing for an additional Interest Period, and (c) not later than 12:00 (noon), New York City time, three Business Days prior to conversion, to convert the Interest Period with respect to any Eurodollar Borrowing to another permissible Interest Period, subject in each case to the following:
(i) [intentionally omitted];
(ii) each conversion or continuation shall be made pro rata among the Lenders in accordance with the respective principal amounts of the Loans comprising the converted or continued Borrowing;
(iii) if less than all the outstanding principal amount of any Borrowing shall be converted or continued, then each resulting Borrowing shall satisfy the limitations specified in Sections 2.02(a) and 2.02(b) regarding the principal amount and maximum number of Borrowings of the relevant Type;
(iv) each conversion shall be effected by each Lender and the Administrative Agent by recording for the account of such Lender the new Loan of such Lender resulting from such conversion and reducing the Loan (or portion thereof) of such Lender being converted by an equivalent principal amount; accrued interest on any Eurodollar Loan (or portion thereof) being converted shall be paid by the Borrower at the time of conversion;
(v) if any Eurodollar Borrowing is converted at a time other than the end of the Interest Period applicable thereto, the Borrower shall pay, upon demand, any amounts due to the Lenders pursuant to Section 2.16;
(vi) any portion of a Borrowing maturing or required to be repaid in less than one month may not be converted into or continued as a Eurodollar Borrowing;
(vii) any portion of a Eurodollar Borrowing that cannot be converted into or continued as a Eurodollar Borrowing by reason of the immediately preceding clause shall be automatically converted at the end of the Interest Period in effect for such Borrowing into an ABR Borrowing;
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(viii) no Interest Period may be selected for any Eurodollar Term Loan Borrowing that would end later than a Term Loan Repayment Date, as the case may be, occurring on or after the first day of such Interest Period if, after giving effect to such selection, the aggregate outstanding amount of (a) the Eurodollar Term Borrowings of the applicable Class with Interest Periods ending on or prior to such Term Loan Repayment Date, and (b) the ABR Term Loan Borrowings of the applicable Class would not be at least equal to the principal amount of Term Borrowings to be paid on such Term Loan Repayment Date; and
(ix) upon notice to the Borrower from the Administrative Agent given at the request of the Required Lenders, after the occurrence and during the continuance of an Event of Default, no outstanding Loan may be converted into, or continued as, a Eurodollar Loan.
Each notice pursuant to this Section 2.10, which shall be in writing, shall be irrevocable and shall refer to this Agreement and specify (i) the identity and amount of the Borrowing that the Borrower request be converted or continued, (ii) whether such Borrowing is to be converted to or continued as a Eurodollar Borrowing or an ABR Borrowing, (iii) if such notice requests a conversion, the date of such conversion (which shall be a Business Day) and (iv) if such Borrowing is to be converted to or continued as a Eurodollar Borrowing, the Interest Period with respect thereto. If no Interest Period is specified in any such notice with respect to any conversion to or continuation as a Eurodollar Borrowing, the Borrower shall be deemed to have selected an Interest Period of one months duration. The Administrative Agent shall advise the Lenders of any notice given pursuant to this Section 2.10 and of each Lenders portion of any converted or continued Borrowing. If the Borrower shall not have given notice in accordance with this Section 2.10 to continue any Borrowing into a subsequent Interest Period (and shall not otherwise have given notice in accordance with this Section 2.10 to convert such Borrowing), such Borrowing shall, at the end of the Interest Period applicable thereto (unless repaid pursuant to the terms hereof), automatically be converted into an ABR Borrowing.
SECTION 2.11 Repayment of Term Borrowings . (a) The Borrower shall repay to the Administrative Agent, for the account of the Term Lenders, on the last Business Day of each March, June, September and December, beginning with the last Business Day of March 2019 and ending with the first such day to occur prior to the Term Loan Maturity Date (each such date being called a Repayment Date ), a principal amount of Term Loans (other than any Term Loans that by their terms do not share ratably in such payments as specified herein) for each such date equal to 0.25% of the aggregate principal amount of the Term Loans outstanding on the Closing Date, as adjusted from time to time pursuant to Sections 2.11(b), 2.12, 2.13(f) and 2.23(c), together in each case with accrued and unpaid interest on the principal amount to be paid to, but excluding, the date of such payment.
(b) In the event and on each occasion that the Term Loan Commitments shall be reduced or shall expire or terminate other than as a result of the making of a Term Loan, the installments payable on each Term Loan Repayment Date, as applicable, shall be reduced pro rata (or otherwise in accordance with this Agreement) by an aggregate amount equal to the amount of such reduction, expiration or termination.
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(c) To the extent not previously paid, all Term Loans shall be due and payable on the Term Loan Maturity Date or the Incremental Term Loan Maturity Date, as applicable, together with accrued and unpaid interest on the principal amount to be paid to, but excluding, the date of payment.
(d) All repayments pursuant to this Section 2.11 shall be subject to Section 2.16, but shall otherwise be without premium or penalty.
SECTION 2.12 Optional Prepayment . (a) The Borrower shall have the right at any time and from time to time to prepay any Borrowing, in whole or in part, without premium or penalty, except in the case of a Repricing Event (as defined below), upon at least three Business Days prior written or fax notice (or telephone notice promptly confirmed by written or fax notice) in the case of Eurodollar Loans, or written or fax notice (or telephone notice promptly confirmed by written or fax notice) on the same Business Day of prepayment in the case of ABR Loans, to the Administrative Agent before 12:00 (noon), New York City time; provided , however , that each partial prepayment shall be in an amount that is an integral multiple of $500,000 and not less than $1,000,000.
(b) Optional prepayments of Term Loans pursuant to Section 2.12(a) shall be allocated among the Classes of outstanding Term Loans as specified by the Borrower and applied against the remaining scheduled installments of principal due in respect of such Term Loans under Section 2.11 as directed by the Borrower (or, in the absence of such direction, in direct order of maturity).
(c) Notwithstanding anything to the contrary contained in this Section 2.12 or any other provision of this Agreement and without otherwise limiting the rights in respect of prepayments of the Term Loans, Holdings, the Borrower or any Restricted Subsidiary may repurchase outstanding Term Loans through Dutch auctions open to all Lenders holding Term Loans and/or open market purchases pursuant to this Section 2.12(c) on the following basis:
(i) Holdings, the Borrower or any Restricted Subsidiary may conduct one or more Dutch auctions in compliance with the terms and conditions set forth in this Section 2.12(c)(i) (each such Dutch auction, an Auction ) to repurchase all or any portion of the Term Loans:
(A) To commence any Auction, Holdings, the Borrower or the relevant Restricted Subsidiary shall provide written notice to the Administrative Agent (for distribution to the Lenders) of the Term Loans that will be the subject of the Auction (an Auction Notice ). Each Auction Notice shall be in a form reasonably acceptable to the Administrative Agent and shall contain (x) the total cash value of the bid, in a minimum amount of $10,000,000 with minimum increments of $1,000,000 (the Auction Amount ) and (y) the discount to par, which shall be a range (the Discount Range ) of percentages of the par principal amount of the Term Loans at issue that represents the range of purchase prices that could be paid in the Auction;
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(B) In connection with any Auction, each Term Lender may, in its sole discretion, participate in such Auction and may provide the Administrative Agent with a notice of participation (the Return Bid ), which shall be in a form reasonably acceptable to the Administrative Agent and shall specify (x) a price reflecting a discount to par that must be expressed as a price (the Reply Discount Price ), which must be within the Discount Range, and (y) a principal amount of Term Loans which must be in increments of $1,000,000 or in an amount equal to the Term Lenders entire remaining amount of such Loans (the Reply Amount ). Term Lenders may only submit one Return Bid per Auction. In addition to the Return Bid, the participating Term Lender must execute and deliver, to be held in escrow by the Administrative Agent, an Affiliated Lender Assignment and Assumption;
(C) Based on the Reply Discount Prices and Reply Amounts received by the Administrative Agent, the Administrative Agent, in consultation with Holdings, the Borrower or the relevant Restricted Subsidiary, as applicable, will determine the applicable discount (the Applicable Discount ) for the Auction, which will be the lowest Reply Discount Price for which Holdings, the Borrower or the relevant Restricted Subsidiary, as applicable, can complete the Auction at the Auction Amount; provided that, in the event that the Reply Amounts are insufficient to allow Holdings, the Borrower or the relevant Restricted Subsidiary, as applicable, to complete a purchase of the entire Auction Amount (any such Auction, a Failed Auction ), the Borrower shall either, at its election, (x) withdraw the Auction or (y) complete the Auction at an Applicable Discount equal to the highest Reply Discount Price. Holdings, the Borrower or the relevant Restricted Subsidiary, as applicable, shall purchase Term Loans (or the respective portions thereof) from each Term Lender with a Reply Discount Price reflecting a discount from par that is equal to or greater than that of the Applicable Discount ( Qualifying Bids ) at the Applicable Discount; provided that if the aggregate proceeds required to purchase all Term Loans subject to Qualifying Bids would exceed the Auction Amount for such Auction, Holdings, the Borrower or the relevant Restricted Subsidiary, as applicable, shall purchase such Term Loans at the Applicable Discount ratably based on the principal amounts of such Qualifying Bids (subject to rounding requirements specified by the Administrative Agent). Each participating Term Lender will receive notice of a Qualifying Bid as soon as reasonably practicable but in no case later than five Business Days from the date the Return Bid was due;
(D) Once initiated by an Auction Notice, Holdings, the Borrower or the relevant Restricted Subsidiary, as applicable, may not withdraw an Auction other than a Failed Auction. Furthermore, in connection with any Auction, upon submission by a Term Lender of a Qualifying Bid, such Lender (each, a Qualifying Lender ) will be obligated to sell the entirety or its allocable portion of the Reply Amount, as the case may be, at the Applicable Discount. Each
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purchase of Term Loans in an Auction shall be consummated pursuant to procedures (including as to response deadlines, rounding amounts, type and Interest Period of accepted Term Loans, and calculation of the Applicable Discount referred to above) established by the Administrative Agent and agreed to by Holdings, the Borrower or the relevant Restricted Subsidiary, as applicable; and
(E) The repurchases by Holdings, the Borrower or the relevant Restricted Subsidiary, as applicable, of Term Loans in an Auction pursuant to this Section 2.12(c) (i) shall be subject to the following conditions: (1) the Auction is open to all Term Lenders on a pro rata basis, (2) no Event of Default has occurred or is continuing or would result therefrom, (3) Holdings, the Borrower or the relevant Restricted Subsidiary, as applicable, shall execute an Affiliated Lender Assignment and Assumption with each Lender selling any Term Loans in the relevant Auction, (4) [intentionally omitted], (5) any Term Loans repurchased pursuant to this Section 2.12(c) shall be automatically and permanently canceled upon acquisition thereof by Holdings, the Borrower or the relevant Restricted Subsidiary, as applicable, and (6) none of Holdings, the Borrower or the relevant Restricted Subsidiary, as applicable, shall use the proceeds of Revolving Loans to make any such repurchase; and
(ii) Holdings, the Borrower or any Restricted Subsidiary may conduct one or more open market purchases of all or any portion of the Term Loans without the consent of the Administrative Agent to such purchase subject to the following conditions: (1) as of the date of entry into a binding agreement with respect to the relevant open market purchase, no Default or Event of Default has occurred or is continuing or would result therefrom, (2) Holdings, the Borrower or the relevant Restricted Subsidiary, as applicable, shall execute an Affiliated Lender Assignment and Assumption with each Lender selling any Term Loans in the relevant open market purchase, (3) [intentionally omitted], (4) any Term Loans repurchased pursuant to this Section 2.12(c) shall be automatically and permanently canceled upon acquisition thereof by Holdings, the Borrower or the relevant Restricted Subsidiary, as applicable, and (5) none of Holdings, the Borrower or the relevant Restricted Subsidiary, as applicable, shall use the proceeds of Revolving Loans to make any such repurchase.
(d) Each notice of prepayment shall specify (i) the prepayment date, (ii) the principal amount of each Borrowing (or portion thereof) to be prepaid and (iii) the Class of Loans to be prepaid and the scheduled installment or installments of principal to which such prepayment is to be applied. Each such notice shall be irrevocable and shall commit the Borrower to prepay such Borrowing by the amount stated therein on the date stated therein; provided , however , that such notice of prepayment may state that such notice is conditioned upon the effectiveness of other credit facilities, indentures or similar agreements or other transactions, in which case such notice may be revoked by the Borrower (by notice to the Administrative Agent on or prior to the specified effective date) if such condition is not satisfied; provided further , however , that the provisions of Section 2.16 shall apply with respect to any such revocation or extension. All prepayments under this Section 2.12 shall be subject to Section 2.16 and other than prepayments of ABR Revolving Loans that are not made in connection with the termination or permanent reduction of the Revolving Credit Commitments, shall be accompanied by accrued and unpaid interest on the principal amount to be prepaid to but excluding the date of payment.
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(e) In the event that on or prior to the date that is six months after the Closing Date, (i) all or a portion of the Term Loans funded on the Closing Date are prepaid in a Repricing Event (including, for the avoidance of doubt, any prepayment made pursuant to Section 2.13(d) that constitutes a Repricing Event) or (ii) a Term Lender is deemed a Non-Consenting Lender and must assign its Term Loans funded on the Closing Date pursuant to Section 2.21 in connection with any waiver, amendment or modification that constitutes a Repricing Event, then, in each case, the aggregate principal amount so prepaid or assigned will be subject to a fee payable by the Borrower equal to 1.00% of the principal amount of such Term Loans repaid or assigned in connection with such Repricing Event, on the date of such Repricing Event. Such fee shall be paid by the Borrower to the Administrative Agent, for the account of the applicable Lenders of the applicable Class, on the date of such Repricing Event. For the purpose of this Section 2.12(e), (A) Repricing Event shall mean each of (1) the refinancing of all or a portion of the Term Loans funded on the Closing Date with the proceeds of any syndicated term loans secured on a pari passu basis with the Term Loans funded on the Closing Date (including any Replacement Term Loans) incurred by any Loan Party having a Yield (as determined on the date of initial incurrence thereof) that is less than the Yield (as determined on such date) applicable to the Term Loans so refinanced and (2) any amendment, waiver or other modification of or to this Agreement that has the effect of reducing the Yield applicable to the Term Loans funded on the Closing Date; provided that, in each case of clauses (1) and (2), (x) the primary purpose of such refinancing or amendment, waiver or other modification is to reduce the Yield applicable to the Term Loans funded on the Closing Date and (y) in no event shall any such refinancing or amendment, waiver or other modification consummated in connection with a Change in Control, Qualified Public Offering or Transformative Acquisition constitute a Repricing Event and (B) Transformative Acquisition shall mean any acquisition by Holdings, the Borrower or any Restricted Subsidiary, whether by purchase, merger or otherwise, of all or substantially all of the assets of, or any business line, unit or division of, any Person or of a majority of the outstanding Equity Interests of any Person that (1) is not permitted by the terms of the Loan Documents immediately prior to the consummation of such acquisition or (2) if permitted by the terms of the Loan Documents immediately prior to the consummation of such acquisition, the terms of the Loan Documents would not provide Holdings, the Borrower and its Restricted Subsidiaries with adequate flexibility for the continuation or expansion of their combined operations following such consummation, as determined by the Borrower acting in good faith.
SECTION 2.13 Mandatory Prepayments . (a) In the event of any termination of all the Revolving Credit Commitments, the Borrower shall, on the date of such termination, repay or prepay all its outstanding Revolving Credit Borrowings and replace or cause to be canceled (or make other arrangements satisfactory to the Administrative Agent and the Issuing Bank with respect to) all outstanding Letters of Credit. If, after giving effect to any partial reduction of the Revolving Credit Commitments or at any other time, the Aggregate Revolving Credit Exposure would exceed the Total Revolving Credit Commitment, then the Borrower shall, on the date of such reduction or at such other time, respectively, repay or prepay Revolving Loans and, after the Revolving Loans shall have been repaid or prepaid in full, replace or cause to be canceled (or make other arrangements satisfactory to the Administrative Agent and the Issuing Bank with respect to) Letters of Credit in an amount sufficient to eliminate such excess; provided, however, that Letters of Credit shall be cash collateralized or otherwise backstopped in an amount equal to 103% of the undrawn face amount thereof. The Borrower shall repay or prepay each Revolving Loan no later than the date that is 364 days following the date on which such Revolving Loan was made.
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(b) Not later than the third Business Day following the receipt of Net Cash Proceeds in respect of any Asset Sale made pursuant to Section 6.05(b) by the Borrower and its Restricted Subsidiaries, the Borrower shall apply 100% of the Net Cash Proceeds received with respect thereto to prepay outstanding Term Loans in accordance with Section 2.13(f); provided , however , that prepayments by the Borrower under this clause (b) shall only be required if the aggregate amount of mandatory prepayments that would otherwise be required under this clause (b) for such fiscal year exceeds $2,500,000 (with only the amount in excess of such amount required to be used to prepay the Term Loans).
(c) No later than five Business Days after the date on which the financial statements with respect to each fiscal year are required to be delivered pursuant to Section 5.04(a), commencing with the fiscal year ending December 31, 2019, the Borrower shall prepay outstanding Term Loans in accordance with Section 2.13(f) in an aggregate principal amount (the ECF Payment Amount ) equal to the excess, if any, of (A) the ECF Percentage of Excess Cash Flow for such fiscal year then ended minus , without duplication of amounts reducing Excess Cash Flow, (B) at the option of the Borrower, the aggregate principal amount of (x) any optional prepayments or repurchases of Term Loans, Revolving Loans or Incremental Equivalent Debt that is secured on a pari passu basis with the Credit Facilities prior to the date of prepayment pursuant to this Section 2.13(c), and (y) the amount of any reduction in the outstanding amount of any Term Loans resulting from any assignment made to Holdings, the Borrower or any of its Restricted Subsidiaries in accordance with Section 2.12(c) (including in connection with any Auction) prior to the date of prepayment pursuant to this Section 2.13(c), in the case of this clause (y), based upon the actual amount of cash paid in connection with the relevant assignment, in each case, only to the extent that (I) such prepayments were not financed with the proceeds of long-term Indebtedness (other than Revolving Loans) of the Borrower and its Restricted Subsidiaries, (II) if such prepayment is a prepayment of Revolving Loans or of Incremental Equivalent Debt in the form of a revolving facility, such prepayment is accompanied by a corresponding termination or reduction of the Revolving Credit Commitment or relevant commitment, respectively, and (III) such prepayment was not previously applied to reduce the amount of any prepayment required by this clause (c); provided , however , that any such prepayment by the Borrower under this clause (c) in respect of any fiscal year shall only be required to the extent (if any) by which the ECF Payment Amount for such fiscal year exceeds $2,000,000.
(d) In the event that Holdings, the Borrower or any other Restricted Subsidiary shall receive Net Cash Proceeds from the issuance or incurrence of Indebtedness for borrowed money of Holdings, the Borrower or any other Restricted Subsidiary (other than any cash proceeds from the issuance of Indebtedness for borrowed money otherwise permitted pursuant to Section 6.01), the Borrower shall, substantially simultaneously with (and in any event not later than the third Business Day next following) the receipt of such Net Cash Proceeds by Holdings, such Borrower or such Restricted Subsidiary, apply an amount equal to 100% of such Net Cash Proceeds to prepay outstanding Term Loans in accordance with Section 2.13(f).
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(e) [Intentionally Omitted].
(f) Mandatory prepayments of the Term Loans shall be applied to the installments thereof as directed by the Borrower (or, in the absence of direction from the Borrower, in the direct order of maturity); provided that in the case of any mandatory prepayment in respect of any Asset Sale, the Borrower may apply the Net Cash Proceeds thereof ratably to the payment of the Term Loans and any other indebtedness that is secured on a pari passu basis with the Term Loans; provided further that any amount that is offered to prepay any such other indebtedness and not accepted by the holders thereof shall be applied to prepay the Term Loans (subject to the right of Lenders to decline such prepayment as described below ).
(g) if the Borrower determines in good faith that any prepayment described under clause (b) or clause (c) above (i) in the case of any prepayment attributable to any Foreign Subsidiary, would violate any local law ( e.g ., financial assistance, corporate benefit, thin capitalization, capital maintenance and similar legal principles, restrictions on upstreaming of cash intra-group or the fiduciary or statutory duties of the directors of the relevant subsidiaries), (ii) would require the Borrower or any Restricted Subsidiary to incur a material and adverse Tax liability (including any material and adverse withholding Tax) or (iii) in the case of any prepayment attributable to any joint venture, would violate any organizational document of such joint venture (or any relevant shareholders or similar agreement), in each case if the amount subject to the relevant prepayment were upstreamed or transferred as a distribution or dividend (any amount limited as set forth in clauses (i) through (iii) of this paragraph, a Restricted Amount ), the amount of the relevant prepayment shall be reduced by the Restricted Amount; provided that (i) if the circumstance giving rise to any Restricted Amount ceases to exist within 365 days following the end of the relevant fiscal year or the event giving rise to the relevant prepayment, as applicable, the relevant Restricted Subsidiary shall promptly repatriate or distribute the amount that no longer constitutes a Restricted Amount to the Borrower for application to the Term Loans as required above promptly following the date on which the relevant circumstance ceases to exist and (ii) in no event shall any Restricted Amount increase the Available Amount.
(h) Any Lender (each, a Declining Lender ) may elect not to accept any mandatory prepayment, except in the case of clause (d) above. Any prepayment amount declined by a Declining Lender (any such declined payment, the Declined Proceeds ) will be an addition to the Available Basket.
(i) Holdings shall deliver to the Administrative Agent, at the time of each prepayment required under this Section 2.13, (i) a certificate signed by a Financial Officer of the Borrower setting forth in reasonable detail the calculation of the amount of such prepayment and (ii) to the extent practicable, at least three days prior irrevocable written notice of such prepayment. Each notice of prepayment shall specify the prepayment date, the Class and Type of each Loan being prepaid and the principal amount of each Loan (or portion thereof) to be prepaid. All prepayments of Borrowings under this Section 2.13 shall be subject to Section 2.16 and, in the case of Section 2.13(d), Section 2.12(e), but shall otherwise be without premium or penalty, and shall be accompanied by accrued and unpaid interest on the principal amount to be prepaid to, but excluding ,the date of payment.
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SECTION 2.14 Reserve Requirements; Change in Circumstances . (a) Notwithstanding any other provision of this Agreement, if any Change in Law shall:
(i) impose, modify or deem applicable any reserve, special deposit or similar requirement against assets of, deposits with or for the account of or credit extended to or participated in by any Lender or the Issuing Bank (except any such reserve requirement that is reflected in the Adjusted LIBO Rate);
(ii) subject any Recipient to any Taxes (other than (A) Indemnified Taxes, (B) Taxes described in clauses (b) through (d) of the definition of Excluded Taxes and (C) Connection Income Taxes) on its loans, loan principal, letters of credit, commitments, or other obligations, or its deposits, reserves, other liabilities or capital attributable thereto; or
(iii) impose on such Lender or the Issuing Bank or the London interbank market any other condition, cost or expense affecting this Agreement or Eurodollar Loans made by such Lender or any Letter of Credit or participation therein (other than with respect to Taxes);
and the result of any of the foregoing shall be to increase the cost to such Lender, the Issuing Bank or such other Recipient of making, converting to, continuing or maintaining any Eurodollar Loan, or maintaining its obligation to make such a loan, or increase the cost to any Lender, the Issuing Bank or such other Recipient of issuing or maintaining any Letter of Credit or purchasing or maintaining a participation therein or to reduce the amount of any sum received or receivable by such Lender, the Issuing Bank or such other Recipient hereunder (whether of principal, interest or otherwise), then the Borrower will pay to such Lender, the Issuing Bank or such other Recipient, as the case may be, upon demand, such additional amount or amounts as will compensate such Lender, the Issuing Bank or such other Recipient, as the case may be, for such additional costs incurred or reduction suffered; provided that the Borrower shall not be liable for such compensation as a result of circumstances referred to above (A) if such circumstances are resulting from a market disruption and are not generally affecting the banking market or (B) in the case of any request for payment in respect of a market disruption, such request is not made by the Required Lenders.
(b) If any Lender or the Issuing Bank shall have determined that any Change in Law affecting such Lender or Issuing Bank or any lending office of such Lender or Issuing Bank or such Lenders or Issuing Banks holding company, if any, regarding capital adequacy or liquidity requirements has or would have the effect of reducing the rate of return on such Lenders or the Issuing Banks capital or on the capital of such Lenders or the Issuing Banks holding company, if any, as a consequence of this Agreement or the Loans made or participations in Letters of Credit purchased by such Lender pursuant hereto or the Letters of Credit issued by the Issuing Bank pursuant hereto to a level below that which such Lender or the Issuing Bank or such Lenders or the Issuing Banks holding company could have achieved but for such Change in Law (taking into consideration such Lenders or the Issuing Banks policies and the policies of such Lenders or the Issuing Banks holding company with respect to capital adequacy or liquidity), then from time to time the Borrower shall pay to such Lender or the Issuing Bank, as the case may be, such additional amount or amounts as will compensate such Lender or the Issuing Bank or such Lenders or the Issuing Banks holding company for any such reduction suffered.
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(c) A certificate of a Lender or the Issuing Bank setting forth the amount or amounts necessary to compensate such Lender or the Issuing Bank or its holding company, as applicable, as specified in paragraph (a) or (b) above shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay such Lender or the Issuing Bank the amount shown as due on any such certificate delivered by it within 10 days after its receipt of the same.
(d) Failure or delay on the part of any Lender, the Issuing Bank or such other Recipient to demand compensation pursuant to this Section 2.14 shall not constitute a waiver of such Lenders, the Issuing Banks, or such other Recipients right to demand such compensation; provided that the Borrower shall not be under any obligation to compensate any Lender, the Issuing Bank or such other Recipient under paragraph (a) or (b) above with respect to any increased costs or expenses incurred or reductions suffered more than 270 days prior to the date that such Lender, the Issuing Bank or such other Recipient, as the case may be, notifies the Borrower of the Change in Law giving rise to such increased costs or expenses or reductions and of such Lenders, Issuing Banks or such other Recipients intention to claim compensation therefor; provided further that if the Change in Law giving rise to such increased costs or expenses or reductions is retroactive, then the 270-day period referred to above shall be extended to include the period of retroactive effect thereof.
Notwithstanding the above, a Lender will not be entitled to demand compensation for any increased cost or reduction with respect thereto if it is not the general policy or practice of such Lender to demand it of borrowers in similar circumstances under comparable provisions of credit agreements for borrowers of a similar nature.
SECTION 2.15 Change in Legality . (a) Notwithstanding any other provision of this Agreement, if any Change in Law shall make it unlawful for any Lender to make or maintain any Eurodollar Loan or to give effect to its obligations as contemplated hereby with respect to any Eurodollar Loan, then, by written notice to the Borrower and to the Administrative Agent:
(i) such Lender may declare that Eurodollar Loans will not thereafter (for the duration of such unlawfulness) be made by such Lender hereunder (or be continued for additional Interest Periods) and ABR Loans will not thereafter (for such duration) be converted into Eurodollar Loans, whereupon any request for a Eurodollar Borrowing (or to convert an ABR Borrowing to a Eurodollar Borrowing or to continue a Eurodollar Borrowing for an additional Interest Period) shall, as to such Lender only, be deemed a request for an ABR Loan (or a request to continue an ABR Loan as such or to convert a Eurodollar Loan into an ABR Loan, as the case may be), unless such declaration shall be subsequently withdrawn; and
(ii) such Lender may require that all outstanding Eurodollar Loans made by it be converted to ABR Loans, in which event all such Eurodollar Loans shall be automatically converted to ABR Loans as of the effective date of such notice as provided in paragraph (b) below.
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In the event any Lender shall exercise its rights under (i) or (ii) above, all payments and prepayments of principal that would otherwise have been applied to repay the Eurodollar Loans that would have been made by such Lender or the converted Eurodollar Loans of such Lender shall instead be applied to repay the ABR Loans made by such Lender in lieu of, or resulting from the conversion of, such Eurodollar Loans.
(b) For purposes of this Section 2.15, a notice to the Borrower by any Lender shall be effective as to each Eurodollar Loan made by such Lender, if lawful, on the last day of the Interest Period then applicable to such Eurodollar Loan; in all other cases such notice shall be effective on the date of receipt by the Borrower.
SECTION 2.16 Breakage . The Borrower shall indemnify each Lender against any loss or expense that such Lender may sustain or incur as a consequence of (a) any event, other than a default by such Lender in the performance of its obligations hereunder, that results in (i) such Lender receiving or being deemed to receive any amount on account of the principal of any Eurodollar Loan prior to the end of the Interest Period in effect therefor, (ii) the conversion of any Eurodollar Loan to an ABR Loan, or the conversion of the Interest Period with respect to any Eurodollar Loan, in each case other than on the last day of the Interest Period in effect therefor, or (iii) any Eurodollar Loan to be made by such Lender (including any Eurodollar Loan to be made pursuant to a conversion or continuation under Section 2.10) not being made after notice of such Loan shall have been given by the Borrower hereunder (any of the events referred to in this clause (a) being called a Breakage Event ) or (b) any default in the making of any payment or prepayment required to be made hereunder. In the case of any Breakage Event, such loss shall include an amount equal to the excess, as reasonably determined by such Lender, of (i) its cost of obtaining funds (but not loss of profits) for the Eurodollar Loan that is the subject of such Breakage Event for the period from the date of such Breakage Event to the last day of the Interest Period in effect (or that would have been in effect) for such Loan over (ii) the amount of interest likely to be realized by such Lender in redeploying the funds released or not utilized by reason of such Breakage Event for such period. A certificate of any Lender setting forth any amount or amounts that such Lender is entitled to receive pursuant to this Section 2.16 shall be delivered to the Borrower and shall be conclusive absent manifest error.
SECTION 2.17 Pro Rata Treatment . Except with respect to repurchases of Term Loans made in accordance with Section 2.12(c) and as required under Section 2.15 or 2.25 and subject to the express provisions of this Agreement that require or permit differing payments to be made to Non-Defaulting Lenders as opposed to Defaulting Lenders, each Borrowing, each payment or prepayment of principal of any Borrowing, each payment of interest on the Loans, each payment of the Commitment Fees, each reduction of the Term Loan Commitments or the Revolving Credit Commitments and each conversion of any Borrowing to or continuation of any Borrowing as a Borrowing of any Type shall be allocated pro rata among the Lenders in accordance with their respective applicable Commitments (or, if such Commitments shall have expired or been terminated, in accordance with the respective principal amounts of their outstanding Loans of the applicable Class). Each Lender agrees that in computing such Lenders portion of any Borrowing to be made hereunder, the Administrative Agent may, in its discretion, round each Lenders percentage of such Borrowing to the next higher or lower whole dollar amount.
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SECTION 2.18 Sharing of Setoffs . Each Lender agrees that if it shall, through the exercise of a right of bankers lien, setoff or counterclaim against the Borrower or any other Loan Party, or pursuant to a secured claim under Section 506 of the Bankruptcy Code or other security or interest arising from, or in lieu of, such secured claim, received by such Lender under any applicable bankruptcy, insolvency or other similar law or otherwise, or by any other means, obtain payment (voluntary or involuntary) in respect of any Loan or Loans or L/C Disbursement as a result of which the unpaid principal portion of its Loans and participations in L/C Disbursements shall be proportionately less than the unpaid principal portion of the Loans and participations in L/C Disbursements of any other Lender, it shall be deemed simultaneously to have purchased from such other Lender at face value, and shall promptly pay to such other Lender the purchase price for, a participation in the Loans and L/C Exposure of such other Lender, so that the aggregate unpaid principal amount of the Loans and L/C Exposure and participations in Loans and L/C Exposure held by each Lender shall be in the same proportion to the aggregate unpaid principal amount of all Loans and L/C Exposure then outstanding as the principal amount of its Loans and L/C Exposure prior to such exercise of bankers lien, setoff or counterclaim or other event was to the principal amount of all Loans and L/C Exposure outstanding prior to such exercise of bankers lien, setoff or counterclaim or other event; provided , however , that (a) if any such purchase or purchases or adjustments shall be made pursuant to this Section 2.18 and the payment giving rise thereto shall thereafter be recovered, such purchase or purchases or adjustments shall be rescinded to the extent of such recovery and the purchase price or prices or adjustment restored without interest and (b) the provisions of this Section 2.18 shall not be construed to apply to any payment made by the Borrower pursuant to and in accordance with the express terms of this Agreement or any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans or participations in L/C Disbursements to any assignee or participant (including to the Borrower in connection with an Auction pursuant to Section 2.12(c)). The Borrower and Holdings expressly consent to the foregoing arrangements and agree that any Lender holding a participation in a Loan or L/C Disbursement deemed to have been so purchased may exercise any and all rights of bankers lien, setoff or counterclaim with respect to any and all moneys owing by the Borrower and Holdings to such Lender by reason thereof as fully as if such Lender was a direct creditor of the Borrower in the amount of such participation.
SECTION 2.19 Payments . (a) The Borrower shall make each payment (including principal of or interest on any Borrowing or any L/C Disbursement or any Fees or other amounts) hereunder and under any other Loan Document not later than 12:00 (noon), New York City time, on the date when due in immediately available Dollars, without setoff, defense or counterclaim. Each such payment (other than Issuing Bank Fees and customary issuance and administration fees of an Issuing Bank, which shall be paid directly to the applicable Issuing Bank) shall be made to the Administrative Agent at its offices at Eleven Madison Avenue, New York, NY 10010. All payments received by the Administrative Agent after 12:00 (noon), New York City time, shall be deemed received on the next succeeding Business Day (in the Administrative Agents sole discretion). The Administrative Agent shall promptly distribute to each Lender any payments received by the Administrative Agent on behalf of such Lender.
(b) Except as otherwise expressly provided herein, whenever any payment (including principal of or interest on any Borrowing or any Fees or other amounts) hereunder or under any other Loan Document shall become due, or otherwise would occur, on a day that is not a Business Day, such payment may be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of interest or Fees, if applicable.
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(c) Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Administrative Agent for the account of the Lenders or the Issuing Bank hereunder that the Borrower will not make such payment, the Administrative Agent may assume that the Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders or the Issuing Bank, as the case may be, the amount due. In such event, if the Borrower does not in fact make such payment, then each of the Lenders or the Issuing Bank, as the case may be, severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender, and to pay interest thereon, for each day from and including the date such amount is distributed to it but excluding the date of payment to the Administrative Agent, at a rate determined by the Administrative Agent to represent its cost of overnight or short-term funds (which determination shall be conclusive absent manifest error).
SECTION 2.20 Taxes . (a) Payments Free of Taxes . Any and all payments by or on account of any obligation of any Loan Party under any Loan Document shall be made without deduction or withholding for any Taxes, except as required by applicable law. If any applicable law (as determined in the good faith discretion of an applicable Withholding Agent) requires the deduction or withholding of any Tax from any such payment by a Withholding Agent, then the applicable Withholding Agent shall be entitled to make such deduction or withholding and shall timely pay the full amount deducted or withheld to the relevant Governmental Authority in accordance with applicable law and, if such Tax is an Indemnified Tax, then the sum payable by any Loan Party shall be increased as necessary so that after such deduction or withholding has been made (including such deductions and withholdings applicable to additional sums payable under this Section 2.20) the applicable Recipient receives an amount equal to the sum it would have received had no such deduction or withholding been made.
(b) Payment of Other Taxes by the Loan Parties . Each of Holdings and the Borrower shall, and shall cause each other Loan Party to, timely pay to the relevant Governmental Authority in accordance with applicable law, or at the option of the Administrative Agent timely reimburse it for the payment of, any Other Taxes.
(c) Indemnification by the Borrower . Each of Holdings and the Borrower shall jointly and severally indemnify each Recipient, within 10 days after demand therefor, for the full amount of any Indemnified Taxes (including Indemnified Taxes imposed or asserted on or attributable to amounts payable under this Section 2.20) payable or paid by such Recipient or required to be withheld or deducted from a payment to such Recipient and any reasonable expenses directly arising therefrom or with respect thereto, whether or not such Indemnified Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate reflecting the amount and a description of such payment or liability delivered to the Borrower by a Lender (with a copy to the Administrative Agent), or by the Administrative Agent on its own behalf or on behalf of a Lender, shall be conclusive absent manifest error.
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(d) Indemnification by the Lenders . Each Lender shall severally indemnify the Administrative Agent, within 10 days after demand therefor, for (i) any Indemnified Taxes attributable to such Lender (but only to the extent that none of Holdings or the Borrower has already indemnified the Administrative Agent for such Indemnified Taxes and without limiting the obligation of each of Holdings and the Borrower to do so), (ii) any Taxes attributable to such Lenders failure to comply with the provisions of Section 9.04(d) relating to the maintenance of a Participant Register and (iii) any Excluded Taxes attributable to such Lender, in each case, that are payable or paid by the Administrative Agent in connection with any Loan Document, and any reasonable expenses arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to any Lender by the Administrative Agent shall be conclusive absent manifest error. Each Lender hereby authorizes the Administrative Agent to set off and apply any and all amounts at any time owing to such Lender under any Loan Document or otherwise payable by the Administrative Agent to the Lender from any other source against any amount due to the Administrative Agent under this paragraph (d).
(e) Evidence of Payments . As soon as practicable after any payment of Taxes by any Loan Party to a Governmental Authority pursuant to this Section 2.20, the Borrower shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.
(f) Status of Lenders . (i) Any Lender that is entitled to an exemption from or reduction of withholding Tax with respect to payments made under any Loan Document shall deliver to the Borrower and the Administrative Agent, at the time or times reasonably requested by the Borrower or the Administrative Agent, such properly completed and executed documentation reasonably requested by the Borrower or the Administrative Agent as will permit such payments to be made without withholding or at a reduced rate of withholding. In addition, any Lender, if reasonably requested by the Borrower or the Administrative Agent, shall deliver such other documentation prescribed by applicable law or reasonably requested by the Borrower or the Administrative Agent as will enable the Borrower or the Administrative Agent to determine whether or not such Lender is subject to backup withholding or information reporting requirements. Notwithstanding anything to the contrary in the preceding two sentences, the completion, execution and submission of such documentation (other than such documentation set forth in Sections 2.20(f)(ii)(A), (ii)(B) and (ii)(D) below) shall not be required if in the Lenders reasonable judgment such completion, execution or submission would subject such Lender to any material unreimbursed cost or expense or would materially prejudice the legal or commercial position of such Lender.
(ii) Without limiting the generality of the foregoing:
(A) any Lender that is a U.S. Person shall deliver to the Borrower and the Administrative Agent on or prior to the date on which such Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Administrative Agent), executed originals of IRS Form W-9 certifying that such Lender is exempt from U.S. federal backup withholding Tax;
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(B) any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to the Borrower and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Administrative Agent), whichever of the following is applicable:
(1) in the case of a Foreign Lender claiming the benefits of an income tax treaty to which the United States is a party (x) with respect to payments of interest under any Loan Document, executed originals of IRS Form W-8BEN or IRS Form W-8BEN-E (or any successor thereto) establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the interest article of such tax treaty and (y) with respect to any other applicable payments under any Loan Document, IRS Form W-8BEN or IRS Form W-8BEN-E (or any successor thereto) establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the business profits or other income article of such tax treaty;
(2) executed originals of IRS Form W-8ECI;
(3) in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under Section 881(c) of the Code, (x) a certificate substantially in the form of Exhibit F-1 to the effect that such Foreign Lender is not a bank within the meaning of Section 881(c)(3)(A) of the Code, a 10 percent shareholder of the Borrower within the meaning of Section 881(c)(3)(B) of the Code, or a controlled foreign corporation described in Section 881(c)(3)(C) of the Code (a U.S. Tax Compliance Certificate ) and (y) executed originals of IRS Form W-8BEN or IRS Form W-8BEN-E (or any successor thereto); or
(4) to the extent a Foreign Lender is not the beneficial owner, executed originals of IRS Form W-8IMY, accompanied by IRS Form W-8ECI, IRS Form W-8BEN or IRS Form W-8BEN-E (or any successor thereto), a U.S. Tax Compliance Certificate substantially in the form of Exhibit F-2 or Exhibit F-3, IRS Form W-9, and/or other certification documents from each beneficial owner, as applicable; provided that if the Foreign Lender is a partnership and one or more direct or indirect partners of such Foreign Lender are claiming the portfolio interest exemption, such Foreign Lender may provide a U.S. Tax Compliance Certificate substantially in the form of Exhibit F-4 on behalf of each such direct or indirect partner;
(C) any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to the Borrower and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time
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thereafter upon the reasonable request of the Borrower or the Administrative Agent), executed originals of any other form prescribed by applicable law as a basis for claiming exemption from or a reduction in U.S. federal withholding Tax, duly completed, together with such supplementary documentation as may be prescribed by applicable law to permit the Borrower or the Administrative Agent to determine the withholding or deduction required to be made; and
(D) if a payment made to a Lender under any Loan Document would be subject to U.S. federal withholding Tax imposed by FATCA if such Lender were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender shall deliver to the Borrower and the Administrative Agent at the time or times prescribed by law and at such time or times reasonably requested by the Borrower or the Administrative Agent such documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by the Borrower or the Administrative Agent as may be necessary for the Borrower and the Administrative Agent to comply with their obligations under FATCA and to determine that such Lender has complied with such Lenders obligations under FATCA or to determine the amount to deduct and withhold from such payment. Solely for purposes of this clause (D), FATCA shall include any amendments made to FATCA after the date of this Agreement.
Each Lender agrees that if any form or certification it previously delivered expires or becomes obsolete or inaccurate in any respect, it shall update such form or certification or promptly notify the Borrower and the Administrative Agent in writing of its legal inability to do so.
(g) Treatment of Certain Refunds . If any party determines, in its sole discretion exercised in good faith, that it has received a refund of any Taxes as to which it has been indemnified pursuant to this Section 2.20 (including by the payment of additional amounts pursuant to this Section 2.20), it shall pay to the indemnifying party an amount equal to such refund (but only to the extent of indemnity payments made under this Section 2.20 with respect to the Taxes giving rise to such refund), net of all out-of-pocket expenses (including Taxes) of such indemnified party and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund). Such indemnifying party, upon the request of such indemnified party, shall repay to such indemnified party the amount paid over pursuant to this paragraph (g) ( plus any penalties, interest or other charges imposed by the relevant Governmental Authority) in the event that such indemnified party is required to repay such refund to such Governmental Authority. Notwithstanding anything to the contrary in this paragraph (g), in no event will the indemnified party be required to pay any amount to an indemnifying party pursuant to this paragraph (g) the payment of which would place the indemnified party in a less favorable net after-Tax position than the indemnified party would have been in if the Tax subject to indemnification and giving rise to such refund had not been deducted, withheld or otherwise imposed and the indemnification payments or additional amounts with respect to such Tax had never been paid. This paragraph shall not be construed to require any indemnified party to make available its Tax returns (or any other information relating to its Taxes that it deems confidential) to the indemnifying party or any other Person.
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(h) Survival . Each partys obligations under this Section 2.20 shall survive the resignation or replacement of the Administrative Agent or any assignment of rights by, or the replacement of, a Lender, the termination of the Commitments and the repayment, satisfaction or discharge of all obligations under any Loan Document.
(i) Issuing Bank . For purposes of this Section 2.20, the term Lender includes any Issuing Bank and the term applicable law includes FATCA.
SECTION 2.21 Assignment of Commitments Under Certain Circumstances; Duty to Mitigate . (a) In the event (i) any Lender or any Issuing Bank delivers a certificate requesting compensation pursuant to Section 2.14, (ii) any Lender or the Issuing Bank delivers a notice described in Section 2.15, (iii) the Borrower is required to pay any additional amount to any Lender or the Issuing Bank or any Governmental Authority on account of any Lender or the Issuing Bank pursuant to Section 2.20, (iv) any Lender has become a Defaulting Lender or (v) any Lender has become a Non-Consenting Lender, upon notice to such Lender or the Issuing Bank, as the case may be, and the Administrative Agent, the Borrower may require such Lender or the Issuing Bank to transfer and assign, without recourse (in accordance with and subject to the restrictions contained in Section 9.04), all of its interests, rights and obligations under this Agreement (or, in the case of clause (v) above, all of its interests, rights and obligations with respect to the Class of Loans or Commitments that is the subject of the related consent, amendment, waiver or other modification) to an Eligible Assignee that shall assume such assigned obligations and, with respect to clause (v) above, shall consent to such requested amendment, waiver or other modification of any Loan Document (which Eligible Assignee may be another Lender, if a Lender accepts such assignment); provided that (x) such assignment shall not conflict with any law, rule or regulation or order of any court or other Governmental Authority having jurisdiction, (y) the Borrower shall have received the prior written consent of the Administrative Agent (and, if a Revolving Credit Commitment is being assigned, of each Issuing Bank), which consents shall not unreasonably be withheld or delayed, and (z) the Borrower or such Eligible Assignee shall have paid to the affected Lender or Issuing Bank in immediately available funds an amount equal to the sum of the principal of and interest accrued to the date of such payment on the outstanding Loans or L/C Disbursements of such Lender or Issuing Bank, respectively, plus all Fees and other amounts accrued for the account of such Lender or Issuing Bank hereunder with respect thereto (including any amounts under 2.12(e), 2.14 or 2.16); provided, further, that, if prior to any such transfer and assignment the circumstances or event that resulted in such Lenders or the Issuing Banks claim for compensation under Section 2.14, notice under Section 2.15 or the amounts paid pursuant to Section 2.20, as the case may be, cease to cause such Lender or Issuing Bank to suffer increased costs or reductions in amounts received or receivable or reduction in return on capital, or cease to have the consequences specified in Section 2.15, or cease to result in amounts being payable under Section 2.20, as the case may be (including as a result of any action taken by such Lender or Issuing Bank pursuant to paragraph (b) below), or if such Lender or Issuing Bank shall waive its right to claim further compensation under Section 2.14 in respect of such circumstances or event or shall withdraw its notice under Section 2.15 or shall waive its right to further payments under Section 2.20 in respect of such circumstances or event or shall consent to the proposed
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amendment, waiver, consent or other modification, as the case may be, then such Lender or Issuing Bank shall not thereafter be required to make any such transfer and assignment hereunder. Each Lender hereby grants to the Administrative Agent an irrevocable power of attorney (which power is coupled with an interest) to execute and deliver, on behalf of such Lender as assignor, any Assignment and Acceptance necessary to effectuate any assignment of such Lenders interests hereunder in the circumstances contemplated by this Section 2.21(a).
(b) If (i) any Lender or Issuing Bank shall request compensation under Section 2.14, (ii) any Lender or Issuing Bank delivers a notice described in Section 2.15 or (iii) the Borrower is required to pay any additional amount to any Lender or Issuing Bank or any Governmental Authority on account of any Lender or Issuing Bank, pursuant to Section 2.20, then such Lender or Issuing Bank shall use reasonable efforts (which shall not require such Lender or Issuing Bank to incur an unreimbursed loss or unreimbursed cost or expense or otherwise take any action inconsistent with its internal policies or legal or regulatory restrictions or suffer any disadvantage or burden deemed by it to be significant) (x) to file any certificate or document reasonably requested in writing by the Borrower or (y) to assign its rights and delegate and transfer its obligations hereunder to another of its offices, branches or affiliates, if such filing or assignment would reduce its claims for compensation under Section 2.14 or enable it to withdraw its notice pursuant to Section 2.15 or would reduce amounts payable pursuant to Section 2.20, as the case may be, in the future. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender or Issuing Bank in connection with any such filing or assignment, delegation and transfer.
SECTION 2.22 Letters of Credit . (a) General . The Borrower may request the issuance of a Letter of Credit denominated in Dollars for its own account or for the account of any of the other Wholly Owned Subsidiaries of Holdings that is a Restricted Subsidiary (in which case the Borrower and such Restricted Subsidiary shall be co-applicants with respect to such Letter of Credit), in a form reasonably acceptable to the Administrative Agent and the Issuing Bank, at any time after the Closing Date and from time to time until the L/C Commitment Maturity Date. This Section 2.22 shall not be construed to impose an obligation upon any Issuing Bank to issue any Letter of Credit that is inconsistent with the terms and conditions of this Agreement. Notwithstanding anything to the contrary contained in this Section 2.22 or elsewhere in this Agreement, in the event that a Revolving Credit Lender is a Defaulting Lender, each Issuing Bank shall not be required to issue any Letter of Credit unless such Issuing Bank has entered into arrangements satisfactory to it and the Borrower to eliminate such Issuing Banks risk with respect to the participation in Letters of Credit by all such Defaulting Lenders, including by reallocating all or any part of such Defaulting Lenders participation in Letters of Credit among the Non-Defaulting Lenders and/or Cash Collateralizing each Defaulting Lenders Pro Rata Percentage of each L/C Disbursement in an amount not less than the Minimum Collateral Amount.
(b) Notice of Issuance, Amendment, Renewal, Extension; Certain Conditions . In order to request the issuance of a Letter of Credit (or to amend, renew or extend an existing Letter of Credit), the Borrower shall hand deliver or fax to an Issuing Bank and the Administrative Agent (reasonably in advance of the requested date of issuance, amendment, renewal or extension) a notice requesting the issuance of a Letter of Credit, or identifying the Letter of Credit to be amended, renewed or extended, the date of issuance, amendment, renewal
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or extension, the date on which such Letter of Credit is to expire (which shall comply with paragraph (c) below), the amount of such Letter of Credit, the name and address of the beneficiary thereof and such other information as shall be necessary to prepare such Letter of Credit. A Letter of Credit shall be issued, amended, renewed or extended only if, and upon issuance, amendment, renewal or extension of each Letter of Credit the Borrower shall be deemed to represent and warrant that, after giving effect to such issuance, amendment, renewal or extension (i) the L/C Exposure shall not exceed the L/C Sublimit, (ii) the portion of the L/C Exposure attributable to Letters of Credit issued by any Issuing Bank does not exceed the L/C Commitment of such Issuing Bank (unless otherwise agreed by such Issuing Bank) and (iii) the Aggregate Revolving Credit Exposure shall not exceed the Total Revolving Credit Commitment. For the avoidance of doubt, Credit Suisse AG, acting through any of its Affiliates or branches, in its capacity as an Issuing Bank hereunder, shall not be required to issue any trade or commercial letters of credit.
(c) Expiration Date . Each Letter of Credit shall expire at the close of business on the earlier of (x) the date that is one year after the date of the issuance of such Letter of Credit or such longer period of time as may be agreed by the Issuing Bank and (y) the L/C Maturity Date, unless such Letter of Credit expires by its terms on an earlier date; provided , however , that any standby Letter of Credit with a one-year tenor may, upon the request of the Borrower, include a provision providing for evergreen renewal thereof whereby such Letter of Credit shall be renewed automatically for additional periods (which shall in no event extend beyond the L/C Maturity Date unless cash collateralized or backstopped pursuant to arrangements reasonably satisfactory to the Issuing Bank thereof) unless the Issuing Bank notifies the beneficiary thereof at least 30 days (or such longer period as may be specified in such Letter of Credit) prior to the then-applicable expiration date that such Letter of Credit will not be renewed.
(d) Participations . By the issuance of a Letter of Credit and without any further action on the part of the Issuing Bank or the Lenders, the Issuing Bank hereby grants to each Revolving Credit Lender, and each such Lender hereby acquires from the Issuing Bank, a participation in such Letter of Credit equal to such Lenders Pro Rata Percentage of the aggregate amount available to be drawn under such Letter of Credit, effective upon the issuance of such Letter of Credit. In consideration and in furtherance of the foregoing, each Revolving Credit Lender hereby absolutely and unconditionally agrees to pay to the Administrative Agent, for the account of the Issuing Bank, such Lenders Pro Rata Percentage of each L/C Disbursement made by the Issuing Bank and not reimbursed by the Borrower (or, if applicable, another party pursuant to its obligations under any other Loan Document) forthwith on the date due as provided in Section 2.02(e). Each Revolving Credit Lender acknowledges and agrees that its obligation to acquire participations pursuant to this paragraph in respect of Letters of Credit is absolute and unconditional and shall not be affected by any circumstance whatsoever, including the occurrence and continuance of a Default or an Event of Default, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever.
(e) Reimbursement . If the Issuing Bank shall make any L/C Disbursement in respect of a Letter of Credit, the Borrower agrees to pay to the Administrative Agent an amount equal to such L/C Disbursement no later than the next Business Day after the Borrower shall have received notice from the Issuing Bank that payment of such draft will be made.
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(f) Obligations Absolute . The Borrowers obligation to reimburse L/C Disbursements as provided in paragraph (e) above shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement, under any and all circumstances whatsoever, and irrespective of:
(i) any lack of validity or enforceability of any Letter of Credit or any Loan Document, or any term or provision therein;
(ii) any amendment or waiver of or any consent to departure from all or any of the provisions of any Letter of Credit or any Loan Document;
(iii) the existence of any claim, setoff, defense or other right that the Borrower, any other party guaranteeing, or otherwise obligated with, the Borrower, any other Subsidiary or other Affiliate thereof or any other person may at any time have against the beneficiary under any Letter of Credit, the Issuing Bank, the Administrative Agent or any Lender or any other person, whether in connection with this Agreement, any other Loan Document or any other related or unrelated agreement or transaction;
(iv) any draft or other document presented under a Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect;
(v) payment by the Issuing Bank under a Letter of Credit against presentation of a draft or other document that does not comply with the terms of such Letter of Credit; and
(vi) any other act or omission to act or delay of any kind of the Issuing Bank, the Lenders, the Administrative Agent or any other person or any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section 2.22, constitute a legal or equitable discharge of the Borrowers obligations hereunder.
Without limiting the generality of the foregoing, it is expressly understood and agreed that the absolute and unconditional obligation of the Borrower hereunder to reimburse L/C Disbursements will not be excused by the gross negligence or willful misconduct of the Issuing Bank. However, the foregoing shall not be construed to excuse the Issuing Bank from liability to the Borrower to the extent of any direct damages (as opposed to consequential damages, claims in respect of which are hereby waived by the Borrower to the extent permitted by applicable law) suffered by the Borrower that are caused by the Issuing Banks gross negligence or willful misconduct in determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof. It is further understood and agreed that the Issuing Bank may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary and, in making any payment under any Letter of Credit (i) the Issuing Banks exclusive reliance on the documents presented to it under such Letter of Credit as to any and all matters set forth therein, including reliance on the amount of any draft presented under such Letter of Credit, whether or not the amount due to the beneficiary thereunder equals the amount of such draft and whether or not any document
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presented pursuant to such Letter of Credit proves to be insufficient in any respect, if such document on its face appears to be in order, and whether or not any other statement or any other document presented pursuant to such Letter of Credit proves to be forged or invalid or any statement therein proves to be inaccurate or untrue in any respect whatsoever and (ii) any noncompliance in any immaterial respect of the documents presented under such Letter of Credit with the terms thereof shall, in each case, be deemed not to constitute gross negligence or willful misconduct of the Issuing Bank.
(g) Disbursement Procedures . The Issuing Bank shall, promptly following its receipt thereof, examine all documents purporting to represent a demand for payment under a Letter of Credit. The Issuing Bank shall as promptly as possible give telephonic notification, confirmed by fax, to the Administrative Agent and the Borrower of such demand for payment and whether the Issuing Bank has made or will make an L/C Disbursement thereunder; provided that any failure to give or delay in giving such notice shall not relieve the Borrower of its obligation to reimburse the Issuing Bank and the Revolving Credit Lenders with respect to any such L/C Disbursement.
(h) Interim Interest . If the Issuing Bank shall make any L/C Disbursement in respect of a Letter of Credit, then, unless the Borrower shall reimburse such L/C Disbursement in full on such date, the unpaid amount thereof shall bear interest for the account of the Issuing Bank, for each day from and including the date of such L/C Disbursement, to but excluding the earlier of the date of payment by the Borrower or the date on which interest shall commence to accrue thereon as provided in Section 2.02(f), at the rate per annum that would apply to such amount if such amount were an ABR Revolving Loan.
(i) Resignation or Removal of the Issuing Bank . Each Issuing Bank may resign at any time by giving 30 days prior written notice to the Administrative Agent, the Lenders and the Borrower and may be removed at any time by the Borrower by notice to the Issuing Banks, the Administrative Agent and the Lenders. Upon the acceptance of any appointment as an Issuing Bank hereunder by a Revolving Credit Lender that shall agree to serve as successor Issuing Bank, such successor (to the extent reasonably acceptable to the Borrower and the Administrative Agent) shall succeed to and become vested with all the interests, rights and obligations of the retiring Issuing Bank. At the time such removal or resignation shall become effective, the Borrower shall pay all accrued and unpaid fees pursuant to Section 2.05(c)(ii) and 2.05(c)(iii). The acceptance of any appointment as an Issuing Bank hereunder by a successor Revolving Credit Lender shall be evidenced by an agreement entered into by such successor, in a form satisfactory to the Borrower and the Administrative Agent, and, from and after the effective date of such agreement, (i) such successor Revolving Credit Lender shall have all the rights and obligations of the previous Issuing Bank under this Agreement and the other Loan Documents and (ii) references herein and in the other Loan Documents to the term Issuing Bank shall be deemed to refer to such successor or to any previous Issuing Bank, or to such successor and all previous Issuing Banks, as the context shall require. After the resignation or removal of an Issuing Bank hereunder, the retiring Issuing Bank shall remain a party hereto and shall continue to have all the rights and obligations of an Issuing Bank under this Agreement and the other Loan Documents with respect to Letters of Credit issued by it prior to such resignation or removal, but shall not be required to issue additional Letters of Credit.
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(j) Cash Collateralization . If any Event of Default shall occur and be continuing, the Borrower shall, on the Business Day they receive notice from the Administrative Agent or the Required Lenders (or, if the maturity of the Loans has been accelerated, Revolving Credit Lenders holding participations in outstanding Letters of Credit representing greater than 50% of the aggregate undrawn amount of all outstanding Letters of Credit) thereof, Cash Collateralize the L/C Exposure in an amount not less than the Minimum Collateral Amount as of such date. Such Cash Collateral shall be held by the Collateral Agent as collateral for the payment and performance of the Obligations; provided that the obligation to Cash Collateralize will become effective immediately and such deposit will become immediately payable in immediately available funds, without demand or notice of any kind, upon the occurrence of a Default or an Event of Default described in Section 7.01(g) or (h) or upon the exercise of any of the remedies provided in the last paragraph of Section 7.01. The Collateral Agent shall have exclusive dominion and control, including the exclusive right of withdrawal, over such account. Other than any interest earned on the investment of such deposits in Cash Equivalents, which investments shall be made at the option and sole discretion of the Collateral Agent, such deposits shall not bear interest. Interest or profits, if any, on such investments shall accumulate in such account. Moneys in such account shall (i) automatically be applied by the Administrative Agent to reimburse the Issuing Bank for L/C Disbursements for which it has not been reimbursed, (ii) be held for the satisfaction of the reimbursement obligations of the Borrower for the L/C Exposure at such time and (iii) if the maturity of the Loans has been accelerated (but subject to the consent of Revolving Credit Lenders holding participations in outstanding Letters of Credit representing greater than 50% of the aggregate undrawn amount of all outstanding Letters of Credit), be applied to satisfy the Obligations. If the Borrower is required to provide an amount of Cash Collateral hereunder as a result of the occurrence of an Event of Default, such amount (to the extent not applied as aforesaid) shall be returned to the Borrower within three Business Days after all Events of Default have been cured or waived.
(k) Additional Issuing Banks . The Borrower may, at any time and from time to time with the consent of the Administrative Agent (which consent shall not be unreasonably withheld, conditioned or delayed) and such Revolving Credit Lender, designate one or more additional Revolving Credit Lenders to act as an issuing bank under the terms of this Agreement. Any Lender designated as an Issuing Bank pursuant to this paragraph (k) shall be deemed to be an Issuing Bank (in addition to being a Lender) in respect of Letters of Credit issued or to be issued by such Lender.
(l) Defaulting Lenders . At any time that there shall exist a Defaulting Lender, promptly (and in any event within two Business Days) following the written request of the Borrower to the Administrative Agent (with a copy to each Issuing Bank), all or any part of such Defaulting Lenders L/C Exposure shall be reallocated among the Non-Defaulting Lenders in accordance with their respective Pro Rata Percentages (calculated without regard to such Defaulting Lenders Commitment) but only to the extent that such reallocation does not cause the Revolving Credit Exposure of any Non-Defaulting Lender to exceed such Non-Defaulting Lenders Revolving Credit Commitment or the L/C Exposure of any Non-Defaulting Lender to exceed such Non-Defaulting Lenders L/C Commitment. No reallocation hereunder shall constitute a waiver or release of any claim of any party hereunder against a Defaulting Lender arising from that Lender having become a Defaulting Lender, including any claim of a Non-Defaulting Lender as a result of such Non-Defaulting Lenders increased exposure following
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such reallocation. If the reallocation pursuant to the first sentence of this Section 2.22(l) fails, or otherwise upon the request of the Administrative Agent or any Issuing Bank (with a copy to the Administrative Agent), the Borrower shall Cash Collateralize the Issuing Banks Fronting Exposure with respect to such Defaulting Lender in an amount not less than the Minimum Collateral Amount:
(i) The Borrower, and to the extent provided by any Defaulting Lender, such Defaulting Lender, hereby grant to the Administrative Agent, for the benefit of the Issuing Banks, and agree to maintain, a security interest in all such Cash Collateral as security for the Defaulting Lenders obligation to fund participations in respect of L/C Exposure, to be applied pursuant to clause (ii) below. If at any time the Administrative Agent determines that Cash Collateral is subject to any right or claim of any person other than the Administrative Agent and the Issuing Banks as herein provided, or that the total amount of such Cash Collateral is less than the Minimum Collateral Amount, the Borrower will, promptly upon demand by the Administrative Agent, pay or provide to the Administrative Agent additional Cash Collateral in an amount sufficient to eliminate such deficiency (after giving effect to any Cash Collateral provided by the Defaulting Lender).
(ii) Notwithstanding anything to the contrary contained in this Agreement, Cash Collateral provided under this Section 2.22(l) in respect of Letters of Credit shall be applied to the satisfaction of the Defaulting Lenders obligation to fund participations in respect of L/C Exposure (including, as to Cash Collateral provided by a Defaulting Lender, any interest accrued on such obligation) for which the Cash Collateral was so provided, prior to any other application of such property as may otherwise be provided for herein.
(iii) Cash Collateral (or the appropriate portion thereof) provided to reduce the Issuing Banks Fronting Exposure shall no longer be required to be held as Cash Collateral pursuant to this Section 2.22(l) following (i) the elimination of the applicable Fronting Exposure (including by the termination of Defaulting Lender status of the applicable Lender), or (ii) the determination by the Administrative Agent and the Issuing Banks that there exists excess Cash Collateral and, in either case, any such Cash Collateral provided by the Borrower shall be refunded to the Borrower; provided that the person providing Cash Collateral and the Issuing Banks may agree that Cash Collateral shall be held to support future anticipated Fronting Exposure or other obligations; and provided, further, that to the extent that such Cash Collateral was provided by any Loan Party, such Cash Collateral shall remain subject to the security interest granted pursuant to the Loan Documents.
(iv) So long as any Lender is a Defaulting Lender, no Issuing Bank shall be required to issue, extend, renew or increase any Letter of Credit unless it is satisfied that it will have no Fronting Exposure after giving effect thereto.
SECTION 2.23 Incremental Term Loans and Incremental Revolving Credit Commitments . (a) The Borrower may, by written notice to the Administrative Agent from time to time, request (i) the addition of one or more new tranches of term facilities or an increase in the principal amount of the Term Loans of any existing Class (any such new tranche or increase,
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an Incremental Term Facility ; the Loans thereunder, Incremental Term Loans ) or (ii) the addition of one or more new tranches of incremental revolving commitments or an increase in the aggregate amount of the Revolving Credit Commitments of any Class (any such new tranche or increase, an Incremental Revolving Credit Commitment ; the Loans thereunder, Incremental Revolving Loans ), as applicable, in a total aggregate amount not to exceed the Incremental Facility Amount. Such notice shall set forth (i) the amount of the Incremental Term Facility and/or Incremental Revolving Credit Commitments being requested (which shall be in minimum increments of $1,000,000 and a minimum amount of $5,000,000 or such lesser amount equal to the remaining Incremental Facility Amount), (ii) the date on which such Incremental Term Facility and/or Incremental Revolving Credit Commitments are requested to become effective (which shall not be less than five Business Days nor more than 60 days after the date of such notice, unless otherwise agreed to by the Administrative Agent), (iii) in the case of any Incremental Term Facility, whether such Incremental Term Facility constitutes a new tranche of term facilities or an increase in the principal amount of the Term Loans of any existing Class and (iv) in the case of any Incremental Revolving Credit Commitment, whether such Incremental Revolving Credit Commitment constitutes a new tranche of incremental revolving commitments or an increase in the aggregate amount of the Revolving Credit Commitments of any existing Class.
(b) The Borrower may (but shall not be required to) seek Incremental Term Facilities and/or Incremental Revolving Credit Commitments from existing Lenders (each of which shall be entitled to agree or decline to participate in its sole discretion) and additional banks, financial institutions and other institutional lenders in connection therewith; provided that each of the Administrative Agent and (solely in the case of Incremental Revolving Credit Commitments) the Issuing Bank shall have consent rights with respect to any such lenders providing the relevant Incremental Term Facility or Incremental Revolving Credit Commitments (not to be unreasonably withheld, conditioned or delayed) if such consent would be required pursuant to Section 9.04 for an assignment of Term Loans to the lenders providing the relevant Incremental Term Facility or for an assignment of Revolving Credit Commitments to the lenders providing the Incremental Revolving Credit Commitments. The Borrower and each lender providing the relevant Incremental Term Facilities or Incremental Revolving Credit Commitments, as applicable, shall execute and deliver to the Administrative Agent an Incremental Assumption Agreement and such other documentation as the Administrative Agent shall reasonably specify to evidence the commitment of such person to provide a portion of the relevant Incremental Term Facility and/or Incremental Revolving Credit Commitments.
(c) The terms and provisions of any Incremental Term Facility shall be identical to those of the Initial Term Loans except as otherwise set forth herein or in the relevant Incremental Assumption Agreement, it being understood that the lenders providing the relevant Incremental Term Facility (other than any Incremental Term Facility constituting an increase in the principal amount of the Term Loans of an existing Class, which shall be on the same terms as those applicable to the then-existing Term Loans of the applicable Class) may in the relevant Incremental Assumption Agreement:
(i) agree to yield protection terms that are less favorable (but not more favorable) than the terms applicable to the Initial Term Loans,
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(ii) agree to participate on a less than (but not greater than) pro rata basis with the existing Term Loans in respect of any prepayments or repayments of Term Loans under this Agreement,
(iii) agree that the final maturity date with respect to such Incremental Term Loans may be the same as or later than the Latest Term Maturity Date,
(iv) provide for amortization such that the weighted average life to maturity of such Incremental Term Facility may be equal to or longer than the remaining weighted average life to maturity of the Term Loans then outstanding (without giving effect to any prepayments thereof),
(v) agree that such Incremental Term Facility shall have the same Guarantees as (or fewer, but in no event more, Guarantees than) the Initial Term Loans,
(vi) agree that such Incremental Term Facility may be secured by all or a portion of the Collateral, but in no event secured by any assets not constituting Collateral,
(vii) agree to interest rate, interest rate margins, fees, original issue discount and interest rate floor as may be determined by the Borrower and the lenders providing such Incremental Term Facility; provided , that the Yield applicable to any Incremental Term Facility (as determined on the date of initial incurrence thereof) will not be more than 0.50% per annum higher than the Yield in respect of the Initial Term Loans (as determined on such date) unless the Yield with respect to the Initial Term Loans is adjusted to be equal to such Yield applicable to such Incremental Term Facility minus 0.50% per annum; provided, further , that any increase in Yield with respect to the Initial Term Loans due to the application of an Adjusted LIBO Rate floor or Alternate Base Rate floor on any Incremental Term Facility shall be effected solely through an increase in (or implementation of, as applicable) the Adjusted LIBO Rate floor or Alternate Base Rate floor applicable to such Initial Term Loans,
(viii) agree that, notwithstanding anything to the contrary in this Section 2.23 or in any other provision of any Loan Document, if the proceeds of any Incremental Term Facility are intended to be applied to finance an acquisition or other Investment that is permitted under this Agreement, the conditions to entering into and availability of such Incremental Term Facility (including applicability of customary SunGard or other certain funds conditionality), and the timing of satisfaction or waiver of any such conditions (as between being satisfied or waived upon execution of an amendment evidencing such Incremental Term Facility or upon the making of any Incremental Term Loans thereunder), shall be as agreed to among the Borrower and the Lenders in respect of such Incremental Term Facility but without in any way limiting the other applicable conditions to Incremental Term Facilities specified in this Section 2.23; provided that, in any event, no Event of Default under Section 7.01(b), 7.01(c), 7.01(g) or 7.01(h) exists or would exist immediately after giving effect to the borrowing of such Incremental Term Facility,
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(ix) agree that, notwithstanding anything to the contrary in this Section 2.23 or in any other provision of any Loan Document, if the proceeds of any Incremental Term Facility are intended to be applied to finance an acquisition or other Investment that is permitted under this Agreement, the Loan Parties shall not be required to make any representations or warranties in connection with such Incremental Term Facility (other than the Specified Representations, which shall be required to be true and correct as of the applicable date of funding of such Incremental Term Facility before and after giving effect to such Incremental Term Facility), unless, and solely to the extent otherwise required by, the lender or lenders providing such Incremental Term Facility,
(x) agree that the proceeds of such Incremental Term Facility may be used for any purpose specified in such Incremental Assumption Agreement, to the extent that such use is otherwise permitted under this Agreement and
(xi) require (but need not require) that the Borrower deliver legal opinions, board resolutions and other closing certificates to the Administrative Agent (as the Administrative Agent shall reasonably request) in connection with such Incremental Term Facility.
To the extent that, except as otherwise provided for in this Section 2.23(c), the terms of any Incremental Term Facility (other than any terms which are applicable only after the Latest Term Maturity Date) are not substantially consistent with the terms of the Initial Term Loans, such terms shall be reasonably satisfactory to the Administrative Agent.
(d) The terms and provisions of any Incremental Revolving Credit Commitment shall be identical to those of the Initial Revolving Credit Commitments except as otherwise set forth herein or in the relevant Incremental Assumption Agreement, it being understood that the Incremental Revolving Credit Lenders may, with respect to any Incremental Revolving Credit Commitment (other than any Incremental Revolving Credit Commitment constituting an increase in the principal amount of the Revolving Credit Commitments of an existing Class, which shall be on the same terms as those applicable to the then-existing Revolving Credit Commitments of the applicable Class) in the relevant Incremental Assumption Agreement:
(i) agree to participate on a less than (but not greater than) pro rata basis with the Initial Revolving Credit Commitments in respect of any prepayments or repayments of Revolving Loans or reductions in Revolving Credit Commitments under this Agreement,
(ii) agree that the final termination date with respect to such Incremental Revolving Credit Commitment may be the same as or later than the Latest Revolving Credit Maturity Date,
(iii) agree that such Incremental Revolving Credit Commitment shall have the same Guarantees as (or fewer, but in no event more, Guarantees than) the Initial Revolving Credit Commitment,
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(iv) agree that such Incremental Revolving Credit Commitment may be secured by all or a portion of the Collateral, but in no event secured by any assets not constituting Collateral,
(v) agree to interest rate, interest rate margins, fees, original issue discount and interest rate floor as may be determined by the Borrower and the lenders providing such Incremental Revolving Credit Commitments,
(vi) agree that, notwithstanding anything to the contrary in this Section 2.23 or in any other provision of any Loan Document, if the proceeds of any Incremental Revolving Credit Commitment are to be applied to finance an acquisition or other Investment that is permitted under this Agreement, the conditions to entering into and availability of such Incremental Revolving Credit Commitment (including applicability of customary SunGard or other certain funds conditionality), and the timing of satisfaction or waiver of any such conditions (as between being satisfied or waived upon execution of an amendment evidencing such Incremental Revolving Credit Commitment or upon the making of any Incremental Revolving Loans thereunder), shall be as agreed to among the Borrower and the lenders in respect of such Incremental Revolving Credit Commitment but without in any way limiting the other applicable conditions to Incremental Revolving Credit Commitments specified in this Section 2.23; provided that, in any event, no Event of Default under Section 7.01(b), 7.01(c), 7.01(g) or 7.01(h) exists or would exist immediately after giving effect to the borrowing of such Incremental Revolving Credit Commitment,
(vii) agree that, notwithstanding anything to the contrary in this Section 2.23 or in any other provision of any Loan Document, if the proceeds of any Incremental Revolving Credit Commitment are intended to be applied to finance an acquisition or other Investment that is permitted under this Agreement, the Loan Parties shall not be required to make any representations or warranties in connection with the initial funding of such Incremental Revolving Credit Commitment (other than the Specified Representations, which shall be required to be true and correct as of the applicable date of initial funding of such Incremental Revolving Credit Commitment before and after giving effect to such Incremental Revolving Credit Commitment), unless and solely to the extent otherwise required by, the lender or lenders providing such Incremental Revolving Credit Commitment and initial funding,
(viii) agree that the proceeds of such Incremental Revolving Credit Commitment may be used for any purpose specified in such Incremental Assumption Agreement, to the extent that such use is otherwise permitted under this Agreement and
(ix) require (but need not require) that the Borrower deliver legal opinions, board resolutions and other closing certificates to the Administrative Agent (as the Administrative Agent shall reasonably request) in connection with such Incremental Revolving Credit Commitment.
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To the extent that, except as otherwise provided for in this Section 2.23(d), the terms of any Incremental Revolving Credit Commitment (other than any terms which are applicable only after the Latest Revolving Credit Maturity Date) are not substantially consistent with the terms of the Initial Revolving Credit Commitment, such terms shall be reasonably satisfactory to the Administrative Agent.
(e) No Incremental Term Facility or Incremental Revolving Credit Commitment shall become effective under this Section 2.23 unless (i) on the date of such effectiveness (except as expressly set forth in paragraphs (c) and (d) of this Section 2.23), the conditions set forth in paragraphs (b) of Section 4.01 shall be satisfied, (ii) on the date of such effectiveness, no Event of Default under Section 7.01(b), 7.01(c), 7.01(g) or 7.01(h) exists or would exist immediately after giving effect to the applicable Incremental Indebtedness and (iii) the other conditions precedent set forth in the applicable Incremental Assumption Agreement have been satisfied (or waived as provided in such Incremental Assumption Agreement).
(f) The Administrative Agent shall promptly notify each Lender as to the effectiveness of each Incremental Assumption Agreement. Each of the parties hereto hereby agrees that, upon the effectiveness of any Incremental Assumption Agreement, this Agreement shall be deemed amended to the extent necessary or appropriate in the reasonable opinion of the Administrative Agent and the Borrower to reflect the existence and terms of the Incremental Term Facility and/or Incremental Revolving Credit Commitment and the Incremental Term Loans and/or Incremental Revolving Loans evidenced thereby and the Administrative Agent and the Borrower may revise this Agreement to evidence such amendments.
(g) Each of the parties hereto hereby agrees that the Administrative Agent may, in consultation with the Borrower, take any and all action as may be reasonably necessary to ensure that (i) all Incremental Term Loans constituting an increase in the principal amount of the Term Loans of any existing Class, when originally made, are included in each Borrowing of outstanding Term Loans of such Class on a pro rata basis and (ii) all Incremental Revolving Loans in respect of an increase in the aggregate amount of the Revolving Credit Commitment of any existing Class, when originally made, are included in each Borrowing of outstanding Revolving Loans of such Class on a pro rata basis. This may be accomplished at the discretion of the Administrative Agent by (x) with respect to Incremental Term Loans constituting an increase in the principal amount of an existing Class, requiring each outstanding Eurodollar Term Borrowing of the relevant Class to be converted into an ABR Term Borrowing on the date of such Incremental Term Loan, or by allocating a portion of such Incremental Term Loan to each outstanding Eurodollar Term Borrowing of the relevant Class on a pro rata basis and (y) with respect to Incremental Revolving Loans in respect of an increase in the aggregate amount of the Revolving Credit Commitment of any existing Class, (A) requiring the outstanding Revolving Loans of the relevant Class to be prepaid with the proceeds of a new Revolving Credit Borrowing of such Class, (B) causing the existing Revolving Credit Lenders to assign portions of their outstanding Revolving Loans of such Class to the relevant Incremental Revolving Credit Lenders or (C) any combination of the foregoing. Any conversion of Eurodollar Loans to ABR Loans required by the preceding sentence shall be subject to Section 2.16. In addition, to the extent any Incremental Term Loans constitute an increase in the principal amount of the Initial Term Loans, the scheduled amortization payments under Section 2.11(a)(i) required to be made after the making of such Incremental Term Loans shall be ratably increased by the aggregate principal amount of such Incremental Term Loans.
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SECTION 2.24 [Intentionally Omitted].
SECTION 2.25 Loan Modification Offers . (a) The Borrower may, by written notice to the Administrative Agent from time to time, make one or more offers (each, a Loan Modification Offer ) to all the Lenders of one or more Classes of Loans and/or Commitments (each Class subject to such a Loan Modification Offer, an Affected Class ) to make one or more Permitted Amendments pursuant to procedures reasonably specified by the Administrative Agent and reasonably acceptable to the Borrower. Such notice shall set forth (i) the terms and conditions of the requested Permitted Amendment and (ii) the date on which such Permitted Amendment is requested to become effective (which shall not be less than 10 Business Days nor more than 30 Business Days after the date of such notice, unless otherwise agreed to by the Administrative Agent). Permitted Amendments shall become effective only with respect to the Loans and/or Commitments of the Lenders of the Affected Class that accept the applicable Loan Modification Offer (such Lenders, the Accepting Lenders ) and, in the case of any Accepting Lender, only with respect to such Lenders Loans and/or Commitments of such Affected Class as to which such Lenders acceptance has been made; provided that no Permitted Amendment shall become effective unless the aggregate principal amount of the Loans and/or Commitments of the Accepting Lenders subject to the Permitted Amendment is greater than (x) with respect to any Term Loans, $10,000,000 and (y) with respect to any Revolving Credit Commitments, $5,000,000.
(b) The Borrower and each Accepting Lender shall execute and deliver to the Administrative Agent a Loan Modification Agreement and such other documentation as the Administrative Agent shall reasonably specify to evidence the acceptance of the Permitted Amendments and the terms and conditions thereof; provided that no Permitted Amendment shall become effective unless the Administrative Agent receives all legal opinions, board resolutions and other closing certificates required pursuant to such Loan Modification Agreement. The Administrative Agent shall promptly notify each Lender as to the effectiveness of each Loan Modification Agreement. Each of the parties hereto hereby agrees that, upon the effectiveness of any Loan Modification Agreement, this Agreement shall be deemed amended to the extent (but only to the extent) necessary to reflect the existence and terms of the Permitted Amendment evidenced thereby and only with respect to the applicable Loans and/or Commitments of the Accepting Lenders of the Affected Class, including any amendments necessary to treat the applicable Loans and/or Commitments of the Accepting Lenders of the Affected Class as a new Class of loans and/or commitments hereunder; provided that, in the case of any Loan Modification Offer relating to Revolving Credit Commitments or Revolving Loans, (i) all Borrowings and all prepayments of Revolving Loans shall continue to be made on a ratable basis among all Revolving Credit Lenders, based on the relative amounts of their Revolving Credit Commitments, until the repayment of the Revolving Loans attributable to the non-extended Revolving Credit Commitments on the relevant Maturity Date, (ii) the allocation of the participation exposure with respect to any then-existing or subsequently issued or made Letter of Credit as between the Revolving Credit Commitments of such new Class and the remaining Revolving Credit Commitments shall be made on a ratable basis in accordance with the relative amounts thereof until the Maturity Date relating to such non-extended Revolving Credit Commitments has occurred and (iii) the L/C Maturity Date may not be extended without the prior written consent of each Issuing Bank. If the Aggregate Revolving Credit Exposure exceeds the Total Revolving Credit Commitment as a result of the occurrence of the Maturity Date with respect to any Class of Revolving Credit Commitments while an extended Class of Revolving Credit Commitments remains outstanding, the Borrower shall make such payments and arrangements as may be required by Section 2.13(a) to eliminate such excess on such Maturity Date.
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(c) Permitted Amendments shall mean any or all of the following: (i) an extension of the final maturity date and/or amortization applicable to the applicable Loans and/or Commitments of the Accepting Lenders, (ii) a change in the Applicable Margin (and any Adjusted LIBO Rate floor) with respect to the applicable Loans and/or Commitments of the Accepting Lenders, (iii) a change in any fees payable to (or the inclusion of additional fees to be payable to) the Accepting Lenders and (iv) such amendments to this Agreement and the other Loan Documents as shall be appropriate, in the reasonable judgment of the Administrative Agent and the Borrower, to provide the rights and benefits of this Agreement and other Loan Documents to each new Class of loans and/or commitments resulting therefrom.
SECTION 2.26 Defaulting Lenders . Notwithstanding anything to the contrary contained in this Agreement, if any Lender becomes a Defaulting Lender, then, until such time as such Lender is no longer a Defaulting Lender, to the extent permitted by applicable law:
(a) Such Defaulting Lenders right to approve or disapprove any amendment, waiver or consent with respect to this Agreement shall be restricted as set forth in the definition of Required Lenders.
(b) Any payment of principal, interest, fees or other amounts received by the Administrative Agent for the account of such Defaulting Lender (whether voluntary or mandatory, at maturity, pursuant to Article VII or otherwise) or received by the Administrative Agent from a Defaulting Lender pursuant to Section 2.18 shall be applied at such time or times as may be determined by the Administrative Agent as follows: first, to the payment of any amounts owing by such Defaulting Lender to the Administrative Agent hereunder; second, to the payment on a pro rata basis of any amounts owing by such Defaulting Lender to any Issuing Bank hereunder; third, to Cash Collateralize the Issuing Banks Fronting Exposure with respect to such Defaulting Lender in accordance with Section 2.22(l); fourth, as the Borrower may request (so long as no Default or Event of Default shall have occurred and be continuing), to the funding of any Loan in respect of which such Defaulting Lender has failed to fund its portion thereof as required by this Agreement, as determined by the Administrative Agent; fifth, if so determined by the Administrative Agent and the Borrower, to be held in a deposit account and released pro rata in order to (x) satisfy such Defaulting Lenders potential future funding obligations with respect to Loans under this Agreement and (y) Cash Collateralize the Issuing Banks future Fronting Exposure with respect to such Defaulting Lender with respect to future Letters of Credit issued under this Agreement, in accordance with Section 2.22(l); sixth, to the payment of any amounts owing to the Lenders or the Issuing Bank as a result of any judgment of a court of competent jurisdiction obtained by any Lender or the Issuing Bank against such Defaulting Lender as a result of such Defaulting Lenders breach of its obligations under this Agreement; seventh, so long as no Default or Event of Default exists, to the payment of any amounts owing to the Borrower as a result of any judgment of a court of competent jurisdiction obtained by the Borrower against such Defaulting Lender as a result of such Defaulting Lenders breach of its obligations under this Agreement; and eighth, to such Defaulting Lender or as
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otherwise directed by a court of competent jurisdiction; provided that if (x) such payment is a payment of the principal amount of any Loans or L/C Disbursements in respect of which such Defaulting Lender has not fully funded its appropriate share, and (y) such Loans were made or the related Letters of Credit were issued at a time when the conditions set forth in Section 4.01 were satisfied or waived, such payment shall be applied solely to pay the Loans of, and L/C Disbursements owed to, all Non-Defaulting Lenders on a pro rata basis prior to being applied to the payment of any Loans of, or L/C Disbursements owed to, such Defaulting Lender until such time as all Loans and funded and unfunded participations in L/C Obligations are held by the Lenders pro rata in accordance with the Commitments under the applicable Facility without giving effect to Section 2.22(l). Any payments, prepayments or other amounts paid or payable to a Defaulting Lender that are applied (or held) to pay amounts owed by a Defaulting Lender or to post Cash Collateral pursuant to this Section 2.26(b) shall be deemed paid to and redirected by such Defaulting Lender, and each Lender irrevocably consents hereto.
ARTICLE III
Representations and Warranties
Each of Holdings and the Borrower represents and warrants to the Administrative Agent, the Collateral Agent, the Issuing Bank and each of the Lenders that:
SECTION 3.01 Organization; Powers . Each of Holdings, the Borrower and the other Restricted Subsidiaries (a) is duly organized, validly existing and (to the extent the concept is applicable in such jurisdiction) in good standing under the laws of the jurisdiction of its organization, (b) has all requisite power and authority to own its property and assets and to carry on its business as now conducted and as proposed to be conducted, (c) is qualified to do business in, and is in good standing in, every jurisdiction where such qualification is required and (d) has the power and authority to execute, deliver and perform its obligations under each of the Loan Documents and each other agreement or instrument contemplated thereby to which it is or will be a party and, in the case of the Borrower, to borrow and otherwise obtain credit hereunder, except, in the case of clauses (b) and (c) above, where the failure to do so, individually or in the aggregate, would not reasonably be expected to result in a Material Adverse Effect.
SECTION 3.02 Authorization . (a) This Agreement and the other Loan Documents have been duly authorized by all requisite corporate, limited liability company, partnership and, if required, stockholder, partner or member action, in each case, to the extent applicable, by each of Holdings, the Borrower and the other Loan Parties party thereto and (b) this Agreement and the other Loan Documents do not (i) violate (A) any applicable material provision of law, statute, rule or regulation, (B) any applicable provision of the certificate, articles of incorporation, partnership agreement or other constitutive documents or by-laws of Holdings, the Borrower or any other Restricted Subsidiary, (C) any applicable order of any Governmental Authority or (D) any applicable provision of any material indenture, agreement or other instrument to which Holdings, the Borrower or any other Restricted Subsidiary is a party or by which any of them or any of their property is or may be bound, (ii) conflict with, result in a breach of or constitute (alone or with notice or lapse of time or both) a default under, or give rise to any right to accelerate or to require the prepayment, repurchase or redemption of any obligation under any such material indenture, agreement or other instrument or (iii) result in the creation or imposition
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of any Lien upon or with respect to any property or assets now owned or hereafter acquired by Holdings, the Borrower or any other Restricted Subsidiary (other than any Lien created hereunder or under the Security Documents), except, in the case of clauses (ii) and (iii) above, where the failure to do so, individually or in the aggregate, would not reasonably be expected to result in a Material Adverse Effect.
SECTION 3.03 Enforceability . This Agreement has been duly executed and delivered by Holdings and the Borrower and constitutes, and each other Loan Document when executed and delivered by each Loan Party that is a party thereto will constitute, a legal, valid and binding obligation of such Loan Party enforceable against such Loan Party in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law).
SECTION 3.04 Financial Statements . The Borrower has heretofore furnished to the Administrative Agent (i) the audited consolidated balance sheets and related statements of comprehensive income, changes in stockholders equity and cash flows of the Borrower and its consolidated Subsidiaries for the fiscal years ended on December 31, 2015, 2016 and 2017 available as of the date of this Agreement and (ii) the unaudited balance sheet and related statements of comprehensive income and cash flows of the Borrower and its consolidated Subsidiaries for the fiscal quarters ending on March 31, 2018, June 30, 2018 and September 30, 2018. Such financial information (i) presents fairly, in all material respects, the financial condition and results of operations and cash flows of the Borrower and its consolidated Subsidiaries, as of such dates and for such periods and (ii) was prepared in accordance with GAAP applied on a consistent basis, subject, in the case of unaudited financial statements, to year-end audit adjustments and the absence of footnotes.
SECTION 3.05 No Material Adverse Change . Since December 31, 2017, no event, change or condition has occurred that has had, or would reasonably be expected to have, a Material Adverse Effect.
SECTION 3.06 Title to Properties; Possession Under Leases . (a) Each of Holdings, the Borrower and the other Restricted Subsidiaries has good and valid title to, or valid leasehold interests in, all its material properties and assets (including all Mortgaged Property), except for minor defects in title that do not interfere with its ability to conduct its business as currently conducted or to utilize such properties and assets for their intended purposes, and except where the failure to have such title could not reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect. All such material properties and assets are free and clear of Liens, other than Permitted Liens.
(b) Each of Holdings, the Borrower and the other Restricted Subsidiaries has complied with all material obligations under all material leases to which it is a party and all such material leases are in full force and effect. Each of Holdings, the Borrower and the other Restricted Subsidiaries enjoys peaceful and undisturbed possession under all such material leases.
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(c) As of the Closing Date, none of Holdings, the Borrower and the other Restricted Subsidiaries has received any written notice of, nor do Holdings and the Borrower and the other Restricted Subsidiaries have any knowledge of, any pending or contemplated condemnation proceeding affecting the Mortgaged Properties or any sale or disposition thereof in lieu of condemnation.
(d) As of the Closing Date, none of Holdings, the Borrower and the other Restricted Subsidiaries is obligated under any right of first refusal, option or other contractual right to sell, assign or otherwise dispose of any Mortgaged Property or any interest therein.
SECTION 3.07 Subsidiaries . Schedule 3.07 sets forth as of the Closing Date a list of all Subsidiaries and the percentage ownership interest of Holdings, directly or indirectly, therein. The shares of capital stock or other ownership interests so indicated on Schedule 3.07 are fully paid and nonassessable.
SECTION 3.08 Litigation; Compliance with Laws . (a) Except as set forth on Schedule 3.08, there are no actions, suits or proceedings at law or in equity or by or before any Governmental Authority now pending or, to the knowledge of Holdings or the Borrower, threatened in writing against or affecting Holdings, the Borrower or any other Restricted Subsidiary or any business, property or rights of any such person (i) that involve any Loan Document or the Transactions or (ii) which would reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect.
(b) Since the date of this Agreement, there has been no change in the status of the matters disclosed on Schedule 3.08 that, individually or in the aggregate, has resulted in a Material Adverse Effect.
(c) No action, consent or approval of, registration or filing with or any other action by any Governmental Authority is or will be required in connection with the Transactions, except for (a) the filing of Uniform Commercial Code financing statements and filings with the United States Patent and Trademark Office and the United States Copyright Office, (b) recordation of the Mortgages and (c) such as have been made or obtained and are in full force and effect.
(d) None of Holdings, the Borrower or any of the other Restricted Subsidiaries or any of their respective material properties or assets is in violation of, nor will the continued operation of their material properties and assets as currently conducted violate, any law, rule or regulation or any restrictions of record or agreements affecting the Mortgaged Property, or is in default with respect to any judgment, writ, injunction, decree or order of any Governmental Authority, where such violation or default would reasonably be expected to result in a Material Adverse Effect.
SECTION 3.09 Agreements . (a) None of Holdings, the Borrower or the other Restricted Subsidiaries is a party to any agreement or instrument or subject to any corporate restriction that has resulted or would reasonably be expected to result in a Material Adverse Effect.
(b) None of Holdings, the Borrower or the other Restricted Subsidiaries is in default in any manner under any provision of any indenture or other agreement or instrument evidencing Indebtedness, or any other material agreement or instrument to which it is a party or by which it or any of its properties or assets are or may be bound, where such default has resulted or would reasonably be expected to result in a Material Adverse Effect.
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SECTION 3.10 Federal Reserve Regulations . (a) None of Holdings, the Borrower or the other Subsidiaries is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of buying or carrying Margin Stock.
(b) No part of the proceeds of any Loan or any Letter of Credit will be used, whether directly or indirectly, and whether immediately, incidentally or ultimately, for any purpose that entails a violation of, or that is inconsistent with, the provisions of the Regulations of the Board, including Regulation T, U or X.
SECTION 3.11 Investment Company Act . None of the Loan Parties is an investment company as defined in, or is required to be registered as an investment company under, the Investment Company Act of 1940, as amended.
SECTION 3.12 Tax Returns . Each of Holdings, the Borrower and the other Restricted Subsidiaries has filed or caused to be filed all federal and all material state, local and foreign Tax returns or materials required to have been filed by it and has paid or caused to be paid all material Taxes due and payable by it and all material assessments received by it, except Taxes that are being contested in good faith by appropriate proceedings and for which Holdings, the Borrower or such Restricted Subsidiary, as applicable, shall have set aside on its books adequate reserves with respect thereto in accordance with GAAP.
SECTION 3.13 No Material Misstatements; Beneficial Ownership Certification . (a) As of the Closing Date, no information (other than projections, other forward-looking and/or projected information and information of a general economic or industry-specific nature) that has been made available to the Lenders by Holdings, the Borrower, or any of their respective representatives in connection with the Transactions or the negotiation of the Loan Documents, when taken as a whole, contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained therein not materially misleading in light of the circumstances under which such statements were made (after giving effect to all supplements and updates thereto from time to time); provided that such projections have been or will be prepared in good faith based upon accounting principles consistent with the historical audited financial statements of Holdings and the Borrower and upon assumptions that were reasonable and believed at the time furnished (it being recognized by the Lenders that such projections are not to be viewed as facts and are subject to significant uncertainties and contingencies many of which are beyond the control of the Loan Parties, that no assurance can be given that any particular financial projections will be realized, that actual results may differ from projected results and that such differences may be material).
(b) As of the Closing Date, the information included in the Beneficial Ownership Certification is true and correct in all respects.
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SECTION 3.14 Employee Benefit Plans . Each of Holdings, the Borrower and the other Restricted Subsidiaries and their ERISA Affiliates are in compliance with the applicable provisions of ERISA and the Code and the regulations and published interpretations thereunder, except as would not reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect. No ERISA Event has occurred or is reasonably expected to occur that would reasonably be expected to result, individually or in the aggregate, in a Material Adverse Effect. The present value of all benefit liabilities under each Plan (based on the assumptions used for purposes of Accounting Standards Codification No. 718) did not, as of the last annual valuation date applicable thereto, exceed the fair market value of the assets of such Plan by an amount that, if required to be paid by Holdings, the Borrower or any other Restricted Subsidiary, would reasonably be expected to have a Material Adverse Effect, and the present value of all benefit liabilities of all underfunded Plans (based on the assumptions used for purposes of Accounting Standards Codification No. 718) did not, as of the last annual valuation dates applicable thereto, exceed the fair market value of the assets of all such underfunded Plans by an amount that, if required to be paid by Holdings, the Borrower or any other Restricted Subsidiary, would reasonably be expected to have a Material Adverse Effect.
SECTION 3.15 Environmental Matters . Except with respect to any matters that, individually or in the aggregate, would not reasonably be expected to result in a Material Adverse Effect, none of Holdings, the Borrower or the other Subsidiaries (i) has failed to comply with any Environmental Law or to obtain, maintain or comply with any Environmental Permit, (ii) has become subject to any Environmental Liability, (iii) has received notice of any claim with respect to any Environmental Liability or (iv) knows of any basis for any Environmental Liability.
SECTION 3.16 Security Documents . (a) The Guarantee and Collateral Agreement, upon execution and delivery thereof by the parties thereto, will create in favor of the Collateral Agent, for the benefit of the Secured Parties, a legal, valid and enforceable security interest in the Collateral (as defined in the Guarantee and Collateral Agreement) and the proceeds thereof and (i) when the Pledged Collateral (as defined in the Guarantee and Collateral Agreement) is delivered to the Collateral Agent, the Liens created under Guarantee and Collateral Agreement shall constitute fully perfected first priority Liens on, and security interests in, all right, title and interest of the Loan Parties in such Pledged Collateral, in each case prior and superior in right to any other person, and (ii) when financing statements in appropriate form are filed in the offices specified on Schedule 3.16(a), the Lien created under the Guarantee and Collateral Agreement will constitute a fully perfected Lien on, and security interest in, all right, title and interest of the Loan Parties in such Collateral (other than Registered Intellectual Property, as defined in the Guarantee and Collateral Agreement), in each case prior and superior in right to any other person, other than with respect to Permitted Liens.
(b) Upon the recordation of the IP Security Agreement with the United States Patent and Trademark Office and the United States Copyright Office, together with the Uniform Commercial Code financing statements in appropriate form filed in the offices specified on Schedule 3.16(a), any Lien created under the Guarantee and Collateral Agreement shall constitute a fully perfected Lien on, and security interest in, all right, title and interest of the Loan Parties in the Registered Intellectual Property (as defined in the Guarantee and Collateral Agreement) to the extent in which a security interest may be perfected by making such filings, in each case prior and superior in right to any other person, other than with respect to Permitted Liens (it being understood that subsequent recordings in the United States Patent and Trademark Office and the United States Copyright Office may be necessary to perfect a Lien on registered trademarks and patents, trademark and patent applications and registered copyrights acquired by the Loan Parties after the date hereof).
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(c) The Mortgages are effective to create in favor of the Collateral Agent, for the ratable benefit of the Secured Parties, a legal, valid and enforceable Lien and security interest on all of the Loan Parties right, title and interest in and to the Mortgaged Property thereunder and the proceeds thereof, and when the Mortgages are recorded in the offices specified on Schedule 3.16(c), the Mortgages shall constitute a fully perfected Lien on, and security interest in, all right, title and interest of the Loan Parties in such Mortgaged Property and the proceeds thereof, in each case prior and superior in right to any other person, other than with respect to the rights of persons pursuant to Permitted Liens.
(d) Each Security Document, other than any Security Document referred to in the preceding paragraphs of this Section, upon execution and delivery thereof by the parties thereto and the making of the filings and taking of the other actions provided for therein, will be effective under applicable law to create in favor of the Collateral Agent, for the benefit of the Secured Parties, a valid and enforceable security interest in the Collateral subject thereto, and will constitute a fully perfected security interest in all right, title and interest of the Loan Parties in the Collateral subject thereto, prior and superior to the rights of any other Person, except for rights secured by Permitted Liens.
SECTION 3.17 Intellectual Property; Licenses, etc. Each of Holdings, the Borrower and the other Restricted Subsidiaries owns, licenses or possesses the right to use, all of the trademarks, service marks, trade names, copyrights, patents, and other intellectual property rights (collectively, IP Rights ) that are used in and necessary for the operation of its respective business, as currently conducted, and, to the knowledge of Holdings and the Borrower, such IP Rights do not violate the rights of any other Person, except to the extent such failure to own, license or possess or such violations, either individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect. To the knowledge of Holdings and the Borrower, the conduct of the business of each of Holdings, the Borrower and the other Restricted Subsidiaries as currently conducted does not infringe upon or violate any rights held by any other Person, except for such infringements and violations which, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect. No claim or litigation regarding any of the foregoing is pending or, to the knowledge of Holdings and the Borrower, threatened, which, either individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect.
SECTION 3.18 Labor Matters . As of the Closing Date, there are no strikes, lockouts or slowdowns against Holdings, the Borrower or any other Restricted Subsidiary pending or, to the knowledge of Holdings and the Borrower, threatened, except as would not reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect. Except as would not reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect, (a) the hours worked by and payments made to employees of each of Holdings, the Borrower and the other Restricted Subsidiaries have not been in violation of the Fair Labor Standards Act or any other applicable federal, state, local or foreign law dealing with such matters; (b) all payments due from each of Holdings, the Borrower and the other Restricted Subsidiaries, or for which any claim may be made against Holdings, the Borrower or any other
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Restricted Subsidiary, on account of wages and employee health and welfare insurance and other benefits, have been paid or accrued as a liability on the books of Holdings, such Borrower or such Restricted Subsidiary; and (c) the consummation of the Transactions will not give rise to any right of termination or right of renegotiation on the part of any union under any collective bargaining agreement to which Holdings, the Borrower or any other Restricted Subsidiary is bound.
SECTION 3.19 Solvency . Immediately after the consummation of the Transactions on the Closing Date (after giving effect to the making of each Loan made on the Closing Date and after giving effect to the application of the proceeds thereof, including the payment of the Special Dividend), (a) the fair value of the assets of Holdings and the Subsidiaries, taken as a whole, exceeds the sum of all debts (including subordinated debt or contingent liabilities) of Holdings and the Subsidiaries, taken as a whole; (b) the present fair saleable value of the assets of Holdings and the Subsidiaries, taken as a whole, is greater than the amount that will be required to pay the probable liability on existing debts (including subordinated debt or contingent liabilities) of Holdings and the Subsidiaries, taken as a whole, as such debts become absolute and matured, (c) the capital of Holdings and the Subsidiaries, taken as a whole, is not unreasonably small in relation to the business of Holdings and the Subsidiaries, taken as a whole, and (d) Holdings and the Subsidiaries, taken as a whole, do not intend to incur, or believe that they will incur, debts and liabilities (including current obligations and contingent liabilities) beyond their ability to pay such debt as they mature in the ordinary course of business.
SECTION 3.20 Sanctioned Persons; PATRIOT Act; FCPA . (a) None of Holdings, the Borrower or the other Subsidiaries nor, to its knowledge, any director, officer, agent, employee or Affiliate of any of the foregoing is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department ( OFAC ) or sanctions under other similar applicable laws of other jurisdictions in which it conducts business with the result that any Lender would be in violation of applicable law; and none of Holdings, the Borrower and the other Subsidiaries intends to directly or indirectly use the proceeds of the Loans or the Letters of Credit or otherwise make available such proceeds to any person, for the purpose of financing the activities of any person currently subject to any U.S. sanctions administered by OFAC or sanctions under other similar applicable laws of other jurisdictions in which it conducts business with the result that any Lender or the Issuing Bank would be in violation of applicable law.
(b) Each of Holdings, the Borrower and the other Subsidiaries is in compliance, in all material respects, with the USA PATRIOT Act and all other laws, rules, and regulations of any jurisdiction applicable to Holdings or any of its Affiliates from time to time concerning or relating to money laundering.
(c) No proceeds of any Loan will be authorized for use, directly, or to its knowledge indirectly, for any payments to any officer or employee of a government, or government-controlled entity, political party, official of a political party, candidate for political office, or anyone else acting in an official capacity, in order to obtain, retain or direct business or obtain any improper advantage, in violation of the United States Foreign Corrupt Practices Act of 1977, as amended, or any other applicable anti-bribery or anti-corruption law.
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SECTION 3.21 Insurance . Holdings, the Borrower and the other Restricted Subsidiaries have insurance in such amounts and covering such risks and liabilities as are in accordance with normal industry practice when taken as a whole. As of the Closing Date, such insurance is in full force and effect and all premiums have been duly paid.
SECTION 3.22 Use of Proceeds . The Borrower will (a) use the proceeds of the Term Loans and Revolving Loans and will request the issuance of Letters of Credit only for the purposes specified in Section 5.08 and (b) use the proceeds of Incremental Term Loans and Incremental Revolving Loans only for the purposes specified in the applicable Incremental Assumption Agreement.
ARTICLE IV
Conditions of Lending
The obligations of the Lenders to make Loans and of the Issuing Bank to issue Letters of Credit hereunder are subject to the satisfaction (or waiver) of the following conditions:
SECTION 4.01 All Credit Events . On the date of each Borrowing (other than a conversion or a continuation of a Borrowing), including on the date of each issuance, amendment, extension or renewal of a Letter of Credit (other than any amendment, extension or renewal of a Letter of Credit that does not increase the face amount of such Letter of Credit) (each such event being called a Credit Event ):
(a) The Administrative Agent shall have received a notice of such Borrowing as required by Section 2.03 (or such notice shall have been deemed given in accordance with Section 2.02) or, in the case of the issuance, amendment, extension or renewal of a Letter of Credit, the Issuing Bank and the Administrative Agent shall have received a notice requesting the issuance, amendment, extension or renewal of such Letter of Credit as required by Section 2.22(b).
(b) Subject to Section 2.23, the representations and warranties set forth in Article III and in each other Loan Document shall be true and correct (i) in the case of the representations and warranties qualified as to materiality, in all respects, and (ii) otherwise, in all material respects, in each case on and as of the date of such Credit Event with the same effect as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date, in which case such representations and warranties shall be true as of such earlier date.
(c) At the time of and immediately after such Credit Event (subject to Section 2.23), no Default or Event of Default shall have occurred and be continuing.
Each Credit Event shall be deemed to constitute a representation and warranty by the Borrower and Holdings on the date of such Credit Event as to the matters specified in paragraphs (b) and (c) of this Section 4.01.
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SECTION 4.02 First Credit Event . On the Closing Date:
(a) The Administrative Agent (or its counsel) shall have received (i) from each Loan Party hereto either (A) a counterpart of this Agreement signed on behalf of such party or (B) written evidence reasonably satisfactory to the Administrative Agent (which may include facsimile or PDF transmission of a signed signature page of this Agreement) that such party has signed a counterpart of this Agreement, (ii) duly executed copies (or facsimile or PDF copies) of the Security Documents by each Loan Party party thereto, (iii) duly executed copies (or facsimile or PDF copies) of any promissory notes requested by a Lender pursuant to Section 2.04(e) at least one Business Day prior to the Closing Date, payable to each such requesting Lender and (iv) written opinions of (A) Willkie Farr & Gallagher LLP, counsel for the Borrower and (B) local counsel in each jurisdiction in which a Loan Party is organized or a Mortgaged Property is located and the laws of which are not covered by the opinion letter referred to in the immediately foregoing clause (A), in each case, dated as of the Closing Date, addressed to the Administrative Agent, the Collateral Agent, the Issuing Bank and the Lenders and in form and substance reasonably satisfactory to the Administrative Agent and covering such other matters relating to the Loan Documents and the Transactions as the Administrative Agent shall reasonably request, and Holdings and the Borrower hereby request such counsel to deliver such opinions.
(b) The Administrative Agent shall have received the financial statements referenced in Section 3.04.
(c) The Administrative Agent shall have received a solvency certificate from a Financial Officer of the Borrower in the form attached hereto as Exhibit G.
(d) The Administrative Agent shall have received (a) at least three Business Days prior to the Closing Date, all documentation and other information with respect to the Loan Parties as has been requested in writing at least 10 calendar days prior to the Closing Date by the Administrative Agent or the Arranger required by regulatory authorities under applicable know your customer and anti-money laundering rules and regulations, including the USA PATRIOT Act and (b) at least three Business Days prior to the Closing Date, a Beneficial Ownership Certification.
(e) The Administrative Agent shall have received (i) a copy of the certificate or articles of incorporation, certification of formation or other constitutive document, as applicable, including all amendments thereto, of each Loan Party, certified as of a recent date by the Secretary of State of the state of its organization and a certificate as to the good standing of each Loan Party as of a recent date, from such Secretary of State (or, in each case, a comparable governmental official), if available; (ii) a certificate of the Secretary, Assistant Secretary or other Responsible Officer of each Loan Party dated the Closing Date and certifying (A) that attached thereto is a true and complete copy of the by-laws, or operating, management or partnership agreement, as applicable, of such Loan Party as in effect on the Closing Date and at all times since a date prior to the date of the resolutions described in clause (B) below, (B) that attached thereto is a true and complete copy of resolutions duly adopted by the board of directors, board of managers or members of other governing body, as applicable, of such Loan Party authorizing the execution, delivery and performance of the Loan Documents to which such person is a party and, in the case of the Borrower, the borrowings hereunder, and that such resolutions have not been modified, rescinded or amended and are in full force and effect, (C) that the certificate or articles of incorporation or formation or other constitutive documents, as applicable, of such
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Loan Party have not been amended since the date of the last amendment thereto shown on the certificate of good standing furnished pursuant to clause (i) above, and (D) as to the incumbency and specimen signature of each officer executing any Loan Document or any other document delivered in connection herewith on behalf of such Loan Party; and (iii) a certificate of another officer as to the incumbency and specimen signature of the Secretary, Assistant Secretary or other Responsible Officer executing the certificate pursuant to clause (ii) above.
(f) The Administrative Agent shall have received a certificate, dated the Closing Date and signed by a Financial Officer of the Borrower, confirming compliance with the condition precedent set forth in paragraphs (b) and (c) of Section 4.01.
(g) The Administrative Agent shall have received all Fees and other fees and amounts due and payable on or prior to the Closing Date, including, to the extent invoices have been presented no later than three Business Days before the Closing Date, reimbursement or payment of all out-of-pocket expenses (including fees, charges and disbursements of counsel), required to be reimbursed or paid by any Loan Party hereunder, under any other Loan Document or under any other agreement entered into by any of the Arranger, the Administrative Agent and the Lenders, on the one hand, and any of the Loan Parties, on the other hand.
(h) The Guarantee and Collateral Agreement shall have been duly executed by each Loan Party that is to be a party thereto and shall be in full force and effect on the Closing Date. The Collateral Agent, on behalf of the Secured Parties, shall have a security interest in the Collateral of the type and priority described in the Guarantee and Collateral Agreement.
(i) Each document (including any Uniform Commercial Code financing statements but excluding any Mortgages) required by the Security Documents or under law or reasonably requested by the Collateral Agent to be filed, registered or recorded in order to create in favor of the Collateral Agent, for the benefit of the Lenders and the other Secured Parties, a perfected Lien on the Collateral described therein, prior and superior in right to any other person (subject to Permitted Liens), shall have been filed, registered or recorded or delivered to the Administrative Agent in proper form for filing, registration or recordation. The Collateral Agent shall have received all Pledged Collateral (as defined in the Guarantee and Collateral Agreement) required to be delivered to the Collateral Agent pursuant to the Guarantee and Collateral Agreement, together with undated proper instruments of assignment duly executed by the applicable Loan Party in blank and such other instruments or documents as the Collateral Agent may reasonably request.
(j) The Collateral Agent shall have received a Perfection Certificate with respect to the Loan Parties dated the Closing Date and duly executed by a Responsible Officer of Holdings, and shall have received the results of a recent lien search made with respect to the Loan Parties in the states (or other jurisdictions) of formation of such persons, in which the chief executive office of each such person is located and in the other jurisdictions in which such persons maintain property, as applicable, in each case as indicated on such Perfection Certificate, together with copies of the financing statements (or similar documents) disclosed by such search, and accompanied by evidence reasonably satisfactory to the Collateral Agent that the Liens indicated in any such financing statement (or similar document) would be Permitted Liens or have been or will be contemporaneously released or terminated.
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(k) Other than as set forth in Section 5.11, (i) each of the Security Documents, in form and substance reasonably satisfactory to the Lenders, relating to each of the Mortgaged Properties shall have been duly executed by the parties thereto and delivered to the Collateral Agent and shall be in full force and effect, (ii) each of such Mortgaged Properties shall not be subject to any Lien other than Permitted Liens, (iii) each of such Security Documents shall have been filed and recorded in the recording office as specified on Schedule 3.16(c) (or a fully paid pro forma lenders title insurance policy, in form and substance reasonably acceptable to the Collateral Agent, insuring such Security Document as a first lien on such Mortgaged Property (subject to any Permitted Liens) shall have been received by the Collateral Agent) and, in connection therewith, the Collateral Agent shall have received evidence reasonably satisfactory to it of each such filing and recordation and (iv) the Collateral Agent shall have received (A) a policy or policies of title insurance issued by a nationally recognized title insurance company, together with such endorsements, coinsurance and reinsurance as may be reasonably requested by the Collateral Agent and the Lenders, insuring the Mortgages as valid first liens on the Mortgaged Properties, free of Liens other than Permitted Liens, together with surveys and legal opinions required to be furnished pursuant to the terms of the Mortgages or as reasonably requested by the Collateral Agent and (B) if any such Mortgaged Property is a Flood Hazard Property, the Flood Insurance Documents related thereto.
(l) The Administrative Agent shall have received a copy of, or a certificate as to coverage under, the insurance policies required by Section 5.02 and the applicable provisions of the Security Documents, in form and substance reasonably satisfactory to the Administrative Agent.
Notwithstanding the foregoing, if, after the use by the Loan Parties of commercially reasonable efforts to cause the conditions relating to the collateral and guarantee matters set forth in clauses (i), (k) and (l) hereof to be satisfied as of the Closing Date (other than any Collateral the security interest in which may be perfected by the filing of a UCC financing statement, filings in the United States Patent and Trademark Office and the United States Copyright Office or the delivery of stock certificates and the security agreement giving rise to the security interest therein), such conditions shall not be a condition precedent to the effectiveness of this Agreement on the Closing Date, but shall be accomplished as promptly as practicable after the Closing Date and in any event within the period specified on Schedule 5.11 or such later date as the Administrative Agent may agree to in its sole discretion.
ARTICLE V
Affirmative Covenants
Each of Holdings and the Borrower covenants and agrees with each Lender that so long as this Agreement shall remain in effect and until the Commitments have been terminated and the principal of and interest on each Loan, all Fees and all other expenses or amounts (other than contingent amounts not yet due) payable under any Loan Document shall have been paid in full and all Letters of Credit have been Cash Collateralized or canceled or have expired and all amounts drawn thereunder have been reimbursed in full, unless the Required Lenders shall otherwise consent in writing, each of Holdings and the Borrower will, and will cause each of the other Restricted Subsidiaries to:
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SECTION 5.01 Existence; Compliance with Laws; Businesses and Properties . (a) Do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence, except as otherwise expressly permitted under Section 6.05.
(b) Except as would not reasonably be expected to have a Material Adverse Effect, do or cause to be done all things necessary to obtain, preserve, renew, extend and keep in full force and effect the rights, licenses, permits, franchises, authorizations, patents, copyrights and trademarks and trade names required for the conduct of its business; maintain and operate such business in substantially the manner in which it is presently conducted and operated; comply with all applicable laws, rules, regulations and decrees and orders of any Governmental Authority, whether now in effect or hereafter enacted (including ERISA, FCPA, regulations under OFAC, anti-terrorism laws and anti-money laundering laws and laws related to sanctioned persons); and at all times maintain and preserve all property required for the conduct of such business and keep such property in good repair, working order and condition and from time to time make, or cause to be made, all needful and proper repairs, renewals, additions, improvements and replacements thereto necessary in order that the business carried on in connection therewith may be properly conducted at all times.
SECTION 5.02 Insurance . (a) Maintain insurance, to such extent and against such risks, including fire and other risks insured against by extended coverage, as is customary with companies in the same or similar businesses operating in the same or similar locations, including public liability insurance against claims for personal injury or death or property damage occurring upon, in, about or in connection with the use of any properties owned, occupied or controlled by it; and maintain such other insurance as may be required by law.
(b) Cause all such policies of casualty or liability insurance to be endorsed or otherwise amended to, in the case of any casualty insurance policy, include a customary lenders loss payable endorsement and, in the case of any liability insurance policy (other than workers compensation, director and officer liability or other policies in which such endorsements are not customary), name the Collateral Agent, on behalf of the Secured Parties, as additional insured, in each case in form and substance reasonably satisfactory to the Administrative Agent and the Collateral Agent, which endorsement, in the case of casualty insurance policies, shall provide that, from and after the Closing Date, if the insurance carrier shall have received written notice from the Administrative Agent or the Collateral Agent of the occurrence of an Event of Default, the insurance carrier shall pay all proceeds otherwise payable to any Loan Party under such policies directly to the Collateral Agent; cause all such policies to provide that none of the Loan Parties, the Administrative Agent, the Collateral Agent nor any other party shall be a coinsurer thereunder and to contain a replacement cost endorsement, without any deduction for depreciation, and such other provisions as the Administrative Agent or the Collateral Agent may reasonably require from time to time to protect their interests; deliver original or certified copies of all such casualty and liability policies to the Collateral Agent; use commercially reasonable efforts to cause each such policy to provide that it shall not be canceled, modified or not renewed (i) by reason of nonpayment of premium upon not less than 10 days prior written notice thereof by the insurer to the Administrative Agent and the Collateral Agent (giving the Administrative Agent and the Collateral Agent the right to cure defaults in the payment of premiums) or (ii) for any other reason upon not less than 30 days prior written notice thereof by the insurer to the Administrative Agent and the Collateral Agent, deliver to the Administrative Agent and the
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Collateral Agent, prior to the cancellation, modification or nonrenewal of any such policy of insurance, a copy of a renewal or replacement policy (or other evidence of renewal of a policy previously delivered to the Administrative Agent and the Collateral Agent) together with evidence satisfactory to the Administrative Agent and the Collateral Agent of payment of the premium therefor.
(c) With respect to any Mortgaged Property that is at any time (i) a Flood Hazard Property, obtain flood insurance in such total amount as the Administrative Agent, the Collateral Agent or the Required Lenders may from time to time reasonably require, and otherwise comply with the Flood Insurance Laws, or (ii) a Zone 1 area, obtain earthquake insurance in such total amount as the Administrative Agent, the Collateral Agent or the Required Lenders may from time to time reasonably require.
(d) With respect to any Mortgaged Property, carry and maintain comprehensive general liability insurance including the broad form CGL endorsement and coverage on an occurrence basis against claims made for personal injury (including bodily injury, death and property damage) and umbrella liability insurance against any and all claims, in no event for a combined single limit of less than that which is customary for companies in the same or similar businesses operating in the same or similar locations, naming the Collateral Agent as an additional insured, on forms reasonably satisfactory to the Collateral Agent.
(e) Notify the Administrative Agent and the Collateral Agent promptly whenever any separate insurance concurrent in form or contributing in the event of loss with that required to be maintained under Section 5.02(b) is taken out by any Loan Party; and promptly deliver to the Administrative Agent and the Collateral Agent a duplicate original copy of such policy or policies.
SECTION 5.03 Obligations and Taxes . Except as would not reasonably be expected to have a Material Adverse Effect, pay its Indebtedness and other obligations promptly and in accordance with their terms and pay and discharge promptly when due all Taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits or in respect of its property, before the same shall become delinquent or in default, as well as all lawful claims for labor, materials and supplies or otherwise that, if unpaid, might give rise to a Lien upon such properties or any part thereof; provided , however , that such payment and discharge shall not be required with respect to any such Tax, assessment, charge, levy or claim so long as (a) the validity or amount thereof shall be contested in good faith by appropriate proceedings and such contest operates to suspend collection of the contested obligation, Tax, assessment or charge and enforcement of a Lien, (b) in the case of a Mortgaged Property, there is no risk of forfeiture of such property and (c) Holdings, the Borrower or the Restricted Subsidiary, as applicable, has set aside on its books adequate reserves with respect thereto in accordance with GAAP.
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SECTION 5.04 Financial Statements, Reports, etc . Furnish to the Administrative Agent for distribution to each Lender:
(a) within 120 days after the end of each fiscal year, the consolidated balance sheet and related statements of comprehensive income, changes in stockholders equity and cash flows showing the financial condition and results of operations of the Borrower and its consolidated Subsidiaries as of the close of and during such fiscal year on a consolidated basis, audited by independent certified public accountants of recognized national standing and accompanied by an opinion of such accountants (which shall not be subject to (i) a going concern or like qualification, exception or emphasis (other than with respect to, or resulting from, (A) an upcoming maturity date of any Indebtedness of the Borrower and its Subsidiaries occurring within one year from the time such opinion is delivered, (B) solely with respect to the Term Facility, any actual breach of the financial maintenance covenant set forth in Section 6.10 or, with respect to any Indebtedness, any potential inability to satisfy a financial maintenance covenant on a future date or in a future period or (C) the activities of Unrestricted Subsidiaries) or (ii) a qualification, exception or emphasis as to the scope of the relevant audit) to the effect that such consolidated financial statements have been prepared in accordance with GAAP and present fairly in all material respects the consolidated financial position and consolidated results of operations, stockholders equity and cash flows of the Borrower and its consolidated Subsidiaries in accordance with GAAP consistently applied, together with comparative figures for the immediately preceding fiscal year, together with a management discussion and analysis of financial condition and result of operations in reasonably customary form and substance (it being understood that all of the foregoing information may be furnished in the form of a Form 10-K and only the information required by such Form 10-K shall be required by this Section 5.04(a));
(b) within 45 days after the end of each of the first three fiscal quarters of each fiscal year, the consolidated balance sheet and related statements of comprehensive income and change in cash flows showing the financial condition of the Borrower and its consolidated Subsidiaries as of the close of such fiscal quarter and the results of operations of the Borrower and its consolidated Subsidiaries during such fiscal quarter and the then elapsed portion of the fiscal year, and comparative figures for the same periods in the immediately preceding fiscal year, all certified by one of its Financial Officers as fairly presenting in all material respects the financial condition and results of operations of the Borrower and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, subject to normal year-end audit adjustments (it being understood that all of the foregoing information may be furnished in the form of a Form 10-Q and only the information required by such Form 10-Q shall be required by this Section 5.04(b));
(c) concurrently with any delivery of financial statements under paragraph (a) or (b) above at a time when there are one or more Unrestricted Subsidiaries, consolidating financial statements reflecting the adjustments necessary to eliminate the accounts of Unrestricted Subsidiaries from such consolidated financial statements;
(d) concurrently with any delivery of financial statements under paragraph (a) or (b) above, a Compliance Certificate (i) certifying that no Event of Default or Default has occurred or, if such an Event of Default or Default has occurred, specifying the nature and extent thereof and any corrective action taken or proposed to be taken with respect thereto and (ii) setting forth computations in detail reasonably satisfactory to the Administrative Agent demonstrating compliance with the financial maintenance covenant contained in Section 6.10 only to the extent then in effect and, in the case of a certificate delivered with the financial statements required by paragraph (a) above with respect to a fiscal year ending on or after December 31, 2019, setting forth the Borrowers calculation of Excess Cash Flow;
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(e) prior to the consummation of a Qualified Public Offering, within 90 days after the end of each fiscal year of the Borrower (beginning with the fiscal year ending December 31, 2018), a detailed consolidated budget for the then-current fiscal year (including a projected consolidated balance sheet and related statements of projected operations and cash flows as of the end of and for such then-current fiscal year and setting forth the assumptions used for purposes of preparing such budget) and, promptly when available, any significant revisions of such budget;
(f) promptly after the same become publicly available, copies of all periodic and other reports, proxy statements and other materials filed by Holdings, the Borrower or any other Subsidiary with the Securities and Exchange Commission, or any Governmental Authority succeeding to any or all of the functions of the Securities and Exchange Commission, or with any national securities exchange, or distributed to its shareholders, as the case may be;
(g) promptly after the receipt thereof by Holdings, the Borrower or any other Subsidiary, a copy of any management letter received by any such person from its certified public accountants and the managements response thereto;
(h) promptly after the request by any Lender, all documentation and other information that such Lender reasonably requests in order to comply with its ongoing obligations under applicable know your customer and anti-money laundering rules and regulations, including the USA PATRIOT Act;
(i) promptly after the reasonable request by the Administrative Agent or any Lender, copies of (i) any documents described in Section 101(k)(1) of ERISA that Holdings, the Borrower, the other Restricted Subsidiaries or any of their ERISA Affiliates may request with respect to any Multiemployer Plan and (ii) any notices described in Section 101(l)(1) of ERISA that Holdings, the Borrower, the other Restricted Subsidiaries or any of their ERISA Affiliates may request with respect to any Multiemployer Plan; provided that if Holdings, the Borrower, the other Restricted Subsidiaries or any of their ERISA Affiliates has not requested such documents or notices from the administrator or sponsor of the applicable Multiemployer Plan, Holdings, the Borrower, the other Restricted Subsidiaries or the applicable ERISA Affiliate shall promptly make a request for such documents or notices from such administrator or sponsor and shall provide copies of such documents and notices promptly after receipt thereof; and
(j) promptly, from time to time, (i) such other information regarding the operations, business affairs and financial condition of Holdings, the Borrower or any other Restricted Subsidiary, or compliance with the terms of any Loan Document, and (ii) information and documentation necessary for purposes of compliance with the Beneficial Ownership Regulation, in each case, as the Administrative Agent or any Lender, acting through the Administrative Agent, may reasonably request.
Information required to be delivered pursuant to this Section 5.04 shall be deemed to have been delivered if such information, or one or more annual or quarterly reports containing such information, shall have been posted by the Administrative Agent on SyndTrak, IntraLinks or a similar site to which the Lenders have been granted access; provided that upon written request by the Administrative Agent, Holdings shall deliver paper copies of such documents to the
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Administrative Agent for further distribution to each Lender until a written request to cease delivering paper copies is given by the Administrative Agent. Information required to be delivered pursuant to this Section 5.04 may also be delivered by electronic communications pursuant to procedures approved by the Administrative Agent. Each Lender shall be solely responsible for timely accessing posted documents and maintaining its copies of such documents.
SECTION 5.05 Notices . Promptly after any Responsible Officer of the Borrower obtains knowledge thereof, the Borrower will furnish to the Administrative Agent (for the distribution to each Issuing Bank and each Lender) written notice of the following:
(a) any Event of Default or Default, specifying the nature and extent thereof and the corrective action (if any) taken or proposed to be taken with respect thereto;
(b) to the extent permitted by law, the filing or commencement of, or any written threat or notice of intention of any person to file or commence, any action, suit or proceeding, whether at law or in equity or by or before any Governmental Authority, against Holdings or any of its Affiliates that would reasonably be expected to result in a Material Adverse Effect;
(c) the occurrence of any ERISA Event that, alone or together with any other ERISA Events that have occurred, would reasonably be expected to result in a Material Adverse Effect;
(d) any development that has resulted in, or would reasonably be expected to result in, a Material Adverse Effect; and
(e) any change in the Borrowers public corporate rating by S&P, in the Borrowers public corporate family rating by Moodys or in the public ratings of the Credit Facilities by S&P or Moodys, or any notice from either such agency indicating its intent to effect such a change or to place Holdings or the Credit Facilities on a CreditWatch or WatchList or any similar list, in each case with negative implications, or its cessation of, or its intent to cease, rating the Borrower or the Credit Facilities.
SECTION 5.06 Information Regarding Collateral . (a) Furnish to the Administrative Agent prompt written notice (and in any event within 30 calendar days or such longer period as the Administrative Agent shall agree in its sole discretion) of any change (i) in any Loan Partys corporate name, (ii) in any Loan Partys identity or corporate structure or (iii) in any Loan Partys federal Taxpayer Identification Number or organizational identification number. Holdings and the Borrower agree to provide the Administrative Agent with prior written notice (or such later notice as the Administrative Agent shall agree in its sole discretion) of any change in the jurisdiction of organization or formation of any Loan Party. Holdings and the Borrower agree not to effect or permit any change referred to in the preceding sentence unless all filings have been made under the Uniform Commercial Code or otherwise that are required in order for the Collateral Agent to continue at all times following such change to have a valid, legal and perfected security interest in all the Collateral. Holdings and the Borrower also agree promptly to notify the Administrative Agent if any material portion of the Collateral is damaged or destroyed.
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(b) Each year, at the time of delivery of the annual financial statements with respect to the preceding fiscal year pursuant to Section 5.04(a), deliver to the Administrative Agent a Compliance Certificate setting forth the information required pursuant to the Perfection Certificate or confirming that there has been no change in such information since the date of the Perfection Certificate delivered on the Closing Date or the date of the most recent certificate delivered pursuant to this Section 5.06.
SECTION 5.07 Maintaining Records; Access to Properties and Inspections; Maintenance of Ratings . (a) Keep proper books of record and account in which full, true and correct entries in conformity with GAAP (or applicable local standards) in all material respects and all requirements of law in all material respects are made of all material dealings and transactions in relation to its business and activities. Each Loan Party will, and will cause each of its subsidiaries to, permit any representatives designated by the Administrative Agent or any Lender to visit and inspect, at the cost of the Borrower, the financial records and the properties of such person at reasonable times and as often as reasonably requested and to make extracts from and copies of such financial records, and permit any representatives designated by the Administrative Agent or any Lender to discuss the affairs, finances and condition of such person with the officers thereof and independent accountants therefor; provided that no more than one annual visit per calendar year shall be at the cost of the Borrower if no Event of Default shall have occurred and be continuing at the time of such visit.
(b) Use commercially reasonable efforts to cause the Credit Facilities to be continuously and publicly rated (but not any specific rating) by S&P and Moodys and use commercially reasonable efforts to maintain a public corporate rating (but not any specific rating) from S&P and a public corporate family rating (but not any specific rating) from Moodys, in each case in respect of the Borrower.
SECTION 5.08 Use of Proceeds . (a) Use the proceeds of the Term Loans (i) to finance the payment of the Special Dividend and the payment of Transactions Costs and (ii) with respect to any amounts not used pursuant to the foregoing clause (i), for general corporate purposes of the Borrower and its Restricted Subsidiaries (including for capital expenditures, the payment of transaction fees and expenses, Permitted Acquisitions, Restricted Payments, refinancing of Indebtedness and any other transactions not prohibited by this Agreement), (b) use the proceeds of the Revolving Loans (including Letters of Credit) for working capital needs and for other general corporate purposes of the Borrower and its Restricted Subsidiaries (including for capital expenditures, the payment of transaction fees and expenses, Permitted Acquisitions, Restricted Payments, refinancing of Indebtedness and any other transactions not prohibited by this Agreement) and (c) use the proceeds of Incremental Term Loans and Incremental Revolving Loans only for the purposes specified in the applicable Incremental Assumption Agreement.
SECTION 5.09 Compliance with Environmental Laws . Except as would not reasonably be expected to result in a Material Adverse Effect, comply, and cause all lessees and other persons occupying or operating any properties of Holdings, the Borrower and the other Subsidiaries to comply, in all material respects with all Environmental Laws applicable to its operations and properties; obtain and renew all material Environmental Permits necessary for its operations and properties; and conduct any response or remedial action required under and in accordance with Environmental Laws; provided , however , that none of Holdings, the Borrower
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or the other Subsidiaries shall be required to undertake any response or remedial action required under Environmental Laws to the extent that its obligation to do so is being contested in good faith and by proper proceedings and appropriate reserves are being maintained with respect to such circumstances in accordance with GAAP, except to the extent that such response or remedial action is necessary to prevent or abate an imminent and substantial danger to human health and/or the environment.
SECTION 5.10 Further Assurances . Execute any and all further documents, financing statements, agreements and instruments, and take all further action (including filing Uniform Commercial Code and other financing statements, mortgages and deeds of trust) that may be required under applicable law, or that the Required Lenders, the Administrative Agent or the Collateral Agent may reasonably request, in order to effectuate the transactions contemplated by the Loan Documents and in order to grant, preserve, protect and perfect the validity and first priority of the security interests created or intended to be created by the Security Documents. Holdings and the Borrower will cause any subsequently acquired or organized Restricted Subsidiary that is not an Excluded Subsidiary (and any Subsidiary that ceases to be an Excluded Subsidiary) promptly to become a Guarantor and a Loan Party by executing and delivering a supplement to the Guarantee and Collateral Agreement and each applicable Security Document in favor of the Collateral Agent. In addition, from time to time, Holdings will, at its cost and expense, promptly secure or cause the Borrower and the other Restricted Subsidiaries that are not Excluded Subsidiaries to secure the Obligations by pledging or creating, or causing to be pledged or created, perfected security interests with respect to such of its or their assets and properties as the Administrative Agent or the Required Lenders shall designate, subject to the limitations set forth in this Section 5.10 and in the applicable Security Documents (it being understood that it is the intent of the parties that, subject to the limitations set forth in this Section 5.10 and in the applicable Security Documents, the Obligations shall be secured by substantially all the assets of Holdings, the Borrower and the other Restricted Subsidiaries that are not Excluded Subsidiaries (including real and other properties acquired subsequent to the Closing Date)). Such security interests and Liens will be created under the Security Documents in form and substance reasonably satisfactory to the Collateral Agent, and Holdings and the Borrower shall deliver or cause to be delivered to the Collateral Agent within 90 days or such longer period as the Collateral Agent may agree in its sole discretion, all such instruments and documents (including legal opinions, surveys, abstracts, appraisals, title insurance policies and lien searches) as the Collateral Agent shall reasonably request to evidence compliance with this Section 5.10. Holdings and the Borrower agree to provide such evidence as the Collateral Agent shall reasonably request as to the perfection and priority status of each such security interest and Lien. In furtherance of the foregoing, each of Holdings and the Borrower will each give notice to the Administrative Agent within 30 days of the acquisition by it or any other Restricted Subsidiary that is not an Excluded Subsidiary of any real property (or any interest in real property) having a fair market value of at least $3,000,000; provided however , that notwithstanding anything to the contrary set forth in this Agreement or any other Loan Document, (x) no Mortgages shall be required with respect to any owned real property of any Loan Party acquired after the Closing Date and having a fair market value of less than $3,000,000 ( Immaterial Owned Real Property ), (y) no Mortgages shall be required with respect to any leasehold interest in real property, and (z) no landlord lien waivers, bailee waivers, estoppel letters, collateral access agreements or similar agreements will be required in connection with any Mortgages or Mortgaged Property.
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SECTION 5.11 Post-Closing Obligations . The parties hereto acknowledge and agree that within the time periods set forth in Schedule 5.11, or within such longer period or periods that the Administrative Agent in its sole discretion may permit, Holdings and the other Subsidiaries shall deliver to the Administrative Agent the documents, and perform the actions, set forth on Schedule 5.11 that would have been required to be delivered or taken on or prior to the Closing Date but for the last paragraph of Section 4.02.
SECTION 5.12 Quarterly Lender Calls . Beginning after the fiscal year of the Borrower ending December 31, 2018, no later than (i) 10 days after the delivery of any financial statements pursuant to Section 5.04(a) or (b) or (ii) such other time as agreed by the Borrower and the Administrative Agent (each party acting reasonably) the appropriate Financial Officers of the Borrower shall participate in one conference call with the Administrative Agent and the Lenders to discuss in reasonable detail (subject to confidentiality and privilege restrictions on the Borrower and its Subsidiaries) such financial statements and the financial condition and results of operations of the Borrower and its Subsidiaries, as well as to answer reasonable questions from the Administrative Agent or the Lenders about such financial statements; provided that if the Borrower holds a conference call open to the public or holders of any public securities to discuss the financial statements and the financial condition and results of operations of the Borrower and its Subsidiaries for the most recently ended fiscal year or fiscal quarter, as applicable, for which financial statements have been delivered pursuant to Section 5.04(a) or (b) above, such conference call will be deemed to satisfy the requirements of this Section 5.12 so long as the Administrative Agent and the Lenders are provided access to such conference call and the ability to ask questions thereon.
SECTION 5.13 Designation of Subsidiaries . The Borrower may at any time after the Closing Date designate any Subsidiary (other than the Borrower) as an Unrestricted Subsidiary or any Unrestricted Subsidiary as a Restricted Subsidiary; provided that (i) immediately before and after such designation, no Event of Default shall have occurred and be continuing and (ii) in the case of a designation of any Restricted Subsidiary as an Unrestricted Subsidiary, the Borrower could incur $1.00 of unsecured Ratio Debt both prior to and after giving pro forma effect to such designation and the pro forma adjustments described in Section 1.03. The designation of any Subsidiary as an Unrestricted Subsidiary after the Closing Date shall constitute an Investment by the Borrower therein at the date of designation in an amount equal to the fair market value of the Borrowers Investment therein. The designation of any Unrestricted Subsidiary as a Restricted Subsidiary shall constitute the incurrence at the time of designation of any Indebtedness or Liens of such Subsidiary existing at such time. Upon a redesignation of an Unrestricted Subsidiary as a Restricted Subsidiary, the Borrower shall be deemed to continue to have a permanent Investment in an Unrestricted Subsidiary equal to an amount (if positive) equal to (1) the Borrowers Investment in such Subsidiary at the time of such redesignation, less (2) the portion (proportionate to the Borrowers Equity Interest in such Subsidiary) of the fair market value of the net assets of such Subsidiary at the time of such redesignation; and any property transferred to or from an Unrestricted Subsidiary shall be valued at its fair market value at the time of such transfer, in each case as determined in good faith by the Borrower. Notwithstanding the foregoing, no Unrestricted Subsidiary that has been designated as a Restricted Subsidiary may again be designated as an Unrestricted Subsidiary.
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ARTICLE VI
Negative Covenants
Each of Holdings and the Borrower covenants and agrees with each Lender that, so long as this Agreement shall remain in effect and until the Commitments have been terminated and the principal of and interest on each Loan, all Fees and all other expenses or amounts (other than contingent amounts not yet due) payable under any Loan Document have been paid in full and all Letters of Credit have been Cash Collateralized or canceled or have expired and all amounts drawn thereunder have been reimbursed in full, unless the Required Lenders shall otherwise consent in writing, (A) with respect to Sections 6.06(b)(i) and 6.08(a), Holdings will not and (B) except with respect to Section 6.08(a), the Borrower will not, nor will Holdings or the Borrower cause or permit any of the other Restricted Subsidiaries to:
SECTION 6.01 Indebtedness . Incur, create, assume or permit to exist any Indebtedness,
except:
(a) Indebtedness existing on the date hereof and set forth in Schedule 6.01;
(b) Indebtedness created hereunder and under the other Loan Documents and any Credit Agreement Refinancing Indebtedness in respect thereof (or in respect of other Credit Agreement Refinancing Indebtedness);
(c) Incremental Equivalent Debt;
(d) intercompany Indebtedness of the Borrower and the other Restricted Subsidiaries to the extent permitted by Section 6.04(c) or (s);
(e) Indebtedness of the Borrower or any other Restricted Subsidiary (including purchase money indebtedness) incurred to finance the acquisition, construction or improvement of any fixed or capital assets, and extensions, renewals and replacements of any such Indebtedness that do not increase the outstanding principal amount thereof; provided that (i) such Indebtedness is incurred prior to or within 180 days after such acquisition or the completion of such construction or improvement and (ii) the aggregate outstanding principal amount of Indebtedness permitted by this Section 6.01(e), when combined with the aggregate outstanding principal amount of all Capital Lease Obligations and Synthetic Lease Obligations incurred pursuant to Section 6.01(f), together with any Permitted Refinancing Indebtedness in respect thereof, shall not exceed at the time of incurrence thereof, the greater of (x) $15,000,000 and (y) 16.5% of Consolidated EBITDA for the most recently ended Test Period;
(f) Capital Lease Obligations and Synthetic Lease Obligations in an aggregate outstanding principal amount, when combined with the aggregate outstanding principal amount of all Indebtedness incurred pursuant to Section 6.01(e), together with any Permitted Refinancing Indebtedness in respect thereof, shall not exceed at the time of incurrence thereof, the greater of (x) $15,000,000 and (y) 16.5% of Consolidated EBITDA for the most recently ended Test Period;
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(g) Indebtedness under performance or surety bonds or with respect to workers compensation claims, in each case incurred in the ordinary course of business;
(h) (i) Indebtedness of any person that becomes a Restricted Subsidiary after the date hereof or Indebtedness acquired or assumed by the Borrower or any other Restricted Subsidiary in connection with any Permitted Acquisition or other similar Investment permitted under Section 6.04 and (ii) Indebtedness of the Borrower or any other Restricted Subsidiary incurred to finance a Permitted Acquisition or other similar Investment permitted under Section 6.04, so long as, in the case of each of the foregoing clauses (h)(i) and (h)(ii) of this Section 6.01, on a pro forma basis after giving effect thereto and the pro forma adjustments described in Section 1.03, no Event of Default shall have occurred and be continuing, and either (x) the Total Leverage Ratio shall not exceed 4.00 to 1.00 or (y) the Total Leverage Ratio shall be no greater than the Total Leverage Ratio immediately prior thereto; provided that no such Indebtedness incurred under the foregoing clause (h)(ii) of this Section 6.01 (I) may be incurred by a Subsidiary that is not a Subsidiary Guarantor or (II) shall have a final maturity or have scheduled amortization or payments of principal (other than customary AHYDO Payments, customary offers to repurchase and prepayment events upon a Change in Control, Asset Sale or event of loss and a customary acceleration right after an Event of Default) prior to Latest Term Maturity Date at the time such Indebtedness is incurred;
(i) Indebtedness of the Borrower or any Subsidiary Guarantor in an aggregate principal amount not exceeding at any time outstanding the greater of (x) $30,000,000 and (y) 33% of Consolidated EBITDA for the most recently ended Test Period;
(j) Guarantees (i) by the Borrower or any Subsidiary Guarantor of any Indebtedness of the Borrower or Subsidiary Guarantor permitted under this Section 6.01, (ii) by the Borrower or Subsidiary Guarantor of Indebtedness otherwise permitted under this Section 6.01 of any Restricted Subsidiary that is not the Borrower or Subsidiary Guarantor; provided that any such Guarantee shall be treated as an Investment in such Restricted Subsidiary that is not the Borrower or Subsidiary Guarantor for purposes of Section 6.04, (iii) by any Restricted Subsidiary that is not the Borrower or a Subsidiary Guarantor of Indebtedness of another Restricted Subsidiary that is not the Borrower or a Subsidiary Guarantor and (iv) by the Borrower or any other Restricted Subsidiary of Indebtedness of any person that is not a Restricted Subsidiary; provided that any such Guarantee shall be treated as an Investment in such person for purposes of Section 6.04;
(k) Indebtedness in respect of Hedging Agreements consistent with prudent business practice and which are not speculative in nature;
(l) Indebtedness of any Restricted Subsidiary that is not a Loan Party in an aggregate principal amount not exceeding at any time outstanding the greater of (x) $10,000,000 and (y) 11% of Consolidated EBITDA for the most recently ended Test Period;
(m) extensions, renewals, refinancings and replacements of Indebtedness incurred under Section 6.01(a), (c), (e), (f), (h), this clause (m), and (o) (the Indebtedness being extended, renewed, refinanced or replaced being referred to herein as the Refinanced Indebtedness ; and the Indebtedness incurred under this Section 6.01(m) being referred to herein as Permitted
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Refinancing Indebtedness ); provided that (i) the principal amount of the Refinanced Indebtedness is not increased (except by an amount equal to any premium on such Refinanced Indebtedness and fees and expenses and any original issue discount incurred in connection with such extension, renewal, refinancing or replacement), (ii) the final maturity date of the Permitted Refinancing Indebtedness is on or after the earlier of (x) the final maturity date of the Refinanced Indebtedness and (y) 91 days after the Latest Maturity Date in effect on the date of incurrence of such Permitted Refinancing Indebtedness, (iii) the weighted average life to maturity of the Permitted Refinancing Indebtedness as of such incurrence date is greater than or equal to the lesser of (x) the then remaining weighted average life to maturity of the Refinanced Indebtedness and (y) 91 days after the weighted average life to maturity of the Class of Term Loans then outstanding with the greatest remaining weighted average life to maturity, (iv) if the Refinanced Indebtedness is subordinated to the Obligations, the Permitted Refinancing Indebtedness is subordinated to the Obligations on terms not less favorable to the Lenders, and (v) the obligors in respect of the Refinanced Indebtedness are the only obligors on the Permitted Refinancing Indebtedness (unless each such subsequent obligor would have been required to be an obligor of the Refinanced Indebtedness or is a Loan Party or, in the case of Refinanced Indebtedness of a non-Loan Party, such subsequent obligor is not a Loan Party);
(n) Capital Lease Obligations arising under any sale-leaseback transaction permitted
hereunder;
(o) Indebtedness comprising take-or-pay obligations in respect of supply contracts entered into the ordinary course of business;
(p) Indebtedness supported by a Letter of Credit, in a principal amount not to exceed the face amount of such Letter of Credit;
(q) (i) Indebtedness arising from an agreement providing for indemnification obligations or obligations in respect of purchase price (including earnouts) or other similar adjustments incurred pursuant to an Investment or Asset Sale, in each case permitted under this Agreement, and (ii) Indebtedness arising from guaranties, letters of credit, bank guaranties, surety bonds, performance bonds or similar instruments securing the performance pursuant to any such agreement described in clause (i);
(r) other Indebtedness of the Loan Parties constituting Total Debt; provided that (i) both before and after the incurrence thereof, no Event of Default shall have occurred and be continuing, (ii) (A) in the case of any such Indebtedness secured by Liens on the Collateral that rank pari passu with the Liens on the Collateral securing the Credit Facilities, the First Lien Leverage Ratio, on a pro forma basis after giving effect to such incurrence and the pro forma adjustments described in Section 1.03, shall not exceed 2.75 to 1.00 and (B) in the case of any such Indebtedness secured by Liens on the Collateral that rank junior to the Liens on the Collateral securing the Credit Facilities or in the case of unsecured Indebtedness, the Total Leverage Ratio, on a pro forma basis after giving effect to such incurrence and the pro forma adjustments described in Section 1.03, shall not exceed 4.00 to 1.00, (iii) any such Indebtedness shall not be incurred by or guaranteed by any person other the Loan Parties, (iv) any such Indebtedness, if secured, shall not be secured by any assets other than the Collateral and (v) any such Indebtedness shall not have a final maturity or have scheduled amortization or payments of
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principal (other than customary AHYDO Payments, customary offers to repurchase and prepayment events upon a change of control, asset sale or event of loss and a customary acceleration right after an event of default) prior to the Latest Term Maturity Date at the time such Indebtedness is incurred (any Indebtedness incurred pursuant to this clause (p), Ratio Debt ); and
(s) all premiums (if any), interest (including post-petition interest), accretion or amortization of original issue discount, fees, expenses, charges and additional or contingent interest on obligations described in clauses (a) through (r) above.
For purposes of determining compliance with this Section 6.01, (i) in the event that an item of Indebtedness (or any portion thereof) meets the criteria of more than one of the categories of Indebtedness permitted under this Section 6.01, Holdings, in its sole discretion, at the time of incurrence will divide, classify or reclassify or at any later time divide, classify or reclassify such item of Indebtedness (or any portion thereof) and will only be required to include the amount and type of such Indebtedness in one of the above clauses or paragraphs and (ii) at the time of incurrence, Holdings will be entitled to divide and classify an item of Indebtedness in more than one of the types of Indebtedness described in this Section 6.01.
SECTION 6.02 Liens . Create, incur, assume or permit to exist any Lien on any property or assets (including the Equity Interests or other securities of any Person) now owned or hereafter acquired by it or on any income or revenues or rights in respect of any thereof, except:
(a) Liens on property or assets of the Borrower and the other Restricted Subsidiaries existing on the date hereof and set forth in Schedule 6.02; provided that such Liens shall secure only those obligations which they secure on the date hereof and Permitted Refinancing Indebtedness in respect thereof;
(b) any Lien created under the Loan Documents;
(c) any Lien existing on any property or asset prior to the acquisition thereof by the Borrower or any other Restricted Subsidiary or existing on any property or assets of any person that becomes a Restricted Subsidiary after the date hereof pursuant to a Permitted Acquisition prior to the time such person becomes a Restricted Subsidiary, as the case may be; provided that (i) such Lien is not created in contemplation of or in connection with such acquisition or such person becoming a Restricted Subsidiary, (ii) such Lien does not apply to any other property or assets of the Borrower or any other Restricted Subsidiary and (iii) such Lien secures only those obligations which it secures on the date of such acquisition or the date such person becomes a Restricted Subsidiary, as the case may be;
(d) Liens for Taxes not yet due and payable or which are being contested in compliance with Section 5.03;
(e) carriers, warehousemens, mechanics, materialmens, repairmens or other like Liens arising in the ordinary course of business and securing obligations that are not due and payable or which are being contested in compliance with Section 5.03;
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(f) pledges and deposits made in the ordinary course of business in compliance with workmens compensation, unemployment insurance and other social security laws or regulations;
(g) deposits to secure the performance of bids, trade contracts (other than for Indebtedness), leases (other than Capital Lease Obligations), statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business;
(h) zoning restrictions, easements, rights-of-way, restrictions on use of real property and other similar encumbrances incurred in the ordinary course of business which, in the aggregate, are not substantial in amount and do not materially detract from the value of the property subject thereto or interfere with the ordinary conduct of the business of the Borrower or any other Restricted Subsidiary;
(i) purchase money security interests in real property, improvements thereto or equipment hereafter acquired (or, in the case of improvements, constructed) by the Borrower or any other Restricted Subsidiary; provided that (i) such security interests secure Indebtedness permitted by Section 6.01, (ii) such security interests are incurred, and the Indebtedness secured thereby is created, within 180 days after such acquisition (or construction), (iii) the Indebtedness secured thereby does not exceed the lesser of the cost and the fair market value of such real property, improvements or equipment at the time of such acquisition (or construction) and (iv) such security interests do not apply to any other property or assets of the Borrower or any other Restricted Subsidiary except for replacements, additions, accessions and improvements to such property and the proceeds and the products thereof, and any lease of such property (including accessions thereto) and the proceeds and products thereof; provided, further that individual financings of equipment provided by one lender may be cross collateralized to other financings of equipment provided by such lender;
(j) Liens arising out of judgments, decrees or attachments that do not constitute an Event of Default under Article VII;
(k) Liens securing Credit Agreement Refinancing Indebtedness subject to an Acceptable Intercreditor Agreement;
(l) other Liens that do not, individually or in the aggregate, secure obligations (or encumber property with a fair market value) in excess of the greater of (x) $15,000,000 and (y) 16.5% of Consolidated EBITDA for the most recently ended Test Period, at any one time;
(m) Liens (i) of a collection bank arising under Section 4-210 of the Uniform Commercial Code or any comparable or successor provision on items in the course of collection, (ii) attaching to pooling, commodity trading accounts or other commodity brokerage accounts incurred in the ordinary course of business and (iii) in favor of banking or other financial institutions or electronic payment service providers arising as a matter of law encumbering deposits (including the right of setoff) and which are within the general parameters customary in the banking or finance industry;
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(n) Liens that are contractual rights of setoff (i) relating to the establishment of depository relations with banks or other Persons not given in connection with the issuance of Indebtedness, (ii) relating to pooled deposit or sweep accounts of Holdings or any of its Restricted Subsidiaries to permit satisfaction of overdraft or similar obligations incurred in the ordinary course of business of Holdings and its Restricted Subsidiaries or (iii) relating to purchase orders and other agreements entered into with customers of Holdings or any of its Restricted Subsidiaries in the ordinary course of business;
(o) Liens solely on any cash earnest money deposits made by Holdings or any of its Restricted Subsidiaries in connection with any letter of intent or purchase agreement permitted under this Agreement;
(p) Liens on assets and Equity Interests of non-Loan Parties securing Indebtedness of non-Loan Parties that is permitted by Section 6.01 and that is otherwise non-recourse against the Loan Parties;
(q) to the extent constituting Liens, leases or subleases granted in the ordinary course of business to others not interfering in any material respect with the business of the Borrower or any other Restricted Subsidiary and any interest or title of a lessor under any lease not in violation of this Agreement;
(r) Liens arising from the rights of lessors under any lease (including financing statements regarding property subject to lease) not in violation of the requirements of this Agreement, provided that such Liens are only in respect of the real property subject to, and secure only, such lease (and any other lease with the same or affiliated lessor);
(s) Liens arising out of sale-leaseback transactions permitted hereunder;
(t) Liens granted by a Restricted Subsidiary that is not a Loan Party in favor of any Restricted Subsidiary and Liens granted by a Loan Party in favor of any other Loan Party;
(u) Liens on Equity Interests of any joint venture (a) securing obligations of such joint venture or (b) pursuant to the relevant joint venture agreement or arrangement;
(v) other Liens on Collateral securing Indebtedness subject to an Acceptable Intercreditor Agreement; provided that, in the case of any such Indebtedness that is (a) secured by a Lien on the Collateral on a junior basis to the Obligations, the Total Leverage Ratio, on a pro forma basis after giving effect to such Lien and any pro forma adjustments described in Section 1.03, shall not exceed 4.00 to 1.00 and (b) secured by a Lien on the Collateral on a pari passu basis with the Obligations, the First Lien Leverage Ratio, on a pro forma basis after giving effect to such Lien and any pro forma adjustments described in Section 1.03, shall not exceed 2.75 to 1.00; and
(w) Liens securing Incremental Equivalent Debt subject to an Acceptable Intercreditor Agreement.
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For purposes of determining compliance with this Section 6.02, (x) a Lien need not be incurred solely by reference to one category described in this Section 6.02 but may be incurred under any combination of such categories (including in part under one such category and in part under any other such category) and (y) in the event that a Lien (or any portion thereof) meets the criteria of one or more of such categories of Liens permitted hereunder, Holdings shall, in its sole discretion, classify or reclassify such Lien (or any portion thereof) in any manner that complies with this definition.
SECTION 6.03 Sale and Lease-Back Transactions . Enter into any arrangement, directly or indirectly, with any person whereby it shall sell or transfer any property, real or personal, used or useful in its business, whether now owned or hereafter acquired, and thereafter rent or lease such property or other property which it intends to use for substantially the same purpose or purposes as the property being sold or transferred, unless the sale or transfer of such property is permitted by Section 6.05.
SECTION 6.04 Investments . Make or permit to exist any Investment except:
(a) (i) Investments by the Borrower and the Restricted Subsidiaries existing on the date hereof in Restricted Subsidiaries and (ii) additional Investments by the Borrower and the other Restricted Subsidiaries in the Borrower or the other Restricted Subsidiaries; provided that (A) any such Equity Interests held by a Loan Party shall be pledged pursuant to the Guarantee and Collateral Agreement, (B) the aggregate amount of Investments made after the Closing Date by Loan Parties in Restricted Subsidiaries that are not Loan Parties shall not exceed at any time outstanding the greater of (x) $10,000,000 and (y) 11% of Consolidated EBITDA for the most recently ended Test Period and (C) any such Investments in the form of loans or advances shall be subject to the limitations set forth in clause (c)(i) and (c)(iii) below;
(b) Investments in cash or Cash Equivalents;
(c) loans or advances made by the Borrower to any other Restricted Subsidiary and made by any Restricted Subsidiary to the Borrower or any other Restricted Subsidiary; provided that (i) any such loans or advances made by a Loan Party shall be evidenced by a promissory note or global intercompany note pledged to the Collateral Agent for the benefit of the Secured Parties pursuant to the Guarantee and Collateral Agreement, together with an appropriate allonge or note power, (ii) the amount of such loans and advances made by Loan Parties to Restricted Subsidiaries that are not Loan Parties shall be subject to the limitation set forth in clause (a) above and (iii) any such loans or advances owed by a Loan Party to a Restricted Subsidiary that is not a Loan Party shall be subordinated in right of payment to the Obligations pursuant to an affiliate subordination agreement reasonably satisfactory to the Collateral Agent;
(d) Investments received in connection with the bankruptcy or reorganization of, or settlement of delinquent accounts and disputes with, customers and suppliers, in each case in the ordinary course of business;
(e) the Borrower and the other Restricted Subsidiaries may make loans and advances to their respective employees so long as the aggregate principal amount thereof at any time outstanding (determined without regard to any write-downs or write-offs of such loans and advances) shall not exceed in any fiscal year the greater of (x) $2,500,000 and (y) 2.75% of Consolidated EBITDA for the most recently ended Test Period;
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(f) the Borrower and the other Restricted Subsidiaries may enter into Hedging Agreements expressly permitted by Section 6.01(k);
(g) the Borrower or any other Restricted Subsidiary may acquire all or substantially all the assets of a person or line of business of such person, or not less than a majority of the Equity Interests of a person (referred to herein as the Acquired Entity ); provided that (i) such acquisition was not preceded by an unsolicited tender offer for such Equity Interests by, or proxy contest initiated by, Holdings, the Borrower or any other Subsidiary; (ii) the Acquired Entity shall be in a Similar Business; and (iii) (A) both before and after giving effect thereto, no Event of Default shall have occurred and be continuing, in each case at and as of the date the agreement for such acquisition is signed and (B) at the time of the consummation of such transaction (or following such transaction within the time specified in this Agreement), the Borrower shall comply, and shall cause the Acquired Entity to comply, with the applicable provisions of Section 5.10 and the Security Documents; provided that the total consideration paid by or on behalf of the Borrower and the other Restricted Subsidiaries for any such acquisition of a person that does not become a Loan Party (including by way of merger) or of assets (other than Immaterial Owned Real Property) that do not become Collateral, when aggregated with the total consideration paid by or on behalf of the Borrower and the other Restricted Subsidiaries for all other acquisitions made by the Borrower and the other Restricted Subsidiaries of persons that do not become Loan Parties (including by way of merger) or of assets (other than Immaterial Owned Real Property) that do not become Collateral, shall not exceed the greater of (x) $25,000,000 and (y) 27.5% of Consolidated EBITDA as of the last day of the most recently ended Test Period (any acquisition of an Acquired Entity meeting all the criteria of this Section 6.04(g) being referred to herein as a Permitted Acquisition );
(h) Investments existing on the date hereof and set forth in Schedule 6.04;
(i) additional Investments up to an amount not to exceed the Available Amount; provided that, with respect to an Investment made using the Cumulative Retained Excess Cash Flow Amount, (1) no Event of Default shall have occurred and be continuing or would result therefrom and (2) the Borrower would be in compliance with the financial maintenance covenant set forth in Section 6.10 (calculated as of the most recently ended Test Period and as if the Total Leverage Ratio specified therein was required to be tested), after giving pro forma effect to such Investment and the pro forma adjustments described in Section 1.03;
(j) Investments consisting of deposits, prepayments and/or other credits to suppliers in the ordinary course of business;
(k) Investments consisting of extensions of trade credit in the ordinary course of business or consistent with past practice;
(l) promissory notes and other Investments received in connection with dispositions permitted by this Agreement;
(m) Investments in the ordinary course of business or consistent with past practice consisting of endorsements for collection or deposit and customary trade arrangements with customers consistent with past practices;
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(n) to the extent that they constitute Investments, purchases and acquisitions of inventory, supplies, materials or equipment or purchases, acquisitions, licenses, sublicenses, subleases or leases of other assets, intellectual property, or other rights, in each case in the ordinary course of business;
(o) Investments in any Subsidiary or any joint venture in connection with any intercompany cash management arrangement or related activities arising in the ordinary course of business so long as any concentration account or similar aggregating arrangement is in the name of a Loan Party;
(p) unfunded pension fund and other employee benefit plan obligations and liabilities to the extent that the same are permitted to remain unfunded under applicable requirements of Law;
(q) obligations with respect to Guarantees provided by the Borrower or any Restricted Subsidiary in respect of leases and/or subleases (other than Capital Lease Obligations) or of other obligations that do not constitute Indebtedness, in each case entered into in the ordinary course of business;
(r) the Borrower and its Subsidiaries may undertake or consummate any IPO Reorganization Transactions;
(s) Investments made by the Borrower or any Restricted Subsidiary in any other Restricted Subsidiary in order to satisfy regulatory capital requirements with respect to FDIC deposit insurance;
(t) Investments consisting of Indebtedness, Liens, Asset Sales and Restricted Payments permitted (other than by reference to this Section 6.04(t) ) under Sections 6.01 , 6.02 , 6.05(b) and 6.06 , respectively;
(u) other Investments; provided that (1) no Event of Default shall have occurred and be continuing or would result therefrom and (2) the Total Leverage Ratio, on a pro forma basis after giving effect to such Investment and any pro forma adjustments described in Section 1.03, shall not exceed 2.00 to 1.00; and
(v) in addition to Investments permitted by paragraphs (a) through (u) above, additional Investments by the Borrower and the other Restricted Subsidiaries so long as the aggregate amount of Investments made pursuant to this paragraph (v) (determined without regard to any write-downs or write-offs of such Investments) does not exceed in the aggregate at any time outstanding the greater of (x) $25,000,000 and (y) 27.5% of Consolidated EBITDA as of the last day of the most recently ended Test Period.
For purposes of determining compliance with this Section 6.04, (x) an Investment need not be incurred solely by reference to one category described in this Section 6.04 but may be incurred under any combination of such categories (including in part under one such category and in part under any other such category) and (y) in the event that an Investment (or any portion thereof) meets the criteria of one or more of such categories of Investment permitted hereunder, the Borrower shall, in its sole discretion, classify or reclassify such Investment (or any portion thereof) in any manner that complies with this definition.
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SECTION 6.05 Mergers, Consolidations and Sales of Assets . (a) Merge into or consolidate with any other person, or permit any other person to merge into or consolidate with it, liquidate or dissolve, or sell, transfer, lease or otherwise dispose of (in one transaction or in a series of transactions) all or substantially all the assets (whether now owned or hereafter acquired) of the Borrower and its Restricted Subsidiaries, taken as a whole, except that:
(i) if at the time thereof and immediately after giving effect thereto no Event of Default shall have occurred and be continuing (x) any Wholly Owned Subsidiary of Holdings that is a Restricted Subsidiary may merge into the Borrower in a transaction in which such Borrower is the surviving corporation and (y) any Wholly Owned Subsidiary of Holdings that is a Restricted Subsidiary (other than the Borrower) may merge into or consolidate with any other Wholly Owned Subsidiary of Holdings that is a Restricted Subsidiary in a transaction in which the surviving entity is a Restricted Subsidiary and no person other than a Wholly Owned Subsidiary of Holdings that is a Restricted Subsidiary receives any consideration ( provided that if any party to any such transaction is a Loan Party, the surviving entity of such transaction shall be a Loan Party and no person other than a Loan Party shall receive any consideration);
(ii) any Restricted Subsidiary (other than the Borrower) may liquidate or dissolve if the Borrower determines in good faith that such liquidation or dissolution is in the best interests of the Borrower; provided that (x) the assets of such Restricted Subsidiary are transferred upon such liquidation to the Borrower or another Restricted Subsidiary and (y) if such Restricted Subsidiary is a Subsidiary Guarantor, the assets of such Subsidiary Guarantor are transferred upon such liquidation to the Borrower or another Subsidiary Guarantor;
(iii) the Borrower may merge or consolidate with any other Person; provided that (A) the Borrower shall be the continuing or surviving Person or (B) if the Person formed by or surviving any such merger or consolidation is not the Borrower (any such Person, the Successor Borrower ), (1) the Successor Borrower shall be an entity organized or existing under the laws of the United States, any State thereof or the District of Columbia, (2) the Successor Borrower shall expressly assume all the obligations of the Borrower under this Agreement and the other Loan Documents to which the Borrower is a party pursuant to a supplement hereto or thereto in form and substance reasonably satisfactory to the Administrative Agent, (3) each Loan Party other than the Borrower, unless it is the other party to such merger or consolidation, shall have reaffirmed, pursuant to an agreement in form and substance reasonably satisfactory to the Administrative Agent, that its Guarantee of, and grant of any Liens as security for, the Obligations shall apply to the Successor Borrowers obligations under this Agreement and (4) the Borrower shall have delivered to the Administrative Agent a certificate of a Responsible Officer and an opinion of counsel, each stating that such merger or consolidation complies with this Agreement; provided further that (x) no Event of Default exists after giving effect to such merger or consolidation, (y) if the foregoing requirements are satisfied, the Successor Borrower will succeed to, and be substituted for,
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the Borrower under this Agreement and the other Loan Documents and (z) the Borrower agrees to provide any documentation and other information about the Successor Borrower as shall have been reasonably requested in writing by any Lender through the Administrative Agent that such Lender shall have reasonably determined is required by regulatory authorities under applicable know your customer and anti-money laundering rules and regulations, including the USA Patriot Act;
(iv) the Borrower and its Subsidiaries may undertake or consummate any IPO Reorganization Transactions;
(v) any Person (other than Holdings or the Borrower) may merge into or consolidate with any Restricted Subsidiary (other than the Borrower) in a transaction in which the surviving entity is a Restricted Subsidiary and, if any party to such merger or consolidation is a Subsidiary Guarantor, is a Subsidiary Guarantor; and
(vi) any Restricted Subsidiary (other than the Borrower) may merge into or consolidate with any Person in order to (1) effect an Asset Sale permitted pursuant to Section 6.05(b) or (2) make an Investment permitted pursuant to Section 6.04 .
(b) Make any Asset Sale, except:
(i) transfers of condemned property as a result of the exercise of eminent domain or other similar powers to the respective Governmental Authority or agency that has condemned the same (whether by deed in lieu of condemnation or otherwise), and transfers of property arising from foreclosure or similar action or that have been subject to a casualty to the respective insurer of such real property as part of an insurance settlement; and
(ii) other Asset Sales, provided that, with respect to any Asset Sale pursuant to this clause (ii), (A) the fair market value of the consideration in respect of such Asset Sale is at least equal to the fair market value of the assets being sold, transferred, leased or disposed of, (B) in the case of an Asset Sale where the fair market value of the consideration in respect of such Asset Sale is in excess of the greater of (x) $5,000,000 and (y) 5.5% of Consolidated EBITDA for the most recently ended Test Period, such Asset Sale is for consideration at least 75% of which is cash or Cash Equivalents; provided that for purposes of this clause (B), any Designated Non-Cash Consideration received by the Borrower or any other Restricted Subsidiary in such Asset Sale having an aggregate fair market value, taken together with all other Designated Non-Cash Consideration received that is at that time outstanding, not to exceed the greater of (1) $5,000,000 and (2) 5.5% of Consolidated EBITDA for the most recently ended Test Period (with the fair market value of each item of Designated Non-Cash Consideration being measured at the time received and without giving effect to subsequent changes in value) shall be deemed to be cash, (C) the Net Cash Proceeds of such Asset Sale are applied and/or reinvested in accordance with Section 2.13(b) and (D) no Event of Default has occurred and is continuing on the date on which the agreement governing such Asset Sale is executed.
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SECTION 6.06 Restricted Payments; Restrictive Agreements . (a) Make, or agree to make, directly or indirectly, any Restricted Payment, or incur any obligation (contingent or otherwise) to do so; provided , however , that
(i) any Restricted Subsidiary (other than the Borrower) may pay dividends or make other distributions ratably to its equity holders,
(ii) so long as no Event of Default shall have occurred and be continuing or would result therefrom, the Borrower may make distributions to Holdings so that Holdings may repurchase its Equity Interests owned by employees of Holdings, the Borrower or the other Subsidiaries or make payments to employees of Holdings, the Borrower or the other Subsidiaries upon termination of employment in connection with the exercise of stock options, stock appreciation rights or similar equity incentives or equity based incentives pursuant to management incentive plans or in connection with the death or disability of such employees in an aggregate amount not to exceed $1,500,000 in any such fiscal year of the Borrower, such amounts not used in any fiscal year may be carried forward to the subsequent fiscal year,
(iii) the Borrower may make Restricted Payments to Holdings in the amount necessary to allow Holdings to make payments permitted by Sections 6.07(g), (h) and (i),
(iv) Restricted Payments constituting IPO Reorganization Transactions,
(v) the Borrower may make Restricted Payments to Holdings in an amount equal to the Available Amount; provided that, with respect to Restricted Payments made using the Cumulative Retained Excess Cash Flow Amount, (1) no Event of Default shall have occurred and be continuing or would result therefrom and (2) on a pro forma basis after giving effect to such Restricted Payment and any pro forma adjustments described in Section 1.03, the Total Leverage Ratio is equal to or less than 2.70 to 1.00,
(vi) the Borrower and its Restricted Subsidiaries may make dividends and other distributions in order to consummate the Transactions,
(vii) the Borrower and its Restricted Subsidiaries may make Restricted Payments to the extent necessary to permit Holdings or any Parent Company to pay (1) general administrative costs and expenses (including corporate overhead, legal or similar expenses and customary salary, bonus and other benefits payable to directors, officers, employees, members of management, managers or consultants of any Parent Company) and franchise fees and Taxes and similar fees, Taxes and expenses required to maintain the organizational existence of such Parent Company, in each case, which are reasonable and customary and incurred in the ordinary course of business, (2) any reasonable and customary indemnification claims made by directors, officers, members of management, managers, employees or consultants of any Parent Company, in each case, to the extent attributable to the ownership or operations of the Borrower, any Parent Company (but excluding, for the avoidance of doubt, the portion of any such amount, if any, that is attributable to the ownership or operations of any Subsidiary of Holdings or any Parent Company other than the Borrower or its Restricted Subsidiaries), or the other Restricted
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Subsidiaries, (3) fees and expenses related to debt or equity offerings, investments or acquisitions (whether or not consummated) and (4) after the consummation of a Qualified Public Offering, Public Company Costs, in each case attributable to the investment in the Borrower and the other Restricted Subsidiaries (and Unrestricted Subsidiaries, to the extent of cash received from such Unrestricted Subsidiaries for payment thereof by the Borrower),
(viii) after the consummation of a Qualified Public Offering, the Borrower may make Restricted Payments, so that the Borrower (or its Parent Company) may pay dividends, in an aggregate amount per annum not to exceed the greater of (x) 6.0% of the net proceeds received by the Borrower in such Qualified Public Offering and (y) 5.0% of the Borrowers (or its Parent Companys) market capitalization, so long as no Event of Default has occurred and is continuing,
(ix) other such Restricted Payments, not to exceed in the aggregate the greater of (x) $15,000,000 and (y) 16.5% of Consolidated EBITDA for the most recently ended Test Period, provided that no Event of Default shall have occurred and be continuing or would result therefrom, and
(x) the Borrower and its Restricted Subsidiaries may make Restricted Payments so long as (1) no Event of Default shall have occurred and be continuing or would result therefrom and (2) on a pro forma basis after giving effect to such Restricted Payment and any pro forma adjustments described in Section 1.03, the Total Leverage Ratio is equal to or less than 1.75 to 1.00.
(b) Enter into, incur or permit to exist any agreement or other arrangement that prohibits, restricts or imposes any condition upon (i) the ability of Holdings, the Borrower or any other Restricted Subsidiary to create, incur or permit to exist any Lien upon any of its property or assets to secure the Obligations, or (ii) the ability of the Borrower or other Restricted Subsidiary to pay dividends or other distributions with respect to any of its Equity Interests or to make or repay loans or advances to the Borrower or any other Restricted Subsidiary or to Guarantee Indebtedness of the Borrower or any other Restricted Subsidiary; provided that (A) the foregoing shall not apply to restrictions and conditions imposed by law or by any Loan Document, (B) the foregoing shall not apply to customary restrictions and conditions contained in agreements relating to the sale of a Restricted Subsidiary pending such sale; provided further that such restrictions and conditions apply only to the Restricted Subsidiary that is to be sold and such sale is permitted hereunder, (C) clause (i) of the foregoing shall not apply to restrictions or conditions imposed by any agreement relating to secured Indebtedness permitted by this Agreement if such restrictions or conditions apply only to the property or assets securing such Indebtedness, (D) clause (i) of the foregoing shall not apply to customary provisions in leases and other contracts restricting the assignment or financing thereof, (E) the foregoing shall not apply to restrictions set forth in any agreement evidencing Indebtedness of a Restricted Subsidiary that is not a Loan Party permitted by Section 6.01, (F) the foregoing shall not apply to restrictions that are assumed in connection with any acquisition of property or the Equity Interests of any person, so long as the relevant encumbrance or restriction relates solely to the person and its subsidiaries (including the Equity Interests of the relevant person) or property so acquired and was not created in connection with or in anticipation of such acquisition, (G) the foregoing shall not apply to
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restrictions that are imposed by customary provisions in partnership agreements, limited liability company organizational governance documents, joint venture agreements and other similar agreements, in each case, with respect to any Restricted Subsidiary that is not a Wholly-Owned Subsidiary, that prohibit or restrict the pledge or transfer of ownership interests in the relevant Restricted Subsidiary, (H) the foregoing shall not apply to restrictions arising pursuant to an agreement or instrument relating to any Indebtedness permitted to be incurred after the Closing Date if the relevant restrictions, taken as a whole, are not materially less favorable to the Lenders than the restrictions contained in this Agreement, taken as a whole (as determined in good faith by the Borrower), and (I) the foregoing shall not apply to restrictions set forth in documents which exist on the Closing Date and were not created in contemplation thereof (and any amendment, modification, restatement, renewal, supplement, refunding, replacement or refinancing of any such document so long as such amendment, modification, restatement, renewal, supplement, refunding, replacement or refinancing is, in the good faith judgment of the Borrower, no more restrictive, taken as a whole, than those in existence prior to such amendment, modification, restatement, renewal, supplement, refunding, replacement or refinancing).
SECTION 6.07 Transactions with Affiliates . Except for transactions between or among the Borrower and one or more Restricted Subsidiaries or between or among Restricted Subsidiaries, sell or transfer any property or assets to, or purchase or acquire any property or assets from, or otherwise engage in any other transactions with, any of its Affiliates, with a fair market value in excess of $3,000,000, except that (a) the Borrower or any other Restricted Subsidiary may engage in any of the foregoing transactions in the ordinary course of business at prices and on terms and conditions not less favorable to such Borrower or such Restricted Subsidiary than could be obtained on an arms-length basis from unrelated third parties, (b) [intentionally omitted], (c) the Borrower or any other Restricted Subsidiary may engage in transactions pursuant to agreements in existence on the Closing Date and set forth on Schedule 6.07 or any amendment, supplement or other modification thereto to the extent such amendment, supplement or modification is not adverse to the Lenders in any material respect, (d) the Borrower and the other Restricted Subsidiaries may consummate the Transactions including the payment of Transaction Costs, (e) the Borrower or any other Restricted Subsidiary may enter into any transactions with Affiliated Lenders contemplated hereunder and in accordance with the terms of, and in the manner provided by, this Agreement, (f) the Borrower or any other Restricted Subsidiary may make (x) Restricted Payments expressly permitted by Section 6.06 and (y) Investments expressly permitted by Section 6.04, (g) the Borrower or any other Restricted Subsidiary may pay to their respective employees and officers compensation in the ordinary course of business, (h) the Borrower or any other Restricted Subsidiary may pay fees to their respective directors in the ordinary course of business, (i) the Borrower and its Subsidiaries may undertake or consummate or otherwise be subject to any IPO Reorganization Transactions and (j) the Borrower or any other Restricted Subsidiary may make payments in connection with the indemnification of their respective employees, officers and directors.
SECTION 6.08 Business of Holdings, the Borrower and the Other Subsidiaries . (a) With respect to Holdings, engage in any business or operating activities or have any assets or liabilities other than (i) its ownership of the Equity Interests of the Borrower and, through the Borrower, the other Subsidiaries, together with the assets and liabilities incidental thereto, including liabilities pursuant to the Guarantee and Collateral Agreement or any other Loan
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Documents; (ii) activities in order to consummate the Transactions; (iii) activities and contractual rights and obligations incidental to maintenance of its corporate existence (including the payment of accounting and other professional fees and expenses), and obligations of Holdings to applicable governmental authorities; (iv) activities related to the payment of Tax liabilities of the Loan Parties in the ordinary course of business; (v) indemnification of directors, managers and officers; (vi) the performance of its obligations under the Loan Documents; (vii) activities in order to consummate a Qualified Public Offering, including any IPO Reorganization Transaction; (viii) the incurrence of unsecured holding company Indebtedness that matures later than the Latest Term Maturity Date at the time of the incurrence thereof, provided that (A) no Guarantees thereof may be provided by the Borrower or any other Restricted Subsidiary and (B) both before and after the incurrence thereof, on a pro forma basis after giving effect thereto and the pro forma adjustments described in Section 1.03, the Total Leverage Ratio shall not exceed 4.00 to 1.00; (ix) guaranteeing the obligations of the Borrower and its Subsidiaries in each case solely to the extent such obligations of the Borrower and its Subsidiaries are not prohibited hereunder; (x) holding any cash or property received in connection with Restricted Payments made by the Borrower in accordance with this Agreement pending application thereof by Holdings; (xi) making contributions to the capital of its Subsidiaries; and (xii) other activities incidental to or in furtherance of any of the foregoing. Holdings shall not create, incur, assume or suffer to exist any Lien on the Equity Interests of the Borrower (other than Liens securing Indebtedness under any Loan Document or arising solely by operation of Law), and shall not incur any Indebtedness (other than in respect of (x) the Guarantees permitted by clause (i) above and (y) the Indebtedness permitted by clause (viii) above).
(b) With respect to the Borrower and the other Restricted Subsidiaries, engage at any time in any business activity, taken as a whole, other than the business activity currently conducted by it on the Closing Date and any Similar Business.
SECTION 6.09 Other Indebtedness and Agreements . (a) Permit (i) any waiver, supplement, modification, amendment, termination or release of the indenture, instrument or agreement pursuant to which any Material Indebtedness that is expressly subordinated in right of payment to the Obligations or any Material Indebtedness that is secured by junior-priority security interest in the Collateral (collectively, the Junior Financing ) of the Borrower or any other Loan Party is outstanding if the effect of such waiver, supplement, modification, amendment, termination or release, taken as a whole, would be adverse to the Lenders in any material respect, other than any such supplements, modifications or amendments expressly permitted by the terms of the applicable intercreditor or subordination agreement or other subordination instrument, or (ii) any waiver, supplement, modification or amendment of its certificate of incorporation, by-laws, operating, management or partnership agreement or other organizational documents, to the extent any such waiver, supplement, modification or amendment, taken as a whole, would be adverse to the Lenders in any material respect; provided that, for purposes of clarity, it is understood and agreed that Holdings, the Borrower or any Restricted Subsidiary may effect a change to its organizational form or consummate any other transaction that is permitted under Section 6.05.
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(b) Make any distribution, whether in cash, property, securities or a combination thereof, other than payments of fees, expenses and indemnification obligations and regularly scheduled payments of principal and interest as and when due (to the extent not prohibited by applicable subordination provisions), in respect of, or pay, or commit to pay, or directly or indirectly redeem, repurchase, retire or otherwise acquire for consideration, or set apart any sum for the aforesaid purposes, any Junior Financing, (collectively, Restricted Debt Payments ), except:
(A) refinancings of any Junior Financing permitted by Section 6.01,
(B) any such distribution, payment, redemption, repurchase, retirement, acquisition or setting apart up to an amount not to exceed the Available Amount; provided that, with respect to such distribution, payment, redemption, repurchase, retirement, acquisition or setting apart made using the Cumulative Retained Excess Cash Flow Amount, (1) no Event of Default shall have occurred and be continuing or would result therefrom and (2) on a pro forma basis after giving effect to such distribution, payment, redemption, repurchase, retirement, acquisition or setting apart the pro forma adjustments described in Section 1.03, the Total Leverage Ratio is equal to or less than 2.70 to 1.00,
(C) other such distributions, payments, redemptions, repurchases, retirements, acquisitions or settings apart, provided that (x) no Event of Default shall have occurred and be continuing or would result therefrom and (y) the Total Leverage Ratio, on a pro forma basis after giving effect thereto and any pro forma adjustments described in Section 1.03, shall not exceed 2.00 to 1.00, and
(D) other such distributions, payments, redemptions, repurchases, retirements, acquisitions or settings apart in an amount, not to exceed the greater of (x) $15,000,000 and (y) 16.5% of Consolidated EBITDA for the most recently ended Test Period, provided that no Event of Default shall have occurred and be continuing or would result therefrom.
SECTION 6.10 Maximum Total Leverage Ratio . If, on the last day of any Test Period (commencing with the Test Period ending March 31, 2019), the aggregate principal amount of Revolving Loans and Letters of Credit (excluding Letters of Credit that have been Cash Collateralized) outstanding exceeds 30% of the aggregate principal amount of the Revolving Credit Commitments, permit the Total Leverage Ratio on the last day of any Test Period (i) ending on or after March 31, 2019 and on or prior to December 31, 2019, to be greater than 4.75 to 1.00 and (ii) ending on or after March 31, 2020, to be greater than 4.50 to 1.00.
The provisions of this Section 6.10 are for the direct benefit of the Lenders under the Financial Covenant Facilities only. Any Default or Event of Default under the provisions of this Section 6.10 will not by itself constitute a Default or Event of Default under any Credit Facility (other than the Financial Covenant Facilities) and will not trigger a cross-default thereunder until a Financial Covenant Acceleration has occurred.
SECTION 6.11 Fiscal Year . The Borrower shall not change its fiscal year-end to a date other than December 31; provided that the Borrower may, upon written notice to the Administrative Agent, change the fiscal year-end of the Borrower to another date, in which case the Borrower and the Administrative Agent will, and are hereby authorized to, make any adjustments to this Agreement that are necessary to reflect such change in fiscal year.
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ARTICLE VII
Events of Default
SECTION 7.01 Event of Default . In case of the happening of any of the following events (each an Event of Default ):
(a) any representation or warranty made or deemed made in or in connection with any Loan Document or the borrowings or issuances of Letters of Credit hereunder, or any representation, warranty, statement or information contained in any report, certificate, financial statement or other instrument furnished in connection with or pursuant to any Loan Document, shall prove to have been false or misleading (i) in the case of representations and warranties qualified as to materiality, in any respect, or (ii) otherwise, in any material respect, in each case when so made, deemed made or furnished;
(b) default shall be made in the payment of any principal of any Loan or the reimbursement with respect to any L/C Disbursement when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment thereof or by acceleration thereof or otherwise;
(c) default shall be made in the payment of any interest on any Loan or any Fee or L/C Disbursement or any other amount (other than an amount referred to in (b) above) due under any Loan Document, when and as the same shall become due and payable, and such default shall continue unremedied for a period of five Business Days;
(d) default shall be made in the due observance or performance by Holdings, the Borrower or any other Restricted Subsidiary of any covenant, condition or agreement contained in Section 5.01(a) (with respect to the existence of Holdings or the Borrower), 5.05 or 5.08 or in Article VI; provided that the Borrowers failure to comply with the financial maintenance covenant set forth in Section 6.10 (a Financial Covenant Event of Default ) shall not constitute a Default or Event of Default with respect to any Term Loans or Term Loan Commitments (or any other Loans or Commitments not constituting a Financial Covenant Facility) unless and until the Required Financial Covenant Lenders have actually terminated all Revolving Credit Commitments with respect to the Financial Covenant Facilities and declared all Obligations with respect to the Financial Covenant Facilities to be immediately due and payable pursuant to the last paragraph of this Section 7.01 as a result of such Financial Covenant Event of Default (and such declaration has not been rescinded as of the applicable date) (the occurrence of such termination and declaration by the Required Financial Covenant Lenders, a Financial Covenant Acceleration ); or
(e) default shall be made in the due observance or performance by Holdings, the Borrower or any other Restricted Subsidiary of any covenant, condition or agreement contained in any Loan Document (other than those specified in (b), (c) or (d) above) and such default shall continue unremedied for a period of 30 days after the earlier of (i) notice thereof from the Administrative Agent (which shall be given at the reasonable request of any Lender) to the Borrower and (ii) knowledge thereof of any of Holdings and the Borrower;
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(f) (i) Holdings, the Borrower or any other Restricted Subsidiary shall fail to pay any principal or interest or other amount due in respect of any Material Indebtedness, when and as the same shall become due and payable (after giving effect to any applicable grace period) or (ii) any other event or condition occurs that results in any Material Indebtedness becoming due prior to its scheduled maturity or that enables or permits (with or without the giving of notice, the lapse of time or both) the holder or holders of any Material Indebtedness or any trustee or agent on its or their behalf to cause any Material Indebtedness to become due, or to require the prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled maturity or that results in the termination or permits any counterparty to terminate any Hedging Agreement the obligations under which constitute Material Indebtedness; provided that this clause (ii) shall not apply to secured Indebtedness that becomes due as a result of the voluntary sale or transfer of the property or assets securing such Indebtedness;
(g) an involuntary proceeding shall be commenced or an involuntary petition shall be filed in a court of competent jurisdiction seeking (i) relief in respect of Holdings, the Borrower or any other Material Subsidiary, or of a substantial part of the property or assets of Holdings, the Borrower or any other Material Subsidiary, under Title 11 of the United States Code, as now constituted or hereafter amended, or any other federal, state or foreign bankruptcy, insolvency, receivership or similar law, (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for Holdings, the Borrower or any other Material Subsidiary or for a substantial part of the property or assets of Holdings, the Borrower or any other Material Subsidiary or (iii) the winding-up or liquidation of Holdings, the Borrower or any other Material Subsidiary; and such proceeding or petition shall continue undismissed for 60 days or an order or decree approving or ordering any of the foregoing shall be entered;
(h) Holdings, the Borrower or any other Material Subsidiary shall (i) voluntarily commence any proceeding or file any petition seeking relief under Title 11 of the United States Code, as now constituted or hereafter amended, or any other federal, state or foreign bankruptcy, insolvency, receivership or similar law, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or the filing of any petition described in (g) above, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for Holdings, the Borrower or any other Material Subsidiary or for a substantial part of the property or assets of Holdings, the Borrower or any other Material Subsidiary, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors, (vi) become unable, admit in writing its inability or fail generally to pay its debts as they become due or (vii) take any action for the purpose of effecting any of the foregoing;
(i) one or more judgments shall be rendered against Holdings, the Borrower or any other Restricted Subsidiary and the same shall remain undischarged for a period of 60 consecutive days during which execution shall not be effectively vacated, stayed or bonded pending an appeal, or any action shall be legally taken by a judgment creditor to levy upon assets or properties of Holdings, the Borrower or any other Restricted Subsidiary to enforce any such judgments (to the extent not paid or covered by third-party insurance provided by a carrier
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notified of such judgment not disputing coverage) and such judgments either (i) are for the payment of money in an aggregate amount in excess of $10,000,000, (ii) are for injunctive relief and would reasonably be expected to result in a Material Adverse Effect or (iii) are subject to indemnity by a third party pursuant to a binding obligation;
(j) an ERISA Event shall have occurred that, in the opinion of the Required Lenders, when taken together with all other ERISA Events that have occurred, would reasonably be expected to result in a Material Adverse Effect;
(k) this Agreement or any material Security Document, at any time after its execution and delivery and for any reason, shall cease to be in full force and effect, or any Loan Party shall contest in writing the validity or enforceability thereof;
(l) any material Guarantee under the Guarantee and Collateral Agreement for any reason shall cease to be in full force and effect (other than in accordance with its terms), or any Guarantor shall deny in writing that it has any further liability under the Guarantee and Collateral Agreement (other than as a result of the discharge of such Guarantor in accordance with the terms of the Loan Documents);
(m) any security interest purported to be created by any Security Document and to extend to assets that are not immaterial to Holdings and the Restricted Subsidiaries on a consolidated basis shall cease to be, or shall be asserted by any Loan Party not to be, a valid, perfected, first priority (except as otherwise expressly provided in this Agreement or such Security Document) security interest in the securities, assets or properties covered thereby, except to the extent that (i) any such loss of perfection or priority results from the failure of the Collateral Agent to maintain possession of certificates representing securities pledged under the Guarantee and Collateral Agreement (unless such failure is due to a request by Holdings and its Subsidiaries), (ii) any such loss of perfection or priority results from the failure of the Collateral Agent to file Uniform Commercial Code continuation statements, (iii) such loss is covered by a lenders title insurance policy and the related insurer promptly after such loss shall have acknowledged in writing that such loss is covered by such title insurance policy or (iv) such loss arose through no fault of any Loan Party and such deficiency is corrected reasonably promptly with reasonable diligence upon obtaining actual knowledge thereof (but in any event, within 20 Business Days thereafter); or
(n) there shall have occurred a Change in Control;
then, and in every such event (other than an event with respect to Holdings or the Borrower described in paragraph (g) or (h) above), and at any time thereafter during the continuance of such event, the Administrative Agent may, and at the request of the Required Lenders shall, by notice to the Borrower, take either or both of the following actions, at the same or different times: (i) terminate forthwith the Commitments and (ii) declare the Loans then outstanding to be forthwith due and payable in whole or in part, whereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and any unpaid accrued Fees and all other liabilities of the Borrower accrued hereunder and under any other Loan Document, shall become forthwith due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived, to the fullest extent
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permitted by applicable law, by the Borrower, anything contained herein or in any other Loan Document to the contrary notwithstanding; provided that, notwithstanding anything to the contrary, if the only Events of Default then having occurred and continuing are pursuant to a Financial Covenant Event of Default, then, unless a Financial Covenant Acceleration has occurred and is continuing, the Administrative Agent shall only take the actions set forth in this paragraph at the request of the Required Financial Covenant Lenders (as opposed to the Required Lenders) and only with respect to the Revolving Credit Commitments, Revolving Loans and other Obligations, in each case, under the Financial Covenant Facilities; and in any event with respect to Holdings or the Borrower described in paragraph (g) or (h) above, the Commitments shall automatically terminate and the principal of the Loans then outstanding, together with accrued interest thereon and any unpaid accrued Fees and all other liabilities of the Borrower accrued hereunder and under any other Loan Document, shall automatically become due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived by the Borrower, anything contained herein or in any other Loan Document to the contrary notwithstanding.
SECTION 7.02 Equity Cure . (a) Notwithstanding anything to the contrary contained in Section 7.01, in the event that the Borrower would not otherwise be in compliance with the financial maintenance covenant set forth in Section 6.10, then not later than 10 Business Days after the day on which financial statements are required to be delivered under Section 5.04(a) or Section 5.04(b), and no earlier than the day that is the last day of the relevant fiscal quarter (the Anticipated Cure Deadline ), Holdings (or another Parent Company) shall have the right to issue common Equity Interests (or any Qualified Capital Stock) for cash, or otherwise receive cash contributions in respect of its common Equity Interests (or any Qualified Capital Stock), and to contribute any such cash to the Borrower as cash common equity (or in the case of cash received by another Parent Company in respect of its Equity Interests, such Parent Company shall have the right to contribute such cash to Holdings as cash common equity and Holdings shall have the right to contribute such cash to the Borrower as cash common equity) (collectively, the Cure Right ), and upon receipt by the Borrower of such cash (the Specified Equity Contribution ) pursuant to the exercise by Holdings (and/or any other Parent Company) and the Borrower of such Cure Right, Consolidated EBITDA as used in the financial maintenance covenant set forth in Section 6.10 shall be increased (solely for the purposes of such financial covenant) giving effect to the Specified Equity Contribution.
(b) If, after giving effect to the recalculations set forth in paragraph (a) of this Section 7.02, the Borrower shall then be in compliance with the financial maintenance covenant set forth in Section 6.10, the Borrower shall be deemed to have satisfied the requirements of such covenant as of the relevant date of determination with the same effect as though there had been no failure to comply therewith at such date, and the applicable breach or default of such covenant that had occurred shall be deemed cured for purposes of this Agreement.
(c) Upon receipt by the Administrative Agent of written notice, on or prior to the Anticipated Cure Deadline, that the Borrower intends to exercise the Cure Right in respect of a fiscal quarter, the Lenders shall not be permitted to accelerate Loans held by them or to exercise remedies against the Collateral on the basis of a failure to comply with the requirements of the financial maintenance covenant set forth in Section 6.10, unless such failure is not cured pursuant to the exercise of the Cure Right on or prior to the Anticipated Cure Deadline.
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Notwithstanding anything to the contrary herein, no Lender or Issuing Bank shall be required to make any Revolving Loan or issue or amend any Letter of Credit from the date on which financial statements are required to be delivered with respect to any fiscal quarter or year (or, if earlier, the date on which such financial statements are actually delivered) for which the Borrower has failed to comply with the financial maintenance covenant set forth in Section 6.10 for the Test Period ending on the last day of such fiscal quarter or year to the earlier of (i) any cure or waiver of any Default or Event of Default arising from such failure to comply with such financial covenant and (ii) such time as (x) the Administrative Agent has received written notice, on or prior to the Anticipated Cure Deadline, of the Borrowers intention to exercise the Cure Right in respect of such fiscal quarter and (y) the Specified Equity Contribution has been actually received by the Borrower on or prior to the Anticipated Cure Deadline.
(d) Notwithstanding anything herein to the contrary, (i) in each four fiscal quarter period there shall be at least two fiscal quarters in which the Cure Right is not exercised, (ii) no more than five Specified Equity Contributions may be made pursuant to this Section 7.02, (iii) the amount of any Specified Equity Contribution shall be no greater than the amount required to cause the Borrower to be in compliance with the financial maintenance covenant set forth in Section 6.10, (iv) all Specified Equity Contributions shall be disregarded for all purposes under this Agreement (including any ratio based conditions or any baskets with respect to the covenants set forth in Article VI) other than determining compliance with the financial maintenance covenant set forth in Section 6.10 and (v) there shall be no pro forma or other reduction of the amount of Indebtedness by the amount of any Specified Equity Contribution for purposes of determining compliance with Section 6.10 for the fiscal quarter in respect of which the Cure Right was exercised (other than, with respect to any future period, to the extent of any portion of such Specified Equity Contribution that is actually applied to repay Indebtedness).
ARTICLE VIII
Agency
SECTION 8.01 Appointment and Authority . Each of the Lenders and the Issuing Bank hereby irrevocably appoints Credit Suisse AG, Cayman Islands Branch, to act on its behalf as the Administrative Agent and the Collateral Agent (for purposes of this Article VIII, the Administrative Agent and the Collateral Agent are referred to collectively as the Agents ) hereunder and under the other Loan Documents and authorizes the Agents to take such actions on its behalf and to exercise such powers as are delegated to the Agents by the terms hereof or thereof, together with such actions and powers as are reasonably incidental thereto. The provisions of this Article are solely for the benefit of the Agents, the Issuing Bank and the Lenders, and neither the Borrower nor any other Loan Party shall have rights as a third-party beneficiary of any such provisions. It is understood and agreed that the use of the term agent herein or in any other Loan Documents (or any other similar term) with reference to the Agents is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable law. Instead, such term is used as a matter of market custom, and is intended to create or reflect only an administrative relationship between contracting parties.
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SECTION 8.02 Rights as a Lender . Each person serving as an Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not an Agent, and the term Lender or Lenders shall, unless otherwise expressly indicated or unless the context otherwise requires, include the person serving as an Agent hereunder in its individual capacity. Such person and its Affiliates may accept deposits from, lend money to, own securities of, act as the financial advisor or in any other advisory capacity for, and generally engage in any kind of business with, Holdings, the Borrower or any other Subsidiary or other Affiliate thereof as if such person were not an Agent hereunder and without any duty to account therefor to the Lenders.
SECTION 8.03 Exculpatory Provisions . (a) Neither Agent shall have any duties or obligations except those expressly set forth herein and in the other Loan Documents, and its duties hereunder shall be administrative in nature. Without limiting the generality of the foregoing, neither Agent:
(i) shall be subject to any fiduciary or other implied duties, regardless of whether a Default or Event of Default has occurred and is continuing;
(ii) shall have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby or by the other Loan Documents that such Agent is required to exercise as directed in writing by the Required Lenders (or such other number or percentage of the Lenders as shall be expressly provided for herein or in the other Loan Documents); provided that neither Agent shall be required to take any action that, in its opinion or the opinion of its counsel, may expose such Agent to liability or that is contrary to any Loan Document or applicable law, including for the avoidance of doubt any action that may be in violation of the automatic stay under any Debtor Relief Law or that may effect a forfeiture, modification or termination of property of a Defaulting Lender in violation of any Debtor Relief Law; and
(iii) except as expressly set forth herein and in the other Loan Documents, shall have any duty to disclose, nor shall it be liable for the failure to disclose, any information relating to Holdings, the Borrower, the other Subsidiaries or any of their Affiliates that is communicated to or obtained by a person serving as an Agent or any of its Affiliates in any capacity.
(b) An Agent shall not be liable for any action taken or not taken by it (i) with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary) or as the Administrative Agent shall believe in good faith shall be necessary, under the circumstances as provided in Section 9.08, or (ii) in the absence of its own gross negligence or willful misconduct as determined by a court of competent jurisdiction by final and nonappealable judgment. The Agents shall be deemed not to have knowledge of any Default unless and until notice describing such Default is given to the Administrative Agent in writing by the Borrower or a Lender.
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(c) The Agents shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Agreement or any other Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith or therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein or therein or the occurrence of any Default, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Loan Document or any other agreement, instrument or document, or (v) the satisfaction of any condition set forth in Article IV or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Agents.
SECTION 8.04 Reliance by Agents . Each Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing (including any electronic message, Internet or intranet website posting or other distribution) believed by it to be genuine and to have been signed, sent or otherwise authenticated by the proper person. Each Agent also may rely upon any statement made to it orally or by telephone and believed by it to have been made by the proper person, and shall not incur any liability for relying thereon. In determining compliance with any condition hereunder to the making of a Loan or to any other Credit Event that by its terms must be fulfilled to the satisfaction of a Lender, the Administrative Agent may presume that such condition is satisfactory to such Lender unless the Administrative Agent shall have received notice to the contrary from such Lender prior to the making of such Loan. Each Agent may consult with legal counsel (who may be counsel for the Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.
SECTION 8.05 Delegation of Duties . Each Agent may perform any and all of its duties and exercise its rights and powers hereunder or under any other Loan Document by or through any one or more sub-agents appointed by such Agent. Each Agent and any such sub- agent may perform any and all of its duties and exercise its rights and powers by or through their respective Related Parties. The exculpatory provisions of this Article VIII shall apply to any such sub-agent and to the Related Parties of each Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the Credit Facilities as well as activities as an Agent. Each Agent shall not be responsible for the negligence or misconduct of any sub-agents except to the extent that a court of competent jurisdiction determines in a final and non-appealable judgment that such Agent acted with gross negligence or willful misconduct in the selection of such sub-agents.
SECTION 8.06 Resignation of Agents . (a) Each Agent may at any time give notice (of no less than 10 days) of its resignation to the Lenders, the Issuing Bank and the Borrower. Upon receipt of any such notice of resignation, the Required Lenders shall have the right with the consent of the Borrower (such consent not to be unreasonably withheld, provided that the Borrowers consent shall not be required if an Event of Default pursuant to Section 7.01(b), (c), (g) or (h) has occurred and is continuing), to appoint a successor, which shall be a commercial bank or trust company with an office in New York, New York, or an Affiliate of any such bank, in each case with a combined capital and surplus of at least $1,000,000,000. If no such successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Agent gives notice of its resignation (or such earlier day as shall be agreed by the Required Lenders) (the Resignation Effective Date ), then the retiring Agent may (but shall not be obligated to), on behalf of the Lenders and the Issuing Bank, appoint a successor Agent meeting the qualifications set forth above. Whether or not a successor has been appointed, such resignation shall become effective in accordance with such notice on the Resignation Effective Date.
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(b) If the person serving as Agent is a Defaulting Lender pursuant to clause (d) of the definition thereof, the Required Lenders may, to the extent permitted by applicable law, by notice in writing (of no less than 10 days) to the Borrower and such person remove such person as Agent and, with the consent of the Borrower (which consent shall not be unreasonably withheld or delayed, provided that the Borrowers consent shall not be required if an Event of Default pursuant to Section 7.01(b), (c), (g) or (h) has occurred and is continuing), appoint a successor, which successor shall meet the qualifications set forth in paragraph (a) above. If no such successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days (or such earlier day as shall be agreed by the Required Lenders) (the Removal Effective Date ) then such removal shall nonetheless become effective in accordance with such notice on the Removal Effective Date.
(c) With effect from the Resignation Effective Date or the Removal Effective Date, as applicable, (1) the retiring or removed Agent shall be discharged from its duties and obligations hereunder and under the other Loan Documents (except that in the case of any Collateral held by the retiring or removed Agent on behalf of the Lenders under any of the Loan Documents, the retiring or removed Agent shall continue to hold such Collateral until such time as a successor Agent is appointed) and (2) all payments, communications and determinations provided to be made by, to or through the Agent shall instead be made by or to each Lender directly, until such time, if any, as the Required Lenders appoint a successor Agent as provided for above. Upon the acceptance of a successors appointment as Agent hereunder, such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring or removed Agent, and the retiring or removed Agent shall be discharged from all of its duties and obligations hereunder or under the other Loan Documents. The fees payable by the Borrower to a successor Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrower and such successor Agent. After the retiring or removed Agents resignation or removal hereunder and under the other Loan Documents, the provisions of this Article VIII and Section 9.05 shall continue in effect for the benefit of such retiring or removed Agent, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while the retiring or removed Agent was acting as Agent.
SECTION 8.07 Non-Reliance on Administrative Agent and Other Lenders . Each Lender and the Issuing Bank acknowledges that it has, independently and without reliance upon the Agents or any other Lender or any of their Related Parties and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender and the Issuing Bank also acknowledges that it will, independently and without reliance upon the Agents or any other Lender or any of their Related Parties and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document or any related agreement or any document furnished hereunder or thereunder.
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SECTION 8.08 No Other Duties, etc. Anything herein to the contrary notwithstanding, neither the Arranger nor any person listed on the cover page hereof shall have any powers, duties or responsibilities under this Agreement or any of the other Loan Documents, except in its capacity, as applicable, as an Agent, Issuing Bank or a Lender hereunder.
SECTION 8.09 Administrative Agent May File Proofs of Claim . In case of the pendency of any proceeding under any Debtor Relief Law or any other judicial proceeding relative to any Loan Party, the Administrative Agent (irrespective of whether the principal of any Loan shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether the Administrative Agent shall have made any demand on the Borrower) shall be entitled and empowered (but not obligated) by intervention in such proceeding or otherwise:
(a) to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Loans and all other Obligations that are owing and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of the Lenders, the Issuing Bank and the Administrative Agent (including any claim for the reasonable compensation, expenses, disbursements and advances of the Lenders, the Issuing Bank and the Administrative Agent and their respective agents and counsel and all other amounts due to the Lenders, the Issuing Bank and the Administrative Agent under Sections 2.05 and 9.05) allowed in such judicial proceeding; and
(b) to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender and the Issuing Bank to make such payments to the Administrative Agent and, in the event that the Administrative Agent shall consent to the making of such payments directly to the Lenders or the Issuing Bank, as applicable, to pay to the Administrative Agent any amount due for the reasonable compensation, expenses, disbursements and advances of the Administrative Agent and its agents and counsel, and any other amounts due the Administrative Agent under Sections 2.05 and 9.05.
SECTION 8.10 Collateral and Guaranty Matters . No Secured Party shall have any right individually to realize upon any of the Collateral or to enforce any Guarantee of the Obligations, it being understood and agreed that all powers, rights and remedies under the Loan Documents may be exercised solely by the Agents on behalf of the Secured Parties in accordance with the terms thereof. In the event of a foreclosure by the Collateral Agent on any of the Collateral pursuant to a public or private sale or other disposition, any Lender may be the purchaser or licensor of any or all of such Collateral at any such sale or other disposition, and the Administrative Agent or Collateral Agent, as agent for and representative of the Secured Parties (but not any Lender or Lenders in its or their respective individual capacities unless the Required Lenders shall otherwise agree in writing) shall be entitled, for the purpose of bidding and making settlement or payment of the purchase price for all or any portion of the Collateral sold at any such sale, to use and apply any of the Obligations as a credit on account of the purchase price for any Collateral payable by such Agent on behalf of the Secured Parties at such sale or other disposition. Each Secured Party, whether or not a party hereto, will be deemed, by its acceptance of the benefits of the Collateral and the Security Documents and of the Guarantees of the Obligations provided under the Loan Documents, to have agreed to the foregoing provisions.
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SECTION 8.11 Certain ERISA Matters . (a) Each Lender (x) represents and warrants, as of the date such Person became a Lender party hereto, to, and (y) covenants, from the date such Person became a Lender party hereto to the date such Person ceases being a Lender party hereto, for the benefit of, the Administrative Agent, the Arranger and their respective Affiliates, and not, for the avoidance of doubt, to or for the benefit of the Borrower or any other Loan Party, that at least one of the following is and will be true:
(i) such Lender is not using plan assets (within the meaning of 29 CFR § 2510.3-101, as modified by Section 3(42) of ERISA) of one or more Benefit Plans in connection with the Loans, the Letters of Credit or the Commitments,
(ii) the transaction exemption set forth in one or more PTEs, such as PTE 84-14 (a class exemption for certain transactions determined by independent qualified professional asset managers), PTE 95-60 (a class exemption for certain transactions involving insurance company general accounts), PTE 90-1 (a class exemption for certain transactions involving insurance company pooled separate accounts), PTE 91-38 (a class exemption for certain transactions involving bank collective investment funds) or PTE 96-23 (a class exemption for certain transactions determined by in-house asset managers), is applicable with respect to such Lenders entrance into, participation in, administration of and performance of the Loans, the Letters of Credit, the Commitments and this Agreement,
(iii) (A) such Lender is an investment fund managed by a Qualified Professional Asset Manager (within the meaning of Part VI of PTE 84-14), (B) such Qualified Professional Asset Manager made the investment decision on behalf of such Lender to enter into, participate in, administer and perform the Loans, the Letters of Credit, the Commitments and this Agreement, (C) the entrance into, participation in, administration of and performance of the Loans, the Letters of Credit, the Commitments and this Agreement satisfies the requirements of sub-sections (b) through (g) of Part I of PTE 84-14 and (D) to the best knowledge of such Lender, the requirements of subsection (a) of Part I of PTE 84-14 are satisfied with respect to such Lenders entrance into, participation in, administration of and performance of the Loans, the Letters of Credit, the Commitments and this Agreement, or
(iv) such other representation, warranty and covenant as may be agreed in writing between the Administrative Agent, in its sole discretion, and such Lender.
(b) The Administrative Agent and the Arranger hereby inform the Lenders that each such Person is not undertaking to provide impartial investment advice, or to give advice in a fiduciary capacity, in connection with the transactions contemplated hereby, and that such Person has a financial interest in the transactions contemplated hereby in that such Person or an Affiliate thereof (i) may receive interest or other payments with respect to the Loans, the Letters of Credit, the Commitments and this Agreement, (ii) may recognize a gain if it extended the Loans, the Letters of Credit or the Commitments for an amount less than the amount being paid for an
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interest in the Loans, the Letters of Credit or the Commitments by such Lender or (iii) may receive fees or other payments in connection with the transactions contemplated hereby, the Loan Documents or otherwise, including structuring fees, commitment fees, arrangement fees, facility fees, upfront fees, underwriting fees, ticking fees, agency fees, administrative agent or collateral agent fees, utilization fees, minimum usage fees, letter of credit fees, fronting fees, deal-away or alternate transaction fees, amendment fees, processing fees, term out premiums, bankers acceptance fees, breakage or other early termination fees or fees similar to the foregoing.
SECTION 8.12 Intercreditor Agreements . Each of the Lenders and the other Secured Parties (a) authorizes and instructs the Agents to enter into any Acceptable Intercreditor Agreement (and any amendments, amendments and restatements, restatements or waivers of or supplements to or other modifications to, such agreements) as collateral agent and on behalf of such Person in connection with the incurrence by any Loan Party of any Indebtedness of such Loan Party that is permitted to be incurred and secured by the Collateral pursuant to Sections 6.01 and 6.02 of this Agreement, in order to permit such Indebtedness to be secured by a valid, perfected Lien (with such priority as may be designated by such Loan Party, to the extent such priority is permitted by the Loan Documents), and by its acceptance of the benefits of the Security Documents, hereby acknowledges that any such intercreditor agreement is or will be, as applicable, binding upon it and (b) agrees that it will be bound by and will take no actions contrary to the provisions of such intercreditor agreements (and any amendments, amendments and restatements, restatements or waivers of or supplements to or other modifications to, such agreements in connection with the incurrence by any Loan Party of any Indebtedness of such Loan Party that is permitted to be incurred and secured by the Collateral pursuant to Sections 6.01 and 6.02 of this Agreement, in order to permit such Indebtedness to be secured by a valid, perfected Lien (with such priority as may be designated by such Loan Party, to the extent such priority is permitted by the Loan Documents)), and to subject the Liens on the Collateral securing the Obligations to the provisions thereof.
ARTICLE IX
Miscellaneous
SECTION 9.01 Notices; Electronic Communications . Notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by fax, as follows:
(a) if to the Borrower or Holdings, to 1655 Grant Street, 10 th Floor, Concord, CA 94520, Attn: Gary Zyla, e-mail: gary.zyla@assetmark.com;
(b) if to the Administrative Agent, to Credit Suisse AG, Cayman Islands Branch, Eleven Madison Avenue, New York, NY 10010, Attn: Agency Manager, fax no. 212-322-2991, e-mail: agency.loanops@credit-suisse.com;
(c) if to the Collateral Agent, to Credit Suisse AG, Cayman Islands Branch, Eleven Madison Avenue, New York, NY 10010, Attn: Loan Operations, e-mail: list.ops-collateral@credit-suisse.com; and
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(d) if to a Lender, to it at its address (or fax number) set forth on Schedule 2.01 or in the Assignment and Acceptance pursuant to which such Lender shall have become a party hereto.
Notices sent by hand or overnight courier service, or mailed by certified or registered mail, shall be deemed to have been given when received; notices sent by facsimile shall be deemed to have been given when sent (except that, if not given during normal business hours for the recipient, shall be deemed to have been given at the opening of business on the next Business Day for the recipient). Notices delivered through electronic communications, to the extent provided in paragraph (e) below, shall be effective as provided in said paragraph (e).
(e) Electronic Communications . Notices and other communications to the Lenders and the Issuing Bank hereunder may be delivered or furnished by electronic communication (including e-mail and Internet or intranet websites) pursuant to procedures approved by the Administrative Agent; provided that the foregoing shall not apply to notices to any Lender or Issuing Bank pursuant to Article II if such Lender or Issuing Bank has notified the Administrative Agent that it is incapable of receiving notices under such Article by electronic communication. The Administrative Agent or the Borrower may, in its or their discretion, agree to accept notices and other communications to it or them hereunder by electronic communications pursuant to procedures approved by it or them; provided that approval of such procedures may be limited to particular notices or communications.
Unless the Administrative Agent otherwise prescribes, (i) notices and other communications sent to an e-mail address shall be deemed received upon the senders receipt of an acknowledgement from the intended recipient (such as by the return receipt requested function, as available, return e-mail or other written acknowledgement), and (ii) notices or communications posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient, at its e-mail address as described in the foregoing clause (i), of notification that such notice or communication is available and identifying the website address therefor; provided that, for both clauses (i) and (ii) above, if such notice, email or other communication is not sent during the normal business hours of the recipient, such notice or communication shall be deemed to have been sent at the opening of business on the next Business Day for the recipient.
(f) Change of Address, etc. Any party hereto may change its address or facsimile number for notices and other communications hereunder by notice to the other parties hereto.
(g) Platform .
(i) Each of Holdings and the Borrower hereby agrees that the Administrative Agent may, but shall not be obligated to, make the Communications (as defined below) available to the other Lenders and the Issuing Bank by posting the Communications on Debt Domain, Intralinks, Syndtrak or a substantially similar electronic transmission system (the Platform ).
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(ii) The Platform is provided as is and as available. The Agent Parties (as defined below) do not warrant the adequacy of the Platform and expressly disclaim liability for errors or omissions in the Communications. No warranty of any kind, express, implied or statutory, including any warranty of merchantability, fitness for a particular purpose, non-infringement of third-party rights or freedom from viruses or other code defects, is made by any Agent Party in connection with the Communications or the Platform. In no event shall the Agents or any of their Related Parties (collectively, the Agent Parties ) have any liability to the Borrower or the other Loan Parties, any Lender, the Issuing Bank or any other person or entity for damages of any kind, including direct or indirect, special, incidental or consequential damages, losses or expenses (whether in tort, contract or otherwise) arising out of the Borrowers, any Loan Partys or the Administrative Agents transmission of communications through the Platform, except as may result from the gross negligence or willful misconduct of an Agent Party as determined by a court of competent jurisdiction by final and nonappealable judgment. Communications means, collectively, any notice, demand, communication, information, document or other material that any Loan Party provides to the Administrative Agent pursuant to any Loan Document or the transactions contemplated therein which is distributed to the Administrative Agent or any Lender or Issuing Bank by means of electronic communications pursuant to this Section, including through the Platform.
Each of Holdings and the Borrower hereby agrees, unless directed otherwise by the Administrative Agent or unless the e-mail address referred to in this paragraph has not been provided by the Administrative Agent to the Borrower, that it will, or will cause the other Restricted Subsidiaries to, provide the Communications to the Administrative Agent in an electronic/soft medium that is properly identified in a format acceptable to the Administrative Agent to an e-mail address as directed by the Administrative Agent. In addition, each of Holdings and the Borrower agrees, and agrees to cause the other Restricted Subsidiaries, to continue to provide the Communications to the Administrative Agent or the Lenders or Issuing Bank, as the case may be, in the manner otherwise specified in the Loan Documents but only to the extent requested by the Administrative Agent.
Each of Holdings and the Borrower hereby acknowledges that (a) the Administrative Agent will make available to the Lenders materials and/or information provided by or on behalf of Holdings or the Borrower hereunder (collectively, the Borrower Materials ) by posting the Borrower Materials on the Platform and (b) certain of the Lenders may be public-side Lenders ( i.e ., Lenders that do not wish to receive material non-public information with respect to Holdings, the Borrower, any other Subsidiary or their securities) (each, a Public Lender ). Each of Holdings and the Borrower hereby agrees that (i) all Borrower Materials that are to be made available to Public Lenders shall be clearly and conspicuously marked PUBLIC which, at a minimum, shall mean that the word PUBLIC shall appear prominently on the first page thereof; (ii) by marking Borrower Materials PUBLIC, each of Holdings and the Borrower shall be deemed to have authorized the Administrative Agent and the Lenders to treat such Borrower Materials as not containing any material information with respect to Holdings, the Borrower, any other Subsidiary or their securities for purposes of United States federal and state securities laws other than information that is of a type that would be publicly available if Holdings was a public reporting company ( provided , however , that to the extent such Borrower Materials constitute Information, they shall be treated as set forth in Section 9.16); (iii) all Borrower Materials marked PUBLIC are permitted to be made available through a portion of the Platform
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designated as Public Investor; and (iv) the Administrative Agent shall be entitled to treat any Borrower Materials that are not marked PUBLIC as being suitable only for posting on a portion of the Platform not marked as Public Investor. Notwithstanding the foregoing, the following Borrower Materials shall be deemed to be marked PUBLIC, unless the Borrower notifies the Administrative Agent promptly that any such document contains material information of a type that would not be publicly available if Holdings was a public reporting company: (A) the Loan Documents and (B) notification of changes in the terms of the Credit Facilities.
Each Public Lender agrees to cause at least one individual at or on behalf of such Public Lender to at all times have selected the Private Side Information or similar designation on the content declaration screen of the Platform in order to enable such Public Lender or its delegate, in accordance with such Public Lenders compliance procedures and applicable law, including United States federal and state securities laws, to make reference to Communications that are not made available through the Public Side Information portion of the Platform and that may contain material non-public information with respect to Holdings, the Borrower, any other Subsidiary or their securities for purposes of United States federal or state securities laws.
THE PLATFORM IS PROVIDED AS IS AND AS AVAILABLE. NEITHER THE ADMINISTRATIVE AGENT NOR ANY OF ITS RELATED PARTIES WARRANTS THE ACCURACY OR COMPLETENESS OF THE COMMUNICATIONS OR THE ADEQUACY OF THE PLATFORM AND EACH EXPRESSLY DISCLAIMS LIABILITY FOR ERRORS OR OMISSIONS IN THE COMMUNICATIONS. NO WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY, INCLUDING ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON- INFRINGEMENT OF THIRD-PARTY RIGHTS OR FREEDOM FROM VIRUSES OR OTHER CODE DEFECTS IS MADE BY THE ADMINISTRATIVE AGENT OR ANY OF ITS RELATED PARTIES IN CONNECTION WITH THE COMMUNICATIONS OR THE PLATFORM. IN NO EVENT SHALL THE ADMINISTRATIVE AGENT OR ANY OF ITS RELATED PARTIES HAVE ANY LIABILITY TO ANY LOAN PARTY, ANY LENDER OR ANY OTHER PERSON FOR DAMAGES OF ANY KIND, WHETHER OR NOT BASED ON STRICT LIABILITY AND INCLUDING DIRECT OR INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES, LOSSES OR EXPENSES (WHETHER IN TORT, CONTRACT OR OTHERWISE) ARISING OUT OF ANY LOAN PARTYS OR THE ADMINISTRATIVE AGENTS TRANSMISSION OF COMMUNICATIONS THROUGH THE INTERNET, EXCEPT TO THE EXTENT THE LIABILITY OF ANY SUCH PERSON IS FOUND IN A FINAL AND NONAPPEALABLE RULING BY A COURT OF COMPETENT JURISDICTION TO HAVE RESULTED PRIMARILY FROM SUCH PERSONS GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
The Administrative Agent agrees that the receipt of the Communications by the Administrative Agent at its e-mail address set forth above shall constitute effective delivery of the Communications to the Administrative Agent for purposes of the Loan Documents. Each Lender agrees that receipt of notice to it (as provided in the next sentence) specifying that the Communications have been posted to the Platform shall constitute effective delivery of the Communications to such persons for purposes of the Loan Documents. Each Lender agrees to notify the Administrative Agent in writing (including by electronic communication) from time to time of such persons e- mail address to which the foregoing notice may be sent by electronic transmission and that the foregoing notice may be sent to such e-mail address.
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Nothing herein shall prejudice the right of the Administrative Agent or any Lender to give any notice or other communication pursuant to any Loan Document in any other manner specified in such Loan Document.
SECTION 9.02 Survival of Agreement . All covenants, agreements, representations and warranties made by the Borrower or Holdings herein and in the certificates or other instruments prepared or delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the Lenders and the Issuing Bank and shall survive the making by the Lenders of the Loans and the issuance of Letters of Credit by the Issuing Bank, regardless of any investigation made by the Lenders or the Issuing Bank or on their behalf, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any Fee or any other amount payable under this Agreement or any other Loan Document is outstanding and unpaid or any Letter of Credit is outstanding and so long as the Commitments have not been terminated. The provisions of Sections 2.14, 2.16, 2.20 and 9.05 shall remain operative and in full force and effect regardless of the expiration of the term of this Agreement, the consummation of the transactions contemplated hereby, the repayment of any of the Loans, the expiration of the Commitments, the expiration of any Letter of Credit, the invalidity or unenforceability of any term or provision of this Agreement or any other Loan Document, or any investigation made by or on behalf of the Administrative Agent, the Collateral Agent, any Lender or the Issuing Bank.
SECTION 9.03 Binding Effect . This Agreement shall become effective when it shall have been executed by Holdings, the Borrower and the Administrative Agent and when the Administrative Agent shall have received counterparts hereof which, when taken together, bear the signatures of each of the other parties hereto.
SECTION 9.04 Successors and Assigns . (a) Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the successors and permitted assigns of such party; and all covenants, promises and agreements by or on behalf of the Borrower, Holdings, the Administrative Agent, the Collateral Agent, the Issuing Bank or the Lenders that are contained in this Agreement shall bind and inure to the benefit of their respective successors and assigns.
(b) Subject to the conditions set forth in this paragraph (b), any Lender may assign to one or more Eligible Assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans at the time owing to it), with the prior written consent of the Borrower, the Administrative Agent and (solely with respect to assignments of Revolving Credit Commitments) each Issuing Bank (in each case, such consent not to be unreasonably withheld, conditioned or delayed); provided , that (I) consent of the Borrower shall not be required during the primary syndication of the Term Loans (other than with respect to any proposed assignment to a Disqualified Institution), (II) (x) the Borrower shall be deemed to have consented to any assignment of Loans or Commitments unless it has objected thereto by written notice to the Administrative Agent within ten Business Days after receipt of a written request for consent and (y) the consent of the Borrower shall not be required for any
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assignment of Term Loans or Term Commitments (1) by any Term Lender to any Term Lender or any Affiliate of any Term Lender or an Approved Fund or (2) at any time when an Event of Default under Section 7.01(b), (c), (g) or (h) exists and (III) (x) the Borrower shall be deemed to have consented to any assignment of Revolving Loans or Revolving Credit Commitments unless it has objected thereto by written notice to the Administrative Agent within ten Business Days after receipt of a written request for consent, and (y) the consent of the Borrower shall not be required for any assignment of Revolving Loans or Revolving Credit Commitments (1) by any Revolving Credit Lender to any Revolving Credit Lender or any Affiliate of any Revolving Credit Lender or an Approved Fund or (2) at any time when an Event of Default under Section 7.01(b), (c), (g) or (h) exists). The amount of the Commitment or Loans of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Acceptance with respect to such assignment is delivered to the Administrative Agent) shall not be less than (x) $1,000,000, in the case of Term Loans and Term Commitments and (y) $5,000,000 in the case of Revolving Loans and Revolving Credit Commitments, unless (i) the entire remaining amount of the assigning Lenders Commitment and the Loans at the time owing to it is being assigned, (ii) the applicable assignment is to a Lender, an Affiliate of a Lender or an Approved Fund or (iii) the Borrower and the Administrative Agent otherwise consent. Each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lenders rights and obligations under this Agreement with respect to the Loans or the Commitment assigned (it being understood that assignments under separate Credit Facilities shall not be required to be made on a pro rata basis). The parties to each assignment shall (A) execute and deliver to the Administrative Agent an Assignment and Acceptance via an electronic settlement system acceptable to the Administrative Agent or (B) if previously agreed with the Administrative Agent, manually execute and deliver to the Administrative Agent an Assignment and Acceptance and, in each case, shall pay to the Administrative Agent a processing and recordation fee of $3,500 (which fee may be waived or reduced in the sole discretion of the Administrative Agent), and the assignee, if it is not a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire (in which the assignee shall designate one or more credit contacts to whom all syndicate-level information (which may contain material non-public information about the Loan Parties and their Related Parties or their respective securities) will be made available and who may receive information in accordance with the assignees compliance procedures and applicable laws, including federal and state securities laws) and all applicable Tax forms (including the Tax forms pursuant to Section 2.20(f) hereof). In the case of any assignment to an Eligible Assignee that is or would be, upon giving effect to such assignment, an Affiliated Lender, such assignment shall be subject to the provisions of Section 9.04(l). Upon acceptance and recording pursuant to paragraph (e) of this Section 9.04, from and after the effective date specified in each Assignment and Acceptance, (A) the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Acceptance, have the rights and obligations of a Lender under this Agreement and (B) the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lenders rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.14, 2.16, 2.20 and 9.05, as well as to any Fees accrued for its account and not yet paid).
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(c) By executing and delivering an Assignment and Acceptance, the assigning Lender thereunder and the assignee thereunder shall be deemed to confirm to and agree with each other and the other parties hereto as follows: (i) such assigning Lender warrants that it is the legal and beneficial owner of the interest being assigned thereby free and clear of any adverse claim and that its Term Loan Commitment and Revolving Credit Commitment, and the outstanding balances of its Term Loans and Revolving Loans, in each case without giving effect to assignments thereof which have not become effective, are as set forth in such Assignment and Acceptance, (ii) except as set forth in clause (i) above, such assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement, or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement, any other Loan Document or any other instrument or document furnished pursuant hereto, or the financial condition of Holdings, the Borrower or any other Subsidiary or the performance or observance by any Loan Party of any of its obligations under this Agreement, any other Loan Document or any other instrument or document furnished pursuant hereto; (iii) such assignee represents and warrants that it is an Eligible Assignee and is legally authorized to enter into such Assignment and Acceptance (and the Administrative Agent may rely conclusively on such representation); (iv) such assignee confirms that it has received a copy of this Agreement, together with copies of the most recent financial statements referred to in Section 3.04 or delivered pursuant to Section 5.04, and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (v) such assignee will independently and without reliance upon the Administrative Agent, the Collateral Agent, such assigning Lender or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (vi) such assignee appoints and authorizes the Administrative Agent and the Collateral Agent to take such action as agent on its behalf and to exercise such powers under the Loan Documents as are delegated to each of the Administrative Agent and the Collateral Agent, by the terms hereof or thereof, together with such powers as are reasonably incidental thereto; and (vii) such assignee agrees that it will perform in accordance with their terms all the obligations which by the terms of this Agreement are required to be performed by it as a Lender.
(d) The Administrative Agent, acting for this purpose as an agent of the Borrower, shall maintain at one of its offices in The City of New York a copy of each Assignment and Acceptance delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitment of, and principal amount of and interest on the Loans owing to, each Lender pursuant to the terms hereof from time to time (the Register ). The entries in the Register shall be conclusive and the Borrower, the Administrative Agent, the Issuing Banks, the Collateral Agent and the Lenders may treat each person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Borrower, the Issuing Banks and the Collateral Agent, at any reasonable time and from time to time upon reasonable prior notice.
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(e) Upon its receipt of, and consent to, a duly completed Assignment and Acceptance executed by an assigning Lender and an assignee, an Administrative Questionnaire completed in respect of the assignee (unless the assignee shall already be a Lender hereunder), the processing and recordation fee referred to in paragraph (b) above, if applicable, and the written consent of the Administrative Agent and, if required, the Borrower and the Issuing Bank to such assignment and any applicable Tax forms, the Administrative Agent shall (i) accept such Assignment and Acceptance and (ii) record the information contained therein in the Register. No assignment shall be effective unless it has been recorded in the Register as provided in this paragraph (e).
(f) Each Lender may without the consent of, or notice to, the Borrower, the Issuing Bank or the Administrative Agent sell participations to one or more Eligible Assignees (each, a Participant ) in all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans owing to it); provided , however , that (i) such Lenders obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) the Participant shall be entitled to the benefit of the cost protection provisions contained in Sections 2.14, 2.16 and 2.20 (to the extent that such Participant provides any necessary documentation under Section 2.20 as if it were a Lender hereunder) to the same extent as if they were Lenders (but, with respect to any particular Participant, to no greater extent than the Lender that sold the participation to such Participant, unless the sale of the participation to such Participant is made with the Borrowers prior written consent or to the extent that such entitlement to receive a greater payment results from a Change in Law that occurs after the Participant acquired the applicable participation) and (iv) the Borrower, the Administrative Agent, the Issuing Banks and the Lenders shall continue to deal solely and directly with such Lender in connection with such Lenders rights and obligations under this Agreement, and such Lender shall retain the sole right to enforce the obligations of the Borrower relating to the Loans or L/C Disbursements and to approve any amendment, modification or waiver of any provision of this Agreement (other than, if agreed to between such Participant and the applicable Lender, amendments, modifications or waivers described in Section 9.08(b)(i), (ii), (iii), (iv) or (v)). To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 9.06 as though it were a Lender; provided that such Participant agrees to be subject to Section 2.18 as though it were a Lender.
(g) Each Lender that sells a participation shall, acting solely for this purpose as an agent of the Borrower, maintain a register on which it enters the name and address of each Participant and the principal amounts (and stated interest) of each Participants interest in the Loans or other obligations under the Loan Documents (the Participant Register ); provided that no Lender shall have any obligation to disclose all or any portion of the Participant Register (including the identity of any Participant or any information relating to a Participants interest in any commitments, loans, letters of credit or its other obligations under any Loan Document) to any person except to the extent that such disclosure is necessary to establish that such commitment, loan, letter of credit or other obligation is in registered form under Section 5f.103-1(c) of the United States Treasury Regulations. The entries in the Participant Register shall be conclusive absent manifest error, and such Lender shall treat each person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary. For the avoidance of doubt, the Administrative Agent (in its capacity as Administrative Agent) shall have no responsibility for maintaining a Participant Register.
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(h) Any Lender or Participant may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section 9.04, disclose to the assignee or Participant or proposed assignee or Participant any information relating to the Borrower furnished to such Lender by or on behalf of the Borrower; provided that, prior to any such disclosure of information designated by the Borrower as confidential, each such assignee or Participant or proposed assignee or Participant shall execute an agreement whereby such assignee or participant shall agree (subject to customary exceptions) to preserve the confidentiality of such confidential information on terms no less restrictive than those applicable to the Lenders pursuant to Section 9.16.
(i) Any Lender may at any time pledge or assign all or any portion of its rights under this Agreement to secure extensions of credit to such Lender or in support of obligations owed by such Lender; provided that no such pledge or assignment shall release a Lender from any of its obligations hereunder or substitute any such assignee for such Lender as a party hereto.
(j) Notwithstanding anything to the contrary contained herein, any Lender (a Granting Lender ) may grant to a special purpose funding vehicle (an SPV ), identified as such in writing from time to time by the Granting Lender to the Administrative Agent and the Borrower, the option to provide to the Borrower all or any part of any Loan that such Granting Lender would otherwise be obligated to make to the Borrower pursuant to this Agreement; provided that (i) nothing herein shall constitute a commitment by any SPV to make any Loan and (ii) if an SPV elects not to exercise such option or otherwise fails to provide all or any part of such Loan, the Granting Lender shall be obligated to make such Loan pursuant to the terms hereof. The making of a Loan by an SPV hereunder shall utilize the Commitment of the Granting Lender to the same extent, and as if, such Loan were made by such Granting Lender. Each party hereto hereby agrees that no SPV shall be liable for any indemnity or similar payment obligation under this Agreement (all liability for which shall remain with the Granting Lender). In furtherance of the foregoing, each party hereto hereby agrees (which agreement shall survive the termination of this Agreement) that, prior to the date that is one year and one day after the payment in full of all outstanding commercial paper or other senior indebtedness of any SPV, it will not institute against, or join any other person in instituting against, such SPV any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings under the laws of the United States or any State thereof. In addition, notwithstanding anything to the contrary contained in this Section 9.04, any SPV may (i) with notice to, but without the prior written consent of, the Borrower and the Administrative Agent and without paying any processing fee therefor, assign all or a portion of its interests in any Loans to the Granting Lender or to any financial institutions (consented to by the Borrower and Administrative Agent) providing liquidity or credit support to or for the account of such SPV to support the funding or maintenance of Loans and (ii) disclose on a confidential basis any non-public information relating to its Loans to any rating agency, commercial paper dealer or provider of any surety, guarantee or credit or liquidity enhancement to such SPV.
(k) Neither Holdings nor the Borrower shall assign or delegate any of its rights or duties hereunder without the prior written consent of the Administrative Agent, each Issuing Bank and each Lender, and any attempted assignment without such consent shall be null and void.
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(l) Notwithstanding anything to the contrary contained herein, any Lender may, at any time, assign all or a portion of its rights and obligations under this Agreement in respect of its Term Loans to any Affiliated Lender on a non-pro rata basis (x) through Auctions open to all Lenders holding the relevant Term Loans on a pro rata basis or (y) through open market purchases, in each case with respect to clauses (x) and (y), without the consent of the Administrative Agent, subject to the applicable conditions set forth in Section 2.12(c); provided that no Affiliated Lender shall be required to represent or warrant that it is not in possession of material non-public information with respect to Holdings, the Borrower or any Subsidiary thereof or their respective securities in connection with any assignment permitted by this Section 9.04(l).
(m) Notwithstanding any other provision of this Agreement, no Lender will assign its rights and obligations under this Agreement, or sell participations in its rights and/or obligations under this Agreement, to any person who is (i) listed on the Specially Designated Nationals and Blocked Persons List maintained by OFAC and/or on any other similar list maintained by OFAC pursuant to any authorizing statute, executive order or regulation or (ii) either (A) included within the term designated national as defined in the Cuban Assets Control Regulations, 31 C.F.R. Part 515 or (B) designated under Sections 1(a), 1(b), 1(c) or 1(d) of Executive Order No. 13224, 66 Fed. Reg. 49079 (published September 25, 2001) or similarly designated under any related enabling legislation or any other similar executive orders.
(n) Notwithstanding anything to the contrary herein, the Administrative Agent shall not be responsible or have any liability for, or have any duty to ascertain, inquire into, monitor or enforce, compliance with the provisions hereof relating to Disqualified Institutions. Without limiting the generality of the foregoing, (A) the Administrative Agent shall not be obligated to ascertain, monitor or inquire as to whether any Lender or Participant or prospective Lender or Participant is a Disqualified Institution, (B) the Administrative Agent shall in no circumstances have any liability with respect to any assignment or participation to a Disqualified Institution to which the Borrower has consented (including deemed consent) or with respect to any other assignment or participation to a Disqualified Institution and (C) the Administrative Agent shall in no circumstances have any liability with respect to or arising out of any disclosure of confidential information to any Disqualified Institution, unless such assignment or disclosure resulted from the gross negligence, bad faith or willful misconduct of, or material breach of the Loan Documents by, the Administrative Agent.
(o) In the case of any assignment or participation by a Lender without the Borrowers consent to a Disqualified Institution (or any affiliate thereof) or, to the extent the Borrowers consent is required under the terms of the Loan Documents, to any other person, the Borrower shall be entitled to (a) terminate any Commitment of such person and repay any applicable outstanding Loans (in the case of Term Loans, at a price equal to the lesser of par and the amount such person paid to acquire such Loans), without premium, penalty, prepayment fee or breakage, and/or (b) require such person to assign its rights and obligations to one or more Eligible Assignees at the price indicated above (which assignment shall not be subject to the processing and recordation fee specified above); provided that upon inquiry by any Lender to the Administrative Agent as to whether a specified potential assignee or prospective Participant is on the list of Disqualified Institutions, the Administrative Agent shall be permitted to disclose to such Lender whether such specific potential assignee or prospective Participant is on the list of Disqualified Institutions.
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SECTION 9.05 Expenses; Indemnity; Damage Waivers . (a) The Borrower and Holdings agree, jointly and severally, to pay within 30 days of a written demand therefor (together with reasonable backup documentation supporting such reimbursement request) (i) all reasonable and documented out-of-pocket expenses incurred by the Arranger, the Administrative Agent, the Collateral Agent, any documentation agent, any syndication agent and the Issuing Bank (but limited, in the case of legal fees and expenses, to the actual reasonable and documented out-of-pocket fees, disbursements and other charges of one firm of outside counsel to all such Persons taken as a whole and, if reasonably necessary, of one local counsel in any relevant local jurisdiction to all such Persons, taken as a whole), in connection with the syndication of the Credit Facilities and the preparation and administration of this Agreement and the other Loan Documents or in connection with any amendments, modifications or waivers of the provisions hereof or thereof and (ii) all reasonable out-of-pocket expenses (but limited, in the case of legal fees and expenses, to the reasonable and documented out-of-pocket fees, disbursements and other charges (x) of one firm of outside counsel to all such Persons taken as a whole and, solely in the case of an actual or reasonably perceived conflict of interest, one additional counsel to each similarly situated group of Persons, and (y) if reasonably necessary, of one local counsel in any relevant jurisdiction to all such Persons, taken as a whole and, solely in the case of an actual or reasonably perceived conflict of interest, one additional local counsel to each similarly situated group of Persons, in each such relevant material jurisdiction) incurred by the Arranger, the Administrative Agent, the Collateral Agent, the syndication agent, the documentation agent, the Issuing Bank and the Lenders in connection with the enforcement or protection of its rights in connection with this Agreement and the other Loan Documents or in connection with the Loans made or Letters of Credit issued hereunder, including all such reasonable out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loans.
(b) The Borrower and Holdings agree, jointly and severally, to indemnify each Arranger, the Administrative Agent, the Collateral Agent, any syndication agent, any documentation agent, each Lender, the Issuing Bank and each Related Party of any of the foregoing persons (each such person being called an Indemnitee ) against, and to hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses (but limited, in the case of legal fees and expenses, to the actual reasonable and documented out-of-pocket fees, disbursements and other charges of one counsel to all Indemnitees taken as a whole and, solely in the case of an actual or reasonably perceived conflict of interest, one additional counsel to each similarly situated group of affected Indemnitees, taken as a whole and, if reasonably necessary, one local counsel in any relevant material jurisdiction to all Indemnitees, taken as a whole, and solely in the case of any such actual or reasonably perceived conflict of interest, one additional local counsel to all affected Indemnitees, taken as a whole, in each relevant jurisdiction), incurred by or asserted against any Indemnitee arising out of, in any way connected with, or as a result of (i) the execution or delivery of this Agreement or any other Loan Document or any agreement or instrument contemplated thereby, the performance by the parties thereto of their respective obligations thereunder or the consummation of the Transactions and the other transactions contemplated thereby (including the syndication of the Credit Facilities), (ii) the use of the proceeds of the Loans or issuance of Letters of Credit, (iii) any
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actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether or not any Indemnitee is a party thereto (and regardless of whether such matter is initiated by a third party or by the Borrower, any other Loan Party or any of their respective Affiliates), or (iv) any actual or alleged presence or Release of Hazardous Materials on any property currently or formerly owned or operated by Holdings, the Borrower or any other Subsidiary, or any Environmental Liability related in any way to Holdings, the Borrower or any other Subsidiary; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have (x) resulted from the willful misconduct or gross negligence of such Indemnitee or any of its Affiliates or controlling persons thereof or (y) arisen out of or in connection with any claim, litigation or proceeding that is solely among Indemnitees (other than claims against any Indemnitee in its capacity or in fulfilling its role as an Arranger, the Administrative Agent, the Collateral Agent, the Issuing Bank or other similar role) that a court of competent jurisdiction has determined in a final and nonappealable judgment did not involve any act or omission of any of Holdings, the Borrower or their Subsidiaries. Notwithstanding the foregoing, each Indemnitee shall be obligated to refund and return any and all amounts paid by the Borrower or Holdings to such Indemnitee for fees, losses, claims, liabilities, expenses or damages under this Section 9.05 to the extent a court of competent jurisdiction has determined in a final and nonappealable judgment that such Indemnitee was not entitled to payment of such amounts in accordance with the terms of this Section 9.05
(c) To the extent that Holdings and the Borrower fail to pay any amount required to be paid by them to the Arranger, Administrative Agent, the Collateral Agent or the Issuing Bank or any Related Party thereof under paragraph (a) or (b) of this Section, each Lender severally agrees to pay to the Administrative Agent, the Issuing Bank or such Related Party, as the case may be, such Lenders pro rata share (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount; provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Arranger, the Administrative Agent, the Collateral Agent or the Issuing Bank in its capacity as such. For purposes hereof, a Lenders pro rata share shall be determined based upon its share of the sum of the Aggregate Revolving Credit Exposure, outstanding Term Loans and unused Commitments at the time.
(d) To the extent permitted by applicable law, none of Holdings, its Related Parties or any Indemnitee shall be liable on any theory of liability for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement or any agreement or instrument contemplated hereby, the Transactions, any Loan or Letter of Credit or the use of the proceeds thereof; provided that nothing contained in this sentence shall limit the indemnification obligations to the extent set forth hereinabove to the extent such special, indirect, consequential or punitive damages are included in any third party claim in connection with which an Indemnitee is entitled to indemnification hereunder.
(e) The provisions of this Section 9.05 shall remain operative and in full force and effect regardless of the expiration of the term of this Agreement, the consummation of the transactions contemplated hereby, the repayment of any of the Loans, the expiration of the 145 Commitments, the expiration of any Letter of Credit, the invalidity or unenforceability of any term or provision of this Agreement or any other Loan Document, or any investigation made by or on behalf of the Arranger, the Administrative Agent, the Collateral Agent, any Lender or the Issuing Bank. All amounts due under this Section 9.05 shall be payable on written demand therefor.
SECTION 9.06 Right of Setoff . If an Event of Default shall have occurred and be continuing, each Lender and Issuing Bank and each Affiliate of any of the foregoing is hereby authorized at any time and from time to time, except to the extent prohibited by law, to setoff and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender or Issuing Bank, or by such an Affiliate, to or for the credit or the account of the Borrower or Holdings against any of and all the obligations of the Borrower or Holdings now or hereafter existing under this Agreement and other Loan Documents held by such Lender or Issuing Bank, irrespective of whether or not such Lender or Issuing Bank shall have made any demand under this Agreement or such other Loan Document and although such obligations may be unmatured or owed to a branch, office or Affiliate of such Lender or Issuing Bank different from the branch, office or Affiliate holding such deposit or obligated on such Indebtedness; provided that in the event that any Defaulting Lender or Affiliate thereof shall exercise any such right of setoff, (x) all amounts so setoff shall be paid over immediately to the Administrative Agent and, pending such payment, shall be segregated by such Defaulting Lender or its Affiliate from its other funds and deemed held in trust for the benefit of the Administrative Agent and the Lenders, and (y) the Defaulting Lender shall provide promptly to the Administrative Agent a statement describing in reasonable detail the Obligations owing to such Defaulting Lender as to which it or its Affiliate exercised such right of setoff. The rights of each Lender, each Issuing Bank and their respective Affiliates under this Section 9.06 are in addition to other rights and remedies (including other rights of setoff) which such Lender, such Issuing Bank and any such Affiliate may have.
SECTION 9.07 Applicable Law . THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (OTHER THAN LETTERS OF CREDIT AND AS EXPRESSLY SET FORTH IN OTHER LOAN DOCUMENTS) SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK. EACH LETTER OF CREDIT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED IN ACCORDANCE WITH, THE LAWS OR RULES DESIGNATED IN SUCH LETTER OF CREDIT, OR IF NO SUCH LAWS OR RULES ARE DESIGNATED, THE UNIFORM CUSTOMS AND PRACTICE FOR DOCUMENTARY CREDITS MOST RECENTLY PUBLISHED AND IN EFFECT, ON THE DATE SUCH LETTER OF CREDIT WAS ISSUED, BY THE INTERNATIONAL CHAMBER OF COMMERCE (THE UNIFORM CUSTOMS ) AND, AS TO MATTERS NOT GOVERNED BY THE UNIFORM CUSTOMS, THE LAW OF THE STATE OF NEW YORK.
SECTION 9.08 Waivers; Amendments . (a) No failure or delay of the Administrative Agent, the Collateral Agent, any Lender or the Issuing Bank in exercising any power or right hereunder or under any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Administrative Agent, the
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Collateral Agent, the Issuing Bank and the Lenders hereunder and under the other Loan Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of this Agreement or any other Loan Document or consent to any departure by the Borrower or any other Loan Party therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) below, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice or demand on the Borrower or Holdings in any case shall entitle the Borrower or Holdings to any other or further notice or demand in similar or other circumstances.
(b) Except as otherwise provided herein in Sections 2.08, 2.23 and 2.25, neither this Agreement nor any other Loan Document nor any provision hereof or thereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Borrower, Holdings and (other than with respect to clauses (i), (ii), (iii), (ix) and (x) below) the Required Lenders; provided , however , that no such agreement shall:
(i) decrease the principal amount of, or extend the maturity of or any scheduled principal payment date or date for the payment of any interest on any Loan or any date for reimbursement of an L/C Disbursement, or waive or excuse any such payment or any part thereof, or decrease the rate of interest on any Loan (other than a waiver of default interest) or L/C Disbursement (it being understood that any change in any definition applicable to any ratio used in the calculation of such rate of interest (or any component definition thereof) shall not constitute a reduction in any rate of interest), without the prior written consent of each Lender directly adversely affected thereby,
(ii) increase (other than with respect to any Incremental Term Facility or Incremental Revolving Credit Commitment to which the Lender providing such incremental facility has agreed) or extend the Commitment (it being understood that a waiver of any condition precedent or the waiver of any Default, Event of Default or mandatory prepayment shall not constitute an increase or extension of any Commitment of any Lender) or waive, decrease or extend the date for payment of any Fees or premium owed to any Lender (it being understood that any change in any definition applicable to any ratio used in the calculation of such Fees (or any component definition thereof) shall not constitute a reduction in any Fees), without the prior written consent of each Lender directly adversely affected thereby,
(iii) without the prior written consent of each Lender directly adversely affected thereby, amend, modify or waive the pro rata requirements of Section 2.17,
(iv) without the prior written consent of each Lender, (x) amend, modify or waive the provisions of Section 9.04(k) or (y) other than in accordance with the Loan Documents, release all or substantially all of the value of the Guarantees, or all or substantially all of the Collateral,
(v) amend, modify or waive the provisions of this Section 9.08 or the percentage contained in the definition of the term Required Lenders, Required Financial Covenant Lenders, Required Revolving Lenders or any other provision of any Loan Document specifying the number or percentage of Lenders (or Lenders of any
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Class) required to waive, amend or modify any rights thereunder or make the determination or grant any consent thereunder, without the consent of each Lender (or each Lender of such Class, as the case may be) (it being understood that with the consent of the Required Lenders, the provisions of this Section 9.08 and the definition of the term Required Lenders may be amended to include references to any new class of loans created under this Agreement (or to lenders extending such loans) on substantially the same basis as the corresponding references relating to the existing Classes of Loans or Lenders),
(vi) amend, modify or waive provisions of any Loan Document in a manner that by its terms adversely affects the rights of Lenders holding Loans of one Class differently from the rights of Lenders holding Loans of any other Class without the prior written consent of Lenders holding a majority in interest of the outstanding Loans and unused Commitments of each adversely affected Class, provided that in the case of any amendment, modification or waiver that adversely affects the rights of Lenders holding Revolving Loans differently from the rights of Lenders holding Loans of any other Class, the prior written consent of each Lender holding Revolving Loans shall be required,
(vii) amend, modify or waive the protections afforded to an SPV pursuant to the provisions of Section 9.04(j) without the written consent of such SPV,
(viii) impose additional restrictions on the ability of any Lender to assign any of its rights and obligations hereunder without the prior written consent of such Lender,
(ix) amend, modify or waive any condition precedent to an extension of credit (or deemed extension of credit) under the Revolving Facility (or any facility consisting of Incremental Revolving Credit Commitments) without the prior written consent of the Required Revolving Lenders (and, in the case of the issuance of a Letter of Credit, the relevant Issuing Bank), or
(x) amend, modify or waive Section 6.10 or the defined terms used in Section 6.10 (solely in respect of the use of such defined terms in Section 6.10) or waive any Default or Event of Default resulting from a breach of Section 6.10, without the prior written consent of solely the Required Financial Covenant Lenders;
provided , further , that, notwithstanding the foregoing, (I) only the consent of Issuing Banks and the Administrative Agent shall be required with respect to any amendment that changes the L/C Sublimit and (II) no such agreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent, the Collateral Agent or the Issuing Bank hereunder or under any other Loan Document without the prior written consent of the Administrative Agent, the Collateral Agent or the Issuing Bank.
(c) The Administrative Agent, Holdings and the Borrower may amend any Loan Document to correct (i) an obvious error or any error or omission of a technical nature or (ii) to effect administrative changes that are not adverse to any Lender. Notwithstanding anything to the contrary contained herein, such amendment shall become effective without any further consent of any other party to such Loan Document (in the case of clause (ii) of the foregoing sentence, if the same is not objected to in writing by the Required Lenders within five Business Days following receipt of notice thereof; provided that, if the Required Lenders make such objection in writing, such amendment shall not become effective without the consent of the Required Lenders).
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(d) Subject to the rights of the Administrative Agent, the Collateral Agent and the Issuing Banks under the second proviso of Section 9.08(b) but notwithstanding any other provision of this Agreement, this Agreement may be amended:
(i) with the written consent of the Borrower and the Lenders providing the relevant Replacement Term Loans to permit the refinancing or replacement of all or any portion of the outstanding Term Loans under a specified Class (any such loans being refinanced or replaced, the Replaced Term Loans ) with one or more replacement term loans hereunder ( Replacement Term Loans ) pursuant to a Refinancing Amendment; provided that:
(A) the aggregate principal amount of any Replacement Term Loans shall not exceed the aggregate principal amount of the Replaced Term Loans ( plus the amount of accrued interest and premium thereon and underwriting discounts, fees (including upfront fees and original issue discount), commissions and expenses associated therewith),
(B) any Replacement Term Loans must have a final maturity date that is equal to or later than the final maturity date of, and have a weighted average life to maturity equal to or greater than the weighted average life to maturity of, the Replaced Term Loans at the time of the relevant refinancing,
(C) any Replacement Term Loans shall be pari passu with any then-existing Term Loans in right of payment and pari passu with such Term Loans with respect to the Collateral,
(D) any Replacement Term Loans that are secured may not be secured by any assets other than all or a portion of the Collateral,
(E) any Replacement Term Loans that are guaranteed may not be guaranteed by any Person other than one or more Loan Parties,
(F) any Replacement Term Loans may participate on a pro rata basis or a less than pro rata basis (but not greater than a pro rata basis) in any voluntary or mandatory prepayment in respect of the Initial Term Loans (and any Term Loans (other than the Initial Term Loans) then subject to ratable repayment requirements), in each case as agreed by the Borrower and the Lenders providing the relevant Replacement Term Loans,
(G) any Replacement Term Loans may have pricing (including interest, fees and premiums) and optional prepayment terms as the Borrower and the Lenders providing such Replacement Term Loans may agree,
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(H) the other terms and conditions of any Replacement Term Loans (excluding pricing, interest, fees, rate floors, premiums, optional prepayment terms, security and maturity, subject to preceding clauses (B) through (G)) are no more favorable (taken as a whole) (as reasonably determined by the Borrower) to the Lenders providing such Replacement Term Loans than, those applicable to the Replaced Term Loans (other than covenants or other provisions applicable only to periods after the Latest Term Loan Maturity Date (in each case, as of the date of incurrence of such Replacement Term Loans)), and
(I) the Borrower shall have prepaid the applicable Term Loans in accordance with Section 2.13(d), and
(ii) with the written consent of the Borrower and the Lenders providing the relevant Replacement Revolving Facility to permit the refinancing or replacement of all or any portion of any Revolving Credit Commitment under the applicable Class (any such Revolving Credit Commitment being refinanced or replaced, a Replaced Revolving Facility ) with a replacement revolving facility hereunder (a Replacement Revolving Facility ) pursuant to a Refinancing Amendment; provided that:
(A) the aggregate principal amount of any Replacement Revolving Facility shall not exceed the aggregate principal amount of the Replaced Revolving Facility ( plus the amount of accrued interest and premium thereon, underwriting discounts, fees (including upfront fees and original issue discount), commissions and expenses associated therewith),
(B) no Replacement Revolving Facility may have a final maturity date (or have scheduled commitment reductions) prior to the final maturity date of the relevant Replaced Revolving Facility at the time of such refinancing,
(C) any Replacement Revolving Facility shall be pari passu with any then-existing Revolving Credit Commitments in right of payment and pari passu with any then-existing Revolving Credit Commitments with respect to the Collateral,
(D) any Replacement Revolving Facility that is secured may not be secured by any assets other than all or any portion of the Collateral,
(E) any Replacement Revolving Facility that is guaranteed may not be guaranteed by any Person other than one or more Loan Parties,
(F) to the extent more than one Revolving Facility exists after giving effect to the incurrence of any Replacement Revolving Facility, (x) the borrowing and repayment (except for (1) payments of interest and fees at different rates on the Revolving Facilities (and related outstandings), (2) repayments required upon the final maturity date of any Revolving Facility and (3) repayments made in connection with a permanent repayment and termination of Revolving Credit Commitments under any Revolving Facility (subject to clause (z) below)) of Revolving Loans with respect to any Revolving Facility after the effective date of
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such Replacement Revolving Facility shall be made on a pro rata basis with all other Revolving Facilities, (y) all Letters of Credit shall be participated on a pro rata basis by all Revolving Credit Lenders and (z) the permanent repayment of Revolving Loans with respect to, and reduction or termination of Revolving Credit Commitments under, any Revolving Facility after the effective date of such Replacement Revolving Facility shall be made on a pro rata basis with all other Revolving Facilities, except that the Borrower shall be permitted to permanently repay Revolving Loans and terminate Revolving Credit Commitments of any Revolving Facility on a greater than pro rata basis as compared to any other Revolving Facilities with a later final maturity date than such Revolving Facility,
(G) any Replacement Revolving Facility may have pricing (including interest, fees and premiums) and, subject to preceding clause (F), optional prepayment terms as the Borrower and the Lenders providing such Replacement Revolving Facility may agree,
(H) the other terms and conditions of any Replacement Revolving Facility (excluding pricing, interest, fees, rate floors, premiums, optional prepayment terms, security and maturity, subject to preceding clauses (B) through (G)) are no more favorable (taken as a whole) (as reasonably determined by the Borrower) to the Lenders providing such Replacement Revolving Facility than, those applicable to the Replaced Revolving Facility (other than covenants or other provisions applicable only to periods after the Latest Revolving Credit Maturity Date (in each case, as of the date of incurrence of the relevant Replacement Revolving Facility)), and
(I) the commitments in respect of the relevant Replaced Revolving Facility shall be terminated, and all loans outstanding thereunder and all fees then due and payable in connection therewith shall be paid in full, in each case on the date any Replacement Revolving Facility is implemented.
Each party hereto hereby agrees that this Agreement may be amended by the Borrower, the Administrative Agent and the lenders providing the relevant Replacement Term Loans or the Replacement Revolving Facility, as applicable, to the extent necessary or appropriate in the reasonable opinion of the Administrative Agent and the Borrower to reflect the existence and terms of such Replacement Term Loans or Replacement Revolving Facility, as applicable, incurred or implemented pursuant thereto (including any amendment necessary to treat the loans and commitments subject thereto as a separate tranche and Class of Loans or commitments hereunder). It is understood that any Lender approached to provide all or a portion of any Replacement Term Loans or any Replacement Revolving Facility may elect or decline, in its sole discretion, to provide such Replacement Term Loans or Replacement Revolving Facility.
SECTION 9.09 Interest Rate Limitation . Notwithstanding anything herein to the contrary, if at any time the interest rate applicable to any Loan or participation in any L/C Disbursement, together with all fees, charges and other amounts which are treated as interest on such Loan or participation in such L/C Disbursement under applicable law (collectively the Charges ), shall exceed the maximum lawful rate (the Maximum Rate ) which may be
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contracted for, charged, taken, received or reserved by the Lender holding such Loan or participation in accordance with applicable law, the rate of interest payable in respect of such Loan or participation hereunder, together with all Charges payable in respect thereof, shall be limited to the Maximum Rate and, to the extent lawful, the interest and Charges that would have been payable in respect of such Loan or participation but were not payable as a result of the operation of this Section 9.09 shall be cumulated and the interest and Charges payable to such Lender in respect of other Loans or participations or periods shall be increased (but not above the Maximum Rate therefor) until such cumulated amount, together with interest thereon at the Federal Funds Effective Rate to the date of repayment, shall have been received by such Lender.
SECTION 9.10 Entire Agreement . This Agreement, the other Loan Documents and any separate letter agreements with respect to fees payable to the Administrative Agent or the syndication of the Loans and Commitments constitute the entire contract between the parties relative to the subject matter hereof. Any other previous agreement among the parties with respect to the subject matter hereof is superseded by this Agreement and the other Loan Documents. Nothing in this Agreement or in the other Loan Documents, expressed or implied, is intended to confer upon any person (other than the parties hereto and thereto, their respective successors and assigns permitted hereunder (including any Affiliate of the Issuing Bank that issues any Letter of Credit) and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent, the Collateral Agent, the Issuing Bank and the Lenders) any rights, remedies, obligations or liabilities under or by reason of this Agreement or the other Loan Documents.
SECTION 9.11 WAIVER OF JURY TRIAL . EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.11.
SECTION 9.12 Severability . In the event any one or more of the provisions contained in this Agreement or in any other Loan Document should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby (it being understood that the invalidity of a particular provision in a particular jurisdiction shall not in and of itself affect the validity of such provision in any other jurisdiction). The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.
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SECTION 9.13 Counterparts; Electronic Execution . (a) This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original but all of which when taken together shall constitute a single contract, and shall become effective as provided in Section 9.03. Delivery of an executed signature page to this Agreement by facsimile or other electronic transmission shall be as effective as delivery of an original signed counterpart of this Agreement.
(b) The words execution, signed, signature, delivery and words of like import in or relating to any document to be signed in connection with this Agreement or any other Loan Document and the transactions contemplated hereby shall be deemed to include Electronic Signatures, deliveries or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature, physical delivery thereof or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act; provided that nothing herein shall require the Administrative Agent to accept electronic signatures in any form or format without its prior written consent.
SECTION 9.14 Headings . Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and are not to affect the construction of, or to be taken into consideration in interpreting, this Agreement.
SECTION 9.15 Jurisdiction; Consent to Service of Process . (a) Each party hereto hereby irrevocably and unconditionally submits, for itself and its property, to the jurisdiction of any New York State court or federal court of the United States of America sitting in New York County, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or the other Loan Documents, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding brought by it or any of its Affiliates against any Agent, Issuing Bank or Lender shall be brought, and shall be heard and determined, only in such New York State court or, to the extent permitted by law, in such federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement or any other Loan Document shall affect any right that the Administrative Agent, the Collateral Agent, the Issuing Bank or any Lender may otherwise have to bring any action or proceeding relating to this Agreement or the other Loan Documents against any Loan Party or their respective properties in the courts of any jurisdiction.
(b) Each of Holdings and the Borrower hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or the other Loan Documents in any such New York State or federal court. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.
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(c) Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 9.01. Nothing in this Agreement or any other Loan Document will affect the right of any party to this Agreement to serve process in any other manner permitted by law.
SECTION 9.16 Confidentiality . Each of the Administrative Agent, the Collateral Agent, the Issuing Bank and the Lenders agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its Affiliates and its and its Affiliates officers, directors, employees and agents, including accountants, legal counsel and other advisors (it being understood that the persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent requested by any regulatory authority, self-regulatory authority or quasi-regulatory authority (such as the National Association of Insurance Commissioners), (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) in connection with the exercise of any remedies hereunder or under the other Loan Documents or any suit, action or proceeding relating to the enforcement of its rights hereunder or thereunder, (e) subject to an agreement containing provisions substantially the same as those of this Section 9.16, to (i) any actual or prospective assignee of or Participant in any of its rights or obligations under this Agreement and the other Loan Documents or (ii) any actual or prospective counterparty (or its advisors) to any swap or derivative transaction relating to Holdings, the Borrower or any other Subsidiary or any of their respective obligations, (f) with the consent of the Borrower, (g) to the extent such Information becomes publicly available other than as a result of a breach of this Section 9.16 and (h) on a confidential basis to (x) any rating agency in connection with rating Holdings, the Borrower or any other Subsidiary or the Credit Facilities or (y) the CUSIP Service Bureau or any similar agency in connection with the issuance and monitoring of CUSIP numbers with respect to the Credit Facilities or market data collectors, similar services, providers to the lending industry and service providers to the Administrative Agent in connection with the administration and management of this Agreement and the Loan Documents. For the purposes of this Section 9.16, Information shall mean all information received from the Borrower or Holdings and related to the Borrower or Holdings or their business, other than any such information that was available to the Administrative Agent, the Collateral Agent, the Issuing Bank or any Lender on a nonconfidential basis prior to its disclosure by the Borrower or Holdings; provided that, in the case of Information received from the Borrower or Holdings after the date hereof, such information is clearly identified at the time of delivery as confidential. Any person required to maintain the confidentiality of Information as provided in this Section 9.16 shall be considered to have complied with its obligation to do so if such person has exercised the same degree of care to maintain the confidentiality of such Information as such person would accord its own confidential information.
SECTION 9.17 Lender Action . Each Lender agrees that it shall not take or institute any actions or proceedings, judicial or otherwise, for any right or remedy against any Loan Party or any other obligor under any of the Loan Documents (including the exercise of any right of setoff, rights on account of any bankers lien or similar claim or other rights of self-help), or institute any actions or proceedings, or otherwise commence any remedial procedures, with respect to any Collateral or any other property of any such Loan Party, unless expressly provided for herein or in any other Loan Document, without the prior written consent of the Administrative Agent. The provisions of this Section 9.17 are for the sole benefit of the Lenders and shall not afford any right to, or constitute a defense available to, any Loan Party.
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SECTION 9.18 USA PATRIOT Act Notice . Each Lender and the Administrative Agent (for itself and not on behalf of any Lender) hereby notifies Holdings and the Borrower that pursuant to the requirements of the USA PATRIOT Act, it is required to obtain, verify and record information that identifies Holdings and the Borrower, which information includes the name and address of Holdings and the Borrower and other information that will allow such Lender or the Administrative Agent, as applicable, to identify Holdings and the Borrower in accordance with the USA PATRIOT Act.
SECTION 9.19 Release of Collateral and Guarantees . (a) All security interests and Liens granted or created under the Security Documents shall automatically terminate when all the Loan Document Obligations (other than contingent amounts not yet due) have been paid in full, the Lenders have no further commitment to lend under this Agreement and the Letters of Credit shall have been canceled or have expired and all L/C Disbursements shall have been reimbursed.
(b) A Subsidiary Guarantor shall automatically be released from its obligations under the Security Documents and all security interests and Liens granted or created thereunder in the Collateral and guarantee obligations of such Subsidiary Guarantor shall be automatically released and/or terminated upon the consummation of any transaction permitted by this Agreement as a result of which such Subsidiary Guarantor ceases to be a Subsidiary or, upon the Borrowers written request, becomes an Unrestricted Subsidiary or another Excluded Subsidiary.
(c) [Intentionally Omitted].
(d) Upon any sale or other transfer by any Loan Party of any Collateral that is permitted under this Agreement to any person that is not another Loan Party, or, upon the effectiveness of any written consent to the release of the security interest or Lien granted under the Security Documents in any Collateral pursuant to Section 9.08 (or, if later, the date such release is permitted to occur pursuant to such consent), the security interests and Liens in such Collateral shall be automatically released.
(e) In connection with any termination or release pursuant to paragraph (a) or (b) above, the Collateral Agent shall promptly execute and deliver to any Loan Party, at such Loan Partys expense, all Uniform Commercial Code termination statements and other documents that such Loan Party shall reasonably request to evidence such termination or release. Any execution and delivery of documents pursuant to this Section 9.19 shall be without recourse to or representation or warranty by the Collateral Agent or any Secured Party. Without limiting the provisions of Section 9.05(a), the Borrower shall reimburse the Collateral Agent upon demand for all reasonable and documented costs and out-of-pocket expenses, including the reasonable and documented fees, charges and expenses of counsel, incurred by it in connection with any action contemplated by this Section 9.19.
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SECTION 9.20 Acknowledgement and Consent to Bail-In of EEA Financial Institutions . Notwithstanding anything to the contrary in any Loan Document or in any other agreement, arrangement or understanding among any such parties, each party hereto acknowledges that any liability of any EEA Financial Institution arising under any Loan Document, to the extent such liability is unsecured, may be subject to the write-down and conversion powers of an EEA Resolution Authority and agrees and consents to, and acknowledges and agrees to be bound by:
(a) the application of any Write-Down and Conversion Powers by an EEA Resolution Authority to any such liabilities arising hereunder which may be payable to it by any party hereto that is an EEA Financial Institution; and
(b) the effects of any Bail-In Action on any such liability, including, if applicable:
(i) a reduction in full or in part or cancellation of any such liability;
(ii) a conversion of all, or a portion of, such liability into shares or other instruments of ownership in such EEA Financial Institution, its parent entity, or a bridge institution that may be issued to it or otherwise conferred on it, and that such shares or other instruments of ownership will be accepted by it in lieu of any rights with respect to any such liability under this Agreement or any other Loan Document; or
(iii) the variation of the terms of such liability in connection with the exercise of the write-down and conversion powers of any EEA Resolution Authority.
156
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.
ASSETMARK FINANCIAL HOLDINGS, INC., as Borrower | ||
By: |
/s/ Gary G. Zyla |
|
Name: Gary G. Zyla | ||
Title: Executive Vice President and Chief Financial Officer |
ASSETMARK HOLDINGS LLC, as Holdings |
||
By: |
/s/ Gary G. Zyla |
|
Name: Gary G . Zyla | ||
Title: Executive Vice President, Chief
|
[Signature Page to AssetMark Credit Agreement]
157
CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH, as Administrative Agent, Collateral Agent, an Issuing Bank and a Revolving Credit Lender |
||
By: |
/s/ Doreen Barr |
|
Name: Doreen Barr | ||
Title: Authorized Signatory | ||
By: |
/s/ Michael Del Genio |
|
Name: Michael Del Genio | ||
Title: Authorized Signatory |
[Signature Page to AssetMark Credit Agreement]
158
Schedule 1.01(a)
Mortgaged Property
None.
Schedule 2.01
Lenders and Commitments
Term Lender |
Term Loan Commitment | |||
Credit Suisse AG, Cayman Islands Branch |
$ | 250,000,000 | ||
Total |
$ | 250,000,000 | ||
Revolving Credit Lender |
Revolving Credit Commitment | |||
Credit Suisse AG, Cayman Islands Branch |
$ | 20,000,000 | ||
Total |
$ | 20,000,000 | ||
Issuing Bank |
L/C Commitment | |||
Credit Suisse AG, Cayman Islands Branch |
$ | 5,000,000 | ||
Total |
$ | 5,000,000 |
160
Lender address details
Credit Suisse AG, Cayman Islands Branch
Credit Suisse AG
Eleven Madison Avenue
New York, NY 10010
Attention of: Agency Manager
Fax: (212) 322-2291
Email: agency.loanops@credit-suisse.com
Schedule 3.08
Litigation
None.
Schedule 3.16(a)
UCC Filing Offices
Grantor |
Jurisdiction |
UCC Filing Office/Local Filing Office |
||
AssetMark Holdings LLC | Delaware | Delaware Secretary of State | ||
AssetMark Financial Holdings, Inc. | Delaware | Delaware Secretary of State | ||
AssetMark Financial, Inc. | Arizona | Arizona Secretary of State | ||
AssetMark Retirement Services, Inc. | Pennsylvania | Pennsylvania Secretary of State | ||
AssetMark, Inc. | California | California Secretary of State |
Schedule 3.16(c)
Mortgage Filing Offices
None.
Schedule 5.11
Post-Closing Obligations
Within 60 days of the Closing Date (or within such longer period as the Administrative Agent in its sole discretion may permit), the Borrower shall deliver to the Administrative Agent the insurance certificates and endorsements required to be delivered pursuant to Section 5.02(b) of the Credit Agreement that have not been delivered on the Closing Date.
Within 60 days of the Closing Date (or within such longer period as the Administrative Agent in its sole discretion may permit), Holdings and the other Grantors shall comply with their obligations with respect to Deposit Accounts as set forth in Section 4.04(b) of the Guarantee and Collateral Agreement.
Schedule 6.01
Existing Indebtedness
1. AssetMark has an $8,000,000 earnout, listed on its balance sheet, in respect of an Asset Purchase Agreement with Clark Capital.
Schedule 6.02
Existing Liens
None.
Schedule 6.04
Existing Investments
1. |
Unit Purchase Agreement among AssetMark Financial, Inc., Global Financial Private Capital, LLC., GFPC Holdings, LLC., GF Founders, LLC. And GFPC Holdings, LLC. (as Sellers Representative), dated as of August 11, 2018. |
Schedule 6.07
Existing Contracts with Affiliates
None.
EXHIBIT A
FORM OF ADMINISTRATIVE QUESTIONNAIRE
AssetMark Financial Holdings, Inc.
Syndtrak Agency access:
Please note that it is IMPERATIVE that the following information is delivered to Credit Suisse in order to provide a lender access to the Syndtrak Agency site where documents that monitor the credit on an ongoing basis are posted. Many Firms submit their own form so please take the time to amend the form your Firm uses to reflect who should be granted access to the Syndtrak Agency site.
It is IMPERATIVE that you indicate EXACT details regarding who should receive access to the Syndtrak Agency site.
Sub-allocation of lender allocation:
It is very important that all of the requested information be completed accurately and that this questionnaire be returned promptly. If your institution is sub-allocating its allocation, please fill out an administrative questionnaire for each legal entity.
Syndtrak Agency site maintenance contact information
Laura Vargas
Tel: 212-325-2515
E-mail: laura.vargas@credit-suisse.com
Agent Wire Instructions
Bank of New York
Reference: AssetMark Financial Holdings, Inc.
ABA: [***]
Account Name: [***]
Account Number: [***]
A-1
Legal Name of Lender to appear in Documentation: |
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Signature Block Information: | ||||
Lender Parent: |
Signing Credit Agreement |
☐ Yes ☐ No | |
Coming in via Assignment |
☐ Yes ☐ No |
Lender Domestic Address | Lender Eurodollar Address | |
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Type of Lender: |
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(Bank, Asset Manager, Broker/Dealer, CLO/CDO, Finance Company, Hedge Fund, Insurance, Mutual Fund, Pension Fund, Other Regulated Investment Fund, Special Purpose Vehicle, Other please specify) |
Contacts/Notification Methods: Borrowings, Paydowns, Interest, Fees, etc.
Primary Credit Contact | Secondary Credit Contact | |||
Name: |
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Company: |
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Title: |
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Address: |
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Telephone: |
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Facsimile: |
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E-Mail Address: |
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A-2
Primary Operations Contact | Secondary Operations Contact | |||
Name: |
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Company: |
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Title: |
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Address: |
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Telephone: |
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Facsimile: |
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E-Mail Address: |
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Lenders Domestic Wire Instructions
Bank Name: |
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ABA/Routing No: |
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Account Name: |
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Account No. |
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FFC Account Name: |
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FFC Account No.: |
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Attention: |
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Reference: |
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A-3
Tax Documents
U.S. federal tax documents required in connection with the U.S. term loans, U.S. revolving loans, U.S. incremental term loans and U.S. letters of credit
NON-U.S. LENDER INSTITUTIONS:
I. Corporations:
If your institution is incorporated outside of the United States for U.S. federal income tax purposes, and is the beneficial owner of the interest and other income it receives, you must complete one of the following three tax forms, as applicable to your institution: (a) Form W-8BEN-E (Certificate of Foreign Status of Beneficial Owner), (b) Form W-8ECI (Income Effectively Connected to a U.S. Trade or Business), or (c) Form W-8EXP (Certificate of Foreign Government or Governmental Agency).
A U.S. taxpayer identification number is required for any institution submitting Form W-8ECI. It is also required on Form W-8BEN-E for certain institutions claiming the benefits of a tax treaty with the U.S. Please refer to the instructions when completing the form applicable to your institution. In addition, please be advised that U.S. tax regulations do not permit the acceptance of faxed forms. Original tax forms must be submitted.
II. Flow-Through Entities:
If your institution is organized outside the U.S., and is classified for U.S. federal income tax purposes as either a Partnership, Trust, Qualified or Non-Qualified Intermediary, or other non-U.S. flow-through entity, an original Form W-8IMY (Certificate of Foreign Intermediary, Foreign Flow-Through Entity, or Certain U.S. Branches for United States Tax Withholding) must be completed by the intermediary together with a withholding statement. Flow-through entities other than Qualified Intermediaries are required to include tax forms for each of the underlying beneficial owners.
Please refer to the instructions when completing this form. In addition, please be advised that U.S. tax regulations do not permit the acceptance of faxed forms. Original tax form(s) must be submitted.
U.S. LENDER INSTITUTIONS:
If your institution is incorporated or organized within the United States, you must complete and return Form W-9 (Request for Taxpayer Identification Number and Certification). Please be advised that we request that you submit an original Form W-9.
Pursuant to the language contained in the tax section of the Credit Agreement, the applicable tax form for your institution must be completed and returned prior to the first payment of income. Failure to provide the proper tax form when requested may subject your institution to U.S. Federal tax withholding.
A-4
EXHIBIT B-1
F ORM OF
A SSIGNMENT AND A CCEPTANCE
This Assignment and Acceptance (the Assignment and Acceptance ) is dated as of the Effective Date set forth below and is entered into by and between [the][each] 1 Assignor identified in item 1 below ([the][each, an] Assignor ) and [the][each] 2 Assignee identified in item 2 below ([the][each, an] Assignee ). [It is understood and agreed that the rights and obligations of [the Assignors][the Assignees] 3 hereunder are several and not joint.] 4 Capitalized terms used but not defined herein shall have the meanings given to them in the Credit Agreement identified below (as amended, restated, amended and restated, supplemented or otherwise modified from time to time, the Credit Agreement ), receipt of a copy of which is hereby acknowledged by [the][each] Assignee. The Standard Terms and Conditions set forth in Annex I attached hereto are hereby agreed to and incorporated herein by reference and made a part of this Assignment and Acceptance as if set forth herein in full.
For an agreed consideration, [the][each] Assignor hereby irrevocably sells and assigns to [the Assignee][the respective Assignees], and [the][each] Assignee hereby irrevocably purchases and assumes from [the Assignor][the respective Assignors], subject to and in accordance with the Standard Terms and Conditions and the Credit Agreement, as of the Effective Date inserted by the Administrative Agent as contemplated below (i) all of [the Assignors][the respective Assignors] rights and obligations in [its capacity as a Lender][their respective capacities as Lenders] under the Credit Agreement and any other documents or instruments delivered pursuant thereto to the extent related to the amount and percentage interest identified below of all of such outstanding rights and obligations of [the Assignor][the respective Assignors] under the respective facilities identified below (including without limitation any letters of credit, and guarantees included in such facilities), and (ii) to the extent permitted to be assigned under applicable law, all claims, suits, causes of action and any other right of [the Assignor (in its capacity as a Lender)][the respective Assignors (in their respective capacities as Lenders)] against any person, whether known or unknown, arising under or in connection with the Credit Agreement, any other documents or instruments delivered pursuant thereto or the loan transactions governed thereby or in any way based on or related to any of the foregoing, including, but not limited to, contract claims, tort claims, malpractice claims, statutory claims and all other claims at law or in equity related to the rights and obligations sold and assigned pursuant to clause (i) above (the rights and obligations sold and assigned by [the][any] Assignor to [the][any] Assignee pursuant to clauses (i) and (ii) above being referred to herein collectively as [the][an] Assigned Interest). In
1 |
For bracketed language here and elsewhere in this form relating to the Assignor(s), if the assignment is from a single Assignor, choose the first bracketed language. If the assignment is from multiple Assignors, choose the second bracketed language. |
2 |
For bracketed language here and elsewhere in this form relating to the Assignee(s), if the assignment is to a single Assignee, choose the first bracketed language. If the assignment is to multiple Assignees, choose the second bracketed language. |
3 |
Select as appropriate. |
4 |
Include bracketed language if there are either multiple Assignors or multiple Assignees. |
B-1-1
the case where the Assigned Interest covers all of the Assignors rights and obligations under the Credit Agreement, the Assignor shall cease to be a party thereto but shall continue to be entitled to the benefits of Sections 2.15, 2.16, 2.20 and 9.05 of the Credit Agreement with respect to facts and circumstances occurring on or prior to the Effective Date and subject to its obligations hereunder and under Section 9.16 of the Credit Agreement. Such sale and assignment is (i) subject to acceptance and recording thereof in the Register by the Administrative Agent pursuant to Section 9.04(d) and (e) of the Credit Agreement, (ii) without recourse to [the][any] Assignor and (iii) except as expressly provided in this Assignment and Acceptance, without representation or warranty by [the][any] Assignor.
1. | Assignor[s]: |
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||||
|
||||||
Assignor [is] [is not] a Defaulting Lender | ||||||
2. | Assignee[s]: |
|
||||
|
||||||
[for each Assignee, indicate [Affiliate][Approved | ||||||
Fund] of [ identify Lender ]] | ||||||
3. | Borrower: |
|
||||
4. | Administrative Agent: |
Credit Suisse AG, Cayman Islands Branch, as the administrative agent under the Credit Agreement. |
||||
5. | Credit Agreement: | The Credit Agreement, dated as of November 14, 2018, among AssetMark Financial Holdings, Inc., a Delaware corporation, AssetMark Holdings LLC, a Delaware limited liability company, the Lenders from time to time party thereto and Credit Suisse AG, Cayman Islands Branch, as the Administrative Agent and Collateral Agent, as amended, amended and restated, supplemented, modified or replaced from time to time. |
B-1-2
6. |
Assigned Interest[s]: |
Assignor[s] 5 |
Assignee[s]
6
|
Facility
Assigned 7 |
Aggregate Amount of
Commitment/Loans for all Lenders 8 |
Amount of
Commitment/Loans Assigned |
Percentage
Assigned of Commitment/ Loans 9 |
CUSIP
Number |
||||||||||||||||||
$ | $ | % | ||||||||||||||||||||||
$ | $ | % | ||||||||||||||||||||||
$ | $ | % |
[7. Trade Date: ] 10
Effective Date: , 20 [TO BE INSERTED BY ADMINISTRATIVE AGENT AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE REGISTER THEREFOR.]
5 |
List each Assignor, as appropriate. |
6 |
List each Assignee, as appropriate. |
7 |
Fill in the appropriate terminology for the types of facilities under the Credit Agreement that are being assigned under this Assignment (e.g., Revolving Credit Commitment, Term Loan Commitment, etc.) |
8 |
Amount to be adjusted by the counterparties to take into account any payments or prepayments made between the Trade Date and the Effective Date. |
9 |
Set forth, to at least 9 decimals, as a percentage of the Commitment/Loans of all Lenders thereunder. |
10 |
To be completed if the Assignor(s) and the Assignee(s) intend that the minimum assignment amount is to be determined as of the Trade Date. |
B-1-3
The terms set forth in this Assignment and Acceptance are hereby agreed to:
ASSIGNOR[S] 11 | ||
[NAME OF ASSIGNOR] | ||
By: |
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|
Title: | ||
[NAME OF ASSIGNOR] | ||
By: |
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|
Title: | ||
ASSIGNEE[S] 12 | ||
[NAME OF ASSIGNEE] | ||
By: |
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Title: | ||
[NAME OF ASSIGNEE] | ||
By: |
|
|
Title: |
Consented to and Accepted:
Credit Suisse AG, Cayman Islands Branch, as Administrative Agent | ||
By: |
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|
Title: |
11 |
Add additional signature blocks as needed. Include both Fund/Pension Plan and manager making the trade (if applicable). |
12 |
Add additional signature blocks as needed. Include both Fund/Pension Plan and manager making the trade (if applicable). |
B-1-4
[Consented to:] 13 | ||
[ASSETMARK FINANCIAL HOLDINGS, INC. | ||
By: |
|
|
Title: ] | ||
[ISSUING BANK | ||
By: |
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|
Title: ] |
13 |
To be added only if the consent of the Borrower and/or other parties (e.g., Issuing Banks) is required by the terms of the Credit Agreement. See Section 9.04(b). |
B-1-5
ANNEX I TO
EXHIBIT B-1
STANDARD TERMS AND CONDITIONS FOR
ASSIGNMENT AND ACCEPTANCE
1. Representations and Warranties .
1.1 Assignor[s] . [The][Each] Assignor (a) represents and warrants that (i) it is the legal and beneficial owner of [the][the relevant] Assigned Interest, (ii) [the][such] Assigned Interest is free and clear of any lien, encumbrance or other adverse claim, (iii) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Acceptance and to consummate the transactions contemplated hereby and (iv) it is [not] a Defaulting Lender; and (b) assumes no responsibility with respect to (i) any statements, warranties or representations made in or in connection with the Credit Agreement or any other Loan Document, (ii) the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Loan Documents or any collateral thereunder, (iii) the financial condition of the Borrower, any of their Subsidiaries or Affiliates or any other person obligated in respect of any Loan Document, or (iv) the performance or observance by Holdings, the Borrower, any of their Subsidiaries or Affiliates or any other person of any of their respective obligations under any Loan Document.
1.2. Assignee[s] . [The][Each] Assignee (a) represents and warrants that (i) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Acceptance and to consummate the transactions contemplated hereby and to become a Lender under the Credit Agreement, (ii) it meets all the requirements to be an Eligible Assignee, as defined in the Credit Agreement (subject to such consents, if any, as may be required under Section 9.04(b) of the Credit Agreement), (iii) it has delivered a true and complete Administrative Questionnaire substantially in the form of Exhibit A to the Credit Agreement as well as all applicable tax forms required to be delivered in accordance with the Credit Agreement, (iv) from and after the Effective Date, it shall be bound by the provisions of the Credit Agreement and the other Loan Documents as a Lender thereunder and, to the extent of [the][the relevant] Assigned Interest, shall have the obligations of a Lender thereunder, (v) it is sophisticated with respect to decisions to acquire assets of the type represented by the Assigned Interest and either it, or the person exercising discretion in making its decision to acquire the Assigned Interest, is experienced in acquiring assets of such type, (vi) if it is a Foreign Lender, attached to the Assignment and Acceptance is any documentation required to be delivered by it pursuant to Section 2.20 of the Credit Agreement, duly completed and executed by the Assignee, (vii) it has received a copy of the Credit Agreement together with copies of the most recent financial statements referred to in Section 3.04 or delivered pursuant to Section 5.04(a) or (b) thereof, as applicable, and such other documents and information as it deems appropriate to make its own credit analysis and decision to enter into this Assignment and Acceptance and to purchase [the][such] Assigned Interest, (viii) it has, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it deems appropriate, made its own credit analysis and decision to enter into this Assignment and Acceptance and to purchase [the][such] Assigned Interest, and (ix) attached to the Assignment and Acceptance is any documentation required to be delivered by it pursuant to the terms of the Credit Agreement, duly completed and executed by [the][such] Assignee and (b) agrees that (i) it will, independently and without reliance on the Administrative Agent, the Assignor or any other Lender,
ANNEX I-1
and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Documents, (ii) it appoints and authorizes the Administrative Agent to take such action on its behalf and to exercise such powers and discretion under the Credit Agreement, the other Loan Documents or any other instrument or document furnished pursuant hereto or thereto as are delegated to the Administrative Agent, by the terms thereof, together with such powers as are reasonably incidental thereto, and (iii) it will perform in accordance with their terms all of the obligations which by the terms of the Loan Documents are required to be performed by it as a Lender.
2. Payments . From and after the Effective Date, the Administrative Agent shall make all payments in respect of [the][each] Assigned Interest (including payments of principal, interest, fees and other amounts) to [the][the relevant] Assignor for amounts which have accrued to but excluding the Effective Date and to [the][the relevant] Assignee for amounts which have accrued from and after the Effective Date. Notwithstanding the foregoing, the Administrative Agent shall make all payments of interest, fees or other amounts paid or payable in kind from and after the Effective Date to [the][the relevant] Assignee. The Administrative Agent shall receive a processing and recordation fee of $3,500 for each assignment.
3. General Provisions . This Assignment and Acceptance shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and assigns. This Assignment and Acceptance may be executed in any number of counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original but all of which when taken together shall constitute one instrument. Delivery of an executed counterpart of a signature page of this Assignment and Acceptance by telecopy shall be as effective as delivery of a manually executed counterpart of this Assignment and Acceptance. This Assignment and Acceptance shall be governed by, and construed in accordance with, the laws of the State of New York.
ANNEX I-2
EXHIBIT B-2
F ORM OF
A FFILIATED L ENDER
A SSIGNMENT AND A SSUMPTION
This Affiliated Lender Assignment and Assumption (the Affiliated Lender Assignment and Assumption) is dated as of the Effective Date set forth below and is entered into by and between [Insert name of Assignor] (the Assignor) and [Insert name of Affiliated Lender] (the Assignee). Capitalized terms used but not defined herein shall have the meanings given to them in the Credit Agreement identified below (as amended, restated, amended and restated, supplemented or otherwise modified from time to time, the Credit Agreement ), receipt of a copy of which is hereby acknowledged by the Assignee. The Standard Terms and Conditions set forth in Annex I attached hereto are hereby agreed to and incorporated herein by reference and made a part of this Affiliated Lender Assignment and Assumption as if set forth herein in full.
For an agreed consideration, the Assignor hereby irrevocably sells and assigns to the Assignee, and the Assignee hereby irrevocably purchases and assumes from the Assignor, subject to and in accordance with the Standard Terms and Conditions and the Credit Agreement, as of the Effective Date inserted by the Administrative Agent as contemplated below, (i) all of the Assignors rights and obligations in its capacity as a Term Lender under the Credit Agreement and any other documents or instruments delivered pursuant thereto to the extent related to the amount and percentage interest identified below of all of such outstanding rights and obligations of the Assignor under the respective facilities identified below and (ii) to the extent permitted to be assigned under applicable law, all claims, suits, causes of action and any other right of the Assignor (in its capacity as a Term Lender) against any person, whether known or unknown, arising under or in connection with the Credit Agreement, any other documents or instruments delivered pursuant thereto or the loan transactions governed thereby or in any way based on or related to any of the foregoing, including, but not limited to, contract claims, tort claims, malpractice claims, statutory claims and all other claims at law or in equity related to the rights and obligations sold and assigned by the Assignor to the Assignee pursuant to clause (i) above (the rights and obligations sold and assigned pursuant to clauses (i) and (ii) above being referred to herein collectively as the Assigned Interest). In the case where the Assigned Interest covers all of the Assignors rights and obligations under the Credit Agreement, the Assignor shall cease to be a party thereto but shall continue to be entitled to the benefits of Sections 2.15, 2.16, 2.20 and 9.05 of the Credit Agreement with respect to facts and circumstances occurring on or prior to the Effective Date and subject to its obligations hereunder and under Section 9.16 of the Credit Agreement. Such sale and assignment is (i) subject to acceptance and recording thereof in the Register by the Administrative Agent pursuant to Section 9.04(d) and (e) of the Credit Agreement, (ii) without recourse to the Assignor and (iii) except as expressly provided in this Affiliated Lender Assignment and Assumption, without representation or warranty by the Assignor.
B-2-1
1. | Assignor: |
|
||||
|
||||||
Assignor [is] [is not] a Defaulting Lender | ||||||
2. | Assignee: |
|
||||
|
||||||
[for Assignee, indicate [Affiliate][Approved | ||||||
Fund] of [ identify Lender ]] | ||||||
3. | Borrower: |
|
||||
4. | Administrative Agent: | Credit Suisse AG, Cayman Islands Branch, as the administrative agent under the Credit Agreement. | ||||
5. | Credit Agreement: | The Credit Agreement, dated as of November 14, 2018, among AssetMark Financial Holdings, Inc., a Delaware corporation, AssetMark Holdings LLC, a Delaware limited liability company, the Lenders from time to time party thereto and Credit Suisse AG, Cayman Islands Branch, as the Administrative Agent and Collateral Agent, as amended, amended and restated, supplemented, modified or replaced from time to time. |
6. |
Assigned Interest[s]: |
Assignor |
Assignee
|
Facility
Assigned 14 |
Aggregate Amount of
Commitment/Loans for all Lenders 15 |
Amount of
Commitment/Loans Assigned |
Percentage
Assigned of Commitment/ Loans 16 |
CUSIP
Number |
||||||||||||||||||
$ | $ | % | ||||||||||||||||||||||
$ | $ | % | ||||||||||||||||||||||
$ | $ | % |
[7. Trade Date: ] 17
Effective Date: , 20 [TO BE INSERTED BY ADMINISTRATIVE AGENT AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE REGISTER THEREFOR.]
14 |
Fill in the appropriate terminology for the types of facilities under the Credit Agreement that are being assigned under this Assignment |
15 |
Amount to be adjusted by the counterparties to take into account any payments or prepayments made between the Trade Date and the Effective Date. |
16 |
Set forth, to at least 9 decimals, as a percentage of the Commitment/Loans of all Lenders thereunder. |
17 |
To be completed if the Assignor(s) and the Assignee(s) intend that the minimum assignment amount is to be determined as of the Trade Date. |
B-2-2
The terms set forth in this Assignment and Acceptance are hereby agreed to:
ASSIGNOR 18 | ||
[NAME OF ASSIGNOR] | ||
By: |
|
|
Title: | ||
ASSIGNEE 19 | ||
[NAME OF ASSIGNEE] | ||
By: |
|
|
Title: |
Accepted: | ||
Credit Suisse AG, Cayman Islands Branch, as Administrative Agent | ||
By: |
|
|
Title: | ||
[Consented to:] 20 | ||
[ASSETMARK FINANCIAL HOLDINGS, INC. | ||
By: |
|
|
Title: ] |
18 |
Add additional signature blocks as needed. Include both Fund/Pension Plan and manager making the trade (if applicable). |
19 |
Add additional signature blocks as needed. Include both Fund/Pension Plan and manager making the trade (if applicable). |
20 |
To be added only if the consent of the Borrower and/or other parties is required by the terms of the Credit Agreement. See Section 9.04(b). |
B-2-3
ANNEX I TO
EXHIBIT B-2
STANDARD TERMS AND CONDITIONS FOR
AFFILIATED LENDER ASSIGNMENT AND ASSUMPTION
1. Representations and Warranties .
1.1 Assignor . The Assignor (a) represents and warrants that (i) it is the legal and beneficial owner of the Assigned Interest, (ii) the Assigned Interest is free and clear of any lien, encumbrance or other adverse claim, (iii) its Commitment in respect of Term Loans, and the outstanding balances of its Term Loans, in each case without giving effect to assignments thereof which have not become effective, are as set forth herein, and (iv) it has full power and authority, and has taken all action necessary, to execute and deliver this Affiliated Lender Assignment and Assumption and to consummate the transactions contemplated hereby; and (b) makes no representation or warranty and assumes no responsibility with respect to (i) any statements, warranties or representations made in or in connection with the Credit Agreement or any other Loan Document, (ii) the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Loan Documents or any collateral thereunder, (iii) the financial condition of the Borrower, any of their Subsidiaries or Affiliates or any other person obligated in respect of any Loan Document or (iv) the performance or observance by Holdings, the Borrower, any of their Subsidiaries or Affiliates or any other person of any of their respective obligations under any Loan Document. In connection with any Auction, the Assignor acknowledges and agrees that in connection with this Affiliated Lender Assignment and Assumption, (1) the Assignor has independently, without reliance on the applicable Affiliated Lender, Holdings, the Borrower, any of their respective subsidiaries, the Administrative Agent, the Arranger, the Lenders or any of their respective Affiliates, made its own analysis and determination to participate in such assignment notwithstanding the Assignors lack of knowledge of the material non-public information with respect to Holdings, the Borrower and/or any of their respective subsidiaries and/or their respective securities ( MNPI ) and (2) none of the applicable Affiliated Lenders, Holdings, the Borrower, any of their respective subsidiaries, the Administrative Agent, the Arranger, the Lenders or any of their respective Affiliates shall have any liability to the Assignor, and the Assignor hereby waives and releases, to the extent permitted by applicable law, any claims it may have against the applicable Affiliated Lender, Holdings, the Borrower, each of their respective subsidiaries, the Administrative Agent, the Arranger, the Lenders and their respective Affiliates, under applicable law or otherwise, with respect to the nondisclosure of the MNPI.
1.2 Assignee . The Assignee (a) represents and warrants that (i) it is an Affiliated Lender and has full power and authority, and has taken all action necessary, to execute and deliver this Affiliated Lender Assignment and Assumption and to consummate the transactions contemplated hereby and to become a Lender under the Credit Agreement, (ii) it satisfies the requirements, if any, specified in the Credit Agreement that are required to be satisfied by it in order to acquire the Assigned Interest and become a Lender, (iii) from and after the Effective Date, it shall be bound by the provisions of the Credit Agreement and the other Loan Documents as a Lender (including as an Affiliated Lender) thereunder and, to the extent of the Assigned Interest, shall have the obligations of a Lender (including as an Affiliated Lender) thereunder, (iv) it is sophisticated with respect to decisions to acquire assets of the type represented by the Assigned Interest and either it, or the person exercising discretion in making its decision to acquire the Assigned Interest, is experienced in acquiring assets of such type, (v) it has received a copy of the Credit Agreement, together with copies of the most recent financial statements referred to in Section 3.04 of the Credit Agreement and/or delivered pursuant to Section 5.04(a) and (b) thereof,
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as applicable, and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Affiliated Lender Assignment and Assumption and to purchase the Assigned Interest on the basis of which it has made such analysis and decision independently and without reliance on the Administrative Agent or any other Lender, (vi) if it is a Foreign Lender, attached to the Affiliated Lender Assignment and Assumption is any documentation required to be delivered by it pursuant to Section 2.20 of the Credit Agreement, duly completed and executed by the Assignee, (vii) [reserved] and (viii) in the case of Holdings, any Borrower or any of their Restricted Subsidiaries, (1) no Indebtedness incurred under the Revolving Facility has been utilized to fund the purchase of the Assigned Interest, (2) no Event of Default exists at the time of acceptance of bids for any Auction or the confirmation of any open market purchase, (3) the Term Loans in respect of such Assigned Interest shall, to the extent permitted by applicable law, be retired and cancelled immediately after the Effective Date and (4) the Auction will be open to all Term Lenders on a pro rata basis; and (b) agrees that (i) it will, independently and without reliance on the Administrative Agent, the Assignor or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Documents, (ii) it appoints and authorizes the Administrative Agent to take such action on its behalf and to exercise such powers and discretion under the Credit Agreement, the other Loan Documents or any other instrument or document furnished pursuant hereto or thereto as are delegated to the Administrative Agent, by the terms thereof, together with such powers as are reasonably incidental thereto, and (iii) it will perform in accordance with their terms all of the obligations which by the terms of the Loan Documents are required to be performed by it as a Lender. The Assignee further agrees that, solely in its capacity as an Affiliated Lender, it will not be entitled to (a) attend (including by telephone) or participate in any meeting or discussions (or portion thereof) among the Administrative Agent or any Lender or among Lenders to which the Loan Parties or their representatives are not invited or (b) receive any information or material prepared by the Administrative Agent or any Lender or any communication by or among the Administrative Agent and one or more Lenders, except to the extent such information or materials have been made available by the Administrative Agent or any Lender to any Loan Party or its representatives (and in any case, other than the right to receive notices of Borrowings, prepayments and other administrative notices in respect of its Term Loans required to be delivered to Lenders pursuant to Article 2 of the Credit Agreement).
2. Payments . From and after the Effective Date, the Administrative Agent shall make all payments in respect of the Assigned Interest (including payments of principal, interest, fees and other amounts) to the Assignor for amounts which have accrued to but excluding the Effective Date and to the Assignee for amounts which have accrued from and after the Effective Date. Notwithstanding the foregoing, the Administrative Agent shall make all payments of interest, fees or other amounts paid or payable in kind from and after the Effective Date to the Assignee. The Administrative Agent shall receive a processing and recordation fee of $3,500 for each assignment.
3. General Provisions . This Affiliated Lender Assignment and Acceptance shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and assigns. This Affiliated Lender Assignment and Acceptance may be executed in any number of counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original but all of which when taken together shall constitute one instrument. Delivery of an executed counterpart of a signature page of this Affiliated Lender Assignment and Acceptance by telecopy shall be as effective as delivery of a manually executed counterpart of this Affiliated Lender Assignment and Acceptance. This Affiliated Lender Assignment and Acceptance shall be governed by, and construed in accordance with, the laws of the State of New York.
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EXHIBIT C
FORM OF BORROWING REQUEST
Date: , 1
To: Credit Suisse AG, Cayman Islands Branch, as Administrative Agent
Credit Suisse AG, Cayman Islands Branch
Eleven Madison Avenue
New York, NY 10010
Attn: Agency Manager
Fax: 212-322-2291
Email: agency.loanops@credit-suisse.com
Ladies and Gentlemen:
Reference is made to that certain Credit Agreement, dated as of November 14, 2018 (as amended, supplemented or otherwise modified from time to time, the Credit Agreement ), among AssetMark Financial Holdings, Inc., a Delaware corporation (the Borrower ), AssetMark Holdings LLC, a Delaware limited liability company, the Lenders from time to time party thereto and Credit Suisse AG, Cayman Islands Branch, as the Administrative Agent and Collateral Agent. Capitalized terms used herein and not otherwise defined shall have the meaning assigned thereto in the Credit Agreement.
Pursuant to Section 2.03 of the Credit Agreement, the undersigned hereby requests a Borrowing under the Credit Agreement on the terms set forth below:
1. | Type of Borrowing: . 2 | |||
2. | Date of Borrowing: . 3 | |||
3. | Account Number and Location: | |||
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4. | Amount: . 4 | |||
5.
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Interest Period: . 5 |
1 |
(a) In the case of a Eurodollar Borrowing, not later than 12:00 (noon), New York City time, three Business Days before a proposed Borrowing, or (b) in the case of an ABR Borrowing, not later than 12:00 (noon), New York City time, on the Business Day of a proposed Borrowing. |
2 |
Specify a Term Borrowing, Incremental Term Borrowing, Revolving Borrowing or Incremental Revolving Borrowing and whether such Borrowing is to be a Eurodollar Borrowing or an ABR Borrowing, and, if applicable, whether such Borrowing is a conversion or continuation. |
3 |
Date must be a Business Day. |
4 |
Except for Loans deemed made pursuant to Section 2.02(f), the Loans comprising any Borrowing shall be in an aggregate principal amount that is (i) an integral multiple of $1,000,000 and not less than $5,000,000 (except, with respect to any Incremental Term Borrowing, to the extent otherwise provided in the related Incremental Assumption Agreement) or (ii) equal to the remaining available balance of the applicable Commitments. |
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Except in respect of any conversion or continuation of a Borrowing, the Borrower hereby certifies that on the date of the Borrowing pursuant to this Borrowing Request, the conditions specified in clauses (a), (b) and (c) of Section 4.01 of the Credit Agreement will be satisfied.
Borrower: |
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By: |
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Name: | ||
Title: |
5 |
To be included for Eurodollar Borrowings only. For a Eurodollar Borrowing, select an Interest Period of 1, 2, 3 or 6 months (or 12 months, or any period of less than one month, if at the date of Borrowing, all applicable Lenders agree to make interest periods of such duration available). |
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THIS MORTGAGE, ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT, FIXTURE FILING AND FINANCING STATEMENT dated as of , 20[ ] (this Mortgage ), by [[], a [] []] having offices at [] (the Mortgagor ), and CREDIT SUISSE AG, Cayman Islands Branch, having an office at Eleven Madison Avenue, New York, New York 10010 as Collateral Agent for the Secured Parties (as such terms are defined below) (the Mortgagee ).
WITNESSETH THAT:
Reference is made to (a) the Credit Agreement dated as of November 14, 2018 (as amended, supplemented or otherwise modified from time to time, the Credit Agreement ), among AssetMark Financial Holdings, Inc., a Delaware corporation (the Borrower ), AssetMark Holdings LLC, a Delaware limited liability company ( Holdings ), the lenders from time to time party thereto (the Lenders ) and Credit Suisse AG, Cayman Islands Branch, as administrative agent (the Administrative Agent ) and collateral agent (the Collateral Agent ) for the Lenders and (b) the Guarantee and Collateral Agreement dated as of November 14, 2018 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time, the Guarantee and Collateral Agreement ), among Holdings, the Borrower, the Subsidiary Guarantors and Credit Suisse AG, Cayman Islands Branch, as Collateral Agent. Capitalized terms used but not otherwise defined herein have the meanings given to them in the Credit Agreement and the Guarantee and Collateral Agreement, as applicable.
Pursuant to the Credit Agreement, (a) the Lenders have agreed to make Term Loans, including Incremental Term Loans, and Revolving Loans, including Incremental Revolving Loans, to the Borrower and (b) the Issuing Bank(s) has issued or agreed to issue from time to time Letters of Credit for the account of the Borrower or any Subsidiary, in each case pursuant to, upon the terms of and subject to the conditions specified in the Credit Agreement. Amounts paid in respect of Term Loans may not be reborrowed. Subject to the terms of the Credit Agreement, the Borrower may borrow, prepay and reborrow Revolving Loans.
Mortgagor is the Borrower and will derive substantial benefit from the making of the Loans by the Lenders and the issuance of the Letters of Credit by each Issuing Bank. In order to induce the Lenders to make Loans and each Issuing Bank to issue Letters of Credit, the Mortgagor has agreed to secure, among other things, the due and punctual payment and performance of all of the obligations of the Borrower under the Credit Agreement.
The obligations of the Lenders to make Loans are conditioned upon, among other things, the execution and delivery by the Mortgagor of this Mortgage in the form hereof to secure: (a) the due and punctual payment of (i) the principal of and interest (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on the Loans, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, (ii) each payment required to be made by the Borrower under the Credit Agreement in respect of any Letter of Credit, when and as due, including payments in respect of reimbursement of disbursements, interest and fees thereon and obligations to provide cash collateral, and (iii) all other monetary obligations of the Borrower to any of the Secured Parties
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under the Credit Agreement and each of the other Loan Documents, including fees, costs, expenses and indemnities, whether primary, secondary, direct, contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), (b) the due and punctual performance of all other obligations of the Borrower of every nature under or pursuant to the Credit Agreement and each of the other Loan Documents, (c) the due and punctual payment and performance of all the obligations of each other Loan Party under or pursuant to the Guarantee and Collateral Agreement and each of the other Loan Documents, (d) the due and punctual payment and performance of all obligations of each Loan Party under each Hedging Agreement that (i) is in effect on the Closing Date with a counterparty that is the Administrative Agent or a Lender or an Affiliate of the Administrative Agent or a Lender as of the Closing Date or (ii) is entered into after the Closing Date with any counterparty that is the Administrative Agent or a Lender or an Affiliate of the Administrative Agent or a Lender at the time such Hedging Agreement is entered into (the foregoing obligations in clauses (a) through (d) being collectively referred to as the Obligations ).
As used in this Mortgage, the term Secured Parties shall mean (a) the Lenders, (b) the Administrative Agent, (c) the Collateral Agent, (d) any Issuing Bank, (e) each provider of Cash Management Services the obligations under which constitute Secured Cash Management Obligations, (f) counterparty to any Hedging Agreement with a Loan Party that either (i) is in effect on the Closing Date if such counterparty is the Administrative Agent, a Lender or an Affiliate of the Administrative Agent or a Lender as of the Closing Date or (ii) is entered into after the Closing Date if such counterparty is the Administrative Agent, a Lender or an Affiliate of the Administrative Agent or a Lender at the time such Hedging Agreement is entered into, (g) the beneficiaries of each indemnification obligation undertaken by any Loan Party under any Loan Document and (h) the successors and assigns of each of the foregoing.
Pursuant to the requirements of the Credit Agreement, the Mortgagor is granting this Mortgage to create a lien on and a security interest in the Mortgaged Property (as hereinafter defined) to secure the performance and payment by the Mortgagor of the Obligations. The Credit Agreement also requires the granting by other Loan Parties of mortgages, deeds of trust and/or deeds to secure debt (the Other Mortgages ) that create liens on and security interests in certain real and personal property other than the Mortgaged Property to secure the performance of the Obligations.
Granting Clauses
NOW, THEREFORE, IN CONSIDERATION OF the foregoing and in order to secure the due and punctual payment and performance of the Obligations for the benefit of the Secured Parties, Mortgagor hereby grants, conveys, mortgages, assigns and pledges to the Mortgagee, a mortgage lien on and a security interest in, all the following described property (the Mortgaged Property ) whether now owned or held or hereafter acquired:
(1) the land more particularly described on Exhibit A hereto (the Land ), together with all rights appurtenant thereto, including the easements over certain other adjoining land granted by any easement agreements, covenant or restrictive agreements and all air rights, mineral rights, water rights, oil and gas rights and development rights, if
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any, relating thereto, and also together with all of the other easements, rights, privileges, interests, hereditaments and appurtenances thereunto belonging or in any way appertaining and all of the estate, right, title, interest, claim or demand whatsoever of Mortgagor therein and in the streets and ways adjacent thereto, either in law or in equity, in possession or expectancy, now or hereafter acquired (the Premises );
(2) all buildings, improvements, structures, paving, parking areas, walkways and landscaping now or hereafter erected or located upon the Land, and all fixtures of every kind and type affixed to the Premises or attached to or forming part of any structures, buildings or improvements and replacements thereof now or hereafter erected or located upon the Land (the Improvements );
(3) subject to the limitations set forth in the Guarantee and Collateral Agreement, all apparatus, movable appliances, building materials, equipment, fittings, furnishings, furniture, machinery and other articles of tangible personal property of every kind and nature, and replacements thereof, now or at any time hereafter placed upon or used in any way in connection with the use, enjoyment, occupancy or operation of the Improvements or the Premises, including all of Mortgagors books and records relating thereto and including all pumps, tanks, goods, machinery, tools, equipment, lifts (including fire sprinklers and alarm systems, fire prevention or control systems, cleaning rigs, air conditioning, heating, boilers, refrigerating, electronic monitoring, water, loading, unloading, lighting, power, sanitation, waste removal, entertainment, communications, computers, recreational, window or structural, maintenance, truck or car repair and all other equipment of every kind), restaurant, bar and all other indoor or outdoor furniture (including tables, chairs, booths, serving stands, planters, desks, sofas, racks, shelves, lockers and cabinets), bar equipment, glasses, cutlery, uniforms, linens, memorabilia and other decorative items, furnishings, appliances, supplies, inventory, rugs, carpets and other floor coverings, draperies, drapery rods and brackets, awnings, venetian blinds, partitions, chandeliers and other lighting fixtures, freezers, refrigerators, walk-in coolers, signs (indoor and outdoor), computer systems, cash registers and inventory control systems, and all other apparatus, equipment, furniture, furnishings, and articles used in connection with the use or operation of the Improvements or the Premises, it being understood that the enumeration of any specific articles of property shall in no way result in or be held to exclude any items of property not specifically mentioned (the property referred to in this subparagraph (3), the Personal Property );
(4) all general intangibles owned by Mortgagor and relating to design, development, operation, management and use of the Premises or the Improvements, all certificates of occupancy, zoning variances, building, use or other permits, approvals, authorizations and consents obtained from and all materials prepared for filing or filed with any Governmental Authority in connection with the development, use, operation or management of the Premises and Improvements, all construction, service, engineering, consulting, leasing, architectural and other similar contracts concerning the design, construction, management, operation, occupancy and/or use of the Premises and Improvements, all architectural drawings, plans, specifications, soil tests, feasibility studies, appraisals, environmental studies, engineering reports and similar materials relating to any portion of or all of the Premises and Improvements, and all payment and performance bonds or warranties or guarantees relating to the Premises or the Improvements, to the extent assignable without violating the terms thereof and without consent of third parties (the Permits, Plans and Warranties );
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(5) all now or hereafter existing leases or licenses (under which Mortgagor is landlord or licensor) and subleases (under which Mortgagor is sublandlord), concession, management, mineral or other agreements of a similar kind that permit the use or occupancy of the Premises or the Improvements for any purpose in return for any payment, or the extraction or taking of any gas, oil, water or other minerals from the Premises in return for payment of any fee, rent or royalty (collectively, Leases ), and all agreements or contracts for the sale or other disposition of all or any part of the Premises or the Improvements, now or hereafter entered into by Mortgagor, together with all charges, fees, income, issues, profits, receipts, rents, revenues or royalties payable thereunder ( Rents );
(6) except as may be provided to the contrary in the Credit Agreement, all real estate tax refunds and all proceeds of the conversion, voluntary or involuntary, of any of the Mortgaged Property into cash or liquidated claims ( Proceeds ), including Proceeds of insurance maintained by the Mortgagor and condemnation awards, any awards that may become due by reason of the taking by eminent domain or any transfer in lieu thereof of the whole or any part of the Premises or Improvements or any rights appurtenant thereto, and any awards for change of grade of streets, together with any and all moneys now or hereafter on deposit for the payment of real estate taxes, assessments or common area charges levied against the Mortgaged Property, unearned premiums on policies of fire and other insurance maintained by the Mortgagor covering any interest in the Mortgaged Property or required by the Credit Agreement; and
(7) all extensions, improvements, betterments, renewals, substitutes and replacements of and all additions and appurtenances to, the Land, the Premises, the Improvements, the Personal Property, the Permits, Plans and Warranties and the Leases, hereinafter acquired by or released to the Mortgagor or constructed, assembled or placed by the Mortgagor on the Land, the Premises or the Improvements, and all conversions of the security constituted thereby, immediately upon such acquisition, release, construction, assembling, placement or conversion, as the case may be, and in each such case, without any further mortgage, Mortgage, conveyance, assignment or other act by the Mortgagor, all of which shall become subject to the lien of this Mortgage as fully and completely, and with the same effect, as though now owned by the Mortgagor and specifically described herein.
TO HAVE AND TO HOLD the Mortgaged Property unto the Mortgagee, its successors and assigns, for the ratable benefit of the Secured Parties, forever, subject only to those Liens expressly permitted by Section 6.02 of the Credit Agreement and matters set forth in the title insurance policy issued to Mortgagee in connection with this Mortgage (collectively, the Permitted Encumbrances ) and to satisfaction and release as provided in Section 3.04 hereof.
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ARTICLE I
Representations, Warranties and Covenants of Mortgagor
Mortgagor covenants as follows:
SECTION 1.01. Title, Mortgage Lien. (a) Mortgagor has good and marketable fee simple title to the Land and Improvements and is the owner of all other Mortgaged Property, subject only to Permitted Encumbrances, except for minor defects of title that do not materially interfere with its ability to conduct its business as currently conducted or to utilize such property and assets for their intended purposes.
(b) The execution and delivery of this Mortgage is within Mortgagors corporate or other organizational powers and has been duly authorized by all necessary corporate or other organizational and, if required, stockholder action. This Mortgage has been duly executed and delivered by Mortgagor and constitutes, a legal, valid and binding obligation of Mortgagor, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency or similar laws affects creditors rights generally and to general principle of equity.
(c) To the best of Mortgagors knowledge, the execution, delivery and recordation of this Mortgage (i) do not require any consent or approval of, registration or filing with, or any other action by, any Governmental Authority, except such as have been obtained or made and are in full force and effect and except filings necessary to perfect the lien of this Mortgage or where the failure to obtain would not reasonably be expected to have a Material Adverse Effect, (ii) except as would not reasonably be expected to have a Material Adverse Effect, will not violate any applicable law or regulation or the charter, by-laws or other organizational documents of Mortgagor or any order of any Governmental Authority, (iii) except as would not reasonably be expected to have a Material Adverse Effect, will not violate or result in a default under any material indenture, agreement or material other instrument binding upon Mortgagor or its assets, or give rise to a right thereunder to require any payment to be made by Mortgagor, and (iv) will not result in the creation or imposition of any Lien on any asset of Mortgagor, except the lien of this Mortgage.
(d) This Mortgage and the Uniform Commercial Code Financing Statements described in Section 1.09 of this Mortgage, when duly recorded in the applicable public records will create a valid, perfected and enforceable lien upon and security interest in all of the Mortgaged Property.
(e) Except as otherwise agreed to by the Collateral Agent, Mortgagor will forever warrant and, using commercially reasonable efforts, defend its title to the Mortgaged Property, the rights of Mortgagee therein under this Mortgage and the validity and priority of the lien of this Mortgage thereon against the claims of all persons and parties except those having rights under Permitted Encumbrances to the extent of those rights.
SECTION 1.02. Credit Agreement. This Mortgage is given pursuant to the Credit Agreement. Mortgagor expressly covenants and agrees to pay when due, and to timely perform, and to cause the other Loan Parties to pay when due, and to timely perform, the Obligations in accordance with the terms of the Loan Documents.
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SECTION 1.03. Payment of Taxes, and Other Obligations. (a) Mortgagor will pay and discharge from time to time prior to the time when the same shall become delinquent, and before any interest or penalty accrues thereon or attaches thereto, all Taxes and other obligations with respect to the Mortgaged Property or any part thereof or upon the Rents from the Mortgaged Property or arising in respect of the occupancy, use or possession thereof in accordance with, and to the extent required by, the Credit Agreement.
(b) In the event of the passage of any state, Federal, municipal or other governmental law, order, rule or regulation subsequent to the date hereof (i) deducting from the value of real property for the purpose of taxation any lien or encumbrance thereon or in any manner changing or modifying the laws now in force governing the taxation of this Mortgage or debts secured by mortgages or deeds of trust (other than laws governing income, franchise and similar taxes generally) or the manner of collecting taxes thereon and (ii) imposing a tax to be paid by Mortgagee, either directly or indirectly, on this Mortgage or any of the Loan Documents, or requiring an amount of taxes to be withheld or deducted therefrom, Mortgagor will promptly (i) notify Mortgagee of such event, (ii) enter into such further instruments as are reasonably necessary or desirable to obligate Mortgagor to make any additional payments necessary to put the Secured Parties in the same financial position they would have been if such law, order, rule or regulation had not been passed and (iii) make such additional payments to Mortgagee for the benefit of the Secured Parties.
SECTION 1.04. Maintenance of Mortgaged Property. Mortgagor will maintain the Improvements and the Personal Property in the manner required by the Credit Agreement.
SECTION 1.05. Insurance . Mortgagor will keep or cause to be kept the Improvements and Personal Property insured against such risks, and in the manner, described in Section 5.02 of the Credit Agreement and shall purchase such additional insurance as may be required from time to time pursuant thereto. Federal Emergency Management Agency Standard Flood Hazard Determination Forms will be purchased by Mortgagor for each Mortgaged Property on which Improvements are located. If at any time the area in which the Premises are located is designated a special flood hazard area in any Flood Insurance Rate Map published by the Federal Emergency Management Agency (or any successor agency), Mortgagor will obtain flood insurance in such total amount as the Mortgagee may from time to time reasonably require and otherwise comply with the National Flood Insurance Program as set forth in the Flood Disaster Protection Act of 1973, as it may be amended from time to time.
SECTION 1.06. Casualty Condemnation/Eminent Domain. Mortgagor shall give Mortgagee prompt written notice of any material casualty or other material damage to the Mortgaged Property or any proceeding for the taking of the Mortgaged Property or any material portion thereof or interest therein under power of eminent domain or by condemnation or any similar proceeding in accordance with, and to the extent required by, the Credit Agreement. Any Net Cash Proceeds received by or on behalf of the Mortgagor shall be reinvested in accordance with the terms of the Credit Agreement or, if prepayment shall be required pursuant to the Credit Agreement, such Net Cash Proceeds shall be applied in accordance with the Credit Agreement.
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SECTION 1.07. Assignment of Leases and Rents. (a) Mortgagor hereby irrevocably and absolutely grants, transfers and assigns all of its right title and interest in all Leases, together with any and all extensions and renewals thereof, to Mortgagee, for the benefit of the Secured Parties, for purposes of securing and discharging the performance by Mortgagor of the Obligations. Mortgagor has not assigned or executed any assignment of, and will not assign or execute any assignment of, any Leases or the Rents payable thereunder to anyone other than Mortgagee.
(b) All Leases shall be subordinate to the lien of this Mortgage. Mortgagor will not enter into, modify or amend any Lease if such Lease, as entered into, modified or amended, will not be subordinate to the lien of this Mortgage.
(c) Subject to Section 1.07(d), Mortgagor has assigned and transferred to Mortgagee, for the benefit of the Secured Parties, all of Mortgagors right, title and interest in and to the Rents now or hereafter arising from each Lease heretofore or hereafter made or agreed to by Mortgagor, it being intended that this assignment establish, subject to Section 1.07(d), an absolute transfer and assignment of all Rents and all Leases to Mortgagee and not merely to grant a security interest therein. Subject to Section 1.07(d), Mortgagee (or any agent appointed by the Mortgagee) may in Mortgagors name and stead (with or without first taking possession of any of the Mortgaged Property personally or by receiver as provided herein) operate the Mortgaged Property and rent, lease or let all or any portion of any of the Mortgaged Property to any party or parties at such rental and upon such terms as the Mortgagee shall determine, and may collect and have the benefit of all of said Rents arising from or accruing at any time thereafter or that may thereafter become due under any Lease.
(d) So long as an Event of Default shall not have occurred and be continuing, Mortgagee will not exercise any of its rights under Section 1.07(c), and Mortgagor shall (a) receive and collect the Rents accruing under any Lease, (b) exercise all rights of Mortgagor under the Leases and (c) enforce the obligations of tenants under the Leases; but after the occurrence and during the continuance of any Event of Default, Mortgagee may, at its option, receive and collect all Rents and enter upon the Premises and Improvements through its officers, agents, employees or attorneys for such purpose and for the operation and maintenance thereof. Mortgagor hereby irrevocably authorizes and directs each tenant, if any, and each successor, if any, to the interest of any tenant under any Lease, respectively, to rely upon any notice of a claimed Event of Default sent by Mortgagee to any such tenant or any of such tenants successors in interest, and thereafter to pay Rents to Mortgagee without any obligation or right to inquire as to whether an Event of Default actually exists and even if some notice to the contrary is received from the Mortgagor, who shall have no right or claim against any such tenant or successor in interest for any such Rents so paid to Mortgagee. Each tenant or any of such tenants successors in interest from whom Mortgagee or any officer, agent, attorney or employee of Mortgagee shall have collected any Rents, shall be authorized to pay Rents to Mortgagor only after such tenant or any of their successors in interest shall have received written notice from Mortgagee that the Event of Default is no longer continuing, unless and until a further notice of an Event of Default is given by Mortgagee to such tenant or any of its successors in interest.
(e) Mortgagee will not become a mortgagee in possession so long as it does not enter or take actual possession of the Mortgaged Property. In addition, Mortgagee shall not be responsible or liable for performing any of the obligations of the landlord under any Lease, for any waste by any tenant, or others, for any dangerous or defective conditions of any of the Mortgaged Property, for negligence in the management, upkeep, repair or control of any of the Mortgaged Property or any other act or omission by any other person, other than Mortgagees gross negligence, bad faith or willful misconduct.
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SECTION 1.08. Restrictions on Transfers and Encumbrances. Mortgagor shall not directly or indirectly sell, convey, alienate, assign, lease, sublease, license, mortgage, pledge, encumber or otherwise transfer, create, consent to or suffer the creation of any lien, charge or other form of encumbrance upon any interest in or any part of the Mortgaged Property, or be divested of its title to the Mortgaged Property or any interest therein in any manner or way, whether voluntarily or involuntarily (other than resulting from a condemnation), or engage in any common, cooperative, joint, time-sharing or other congregate ownership of all or part thereof, except in each case in accordance with and to the extent permitted by the Credit Agreement; provided , that Mortgagor may, to the extent permitted by the Credit Agreement, in the ordinary course of business and in accordance with reasonable commercial standards, enter into easement or covenant agreements that (i) relate to and/or benefit the operation of the Mortgaged Property and (ii) do not materially and adversely affect the value, use or operation of the Mortgaged Property ( Permitted Easements or Covenant Agreements ), and, within a reasonable amount of time following a request from Mortgagor, Mortgagee shall execute and deliver any instrument reasonably necessary to subordinate the lien of the Mortgage to a Permitted Easement or Covenant Agreement. If any of the foregoing transfers or encumbrances results in a prepayment requirement under the Credit Agreement, any Net Cash Proceeds received by or on behalf of the Mortgagor in respect thereof shall constitute trust funds to be held by the Mortgagor for the benefit of the Secured Parties and applied in accordance with the Credit Agreement.
SECTION 1.09. Security Agreement. This Mortgage is both a Mortgage of real property and a grant of a security interest in personal property, and shall constitute and serve as a Security Agreement within the meaning of the uniform commercial code as adopted in the state wherein the Premises are located ( UCC ). Mortgagor has hereby granted unto Mortgagee a security interest in and to all the Mortgaged Property described in this Mortgage that is not real property, and simultaneously with the recording of this Mortgage, Mortgagor has filed or will file UCC financing statements, and will file continuation statements prior to the lapse thereof, at the appropriate offices in the jurisdiction of formation of the Mortgagor to perfect the security interest granted by this Mortgage in all the Mortgaged Property that is not real property. Mortgagor hereby appoints Mortgagee as its true and lawful attorney-in-fact and agent, for Mortgagor and in its name, place and stead, in any and all capacities, to execute any document and to file the same in the appropriate offices (to the extent it may lawfully do so), and to perform each and every act and thing reasonably requisite and necessary to be done to perfect the security interest contemplated by the preceding sentence. Mortgagee shall have all rights with respect to the part of the Mortgaged Property that is the subject of a security interest afforded by the UCC in addition to, but not in limitation of, the other rights afforded Mortgagee hereunder and under the Guarantee and Collateral Agreement. In the event of any conflict between the terms and provisions of this Section 1.09 and the terms and provisions contained in the Guarantee and Collateral Agreement, the terms and provisions in the Guarantee and Collateral Agreement shall govern and control.
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SECTION 1.10. Filing and Recording. Mortgagor will cause this Mortgage, the UCC financing statements referred to in Section 1.09, any other security instrument creating a security interest in or evidencing the lien hereof upon the Mortgaged Property and each UCC continuation statement and instrument of further assurance to be filed, registered or recorded and, if necessary, refiled, rerecorded and reregistered, in such manner and in such places as may be required by any present or future law in order to publish notice of and fully to perfect the lien hereof upon, and the security interest of Mortgagee in, the Mortgaged Property until this Mortgage is terminated and released in full in accordance with Section 3.04. Mortgagor will pay all filing, registration and recording fees, all Federal, state, county and municipal recording, documentary or intangible taxes and other taxes, duties, imposts, assessments and charges, and all reasonable expenses incidental to or arising out of or in connection with the execution, delivery and recording of this Mortgage, UCC continuation statements any mortgage supplemental hereto, any security instrument with respect to the Personal Property, Permits, Plans and Warranties and Proceeds or any instrument of further assurance.
SECTION 1.11. Further Assurances. Upon demand by Mortgagee, Mortgagor will, at the cost of Mortgagor and without expense to Mortgagee, do, execute, acknowledge and deliver all such further acts, deeds, conveyances, mortgages, assignments, notices of assignment, transfers and assurances as Mortgagee shall from time to time reasonably require for the better assuring, conveying, assigning, transferring and confirming unto Mortgagee the property and rights hereby conveyed or assigned or intended now or hereafter so to be, or which Mortgagor may be or may hereafter become bound to convey or assign to Mortgagee, or for carrying out the intention or facilitating the performance of the terms of this Mortgage, or for filing, registering or recording this Mortgage, and on demand, Mortgagor will also execute and deliver and hereby appoints Mortgagee as its true and lawful attorney-in-fact and agent, for Mortgagor and in its name, place and stead, in any and all capacities, to execute and file to the extent it may lawfully do so (provided that the Mortgagee shall not be required to do so), one or more financing statements, chattel mortgages or comparable security instruments reasonably required to evidence more effectively the lien hereof upon the Personal Property and to perform each and every act and thing requisite and necessary to be done to accomplish the same.
SECTION 1.12. Additions to Mortgaged Property. All right, title and interest of Mortgagor in and to all extensions, improvements, betterments, renewals, substitutions and replacements of, and all additions and appurtenances to, the Mortgaged Property hereafter acquired by or released to Mortgagor or constructed, assembled or placed by Mortgagor upon the Premises or the Improvements, and all conversions of the security constituted thereby, immediately upon such acquisition, release, construction, assembling, placement or conversion, as the case may be, and in each such case without any further mortgage, Mortgage, conveyance, assignment or other act by Mortgagor, shall become subject to the lien and security interest of this Mortgage as fully and completely and with the same effect as though now owned by Mortgagor and specifically described in the grant of the Mortgaged Property above, but at any and all times Mortgagor will execute and deliver to Mortgagee any and all such further assurances, mortgages, deeds of trust, conveyances or assignments thereof as reasonably necessary for the purpose of expressly and specifically subjecting the same to the lien and security interest of this Mortgage.
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SECTION 1.13. No Claims Against Mortgagee. Nothing contained in this Mortgage shall constitute any consent or request by Mortgagee, express or implied, for the performance of any labor or services or the furnishing of any materials or other property in respect of the Mortgaged Property or any part thereof, nor as giving Mortgagor any right, power or authority to contract for or permit the performance of any labor or services or the furnishing of any materials or other property in such fashion as would permit the making of any claim against Mortgagee in respect thereof.
SECTION 1.14. Fixture Filing. (a) Certain portions of the Mortgaged Property are or will become fixtures (as that term is defined in the UCC) on the Land, and this Mortgage, upon being filed for record in the real estate records of the county wherein such fixtures are situated, shall operate also as a financing statement filed as a fixture filing in accordance with the applicable provisions of said UCC upon such portions of the Mortgaged Property that are or become fixtures.
(b) The real property to which the fixtures relate is described in Exhibit A attached hereto. The record owner of the real property described in Exhibit A attached hereto is Mortgagor. The name, type of organization and jurisdiction of organization of the debtor for purposes of this financing statement are the name, type of organization and jurisdiction of organization of the Mortgagor set forth in the first paragraph of this Mortgage, and the name of the secured party for purposes of this financing statement is the name of the Mortgagee set forth in the first paragraph of this Mortgage. The mailing address of the Mortgagor/debtor is the address of the Mortgagor set forth in the first paragraph of this Mortgage. The mailing address of the Mortgagee/secured party from which information concerning the security interest hereunder may be obtained is the address of the Mortgagee set forth in the first paragraph of this Mortgage. Mortgagors organizational identification number is []. The Mortgagor shall inform the Mortgagee (and take any steps required by Sections 1.10 and 1.11) if any of the Mortgagors information set forth in this subparagraph (b) shall change.
ARTICLE II
Defaults and Remedies
SECTION 2.01. Events of Default. Any Event of Default under the Credit Agreement (as such term is defined therein) shall constitute an Event of Default under this Mortgage.
SECTION 2.02. Demand for Payment. If an Event of Default shall occur and be continuing, then, upon written demand of Mortgagee, Mortgagee may declare the Loans then outstanding to be forthwith due and payable in whole or in part, whereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and any unpaid accrued Fees and all other liabilities of the Mortgagor accrued hereunder and under any other Loan Document, shall become forthwith due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived, to the fullest extent permitted by applicable law, by the Mortgagor, anything contained herein or in any other Loan Document to the contrary notwithstanding, and Mortgagee shall be entitled and empowered to institute an action or proceedings at law or in equity for the collection of the sums so due and unpaid, to prosecute any such action or proceedings to judgment or final decree, to enforce any such judgment or final decree against Mortgagor and to collect, in any manner provided by law, all moneys adjudged or decreed to be payable.
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SECTION 2.03. Rights to Take Possession, Operate and Apply Revenues. (a) If an Event of Default shall occur and be continuing, Mortgagor shall, within ten (10) days of demand of Mortgagee, forthwith surrender to Mortgagee actual possession of the Mortgaged Property and, if and to the extent not prohibited by applicable law, Mortgagee itself, or by such officers or agents as it may appoint, may then enter and take possession of all the Mortgaged Property without the appointment of a receiver or an application therefor, exclude Mortgagor and its agents and employees wholly therefrom, and have access to the books, papers and accounts of Mortgagor.
(b) If Mortgagor shall for any reason fail to surrender or deliver the Mortgaged Property or any part thereof after such demand by Mortgagee, Mortgagee may to the extent not prohibited by applicable law, obtain a judgment or decree conferring upon Mortgagee the right to immediate possession or requiring Mortgagor to deliver immediate possession of the Mortgaged Property to Mortgagee, to the entry of which judgment or decree Mortgagor hereby specifically consents. Mortgagor will pay to Mortgagee, upon demand, all reasonable documented and out of pocket expenses of obtaining such judgment or decree, including reasonable compensation to Mortgagees attorneys and agents with interest thereon at the rate per annum applicable to overdue amounts under the Credit Agreement (the Interest Rate ); and all such expenses and compensation shall, until paid, be secured by this Mortgage.
(c) Upon every such entry or taking of possession, Mortgagee may, to the extent not prohibited by applicable law, hold, store, use, operate, manage and control the Mortgaged Property, conduct the business thereof and, from time to time, (i) make all necessary and proper maintenance, repairs, renewals, replacements, additions, betterments and improvements thereto and thereon, (ii) purchase or otherwise acquire additional fixtures, personalty and other property, (iii) insure or keep the Mortgaged Property insured, (iv) manage and operate the Mortgaged Property and exercise all the rights and powers of Mortgagor to the same extent as Mortgagor could in its own name or otherwise with respect to the same, or (v) enter into any and all agreements with respect to the exercise by others of any of the powers herein granted Mortgagee, all as may from time to time be directed or determined by Mortgagee to be in its best interest and Mortgagor hereby appoints Mortgagee as its true and lawful attorney-in-fact and agent, for Mortgagor and in its name, place and stead, in any and all capacities, to perform any of the foregoing acts. Mortgagee may collect and receive all the Rents, issues, profits and revenues from the Mortgaged Property, including those past due as well as those accruing thereafter, and, after deducting (i) all expenses of taking, holding, managing and operating the Mortgaged Property (including compensation for the services of all persons employed for such purposes), (ii) the costs of all such maintenance, repairs, renewals, replacements, additions, betterments, improvements, purchases and acquisitions, (iii) the costs of insurance, (iv) such taxes, assessments and other similar charges as Mortgagee may at its option pay, (v) other proper charges upon the Mortgaged Property or any part thereof and (vi) the reasonable documented, out of pocket compensation, expenses and disbursements of the attorneys and agents of Mortgagee, Mortgagee shall apply the remainder of the moneys and proceeds so received in accordance with Section 2.08.
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(d) Whenever, before any sale of the Mortgaged Property under Section 2.06, all Obligations that are then due shall have been paid and all Events of Default fully cured, Mortgagee will surrender possession of the Mortgaged Property back to Mortgagor, its successors or assigns. The same right of taking possession shall, however, arise again if any subsequent Event of Default shall occur and be continuing.
SECTION 2.04. Right to Cure Mortgagors Failure to Perform. Should Mortgagor fail in the payment, performance or observance of any term, covenant or condition required by this Mortgage or the Credit Agreement (with respect to the Mortgaged Property), after the expiration of any applicable cure period, Mortgagee may pay, perform or observe the same, and all payments made or costs or expenses incurred by Mortgagee in connection therewith shall be secured hereby and shall be, without demand, immediately repaid by Mortgagor to Mortgagee with interest thereon at the Interest Rate. Mortgagee is hereby empowered to enter and to authorize others to enter upon the Premises or the Improvements or any part thereof for the purpose of performing or observing any such defaulted term, covenant or condition without having any obligation to so perform or observe and without thereby becoming liable to Mortgagor, to any person in possession holding under Mortgagor or to any other person, other than as a result of Mortgagees gross negligence, bad faith or willful misconduct.
SECTION 2.05. Right to a Receiver. If an Event of Default shall occur and be continuing, Mortgagee, upon application to a court of competent jurisdiction, shall be entitled as a matter of right, to the extent permitted by applicable law, to the appointment of a receiver to take possession of and to operate the Mortgaged Property and to collect and apply the Rents. The receiver shall have all of the rights and powers permitted under the laws of the state wherein the Mortgaged Property is located. Mortgagor shall pay to Mortgagee upon demand all reasonable documented and out of pocket expenses, including receivers fees, reasonable attorneys fees and disbursements, costs and agents compensation incurred pursuant to the provisions of this Section 2.05; and all such expenses shall be secured by this Mortgage and shall be, without demand, immediately repaid by Mortgagor to Mortgagee with interest thereon at the Interest Rate.
SECTION 2.06. Foreclosure and Sale. (a) If an Event of Default shall occur and be continuing, Mortgagee may elect to sell, the Mortgaged Property or any part of the Mortgaged Property by exercise of the power of foreclosure or of sale granted to Mortgagee by applicable law or this Mortgage. In such case, Mortgagee may commence a civil action to foreclose this Mortgage, or it may proceed and sell the Mortgaged Property to satisfy any Obligation. Mortgagee or an officer appointed by a judgment of foreclosure to sell the Mortgaged Property, may sell all or such parts of the Mortgaged Property as may be chosen by Mortgagee at the time and place of sale fixed by it in a notice of sale, either as a whole or in separate lots, parcels or items as Mortgagee shall deem expedient, and in such order as it may determine, at public auction to the highest bidder. Mortgagee or an officer appointed by a judgment of foreclosure to sell the Mortgaged Property may postpone any foreclosure or other sale of all or any portion of the Mortgaged Property by public announcement at such time and place of sale, and from time to time thereafter may postpone such sale by public announcement or subsequently noticed sale. Without further notice, Mortgagee or an officer appointed to sell the Mortgaged Property may make such sale at the time fixed by the last postponement, or shall, give a new notice of sale. Any person, including Mortgagor, Mortgagee or any designee or affiliate thereof, may purchase at such sale.
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(b) The Mortgaged Property may be sold subject to unpaid taxes and Permitted Encumbrances, and, after deducting all costs, fees and expenses of Mortgagee (including costs of evidence of title in connection with the sale), Mortgagee or an officer that makes any sale shall apply the proceeds of sale in the manner set forth in Section 2.08.
(c) Any foreclosure or other sale of less than the whole of the Mortgaged Property or any defective or irregular sale made hereunder shall not exhaust the power of foreclosure or of sale provided for herein; and subsequent sales may be made hereunder until the Obligations have been satisfied, or the entirety of the Mortgaged Property has been sold.
(d) If an Event of Default shall occur and be continuing, Mortgagee may instead of, or in addition to, exercising the rights described in Section 2.06(a) above and either with or without entry or taking possession as herein permitted, proceed by a suit or suits in law or in equity or by any other appropriate proceeding or remedy (i) to specifically enforce payment of some or all of the Obligations, or the performance of any term, covenant, condition or agreement of this Mortgage or any other Loan Document or any other right, or (ii) to pursue any other remedy available to Mortgagee, all as Mortgagee shall determine most effectual for such purposes.
SECTION 2.07. Other Remedies. (a) In case an Event of Default shall occur and be continuing, Mortgagee may also exercise, to the extent not prohibited by law, any or all of the remedies available to a secured party under the UCC.
(b) In connection with a sale of the Mortgaged Property or any Personal Property and the application of the proceeds of sale as provided in Section 2.08, Mortgagee shall be entitled to enforce payment of and to receive up to the principal amount of the Obligations, plus all other charges, payments and costs due under this Mortgage, and to recover a deficiency judgment for any portion of the aggregate principal amount of the Obligations remaining unpaid, with interest.
SECTION 2.08. Application of Sale Proceeds and Rents. After any foreclosure sale of all or any of the Mortgaged Property, the Mortgagee shall receive and apply the proceeds of the sale together with any Rents that may have been collected and any other sums that then may be held by the Mortgagee under this Mortgage as follows:
FIRST, to the payment of all reasonable, out-of-pocket, documented costs and expenses incurred by the Mortgagee in connection with such collection, sale, foreclosure or realization or otherwise in connection with this Mortgage, any other Loan Document or any of the Obligations, including all court costs and the fees and expenses of its agents and legal counsel, the repayment of all advances made by the Mortgagee hereunder or under any other Loan Document on behalf of Mortgagor and any other reasonable, out-of-pocket, documented costs or expenses incurred in connection with the exercise of any right or remedy hereunder or under any other Loan Document;
SECOND, to the payment in full of Participations (the amounts so applied to be distributed between or among the Administrative Agent and/or any relevant Issuing Bank pro rata in accordance with the amounts of Participations owed to them on the date of any such distribution);
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THIRD, to the payment in full of all other Obligations (the amounts so applied to be distributed among the Secured Parties pro rata in accordance with the amounts of the Obligations owed to them on the date of any such distribution); and
FOURTH, to the Mortgagor, its successors or assigns, or as a court of competent jurisdiction may otherwise direct.
Mortgagee shall have absolute discretion as to the time of application of any such proceeds, moneys or balances in accordance with this Mortgage. Upon any sale of the Mortgaged Property by Mortgagee (including pursuant to a power of sale granted by statute or under a judicial proceeding), the receipt of Mortgagee or of the officer making the sale shall be a sufficient discharge to the purchaser or purchasers of the Mortgaged Property so sold and such purchaser or purchasers shall not be obligated to see to the application of any part of the purchase money paid over to the Mortgagee or such officer or be answerable in any way for the misapplication thereof; provided that such sale is permitted, and in accordance with, the terms of this Mortgage.
SECTION 2.09. Mortgagor as Tenant Holding Over. If Mortgagor remains in possession of any of the Mortgaged Property after any foreclosure sale by Mortgagee, at Mortgagees election Mortgagor shall be deemed a tenant holding over and shall forthwith surrender possession to the purchaser or purchasers at such sale or be summarily dispossessed or evicted according to provisions of law applicable to tenants holding over.
SECTION 2.10. Waiver of Appraisement, Valuation, Stay, Extension and Redemption Laws. Mortgagor waives, to the extent not prohibited by law, (i) the benefit of all laws now existing or that hereafter may be enacted (x) providing for any appraisement or valuation of any portion of the Mortgaged Property and/or (y) in any way extending the time for the enforcement or the collection of amounts due under any of the Obligations or creating or extending a period of redemption from any sale made in collecting said debt or any other amounts due Mortgagee, (ii) any right to at any time insist upon, plead, claim or take the benefit or advantage of any law now or hereafter in force providing for any homestead exemption, stay, statute of limitations, extension or redemption, or sale of the Mortgaged Property as separate tracts, units or estates or as a single parcel in the event of foreclosure or notice of deficiency, and (iii) all rights of redemption, valuation, appraisement, stay of execution, notice of election to mature or declare due the whole of or each of the Obligations and marshaling in the event of foreclosure of this Mortgage.
SECTION 2.11. Discontinuance of Proceedings. In case Mortgagee shall proceed to enforce any right, power or remedy under this Mortgage by foreclosure, entry or otherwise, and such proceedings shall be discontinued or abandoned for any reason, or shall be determined adversely to Mortgagee, then and in every such case Mortgagor, Mortgagee shall be restored to their former positions and rights hereunder, and all rights, powers and remedies of Mortgagee shall continue as if no such proceeding had been taken.
SECTION 2.12. Suits to Protect the Mortgaged Property. Mortgagee shall have power (a) to institute and maintain suits and proceedings to prevent any impairment of the Mortgaged Property by any acts that may be unlawful or in violation of this Mortgage, (b) to preserve or protect its interest in the Mortgaged Property and in the Rents arising therefrom and (c) to restrain the enforcement of or compliance with any legislation or other governmental enactment, rule or order that may be unconstitutional or otherwise invalid if the enforcement of or compliance with such enactment, rule or order would impair the security or be prejudicial to the interest of Mortgagee hereunder.
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SECTION 2.13. Filing Proofs of Claim. In case of any receivership, insolvency, bankruptcy, reorganization, arrangement, adjustment, composition or other proceedings affecting Mortgagor, shall, to the extent permitted by law, be entitled to file such proofs of claim and other documents as may be necessary or advisable in order to have the claims of Mortgagee allowed in such proceedings for the Obligations secured by this Mortgage at the date of the institution of such proceedings and for any interest accrued, late charges and additional interest or other amounts due or that may become due and payable hereunder after such date.
SECTION 2.14. Possession by Mortgagee. Notwithstanding the appointment of any receiver, liquidator or trustee of Mortgagor, any of its property or the Mortgaged Property, Mortgagee shall be entitled, to the extent not prohibited by law, to remain in possession and control of all parts of the Mortgaged Property now or hereafter granted under this Mortgage to Mortgagee in accordance with the terms hereof and applicable law.
SECTION 2.15. Waiver. (a) No delay or failure by Mortgagee to exercise any right, power or remedy accruing upon any breach or Event of Default shall exhaust or impair any such right, power or remedy or be construed to be a waiver of any such breach or Event of Default or acquiescence therein; and every right, power and remedy given by this Mortgage to Mortgagee may be exercised from time to time and as often as may be deemed expedient by Mortgagee. No consent or waiver by Mortgagee to or of any breach or Event of Default by Mortgagor in the performance of the Obligations shall be deemed or construed to be a consent or waiver to or of any other breach or Event of Default in the performance of the same or of any other Obligations by Mortgagor hereunder. No failure on the part of Mortgagee to complain of any act or failure to act or to declare an Event of Default, irrespective of how long such failure continues, shall constitute a waiver by Mortgagee of its rights hereunder or impair any rights, powers or remedies consequent on any future Event of Default by Mortgagor.
(b) Even if Mortgagee (i) grants some forbearance or an extension of time for the payment of any sums secured hereby, (ii) takes other or additional security for the payment of any sums secured hereby, (iii) waives or does not exercise some right granted herein or under the Loan Documents, (iv) releases a part of the Mortgaged Property from this Mortgage, (v) agrees to change some of the terms, covenants, conditions or agreements of any of the Loan Documents, (vi) consents to the filing of a map, plat or replat affecting the Premises, (vii) consents to the granting of an easement or other right affecting the Premises or (viii) makes or consents to an agreement subordinating Mortgagees lien on the Mortgaged Property hereunder; no such act or omission shall preclude Mortgagee from exercising any other right, power or privilege herein granted or intended to be granted in the event of any breach or Event of Default then made or of any subsequent default; nor, except as otherwise expressly provided in an instrument executed by Mortgagee, shall this Mortgage be altered thereby. In the event of the sale or transfer by operation of law or otherwise of all or part of the Mortgaged Property, Mortgagee is hereby authorized and empowered to deal with any vendee or transferee with reference to the Mortgaged Property secured hereby, or with reference to any of the terms, covenants, conditions or agreements hereof, as fully and to the same extent as it might deal with the original parties hereto and without in any way releasing or discharging any liabilities, obligations or undertakings.
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SECTION 2.16. Waiver of Trial by Jury. To the fullest extent permitted by applicable law, Mortgagor, Mortgagee each hereby irrevocably and unconditionally waive trial by jury in any action, claim, suit or proceeding relating to this Mortgage and for any counterclaim brought therein.
SECTION 2.17. Remedies Cumulative. No right, power or remedy conferred upon or reserved to Mortgagee by this Mortgage is intended to be exclusive of any other right, power or remedy, and each and every such right, power and remedy shall be cumulative and concurrent and in addition to any other right, power and remedy given hereunder or now or hereafter existing at law or in equity or by statute.
ARTICLE III
Miscellaneous
SECTION 3.01. Partial Invalidity. In the event any one or more of the provisions contained in this Mortgage shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall, at the option of Mortgagee, not affect any other provision of this Mortgage, and this Mortgage shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein or therein.
SECTION 3.02. Notices. All notices and communications hereunder shall be in writing and given to Mortgagor in accordance with the terms of the Credit Agreement at the address set forth on the first page of this Mortgage and to the Mortgagee as provided in the Credit Agreement.
SECTION 3.03. Successors and Assigns. All of the grants, covenants, terms, provisions and conditions herein shall run with the Premises and the Improvements and shall apply to, bind and inure to, the benefit of the permitted successors and assigns of Mortgagor and the successors and assigns of Mortgagee.
SECTION 3.04. Satisfaction and Cancellation. (a) The conveyance to Mortgagee of the Mortgaged Property as security created and consummated by this Mortgage shall be null and void when (i) all the Obligations (other than Obligations in respect of Hedging Agreements and contingent indemnities and expense reimbursement obligations to the extent no claim therefor has been made) have been paid in full, (ii) the Lenders have no further commitment to lend under the Credit Agreement and (iii) the Letters of Credit have been canceled or have expired and all L/C Disbursements shall have been reimbursed.
(b) Upon a sale or financing by Mortgagor of all or any portion of the Mortgaged Property that is permitted by the Credit Agreement and the application of the Net Cash Proceeds of such sale or financing in accordance with the terms of the Credit Agreement, the lien of this Mortgage shall be released from the applicable portion of the Mortgaged Property. Mortgagor shall give the Mortgagee reasonable written notice of any sale or financing of the Mortgaged Property prior to the closing of such sale or financing.
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(c) In connection with any termination or release pursuant to paragraph (a), the Mortgage shall be marked satisfied by the Mortgagee, and this Mortgage shall be canceled of record at the request and at the expense of the Mortgagor. Mortgagee shall execute any documents reasonably requested by Mortgagor to accomplish the foregoing or to accomplish any release contemplated by this Section 3.04 and Mortgagor will pay all reasonable and documented out of pocket costs and expenses, including reasonable attorneys fees, disbursements and other charges, incurred by Mortgagee in connection with the preparation and execution of such documents.
SECTION 3.05. Definitions. As used in this Mortgage, the singular shall include the plural as the context requires and the following words and phrases shall have the following meanings: (a) including shall mean including but not limited to; (b) provisions shall mean provisions, terms, covenants and/or conditions; (c) lien shall mean lien, charge, encumbrance, security interest, mortgage or Mortgage; (d) obligation shall mean obligation, duty, covenant and/or condition; and (e) any of the Mortgaged Property shall mean the Mortgaged Property or any part thereof or interest therein. Any act that Mortgagee is permitted to perform hereunder may be performed at any time and from time to time by Mortgagee or any person or entity designated by Mortgagee. Each appointment of Mortgagee as attorney-in-fact for Mortgagor under the Mortgage is irrevocable, with power of substitution and coupled with an interest. Subject to the applicable provisions hereof, Mortgagee has the right to refuse to grant its consent, approval or acceptance or to indicate its satisfaction, in its sole discretion, whenever such consent, approval, acceptance or satisfaction is required hereunder.
SECTION 3.06. Multisite Real Estate Transaction. Mortgagor acknowledges that this Mortgage is one of a number of Other Mortgages and Security Documents that secure the Obligations. Mortgagor agrees that the lien of this Mortgage shall be absolute and unconditional and shall not in any manner be affected or impaired by any acts or omissions whatsoever of Mortgagee, and without limiting the generality of the foregoing, the lien hereof shall not be impaired by any acceptance by the Mortgagee of any security for or guarantees of any of the Obligations hereby secured, or by any failure, neglect or omission on the part of Mortgagee to realize upon or protect any Obligation or indebtedness hereby secured or any collateral security therefor including the Other Mortgages and other Security Documents. The lien hereof shall not in any manner be impaired or affected by any release (except as to the property released), sale, pledge, surrender, compromise, settlement, renewal, extension, indulgence, alteration, changing, modification or disposition of any of the Obligations secured or of any of the collateral security therefor, including the Other Mortgages and other Security Documents or of any guarantee thereof, and Mortgagee may foreclose, exercise any power of sale, or exercise any other remedy available to it under any or all of the Other Mortgages and other Security Documents without first exercising or enforcing any of its rights and remedies hereunder. Such exercise of Mortgagees rights and remedies under any or all of the Other Mortgages and other Security Documents shall not in any manner impair the indebtedness hereby secured or the lien of this Mortgage and any exercise of the rights or remedies of Mortgagee hereunder shall not impair the lien of any of the Other Mortgages and other Security Documents or any of Mortgagees rights and remedies thereunder. Mortgagor specifically consents and agrees that Mortgagee may exercise its rights and remedies hereunder and under the Other Mortgages and other Security Documents separately or concurrently and in any order that it may deem appropriate and waives any rights of subrogation.
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SECTION 3.07. No Oral Modification. This Mortgage may not be changed or terminated orally. Any agreement made by Mortgagor and Mortgagee after the date of this Mortgage relating to this Mortgage shall be superior to the rights of the holder of any intervening or subordinate Mortgage, lien or encumbrance.
ARTICLE IV
Particular Provisions
This Mortgage is subject to the following provisions relating to the particular laws of the state wherein the Premises are located:
SECTION 4.01. Applicable Law; Certain Particular Provisions. This Mortgage shall be governed by and construed in accordance with the internal law of the state where the Mortgaged Property is located, except that Mortgagor expressly acknowledges that by their terms, the Credit Agreement, and other Loan Documents (aside from those Other Mortgages to be recorded outside New York) shall be governed by the internal law of the State of New York, without regard to principles of conflict of law. Mortgagor and Mortgagee agree to submit to jurisdiction and the laying of venue for any suit on this Mortgage in the state where the Mortgaged Property is located. The terms and provisions set forth in Appendix A attached hereto are hereby incorporated by reference as though fully set forth herein. In the event of any conflict between the terms and provisions contained in the body of this Mortgage and the terms and provisions set forth in Appendix A, the terms and provisions set forth in Appendix A shall govern and control.
D-19
IN WITNESS WHEREOF, this Mortgage has been duly executed by Mortgagor as of the date first above written.
[MORTGAGOR] | ||||
By |
|
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Name: | ||||
Title: |
D-20
[LOCAL FORM OF ACKNOWLEDGEMENT]
Exhibit A
to Mortgage
Description of the Land
[To be provided]
Appendix A
to Mortgage
Local Law Provisions
EXHIBIT E-1
LENDER: []
PRINCIPAL AMOUNT: $[]
FORM OF TERM PROMISSORY NOTE
New York, New York
[DATE]
FOR VALUE RECEIVED, the undersigned, AssetMark Financial Holdings, Inc., a Delaware corporation (the Borrower ), hereby promises to pay to the Lender set forth above (the Lender ) or its registered assigns, in lawful money of the United States of America in immediately available funds at the office of the Administrative Agent (as defined below) (i) on the dates set forth in the Credit Agreement, dated as of November 14, 2018 (as amended, supplemented or otherwise modified from time to time, the Credit Agreement ), among the Borrower, AssetMark Holdings LLC, a Delaware limited liability company, the Lenders from time to time party thereto and Credit Suisse AG, Cayman Islands Branch, as administrative agent (in such capacity, the Administrative Agent ) and as collateral agent for the Lenders, the principal amounts set forth in the Credit Agreement with respect to Term Loans made by the Lender to the Borrower pursuant to the Credit Agreement, and (ii) on each Interest Payment Date, interest at the rate or rates per annum as provided in the Credit Agreement on the unpaid principal amount of all Term Loans made by the Lender to the Borrower pursuant to the Credit Agreement. Capitalized terms used but not defined herein shall have the meanings assigned thereto in the Credit Agreement.
The Borrower promises to pay interest, on demand, on any overdue principal and, to the extent permitted by law, overdue interest from their due dates at the rate or rates provided in the Credit Agreement.
This Note is one of the promissory notes referred to in Section 2.04(e) of the Credit Agreement that, among other things, contains provisions for the acceleration of the maturity hereof upon the happening of certain events, for optional and mandatory prepayment of the principal hereof prior to the Term Loan Maturity Date and for the amendment or waiver of certain provisions of the Credit Agreement, all upon the terms and conditions therein specified. This Note is entitled to the benefit of the Credit Agreement and is guaranteed and secured as provided therein and in the other Loan Documents referred to therein.
In case an Event of Default shall occur and be continuing, the principal of and accrued interest on this Note may become or be declared to be due and payable in the manner and with the effect provided in the Credit Agreement. The non-exercise by the Lender of any of its rights hereunder in any particular instance shall not constitute a waiver thereof in that or any subsequent instance.
E-1-1
To the fullest extent permitted by applicable law, the Borrower hereby waives diligence, presentment, demand, protest and notice of any kind in connection with this Note.
All Borrowings evidenced by this Note, the Type thereof, the maturity thereof, all payments, repayments and prepayments of the principal hereof and interest hereon and the respective dates thereof shall be recorded by the Lender and, prior to any transfer hereof, endorsed by the Lender on the applicable schedule attached hereto and made a part hereof, or on a continuation of such schedules attached to and made a part hereof or otherwise recorded by such Lender in its internal records; provided that the failure of the Lender to make any such recordation or endorsement shall not affect the obligations of the Borrower under this Note or under the Credit Agreement.
This Note and the Term Loans evidenced hereby may be transferred in whole or in part only by registration of such transfer on the Register maintained for such purpose by or on behalf of the undersigned as provided in Section 9.04(d) of the Credit Agreement.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
ASSETMARK FINANCIAL HOLDINGS, INC. | ||||
By |
|
|||
Name: | ||||
Title: |
E-1-2
Schedule A to Note
LOANS, CONVERSIONS AND REPAYMENTS OF ABR LOANS
Date |
Amount of ABR Loans |
Amount Converted to ABR
Loans |
Amount of Principal of
ABR Loans Repaid |
Amount of ABR Loans
Converted to Eurodollar Loans |
Unpaid Principal Balance
of ABR Loans |
Notation Made By |
Schedule B to Note
LOANS, CONTINUATIONS, CONVERSIONS AND REPAYMENTS OF EURODOLLAR LOANS
Date |
Amount of
Eurodollar Loans |
Amount Converted to
Eurodollar Loans |
Interest Period and
Adjusted LIBOR with Respect Thereto |
Amount of Principal of
Eurodollar Loans Repaid |
Amount of Eurodollar
Loans Converted to ABR Loans |
Unpaid Principal
Balance of Eurodollar Loans |
Notation Made By |
EXHIBIT E-2
LENDER: []
PRINCIPAL AMOUNT: $[]
FORM OF REVOLVING PROMISSORY NOTE
New York, New York
[DATE]
FOR VALUE RECEIVED, the undersigned, AssetMark Financial Holdings, Inc., a Delaware corporation (the Borrower ), hereby promises to pay to the Lender set forth above (the Lender ) or its registered assigns, in lawful money of the United States of America in immediately available funds at the office of the Administrative Agent (as defined below) on the Revolving Credit Maturity Date (as defined in the Credit Agreement dated as of November 14, 2018 (as amended, supplemented or otherwise modified from time to time, the Credit Agreement )), among the Borrower AssetMark Holdings LLC, a Delaware limited liability company, the Lenders from time to time party thereto and Credit Suisse AG, Cayman Islands Branch, as administrative agent (in such capacity, the Administrative Agent and as collateral agent for the Lenders), (A) the lesser of (i) the principal amount set forth above and (ii) the aggregate unpaid principal amount of all Revolving Loans made by the Lender to the Borrower pursuant to the Credit Agreement and (B) interest from the date hereof on the principal amount from time to time outstanding on each Revolving Loan made by the Lender to the Borrower at the rate or rates per annum and payable on such dates as provided in the Credit Agreement. Capitalized terms used but not defined herein shall have the meanings assigned thereto in the Credit Agreement.
The Borrower promises to pay interest, on demand, on any overdue principal and, to the extent permitted by law, overdue interest from their due dates at the rate or rates provided in the Credit Agreement.
This Note is one of the promissory notes referred to in Section 2.04(e) of the Credit Agreement that, among other things, contains provisions for the acceleration of the maturity hereof upon the happening of certain events, for optional and mandatory prepayment of the principal hereof prior to the Revolving Credit Maturity Date and for the amendment or waiver of certain provisions of the Credit Agreement, all upon the terms and conditions therein specified. This Note is entitled to the benefit of the Credit Agreement and is guaranteed and secured as provided therein and in the other Loan Documents referred to therein.
In case an Event of Default shall occur and be continuing, the principal of and accrued interest on this Note may become or be declared to be due and payable in the manner and with the effect provided in the Credit Agreement. The nonexercise by the Lender of any of its rights hereunder in any particular instance shall not constitute a waiver thereof in that or any subsequent instance.
E-2-1
To the fullest extent permitted by applicable law, the Borrower hereby waives diligence, presentment, demand, protest and notice of any kind in connection with this Note.
All Borrowings evidenced by this Note, the Type thereof, the maturity thereof, all payments, repayments and prepayments of the principal hereof and interest hereon and the respective dates thereof shall be recorded by the Lender and, prior to any transfer hereof, endorsed by the Lender on the applicable schedule attached hereto and made a part hereof, or on a continuation of such schedules attached to and made a part hereof or otherwise recorded by such Lender in its internal records; provided that the failure of the Lender to make any such recordation or endorsement shall not affect the obligations of the Borrower under this Note or under the Credit Agreement.
This Note and the Revolving Loans evidenced hereby may be transferred in whole or in part only by registration of such transfer on the Register maintained for such purpose by or on behalf of the undersigned as provided in Section 9.04(d) of the Credit Agreement.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
ASSETMARK FINANCIAL HOLDINGS, INC. | ||||
By |
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|||
Name: | ||||
Title: |
E-2-2
Schedule A to Note
LOANS, CONVERSIONS AND REPAYMENTS OF ABR LOANS
Date |
Amount of ABR
Loans |
Amount
Converted to ABR Loans |
Amount of
Principal of ABR Loans Repaid |
Amount of
ABR Loans Converted to Eurodollar Loans |
Unpaid
Principal Balance of ABR Loans |
Notation
Made By |
Schedule B to Note
LOANS, CONTINUATIONS, CONVERSIONS AND REPAYMENTS OF EURODOLLAR LOANS
Date |
Amount of Eurodollar
|
Amount Converted
|
Interest
|
Amount of
|
Amount of
|
Unpaid
|
Notation
|
EXHIBIT F-1
[FORM OF]
U.S. TAX COMPLIANCE CERTIFICATE
(For Foreign Lenders That Are Not Partnerships For U.S. Federal Income Tax Purposes)
Reference is hereby made to the Credit Agreement, dated as of November 14, 2018 (as amended, supplemented or otherwise modified from time to time, the Credit Agreement ), among AssetMark Financial Holdings, Inc., a Delaware corporation, AssetMark Holdings LLC, a Delaware limited liability company, the lenders from time to time party thereto and Credit Suisse AG, Cayman Islands Branch, as the Administrative Agent and Collateral Agent.
Pursuant to the provisions of Section 2.20 of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record and beneficial owner of the Loan(s) (as well as any Note(s) evidencing such Loan(s)) in respect of which it is providing this certificate, (ii) it is not a bank within the meaning of Section 881(c)(3)(A) of the Code, (iii) it is not a ten percent shareholder of the Borrower within the meaning of Section 881(c)(3)(B) of the Code and (iv) it is not a controlled foreign corporation related to the Borrower as described in Section 881(c)(3)(C) of the Code.
The undersigned has furnished the Administrative Agent and the Borrower with a certificate of its non-U.S. Person status on IRS Form W-8BEN or W-8BEN-E (or any successor thereto). By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform the Borrower and the Administrative Agent, and (2) the undersigned shall have at all times furnished the Borrower and the Administrative Agent with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.
Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement.
[NAME OF LENDER] | ||
By | ||
|
||
Name: | ||
Title: |
Date: , 20[ ]
F-1-1
EXHIBIT F-2
[FORM OF]
U.S. TAX COMPLIANCE CERTIFICATE
(For Foreign Participants That Are Not Partnerships For U.S. Federal Income Tax Purposes)
Reference is hereby made to the Credit Agreement, dated as of November 14, 2018 (as amended, supplemented or otherwise modified from time to time, the Credit Agreement ), among AssetMark Financial Holdings, Inc., a Delaware corporation, AssetMark Holdings LLC, a Delaware limited liability company, the lenders from time to time party thereto and Credit Suisse AG, Cayman Islands Branch, as the Administrative Agent and Collateral Agent.
Pursuant to the provisions of Section 2.20 of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record and beneficial owner of the participation in respect of which it is providing this certificate, (ii) it is not a bank within the meaning of Section 881(c)(3)(A) of the Code, (iii) it is not a ten percent shareholder of the Borrower within the meaning of Section 881(c)(3)(B) of the Code, and (iv) it is not a controlled foreign corporation related to the Borrower as described in Section 881(c)(3)(C) of the Code.
The undersigned has furnished its participating Lender with a certificate of its non-U.S. Person status on IRS Form or W-8BEN-E (or any successor thereto). By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform such Lender in writing, and (2) the undersigned shall have at all times furnished such Lender with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.
Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement.
[NAME OF PARTICIPANT] |
||
By | ||
|
||
Name: | ||
Title: |
Date: , 20[ ]
F-2-1
EXHIBIT F-3
[FORM OF]
U.S. TAX COMPLIANCE CERTIFICATE
(For Foreign Participants That Are Partnerships For U.S. Federal Income Tax Purposes)
Reference is hereby made to the Credit Agreement, dated as of November 14, 2018 (as amended, supplemented or otherwise modified from time to time, the Credit Agreement ), among AssetMark Financial Holdings, Inc., a Delaware corporation, AssetMark Holdings LLC, a Delaware limited liability company, the lenders from time to time party thereto and Credit Suisse AG, Cayman Islands Branch, as the Administrative Agent and Collateral Agent.
Pursuant to the provisions of Section 2.20 of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record owner of the participation in respect of which it is providing this certificate, (ii) its direct or indirect partners/members are the sole beneficial owners of such participation, (iii) with respect to such participation, neither the undersigned nor any of its direct or indirect partners/members is a bank extending credit pursuant to a loan agreement entered into in the ordinary course of its trade or business within the meaning of Section 881(c)(3)(A) of the Code, (iv) none of its direct or indirect partners/members is a ten percent shareholder of the Borrower within the meaning of Section 881(c)(3)(B) of the Code and (v) none of its direct or indirect partners/members is a controlled foreign corporation related to the Borrower as described in Section 881(c)(3)(C) of the Code.
The undersigned has furnished its participating Lender with IRS Form W-8IMY accompanied by one of the following forms from each of its partners/members that is claiming the portfolio interest exemption: (i) an IRS Form or W-8BEN-E (or any successor thereto) or (ii) an IRS Form W-8IMY accompanied by an IRS Form W-8BEN or W-8BEN-E (or any successor thereto) from each of such partners/members beneficial owners that is claiming the portfolio interest exemption. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform such Lender and (2) the undersigned shall have at all times furnished such Lender with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.
Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement.
[NAME OF PARTICIPANT] | ||
By |
|
|
Name: | ||
Title: |
Date: , 20[ ]
F-3-1
EXHIBIT F-4
[FORM OF]
U.S. TAX COMPLIANCE CERTIFICATE
(For Foreign Lenders That Are Partnerships For U.S. Federal Income Tax Purposes)
Reference is hereby made to the Credit Agreement, dated as of November 14, 2018 (as amended, supplemented or otherwise modified from time to time, the Credit Agreement ), among AssetMark Financial Holdings, Inc., a Delaware corporation, AssetMark Holdings LLC, a Delaware limited liability company, the lenders from time to time party thereto and Credit Suisse AG, Cayman Islands Branch, as the Administrative Agent and Collateral Agent.
Pursuant to the provisions of Section 2.20 of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record owner of the Loan(s) (as well as any Note(s) evidencing such Loan(s)) in respect of which it is providing this certificate, (ii) its direct or indirect partners/members are the sole beneficial owners of such Loan(s) (as well as any Note(s) evidencing such Loan(s)), (iii) with respect to the extension of credit pursuant to this Credit Agreement or any other Loan Document, neither the undersigned nor any of its direct or indirect partners/members is a bank extending credit pursuant to a loan agreement entered into in the ordinary course of its trade or business within the meaning of Section 881(c)(3)(A) of the Code, (iv) none of its direct or indirect partners/members is a ten percent shareholder of the Borrower within the meaning of Section 881(c)(3)(B) of the Code and (v) none of its direct or indirect partners/members is a controlled foreign corporation related to the Borrower as described in Section 881(c)(3)(C) of the Code.
The undersigned has furnished the Administrative Agent and the Borrower with IRS Form W-8IMY accompanied by one of the following forms from each of its partners/members that is claiming the portfolio interest exemption: (i) an IRS Form W-8BEN or W-8BEN-E (or any successor thereto) or (ii) an IRS Form W-8IMY accompanied by an IRS Form W-8BEN or W-8BEN-E (or any successor thereto) from each of such partners/members beneficial owners that is claiming the portfolio interest exemption. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform the Borrower and the Administrative Agent, and (2) the undersigned shall have at all times furnished the Borrower and the Administrative Agent with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.
F-4-1
Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement.
[NAME OF LENDER] | ||
By | ||
|
||
Name: | ||
Title: |
Date: , 20[ ]
F-4-2
EXHIBIT G
[FORM OF]
SOLVENCY CERTIFICATE
[], 20[]
This Solvency Certificate is being executed and delivered pursuant to Section 4.02(c) of the Credit Agreement dated as of November 14, 2018 (as amended, supplemented or otherwise modified from time to time, the Credit Agreement ), among AssetMark Financial Holdings, Inc., a Delaware corporation (the Borrower ), AssetMark Holdings LLC ( Holdings ), a Delaware limited liability company, the lenders from time to time party thereto and Credit Suisse AG, Cayman Islands Branch, as the Administrative Agent and Collateral Agent. Unless otherwise defined herein, capitalized terms used in this Certificate shall have the meanings set forth in the Credit Agreement.
I, [], the [Chief Financial Officer/equivalent officer] of the Borrower, in such capacity and not in an individual capacity, hereby certify as follows:
1. |
I am generally familiar with the businesses, financial position and assets of Holdings and its Subsidiaries, on a consolidated basis, and I am duly authorized to execute this Solvency Certificate on behalf of the Borrower pursuant to the Credit Agreement; and |
2. |
As of the date hereof and after giving effect to the Transactions (including after giving effect to the making of each Loan made on the Closing Date and after giving effect to the application of the proceeds thereof, including the payment of the Special Dividend), that: |
(i) |
the sum of the fair value of the assets of Holdings and its Subsidiaries, taken as a whole, exceeds the sum of all debts (including subordinated debt or contingent liabilities) of Holdings and its Subsidiaries, taken as a whole; |
(ii) |
the present fair saleable value of the assets of Holdings and its Subsidiaries, taken as a whole, is greater than the amount that will be required to pay the probable liability on existing debts (including subordinated debt or contingent liabilities) of Holdings and its Subsidiaries, taken as a whole, as such debts become absolute and matured; |
(iii) |
the capital of Holdings and its Subsidiaries, taken as a whole, is not unreasonably small in relation to the business of Holdings and its Subsidiaries, taken as a whole; and |
(iv) |
Holdings and its Subsidiaries, taken as a whole, do not intend to incur, or believe that they will incur, debts and liabilities (including current obligations and contingent liabilities) beyond their ability to pay such debt as they mature in the ordinary course of business. |
G-1
For the purposes hereof, the amount of any contingent liability at any time shall be computed as the amount that, in light of all of the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability (irrespective of whether such contingent liabilities meet the criteria for accrual under Statement of Financial Accounting Standards No. 5).
[Signature Page Follows]
G-2
IN WITNESS WHEREOF, I have executed this Solvency Certificate on the date first written above.
ASSETMARK FINANCIAL HOLDINGS, INC. | ||
By: |
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Name: | ||
Title: |
G-3
EXHIBIT H
FORM OF COMPLIANCE CERTIFICATE
Financial Statement Date: 1
To: Credit Suisse AG, Cayman Islands Branch, as Administrative Agent
Credit Suisse AG, Cayman Islands Branch
Eleven Madison Avenue
New York, NY 10010
Attn: Agency Manager
Fax: 212-322-2291
Email: agency.loanops@credit-suisse.com
Ladies and Gentlemen:
Reference is made to that certain Credit Agreement, dated as of November 14, 2018 (as amended, supplemented or otherwise modified from time to time, the Credit Agreement ), among AssetMark Financial Holdings, Inc., a Delaware corporation (the Borrower ), AssetMark Holdings LLC, a Delaware limited liability company, the Lenders from time to time party thereto and Credit Suisse AG, Cayman Islands Branch, as the Administrative Agent and Collateral Agent. Terms used herein and not otherwise defined shall have the meaning assigned thereto in the Credit Agreement.
The undersigned hereby certifies as of the date hereof that [he/she] is a Responsible Officer of the Borrower, and that, as such, [he/she] is authorized to execute and deliver this certificate to the Administrative Agent on the behalf of the Borrower, and that:
[ Use following paragraph 1 for fiscal year-end financial statements ] 2
1. Attached hereto as Schedule 1 are the year-end audited consolidated financial statements or Form 10-K required by Section 5.04(a) of the Credit Agreement for the fiscal year of the Borrower and its consolidated Subsidiaries ended as of the referenced fiscal year end, accompanied by the opinion of independent certified public accountants of recognized national standing as required by Section 5.04(a) of the Credit Agreement.
[ Use following paragraph 1 for fiscal quarter-end financial statements ] 3
1. Attached hereto as Schedule 1 are the unaudited consolidated financial statements or Form 10-Q required by Section 5.04(b) of the Credit Agreement for the fiscal quarter of the Borrower and its consolidated Subsidiaries ended as of the referenced fiscal quarter end. Such financial statements fairly present in all material respects the financial condition and results of operations of the Borrower and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, subject to normal year-end audit adjustments.
1 |
To be the last day of the fiscal quarter or fiscal year, as applicable, for which the certificate is being delivered. |
2 |
Required to be delivered within 120 days after the end of each fiscal year. |
3 |
Required to be delivered within 45 days after the end of each of the first three fiscal quarters of each fiscal |
year. |
|
H-1
2. The undersigned has reviewed and is familiar with the terms of the Credit Agreement and has made, or has caused to be made under [his/her] supervision, a review of the activities of the Borrower and its consolidated Subsidiaries during the fiscal period covered by the attached financial statements.
3. To the knowledge of the undersigned, no Default or Event of Default has occurred and is continuing. [If unable to provide the foregoing certification, fully describe the nature and extent thereof and any corrective action taken or proposed to be taken with respect thereto on Annex A attached hereto.]
4. Attached as Schedule 2 hereto are reasonably detailed computations demonstrating compliance with the covenant contained in Section 6.10 of the Credit Agreement as at the end of the applicable Test Period (to the extent such financial covenant was subject to testing during such Test Period) and which such computations are true and accurate in all material respects on and as of the date hereof. 4
[ for year-end certificate ending on or after December 31, 2019 only ]
5. [Attached as Schedule 3 hereof are reasonably detailed computations with respect to Excess Cash Flow for such period, which such computations are true and accurate in all material respects on and as of the date of this certificate.]
[ for year-end certificate only, select one :]
[5/6]. [There has been no change in the information required to be set forth on the Perfection Certificate since the date of the Perfection Certificate delivered on [the Closing Date][the date of the last Compliance Certificate].]
--or--
[5/6]. [The information required to be set forth on the Perfection Certificate is set forth on Schedule 4 attached hereto.]
[ for year-end certificate only ]
[6/7]. [Schedule 5 identifies all material registered, or applications to register, Intellectual Property (as defined in the Guarantee and Collateral Agreement) of any Grantor (as defined in the Guarantee and Collateral Agreement) in the United States Patent and Trademark Office or United States Copyright Office in existence of the date hereof that has not been previously identified to the Collateral Agent.]
4 |
The calculation with respect to the covenant contained in Section 6.10 of the Credit Agreement shall only be required if, on the last day of any Test Period (commencing with the Test Period ending March 31, 2019), the aggregate principal amount of Revolving Loans and Letters of Credit (excluding Letters of Credit that have been Cash Collateralized) outstanding exceeds 30% of the aggregate principal amount of the Revolving Credit Commitments. |
[ Signature Page Follows ]
H-2
IN WITNESS WHEREOF, the undersigned has executed this certificate in such undersigneds capacity as a duly authorized officer of the Borrower, on behalf of the Borrower, and not individually, as of the day and year first above written.
ASSETMARK FINANCIAL HOLDINGS, INC. | ||
By |
|
|
Name: | ||
Title: |
H-3
SCHEDULE 1
[Section 5.04 Financial Statements]
- 1 -
SCHEDULE 2
For the Quarter/Year ended [mm/dd/yy] ($ in 000s)
I. |
Section 6.10 of the Credit Agreement Total Leverage Ratio 1 |
A. Consolidated Interest Expense 2 |
||||||
1. the sum of: |
||||||
(i) the interest expense (including imputed interest expense in respect of Capital Lease Obligations and Synthetic Lease Obligations) of the Borrower and the other Restricted Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP; and |
$ | |||||
(ii) any interest accrued during such period in respect of Indebtedness of the Borrower or any other Restricted Subsidiary that is required to be capitalized rather than included in consolidated interest expense for such period in accordance with GAAP |
$ | |||||
1.1 Consolidated Interest Expense | $ | |||||
B. Consolidated EBITDA 3 |
||||||
.
|
1. Net income or loss of the Borrower and the other Restricted Subsidiaries for such period determined on a consolidated basis in accordance with GAAP, minus : |
$ | ||||
(i) | the income of any Restricted Subsidiary (other than the Borrower) to the extent that the declaration or payment of dividends or similar distributions by such Restricted Subsidiary of that income is not at the time permitted by operation of the terms of its charter or any agreement, instrument, judgment, decree, statute, rule or governmental regulation applicable to such Restricted Subsidiary | $ |
1 |
Calculated, including pro forma adjustments, giving pro forma effect in accordance with Section 1.03 of the Credit Agreement. |
2 |
For purposes of this section, interest expense shall be determined after giving effect to any net payments made or received by the Borrower or any other Restricted Subsidiary with respect to interest rate Hedging Agreements. |
3 |
Calculated after giving effect to any Specified Equity Contribution pursuant to Section 7.02 of the Credit Agreement. |
- 1 -
SCHEDULE 2
(ii) the income or loss of any person accrued prior to the date it becomes a Restricted Subsidiary or is merged into or consolidated with the Borrower or any other Restricted Subsidiary or the date that such persons assets are acquired by the Borrower or any other Restricted Subsidiary |
$ | |||
|
(iii) the income of any person in which any other person (other than the Borrower or any other Restricted Subsidiary that is a Wholly Owned Subsidiary of the Borrower or any director holding qualifying shares in accordance with applicable law) has a joint interest, except to the extent of the amount of dividends or other distributions actually paid to the Borrower or any other Restricted Subsidiary that is a Wholly Owned Subsidiary of the Borrower by such person during such period |
$ | ||
(iv) the cumulative effect of a change in accounting principles during such period to the extent included in net income or loss as determined in accordance with GAAP |
$ | |||
(v) any income (loss) for such period attributable to the early extinguishment of Indebtedness, hedging agreements or other derivative instruments; and |
$ | |||
(vi) the effects of acquisition method accounting, including applying acquisition method accounting to inventory, property and equipment, leases, software and other intangible assets and deferred revenue (including deferred costs related thereto and deferred rent) required or permitted by GAAP and related authoritative pronouncements (including the effects of such adjustments pushed down to the Borrower or any other Restricted Subsidiary), as a result of any Permitted Acquisition (or other Investment permitted hereunder) or the amortization or write-off of any amounts thereof |
$ | |||
1.1 | Consolidated Net Income | $ |
- 2 -
SCHEDULE 2
2. | without duplication and to the extent deducted in determining Consolidated Net Income, the sum of: | |||
(i) Consolidated Interest Expense for such period (Line I.A.1.1) |
$ | |||
(ii) provision for taxes based on income, profits or capital and sales taxes, including federal, foreign, state, franchise, business license, value added, excise and similar taxes paid or accrued during such period (including in respect of repatriated funds) |
$ | |||
(iii) all amounts attributable to depreciation and amortization for such period |
$ | |||
(iv) any aggregate net loss during such period arising from the sale, exchange or other disposition of assets outside of the ordinary course of business |
$ | |||
(v) any Public Company Costs |
$ | |||
(vi) any fees and expenses (including any transaction or retention bonus) incurred during such period, or any amortization thereof during such period, in connection with any acquisition or Investment, asset disposition, issuance or repayment of debt, issuance of equity securities, refinancing transaction or amendment or other modification of or waiver or consent relating to any debt instrument (in each case, including Transaction Costs and any such transaction undertaken but not completed) |
$ | |||
(vii) Up to $6,000,000 in an aggregate amount for any Test Period, unusual or non-recurring charges (including any unusual or non-recurring expenses directly attributable to the implementation of cost savings initiatives), severance, relocation costs, integration and facilities opening costs, retention or completion bonuses, transition costs and costs related to closure/consolidation of facilities and curtailments or modifications to pension and other post-retirement employee benefit plans (including any settlement of pension liabilities) (in each case, other than those referred to in Line I.B.2.viii below) in any period |
$ |
- 3 -
SCHEDULE 2
|
incurred during such period, provided that the aggregate cumulative amount for all items added pursuant to this Line I.B.2.vii or Line I.B.2.viii below shall not exceed, when aggregated with the aggregate amount added to or included in Consolidated EBITDA pursuant to any pro forma adjustments during such period pursuant to clause (ii) of Section 1.03(d), 25.0% of Consolidated EBITDA (giving effect to such adjustments) for such Test Period, |
|||
(viii) Up to $8,000,000 in an aggregate amount for any Test Period, restructuring charges and expenses for such period, provided that aggregate cumulative amount for all items added pursuant to this Line I.B.2.viii or Line I.B.2.vii shall not exceed, when aggregated with the aggregate amount added to or included in Consolidated EBITDA pursuant to any pro forma adjustments during such period pursuant to clause (ii) of Section 1.03(d) of the Credit Agreement, 25.0% of Consolidated EBITDA (giving effect to such adjustments) for such Test Period, |
$ | |||
(ix) any non-cash charges or losses that have been deducted in determining Consolidated Net Income for such period in accordance with GAAP, to the extent of such deduction (other than any such non-cash charge or loss in respect of an item that increased Consolidated EBITDA in a prior period that began after the Closing Date and any such non-cash charge or loss that results from the write-down or write-off of current assets) |
$ | |||
(x) the amount of any net losses from discontinued operations |
$ | |||
(xi) the amount of any minority interest income consisting of subsidiary income attributable to minority equity interests of third parties in any Subsidiary that is not a Wholly-Owned Subsidiary deducted from (and not added back in such period to) Consolidated Net Income |
$ | |||
(xii) any extraordinary losses for such period |
$ | |||
(xiii)stock-based compensation award expenses |
$ |
- 4 -
SCHEDULE 2
|
(xiv) any loss attributable to deferred compensation plans or trusts |
$ | ||
(xv) to the extent covered by insurance and actually reimbursed, or if there is reasonable evidence that such amount will in fact be reimbursed by a third party insurer (and only to the extent that such amount is in fact reimbursed) within 180 days of the date of such determination (with a deduction in the applicable future period for any amount so excluded to the extent not so reimbursed within such 180 days), expenses, charges or losses with respect to business interruption (and if such expenses, charges or losses are added to Consolidated Net Income in determining Consolidated EBITDA, such insurance proceeds shall be excluded from Consolidated EBITDA) |
$ | |||
(xvi) all costs, fees and exposes of the board of directors of the Borrower and Holdings that are actually reimbursed by the Borrower |
$ | |||
(xvi) charges attributable to, and payments of, legal settlements, fines, judgments or orders |
$ | |||
|
(xvi) any net pension or other post-employment benefit costs representing amortization of unrecognized prior service costs, actuarial losses, including amortization of such amounts arising in prior periods, amortization of the unrecognized net obligation (and loss or cost) existing at the date of initial application of FASB Accounting Standards Codification 715, and any other items of a similar nature |
$ | ||
2.1 |
Total |
$ | ||
3. |
without duplication, and to the extent included in the calculation of such Consolidated Net Income, the sum of: | |||
(i) all cash payments made during such period on account of reserves, restructuring charges and other non-cash charges added to Consolidated Net Income pursuant to Line I.B.2.viii or Line I.B.2.ix above in a previous period |
$ |
- 5 -
SCHEDULE 2
(ii) any extraordinary gains and all non-cash items of income for such period |
$ | |||
(iii) any aggregate net gain during such period arising from the sale, exchange or other disposition of assets outside of the ordinary course of business |
$ | |||
(iv) the amount of any net gains from discontinued operations |
$ | |||
(v) the amount of any minority interest losses consisting of subsidiary losses attributable to minority equity interests of third parties in any Subsidiary that is not a Wholly Owned Subsidiary added back to (and not deducted in such period from) Consolidated Net Income; and |
$ | |||
(vi) any gain attributable to deferred compensation plans or trusts, all determined on a consolidated basis in accordance with GAAP |
$ | |||
3.1 |
Total |
$ | ||
4. |
Total Consolidated EBITDA 4 for current quarter ((Line I.B.1.1 + Line I.B.2.1) Line I.B.3.1) |
$ | ||
5. |
Total Consolidated EBITDA for previous 3 consecutive fiscal quarters |
$ | ||
6. |
Total Consolidated EBITDA for 4 consecutive fiscal quarters ended ________ (Line I.B.4 + Line I.B.5) |
$ |
C. |
Total Leverage Ratio |
4 |
For purposes of calculating the First Lien Leverage Ratio and the Total Leverage Ratio, (A) the Consolidated EBITDA of any Acquired Entity acquired by the Borrower or any other Restricted Subsidiary pursuant to a Permitted Acquisition during such period shall, to the extent reasonably determinable on a going concern basis, be included on a pro forma basis for such period (assuming the consummation of such acquisition and the incurrence or assumption of any Indebtedness in connection therewith occurred as of the first day of such period and including the pro forma adjustments described in Section 1.03 of the Credit Agreement) and (B) the Consolidated EBITDA attributable to any Asset Sale by the Borrower or any other Restricted Subsidiary during such period shall be excluded for such period (assuming the consummation of such Asset Sale and the repayment of any Indebtedness in connection therewith and including the pro forma adjustments described in Section 1.03 of the Credit Agreement with respect to such period). |
- 6 -
SCHEDULE 2
1. Indebtedness of Holdings, the Borrower and the other Restricted Subsidiaries at such time consisting only of Indebtedness for borrowed money, notes, bonds, debentures, drawn but unreimbursed obligations under letters of credit, letters of guaranty and bankers acceptances, obligations in respect of Capital Lease Obligations and purchase money indebtedness (other than trade accounts payable in the ordinary course of business) |
$ |
divided by
2. Consolidated EBITDA 5 for four consecutive fiscal quarters ended _____________ (Line I.B.6) |
$ | |||
3. Total Leverage Ratio for four consecutive fiscal quarters ended on the Financial Statement Date |
____:1.00 |
5 |
For purposes of calculating the Total Leverage Ratio, (A) the Consolidated EBITDA of any Acquired Entity acquired by the Borrower or any other Restricted Subsidiary pursuant to a Permitted Acquisition during such period shall, to the extent reasonably determinable on a going concern basis, be included on a pro forma basis for such period (assuming the consummation of such acquisition and the incurrence or assumption of any Indebtedness in connection therewith occurred as of the first day of such period and including the pro forma adjustments described in Section 1.03 of the Credit Agreement) and (B) the Consolidated EBITDA attributable to any Asset Sale by Holdings, the Borrower or any other Restricted Subsidiary during such period shall be excluded for such period (assuming the consummation of such Asset Sale and the repayment of any Indebtedness in connection therewith and including the pro forma adjustments described in Section 1.03 of the Credit Agreement with respect to such period). |
- 7 -
SCHEDULE 3
II. |
Excess Cash Flow 1 |
A. Consolidated EBITDA for the fiscal year to which this certificate relates |
||||
1. Total Consolidated EBITDA for fiscal year (Line I.B.6 ) |
$ | |||
B. For the fiscal year to which this certificate relates, the sum, without duplication, of |
||||
1. the amount of any Taxes payable in cash by the Borrower and the other Restricted Subsidiaries with respect to such fiscal year |
$ | |||
2. Consolidated Interest Expense for such fiscal year paid in cash |
$ | |||
3. capital expenditures made in cash during such fiscal year, to the extent financed with internally generated cash flow |
$ | |||
4. permanent repayments of Indebtedness (other than mandatory prepayments of Loans under Section 2.13 of the Credit Agreement and prepayments and repurchases of Loans referred to in clause (B) of Section 2.13(c) of the Credit Agreement) made in cash by the Borrower or any other Restricted Subsidiary during such fiscal year, but only to the extent that the Indebtedness so prepaid by its terms cannot be reborrowed or redrawn and such prepayments do not occur in connection with a refinancing of all or any portion of such Indebtedness |
$ | |||
5. all amounts added back to Consolidated Net Income in calculating Consolidated EBITDA pursuant to Lines I.B.2.vi and I.B.2.xvi above or, to the extent paid in cash during such fiscal year, Lines I.B.2.vii or I.B.2.viii above |
$ | |||
6. additions to noncash working capital for such fiscal year ( i.e. , the increase, if any, in Current Assets minus Current Liabilities from the beginning to the end of such fiscal year); |
$ | |||
7. (A) cash consideration paid during such fiscal year (or, at the option of the Borrower, committed to be paid prior to the date the Borrower is required to make a payment of Excess Cash |
$ |
1 |
Calculated without giving pro forma effect in accordance with Section 1.03 of the Credit Agreement. |
- 1 -
SCHEDULE 3
Flow in respect of such fiscal year) by the Borrower or any other Restricted Subsidiary to make Permitted Acquisitions or other similar Investments (other than (1) in Holdings or a Restricted Subsidiary and (2) in Cash Equivalents) permitted under Section 6.04 of the Credit Agreement and (B) Restricted Payments made in cash during such fiscal year (or, at the option of the Borrower, committed to be paid prior to the date the Borrower is required to make a payment of Excess Cash Flow in respect of such fiscal year) by the Borrower or any Restricted Subsidiary (other than to Holdings or any Restricted Subsidiary) permitted under Section 6.06(a) of the Credit Agreement (other than Section 6.06(a)(v) of the Credit Agreement) (except, in each case to the extent funded with the proceeds of long-term Indebtedness (other than revolving Indebtedness)); 2 and |
||||
8. payments made in cash by the Borrower or any other Restricted Subsidiary during such fiscal year (except to the extent deducted in calculating Consolidated Net Income or Consolidated EBITDA) in satisfaction of noncurrent liabilities (excluding any payments of Indebtedness for borrowed money), to the extent financed with internally generated cash flow |
$ | |||
9. Total |
$ |
C. Excess Cash Flow: | ||||
1. Consolidated EBITDA (Line II.A.4) |
$ | |||
plus |
||||
2. reductions to noncash working capital of the Borrower and the other Restricted Subsidiaries for such fiscal year ( i.e. , the absolute value of the decrease, if any, in Current Assets minus Current Liabilities from the beginning to the end of such fiscal year) 3 |
$ |
2 |
Amounts described in II.B.7. will not reduce Excess Cash Flow in subsequent periods and, to the extent not paid, will increase Excess Cash Flow in the subsequent period. |
3 |
For purposes of calculating Excess Cash Flow, increases or decreases in working capital shall exclude (A) any changes in Current Assets or Current Liabilities solely as a result of acquisitions or dispositions by the Borrower and the other Restricted Subsidiaries during the applicable period and (B) any reclassification in accordance with GAAP of assets or liabilities, as applicable, between current and noncurrent. |
- 2 -
SCHEDULE 3
minus | ||||||
3. | Total (Line II.B.9) | $ | ||||
4. | Excess Cash Flow | $ | ||||
D. |
Excess Cash Flow Prepayment : | |||||
1. | ECF Percentage 4 | % | ||||
times | ||||||
2. | Excess Cash Flow (Line II.C.4) | $ | ||||
3. | Total | $ | ||||
minus
|
||||||
4. | (x) without duplication of amounts reducing Excess Cash Flow, at the option of the Borrower, the aggregate principal amount of (x) any optional prepayments or repurchases of Term Loans, Revolving Loans or Incremental Equivalent Debt that is secured on a pari passu basis with the Credit Facilities prior to the date of prepayment pursuant to Section 2.13(c) of the Credit Agreement, and (y) the amount of any reduction in the outstanding amount of any Term Loans resulting from any assignment made to Holdings, the Borrower or any of its Restricted Subsidiaries in accordance with Section 2.12(c) of the Credit Agreement (including in connection with any Auction) prior to the date of prepayment pursuant to Section 2.13(c) of the Credit Agreement, in the case of this clause (y), based upon the actual amount of cash paid in connection with the relevant assignment, in each case, only to the extent that (I) such prepayments were not financed with the proceeds of long-term Indebtedness (other than Revolving Loans) of the Borrower and its Restricted Subsidiaries, (II) if such prepayment is a prepayment of Revolving Loans or of Incremental Equivalent Debt in the form of a revolving facility, such prepayment is accompanied by a corresponding termination or reduction of the Revolving Credit Commitment or relevant commitment, respectively, and (III) such prepayment was not previously applied to reduce the amount of any prepayment required by this clause | $ |
4 |
ECF Percentage shall mean 50% (or, if the First Lien Leverage Ratio as of the last day of the applicable fiscal year of the Borrower shall have been (x) equal to or less than 2.20 to 1.00 but greater than 1.70 to 1.00, 25% or (y) equal to or less than 1.70 to 1.00, 0%). |
- 3 -
SCHEDULE 3
5. | Excess Cash Flow Prepayment (Line II.D.3 Line II.D.4) 5 | $ |
5 |
Any such Excess Cash Flow Prepayment by the Borrower shall only required to the extent the amount of such prepayment for such fiscal year of the Borrower exceeds $2,000,000. |
- 4 -
SCHEDULE 4
[Supplement to the Perfection Certificate]
SCHEDULE 5
IP SUPPLEMENTAL SCHEDULE
U.S. COPYRIGHTS
Copyrights/Copyright Applications
Grantor / Registered Owner |
Title |
Registration/Application Number |
Expiration Date |
|||
Exclusive Copyright Licenses
Grantor / Licensee |
Licensor |
Title |
Registration Number |
Expiration Date |
||||
U.S. PATENTS
U.S. Patents/Patent Applications
Registered Owner
|
Title of Patent |
Registration/Application Number |
Expiration Date |
|||
U.S. TRADEMARKS
Trademarks/Trademark Applications
Registered Owner |
Mark |
Application/Registration Number |
Expiration Date |
|||
Exhibit 10.3
The redacted information has been excluded because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed.
HWA INTERNATIONAL, INC./CENTURION TRUST COMPANY
TRUSTNET SOFTWARE LICENSE AGREEMENT
Upon this Agreement becoming effective as provided in Section 20 (the Effective Date), HWA International, Inc. (Licensor), whose address is 2525 Horizon Lake Drive, Suite 110, Memphis, Tennessee 38133, hereby grants, and Centurion Trust Company (Licensee), whose address is 2625 East Camelback Road, Suite 540, Phoenix, Arizona 85016, hereby accepts, according to the terms of this Agreement, a license (the License) to use the Licensed Software. The term; (a) Agreement means this 7-page Trustnet Software License Agreement, including Addendum I and Exhibits A through D hereto; and (b) Licensed Software means all programs, updates, revisions, enhancements, modifications, manuals and related materials supplied by Licensor pursuant to this Agreement, and includes (i) the Initial Standard Software which means the Licensed Software described on Exhibit A hereto and, (ii) the Initial Custom Software, which means the Licensed Software described on Exhibit B hereto. The Initial Software means only the Initial Starboard Software and the Initial Custom Software.
1. |
OWNERSHIP. |
The Licensed Software, including all related notes, flow charts and other Materials and all duplicates thereof, shall remain at all times the exclusive property of Licensor.
2. |
SCOPE OF LICENSE. |
The License is for the current version of the Initial Standard Software and the related Initial Custom Software, and also covers all future standard updates, revisions, enhancements and modifications, any additional custom software which may be provided in the future by Licensor to Licensee pursuant to this Agreement, and all related notes, flow charts and other materials.
Licensee may use the Licensed Software in machine readable form on one central processing unit located at its address set forth above (or any future new and substitute address of Licensee in the State of Arizona) and any associated remote terminals or units which have the capacity to utilize or call into use the Licensed Software. Subject to the provisions of the following sentence, Licensee may use the Licensed Software only for its own internal data processing needs (which may include limited access to data files by WAN or other method by Licensees customers in the ordinary course of business) and not for any other purpose or at any other location. Licensee may use the Licensed Software on a back-up system for security purposes and/or when the primary central processing unit is temporarily inoperable until it is restored to operable status.
Except as is provided in the following sentence the License and Licensees other rights under this Agreement may not be assigned, sub-licensed or otherwise transferred, whether voluntarily, involuntarily or by operation of law, without Licensors prior written consent. Licensee may transfer the License and its other rights under this Agreement to an entity which succeeds to Licensees trust accounting business by merger, consolidation, purchase or otherwise; provided that, any transferee shall then be subject to the same restrictions on use and transfer as if it were the original named Licensee, and Licensor may charge a transfer fee equal to one-half the current license fee.
The License will be non-exclusive and Licensor may also grant non-exclusive licenses to use all or any portion of the Licensed Software to any other customer(s) of Licensor. Licensee will have no right to any payment or other consideration based on any such other licenses.
3. |
TERM. |
The term of this Agreement will commence on the Effective Date and continue until December 31, 2016, unless cancelled or terminated earlier as provided in this Agreement. Thereafter the License is renewable on an annual basis at Licensees option for an additional annual fee of $1.00, unless terminated earlier as provided in this Agreement. The License will remain in effect during the term of this Agreement.
4. |
BASIC FEES; ADDITIONAL USERS; OPTION. |
The one-time basic fee (the Base Fee) is: (a) $[***]; plus (b) for the Initial Custom Software, a sum computed in accordance with Exhibit D. but not in excess of $[***] (the Custom Fee). In addition, Licensee will pay Licensor a one-time consulting fee in the amount of $[***] (the Consulting Fee). The Base Fee and the Consulting Fee do not Include the analytic and design fees which will be separately billed in accordance with Exhibit 0. The Base Fee and the Consulting Fee constitute the entire consideration Licensee will be required to pay, except as specifically provided in the preceding sentence, in the following two subsections, in Sections 2. 5 through 9 and 15, and in Addendum I. Licensee agrees to pay the Base Fee and the Consulting Fee to Licensor as follows: (a) $[***] at the Effective Date; (b) $[***] on the earlier of receipt of a Confirmation Letter or completion of conversion pursuant to Section 6; and (c) the Custom fee as invoiced monthly for hours of work completed on the Initial Custom Software. The term Confirmation Letter means a notice from Licensor received by Licensee at any time prior to July 1, 1995, which confirms that the Initial Custom Software will be completed and the operational date described in Section 6 will be on or before July 3, 1995.
The Base Fee is computed on the basis of a maximum of [***] user/terminals. For each additional user/terminal employed by Licensee, Licensee will pay Licensor an additional onetime fee of $[***].
Licensee is also granted the option to include Licensors Performance Measurement software in the Licensed Software for an additional onetime fee of: (a) $[***] for Performance Summary; (b) $[***] for Performance Report: or (c) $[***] for both Performance Summary and Performance Report.
The fees in the preceding two paragraphs may be increased pursuant to Section 17.
5. |
TAXES. |
In addition to the Base Fee and all other fee(s) and charge(s) payable by Licensee to Licensor pursuant to this Agreement (collectively the Fees), Licensee agrees to either pay directly, or reimburse Licensor if Licensor pays, any sales, transaction privilege, use and/or similar excise taxes which are based on or measured by any fees and payable to the State of Tennessee or the State of Arizona or any of their counties, municipalities or other governmental subdivisions; provided that. Licensee shall not be obligated to pay or reimburse: (a) any corporate franchise or net income tax of Licensor; or (b) any interest or penalty which may accrue on any tax which is not timely and accurately reported and paid to the relevant governmental entity. Licensor confirms that it knows of no such tax in the State of Tennessee which is in effect on May 19, 1995.
6. |
INSTALLATION: CONVERSION. |
Licensor will make reasonable efforts to (and if a Confirmation Letter has been sent Licensor will) deliver and install the Initial Software and assist in the conversion of Licensees system, data and operations on a coordinated schedule which will allow the initial training described in Section 7 to be completed and the Initial Software to be operative on Licensees system for use in the ordinary course of Licensees business on or before July 3, 1995. If no Confirmation Letter is sent Licensor will assure that the operational date is no later than October 2, 1995. Upon installation and conversion Licensor will demonstrate that the Initial Software is operating in accordance with Licensors specifications described on Exhibit C hereto.
Licensee will cooperate with Licensor to provide access to its premises for installation and conversion and Licensor agrees to conform to Licensees security requirements while on Licensees premises. Licensor agrees to indemnify Licensee for losses to property or claims based on bodily injury or death caused by or arising from Licensors employees or agents negligence or willful misconduct while on Licensees premises.
-2-
The total Fee for the initial delivery, installation and conversion, including all conversion software programming, which will be $[***], plus directly related travel, lodging, meals and communications expenses, will be payable by Licensee to Licensor upon completion of conversion. Licensor will notify Licensee in writing when the conversion has been completed.
Any delays in the installation and conversion caused by malfunction of Licensees computer hardware will be the sole responsibility of Licensee; provided that, Licensee has confirmed that the Licensed Software will be compatible with Licensees properly operating existing hardware. Licensor may charge Fees for time and expenses incurred as a result of delays caused by Licensees malfunctioning computer hardware, or for future installation services not covered by Addendum I, in accordance with Exhibit D hereto.
7. |
TRAINING. |
Licensor will provide three days training for Licensees employees in Phoenix, Arizona, in conjunction with the initial conversion described in Section 6. The Fee for the three days of initial training is included in the Base Fee. Additional expenses for directly related travel, lodging, meals and communications expenses for the trip will be billed after the trip, along with travel time, in accordance with Exhibit D. Fees and expenses for any future training [not covered by Addendum 1] will be computed in accordance with Exhibit D hereto.
8. |
LIMITED WARRANTY. |
Licensor warrants that all Licensed Software provided by Licensor pursuant to this Agreement will be free from defects at the time(s) of delivery and installation and for 90 days thereafter, will then comply with and perform the relevant current functions and specifications communicated by Licensor to Licensee, and will represent the most current version of the relevant Licensed Software. The foregoing warranty, and Licensors obligations under this Section 8, will continue beyond the 90-day period only so long as the Software Maintenance Agreement (Addendum I) remains in effect.
Licensor will issue periodic Licensed Software updates and revisions containing modifications reasonably necessary or appropriate to enhance or improve, reflect regulatory changes and/or correct the operation of the Licensed Software. Licensee must apply such updates and revisions according to instructions received from Licensor. Failure to apply such an update or revision within 30 working days from the date received with instructions by Licensee will suspend the warranty provisions of this Section 8 with respect to any affected portion of the Licensed Software until such update or revision has been applied by Licensee.
Licensor agrees to provide Licensee such telephone consultation during Licensors published hours then in effect as may be required by Licensee to resolve technical problems encountered while working with the Licensed Software. Licensor agrees, upon receiving written notice of any failure(s) of the Licensed Software to conform to the above warranty promptly after Licensee becomes aware of the relevant failure(s), to verify and correct errors in the Licensed Software provided the errors can be recreated with the latest unaltered version of the Licensed Software. Licensee may be required to supply copies of Licensees reports, files and/or programs to assist Licensor in problem determination. Error verification will be conducted at Licensors facilities. Licensor will respond to verified errors, at no charge, by issuing a program temporary fix and/or corrections to Licensee via Licensors Bulletin Board System.
The limited warranty in this Section 8 will become void If the Licensed Software is modified in any material manner except by or under the direction of or with the consent of Licensor, or if any of Licensees data file structure is altered except by the Licensed Software. Errors due to modifications not approved by Licensor, hardware malfunction or error, software supplied by any party other than Licensor, or improper use are the responsibility of Licensee, and efforts expended identifying and correcting such errors may be charged to Licensee in accordance with Exhibit D hereto.
-3-
THE FOREGOING WARRANTIES ARE IN LIEU OF ALL OTHER WARRANTIES OF PERFORMANCE OR AGAINST DEFECTS, EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, ANY IMPLIED WARRANTIES OF MERCHANT- ABILITY OR FITNESS FOR A PARTICULAR PURPOSE. EXCEPT AS IS SPECIFICALLY STATED IN THIS AGREEMENT, LICENSOR DOES NOT WARRANT THAT THE FUNCTIONS CONTAINED IN THE LICENSED SOFTWARE WILL MEET LICENSEES REQUIREMENTS OR THAT THE OPERATION OF THE LICENSED SOFTWARE WILL BE UNINTERRUPTED OR ERROR FREE. LICENSEE AGREES THAT LICENSORS LIABILITY FOR DAMAGES UNDER THIS SECTION 8. EXCEPT FOR ANY DAMAGES RESULTING FROM ANY INTENTIONAL BREACH BY LICENSOR, SHALL NOT EXCEED THE TOTAL FEES PAYABLE BY LICENSEE AND SHALL NOT INCLUDE ANY SPECIAL OR CONSEQUENTIAL DAMAGES (EVEN IF LICENSOR IS ADVISED OF THE POSSIBILITY OF SUCH DAMAGES). AS USED IN THE PRECEDING SENTENCE, THE TERM INTENTIONAL BREACH MEANS A KNOWING, WILLFUL REFUSAL BY LICENSOR TO PROVIDE LICENSED SOFTWARE OR SUPPORT AS SPECIFICALLY REQUIRED, AND DOES NOT INCLUDE ANY OTHER BREACH OR DEFAULT, INCLUDING, WITHOUT LIMITATION, ANY BREACH OR DEFAULT BASED ON NEGLIGENCE OR ANY INABILITY TO PERFORM.
9. |
CUSTOM SOFTWARE; MODIFICATIONS. |
Licensee may from time to time in the future desire custom software enhancements or additions which are not included in the Initial Custom Software and not generally available to Licensors customers. If Licensee makes such a request and the proposed enhancement or addition is feasible and compatible with the then current Licensed Software, Licensor will quote Licensee an estimated timeline and Fee (which will reasonably reflect the pricing on Exhibit D) therefor. If Licensee accepts the quotation, Licensor will develop and deliver the enhancement or addition, which will then be included in the Licensed Software.
Any modified Licensed Program(s) will remain subject to the same restrictions on use. reproduction, and disclosure as are applicable to the unmodified Licensed Software.
10. |
CONFIDENTIALITY. |
Licensee acknowledges the Licensed Software Contains trade secrets, that they are of substantial value to Licensor, and that their unauthorized use, disclosure or reproduction could cause Licensor irreparable harm. Licensee agrees not to disclose, use, reproduce, publish, release, transfer or otherwise make available any portion of the Licensed Software, in any form, to any person other than Licensees or Licensors authorized employees, agents or customers as allowed by Section 2, without Licensors prior written approval. Licensee agrees that all materials supplied by Licensor under this Agreement shall be kept in a secure place, and Licensee will take appropriate action reasonably satisfactory to Licensor, by instruction, agreement or otherwise, with any persons permitted access to the Licensed Software to assure continuous confidentiality. Licensee will be responsible for the supervision and control of its use of the Licensed Software including but not limited to assuring Licensees personnel are instructed in the restrictions and conditions of the License; protecting the Licensed Software from theft or destruction; and assuring proper machine configuration, audit controls and operating methods. The parties agree that all confidential or proprietary information communicated to either party, before or after the Effective Date, will be regarded as given in confidence. Licensee may not remove or destroy any proprietary markings or proprietary legends on or contained within the Licensed Software. Licensee agrees that all Information relating to the Licensed Software is confidential and proprietary to Licensor and that all such information will be disclosed only to those employees or consultants of Licensee with a need to know. Licensor shall have the sane responsibilities to safeguard the confidentiality of any records or other information regarding Licensees business and customers which is disclosed to Licensor in connection with the natters described in this Agreement. Both parties acknowledge that no adequate remedy at law will exist in the event of a breach of any obligation imposed by this
Section 10, and injunctive and/or other equitable relief to prevent or remedy any such breach will be available.
-4-
11. |
PERMISSION TO COPY LICENSED SOFTWARE. |
Subject to the provisions of Sections 1, 2 and 10, Licensee may make one copy of the Licensed Software, in whole or in part, for back-up or archival purposes, and will maintain appropriate records of the location of any such copy. Licensee agrees to reproduce and include any copyright notice or proprietary notice of Licensor contained in the original Licensed Software on any form of any copy of any of the Licensed Software made by Licensor.
12. |
UNAUTHORIZED ACTS. |
Each party agrees to notify the other party immediately after learning thereof of the possession, use, knowledge, disclosure or reproduction of any Licensed Software or information which is disclosed to any person or entity in violation of this Agreement, and to reasonably cooperate with the other party in any investigation of and litigation against any such person or entity.
13. |
CANCELLATION. |
Licensee may at its option cancel this Agreement by written notice to Licensor (and receive a full refund of all Fees paid) at any time prior to 30 days after completion of the initial installation and conversion described in Section 6; provided that, Licensee will promptly return all Licensed Software and, if Licensor is not in default under this Agreement at the time of such notice, Licensee will be charged for all actual time, materials and expenses expended and incurred by Licensor in performing under this Agreement prior to receipt of such notice computed in accordance with Exhibit 0. Any such reimbursement will then constitute the total payment liability of Licensee.
14. |
INFRINGEMENT. |
Licensor warrants that: (a) Licensor has good title to the Licensed Software and/or the unrestricted right to grant Licensee the License; and (b) the Licensed Software, when and to the extent used by Licensee within the scope of the License, does not and will not
infringe on any patent, copyright, trademark, trade secret or any other third-party proprietary right. Licensor will defend at its expense any action brought against Licensee to the extent it is based on a claim that, if true, would constitute or reflect a violation of the foregoing warranty, and will pay any costs, damages and attorney fees incurred by or awarded against Licensee in such action which are attributable to such claim. Licensee shall give Licensor prompt written notice upon receipt of any such claim and Licensor may participate reasonably and in good faith in the defense of such action and negotiations regarding any settlement of such claim. If any of the Licensed Software becomes, or in Licensees opinion be likely to become, the subject of a claim of infringement of a copyright, patent, trademark, trade secret or other right, Licensor may procure for Licensee the right to continue using the Licensed Software or replace or modify it to make it non-infringing.
15. |
DEFAULT. |
If Licensor or Licensee (a Defaulting Party) fails in any material respect to pay any Fees or comply with any other term or provision of this Agreement or becomes the subject of an order for relief under Chapter 7 of the federal Bankruptcy Code (a Default), and such Default is not cured within 60 days after written notice thereof is received by the Defaulting Party from the other party (a Non-Defaulting Party), then the Non-Defaulting Party may terminate this Agreement by written notice of termination to the Defaulting Party at any time thereafter that the noticed Default remains uncured. If Licensor terminates this Agreement pursuant to this Section 15, Licensee shall return all copies of the Licensed Software to Licensor, and cease all use thereof, no later than 60 days after the effective date of termination. Licensee shall then pay Licensor a temporary use fee of $[***] for every day from the date of termination by licensor until Licensee returns the Licensed Software and ceases such use. If Licensee fails to return the Licensed Software and cease use as required by the second preceding sentence, Licensor shall have the right to peaceably enter the premises of Licensee and take physical possession of and remove the Licensed Software.
-5-
Subject only to the specific limitations in Section 8, both parties shall have available, in the event of Default, all rights and remedies specifically provided in this Agreement and all other remedies available at law or in equity. In the event of any litigation, the prevailing party shall be entitled to collect from the other party its reasonable costs and attorneys fees incurred therein.
Licensor will deposit, and update on a calendar quarterly basis during the term of this Agreement (which may be confirmed by Licensee), a copy of the current version of all Licensed Software and related technical documentation, including all source code required for maintenance and/or correction, at First Security Bank in Batesville, Mississippi, or (with prior notice to Licensee) another responsible unaffiliated escrow agent for distribution to Licensee only if and when Licensor (but not Licensee) is in Default under, and Licensor is grossly negligently or intentionally failing to provide the support specifically required by, this Agreement. The purpose of this paragraph is solely to assure Licensee the ability to use the Licensed Software in accordance with the terms (and subject to all limitations) of the License granted in this Agreement if the required support is not being provided by Licensor because of an uncured Default by Licensor.
16. |
MISCELLANEOUS. |
This Agreement is the complete and exclusive statement between the parties relating to the subject matter of this Agreement, superseding all other communications, whether oral or written. No waiver of any right or obligation under, and no amendment of, this Agreement will be effective unless and until it is evidenced by a writing signed by both parties. This Agreement shall be governed by the laws of the State of Tennessee and the United States of America. This Agreement shall be binding upon and inure to the benefit of the parties, their employees, agents, representatives, affiliates, subsidiaries and successors and assigns (both authorized and unauthorized). Neither party shall be liable for delays which result from power failure, failure of common carriers or
communication lines, weather disruption, theft or vandalism, war, civil unrest, fire, flood or other acts of God. or similar causes (which do not include failure to adequately staff work unless the party is making reasonable good faith efforts to do so) which are beyond the reasonable control of that party. Time is of the essence of this Agreement.
17. |
PRICE INCREASES. |
Licensor may from time to time increase any price or rate set forth on Addendum I or Exhibit D hereto or the $[***] additional user and the Performance Measurement fees set forth in Section 4 (but not more than once in any calendar year or before January 1, 1996, or without prior notice to Licensee) so long as; (a) the percentage increase (computed on a cumulative basis with all prior percentage increases) does not exceed [***]% per annum from the Effective Date to the effective date of such increase; and (b) the resulting price or rate does not exceed Licensors standard published prices and rates to its customers.
18. |
NOTICES. |
Except as is provided in this Agreement with respect to telephonic communications, all notices and requests which may be given pursuant to this Agreement shall be in writing and personally delivered, sent by United States certified mail, or given by telecopy transmission to the parties at their respective addresses or telecopy numbers set forth in this Agreement. Either party may change its address or telecopy number by notice given to the other party pursuant to this Section 18.
19. |
ADDENDUM/EXHIBITS. |
The attached Addendum I (Software Maintenance Agreement) and Exhibit A (Initial Standard Software), B (Initial Custom Software), C (Specifications and Functions) and D (Standard Billing Policies) are incorporated in this Agreement.
-6-
20. |
EFFECTIVE DATE. |
The Effective Date will be the first business day on or before JUNE 5, 1995 that Licensee has in its possession at its address set forth above an original counterpart of this Agreement executed by Licensor and Licensee.
LICENSOR: HWA INTERNATIONAL, INC. | LICENSEE: CENTURION TRUST COMPANY | |||||||
By |
/s/ Steve W. Suter |
By |
/s/ Tom L. Peterson |
|||||
Title | President | Title | M ANAGING D IRECTOR | |||||
Date | June 1, 1995 | Date | June 1, 1995 | |||||
Telecopy (901) 388-5574 | Telecopy (602) 957-9788 |
-7-
ADDENDUM I
SOFTWARE MAINTENANCE AGREEMENT
The term of this Addendum I will commence on July 1, 1995, and expire (absent earlier cancellation or termination of the entire Agreement) on the earlier of any effective date selected and set forth in a written notice (which must be received at least 90 days prior to the effective date): (a) by Licensee to Licensor which is on or after December 31, 1996: or (b) by Licensor to Licensee which is on or after December 31, 2000.
Licensee is guaranteed access to a staff member who will answer Licensees questions and provide such telephone support for the Licensed Software as may be needed by Licensee, and Licensee will receive continued no-charge, error-correction support for the Licensed Software. Support will be provided during Licensors published hours in effect from time to time, which shall at a minimum be from 8:00 a.m. to 5:00 p.m. Central Standard time Monday through Friday, normal Licensor published holidays excluded.
Licensor will provide Licensee the above services for all levels of service and the following additional services based on the level of support selected in writing by Licensee:
level 1: |
Licensee is provided all new releases, enhancements and upgrades which will be sent to Licensee at no additional cost (except for Licensors actual costs of media, shipping and handling). Such releases, enhancements and upgrades exclude newly developed and completely independent software packages. Telephone support is billed as used. Licensee also receives preferential customer rates for such other services as are offered by Licensor. |
Level 2 : |
Licensee receives Level 1 service plus up to [***] hours per month of free telephone support. Telephone support in excess of [***] hours per month is billed as used. Unused telephone support is not transferable from one month to the next. |
Level 3: |
Licensee receives Level 1 service plus up to [***] hours per year of free telephone support. Registration fees for the annual users meeting for [***] participant are included, as is [***] registration at any supplemental training session held by Licensor. Unused telephone support and registration fee waivers are not transferable from one year to the next. |
Licensor will provide Level 3 service without charge only through June 30, 1996. Thereafter the annualized fee for: (a) Level 1 service will be $[***] plus $[***] for each terminal /user in excess of two: (b) Level 2 services will be $[***] plus $[***] per terminal/user in excess of two: and (c) Level 3 service will be $[***] plus $[***] per terminal/user in excess of two.
Weekly dividend announcements are available as an option based on a monthly fee of $[***].
Telephone support, except that covered in Levels 2 and 3, is charged monthly pursuant to Exhibit D. Long distance telephone toll charges are billed at Licensors cost. Licensor shall invoice Licensee on a monthly basis for services provided and Licensee shall pay all valid invoices within 15 days of receipt of each invoice.
Licensee may change the level of service from time to time but only as of any January 1. Any charges shall be proportionately pro-rated based on any change in level of service or partial period included in the term of this Addendum.
Initial Standard Software
1. |
TrustNet Serial No. A15427. |
2. |
Checkwriting module. |
3. |
Multi-User IQ Report Generator. |
4. |
Portfolio Modeling. |
Exhibit A
Exhibit B - Page 1 of 2
1. |
F2 Notes capability . This function will allow display and addition of customer service notes relating to any account. you will be able to press an F-key to display the most recent screen of notes for the account. This front screen will show one line for each note, with the ability to expand any note to full size (up to 6 lines of 70 characters each). The notes function will be available from Account Inquiry. Trust Holdings Inquiry and Transaction Inquiry. ($[***] to $[***]) |
2 . |
600 number interface . This program will create the file that will be used by the 800 inquiry line. Customers will be able to call in using either their BHG account number or their THET account number. ($[***] to $[***]) |
3. |
Trade Consolidation. This function will be accomplished using two separate programsone to set the trade batch for the group of transactions to be included, and a second to consolidate that batch into trades by fund. The consolidations will net transactions by |
a) Dollar purchases/redemptions for a fund
b) Shares purchases/redemptions for a fund
c) Exchanges within a fund family
Two reports will be printedone for TFTC trades, and another for direct trades. A file for transmission to IFTC will also be produced. ($[***] to $[***])
4. |
Accrual Dividend programming for various scenarios . we will add a place to set up the accrual processing rules for each accrual fund. Accrual rules will specify if transactions will take effect (for accrual purposes) on same day, next calendar day. or next business day. The transaction types are: purchase, sale, exchange in, exchange out, dividend reinvestment, transfer in, transfer out. |
We will add a place to set up the holiday schedule (up to 10 dates).
A daily program will scan the pending accruals file for records that are effective today, and update the dally balance for the account. This program will correctly handle weekend and holiday acruals. For dividend reinvestment transactions, the program will probably need to apply the adjustment back a few days to the trade date of the reinvestment.
A monthly program will calculate dividends due to each account, and create suspended transactions. The program will need to span months for funds that pay mid-month. ($[***] to $[***])
5. |
Daily pricing interface to trade file ( from FM Signal feed) . This program will read the file received form the FM feed, print a report and update prices on the asset file and the market pricing history file. It will also fill in the price per unit for all transactions with todays trade date, and recalculate the shares or dollars (depending on transaction type). ($[***] to $[***]) |
6. |
Cash Balancing Report . This program will print a report showing one line for each account that has a balance in (Income + Principal) Cash or any pending (unsettled) sales transactions. The Net Cash Balance should balance to the DDA account ($[***] to $[***]) |
Exhibit B
Exhibit B - Page 2 of 2
7. |
Remittance processing . We will write a program to establish the available cash balance. We also will establish a place for the account wire information and withholding percentage. The daily remittance processing program will scan the checks files, and attempt to process each check with a due date of today or earlier. Four different cases must be handled: |
A) |
If available cash is insufficient to cover the amount, a line is printed on the Insufficient Funds Report. |
B) |
If available cash is sufficient to cover the amount, the program will subtract the amount from the available cash balance and determine the processing method: |
B1) |
the payment is by check, the program will assign a check number, print a line on the Pre-Check Listing, output the check information to the laser printer checks file, create a transaction on the daily file, and delete the record from the checks file, |
B2) |
the payment is by wire, the program will print a line on the Wire Advice Report, create a transaction on the daily file, and delete the record from the checks file. If the wire transfer is chargeable, it will also create a wire fee transaction on the daily file. |
B3) |
the payment is by Kemper Journal, the program will print a line on the Kemper Journal Report, create a transaction on the daily file, and delete the record from the checks file. |
For any processing method, the account may also be set up for a withholding percentage. If it is, two transactions will be created (one for the net payment, and another for the withholding amount). After all reports print, a final Remittance Processing Summary Report will recap totals from processing method to use for funds transfer. ($[***] to $[***])
8. |
Cash Sweeps (for both overdrafts and positive balances. This program will scan each account, and create a transaction to sweep cash between the cash (DDA) account and the ACM fund for that account as needed. If the cash balance minus non-suspended fee and check transactions is greater than zero, it will create a transaction to purchase the ACM fund. If that amount is less than zero, it will create a transaction to sell the ACM fund. ($[***] to $[***]) |
Specifications and Functions
General
|
Menu-based system - easy to learn and operate |
|
Comprehensive array of features/capabilities |
|
Runs under DOS or Windows - networks with NetBIOS compatible systems (like Novell) |
|
Daily or Weekly Officers Report |
|
Statistical report shows 2-page summary of department |
Management Reporting
|
Integrated tickler file and reporting |
|
Investment Review and Securities transaction report for committee Meetings |
Accounting and Operations Reporting
|
Daily balancing reports - cash and inventory |
|
Dividend/Interest Hap. with automated posting |
|
Cash Management (Money Market Funds) |
|
Six different formats of Customer Report available |
|
Annual report to Comptroller of the Currency (or FDIC) |
|
Tax Worksheet, Schedule D report |
|
1099/5498 magnetic media reporting to IRS |
|
Trust fee calculation and processing |
|
Additional transaction codes may be defined by the user |
|
Suppresses incorrect entries and their reversals for the Customer Report |
|
Tickler researcher locates accounts missing vital data such as trust fee or distribution information |
|
Central address file option |
Security
|
Solid-state software key required to access the system |
|
Individual password for each operator |
|
Four security levels |
Audit
|
Broker report |
|
Dramatic reduction in time spent by bank examiners - tine for which you are charged |
|
Contains self-auditing features |
Automated Market Value Updating
|
TrustNet Features automatic updating of the market value and ratings of nationally-traded securities. |
Data is received by modem from our Memphis office.
Advanced Modules
|
IQ Report Generator for ad hoc reporting |
|
Portfolio Modeling for asset re-allocation |
|
Checkwriting |
Additional functions with Initial Custom Software
|
F2 Notes Capability |
|
800 Number Interface |
|
Trades Consolidation & Sub-Custodian Interface |
Exhibit C
Standard Billing Policies
General
Invoices for professional services and telephone support may be produced at any time but are primarily issued on a monthly basis. Invoices for software, hardware, supplies and miscellaneous services are issued at the time of delivery.
Personnel time
Installation/Training |
$ | [ | ***]/hr. | |
Telephone suport for SMS clients ([***] minimum) |
$ | [ | ***]/hr. | |
Programming ([***] minimum) |
$ | [ | ***]/hr. | |
System design and analysis |
$ | [ | ***]/hr. | |
Consulting |
$ | [ | ***]/hr. | |
Design, Programming and Telephone support for non-SMS customers |
$ | [ | ***]/hr. |
Travel time
The first 4 hours of travel time are billed at $[***] per hour. Travel time in excess of [***] hours for one trip will be charged at $[***] per hour. One trip may involve more than one travel day. Total travel and working time in any one day will not exceed [***] hours unless otherwise authorized by Licensee.
Expenses
Travel expenses will be charged at cost and includes reasonable transportation, lodging, meals and incidental expenses. Automobile mileage is billed at $[***] per mile.
Long distance telephone toll expenses to and from Licensee and calls made on Licensees behalf will be charged at $[***] per minute. Miscellaneous expenses incurred on Licensees behalf will be charged at actual cost.
Media & shipping charges
Shipments made at the request of Licensee will be shipped via United States Postal Service first class or standard United Parcel Service ground, unless another method is specified by Licensee. If alternate shipping is requested (e.g., Express Mail. Federal Express) Licensee will be charged that fee or Licensor will use Licensees account number to reverse the charges. All shipping costs by whatever carrier will be charged to Licensee.
Terms
Charges are due and payable within 15 days of receipt of invoice unless otherwise stated in the Agreement. Finance charges on delinquent balances will be accrued at [***]% per month. Payments received will be credited to outstanding finance charges first.
Exhibit D
HWA INTERNATIONAL
SOFTWARE LICENSE AMENDMENT
HWA International, hereinafter referred to as the licensor, by its acceptance of this amendment by authorized signature, and Centurion Trust Company, hereinafter referred to as the licensee, agree to accept the following amendment to the existing license agreement covering TrustNet.
Licensor grants permission to licensee to operate TrustNet on one additional properly configured Server located at its affiliate FundMinder, Inc., 15233 Ventura Boulevard, Suite 512, Sherman Oaks, CA 91403.
This increases the number of licensed workstations to be shared by the two sites from 35 to 50.
The amendment fee is $[***] payable as a single payment with signed amendment. The amendment fee is payable at the offices of HWA International, Inc., 2565 Horizon Lake Drive, Suite 110, Memphis, Tennessee 38133.
SMS fee will increase by $[***] per workstation, beginning January 1, 1999. There is no SMS increase for the second server.
The licensor hereby grants and the licensee accepts the amendment.
HWA International, Inc. (Licensor) |
Centurion Trust Company 2425 East Camelback Road, Suite 530 Phoenix, AZ 85016 |
|||||||||
By: |
/s/ Donna Manley, VP |
By: |
/s/ Gerard Dipoto |
|||||||
(Authorized signature & title) | (Authorized signature & title) | |||||||||
Date: | 1-8-99 | Date: | 1/4/99 |
June 9, 2008
Mr. Dennis Chance
Genworth Financial Trust Company
3200 North Central Avenue
7 th Floor
Phoenix, AZ 85012
Dear Dennis:
Enclosed is a counter-signed agreement for your records.
We deeply appreciate the confidence you have placed in us, and will do our best to take care of your immediate and long-term needs.
Please call if there is anything we can do to improve the efficiency of your operations.
With warmest regards,
/s/ Donna Manley |
Donna Manley |
Executive Vice President |
1-800-328-8661 phone: (901)388-6120 fax: (901) 388-5574 www.hwainternational.com
HWA INTERNATIONAL
SOFTWARE LICENSE AMENDMENT
HWA International, Inc., hereinafter referred to as Licensor, by its acceptance of this amendment by authorized signature, and Genworth Financial Trust Company hereinafter referred to as Licensee, agree to accept the following amendment to the existing license agreement of TrustNet dated June 1, 1995.
Licensor grants permission to Licensee to add the following:
Module Name |
Std License Upgrade | Annual SMS | ||||||
109 additional workstations at $995 each |
$ | [***] | $ | [***] |
This increases the number of licensed workstations from 75 to 184. Because this is the first workstation in a new pricing tier, the following modules also need to be upgraded to the level for 151-200 workstations. For the next 16 workstations that are added, there would be no increase in the license fees for the add-on modules.
Module Name |
License for 1-5
workstations |
License for 151-200
workstations |
License Upgrade | |||||||||
Check Writing |
$ | [***] | $ | [***] | $ | [***] | ||||||
Quick Query |
[***] | [***] | [***] | |||||||||
1099-MISC |
[***] | [***] | [***] | |||||||||
MF Modeling |
[***] | [***] | [***] |
The license fee of, $[***] plus SMS for 2008 of $[***] is payable with the signed amendment at the offices of HWA International, Inc., at the address shown below. The annual SMS fee will increase as shown above, prorated this year.
Licensor hereby grants and Licensee accepts the amendment.
HWA International, Inc. 8363 Wolf Lake Drive Suite 101 Memphis, TN 38133 |
Genworth Financial Trust Company 3200 North Central Avenue 7 th Floor Phoenix, AZ 85012 |
|||
/s/ Donna Manley |
/s/ Ron Link |
|||
Authorized signature | Authorized signature | |||
Donna Manley Printed name |
Ron Link Printed name |
|||
Vice - President Title |
CFO Title |
|||
6/10/08 Date |
4/21/08 Date |
October 27, 2009
Mr. Dennis Chance
Genworth Financial Trust Co.
3200 North Central Avenue
Phoenix, AZ 85012
Dear Dennis:
Enclosed is a counter-signed agreement for your records.
We deeply appreciate the confidence you have placed in us, and will do our best to take care of your immediate and long-term needs.
With warmest regards,
/s/ Donna Manley |
Donna Manley |
Executive Vice President |
1-800-328-8661 phone: (901)388-6120 fax: (901) 388-5574 www.hwainternational.com
RECEIVED OCT 27 2009
HWA INTERNATIONAL
SOFTWARE LICENSE AMENDMENT
HWA International, Inc., hereinafter referred to as Licensor, by its acceptance of this amendment by authorized signature, and Genworth Financial Trust Company hereinafter referred to as Licensee, agree to accept the following amendment to the existing license agreement of TrustNet dated June 1, 1995.
Licensor grants permission to Licensee to add the following:
Module Name |
Std License Upgrade | Annual SMS | ||||||
36 additional workstations at $995 each |
$ | [***] | $ | [***] |
This increases the number of licensed workstations from 184 to 220 . Because workstations over 200 are a new module pricing tier, the following modules also need to be upgraded to the level for 201-220 workstations. For the next 30 workstations that are added, there would be no increase in the license fees for the add-on modules.
Module Name |
License for 151-200
workstations |
License for 201-250
workstations |
License Upgrade | |||||||||
Check Writing |
$ | [***] | $ | [***] | $ | [***] | ||||||
Quick Query |
[***] | [***] | [***] | |||||||||
1099-MISC |
[***] | [***] | [***] | |||||||||
MF Modeling |
[***] | [***] | [***] |
The license fee of $[***] plus SMS for the remainder of 2009 of $[***] is payable with the signed amendment at the offices of HWA International, Inc., at the address shown below. The annual SMS fee will increase as shown above, prorated this year.
Licensor hereby grants and Licensee accepts the amendment.
HWA International, Inc. 8363 Wolf Lake Drive Suite 101 Memphis, TN 38133 |
Genworth Financial Trust Company 3200 North Central Avenue 7 th Floor Phoenix, AZ 85012 |
|||
/s/ Donna Manley Authorized signature |
/s/ Ron A. Link, CPA Authorized signature |
|||
Donna Manley Printed name |
Ron A. Link, Cpa Printed name |
|||
Vice President Title |
CFO Title |
|||
10-27-09 Date |
10/26/09 Date |
HWA INTERNATIONAL
SOFTWARE LICENSE AMENDMENT
HWA International, Inc., hereinafter referred to as Licensor, by its acceptance of this amendment by authorized signature, and AssetMark Trust Company, hereinafter referred to as Licensee, agree to accept the following amendment to the existing license agreement of TrustNet dated June 1, 1995.
Licensor grants permission to Licensee to add the following:
Module Name |
Std License Upgrade | Annual SMS | ||||||
30 additional workstations (#246 - # 275) |
$ | [***] | $ | [***] |
This increases the number of licensed workstations from 245 to 275. Because workstations over 250 are a new module pricing tier, the following modules also need to be upgraded to the level for 251-300 workstations. For the next 25 workstations that are added, there would be no increase in the license fees for the add-on modules.
Module Name |
Std License Upgrade for
251-300 workstations |
Annual SMS Increase for
251-300 workstations |
||||||
Check Writing |
$ | [***] | $ | [***] | ||||
Quick Query |
[***] | [***] |
Licensor also grants permission to Licensee to delete the following module(s):
|
1099-MISC |
|
1099-OID |
|
Mutual Fund Modeling |
The annual SMS fee will increase as shown above, prorated this year.
The following items are payable with the signed amendment at the offices of HWA International, Inc., at the address shown below.
|
License Fee: $[***] |
|
Pro-rated SMS: $[***] |
Licensor hereby grants and Licensee accepts the amendment.
AssetMark Trust Company 3200 N. Central Ave., 7 th Floor 7 th Floor Phoenix, AZ 85012 |
HWA International, Inc. 8363 Wolf Lake Drive Suite 101 Memphis, TN 38133 |
|||
/s/ Carla Binghan Authorized signature |
/s/ Donna Manley Authorized signature |
|||
Carla Binghan Printed name |
Donna Manley Printed name |
|||
IT Manager Title |
Vice - President Title |
|||
9/27/17 Date |
9/27/17 Date |
HWA INTERNATIONAL
SOFTWARE LICENSE AMENDMENT
HWA International, Inc., hereinafter referred to as Licensor, by its acceptance of this amendment by authorized signature, and AssetMark Trust Company, hereinafter referred to as Licensee, agree to accept the following amendment to the existing license agreement of TrustNet dated June 1, 1995.
Licensor grants permission to Licensee to add the following:
Module Name |
Std License Upgrade | Annual SMS | ||||||
[***] additional users (#[***] - # [***]) |
$ | [***] | $ | [***] |
This increases the number of licensed users from [***] to [***] Because users over [***] are a new module pricing tier, the following modules also need to be upgraded to the level for [***] -[***] users. For the next [***] users that are added, there would be no increase in the license fees for the add-on modules.
Module Name |
Std License Upgrade for
[***]-[***] users |
Annual SMS Increase for
[***]-[***] users |
||||||
Check Writing |
$ | [***] | $ | [***] | ||||
Quick Query |
[***] | [***] |
The annual SMS fee will increase as shown above, prorated this year.
The following items are payable with the signed amendment at the offices of HWA International, Inc., at the address shown below.
|
License Fee: $[***] |
|
Pro-rated SMS: $[***] (March December 31, 2018) |
Licensor hereby grants and Licensee accepts the amendment.
AssetMark Trust Company 3200 N. Central Avenue 7 th Floor Phoenix, AZ 85012 |
HWA International, Inc. 8363 Wolf Lake Drive Suite 101 Memphis, TN 38133 |
|||
/s/ Muk Mehta Authorized signature |
/s/ Donna Manley Authorized signature |
|||
Muk Mehta Printed name |
Donna Manley Printed name |
|||
Chief Information Officer Title |
Vice - President Title |
|||
11-8-18 Date |
10/17/18 Date |
Exhibit 10.4
The redacted information has been excluded because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed.
SUBCUSTODIAL AND
SERVICE AGREEMENT
This Agreement (Agreement) is entered into by and among GE Financial Trust Company (GEFTC) and Fidelity Brokerage Services LLC (FBS) and National Financial Services LLC (NFS), (FBS and NFS together, Fidelity) acting through its business unit Fidelity Registered Investment Advisor Group (FRIAG) (Fidelity, FRIAG and GEFTC may individually be referred to as a Party or collectively as Parties), effective as of November 1, 2005;
WHEREAS, GEFTC is a trust company duly chartered by the Arizona State Banking Department and maintains accounts and provides trust and custody services for its trust company customers (each a Client);
WHEREAS, GEFTC accepts Client accounts referred by its registered investment advisory affiliate, GE Private Asset Management (Advisory Firm);
WHEREAS, Advisory Firm and GEFTC wish to retain Fidelity to act as sub-custodian as contemplated in this Agreement and to provide brokerage services in connection with their separate account wrap program.
WHEREAS, Advisory Firm intends to use the services of investment managers which will provide portfolio research models and asset allocation strategies; whereby only the Advisory Firm, and not the investment managers, will have trading authorization on the Accounts.
WHEREAS, Advisory Firm provides investment advisory services to Clients;
WHEREAS, Fidelity and GEFTC intend to establish a technology based operating platform and interface;
WHEREAS, Fidelity desires to provide brokerage services and act as subcustodian for Client accounts;
WHEREAS, GEFTC intends to use electronic interfaces between TNET, a trust accounting system licensed and operated by GEFTC, and Fidelitys brokerage platform to exchange information including without limitation balances, positions, and history. GEFTC may also affect transactions in certain Client Accounts through the interface;
WHEREAS, Fidelity and GEFTC and Advisory Firm intend to interface using a Checkfree APL that shall be implemented on or about February 2006; and prior to that Advisory Firm will use Fidelitys product, Advisor Channel, to send and receive intra-day trade information to Fidelity.
WHEREAS, FBS and NFS are each a broker-dealer registered with the Securities and Exchange Commission and a member of the National Association of Securities Dealers, Inc;
WHEREAS, in addition to acting as a subcustodian, Fidelity will provide execution and clearance services for equity and fixed income securities held at Fidelity in GEFTC Accounts (as defined below) in accordance with the terms of this Agreement;
1
NOW, THEREFORE, in consideration of the mutual agreements hereinafter set forth, and for other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the parties, intending to be legally bound, do hereby agree as follows:
1. |
APPOINTMENT OF CUSTODIAN; TYPES OF ACCOUNTS, TRADING, AND FEES |
1.1. |
Appointment of Fidelity as Subcustodian and Types of Accounts |
1.1.1. |
Pursuant to this Agreement and the separate Fidelity brokerage account application and agreement accepted by Fidelity for each account (Application and Agreement), to be executed in a form substantially similar to that attached hereto as Exhibit A, as such form may be amended from time to time, such amendments to be immaterial or required by applicable law, rule or regulation or Fidelity Policies and Procedures, GEFTC authorizes Fidelity to hold securities in registered form in its name. If there is any conflict between this Agreement and the Application Agreement, the terms of the Application Agreement shall prevail with the exception of: the term and termination provisions this Agreement (all of section 2); the representations and warranties (all of section 3), including without limitation service levels (Exhibit C); indemnification provisions (all of section 4); confidentiality (all of section 5); and pricing (Exhibit B), excluding any margin fees. If future material amendments are made to the Application Agreement that conflict with this Agreement, GEFTC reserves the right to review those amendments, and if GEFTC determines using reasonable business judgment that such amendments are unacceptable, GEFTC may terminate this agreement. |
1.1.2. |
GEFTC Accounts are brokerage accounts opened by and registered in the name of GEFTC as legal and record owner which accounts may be owned by GEFTC for the benefit of one or more of its Clients and carried by Fidelity under GEFTCs name, address and tax identification number in which it will hold securities and cash. GEFTC Accounts include both Omnibus GEFTC Accounts and Non-Omnibus GEFTC Accounts. Omnibus GEFTC Accounts are those accounts that hold commingled assets of GEFTCs Clients. Non-Omnibus GEFTC Accounts are other GEFTC Accounts established at Fidelity and registered in GEFTCs name for the benefit of a particular GEFTC Client. For all accounts carried by Fidelity pursuant to this Agreement, Fidelitys customer shall be GEFTC only and in no event will any Client, other customer or prospective Client or customer of GEFTC or Advisory Firm be considered to be a customer of Fidelity. |
1.1.3. |
Fidelity will not charge GEFTC or Advisory Firm a separate custody fee for maintaining custody of GEFTC Accounts. |
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1.1.4. |
With respect to GEFTC Accounts, GEFTC will be the end financial institution responsible for all know your customer, anti-money laundering and other applicable legal and regulatory requirements, including but not limited to the Bank Secrecy Act of 1970, as amended, and related regulations, for any Client who may have a disclosed or undisclosed beneficial interest in a GEFTC Account. GEFTC agrees not to open any GEFTC Accounts, process any transactions or provide any other services that would violate any applicable sanctions administered by the Office of Foreign Assets Control of the U.S. Department of the Treasury. |
1.1.5. |
GEFTC has authorized Advisory Firm, an investment Advisor registered under the Investment Advisor Act of 1940, with discretionary authority to engage in various trading and other investment related activities, including, but not limited to the purchase, sale or exchange of securities on GEFTC Accounts. The Advisory Firm shall be designated in the Applications and Agreement as the investment adviser with trading authorization on Client Accounts. Fidelity will not be responsible for the actions or inactions of the Advisory Firm. |
1.1.6. |
GEFTC agrees that it shall not request Fidelity to establish, carry or provide services under this Agreement to any Fully Disclosed Client Account directly for a Client, customer or prospect of GEFTC or Advisory Firm (a Fully Disclosed Client Account). A Fully Disclosed Client Account shall mean any brokerage account registered in the Clients name as legal and record owner, address and tax identification number and with respect to which Fidelity would otherwise collect personal and financial information with respect to such Client. GEFTC will open accounts with Fidelity and/or refer Clients to Fidelity only in those instances in which GEFTC and/or the Advisory Firm deems it appropriate and in the best interest of Clients. In the event that GEFTC desires to open an account with Fidelity on a fully-disclosed basis, prior to opening such account, GEFTC and Fidelity shall negotiate in good faith the terms and conditions of the parties obligations with respect to such fully-disclosed accounts. |
1.1.7. |
Subject to the terms hereof and the Application and Agreement, GEFTC hereby authorizes Fidelity to hold any securities received by it from time to time for the account of GEFTC Accounts. Fidelity may elect to utilize Depositories and third-party subcustodians to the extent it deems appropriate possible in connection with its performance hereunder. Depository shall include the Federal Reserve Banks book-entry system, the Depository Trust Company, Euroclear, Clearstream Banking, S.A. and any other securities depository, book-entry system or clearing agency (and their respective successors and nominees) registered with the Securities and Exchange Commission or otherwise authorized to act as a securities depository, book-entry system or clearing agency pursuant to applicable law. A Third-Party Subcustodian shall mean a bank or other financial institution (other than a Depository) which is utilized by Fidelity in connection with the purchase, sale or custody of securities hereunder. |
1.1.8. |
Securities and cash deposited by Fidelity in a Depository will be held subject to the rules, terms and conditions of such Depository. Securities and cash held through Third-Party Subcustodians shall be held subject to the terms and conditions of any applicable agreement between Fidelity and such Third Party Subcustodians. Third-Party Subcustodians may be authorized to hold Securities |
3
in central securities depositories or clearing agencies in which such Third-Party Subcustodians participate. Unless otherwise required by law or practice or a particular Third-Party Subcustodian agreement, securities deposited with Third-Party Subcustodians will be held in a commingled account in the name of NFS as custodian for the benefit of its customers. Fidelity shall identify on its books and records the securities and cash belonging to GEFTC Accounts, whether held directly or indirectly through Depositories or Third-Party Subcustodians. |
1.2. |
Trading and Operational Interface |
1.2.1. |
On or before December 31, 2005, GEFTC anticipates transferring from GEFTC over to Fidelity approximately $1.5 billion in initial assets (the Transfer). GEFTC and Advisory Firm anticipate that approximately 100 million equity shares shall be traded during the first 12 month period from the date of the Transfer. The Transfer will include approximately 225 non-omnibus GEFTC accounts and two omnibus GEFTC account. |
1.2.2. |
Trading of equity on GEFTC Accounts will be done through Fidelitys Advisor CHANNEL® products or other electronic trading system supported by Fidelity until the parties interface through CheckFree APL, at which time all equity trades will be placed via the APL or other systems acceptable to Fidelity. Trading of fixed income securities shall be done through Fidelitys Bond Trader Pro system or by sending fax, email or phone trades directly to Fidelitys fixed income trading desk. |
1.2.3. |
It is understood that by Fidelity and GEFTC that orders for the execution of transactions in GEFTC Accounts shall be directed to Fidelity, but that Advisor may use other broker/dealers (Trade Away) if Advisor deems such activity as appropriate in its sole discretion. Fidelity shall provide monthly trade execution reports to GEFTC and the Advisory Firm to report on execution quality. |
1.3. |
Pricing and Billing for Fidelity Brokerage Services |
1.3.1. |
The pricing schedule that will apply to all GEFTC Accounts is set forth in Exhibit B. This pricing schedule does not apply to separate account network, turn key asset management and other programs which may be selected by GEFTC, which may which charge either transaction based or asset based fees. This pricing schedule includes all services discussed in this Agreement including custody and clearing services, use of Advisor Channel, use of Bond Trader Pro, interfacing, operational and administrative services, asset conversions and the implementation of CheckFree APL at no additional charge. |
1.3.2. |
Fees accrued, pursuant to Exhibit B, shall accrue during the quarter. All transaction costs, commissions, ticket charges, and other fees will be billed directly to GEFTC, rather than being charged to individual trade. Such accrued fees shall be billed quarterly in arrears to GEFTC on or before 30 days following the calendar quarter end, or if Fidelity is unable to bill GEFTC by that date, as promptly as possible thereafter. |
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2. |
EFFECTIVENESS AND TERMINATION |
2.1. |
This Agreement shall remain in full force and effect for an initial 36-month term unless terminated in accordance with this section 2. Fidelity may terminate this Agreement at the end of such 36-month period by giving GEFTC 90 days prior written notification of termination. GEFTC may terminate this Agreement at the end of such 36-month period by giving 90 days prior written notification of termination. Upon termination of this Agreement, both GEFTC and Fidelity agree to provide on-going support and operational services pursuant to this Agreement no less than 90 days from termination or until the completion of the conversion of assets, whichever occurs earlier. If, in the event of termination, an Account does not transfer from Fidelity, Fidelity may transfer such Account as it reasonably deems appropriate. |
2.2. |
In the event no written notification is given as set forth above, this Agreement shall be deemed to have been renewed for additional successive one-year periods. At any time during such additional periods, this Agreement may be terminated by Fidelity giving 90 days prior written notification to GEFTC, or by GFTC giving 90 days prior written notice to Fidelity, and such termination shall be effective as of the end of such 90-day period. Upon termination of this Agreement, both GEFTC and Fidelity agree to provide on-going support and operational services pursuant to this Agreement no less than 90 days from termination or until the completion of the conversion of assets, whichever occurs earlier. |
2.3. |
This Agreement may be terminated: |
2.3.1. |
by mutual written consent of the parties hereto; |
2.3.2. |
by either party upon the occurrence of the following: (i) a material breach by the other party of any of its representations, warranties, covenants or agreements hereunder, and (ii) the failure to cure such breach by the other party within 30 days following its receipt of written notice of such breach; |
2.3.3. |
if required by law or any applicable supervising regulating authorities; |
2.3.4. |
by either party if the other party becomes insolvent or becomes the subject of a voluntary or involuntary bankruptcy proceeding; |
2.3.5 |
pursuant to Section 2.5 below. |
2.3.6. |
by GEFTC in the event that Fidelity fails to provide services in material compliance with Service Levels set forth in Exhibit C. |
2.4. |
The termination of this Agreement will not relieve any party of any obligation or liability hereunder that accrued prior to such termination. Upon termination of this Agreement, all payments under Section 1.3 shall immediately cease and Fidelity will notify GEFTC of the revised pricing schedule that will apply to any GEFTC Accounts maintained with Fidelity. |
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2.5. |
It is understood that GEFTC strives to grow over time, which could result in growth of client assets under management, share volume traded and servicing support activity. It is understood that GEFTC may fail to grow or may experience loss of assets over time. As well, it is understood that movements in financial markets will impact GEFTCs asset levels and growth paths. The potential for business growth and/or asset loss experienced in the normal course of doing business is contemplated within the standard terms of this Agreement and is not cause for renegotiation of any terms. In the event of a material change in GEFTCs business model, Fidelity and GEFTC, respectively, reserve the right to notify the other Party of its request to renegotiate the fee schedule contained in Exhibit B upon providing 90 days notice. A material change for this Section 2.5 may include, but is not limited to: a change from the omnibus model to either a business accounts or fully disclosed model; a change to trading practices in which Fidelity is no longer being directed substantially all (at least 95%) trade flow related to omnibus assets held in sub-custody by Fidelity; a change to or expansion of servicing standards or practices beyond what is addressed in this Agreement; or other GEFTC business model changes that result in verifiable and detrimental financial impacts to either party. In such event, if Fidelity and GEFTC fail to reach an agreement on a revised pricing schedule within 90 days of such notice, then either party may terminate this Agreement with a written 90 day termination notice to the other. Upon termination of this Agreement, both GEFTC and Fidelity agree to provide ongoing support and operational services pursuant to this Agreement no less than 90 days from termination or until the completion of the conversion of assets, whichever occurs earlier. |
3. |
REPRESENTATIONS, WARRANTIES AND COVENANTS |
3.1. |
Each of the parties represents warrants and agrees to the others as follows: |
3.1.1. |
Such party is an entity duly organized, validly existing and in good standing under the laws of its jurisdiction of organization and is duly qualified to transact business in each other jurisdiction where it is required to be so qualified; |
3.1.2. |
This Agreement has been duly authorized and executed by such party, and represents the legal, valid and binding obligation of such party, enforceable against such party in accordance with its terms; |
3.1.3. |
The execution, delivery and performance by such party of this Agreement does not violate, conflict with or constitute a breach of any provision of any Federal, state or local law applicable to such party, the organizational documents of such party or any material agreement, contract, consent, decree, order or other instrument to which such party is a party or by which such party is bound; |
3.1.4. |
Each of the parties shall obtain such regulatory and Client consents as may be required, including GEFTC obtaining the consent of the Arizona State Banking Department, to execute, deliver and perform the term of this Agreement; and |
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3.1.5. |
Neither GEFTC and Fidelity, nor Advisor Firm and Fidelity, are affiliated with each other in any way. |
3.2. |
With respect to the Omnibus GEFTC Accounts and Non-Omnibus GEFTC Accounts, GEFTC represents, warrants and agrees that: |
3.2.1. |
GEFTC is Fidelitys brokerage customer; |
3.2.2. |
Clients are GEFTCs trust company customers and will not be regarded as Fidelitys brokerage customers; |
3.2.3. |
GEFTC is responsible for obtaining and maintaining all necessary documentation and information relating to such Clients and GEFTC Accounts; |
3.2.4. |
GEFTC or its designated Advisory Firm is responsible for making all investment decisions and suitability determinations with respect to such Clients and GEFTC Accounts; |
3.2.5. |
Clients will not have any contact with Fidelity with respect to the GEFTC Accounts; |
3.2.6. |
GEFTC is responsible for providing all Clients with all information or records to which such Clients may be entitled by virtue of their beneficial ownership in GEFTC Accounts, including, but not limited to, customer account statements, confirmation of transactions, tax information and any other information or records required by law or regulation; |
3.2.7. |
GEFTC is responsible for completing all reporting to the Internal Revenue Service and state taxing authorities on such Client accounts; |
3.2.8. |
GEFTC or their designated Advisory Firm is responsible for monitoring the investments in all Client Accounts held at Fidelity, and Fidelity will not be responsible for monitoring the investments made in any Client accounts; and |
3.2.9. |
Fidelity will not be responsible for monitoring the activities of Advisory Firm in GEFTC Accounts. |
3.3. |
With respect to the Omnibus GEFTC Account, GEFTC represents, warrants and agrees that: |
3.3.1. |
Each Client has authorized the Advisory Firm to establish a custodial account for the Clients benefit at GEFTC and at sub-custodians as appropriate, therefore, including Fidelity, to maintain the account. |
3.3.2. |
GEFTC maintains on its books a separate account for each Client account and segregates in its books each Client accounts assets. For those Client accounts managed by the Advisory Firm, GEFTC does not take physical custody of Client assets, but holds assets by book entry. |
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3.3.3. |
For any new Clients of the Advisory Firm, each Client has authorized GEFTC and the Advisory Firm to transfer his/her account from a fully disclosed account at the current firm to an account registered under GEFTC, for the benefit of the Client at Fidelity. |
3.4. |
To the extent GEFTC is acting in fiduciary capacity to any Client for the purposes of ERISA, GEFTC represents and warrants that it shall administer the GEFTC Accounts consistent with such obligations, including, but limited to, the proper disclosure and handling of fees and compensation. |
3.5 |
During the term of this Agreement, each party shall remain in material compliance with each of the laws, rules, and regulations to which their activities are subject. |
3.4.1 |
GEFTC agrees to notify Fidelity immediately in the event GEFTCs charter with any governmental or regulatory organization which GEFTC is currently registered is suspended, terminated or materially changes. Fidelity agrees to notify GEFTC immediately in the event Fidelitys registration as a broker-dealer and/or membership with the NASD is suspended, terminated or materially changes |
3.4.2 |
Upon reasonable prior written notice, Fidelity will respond to requests for information from the Arizona State Banking Department related to the books and records maintained by Fidelity in the ordinary course of business with respect to the GEFTC Accounts. In addition, upon written request, Fidelity will provide GEFTC with its SAS 70 and NFS Statement of Financial Condition. |
3.6. |
Each Party will be responsible for reviewing and determining whether additional disclosures are necessary in its respective regulatory filings, disclosures to clients or otherwise with respect to the terms and conditions of this Agreement and obtain any necessary consent from its regulatory authorities and/or Clients. Fidelity and GEFTC acknowledge that this Agreement must comply with applicable laws, rules and regulations. The parties acknowledge that the sale or redemption of any mutual fund must be made in compliance with such funds prospectus and policies and applicable laws, rules and regulations. GEFTC agrees that it will monitor and assess short term redemption fees on Fidelity mutual funds, and non-Fidelity funds if required, at the sub-account or participant level on all Omnibus GEFTC Accounts. |
3.7. |
Unless otherwise agreed to by GEFTC, Fidelity will not use Client information it obtains from GEFTC to directly solicit Clients to open Fidelity retail brokerage accounts. |
3.8 |
With respect to the securities held in GEFTC Accounts, Fidelity shall: |
3.8.1 |
Timely post any interest and dividends actually received by Fidelity and any amounts actually received by Fidelity with respect to matured securities. Fidelity shall make such information available on Advisor CHANNEL and CheckFree APL or other third party portfolio accounting systems, as instructed by GEFTC. |
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3.8.2. |
Forward to GEFTC copies of all information or documents that it may actually receive from an issuer of securities pursuant to sections 4.5 and 6 of the Application and Agreement. |
3.8.3 |
If so notified by a regulatory body or governmental agency, Fidelity will forward to GEFTC any forms or other document requiring GEFTCs signature. |
3.8.4 |
Hold directly, or through a Depository, all rights and similar securities issued with respect to any securities credited to the GEFTC Accounts. |
3.8.5 |
Endorse for collection checks, drafts or other negotiable instruments. |
3.9 |
With respect to any rights or actions conferred upon GEFTC pursuant to the information or documents it receives under section 3.7, GEFTC will notify Fidelity of its decision relating thereto. |
3.10 |
GEFTC and Fidelity each agree to maintain respective conversion teams for the support of the initial conversion of assets to Fidelity during the first 5 months of this Agreement, or for a period of the agreement date through 60-days past the actual conversion date, whichever is longer. Fidelitys conversion team will include a business and technical analyst. The parties respective conversion teams shall cooperate in good faith to promptly address issues that may arise during the initial conversion. |
3.11. |
Upon completion of the implementation and conversion process, Fidelity represents that it will assign and maintain for the duration of the term a service and support structure that is materially sufficient to maintain the service level standards outlined in Exhibit C. |
3.12. |
GEFTC represents warrants and agrees to the additional warranties set forth in Exhibit D and incorporated herein by reference. |
3.13. |
Fidelity represents, warrants and agrees as follows: |
3.13.1 |
It has the financial resources, personnel and organizational resources reasonably needed to perform its obligations under this Agreement and will notify GEFTC of any change in circumstances that would materially adversely impact Fidelitys ability to perform its obligations under this Agreement. |
3.13.2 |
It shall maintain throughout the term of this Agreement, commercially reasonable levels of excess SIPC coverage for the protection of the value of all cash and securities held in GEFTC accounts, and it authorizes and approves disclosure by GEFTC to GEFTC Clients that: (i) Client assets in GEFTC Accounts are protected by Securities Investor Protection Insurance (SPIC) insurance up to $[***] (including cash claims limited to $[***]); (ii) additional insurance protection for cash and securities has been arranged to supplement the SIPC coverage; (iii) this additional protection covers total account net equity in excess of the $[***]/$[***] coverage provided by SIPC; and (iv) neither coverage protects against a decline in the market value of securities. |
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3.13.3 |
It shall maintain throughout the term of this Agreement a commercially reasonable disaster recovery plan. |
4. |
LIMITATION OF LIABILITY AND INDEMNIFICATION |
4.1. |
Neither GEFTC nor Fidelity will be liable under this Agreement for any special, consequential, indirect, incidental or similar damages of any kind, including lost revenue, lost profits and lost or damaged data. Market based losses that are a result of delayed or incorrect execution or other error due to Fidelitys negligence or willful misconduct shall not be considered special, consequential, indirect, incidental or similar damages of any kind, unless due to the negligence or willful misconduct of GEFTC or Advisory Firm. |
4.2. |
GEFTC will indemnify, defend and hold harmless Fidelity and its officers, directors, managers, employees, designees, affiliates, subsidiaries and agents (each a Fidelity Party) from and against any and all damages, liabilities, expenses (including reasonable attorneys fees), costs and claims (collectively, Costs) incurred by any Fidelity Party to the extent arising from or relating to: (i) any breach by GEFTC of any representation, warranty, covenant or other obligation contained in this Agreement; (ii) any error, wrongful act or wrongful omission by GEFTC, or a third party service provider working for GEFTC, in submitting any order or instruction to Fidelity or performing its obligations under this Agreement; (iii) subject to subsection 4.4, such Fidelity Partys investigation, preparation or defense of any of the foregoing; and (iv) any interface or support of any interface GEFTC establishes with TNET or other interface(s) made available through Fidelity. |
4.3. |
Fidelity will indemnify, defend and hold harmless GEFTC and its officers, directors, managers, employees, designees, affiliates, subsidiaries and agents (each a GEFTC Party) from any and all Costs incurred by any GEFTC Party to the extent arising from or relating to: (i) any breach by Fidelity of any representation, warranty, covenant or other obligation contained in this Agreement; (ii) any error, wrongful act or wrongful omission by Fidelity in performing its obligations under this Agreement; and (iii) subject to subsection 4.4, such GEFTC Partys investigation, preparation or defense of any of the foregoing. |
4.4. |
No party will be entitled to indemnification pursuant to this Agreement to the extent that such partys Costs arise out of or relate to such partys own negligence or willful misconduct. |
4.5. |
Promptly after a party (the Indemnitee) receives notice or becomes aware of a claim threatened or commenced against it, against which another party to this Agreement (the Indemnitor) is obligated to indemnify the Indemnitee, the Indemnitee will give written notice of such claim to the Indemnitor. However, the Indemnitees failure to notify the Indemnitor will not relieve the Indemnitor from any liability that it may have to any Indemnitee under this Agreement, except to the extent that the Indemnitor has been prejudiced in any material respect by such failure. The Indemnitor will be entitled to assume the defense of the claim with counsel reasonably satisfactory to the Indemnitee, and the Indemnitee will have the right to participate in the defense or preparation of the defense of the claim as follows: (i) in the event that the Indemnitor elects to assume the defense of the claim, and to retain such reasonably satisfactory counsel, the Indemnitee will bear all fees and expenses of any additional counsel the Indemnitee retains and any |
10
other costs associated with the Indemnitees participation, and (ii) in the event that the Indemnitor does not assume the defense of the claim within a reasonable time after its receipt of the Indemnitees notice, the Indemnitor will reimburse the Indemnitee for its reasonable fees and expenses of counsel in defending the claim. If the Indemnitor assumes the defense of claim, the Indemnitor will not, without the prior written consent of the Indemnitee, settle or compromise the liability of the Indemnitee, or permit a default or consent to the entry of any judgment in a court action, unless in connection with such settlement, compromise or consent the Indemnitee receives from the claimant a written unconditional release from all liability in respect of the claim. |
5. |
CONFIDENTIAL AND PROPRIETARY INFORMATION |
5.1. |
Definition of Confidential Information . The parties acknowledge that in connection with this Agreement each may be provided with confidential and proprietary information of the other party and third parties with which the other party conducts business. All information of a party and the third parties with which such party conducts business that is marked confidential, described as confidential at the time of disclosure or that the receiving party should reasonably know to be confidential, including the information relating to the TNET Interface, is collectively referred to as Confidential Information. The terms and conditions of this Agreement are considered Confidential Information. In addition, any GEFTC Account information shall be considered Confidential Information. Despite any contrary provision in this Agreement, Confidential Information will not include information that: (a) is or becomes generally known to the public not as a result of a disclosure by the receiving party, (b) is rightfully in the possession of the receiving party before disclosure by the first party, (c) is independently developed by the receiving party without reliance on such information, or (d) is received by the receiving party in good faith and without restriction from a third party not under a confidentiality obligation to the first party and having the right to make such disclosure. The parties acknowledge that as financial institutions, each may be subject to certain laws and regulations regarding the privacy and protection of consumer information and that any use of personal information by the Receiving Party may be subject to compliance with such laws. |
5.2. |
Obligations Regarding Confidential Information . Except as expressly permitted by this Agreement, each party will: |
5.2.1. |
keep and maintain all Confidential Information of the other parties in strict confidence, using such degree of care as is appropriate to avoid unauthorized use or disclosure; |
5.2.2. |
not, directly or indirectly, disclose any Confidential Information of the other parties to any third party, except with the others prior written consent; |
5.2.3. |
use the other parties Confidential Information solely as necessary to perform its obligations or exercise its rights under this Agreement; |
5.2.4. |
not use another partys Confidential Information to compete with such party in any way; and |
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5.2.5. |
advise the other party immediately if it learns or has reason to believe that any person or entity which has had access to such partys Confidential Information has violated or intends to violate the terms of this Agreement. |
5.3. |
Permitted Disclosures . Each party will be permitted to disclose the other parties Confidential Information only to its employees, legal counsel, accountants, auditors, and agents, and its applicable regulatory authorities which expressly request such information during an examination or inquiry (collectively, Authorized Recipients) having a need to know the Confidential Information in connection with the performance of its obligations or the exercise of its rights under this Agreement. Each party will instruct its Authorized Recipients as to their obligations under this Agreement. Despite any contrary provision in this Agreement, either party may disclose the other partys Confidential Information to the extent required to comply with law or court order; provided, however, that the party required to disclose the Confidential Information must if legally permissible: |
5.3.1. |
to the extent practicable, give prompt written notice of the disclosure requirement to the party whose Confidential Information is at issue provided such notice is not prohibited by law, |
5.3.2. |
to the extent practicable, give the other party a reasonable opportunity to prevent the disclosure of the Confidential Information, and |
5.3.3. |
reasonably cooperate with the other party in any efforts it makes to prevent the disclosure of the Confidential Information. |
5.4. |
Remedies . The parties acknowledge that the disclosure of anothers Confidential Information may cause irreparable injury to the other and damages which may be difficult to ascertain. Therefore, each party will be entitled to injunctive relief upon a disclosure or threatened disclosure of any of its Confidential Information in violation of this Agreement, without the necessity of proving damages. |
6. |
MISCELLANEOUS |
6.1. |
Force Majeure . No party will be responsible for losses caused directly or indirectly by conditions beyond its reasonable control (each, a Force Majeure Event), including but not limited to war, natural disaster, terrorist activity, government, clearing corporation or NSCC restrictions or changes, exchange, market, clearing corporation or NSCC rulings, strikes, interruptions of communications or data processing services, or disruptions in orderly trading on any exchange or market. |
6.2. |
Additional Covenants . Each party will retain absolute and complete responsibility for the supervision of all of its representatives, employees or other agents, and the other party will have no supervisory, compliance or other responsibility as to the actions of such representatives, employees or agents of the other party. |
6.3. |
Use of Name; Extent of Relationship . The parties acknowledge that the names of each party, and the names of each partys products and services, whether or not registered as a trademark, are owned by such party. Each party agrees not to use such other parties names in marketing materials or in any other manner without the owning partys prior written approval, except that each party may use the other parties names in regulatory filings. No party will represent in any manner that it is an agent or representative of the |
12
other parties. The sole and exclusive extent of the parties relationship will be as set forth in this Agreement. The parties are not partners, joint venturers, employees or employers of one another. No party will represent or imply in any way that it has any relationship with the other party except as described in this Agreement. |
6.4. |
Governing Law. This Agreement will be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts, without regard to the choice of law principles thereof. |
6.5. |
Entire Agreement; Successors and Assigns . This Agreement constitutes the entire agreement between the parties hereto with respect to the matters contained herein and supersedes all prior agreements and understandings between the parties with respect thereto. Neither party may assign its rights or delegate its duties under this Agreement without the prior written consent of the other parties; provided however, that any party may assign its rights or delegate its duties to any affiliate, subsidiary or assignee whether by merger, consolidation or otherwise that agrees in writing to perform such partys duties. This Agreement will be binding upon and will inure to the benefit of the parties and its successors and permitted assigns. |
6.6. |
Notices. Any notice, demand, consent, election, offer, approval, request or other communication (collectively, a Notice) required or permitted under this Agreement must be in writing and delivered by a nationally recognized overnight courier or sent by certified or registered mail, postage prepaid, return receipt requested. A Notice must be addressed to a party as follows: |
6.6.1. |
If to Fidelity: |
Fidelity Brokerage Company
Attention: Jennifer Moran, Senior Vice President
82 Devonshire Street Z2N
Boston, MA 02109
6.6.2. |
If to GEFTC: |
GE Financial Trust Company, FSB
ATTN: President
3200 N. Central Avenue, Suite 620
Phoenix, Arizona 85012
6.6.3. |
A Notice delivered via a nationally recognized overnight courier will be deemed given as of the next business day after it is sent. A Notice sent via mail will be deemed given three business days after it is mailed. The address specified by a party above for notices to be sent may be changed by such party by written notice to the other parties. |
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6.7. |
Amendment and Waiver . The terms of this Agreement may be waived, amended or modified in whole or in part only by a writing signed by GEFTC and Fidelity. The failure by either party of any time to require performance by the other of any provision of this Agreement will not affect in any way either partys right to require such performance at any time thereafter. The waiver by either party of a breach of a provision of this Agreement will not be taken or held to be a waiver of the provision itself. |
6.8. |
Non-Exclusivity . Each party may enter into other similar agreements with any other person or persons without the other partys consent. |
6.9. |
Severability . All provisions and covenants contained herein are severable, and in the event that any one or more of them is held to be invalid, illegal or unenforceable in any respect by any court of competent jurisdiction, the validity, legality and enforceability of the remaining provisions and covenants contained herein will not in any way be affected thereby, and this Agreement will be interpreted as if such invalid, illegal or unenforceable agreement(s), provision(s) or covenant(s) was not contained herein. |
6.10. |
Survival . The rights and obligation of the parties under sections 4 and 5 shall survive any termination of this Agreement. |
6.11. |
Captions . The descriptive heading of the sections and subsections of this Agreement are for convenience only, do not constitute a part of this Agreement, and do not affect this Agreements construction or interpretation. |
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
14
IN WITNESS THEREOF, the parties hereto have caused this Agreement to be executed as of the day and year first above written.
GE FINANCIAL TRUST COMPANY, FSB | ||||
By: |
/s/ Gurinder Ahluwalia |
|||
Name: | Gurinder Ahluwalia | |||
Title: | Chairman | |||
Date: | 11/1/05 |
FIDELITY BROKERAGE SERVICES LLC AND NATIONAL FINANCIAL SERVICES LLC, ACTING THROUGH FIDELITY REGISTERED INVESTMENT ADVISOR GROUP
By: |
/s/ Jennifer Moran |
|||
Name: | Jennifer Moran | |||
Title: | Senior Vice President | |||
Date: | NOV 03 2005 |
15
Exhibit A
Attach:
1. |
Advisor Brokerage Kit, including: |
a. |
Advisor Account Agreement |
b. |
Advisor Account Application |
2. |
Transfer of Asset for Unlike Registrations |
16
Exhibit B
Pricing Schedule
17
EXHIBIT C
Service Levels
A. |
GENERAL PROVISIONS |
Provided GEFTC has substantially performed its obligations under the Agreement and any other policies and procedures agreed to in writing between GEFTC and Fidelity, including any prerequisites noted set forth in the Services Levels, Fidelity shall provide service level and support to GEFTC in accordance with the standards described below.
1. |
General Service Levels |
The following Service Level is attached hereto as Schedule A and incorporated herein by reference:
|
Service Level 1 Transmission File Availability |
|
Service Level 2 Key Activity Operations Efficacy |
|
Service Level 3 System Availability |
2. |
Reporting. |
Within 15 business days after the end of each calendar quarter, Fidelity will generate a quarter report covering the degree of compliance with the stated service level in order to measure performance and monitor standards as compared to the appropriate service level specifications set forth in Schedule A.
GEFTC and Fidelity shall designate appropriate personnel to meet on a quarterly basis in an agreed upon forum, after production of monthly reports for a calendar quarter by Fidelity, and at the respective costs of Fidelity and GEFTC, to review the past quarters reports and the performance of the Parties and to discuss potential problems or issues in connections with the services level. Both Parties agree to make good faith efforts to resolve such problems or issues.
3. |
Measurement and Monitoring Methodologies. |
The measurement and monitoring methodologies are described in the Service Level.
4. |
Commencement of Obligations. |
The measuring and reporting obligations set forth herein shall commence upon the second calendar month following conversion.
5. |
Cooperation. |
The achievement of the Service Level by Fidelity will require the coordinated, collaborative, good faith effort of Fidelity, GEFTC and with each partys respective subcontractors or vendors. Each party will provide a single point of contact for the prompt resolution of all issues.
18
6. |
Detailed Metrics: |
The detailed metrics relating to Service Levels and Key Measurements are as set forth in Appendix C-1.
7. |
Definition for Services Levels: |
Phrase / Term |
Description |
|
Business Hours | Defined as the hours from 8:00 a.m. to 8:00 p.m. Eastern Time on all days during which the New York Stock Exchange is open, unless otherwise stated in a specific Service Level. | |
Key Activities | Means each of the activities listed on Key Activity Requirements as identified in Service Levels 2 and 3. | |
Measurement Interval | Means the frequency which Fidelity will measure the Service Level performance for monthly reporting. Criteria are defined in the detail of each Service Level, respectively. | |
On-Time | Means in accordance with time periods listed. | |
Problem Response |
Means acknowledgment of Fidelitys receipt of a Problem Ticket from GEFTC through approved escalation processes. | |
Resolution | Means providing a commercially reasonable fix, error correction or work-around. | |
Service Metric | Means the expected Fidelity performance requirements as defined in the detail of each Service Level, respectively, | |
Transmission Files | Means the files designated as such in Service Level #1. | |
Severity Levels |
See Appendix C-1, Service Level #1 Severity Level Definitions for Prioritization of Technical Issues |
19
Appendix C-1
SERVICE LEVEL #1
TRANSMISSION FILES AVAILABILITY | ||||||
M EASUREMENT M ETHOD | ||||||
Data Capture/ Measurement Method | FRIAG Quarterly Performance Report | |||||
Measurement Interval |
Daily, Month End or Year End as described below. | |||||
Calculation | For each File Transmission, the number of file transmissions completed in accordance with the respective Service Level divided by the total number of transmissions completed. | |||||
R ESPONSIBILITY | ||||||
Reporting Period |
Quarterly | |||||
Applicable Hours | Per Time Frames Listed in Service Metrics. | |||||
S ERVICE M ETRICS F OR S ERVICE L EVEL #1 | ||||||
Service Level |
1. Transmission Files Availability . 95% of the file transmissions (based on a weighted average of the aggregate number of files transmitted) shall be completed in accordance within Time Frame/Availability requirements for such Transmission Files. |
|||||
Transmission File: |
File Name: |
Time Frame/Availability: |
||||
Security Master File sent from Fidelity to GEFTC |
FBSI.TCS.FBDTN05P.G E.ORDER.ACKS(0) |
Daily by 7:00 a.m. | ||||
Trade Confirmations sent from Fidelity to GEFTC |
FBSI.TCS.FBDTN20P.G E.CONFIRMS(0) |
Daily, by 7:00 a.m. | ||||
Trade Settlement sent from Fidelity to GEFTC |
FBSI.TCS.FBB5960.GE.
TRADE. SETTLE(0) |
Daily, by 7:00 a.m. | ||||
Income Settlement sent from Fidelity to GEFTC |
FBSI.TCS.FBB5961.GE.I NC.SETT(0) |
Daily, by 4:30 p.m. | ||||
Income Projections sent from Fidelity to GEFTC |
FBSI.TCS.FBB5961. GE.INC.PROJ(0) |
Daily, by 4:30 p.m. | ||||
Position Reconciliation sent from Fidelity to GEFTC |
FBSI.TCS.FBDTN15P. GE.POSITION(0) |
Daily, by 7:00 a.m. | ||||
Trade Commissions (available on Advisor Channel.com | Quarterly commission report | Quarterly (no later than 30 th day of the month following calendar quarter end.) |
20
S ERVICE M ETRICS F OR S ERVICE L EVEL #1, CONTINUED | ||||
Service Level Support | Transmission File Business Processes: | |||
Business Process |
Prerequisite (if any) |
|||
i. Prompt notification upon discovery of problems affecting any file transmissions to/from GEFTC |
GEFTC to promptly notify Fidelity of any transmission problems discovered at GEFTC site.
GEFTC to research locally to determine that incident is not a GEFTC problem before reporting transmission failures to Fidelity; or concurrent to notification to Fidelity where GEFTC reasonably believes problem is not a GEFTC problem. |
|||
ii. Communication of specific alternatives to resolve transmission file failures. | GEFTC to research locally to determine that incident is not a GEFTC problem before reporting transmission failures to Fidelity; or concurrent to notification to Fidelity where GEFTC reasonably believes problem is not a GEFTC problem. | |||
iii. Technology Support for File Transmissions provided as follows:
1-603-791-7604 (during the hours of 8:30 a.m. to 5:00 p.m. ET) or 24 x 7 1-800-525-3274 Option #2 or Ibg.transmission.support@fmr.com |
GEFTC to research locally to determine that incident is not a GEFTC problem before reporting transmission failures to Fidelity; or concurrent to notification to Fidelity where GEFTC reasonably believes problem is not a GEFTC problem. | |||
iv. AC.com and Advisor Channel Software Support available as follows:
1-800-248-2885 Option #3 (during the hours of 8:00 a.m. to 8:00 p.m. ET) |
GEFTC to research locally to determine that incident is not a GEFTC problem before reporting transmission failures to Fidelity; or concurrent to notification to Fidelity where GEFTC reasonably believes problem is not a GEFTC problem. | |||
v. Program Bugs technical support provided as follows:
1-800-248-2885 Option #1 (during the hours of 8:30 a.m. to 5:00 p.m. ET) |
GEFTC to research locally to determine that incident is not a GEFTC problem before reporting transmission failures to Fidelity; or concurrent to notification to Fidelity where GEFTC reasonably believes problem is not a GEFTC problem. |
21
Severity Level Definitions for Prioritization of Technical Issues:
The following Severity Level response matrix represents Fidelitys corporate policy for addressing technology and product disruptions.
Severity Level |
Definition |
Who Opens |
Response |
Response Time |
Resolution or
Time |
|||||
1 | Site or platform outage or significant business disruption across multiple clients |
TechOps; Operational Support |
Operational problem: Immediate fix.
Software problem: Work around provided until problem is fixed and inform business. |
45 minutes |
2 hours |
|||||
2 | Business critical - functionality loss or major client dissatisfier, including known security breaches |
TechOps; Operational Support |
Operational problem: Fix within 24 hours and inform business.
Software problem: Close into CQ for business prioritization. |
60 minutes |
Operational problem: Fix within 24 hours and inform business.
Software problem: Close into CQ for business prioritization. |
|||||
3 | Non-business critical defects |
TechOps; Operational Support |
Operational problem: Fix within 72 hours and inform business.
Software problem: Close into CQ for business prioritization. |
90 minutes |
Operational problem: Fix within 72 hours and inform business.
Software problem: Close into CQ for business prioritization. |
P REREQUISITES | ||
Prerequisites |
GEFTC to immediately research perceived transmission failures locally to ensure that any such failure is not a result of a failure of GEFTCs systems before reporting such transmission failures to Fidelity.
Standing weekly conference call to be held within no less than 90 days following the initial conversion of the Accounts to Fidelity to identify, discuss and resolve any operational or relationship issues. |
22
SERVICE LEVEL #2
KEY ACTIVITY - OPERATIONS EFFICACY | ||
M EASUREMENT M ETHOD | ||
Data Capture/ Measurement Method | FRIAG Quarterly Performance Report | |
Measurement Interval |
Quarterly | |
Calculation | For each Key Activity, the number of activities completed in accordance with the respective Performance Level divided by the total number of activities completed | |
R ESPONSIBILITY | ||
Reporting Period |
Quarterly | |
Applicable Hours |
N/A | |
S ERVICE M ETRIC | ||
Service Level | 90% of Key Activities (based on a weighted average of the aggregate number of activities completed) shall be completed in accordance with the Performance Levels set forth below for such Key Activities | |
P REREQUISITES | ||
Prerequisites | See Key Activities Below |
23
SERVICE METRICS FOR SERVICE LEVEL #2
Business Process |
Key Activity |
Performance Level |
Prerequisite (if any) |
|||
Transfer of Account (TOA) Initiation Receives | Non- Automatic Converion of Accounts Transfer (ACAT) Transfers In (TOA receives) | Fidelity will process 95% of Non-ACAT transfers that are received In Good Order the same day with receipt of complete transfer documentation. | Transfer documentation must be In Good Order (IGO). Brokerage account application must be IGO. GEFTC must provide evidence of matching registration, address and SSN as compared to the delivering firms records. GEFTC to include fbo reference on the account to match the registration of delivering firms records. GEFTC and Fidelity will follow process outlined in TOA workflow document. | |||
TOA Initiation Receives | ACAT Transfers (TOA receives) | Fidelity will process 95% of ACAT transfers that are received In Good Order the same day with receipt of complete transfer documentation. | Transfer documentation must be IGO. Brokerage account must be established. GEFTC must provide evidence of matching registration, address and SSN as compared to the delivering firms records. GEFTC to include fbo reference on the account to match the registration of delivering firms records. GEFTC and Fidelity will follow process outlined in TOA workflow document. | |||
TOA Initiation Receives | Notification of rejected TOA receives | Notice of ACAT and Non-ACAT transfers NIGO and Reject is posted to AC.com intra-day. | Following the completion of training and workflow analysis, the parties agree to negotiate in good faith the maximum Not In Good Order (NIGO) rate. | |||
TOA Initiation Delivers | Transfers Out (TOA delivers) | Fidelity will process 95% of transfers that are received In Good Order within 3 business days of receipt. | Transfer documentation must be IGO. | |||
Cash Disbursement from Business Accounts | Delivery of cash to GECTC | Fidelity will deliver funds to GECFT within 1 day of settlement of transactions. | Request from GEFTC is in IGO. |
24
Business
|
Key Activity |
Performance Level |
Prerequisite (if any) |
|||
Journal from Business Account to Omnibus Account | Asset Movements, Trailing Dividends/Interest | Fidelity will process 95% of journal request on the same day of receipt of Letter of Instruction (LOI). This also includes dividends and interest income received in the non-omnibus GEFTC Accounts. Fidelity shall journal such assets to the GEFTC Omnibus Account per GEFTCs instruction. | GEFTC to provide a letter of instruction (LOI) IGO on the journal of assets. | |||
NASU | New Account Set- Up | Completed same business day. |
Brokerage account application must be received IGO through Fidelitys Covington, KY facility by 1:30 pm E.T.
Large faxed New Account volume near cut-off time may affect standard. |
|||
Trade Execution |
Equity Execution Quality | 95% of all trades through Fidelity will be executed at or between the quoted spreads. | Fidelity must receive at least 3 day prior notice of any planned rebalancing activity. | |||
Service | Telephone Calls | 85% of telephone service calls will be answered within 20 seconds. | Based upon volume routed through appropriate 800 number/PIN. | |||
Service |
Problem Resolution |
75% of work items resolved within 2 days | Tracking work item must be opened by Fidelity CSM. |
25
Exhibit D
Additional GEFTC Representations and Warranties
GEFTC represents warrants and agrees as follows:
1. |
GEFTC is a bank as that term is defined in Section 3(a)(6) of the Securities Exchange Act, as amended (the Exchange Act), and is exempt from registration as a broker or dealer under the Exchange Act. Subsequent to the May 12, 2001 effective date of relevant provisions of the Gramm-Leach-Blilely Act (the GLB Act), GEFTC will operate its activities in such a manner so as to remain exempt from broker dealer registration. |
2. |
GEFTC has received all necessary consents, authorizations and approvals (collectively, the Approvals) from any fiduciaries, co-fiduciaries, grantors, beneficiaries or other persons or entities exercising authority or rights with respect to the Clients under any account. |
3. |
GEFTC has made such disclosures to Clients regarding all third-party service providers we use and any personal information GEFTC passes through to third-party providers in the course of managing Client Accounts. |
4. |
Clients executing authorizing documents, including the delegation to GEFTC of discretionary investment authority, shall be properly authorized to do so by the person, grantor, trust, institution or other entity the Client represents. |
5. |
In the event GEFTC provides instructions to Fidelity via a faxed or imaged document, GEFTC represents that it will have the original of that document in its files and will forward to Fidelity upon request. |
6. |
GEFTC shall be financially responsible for any unsatisfied financial obligation in GEFTCs firm or Client Accounts in that event that that obligation is the result of instructions, or an order that GEFTC or a third-party service provider working for GEFTC directs to Fidelity. |
7. |
GEFTC understands and accepts that for a variety of reasons, including verification of securities transactions and other information, Fidelity may monitor and / or tape-record telephone conversations with GEFTC and its employees. GEFTC also understands that such monitoring and/or recording may take place without an audible electronic beep, tone or vocal announcement to indicate the line may be recorded. GEFTC consents to such recording and will be solely responsible for notifying, and obtaining the consent of all present GEFTC employees, and any that join GEFTC in the future, that such conversations may be monitored and/or recorded. GEFTC consents to the admission of such recordings as evidence in any adjudication of any dispute or claim arising under this representation should Fidelity wish to admit them. |
8. |
GEFTC shall not alter the Fidelity custodial agreement, disclosure statement, client agreements, or Client applications provided to GEFTC by Fidelity. |
26
AMENDMENT
OF THE
SUBCUSTODIAL AND
SERVICE AGREEMENT
This amendment (Amendment) to the Subcustodial and Service Agreement, including any prior amendments thereto, (Agreement) between Genworth Financial Trust Company (GFTC) and Fidelity Brokerage Services LLC (FBS) and National Financial Services LLC (NFS), (FBS and NFS together, Fidelity) acting through its business unit Fidelity Registered Investment Advisor Group (FRIAG) (Fidelity, FRIAG and GFTC may individually be referred to as a Party or collectively as Parties), is entered into by and among the parties hereto as of February 22, 2007 (Effective Date).
WHEREAS, Fidelity and GFTC intend to amend certain pricing terms set forth in Exhibit B to the Agreement;
WHEREAS, GFTC desires Fidelity to provide additional products/services to GFTC including customizing reports of execution quality, referral programs and marketing support programs;
WHEREAS, Fidelity intends to work with GFTC to scope additional products/services requested by GFTC, including customization of execution quality reports, referral programs and marketing support programs;
WHEREAS, the Parties intend to negotiate in good faith the addition of mutually agreed upon services to this Agreement, including related pricing for such services.
NOW, THEREFORE, in consideration of the mutual agreements hereinafter set forth, and for other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the parties, intending to be legally bound, do hereby agree as follows:
1. Exhibit B, entitled Pricing Schedule , is hereby amended to replace in its entirety the section entitled Equities as follows :
EQUITIES
Trades submitted electronically (via Advisor Channel or Checkfree APL):
Minimum ticket charge: |
[ | ***] per trade | ||
Maximum ticket charge: |
[ | ***] per trade* | ||
Cents per share charge: |
[ | ***]/share | ||
Rep. assisted trades placed via telephone |
||||
Minimum ticket charge: |
[ | ***] per trade | ||
Maximum ticket charge: |
[ | ***] per trade* | ||
Cents per share charge: |
[ | ***]/share |
* Maximum ticket charge shall apply as a ceiling for the Cents per share charge of [***]/share in the case of trades submitted electronically and of [***]/share in the case of Rep. assisted trades placed via telephone, however; trades executed via Fidelity Capital Markets Services Institutional Program Trading capabilities (which may include Domestic Institutional Block Trading, Standard Algorithmic Trading, Proprietary Algorithmic Trading, and Staged CrossStream Trading) will include a surcharge of [***] per share: |
2. Billing . With respect to the billing of charges associated with the annual GFTC rebalancing only, such charges will be billed directly to GFTC in two separate installments. Each such installment shall be equal to fifty percent (50%) of the total annual rebalancing charges. The first installment shall be billed as part of the Q1 billing cycle (to be paid by GFTC in Q2) and the second installment shall be billed as part of the Q3 billing cycle (to be paid by GFTC during Q4 2007). The second installment will only be due and payable to Fidelity if a mutually agreed upon set of services (outlined in Section 3) are materially delivered and implemented in accordance with the good faith amendment process outlined in section 3, unless any such failure by Fidelity to meet the requirements outlined in Section 3 below is materially due to the action or inaction of GFTC in which case the second installment shall be due.
3. Additional Products/Services . The Parties hereby agree to act in good faith and use commercially reasonable efforts to amend the existing Agreement within sixty (60) days of the date hereof to include additional products/services, including charges for such products/services. Such an amendment shall be subject to mutual agreement by the Parties. Further, as part of this effort towards defining and providing additional products/services, the parties agree to act in good faith to scope out the following products/services currently requested by GFTC:
a) |
customization of execution quality reports for GTFC trades; |
b) |
participation in business development or referral programs; |
c) |
provision of additional general marketing consulting services and programs (does not include expenses for reproduction of marketing materials); |
d) |
consultation and implementation of new TOA workflows; and |
e) |
consultation and implementation of 401k distribution strategies. |
4. This Amendment may be executed in one or more counterparts, each of which shall be deemed an original and all of which, when taken together, shall constitute one and the same instrument.
5. The pricing set forth in this Amendment will be effective on the Effective Date.
6. Unless amended herein, all other provisions of the Agreement shall remain in full force and effect.
National Financial Services LLC | Genworth Financial Trust Company | |||||||
By: |
/s/ Jennifer Moran |
By: |
/s/ Michael J Abelson |
|||||
Name: | Jennifer Moran | Name: | Michael J Abelson | |||||
Title: | Sr. Vice President | Title: | Senior Vice President | |||||
Date: | Feb 23, 2007 | Date: | Feb 22, 2007 |
|
EXECUTION COPY
DEC 16 2011
AMENDMENT TO THE CUSTODY AGREEMENT
This Cost Basis Reporting Amendment (this Amendment) to the Subcustodial and Service Agreement (the Agreement) made and entered into November 1, 2005 by and among Fidelity Brokerage Services LLC (FBS), National Financial Services LLC (NFS) (together, Fidelity), and Genworth Financial Trust Company (Customer), shall be effective as of the date, or the last of the dates, if different, on which this Amendment is executed by FBS, NFS and Customer (the Effective Date ).
WHEREAS, the parties wish to amend the Agreement, as set forth below:
NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, Fidelity and Customer agree as follows:
1. |
The attached Cost Basis Reporting Addendum (the Addendum) is hereby added to the Agreement. |
2. |
Except as specifically amended hereby, the terms, provisions, conditions, covenants and agreements set forth in the Agreement are hereby confirmed and shall remain in full force and effect. |
3. |
In the event of a conflict between the terms of the attached Addendum and the terms of the Agreement, the terms of the Agreement shall control. |
IN WITNESS WHEREOF, the Parties hereto have caused this Amendment to be executed as of the Effective Date.
Fidelity Brokerage Services LLC | National Financial Services LLC |
BY: |
/s/ Melissa Morganti Zizza |
BY: |
/s/ Pui Shan Ng |
PRINT NAME: | Melissa Morganti Zizza | PRINT NAME: | Pui Shan Ng | |||||
PRINT TITLE: | Vice President | PRINT TITLE : | Vice President | |||||
DATE SIGNED: | 12/13/11 | DATE SIGNED: | 12-6-2011 | |||||
Customer |
NAME: | Genworth Financial Trust Company |
BY: |
/s/ Bradford Wheeler |
PRINT NAME: | Bradford Wheeler | |||||||
PRINT TITLE: | P RESIDENT | |||||||
DATE SIGNED: | 11/30/2011 |
COST BASIS REPORTING ADDENDUM
WHEREAS, the Internal Revenue Service has issued final regulations on broker reporting of sales of securities and on the basis of securities pursuant to Sections 6045(g), 6045A, and 6045B of the Internal Revenue Code (the Cost Basis Rule), which require an applicable person (as such term is defined in the Cost Basis Rule) to furnish to a receiving broker a transfer statement that includes certain information about a transferred security (Transfer Statement);
WHEREAS, pursuant to the arrangement between the parties governed by the Custody Agreement, Fidelity is an applicable person under the Cost Basis Rule, and Customer is a bank that maintains the information prescribed by Treasury Regulations Section 1.6045A-1(b) to be included in a Transfer Statement as required by the Cost Basis Rule (Required Information);
WHEREAS, Customer may elect to either 1) provide to Fidelity the Required Information for each transaction necessary for Fidelity to complete and issue Transfer Statements; or 2) issue its own Transfer Statements directly without the involvement of Fidelity, in each case on the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, Fidelity and Customer agree as follows:
1. |
CUSTOMER OBLIGATIONS |
1.1. Required Information .
(a) Customer agrees to provide Fidelity with instructions as to the manner in which it shall facilitate compliance with the Cost Basis Rule as set forth on Exhibit A . Such instructions shall be provided to Fidelity in writing on or before December 15, 2011. Fidelity may use and disclose to the receiving broker any Required Information provided by Customer to carry out its obligations under this Amendment and under applicable law, including without limitation by issuing Transfer Statements consistent with the Cost Basis Rule.
(b) In providing any Required Information to Fidelity hereunder, Customer shall comply with all applicable laws, including, without limitation, laws governing the collection, use and distribution of personal information. The Parties acknowledge that the Required Information may include personal and other confidential information. Customer shall promptly notify Fidelity of any contractual restrictions to which it is subject which may govern, limit or otherwise impact the collection, use or distribution of the Required Information as contemplated under this Custody Agreement.
(c) Customer agrees that Customer is exclusively responsible for the accuracy and adequacy of all the Required Information that it transmits to Fidelity. Customer represents and warrants that the Required Information transmitted to Fidelity will not disrupt, disable, harm, or otherwise impede any software, firmware, hardware, computer system or network owned by Fidelity or operated for or on behalf of Fidelity.
1.2. No Fees . The Parties acknowledge that no fees are payable by Customer to Fidelity under this Amendment.
2
2. |
FIDELITY OBLIGATIONS |
2.1. Required Information . Fidelity hereby agrees to use the Required Information only for purposes related to the Cost Basis Rule and for any other purposes permitted or required by applicable law. Fidelity will maintain the security and confidentiality of the Required Information, including shareholder data, as required by applicable law.
3. |
WARRANTIES; LIMITATIONS; AND INDEMNIFICATION |
3.1. Customer Responsibilities . Customer acknowledges and agrees that it is solely responsible for ensuring that its delivery of any Required Information to Fidelity complies with all applicable laws, rules and regulations of relevant federal and state authorities, applicable self-regulatory organizations and any other regulatory authority. Customer represents and warrants to Fidelity that: (a) the Required Information it provides will be complete and accurate; (b) it has authority to possess and to provide the Required Information and is in compliance with and is not violating any privacy or confidentiality rules, regulations, or agreements by providing same; (c) Fidelity is authorized to use the Required Information in order to comply with its Cost Basis Rule obligations; and (d) the Required Information does not contain any malicious code and will not cause any computer virus or data corruption.
3.2. Indemnification . Customer will indemnify and hold harmless Fidelity and its Affiliates, officers, directors, employees and agents from and against any and all penalties, fines and interest assessed by the Internal Revenue Service, as well as any and all other liabilities, damages, awards, settlements, losses, claims and expenses, including without limitation reasonable attorney fees and expenses and costs of investigation (collectively, Damages ) resulting from and to the extent arising from Customers breach of any term or condition of this Amendment. In the event that any Required Information is disclosed by Fidelity at any time, such disclosure shall be made in accordance with all applicable laws, rules and regulations, including but not limited to the Graham-Leach-Bliley Act as it applies to Customer.
3
EXHIBIT A
In accordance with the terms of this Amendment, Customer shall inform Fidelity which of the methods set forth below it desires to employ in order to ensure compliance with the Cost Basis Rule. Customer shall deliver to Fidelity all Required Information needed by Fidelity to carry out its obligations under this Amendment and to comply with applicable law, including, without limitation, the Cost Basis Rule.
Method A:
On or before the thirteenth (13 th ) day following settlement of a transfer of assets, Customer shall provide Fidelity with the Required Information necessary for Fidelity to issue Transfer Statements in compliance with the Cost Basis Rule. Customer shall submit to Fidelity the Required Information via the platform agreed to by the parties.
Method B:
Customer acknowledges Fidelitys duty to furnish Transfer Statements under the Cost Basis Rule. Customer represents and warrants that it shall perform the functions on Fidelitys behalf necessary to satisfy this regulatory obligation, including, but not limited to, gathering and maintaining the Required Information, creating Transfer Statements, and issuing the Transfer Statements to the receiving brokers as required by the Cost Basis Rule. Fidelity agrees to provide Customer with any Required Information in its possession necessary to assist Customer in fulfilling its obligations hereunder to furnish such Transfer Statements.
4
AMENDMENT # 2 TO THE SUBCUSTODIAL AND SERVICES AGREEMENT
This AMENDMENT #2 TO THE SUBCUSTODIAL AND SERVICES AGREEMENT, (this Amendment), dated June 23, 2015, is entered into by and between Fidelity Brokerage Services LLC (FBS) and National Financial Services LLC (NFS) (Collectively Fidelity) and AssetMark Trust Company (ATC) (formerly, GE Financial Trust Company) (Customer).
WHEREAS, Fidelity and Customer entered into a Subcustodial and Services Agreement, dated as of November 1, 2005, and amended effective February 22, 2007 (the Agreement), pursuant to which Customer engaged Fidelity to act as its sub-custodian in effecting transactions for its clients through Fidelitys brokerage platform and providing certain other related services.
WHEREAS, the parties desire to amend the Agreement as set forth below.
NOW THEREFORE, in consideration of the foregoing and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:
1. Exhibit B of the Agreement, as amended by the February 22, 2007, Amendment, is hereby deleted in its entirety and replaced with the new Exhibit B attached hereto. The pricing in Exhibit B includes payments from Fidelity to ATC that are a percentage of the income received by Fidelity related to fund holdings. Fidelity shall provide a monthly payment report to ATC.
2. Section 2.2 of the Agreement is hereby deleted in its entirety and replaced with the following Section 2.2:
In the event no written notification is given as set forth above, this Agreement shall be deemed to have been renewed for additional successive one-year periods. At any time during such additional periods, this Agreement may be terminated by Fidelity giving 180 days prior written notification to Customer, or by Customer giving 90 days prior written notice to Fidelity, and such termination shall be effective as of the end of such 180 or 90 day period, as applicable. Upon termination of this Agreement, both Customer and Fidelity agree to provide ongoing support and operational services pursuant to this Agreement no less than 90 days from termination or until the completion of the conversion of the assets, whichever occurs earlier.
3. Since the 2005 execution of the Agreement, ATCs custodial business has expanded, and ATC accepts Client accounts referred to it, not only by its registered investment advisory affiliate AssetMark, Inc. (previously named GE Private Asset Management, Inc.), but also from third party registered investment advisers. The expansion of ATCs custodial Client base in no way affects Fidelitys obligations under the Agreement but, for purposes of clarity, the Parties agree to amend Section 3 of the Agreement as follows:
Paragraph 3.2.4 is amended to clarify that Advisory Firm, a third party registered investment adviser and/or Client is responsible for making investment decisions and/or suitability determinations with respect to such Clients and ATC Accounts, and Fidelity will not be responsible for monitoring the investment decisions and/or suitability determinations with respect to such Clients and ATC Accounts.
Paragraph 3.2.8 is amended to clarify that ATC, Advisory Firm, a third party registered investment adviser and/or Client is responsible for monitoring the investment in Client Accounts held at Fidelity, and Fidelity will not be responsible for monitoring the investment made in any Client Accounts.
Paragraph 3.3.1 is amended to clarify that with regard to each Client Account, the Client has authorized Advisory Firm to establish a custodial Account for the Clients benefit or has established a custodial Account on their own behalf or another person has been authorized to establish a custodial Account for the Clients benefit.
Paragraph 3.3.3 is deleted in its entirety as unnecessary.
4. Except as expressly amended by this Amendment #2, the Agreement shall remain in full force and effect. References to the Agreement in other agreements, documents or instruments shall be in reference to the Agreement, as amended hereby. In the event one or more provisions of this Amendment conflicts or is inconsistent with one or more provisions of the Agreement, the provisions of this Amendment shall control. Except as otherwise provided, the capitalized terms in this Amendment shall have the same meaning as set forth in the Agreement. This Amendment may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same agreement. The facsimile signature of any party to this Amendment shall constitute the valid and binding execution hereof by such party.
IN WITNESS WHEREOF, each party has caused this Amendment to be executed by its duly authorized representative as of the date first set forth above.
AssetMark Trust Company | Fidelity Brokerage Services LLC | |||||||
By: |
/s/ Carrie E. Hansen |
By: |
/s/ Michael Danick |
|||||
Name: | Carrie E. Hansen | Name: | Michael Danick | |||||
Title: | EVP, COO | Title: | Vice President | |||||
Date: | 06/23/2015 | Date: | 6/30/15 | |||||
National Financial Services LLC | ||||||||
By: |
/s/ Pui Shan Ng |
|||||||
Name: | Pui Shan Ng | |||||||
Title: | Vice President | |||||||
Date: | 6-30-2015 |
Exhibit B
Fidelity Pricing
CLIENT NAME: ASSETMARK TRUST COMPANY
FIDELITY
Terms |
||||
AssetMark Mutual Fund Pricing: |
||||
Annual Base Fee ($) (per account): |
[ | ***] | ||
Custody Fee (bps): |
[ | ***] | ||
Transaction Fee (on all TF trades): |
[ | ***] | ||
Transaction Fee Surcharge (NPFF Buy Side Transactions): |
[ | ***] | ||
Monthly Minimum ($): |
[ | ***] | ||
Deconversion/Close out Fee: |
[ | ***] | ||
Proprietary Fund Fee: |
[ | ***] | ||
Wire Fees: |
[ | ***] | ||
Payments to AssetMark: |
||||
Funds Excluding Proprietary Funds |
||||
Expense Reimbursement - NTF (No Transaction Fee) |
[ | ***] | ||
Expense Reimbursement - RFN (Identified EB Assets Only) |
[ | ***] | ||
Expense Reimbursement - Asset Based Service Payment |
[ | ***] | ||
Expense Reimbursement - Asset Based Administrative Fee |
[ | ***] | ||
Proprietary Funds Only |
||||
Expense Reimbursement - NTF (No Transaction Fee) |
[ | ***] | ||
Expense Reimbursement - RFN (Identified EB Assets Only) |
[ | ***] | ||
Expense Reimbursement - Asset Based Service Payment |
[ | ***] | ||
Expense Reimbursement - Asset Based Administrative Fee |
[ | ***] | ||
AssetMark IS Custody Pricing: |
||||
Electronic Equities |
[ | ***] | ||
Manual Equities |
[ | ***] | ||
International (USD Settlement) 2 |
[ | ***] | ||
International (Local Currency Settlement) 3 |
[ | ***] | ||
Fixed Income 4 |
[ | ***] | ||
Tradeaway Fee |
[ | ***] | ||
International Tradeaway Fee |
[ | ***] | ||
Electronic Options |
[ | ***] | ||
Manual Options |
[ | ***] |
Detail Notes:
A. |
Custody Fee excludes Fidelity fund assets for TrustCustody Customers only. |
B. |
The funds reserve the right to change or suspend payments or impose certain restrictions at anytime. In accordance therewith, Fidelity may revise or suspend payment at any time. |
C. |
Expense Reimbursement Program Payments - The Parties agree that all expense reimbursement payments on Funds Excluding Proprietary Funds will be reduced to [*** ] on February 1st, 2017. |
D. |
Expense Reimbursement Program Payments - NTF, RFN, and Asset Based Administrative Fees - Statements are published in WealthCentral 1 month following billing period. Payments are made 1 month + 7 days following billing period. If 1 month + 7 days falls on a weekend, payments are made the following business day. |
E. |
Expense Reimbursement Program Payments - Asset Based Service Payments - Statements and payments are processed the 15th day of the month following billing period, with the exception of certain NTF funds which are processed the 20th day of the month. If the 15th or 20th fall on a weekend, payments are made the following business day. |
i. |
Expense Reimbursement Service Payment - NTF - Payments from Fidelity to reimburse TPA and/or bank trust organizations for administrative expenses associated with providing services to a retirement plan or trust account. Payments are paid based on an expected basis based on the fees negotiated by Fidelity. |
ii. |
Expense Reimbursement Service Payment - RFN - Additional payments from Fidelity for participant recordkeeping and related costs associated with the servicing of employee benefit plans. Please note that the RFN component is only paid with respect to eligible employee benefit assets when TPA and/or bank trust organizations associated with such assets have signed an attestation stating that their accounts are eligible employee benefit assets and are in the appropriate RFN branch prefixes. Some funds may have special requirements in support of the TPA Retirement Network program (e.g., NAV requirements). Please contact the individual fund company directly for more details. Payments are paid based on an expected basis based on the fees negotiated by Fidelity. |
iii. |
Expense Reimbursement - Asset Based Service Payments - Payments shall be paid from Fidelity to ATC to pay or reimburse ATC for expenses associated with services performed for their clients. This amount may coincide with the fee that would otherwise be payable if it were being made pursuant to a Rule 12b-1 arrangement as indicated in the funds prospectus. The amounts paid are based on the fees actually received by Fidelity from the Fund company or a service provider to the fund, such as the fund adviser or principal underwriter, and may differ from those stated in either the applicable fund prospectus or herein, with the exception of certain NTF funds which are paid based on an expected basis based on the fees negotiated by Fidelity. |
iv. |
Expense Reimbursement - Asset Based Administrative Fees - Asset Based Administrative Fees are paid by certain fund companies on non-NTF positions in lieu of a per position fee. Payments are paid based on an expected basis based on the fees negotiated by Fidelity. |
F. |
Proprietary Funds include funds advised by AssetMark, Inc., and include funds in the GPS Funds I and GPS Funds II series trusts and are generally named GuideMark and GuidePath. Proprietary Funds also include the Genworth Financial Contra Fund (cusip number: 15642U303), soon to be known as the Savos Dynamic Hedging Fund advised by Altegris Advisors, L.L.C. |
G. |
Each party has the right to reevaluate pricing every year. |
H. |
Please contact your Fidelity relationship manager to discuss pricing related to transactions in securities/trading types other than those listed herein. In the event that you place an order prior to executing an amendment specific to the pricing of such securities/trading types, you agree to pay the Fidelity standard pricing then in effect for such securities/trading types, as may be amended by Fidelity from time to time. A Fidelity Transaction Pricing Schedule is available upon request. |
I. |
Soon after the effectiveness of this Amendment #2, ATC shall transfer to Fidelity for services under the Agreement substantially all the mutual fund assets held in ATC custodial Accounts, currently approximately [*** ]. The Parties acknowledge that the actual amount converted may be greater than or less than [***] due to market activity or client issues. Immediately after such mutual fund assets have been transferred to Fidelity, Fidelity shall lower the Electronic Equities pricing to [***] per share, from [***] |
J. |
Beginning on the date of the completion of the transfer to Fidelity of substantially all the mutual fund assets held in ATC custodial Accounts after the effectiveness of this Amendment #2, the expense reimbursement payments from Fidelity to ATC shall be based on the rates Fidelity provided to ATC by email on May 1, 2015, with the exception of the following funds: CNR Intermediate Fixed Inc N, CNR Emerging Markets N, and CNR Fixed Inc Opportunities N fund. ATC acknowledges that fund families may renegotiate rates paid to Fidelity, but Fidelity shall use commercially reasonable efforts to negotiate reasonable expense reimbursement payments. |
K. |
Fidelity shall build and launch for use by ATC an enhanced daily accrual dividend file capability. The enhanced capabilities will include a daily file with cusip, pay date, month-to-date accrual amount, share quantity, and other related data elements required to calculate and reconcile daily accrual balances. |
L. |
Fidelity shall launch for use by ATC an enhancement to the daily income feature to expand the rate field to 5 decimals. |
1 |
Maximum ticket charge shall apply as a ceiling for the Cents per share charge of [***]/share in the case of trades submitted electronically and of [***]/share in the case of Rep. assisted trades placed via telephone, however; trades executed via Fidelity Capital Markets Services Institutional Program Trading capabilities (which may include Domestic Institutional Block Trading, Standard Algorithmic Trading, Proprietary Algorithmic Trading, and Staged CrossStream Trading) will include a surcharge of $.005 per Share. |
2 |
Except for Canada, where price is [***] per share if share price is greater than [ ***], [ ***] per share if share price is less than [***]. Fx component of trade is [***] for Canada and [***] for all other countries |
3 |
Pricing varies by country consisting of a flat per trade fee and a basis point fee on principal. Schedule available via your relationship manager. |
4 |
Certain fixed income transactions are subject to additional fees including [***] for Commercial Paper, [***] for government T-bills auction orders placed through the trading desk. For agency business, Muni-Resets and Auction Rate Preferred securities are charged a [***] transaction fee and Exchange Traded fixed income securities are [***] per bond with a [***] minimum. UITs are charged [***] per trade. |
/s/ Carrie E. Hansen |
6/23/2015 |
|||||
ASSETMARK TRUST COMPANY | Date |
EXECUTION COPY
AUG 21 2015
AMENDMENT TO THE SUBCUSTODIAL AND SERVICE AGREEMENT
This trade away amendment (this Amendment) to the Subcustodial and Service Agreement made and entered into November, 2005, by and among Fidelity Brokerage Services LLC (FBS), National Financial Services LLC (NFS) (together, Fidelity), and AssetMark Trust Company (Customer), shall be effective as of the date, or the last of the dates, if different, on which this Amendment is executed by FBS, NFS and Customer (the Effective Date ).
WHEREAS, the parties wish to amend the Subcustodial and Service Agreement, as set forth below:
NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, Fidelity and Customer agree as follows:
1. |
The attached Trade Away Addendum (the Addendum) is hereby added to the Subcustodial and Service Agreement. |
2. |
Except as specifically amended hereby, the terms, provisions, conditions, covenants and agreements set forth in the Subcustodial and Service Agreement are hereby confirmed and shall remain in full force and effect. |
3. |
If any provision of the attached Addendum conflicts or is inconsistent with any provision of the Subcustodial and Service Agreement, the provisions of this Addendum will control for securities transactions executed by Executing Brokers on behalf of IMA Managers Clients. |
IN WITNESS WHEREOF, the Parties hereto have caused this Amendment to be executed as of the Effective Date.
Fidelity Brokerage Services LLC | National Financial Services LLC | |||||||
BY: /s/ Michael Danick | BY: /s/ Pui Shan Ng | |||||||
PRINT NAME: | Michael Danick | PRINT NAME: | Pui Shan Ng | |||||
PRINT TITLE: | Vice President | PRINT TITLE: | Vice President | |||||
DATE SIGNED: | 7/23/15 | DATE SIGNED: | 7-23-2015 |
Customer | ||
NAME: AssetMark Trust Company | ||
BY: /s/ Gaurav Auditya | ||
PRINT NAME: | Gaurav Auditya | |
PRINT TITLE: | Vice President of Custody Operations, Trade Operations and Reporting | |
DATE SIGNED: | July 13, 2015 |
TRADE AWAY ADDENDUM
WHEREAS, Customers Clients include those with Individually managed Accounts (IMA) managed by managers with discretionary authority (IMA Managers), and Customer desires that Fidelity accept from IMA Managers instructions relating to the settlement of trade away securities transaction (Trade Away Transactions) executed by Executing Brokers on behalf of a Client.
WHEREAS, the terms of this Trade-Away Addendum (Addendum) will apply to any instruction or representation an IMA Manager gives to Fidelity for securities transactions that IMA Manager places directly with any broker-dealers, including both foreign and domestic broker-dealers that are not affiliated with Fidelity (Executing Brokers).
NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, Fidelity and Customer agree as follows:
(1) As between IMA Manager and Fidelity, IMA Manager is solely responsible for the selection, monitoring and supervision of Executing Brokers, including assessing their execution capabilities and financial strength. IMA Manager will perform such due diligence as it believes is necessary in connection with its selection of Executing Brokers. Fidelity will have no obligation to select, monitor or supervise Executing Brokers.
(2) Fidelitys role in any Trade Away Transaction IMA Manager arranges is limited to acting as custodian and settlement agent in settling transactions for Customer and IMA Managers Clients. Customer and IMA Manager will not identify Fidelity as executing broker or counterparty in any securities transaction IMA Manager arranges with an Executing Broker, and any such designation will not be binding on Fidelity.
(3) Customer agrees that IMA Manager must comply with the Trade-Away Operational Procedures, as amended from time to time with notice to Customer and IMA Manager (Procedures). Fidelity will act solely as settlement agent and custodian in Trade Away Transactions, and will have no other responsibility whatsoever with regard to the execution or clearance of any such transactions. Fidelitys duties in this regard will be further conditioned upon Fidelity (directly or through its agents) having custody of or receiving the subject securities or other property (including cash) in good deliverable form before settlement. Fidelity is not obligated, nor will it undertake to settle any Trade Away Transaction in any account without sufficient cash or securities in the account to settle the transaction on settlement date.
(4) Fidelity in its sole discretion may limit or restrict IMA Managers ability to deal with particular Executing Brokers, or may place limits on the number or volume of Trade Away Transactions IMA Manager may affect on behalf its Clients. Fidelity may also require Customer and IMA Managers Clients to maintain minimum net equity in the Accounts. Fidelity will provide written notice of any such requirements, limitations and restrictions (Rules) and Customer and IMA Manager must comply with such Rules.
2
(5) Fidelity may terminate this Addendum and no longer accept for settlement and custody of trade away transactions and securities in the event IMA Manager or Customer fails to comply with the terms of this Addendum.
(6) Fidelity may charge Clients trade away fees as set forth in the Custody Agreement Fee Exhibit as it may be revised from time to time. Customer agrees to notify its Clients of such fees associated with trade away securities transactions to the extent that they are charged Client Accounts.
(7) To facilitate settlement on behalf of Customers Clients, Fidelity may book Trade Away Transactions through its systems in a manner that makes them appear as though they are buys and sells, and may reflect this activity as a trade on standardized communications. Customer understands that, notwithstanding the presentation of this information on communications that Customer and IMA Manager receive from Fidelity, Fidelity is acting solely as settlement agent in connection with Trade Away Transactions.
In consideration of Fidelitys acceptance of instructions relating to Trade Away Transactions executed through Executing Brokers, Customer agrees to indemnify and hold harmless Fidelity and their officers, directors, employees, agents, control persons and affiliates from and against all claims, losses, damages, liabilities and expenses (including reasonable attorneys fees arising out of or relating to: (1) Customers or IMA Managers failure to comply with the terms or conditions of this Addendum; (2) the execution and clearance of any Trade Away Transaction, including the acts or omissions of any Executing Broker or other party not controlled by Fidelity; (3) Fidelitys following Customers or IMA Managers instructions pertaining to the settlement of Trade Away Transactions; or (4) a Trade Away Transaction that fails to settle as a result of Customers or IMA Managers act or omission or due to insufficient cash or securities in an account to settle the Trade Away Transaction on settlement date. This indemnification obligation is in addition to that set forth in the Custody Agreement.
Customer acknowledges that Fidelity reserves the right to confirm any instruction with IMA Manager or the Client prior to acting upon the instruction.
3
AMENDMENT #5 TO THE SUBCUSTODIAL AND SERVICES AGREEMENT
This Amendment #5, effective June 1, 2018, amends the Subcustodial and Services Agreement between AssetMark Trust Company (ATC) (formerly, GE Financial Trust Company) (Customer) and Fidelity Brokerage Services LLC (FBS) and National Financial Services LLC (NFS) (collectively, Fidelity) effective November 1, 2005, and any amendments thereto (the Agreement).
This Amendment hereby modifies the Agreement by deleting Exhibit B in its entirety and replacing it with a new Exhibit B attached hereto. The pricing in Exhibit B includes payments from Fidelity to ATC that are a percentage of the income received by Fidelity related to fund holdings. Fidelity shall provide a monthly payment report to ATC.
Exhibit B
Fidelity Pricing
CLIENT NAME: ASSETMARK TRUST COMPANY
FIDELITY Terms |
||
AssetMark Mutual Fund Pricing: |
||
Annual Base Fee ($) (per account): |
[***] | |
Custody Fee (bps): |
[***] | |
Transaction Fee (on all TF trades): |
[***] | |
Transaction Fee Surcharge (NPFF Buy Side Transactions): |
[***] | |
Monthly Minimum ($): |
[***] | |
Deconversion/Close out Fee: |
[***] | |
Proprietary Fund Fee: |
[***] | |
Wire Fees: |
[***] | |
Payments to AssetMark: |
||
Funds Excluding Proprietary Funds |
||
Expense Reimbursement - NTF (No Transaction Fee) |
[***] | |
Expense Reimbursement - RFN (Identified EB Assets Only) |
[***] | |
Expense Reimbursement - Asset Based Service Payment |
[***] | |
Expense Reimbursement - Asset Based Administrative Fee |
[***] | |
Proprietary Funds Only |
||
Expense Reimbursement - NTF (No Transaction Fee) |
[***] | |
Expense Reimbursement - RFN (Identified EB Assets Only) |
[***] | |
Expense Reimbursement - Asset Based Service Payment |
[***] | |
Expense Reimbursement - Asset Based Administrative Fee |
[***] | |
AssetMark IS Custody Pricing: |
||
Electronic Equities |
[***] per Share / [***] per Trade Min / [***] per Trade Max 1 | |
Manual Equities |
[***] per Share / $[***] per Trade Min / [***] per Trade Max 1 | |
International Equities (USD Settlement) 2 |
[***] [***] on Principal | |
International Equities (Local Currency Settlement) |
Varies based on Foreign Pricing Schedule | |
Fixed Income (Domestic and International) |
[***] | |
Domestic Tradeaway Fee |
[***] | |
International Tradeaway Fee |
[***] | |
Electronic Options |
[***] | |
Manual Options |
[***] |
See Detail Notes below for additional information
Detail Notes:
A. |
Custody Fee excludes Fidelity fund assets for TrustCustody Customers only. |
B. |
The funds reserve the right to change or suspend payments or impose certain restrictions at anytime. In accordance therewith, Fidelity may revise or suspend payment at any time. |
C. |
Expense Reimbursement Program Payments NTF, RFN, and Asset Based Administrative Fees Statements are published in WealthCentral 1 month following billing period. Payments are made 1 month + 7 days following following billing period. If 1 month + 7 days falls on a weekend, payments are made the following business day. |
D. |
Expense Reimbursement Program Payments Asset Based Service Payments Statements and payments are processed the 15 th day of the month following billing period, with the exception of certain NTF funds which are processed the 20 th day of the month. If the 15 th or 20 th fall on a weekend, payments are made the following business day. |
i. |
Expense Reimbursement Program Payment NTF - Payments from Fidelity to reimburse TPA an/or bank trust organizations for administrative expenses associated with providing services to a retirement plan or trust account. Payments are based on an expected basis based on the fees negotiated by Fidelity. |
ii. |
Expense Reimbursement Service Payment RFN Additional payments from Fidelity for participant recordkeeping and related costs associated with the servicing of employee benefit plans. Please note that the RFN component is only paid with respect to eligible employee benefit assets when TPA and/or bank trust organizations associated with such assets have signed an attestation stating that their accounts are eligible employee benefit assets and are in the appropriate RFN branch prefixes. Some funds may have special requirements in support of the TPA Retirement Network Program (e.g., NAV requirements). Please contact the individual fund company directly for more details. Payments are paid based on an expected basis based on the fees negotiated by Fidelity. |
iii. |
Expense Reimbursement Asset Based Service Payments Payments shall be paid from Fidelity to ATC to pay or reimburse ATC for expenses associated with services performed for clients. This amount may coincide with the fee that would otherwise be payable if it were being made pursuant to a Rule 12b-1 arrangement as indicated in the funds prospectus. The amounts paid are based on the fees actually received by Fidelity from the Fund company or a service provider to the fund, such as the fund advisor or principal underwriter, and may diffor from those stated in either the applicable fund prospectus or herein, with the exception of certain NTF funds which are paid based on an expected basis based on the fees negotiated by Fidelity. |
1 |
Maximum ticket charge shall apply as a ceiling for the Cents per share charge of [***]/share in the case of trades submitted electronically and of [***]/share in the case of Rep. assisted trades placed via telephone, however; trades executed via Fidelity Capital Markets Services Institutional Program Trading capabilities (which may include Domestic Institutional Block Trading, Standard Algorithmic Trading, Proprietary Algorithmic Trading, and Staged CrossStream Trading) will include a surcharge of [***] per share. |
2 |
Except for Canada, where price is [***] per share if share price is greater than [***], [***] per share if share price is less than [***]. Fx component of trade is [***] for Canada and [***] for all other countries. |
3 |
Pricing varies by country consisting of a flat per trade fee and a basis point fee on principal. Schedule available via your relationship manager. |
4 |
Certain fixed income transactions are subject to additional fees including [***] for Commercial Paper, [***] for government T-bills auction orders placed through the trading desk. For agency business, Muni-Resets and Auction Rate Preferred securities are charged a [***] transaction fee and Exchange Traded fixed income securities are [***] per bond with a [***] minimum. UITs are charged [***] per trade. |
Amendment to Subcucstodial and Services Agreement
Page 2 of 3
iv. |
Expense Reimbursement Asset Based Administrative Fees Asset Based Administrative Fees are paid by certain fund companies on non-NTF positions in lieu of a per position fee. Payments are made on an expected basis based on the fees negotiated by Fidelity. |
E. |
Proprietary Funds include funds advised by AssetMark, Inc., and include funds in the GPS Funds I and GPS Funds II series trusts and are generally named GuideMark and GuidePath. Proprietary Funds also include the Genworth Financial Contra Fund (cusip number: 15642U303), soon to be known as the Savos Dynamic Hedging Fund advised by Altegris Advisors, L.L.C. |
F. |
Each party has the right to reevaluate pricing every year. |
G. |
Fidelity may collect Per Position on Transaction Fee funds, but shall not pay such fees to the customer. |
H. |
Please contact your Fidelity relationship manager to discuss pricing related to transactions in securities/trading types other than those listed herein. In the event that you place an order prior to executing an amendment specific to the pricing of such securities/trading types, you agree to pay the Fidelity standard pricing then in effect for such securities/trading types, as may be amended by Fidelity from time to time. A Fidelity Transaction Pricing Schedule is available upon request. |
I. |
The expense reimbursement payments from Fidelity to ATC shall be based on the rates Fidelity provided to ATC by email on May 1, 2015, with the exception of the following funds: CNR Intermediate Fixed Inc. N, CNR Emerging Markets N, and CNR Fixed Inc Opportunities N fund. ATC acknowledges that fund families may negotiate rates paid to Fidelity, but Fidelity shall use commercially reasonable efforts to negotiate expense reimbursement payments. |
J. |
Fidelity shall build and launch for use by ATC an enhanced daily accrual dividend file capability. The enhanced capabilities will include a daily file with cusip, pay date, month-to-date accrual amount, share quality, and other related daya elements required to calculate and reconcile daily accrual balances. |
K. |
Fidelity shall launch for use by ATC on enhancement to the daily income feature to expand the rate field to 5 decimals. |
Except as expressly amended by this Amendment, the Agreement shall remain in full force and effect. References to the Agreement in other agreements, documents or instruments shall be in reference to the Agreement, as amended hereby. In the event one or more provisions of this Amendment conflicts or is inconsistent with one or more provisions of the Agreement, the provisions of this Amendment shall control. Except as otherwise provided, the capitalized terms in this Amendment shall have the same meaning as set forth in the Agreement. This Amendment may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same agreement. The facsimile signature of any party to this Amendment shall constitute the valid and binding execution hereof by such party.
National Financial Services LLC | AssetMark Trust Company | |||||||
By: |
/s/ Lisa O Smith |
By: |
/s/ Carrie Hansen |
|||||
Name: | Lisa O Smith | Name: | Carrie Hansen | |||||
Title: | Vice President - Fidelity Clearing & Custody Solutions | Title: | EVP, COO | |||||
Date: | 6/19/2018 | Date: | 6/19/2018 | |||||
Fidelity Brokerage Services LLC | ||||||||
By: |
/s/ Mike Danick |
|||||||
Name: | Mike Danick | |||||||
Title: | Vice President | |||||||
Date: | 6/19/2018 |
Amendment to Subcucstodial and Services Agreement
Page 3 of 3
Certificate Of Completion | ||||
Envelope Id: D677345D71A9488AA7AC4460A50014C7 | Status: Completed | |||
Subject: Please DocuSign: Assetmark Pricing Amendment 06-18-18.pdf | ||||
PramataWorkflow: | ||||
Source Envelope: | ||||
Document Pages: 3 | Signatures: 3 | Envelope Originator: | ||
Certificate Pages: 2 | Initials: 1 | FIContractExecution | ||
AutoNav: Enabled | 245 Summer Street | |||
EnvelopeId Stamping: Enabled | Boston, MA 02210 | |||
Time Zone: (UTC-05:00) Eastern Time (US & Canada) | a390245@fmr.com | |||
IP Address: 192.223.236.250 | ||||
Record Tracking | ||||
Status: Original | Holder: FIContractExecution | Location: DocuSign | ||
6/19/2018 |
a390245@fmr.com |
|||
Signer Events | Signature | Timestamp | ||
Carrie Hansen | Sent: 6/19/2018 | |||
Carrie.Hansen@AssetMark.com | Viewed: 6/19/2018 | |||
EVP, COO | Signed: 6/19/2018 | |||
Security Level: Email, Account Authentication (None) | Using IP Address: 40.140.177.158 | |||
Electronic Record and Signature Disclosure: | ||||
Not Offered via DocuSign |
||||
Mussaab Hussain | Sent: 6/19/2018 | |||
Mussaab.Hussain@fmr.com | Viewed: 6/19/2018 | |||
Fidelity Family Office Services | Signed: 6/19/2018 | |||
Security Level: Email, Account Authentication (None) | Using IP Address: 192.223.242.21 | |||
Electronic Record and Signature Disclosure: | ||||
Not Offered via DocuSign |
||||
Mike Danick Mike.Danick@fmr.com |
Sent: 6/19/2018 Viewed: 6/19/2018 |
|||
Vice President | Signed: 6/19/2018 | |||
Security Level: Email, Account Authentication (None) | Using IP Address: 192.223.236.250 | |||
Electronic Record and Signature Disclosure: | ||||
Not Offered via DocuSign |
||||
Lisa O Smith Lisa.Q.Smith@fmr.com |
Sent: 6/19/2018 Viewed: 6/19/2018 |
|||
Vice President- Fidelity Clearing & Custody Solutions | Signed: 6/19/2018 | |||
Security Level: Email, Account Authentication | Using IP Address: 192.223.236.250 | |||
(None) | ||||
Electronic Record and Signature Disclosure: | ||||
Not Offered via DocuSign |
||||
In Person Signer Events | Signature | Timestamp | ||
Editor Delivery Events | Status | Timestamp | ||
Agent Delivery Events | Status | Timestamp |
Intermediary Delivery Events | Status | Timestamp | ||
Certified Delivery Events | Status | Timestamp | ||
Carbon Copy Events | Status | Timestamp | ||
Catherine Davies | COPIED | Sent: 6/19/2018 | ||
Catherine.Davies@fmr.com | ||||
Security Level: Email, Account Authentication (None) | ||||
Electronic Record and Signature Disclosure: | ||||
Not Offered via DocuSign |
||||
Notary Events | Signature | Timestamp | ||
Envelope Summary Events | Status | Timestamps | ||
Envelope Sent | Hashed/Encrypted | 6/19/2018 | ||
Certified Delivered | Security Checked | 6/19/2018 | ||
Signing Complete | Security Checked | 6/19/2018 | ||
Completed | Security Checked | 6/19/2018 | ||
Payment Events | Status | Timestamps |
AMENDMENT #6 TO THE SUBCUSTODIAL AND SERVICE AGREEMENT
This AMENDMENT #6 TO THE SUBCUSTODIAL AND SERVICE AGREEMENT, (this Amendment), effective November 1, 2018, is entered into by and between Fidelity Brokerage Services LLC (FBS) and National Financial Services LLC (NFS) (Collectively Fidelity) and AssetMark Trust Company (formerly, GE Financial Trust Company) (Customer).
WHEREAS, Fidelity and Customer entered into a Subcustodial and Service Agreement, dated as of November 1, 2005 (as amended, the Agreement), pursuant to which Customer engaged Fidelity to act as its sub-custodian in effecting transactions for its clients through Fidelitys brokerage platform and providing certain other related services.
WHEREAS, the parties desire to amend the Agreement as set forth below.
NOW THEREFORE, in consideration of the foregoing and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:
1. Exhibit B of the Agreement is hereby deleted in its entirety and replaced with the new Exhibit B attached hereto.
2. This Amendment shall remain in full force and effect for a one (1) year period beginning on the effective date of the Amendment. Either party may terminate this Agreement at the end of such one year period by giving 90 days prior written notification of termination. In such event, this Agreement shall terminate at the end of such one year period. All provisions related to term and termination as stated in the Agreement shall otherwise remain intact.
3. Except as expressly amended by this Amendment, the Agreement shall remain in full force and effect. References to the Agreement in other agreements, documents or instruments shall be in reference to the Agreement, as amended hereby. In the event one or more provisions of this Amendment conflicts or is inconsistent with one or more provisions of the Agreement, the provisions of this Amendment shall control. Except as otherwise provided, the capitalized terms in this Amendment shall have the same meaning as set forth in the Agreement. This Amendment may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same agreement. The facsimile signature of any party to this Amendment shall constitute the valid and binding execution hereof by such party.
IN WITNESS WHEREOF, each party has caused this Amendment to be executed by its duly authorized representative.
AssetMark Trust Company | Fidelity Brokerage Services LLC | |||||||
By: |
/s/ Carrie Hansen |
By: |
/s/ Jennifer Moran |
|||||
Name: |
Carrie Hansen |
|
Name: |
Jennifer Moran | ||||
Title: | EVP, COO | Title: | Vice President |
National Financial Services LLC | ||
By: |
/s/ Lisa O Smith |
|
Name: | Lisa O Smith | |
Title: | Vice President - FCCS |
Exhibit B
Fidelity Pricing
CLIENT NAME: ASSETMARK TRUST COMPANY | ||
FIDELITY
Terms |
||
AssetMark Payments to Fidelity: |
||
AssetMark Mutual Fund Pricing: |
||
Annual Base Fee ($) (per account): |
[***] | |
Subcustodial and Service Fee (bps): |
[***] | |
Transaction Fee (on all TF trades): |
[***] | |
Transaction Fee Surcharge (NPFF Buy Side Transactions): |
[***] | |
Monthly Minimum ($): |
[***] | |
Deconversion/Close out Fee: |
[***] | |
Proprietary Fund Fee: |
[***] | |
Wire Fees: |
[***] | |
* Subcustodial and Service Fee Mutual Fund & Individual Securities Tiered (bps): |
||
First $10B |
[***] | |
Next $10B |
[***] | |
Next $10B |
[***] | |
Next $10B |
[***] | |
Next $10B |
[***] | |
Over $50B |
[***] | |
Fidelity Payments to AssetMark: |
||
Funds Excluding Proprietary Funds |
||
Expense Reimbursement NTF (No Transaction Fee) |
[***] | |
Expense Reimbursement RFN (Identified EB Assets Only) |
[***] | |
Expense Reimbursement Asset Based Service Payment |
[***] | |
Expense Reimbursement Asset Based Administrative Fee |
[***] | |
Proprietary Funds Only |
||
Expense Reimbursement NTF (No Transaction Fee) |
[***] | |
Expense Reimbursement RFN (Identified EB Assets Only) |
[***] | |
Expense Reimbursement Asset Based Service Payment |
[***] | |
Expense Reimbursement Asset Based Administrative Fee |
[***] | |
AssetMark IS Custody Pricing: |
||
Custody Fee (per IS position per year) |
[***] | |
Electronic Equities |
[***] | |
Manual Equities |
[***] | |
International Equities (USD Settlement) 1 |
[***] | |
International Equities (Local Currency Settlement) 2 |
[***] | |
Fixed Income (Domestic and International) 3 |
[***] | |
Domestic Tradeaway Fee Until and Including November 30, 2018 |
[***] | |
Domestic Tradeaway Fee After November 30, 2018 |
[***] | |
International Tradeaway Fee |
[***] | |
Electronic Options |
[***] | |
Manual Options |
[***] |
See Detail Notes below for additional information
Detail Notes:
A. |
Custody Fee excludes Fidelity fund assets for TrustCustody Customers only. |
B. |
The funds reserve the right to change or suspend payments or impose certain restrictions at anytime. In accordance therewith, Fidelity may revise or suspend payment at any time. |
C. |
Expense Reimbursement Program Payments NTF, RFN, and Asset Based Administrative Fees Statements are published in WealthCentral 1 month following billing period. Payments are made 1 month + 7 days following following billing period. If 1 month + 7 days falls on a weekend, payments are made the following business day. |
D. |
Expense Reimbursement Program Payments Asset Based Service Payments Statements and payments are processed the 15 th day of the month following billing period, with the exception of certain NTF funds which are processed the 20 th day of the month. If the 15 th or 20 th fall on a weekend, payments are made the following business day. |
i. |
Expense Reimbursement Program Payment NTF- Payments from Fidelity to reimburse TPA an/or bank trust organizations for administrative expenses associated with providing services to a retirement plan or trust account. Payments are based on an expected basis based on the fees negotiated by Fidelity. |
ii. |
Expense Reimbursement Service Payment RFN Additional payments from Fidelity for participant recordkeeping and related costs associated with the servicing of employee benefit plans. Please note that the RFN component is only paid with respect to eligible employee benefit assets when TPA and/or bank trust organizations associated with such assets have signed an attestation stating that their accounts are eligible employee benefit assets and are in the appropriate RFN branch prefixes. Some funds may have special requirements in support of the TPA Retirement Network Program (e.g., NAV requirements). Please contact the individual fund company directly for more details. Payments are paid based on an expected basis based on the fees negotiated by Fidelity. |
iii. |
Expense Reimbursement Asset Based Service Payments Payments shall be paid from Fidelity to ATC to pay or reimburse ATC for expenses associated with services performed for clients. This amount may coincide with the fee that would otherwise be payable if it were being made pursuant to a Rule 12b-1 arrangement as indicated in the funds prospectus. The amounts paid are based on the fees actually received by Fidelity from the Fund company or a service provider to the fund, such as the fund advisor or principal underwriter, and may differ from those stated in either the applicable fund prospectus or herein, with the exception of certain NTF funds which are paid based on an expected basis based on the fees negotiated by Fidelity. |
iv. |
Expense Reimbursement Asset Based Administrative Fees Asset Based Administrative Fees are paid by certain fund companies on non-NTF positions in lieu of a per position fee. Payments are made on an expected basis based on the fees negotiated by Fidelity. |
E. |
Proprietary Funds include funds advised by AssetMark, Inc., and include funds in the GPS Funds I and GPS Funds II series trusts and are generally named GuideMark and GuidePath. Proprietary Funds also include cusip number 15642U303, the Savos Dynamic Hedging Fund advised by AssetMark, Inc. |
F. |
Each party has the right to reevaluate pricing every year. |
1 |
Except for Canada, where price is [***] per share if share price is greater than [***], [***] per share if share price is less than [***]. Fx component of trade is [***] for Canada and [***] for all other countries. |
2 |
Pricing varies by country consisting of a flat per trade fee and a basis point fee on principal. Schedule available via your relationship manager. |
3 |
Certain fixed income transactions are subject to additional fees including [***] for Commercial Paper, [***] for government T-bills auction orders placed through the trading desk. For agency business, Muni-Resets and Auction Rate Preferred securities are charged a [***] transaction fee and Exchange Traded fixed income securities are [***] per bond with a [***] minimum. UITs are charged [***] per trade. |
G. |
Fidelity may collect Per Position on Transaction Fee funds, but shall not pay such fees to the customer. |
H. |
Please contact your Fidelity relationship manager to discuss pricing related to transactions in securities/trading types other than those listed herein. In the event that you place an order prior to executing an amendment specific to the pricing of such securities/trading types, you agree to pay the Fidelity standard pricing then in effect for such securities/trading types, as may be amended by Fidelity from time to time. A Fidelity Transaction Pricing Schedule is available upon request. |
I. |
The expense reimbursement payments from Fidelity to ATC shall be based on the rates Fidelity provided to ATC by email on May 1, 2015, with the exception of the following funds: CNR Intermediate Fixed Inc. N, CNR Emerging Markets N, and CNR Fixed Inc Opportunities N fund. ATC acknowledges that fund families may negotiate rates paid to Fidelity, but Fidelity shall use commercially reasonable efforts to negotiate expense reimbursement payments. |
J. |
Fidelity shall build and launch for use by ATC an enhanced daily accrual dividend file capability. The enhanced capabilities will include a daily file with cusip, pay date, month-to-date accrual amount, share quality, and other related data elements required to calculate and reconcile daily accrual balances. |
K. |
Fidelity shall launch for use by ATC on enhancement to the daily income feature to expand the rate field to [***] decimals. |
Exhibit 10.5
The redacted information has been excluded because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed.
CHECKFREE APL MASTER AGREEMENT
This CheckFree APL Master Agreement (Agreement) is made between CheckFree Investment Services, a division of CheckFree Services Corporation, a Delaware corporation with a place of business at 10 Exchange Place, 23 rd floor, Jersey City, NJ 07302 (hereafter CKFR) and AssetMark Investment Services, with a principal place of business at 2300 Contra Costa Blvd., Suite 425, Pleasant Hill, CA 94523 (hereafter, referred to as Client). This Agreement shall supersede and replace the CheckFree APL Wrap System Agreement, dated July 15, 2002 between the parties (the Old Agreement).
WHEREAS, Client provides certain services to certain companies and wish to include on each account to each company the fees for access to the CheckFree APL system (the System); and,
NOW THEREFORE, in consideration of the mutual promises herein contained, and for other good and valuable consideration, the sufficiency of which is hereby acknowledged by both parties, the parties to this Agreement, intending to be legally bound, hereby agree as follows:
1. |
TERM AND PRICING |
CKFR agrees to provide Client, with volume based pricing on the number of accounts used, in the aggregate, for advisors or other parties mutually agreed upon by CKFR and Client (each an Authorized Party or AP) to which Client provides certain outsourcing services, except as provided in Sections 1.5. Client agrees to submit to CKFR the New User Notification Form substantially in the form attached as Addendum B in order to notify CKFR of the Authorized Party and any needed implementation services.
1.1 |
For a period of three (3) years (the Term), CKFR agrees to furnish Client with access to its customized version of the System. CKFR will give Client pricing based on the combined number of accounts Of all Authorized Parties as stated in Schedule 1 (attached hereto), except as stated in Section 1.5. |
1.2 |
Client and Authorized Parties will have access to the System by means of thirty (30) active ports. Such access will normally be between the hours of 8:00 a.m. and 6:00 p.m., Eastern Time, Monday through Friday. Client and Authorized Parties will have access at other times subject to CKFRs reasonable discretion based on usage considerations. |
1.3 |
CKFR will provide Client and Authorized Party personnel with the documentation, training, and assistance necessary to implement access to the System. If an Authorized Party requires additional services, such services will be negotiated between CKFR and Client and paid for by Client as long as Client has given prior approval for such services. |
1.4 |
The monthly rates and minimum payments applicable to the System are set forth on Schedule 1 hereto, with the rate to be determined in each instance based on the type of account, as further listed on Schedule 1 hereto, except as stated in Section 1 . 5 . |
1.5 |
Notwithstanding the pricing set forth on Schedule 1 hereto, if an Authorized Party is a current client of CKFR or is processing accounts on the System at the time of becoming an Authorized Party (each such pre-existing client of CKFR being hereinafter referred to as a PEC), Client will be responsible for such PECs then current account pricing for six (6) months from the time in which Client has assumed full responsibility for servicing such accounts. This period of time shall be known as the Wait Period. Client and CKFR acknowledge that during the Wait Period there may be a transition of account servicing responsibilities from the PEC to Client. CKFR shall pass on the discounts associated with Schedule 1 the month immediately following the Wait Period as Client assumes the servicing of those accounts. The example below illustrates the invoicing of the Wait Period. |
1
Example #1: It is January 1, 2005 and the PEC has 20,000 accounts, the PEC is a current CKFR client until August 2005. The transition schedule is as follows: 5000 accounts in February 2005; 5000 accounts in July 2005; 5000 accounts in December 2005 and 5000 accounts in April 2007.
|
January 2005June 2005; then current PEC pricing for all accounts |
|
July 2005December 2005: - then current PEC pricing for 15,000 accounts; Schedule 1 pricing for 5000 accounts |
|
January 2006June 2006: then current PEC pricing for 10,000 accounts; Schedule 1 pricing for 10,000 accounts |
|
July 2006October 2007: then current PEC pricing for 5,000 accounts; Schedule 1 pricing for 15,000 accounts |
|
November 2007thereafter: Schedule 1 pricing |
If Authorized Party is not a current client of CKFR or is not currently processing accounts on the System at the time of becoming an Authorized Party, then Client may use pricing listed in Schedule 1 for additional accounts added to System
1.5.1 |
Notwithstanding the above language, CKFR shall not charge more than the following monthly per account rates by product. |
Mutual Fund Wrap Accounts |
$ | [***] | ||
Separately Managed Wrap Accounts |
$ | [***] | ||
ETF Wrap Accounts |
$ | [***] | ||
Multiple Strategy Portfolio Accounts |
$ | [***] | ||
Administrative Accounts |
$ | [***] | ||
Funding Accounts |
$ | [***] |
1.6 |
In the event that Client and CKFR desire to cover additional types of accounts or include other Authorized Parties under, or remove Authorized Parties from, the terms of this Agreement, Client and CKFR may amend the schedules and addenda hereto by mutual agreement of Client and CKFR in writing. |
1.7 |
Payments due under this agreement are to be made within thirty (30) calendar days of receipt by Client of the invoice. Client agrees to pay any applicable taxes, including state and local, levied or based on this charge or the Agreement (excluding income taxes payable by CKFR). Payments made by credit card shall incur a [***] percent ([***]%) surcharge. |
1.8 |
Late Fees , In the event Client fails to pay any fee or charge on or before the due date specified by this Agreement, CKFR reserves the right to impose a late fee equal to 1 1 ⁄ 2 % of the delinquent amount for each month or partial month that the amount remains unpaid (or, if less, the maximum amount permitted by law). |
1.9 |
CKFR also offers certain Optional Services that are not included in the System and that are priced separately. Addendum A to this Agreement lists the Optional Services that are available upon request. The Optional Services are subject to change over time and are not all- inclusive. |
1.10 |
CKFR will make available the services and functions as described in the System users guide, to be provided to the Authorized Parties upon execution of this Agreement, and the Webster on-line enhancements bulletin board. Authorized Parties will have access to additional services and functions that are released to the System user base generally. In the event that CKFR is requested to provide additional custom programming it will do so at the rate of [***] ($[***]) per hour. Software analysis will be provided to analyze, facilitate, implement and test programming as described herein at the rate of [***] dollars ($[***]) per hour. |
2
1.11 |
CKFR shall not agree to provide, or provide, to any Authorized Party any Optional Services or other services not specifically contemplated hereby without Clients prior written consent thereto, if such services would result in the incurrence of additional fees by Client and Client shall have no responsibility or liability to CKFR for any fees incurred without such prior written consent. |
1.12 |
Client and CKFR hereby acknowledge that they have executed a letter agreement dated March 14, 2006 (the Letter Agreement), whereby the parties reached an agreement on the use by Client of a specific tool developed by CKFR (as described in such Letter Agreement). The parties hereto agree and acknowledge that the Letter Agreement shall survive until the termination or expiration of this Agreement, The parties further acknowledge that the reference to Section 1.12 in the Letter Agreement to the Old Agreement should have been to Section 1.5 of the Old Agreement. |
1.13 |
During the term of this Agreement, Client may request CKFR to develop a specific and specialized competitive modification to the System (a Tool). If CKFR agrees to develop the Tool, and if CKFR expressly agrees in a writing signed by both parties (which shall not include a facsimile or email) (the Use Agreement), Client shall enjoy (subject to the terms and conditions below and in such Use Agreement) exclusive use of such particular Tool for a defined period of time agreed to by Client and CKFR in such Use Agreement (the Restricted Period). In such case, CKFR will not sell or utilize the Tool, as developed, for other CKFR clients for the Restricted Period. Client agrees, however, that CKFR shall not be restricted from designing, developing, creating, selling and implementing similar or identical functionality, features and/or tools to or for other CKFR client(s), so long as CKFR and such client(s) undertake the design and creation of such functionality, features and/or tools by utilizing a discovery and collaborative process similar to that which was followed by CKFR and Client during the design and creation of the Tool. During such process, CKFR shall not divulge, reveal or provide specific information about the Tool to such other client(s). However, if through the discovery and collaborative process, CKFR and such client(s) are able to create and/or develop functionality, features and/or tools that are similar to, or even identical to, the Tool, CKFR shall not be in violation of the Agreement by creating and providing these functionalities, features and/or tools to such client(s). Further, with respect to CKFR products and services made generally available to CKFRs customer base, CKFR shall not be prohibited from offering any features, functionality and/or tools in such products and services that separately, or in conjunction with other features, functionality and/or tools perform similar to any Tool(s), so long as the Tool(s), as specifically designed and created by CKFR for Client is not included in such CKFR products or services. Client acknowledges and agrees that, between itself and CKFR, CKFR owns all of the rights (including any and all intellectual property rights), title and interest in and to the System, including all modifications (including the Tool), enhancements and releases thereto. Nothing in this Agreement shall be construed to infer the provision of any such rights to AssetMark. |
2. |
CONFIDENTIAL INFORMATION |
CKFR and Client each agree that it, including its officers, employees and agents, who shall be obligated either by execution of a confidentiality agreement requiring such person to maintain the confidentiality of the Confidential Information or is subject to a policy which would protect the Confidential Information from disclosure, shall maintain all information disclosed to it by the other in connection with this Agreement in confidence and will not disclose any such information to anyone who does not have a need to know such Confidential Information for the purposes of fulfilling obligations under this Agreement, nor shall a recipient of such Confidential Information use it for its own benefit or for the benefit of others without the written consent of the other party. Confidential Information may be released, but only to the extent necessary to resolve any dispute involving this Agreement or as otherwise required by law or order of any court or tribunal having jurisdiction.
3
Confidential Information shall mean all information or material proprietary to CKFR or Client or designated by either party as proprietary, which either party may obtain knowledge about or access to, through or as a result of our mutual relationship. Confidential Information includes, but is not limited to, the following types of information and other information of a similar nature whether or not reduced to writing: any and all information gained in or through the System (including software, databases, methodologies and evaluations), discoveries, ideas, concepts, research, development, processes, operating procedures, know-how, marketing techniques, procedures and materials, marketing and development plans, client names and other information related to clients, account fees, pricing and policies and financial information. Confidential Information also includes any information described above which either party obtains from a third party and which either party treats as proprietary or designates as Confidential Information, whether or not owned or developed by that party, unless such information was obtained from a third party free from any obligation of confidentiality or restriction on disclosure. Confidential Information received hereunder shall not be treated as confidential if it is or becomes generally available or known to the public other than by disclosure by the receiving party hereunder in violation of this Agreement. Client shall not download, copy, transfer or otherwise remove or manipulate Confidential Information from the System, nor shall Client copy and paste such items into any third party applications other than to productivity software, such as spreadsheets or word processing applications used solely for Clients internal use, which shall not include use for the benefit of an affiliate of Client or a joint venture to which Client is a party.
3. |
WARRANTY AND LIMITATION OF LIABILITY |
3.1 |
CKFR SHALL INDEMNIFY AND HOLD CLIENT HARMLESS FROM ALL FINES, PENALTIES, LOSSES, LIABILITIES, DAMAGES, CLAIMS, AND COSTS (INCLUDING REASONABLE ATTORNEYS FEES AND COURT COSTS), CAUSED AS A RESULT OF CKFRS GROSS NEGLIGENCE, WILLFUL MISCONDUCT, CKFRS BREACH OF INTELLECTUAL PROPERTY RIGHTS OR CLIENTS CONFIDENTIALITY PROVISIONS. If any claim is brought alleging infringement or the violation of any intellectual property right, the alleged infringing party will avoid any further possible infringement of the intellectual property right in question. The alleged infringing party will seek to resolve the claim in consultation with the non-infringing party, either by means of alternative arrangements for the Services, or by obtaining permission to use the intellectual property in question. |
3.2 |
EXCEPT AS OTHERWISE STATED IN SECTION 3.1, NEITHER PARTY SHALL BE LIABLE FOR ANY INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES. ANY CLAIM FOR DAMAGES AGAINST CKFR, OTHER THAN AS PROVIDED FOR HEREIN, SHALL BE LIMITED TO LIQUIDATED DAMAGES IN THE AMOUNT OF THE SYSTEM FEES PAID BY CLIENT TO CKFR FOR EACH AFFECTED AUTHORIZED USER PURSUIANT TO THIS AGREEMENT FOR THE TWO (2) CALENDAR MONTHS IMMEDIATELY PRECEEDING THE MONTH THAT GAVE RISE TO THE DAMAGES. |
EXCEPT AS OTHERWISE PROVIDED HEREIN, CKFR MAKES NO OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION, ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO THE SERVICES PROVIDED HEREUNDER.
Neither party shall be liable for any delay or other failure of performance caused by factors beyond its reasonable control, such as, but not limited to, strikes, insurrection, war, fire, lack of energy, acts of God, governmental acts or regulation, or acts of third parties.
4
In the event that Client at any time accesses data comprised of evaluations of Fixed Income Securities and certain other data related to such securities, the following additional provisions shall apply:
i) |
Fixed Income Securities are complicated financial instruments. There are many methodologies (including computer-based analytical modeling and individual security evaluations*) available to generate approximations of their market value, and there is significant professional disagreement about which is best. No evaluation method, including those used by CKFR, may consistently generate approximations that correspond to actual traded prices of the instruments. |
ii) |
The System contains evaluations; however, Client acknowledges that there may be errors or defects in the System evaluations and may be inappropriate for use in certain applications. |
iii) |
Client acknowledges and agrees that Client assumes all responsibility for edit checking, external verification of evaluations, and ultimately the appropriateness of use of evaluations and other pricing data provided via the System, regardless of any efforts made by CKFR or any of its third party suppliers in this respect. Client agrees to indemnify and hold CKFR and its third party suppliers completely harmless in the event that errors, defects, or inappropriate evaluations are made available to Client via the System. |
* |
Individual security evaluations are used for miscellaneous issues that may not fit into any of data suppliers current evaluation models. These issues are evaluated on a case-by-case basis. Data suppliers concentrate on integrity within both market sector and issuer, examine the individual characteristics of each issue, and confer with broker/dealers and other information sources. Market sources are contacted by CKFRs data suppliers when appropriate for the particular issue. These issue types include but are not limited to non-investment grade issues and issues with special terms and conditions. These issues are subject to the same quality control standards applied to other evaluations provided by CKFRs data suppliers. |
4. |
INTELLECTUAL PROPERTY |
4.1 |
CKFR shall own all right, title and interest in and to all of the System, software, software code (including source code) and documentation CKFR supplies to Client in the performance of this Agreement, including without limitation all error corrections, updates, upgrades, enhancements and custom programming, all patents, copyrights and other intellectual property rights therein. |
4.2 |
Each party shall have or obtain all necessary licenses and governmental approvals to use any and all intellectual property that may be shared between the parties. |
4.3 |
Each party will hold harmless and indemnify the other party and, at the other partys option, defend the other party from and against any and all fines, penalties, losses, liabilities, damages, claims, and costs (including reasonable attorneys fees and court costs), arising out of or incurred as a result, directly or indirectly, of any alleged or actual infringement or violation of any right, or alleged right, relating to intellectual property, to include any patent, copyright or trade secret. |
4.3 |
In addition, if any claim is brought alleging infringement or the violation of any intellectual property right, the alleged infringing party will avoid any further possible infringement of the intellectual property right in question. The alleged infringing party will seek to resolve the claim in consultation with the non-infringing party, either by means of alternative arrangements for the Services, or by obtaining permission to use the intellectual property in question. |
5
5. |
ASSIGNMENT |
This Agreement may not be assigned by Client, in whole or in part, without the prior written consent of CKFR. Any prohibited assignment or transfer shall be void. Client agrees not to resell or allow third parties to have access to the System without the prior written consent of CKFR.
6. |
TERMINATION |
6.1 |
This Agreement will automatically renew and extend for successive twelve (12) month terms (Renewal Term), commencing at the conclusion of the Initial Term or any Renewal Term unless either Client or CKFR gives contrary notice at least one hundred and eighty (180) days prior to the expiration of the Initial Term or the then current Renewal Term. Upon termination, the obligations of a continuing nature shall continue to be binding and in full force and effect, including, without limitation, those reflected in the following sections of this Agreement: section 2, section 3 and section 4. Notwithstanding the foregoing, Client is hereby granted the right at its option to terminate this Agreement for its convenience at any time after the first eighteen (18) months by giving one hundred and eighty (180) days prior written notice of termination, and by the payment to CKFR of an amount equal to the higher of the applicable fees or the minimum fee for the months remaining in the term. In addition, if either party breaches the terms of this Agreement and fails to cure such breach within thirty (30) days of written notice from the non-breaching party, then, at the option of the nonbreaching party, this Agreement shall terminate. Upon termination for any reason, Client shall instruct all Authorized Parties that it is unable to provide services related to the System. |
7. |
DATA |
Authorized Party may request data tapes for de-conversion by making such request through Client. The fee for each de-conversion tape generation is $[***] per tape per Authorized user. Standard data tapes for download and delivery will include all Authorized Party owned and generated data. Such data will include, but not be limited to, all tax lot, account/broker profiles, name and address files, and all fields for the following files: EDPORT, EDGL, EDAC, EDMEMO, EDPMHIST and INFODEX. Files may be accessed by Authorized Party or Client either by aforementioned tape or by electronic download.
8. |
MISCELLANEOUS |
8.1 |
CKFR hereby affirms that it complies with the Financial Services Modernization Act of 1999 (Gramm-Leach-Bliley Act) regarding Privacy of non-public personal information as stated in Title V of that Act and promulgated by the Federal Reserve Board in Regulation P. |
8.2 |
If any provision of this Agreement (or any portion thereof) shall be held to be invalid, illegal or unenforceable, the validity, legality or enforceability of the remainder hereof shall not in any way be affected or impaired thereby. |
8.3 |
The headings in this Agreement are intended for convenience of reference and shall not affect its interpretation. |
8.4 |
The parties do not intend the benefits of this Agreement to inure to any third party, and nothing contained herein shall be construed as creating any right, claim or cause of action in favor of any such third party against either of the parties hereto. |
6
8.5 |
This Agreement shall be governed by the laws of the State of Delaware without regard to choice of law principals. |
8.6 |
Service of all notices under this Agreement shall be in writing and sent by either U.S. Certified Mail, return receipt requested, postage paid, addressed to the party to be served notice, or by nationally recognized overnight mail service, at the following addresses. All such notices and communications shall be effective upon receipt. |
8.7 | CheckFree Investment Services | AssetMark Investment Services | ||||||
a Division of CheckFree Services Corporation | 2300 Contra Costa Blvd., Suite 425 | |||||||
4411 East Jones Bridge Road | Pleasant Hill, CA 94523 | |||||||
Norcross, Georgia 30092 | ||||||||
Attention: William C. Buckham, | Attention: John Whittaker | |||||||
Assistant General Counsel | Chief Operating Officer |
8.8 |
Each of the individuals executing this Agreement on behalf of CKFR and Client hereby represents and warrants that he/she is duly authorized by all necessary action to execute this Agreement on behalf of his/her respective principal. |
8.9 |
This Agreement constitutes the entire agreement and supercedes any prior agreement(s) between the parties hereto with respect to the subject matter of this Agreement and there are no representations, understandings or agreements that are not fully expressed herein. All changes, waivers, and discharges must be in a writing signed by an authorized representative of the party against which the change, waiver or discharge is sought to be enforced. |
8.10 |
This Agreement may be executed in multiple counterparts, each of which shall constitute an original and all of which when taken together shall constitute but one and the same instrument. |
This Agreement shall be effective upon CKFRs signature (the Effective Date). CKFR agrees to fully execute this Agreement within ten (10) days of signed receipt of it from Client. EXECUTED in multiple originals.
AssetMark Investment Services (Client) |
CheckFree Investment Services a Division of CheckFree Services Corporation (CKFR) |
|||||||
By: | /s/ John M. Whittaker | By: | /s/ Kenneth Bachulis | |||||
Print: | John M. Whittaker | Print: | Kenneth Bachulis | |||||
Title: | SVP, COO | Title: | Vice President | |||||
6/23/06 |
7
Schedule 1
The following monthly rates apply for all business added to the accounts of Authorized Parties except for those excluded in Section 1.5. Client rates will be based on the total number of accounts utilized by the Authorized Parties. Client shall be required to pay a monthly minimum fee of [***] dollars $[***] for the AIS directory. Client understands and agrees that additional directories requested by Client shall incur both a setup charge as well as an additional monthly minimum charge. Such fees shall be furnished to Client upon request for any such additional directory.
For Active Accounts, the following monthly rates apply:
Mutual Fund Wrap Accounts
$[***] per account for accounts 0 1,000 and,
$[***] per account for accounts 1,001 5,000 and,
$[***] per account for accounts 5,001 10,000 and,
$[***] per account for accounts 10,001 20,000 and,
$[***] per account for accounts 20,001 30,000 and,
$[***] per account for accounts 30,001 40,000 and,
$[***] per account for accounts 40,001 70,000 and,
$[***] per account for each account thereafter.
Separately Managed Wrap Accounts
$[***] per account for accounts 0 300 and,
$[***] per account for accounts 301 800 and,
$[***] per account for accounts 801 1,500 and,
$[***] per account for accounts 1,501 3,000 and,
$[***] per account for each account thereafter.
ETF Wrap Accounts
$[***] per account for accounts 0 1,000 and,
$[***] per account for accounts 1,001 5,000 and,
$[***] per account for accounts 5,001 10,000 and,
$[***] per account for accounts 10,001 20,000 and,
$[***] per account for accounts 20,001 30,000 and,
$[***] per account for each account thereafter.
Multiple Strategy Portfolio (CMA) Accounts
$[***] for the first two sleeves and $[***] for each sleeve per account thereafter, for
accounts 0 500 and,
$[***] for the first two sleeves and $[***] for each sleeve per account thereafter, for
accounts 501 1,000 and,
$[***] for the first two sleeves and $[***] for each sleeve per account thereafter.
Administrative Accounts 1
$[***] per account
Funding Accounts 2
$[***] per account
1 |
Includes bookkeeping transactions via interface, post/reconcile trades via interface, postscript reporting and performance calculations. Excludes Windows build. |
2 |
Includes bookkeeping transactions via interface, post/reconcile trades via interface. Excludes Performance. The maximum period of time that CKFR agrees to invoice a funding account is limited to three months. |
i
CKFR and Client agree that Active Accounts are billable. Active Accounts are defined as accounts in which interface processing is run against the accounts and/or accounts that are manually updated on the System. For the avoidance of doubt, all Active Accounts will be coded into a System code, called RR, less than 99. Client controls the coding of these accounts and may change the coding to RR=99 to signify an Inactive Account. Client agrees to notify CKFR within thirty (30) days of any change to such account coding. Client represents that it will not change account RRs in order to avoid paying associated System fees. Client shall notify CKFR in writing of account coding changes at least thirty (30) days in advance. Client further agrees that any dispute regarding invoicing related to incorrectly coded accounts or System fees must be brought to the attention of CKFR, in writing, within thirty (30) days of receipt of current invoice by Client.
Inactive Accounts are not billable and are defined as closed accounts, which are kept for historical reporting purposes (i.e. composites). For the avoidance of doubt, these Inactive Accounts are stored in RRs greater than 98 on the System. Accounts that have been terminated by Authorized Party will be migrated by Client into the RR EQ 99 designation. At that point Client will not be charged the normal monthly account fee, but such data will be stored on the System at no additional charge, Twenty-four months after termination of accounts, CKFR may purge closed tax lot data on these accounts, but will continue to store historical performance data for the term of the Agreement.
Monthly billing at the rates specified herein will commence at the first billing cycle following the Effective Date or, if the Agreement is executed and returned to CKFR by June 15, 2006, such rates will be effective as of September 1, 2005, and CKFR shall credit the Client accordingly.
ii
Addendum A: Optional Services-Not Included in System
|
PostScript based Client Reporting (Graphical) |
|
Interfaces new developed interfaces or existing interfaces |
|
Securities Pricing other than listed U.S. equities |
|
Ancillary securities information such as factors and ratings |
|
JJ Kenny Municipal Bond Pricing |
|
Faxing |
|
15 Minute Delay Quote Terminal |
|
PostScript Printing |
Black and White
Color
|
Printing other than quarterly monitor |
|
Outsourcing (third party vendors print/fulfillment services) |
|
APL Archive |
|
Additional On-site Training/Support |
|
Communications Equipment |
Purchase, Lease, Rental Fees
Equipment Maintenance
|
Dedicated and Leased Line(s) |
|
Electronic delivery of statements APL Navigator |
|
CD ROM bum |
|
Client Initiated Disaster Recovery & Network testing |
|
Terminal Emulation Software KEA |
|
Communications Software VPN token (incurs a monthly per-token communications charge) |
iii
Addendum B: New User Notification for Authorized Parties
Name of Authorized User:
Date:
New User Notification Billing Period Start Date:
Authorized User Needs: | CKFR Pricing: |
|
Directory Setup |
|
Source (s) of data files |
|
Number of ports |
|
Number of accounts |
|
Data files being converted |
|
Implementation of existing interfaces |
Trades
Bookkeeping
Position
Cash
Name & Address
End of day trades allocation
Electronic Order Routing
|
Creation of new interfaces |
Trades
Bookkeeping
Positions
Cash
Name & Address
End of day trades allocation
Electronic Order Routing
|
Customized ASCII text reports (samples provided) |
|
Customized functionality |
|
Performance sectors |
|
PostScript report customization |
|
Standard Billing System |
|
COMMUNICATION COSTS - TBD |
TOTAL FEE: | $ |
iv
CKFR input:
Start Date of conversion:
Short Name of directory:
AP Directory Minimum: Per Month
v
Effective Date: |
12/2/2010 |
|
Contract Type: |
Amendment #1 |
||||||
Client Short Name: |
AIS |
|
Contract Company Name: |
Genworth Financial Wealth Management, Inc. |
|||
Address: |
2300 Contra Costa Blvd., Suite #600 |
|||
City, State, Zip: |
Pleasant Hill, CA 94523 |
|||
Country: |
United States |
|||
Contact Name: |
Carrie Hansen |
|||
Telephone Number: |
800-664-5345 |
Date Contract Recd |
Contract Format |
Type of Service |
Group Responsible |
If CAM, Team # |
||||
12/16/2010 |
Original |
Hosted (i.e. APL) |
CAM |
CAM Team 12 |
Legal Contracting Officer (initial & date): | ||
Projected Revenue of Contract: | I hereby certify that I have compared the attached signed contract document to the final version submitted to the Client for signature (as such was approved internally) and that there have been no modifications. | |
refer to agreement |
/s/ X [Authorized Signatory] 12/17/2010 |
Date Released to Authorized Signatory for signature:
Salesperson(s):
RM: Larry Bernstein / Michael Dellipaoli
Special Notes:
Date/Time Cover Sheet Generated | 12/17/2010 9:14 AM |
Signatures/Initials - please date | ||||
☒ /s/ Tom Ryan 12/20/10 |
☐ Lana Cheng-Minafia (Client Svcs. SOWs $25,000.00 & less) |
Electronic Copy | ||
☒ Hamilton Bunge / Bob Whiteside (Finance) |
☐ Mike Gianoni (Group PresidentFinancial Institutions Group) |
☐
Finance
|
||
/s/ Hamilton Bunge 12/28/10 |
||||
☐ Pete Crenier (SVP, Client ServicesIS) |
☐ Sean Gallagher (PresidentInvestment Services) |
☐ Legal Department Contract Repository |
||
☐ Angelo Fazio (Client Svcs. SOWs $25,000.00 & less) |
☐ Chery Nash (SVP, Business Development) |
|||
☐ Charles Smith (Client Svcs.SOWs $25,000.00 & less) |
Executed Contract Distribution: | |||
☐ David Cerza (Client Svcs.SOWs $25,000.00 & less) |
Original |
|||
☐ Keith Smith (Client Svcs.SOWs $25,000.00 So less) |
☐ Client-sent via UPS (see Legal for tracking number) |
|||
☐ Contract File Cabinets |
A MENDMENT #1
This is Amendment #1 ( Amendment ), made effective as of December 2, 2010 (the Amendment Effective Date ), is to the CheckFree APL Master Agreement between CheckFree Services Corporation ( CKFR ) and Genworth Financial Wealth Management, Inc. f/k/a/ AssetMark Investment Services, ( Client ), effective as of June 23, 2006 (the Agreement ). Any capitalized terms not defined in this Amendment shall be given their meanings set forth in the Agreement.
RECITALS
WHEREAS, per Section 1.2 of the Agreement, Client may access the System by means of thirty (30) ports; and
WHEREAS, CKFR and Client each desire to the Agreement.
THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and the mutual covenants contained herein, the parties agree to modify and otherwise amend the Agreement as follows:
1. |
As of the Amendment Effective Date and notwithstanding anything to the contrary in the Agreement, CheckFree hereby agrees to increase the number of ports that the Client uses to access the System by fifteen (15) ports, for a collective use of forty-five (45) ports ( Total Ports ), at no additional costs to the Client. Additional ports requested by Client in excess of the Total Ports shall be billable to and payable by Client at CKFRs then-current rate per port per month. |
2. |
EFFECT OF AMENDMENT: Except as otherwise expressly provided in this Amendment, all other terms and conditions of the Agreement shall remain in full force and effect. |
This Amendment shall be effective upon the Amendment Effective Date set forth above. EXECUTED in multiple originals.
CheckFree Services Corporation | Genworth Financial Wealth Management Inc. | |||||||
By: |
/s/ Robert Whiteside |
By: |
/s/ Carrie Hansen |
|||||
Print Name: Robert Whiteside | Print Name: Carrie Hansen | |||||||
Title: VP Finance | Title: Chief Operation Officer |
Effective Date: |
9/7/2011 |
|
Contract Type: |
Amendment #2 |
||||||
Client Short Name: |
|
|
Contract Company Name: |
Genworth Financial Wealth Mgmt |
|||
Address: |
|
|||
City, State, Zip: |
|
|||
Country: |
United States |
|||
Contact Name: |
|
|||
Telephone Number: |
|
Date Contract Recd |
Contract Format |
Type of Service |
Group Responsible |
If CAM, Team # |
||||
10/19/2011 |
Original |
Hosted (i.e. APL) |
|
|
Legal Contracting Officer (initial & date): | ||
Projected Revenue of Contract: | I hereby certify that I have compared the attached signed contract document to the final version submitted to the Client for signature (as such was approved internally) and that there have been no modifications. | |
No Projected Revenue charge | /s/ Ma 10-19-2011 |
Date Released to Authorized Signatory for signature:
10/19/2011
Salesperson(s):
RM:
Date/Time Cover Sheet Generated | 10/19/2011 2:25 PM |
Signature/Initials - please date |
Executed Contract Distribution: |
|||||
☐ | Louis Bonanni (Legal) | Original | Electronic Copy | |||
☒ | Hamilton Bunge / Bob Whiteside (Finance) |
☐ Clientsent via UPS (see Legal for tracking number) |
☐ Finance JERSEY CITY/ MORRIS PLAINS/ UNITED KINGDOM |
|||
/s/ Hamilton Bunge / Bob Whiteside 10/20/2010 | ||||||
☒ | Cheryl Nash (Interim President) |
☐ Contract File Cabinets |
||||
/s/ Cheryl Nash 10/20/11 | ||||||
☐ |
Pete Crenier (SVP, Client Services - IS) |
|||||
☐ | Doug Smith (VP, Operations) |
☐ Legal Department Contract Repository |
||||
☐ | Mike Gianoni (Group President Financial Institutions Group) |
A MENDMENT #2
This is Amendment #2 ( Amendment ), made effective as of September 7, 2011 (the Amendment Effective Date ), is to the CheckFree APL Master Agreement between CheckFree Services Corporation ( CKFR ) and Genworth Financial Wealth Management, Inc. f/k/a AssetMark Investment Services, ( Client ), effective as of June 23, 2006 (the Agreement ). Any capitalized terms not defined in this Amendment shall be given their meanings set forth in the Agreement.
RECITALS
WHEREAS, Client intends to undergo a directory consolidation with a targeted completion date of October 31, 2011 and this Amendment will provide interim account pricing; and
WHEREAS, CKFR and Client each desire to amend the Agreement.
THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and the mutual covenants contained herein, the parties agree to modify and otherwise amend the Agreement as follows:
1. |
Schedule 1 of the Agreement is hereby modified to include the following: |
Multiply Strategy Portfolio (MSP) Active Accounts include:
(a) MSP accounts that are migrated from the GNA APL directory to the AIS APL directory after the Amendment Effective Date, and identified on the AIS directory by RR EQ 1. An MSP account shall be considered migrated when the account is no longer billed for on the GNA directory, but is billed for on the AIS directory.
(b) New MSP accounts added to the AIS directory after the Amendment Effective Date identified by RR EQ 1.
For the MSP Active Accounts, the following rate applies:
$[***] per account per month
2. |
The MSP Active Account per account fee of $[***] per month shall remain in effect while this Amendment remains in force. |
3. |
This Amendment shall expire on June 30, 2012 or upon the execution of a new APL license Agreement between the parties, whichever occurs sooner. |
4. |
EFFECT OF AMENDMENT: Except as otherwise expressly provided in this Amendment, all other terms and conditions of the Agreement shall remain in full force and effect. |
[SIGNATURES ON NEXT PAGE]
This Amendment shall be effective upon the Amendment Effective Date set forth above. EXECUTED in multiple originals.
CheckFree Services Corporation | Genworth Financial Wealth Management, Inc. | |||||||
By: |
/s/ Cheryl Nash |
By: |
/s/ Carrie E. Hansen |
|||||
Print Name: Cheryl Nash | Print Name: Carrie E. Hansen | |||||||
Title: President | Title: SVP, COO, President - Mutual Funds | |||||||
Date: 10/20/11 | Date: 10/18/11 |
Effective Date: |
8/6/2012 |
|
Contract Type: |
Amendment No. 3 |
||||||
Client Short Name: |
|
Contract Company Name: |
Genworth Financial Wealth Management, Inc. |
|||
Address: |
|
|||
City, State, Zip: |
|
|||
Country: |
|
|||
Contact Name: |
Gary Zyla |
|||
Telephone Number: |
|
Date Contract Recd |
Contract Format |
Type of Service |
Group Responsible |
If CAM, Team # |
||||
8/6/2012 |
|
Hosted (i.e. APL) |
|
|
Legal Contracting Officer (initial & date): | ||
Projected Revenue of Contract: | I hereby certify that I have compared the attached signed contract document to the final version submitted to the Client for signature (as such was approved internally) and that there have been no modifications. | |
IDC Data Fixed Monthly Fee (Updated) | /s/ X [Authorized Signatory] 8-6-2012 | |
(See Attached) |
Date Released to Authorized Signatory for signature:
8/6/2012
Salesperson(s):
RM: Todd Fornella
Date/Time Cover Sheet Generated | 8/6/2012 10:39 AM |
Signature/Initials - please date |
Executed Contract Distribution: |
|||||
☒ | Louis Bonanni (Legal) | Original | Electronic Copy | |||
/s/ Louis Bonanni 7/6/12 | ||||||
☒ |
Hamilton Bunge / Bob Whiteside (Finance)
/s/ Hamilton Bunge 12/28/10 |
☐ Client sent via UPS (see Legal for tracking number)
☐ Contract File Cabinets |
☐ Finance JERSEY CITY/ MORRIS PLAINS/ UNITED KINGDOM |
|||
☐ | Cheryl Nash (IPresident) |
☐ Legal Department Contract Repository |
||||
☒ | Pete Crenier (SVP, Client Services -IS) | |||||
Pete Crenier 8/8/2 | ||||||
☐ | Doug Smith (VP, Operations) | |||||
☐ | Mike Gianoni (Group President Financial Institutions Group) |
Contract ID#873
A MENDMENT #3
This is Amendment #3 ( Amendment), made effective as of August 1, 2012 (the Amendment Effective Date ), is to the CheckFree APL Master Agreement between Fiserv Investment Solutions, Inc (as successor-in-interest to CheckFree Services Corporation) ( Fiserv ) and Genworth Financial Wealth Management, Inc. f/k/a AssetMark Investment Services, ( Client ), effective as of June 23, 2006 (the Agreement ). Any capitalized terms not defined in this Amendment shall be given their meanings set forth in the Agreement.
RECITALS
WHEREAS, the Client is receiving JJ Kenny Daily Muni pricing ( Existing Data ) through the System; and
WHEREAS, Fiserv and Client agree to replace the Existing Data with IDC Data (as defined below); and
WHEREAS, Fiserv and Client each desire to amend the Agreement.
THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and the mutual covenants contained herein, the parties agree to modify and otherwise amend the Agreement as follows:
1. |
Effective with the Amendment Effective Date, the following fees for the Existing Data shall be deleted from the Clients monthly invoice: |
Description |
Unit Price |
|
MUNI PRICING JJKENNY | [***] | |
WKLY MUNI PRICING JJKENNYW | [***] |
Effective with the Amendment Effective Date, the Existing Data shall be replaced with IDC Muni Pricing data ( IDC Data ) and the following fees shall apply:
Effective August 1, 2012, IDC Data shall be a fixed monthly fee of [***] dollars $[***], invoiced monthly in arrears.
Effective August 1, 2013, IDC Data shall be a fixed monthly fee of [***] dollars $[***], invoiced monthly in arrears.
Effective August 1, 2014, IDC Data shall be a fixed monthly fee of [***] dollars $[***], invoiced monthly in arrears.
2. |
EFFECT OF AMENDMENT: Except as otherwise expressly provided in this Amendment, all other terms and conditions of the Agreement shall remain in full force and effect. |
This Amendment shall be effective upon the Amendment Effective Date set forth above. EXECUTED in multiple originals.
Fiserv Investment Solutions, Inc. | Genworth Financial Wealth Management, Inc. | |||||||
By: |
/s/ Peter Crenier |
By: |
/s/ Gary Zyla |
|||||
Print Name: |
Peter Crenier |
Print Name: |
Gary Zyla |
|||||
Title: |
SVP |
Title: |
CFO |
|||||
Date: |
8/8/12 |
Date: |
8/3/2012 |
Effective Date: |
1/1/2013 |
|
Contract Type: |
Amendment No. 5 |
||||||
Client Short Name: |
|
|
Contract Company Name: |
Genworth Financial Wealth Mgmt |
|||
Address: |
|
|||
City, State, Zip: |
|
|||
Country: |
United States |
|||
Contact Name: |
|
|||
Telephone Number: |
|
Date Contract Recd |
Contract Format |
Type of Service |
||||||
9/5/2013 |
|
Hosted (i.e. APL) |
Legal Contracting Officer (initial & date): | ||
Projected Revenue of Contract: | I hereby certify that I have compared the attached signed contract document to the final version submitted to the Client for signature (as such was approved internally) and that there have been no modifications. | |
/s/ Muriel 9-5-2013 |
Date Released to Authorized Signatory for signature:
9/5/2013
Salesperson(s): Todd Fornella
Relationship Manager:
Date/Time Cover Sheet Generated | 9/5/2013 3:09 PM |
Signatures/Initials - please date | Executed Contract Distribution: | |||
☒ Louis Bonanni (Legal) |
Origina l |
Electronic Copy | ||
/s/ Louis Bonanni 9/5/2013 |
||||
☒ Daniel McLaughlin/ Hamilton Bunge (Finance) |
☐ Client - sent via UPS (see Legal for tracking number) |
☐ Jersey City |
||
/s/ Daniel McLaughlin/ Hamilton Bunge 9/5/2013 |
||||
☒ Cheryl Nash (President) |
☐ Salesperson |
☐ Los Angeles |
||
/s/ Cheryl Nash 9/5/13 |
||||
☐ Dough Smith (SVP) |
☐ Relationship Manager |
☐ Morris Plains |
||
☐ Hilary Fiorella (VP) |
☐ Contract File Cabinets |
☐ United Kingdom |
||
☐ Mike Gianoni (Group President - Financial Institutions Group) |
☐ Contract Repository. |
|||
Contract ID#1288
Amendment No. 5
This Amendment No. 5 ( Amendment ), made effective as of January 1, 2013 (the Amendment Effective Date ), is to the CheekFree APL Master Agreement between Fiserv Investment Solutions, Inc (as successor-in- interest to CheekFree Services Corporation) ( Fiserv ) and Genworth Financial Wealth Management, Inc. f/k/a AssetMark Investment Services, ( Client ), effective as of June 23, 2006 (the Agreement ). Any capitalized terms not defined in this Amendment shall be given their meanings set forth in the Agreement.
RECITALS
WHEREAS, Fiserv and Client each desire to amend the Agreement as expressly set forth herein,
WHEREAS, Fiserv and Client each desire to amend the Agreement to include non-trading accounts
THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and the mutual covenants contained herein, the parties agree to modify and otherwise amend the Agreement as follows:
1. Schedule 1 of the Agreement is hereby modified to include the following:
Non-Trading Accounts include:
(a) Non-Trading Accounts are accounts, which are no longer traded. Non- Trading accounts include pricing feeds, extracts and control jobs this will allow Genworth to perform reconciliation on a daily basis. Non-Trading accounts are kept for historical reporting purposes (i.e. composites). These Non-Trading Accounts are stored in RR=98.
For the Non-Trading accounts, the following rate applies:
$[***] per account
2. The Non-Trading Account per account fee of $[***] shall remain in effect while this Amendment remains in force.
3. EFFECT OF AMENDMENT: Except as otherwise expressly provided in this Amendment, all other terms and conditions of the Agreement shall remain in full force and effect.
This Amendment shall be effective upon the Amendment Effective Date set forth above.
Fiserv Investment Solutions, Inc. | Genworth Financial Wealth Management, Inc. | |||||||
By: |
/s/ Cheryl Nash |
By: |
/s/ Carrie E. Hansen |
|||||
Print Name: | Cheryl Nash | Print Name: | Carrie E. Hansen | |||||
Title: | President | Title: | SVP, COO | |||||
Date: | 9/5/13 | Date: |
09 /04/13 |
Effective Date: | 1/1/2013 |
|
Contract Type: | Amendment No. 6 | ||||||||
Client Short Name: |
|
|
||||||||||
Contract Company Name: | Genworth Financial Wealth Mgmt | |||||||||||
Address: | ||||||||||||
City, State, Zip: | ||||||||||||
Country: |
United States |
|||||||||||
Contact Name: | ||||||||||||
Telephone Number: | ||||||||||||
Date Contract Recd | Contract Format | Type of Service | ||||||||||
9/5/2013 | Hosted (i.e. APL) | |||||||||||
Legal Contracting Officer (initial & date): | ||||||||||||
Projected Revenue of Contract: |
I hereby certify that I have compared the attached signed contract document to the final version submitted to the Client for signature (as such was approved internally) and that there have been no modifications.
|
|||||||||||
|
/s/ Muriel 9-5-2013 |
|||||||||||
Date Released to Authorized Signatory for signature: |
||||||||||||
9/5/2013 | ||||||||||||
Salesperson(s): |
Todd Fornella |
|||||||||||
Relationship Manager: |
||||||||||||
Date/Time Cover Sheet Generated | 9/5/2013 3:09 PM |
Signatures/Initials - please date | Executed Contract Distribution: | |||||||||||
☒
☒
☒
☐
☐
☐ |
Louis Bonanni (Legal)
/s/ Louis Bonanni 9/5/2013
Daniel McLaughlin/Hamilton Bunge (Finance)
/s/ Daniel McLaughlin/Hamilton Bunge 9/5/2013
Cheryl Nash (President)
/s/ Cheryl Nash 9/5/13
Doug Smith (SVP)
Hilary Fiorella (VP)
Mike Gianoni (Group PresidentFinancial Institutions Group) |
Original | Electronic Copy | |||||||||
☐ ☐ ☐
☐ |
Client sent via UPS (see Legal for tracking number) Salesperson Relationship Manager
Contract File Cabinets |
☐ ☐ ☐
☐ |
Jersey City Los Angeles Morris Plains
United Kingdom |
|||||||||
☐ | Contract Repository. | |||||||||||
Contract ID#1288
Amendment No. 6
This Amendment No. 6 ( Amendment ), made effective as of April 11, 2013 (the Amendment Effective Date ), is to the CheekFree APL Master Agreement between Fiserv Investment Solutions, Inc (as successor-in- interest to CheekFree Services Corporation) ( Fiserv ) and Genworth Financial Wealth Management, Inc. f/k/a AssetMark Investment Services, ( Client ), effective as of June 23, 2006 (the Agreement ). Any capitalized terms not defined in this Amendment shall be given their meanings set forth in the Agreement.
RECITALS
WHEREAS, Fiserv and Client each desire to amend the Agreement as expressly set forth herein.
WHEREAS, Fiserv and Client each desire to amend the Agreement to include fees for GPS Select UMA accounts, which product was launched on the GFWM Platform in early 2013.
THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and the mutual covenants contained herein, the parties agree to modify and otherwise amend the Agreement as follows:
1. Schedule 1 of the Agreement is hereby modified to include the following pricing:
For UMA Accounts, the following monthly fees apply
$[***] Per GPS Select UMA Account up to two (2) sleeves, with a sleeve being an allocation received from a Strategist; and
$[***] per GPS Select UMA Account thereafter.
(a) These GPS Select UMA Accounts are stored in RR=11.
2. EFFECT OF AMENDMENT: Except as otherwise expressly provided in this Amendment, all other terms and conditions of the Agreement shall remain in full force and effect.
This Amendment shall be effective upon the Amendment Effective Date set forth above.
Fiserv Investment Solutions, Inc. | Genworth Financial Wealth Management, Inc. | |||||||
By: |
/s/ Cheryl Nash |
By: |
/s/ Carrie E. Hansen |
|||||
Print Name: | Cheryl Nash | Print Name: | Carrie E. Hansen | |||||
Title: | President | Title: | SVP, COO | |||||
Date: | 9/5/13 | Date: | 09/04/13 |
Effective Date: |
|
Contract Type: |
Amendment #7 |
|||||||
Client Short Name: |
|
Sales Type: |
|
Contract Company Name: |
Genworth Financial Wealth Management, Inc. |
|||
Address: |
|
|||
City, State, Zip: |
|
|||
Country: |
|
|||
Contact Name: |
|
|||
Telephone Number: |
|
Date Contract Recd |
Contract Format |
Type of Service |
||||||
6/12/2014 |
|
Hosted (i.e. APL) |
Rev Type | TCV | |||
Professional Services | Legal Contracting Officer (initial & date): | |||
Maintenance | ||||
License Processing | I hereby certify that I have compared the attached signed contract document to the final version submitted to the Client for signature (as such was approved internally) and that there have been no modifications. | |||
Total: | [***] | |||
CY Impact Revenue: |
/s/ X [Authorized Signatory] 6/12/14 |
|||
Date Released to Authorized Signatory for signature:
6/12/2014 Connectivity
Salesperson(s): Split % :
Relationship Manager: Split % :
6/12/2014 6:03 PM |
Signatures/Initials - please date | Executed contract Distribution: | |||
☒ Jamie Plaisted (Legal) |
Original |
Electronic Copy | ||
/s/ Jamie Plaisted 6/16 |
||||
☐ Daniel McLaughlin/Hamilton Bunge (Finance) |
☐ Client - sent via UPS (see Legal for tracking number) |
|||
☒ Cheryl Nash (President) |
☐ Sales Force |
☐ Warren |
||
/s/ Cheryl Nash 6/17/14 |
☐ Shared Drive |
☐ Los Angeles |
||
☐ Doug Smith (SVP, Operations |
☐ Contract Repository |
☐ Morris Plains |
||
☐ Hilary Fiorella (SVP, Client Services) |
☐ Contract File Cabinets |
☐ United Kingdom |
||
☒ /s/ Maria Cordero 6/17/14 |
☐ WorkFlow (Check-In) |
SF#1629
A MENDMENT #7
This is Amendment #7 ( Amendment ), made effective as of the Amendment Effective Date, to the Fiserv APL System Agreement by and between Fiserv Investment Solutions, Inc. ( Fiserv ) and Genworth Financial Wealth Management, Inc. (as successor-in-interest to Assetmark Investment Services) ( Client ), effective as of June 23 rd , 2006 as amended , (the Agreement ). Any capitalized terms not defined in this Amendment shall be given their meanings set forth in the Agreement.
RECITALS
WHEREAS, Fiserv and Client each desire to amend the Agreement.
THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and the mutual covenants contained herein, the parties agree to modify and otherwise amend the Agreement as follows:
1. |
As of the Amendment Effective Date, Fiserv hereby grants Client access to a 1.5 Meg T1 shared Veriz on M PLS cloud circuit with connectivity to Fiserv MPLS cloud network ( Connectivity Service ) for a monthly fee of $[***] ( Monthly Fee ), which Monthly Fee is due, owing and payable in accordance with Section 1 of the Agreement. The Connectivity Service will be installed at the Clients location as specifically set forth in the attached Exhibit A. |
2. |
The Connectivity Service shall commence on the Amendment Effective Date and will run concurrently with the Term of the Agreement. However, the Connectivity Service set forth herein shall terminate and cease to be of any force and effect: (a) upon the termination or expiration of the Agreement; or (b) upon the termination of CKFRs direct agreement with such third party service provider that supplies the connectivity circuits, whichever is earlier. Client may terminate this Amendment and the services herein for convenience by giving CKFR ninety (90) days prior written notice of termination, and, in the event of such termination, Client shall pay CKFR an amount that shall be the result of multiplying the Monthly Fee by the months remaining in the then-current Term on the effective date of termination (including any partial months) ( Termination Fee), it being agreed that such Termination Fee constitutes reasonable liquidated damages sustained by CKFR by reason of such early termination. Upon termination or expiration of this Amendment for any reason, or upon earlier request by CKFR, Client shall promptly deliver to CKFR all equipment and hardware associated with the services herein. |
3. |
EFFECT OF AMENDMENT: Except as otherwise expressly provided in this Amendment, all other terms and conditions of the Agreement shall remain in full force and effect. |
This Amendment shall be effective upon FISERVs execution of this Amendment (the Amendment Effective Date ). EXECUTED in multiple originals.
Fiserv Investment Solutions, Inc. |
Genworth Financial Wealth Management, Inc. (an affiliate of Genworth North America Corporation) |
|||||||
By: |
/s/ Cheryl Nash |
By: |
/s/ James Hanna |
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Print Name: | Cheryl Nash | Print Name: | James Hanna | |||||
Title: | President | Title: | CTO | |||||
Date: | 6/17/14 | Date: | 6/12/14 |
EXHIBIT A
Address: | 1655 Grant Street, 10th Floor | Concord, CA 94520 | |
Client Point of Contact: | Patty Adams, 925 382 6880 | |
Fiserv Relationship Manager: | Michael Dellipaoli, Michael.Dellipaoli@Fiserv.com | |
Fiserv Business Analyst: | Lissethe Vargas, 1.877.347.3781 ext. 0780 | |
Ticket Number: | AIS0164 | |
Development Queue: | Networking |
1. Services and Deliverables . Pursuant to the terms of this Amendment, Fiserv shall provide the professional services which may include, without limitation, customization, analysis, testing, programming, implementation, production, training and/or consulting services (the Services ) set forth below. The Services are subject to change only by a written agreement of the parties that expressly amends this Amendment.
Fiserv will provide the following Services under this Amendment:
|
Client has requested that Fiserv provides a new 1.5 MB datacenter located in Franklin Park, IL, while Backup datacenter is located in Durham, NC. |
The delivery will include engineering, design, provisioning, and testing.
|
As part of the Services, Fiserv will provide the Clients data center equipment (CPE), which will be (collated/housed) at Client site: |
Data Center Location Primary:
Windstream 9333 W Grand Ave,
Franklin Park, IL 60131
Data Center Location Backup:
Windstream 99 T W Alexander Dr,
Durham, NC 27709
|
Installation/monitoring/maintenance of CPE is Fiservs responsibility. |
Fiserv will provide the following materials and deliverables ( Deliverables ) under this Amendment:
|
MPLS cloud connectivity to the Fiservs network to both the primary and backup datacenters. |
|
Primary 1.5 Meg circuit and Backup 1.5 Meg circuits with Verizon |
|
New CPEs for each line |
|
Configuration of CPEs |
All Deliverables (including hardware, CPEs, and software) provided in connection with such Services shall be owned exclusively by Fiserv, are provided to Client solely for use in connection with the System in strict accordance with the terms of the Agreement and only for as long as the Agreement remains in effect. Clients use of any Deliverables is subject to all terms and conditions of the Agreement applicable to such System (including, without limitation, any use restrictions).
2. Payment Terms . Fiserv will perform the Services and provide the Deliverables under this Amendment for a fixed price of $[***] ( Fixed Price ). The Fixed Price will be due and payable upon completion of the project. Fiserv shall perform only the Services expressly identified in this Amendment for the Fixed Price. Any services and deliverables not expressly identified under this Amendment are deemed to be out-of-scope with respect to this Amendment and are not included in the Fixed Price.
Rev. 2013-03-04
2
EXHIBIT A
3. Client Responsibilities .
Client will provide the following resources and has the following responsibilities in supporting Fiservs performance of the Services:
|
Client will provide demarcation information for the device to ensure it is properly connected. |
|
Client will provide inside wiring for the device. |
|
Client will provide the necessary technical staff to connect Fiservs CPE to the client network. |
|
Client will configure its network to accept Fiservs CPE. |
|
Client must collocate Fiservs CPE in a secure location appropriate for housing network equipment. |
|
From time to time, Client may be requested to reboot/support CPE. |
|
Client agrees to be bound by Fiservs Data Access and Usage policy for network connectivity, which will available upon request. |
4. Assumptions .
If any of the following assumptions are not met, Fiserv reserves the right to charge additional amounts or receive an extension to any Deliverable due dates or Services completion dates.
|
All Client project teams, sponsors, and management will be readily available to Fiserv when needed and have the ability and authority to resolve business and technical issues regarding the project on a timely basis. |
|
Client will provide accurate and complete information as needed, will complete its responsibilities in a timely and effective manner, and will make decisions and provide approvals, as necessary, in a timely manner. |
|
Fiserv will work directly with Clients assigned project management and product development teams. These Client teams will be Fiservs primary points of contact regarding project issues and scope changes. Fiserv shall be entitled to rely on the instructions, authorizations, approvals and other information provided by the Client teams. |
|
Clients project team will perform reviews and provide critical feedback on checkpoints as required, in a timely manner, and as agreed per the applicable project plan. |
|
Client will provide resources and materials as needed for Fiserv to complete its responsibilities, including where applicable, office space, connectivity, a telephone line and access to all necessary buildings and facilities. |
Rev. 2013-03-04
3
SF#1672
A MENDMENT # 9
This is Amendment #7 ( Amendment ), made effective as of September 23, 2014, to the Fiserv APL System Agreement dated as of June 23, 2006 between Fiserv Investment Solutions, Inc. ( Fiserv ) and AssetMark, Inc. (formerly known as Genworth Financial Wealth Management, Inc.) ( Client ) (the Agreement ). Any capitalized terms not defined in this Amendment shall be given their meanings set forth in the Agreement.
The parties agree to amend the Agreement as follows:
1. |
The following sentence shall be added to the end of Section 3.1: |
Any claim against CKFR under this Section 3.1, shall be limited in the aggregate to liquidated damages in the amount of the system fees paid by Client to CKFR pursuant to this agreement for the twelve (12) calendar months immediately preceding the month that gave rise to the damages.
2. |
The parties agree to otherwise extend the Agreement termination date from September 23, 2014 to November 22, 2014 under the same terms and conditions. |
3. |
Except as expressly provided in this Amendment, all other terms of the Agreement shall remain in effect. |
This Amendment shall be effective upon Fiservs execution.
Fiserv Investment Solutions, Inc. | AssetMark, Inc. | |||||||
By: |
/s/ Daniel McLaughlin |
By: |
/s/ Carrie E. Hansen |
|||||
Print Name: | Daniel McLaughlin | Print Name: | Carrie E. Hansen | |||||
Title: | VP/CFO | Title: | EVP, COO | |||||
Date: | 9/22/14 | Date: | 9/11/2014 |
Signatures/Initials - please date | Executed Contract Distribution: | |||||||||||
☒
☐
☐
☐
☒
☐ |
Jamie Plaisted (Legal)
/s/ Jamie Plaisted 11/25
Daniel McLaughlin/Hamilton Bunge (Finance)
Cheryl Nash (President)
Doug Smith (SVP Operations)
Hilary Fiorella (SVP, Client Services)
/s/ Hilary Fiorella 11/25/14
Lou Bonanni (Legal Financial Institutions Group) |
Original | Electronic Copy | |||||||||
☐
☐ ☐ ☐ ☐ |
Client sent via UPS (sec Legal for tracking number) Sales Force Shared Drive Contract Repository Contract File Cabinets |
☐ ☐ ☐ ☐ |
Jersey City Los Angeles Morris Plains United Kingdom |
|||||||||
11/25/14
SF#1702
A MENDMENT # 10
This is Amendment #10 ( Amendment ), made effective as of November 22, 2014, to the Fiserv APL System Agreement dated as of June 23, 2006 between Fiserv Investment Solutions, Inc. ( Fiserv ) and AssetMark, Inc. (formerly known as Genworth Financial Wealth Management, Inc.) ( Client ) (the Agreement ). Any capitalized terms not defined in this Amendment shall be given their meanings set forth in the Agreement.
The parties agree to amend the Agreement as follows:
1. |
The following sentence shall be added to the end of Section 3.1: |
Notwithstanding anything in the Agreement to the contrary herein, any claim against CKFR under this Section 3.1, shall be limited in the aggregate to liquidated damages in the amount of the system fees paid by Client to CKFR pursuant to this agreement for the twelve (12) calendar months immediately preceding the month that gave rise to the damages.
2. |
The parties agree to otherwise extend the Agreement termination date to December 21, 2014 under the same terms and conditions. |
3. |
Except as expressly provided in this Amendment, all other terms of the Agreement shall remain in effect. |
This Amendment shall be effective upon Fiservs execution.
Fiserv Investment Solutions, Inc. | AssetMark, Inc. |
By: | /s/ Hilary Fiorella | By: | /s/ Carrie E. Hansen |
Print Name: | Hilary Fiorella | Print Name: | Carrie E. Hansen |
Title: | SVP Client Services | Title: | EVP, COO | |||||
Date: | 11/25/2014 | Date: | 11/14/2014 |
Date Released to Authorized Signatory for signature: |
11/25/2014 |
Salesperson(s): |
|
|
||||
Relationship Manager: |
X [Authorized Signatory] 100 |
Date/Time Cover Sheet Generated |
11/25/2014 4:20 PM |
Signatures/Initials please date |
Executed Contract Distribution: |
|||||||||
☒ |
Jamie Plaisted ( Legal ) (Illegible) 11/125 | Original | Electronic Copy | |||||||
☐ | Daniel McLaughlin/Hamilton Bunge (Finance) | ☐ | Clientsent via UPS (see Legal for tracking number) | ☐ | Jersey City | |||||
☐ | Cheryl Nash (President) | ☐ | Sales Force | ☐ | Los Angeles | |||||
☐ | Doug Smith (SVP, Operations) | ☐ | Shared Drive | ☐ | Morris Plains | |||||
☐ | Hilary Fiorella (SVP, Client Services) | ☐ | Contract Repository | ☐ | United Kingdom | |||||
☐ |
Lou Bonanni (LegalFinancial Institutions Group) |
☐ |
Contract File Cabinets | |||||||
☒ |
/s/ Maria Cordero 11/25/14 |
Effective Date: | 12/22/2014 | Contract Type: | Amendment #11 | |||||||||
Client Short Name: | Sales Type: | |||||||||||
Contract Company Name: |
AssetMark, Inc. | |||||||||||
Address: |
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City, State, Zip: |
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Country: |
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Contact Name: |
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Telephone Number: |
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Date Contract Recd |
Contract Format |
Type of Service |
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12/22/2014 | Hosted (i.e. APL) | |||||||||||
Rev Type | TCV | |||||||||||
Professional Services | Legal Contracting Officer (initial & date): | |||||||||||
Maintenance | I hereby certify that I have compared the attached signed contract document to the final version submitted to the Client for signature (as such was approved internally) and that there have been no modifications. | |||||||||||
License Processing |
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Total: |
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CY Impact Revenue: | ||||||||||||
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Date Released to Authorized Signatory for signature: |
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12/22/2014 |
||||||||||||
Salesperson(s): |
X [Authorized Signatory] | 100.00 | Split %: | |||||||||
Relationship Manager: |
Split %: |
12/22/2014 4:29 PM
1 of 1
SF#
A MENDMENT # 11
This is Amendment #11 ( Amendment ), made effective as of December 22, 2014, to the Fiserv APL System Agreement dated as of June 23, 2006, between Fiserv Investment Solutions, Inc. ( Fiserv ) and AssetMark, Inc. (formerly known as Genworth Financial Wealth Management, Inc.) ( Client ) (the Agreement ). Any capitalized terms not defined in this Amendment shall be given their meanings set forth in the Agreement.
The parties agree to amend the Agreement as follows:
1. |
The following sentence shall be added to the end of Section 3: |
Notwithstanding anything in the Agreement to the contrary herein in no event shall Fiserv be liable for loss of goodwill, or for special, indirect, incidental, consequential, punitive, exemplary, or tort damages arising out of or relating to this agreement, regardless of whether such claim arises in tort, contract, or otherwise. Except for claims related to proprietary rights or payment obligations, neither party may assert any claim against the other related to this agreement more than 2 years after such claim accrued. Fiservs aggregate liability to Client and any third party for any and all claims or obligations relating to this agreement shall be limited to the total fees paid by Client to Fiserv in the twelve (12) month period preceding the date the claim accrued.
2. |
The parties agree to otherwise extend the Agreement termination date to January 21, 2014, under the same terms and conditions. |
3. |
Except as expressly provided in this Amendment, all other terms of the Agreement shall remain in effect. |
This Amendment shall be effective upon Fiservs execution.
Fiserv Investment Solutions, Inc. | AssetMark, Inc. | |||||||
By: | /s/ Dan McLaughlin | By: | /s/ Gary Zyla | |||||
Print Name: Dan McLaughlin | Print Name: Gary Zyla | |||||||
Title: VP/CFO | Title: EVP, CFO | |||||||
Date: 12/22/14 | Date: 12/19/14 |
SF#
A MENDMENT # 12
This is Amendment #12 ( Amendment ), made effective as of January 21, 2015, to the Fiserv APL System Agreement dated as of June 23, 2006 between Fiserv Investment Solutions, Inc. ( Fiserv ) and AssetMark, Inc. (formerly known as Genworth Financial Wealth Management, Inc.) ( Client ) (the Agreement ). Any capitalized terms not defined in this Amendment shall be given their meanings set forth in the Agreement.
The parties agree to amend the Agreement as follows:
1. |
The parties agree to extend the Agreement termnination date to March 27, 2015, under the same terms and conditions. |
2. |
Except as expressly provided in this Amendment, all other terms of the Agreement shall remain in effect. |
This Amendment shall be effective upon Fiservs execution.
Fiserv Investment Solutions, Inc. | AssetMark, Inc. | |||||||
By: | /s/ Dan McLaughlin | By: | /s/ Carrie E. Hansen | |||||
Print Name: Dan McLaughlin | Print Name: Carrie E. Hansen | |||||||
Title: VP/CFO | Title: EVP, COO | |||||||
Date: 1/26/15 | Date: 1/20/2015 |
Effective Date: 3/27/15 |
|
Contract Type: Amendment #13 | ||
Client Short Name: AIS |
|
Contract Company Name: | AssetMark Inc (formerly Genworth) | |
Address: | ||
City, State, Zip: | ||
Country: | ||
Contact Name: | ||
Telephone Number: |
Date Contract Recd | Contract Format | Type of Service | ||||
3/31/15 | Hosted (i.e. APL) |
Legal Contracting Officer (initial & date): | ||
Projected Revenue of Contract: |
I hereby certify that I have compared the attached signed contract document to the final version submitted to the Client for signature (as such was approved internally) and that there have been no modifications. |
|
X [Authorized Signatory] 3/31/15 |
Meets Contract Mandates (Y/N) Y | ||
Date Released to Authorized Signatory for signature: | If No, Highlest Level Approved | |
3/31/15 |
Approvals Sought by (Initials)
|
Salesperson(s): | ||
Relationship Manager: |
Date/Time Cover Sheet Generated | 3/19/2015 12:51 PM |
Signatures/Initialsplease date | Executed Contract Distribution: | |||||||||
☒ | Jamie Plaisted (Legal) /s/ Jamie Plaisted 3/31 | Original | Electronic Copy | |||||||
☐ | Daniel McLaughlin/Hamilton Bunge (Finance) | ☐ | Client sent via UPS (see Legal for tracking number) | ☐ | Jersey City | |||||
☒ | Cheryl Nash (President) /s/ Cheryl Nash 4/1/15 | ☐ | Sales Force | ☐ | Los Angeles | |||||
☐ | Doug Smith (SVP, Operations) | ☐ | Shared Drive | ☐ | Morris Plains | |||||
☐ | Hilary Fiorella (SVP, Client Services) | ☐ | Contract Repository | ☐ | United Kingdom | |||||
☐ | Lou Bonanni (Legal Financial Institutions Group) | ☐ | Contract File Cabinets |
4/2/15
AMENDMENT #13
This Amendment #13 (Amendment) dated as of March 27, 2015 (Amendment Effective Date) to the Fiserv APL System Agreement dated June 23, 2006 (as amended through the date hereof, (the Agreement) between Fiserv Investment Solutions, Inc. (Fiserv) and AssetMark, Inc. (fka Genworth Financial Wealth Management, Inc.)(Client). Any capitalized terms not defined in this Amendment shall be given their meanings set forth in the Agreement.
The parties agree to amend the Agreement as follows:
1. |
The parties agree to extend the Agreement termination date to April 27, 2015 under the same terms and conditions. |
2. |
Except as expressly provided in this Amendment, all other terms of the Agreement shall remain in effect. |
IN WITNESS WHEREOF, the parties have caused this Amendment to be executed by their duly authorized representatives as of the Amendment Effective Date.
For Client: | For Fiserv: | |||||||
AssetMark, Inc. | Fiserv Investment Solutions, Inc. | |||||||
By: | /s/ Carrie E. Hansen | By: | /s/ Cheryl Nash | |||||
Print Name: Carrie E. Hansen | Print Name: Cheryl Nash | |||||||
Title: EVP, COO | Title: President | |||||||
Date: 3/27/2015 | Date: 4/1/15 |
Effective Date: | 4/27/15 |
|
Contract Type: | Amendment #14 | ||||
Client Short Name: | AIS |
Contract Company Name: | AssetMark Inc. | |
Address: | ||
City, State, Zip: | ||
Country: | ||
Contact Name: | ||
Telephone Number: |
Date Contract Recd | Contract Format | Type of Service | ||
4/28/15 | Hosted (i.e. APL) |
Legal Contracting Officer (initial & date): | ||||
Projected Revenue of Contract: | I hereby certify that I have compared the attached signed contract document to the final version submitted to the Client for signature (as such was approved internally) and that there have been no modifications. | |||
DCR 4/28/15 |
Meets Contract Mandates |
(Y/N) |
|||||
Date Released to Authorized Signatory for signature: |
If No, Highlest Level Approved |
|||||
4/28/15 |
Approvals Sought by |
(Initials) |
Salesperson(s): | ||
Relationship Manager: |
Date/Time Cover Sheet Generated | 4/27/2015 5:15 PM |
Signatures/Initials - please date | Executed Contract Distribution: | |||||||||
☒ | Jamie Plaisted (Legal) /s/ Jamie Plaisted 4/28 | Original | Electronic Copy | |||||||
☒ | Daniel McLaughlin/Hamilton Bunge (Finance) /s/ Daniel McLaughlin 4/28 | |||||||||
☐ | Client sent via UPS (see Legal for tracking number) | ☐ | Jersey City | |||||||
☐ | Cheryl Nash (President) | ☐ | Sales Force | ☐ | Los Angeles | |||||
☐ | Shared Drive | ☐ | Morris Plains | |||||||
☐ | Doug Smith (SVP, Operations) | ☐ | Contract Repository | ☐ | United Kingdom | |||||
☐ | Contract File Cabinets | |||||||||
☐ | Hilary Fiorella (SVP, Client Services) | |||||||||
☐ | Lou Bonanni (LegalFinancial Institutions Group) |
4/28/15
AMENDMENT #14
This Amendment #14 (Amendment) dated as of April 27, 2015 (Amendment Effective Date) to the Fiserv APL System Agreement dated June 23, 2006 (as amended through the date hereof, (the Agreement) between Fiserv Investment Solutions, Inc. (Fiserv) and AssetMark, Inc. (fka Genworth Financial Wealth Management, Inc.)(Client). Any capitalized terms not defined in this Amendment shall be given their meanings set forth in the Agreement.
The parties agree to amend the Agreement as follows:
1. |
The parties agree to extend the Agreement termination date to April 30, 2015 under the same terms and conditions. |
2. |
Except as expressly provided in this Amendment, all other terms of the agreement shall remain in effect. |
IN WITNESS WHEREOF, the parties have caused this Amendment to be executed by their duly authorized representatives as of the Amendment Effective Date.
For Client: AssetMark, Inc. |
For Fiserv: Fiserv Investment Solutions, Inc. |
|||||||
By: |
/s/ Carrie E. Hansen |
By: |
/s/ Dan McLaughlin |
|||||
Print Name: Carrie E. Hansen | Print Name: Dan McLaughlin | |||||||
Title: EXEC. VP, COO | Title: VP/CFO | |||||||
Date: 04/28/15 | Date: 4/28/15 |
SF# 1757
AMENDMENT # 15
This is Amendment #15 ( Amendment ), made effective as of April 30, 2015 (the Amendment Effective Date), to the Fiserv APL System Agreement, dated as of June 23, 2006, between Fiserv Solutions, LLC ( Fiserv ) and AssetMark, Inc. (formerly known as Genworth Financial Wealth Management, Inc.) ( Client ), as amended (the Agreement ). Any capitalized terms not defined in this Amendment #15 shall be given their meanings set forth in the Agreement and its Amendments.
The parties agree to amend the Agreement as follows:
1. |
Term . Section 1.1 of the Agreement is amended to extend the Term of the Agreement from the Amendment Effective Date for a period of two (2) years (the Initial Term). After the Initial Term, the Agreement shall automatically renew one three (3) month term (each a Renewal Term) on the same terms, conditions and pricing unless either Party provides the other Party with contrary written notice at least six (6) months prior to the expiration of the Initial Term. The Initial Term and the Renewal Term, if any, shall be referred to together as the Term. |
2. |
Information Security . Fiserv shall (i) immediately notify Client of any access to or use of Clients Confidential Information, including all Client data stored in the System in contravention of Fiservs Information Security policy (Unauthorized Access) and (ii) reasonably cooperate with Client in investigating the Unauthorized Access. Fiserv shall provide Client with reasonably sufficient details regarding its Information Security policy on Clients periodic request. |
3. |
Fees and Charges . Schedule 1 to the Agreement is amended and restated in its entirety as attached to this Amendment. Addendums A and B of the 2006 original Agreement shall be deleted. |
4. |
Deletion of Sections 1.5 and 1.12 . Sections 1.5, 1.12 and 1.13 shall be deleted. Parties acknowledge that the March 14, 2006, Letter Agreement referenced by section 1.12 cannot be located and current personnel are not aware of its contents. |
5. |
Liability Cap . The following sentence shall be added to the end of Section 3: |
Notwithstanding anything in the Agreement to the contrary herein in no event shall Fiserv be liable for loss of goodwill, or for special, indirect, incidental, consequential, punitive, exemplary, or tort damages arising out of or relating to this agreement, regardless of whether such claim arises in tort, contract, or otherwise. Except for claims related to proprietary rights or payment obligations, neither Party may assert any claim against the other related to this agreement more than 2 years after such claim accrued. Fiservs aggregate liability to Client and any third party for any and all claims or obligations relating to this agreement shall be limited to the total fees paid by Client to Fiserv in the twelve (12) month period preceding the date the claim accrued. |
6. |
Termination . 6.1 shall be replaced with the following: After the end of the Initial Term, this Agreement will automatically renew and extend for successive twelve (12) month terms (each a Renewal Term, together with the Initial Term, the Term), unless either Party provides contrary notice one hundred and eighty days prior to the expiration of the initial Term or any Renewal Term. In addition, Client may terminate at any time for convenience during a Renewal Term upon three months notice to Fiserv provided that it pay the number of remaining months in the Renewal Term |
Fiserv/AssetMark Agreement
Amendment #15
April 30, 2015
Page 2 of 7
multiplied by its Monthly Minimum. Upon termination, the obligations of a continuing nature shall survive, including Sections 2 through 5 and 8 of the Agreement. In addition if either Party breaches the terms of this Agreement and fails to cure such breach within thirty (30) days notice from the non-breaching Party then, at the option of the non-breaching Party, this Agreement shall terminate. Upon termination for any reason Client shall instruct all Authorized Parties that it is unable to provide services related to the System. |
7. |
Data . Section 7 regarding data for de-conversion shall be amended by adding to the list of files EDPMSECT. The [***] fee per tape is no longer applicable. Fiserv shall charge at its then standard rates for time and materials need to provide de-conversion services. |
8. |
Past Amendments and Miscellaneous . The 2006 Agreement was with CheckFree Investment Solutions, a division of CheckFree Services Corporation. Fiserv Investment Solutions, Inc., is successor-in-interest to CheckFree Services Corporation. At the time of the 2006 Agreement, AssetMark, Inc., was named AssetMark Investment Services, Inc. During the time of the amendments to the 2006 Agreement, AssetMark has also been named Genworth Financial Wealth Management, Inc. |
The amendments to the 2006 Agreement have been as follows, a brief, non-determinative description following each:
1. |
Amendment #1, effective December 2, 2010, increasing Total Ports to 45; |
2. |
Amendment #2, effective September 7, 2011, regarding Multiple Strategy Portfolio accounts; |
3. |
Amendment #3, effective August 1, 2012, regarding JJ Kenny Daily Muni pricing and IDC Data; |
4. |
Amendment #5, effective January 1, 2013, adding non-trading accounts; |
5. |
Amendment #6, effective April 11, 2013, adding UMA accounts; |
6. |
Navigator Addendum, effective October 3, 2013, adding APL Navigator software, which included Kass Enterprises LLC included as a party; |
7. |
Amendment #7, effective June 17, 2014, regarding access to 1.5 Meg T1 shared Verizon MPLS cloud circuit with connectivity to Fiserv MPLS cloud network; |
8. |
Amendment #7, effective June 21, 2014, defining liquidated damages under 3.1 and extending the Agreement termination date from June 22, 2014, to September 22, 2014; and |
9. |
Amendment #9, effective September 22, 2014, extending the Agreement termination date to November 22, 2014. |
10. |
Amendment #10, effective November 22, 2014, extending the Agreement termination date to December 22, 2014. |
11. |
Amendment #11, effective December 22, 2014, extending the Agreement termination date to January 21, 2015 (although 2014 is listed in the Amendment). |
12. |
Amendment #12, effective January 21, 2015, extending the Agreement termination date to March 27, 2015. |
Fiserv/AssetMark Agreement
Amendment #15
April 30, 2015
Page 3 of 7
13. |
Amendment #13, effective March 27, 2015, extending the Agreement termination date to April 27, 2015. |
14. |
Amendment #14, effective April 27, 2015, extending the Agreement termination date to April 30, 2015. |
There was no amendment #4; there were two amendments #7 and no Amendment #8. Capitalized terms, not otherwise defined herein, shall have the meanings assigned to them in the Agreement and any Amendments. Except as set forth herein, all terms and conditions of the 2006 Agreement, as amended by its Amendments, listed above, shall remain in full force and effect, provided though, in the event of any conflict between the terms of this Amendment #12 and the Agreement and its Amendments, the terms of this Amendment#12 shall control. No amendment or modification of this Amendment shall be effective unless signed by authorized representatives of both parties. This Agreement, as amended, constitutes the entire agreement of the parties concerning its subject matter.
9. |
Legal Entity Name Change . Client legally changed its name from Genworth Financial Wealth Management, Inc., to AssetMark, Inc., by amendment of its Articles of Incorporation, November 6, 2013, filed with the Secretary of State of the State of California November 14, 2013. |
10. |
Press Release . The Parties agree that, unless required by law, (i) no press release or public announcement concerning the Agreement, as amended, and the services provided by Fiserv shall be made by Fiserv without the prior written approval of Client, (ii) Strategist and its agents shall not identify Client or any Client affiliate as a customer in public announcements or marketing materials without Clients prior written approval, provided that Fiserv may identify Client as a client when responding to requests for proposals and in similar communications which are one-on-one communications or have a limited audience, and (iii) Fiserv and its agents shall not use Clients or an affiliates logo(s) or trademark(s) without Clients prior written approval. |
This Amendment shall be effective as of the Amendment Effective Date set forth above.
Fiserv Solutions, LLC | AssetMark, Inc. | |||||||
By: | /s/ Cheryl Nash | By: | /s/ Carrie E. Hansen | |||||
Print Name: Cheryl Nash | Print Name: Carrie E. Hansen | |||||||
Title: President | Title: Executive VP, COO, President Mutual Funds | |||||||
Date: 4/30/15 | Date: 04/30/2015 |
Fiserv/AssetMark Agreement
Amendment #15
April 30, 2015
Page 4 of 7
SCHEDULE 1
FEES
Monthly System Fees:
Client agrees to pay Fiserv a Monthly Minimum System Fee of [***] dollars ($[***]) per month (Monthly Minimums) or the below Actual Monthly Fees, whichever is the greater amount (such greater amount to be referred to as the Monthly System Fees).
Actual Monthly Fees:
Unit Price means price per Active Account.
A MFA Account is one invested primarily in mutual funds as part of a mutual fund wrap program.
An ETF Account is one invested primarily in ETFs as part of an ETF wrap program.
A SMA or IMA or Individually Managed Account is one whose manager does not maintain separate sleeves within the Account, but the Account is managed and accounted for as a whole. By way of examples, at the Effective Date of this Amendment #15, such Accounts on the AssetMark Platform included those IMAs managed by Eaton Vance, by Natixis Global Asset Management, by Nuveen Asset Management, and by PIMCO, and the Manager Select Accounts managed by Parametric. Individually managed accounts where the manager is not leveraging the tools and services provided by Fiserv, such as the trading tools, will be classified as Reporting Only Accounts and will be charged separate rates listed below. By way of examples, at the Effective Date of this Amendment #15, such Accounts on the AssetMark Platform included those IMAs managed by City National Rochdale and by William Blair.
A UMA Account is an Account managed by one adviser but with sleeves of investments selected by different advisers. By way of examples, at the Effective Date of this Amendment #15, such Accounts on the AssetMark Platform included GPS Select Solutions, Custom GPS Select Solutions, the UMAs managed by the Savos division of Client which include the GMS, PMP, ARO, and Fixed Income strategies, the MSA or Multiple Strategy Accounts, the CMA Account Managed by Parametric and the Aris (high net worth) IMA.
Fiserv/AssetMark Agreement
Amendment #15
April 30, 2015
Page 5 of 7
Description |
Unit Price | |||
MFA Accounts Under 10,000 |
$ | [***] | ||
MFA Accounts 10,001 to 20,000 |
$ | [***] | ||
MFA Accounts 20,001 to 40,000 |
$ | [***] | ||
MFA Accounts 40,001 to 60,000 |
$ | [***] | ||
MFA Accounts 60,001 to 80,000 |
$ | [***] | ||
MFA Accounts 80,001 to 110,000 |
$ | [***] | ||
MFA Accounts > 110,000 |
$ | [***] |
Description |
Unit Price | |||
SMA Accounts (IMA Accounts) |
$ | [***] |
Description |
Unit Price | |||
ETF Accounts Under 5,000 |
$ | [***] | ||
ETF Accounts 5,001 to 10,000 |
$ | [***] | ||
ETF Accounts 10,001 to 20,000 |
$ | [***] | ||
ETF Accounts 20,001 to 30,000 |
$ | [***] | ||
ETF Accounts 30,001 to 40,000 |
$ | [***] | ||
ETF Accounts > 40,000 |
$ | [***] |
Description |
Unit Price | |||
UMA Accounts Under 10,000 |
$ | [***] | ||
UMA Accounts 10,001 to 20,000 |
$ | [***] | ||
UMA Accounts > 20,000 |
$ | [***] |
In addition to the UMA Unit Fees listed above there will be an additional monthly charge of [***] basis points (or [***]) of Assets Under Management (AUM) in the UMA Accounts. AUM in the UMA Accounts will be calculated as market value on the last business day of each month.
Description |
Unit Price | |||
Reporting Only Accounts under 5,000 |
$ | [***] | ||
Reporting Only Accounts 5,001 to 10,000 |
$ | [***] | ||
Reporting Only Accounts 10,001 to 20,000 |
$ | [***] | ||
Reporting Only Accounts from 20,001 |
$ | [***] |
Fiserv/AssetMark Agreement
Amendment #15
April 30, 2015
Page 6 of 7
Description |
Unit Price | |||
Admin Accounts |
$ | [***] |
Description |
Unit Price | |||
Non-Trading Accounts |
$ | [***] |
Description |
Unit Price | |||
Suspended Trading Accounts |
$ | [***] |
Professional Services Fees
Any services not listed on this Schedule 1, including professional services under Section 1.10 and deconversion services under Section 7, shall be at Fiservs then current rates. Below are the rates applicable at the Effective Date of this Amendment #15.
Development Rates
Standard Rates
Activity |
Cost | |||
Development |
[***] | |||
Business Analyst |
[***] | |||
Quality Assurance |
[***] | |||
Average |
[***] |
Closed/Inactive Account Fees:
Fiserv and Client agree that Active Accounts are billable. Active Accounts shall mean accounts against which interface processing is run and/or accounts that are manually updated on the System. All Active Accounts will be coded into a System code, called RR, less than 99.
Inactive Accounts shall mean accounts that are not listed above and are closed accounts that are kept solely for historical reporting purposes (i.e., Certified Financial Analyst Institute composites). Client shall code these Inactive Accounts exclusively as RR equal to 99 on the System. Inactive Accounts are billable monthly at [***] cents an account, for each account over 100,000 accounts, provided, however, that for the first six (6) months following the Amendment Effective Date, there shall be no Closed/Inactive Accounts charge.
Fiserv/AssetMark Agreement
Amendment #15
April 30, 2015
Page 7 of 7
Client controls and is responsible for the coding of its accounts, agrees to notify Fiserv promptly following any change to such account coding and represents that it will code accounts as per Fiserv policy and not code accounts in order to avoid paying associated Monthly System Fees or other amounts that may be due and owing.
Communication Charges Separate:
Communication costs are not included as part of the above Unit Prices or Monthly Minimum System Fees. Communication costs are the responsibility of Client but options can be provided as an Optional Service by Fiserv. Fiserv will discuss the optimal method of communication with Client at Clients request.
Increases:
Fiserv may increase all fees, including Unit Prices, Monthly Minimums and Professional Services standard rates, under the Agreement [***] each year commencing one year from the Amendment Effective Date.
Fiserv Contract ID#1764
A MENDMENT #16
This is Amendment #16 (Amendment), made effective as of June 14, 2015 (the Amendment Effective Date), to the Fiserv APL System Agreement, dated as of June 23, 2006, between Fiserv Solutions, LLC (Fiserv) and AssetMark, Inc. (Client), as amended (the Agreement). Any capitalized terms not defined in this Amendment #16 shall be given their meanings set forth in the Agreement and its Amendments.
The parties agree to amend the Agreement as follows:
1. |
Incentive . Client recently acquired approximately 6600 accounts ( Transition Accounts ) from an acquisition of Aris Corporation of America. If Client converts at least 6000 Transition Accounts by December 31, 2015 into full trading accounts, Client shall receive a [***] relationship credit on its next invoice. |
2. |
No Further Amendments . Except as otherwise expressly provided in this Amendment, all other terms and conditions of the Amendment and the Agreement shall remain in full force and effect. |
This Amendment shall be effective as of the Amendment Effective Date set forth above.
Fiserv Solutions, LLC | AssetMark, Inc. | |||||||
By: | /s/ Cheryl Nash | By: | /s/ Carrie E. Hansen | |||||
Print Name: Cheryl Nash | Print Name: Carrie E. Hansen | |||||||
Title: President | Title: EVP, COO | |||||||
Date: 8/10/15 | Date: 8/6/2015 |
Confidential & Proprietary | Page 1 of 1 |
AMENDMENT #1 7 TO AGREEMENT
AMENDMENT #17 ( Amendment ) dated December 16, 2015, to the Fiserv APL System Agreement dated June 23, 2006, between Fiserv Solutions, LLC ( Fiserv ), and AssetMark, Inc. ( Client ), (as amended through the date hereof, the Agreement ).
Fiserv and Client entered into the Agreement for Fiservs provision of various Services to Client and wish to amend the Agreement as follows:
1. Defined Terms . Unless otherwise defined herein, capitalized terms used herein shall have the same meanings assigned them in the Agreement.
2. Termination. The parties agree to amend the Agreement as follows:
Section 6.1, Termination, is revised and replaced in its entirety with the following:
Client may terminate at any time for convenience during a Renewal Term upon three months notice to Fiserv, provided that it pays the number of remaining months in the Renewal Term multiplied by its Monthly Minimum. Upon termination, the obligations of a continuing nature shall survive, including Sections 2, 3, 4 and 8 of the Agreement. In addition, if either Party breaches the terms of this Agreement and fails to cure such breach within thirty (30) days notice from the non-breaching Party then, at the option of the non-breaching Party, this Agreement shall terminate. Upon termination for any reason, Client shall instruct all Authorized Parties that it is unable to provide services related to the System.
The third line of section 1, Term, of Amendment #15 is clarified to read, ...The Agreement shall automatically renew for successive three (3) months terms (each a renewal Term)... The reference to one three month Renewal Term was not intended by the Parties.
3. Amendment . This Amendment is intended to be a modification of the Agreement. Except as expressly modified herein, the Agreement shall remain in full force and effect. In the event of a conflict between the terms of this Amendment and the Agreement, this Amendment shall control.
IN WITNESS WHEREOF, the parties have caused this Amendment to be executed by their duly authorized representatives and is effective upon the date in which it becomes fully executed by the Parties (the Effective Date).
For Client: | For Fiserv: | |||||||
ASSETMARK, INC. | FISERV SOLUTIONS, LLC | |||||||
By: | /s/ Carrie E. Hansen | By: | /s/ Dan McLaughlin | |||||
Name: Carrie E. Hansen | Name: Dan McLaughlin | |||||||
Title: EVP, COO | Title: Authorized Signatory | |||||||
Date: 1/26/2016 | Date: 1/26/16 |
Page 1 |
A MENDMENT # 18
This is Amendment #18 ( Amendment ), made effective as of March 9, 2017 to the Fiserv APL System Agreement, dated as of June 23, 2006, between Fiserv Solutions, LLC ( Fiserv ) and AssetMark, Inc. ( AssetMark ), as amended (the Agreement ). Any capitalized terms not defined in this Amendment #18 shall be given their meanings set forth in the Agreement and its Amendments.
The Parties agree to amend the Agreement as follows:
1. |
Term . Section 1.1 of the Agreement is replaced with the following: |
1.1. The Term of the Agreement shall commence on May 1, 2017, and extend for a period of four (4) years (the Initial Term). After the Initial Term, the Agreement shall automatically renew for one one-year term (a Renewal Term) at the terms of this Amendment #18, including the agreed Fixed Fee and Maximum Accounts of Schedule 1 corresponding to the 1/1/21 4/30/21 period, unless AssetMark provides Fiserv with written notice of termination at least three (3) months prior to the expiration of the Initial Term. After the fifth year, the Agreement shall automatically renew (beginning on May 1, 2022) on each annual anniversary for one-year terms (a Renewal Term) at the terms of this Amendment #18, including the agreed Fixed Fee and Maximum Accounts of Schedule 1, unless either Party provides written notice of termination at least three (3) months prior to the expiration of the Renewal Term. The Initial Term and the Renewal Term(s) shall be referred to together as the Term.
2. |
Termination . Section 6.1 is replaced with the following: |
6.1.1. AssetMark may terminate at any time for convenience during the Initial Term and any Renewal Term upon three months notice to Fiserv, provided that it pays, for the number of months remaining after de-conversion to another system and service provider designated by AssetMark until the end of the full Initial Term or any Renewal Term, as applicable, the Fixed Fees payable pursuant to Schedule 1. Payment of such fee shall be AssetMarks sole and exclusive liability and Fiservs sole and exclusive remedy for such termination. In addition, if either Party breaches the terms of this Agreement and fails to cure such breach within thirty (30) days notice from the non-breaching Party then, at the option of the non-breaching Party, this Agreement shall terminate, at the date determined by the non-breaching Party, without payment of the Fixed Fees by AssetMark for the remainder of the Term for which Fiserv does not provide Services.
6.1.2. Fiserv will provide a copy of AssetMarks data upon AssetMarks request at its then standard rates. If AssetMark does not request such data prior to de-conversion to another system and service provider designated by AssetMark, Fiserv shall have the right to delete the data upon 90 days notice to AssetMark.
3. |
Notices . The addresses in Section 8.7 shall be updated as follows: AssetMark, 1655 Grant Street, 10th Floor, Concord, CA 94520 Attn: President and General Counsel. Fiserv, 184 Liberty Corner Road, Warren, NJ 07059 Attn: Chief Operating Officer and General Counsel. |
Fiserv/AssetMark Amendment #18
March 9 2017
Page 2 of 3
4. |
Tax Functionality and Termination . Fiserv shall work in good faith to complete the work needed to provide AssetMarks desired tax trading capabilities by March 31, 2018 (Delivery Date). The Parties may mutually agree to change the Delivery Date. The Parties agree to sign a Statement of Work (SOW) by April 15, 2017, for $[***] per month through the Delivery Date to define and deliver on these tax trading capabilities. This work shall include the services of Kass Enterprises. If there is any change to the scope of these tax trading capabilities as defined by the SOW when first signed, the Delivery Date may change accordingly, as shall be specified in the amended SOW. If Fiserv does not deliver the tax trading capabilities as defined by the SOW by the Delivery Date, then AssetMark shall have a one-time right to terminate the Agreement without penalty or payment of Fixed Fees for the remainder of the Term for which Services are not provided, upon 90 days notice to Fiserv, at a time specified by AssetMark, not to exceed the Initial Term of the agreement. |
5. |
Kass Enterprises . Kass Enterprises shall be available for the Term for the provision of professional services and pursuant to the October 3, 2013, Navigator Amendment to the Agreement and additional agreed SOWs. |
6. |
Fees and Charges . Schedule 1 to the Agreement is replaced with the Schedule 1 attached to this Amendment. |
7. |
Terms Continue. Any provision of the Agreement not specifically modified by this Amendment shall remain in full force and effect. |
This Amendment shall be effective as of the date first set forth above.
Fiserv Solutions, LLC | AssetMark, Inc. | |||||||
By: | /s/ Cheryl Nash | By: | /s/ Charles G Goldman | |||||
Print Name: Cheryl Nash | Print Name: Charles G Goldman | |||||||
Title: President | Title: CEO | |||||||
Date: 3/15/2017 | Date: 3/14/2017 |
Fiserv/AssetMark Amendment #18
March 9 2017
Page 3 of 3
SCHEDULE 1
FEES
AssetMark shall pay the following fees for the System and Services:
5/1/17
-
12/31/17 |
1/1/18 -
12/13/18 |
1/1/19
-
12/13/19 |
1/1/120 -
12/13/20 |
1/1/21 -
4/30/21 |
||||||||||||||||
Fixed Fee |
[***] | [***] | [***] | [***] | [***] | |||||||||||||||
Maximum Accounts |
[***] | [***] | [***] | [***] | [***] |
An additional per Account fee of $[***] shall be applied for each Account exceeding the corresponding Maximum Accounts listed above. An Account is any open and trading account; an Account does not include any Non-Trading Account, any Suspended Trading Account, and any Inactive Account. Non-Trading, Suspended and Inactive Accounts shall not count towards the number of Maximum Accounts and shall not be charged any fee; services for these accounts shall be provided as part of the Fixed Fee compensation paid by AssetMark.
Other than Navigator for which the current fees apply as specified in the October 3, 2013, Navigator Amendment to the Agreement, this Fixed Fee is intended to be an all-inclusive fee for all services which AssetMark currently receives under the current Agreement. If AssetMark is provided new or additional services, including additional professional services under Section 1.10 or de-conversion services under Section 7, then they shall be at Fiservs then current rates.
A [***] relationship credit will be applied monthly to the eight monthly invoices from May 1, 2017.
Exhibit 10.6
Master Services Agreement
between
AssetMark
and
Consultant
This Master Services Agreement is effective as of the Effective Date specified on the signatures page of this Master Services Agreement and is between AssetMark, Inc., or the AssetMark Affiliate identified on the signature page (AssetMark) and the individual or entity identified on the signature page (each a Party).
In consideration of the mutual promises and covenants contained herein, the Parties agree as follows:
1. |
Master Agreement; Statements of Work. |
(a) Agreement Structure . This is a Master Services Agreement (MSA) containing terms and conditions to be applicable to one or more written Statements of Work (SOWs), which may be in the form attached hereto. Each SOW shall specify services and any deliverables to be provided by Consultant (such services and deliverables together, the Services), applicable fees, term for which Services shall be provided and, if any, the specifications, service levels and project timelines, as well as any requirements which are in addition to the general provisions of this Agreement. Collectively, the MSA and each SOW are the Agreement.
(b) Parties to SOWs . Services purchased under this MSA with a SOW may be used by AssetMark on behalf of itself and for the benefit of all its Affiliates. Additionally, any AssetMark Affiliate may purchase Services directly by executing its own SOW, without the need to execute a separate Master Services Agreement. In such case, each SOW shall be deemed, upon its execution, to incorporate the terms and conditions of this MSA and shall constitute a separate, distinct and independent contract between Consultant and the signing Affiliate, and references to AssetMark in this MSA shall be read to refer to the AssetMark Affiliate, and the Assetmark Affiliate that signs the SOW shall be solely responsible for payment with respect to such Services and performance of the terms of the MSA and SOW.
Affiliate means a legal entity controlled by, controlling or under direct or indirect common control with AssetMark. For purposes of this definition, control means (x) the ownership, directly or indirectly, of more than fifty percent (50%) of the voting securities or other equity interests of an entity (or if outside the United States and a foreign investor is not permitted to own more than fifty percent (50%), the maximum percent ownership allowed for a foreign investor), or (y) the possession, directly or indirectly, of the power to direct or cause the direction of the management and polices of an entity, whether through the ownership of voting securities, by contract, or otherwise.
(c) Relationship of Agreement and SOWs . Nothing contained in this Agreement alone shall constitute a commitment by AssetMark to purchase Services. Such a commitment shall arise only from a fully executed SOW. No SOW shall be effective unless signed by the Parties. A SOW may contain terms and conditions in addition to those in this MSA. However, if a SOW contains terms or conditions that directly conflict with the body of this MSA, the provisions in the body of this MSA shall control, unless the SOW expressly provides that such conflicting term or condition supersedes this MSA. Such additional or different terms or conditions shall be applicable only to the SOW in which they are contained.
AssetMark Master Consulting Agreement
Effective May 2015
AssetMark Consultant Master Services Agreement
With Statement of Work
Page 2 of 17
2. |
Term and Termination. |
(a) Term of MSA . This MSA shall remain in effect for the term of each applicable SOW. Each SOW shall commence as of the Commencement Date defined in such SOW, but no later than when Consultant begins to provide Services under the Agreement, and shall continue for the term and renewal periods (if any) set forth in such SOW. Termination of any one or more SOWs shall not constitute a termination of this Agreement if any remaining SOWs are not terminated. AssetMark may terminate this Agreement, including any or all outstanding SOWs, immediately upon Consultants breach of Section 5 (Confidentiality and Intellectual Property), upon the willful misconduct or grossly negligent conduct of Consultant, or upon any violation by Consultant of AssetMarks Code of Conduct or other policies provided Consultant. Either party may terminate this Agreement or a relevant SOW in the event the other party materially breaches this Agreement or SOW and fails to cure the breach within thirty (30 days notice from the non-breaching party.
(b) Termination of SOWs . A SOW shall continue until the Services or project specified in the SOW are completed or until either Party terminates the SOW. Either Party to a SOW may terminate such SOW with 14 days prior written notice to the other Party unless another notice period is specified in the SOW.
3. |
Services. |
(a) Services . Consultant agrees to provide the Services. Time is of the essence in Consultants performance of the Services.
(b) Independent Parties . The Parties are independent contractors to each other. Nothing herein shall be construed to create a relationship between the Parties in the nature of a profit sharing, partnership, joint venture, principal/agent, employment, or any other relationships which might impose liability on any Party hereto for its past, present, or future debts, liabilities, obligations, acts or omissions. Neither Party shall have the power to obligate or bind the other Party in any manner whatsoever, except to the extent herein specifically provided. Consultant will determine in its discretion, the methods, details and means of performing the Services hereunder, subject to the review and approval by AssetMark to ensure deliverables are being met. Consultant shall be free at all times to arrange the time and manner of performance of the Services to be rendered and will not be expected to maintain a schedule of duties or assignments, other than as specified in the applicable SOW.
(c) Rights in Work Product . AssetMark shall retain ownership of (i) all materials, ideas, concepts, inventions, discoveries, improvements, plans, product names, proprietary information, documents, data, programs, compilations, reports, training materials, research techniques, data and results, designs and specifications, or any other objects produced as a result of Consultants work under this Agreement or delivered by Consultant in the course of performing the Services (the Work Product); and (ii) all copyright, patent, trademark, trade secrets and other proprietary rights in and to the Work Product. All Work Product shall be considered work(s) for hire, as that term is defined in Section 101 of Title 17 of the United States Code, by Consultant for AssetMark and shall belong exclusively to AssetMark. Further, Consultant hereby irrevocably assigns and transfers to AssetMark all ownership of such Work Product, including all related intellectual property rights. AssetMark may obtain and hold in its own name copyrights, registrations and other protection that may be available to Consultant. At no additional charge to AssetMark, Consultant agrees to provide any assistance required to perfect such protection and to take such further actions and execute and deliver such further agreements and other instruments as AssetMark may reasonably request to give effect to this section and Agreement. Consultant may include in the Work Product pre-existing work or materials (thePre-Existing Work) only to the extent that they are provided by Consultant or are owned or licensed by Consultant without restriction and are expressly identified in the applicable SOW. To the extent any Pre-Existing Work is included in the Work Product or otherwise furnished in connection with the Services,
AssetMark Master Consulting Agreement
Effective May 2015
AssetMark Consultant Master Services Agreement
With Statement of Work
Page 3 of 17
Consultant hereby grants to AssetMark an irrevocable, perpetual, nonexclusive, worldwide royalty-free, fully paid-up right and license to use, execute, reproduce, perform and distribute copies of, prepare derivative works based upon, and otherwise exploit such work and materials and the right to authorize others to do any of the foregoing. Consultant agrees that it will not provide to its other clients and customers, nor use in the course of later engagements, the specific Work Product created and delivered to AssetMark pursuant to this Agreement, nor any other materials containing any Confidential Information (as defined by the Confidentiality provisions of this Agreement). Any such use shall constitute a material, non-curable breach of this Agreement. Unless expressly authorized in a SOW, Consultant shall not furnish any intellectual property owned, licensed, or otherwise provided by a third party, including, but not limited to any open source software.
(d) Consultant Conduct . Consultant shall comply with AssetMarks or an Affiliates guidelines, policies and rules applicable to consultants, vendors, suppliers, contractors or other individuals who provide goods or services, including without limitation, AssetMarks Standards of Business Conduct for Suppliers and Contingent Workers and that AssetMark may screen Consultant or Consultant personnel against government-restricted lists and/or that Consultant provide, at its expense, annual criminal background checks and/or drug screenings.
(e) Removal of Supplier Personnel . Upon written notice to Consultant by AssetMark, Consultant shall promptly remove any Consultant employee or agent who is not providing Services in accordance with the Agreement. In such event, Consultant shall promptly provide qualified replacement personnel and shall pay the costs attributable to familiarizing such personnel with the Services.
(f) Notice of Labor Disputes . Consultant shall promptly notify AssetMark of any and all pending labor complaints, disputes or controversies involving any of Consultant employees or agents providing Services pursuant to this Agreement and shall regularly report to AssetMark the progress and status thereof. Consultant shall use all reasonable efforts to resolve any such complaint, dispute or controversy.
(g) Future Services. Notwithstanding anything in this Agreement to the contrary and regardless of termination of this Agreement, Consultant agrees to make the Services available when and to the extent required by AssetMark to complete the Services or project or to provide follow-up support for any work or projects to which Consultant at any time materially contributed pursuant to this Agreement.
(h) No Exclusivity . This Agreement is nonexclusive, and AssetMark may contract with other entities to perform services related to or within the terms of any SOW. Consultant may contract to provide services to others only to the extent that such does not conflict with the provision of Services under this Agreement and SOW, including without limitation Section 3(c) (Rights in Work Product) and Section 5 (Confidential Information and Intellectual Property), and does not create conflicts of interests.
4. |
Compensation. |
(a) Compensation . In consideration of the Services to be provided by Consultant, AssetMark or the Affiliate executing the SOW, shall pay Consultant the compensation expressly specified in the SOW. Consultant shall submit a monthly invoice in arrears, with supporting documentation in a format acceptable to AssetMark, including, if necessary to support payment of the compensation, the nature of the tasks performed, the time spent on each task and the charges for each task. Upon receipt of the invoice, a representative of AssetMark shall review the invoice and confirm its accuracy and pay all amounts not in dispute within 30 days of the date of the invoice. If AssetMark has objection to any items in the invoice, AssetMark need not pay the amounts in dispute but shall work diligently with Consultant to resolve any disputed amounts. Unless otherwise stated in a SOW or agreed by the parties in writing, there are no other fees to be paid by AssetMark to Consultant in connection with this Agreement. Any work performed by Consultant and not specifically authorized by AssetMark in writing shall be considered gratuitous and Consultant shall have no right or claim whatsoever to any form of compensation.
AssetMark Master Consulting Agreement
Effective May 2015
AssetMark Consultant Master Services Agreement
With Statement of Work
Page 4 of 17
(b) Acceptance of Deliverables . When Consultant has completed a Service and/or Deliverable, it will notify AssetMark in writing. AssetMark will have thirty (30) days (or another period as may be expressly set forth in a Statement of Work) from receipt of the notice to test the Service and/or Deliverable (the Testing Period) to determine whether they comply in all material respects with the requirements of this Agreement and any applicable Statement of Work (the Specifications). Upon completion of AssetMarks review and testing, AssetMark will notify Consultant whether it has accepted the Services and/or Deliverables (Accept) or whether it has identified discrepancies with the Specifications (Reject). If AssetMark Rejects a Service and/or Deliverable, AssetMark will provide a written list of items that must be corrected. On receipt of AssetMarks notice, Consultant will promptly commence, at no additional charge to AssetMark, all reasonable efforts to complete, as quickly as possible, the necessary corrections, repairs and modifications to the Services and/or Deliverables as will permit them to be ready for retesting, but in no event will the corrective measures exceed twenty (20) days (or another period as may be agreed upon by the Parties in writing) from receipt of AssetMarks notice. The testing and evaluation process will resume, as described above, with AssetMark having an additional Testing Period. If AssetMark determines that the Services and/or Deliverables, as revised, still do not comply in all material respects with the Specifications, AssetMark may either (1) afford Consultant the opportunity to repeat the correction and modification process as set forth above at no additional cost or charge to AssetMark, or (2) depending on the nature and extent of the failure in AssetMarks sole judgment, terminate the relevant Statement(s) of Work. The foregoing procedure will be repeated until the Services and/or Deliverables materially conform to the Specifications, or AssetMark elects to terminate the Statement(s) of Work as provided above. If AssetMark terminates a Statement of Work, Consultant will pay to AssetMark, within ten (10) business days of written notice of termination, all sums paid to Consultant by AssetMark under this Agreement for the Services and/or Deliverables as to which the termination applies. If Consultant fully performs by making complete reimbursement to AssetMark as provided herein, the reimbursement remedy will be AssetMarks sole remedy and will preclude any other remedy available under this Agreement or at law or in equity for failure of acceptance testing.
(c) Payment . Consultant shall invoice AssetMark monthly in arrears unless otherwise expressly specified in the applicable SOW. AssetMark shall pay undisputed charges within thirty (30) days of Companys receipt of a correct invoice.
(d) Expenses; Travel . Unless otherwise provided in any SOW, each Party shall be responsible for its own costs and expenses incurred in performance of the Agreement. If Consultant travels upon the request of AssetMark, AssetMarks Reimbursable Expense and Billing Policy, which may be amended by AssetMark upon notice to Consultant, shall apply.
(e) Taxes; No Employee Benefits . AssetMark shall not be responsible for paying or reporting any federal or state income tax withholding, social security taxes or unemployment insurance applicable to Consultant. Consultant shall be solely responsible for taxes in the nature of ordinary personal property taxes assessed against or payable by Consultant, taxes based upon Consultants net income or personnel, Consultants corporate franchise taxes and the like). Consultant shall not be entitled to participate in health or disability insurance, retirement benefits, or other welfare or pension benefits to which employees of AssetMark may be entitled.
AssetMark Master Consulting Agreement
Effective May 2015
AssetMark Consultant Master Services Agreement
With Statement of Work
Page 5 of 17
5. |
Confidentiality and Intellectual Property. |
(a) Confidential Information . Confidential Information means non-public information about the disclosing Partys, its Affiliates or their agents, advisors, representatives, consultants or vendors (collectively, Representatives) business or activities that is proprietary and/or confidential, which shall include, without limitation, all business, financial, technical and other information of a Party, its Affiliates or their Representatives, whether marked or designated as confidential or by its nature or the circumstances surrounding its disclosure should reasonably be regarded as confidential. Confidential Information includes not only written or other tangible information, but also information transferred orally, visually, electronically or by any other means. Confidential Information also includes (i) any written reports, findings, conclusions, recommendations, or reporting data and analysis prepared by Consultant and provided to AssetMark, an Affiliate or Representative under this Agreement, (ii) the names and contact information of Financial Advisors and Financial Advisory Firms that use the AssetMark Platform and (iii) any personally identifiable or any nonpublic personal information (as defined by Regulation S-P, of the Code of Federal Regulations, Title 17, Chapter II, Part 248, as it may be amended, and by any state privacy law) of current, former and prospective clients, customers and employees of AssetMark or an Affiliate and other protected persons (Personal Information).
Each Party agrees that it shall (i) not disclose to any third party or use any Confidential Information disclosed to it except as expressly permitted in this Agreement, and (ii) take all reasonable measures to maintain the confidentiality of all Confidential Information of a Disclosing Party in its possession or control, which shall not be less than the measures it uses to maintain the confidentiality of its own information of similar type and importance and shall not be less than the standard of care imposed by state and federal laws and regulations relating to the protection of such information.
Confidential Information shall not include information that (i) is in or enters the public domain without breach of this Agreement, (ii) the receiving party lawfully receives from a third party without restriction on disclosure and to the receiving partys knowledge without breach of a nondisclosure obligation, (iii) the receiving party knew prior to receiving such information from the disclosing party, or (iv) the receiving party develops independently.
The receiving Party shall, at any time upon the disclosing Partys written request, return or destroy the Confidential Information. Notwithstanding the foregoing, a receiving Party may keep a copy of the other Partys Confidential Information if advised by counsel in writing that such destruction or return is prohibited by law, for the purpose of defending or maintaining any litigation, including any administrative proceeding, relating to this Agreement. Upon the request of the disclosing Party, the receiving Party shall confirm in writing the return or destruction of the Confidential Information. Any Confidential Information that a receiving party does not believe can reasonably be destroyed or returned (such as oral communications, a firms electronic mail back-up records, back-up server tapes and any similar such automated record-keeping or other retention systems), need not be destroyed, but shall remain subject to the terms of this Agreement. Return or destruction of Confidential Information shall not affect the receiving Partys obligations under this Agreement. The provisions of this paragraph shall not apply to Confidential Information of Consultant contained in the Work Product, Pre-Existing Work, or Services, which AssetMark may retain in perpetuity.
That portion of Confidential Information that is comprised of Personal Information, trade secrets or computer source code shall be subject to these provisions in perpetuity. All other Confidential Information shall be subject to these confidentiality obligations for seven (7) years after the termination or expiration of the SOW applicable to Services prompting the disclosures of the Confidential Information.
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(b) Intellectual Property . AssetMark Intellectual Property shall include, but shall not be limited to, the Work Product produced by the Services pursuant to this Agreement, AssetMarks name, logo and trademarks and service marks, AssetMarks marketing plans and all other materials, software, website design, specifications, and other intellectual property of AssetMark. AssetMark grants Consultant a non-exclusive, non-transferable, terminable at-will, non-sublicensable license to use the AssetMark Intellectual Property solely for AssetMarks benefit in connection with the Services. Upon written notice from AssetMark or on expiration of this Agreement or termination of this Agreement for any reason, the foregoing license shall terminate. Each Party agrees that it shall (i) not use the other Partys Intellectual Property for any purpose but pursuant to this Agreement, and (ii) take all reasonable measures to maintain and protect the other Partys Intellectual Property.
(c) Equitable relief . Each Party acknowledges that money damages would not be a sufficient remedy for any breach of the Confidentiality or Intellectual Property provisions of this Agreement by it, its Affiliates or its Representatives. Accordingly, each Party agrees that in the event it is determined by a court of competent jurisdiction that there has been a breach or threatened breach of the Confidentiality or Intellectual Property provisions, the other Party, in addition to any other remedies at law or in equity that it may have, shall be entitled, without the requirement of posting a bond or other security, to seek equitable relief, including injunctive relief or specific performance or both. A Party shall notify the other Party in writing immediately upon learning of the occurrence or threatened occurrence of any such unauthorized release Confidential Information or Intellectual Property or breach Confidentiality or Intellectual Property provisions of this Agreement. Except for the misappropriation or unauthorized use of a Partys intellectual property, neither Party shall be entitled to any special, consequential, indirect, punitive or exemplary damages, including loss of profits, as a result of any breach of the Confidentiality or Intellectual Property provisions of this Agreement by the other Party, its Affiliates or its Representatives, regardless of whether a claim is asserted under contract, tort or other theory.
6. |
Indemnification. |
Consultant shall defend, indemnify, and hold harmless AssetMark, Assetmark affiliates, and their directors, officers, agents, employees, subsidiaries and successors in interest from and against any claim, action, proceeding, liability, loss, damage, fine, sanction, cost, or expense, including, without limitation, attorneys fees, experts fees and court costs, arising out of (i) Consultants failure to comply with applicable laws and regulations in its performance of the Services; (ii) Consultants gross negligence or willful misconduct; or (iii) any claim by a third party that AssetMarks authorized use of the Services, Work Product, or Pre-Existing Work (collectively, the Indemnified Items) infringes that third partys intellectual property rights (collectively, Claim(s)), including the payment of all amounts that a court or arbitrator awards or that Consultant agrees to in settlement of any Claim(s) as well as any and all reasonable expenses or charges as they are incurred by AssetMark or any other party indemnified under this Section in cooperating in the defense of any Claim(s). AssetMark shall: (i) give Consultant prompt written notice of such Claim; and (ii) allow Consultant to control, and fully cooperate with Consultant in, the defense and all related negotiations. Consultant shall not enter into any stipulated judgment or settlement that purports to bind AssetMark without AssetMarks express written authorization, which shall not be unreasonably withheld or delayed. Notwithstanding the foregoing, Consultant shall have no indemnity obligation for infringement claims arising from (i) use of the Indemnified Items in excess of the rights granted hereunder; (ii) use of the Indemnified Items in combination with software and/or hardware that is not approved or provided by Consultant or contemplated under the relevant SOW; or (iii) AssetMarks failure to implement an update or enhancement to the Indemnified Items, provided Consultant provides the update or enhancement at no charge and provides
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AssetMark with notice that implementing the update or enhancement would avoid the infringement. If an Indemnified Item becomes or is likely to become the subject of an infringement claim, then, in addition to defending the claim and paying any damages and attorneys fees as required above, Consultant shall, at its option and in its sole discretion, either (a) immediately replace or modify the Indemnified Item, without loss of material functionality or performance, to make it non-infringing or (b) immediately procure for AssetMark the right to continue using the Indemnified Item pursuant to this Agreement. Any costs associated with implementing either of the above alternatives will be borne by Consultant. If Consultant fails to provide one of the foregoing remedies within forty-five (45) days of notice of the claim, Consultant shall refund to AssetMark all sums paid by AssetMark for the infringing Indemnified Item, prorated over three years from the date of delivery of the Indemnified Item.
7. |
Warranties. |
Consultant represents and warrants that (i) it has full power, capacity and authority to enter into and perform this Agreement and to make the grants of rights contained in Section 3(c), and Consultants performance of this Agreement does not violate or conflict with any agreement to which Consultant is a party; (ii) the Services will be performed in a professional manner consistent with the level of care, skill, practice and judgment exercised by other professionals in performing Services of a similar nature under similar circumstances by personnel with requisite skills, qualifications and licenses needed to carry out the work; (iii) all Services and Deliverables will materially conform to the Specifications for a period of one (1) year from Acceptance; (iv) to the best of Consultants knowledge, AssetMarks permitted use of the Indemnified Items will not infringe the Intellectual Property Rights of any third party; (v) there is no pending or threatened litigation that would have a material adverse impact on its performance of this Agreement; and (vi) it will use industry best practices to prevent the introduction of any viruses, worms, or other harmful or destructive code into the Services, Deliverables, and AssetMarks systems.
8. |
Limitation of Liability. |
EXCEPT FOR CONSULTANTS INDEMNITY OBLIGATION IN SECTION 6 (INDEMNIFICATION), COMPANYS GROSS NEGLIGENCE OR WILLFUL MISCONDUCT, COMPANYS VIOLATION OF APPLICABLE LAW, OR EITHER PARTYS BREACH OF SECTION 5 (CONFIDENTIALITY AND INTELLECTUAL PROPERTY), (A) NEITHER PARTY WILL BE LIABLE TO THE OTHER PARTY OR TO ANY THIRD PARTY FOR ANY INCIDENTAL, CONSEQUENTIAL, OR PUNITIVE DAMAGES ARISING OUT OF OR RELATED TO THIS AGREEMENT, EVEN IF THE PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF THOSE DAMAGES, AND (B) EACH PARTYS AGGREGATE LIABILITY TO THE OTHER PARTY FOR ALL DAMAGES, LOSSES, AND CAUSES OF ACTION (WHETHER IN CONTRACT, TORT (INCLUDING NEGLIGENCE), OR OTHERWISE) WILL NOT EXCEED THE TOTAL FEES PAID HEREUNDER BY ASSETMARK TO CONSULTANT DURING THE TWELVE MONTHS PRECEDING THE INITIAL EVENT GIVING RISE TO SUCH LIABILITY.
9. |
Dispute Resolution. |
(a) Mediation and Arbitration . Any controversy, dispute, claim or controversy between AssetMark and Consultant arising out of or relating to this Agreement, including but not limited to the breach, termination, enforcement, interpretation or validity of this Agreement and the scope and applicability of this Agreement to arbitration, shall be submitted first to non-binding mediation. If such mediation is not successful within a reasonable period of time, the Parties agree that such dispute, claim or controversy shall be resolved by binding arbitration by three arbitrators in accordance with the CPR Institute for Dispute Resolution Rules for Non-Administered Arbitration, and judgment upon the award rendered by the arbitrators may be entered by any court having jurisdiction thereof.
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Effective May 2015
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Except as may be required by law, neither Party nor an arbitrator may disclose the existence, content, status or results of any arbitration hereunder without the prior written consent of both Parties. The procedures specified in this Agreement shall be the sole and exclusive procedures for the resolution of disputes between the parties arising out of or relating to this Agreement or any Service Agreement hereunder except as otherwise provided below. Despite any action authorized below, the parties will continue to participate in good faith in the procedures specified in this section.
(b) Exceptions . These provisions shall not be construed to prevent a Party from instituting, and a Party is specifically authorized to initiate, (a) formal legal proceedings at any time to obtain or preserve a superior position (or maintain parity) with respect to other creditors, to include the other Party in a third party action in which indemnification may be sought pursuant to this Agreement, or to seek temporary equitable relief to protect a Partys Confidential Information, or (b) arbitration as described above to avoid the expiration of any applicable limitations of actions or other period.
(c) Predispute binding agreement to arbitrate . This Agreement contains a predispute binding agreement to arbitrate all disputes on an individual, non-class basis. All individuals and entities bound by this Agreement agree that this Agreement affects interstate commerce, so that the Federal Arbitration Act and federal arbitration law apply, notwithstanding any choice of law provision in this Agreement or the custody agreement related to an Account. By entering into this Agreement, with its arbitration provision, the Parties to this Agreement agree as follows:
(i) All Parties to this Agreement are giving up the right to sue each other in court, including waiver of the right to a trial by jury or judge, except as provided by the rules of the designated arbitration forum in which a claim is to be filed, and except as set forth below regarding claims tendered to small claims court.
(ii) Arbitration awards are generally final and binding; a Partys ability to have a court review, reverse or modify an arbitration award is very limited.
(iii) The ability of the Parties to obtain documents, witness statements and other discovery is generally more limited in arbitration than in court proceedings.
(iv) An arbitrator does not have to explain the reason(s) for their award in the same manner as a court.
(v) An arbitrator may or may not be currently or formerly affiliated with the securities industry.
(vi) The rules of some arbitration forums may impose time limits for bringing a claim in arbitration. In some cases, a claim that is ineligible for arbitration may be brought in court. The Parties agree that applicable time limits for bringing any claim will be those that apply to the specific federal or state law claims brought by a Party.
(vii) The rules of the arbitration forum in which the claim is filed, and any amendments thereto, shall be incorporated into the Agreement.
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(viii) Any controversy, claim or dispute arising out of, or relating to, this Agreement, including but not limited to any controversy, claim or dispute arising out of or related to the breach, termination, enforcement, interpretation or validity or enforceability of this Agreement and the scope and applicability of this agreement to arbitrate or any aspect thereof, shall be resolved by arbitration before the Judicial Arbitration and Mediation Service (JAMS).
(ix) The arbitration shall be administered by JAMS pursuant to the JAMS Comprehensive Arbitration Rules and Procedures, shall be held before one arbitrator who shall be a retired judicial officer and shall take place in the city of AssetMarks location or such other location designated by AssetMark.
(x) Class Action Waiver. All disputes will be adjudicated only on an individual basis and not in a class or representative action or as a member of a class, mass, consolidated or representative action, irrespective of the forum in which they are heard. Any claim asserted by a Party shall not be joined, for any purpose, with the claim or claims of any other person or entity, unless all Parties specifically agree to joinder of individual actions. If a court or arbitrator determines in an action between the Parties that this waiver is unenforceable, the Parties agreement to arbitrate will be void for purposes of that particular action. The Parties do not consent to class arbitration.
(xi) The arbitration shall be final and binding, and judgment on the award may be entered in any court having jurisdiction. The Parties understand that by agreeing to arbitration, they are waiving all rights to seek remedies in court and waiving any procedural mechanisms that may be available in court. Nothing in this Agreement will be read to eliminate or abridge any substantive legal right (as opposed to a procedural right, mechanism or forum) that the parties may have under federal or state law.
(xii) An arbitrator may award on an individual basis any relief that would be available in a court, including declaratory or injunctive relief and attorneys fees where provided for by statute or law, except that, unless prohibited by applicable law, the Parties agree not to pursue any claim for punitive damages. In addition, for claims where less than $75,000.00 is in dispute, and as to which the Client provided notice and negotiated in good faith prior to initiating arbitration, if the arbitrator finds that the Client is the prevailing party in the arbitration, the Client will be entitled to a recovery of attorneys fees and costs. Except for claims determined to be frivolous, AssetMark agrees not to seek an award of attorneys fees in arbitration of any individual claim where less than $75,000.00 is in dispute, even if an award is otherwise available under applicable law.
(xiii) If a claim qualifies, a Party may choose to pursue its claim by initiating individual proceedings in small claims court. This is an alternative to arbitration for only those cases that qualify under the rules of the small claims court.
(xiv) For claims where less than $75,000 is in dispute, AssetMark will pay all arbitrator fees. For claims where more than $75,000 is in dispute, the payment of filing, administration and arbitrator fees will be governed by the JAMS Comprehensive Arbitration Rules and Procedures.
(xv) Except as may be required by law, neither a Party nor an arbitrator may disclose the existence, content, status or results of any arbitration hereunder without the prior written consent of the other parties in the arbitration.
(xvi) This section and agreement to arbitrate shall survive termination of this Agreement.
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Effective May 2015
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10. |
Miscellaneous Provisions |
(a) No publicity . Consultant agrees that, unless required by law, (i) no press release, acknowledgment or other information concerning the Agreement and the Services provided hereunder shall be made public by Consultant without the prior written agreement of AssetMark, and (ii) Consultant shall not identify AssetMark or its Affiliates as a customer, nor shall Consultant use AssetMarks or an AssetMark Affiliates name, photographs, logo, trademark, or other identifying characteristics without AssetMarks prior written approval.
(b) Notices . Any notice or report to be given to a Party under this Agreement may be delivered in person, by Registered or Certified Mail, Return Receipt Requested, postage prepaid or by nationally recognized courier service to the address listed in the applicable SOW or at such other address that a Party may designate in writing. Notices and reports may also be delivered electronically, provided receipt is confirmed by the receiving Party. Each Party agrees to notify the other immediately in writing of any claims, demands or actions having any bearing on this Agreement. Any notice to AssetMark must also include a notice to General Counsel, AssetMark, 1655 Grant St, 10th Floor, Concord, CA.
(d) Governing Law . This Agreement shall be deemed a contract made under the laws of the State of California and the rights and obligations of the Parties hereto shall be governed by and construed in accordance with such laws, without regard to conflicts of law principles thereof.
(c) No Waiver . The failure of either Party at any time to require performance by the other Party of any provision hereof shall not be taken or held as a waiver of the provision itself.
(e) No Assignment . Consultant may not assign, transfer, delegate, or subcontract its rights or obligations under this Agreement without the prior written consent of AssetMark. In the event AssetMark consents to Consultants use of a subcontractor, Consultant will ensure the subcontractor complies with all relevant terms of this Agreement. Any breach by the subcontractor will constitute a breach by Consultant. No contract between Consultant and a subcontractor will purport to bind AssetMark.
(f) Entire Agreement . This MSA and the related SOW represent the entire agreement between the Parties with respect to the subject hereof and shall supersede any prior agreements or understandings, whether written or oral, between the Parties with respect to such subject matter.
(g) Amendment . This Agreement, including any change in the Services or provisions of the SOW, may be amended only by a written agreement, consented to by the Parties.
(h) Severability . If any provision of this Agreement is held to be invalid or unenforceable, such invalidity or unenforceability shall not invalidate this Agreement as a whole, but this Agreement shall be construed as though it did not contain the particular provision or provisions held to be invalid or unenforceable.
(k) Survival. All provisions of this Agreement which, by their nature, are intended to survive the expiration or termination of this Agreement, shall survive and remain in full force and effect. In particular, the following Sections shall survive any termination or expiration of this Agreement: 3(c) and 5 though 10.
(i) Headings . The headings contained in this Agreement are for convenience only and shall not affect the interpretation of the Agreement.
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(j) Counterparts. This Agreement may be executed in counterparts each of which, when so executed, shall be deemed to be an original. Such counterparts together shall constitute one agreement. Signatures may be exchanged via facsimile or electronic mail and such signatures shall be binding to the same extent as if original signatures were exchanged.
(Signatures are on Next Page)
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Effective May 2015
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Agreed and accepted:
This Master Services Agreement is effective as of April 18, 2017, (Effective Date or MSA Effective Date) and is between the AssetMark Affiliate identified below (AssetMark) and the individual or entity below (Consultant).
By Consultant (Incedo Inc.) | ||
By: |
/s/ Rena Nigam |
Name and title of person signing: Rena Nigam, President Global Solutions & Services
Name and address of Consultant and whether Consultant is an individual or entity and, if entity, the type and state, e.g., California corporation: Entity incorporated in Delaware with headquarters at 2350 Mission College Blvd, Suite# 246, Santa Clara, CA 95054
By AssetMark: | ||
By: |
/s/ Mukesh Mehta |
Name and title of person signing: Mukesh Mehta, CIO |
Check one:
☑ AssetMark, Inc.
1655 Grant St, 10th Floor,
Concord, CA 94520
☐ AssetMark Trust Company
3200 N Central Ave, seventh floor
Phoenix, AZ 85012-2426
AssetMark Master Consulting Agreement
Effective May 2015
Exhibit 10.7
The redacted information has been excluded because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed.
MASTER SERVICES AGREEMENT
THIS MASTER SERVICES AGREEMENT (Agreement) is by and between Incedo, Inc. dba IB Technology Solutions Inc., a Delaware Corporation (Supplier), with offices at 2350 Mission College Blvd, Suite# 246, Santa Clara, CA 95054, and AssetMark, Inc., a California corporation (Company) with offices at 1655 Grant Street, 10 th Floor, Concord, CA 94520. This Agreement shall become effective on the date on which the last party to sign this Agreement affixes its signature here to (the Effective Date).
1. Master Agreement; Statements of Work .
(a) Agreement Structure . This is a Master Services Agreement containing terms and conditions to be applicable to one or more written Statements of Work (SOWs), which shall be numbered consecutively and may be in the form attached hereto as Exhibit A, or in such other form as may be agreed upon by the parties. A SOW shall specify services and any deliverables to be provided by Supplier (such services and deliverables together, Services), applicable fees, term for which Services shall be provided, specifications, service levels, and project timelines, as well as any requirements which are in addition to the general provisions of this Agreement, such as specific project milestones, acceptance criteria and/or other quality and warranty considerations. If any service, function or responsibility not specifically described in this Agreement and not expressly identified as a retained Company responsibility is required for the proper performance, provision, delivery or receipt of the Services, each shall be deemed to be implied by and included within the scope of the Services to the same extent and in the same manner as if it was specifically described in this Agreement. No SOW shall be effective unless signed by the parties. Any change in the Services or other provisions of the SOW may be made only by a written amendment signed by the parties. Except as otherwise expressly provided herein or in a SOW, Supplier shall supply all personnel, equipment, assets and facilities necessary to perform the Services. Where Supplier personnel operate from Company premises under an SOW, Company shall provide such resources, facilities and access as identified in the SOW or separately agreed by the parties in writing.
(b) Parties to SOWs . Services purchased under this Agreement may be used by Company on behalf of itself and for the benefit of all its Affiliates. Affiliate means a legal entity (i) controlled by a party or (ii) controlling or under direct or indirect common control with a party. For purposes of this definition, control means (x) the ownership, directly or indirectly, of more than fifty percent (50%) of the voting securities or other equity interests of an entity (or if outside the United States and a foreign investor is not permitted to own more than fifty percent (50%), the maximum percent ownership allowed for a foreign investor), or (y) the possession, directly or indirectly, of the power to direct or cause the direction of the management and polices of an entity, whether through the ownership of voting securities, by contract, or otherwise. Any Company Affiliate may purchase Services directly by executing its own SOW. In such case, the Company Affiliate that signs the SOW shall be solely responsible for payment with respect to such Services and performance of the Agreement in connection with the SOW (i.e., each SOW shall be deemed, upon its execution, to incorporate the terms and conditions of this Agreement and shall constitute a separate, distinct and independent contract between Supplier and the signing Affiliate), and shall be entitled to all rights and responsible for all obligations of Company under this Agreement, with respect to the particular Services purchased by such Company Affiliate.
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(c) Relationship of Agreement and SOWs . Each SOW shall be incorporated into and subject to the terms of this Agreement. A SOW may contain terms and conditions in addition to those in this Agreement. However, if a SOW contains terms or conditions that directly conflict with the body of this Agreement, the provisions in the body of this Agreement shall control, unless the SOW expressly provides that such conflicting term or condition supersedes this Agreement. Such additional or different terms or conditions shall be applicable only to the SOW in which they are contained.
(d) No Minimum/No Exclusivity . Nothing contained in this Agreement alone shall constitute a commitment by Company to purchase Services. Such a commitment shall arise only from an SOW signed by the parties. This Agreement is nonexclusive, and Company may contract with other entities to perform services related to or within the terms of any SOW.
(e) FOR USE IF ACCEPTANCE OF PRODUCT IS NEEDED: Acceptance . When Supplier has completed a Service, it shall notify Company in writing that the Service is ready for acceptance testing. Company shall have thirty (30) days (or such other period as may be expressly set forth in a SOW) from receipt of the notice to test the Service to determine whether it complies in all material respects with the requirements of this Agreement, any applicable SOW, service levels, and, solely to the extent not inconsistent with the foregoing, any documentation furnished by Supplier (collectively, the Specifications ). Upon completion of Companys review and testing, Company shall notify Supplier whether it has accepted such Service ( Accept ), or whether it has identified discrepancies with the Specifications ( Reject ). If Company Rejects a Service, Company shall provide a written list of items that must be corrected. On receipt of Companys notice, Supplier shall promptly commence, at no additional charge to Company, all reasonable efforts to complete, as quickly as possible, such necessary corrections, repairs and modifications to the Services as will permit them to be ready for retesting, but in no event shall such corrective measures exceed twenty (20) days (or such other time as the parties may agree upon in writing) from receipt of Companys notice. The testing and evaluation process shall resume, as set forth above, with Company having an additional thirty (30) day testing period. If Company determines that the Services, as revised, still do not comply in all material respects with the Specifications, Company may either (1) afford Supplier the opportunity to repeat the correction and modification process as set forth above at no additional cost or charge to Company, or (2) depending on the nature and extent of the failure in Companys sole judgment, terminate the relevant SOW(s). The foregoing procedure shall be repeated until the Services pass the applicable Specifications, or Company elects to terminate the SOW(s) as provided above. If Company terminates a SOW as provided above, Supplier shall pay to Company, within ten (10) business days of written notice of termination, all sums paid to Supplier by Company under this Agreement for the Services as to which the termination applies.
2. Term and Termination .
(a) Term of Agreement . This Agreement shall remain in effect for a term of three (3) years from the Effective Date with automatic renewals for successive one (1) year terms, unless Company provides Supplier with written notice of non-renewal at least sixty (60) days prior to the end of the then-current term.
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(b) Term of SOWs . Each SOW shall commence as of the Commencement Date as defined in such SOW and shall continue for the term and renewal periods (if any) set forth in such SOW.
(c) Termination of SOWs . Either party to a SOW may terminate such SOW for cause upon not less than thirty (30) days prior written notice to the other upon the occurrence of any of the following: (i) the other partys material breach of any provision of the SOW or this Agreement as it applies to such SOW provided that such breach has not been cured to the non-breaching partys satisfaction within thirty (30) days after such notice; or (ii) if the non-terminating party shall be or become insolvent, shall call any meeting of creditors or have appointed a receiver or trustee over itself or its assets, or if any petition, proceeding or other action under any bankruptcy laws shall be filed by or instituted against the non-terminating party. Company may terminate any and all SOWs for its convenience, without termination fee or penalty, upon not less than thirty (30) days prior written notice to Supplier.
(d) Termination of the Agreement . Only Company (and not any Company Affiliate) or Supplier shall have the right to terminate the Agreement for cause upon not less than thirty (30) days prior written notice to the other upon the occurrence of any of the following: (i) the other partys material breach of any provision of this Agreement independent of any SOW provided that such breach has not been cured to the non-breaching partys satisfaction within thirty (30) days after such notice; or (ii) if the non-terminating party shall be or become insolvent, shall call any meeting of creditors or have appointed a receiver or trustee over itself or its assets, or if any petition, proceeding or other action under any bankruptcy laws shall be filed by or instituted against the non-terminating party. Company (and not any Company Affiliate) may terminate the Agreement, any SOW, or any Service for its convenience, without termination fee or penalty, upon not less than thirty (30) days prior written notice to Supplier.
(e) Duties Upon Termination or Expiration . Upon termination or expiration of any SOW, Supplier shall send Company its final invoice for such SOW and Company shall pay Supplier for Services performed in accordance with such SOW and this Agreement prior to termination or expiration. Upon termination of any SOW, Supplier shall refund Company any pre-payments made by Company on account of Services which were intended to be performed beyond the termination date. Upon termination or expiration of any SOW, as relates to such expired or terminated SOW, Supplier shall, at no additional cost, (i) deliver all completed work and work in progress to Company or its designee, (ii) provide Company or its designee a written report on the status of the Services in a form and level of detail reasonably satisfactory to Company, (iii) make Suppliers personnel reasonably available to meet with Company or its designee, (iv) provide such further information as Company or its designee may reasonably request, and (v) cooperate with and assist Company to wind-down the Services and transfer the Services to Company or its designee. Upon Companys written request, Supplier also shall continue to perform the Services at the then-current rates set forth in the SOW for a period not to exceed one (1) year and the SOW and this Agreement shall continue in effect throughout such period.
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(f) Effect of Termination . Termination of any one or more SOWs shall not constitute a termination of this Agreement or any remaining SOWs not so terminated. If this Agreement is terminated or expires prior to the termination or expiration of the then-current term of any SOWs and such SOWs are not also expressly terminated or have not expired, then such SOWs shall continue for the then-current term and this Agreement shall continue in effect with respect to such SOWs until the termination or expiration of the then-current term of such SOWs. Termination of this Agreement or any SOW shall not limit either party from pursuing any other remedies available to it pursuant to this Agreement.
3. Services .
(a) Obligation to Provide Services . Supplier shall provide the Services described in each SOW.
(b) Use of Licensed Materials . If Supplier is to use any software or other material licensed to Company or any Company Affiliate by a third party, such use must be permitted by and shall be subject to any restrictions in the applicable license. Supplier may be required to execute a confidentiality agreement, sublicense or other appropriate agreement with Company, Company Affiliate and/or such third party prior to such use.
(c) Business Continuity . Supplier shall maintain a Business Continuity and Disaster Recovery Plan for the Services (the Plan ), and implement such plan in the event of any unplanned interruption of the Services. On or before the Effective Date, Supplier shall provide Company with a copy of Suppliers current Plan, revision history, and any reports or summaries relating to past testing of the Plan. Supplier shall actively test, review, and update the Plan on at least an annual basis using American Institute of Certified Public Accountants standards and other industry best practices as guidance. Supplier shall promptly provide Company with copies of all such updates to the Plan. All updates shall be subject to the requirements of this Section. In any event, any future updates or revisions to the Plan shall be no less protective than the plan in effect as of the Effective Date. Supplier shall notify Company of the completion of any audit (e.g., ISO 9000) of the Plan and promptly provide Company with a copy of the audit report and reasonable evidence that any identified deficiencies have been corrected. Supplier shall also promptly provide Company with copies of all reports and/or summaries resulting from any testing of the Plan. If Supplier fails to reinstate the Services within the periods of time set forth in the Plan, Company may in addition to any other remedies available hereunder, in its sole discretion, immediately terminate this Agreement as a non-curable breach. Supplier shall maintain disaster avoidance procedures designed to safeguard Companys data and the data processing capability, and availability of the Services, throughout the Term. Additional disaster recovery/business continuity requirements may be set forth in the individual SOWs. Supplier shall immediately notify Company of any disaster or other event in which the Plan is activated. Without limiting Suppliers obligations under this Agreement, whenever a disaster causes Supplier to allocate limited resources between or among Suppliers customers, Company shall receive at least the same treatment as comparable Supplier customers with respect to such limited resources. The provisions of Section 13 (d) (Force Majeure) shall not limit Suppliers obligations under this section.
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(d) Services Not to Be Withheld . Supplier shall not voluntarily refuse to provide all or any portion of the Services except Supplier may refuse Services upon Companys failure to pay undisputed amounts due after notice and an opportunity to cure as applicable to material breaches. If Supplier breaches or threatens to breach this Section, Supplier agrees that Company shall be irreparably harmed and shall be entitled to apply to a court of competent jurisdiction for and be granted an injunction compelling specific performance by Supplier without the necessity of posting any bond notwithstanding anything else to the contrary in this Agreement.
(e) Quality Assurance . Company shall have the right to conduct audits, to monitor and to perform or witness inspections or tests of the Services furnished hereunder or to otherwise determine Suppliers compliance with the SOW and the Agreement, at Suppliers facility or at such other location where the Services are being developed or provided, at no charge to Company.
(f) Compliance Audit . During the Term, to the extent Supplier engages a third party auditor to perform a SSAE 16 audit or successor audit of Suppliers operations, information security program, and/or disaster recovery/business continuity plan, Supplier shall promptly furnish a copy of the audit report to Company. Any such audit reports shall be deemed Supplier Confidential Information. In the event an audit under this Section identifies any adverse findings, Supplier shall promptly mitigate such findings and provide written documentation to Company of such mitigation. If Supplier fails to mitigate all findings within a reasonable period of time, which shall not exceed thirty (30) days without Companys prior written authorization, Company may terminate this Agreement without further obligation, including payment of any termination or similar fee or penalty.
4. Representations and Warranties .
(a) Services . Supplier represents and warrants that its Services hereunder shall be provided by qualified individuals in a professional and workmanlike manner conforming to the highest industry standards and practices, and in strict accordance with all applicable law, regulations, codes and standards of government agencies, authorities or self regulatory organizations having jurisdiction, and shall conform to any additional warranties, specifications, service levels and time frames in the SOW.
(b) No Claims/No Infringement . Supplier represents and warrants that no claim (whether or not embodied in an action, past or present) that the Services infringe on any patent, copyright, trademark or service mark, or misappropriate any trade secret or other proprietary right, has been threatened or asserted, and no such claim is pending against Supplier or against any entity from which Supplier obtained such rights. Supplier represents and warrants that Companys use of the Services as contemplated in the SOW and this Agreement shall not infringe on any patent, copyright, trademark, or service mark or misappropriate any trade secret or infringe any proprietary or intellectual property right of any party, including without limitation Supplier, any employee or contractor of Supplier or any third party.
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(c) Compliance with Laws. Supplier further represents and warrants it shall, in connection with its performance hereunder, comply with all applicable laws, ordinances, rules, regulations, building codes, electrical codes, business licenses, visas, work permits, court orders, and governmental or regulatory agency orders (collectively, Laws ), including, without limitation, Laws relating to non-discrimination, human rights, child labor, and other employment and labor Laws and applicable foreign export Laws, and Laws pertaining to health, safety, the environment, and hazardous materials.
(d) Offshore Transmission of PI . Except for jurisdictions expressly identified in an SOW, Supplier represents and warrants it shall not transmit or make available any PI to any entity or individual outside the continental United States. Supplier represents and warrants that all Supplier systems used in providing the Services that access Company systems and the data therein in permitted jurisdictions outside the United States shall be configured as follows: (i) all print screen and screen capture functionality shall be disabled; (ii) no Company data will be cached on Supplier systems or transferred to any form of local storage media; (iii) the Supplier systems shall not be capable of printing any Company data or other Confidential Information; (iv) all USB, Firewire, and other similar ports shall be disabled; and (v) all wireless services (e.g., WiFi, Bluetooth®, etc.) shall be disabled. In addition, Supplier shall not permit any recording devices (e.g., cameras, smartphones, audio records, video recorders, etc.) of any kind in the areas of Suppliers facilities where the systems are located that access and display Company data.
(e) No Hidden Costs . Supplier represents and warrants that (i) any licenses or agreements from or with any third party that must be obtained by Company for the Company to use the Services as provided in this Agreement are expressly set forth in the applicable SOW and (ii) there are no additional, undisclosed license fees or expenses payable to third parties required to be paid by Company for the Company to use the Services as provided in this Agreement.
(f) Malware and Disabling Code .
(i) Malware means computer software, code or instructions that (A) adversely affect the operation, security or integrity of a computing, telecommunications or other digital operating or processing system or environment, including without limitation, other programs, data, databases, computer libraries and computer and communications equipment, by altering, destroying, disrupting or inhibiting such operation, security or integrity; (B) without functional purpose, self-replicate without manual intervention; (C) purport to perform a useful function but which actually perform either a destructive or harmful function, or perform no useful function and utilize substantial computer, telecommunications or memory resources; or (D) without authorization collect and/or transmit to third parties any information or data, including without limitation such software, code or instructions commonly known as viruses, Trojans, logic bombs, worms, adware and spyware.
(ii) Disabling Code means any code which could have the effect of permitting improper use, access, deletion or modification of, or, unless Company agrees otherwise in writing, disabling, deactivating, damaging or shutting down one or more software programs or systems and/or hardware or hardware systems, including without limitation, time bombs, protect codes, data destruction keys, trap doors and similar code or devices.
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(iii) Throughout the term of any SOW, Supplier shall take commercially reasonable measures consistent with the highest industry standards to prevent the coding or introduction of any Malware or Disabling Code into the Services and any Company or Company Affiliate system interfacing with the Services, including without limitation the information, data and other materials delivered by or on behalf of Supplier to the Company, any Company Affiliate or their customers or third party suppliers, or the introduction of any Malware into operating environments and processes used by Supplier to provide the Services. Supplier shall continue to review, analyze and implement improvements to and upgrades of its Malware prevention and correction programs and processes that are reasonable and consistent with the highest industry standards. If Malware or Disabling Code is found to have been introduced into the Services, any Company or Company Affiliate system interfacing with the Services, or the information, data and other materials delivered by or on behalf of Supplier to the Company, any Company Affiliate or their customers or third party suppliers, or if any Malware is found to have been introduced into the operating environments and processes used by Supplier to provide the Services, Supplier shall promptly notify the Company (and any affected Company Affiliate) and Supplier shall take immediate and continuing action to eliminate the Malware or Disabling Code and remediate its effects at Suppliers expense; provided , however , Supplier shall not take any such action with respect to the systems of Companys or Company Affiliates customers and third party suppliers except at Companys request. Notwithstanding the foregoing, if such Malware or Disabling Code was introduced by or through the Company or a Company Affiliate and Supplier has complied with its obligations set forth in this Section, Company shall be responsible for the reasonable costs incurred by Supplier to eliminate and remediate the effects of such Malware or Disabling Code. At Companys request, Supplier shall report to Company the nature and status of all Malware and Disabling Code elimination and remediation efforts.
(g) Open Source Software . Supplier represents and warrants that unless Company agrees otherwise in writing, the Services including without limitation any software included in the Services or otherwise provided by Supplier hereunder shall not contain any open source software, shareware, freeware or other similar software, and except for the license and other terms expressly set forth in this Agreement, the software provided by Supplier is not subject to any other express or implied terms, conditions or restrictions, including, but not limited to, additional license terms.
(h) Export Control . Supplier represents and warrants that any technology (including without limitation any hardware or software) provided by Supplier or its designee to Company or a Company Affiliate as part of the Services (i) is not designated for control under the U.S. Munitions List of the International Traffic in Arms Regulations of the Department of State and (ii) does not fall within an Export Control Classification Number under the Commerce Control List requiring an export license under the U.S. Export Administration Regulations of the Bureau of Industry and Security of the Department of Commerce.
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(i) Exclusive Warranties . THE FOREGOING WARRANTIES ARE EXCLUSIVE AND IN LIEU OF ALL OTHER WARRANTIES, WHETHER EXPRESS OR IMPLIED, REGARDING THE QUALITY OR PERFORMANCE LEVEL OF SERVICES, INCLUDING WITHOUT LIMITATION THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
5. Personnel .
(a) Project Management . Each party shall designate in each SOW a project manager who shall be such partys primary point of contact regarding the Services. Each party may designate a new project manager upon reasonable written notice to the other party.
(b) Supplier Personnel . In the event that, as a result of the actions, inaction, or replacement of Supplier project staff, additional or accelerated work is required to perform this Agreement, Supplier shall perform all such work at no additional charge to Company. In addition, Supplier represents and warrants that it will, to the maximum extent possible, take all necessary steps to assure continuity over time of the membership of the group constituting Suppliers project staff. Supplier shall promptly fill any staff vacancy with personnel having qualifications at least equivalent to those of the project staff member(s) being replaced. In the event Supplier replaces any personnel, all transition tasks, including, but not limited to training, knowledge transfer, and other time involved with the replacement personnel becoming familiar with Company and the Services, shall be at no additional cost to Company. Additionally, in order to ensure a smooth transition between re-placement and former Supplier personnel, Supplier shall make the replacement Supplier Personnel available to shadow the personnel to be replaced for a period of not less than ten (10) Business Days. During such shadow period, Company shall only be responsible for the Charges associated with the personnel to be replaced.
(c) Immigration Status of Vendor Personnel . Supplier is solely responsible for ensuring compliance with all laws and regulations, foreign and domestic, with regard to the immigration and visa status of its personnel, including personnel engaged to perform Services at Company facilities in the United States. Supplier may request Company assistance, however Company shall have no obligation to provide any such assistance with regard to securing visas or other immigration documentation for Suppliers personnel. In the event Company agrees to provide the Supplier-requested assistance, additional liability, including further indemnity, will be required of Supplier.
(d) Removal of Supplier Personnel . Upon written notice to Supplier, Company may require that Supplier promptly remove any Supplier employee or agent who is not providing Services in accordance with the Agreement or the SOW. In such event, Supplier shall promptly provide qualified replacement personnel and shall pay the costs attributable to familiarizing such personnel with the Services.
(e) Compliance with Company Policies by Supplier Personnel . Supplier, its employees and agents shall comply with Companys guidelines and policies applicable to providers of goods and/or services to Company, including without limitation Companys Code of Ethics applicable to such providers. Supplier, its employees and agents also shall comply with Companys safety and security policies applicable to providers. These policies may include, without limitation, the requirement that Company screen Supplier, its employees and agents against government-restricted lists and/or that Supplier provide at its expense criminal background checks and/or drug screenings of its employees and agents.
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(f) Notice of Labor Disputes . Supplier shall promptly notify Company of any and all pending labor complaints, disputes or controversies involving any of Suppliers employees, permitted subcontractors or agents providing Services pursuant to this Agreement and shall regularly report to Company the progress and status thereof. Supplier shall use all reasonable efforts to resolve any such complaint, dispute or controversy.
(g) Drug Abuse Policies . If, (A) at any time during the assignment the Company believes in good faith that an employee or agent of Supplier is intoxicated or under the influence of an illegal substance, or (B) as a consequence of an accident caused by or involving the Suppliers employee or agent on Companys premises during the performance of this Agreement, Company or Supplier reasonably deems it likely to have been related to the employees or agents use of an illegal substance, Supplier shall remove such employee or agent from Companys assignment and, at Suppliers expense, have each such person submit to a standard sevenpanel drug test. If, for any such person, the drug test reveals positive indications of drug use, then such person may be re-assigned to perform Services only after Supplier obtains Companys written approval for such assignment, which approval may be withheld for any lawful reason. Supplier shall pay the cost of familiarizing any replacement with the Services.
(h) Criminal Background Checks . Prior to assignment of any Supplier personnel to perform Services under this Agreement and at Companys request (which shall be no more frequently than annually) thereafter, Supplier shall at its expense for each such person obtain a criminal background check consisting at a minimum of a review of state and federal convictions for felonies or misdemeanors for the counties of residence of such person during the prior seven (7) years. If, for any such person, the criminal background check reveals a conviction, then such person may be assigned to perform Services only after Supplier obtains Companys written approval for such assignment, which approval may be withheld for any lawful reason. Supplier shall and Company may (and Supplier will advise any of its employees or agents who provide Services under this Agreement on premises of such parties right to) require a subsequent criminal background check, in addition to the ongoing annual checks referenced above, if either party has a reasonable basis to believe a change in such persons criminal history has occurred. Any subsequent criminal history checks shall be performed by Supplier at Suppliers expense.
(i) Fingerprinting Requirements . To the extent applicable federal, state, county or local laws, ordinances, statutes, rules, regulations or license or permit requirements applicable to the Services change, Supplier will adjust its policies and procedures consistent therewith. Supplier acknowledges that it is aware of the fingerprinting requirements in Rule 17f-2 under the Securities Exchange Act of 1934, (the Rule) and will be responsible for submitting the required fingerprints and accompanying information required by the Rule of its employees covered by the Rule to the Companys Operations Leader as defined by the applicable SOW or as Company may subsequently direct in writing. Supplier acknowledges that it will maintain records of those employees covered by the Rule pursuant to the Rule and that it will provide these documents to Company as Company may reasonably request.
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(j) Denied Persons List . All Supplier personnel performing the Services, regardless of their location, shall be validated by Supplier upon assignment, to have not been on any list published and maintained by the government of the United States of America of persons or entities with whom any U.S. person or entity is prohibited from conducting business. Presently, the lists of such persons or entities include without limitation the following web sites: (a) Denied Persons List on the Bureau of Industry and Security (currently available at http://www.bis.doc.gov/dpl/default.shtm ) or (b) the Specially Designated Nationals and Blocked Persons List of the Office of Foreign Assets Control, Department of Treasury (currently available at http://www.treasury.gov/resource-center/sanctions/SDN-List/Pages/default.aspx ). In the event of either party becoming aware of any Supplier personnel involved in providing Services being included in the list of prohibited persons or entities, Supplier shall promptly remove such personnel from the provision of Services under this Agreement. Supplier shall conduct a quarterly review of the lists mentioned above and shall provide to Company results of such reviews. Supplier shall report to Company immediately if the name of any of Suppliers personnel is placed on any list published by the government of the United States of America of persons or entities with whom any US person or entity is prohibited from conducting business and shall immediately, at Suppliers sole expense, remove such person(s) from performing any Services and as soon as possible and replace such person(s) with qualified person(s) whose names do not appear on such lists.
(k) Communication Systems and Access to Information . During the Term, Supplier may receive access to Company Systems. Such Systems are intended for legitimate business use related to Companys business. Supplier acknowledges that Supplier does not have any expectation of privacy as between Supplier and Company in the use of or access to Companys Systems and that all communications made with such Systems or equipment by or on behalf of Supplier are subject to Companys scrutiny, use and disclosure, in Companys discretion. Company reserves the right, for business purposes, to monitor, review, audit, intercept, access, archive and/or disclose materials sent over, received by or from, or stored in any of its electronic Systems. This includes, without limitation, email communications sent by users across the internet and intranet from and to any domain name owned or operated by Company. This also includes, without limitation, any electronic communication system that has been used to access any of Companys Systems. Supplier further agrees that Supplier will use all appropriate security, such as, for example, encryption and passwords (Supplier must provide passwords and keys to Company), to protect Companys Confidential Information from unauthorized disclosure (internally or externally) and that the use of such security does not give rise to any privacy rights in the communication as between Supplier and Company. Company reserves the right to override any security passwords to obtain access to voicemail, email, computer (and software or other applications) and/or computer disks on Companys Systems. Supplier also acknowledges that Company reserves the right, for any business purposes, to search all work areas (e.g., offices, cubicles, desks, drawers, cabinets, computers, computer disks and files) and all personal items brought onto Company property or used to access Company Systems.
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6. Nondisclosure; Security .
(a) Confidential Information . Each party may have access to information from the other party or its Affiliates that would reasonably be considered proprietary or confidential, including but not limited to the other partys or its Affiliates financial information, technical information, business plans, policies, or products (Confidential Information or CI). Companys CI shall include any written reports, findings, conclusions, recommendations, or reporting data and analysis prepared by Supplier and provided to Company under this Agreement. Supplier also may have access to personally identifiable information of current, former and prospective customers and employees of Company or Company Affiliates (Personal Information or PI). Without limiting the foregoing, PI includes (i) non-public personally identifiable information of individuals who seek to obtain, obtain or have obtained insurance or other financial products or services from Company or its Affiliates which products and services are used or intended to be used for personal, family or household purposes, and (ii) Protected Health Information as defined in 45 Code of Federal Regulations Section 164.501, as amended from time to time. For the avoidance of doubt, all PI shall be deemed Company CI.
(b) Exclusions . A partys CI shall not include information that (i) is or becomes a part of the public domain through no act or omission of the other party in violation of this Agreement; (ii) was in the other partys lawful possession prior to the disclosure and had not been obtained under an obligation of confidentiality by the other party either directly or indirectly from the disclosing party; (iii) is lawfully disclosed to the other party by a third party not known by the receiving party to be bound by a duty of non-disclosure; or (iv) is independently developed by the other party without use of the CI. One party may disclose the other partys CI or PI without violation hereof to the extent such disclosure is required by applicable law, regulation or governmental or judicial order; provided, that the party making such disclosure has given the other party advance written notice of the intended disclosure and a reasonable opportunity to seek a protective order or other confidential treatment of the CI or PI, each to the extent permitted by law; provided, further, that the disclosure is limited to that required by such applicable law, regulation or governmental or judicial order.
(c) Use and Nondisclosure . The parties agree to hold each others CI in confidence, and Supplier agrees to hold PI in confidence. Each party agrees to use the others CI, and in Suppliers case, PI, in accordance with all applicable laws. Each party agrees not to use the others CI, and Supplier agrees not to use PI, for any purpose other than the implementation of this Agreement and not to make each others CI or, in the case of Supplier, PI, available in any form to any third party, except that CI or PI may be disclosed to the parties Affiliates, attorneys, accountants, agents, contractors and consultants on a need-to-know basis under obligations of confidentiality and limited use at least as restrictive as those contained herein. Supplier agrees not to transmit Companys CI or PI to any country other than the country of origin for such Information without Companys prior written consent. Each party agrees to use the same degree of care that it uses to protect its own confidential information of a similar nature and value, but in no event less than the standard of care imposed by applicable laws and regulations relating to the protection of such information and, in the absence of any legally imposed standard of care, a reasonable standard of care, to ensure that the other partys CI and, in the case of Supplier, PI, is not disclosed or
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distributed by its employees, Affiliates, attorneys, accountants, agents, contractors, consultants or agents in violation of this Agreement. Such care shall include, but not be limited to, Suppliers maintenance of appropriate administrative, technical, procedural and physical safeguards to: (i) ensure the security, integrity and confidentiality of Companys CI and PI, (ii) protect against any anticipated threats or hazards to the confidentiality, security or integrity of Companys CI and PI, and (iii) protect against unauthorized access to or use of Companys CI and PI. Company shall have the right to inspect Suppliers practices regarding Companys CI and PI upon reasonable advance notice. Each party shall be responsible for any breaches of this nondisclosure Section by any of its employees, Affiliates, attorneys, accountants, agents, contractors or consultants.
(d) Security Breaches . Supplier shall promptly report to Company any unauthorized access to or disclosure or use of Companys CI or PI by Supplier or its agents (each, a Security Breach). Supplier shall provide Company with a detailed description of the Security Breach, the type of data that was the subject of the Security Breach, the name and any other identifying information of each affected individual (if applicable) that is in Suppliers possession, and any other information Company may request concerning the Security Breach as soon as such information can be obtained. Supplier agrees to take action immediately, at its own expense, to (i) investigate the Security Breach, including without limitation its causes and effects, (ii) identify, prevent and mitigate the effects of any such Security Breach, (iii) carry out any recovery or other action necessary to remedy the Security Breach and prevent a recurrence, and (iv) notify Company of the progress and results of the foregoing. At Companys option, such action shall include without limitation: (A) Suppliers mailing of notices regarding the Security Breach to affected individuals (if applicable), the content of which shall be subject to Companys prior written approval; and/or (B) Suppliers provision of credit monitoring or other similar service to affected individuals (if applicable) offered by a reputable provider, for a reasonable duration but not less than twelve months, and including identity theft protection in a reasonable amount but not less than twenty thousand dollars ($20,000) per affected individual. Alternatively, Company may undertake either or both of the foregoing actions at Suppliers expense. None of the foregoing actions shall limit any other remedies available to Company pursuant to this Agreement. Supplier shall not issue any press release or make any other public filing, report or communication regarding the Security Breach without Companys prior written approval unless otherwise required by applicable law, regulation or governmental or judicial order; provided, that in such case Supplier has given Company advance written notice of the intended disclosure and a reasonable opportunity to seek a protective order or other confidential treatment of the information, each to the extent permitted by law; provided, further, that the disclosure is limited to that required by such applicable law, regulation or governmental or judicial order.
(e) Length of Obligation and Return of Information . The receiving party shall at any time upon the disclosing partys written request either return or destroy, at the receiving partys option, the disclosing partys CI and/or, in the case of Company as the disclosing party, PI. Notwithstanding the foregoing, either party may keep a copy of the other partys CI solely for maintaining reasonably appropriate business records or as may be required by law. A partys CI, other than those portions of CI described below, shall be subject to these confidentiality obligations for five (5) years after the termination or expiration of the last SOW to which such CI pertains. Those portions of CI that are comprised of trade secrets shall be subject to these provisions for so long as they remain protected as trade secrets under applicable law. PI shall be subject to these provisions in perpetuity.
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(f) Publicity . Supplier and its agents agree that, unless required by law, (i) no press release, acknowledgment or other information concerning the Agreement and the Services provided hereunder shall be made public by the Supplier without the prior written agreement of Company, and (ii) Supplier or its agents shall not identify Company or any Company Affiliate as a customer nor shall Supplier or its agents use Companys or a Company Affiliates name, photographs, logo, trademark, or other identifying characteristics without Companys prior written approval.
(g) Security Requirements . Supplier will maintain and enforce safety and physical security procedures with respect to its access, use, and possession of Companys Confidential Information, including Personal Information, that are (a) compliant with the requirements of Exhibits B and C and, to the extent not inconsistent, at least equal to industry standards for such types of locations, and (b) which provide reasonably appropriate technical and organizational safeguards against accidental or unlawful destruction, loss, alteration or unauthorized disclosure or access of such information. In the event of any conflict between Exhibit B and the Agreement, the terms of Exhibit B will prevail. Without limiting the generality of the foregoing, Supplier will take all reasonable measures to secure and defend its location and equipment against hackers and others who may seek, without authorization, to modify or access Supplier systems or the information found therein. Supplier will periodically test its systems for potential areas where security could be breached. Supplier will immediately report to Company any breaches of security or unauthorized access to Companys Confidential Information, including Personal Information, that Supplier detects or becomes aware of, in accordance with Section 6(d).
(h) Unauthorized Access . In the course of furnishing the Services, Supplier shall not access, and shall not permit its personnel or entities within its control to access, Companys Systems without Companys express written authorization. Such written authorization may subsequently be revoked by Company at any time in its sole discretion. Further, any access shall be consistent with, and in no case exceed the scope of, any such authorization given by Company. All Company authorized connectivity or attempted connectivity to Companys Systems shall be only through Companys security gateways and/or firewalls, and in conformity with applicable Company security policies.
(i) Supplier Systems. Supplier shall be solely responsible for all systems Supplier uses to access Company Systems. Supplier shall ensure that its systems include up-to-date anti-viral software to prevent viruses from reaching Company Systems through Suppliers systems. Supplier shall prevent unauthorized access to Company Systems through the Supplier systems. Further, Supplier shall ensure Supplier personnel do not use any virtual private network or other device ( VPN ) to simultaneously connect machines on Company Systems to any machines on any Supplier or third party systems, without (i) using only a remote access method approved in writing and in advance by Company; (ii) providing Company with the full name of each individual who uses any such VPN and the phone number at which the individual may be reached while using the VPN; and (iii) ensuring that any computer used by Supplier personnel to remotely access Company Systems will not simultaneously access the Internet or any other third party network while logged on to Company Systems.
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(j) Use of Personal Portable Devices . Without Companys prior written authorization, under no circumstances will any Supplier personnel connect to any Company System or access, handle, or use any Company Confidential Information and/or data, for purposes of downloading, extracting, storing or transmitting the information and/or data through personally owned, rented, or borrowed equipment, including but not limited to, laptops, personal digital assistants, instant messaging devices, Universal Serial Bus ( USB ) devices and cell phones.
7. Intellectual Property .
(a) Definitions .
(i) The term Materials means all intellectual property rights, including without limitation all patents, patent applications, patent rights, trademarks, trademark applications, trade names, trade dress, service marks, service mark applications, domain names, copyrights, copyright applications, computer programs and other computer software (including, without limitation, all source and object code, algorithms, architecture, structure, display screens, layouts and development tools), inventions, designs, samples, specifications, schematics, know-how, trade secrets, processes, formulae, development tools, discoveries, improvements, ideas, techniques, materials, flow charts, outlines, lists, compilations, manuscripts, writings and pictorial materials, and all documentation and media constituting, describing or relating to the foregoing, including without limitation, manuals, memoranda and records.
(ii) The term Derivative Work means a work based on one or more pre-existing works, including, without limitation, a condensation, transformation, expansion or adaptation, that, if prepared without authorization of the owner of the copyright of such pre-existing work, would constitute a copyright infringement.
(iii) The term Residuals means the general knowledge and experience, including without limitation processes, methods, techniques, know-how and concepts, developed or acquired by a party in the course of the Services, but excluding any CI of the other party and any PI.
(iv) The term Work Product means all Materials created or developed by either party in connection with the Services during the term of this Agreement or any SOW.
(b) Ownership of Pre-existing Materials . All pre-existing Materials of Company or a Company Affiliate shall, as between Company and Supplier, be the property of Company or such Affiliate, as the case may be. All pre-existing Materials of Supplier or its suppliers shall, as between Supplier and Company, be the property of Supplier or its suppliers, as the case may be.
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(c) Ownership of Work Product .
(i) Company Ownership . Company shall be the sole owner of, with the exclusive right to use and exploit, all Work Product on an as-created basis. Supplier shall notify Company of and assign to Company all Work Product on an as-created basis. Supplier agrees that, to the fullest extent permitted under the U.S. Copyright Act, Company shall own the copyright to the Work Product, and that Supplier shall develop such Work Product as work made for hire. In addition, Supplier shall irrevocably assign and transfer to Company all other intellectual property rights, including, but not limited to patent and trade secret rights, in and to all Work Product as such items are created. Any modifications, improvements or amendments to any pre-existing Supplier or its suppliers Materials shall be solely owned by Supplier or its suppliers only if such improvements, amendments or modifications are not included or incorporated in any way in any Work Product, and such Materials shall not be created using Company resources nor shall Company be charged for the creation of such Materials, nor shall any such Materials contain any Company Materials (i.e., the foregoing shall not be construed as an assignment or other grant of rights in any Company Materials).
(ii) License to Supplier Pre-existing Materials . Supplier shall notify Company of all pre-existing Supplier or its suppliers Materials incorporated into or otherwise necessary to use, modify or maintain any Work Product and Supplier hereby grants to Company and Company Affiliates a non-exclusive, perpetual, irrevocable, royalty free, worldwide, limited-transferable (as set forth below) right and license to use, make, have made, sell, practice, copy, display, distribute, maintain, modify and create Derivative Works from, in any and all media, pre-existing Supplier or its suppliers Materials incorporated into or otherwise necessary to use, modify or maintain any Work Product (A) for internal use within Company and Company Affiliates, or (B) otherwise in commerce in the normal course of Companys or Company Affiliates businesses; provided, that Companys and Company Affiliates rights to such shall be solely in connection with the Work Product. Such license to Supplier or its suppliers Materials may be transferred, assigned or sublicensed to any third party in connection with the sale, merger or disposition of the Work Product or the Company or Company Affiliate business or assets to which the Work Product relates. To the extent permitted by Company or a Company Affiliate, the agents, brokers, customers, third party administrators, consultants and contractors of Company and Company Affiliates shall also have the right to use the Supplier or its suppliers Materials under the license granted hereunder in connection with the business of Company or Company Affiliates.
(iii) No Further Use by Supplier of Work Product . Supplier agrees that it shall not provide to its other clients and customers, nor use in any way in the course of later engagements, the specific Work Product created for and delivered to Company pursuant to this Agreement. Company acknowledges that in the course of Suppliers business, Supplier may develop, use, and distribute works that are substantially similar to the Work Product, including works similar in function, structure, sequence, or organization of the Work Product.
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(iv) License to Company Materials. During the Term, Company grants Supplier a non-exclusive, non-transferable, terminable at-will license to use the Company Materials solely for Companys benefit in connection with Suppliers performance of the Services. Company may terminate the foregoing license at any time, without cause, on written notice to Supplier. Unless specifically authorized in the SOW or by Company in writing, Supplier shall use the Company Materials only in the form provided by Company, without modification. Except for the limited license provided in this subsection, nothing contained in this Agreement shall be construed as granting Supplier any right, title, or interest in or to any of the Company Materials or other intellectual property of Company.
(v) Third Party Intellectual Property Rights . In the event Supplier provides any third party intellectual property (the Third Party Intellectual Property) to Company in connection with this Agreement for which Company would be obligated to accept and be bound by any third party terms and conditions, the following shall apply: (1) Supplier shall specifically identify in writing all Third Party Intellectual Property in the applicable SOW; (2) Supplier shall attach to the applicable SOW written copies of all third party license agreements applicable to Company; and (3) Supplier warrants that (i) it has the right to license any Third Party Intellectual Property licensed to Company under this Agreement; (ii) to the best of Suppliers knowledge, the Third Party Intellectual Property does not, and the use of the Third Party Intellectual Property by Company as contemplated by this Agreement will not, infringe any intellectual property rights of any third party; and (iii) unless specifically provided otherwise herein, Company shall have no obligation to pay any third party any fees, royalties, or other payments for Companys use of any Third Party Intellectual Property in accordance with the terms of this Agreement. With regard to (i) any Third Party Intellectual Property that Supplier fails to identify in the applicable SOW, and (ii) any Third Party Intellectual Property embedded in the Work Product for which Company is not required to accept any third party terms and conditions, all such intellectual property shall be considered, as appropriate, part of and included in the definition of Supplier Materials and subject to all warranties, indemnities, and other requirements of this Agreement, including scope of license, relating to the Supplier Materials. To the extent permitted by law or contract, Supplier shall pass through to Company the warranties for the Third Party Intellectual Property.
(d) Residuals . Each party shall have the right to use for any purpose any Residuals from any Work Product.
(e) Further Assurances . Each party covenants and agrees, on its own behalf and on behalf of its employees, agents, successors and assigns, without further compensation, to promptly at any time upon the request of another party, its successors and assigns to provide such further information and execute such further assignments and documents, give testimony, and take all further legal acts as reasonably requested by the other party to perfect title to, or to acquire, transfer and maintain patent, copyright, trademark, mask work, trade secret and other legal protection for, Materials owned by the requesting party pursuant to this Section. Provided that under circumstances shall the foregoing be construed as an obligation on Company to assign or grant Supplier any intellectual property rights.
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(f) Local Law Compliance . In addition to all other requirements of the Agreement relating to intellectual property ownership, Supplier shall ensure it has written agreements compliant with local law with all personnel, including subcontractors and agents, ensuring irrevocable assignment of all intellectual property rights of the personnel to Contractor such that Contractor may fulfill its obligations to perfect Companys ownership in the Work Product.
8. Limitations on Liability . Neither party nor its Affiliates, nor any of such partys or its Affiliates respective directors, officers, employees or agents, shall be liable to the other party or its Affiliates, or any of such other partys or its Affiliates respective directors, officers, employees or agents, for any consequential, incidental, special, indirect, punitive or exemplary damages, including loss of profits and loss of business arising out of or related to this Agreement. The parties shall remain liable for all direct damages for claims arising out of or related to this Agreement, including but not limited to the cost to obtain substitute services or deliverables. The foregoing limitations and exclusions of liability shall not apply to or limit the partys express obligations of indemnification under this Agreement, either partys breach of Section 6 (Nondisclosure), or either partys infringement of the other partys intellectual property rights.
9. Indemnification .
(a) Certain Claims . Each party shall indemnify, defend, and hold harmless the other party, the other partys Affiliates, and each of such other partys and such other partys Affiliates respective directors, officers, employees and agents (each, an Indemnified Party) from all losses, damages, fines, sanctions, injuries, costs and expenses (including without limitation court costs and reasonable attorneys fees) associated with each of the following, provided in each case that the Indemnified Party comply with the procedure set forth below:
(i) claims asserted by a third party, against the party claiming indemnification and directly and proximately caused by the acts or omissions of the other party (the Indemnifying Party), its Affiliates and/or each of their directors, officers, employees or agents (collectively together with the Indemnifying Party, the Indemnifying Group), arising out of or related to this Agreement;
(ii) personal injury, including death, or damage to tangible property, suffered by any Indemnified Party and directly and proximately caused by the acts or omissions of any member of the Indemnifying Group, arising out of or related to this Agreement;
(iii) willful misconduct, gross negligence, or violation of applicable law by any member of the Indemnifying Group, arising out of or related to this Agreement.
(b) Infringement Claims . Supplier shall indemnify, defend, and hold harmless any Company Indemnified Party from all losses, damages, fines, sanctions, injuries, costs and expenses (including without limitation court costs and reasonable attorneys fees) related to any claim that any Materials furnished by Supplier and used by or for any Company Indemnified Party in connection with the Services infringe a third partys copyright, trademark, service mark or
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patent, misappropriates a third partys trade secret, or otherwise infringe any third partys intellectual property or proprietary right. Supplier shall have no liability for any claim of infringement or misappropriation to the extent resulting from: (i) the Company Indemnified Partys use of a superseded or altered release of some or all of such Materials if infringement would have been completely avoided by the use of a subsequent unaltered release of such Materials, if such subsequent release is provided on a timely basis at no additional cost, and following a reasonable period for such subsequent release to be implemented, and Suppliers written notification that use of the subsequent release would avoid the infringement, or (ii) the Company Indemnified Partys use of such Materials in conjunction with software, data, or material not furnished by Supplier unless the possibility of such use was known, recommended, authorized or approved by Supplier or otherwise contemplated under the relevant SOW. In the event that some or all Materials furnished by Supplier become the subject of an infringement claim indemnified above, Supplier shall, at its expense and without limiting any other remedy available to the Company Indemnified Party pursuant to this Agreement, either (x) modify such Materials to make them non-infringing while retaining the same or equivalent functionality, (y) obtain for any Company Indemnified Party who had a right to use the Materials, a license to continue using such Materials or (z) replace the Materials with substantially similar Materials with the same or equivalent functionality. In the event Supplier is unable for any reason to provide one of the foregoing remedies within forty-five (45) days of notice of the claim and such time is not extended by the mutual written agreement of the parties, Company may terminate this Agreement, return the infringing item(s) and receive a refund of all fees paid for the infringing items, prorated over five (5) years from the date of original delivery to Company.
(c) Claims Regarding Personal Information and Violation of Laws . Supplier shall indemnify, defend, and hold harmless any Company Indemnified Party from all losses, damages, fines, sanctions, injuries, costs and expenses (including without limitation court costs and reasonable attorneys fees) arising out of (i) a Supplier Indemnifying Group members violation of Laws or (ii) the breach by any member of the Supplier Indemnifying Group of its obligations pursuant to Section 6 above with respect to Personal Information.
(d) Procedure . The following procedure shall be applicable to indemnification sought pursuant to this Section. The Indemnified Party shall promptly notify the Indemnifying Party of a claim subject to this Section; provided however, that failure to do so shall not preclude such partys right to indemnification if such failure does not materially prejudice the Indemnifying Party, and if such failure does materially prejudice the Indemnifying Party then the Indemnified Partys rights shall only be diminished to the extent of the prejudice. The Indemnified Party shall control the defense and/or settlement of the claim; provided, however, that upon receipt of notice of the claim, the Indemnifying Party shall have the right to assume control the defense of the claim by providing the Indemnified Party notice of such assumption within thirty (30) days after receipt of notice of the claim. The Indemnifying Partys control of the defense shall include the right to compromise or settle such claim for money damages which the Indemnifying Party shall pay with no admission of wrongdoing by the Indemnified Party; provided, however, that any compromise or settlement shall include an unconditional release of the Indemnified Party of all liability on such claim. Any other compromise or settlement must be approved by the Indemnified Party which approval shall not be unreasonably withheld, conditioned or delayed. If the Indemnifying Party
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assumes control of the defense, (i) the Indemnified Party shall participate in such defense and/or settlement as reasonably requested by the Indemnifying Party and at the Indemnifying Partys expense, and (ii) the Indemnified Party in any event may choose to continue to participate in the defense and/or settlement with counsel of its own choosing at its own expense.
10. Fees .
(a) Fees for Services . Services shall be provided at the price set forth in the SOW. Supplier shall not increase such price during the term or any renewal of the SOW. Additional work by Supplier outside the original scope of work in the SOW shall not be charged unless specifically agreed in a writing signed by the parties. Any work performed by Supplier and not specifically authorized by Company in writing shall be considered gratuitous and Supplier shall have no right or claim whatsoever to any form of compensation.
(b) Most-Favored Customer . The parties to this Agreement intend that Company shall have the status of a most-favored customer with respect to matters of pricing and other material terms, including without limitation, warranty, liability and indemnification. If Supplier offers more favorable terms to any of its other customers during the term of this Agreement or any SOW, Company shall be entitled to the more favorable terms for all Services from and after the date of such offer. Company reserves the right to re-open price negotiations at any time as necessitated by changing market conditions or the addition of services.
(c) Purchase Orders, Invoices and Payment . Company shall issue a purchase order on or about the time of execution of a SOW. Notwithstanding the execution of a SOW, Company shall be liable only for Services ordered by written purchase order to Supplier. In the event of any conflict between the pre-printed terms and conditions on a purchase order and the relevant SOW and this Agreement, the terms of the SOW and this Agreement shall prevail. Supplier shall invoice Company monthly in arrears unless otherwise expressly specified in the applicable SOW. At its option, Company shall pay undisputed charges (i) at a discount of [***] percent ([***]%) if paid within seven (7) days of Companys receipt of a correct invoice, or (ii) within forty-five (45) days of Companys receipt of a correct invoice. If goods are provided in connection with the Services, Supplier shall separately itemize the charges for goods and the charges for Services.
(d) Volume Credits . Supplier shall offer discounts to Company on the following schedule, if Companys monthly billing from Supplier (for Services under this Agreement and any/or other agreements) reaches the applicable breakpoints:
Monthly Billing |
% Credit | |||
Up to $[***] |
[ | ***]% | ||
$[***] |
[ | ***]% | ||
Above $[***] |
[ | ***]% |
(e) Expenses . To the extent set forth in the applicable SOW, appropriate travel and reasonable out-of-pocket expenses incurred by Supplier in connection with the Services performed shall be invoiced and reimbursed by Company to Supplier. Supplier agrees that any such expenses for which Supplier shall seek reimbursement from Company shall be in accordance with Companys general policies for such expenses applicable to providers of goods and/or services to Company and must be approved in writing in advance by Company.
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(f) Taxes .
(i) Each party shall be responsible for any personal property taxes on property it owns or leases, for franchise and privilege taxes on its business, and for taxes based on its net income or gross receipts.
(ii) Supplier shall be responsible for any sales, use, excise, value-added, services, consumption, and other taxes and duties payable by Supplier on any goods or services used or consumed by Supplier in providing the Services hereunder, or any subsequent amendment or modification hereto, if the tax is imposed on Suppliers acquisition or use of such goods or services and the amount of tax is measured by Suppliers costs in acquiring such goods or services.
(iii) Company shall be responsible for any sales, use, excise, value-added, services, consumption, and other similar taxes and duties assessed on any fees charged by Supplier to Company in the performance of this Agreement. Company may report and (as appropriate) pay such taxes directly if Company provides Supplier with a direct pay or exemption certificate. Notwithstanding the foregoing, Supplier shall be solely responsible for any taxes levied by any governmental authority or jurisdiction in India or other jurisdiction outside the United States or any change in taxation initiated by any governmental authority or jurisdiction in India or other jurisdiction outside the United States, including any and all Service taxes instituted after the Effective Date.
(iv) The parties agree to cooperate with each other to enable each to more accurately determine its own tax liability and to minimize such liability to the extent legally permissible. Suppliers invoices shall separately state the amounts of any taxes Supplier is proposing to collect from Company. Each party shall provide and make available to the other any resale or direct pay certificates, information regarding out-of-state or out-of-country sales or use of equipment, materials, or services, and other exemption certificates or information reasonably requested by either party.
(v) Supplier shall promptly notify Company and coordinate with Company the response to and settlement of, any claim for taxes asserted by applicable taxing authorities for which Company is alleged to be financially responsible hereunder. At Companys option and expense (including, if required by a taxing authority, payment of any such tax, interest or penalty prior to final resolution of the issue) Company shall have the right to request, which request shall not be denied, delayed, subject to any conditions, or withheld by Supplier, to seek administrative relief, a ruling, judicial review (original or appellate level) or other appropriate review (Proceeding) (in a manner deemed appropriate by Company), as to the applicability of any tax, interest or penalty, or to protest any assessment and participate with Supplier in any legal challenge to such assessment. Notwithstanding the above, Companys liability for such taxes is conditioned
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upon Supplier providing Company notification within five (5) business days of receiving any proposed assessment of any additional taxes, interest or penalty due by Supplier, and Supplier shall provide Company with the necessary authority or powers of attorney to enable Company the opportunity to participate or have other appropriate review as to the applicability of any such taxes prior to any assessment of additional taxes. When requested by Company and at such entitys expense, Supplier shall cooperate with and/or allow Company to participate with Supplier in any such Proceeding, protest or legal challenge related to matters for which Company is alleged to be financially responsible. Notwithstanding the foregoing, Companys participation in any Proceeding shall not prohibit or inhibit Supplier from concluding or resolving matters related to Suppliers other clients, provided, however, that Supplier shall not pay any claimed liability relating to Company or settle any Proceeding unless Company has consented to such payment or settlement.
(vi) Supplier shall, upon the request of Company, expressly assign its right to any and all refund claims relative to Companys payment of any sales, use, excise, value-added, services, consumption, and other taxes and duties (hereinafter referred to as Tax or Taxes) paid to Supplier pursuant to this Agreement, or at the request of Company, provide Company with a power of attorney designating Company as Suppliers duly authorized representative in a form sufficient to permit Company to make a refund claim for any said Taxes paid by Company pursuant to this Agreement. Supplier acknowledges and agrees that any refund claim assigned to Company hereunder or subject to a power of attorney granted to Company hereunder shall not be subject to any right of offset or limited in any respect. In the event the taxing authority does not allow a Supplier to assign its right to a refund claim or grant a power of attorney to Company to file a refund claim, Supplier shall, upon the request of Company, file an amended return or refund claim for Taxes paid by Company to Supplier. Supplier acknowledges and agrees that it shall pass on to Company, without any right of offset, any Tax refunds received by Supplier with respect to Companys previous payment of Taxes pursuant to this Agreement. In the event Supplier has any outstanding tax liabilities with any taxing authority which would prevent Company from directly obtaining a refund of taxes paid to Supplier through an assignment of such right or power of attorney as provided herein, or would prevent Supplier from obtaining such refund directly from said taxing authority, Supplier acknowledges and agrees that Supplier shall directly reimburse Company for all such taxes paid to Supplier by Company without any right of offset or other limitation.
(g) Audits and Records . Supplier shall, at its sole cost and expense, maintain complete and accurate books and records regarding its performance of the Services, compliance with this Agreement, compliance with applicable laws and regulations, and the fees and costs charged to Company, covering all activities and transactions arising out of, or relating to this Agreement and shall keep such records for not less than three (3) years after termination. Company and its duly authorized representatives shall have the right, upon forty-eight (48) hours prior notice, during normal business hours for the Term of this Agreement, and for a period of three (3) years following the termination hereof for any reason, to examine and copy (without charge to Company) such books and records, and all other documents and materials in the possession or under the
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control of Supplier, with respect to the subject matter and terms of this Agreement that, in Companys reasonable judgment have a bearing on or pertain to matters, rights, duties or obligations covered by this Agreement, including without limitation the right to verify Suppliers overhead costs and rates. Company and its authorized representative shall have access to Suppliers facilities that service Company, shall be permitted by Supplier to interview current or former employees of Supplier with respect to matters pertinent to Suppliers performance of this Agreement, shall have access to all necessary records, and shall be furnished, without charge, adequate and appropriate workspace in order to perform the examinations provided for under this subsection. The cost for any such on-site audit shall be borne by Company. Should an audit reveal that the Supplier, has overcharged Company, whether intentionally or inadvertently, then Company shall be entitled to a refund in the amount of the overcharge, plus interest at the maximum rate allowed by law. In the event of an overcharge in excess of ten percent (10%) of the amounts actually due Supplier hereunder, Supplier shall reimburse Company for the reasonable cost of the audit. The exercise by Company of any right to audit under this or any other Section of this Agreement at any time or times or the acceptance by Company of any statement or the payment thereof by Company shall be without prejudice to any of Companys rights or remedies and shall not bar Company from thereafter disputing the accuracy of any payment or statement, and the Supplier shall remain fully liable for any amounts found to be due under this Agreement.
11. Dispute Resolution .
(a) Governing Law. This Agreement shall be governed by and interpreted in accordance with the laws of the State of California without regard to any of its choice of law principles that would require the application of the law of any other jurisdiction. Notwithstanding the foregoing, the parties agree that the Uniform Computer Information Transactions Act (UCITA), if and to the extent enacted in such State, shall not apply to this Agreement or any performance hereunder and the parties expressly opt-out of the applicability of UCITA to this Agreement.
(b) Dispute Resolution .
(i) Arbitration . This Agreement is made pursuant to a transaction involving interstate commerce and shall be governed by and enforceable under the Federal Arbitration Act, 9 U.S.C. Section 1 et seq. Any dispute arising out of or relating to this Agreement shall be resolved by binding arbitration by three arbitrators in accordance with the CPR Institute for Dispute Resolution Rules for Non-Administered Arbitration, and judgment upon the award rendered by the arbitrators may be entered by any court having jurisdiction thereof. Arbitration proceedings shall take place in the city of Companys location or such other location designated by Company. Except as may be required by law, neither party nor an arbitrator may disclose the existence, content, status or results of any arbitration hereunder without the prior written consent of both parties. The procedures specified in this Section shall be the sole and exclusive procedures for the resolution of disputes between the parties arising out of or relating to this Agreement or any SOW hereunder except as otherwise expressly provided in this Agreement. If each of the countries in which Supplier will be performing the Agreement is a signatory to the New York Convention on the Recognition and Enforcement of Arbitral Awards, the arbitration award shall be enforceable under the convention in all relevant foreign jurisdictions.
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(ii) Exceptions . This Section shall not be construed to prevent a party from instituting, and a party is specifically authorized to initiate formal legal proceedings at any time (A) to obtain or preserve a superior position (or maintain parity) with respect to other creditors, (B) to include the other party in a third party action in which indemnification may be sought pursuant to this Agreement, (C) to seek equitable relief to protect a partys CI or Companys or Company Affiliates PI or other intellectual property, or (D) when expressly permitted pursuant to this Agreement.
12. Insurance .
(a) Supplier shall obtain and keep in force the following insurance issued by insurance carriers with an A.M. Best rating of A- or better and with the following minimum limits:
(i) General Liability Insurance with limits not less than $2 million per occurrence with a $5 million umbrella
(ii) Auto Liability Insurance with limits not less than $1 million per occurrence;
(iii) Professional Errors and Omissions Insurance covering the activities of Supplier written on a claims made basis with limits not less than $5 million per claim;
(iv) Crime Insurance covering the activities of Supplier written on a claims made basis with limits not less than $2 million per claim;
(v) Network Security/Privacy Liability (Cyber Liability) Insurance in the amount of $5 million dollars per occurrence including but not limited to protection of private or confidential information whether electronic or non-electronic; network security and privacy liability; protection against liability for systems attacks, denial or loss of service, introduction, implantation or spread of malicious software code; protection against liability for security breach, unauthorized access and use of data including regulatory action expenses and notification and credit monitoring expenses. [Part of E&O Insurance for the Supplier]
(vi) Workers Compensation Insurance with minimum limits as required by state law in the applicable jurisdictions;
(vii) Employers Liability Insurance with limits not less than $1 million per injury; and
(viii) Such other insurance as the Company may reasonably require.
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(b) Supplier shall name Company, Company Affiliates, and Companys and Company Affiliates officers, directors, employees and agents as additional insureds on the General Liability and Auto Liability policies. Supplier agrees to require its insurers to waive all rights of subrogation. Supplier shall provide proof of insurance to Company upon Companys request. The amount and/or availability of Suppliers insurance shall in no way limit or impact Suppliers liability pursuant to this Agreement.
13. Miscellaneous Provisions .
(a) English . The governing version of this Agreement shall be the version signed by the parties in English. All records and documentation to be maintained by Supplier under this Agreement and all deliverables and written materials to be provided by Supplier hereunder shall be in English or Supplier shall, at no additional cost to Company, promptly provide an English translation at Companys request. All Supplier personnel who will be responsible for directly communicating with Company shall be fluent in English.
(b) Currency . Notwithstanding any provision to the contrary in the Agreement, unless expressly agreed otherwise by the parties in writing, all amounts and payments shall be in United States Dollars.
(c) Company Records . Supplier shall maintain accurate records of all amounts billable to, and payments made by, Company pursuant to this Agreement in accordance with generally accepted accounting principles. Supplier also shall retain all records and documentation of Supplier relating to Services, including invoices, correspondence, contracts, and service logs, for a period of seven (7) years following the expiration or termination of the applicable SOW. Company shall have access to and the right to copy such records, upon prior written request to Supplier, at all reasonable times during Suppliers normal business hours during the period in which Supplier is required to maintain such records. Supplier further agrees to cooperate to the fullest extent possible with any request for records or other information submitted by Company or on its behalf and relating to any request or order Company receives from any state or federal court, agency or administrator.
(d) Non-solicitation . During the term of this Agreement and for one (1) year thereafter, except as provided below, neither party will, and will ensure that their affiliates do not, directly or indirectly employ or hire, solicit or endeavor to entice away, employ or hire (or purport to do any of the same), any person who is then, or has within the preceding year been, an employee or individual contractor of the other Party or of an Affiliate of the other Party and involved directly in the performance of any Statement of Work, except with the prior written consent of the other Party. Such consent may be withheld in the other Partys sole discretion. Notwithstanding the foregoing, neither Party shall be precluded from (i) hiring an employee of the other Party who independently approaches the Party, or (ii) conducting general recruiting activities, such as participation in job fairs or publishing advertisements in publications or on Web sites for general circulation.
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(e) Independent Contractor . Suppliers employees and agents are independent contractors with respect to Company, and Supplier shall be solely responsible for their supervision, daily direction and control. Nothing in this Agreement shall be construed to create a partnership,
joint venture, or agency relationship between the parties. Nothing in this Agreement shall be interpreted or construed as creating the relationship of employer and employee between Company or its Affiliates and either Supplier or any employee or agent of Supplier. Each party shall be solely responsible for payment of all compensation owed to its employees and agents, and for all federal and state income tax withholding, Social Security taxes, and unemployment insurance applicable to such personnel as employees of the applicable party. Each party shall bear sole responsibility for any health or disability insurance, retirement benefits, or other welfare or pension benefits (if any) to which such partys employees and agents may be entitled. Each party agrees to indemnify and hold harmless the other party, its Affiliates, and each of such other partys or such other partys Affiliates directors, officers, employees and agents, against any claims that the indemnified party has failed to pay compensation or taxes or provide insurance or benefits for employees or agents of the indemnifying party.
(f) Assignment/Subcontracting/Outsourcing . This Agreement and any SOW hereunder may not be assigned, subcontracted, or outsourced in whole or in part without the prior written consent of the other party, except to (i) an Affiliate, or (ii) any successor to all or substantially all of the stock or assets of the assigning party via merger, acquisition or other similar corporate transaction. Any other purported assignment, subcontracting or outsourcing without consent, shall be deemed null and void and of no effect. Supplier shall remain responsible for permitted assignees, subcontractors, and outsourcers performance pursuant to this Agreement as if Supplier performed the Services itself and shall ensure that all such entities and their employees and agents are bound by and comply with the terms and conditions of this Agreement, including without limitation, the Sections regarding intellectual property and nondisclosure. Any failure of the foregoing to comply with the relevant requirements of this Agreement shall be deemed a breach by Supplier.
(g) Force Majeure . Except as set forth below, neither party shall be in default or otherwise liable for any delay in or failure of its performance under this Agreement or any SOW to the extent such delay or failure arises by reason of any act of God, any governmental requirement or war; provided, that if Supplier is the party experiencing such failure, it shall have exhausted the procedures described in its business continuity plan. A party claiming the benefit of this provision shall, as soon as reasonably practicable after the occurrence of any such event: (i) notify the other party of the nature and extent of any such condition referred to in the preceding sentence, and (ii) use due diligence to remove any such causes and resume performance under this Agreement as soon as feasible. If a force majeure event causes a material failure or delay in the performance of any Services for more than five (5) consecutive days, Company may, at its option, and in addition to any other rights Company may have, procure such Services from an alternate source until Supplier is again able to provide such Services, and Supplier shall be liable for all payments made and costs incurred by Company required to obtain the Services from such alternate source during such period. Company shall not be required to pay for Services not delivered due to a force majeure event. Company may terminate at its option the whole or any part of any SOW if such a situation continues for at least fifteen (15) days, and if Company elects a partial termination, the provisions of this Agreement related to SOW termination shall apply to the part of the SOW terminated. Company may elect additional terminations, in whole or in part, for as long as the situation continues.
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(h) Entire Agreement . This Agreement and all attachments thereto (including without limitation all SOWs referencing this Agreement) shall constitute the complete agreement between the parties and supersedes all previous agreements or representations, written or oral, with respect to the Services described herein. In particular, no shrink-wrap, click-wrap, privacy policies or other terms and conditions or agreements ( Additional Terms) provided with any products, services, documentation, or software hereunder, including any updates thereto, shall be binding on Company, even if use of such items requires an affirmative acceptance of those Additional Terms before access is permitted. All such Additional Terms shall be of no force or effect and shall be deemed rejected by Company in their entirety. This Agreement may be executed in multiple originally signed versions which together shall constitute one agreement. A facsimile signature shall have the same force and effect as an original signature. This Agreement may not be modified or amended except in a SOW or other writing signed by the parties.
(i) Survival . The provisions of this Agreement or any SOW which give the parties rights beyond the termination or expiration of this Agreement or such SOW shall survive such termination or expiration, including without limitation, the sections titled Term and Termination , Nondisclosure , Intellectual Property , Limitations on Liability , Indemnification , Fees , Dispute Resolution , and Miscellaneous .
(j) Invalidity . If any provision of this Agreement is held to be invalid or unenforceable, such invalidity or unenforceability shall not invalidate this Agreement as a whole, but this Agreement shall be construed as though it did not contain the particular provision or provisions held to be invalid or unenforceable.
(k) Waiver . No waiver shall be deemed to be made by any party of any of its rights hereunder unless the same shall be in a writing signed by the waiving party, and any waiver shall be a waiver only with respect to the specific instance involved and shall in no way impair the rights or the obligations of any party in any other respect at any other time.
(l) Headings . Section headings herein are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.
(m) Notices . All notices, including notices of address change, required to be sent hereunder shall be in writing and shall be deemed to have been given when mailed by overnight delivery, when faxed with confirmation of transmission or when delivered by hand (i) if to Company, the Company Project Manager at the address in the relevant SOW, with a copy to: General Counsel, at 1655 Grant Street, 10 th Floor, Concord, CA 94520, facsimile 866-737-5055, or (ii) if to Supplier, to the Supplier Project Manager at the address in the relevant SOW, with a copy to Yelena Kharisova, at Incedo Inc., 2350 Mission College Blvd, Suite# 246, Santa Clara, CA 95054.
AssetMark Statement of Work
Page 27 of 30
Exhibit A
SOW Form
This Statement of Work No. __ forms a part of and is subject to that certain Master Services Agreement by and between [Supplier full legal name] (Supplier) and [AssetMark Entity full legal name] (Company) dated as of __________, 20__ (the Agreement). This document constitutes a SOW as defined in the Agreement. Capitalized terms not otherwise defined herein shall have the meaning assigned in the Agreement. The commencement date of this SOW shall be _______________, 20__ (Commencement Date).
[Insert this sentence if AssetMark party to the SOW is not the same as the AssetMark party to the MSA.] [SOW contracting AssetMark entityfull legal name] , a _______________________ corporation, is the Company Affiliate executing this SOW.
This SOW shall have a term of __________, [with automatic renewals for successive __________ terms, unless Company provides Supplier written notice of non-renewal at least sixty (60) days prior to the end of the then-current term.]
Company Project Manager:
Name:
Address:
Telephone:
Fax:
Supplier Project Manager:
Name:
Address:
Telephone:
Fax:
Description of the Services : [Provide clear, objective description of the services and deliverables. Include/attach requirements or specifications, if applicable. Include service levels, if applicable.]
Duration of Services with beginning and end dates and project milestone dates, if applicable :
Acceptance Criteria and Process : [Describe any additional warranties, acceptance criteria, process for submitting deliverables, timeframe for identifying defects, and Supplier obligations to cure defects]
AssetMark Master Services Agreement
Page 28 of 30
IN WITNESS WHEREOF , the parties hereto have entered into this Agreement as of the Effective Date.
Incedo, Inc. |
By: | /s/ Rena Nigam |
Print Name: Rena Nigam | ||
Title: President | ||
Date: August 1, 2017 |
ASSETMARK, INC. |
By: | /s/ Mukesh Mehta |
Print Name: Mukesh Mehta |
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Title: CIO | ||
Date: 8/1/ 2017 |
AssetMark Statement of Work
Page 29 of 30
Fees : [Specify fee and whether a fixed fee or based upon time and materials. If based upon time and materials, include rate schedule and a not-to-exceed price. Specify if AssetMark entity is to pay Suppliers travel or other expenses.]
Company responsibilities : [Specify any project specific responsibilities of Company. Insert any third party licenses or other agreements Company must obtain to use the Services. If none, delete this section.]
[Company Affiliate:] |
[Supplier:] |
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Signature: |
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Signature: |
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Name: |
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Name: |
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Title: |
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Title: |
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Date: |
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Date: |
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AssetMark Exhibits
Page 30 of 30
Exhibit B
AssetMark ODC Controls and Security Policy, June 5, 2017
(incorporated by reference)
Exhibit C
Standards of Business Conduct For Suppliers and Contingent Workers, effective 03262014
(incorporated by reference)
ASSETMARK FINANCIAL DEFERRED COMPENSATION PLAN
PLAN DESCRIPTION
TABLE OF CONTENTS
INTRODUCTION |
1 | |||
ELIGIBILITY FOR PARTICIPATION |
1 | |||
Eligible Employee |
1 | |||
Date of Participation |
1 | |||
ELECTIONS/CONTRIBUTIONS |
1 | |||
Participant Contributions |
1 | |||
Nonelective Contributions |
2 | |||
Compensation |
2 | |||
CREDITING EARNINGS ON PARTICIPANT ACCOUNTS |
2 | |||
Determination of Amount |
2 | |||
When Earnings Are Credited |
2 | |||
Expenses |
2 | |||
VESTING |
2 | |||
Participant Contributions |
2 | |||
Nonelective Contributions |
3 | |||
Vesting Service Rules |
3 | |||
CLAIM PROCEDURES |
3 | |||
DISTRIBUTIONS |
4 | |||
Time of Distribution |
4 | |||
Retirement Age |
5 | |||
Separation from Service |
5 | |||
Form of Payment |
5 | |||
Payment on Participant Death |
5 | |||
Cash Out |
5 | |||
Medium of Payment |
6 | |||
MISCELLANEOUS |
6 | |||
Domestic Relations Orders |
6 | |||
Amendment and Termination |
6 | |||
Fees |
6 | |||
Administrator Discretion |
6 | |||
Plan Year |
6 | |||
ADMINISTRATIVE INFORMATION |
6 |
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INTRODUCTION
AssetMark Financial Holdings, Inc. (the Company) established the AssetMark Financial Deferred Compensation Plan (the Plan) effective June 1, 2015. This Plan Description describes the Plan as amended and restated effective January 1, 2017.
This revised Plan Description supersedes all previous Plan Descriptions. Although the purpose of this document is to summarize the more significant provisions of the Plan, the Plan document will prevail in the event of any inconsistency.
ELIGIBILITY FOR PARTICIPATION
Eligible Employee
You are an Eligible Employee if you are in the following classification:
An officer of the Company in one of the following positions: Officers, Regional Consultants (RCs) and BDOs (Business Development Officers) of the Company and AssetMark Financial, Inc.
Date of Participation
You will become a Participant eligible to participate in the Plan on the day you first perform an hour of service as an Eligible Employee.
ELECTIONS/CONTRIBUTIONS
Participant Contributions
When you become eligible to participate in the Plan, you may begin contributing to the Plan. All contributions will be credited to an account established in your behalf. Your contributions to the Plan are not subject to federal income tax but may be subject to social security and medicare taxes.
Please note that while you may enjoy certain tax benefits, there may be some drawbacks to participation in the Plan. You should consult with your professional tax/financial advisor to determine the consequences of your participation in this Plan.
You may elect to reduce your Compensation (defined below) and make a contribution to the Plan. You may elect to defer from 5% to 75% of your Compensation. If you fail to make an election within the timeframes required, your failure to make an election will be interpreted as an election to continue with the election you had previously in place (if no election was in place, no participant contributions will be made to the plan). Your contributions to the Plan will be canceled if you become disabled due to any medically determinable physical or mental impairment resulting in the your inability to perform the duties of your position or any substantially similar position, where such impairment can be expected to result in death or can be expected to last for a continuous period of not less than six months.
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Nonelective Contributions
The Company may, in its sole discretion, make a nonelective contribution to the Plan on your behalf. If the Company makes a nonelective contribution, it will be allocated in a manner determined by the Company.
Compensation
Compensation means wages that are shown as taxable wages on your IRS Form W-2, including any amount you elect to defer to any Company benefit plan, subject to the following modifications: Exclude PUCC (Personal Use of Company Car), GTL (Group Term Life) in excess of $50k, Gifts, Prizes, Awards, Fitness Reimbursements, Child Care Reimbursements, Employer Expense of Domestic Partner Medical/Dental/Vision coverage, Taxable Tuition Reimbursements, and Third-Party Sick / Disability Pay, reimbursements or other expense allowances, fringe benefits (cash and noncash), moving expenses, deferred compensation, and welfare benefits (Treas. Reg. section 1.414(s)-1(c)(3)) for all Plan Purposes.
CREDITING EARNINGS ON PARTICIPANT ACCOUNTS
Determination of Amount
Your Account will be credited with earnings that will reflect a market basket of predetermined investments. You may select which investments will make up your market basket. You may change the your investment selections at such times as specified by the Plan Administrator.
When Earnings Are Credited
Your account will be adjusted daily for earnings/losses.
Expenses
The Company may charge your Account with any or all of the expenses involved in the establishment or ongoing operation of the Plan.
VESTING
Participant Contributions
You will have a fully vested interest in your contributions to the Plan.
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Nonelective Contributions
Your interest in your Nonelective Contribution Account will vest based on your years of vesting service (defined below) in accordance with the following schedule:
3 year cliff vesting schedule
Notwithstanding the foregoing, you will become fully (100%) vested in the Company contributions upon the occurrence of the following events:
Attainment of Retirement Age (defined below) while an employee of the Company.
Your death while an employee of the Company.
You Separate from Service with the Company due to a Disability.
The Company experiences a Change in Control event.
Vesting Service Rules
One year of vesting service is earned for each calendar year in which a Participant is credited with 1,000 hours of service with the Employer. Service prior to the effective date of the Plan is disregarded for purposes of vesting service.
CLAIM PROCEDURES
Application for Benefits. You or any other person entitled to benefits from the Plan (a Claimant) may apply for such benefits by completing and filing a claim with the Plan Administrator. Any such claim must be in writing and must include all information and evidence that the Plan Administrator deems necessary to properly evaluate the merit of and to make any necessary determinations on a claim for benefits. The Plan Administrator may request any additional information necessary to evaluate the claim.
Timing of Notice of Denied Claim. The Plan Administrator will notify the Claimant of any adverse benefit determination within a reasonable period of time, but not later than 90 days (45 days if the claim relates to a disability determination) after receipt of the claim. This period may be extended one time by the Plan for up to 90 days (30 additional days if the claim relates to a disability determination), provided that the Plan Administrator both determines that such an extension is necessary due to matters beyond the control of the Plan and notifies the Claimant, prior to the expiration of the initial review period, of the circumstances requiring the extension of time and the date by which the Plan expects to render a decision. If the claim relates to a disability determination, the period for making the determination may be extended for up to an additional 30 days if the Plan Administrator notifies the Claimant prior to the expiration of the first 30-day extension period.
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Content of Notice of Denied Claim. If a claim is wholly or partially denied, the Plan Administrator will provide the Claimant with a written notice identifying (1) the reason or reasons for such denial, (2) the pertinent Plan provisions on which the denial is based, (3) any material or information needed to grant the claim and an explanation of why the additional information is necessary, and (4) an explanation of the steps that the Claimant must take if he wishes to appeal the denial including a statement that the Claimant may bring a civil action under ERISA.
Appeals of Denied Claim. If a Claimant wishes to appeal the denial of a claim, he must file a written appeal with the Plan Administrator on or before the 60th day (180th day if the claim relates to a disability determination) after he receives the Plan Administrators written notice that the claim has been wholly or partially denied. The written appeal must identify both the grounds and specific Plan provisions upon which the appeal is based. The Claimant will be provided, upon request and free of charge, documents and other information relevant to his claim. A written appeal may also include any comments, statements or documents that the Claimant may desire to provide. The Plan Administrator will consider the merits of the Claimants written presentations, the merits of any facts or evidence in support of the denial of benefits, and such other facts and circumstances as the Plan Administrator may deem relevant. The Claimant will lose the right to appeal if the appeal is not timely made. The Plan Administrator will ordinarily rule on an appeal within 60 days (45 days if the claim relates to a disability determination). However, if special circumstances require an extension and the Plan Administrator furnishes the Claimant with a written extension notice during the initial period, the Plan Administrator may take up to 120 days (90 days if the claim relates to a disability determination) to rule on an appeal.
Denial of Appeal. If an appeal is wholly or partially denied, the Plan Administrator will provide the Claimant with a notice identifying (1) the reason or reasons for such denial, (2) the pertinent Plan provisions on which the denial is based, (3) a statement that the Claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the Claimants claim for benefits, and (4) a statement describing the Claimants right to bring an action under section 502(a) of ERISA. The determination rendered by the Plan Administrator will be binding upon all parties.
Determinations of Disability. If the claim relates to a disability determination, determinations of the Plan Administrator will include the information required under applicable United States Department of Labor regulations.
DISTRIBUTIONS
Time of Distribution
You are entitled to receive a distribution of your Account in any form of distribution permitted by the Plan your Separation from Service.
In addition, you may receive a distribution of your Account in any form of distribution permitted by the Plan upon the date you become Disabled and upon a Change in Control event.
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Payments for a distribution event will commence once the payment event occurs but no later than the end of the taxable year or, if later, the 15th day of the third calendar month after the payment event date.
There are some circumstances that may delay a payment. Contact your Plan Administrator for more information.
Retirement Age
Retirement Age means the date you reach age 62.
Separation from Service
Separation from Service means any absence from service that ends your employment with the Company. Separation from Service also means your services for the Company permanently decrease to no more than 25% of the average level of bona fide services compared to services performed over the preceding 12 month period.
Form of Payment
You may receive your Account in the following forms of payment:
Single lump sum payment.
Annual installment payments for a period of years (payable on an annual basis) which extends for no longer than 10 years.
Payment on Participant Death
In the event of your death, the remaining balance of your Account will be distributed in a lump sum.
You have the right to designate one or more primary and one or more secondary Beneficiaries to receive any benefit becoming payable at your death. You are entitled to change your Beneficiaries at any time and from time to time by filing written notice of such change with the Plan Administrator. If you fail to designate a Beneficiary, or in the event that all designated primary and secondary Beneficiaries die before you, the death benefit will be payable to your spouse or, if there is no spouse, to your estate.
Cash Out
If the vested amount of your Account does not exceed $18,000 (in 2017) your entire vested Account may be distributed in a lump sum. The distribution will result in the termination and liquidation of the entirety of your interest in the Plan.
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Medium of Payment
You may receive a distribution from the Plan in the form of cash.
MISCELLANEOUS
Domestic Relations Orders
Your benefits under the Plan may be assigned to other people in accordance with a qualified domestic relations order. You may obtain, without charge, a copy of the Plans procedures regarding qualified domestic relations orders from the Plan Administrator.
Amendment and Termination
The Company may amend, terminate or merge the Plan at any time.
Fees
Your account may be charged for some or all of the costs and expenses of operating the Plan. Such expenses include, but are not limited to, investment expenses and costs to process plan distributions and domestic relations orders.
Administrator Discretion
The Plan Administrator has the authority to make factual determinations, to construe and interpret the provisions of the Plan, to correct defects and resolve ambiguities in the Plan and to supply omissions to the Plan. Any construction, interpretation or application of the Plan by the Plan Administrator is final, conclusive and binding.
Plan Year
The plan year ends on 12/31.
ADMINISTRATIVE INFORMATION
The Plan Sponsor and Plan Administrator is AssetMark Financial Holdings, Inc.
Its address is 1655 Grant Street, 10th Floor Concord, CA 94520.
Its telephone number is 866-767-7359.
Its Employer Identification Number is 30-0774039.
6
Exhibit 10.9
AssetMark Holdings, LLC
SERVICE MEMBER UNIT ISSUANCE AGREEMENT
(Incentive Units)
THIS SERVICE MEMBER UNIT ISSUANCE AGREEMENT (this Agreement ) by and between AssetMark Holdings, LLC, a Delaware limited liability company (the Company ), and the individual ( Service Member ) named on the Master Signature Page (as defined below) hereto is made as of the date set forth on such Master Signature Page hereto.
WHEREAS, on the terms and subject to the conditions hereof, the Company desires to issue to Service Member, and Service Member desires to accept the issuance from the Company of, the Companys Class C Units (the Incentive Units ) in the amount set forth on Service Members Master Signature Page as hereinafter set forth;
WHEREAS, a holder of Incentive Units shall be entitled to participate only in distributions above the Class C Common Unit Threshold attributable to such Incentive Units; and
WHEREAS, this Agreement is one of several agreements entered into by the Company and its Subsidiaries from time to time with certain persons who are or will be key employees or other service providers of the Company or one or more Affiliates as part of a management equity plan designed to comply with Regulation D or Rule 701, as applicable, promulgated under the Securities Act (as defined below).
NOW, THEREFORE, in order to implement the foregoing and in consideration of the mutual representations, warranties, covenants and agreements contained herein, the parties hereto agree as follows:
1. Definitions . Capitalized terms not defined in this Agreement shall have the meanings ascribed to such terms in the Operating Agreement or as defined below.
1.1 Affiliate . The term Affiliate shall have the meaning set forth in the Operating Agreement.
1.2 Agreement . The term Agreement shall have the meaning set forth in the preface.
1.3 Board . The Board shall mean the Board of Managers of the Company.
1.4 Cause . The term Cause shall have the meaning set forth in the Operating Agreement.
1.5 Change in Control . The term Change in Control shall have the meaning set forth in the Operating Agreement. The Board shall have full and final authority to determine conclusively whether a Change in Control has occurred and the date of the occurrence of such Change in Control and any incidental matters thereto.
1.6 Company . The term Company shall have the meaning set forth in the preface.
1.7 Company Group Member . The term Company Group Member shall mean the Company and its Subsidiaries and Affiliates.
1.8 Disability . The term Disability shall have the meaning set forth in the Operating Agreement.
1.9 Employee and Employment . The term employee shall mean, without any inference as to negate Service Members status as an equity holder of the Company for all purposes hereunder (subject to the terms hereof) and for federal and other tax purposes, any employee (as defined in accordance with the regulations and revenue rulings then applicable under Section 3401(c) of the Code) of the Company or any of its Subsidiaries, and the term employment shall include service as a part- or full-time employee, member of the Board or board member to the Company or any of its Subsidiaries.
1.10 Fair Market Value . The term Fair Market Value shall have the meaning set forth in the Operating Agreement.
1.11 Good Reason . The term Good Reason shall have the meaning set forth in the Operating Agreement.
1.12 Issuance Closing . The term Issuance Closing shall have the meaning set forth in Section 2.2.
1.13 Issuance Closing Date . The term Issuance Closing Date shall have the meaning set forth in Section 2.2.
1.14 Huatai . The term Huatai shall have the meaning set forth in the Operating Agreement.
1.15 Initial Public Offering . The term Initial Public Offering shall have the meaning set forth in the Operating Agreement.
1.16 Master Signature Page . The term Master Signature Page shall mean the Service Member Master Signature Page to the Operating Agreement and this Agreement, in the form attached hereto as Annex A, duly executed by Service Member.
1.17 Operating Agreement . The term Operating Agreement shall mean the Amended and Restated Limited Liability Company Agreement of the Company in effect from time to time.
1.18 Permitted Transferee . The term Permitted Transferee shall have the meaning set forth in the Operating Agreement.
1.19 Person . The term Person shall have the meaning set forth in the Operating Agreement.
1.20 Restrictive Covenant Violation . The term Restrictive Covenant Violation shall have the meaning set forth in the Operating Agreement.
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1.21 Securities Act . The term Securities Act shall have the meaning set forth in the Operating Agreement.
1.22 Service Member . The term Service Member shall have the meaning set forth in the preface.
1.24 Sponsors . The term Sponsors shall mean (i) Huatai or any of its Affiliates, (ii) any other investment fund or account managed by Huatai or any of its Affiliates that invests alongside Huatai or any of its Affiliates (i); (iii) any investment vehicle formed and owned entirely by a Person described in clauses (i) or (ii); or (iv) upon any liquidation or any other distribution of any Person described in clause (i), (ii) or (iii), each of the partners, members or equity holders of any such Person.
1.25 Subsidiary . The term Subsidiary shall have the meaning set forth in the Operating Agreement.
1.26 Transfer . The term Transfer shall have the meaning set forth in the Operating Agreement.
1.27 Unvested Units . The term Unvested Units shall have the meaning set forth in the Operating Agreement.
1.28 Vested Units . The term Vested Units shall have the meaning set forth in the Operating Agreement.
2. Issuance of Incentive Units .
2.1 Issuance of Incentive Units.
(a) Pursuant to the terms and subject to the conditions set forth in this Agreement, Service Member hereby subscribes for and agrees to acquire, and the Company hereby agrees to issue to Service Member, and Service Member desires to accept the issuance from the Company of, on the Issuance Closing Date, the number of Incentive Units set forth on Service Members Master Signature Page in exchange for services performed for and to be performed for the Company and its Subsidiaries by Service Member. The Incentive Units issued hereunder shall initially be Unvested Units that will vest and become Vested Units as determined in accordance with Schedule 2 attached hereto.
(b) In the event Service Member ceases to provide services to the Company or its Subsidiaries for any reason, including but not limited to by reason of Service Members death or Disability, all Unvested Units held by Service Member (after giving effect to the additional vesting provided for in Schedule 2 (if any)) shall be forfeited as of the termination of Service Members service with the Company (or, to the extent a forfeiture is not permissible under the applicable law for any reason, the Unvested Units shall be subject to the Call Rights set forth in Article VIII of the Operating Agreement).
2.2 The Closing . The closing (the Issuance Closing ) of the issuance of Incentive Units hereunder shall take place on the Commitment Date specified in the Master Signature Page (the Issuance Closing Date ).
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2.3 Section 83(b) Election . Within ten (10) days after the Issuance Closing Date, Service Member shall provide the Company with a copy of a completed election under Section 83(b) of the Code in the form of Exhibit A to Service Members Master Signature Page. Service Member shall timely (and in any event within thirty (30) days of the Issuance Closing Date) file (via certified mail, return receipt requested) such election with the Internal Revenue Service and shall thereafter notify the Company it has made such timely filing. Service Member should consult his or her tax advisor regarding the consequences of a Section 83(b) election, as well as the receipt, vesting, holding and sale of Incentive Units.
2.4 Closing Conditions . Notwithstanding anything in this Agreement to the contrary, the Company shall be under no obligation to issue, sell or otherwise transfer to Service Member any Incentive Units unless (a) Service Member is an employee of, or consultant to, the Company or one of its Subsidiaries on the Issuance Closing Date; (b) the representations of Service Member contained in Section 3 hereof are true and correct in all material respects as of the Issuance Closing Date; (c) Service Member is not in breach of any agreement, obligation or covenant herein required to be performed or observed by Service Member on or prior to the Issuance Closing Date; and (d) the delivery to the Company of a Master Signature Page duly executed by Service Member.
3. Investment Representations and Covenants of Service Member .
3.1 Incentive Units Unregistered . Service Member acknowledges and represents that Service Member has been advised by the Company that:
(a) the offer and sale of the Incentive Units have not been registered under the Securities Act;
(b) the Incentive Units must be held indefinitely and Service Member must continue to bear the economic risk of the investment in the Incentive Units unless the offer and sale of such Incentive Units are subsequently registered under the Securities Act and all applicable state securities laws or an exemption from such registration is available (or as otherwise provided in the Operating Agreement);
(c) there is no established market for the Incentive Units and it is not anticipated that there will be any public market for the Incentive Units in the foreseeable future;
(d) a restrictive legend in the form set forth below and the legends set forth in the Operating Agreement shall be placed on the certificates, if any, representing the Incentive Units:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN REPURCHASE AND OTHER PROVISIONS SET FORTH IN AN AGREEMENT WITH THE ISSUER, AS AMENDED AND MODIFIED FROM TIME TO TIME, A COPY OF WHICH MAY BE OBTAINED BY THE HOLDER HEREOF AT THE ISSUERS PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE; and
(e) a notation shall be made in the appropriate records of the Company indicating that the Incentive Units are subject to restrictions on transfer and, if the Company should at some time in the future engage the services of a securities transfer agent, appropriate stop-transfer instructions will be issued to such transfer agent with respect to the Incentive Units.
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3.2 Additional Investment Representations . Service Member represents and warrants that:
(a) Service Members financial situation is such that Service Member can afford to bear the economic risk of holding the Incentive Units for an indefinite period of time, has adequate means for providing for Service Members current needs and personal contingencies, and can afford to suffer a complete loss of Service Members investment in the Incentive Units;
(b) Service Members knowledge and experience in financial and business matters are such that Service Member is capable of evaluating the merits and risks of the investment in the Incentive Units;
(c) Service Member understands that the Incentive Units are a speculative investment which involves a high degree of risk of loss of Service Members investment therein, there are substantial restrictions on the transferability of the Incentive Units (including those set forth in the Operating Agreement) and, on the Issuance Closing Date and for an indefinite period following the Issuance Closing, there will be no public market for the Incentive Units and, accordingly, it may not be possible for Service Member to liquidate Service Members investment in case of emergency, if at all;
(d) the terms of this Agreement provide that, if under certain circumstances Service Member ceases to be an employee of, or service provider to, the Company or its Subsidiaries, Unvested Units will be forfeited, and the Company has the right to repurchase the Incentive Units at a price which may, under certain circumstances, be less than the Fair Market Value thereof;
(e) Service Member understands and has taken cognizance of all the risk factors related to his or her acceptance of the Incentive Units and, other than as set forth in this Agreement, no representations or warranties have been made to Service Member or Service Members representatives concerning the Incentive Units or any Company Group Member or their prospects or other matters;
(f) Service Member has been given the opportunity to examine all documents and to ask questions of, and to receive answers from, the Company and its representatives concerning any Company Group Member (including the Operating Agreement and the organizational documents of the Company Group Members) and the terms and conditions of the acquisition of the Incentive Units and to obtain any additional information which Service Member deems necessary;
(g) all information which Service Member has provided to the Company and the Companys representatives concerning Service Member and Service Members financial position is complete and correct as of the date of this Agreement; and
(h) Service Member has indicated on Service Members Master Signature Page whether he or she is an accredited investor within the meaning of Rule 501(a) under the Securities Act.
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4. Certain Sales and Forfeitures Upon Termination of Employment . All Incentive Units issued or issuable pursuant to this Agreement will be subject to certain put and call rights pursuant to the terms and conditions set forth in Article VIII of the Operating Agreement.
5. Restrictive Covenants . Service Member acknowledges and recognizes the highly competitive nature of the businesses of the Company Group Members and accordingly agrees, in his or her capacity as an investor and equityholder in the Company, to the provisions of Schedule 1 to this Agreement. Service Member acknowledges and agrees that the Companys remedies at law for a breach or threatened breach of any of the provisions of Schedule 1 would be inadequate and the Company Group Members would suffer irreparable damages as a result of such breach or threatened breach. In recognition of this fact, Service Member agrees that, in the event of such a breach or threatened breach, in addition to any remedies at law, the Company, without posting any bond, shall be entitled to cease making any payments or providing any benefit otherwise required by this Agreement and obtain equitable relief in the form of specific performance, temporary restraining order, temporary or permanent injunction or any other equitable remedy which may then be available.
6. Miscellaneous .
6.1 Transfers . Prior to the Transfer of Incentive Units to a Permitted Transferee, Service Member shall deliver to the Company a written agreement of the proposed Transferee (a) evidencing such Persons undertaking to be bound by the terms of this Agreement and (b) acknowledging that the Incentive Units Transferred to such Person will continue to be Incentive Units for purposes of this Agreement in the hands of such Person. Any Transfer or attempted Transfer of Incentive Units in violation of any provision of this Agreement or the Operating Agreement shall be void, and the Company shall not record such Transfer on its books or treat any purported Transferee of such Incentive Units as the owner of such Incentive Units for any purpose.
6.2 Recapitalizations, Exchanges, Etc., Affecting Incentive Units . The provisions of this Agreement shall apply, to the full extent set forth herein with respect to the Incentive Units, to any and all securities of the Company or any successor or assign of the Company (whether by merger, consolidation, sale of assets or otherwise) which may be issued in respect of in exchange for, or in substitution of the Incentive Units, by reason of any dividend payable in Incentive Units, issuance of Incentive Units, combination, recapitalization, reclassification, merger, consolidation or otherwise.
6.3 Service Members Service Provision to the Company . Nothing contained in this Agreement shall be deemed to obligate any Company Group Member to employ Service Member in any capacity whatsoever or to prohibit or restrict any Company Group Member from terminating the service of Service Member at any time or for any reason whatsoever, with or without Cause.
6.4 Cooperation . Service Member agrees to cooperate with the Company in taking action reasonably necessary to consummate the transactions contemplated by this Agreement.
6.5 Binding Effect . The provisions of this Agreement shall be binding upon and accrue to the benefit of the parties hereto and their respective heirs, legal representatives, successors and assigns; provided , however, that no Transferee shall derive any rights under this Agreement unless and until such Transferee has executed and delivered to the Company a valid undertaking and becomes bound by the terms of this Agreement.
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6.6 Amendment; Waiver . This Agreement may be amended only by a written instrument signed by the parties hereto. No waiver by any party hereto of any of the provisions hereof shall be effective unless set forth in a writing executed by the party so waiving.
6.7 Governing Law; Jurisdiction . This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Delaware applicable to contracts made and to be performed therein. Any suit, action or proceeding with respect to this Agreement, or any judgment entered by any court in respect of any thereof, shall be brought in any court of competent jurisdiction in the State of Delaware, and each of the Company, Service Member hereby submits to the exclusive jurisdiction of such courts for the purpose of any such suit, action, proceeding or judgment. Service Member and the Company hereby irrevocably waives (i) any objections which it may now or hereafter have to the laying of the venue of any suit, action or proceeding arising out of or relating to this Agreement brought in any court of competent jurisdiction in the State of Delaware, (ii) any claim that any such suit, action or proceeding brought in any such court has been brought in any inconvenient forum and (iii) any right to a jury trial.
6.8 Notices . All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given when delivered by hand or overnight courier or three postal delivery days after it has been mailed by United States registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth below in this Agreement, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt.
If to the Company:
AssetMark Holdings, LLC
C/O Huatai Financial Holdings
Room 4201, 42/F, The Center
99 Queens Road Central, Hong Kong, China
Attention: Ms. Ying SUN, Mr. Joseph NG and Ms. Gigi WONG
Email Address: ying.sun@htsc.com; josephng@htsc.com; gigiwong@htsc.com
gigiwong@htsc.com
With a copy to, which shall not constitute notice to the Company:
Davis Polk & Wardwell LLP
450 Lexington Avenue
New York, NY 10017
Email: john.amorosi@davispolk.com
Attention: John Amorosi
7
and to:
Davis Polk & Wardwell LLP
2201 China World Office 2
1 Jian Guo Men Wai Avenue
Chaoyang District
Beijing 100004
China
Email: howard.zhang@davispolk.com
Attention: Howard Zhang
If to Service Member:
To the most recent address of Service Member set forth in the personnel records of the Company and its Subsidiaries.
Notices and other communications to any recipient hereunder may be delivered or furnished by electronic communication (including e-mail). Notices and other communications sent to an email address shall be deemed received upon the senders receipt of an acknowledgement from the intended recipient (such as by the return receipt requested function, as available, return e-mail or other written acknowledgment); provided that, if such notice or other communication is not sent during the normal business hours of the recipient, such notice or communication shall be deemed to have been sent at the opening of business on the next business day for the recipient.
6.9 Integration . This Agreement and the documents referred to herein (including those referred to in the Master Signature Page) or delivered pursuant hereto which form a part hereof, and the Annexes, Schedules and Exhibits hereto (which are incorporated herein by reference), contain the entire understanding of the parties with respect to the subject matter hereof and thereof; provided that, if the Company or its Affiliates is a party to one or more agreements with Service Member related to the matters subject to Section 5 and Schedule 1 , such other agreements shall remain in full force and effect and continue in addition to this Agreement. There are no restrictions, agreements, promises, representations, warranties, covenants or undertakings with respect to the subject matter hereof other than those expressly set forth herein and therein. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter, subject to the proviso in the first sentence of this Section.
6.10 Counterparts . This Agreement may be executed in separate counterparts, and by different parties on separate counterparts each of which shall be deemed an original, but all of which shall constitute one and the same instrument.
6.11 Injunctive Relief . Service Member and Service Members Permitted Transferees each acknowledges and agrees that a violation of any of the terms of this Agreement will cause the Company irreparable injury for which adequate remedy at law is not available. The Company and its Subsidiaries each acknowledges and agrees that a violation of any of the terms of this Agreement will cause Service Member irreparable injury for which adequate remedy at law is not available. Accordingly, it is agreed that the Company and Service Member shall be entitled to an injunction, restraining order or other equitable relief to prevent breaches of the provisions of this Agreement and to enforce specifically the terms and provisions hereof in any court of competent jurisdiction in the United States or any state thereof, in addition to any other remedy to which it may be entitled at law or equity.
8
6.12 Rights Cumulative; Waiver . The rights and remedies of Service Member and the Company under this Agreement shall be cumulative and not exclusive of any rights or remedies which either would otherwise have hereunder or at law or in equity or by statute, and no failure or delay by either party in exercising any right or remedy shall impair any such right or remedy or operate as a waiver of such right or remedy, nor shall any single or partial exercise of any power or right preclude such partys other or further exercise or the exercise of any other power or right. The waiver by any party hereto of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any preceding or succeeding breach and no failure by either party to exercise any right or privilege hereunder shall be deemed a waiver of such partys rights or privileges hereunder or shall be deemed a waiver of such partys rights to exercise the same at any subsequent time or times hereunder.
* * * * *
9
SCHEDULE 1
Restrictive Covenants
1. Confidentiality; Non-Solicit; Non-Disparagement .
(a) For the purposes of this Schedule 1 , any reference to the Company shall mean the Company and its Subsidiaries, collectively. In view of the fact that Service Members work for the Company brings Service Member into close contact with many confidential affairs of the Company not readily available to the public, and plans for further developments, Service Member agrees:
(i) Service Member will not at any time (whether during or after Service Members employment or service with the Company) (x) retain or use for the benefit, purposes or account of Service Member or any other person; or (y) disclose, divulge, reveal, communicate, share, transfer or provide access to any person outside the Company (other than its professional advisers who are bound by confidentiality obligations), any non-public, proprietary or confidential information, including without limitation (a) financial information and projections, (b) business strategies, (c) products or services, (d) fees, costs and pricing structures, (e) designs, (f) analysis, (g) drawings, photographs and reports, (h) computer software, including operating systems, applications and program listings, (i) flow charts, manuals and documentation, (j) data bases, (k) accounting and business methods, (l) inventions, devices, new developments, methods and processes, whether patentable or unpatentable and whether or not reduced to practice, (m) customers and clients and customer or client lists, (n) copyrightable works, (o) all technology and trade secrets, and (p) all similar and related information in whatever form concerning the past, current or future business, activities and operations of the Company Group Members, its subsidiaries or affiliates and/or any third party that has disclosed or provided any of same to the Company Group Members on a confidential basis ( Confidential Information ) without the prior written authorization of the Board.
(ii) Confidential Information shall not include any information that is (a) generally known to the industry or the public other than as a result of Service Members breach of this covenant or any breach of other confidentiality obligations by third parties; (b) made legitimately available to Service Member by a third party without breach of any confidentiality obligation; or (c) required by law to be disclosed (including via subpoena); provided that Service Member shall give prompt notice to the Company of such requirement of law, disclose no more information than is so required, and cooperate with any attempts by the Company to obtain a protective order or similar treatment.
(iii) Except as required by law, Service Member will not disclose to anyone, other than Service Members immediate family and legal or financial advisors, the existence or contents of this Agreement; provided that Service Member may disclose to any prospective future employer the notice provisions of this Schedule 1 if they agree to maintain the confidentiality of such terms.
(iv) Upon termination of Service Members employment or service with the Company for any reason, Service Member shall (x) cease and not thereafter commence use of any Confidential Information or intellectual property (including without limitation, any patent, invention, copyright, trade secret, trademark, trade name, logo, domain name or other source indicator) owned or used by the Company Group Members; (y) immediately destroy, delete, or return to the Company, at the Companys option, all originals and copies in any form or medium (including memoranda, books, papers, plans, computer files, letters and other data) in Service Members possession or control (including any of the foregoing stored or located in Service Members office, home, laptop or other computer, whether or not Company Group Members property) that contain Confidential Information or otherwise relate to the business of the Company Group Members, except that Service Member may retain only those portions of any personal notes, notebooks and diaries that do not contain any Confidential Information and his or her rolodex (or other physical or electronic address book); and (z) fully cooperate with the Company regarding the delivery or destruction of any other Confidential Information not within Service Members possession or control of which Service Member is or becomes aware.
(b) Service Member acknowledges and recognizes the highly competitive nature of the businesses of the Company Group Members and accordingly agrees as follows:
(i) Service Member will not, within twelve (12) months following the termination of his or her employment or service with the Company for any reason (the Post-Termination Period ) or during Service Members employment or service (collectively with the Post-Termination Period, the Restricted Period ), whether as an employee, consultant, officer, director, stockholder, member, partner, proprietor, associate, representative or in any other capacity whatsoever, Service Member will not influence or attempt to influence customers of the Company Group Members, either directly or indirectly, to divert their business to any individual, partnership, firm, corporation or other entity then in competition with the business of the Company Group Members.
(ii) During the Restricted Period, Service Member will not initiate or respond to communications with any of the employees of the Company Group Members during the twelve (12)-month period prior to the termination of such employees employment or service with the Company, for the purpose of soliciting such employee, or facilitating the hiring of any such employee, to work for any other business, individual, partnership, firm, corporation, or other entity.
Notwithstanding anything to the contrary in this Agreement, Service Member may, directly or indirectly own, solely as an investment, securities of any Person which are publicly traded on a national or regional stock exchange or on the over-the-counter market if Service Member (i) is not a controlling person of, or a member of a group which controls, such person and (ii) does not, directly or indirectly, own five percent (5%) or more of any class of securities of such Person.
For the avoidance of doubt, the Board may waive, through written consent, a portion of or all of the Service Members obligations under this Agreement.
(c) Service Member will not, other than as required by law or by order of a court or other competent authority, make or publish, or cause any other person to make or publish, any statement that is disparaging or that reflects negatively upon the Company Group Members, or that is or reasonably would be expected to be damaging to the reputation of the Company Group Members.
(d) It is expressly understood and agreed that although Service Member and the Company consider the restrictions contained in this Schedule 1 to be reasonable, if a final judicial determination is made by a court of competent jurisdiction, that the time or territory or any other restriction contained in this Agreement is an unenforceable restriction against Service Member, the provisions of this Agreement shall not be rendered void but shall be deemed amended to apply as to such maximum time and territory and to such maximum extent as such court may judicially determine or indicate to be enforceable. Alternatively, if any court of competent jurisdiction finds that any restriction contained in this Agreement is unenforceable, and such restriction cannot be amended so as to make it enforceable, such finding shall not affect the enforceability of any of the other restrictions contained herein.
(e) The period of time during which the provisions of this Schedule 1 shall be in effect shall be extended by the length of time during which Service Member is in breach of the terms hereof as determined by any court of competent jurisdiction on the Companys application for injunctive relief.
2. Specific Performance; Survival .
(a) Service Member acknowledges and agrees that the Company Group Members remedies at law for a breach or threatened breach of any of the provisions of this Schedule 1 would be inadequate and the Company Group Members would suffer irreparable damages as a result of such breach or threatened breach. In recognition of this fact, Service Member agrees that, in the event of such a breach or threatened breach, in addition to any remedies at law, the Company Group Members, without posting any bond, shall be entitled to suspend making any payments or providing any benefit otherwise required by this Agreement and obtain equitable relief in the form of specific performance, temporary restraining order, temporary or permanent injunction or any other equitable remedy which may then be available. The Company Group Members are intended to be third-party beneficiaries of this Agreement, and this Agreement may be enforced by each of them in accordance with the terms hereof in respect of the rights issued to such Company Group Member hereunder.
(b) The provisions of this Schedule 1 shall survive the termination of Service Members employment and service for any reason.
SCHEDULE 2
Vesting Schedule
The Incentive Units shall be divided into two tranches, as follows: (i) one half (1/2) of the Incentive Units shall be Time Vesting Units and (ii) one half (1/2) of the Incentive Units shall be Performance Vesting Units .
1. Time Vesting Units .
(c) The Time Vesting Units shall become vested in three (3) pro-rata equal installments of one third (1/3) on each of the third (3 rd ), fourth (4 th ) and fifth (5 th ) anniversaries of May 1, 2018, provided Service Member is then employed by or performing services for the Company or its Subsidiaries. There shall be no proportionate or partial vesting in the periods prior to each vesting date and all vesting shall occur only on the appropriate vesting date, subject to Service Members continued employment by or performance of service for the Company or its Subsidiaries on each applicable vesting date.
(d) Notwithstanding the foregoing, if Service Member is employed by or providing services for the Company or its Subsidiaries on the date of a Change in Control, all Unvested Units that are Time Vesting Units will become Vested Units.
2. Performance Vesting Units .
(a) The Performance Vesting Units shall become vested as of the first (1 st ) of February that occurs immediately following the fourth (4 th ), fifth (5 th ), sixth (6 th ), seventh (7 th ) and eighth (8 th ) anniversaries of the IRR Base Date, respectively (each, a Performance Vesting Date ); provided that Service Member is employed by or performing services for the Company or its Affiliates as of such Performance Vesting Date, as follows:
(i) if the IRR is under eight percent (8%) (net of any dilution of the Incentive Units), none of the Performance Vesting Units will vest;
(ii) if the IRR is eight percent (8%) (net of any dilution of the Incentive Units), then fifty percent (50%) of the Performance Vesting Units will vest;
(iii) if the IRR is at least twelve percent (12%) (net of any dilution of the Incentive Units), then all of the Performance Vesting Units will vest; and
(iv) if the IRR is more than eight percent (8%), but less than twelve percent (12%) (in each case, net of any dilution of the Incentive Units), then between fifty percent (50%) and one hundred percent (100%) of the Performance Vesting Units will vest with linear interpolation vesting between the two IRR vesting tiers.
The following example is provided for purposes of illustration only.
|
As of the fourth (4 th ) anniversary of the IRR Base Date, the IRR is seven percent (7%) (net of any dilution of the Incentive Units). Therefore, none of the Performance Vesting Units vest. |
|
As of the fifth (5 th ) anniversary of the IRR Base Date, the IRR is eight percent (8%) (net of any dilution of the Incentive Units). Therefore, 50% of the Performance Vesting Units vest. |
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As of the sixth (6 th ) anniversary of the IRR Base Date, the IRR is ten percent (10%) (net of any dilution of the Incentive Units). Therefore, an additional twenty-five percent (25%) of the Performance Vesting Units vest (and so a total of seventy-five percent (75%) of the Performance Vesting Units have vested). |
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As of the seventh (7 th ) anniversary of the IRR Base Date, the IRR is nine percent (9%) (net of any dilution of the Incentive Units). Therefore, no additional Performance Vesting Units vest. |
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As of the eighth (8 th ) anniversary of the IRR Base Date, the IRR is twelve percent (12%) (net of any dilution of the Incentive Units). Therefore, an additional twenty-five percent (25%) of the Performance Vesting Units vest (and so all of the Performance Vesting Units have vested). |
(b) Notwithstanding the foregoing, upon a Change in Control while Service Member is performing services for the Company or its Subsidiaries, (i) all Time Vesting Units that are Unvested Units shall vest and (ii) all Performance Vesting Units that are Unvested Units shall become vested in accordance with Section 2(a) based on the IRR resulting from the Huatai Proceeds received in connection with such Change in Control.
(c) Notwithstanding the foregoing, upon an Initial Public Offering, all Performance Vesting Units that remain unvested at the time of the Initial Public Offering will continue to have the opportunity to vest from time to time after the Initial Public Offering through the final Performance Vesting Date, based on the market price of the Companys equity during such period and the related IRR calculations in such Performance Vesting Units.
3. Discretionary Accelerated Vesting . The Board may, in its sole discretion, vest any and/or all of the Unvested Units hereunder at such time or such other time or times and on such other conditions as the Board determines.
4. Board Determinations . The Board shall in good faith make all determinations necessary or appropriate to determine whether the Performance Vesting Units have vested. All computations shall be made on a pro forma basis taking into account the vesting and payment of any entitlements under outstanding incentive equity awards of the Company Group Members, such that, if the foregoing performance goals are achieved, but, after the vesting and payment of any entitlements under outstanding incentive equity awards of the Company Group Members resulting from such achievement, such performance goals would no longer be achieved, then such vesting shall not take effect. The Boards determinations shall be final, binding and conclusive upon all Persons, absent manifest error or bad faith.
5. Forfeitures . All vesting of Incentive Units shall cease immediately upon termination of Service Members employment with the Company or its Subsidiaries for any reason, and all Unvested Units shall be automatically forfeited in accordance with Section 2.1(b) of this Agreement. Subject to earlier termination and forfeiture as provided herein, to the extent that any portion of the Incentive Units do not become vested in accordance with the provisions of this Schedule 2 , such Unvested Units shall be automatically forfeited and terminated as of the Wind-Up Date without any consideration being paid therefor and otherwise without any further action of the Company whatsoever.
6. Definitions . For purposes of this Schedule 2 , the following terms shall have the following meanings:
(a) IRR means as of any measurement date, the interest rate (compounded annually) which, when used as the discount rate to calculate the sum of (i) the net present value as of the date thereof of the sum of (x) the aggregate value of all Huatai Proceeds and (y) the aggregate amount of all Sponsor Investments plus (ii) the Fair Market Value of the Company held by the Sponsors (subject to clause (C) below), causes such value to equal zero. For purposes of this, (w) Huatai Proceeds will be positive numbers, (x) Sponsor Investments will be negative numbers, (y) Fair Market Value will be a positive number and (z) Huatai Proceeds and Sponsor Investments will be deemed to have been received or made on the first day of the month nearest to the actual date of such receipt or payment. For the avoidance of doubt, in all instances, (A) Fair Market Value shall exclude the aggregate value of all Huatai Proceeds, (B) the calculation of IRR shall not include the amount of any taxes paid or payable in respect of distributions by the Company, which distributions are in turn distributed, in whole or in part, to the Sponsor and (C) if as of any measurement date a Change in Control has occurred, the calculation of Fair Market Value shall be based on the Fair Market Value of the Company as a whole and shall not be limited to the portion of the Company held by the Sponsors. IRR shall be calculated with respect to the IRR Base Date.
(b) Sponsor Investments means the aggregate dollar amount of all loans made to, guaranties of debt of (to the extent the guaranty is called and drawn), cash, equity and working capital contributed to or invested in, the Company and its Affiliates by Huatai.
(c) Huatai Proceeds means the aggregate cash consideration received by the Sponsors (excluding any tax distributions made pursuant to the terms of the Operating Agreement and taxes paid or payable by the Sponsors in respect of any amount distributed or distributable to the Sponsors) in respect of Sponsor Investments (i) as of a Change in Control or an Initial Public Offering (after taking into account any dilution resulting from the vesting of any outstanding incentive equity awards), and (ii) prior to a Change in Control or an Initial Public Offering, upon payment to the Sponsors of any extraordinary cash dividend or significant distribution or the proceeds of any partial liquidation of the Company or any of its Subsidiaries.
(d) Wind-Up Date means the earlier of (i) the first date on which none of the Sponsors hold any equity securities of the Company and none of the Sponsors hold any equity interest received in respect of any such equity securities held or previously held by the Sponsors, or (ii) a sale, transfer, conveyance or other disposition, in one or a series of related transactions, of all of the Companys assets to a Person not affiliated with any of the Sponsors.
(e) IRR Base Date means November 18, 2016.
ANNEX A
Form of Service Member Master Signature Page
ASSETMARK HOLDINGS, LLC
SERVICE MEMBER MASTER SIGNATURE PAGE
(the Service Member)
Dated as of: (the Commitment Date)
A. |
The individual named above and signatory hereto (the Service Member) agrees to be bound by: |
(1) |
The Amended and Restated Limited Liability Company Agreement of AssetMark Holdings, LLC, a Delaware limited liability company (the Company), dated as of October 31, 2016, in the form attached hereto (as amended from time to time, the Operating Agreement), as a Service Member (as defined in the Operating Agreement); and |
(2) |
the Service Member Unit Issuance Agreement (Incentive Units), among the Company and the Service Member, dated as of the Commitment Date, in the form attached hereto (the Incentive Unit Agreement and, together with the Operating Agreement, the Equity Documents). |
B. |
The Service Member and the Company agree that the following information is hereby incorporated by reference into the Equity Documents: |
Class of Units |
Number of Units |
Class C Common Unit Threshold |
Amount Contributed (if any) |
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Class C Units |
C. |
The Service Member agrees that, upon the request of the Company, Service Member shall promptly and duly execute and deliver such further instruments and documents and take such further actions as the Company may reasonably request for the purpose of giving effect to the foregoing. |
D. |
The Company hereby agrees and confirms its consent to the admission of Service Member as a Service Member in accordance with Article 3 of the Operating Agreement. |
[Remainder of Page Intentionally Blank]
1 You are an accredited investor if you meet any of the following tests:
1. |
You are a director or executive officer of the Company; |
2. |
You have an individual net worth, or joint net worth with your spouse, at the time of your purchase exceeding $1,000,000. For purposes of this item, net worth means the excess of total assets at fair market value, including automobiles and other personal property but excluding the value of the primary residence of such natural person (and including property owned by a spouse other than the primary residence of the spouse), over total liabilities. For purposes of calculating net worth, the amount of any mortgage or other indebtedness secured by an investors primary residence should be not included as a liability, except to the extent that (i) the fair market value of the residence is less than the amount of such mortgage or other indebtedness or (ii) the amount of such mortgage or other indebtedness outstanding at the time of sale of securities exceeds the amount outstanding 60 days before such time, other than as a result of the acquisition of the primary residence, in which case the amount of such excess shall be included as a liability; |
3. |
You had individual income (excluding your spouse) in excess of $200,000 in each of the last two calendar years and have a reasonable expectation of reaching the same income level in the current calendar year; or |
4. |
You and your spouse had joint income in excess of $300,000 in each of the last two calendar years and have a reasonable expectation of reaching the same income level in the current year. |
Agreed and accepted: |
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Executed by: |
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AssetMark Holdings LLC |
By: |
Name: |
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Title: |
[ Signature Page to [Name] Unit Issuance Agreement ]
EXHIBIT A
PROTECTIVE ELECTION TO INCLUDE MEMBERSHIP INTEREST IN GROSS
INCOME PURSUANT TO SECTION 83(b) OF THE
INTERNAL REVENUE CODE
On August 21, 2018 the undersigned executed a membership unit issuance agreement (the Unit Issuance Agreement ) pursuant to which equity interests (the Incentive Units) in AssetMark Holdings, LLC (the Company ) were issued in connection with the provision of services by the undersigned to or for the benefit of the Company. Pursuant to the Unit Issuance Agreement and the Amended and Restated Limited Liability Company Agreement of the Company, dated as of October 31, 2016 (the Operating Agreement ), the holder of the Incentive Units is entitled to an interest in Company capital exactly equal to the amount paid or to be paid therefor and an interest in Company profits, and so the Incentive Units qualify as profits interests within the meaning of Revenue Procedure 93-27 as of the date that the Incentive Units are issued. If the relationship under the Unit Issuance Agreement ceases, then under certain circumstances the amount that the holder of the Incentive Units will be entitled to receive as a result of a disposition of the Incentive Units may be less than the fair market value thereof. Hence, the Incentive Units are subject to a substantial risk of forfeiture.
Based on Section 83 of the Internal Revenue Code of 1986, as amended (the Code ), the Treasury Regulations promulgated thereunder, Treasury Regulation §1.721-1(b), Proposed Treasury Regulation §1.721-1(b)(1) and Revenue Procedures 93-27 and 2001-43, the undersigned believes that neither the undersigneds execution of the Unit Issuance Agreement nor the issuance of the Incentive Units pursuant thereto is subject to the provisions of Section 83 of the Code. In the event that execution of the Unit Issuance Agreement or issuance of the Incentive Units is so treated, however, the undersigned desires to have such execution or issuance taxed under the provisions of Section 83(b) of the Code at the time the undersigned executed the Unit Issuance Agreement and the Incentive Units were issued.
Therefore, pursuant to Section 83(b) of the Code and Treasury Regulation §1.83-2 promulgated thereunder, the undersigned hereby makes an election, with respect to the Incentive Units, to report as taxable income for the calendar year 2018 the excess (if any) of the value of the Incentive Units on August 21, 2018 over the purchase price thereof.
The following information is supplied in accordance with Treasury Regulation §1.83-2(e):
(a) The name, address and social security number of the undersigned is as follows:
Social Security No.:
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A-1
(b) A description of the property with respect to which the election is being made: The Incentive Units, including any rights therein that the holder of such units acquired upon the execution of the Unit Issuance Agreement and the Operating Agreement.
(c) The date on which the property was transferred: August 21, 2018. The taxable year for which the election is made: calendar year 2018.
(d) The restrictions to which the property is subject: If the employment relationship between the undersigned and the Company and its subsidiaries ends, then under certain circumstances the amount that the holder of the Incentive Units will be entitled to receive as a result of a disposition of the Incentive Units may be less than the fair market value thereof.
(e) The fair market value of the property with respect to which the election is being made, determined without regard to any lapse restrictions and in accordance with Revenue Procedure 93-27, on the date such property is transferred: zero ($0).
(f) The amount paid for such property: zero ($0).
[END OF PAGE]
[SIGNATURE PAGE FOLLOWS]
SIGNATURE PAGE TO SECTION 83(b) ELECTION
A copy of this election has been furnished to the Company and each other person to whom a copy is required to be furnished pursuant to Treasury Regulation 1.83-2(d).
Signature: |
Print Name: |
Dated: |
Exhibit 10.10
ASSETMARK FINANCIAL HOLDINGS, INC.
2019 EQUITY INCENTIVE PLAN
Section 1. Purpose and Eligibility .
(a) General Purpose. The purpose of this AssetMark Financial Holdings, Inc. 2019 Equity Incentive Plan (as amended from time to time, the Plan ) is to motivate and reward employees and other individuals to perform at the highest level and contribute significantly to the success of AssetMark Financial Holdings, Inc. (the Company ), thereby furthering the best interests of the Company and its shareholders.
(b) Eligible Award Recipients. The persons eligible to receive Awards are the Employees, Consultants and Directors of the Company and its Affiliates, and such other individuals designated by the Administrator who are reasonably expected to become Employees, Consultants and Directors after the receipt of Awards.
(c) Available Awards. The Plan permits the grant of Options, SARs, Restricted Stocks, RSUs, Performance Awards, Other Cash-Based Awards or Other Stock-Based Awards.
Section 2. Definitions . As used in the Plan, the following terms shall have the meanings set forth below:
(a) Affiliate means, with respect to a Person, any entity that, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such Person (or, if no Person is specified, the Company).
(b) Award means any Option, SAR, Restricted Stock, RSU, Performance Award, Other Cash-Based Award or Other Stock-Based Award granted under the Plan.
(c) Award Agreement means any written agreement, contract or other instrument or document (including in electronic form) evidencing an Award granted under the Plan.
(d) Beneficial Owner has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the beneficial ownership of any particular Person, such Person shall be deemed to have beneficial ownership of all securities that such Person has the right to acquire by conversion or exercise of other securities, whether such right is currently exercisable or is exercisable only after the passage of time. The terms Beneficial Ownership, Beneficially Owns and Beneficially Owned have a corresponding meaning.
(e) Beneficiary means a Person entitled to receive payments or other benefits or exercise rights that are available under the Plan in the event of a Participants death. If no such Person can be named or is named by a Participant, or if no Beneficiary designated by a Participant is eligible to receive payments or other benefits or exercise rights that are available under the Plan at a Participants death, such Participants Beneficiary shall be such Participants estate.
1
(f) Board means the Board of Directors of the Company.
(g) Cause means, with respect to a Participant, cause as defined in such Participants Service Agreement, if any, or if not so defined, except as otherwise provided in such Participants Award Agreement, such Participants: (i) serious misconduct in the performance of his or her employment duties, (ii) conviction of, plea of guilty to, or plea of nolo contendere to (x) a felony or (y) a misdemeanor involving moral turpitude, fraud or dishonesty, (iii) commission of an act involving personal dishonesty that results in financial, reputational or other harm to the Company or its Affiliates; (iv) breach of any applicable term set forth in such Participants Service Agreement, if any, or (v) breach or violation of any rule, policy, procedure or guideline of the Company or its Affiliates.
(h) Change in Control means the occurrence of any one or more of the following events:
(i) the acquisition by any Person of Beneficial Ownership, directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such Person any securities acquired directly from the Company or its Affiliates other than in connection with the acquisition by the Company or its Affiliates of a business) representing 50% or more of the combined voting power of the then outstanding voting securities of the Company entitled to vote in the election of directors (the Outstanding Company Voting Securities ); provided, however that for purposes of this Plan any acquisition which complies with clauses (A), (B) and (C) of subsection (v) of this definition shall not constitute a Change of Control;
(ii) a majority of the members of the Board are replaced during any twelve-month period by directors whose appointment or election is not endorsed by a majority of the Board before the date of appointment or election;
(iii) the date which is ten (10) business days prior to the consummation of a complete liquidation or dissolution of the Company;
(iv) the direct or indirect sale, transfer, conveyance or disposition (other than by way of merger or consolidation) by the Company of all or substantially all of the Companys assets in which any Person acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such Person) assets from the Company that have a total gross fair market value equal to more than 50% of the total gross fair market value of all of the assets of the Company immediately prior to such acquisition or acquisitions; or
(v) the consummation of a reorganization, merger, consolidation or similar form of corporate transaction involving the Company that requires the approval of the Companys shareholders, whether for such transaction or the issuance of securities in the transaction (a Business Combination ), unless immediately following such Business Combination: (A) more than 50% of the
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total voting power of (I) the entity resulting from such Business Combination (the Surviving Company ), or (II) if applicable, the ultimate parent entity that directly or indirectly has beneficial ownership of sufficient voting securities eligible to elect a majority of the members of the board of directors (or the analogous governing body) of the Surviving Company (the Parent Company ), is represented by the Outstanding Company Voting Securities that were outstanding immediately prior to such Business Combination (or, if applicable, is represented by shares into which the Outstanding Company Voting Securities were converted pursuant to such Business Combination), and such voting power among the holders thereof is in substantially the same proportion as the voting power of the Outstanding Company Voting Securities among the holders thereof immediately prior to the Business Combination; (B) no Person (other than any employee benefit plan sponsored or maintained by the Surviving Company or the Parent Company) is or becomes the Beneficial Owner, directly or indirectly, of 50% or more of the total voting power of the outstanding voting securities eligible to elect members of the board of directors of the Parent Company (or the analogous governing body) (or, if there is no Parent Company, the Surviving Company); and (C) at least a majority of the members of the board of directors (or the analogous governing body) of the Parent Company (or, if there is no Parent Company, the Surviving Company) following the consummation of the Business Combination were Board members at the time of the Boards approval of the execution of the initial agreement providing for such Business Combination; or
In no event, however shall a Change in Control be deemed to occur as a result of any acquisition (w) by the Company, Huatai International Investment Holding Limited, or any of their respective Affiliates, (x) by any employee benefit plan sponsored or maintained by the Company or any subsidiary, (y) by any underwriter temporarily holding securities pursuant to an offering of such securities, or (z) in respect of an Award held by a particular Participant, by the Participant or any group of persons including the Participant (or any entity controlled by the Participant or any group of persons including the Participant);
Notwithstanding the foregoing or any provision of any Award Agreement to the contrary, for any Award that provides for accelerated distribution on a Change in Control of amounts that constitute deferred compensation (as defined in Section 409A of the Code), if the event that constitutes such Change in Control does not also constitute a change in the ownership or effective control of the Company, or in the ownership of a substantial portion of the Companys assets (in either case, as defined in Section 409A of the Code), such amount shall not be distributed on such Change in Control but instead shall vest as of such Change in Control and shall be distributed on the scheduled payment date specified in the applicable Award Agreement, except to the extent that earlier distribution would not result in the Participant who holds such Award incurring interest or additional tax under Section 409A of the Code.
(i) Code means the Internal Revenue Code of 1986, as amended from time to time, and the rules, regulations and guidance thereunder. Any reference to a provision in the Code shall be deemed to include a reference to any regulations promulgated thereunder and any successor provision thereto.
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(j) Committee means the compensation committee of the Board or such other committee of one or more members of the Board as may be designated by the Board from time to time to administer the Plan in accordance with Section 4 hereof.
(k) Common Stock means the Companys common stock, $0.001 par value per share.
(l) Company means AssetMark Financial Holdings, Inc., a Delaware corporation, or any successor thereto.
(m) Consultant means any individual, including an advisor, who is providing services to the Company or any Subsidiary other than as an Employee or Director, and who may be offered securities registerable pursuant to a registration statement on Form S-8 under the Securities Act.
(n) Director means any member of the Board.
(o) Disability means, unless the applicable Award Agreement provides otherwise, that the Participant is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment; provided, however, that for purposes of determining the term of an Incentive Stock Option, the term Disability shall have the meaning ascribed to it under Section 22(e)(3) of the Code. The determination of whether an individual has a Disability shall be determined under procedures established by the Administrator. Except in situations where the Administrator is determining Disability for purposes of the term of an Incentive Stock Option within the meaning of Section 22(e)(3) of the Code, the Administrator may rely on any determination that a Participant is disabled for purposes of benefits under any long-term disability plan maintained by the Company or any Affiliate in which a Participant participates.
(p) Effective Date means the date on which the registration statement covering the initial public offering of the Shares is declared effective pursuant to Section 12(g) of the Exchange Act by the Securities and Exchange Commission.
(q) Employee means any individual, including any officer or Director, employed by the Company or any Subsidiary or any prospective employee or officer who has accepted an offer of employment from the Company or any Subsidiary, with the status of employment determined based upon such factors as are deemed appropriate by the Committee in its discretion, subject to any requirements of the Code or applicable laws. Mere service as a Director or payment of a directors fee by the Company or an Affiliate will not be sufficient to constitute employment by the Company or an Affiliate.
(r) Exchange Act means the Securities Exchange Act of 1934, as amended.
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(s) Fair Market Value means, as of any date, (i) with respect to Shares, the closing price of a Share on the trading day immediately preceding the date of determination (or, if there is no reported sale on such date, on the last preceding date on which any reported sale occurred), on the principal stock market or exchange on which the Shares are quoted or traded, or if Shares are not so quoted or traded, the fair market value of a Share as determined by the Committee, and (ii) with respect to any property other than Shares, the fair market value of such property determined by such methods or procedures as shall be established from time to time by the Committee.
(t) Grant Date means the date on which the Administrator adopts a resolution, or takes other appropriate action, expressly granting an Award to a Participant that specifies the key terms and conditions of the Award or, if a later effective date is set forth in such resolution, then such effective date as is set forth in such resolution.
(u) Incentive Stock Option means an option representing the right to purchase Shares from the Company, granted pursuant to Section 6, that meets the requirements of Section 422 of the Code.
(v) Intrinsic Value with respect to an Option or SAR Award means (i) the excess, if any, of the price or implied price per Share in a Change in Control or other event over (ii) the exercise or hurdle price of such Award multiplied by (iii) the number of Shares covered by such Award.
(w) Non-Qualified Stock Option means an option representing the right to purchase Shares from the Company, granted pursuant to Section 6, that is not an Incentive Stock Option.
(x) Option means an Incentive Stock Option or a Non-Qualified Stock Option.
(y) Optionholder means a person to whom an Option is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Option.
(z) Other Cash-Based Award means an Award granted pursuant to Section 11, including cash awarded as a bonus or upon the attainment of specified performance criteria or otherwise as permitted under the Plan.
(aa) Other Stock-Based Award means an Award granted pursuant to Section 11 that may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, Shares or factors that may influence the value of Shares, including convertible or exchangeable debt securities, other rights convertible or exchangeable into Shares, purchase rights for Shares, dividend rights or dividend equivalent rights or Awards with value and payment contingent upon performance of the Company or business units thereof or any other factors designated by the Committee.
(bb) Participant means an eligible person to whom an Award is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Award.
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(cc) Performance Award means an Award granted pursuant to Section 10.
(dd) Performance Period means the period established by the Committee with respect to any Performance Award during which the performance goals specified by the Committee with respect to such Award are to be measured.
(ee) Permitted Transferee means (i) a member of the Optionholders immediate family (child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including adoptive relationships), (ii) any person sharing the Optionholders household (other than a tenant or employee), (iii) a trust in which these persons have more than 50% of the Beneficial Ownership interest, (iv) a foundation in which these persons (or the Optionholder) control the management of assets, (v) any other entity in which these persons (or the Optionholder) own more than 50% of the voting interests; and (vi) such other transferees as may be permitted by the Administrator in its sole discretion.
(ff) Person has the meaning ascribed to such term in Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof, including a group as defined in Section 13(d) thereof.
(gg) Plan means this AssetMark Financial Holdings, Inc. 2019 Equity Incentive Plan, as amended from time to time.
(hh) Restricted Stock means any Share subject to certain restrictions and forfeiture conditions, granted pursuant to Section 8.
(ii) Restricted Stock Unit or RSU means a right granted pursuant to Section 9. Each RSU represents an unfunded and unsecured right to receive cash, Shares or a combination thereof, in an amount equal to the Fair Market Value of one Share. Awards of RSUs may include the right to receive dividend equivalents.
(jj) Service Agreement means any employment, severance, consulting or similar agreement between the Company or any of its Affiliates and a Participant.
(kk) Share means a share of the Companys Common Stock.
(ll) Stock Appreciation Right or SAR means a right granted pursuant to Section 7. Each SAR represents an unfunded and unsecured right to receive upon exercise, cash, Shares or a combination thereof, in an amount equal to the excess of (i) the Fair Market Value of one Share on the date of exercise or settlement over (ii) the exercise or hurdle price of the right on the Date of Grant.
(mm) Subsidiary means an entity of which the Company directly or indirectly holds all or a majority of the value of the outstanding equity interests of such entity or a majority of the voting power with respect to the voting securities of such entity. Whether employment by or service with a Subsidiary is included within the scope of the Plan shall be determined by the Committee.
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(nn) Substitute Award means an Award granted in assumption of, or in substitution for, an outstanding award previously granted by a company or other business acquired by the Company or with which the Company combines.
(oo) Termination of Service means the cessation of a Participants performance of services as an Employee, Director or Consultant for the Company or any Subsidiary; provided , however , that in the case of a Participant who is an Employee, the transfer of employment from the Company to a Subsidiary, from a Subsidiary to the Company, from one Subsidiary to another Subsidiary or, unless the Committee determines otherwise, the cessation of employee status but the continuation of the performance of services for the Company or a Subsidiary as a Director or Consultant shall not be deemed a cessation of service that would constitute a Termination of Service; provided , further , that a Termination of Service shall be deemed to occur for a Participant employed by, or performing services for, a Subsidiary when such Subsidiary ceases to be a Subsidiary unless such Participants employment or service continues with the Company or another Subsidiary. Notwithstanding the foregoing, with respect to any Award subject to Section 409A of the Code (and not exempt therefrom), a Termination of Service occurs when a Participant experiences a separation of service (as such term is defined under Section 409A of the Code).
Section 3. Eligibility .
(a) Any Employee, Director or Consultant shall be eligible to be selected to receive an Award under the Plan, to the extent that an offer or receipt of an Award is permitted by applicable law, stock market or exchange rules and regulations or accounting or tax rules and regulations.
(b) Holders of options and other types of awards granted by a company or other business that is acquired by the Company or with which the Company combines are eligible for grants of Substitute Awards under the Plan to the extent permitted under applicable regulations of any stock exchange on which the Company is listed.
Section 4. Administration .
(a) Administration of the Plan . The Plan shall be administered by the Committee. All decisions of the Committee with respect to the Plan shall be final, conclusive and binding upon all parties, including the Company, its shareholders, Participants and any Beneficiaries thereof, unless determined by a court having jurisdiction to be arbitrary and capricious.
(b) Delegation of Authority . To the extent permitted by applicable law, including under Section 157(c) of the Delaware General Corporation Law, the Committee may delegate to one or more officers of the Company some or all of its authority under the Plan, including the authority to grant Options and SARs or other Awards in the form of Share rights (except that such delegation shall not apply to any Award for a Person then covered by Section 16 of the Exchange Act), and the Committee may delegate to one or more committees of the Board (which may consist of solely one Director) some or all of its authority under the Plan, including the authority to grant all types of Awards, in accordance with applicable law.
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(c) Authority of Committee . Subject to the terms of the Plan and applicable law, the Committee (or its delegate) shall have full discretion and authority to:
(i) determine when Awards are to be granted under the Plan and the applicable Date of Grant;
(ii) select the eligible Award recipients to whom Awards shall be granted;
(iii) determine the type or types of Awards (including Substitute Awards) to be granted to each Participant under the Plan;
(iv) determine the number of Shares to be covered by (or with respect to which payments, rights or other matters are to be calculated in connection with) Awards;
(v) prescribe the form of each Award Agreement and determine the terms and conditions of any Award, which need not be identical for each Participant, including but not limited to, the exercise price, the time or times when Awards may be exercised (which may be based on performance criteria), any vesting acceleration or waiver of forfeiture restrictions, any Performance Goals over any Performance Periods, and any restriction or limitation regarding any Award or the Shares relating thereto, based in each case on such factors as the Committee will determine;
(vi) determine whether, to what extent, under what circumstances and by which methods Awards may be settled or exercised in cash, Shares, other Awards, other property, net settlement, or any combination thereof, or canceled, forfeited or suspended;
(vii) determine whether, to what extent and under what circumstances cash, Shares, other Awards, other property and other amounts payable with respect to an Award under the Plan shall be deferred either automatically or at the election of the holder thereof or of the Committee;
(viii) waive any conditions or rights under, amend any terms of, or amend, alter, suspend, discontinue or terminate any Award theretofore granted, subject to the provisions of Section 14(c) below;
(ix) determine the duration and purpose of leaves of absences which may be granted to a Participant without constituting termination of their employment for purposes of the Plan, which periods shall be no shorter than the periods generally applicable to Employees under the Companys employment policies;
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(x) make decisions with respect to outstanding Awards that may become necessary upon a change in corporate control or an event that triggers anti-dilution adjustments;
(xi) allow Participants to satisfy withholding tax obligations in a manner prescribed in Section 15(d);
(xii) authorize any person to execute on behalf of the Company any instrument required to effect the grant of an Award previously granted by the Committee;
(xiii) interpret, administer, correct any defect, supply any omission and reconcile any inconsistency in the Plan, any instrument or agreement relating to the Plan or any Award;
(xiv) establish, amend, suspend, rescind or waive such rules and regulations and appoint such agents, trustees, brokers, depositories and advisors and determine such terms of their engagement as it shall deem appropriate for the proper administration of the Plan and due compliance with applicable law, stock market or exchange rules and regulations or accounting or tax rules and regulations; and
(xv) exercise discretion to make any other determination and take any other action that the Committee deems necessary or desirable for the administration of the Plan and due compliance with applicable law, stock market or exchange rules and regulations or accounting or tax rules and regulations.
Notwithstanding anything to the contrary contained herein, the Board may, in its sole discretion, at any time and from time to time, grant Awards or administer the Plan. In any such case, the Board shall have all of the authority and responsibility granted to the Committee herein.
(d) In addition to such other rights of indemnification as they may have as Directors or members of the Committee or otherwise, and to the extent allowed by Applicable Laws, each person who is, either individually or as a member of the Board or a Committee, or who administers the Plan pursuant to a delegation pursuant to Section 4(b) above, shall be indemnified by the Company against the reasonable expenses, including attorneys fees, actually incurred in connection with any action, suit or proceeding or in connection with any appeal therein, to which the Committee or such person may be party by reason of any action taken or failure to act under or in connection with the Plan or any Award granted under the Plan, and against all amounts paid by such person in settlement thereof (provided, however, that the settlement has been approved by the Company, which approval shall not be unreasonably withheld) or paid by such person in satisfaction of a judgment in any such action, suit or proceeding, except in relation to matters as to which it shall be adjudged in such action, suit or proceeding that such person did not act in good faith and in a manner which such person reasonably believed to be in the best interests of the Company, or in the case of a criminal proceeding, had no reason to believe that the conduct complained of was unlawful; provided, however, that within 60 days after the institution of any such action, suit or proceeding, such person shall, in writing, offer the Company the opportunity at its own expense to handle and defend such action, suit or proceeding.
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Section 5. Shares Available for Awards .
(a) Subject to adjustment as provided in Section 5(c) and except for Substitute Awards, the maximum number of Shares available for issuance under the Plan as of the Effective Date shall equal [ ] Shares (the Share Reserve ).
(b) If any Award is forfeited, cancelled, expires, terminates or otherwise lapses or is settled in cash, in whole or in part, without the delivery of Shares, then the Shares covered by such forfeited, expired, terminated or lapsed Award shall again be available for grant under the Plan. For the avoidance of doubt, any Shares withheld in respect of taxes relating to any Award, and any Shares tendered or withheld to pay the exercise price of an Option, will not again become available for issuance under the Plan.
(c) In the event that the Committee determines that, as a result of any dividend or other distribution (other than an ordinary dividend or distribution), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, separation, rights offering, split-up, spin-off, combination, repurchase or exchange of Shares or other securities of the Company, issuance of warrants or other rights to purchase Shares or other securities of the Company, issuance of Shares pursuant to the anti-dilution provisions of securities of the Company, or other similar corporate transaction or event affecting the Shares, or of changes in applicable laws, regulations or accounting principles, an adjustment is appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, then the Committee shall, subject to compliance with Section 409A of the Code and other applicable law, adjust equitably so as to ensure no undue enrichment or harm (including by payment of cash), any or all of:
(i) the number and type of Shares (or other securities) which thereafter may be made the subject of Awards, including the aggregate limits specified in Section 5(a) and Section 5(e);
(ii) the number and type of Shares (or other securities) subject to outstanding Awards; and
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(iii) the grant, purchase, exercise or hurdle price with respect to any Award or, if deemed appropriate, make provision for a cash payment to the holder of an outstanding Award.
(d) Shares available for distribution under the Plan may consist, in whole or in part, of authorized and unissued shares, treasury shares or shares reacquired by the Company in any manner.
(e) Subject to adjustment as provided in Section 5(c)(i), the maximum number of Shares available for issuance with respect to Incentive Stock Options shall equal the Share Reserve.
Section 6. Options . The Committee is authorized to grant Options to Participants with the following terms and conditions and with such additional terms and conditions, in either case not inconsistent with the provisions of the Plan, as the Committee shall determine in its discretion:
(a) The exercise price per Share under an Option shall be determined by the Committee at the time of grant; provided , however , that, except in the case of Substitute Awards, such exercise price shall not be less than the Fair Market Value of a Share on the date of grant of such Option.
(b) The term of each Option shall be fixed by the Committee but shall not exceed 10 years from the date of grant of such Option. The Committee shall determine the time or times at which an Option becomes vested and exercisable in whole or in part.
(c) The Committee shall determine the method or methods by which, and the form or forms, including cash, Shares, other Awards, other property, net settlement, broker-assisted cashless exercise or any combination thereof, having a Fair Market Value on the exercise date equal to the exercise price of the Shares as to which the Option shall be exercised, in which payment of the exercise price with respect thereto may be made or deemed to have been made.
(d) The terms of any Incentive Stock Option granted under the Plan shall comply in all respects with the provisions of Section 422 of the Code. Incentive Stock Options may be granted only to employees of the Company or of a parent or subsidiary corporation (as defined in Section 424 of the Code).
Section 7. Stock Appreciation Rights . The Committee is authorized to grant SARs to Participants with the following terms and conditions and with such additional terms and conditions, in either case not inconsistent with the provisions of the Plan, as the Committee shall determine:
(a) SARs may be granted under the Plan to Participants either alone (freestanding) or in addition to other Awards granted under the Plan (tandem) and may, but need not, relate to a specific Option granted under Section 6.
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(b) The exercise or hurdle price per Share under a SAR shall be determined by the Committee; provided , however , that, except in the case of Substitute Awards, such exercise or hurdle price shall not be less than the Fair Market Value of a Share on the date of grant of such SAR.
(c) The term of each SAR shall be fixed by the Committee but shall not exceed 10 years from the date of grant of such SAR. The Committee shall determine the time or times at which a SAR may be exercised or settled in whole or in part.
(d) Upon the exercise of a SAR, the Company shall pay to the Participant an amount equal to the number of Shares subject to the SAR multiplied by the excess, if any, of the Fair Market Value of one Share on the exercise date over the exercise or hurdle price of such SAR. The Company shall pay such excess in cash, in Shares valued at Fair Market Value, or any combination thereof, as determined by the Committee.
Section 8. Restricted Stock. The Committee is authorized to grant Awards of Restricted Stock to Participants with the following terms and conditions and with such additional terms and conditions, in either case not inconsistent with the provisions of the Plan, as the Committee shall determine:
(a) The Award Agreement shall specify the vesting schedule.
(b) Awards of Restricted Stock shall be subject to such restrictions as the Committee may impose, which restrictions may lapse separately or in combination at such time or times, in such installments or otherwise, as the Committee may deem appropriate.
(c) Subject to the restrictions set forth in the applicable Award Agreement, a Participant generally shall have the rights and privileges of a stockholder with respect to Awards of Restricted Stock, including the right to vote such Shares of Restricted Stock and the right to receive dividends.
(d) The Committee may, in its discretion, specify in the applicable Award Agreement that any or all dividends or other distributions paid on Awards of Restricted Stock prior to vesting be paid either in cash or in additional Shares and either on a current or deferred basis and that such dividends or other distributions may be reinvested in additional Shares, which may be subject to the same restrictions as the underlying Awards.
(e) Any Award of Restricted Stock may be evidenced in such manner as the Committee may deem appropriate, including book-entry registration.
(f) The Committee may provide in an Award Agreement that an Award of Restricted Stock is conditioned upon the Participant making or refraining from making an election with respect to the Award under Section 83(b) of the Code. If a Participant makes an election pursuant to Section 83 (b) of the Code with respect to an Award of Restricted Stock, such Participant shall be required to file promptly a copy of such election with the Company and the applicable Internal Revenue Service office.
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Section 9. RSUs. The Committee is authorized to grant Awards of RSUs to Participants with the following terms and conditions and with such additional terms and conditions, in either case not inconsistent with the provisions of the Plan, as the Committee shall determine:
(a) The Award Agreement shall specify the vesting schedule and the delivery schedule (which may include deferred delivery later than the vesting date).
(b) Awards of RSUs shall be subject to such restrictions as the Committee may impose, which restrictions may lapse separately or in combination at such time or times, in such installments or otherwise, as the Committee may deem appropriate.
(c) An RSU shall not convey to a Participant the rights and privileges of a stockholder with respect to the Shares subject to such RSU, such as the right to vote or the right to receive dividends, unless and until such Shares are issued to such Participant to settle such RSU.
(d) The Committee may, in its discretion, specify in the applicable Award Agreement that any or all dividend equivalents or other distributions paid on Awards of RSUs prior to vesting or settlement, as applicable, be paid either in cash or in additional Shares and either on a current or deferred basis and that such dividend equivalents or other distributions may be reinvested in additional Shares, which may be subject to the same restrictions as such Awards.
(e) Shares delivered upon the vesting and settlement of an RSU Award may be evidenced in such manner as the Committee may deem appropriate, including book-entry registration.
(f) The Committee may determine the form or forms (including cash, Shares, other Awards, other property or any combination thereof) in which payment of the amount owing upon settlement of any RSU Award may be made.
Section 10. Performance Awards. The Committee is authorized to grant Performance Awards to Participants with the following terms and conditions and with such additional terms and conditions, in either case not inconsistent with the provisions of the Plan, as the Committee shall determine in its discretion:
(a) Performance Awards may be denominated as a cash amount, number of Shares or units or a combination thereof and are Awards that may be earned upon achievement or satisfaction of performance conditions specified by the Committee. In addition, the Committee may specify that any other Award shall constitute a Performance Award by conditioning the grant to a Participant or the right of a Participant to exercise the Award or have the Award vested or settled, and the timing thereof, upon achievement or satisfaction of such performance conditions as may be specified by the Committee. The Committee may use such business criteria and other measures of performance as it may deem appropriate in establishing any performance conditions. Subject to the terms of the Plan, the performance goals to be achieved during any Performance Period, the length of any Performance Period, the amount of any Performance Award granted and the amount of any payment or transfer to be made pursuant to any Performance Award shall be determined by the Committee.
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(b) Each Performance Award shall include a pre-established formula, such that payment, retention or vesting of the Award is subject to the achievement during a Performance Period or Performance Periods, as determined by the Committee, of a level or levels of, or increases in, in each case as determined by the Committee, one or more of the following performance measures with respect to the Company: net flows; platform assets; new producing advisers; production lift from existing advisers; net flows lift from existing advisers; total or net revenue; revenue growth; operating income; income or loss (before or after allocation of corporate overhead and bonus); net earnings; earnings per share; net income or loss; return on equity; total shareholder return; return on assets or net assets; appreciation in and/or maintenance of share price; market share; gross profits; earnings or loss (including earnings or loss before taxes, before interest and taxes, or before earnings before interest, taxes, depreciation and amortization, with or without adjustments); economic value-added models or equivalent metrics; comparisons with various stock market indices; reductions in costs; cash flow or cash flow per share (before or after dividends); return on capital (including return on total capital or return on invested capital); cash flow return on investment; improvement in or attainment of expense levels or working capital levels (including cash and accounts receivable); operating margin; gross margin; cash margin; year-end cash; debt reduction; shareholder equity; operating efficiencies; market share; customer satisfaction; customer growth or household growth; employee satisfaction; research and development achievements; financial ratios, including those measuring liquidity, activity, profitability or leverage; cost of capital or assets under management; financing and other capital raising transactions (including sales of the Companys equity or debt securities; factoring transactions; sales or licenses of the Companys assets, including its intellectual property, whether in a particular jurisdiction or territory or globally; or through partnering transactions); implementation, completion or attainment of measurable objectives with respect to research, development, products or services, acquisitions or divestitures; factoring transactions; recruiting or maintaining personnel; or such other performance measures as may be determined by the Committee from time to time. Performance criteria may be measured on an absolute (e.g., plan or budget) or relative basis; before or after taxes; and may be established on a corporate-wide basis or with respect to one or more business units, divisions, subsidiaries or business segments. Performance may be measured against a group of peer companies, a financial market index or other acceptable objective and quantifiable indices. The Award Agreement may provide that if the Committee determines that a change in the business, operations, corporate structure or capital structure of the Company, or the manner in which the Committee conducts its business, or other events or circumstances render the performance objectives unsuitable, the Committee may modify the performance objectives or the related minimum acceptable level of achievement, in whole or in part, as the Committee deems appropriate and equitable. Performance measures may vary from Performance Award to Performance Award, respectively, and from Participant to Participant, and may be established on a stand-alone basis, in tandem or in the alternative. The Committee shall have the power to impose such other restrictions on Awards subject to this Section as it may deem necessary or appropriate.
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(c) If the Committee determines that a change in the business, operations, corporate structure or capital structure of the Company, or the manner in which the Company conducts its business, or other events or circumstances render the performance objectives for a Performance Award unsuitable, the Committee may modify the performance objectives or the related minimum acceptable level of achievement, in whole or in part, as the Committee deems appropriate and equitable such that it does not provide any undue enrichment or harm.
(d) Performance measures may vary from Performance Award to Performance Award and from Participant to Participant, and may be established on a stand-alone basis, in tandem or in the alternative. The Committee shall have the power to impose such other restrictions on Performance Awards as it may deem necessary or appropriate to ensure that such Awards satisfy all requirements of any applicable law, stock market or exchange rules and regulations or accounting or tax rules and regulations.
(e) Settlement of Performance Awards shall be in cash, Shares, other Awards, other property, net settlement, or any combination thereof, as determined in the discretion of the Committee.
(f) The Committee may, in its discretion, increase or reduce the amount of a settlement otherwise to be made in connection with a Performance Award.
Section 11. Other Cash-Based Awards and Other Stock-Based Awards. The Committee is authorized, subject to limitations under applicable law, to grant Other Cash-Based Awards (either independently or as an element of or supplement to any other Award under the Plan) and Other Stock-Based Awards. The Committee shall determine the terms and conditions of such Awards. Shares delivered pursuant to an Award in the nature of a purchase right granted under this Section 11 shall be purchased for such consideration, and paid for at such times, by such methods and in such forms, including cash, Shares, other Awards, other property, net settlement, broker-assisted cashless exercise or any combination thereof, as the Committee shall determine; provided that the purchase price therefor shall not be less than the Fair Market Value of such Shares on the date of grant of such right.
Section 12. Effect of Termination of Service or a Change in Control on Awards .
(a) The Committee may provide, by rule or regulation or in any applicable Award Agreement, or may determine in any individual case, the circumstances in which, and the extent to which, an Award may be exercised, settled, vested, paid or forfeited in the event of a Participants Termination of Service prior to the end of a Performance Period or vesting, exercise or settlement of such Award.
(b) Subject to the last sentence of Section 2(oo), the Committee may determine, in its discretion, whether, and the extent to which, (i) an Award will vest during a leave of absence, (ii) a reduction in service level (for example, from full-time to part-time employment) will cause a reduction, or other change, to an Award and (iii) a leave of absence or reduction in service will be deemed a Termination of Service.
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(c) In the event of a Change in Control, the Committee may, in its sole discretion, and on such terms and conditions as it deems appropriate, take any one or more of the following actions with respect to any outstanding Award, which need not be uniform with respect to all Participants and/or Awards:
(i) continuation or assumption of such Award by the Company (if it is the surviving corporation) or by the successor or surviving corporation or its parent;
(ii) substitution or replacement of such Award by the successor or surviving corporation or its parent with cash, securities, rights or other property to be paid or issued, as the case may be, by the successor or surviving corporation (or a parent or subsidiary thereof), with substantially the same terms and value as such Award (including any applicable performance targets or criteria with respect thereto);
(iii) acceleration of the vesting of such Award and the lapse of any restrictions thereon and, in the case of an Option or SAR Award, acceleration of the right to exercise such Award during a specified period (and the termination of such Option or SAR Award without payment of any consideration therefor to the extent such Award is not timely exercised), in each case, either (A) immediately prior to or as of the date of the Change in Control or (B) upon a Participants involuntary Termination of Service (including upon a termination of a Participants employment by the Company (or a successor corporation or its parent) without cause, by a Participant for good reason and/or due to a Participants death or disability, as such terms may be defined in the applicable Award Agreement and/or a Participants Service Agreement) on or within a specified period following the Change in Control;
(iv) in the case of a Performance Award, determination of the level of attainment of the applicable performance condition(s); and
(v) cancellation of such Award in consideration of a payment, with the form, amount and timing of such payment determined by the Committee in its sole discretion, subject to the following: (A) such payment shall be made in cash, securities, rights and/or other property; (B) the amount of such payment shall equal the value of such Award, as determined by the Committee in its sole discretion; provided that, in the case of an Option or SAR Award, if such value equals the Intrinsic Value of such Award, such value shall be deemed to be valid; provided further that, if the Intrinsic Value of an Option or SAR Award is equal to or less than zero, the Committee may, in its sole discretion, provide for the cancellation of such Award without payment of any consideration therefor; and (C) such payment shall be made promptly following such Change in Control or on a specified date or dates following such Change in Control; provided that the timing of such payment shall comply with Section 409A of the Code.
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Section 13. General Provisions Applicable to Awards .
(a) Awards shall be granted for such cash or other consideration, if any, as the Committee determines; provided that in no event shall Awards be issued for less than such minimal consideration as may be required by applicable law.
(b) Awards may, in the discretion of the Committee, be granted either alone or in addition to or in tandem with any other Award or any award granted under any other plan of the Company. Awards granted in addition to or in tandem with other Awards, or in addition to or in tandem with awards granted under any other plan of the Company, may be granted either at the same time as or at a different time from the grant of such other Awards or awards.
(c) Subject to the terms of the Plan, payments or transfers to be made by the Company upon the grant, exercise or settlement of an Award may be made in the form of cash, Shares, other Awards, other property, net settlement, or any combination thereof, as determined by the Committee in its discretion at the time of grant, and may be made in a single payment or transfer, in installments or on a deferred basis, in each case in accordance with rules and procedures established by the Committee. Such rules and procedures may include provisions for the payment or crediting of reasonable interest on installment or deferred payments or the grant or crediting of dividend equivalents in respect of installment or deferred payments.
(d) Except as may be permitted by the Committee or as specifically provided in an Award Agreement, (i) no Award and no right under any Award shall be assignable, alienable, saleable or transferable by a Participant other than by will or pursuant to Section 13(e) and (ii) during a Participants lifetime, each Award, and each right under any Award, shall be exercisable only by such Participant or, if permissible under applicable law, by such Participants guardian or legal representative. The provisions of this Section 13(d) shall not apply to any Award that has been fully exercised or settled, as the case may be, and shall not preclude forfeiture of an Award in accordance with the terms thereof.
(e) If permitted by the Committee, a Participant may designate a Beneficiary or change a previous Beneficiary designation only at such times as prescribed by the Committee, in its sole discretion, and only by using forms and following procedures approved or accepted by the Committee for that purpose.
(f) All certificates for Shares and/or other securities delivered under the Plan pursuant to any Award or the exercise thereof shall be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the Plan or the rules, regulations and other requirements of the Securities and Exchange Commission, any stock market or exchange upon which such Shares or other securities are then quoted, traded or listed, and any applicable securities laws, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions.
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(g) The Committee may impose restrictions on any Award with respect to non-competition, non-solicitation, confidentiality and other restrictive covenants as it deems necessary or appropriate in its sole discretion.
Section 14. Amendments and Terminations .
(a) Amendment or Termination of the Plan . Except to the extent prohibited by applicable law and unless otherwise expressly provided in an Award Agreement or in the Plan, the Board may amend, alter, suspend, discontinue or terminate the Plan or any portion thereof at any time; provided , however , that no such amendment, alteration, suspension, discontinuation or termination shall be made without (i) shareholder approval if such approval is required by applicable law or the rules of the stock market or exchange, if any, on which the Shares are principally quoted or traded or (ii) subject to Section 5(c) and Section 12, the consent of the affected Participant, if such action would materially adversely affect the rights of such Participant under any outstanding Award, except (x) to the extent any such amendment, alteration, suspension, discontinuance or termination is made to cause the Plan to comply with applicable law, stock market or exchange rules and regulations or accounting or tax rules and regulations or (y) to impose any clawback or recoupment provisions on any Awards (including any amounts or benefits arising from such Awards) in accordance with Section 18. Notwithstanding anything to the contrary in the Plan, the Committee may amend the Plan, or create sub-plans, in such manner as may be necessary to enable the Plan to achieve its stated purposes in any jurisdiction in a tax-efficient manner and in compliance with local rules and regulations.
(b) Dissolution or Liquidation . In the event of the dissolution or liquidation of the Company, each Award shall terminate immediately prior to the consummation of such action, unless otherwise determined by the Committee.
(c) Terms of Awards . The Committee may waive any conditions or rights under, amend any terms of, or amend, alter, suspend, discontinue or terminate any Award theretofore granted, prospectively or retroactively, without the consent of any relevant Participant or holder or Beneficiary of an Award; provided , however , that, subject to Section 5(c) and Section 12, no such action shall materially adversely affect the rights of any affected Participant or holder or Beneficiary under any Award theretofore granted under the Plan, except (x) to the extent any such action is made to cause the Plan to comply with applicable law, stock market or exchange rules and regulations or accounting or tax rules and regulations, or (y) to impose any clawback or recoupment provisions on any Awards (including any amounts or benefits arising from such Awards) in accordance with Section 18. The Committee shall be authorized to make adjustments in the terms and conditions of, and the criteria included in, Awards in recognition of events (including the events described in Section 5(c)) affecting the Company, or the financial statements of the Company, or of changes in applicable laws, regulations or accounting principles, whenever the Committee determines that such adjustments are appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan.
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(d) No Repricing . Notwithstanding the foregoing, except as provided in Section 5(c), no action (including the repurchase of Options or SAR Awards (in each case, that are out of the money) for cash and/or other property) shall directly or indirectly, through cancellation and regrant or any other method, reduce, or have the effect of reducing, the exercise or hurdle price of any Award established at the time of grant thereof without approval of the Companys shareholders.
Section 15. Miscellaneous .
(a) No Employee, Consultant, Director, Participant, or other Person shall have any claim to be granted any Award under the Plan, and there is no obligation for uniformity of treatment of employees, Participants or holders or Beneficiaries of Awards under the Plan. The terms and conditions of Awards need not be the same with respect to each recipient. Any Award granted under the Plan shall be a one-time Award that does not constitute a promise of future grants. The Company, in its sole discretion, maintains the right to make available future grants under the Plan.
(b) The grant of an Award shall not be construed as giving a Participant the right to be retained in the employ of, or to continue to provide services to, the Company or any Subsidiary. Further, the Company or any applicable Subsidiary may at any time dismiss a Participant, free from any liability, or any claim under the Plan, unless otherwise expressly provided in the Plan or in any Award Agreement or in any other agreement binding on the parties. The receipt of any Award under the Plan is not intended to confer any rights on the receiving Participant except as set forth in the applicable Award Agreement.
(c) Nothing contained in the Plan shall prevent the Company from adopting or continuing in effect other or additional compensation arrangements, and such arrangements may be either generally applicable or applicable only in specific cases.
(d) To the extent provided by the terms of an Award Agreement and subject to the discretion of the Committee, the Participant may satisfy any federal, state or local tax withholding obligation relating to the exercise or acquisition of Common Stock under an Award by any of the following means (in addition to the Companys right to withhold from any compensation paid to the Participant by the Company) or by a combination of such means: (a) tendering a cash payment; (b) authorizing the Company to withhold shares of Common Stock from the shares of Common Stock otherwise issuable to the Participant as a result of the exercise or acquisition of Common Stock under the Award, provided, however, that no shares of Common Stock are withheld with a value exceeding the maximum amount of tax required to be withheld by law; or (c) delivering to the Company previously owned and unencumbered shares of Common Stock of the Company.
(e) If any provision of the Plan or any Award Agreement is or becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction, or as to any Person or Award, or would disqualify the Plan or any Award under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to
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applicable laws, or if it cannot be so construed or deemed amended without, in the determination of the Committee, materially altering the intent of the Plan or the Award Agreement, such provision shall be stricken as to such jurisdiction, Person or Award, and the remainder of the Plan and any such Award Agreement shall remain in full force and effect.
(f) Notwithstanding any other provision of this Plan or any Award to the contrary, no Option or other award shall be granted hereunder if, at the time of grant, such Option or award would result in this Plan or any portion hereof being deemed a scheme involving the grant by a subsidiary of a listed issuer on the Stock Exchange of Hong Kong for options over new shares or other new securities, or an arrangement analogous to such a scheme, that is required to comply with the requirements of Chapter 17 of the Main Board Listing Rules of the Stock Exchange of Hong Kong or any successor thereto (as amended from time to time, Chapter 17 of the HKEX Listing Rules), other than pursuant to a sub-plan or other scheme that satisfies all the requirements of Chapter 17 of the HKEX Listing Rules.
(g) Neither the Plan nor any Award shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company and a Participant or any other Person. To the extent that any Person acquires a right to receive payments from the Company pursuant to an Award, such right shall be no greater than the right of any unsecured general creditor of the Company.
(h) No fractional Shares shall be issued or delivered pursuant to the Plan or any Award, and the Committee shall determine whether cash or other securities shall be paid or transferred in lieu of any fractional Shares, or whether such fractional Shares or any rights thereto shall be canceled, terminated or otherwise eliminated.
(i) Awards may be granted to Participants who are non-United States nationals or employed or providing services outside the United States, or both, on such terms and conditions different from those applicable to Awards to Participants who are employed or providing services in the United States as may, in the judgment of the Committee, be necessary or desirable to recognize differences in local law, tax policy or custom. The Committee also may impose conditions on the exercise or vesting of Awards in order to minimize the Companys obligation with respect to tax equalization for Participants on assignments outside their home country.
Section 16. Effective Date of the Plan. The Plan shall be effective as of the Effective Date, provided that the Board and the Companys stockholders may approve the Plan prior to such date.
Section 17. Term of the Plan. No Award shall be granted under the Plan after the earliest to occur of (i) the 10-year anniversary of the Effective Date; (ii) the maximum number of Shares available for issuance under the Plan have been issued; or (iii) the Board terminates the Plan in accordance with Section 14(a). However, unless otherwise expressly provided in the Plan or in an applicable Award Agreement, any Award theretofore granted may extend beyond such date, and the authority of the Committee to amend, alter, adjust, suspend, discontinue or terminate any such Award, or to waive any conditions or rights under any such Award, and the authority of the Board to amend the Plan, shall extend beyond such date.
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Section 18. Clawback of Awards . Notwithstanding any other provisions in this Plan, the Company may cancel any Award, require reimbursement of any Award by a Participant, and effect any other right of recoupment of equity or other compensation provided under the Plan in accordance with any Company policies that may be adopted and/or modified from time to time ( Clawback Policy ). In addition, a Participant may be required to repay to the Company previously paid compensation, whether provided pursuant to the Plan or an Award Agreement, in accordance with the Clawback Policy. By accepting an Award, the Participant is agreeing to be bound by the Clawback Policy, as in effect or as may be adopted and/or modified from time to time by the Company in its discretion (including, without limitation, to comply with applicable law or stock exchange listing requirements).
Section 19. Section 409A of the Code. With respect to Awards subject to Section 409A of the Code, the Plan is intended to comply with the requirements of Section 409A of the Code, and the provisions of the Plan and any Award Agreement shall be interpreted in a manner that satisfies the requirements of Section 409A of the Code, and the Plan shall be operated accordingly. If any provision of the Plan or any term or condition of any Award would otherwise frustrate or conflict with this intent, the provision, term or condition shall be interpreted and deemed amended so as to avoid this conflict. Notwithstanding anything in the Plan to the contrary, if the Board considers a Participant to be a specified employee under Section 409A of the Code at the time of such Participants separation from service (as defined in Section 409A of the Code), and any amount hereunder is deferred compensation subject to Section 409A of the Code, any distribution of such amount that otherwise would be made to such Participant with respect to an Award as a result of such separation from service shall not be made until the date that is six months after such separation from service, except to the extent that earlier distribution would not result in such Participants incurring interest or additional tax under Section 409A of the Code. If an Award includes a series of installment payments (within the meaning of Section 1.409A-2(b)(2)(iii) of the Treasury Regulations), a Participants right to such series of installment payments shall be treated as a right to a series of separate payments and not as a right to a single payment, and if an Award includes dividend equivalents (within the meaning of Section 1.409A-3(e) of the Treasury Regulations), a Participants right to such dividend equivalents shall be treated separately from the right to other amounts under the Award. Notwithstanding the foregoing, the tax treatment of the benefits provided under the Plan or any Award Agreement is not warranted or guaranteed, and in no event shall the Company be liable for all or any portion of any taxes, penalties, interest or other expenses that may be incurred by a Participant on account of non-compliance with Section 409A of the Code.
Section 20. Successors and Assigns . The terms of the Plan shall be binding upon and inure to the benefit of the Company and any successor entity, including any successor entity contemplated by Section 12(c).
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Section 21. Data Protection . By participating in the Plan, a Participant consents to the holding and processing of personal information provided by such Participant to the Company or any Affiliate, trustee or third party service provider, for all purposes relating to the operation of the Plan. These include:
(a) administering and maintaining Participant records;
(b) providing information to the Company, any Subsidiary, trustees of any employee benefit trust, registrars, brokers or third party administrators of the Plan;
(c) providing information to future purchasers or merger partners of the Company or any Affiliate, or the business in which such Participant works; and
(d) transferring information about such Participant to any country or territory that may not provide the same protection for the information as such Participants home country.
Section 22. Governing Law . The Plan and each Award Agreement shall be governed by the laws of the State of Delaware, without application of the conflicts of law principles thereof.
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ASSETMARK FINANCIAL HOLDINGS, INC.
NOTICE OF RESTRICTED STOCK AWARD
Except as otherwise indicated, any capitalized term used but not defined in this Notice of Restricted Stock Award (this Notice ) shall have the meaning ascribed to such term in the AssetMark Financial Holdings, Inc. 2019 Equity Incentive Plan (as it may be amended from time to time, the Plan ).
Name: []
Address: []
The undersigned Participant has been granted an Award of Restricted Stock (the Award ) under the Plan, subject to the terms and conditions of the Plan, this Notice and the attached Restricted Stock Award Agreement.
By signing where indicated below, AssetMark Financial Holdings, Inc. (the Company ) grants the Award to the Participant upon the terms and conditions set forth in this Notice and the Restricted Stock Award Agreement, and the applicable provisions of the Plan, and the Participant acknowledges receipt of the Award and agrees to observe and be bound by such terms and conditions.
Participant: | AssetMark Financial Holdings, Inc. | |||||
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ASSETMARK FINANCIAL HOLDINGS, INC.
2019 EQUITY INCENTIVE PLAN
RESTRICTED STOCK AWARD AGREEMENT
This Restricted Stock Award Agreement (this Agreement ) is made and entered into as of Grant Date (the Grant Date ) set forth in the Notice of Restricted Stock Award to which this Agreement is attached (the Notice ) by and among AssetMark Financial Holdings, Inc. (the Company ) and the Participant (the Participant ) set forth in the Notice.
WHEREAS, the Company has adopted the AssetMark Financial Holdings, Inc. 2019 Equity Incentive Plan (as it may be amended from time to time, the Plan ), pursuant to which Awards of Restricted Stock may be granted; and
WHEREAS, the Company has determined that it is in the best interests of the Company and its shareholders to grant the Award of Restricted Stock provided for herein; and
NOW, THEREFORE, the parties hereto, intending to be legally bound, agree as follows:
1. Grant of Restricted Stock Award; Consideration . Pursuant to Section 8 of the Plan, the Company hereby issues to the Participant on the Grant Date an Award of Restricted Stock on the terms and conditions and subject to the restrictions set forth in the Notice, this Agreement and the Plan (the Award ). The number of Shares of Restricted Stock granted pursuant to the Award is set forth in the Notice. The Award is made in consideration of the services to be rendered by Participant to the Company and to any Affiliate of the Company that the Participant serves as an Employee, Consultant or Director (the Company and each such Affiliate, as applicable, the Employer ).
2. Restricted Period; Vesting . Except as otherwise provided herein, provided that the Participant does not experience a Termination of Service prior to the applicable vesting date[, and further provided that any additional conditions and performance goals set forth in Schedule [ ] have been satisfied] subject to Section 2, the Award shall vest according to the vesting schedule set forth in the Notice. The Restricted Period shall mean the period during which the Award remains outstanding and not fully vested.
3. Termination of Service . In the event of the Participants Termination of Service for any reason, any Restricted Stock that are not vested as of the date of such Termination of Service will be forfeited.
4. Change in Control; Adjustments . In the event of a Change in Control while the Restricted Stock remains outstanding and unvested, the Restricted Stock will be treated in accordance with Section 12(c) of the Plan. If any change is made to the outstanding Common Stock or the capital structure of the Company, the Committee may make adjustments in the terms and conditions of, and the criteria included in the Restricted Stock in any manner as contemplated by Section 14(c) of the Plan.
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5. Restrictions . Subject to any exceptions set forth in this Agreement or the Plan or as otherwise permitted by the Committee, during the Restricted Period, neither the Restricted Stock nor any rights relating thereto may be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by the Participant other than by will or pursuant to the laws of descent and distribution. Any attempt to assign, alienate, pledge, attach, sell or otherwise transfer or encumber the Restricted Stock or any rights relating thereto in contravention of this Agreement or the Plan shall be wholly ineffective. This provision shall not apply to any portion of the Award that has been vested and fully settled and shall not preclude forfeiture of any portion of the Award in accordance with the terms herein.
6. Rights as a Shareholder.
(a) Voting Rights . The Participant shall be the record owner of the Restricted Stock until such Shares are sold or otherwise disposed of, and shall be entitled to all of the rights of a shareholder of the Company including, without limitation, the right to vote such shares and receive all dividends or other distributions paid with respect to such shares. Notwithstanding the foregoing, any dividends or other distributions shall be subject to the same restrictions on transferability as the shares of Restricted Stock with respect to which they were paid.
(b) Documentation of Issuance . The Company may issue stock certificates or evidence the Participants interest by using a restricted book entry account with the Companys transfer agent. Physical possession or custody of any stock certificates that are issued shall be retained by the Company until such time as the Restricted Stock vests.
(c) Legend . A legend may be placed on any certificate(s) or other document(s) delivered to the Participant indicating restrictions on transferability of the shares of Restricted Stock pursuant to this Agreement or any other restrictions that the Committee may deem advisable under the rules, regulations and other requirements of the Securities and Exchange Commission, any applicable federal or state securities laws or any stock exchange on which the shares of Common Stock are then listed or quoted.
(d) Forfeiture . If the Participant forfeits any rights he or she has under this Agreement in accordance with Section 3, the Participant shall, on the date of such forfeiture, no longer have any rights as a shareholder with respect to the Restricted Stock and shall no longer be entitled to vote or receive dividends on such shares.
7. Section 83(b) Election . The Participant may make an election under Code Section 83(b) (a Section 83(b) Election ) with respect to the Restricted Stock. Any such election must be made within thirty (30) days after the Grant Date. If the Participant elects to make a Section 83(b) Election, the Participant shall provide the Company with a copy of an executed version and satisfactory evidence of the filing of the executed Section 83(b) Election with the Internal Revenue Service. The Participant agrees to assume full responsibility for ensuring that the Section 83(b) Election is actually and timely filed with the Internal Revenue Service and for all tax consequences resulting from the Section 83(b) Election.
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8. Responsibility for Taxes .
(a) The Participant shall be required to pay to the Company, and the Company shall have the right to deduct from any compensation paid to the Participant pursuant to the Plan, the amount of any required withholding taxes in respect of the Restricted Stock and to take all such other action as the Committee deems necessary to satisfy all obligations for the payment of such withholding taxes. The Committee may permit the Participant to satisfy any federal, state or local tax withholding obligation by any of the following means, or by a combination of such means:
(i) tendering a cash payment.
(ii) authorizing the Company to withhold shares of Common Stock from the shares of Common Stock otherwise issuable or deliverable to the Participant as a result of the vesting of the Restricted Stock; provided, however, that no shares of Common Stock shall be withheld with a value exceeding the maximum amount of tax required to be withheld by law.
(iii) delivering to the Company previously owned and unencumbered shares of Common Stock.
(b) Notwithstanding any action the Company takes with respect to any or all income tax, social insurance, payroll tax, or other tax-related withholding ( Tax-Related Items ), the ultimate liability for all Tax-Related Items is and remains the Participants responsibility and the Company (i) makes no representation or undertakings regarding the treatment of any Tax-Related Items in connection with the grant, or vesting or settlement of the Restricted Stock or the subsequent sale of any shares; and (ii) does not commit to structure the Award or the Restricted Stock to reduce or eliminate the Participants liability for Tax-Related Items.
9. Not Salary, Pensionable Earnings or Base Pay . The Participant acknowledges that the Award shall not be included in or deemed to be a part of (a) salary, normal salary or other ordinary compensation, (b) any definition of pensionable or other earnings (however defined) for the purpose of calculating any benefits payable to or on behalf of the Participant under any pension, retirement, termination or dismissal indemnity, severance benefit, retirement indemnity or other benefit arrangement of the Company or any Affiliate (including the Employer) or (c) any calculation of base pay or regular pay for any purpose.
10. Cancellation/Clawback . The Participant hereby acknowledges and agrees that the Participant and the Award are subject to the terms and conditions of Section 18 of the Plan.
11. Provisions of Plan Control . This Agreement is subject to all the terms, conditions and provisions of the Plan, including the amendment provisions thereof, and to such rules, regulations and interpretations relating to the Plan as may be adopted by the Committee and as may be in effect from time to time. The Plan is incorporated herein by reference. If and to the extent that this Agreement conflicts or is inconsistent with the Plan, the Plan shall control, and this Agreement shall be deemed to be modified accordingly.
12. Notices . Any notice required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been given when delivered personally or by courier, or sent by certified or registered mail, postage prepaid, return receipt requested, duly addressed to the party concerned at the address indicated below or to such changed address as such party may subsequently by similar process give notice of:
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If to the Company:
AssetMark Financial Holdings, Inc.
[Address]
Attention: [ ]
Email: [ ]
If to the Participant, to the address of the Participant on file with the Company.
13. No Right to Continued Service . Neither the Plan, the Notice or this Agreement shall be construed as giving the Participant any right to be retained in the employ of, or to continue to provide services to, the Company or any Affiliate (including the Employer).
14. No Right to Future Awards . Any Award granted under the Plan shall be a one-time Award that does not constitute a promise of future grants. The Company, in its sole discretion, maintains the right to make available future grants under the Plan.
15. Entire Agreement . This Agreement, the Plan, the Notice and any other agreements, schedules, exhibits and other documents referred to herein or therein constitute the entire agreement and understanding between the parties in respect of the subject matter hereof and supersede all prior and contemporaneous arrangements, agreements and understandings, both oral and written, whether in term sheets, presentations or otherwise, between the parties with respect to the subject matter hereof.
16. Severability . If any provision of this Agreement is or becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction, or would disqualify the Plan or this Agreement under any law deemed applicable by the Board, such provision shall be construed or deemed amended to conform to applicable laws, or if it cannot be so construed or deemed amended without, in the determination of the Board, materially altering the intent of this Agreement, such provision shall be stricken as to such jurisdiction, and the remainder of this Agreement shall remain in full force and effect.
17. Amendment; Waiver . No amendment or modification of any provision of this Agreement that has a material adverse effect on the Participant shall be effective unless signed in writing by or on behalf of the Company and the Participant; provided that the Company may amend or modify this Agreement without the Participants consent in accordance with the provisions of the Plan or as otherwise set forth in this Agreement. No waiver of any breach or condition of this Agreement shall be deemed to be a waiver of any other or subsequent breach or condition, whether of like or different nature. Any amendment or modification of or to any provision of this Agreement, or any waiver of any provision of this Agreement, shall be effective only in the specific instance and for the specific purpose for which such amendment, modification or waiver is made or given.
18. Assignment . Neither this Agreement nor any right, remedy, obligation or liability arising hereunder or by reason hereof shall be assignable by the Participant.
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19. Successors and Assigns; No Third-Party Beneficiaries . This Agreement shall inure to the benefit of and be binding upon the Company and the Participant and their respective heirs, successors, legal representatives and permitted assigns. Nothing in this Agreement, express or implied, is intended to confer on any Person other than the Company and the Participant, and their respective heirs, successors, legal representatives and permitted assigns, any rights, remedies, obligations or liabilities under or by reason of this Agreement.
20. Dispute Resolution . All controversies and claims arising out of or relating to this Agreement, or the breach hereof, shall be settled by the Companys or the Employers mandatory dispute resolution procedures, if any, as may be in effect from time to time with respect to matters arising out of or relating to the Participants employment with the Company or the Employer.
21. Governing Law; Venue . All matters arising out of or relating to this Agreement and the transactions contemplated hereby, including its validity, interpretation, construction, performance and enforcement, shall be governed by and construed in accordance with the internal laws of the State of Delaware, without giving effect to its principles of conflict of laws. For purposes of any action, lawsuit or other proceedings brought to enforce this Agreement, relating to it, or arising from it, the parties hereby submit to and consent to the sole and exclusive jurisdiction of the courts of Santa Clara County, California, or the federal courts for the United States for the Northern District of California, and no other courts.
22. Imposition of other Requirements and Participant Undertaking . The Company reserves the right to impose other requirements on the Participants participation in the Plan, on the Award and on any Shares to be issued upon settlement of the Award, to the extent the Company determines it is necessary or advisable for legal or administrative reasons. The Participant agrees to take whatever additional action and execute whatever additional documents the Company may deem necessary or advisable to accomplish the foregoing or to carry out or give effect to any of the obligations or restrictions imposed on either the Participant or the Restricted Stock pursuant to this Agreement.
23. References . References herein to rights and obligations of the Participant shall apply, where appropriate, to the Participants legal representative or estate without regard to whether specific reference to such legal representative or estate is contained in a particular provision of this Agreement.
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ASSETMARK FINANCIAL HOLDINGS, INC.
NOTICE OF RESTRICTED STOCK UNIT AWARD
Except as otherwise indicated, any capitalized term used but not defined in this Notice of Restricted Stock Unit Award (this Notice ) shall have the meaning ascribed to such term in the AssetMark Financial Holdings, Inc. 2019 Equity Incentive Plan (as it may be amended from time to time, the Plan ).
Name: []
Address: []
The undersigned Participant has been granted an Award of Restricted Stock Units or RSUs (the Award ) under the Plan, subject to the terms and conditions of the Plan, this Notice and the attached Restricted Stock Unit Award Agreement.
By signing where indicated below, AssetMark Financial Holdings, Inc. (the Company ) grants the Award to the Participant upon the terms and conditions set forth in this Notice and the Restricted Stock Unit Award Agreement, and the applicable provisions of the Plan, and the Participant acknowledges receipt of the Award and agrees to observe and be bound by such terms and conditions.
Participant: | AssetMark Financial Holdings, Inc. | |||||
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ASSETMARK FINANCIAL HOLDINGS, INC.
2019 EQUITY INCENTIVE PLAN
RESTRICTED STOCK UNIT AWARD AGREEMENT
This Restricted Stock Unit Award Agreement (this Agreement ) is made and entered into as of Grant Date (the Grant Date ) set forth in the Notice of Restricted Stock Unit Award to which this Agreement is attached (the Notice ) by and among AssetMark Financial Holdings, Inc. (the Company ) and the Participant (the Participant ) set forth in the Notice.
WHEREAS, the Company has adopted the AssetMark Financial Holdings, Inc. 2019 Equity Incentive Plan (as it may be amended from time to time, the Plan ), pursuant to which Awards of Restricted Stock Units may be granted; and
WHEREAS, the Company has determined that it is in the best interests of the Company and its shareholders to grant the Award of Restricted Stock Units or RSUs provided for herein; and
NOW, THEREFORE, the parties hereto, intending to be legally bound, agree as follows:
1. Grant of Restricted Stock Award; Consideration . Pursuant to Section 9 of the Plan, the Company hereby issues to the Participant on the Grant Date an Award of RSUs on the terms and conditions and subject to the restrictions set forth in the Notice, this Agreement and the Plan (the Award ). The number of RSUs granted pursuant to the Award is set forth in the Notice. Each RSU shall represent the right to receive one Share upon the vesting of such RSU, as determined in accordance with and subject to the terms of this Agreement, the Plan and the Notice. The Award is made in consideration of the services to be rendered by Participant to the Company and to any Affiliate of the Company that the Participant serves as an Employee, Consultant or Director (the Company and each such Affiliate, as applicable, the Employer ).
2. Restricted Period; Vesting . Except as otherwise provided herein, provided that the Participant does not experience a Termination of Service prior to the applicable vesting date[, and further provided that any additional conditions and performance goals set forth in Schedule [ ] have been satisfied] subject to Section 3, the Award shall vest according to the vesting schedule set forth in the Notice. The Restricted Period shall mean the period during which the Award remains outstanding and not fully vested.
3. Termination of Service . In the event of the Participants Termination of Service for any reason, any RSUs that are not vested as of the date of such Termination of Service will be forfeited.
4. Change in Control; Adjustments . In the event of a Change in Control while the RSUs remain outstanding and unvested, the RSUs will be treated in accordance with Section 12(c) of the Plan. If any change is made to the outstanding Common Stock or the capital structure of the Company, the Committee may make adjustments in the terms and conditions of, and the criteria included in, the RSUs in any manner as contemplated by Section 14(c) of the Plan.
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5. Restrictions . Subject to any exceptions set forth in this Agreement or the Plan or as otherwise permitted by the Committee, during the Restricted Period and until such time as the RSUs are settled in accordance with Section 7, neither the RSUs nor any rights relating thereto may be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by the Participant other than by will or pursuant to the laws of descent and distribution. Any attempt to assign, alienate, pledge, attach, sell or otherwise transfer or encumber the RSUs or any rights relating thereto in contravention of this Agreement or the Plan shall be wholly ineffective. This provision shall not apply to any portion of the Award that has been vested and fully settled and shall not preclude forfeiture of any portion of the Award in accordance with the terms herein.
6. No Rights as a Shareholder.
(a) No Voting Rights . The Participant shall have no voting rights or any other rights as a shareholder of the Company with respect to the RSUs unless and until such time as the RSUs are settled in accordance with Section 7.
(b) Dividend Equivalents . If the Notice specifically designates the Award as providing for dividend equivalents, and a cash dividend is declared on Shares with a record date that is within the period commencing on the Grant Date and ending on the date on which the Shares underlying the RSUs are distributed to the Participant pursuant to this Agreement, then the Participant shall be eligible to receive an amount in cash (a Dividend Equivalent ) equal to the dividend that the Participant would have received had the Shares underlying the RSUs been held by the Participant as of the time at which such dividend was declared. Any such Dividend Equivalent will be paid to the Participant in cash as soon as reasonably practicable (and in no event later than 30 days) after the applicable Vesting Date of the corresponding RSUs. For clarity, no Dividend Equivalent will be paid with respect to any RSUs that are forfeited.
(c) Forfeiture . If the Participant forfeits any rights he or she has under this Agreement in accordance with Section 3, the Participant shall no longer be entitled to receive any Dividend Equivalents with respect to the Award.
7. Distribution of Shares . Subject to the provisions of this Agreement, upon the vesting of any of the RSUs, the Company shall, as soon as reasonably practicable (and in no event later than 30 days) after the applicable Vesting Date, (a) issue and deliver to the Participant one Share for each such RSU, and (b) make a cash payment to the Participant equal to the amount of any Dividend Equivalents credited with respect to such RSUs and any interest credited thereon or, at the discretion of the Committee, Shares having a Fair Market Value equal to such amount. Upon delivery, all such Shares shall be fully assignable, alienable, saleable and transferrable by the Participant; provided that any such assignment, alienation, sale, transfer or other alienation with respect to such Shares shall be in accordance with applicable securities laws and any applicable Company policy.
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8. Responsibility for Taxes .
(a) The Participant shall be required to pay to the Company, and the Company shall have the right to deduct from any compensation paid to the Participant pursuant to the Plan, the amount of any required withholding taxes in respect of the RSUs and to take all such other action as the Committee deems necessary to satisfy all obligations for the payment of such withholding taxes. The Committee may permit the Participant to satisfy any federal, state or local tax withholding obligation by any of the following means, or by a combination of such means:
(i) tendering a cash payment.
(ii) authorizing the Company to withhold shares of Common Stock from the shares of Common Stock otherwise issuable or deliverable to the Participant as a result of the vesting of the RSUs; provided, however, that no shares of Common Stock shall be withheld with a value exceeding the maximum amount of tax required to be withheld by law.
(iii) delivering to the Company previously owned and unencumbered shares of Common Stock.
(b) Notwithstanding any action the Company takes with respect to any or all income tax, social insurance, payroll tax, or other tax-related withholding ( Tax-Related Items ), the ultimate liability for all Tax-Related Items is and remains the Participants responsibility and the Company (i) makes no representation or undertakings regarding the treatment of any Tax-Related Items in connection with the grant, or vesting or settlement of the RSUs or the subsequent sale of any shares; and (ii) does not commit to structure the Award or the RSUs to reduce or eliminate the Participants liability for Tax-Related Items.
9. Not Salary, Pensionable Earnings or Base Pay . The Participant acknowledges that the Award shall not be included in or deemed to be a part of (a) salary, normal salary or other ordinary compensation, (b) any definition of pensionable or other earnings (however defined) for the purpose of calculating any benefits payable to or on behalf of the Participant under any pension, retirement, termination or dismissal indemnity, severance benefit, retirement indemnity or other benefit arrangement of the Company or any Affiliate (including the Employer) or (c) any calculation of base pay or regular pay for any purpose.
10. Cancellation/Clawback . The Participant hereby acknowledges and agrees that the Participant and the Award are subject to the terms and conditions of Section 18 of the Plan.
11. Provisions of Plan Control . This Agreement is subject to all the terms, conditions and provisions of the Plan, including the amendment provisions thereof, and to such rules, regulations and interpretations relating to the Plan as may be adopted by the Committee and as may be in effect from time to time. The Plan is incorporated herein by reference. If and to the extent that this Agreement conflicts or is inconsistent with the Plan, the Plan shall control, and this Agreement shall be deemed to be modified accordingly.
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12. Notices . Any notice required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been given when delivered personally or by courier, or sent by certified or registered mail, postage prepaid, return receipt requested, duly addressed to the party concerned at the address indicated below or to such changed address as such party may subsequently by similar process give notice of:
If to the Company:
AssetMark Financial Holdings, Inc.
[Address]
Attention: [ ]
Email: [ ]
If to the Participant, to the address of the Participant on file with the Company.
13. No Right to Continued Service . Neither the Plan, the Notice or this Agreement shall be construed as giving the Participant any right to be retained in the employ of, or to continue to provide services to, the Company or any Affiliate (including the Employer).
14. No Right to Future Awards . Any Award granted under the Plan shall be a one-time Award that does not constitute a promise of future grants. The Company, in its sole discretion, maintains the right to make available future grants under the Plan.
15. Entire Agreement . This Agreement, the Plan, the Notice and any other agreements, schedules, exhibits and other documents referred to herein or therein constitute the entire agreement and understanding between the parties in respect of the subject matter hereof and supersede all prior and contemporaneous arrangements, agreements and understandings, both oral and written, whether in term sheets, presentations or otherwise, between the parties with respect to the subject matter hereof.
16. Severability . If any provision of this Agreement is or becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction, or would disqualify the Plan or this Agreement under any law deemed applicable by the Board, such provision shall be construed or deemed amended to conform to applicable laws, or if it cannot be so construed or deemed amended without, in the determination of the Board, materially altering the intent of this Agreement, such provision shall be stricken as to such jurisdiction, and the remainder of this Agreement shall remain in full force and effect.
17. Amendment; Waiver . No amendment or modification of any provision of this Agreement that has a material adverse effect on the Participant shall be effective unless signed in writing by or on behalf of the Company and the Participant; provided that the Company may amend or modify this Agreement without the Participants consent in accordance with the provisions of the Plan or as otherwise set forth in this Agreement. No waiver of any breach or condition of this Agreement shall be deemed to be a waiver of any other or subsequent breach or condition, whether of like or different nature. Any amendment or modification of or to any provision of this Agreement, or any waiver of any provision of this Agreement, shall be effective only in the specific instance and for the specific purpose for which such amendment, modification or waiver is made or given.
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18. Assignment . Neither this Agreement nor any right, remedy, obligation or liability arising hereunder or by reason hereof shall be assignable by the Participant.
19. Successors and Assigns; No Third-Party Beneficiaries . This Agreement shall inure to the benefit of and be binding upon the Company and the Participant and their respective heirs, successors, legal representatives and permitted assigns. Nothing in this Agreement, express or implied, is intended to confer on any Person other than the Company and the Participant, and their respective heirs, successors, legal representatives and permitted assigns, any rights, remedies, obligations or liabilities under or by reason of this Agreement.
20. Dispute Resolution . All controversies and claims arising out of or relating to this Agreement, or the breach hereof, shall be settled by the Companys or the Employers mandatory dispute resolution procedures, if any, as may be in effect from time to time with respect to matters arising out of or relating to the Participants employment with the Company or the Employer.
21. Governing Law; Venue . All matters arising out of or relating to this Agreement and the transactions contemplated hereby, including its validity, interpretation, construction, performance and enforcement, shall be governed by and construed in accordance with the internal laws of the State of Delaware, without giving effect to its principles of conflict of laws. For purposes of any action, lawsuit or other proceedings brought to enforce this Agreement, relating to it, or arising from it, the parties hereby submit to and consent to the sole and exclusive jurisdiction of the courts of Santa Clara County, California, or the federal courts for the United States for the Northern District of California, and no other courts.
22. Imposition of other Requirements and Participant Undertaking . The Company reserves the right to impose other requirements on the Participants participation in the Plan, on the Award and on any Shares to be issued upon settlement of the Award, to the extent the Company determines it is necessary or advisable for legal or administrative reasons. The Participant agrees to take whatever additional action and execute whatever additional documents the Company may deem necessary or advisable to accomplish the foregoing or to carry out or give effect to any of the obligations or restrictions imposed on either the Participant or the RSU pursuant to this Agreement.
23. References . References herein to rights and obligations of the Participant shall apply, where appropriate, to the Participants legal representative or estate without regard to whether specific reference to such legal representative or estate is contained in a particular provision of this Agreement.
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Exhibit 10.11
ASSETMARK FINANCIAL HOLDINGS, INC.
STOCK OPTION AWARD NOTICE AND AGREEMENT
This Stock Option Award Notice and Agreement (the Option Agreement ) is made as of the Date of Grant set forth below, by and between AssetMark Financial Holdings, Inc. (the Company ) and the individual recipient identified in the Notice below (the Recipient ).
I. |
STOCK OPTION AWARD NOTICE |
Recipient: | [●] | |
Address: | [●] |
The Company has awarded to the Recipient an option to purchase the Companys common stock, $0.001 par value per share, (the Common Stock ) subject to the terms and conditions of the Option Agreement attached hereto, as follows:
Date of Grant: | [●] | |
Vesting Commencement Date: | [●] | |
Exercise Price per Share: | [●] | |
Total Number of Shares: | [●] | |
Exercise Price Per Share: | [●] | |
Type of Option: | [●] | |
Expiration Date: | [●] |
Vesting Schedule :
This option shall be exercisable, in whole or in part, according to the following vesting schedule:
[●]
II. |
AGREEMENT |
1. Award of Option .
(a) The Board of Directors of the Company hereby awards to the Recipient named in the Stock Option Award Notice in Part I of this Notice and Agreement (the Notice ), an option (the Option ) to purchase up to the total number of shares of Common Stock set forth in the Notice, effective as of the Date of Grant set forth in the Notice (the Grant Date ), at the exercise price per share set forth in the Notice of Stock Option Grant (the Exercise Price ), and subject to the terms and conditions of this Option Agreement.
(b) Option Type . If designated in the Notice as an Incentive Stock Option or ISO, this Option is intended to qualify as an incentive stock option as defined in Section 422 of the Code (such an option, to the extent compliant with such definition, an Incentive Stock Option ). The Option shall be regarded as a Non-statutory Stock Option or NSO (a Non-Statutory Stock Option ) if designated as such in the Notice, or if the Option is designated as an ISO but fails to comply with the requirements of Section 422 of the Code, for any reason. In no event shall the Board of Directors, the Company or any Parent or Subsidiary or any of their respective employees or directors have any liability to Recipient (or any other person) due to the failure of the Option to qualify for any reason as an ISO.
(c) Consideration . The grant of the Option is made in consideration of the services to be rendered by the Recipient to the Company
2. Exercise of Option .
(a) Right to Exercise . This Option shall be exercisable during its term in accordance with the Vesting Schedule set out in the Notice and with the applicable provisions of this Option Agreement. In no event shall the Option be exercisable after the Expiration Date set forth in the Notice (the Expiration Date ), at which time the Option (whether vested or unvested) shall immediately terminate.
(b) Method of Exercise . This Option shall be exercisable by delivery of an exercise notice in the form attached as Exhibit A (the Exercise Notice ) or in a manner and pursuant to such procedures as the Board of Directors may determine, which shall state the election to exercise the Option, the number of Shares with respect to which the Option is being exercised (the Exercised Shares ), and such other representations and agreements as may be required by the Company. The Exercise Notice shall be accompanied by payment of the aggregate Exercise Price as to all Exercised Shares, together with any applicable tax withholding. This Option shall be deemed to be exercised upon receipt by the Company of such fully executed Exercise Notice accompanied by payment of the aggregate Exercise Price, together with any applicable tax withholding.
(c) Compliance with Law . No Shares shall be issued pursuant to the exercise of an Option unless such issuance and such exercise comply with all applicable law. Assuming such compliance, for income tax purposes the Shares shall be considered transferred to Recipient on the date on which the Option is exercised with respect to such Shares.
3. Termination of Service .
(a) Termination for Reasons Other Than Cause, Death, Disability . If the Recipient experiences a Termination of Service for any reason other than Cause, death or Disability, the Recipient may exercise the vested portion of the Option, but only within such period of time ending on the earlier of: (a) the date three months following the Termination of Service or (b) the Expiration Date.
(b) Termination for Cause . If the Recipient experiences a Termination of Service for Cause, the Option (whether vested or unvested) shall immediately terminate and cease to be exercisable.
(c) Termination due to Disability . If the Recipient experiences a Termination of Service as a result of the Recipients Disability, the Recipient may exercise the vested portion of the Option, but only within such period of time ending on the earlier of: (a) the date 12 months following the Termination of Service or (b) the Expiration Date.
(d) Termination due to Death . If the Recipient experiences a Termination of Service as a result of the Recipients death, the vested portion of the Option may be exercised by the Recipients estate, by a person who acquired the right to exercise the Option by bequest or inheritance or by the person designated to exercise the Option upon the Recipients death, but only within the time period ending on the earlier of: (a) the date 12 months following the Termination of Service or (b) the Expiration Date.
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4. Lock-Up Period . Recipient hereby agrees that Recipient shall not offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any Common Stock (or other securities) of the Company or enter into any swap, hedging or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any Common Stock (or other securities) of the Company held by Recipient (other than those included in the registration) for a period specified by the representative of the underwriters of Common Stock (or other securities) of the Company not to exceed one hundred and eighty (180) days following the effective date of any registration statement of the Company filed under the Securities Act (or such other period as may be requested by the Company or the underwriters to accommodate regulatory restrictions on (i) the publication or other distribution of research reports and (ii) analyst recommendations and opinions, including, but not limited to, the restrictions contained in NASD Rule 2711(f)(4) or NYSE Rule 472(f)(4), or any successor provisions or amendments thereto).
Recipient agrees to execute and deliver such other agreements as may be reasonably requested by the Company or the underwriters that are consistent with the foregoing or necessary to give further effect thereto. In addition, if requested by the Company or the representative of the underwriters of Common Stock (or other securities) of the Company, Recipient shall provide, within ten (10) days of such request, such information as may be required by the Company or such representative in connection with the completion of any public offering of the Companys securities pursuant to a registration statement filed under the Securities Act of 1933 (the Securities Act ). The obligations described in this Section 4 shall not apply to a registration relating solely to employee benefit plans on Form S-1 or Form S-8 or similar forms that may be promulgated in the future, or a registration relating solely to a Securities Exchange Commission Rule 145 transaction on Form S-4 or similar forms that may be promulgated in the future. The Company may impose stop-transfer instructions with respect to the shares of Common Stock (or other securities) subject to the foregoing restriction until the end of said one hundred and eighty (180) day (or other) period. Recipient agrees that any transferee of the Option or shares acquired pursuant to the Option shall be bound by this Section 4.
5. Method of Payment . Payment of the aggregate Exercise Price shall be by any of the following, or a combination thereof, at the election of the Recipient:
(a) in cash or by certified or bank check at the time the Option is exercised;
(b) surrender of other shares of Common Stock which (i) shall be valued at its Fair Market Value on the date of exercise, and (ii) must be owned free and clear of any liens, claims, encumbrances or security interests, if accepting such shares, in the sole discretion of the Board of Directors, shall not result in any adverse accounting consequences to the Company;
(c) through a cashless exercise program established with a broker;
(d) by reduction in the number of shares otherwise deliverable upon exercise of such Option with a Fair Market Value equal to the aggregate Exercise Price at the time of exercise; or
(e) by any combination of the foregoing methods.
6. Restrictions on Exercise . This Option may not be exercised until such time as the issuance of shares of Common Stock upon such exercise or the method of payment of consideration for such shares would not constitute a violation of any applicable law.
7. Non-Transferability of Option . This Option may not be transferred in any manner otherwise than by will or by the laws of descent or distribution and may be exercised during the lifetime of Recipient only by Recipient. The terms of this Option Agreement shall be binding upon the executors, administrators, heirs, successors and assigns of Recipient.
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8. Term of Option . This Option may be exercised only within the term set out in the Notice, and may be exercised during such term only in accordance with the terms of this Option Agreement.
9. Tax Obligations .
(a) Tax Withholding . Recipient agrees to make appropriate arrangements with the Company (or the Parent or Subsidiary employing or retaining Recipient) for the satisfaction of all Federal, state, local and foreign income and employment tax withholding requirements applicable to the Option exercise. Recipient acknowledges and agrees that the Company may refuse to honor the exercise and refuse to deliver the Shares if such withholding amounts are not delivered at the time of exercise. The Recipient may satisfy any federal, state or local tax withholding obligation relating to the exercise of the Option by any of the following means:
(i) tendering a cash payment;
(ii) authorizing the Company to withhold shares of Common Stock from the shares of Common Stock otherwise issuable to the Recipient as a result of the exercise of the Option; provided, however, that no shares of Common Stock are withheld with a value exceeding the maximum amount of tax required to be withheld by law; or
(iii) delivering to the Company previously owned and unencumbered shares of Common Stock.
(b) Notice of Disqualifying Disposition of ISO Shares . If the Option granted to Recipient herein is an ISO, and if Recipient sells or otherwise disposes of any of the Shares acquired pursuant to the ISO on or before the later of (i) the date two (2) years after the Date of Grant, or (ii) the date one (1) year after the date of exercise, Recipient shall immediately notify the Company in writing of such disposition. Recipient agrees that Recipient may be subject to income tax withholding by the Company on the compensation income recognized by Recipient.
(c) Code Section 409A. Notwithstanding any provision of this Option Agreement to the contrary, this Option is intended to be exempt from Code Section 409A; provided, that the Company does not guarantee to Recipient any particular tax treatment of the Option. In no event whatsoever shall the Company be liable for any additional tax, interest or penalties that may be imposed on Recipient by Code Section 409A or any damages for failing to comply with Code Section 409A.
10. Administration .
(a) Administration of the Option . The Option shall be administered by the Board of Directors. All decisions of the Board of Directors with respect to the Plan shall be final, conclusive and binding upon all parties, including the Company, its shareholders, Participants and any Beneficiaries thereof, unless determined by a court having jurisdiction to be arbitrary and capricious.
(b) Delegation of Authority . To the extent permitted by applicable law, including under Section 157(c) of the Delaware General Corporation Law, the Board of Directors may delegate to one or more officers of the Company some or all of its authority under the Option (except that such delegation shall not apply if the Recipient is then covered by Section 16 of the Exchange Act), and the Board of Directors may delegate to one or more committees of the Board (which may consist of solely one Director) some or all of its authority under the Option, in accordance with applicable law.
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(c) Authority of Board of Directors . Subject to the terms of this Option Agreement and applicable law, the Board of Directors (or its delegate) shall have full discretion and authority to:
(i) waive any conditions or rights under, amend any terms of, or amend, alter, suspend, discontinue or terminate the Option, prospectively or retroactively, without the consent of the Recipient; provided , however , that, subject to clause (vi) below and Section 11 below, no such action shall materially adversely affect the rights of the Recipient, except to the extent any such action is made to cause the Option to comply with applicable law, stock market or exchange rules and regulations or accounting or tax rules and regulations;
(ii) determine the duration and purpose of leaves of absences which may be granted to the Recipient without constituting termination of their employment for purposes of the Option, which periods shall be no shorter than the periods generally applicable to employees under the Companys employment policies;
(iii) make decisions with respect to the Option that may become necessary upon a change in corporate control or an event that triggers anti-dilution adjustments;
(iv) interpret, administer, correct any defect, supply any omission and reconcile any inconsistency in the Option Agreement, or any instrument or agreement relating to the Option;
(v) determine, in its discretion, whether, and the extent to which, (i) the Option will vest during a leave of absence, (ii) a reduction in service level (for example, from full-time to part-time employment) will cause a reduction, or other change, to the Option and (iii) a leave of absence or reduction in service will be deemed a Termination of Service;
(vi) in the event that the Board of Directors determines that, as a result of any dividend or other distribution (other than an ordinary dividend or distribution), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, separation, rights offering, split-up, spin-off, combination, repurchase or exchange of the Common Stock or other securities of the Company, issuance of warrants or other rights to purchase Common Stock or other securities of the Company, issuance of Common Stock pursuant to the anti-dilution provisions of securities of the Company, or other similar corporate transaction or event affecting the Common Stock, or of changes in applicable laws, regulations or accounting principles, an adjustment is appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Option, then the Board shall, subject to compliance with Section 409A of the Code and other applicable law, adjust equitably so as to ensure no undue enrichment or harm (including by payment of cash), any or all of: the number and type of shares (or other securities) subject to the Option; or the grant, purchase, exercise or hurdle price with respect to the Option or, if deemed appropriate, make provision for a cash payment to the Recipient with respect to the Option; and
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(vii) exercise discretion to make any other determination and take any other action that the Board of Directors deems necessary or desirable for the administration of the Option and due compliance with applicable law, stock market or exchange rules and regulations or accounting or tax rules and regulations.
11. Treatment in a Change in Control . In the event of a Change in Control, the Board of Directors may, in its sole discretion, and on such terms and conditions as it deems appropriate, take any one or more of the following actions with respect to the Option: continuation or assumption of such Option by the Company (if it is the surviving corporation) or by the successor or surviving corporation or its parent; substitution or replacement of the Option by the successor or surviving corporation or its parent with cash, securities, rights or other property to be paid or issued, as the case may be, by the successor or surviving corporation (or a parent or subsidiary thereof), with substantially the same terms and value as the Option (including any applicable performance targets or criteria with respect thereto); acceleration of the vesting of the Option and the lapse of any restrictions thereon and, acceleration of the right to exercise the Option during a specified period (and the termination of the Option without payment of any consideration therefor to the extent not timely exercised), in each case, either (A) immediately prior to or as of the date of the Change in Control or (B) upon the Recipients involuntary Termination of Service (including upon a termination of Recipients employment by the Company (or a successor corporation or its parent) without cause, by Recipient for good reason and/or due to Recipients death or Disability) on or within a specified period following the Change in Control; and cancellation of the Option in consideration of a payment, with the form, amount and timing of such payment determined by the Board of Directors in its sole discretion, subject to the following: (A) such payment shall be made in cash, securities, rights and/or other property; (B) the amount of such payment shall equal the value of the Option, as determined by the Board of Directors in its sole discretion; provided that, if such value equals the Intrinsic Value of the Option, such value shall be deemed to be valid; provided further that, if the Intrinsic Value of the Option is equal to or less than zero, the Board of Directors may, in its sole discretion, provide for the cancellation of the Option without payment of any consideration therefor; and (C) such payment shall be made promptly following such Change in Control or on a specified date or dates following such Change in Control; provided that the timing of such payment shall comply with Section 409A of the Code.
12. Definitions .
(a) Affiliate means, with respect to a Person, any entity that, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such Person (or, if no Person is specified, the Company).
(b) Beneficial Owner has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the beneficial ownership of any particular Person, such Person shall be deemed to have beneficial ownership of all securities that such Person has the right to acquire by conversion or exercise of other securities, whether such right is currently exercisable or is exercisable only after the passage of time. The terms Beneficial Ownership, Beneficially Owns and Beneficially Owned have a corresponding meaning.
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(c) Change in Control means the occurrence of any one or more of the following events:
(i) the acquisition by any Person of Beneficial Ownership, directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such Person any securities acquired directly from the Company or its Affiliates other than in connection with the acquisition by the Company or its Affiliates of a business) representing 50% or more of the combined voting power of the then outstanding voting securities of the Company entitled to vote in the election of directors (the Outstanding Company Voting Securities); provided, however that for purposes of this Plan any acquisition which complies with clauses (A), (B) and (C) of subsection (v) of this definition shall not constitute a Change of Control;
(ii) a majority of the members of the Board are replaced during any twelve-month period by directors whose appointment or election is not endorsed by a majority of the Board before the date of appointment or election;
(iii) the date which is ten (10) business days prior to the consummation of a complete liquidation or dissolution of the Company;
(iv) the direct or indirect sale, transfer, conveyance or disposition (other than by way of merger or consolidation) by the Company of all or substantially all of the Companys assets in which any Person acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such Person) assets from the Company that have a total gross fair market value equal to more than 50% of the total gross fair market value of all of the assets of the Company immediately prior to such acquisition or acquisitions; or
(v) the consummation of a reorganization, merger, consolidation or similar form of corporate transaction involving the Company that requires the approval of the Companys shareholders, whether for such transaction or the issuance of securities in the transaction (a Business Combination), unless immediately following such Business Combination: (A) more than 50% of the total voting power of (I) the entity resulting from such Business Combination (the Surviving Company), or (II) if applicable, the ultimate parent entity that directly or indirectly has beneficial ownership of sufficient voting securities eligible to elect a majority of the members of the board of directors (or the analogous governing body) of the Surviving Company (the Parent Company), is represented by the Outstanding Company Voting Securities that were outstanding immediately prior to such Business Combination (or, if applicable, is represented by shares into which the Outstanding Company Voting Securities were converted pursuant to such Business Combination), and such voting power among the holders thereof is in substantially the same proportion as the voting power of the Outstanding Company Voting Securities among the holders thereof immediately prior to the Business Combination; (B) no Person (other than any employee benefit plan sponsored or maintained by the Surviving Company or the Parent Company) is or becomes the Beneficial Owner, directly or indirectly, of 50% or more of the total voting power of the outstanding voting securities eligible to elect members of the board of directors of the Parent Company (or the analogous governing body) (or, if there is no Parent Company, the Surviving Company); and (C) at least a majority of the members of the board of directors (or the analogous governing body) of the Parent Company (or, if there is no Parent Company, the Surviving Company) following the consummation of the Business Combination were Board members at the time of the Boards approval of the execution of the initial agreement providing for such Business Combination.
In no event, however, shall a Change in Control be deemed to occur as a result of any acquisition (w) by the Company, Huatai International Investment Holding Limited, or any of their respective Affiliates, (x) by any employee benefit plan sponsored or maintained by the Company or any
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subsidiary, (y) by any underwriter temporarily holding securities pursuant to an offering of such securities, or (z) by the Recipient or any group of persons including the Recipient (or any entity controlled by the Recipient or any group of persons including the Recipient);
(d) Disability means that the Recipient is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment; provided, however, that for purposes of determining the term of the Option, if it is an Incentive Stock Option, the term Disability shall have the meaning ascribed to it under Section 22(e)(3) of the Code. The determination of whether the Recipient has a Disability shall be determined under procedures established by the Board of Directors. Except in situations where the Board of Directors is determining Disability for purposes of the term of an Incentive Stock Option within the meaning of Section 22(e)(3) of the Code, the Board of Directors may rely on any determination that the Recipient is disabled for purposes of benefits under any long-term disability plan maintained by the Company or any affiliate in which the Recipient participates.
(e) Exchange Act means the Securities Exchange Act of 1934, as amended.
(f) Intrinsic Value means (i) the excess, if any, of the price or implied price per share of Common Stock in a Change in Control or other event over (ii) the Exercise Price multiplied by (iii) the number of shares of Common Stock covered by such Award.
(g) Person has the meaning ascribed to such term in Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof, including a group as defined in Section 13(d) thereof.
(h) Termination of Service means the cessation of a Recipients performance of services as an employee, director or consultant for the Company or any Subsidiary; provided , however , that in the case of a Recipient who is an employee, the transfer of employment from the Company to a Subsidiary, from a Subsidiary to the Company, from one Subsidiary to another Subsidiary or, unless the Board of Directors determines otherwise, the cessation of employee status but the continuation of the performance of services for the Company or a Subsidiary as a director or consultant shall not be deemed a cessation of service that would constitute a Termination of Service; provided , further , that a Termination of Service shall be deemed to occur for a Recipient employed by, or performing services for, a Subsidiary when such Subsidiary ceases to be a Subsidiary unless such Recipients employment or service continues with the Company or another Subsidiary.
13. Entire Agreement; Governing Law . This Option Agreement constitutes the entire agreement of the parties with respect to the subject matter hereof and supersedes in their entirety all prior undertakings and agreements of the Company and Recipient with respect to the subject matter hereof, and may not be modified adversely to the Recipients interest except by means of a writing signed by the Company and Recipient. This Option Agreement is governed by the internal substantive laws but not the choice of law rules of California.
14. No Guarantee of Continued Service . RECIPIENT ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (OR THE PARENT OR SUBSIDIARY EMPLOYING OR RETAINING PARTICIPANT) AND NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING SHARES HEREUNDER. RECIPIENT FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED
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ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE IN ANY WAY WITH THE RIGHT OF THE RECIPIENT OR THE COMPANY (OR THE PARENT OR SUBSIDIARY EMPLOYING OR RETAINING RECIPIENT) TO TERMINATE RECIPIENTS RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT CAUSE.
Recipient hereby accepts the Option subject to all of the terms and provisions of this Option Agreement. Recipient has reviewed this Option Agreement in its entirety, has had an opportunity to obtain the advice of counsel prior to executing this Option Agreement and fully understands all provisions of this Option Agreement. Recipient hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Board of Directors upon any questions arising under this Option Agreement. Recipient further agrees to notify the Company upon any change in the residence address indicated below.
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EXHIBIT A
ASSETMARK FINANCIAL HOLDINGS, INC.
OPTION EXERCISE NOTICE
AssetMark Financial Holdings, Inc.
1655 Grant Street, 10th Floor
Concord, CA 94520
Attention: Corporate Secretary
1. Exercise of Option . Effective as of today, , , the undersigned ( Recipient ) hereby elects to exercise Recipients option (the Option ) to purchase shares of the common stock, par value $0.001 per share (the Shares ) of AssetMark Financial Holdings, Inc. (the Company ) under and pursuant to the Stock Option Award Notice and Agreement by and between the Company and the Recipient dated as of (the Option Agreement ).
2. Delivery of Payment . Recipient herewith delivers to the Company the full purchase price of the Shares, as set forth in the Option Agreement, and any and all withholding taxes due in connection with the exercise of the Option.
3. Representations of Recipient . Recipient acknowledges that Recipient has received, read and understood the Option Agreement and agrees to abide by and be bound by its terms and conditions.
4. Rights as Stockholder . Until the issuance of the Shares (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to the Common Stock subject to an Award, notwithstanding the exercise of the Option. The Shares shall be issued to Recipient as soon as practicable after the Option is exercised in accordance with this Option Agreement. No adjustment shall be made for a dividend or other right for which the record date is prior to the date of issuance except as provided in Section 13 of the Plan.
5. Tax Consultation . Recipient understands that Recipient may suffer adverse tax consequences as a result of Recipients purchase or disposition of the Shares. Recipient represents that Recipient has consulted with any tax consultants Recipient deems advisable in connection with the purchase or disposition of the Shares and that Recipient is not relying on the Company for any tax advice.
6. Successors and Assigns . The Company may assign any of its rights under this Exercise Notice to single or multiple assignees, and this Exercise Notice shall inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer herein set forth, this Exercise Notice shall be binding upon Recipient and his or her heirs, executors, administrators, successors and assigns.
7. Interpretation . Any dispute regarding the interpretation of this Exercise Notice shall be submitted by Recipient or by the Company forthwith to the Administrator, which shall review such dispute at its next regular meeting. The resolution of such a dispute by the Administrator shall be final and binding on all parties.
8. Governing Law; Severability . This Exercise Notice is governed by the internal substantive laws, but not the choice of law rules, of California. In the event that any provision hereof becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Exercise Notice shall continue in full force and effect.
9. Entire Agreement . The Option Agreement is incorporated herein by reference. This Exercise Notice and the Option Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Recipient with respect to the subject matter hereof, and may not be modified adversely to the Recipients interest except by means of a writing signed by the Company and Recipient.
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Date Received |
Exhibit 10.12
FORM OF INDEMNIFICATION AGREEMENT
This Indemnification Agreement (this Agreement ) is made and entered into as of the day of , 20 , by and between AssetMark Financial Holdings, Inc., a Delaware corporation (the Company ) and ( Indemnitee ).
W I T N E S S E T H:
WHEREAS, highly competent persons have become more reluctant to serve publicly-held corporations as directors or officers or in other capacities unless they are provided with adequate protection through insurance or adequate indemnification against risks of claims and actions against them arising out of their service to and activities on behalf of the corporation.
WHEREAS, the Board of Directors of the Company (the Board ) has determined that, to attract and retain qualified individuals, the Company will attempt to maintain on an ongoing basis, at its sole expense, liability insurance to protect persons serving the Company and its subsidiaries from certain liabilities. Although the furnishing of such insurance has been a customary and widespread practice among United States-based corporations and other business enterprises, the Company believes that, given current market conditions and trends, such insurance may be available to it in the future only at higher premiums and with more exclusions. At the same time, directors, officers, and other persons in service to corporations or business enterprises are being increasingly subjected to expensive and time-consuming litigation relating to, among other things, matters that traditionally would have been brought only against the Company or business enterprise itself.
WHEREAS, the Certificate of Incorporation and By-Laws of the Company (as amended and/or restated from time to time, the Certificate of Incorporation and the By-Laws , respectively) provide or will provide that the Company shall indemnify and advance expenses to all directors and officers of the Company in the manner set forth therein and to the fullest extent permitted by applicable law, and the Companys Certificate of Incorporation provides for limitation of liability for directors. In addition, Indemnitee may be entitled to indemnification pursuant to the General Corporation Law of the State of Delaware ( DGCL ). The Certificate of Incorporation and By-Laws and the DGCL expressly provide or will provide that the indemnification provisions set forth therein are not exclusive, and thereby contemplate that contracts may be entered into between the Company and members of the board of directors, officers and other persons with respect to indemnification.
WHEREAS, the uncertainties relating to such insurance and to indemnification have increased the difficulty of attracting and retaining such persons.
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WHEREAS, the Board has determined that the increased difficulty in attracting and retaining such persons is detrimental to the best interests of the Companys stockholders and that the Company should act to assure such persons that there will be increased certainty of such protection in the future.
WHEREAS, it is reasonable, prudent and necessary for the Company contractually to obligate itself to indemnify, and to advance expenses on behalf of, such persons to the fullest extent permitted by applicable law so that they will serve or continue to serve the Company free from undue concern that they will not be so indemnified.
WHEREAS, this Agreement is a supplement to and in furtherance of the Certificate of Incorporation and By-Laws and any resolutions adopted pursuant thereto and shall not be deemed a substitute therefor, nor to diminish or abrogate any rights of Indemnitee thereunder.
WHEREAS, Indemnitee does not regard the protection available under the Companys Certificate of Incorporation and By-Laws and insurance as adequate in the present circumstances, and may not be willing to serve as an officer or director of the Company without adequate protection, and the Company desires Indemnitee to serve in such capacity. Indemnitee is willing to serve, continue to serve and to take on additional service for or on behalf of the Company on the condition that he or she be so indemnified.
NOW, THEREFORE, in consideration of the premises and the covenants contained herein, the Company and Indemnitee do hereby covenant and agree as follows:
ARTICLE 1
C ERTAIN D EFINITIONS
(a) As used in this Agreement:
Change of Control means any one of the following circumstances occurring after the date hereof: (i) there shall have occurred an event required to be reported with respect to the Company in response to Item 6(e) of Schedule 14A of Regulation 14A (or in response to any similar item or any similar schedule or form) under the Exchange Act, regardless of whether the Company is then subject to such reporting requirement; (ii) any person or group (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act) shall have become, without prior approval of the Companys Board by approval of at least a majority of the Continuing Directors, the beneficial owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 15% or more of the combined voting power of the Companys then outstanding voting securities (provided that, for purposes of this clause (ii), the term person shall exclude (w) the Company, (x) Huatai Securities Co., Ltd. and any of its
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direct or indirect subsidiaries, (y) any trustee or other fiduciary holding securities under an employee benefit plan of the Company and (z) any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company); (iii) there occurs a merger or consolidation of the Company with any other entity, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 51% of the combined voting power of the voting securities of the surviving entity outstanding immediately after such merger or consolidation and with the power to elect at least a majority of the board of directors or other governing body of such surviving entity; (iv) all or substantially all the assets of the Company are sold or disposed of in a transaction or series of related transactions; (v) the approval by the stockholders of the Company of a complete liquidation of the Company; or (vi) the Continuing Directors cease for any reason to constitute at least a majority of the members of the Board.
Continuing Director means (i) each director on the Board on the date hereof or (ii) any new director whose election or nomination for election by the Companys stockholders was approved by a vote of at least a majority of the directors then still in office who were directors on the date hereof or whose election or nomination was so approved.
Corporate Status means the status of a person who is or was a director, officer, trustee, general partner, managing member, fiduciary, board of directors committee member, employee or agent of the Company or of any other Enterprise.
Disinterested Director means a director of the Company who is not and was not a party to the Proceeding in respect of which indemnification is sought by Indemnitee.
Enterprise means the Company and any other corporation, limited liability company, partnership, joint venture, trust, employee benefit plan or other enterprise of which Indemnitee is or was serving at the request of the Company as a director, officer, trustee, general partner, managing member, fiduciary, board of directors committee member, employee or agent.
ERISA means the Employee Retirement Income Security Act of 1974, as amended.
Exchange Act means the Securities Exchange Act of 1934, as amended.
Expenses means all direct and indirect costs (including attorneys fees, retainers, court costs, transcripts, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery
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service fees, and all other disbursements or expenses) reasonably incurred in connection with (i) prosecuting, defending, preparing to prosecute or defend, investigating, being or preparing to be a witness in, or otherwise participating in, a Proceeding or (ii) establishing or enforcing a right to indemnification under this Agreement, the Certificate of Incorporation and By-Laws, applicable law or otherwise. Expenses also shall include Expenses incurred in connection with any appeal resulting from any Proceeding, including the premium, security for, and other costs relating to any cost bond, supersedeas bond, or other appeal bond or its equivalent. For the avoidance of doubt, Expenses shall not include any Liabilities.
Independent Counsel means a law firm, or a member of a law firm, that is experienced in matters of corporate law and neither currently is, nor in the five years previous to its selection or appointment has been, retained to represent (i) the Company or Indemnitee in any matter material to either such party (other than with respect to matters concerning Indemnitee under this Agreement or of other indemnitees under similar indemnification agreements) or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term Independent Counsel shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitees rights under this Agreement.
Liabilities means any losses or liabilities, including any judgments, fines, ERISA excise taxes and penalties, penalties and amounts paid in settlement, arising out of or in connection with any Proceeding (including all interest, assessments and other charges paid or payable in connection with or in respect of any such judgments, fines, ERISA excise taxes and penalties, penalties or amounts paid in settlement).
Proceeding means any threatened, pending or completed action, derivative action, suit, claim, counterclaim, cross claim, arbitration, alternate dispute resolution mechanism, investigation, inquiry, administrative hearing or any other actual, threatened or completed proceeding, whether civil (including intentional and unintentional tort claims), criminal, administrative or investigative, including any appeal therefrom, and whether instituted by or on behalf of the Company or any other party, or any inquiry or investigation that Indemnitee in good faith believes might lead to the institution of any such action, suit or other proceeding hereinabove listed in which Indemnitee was, is or will be involved as a party, potential party, non-party witness or otherwise by reason of any Corporate Status of Indemnitee, or by reason of any action taken (or failure to act) by him or her or of any action (or failure to act) on his or her part while serving in any Corporate Status.
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(b) For the purposes of this Agreement:
References to Company shall include, in addition to the resulting or surviving corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, employees or agents, so that if Indemnitee is or was a director, officer, employee, or agent of such constituent corporation or is or was serving at the request of such constituent corporation as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust or other enterprise, then Indemnitee shall stand in the same position under the provisions of this Agreement with respect to the resulting or surviving corporation as Indemnitee would have with respect to such constituent corporation if its separate existence had continued.
Reference to other enterprise shall include employee benefit plans; references to fines shall include any excise tax assessed with respect to any employee benefit plan; references to serving at the request of the Company shall include any service as a director, officer, employee or agent of the Company which imposes duties on, or involves services by, such director, officer, employee or agent with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner he reasonably believed to be in the best interests of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner not opposed to the best interests of the Company as referred to in this Agreement.
Reference to including shall mean including, without limitation, regardless of whether the words without limitation actually appear, references to the words herein, hereof and hereunder and other words of similar import shall refer to this Agreement as a whole and not to any particular paragraph, subparagraph, section, subsection or other subdivision. Whenever the context may require, any pronoun used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns, pronouns and verbs shall include the plural and vice versa.
ARTICLE 2
S ERVICES B Y I NDEMNITEE
Section 2.01 . Services By Indemnitee. Subject to the terms of any applicable employment agreement, offer letter or other relevant agreement or arrangement between Indemnitee and the Company, Indemnitee hereby agrees to serve or continue to serve, at the will of the Company, as applicable, as a director, officer or key employee of the Company, as applicable, for so long as Indemnitee is duly elected or appointed or until Indemnitee tenders his or her resignation or is removed.
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ARTICLE 3
I NDEMNIFICATION
Section 3.01 . General. (a) The Company hereby agrees to and shall indemnify Indemnitee and hold Indemnitee harmless from and against any and all Expenses and Liabilities, in either case, actually and reasonably incurred by Indemnitee or on Indemnitees behalf by reason of Indemnitees Corporate Status, to the fullest extent permitted by applicable law. The Companys indemnification obligations set forth in this Section 3.01 shall apply (i) in respect of Indemnitees past, present and future service in any Corporate Status and (ii) regardless of whether Indemnitee is serving in any Corporate Status at the time any such Expense or Liability is incurred.
For purposes of this Agreement, the meaning of the phrase to the fullest extent permitted by applicable law shall include, but not be limited to:
(i) to the fullest extent permitted by any provision of the DGCL, or the corresponding provision of any successor statute, and
(ii) to the fullest extent authorized or permitted by any amendments to or replacements of the DGCL adopted after the date of this Agreement that increase the extent to which a corporation may indemnify its officers and directors.
(b) Witness Expenses . Notwithstanding any other provision of this Agreement, to the extent that Indemnitee is, by reason of his or her Corporate Status, a witness in any Proceeding to which Indemnitee is not a party, he shall be indemnified against all Expenses actually and reasonably incurred by Indemnitee or on his or her behalf in connection therewith.
(c) Expenses as a Party Where Wholly or Partly Successful . Notwithstanding any other provisions of this Agreement, to the fullest extent permitted by applicable law, to the extent that Indemnitee is a party to (or a participant in) and is successful, on the merits or otherwise, in any Proceeding or in defense of any claim, issue or matter therein, in whole or in part, the Company shall indemnify Indemnitee against all Expenses actually and reasonably incurred by him or her in connection therewith. If Indemnitee is not wholly successful in such Proceeding, but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall, to the fullest extent permitted by applicable law, indemnify Indemnitee against all Expenses actually and reasonably incurred by Indemnitee or on his or her behalf in connection with each successfully resolved claim, issue or matter. For purposes of this Section and without limitation, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.
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Section 3.02 . Exclusions. Notwithstanding any provision of this Agreement and unless Indemnitee ultimately is successful on the merits with respect to any such claim, the Company shall not be obligated under this Agreement to make any indemnity in connection with any claim made against Indemnitee:
(a) for (i) an accounting of profits made from the purchase and sale (or sale and purchase) by Indemnitee of securities of the Company within the meaning of Section 16(b) of the Exchange Act or similar provisions of state statutory law or common law or (ii) any reimbursement of the Company by Indemnitee of any bonus or other incentive-based or equity-based compensation or of any profits realized by Indemnitee from the sale of securities of the Company, as required in each case under the Exchange Act (including any such reimbursements that arise from an accounting restatement of the Company pursuant to Section 304 of the Sarbanes-Oxley Act of 2002 (the Sarbanes-Oxley Act ), or the payment to the Company of profits arising from the purchase and sale by Indemnitee of securities in violation of Section 306 of the Sarbanes-Oxley Act); or
(b) except as otherwise provided in Section 6.01(e), prior to a Change of Control, in connection with any Proceeding (or any part of any Proceeding) initiated by Indemnitee (other than any cross claim or counterclaim asserted by the Indemnitee), including any Proceeding (or any part of any Proceeding) initiated by Indemnitee against the Company or its directors, officers, employees or other indemnitees, unless (i) the Board authorized the Proceeding (or any part of any Proceeding) prior to its initiation or (ii) the Company provides the indemnification, in its sole discretion, pursuant to the powers vested in the Company under applicable law.
ARTICLE 4
A DVANCEMENT O F E XPENSES ; D EFENSE OF C LAIMS
Section 4.01 . Advances. Notwithstanding any provision of this Agreement to the contrary, the Company shall advance any Expenses actually and reasonably incurred by Indemnitee in connection with any Proceeding within ten (10) days after the receipt by the Company of each statement requesting such advance from time to time, whether prior to or after final disposition of any Proceeding. Advances shall be unsecured and interest free. Advances shall be made without regard to Indemnitees ability to repay such amounts and without regard to Indemnitees ultimate entitlement to indemnification under the other provisions of this Agreement. Advances shall include any and all reasonable Expenses incurred pursuing an action to enforce this right of advancement, including Expenses incurred preparing and forwarding statements to the Company to support the advances claimed.
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Section 4.02 . Repayment of Advances or Other Expenses. Indemnitee agrees that Indemnitee shall reimburse the Company for all Expenses advanced by the Company pursuant to Section 4.01, in the event and only to the extent that it shall be determined by final judgment or other final adjudication under the provisions of any applicable law (as to which all rights of appeal therefrom have been exhausted or lapsed) that Indemnitee is not entitled to be indemnified by the Company for such Expenses.
Section 4.03 . Defense of Claims. The Company shall be entitled to assume the defense of any Proceeding with counsel consented to by Indemnitee (such consent not to be unreasonably withheld) upon the delivery by the Company to Indemnitee of written notice of the Companys election to do so. After delivery of such notice, consent to such counsel by Indemnitee and the retention of such counsel by the Company, the Company will not be liable to Indemnitee under this Agreement for any fees or expenses of counsel subsequently incurred by Indemnitee with respect to such Proceeding; provided that (i) Indemnitee shall have the right to employ separate counsel in respect of any Proceeding at Indemnitees expense and (ii) if (A) the employment of counsel by Indemnitee has been previously authorized in writing by the Company or (B) Indemnitee shall have reasonably concluded upon the advice of counsel that there is a conflict of interest between the Company and Indemnitee in the conduct of the defense of such Proceeding, then in each such case the fees and expenses of Indemnitees counsel shall be at the Companys expense. The Company shall not settle any action, claim or Proceeding (in whole or in part) which would impose any Expense, judgment, fine, penalty or limitation on Indemnitee without Indemnitees prior written consent, such consent not to be unreasonably withheld. Indemnitee shall not settle any action, claim or Proceeding (in whole or in part) which would impose any Expense, judgment, fine, penalty or limitation on the Company without the Companys prior written consent, such consent not to be unreasonably withheld.
ARTICLE 5
P ROCEDURES F OR N OTIFICATION OF AND D ETERMINATION OF E NTITLEMENT T O I NDEMNIFICATION
Section 5.01 . Notification; Request For Indemnification. (a) As soon as reasonably practicable after receipt by Indemnitee of written notice that he or she is a party to or a participant (as a witness or otherwise) in any Proceeding or of any other matter in respect of which Indemnitee intends to seek indemnification or advancement of Expenses hereunder, Indemnitee shall provide to the Company written notice thereof, including the nature of and the facts underlying the Proceeding. The omission by Indemnitee to so notify the Company will not relieve the Company from any liability which it may have to Indemnitee hereunder or otherwise.
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(b) To obtain indemnification under this Agreement, Indemnitee shall deliver to the Company a written request for indemnification, including therewith such information as is reasonably available to Indemnitee and reasonably necessary to determine Indemnitees entitlement to indemnification hereunder. Such request(s) may be delivered from time to time and at such time(s) as Indemnitee deems appropriate in his or her sole discretion. Indemnitees entitlement to indemnification shall be determined according to Section 5.02 of this Agreement and applicable law.
Section 5.02 . Determination of Entitlement. (a) Where there has been a written request by Indemnitee for indemnification pursuant to Section 5.01(b), then as soon as is reasonably practicable (but in any event not later than 60 days) after final disposition of the relevant Proceeding, a determination, if required by applicable law, with respect to Indemnitees entitlement thereto shall be made in the specific case: (i) if a Change of Control shall not have occurred, (A) by a majority vote of the Disinterested Directors, even though less than a quorum of the Board, (B) by a committee of Disinterested Directors designated by a majority vote of the Disinterested Directors, even though less than a quorum of the Board, (C) if there are no such Disinterested Directors or, if such Disinterested Directors so direct, by Independent Counsel in a written opinion to the Board, a copy of which shall be delivered to Indemnitee; or (ii) if a Change of Control shall have occurred, by Independent Counsel in a written opinion to the Board, a copy of which shall be delivered to Indemnitee. If it is so determined that Indemnitee is entitled to indemnification, payment to Indemnitee shall be made within ten (10) days after such determination. Indemnitee shall reasonably cooperate with the person, persons or entity making such determination with respect to Indemnitees entitlement to indemnification, including providing to such person, persons or entity upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to Indemnitee and reasonably necessary to such determination. Any costs or expenses (including attorneys fees and disbursements) actually and reasonably incurred by Indemnitee in so cooperating with the person, persons or entity making such determination shall be borne by the Company (irrespective of the determination as to Indemnitees entitlement to indemnification).
(b) If entitlement to indemnification is to be determined by Independent Counsel pursuant to Section 5.02(a)(ii), such Independent Counsel shall be selected by Indemnitee, and Indemnitee shall give written notice to the Company advising it of the identity of the Independent Counsel so selected. If entitlement to indemnification is to be determined by Independent Counsel pursuant to Section 5.02(a)(i)(C) (or if Indemnitee requests that such selection be made by the Board), such Independent Counsel shall be selected by the Company in which case the Company shall give written notice to Indemnitee advising him or her of the identity of the Independent Counsel so selected. In either event, Indemnitee or the Company, as the case may be, may, within 10 days after such written notice of selection shall have been received, deliver to the Company or to Indemnitee, as
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the case may be, a written objection to such selection; provided, however, that such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements of Independent Counsel as defined in Article 1 of this Agreement, and the objection shall set forth with particularity the factual basis of such assertion. Absent a proper and timely objection, the person so selected shall act as Independent Counsel. If such written objection is so made and substantiated, the Independent Counsel so selected may not serve as Independent Counsel unless and until such objection is withdrawn or a court of competent jurisdiction has determined that such objection is without merit. If, within 20 days after the later of submission by Indemnitee of a written request for indemnification pursuant to Section 5.01(b) hereof and the final disposition of the Proceeding, no Independent Counsel shall have been selected and not objected to, either the Company or Indemnitee may petition a court of competent jurisdiction for resolution of any objection which shall have been made by the Company or Indemnitee to the others selection of Independent Counsel and/or for the appointment as Independent Counsel of a person selected by the court or by such other person as the court shall designate, and the person with respect to whom all objections are so resolved or the person so appointed shall act as Independent Counsel under Section 5.02(a) hereof. Upon the due commencement of any judicial proceeding or arbitration pursuant to Section 6.01(a) of this Agreement, the Independent Counsel shall be discharged and relieved of any further responsibility in such capacity (subject to the applicable standards of professional conduct then prevailing).
(c) The Company agrees to pay the reasonable fees and expenses of any Independent Counsel serving under this Agreement.
Section 5.03 . Presumptions and Burdens of Proof; Effect of Certain Proceedings. (a) In making any determination with respect to entitlement to indemnification hereunder, the person or persons or entity making such determination shall, to the fullest extent not prohibited by law, presume that Indemnitee is entitled to indemnification under this Agreement if Indemnitee has submitted a request for indemnification in accordance with Section 5.01(b) of this Agreement, and the Company shall, to the fullest extent not prohibited by law, have the burden of proof to overcome that presumption in connection with the making by any person, persons or entity of any determination contrary to that presumption. Neither the failure of any person, persons or entity to have made a determination prior to the commencement of any action pursuant to this Agreement that indemnification is proper in the circumstances because Indemnitee has met the applicable standard of conduct, nor an actual determination by any person, persons or entity that Indemnitee has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that Indemnitee has not met the applicable standard of conduct.
(b) If the person, persons or entity empowered or selected under Section 5.02 of this Agreement to determine whether Indemnitee is entitled to indemnification shall not have made a determination within the sixty (60) day
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period referred to in Section 5.02(a), the requisite determination of entitlement to indemnification shall, to the fullest extent not prohibited by law, be deemed to have been made and Indemnitee shall be entitled to such indemnification; provided , however, that such 60-day period may be extended for a reasonable time, not to exceed an additional thirty (30) days, if the person, persons or entity making the determination with respect to entitlement to indemnification in good faith requires such additional time for the obtaining or evaluating of documentation and/or information relating thereto.
(c) The termination of any Proceeding or of any claim, issue or matter therein, by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, shall not (except as otherwise expressly provided in this Agreement) of itself adversely affect the right of Indemnitee to indemnification or create a presumption that Indemnitee did not act in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the Company or, with respect to any criminal Proceeding, that Indemnitee had reasonable cause to believe that his or her conduct was unlawful.
(d) For purposes of any determination of good faith, Indemnitee shall be deemed to have acted in good faith if Indemnitees action was in good faith reliance on the records or books of account of any Enterprise, including financial statements, or on information supplied to Indemnitee by the officers of such Enterprise in the course of their duties, or on the advice of legal counsel for such Enterprise or on information or records given or reports made to such Enterprise by an independent certified public accountant or by an appraiser or other expert selected by such Enterprise. The provisions of this Section 5.03(d) shall not be deemed to be exclusive or to limit in any way the other circumstances in which Indemnitee may be deemed or found to have met the applicable standard of conduct set forth in this Agreement.
(e) The knowledge and/or actions, or failure to act, of any other director, trustee, partner, managing member, fiduciary, officer, agent or employee of any Enterprise shall not be imputed to Indemnitee for purposes of determining any right to indemnification under this Agreement.
ARTICLE 6
R EMEDIES OF I NDEMNITEE
Section 6.01. Adjudication or Arbitration . (a) In the event of any dispute between Indemnitee and the Company hereunder as to entitlement to indemnification or advancement of Expenses (including where (i) a determination is made pursuant to Section 5.02 of this Agreement that Indemnitee is not entitled to indemnification under this Agreement, (ii) advancement of Expenses is not timely made pursuant to Section 4.01 of this Agreement, (iii) payment of indemnification pursuant to Section 3.01 of this Agreement is not made within ten (10) days after a determination has been made that Indemnitee is entitled to
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indemnification, (iv) no determination as to entitlement to indemnification is timely made pursuant to Section 5.02 of this Agreement and no payment of indemnification is made within ten (10) days after entitlement is deemed to have been determined pursuant to Section 5.03(b) or (v) a contribution payment is not made in a timely manner pursuant to Section 8.04 of this Agreement), then Indemnitee shall be entitled to an adjudication by a court of his or her entitlement to such indemnification, contribution or advancement. Alternatively, in such case, Indemnitee, at his or her option, may seek an award in arbitration to be conducted by a single arbitrator pursuant to the Commercial Arbitration Rules of the American Arbitration Association. The Company shall not oppose Indemnitees right to seek any such adjudication or award in arbitration.
(b) In the event that a determination shall have been made pursuant to Section 5.02(a) of this Agreement that Indemnitee is not entitled to indemnification, any judicial proceeding or arbitration commenced pursuant to this Section 6.01 shall be conducted in all respects as a de novo trial or arbitration on the merits, and Indemnitee shall not be prejudiced by reason of that adverse determination. In any judicial proceeding or arbitration commenced pursuant to this Section 6.01 the Company shall have the burden of proving Indemnitee is not entitled to indemnification or advancement of Expenses, as the case may be, and the Company may not refer to or introduce into evidence any determination pursuant to Section 5.02(a) of this Agreement adverse to Indemnitee for any purpose. If Indemnitee commences a judicial proceeding or arbitration pursuant to this Section 6.01, Indemnitee shall not be required to reimburse the Company for any advances pursuant to Section 4.02 until a final determination is made with respect to Indemnitees entitlement to indemnification (as to which all rights of appeal have been exhausted or lapsed).
(c) If a determination shall have been made pursuant to Section 5.02(a) of this Agreement that Indemnitee is entitled to indemnification, the Company shall be bound by such determination in any judicial proceeding or arbitration commenced pursuant to this Section 6.01, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitees statement not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law.
(d) The Company shall be precluded from asserting in any judicial proceeding or arbitration commenced pursuant to this Section 6.01 that the procedures and presumptions of this Agreement are not valid, binding and enforceable and shall stipulate in any such court or before any such arbitrator that the Company is bound by all the provisions of this Agreement.
(e) The Company shall indemnify Indemnitee to the fullest extent permitted by law against all Expenses and, if requested by Indemnitee, shall (within ten (10) days after the Companys receipt of such written request) advance such Expenses to Indemnitee, which are reasonably incurred by Indemnitee in
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connection with any judicial proceeding or arbitration brought by Indemnitee for (i) indemnification or advances of Expenses by the Company (or otherwise for the enforcement, interpretation or defense of his or her rights) under this Agreement or any other agreement, including any other indemnification, contribution or advancement agreement, or any provision of the Certificate of Incorporation or By-Laws now or hereafter in effect or (ii) recovery or advances under any directors and officers liability insurance policy maintained by the Company, regardless of whether Indemnitee ultimately is determined to be entitled to such indemnification, contribution, advancement or insurance recovery, as the case may be.
ARTICLE 7
D IRECTORS AND O FFICERS L IABILITY I NSURANCE
Section 7.01 . D&O Liability Insurance. The Company shall obtain and maintain a policy or policies of insurance ( D&O Liability Insurance ) with reputable insurance companies providing liability insurance for directors and officers of the Company in their capacities as such (and for any capacity in which any director or officer of the Company serves any other Enterprise at the request of the Company), in respect of acts or omissions occurring while serving in such capacity, on terms with respect to coverage and amount (including with respect to the payment of Expenses) no less favorable than those of such policy in effect on the date hereof, except for any changes approved by the Board prior to a Change of Control; provided that such coverage and amounts are available on commercially reasonable terms.
Section 7.02 . Evidence of Coverage. Upon request by Indemnitee, the Company shall provide copies of all policies of D&O Liability Insurance obtained and maintained in accordance with Section 7.01 of this Agreement. The Company shall promptly notify Indemnitee of any changes in such insurance coverage.
ARTICLE 8
M ISCELLANEOUS
Section 8.01 . Nonexclusivity of Rights. The rights of indemnification, contribution and advancement of Expenses as provided by this Agreement shall not be deemed exclusive of any other rights to which Indemnitee may at any time be entitled to under applicable law, the Certificate of Incorporation, the By-Laws, any agreement, a vote of stockholders, a resolution of directors or otherwise. No right or remedy herein conferred is intended to be exclusive of any other right or remedy, and every other right and remedy shall be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other right or remedy.
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Section 8.02 . Insurance and Subrogation. (a) Indemnitee shall be covered by the Companys D&O Liability Insurance in accordance with its or their terms to the maximum extent of the coverage available for any director or officer under such policy or policies. If, at the time the Company receives notice of a claim hereunder, the Company has director and officer liability insurance in effect, the Company shall give prompt notice of such Proceeding to the insurers in accordance with the procedures set forth in the respective policies. The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of Indemnitee, all amounts payable as a result of such Proceeding in accordance with the terms of such policies. The failure or refusal of any such insurer to pay any such amount shall not affect or impair the obligations of the Company under this Agreement.
(b) In the event of any payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Company to bring suit to enforce such rights.
(c) The Company shall not be liable under this Agreement to make any payment of amounts otherwise indemnifiable (or for which advancement is provided) hereunder if and to the extent that Indemnitee has actually received such payment under any insurance policy or other indemnity provision.
Section 8.03. Amounts Received from Non-Company Sources. The Companys obligation to indemnify or advance Expenses hereunder to Indemnitee who is or was serving at the request of the Company as a director, officer, trustee, partner, managing member, fiduciary, board of directors committee member, employee or agent of any other Enterprise shall be reduced by any amount Indemnitee has actually received as indemnification or advancement of Expenses from such Enterprise.
Section 8.04 . Contribution. To the fullest extent permissible under applicable law, if the indemnification provided for in this Agreement is unavailable to Indemnitee for any reason whatsoever, the Company, in lieu of indemnifying Indemnitee, shall contribute to the amount incurred by Indemnitee, whether for judgments, fines, penalties, ERISA excise taxes, amounts paid or to be paid in settlement and/or for Expenses, in connection with any claim relating to an indemnifiable event under this Agreement, in such proportion as is deemed fair and reasonable in light of all of the circumstances of such Proceeding to reflect (i) the relative benefits received by the Company and Indemnitee as a result of the event(s) and/or transaction(s) giving rise to such Proceeding; and/or (ii) the relative fault of the Company (and its directors, officers, employees and agents) and Indemnitee in connection with such event(s) and/or transaction(s).
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Section 8.05 . Amendment. This Agreement may not be modified or amended except by a written instrument executed by or on behalf of each of the parties hereto. No amendment, alteration or repeal of this Agreement or of any provision hereof shall limit, restrict or reduce any right of Indemnitee under this Agreement in respect of any act or omission, or any event occurring, prior to such amendment, alteration or repeal. To the extent that a change in applicable law, whether by statute or judicial decision, (i) permits greater indemnification, contribution or advancement of Expenses than would be afforded under the Certificate of Incorporation and By-Laws and this Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change or (ii) limits rights with respect to indemnification, contribution or advancement of Expenses, it is the intent of the parties hereto that the rights with respect to indemnification, contribution or advancement of Expenses in effect prior to such change shall remain in full force and effect to the extent permitted by applicable law.
Section 8.06 . Waivers. The observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively) by the party entitled to enforce such term only by a writing signed by the party against which such waiver is to be asserted. Unless otherwise expressly provided herein, no delay on the part of any party hereto in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any waiver on the part of any party hereto of any right, power or privilege hereunder operate as a waiver of any other right, power or privilege hereunder nor shall any single or partial exercise of any right, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder.
Section 8.07 . Entire Agreement. This Agreement and the documents referred to herein constitute the entire agreement between the parties hereto with respect to the matters covered hereby, and any other prior or contemporaneous oral or written understandings or agreements with respect to the matters covered hereby are superseded by this Agreement, provided that this Agreement is a supplement to and in furtherance of the Certificate of Incorporation and By-Laws and applicable law, and shall not be deemed a substitute therefor, nor to diminish or abrogate any rights of Indemnitee thereunder.
Section 8.08 . Severability. If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (a) the validity, legality and enforceability of the remaining provisions of this Agreement (including each portion of any Section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby and shall remain enforceable to the fullest extent permitted by law; (b) such provision or provisions shall be deemed reformed to the extent necessary to conform to applicable law and to give the maximum effect to the intent of the parties hereto; and (c) to the fullest extent
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possible, the provisions of this Agreement (including each portion of any Section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested thereby.
Section 8.09 . Notices. All notices, requests, demands and other communications under this Agreement shall be in writing (which may be by facsimile or email transmission). All such notices, requests and other communications shall be deemed received on the date of receipt by the recipient thereof if received prior to 5:00 p.m. in the place of receipt and such day is a business day in the place of receipt. Otherwise, any such notice, request or communication shall be deemed not to have been received until the next succeeding business day in the place of receipt. The address for notice to a party is as shown on the signature page of this Agreement, or such other address as any party shall have given by written notice to the other party as provided above.
Section 8.10 . Binding Effect. (a) The Company expressly confirms and agrees that it has entered into this Agreement and assumed the obligations imposed on it hereby to induce Indemnitee to serve as a director or officer of the Company, and the Company acknowledges that Indemnitee is relying upon this Agreement in serving as a director or officer of the Company.
(b) This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors, assigns, including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business and/or assets of the Company, spouses, heirs, and executors, administrators and personal and legal representatives. The Company shall require and cause any successor (whether direct or indirect by purchase, merger, consolidation or otherwise) to all or substantially all, or a substantial part of the business or assets of the Company, by written agreement in form and substance satisfactory to Indemnitee, expressly to assume and agree to perform this Agreement in the manner and to the same extent that the Company would be required to perform if no such succession had taken place.
(c) The indemnification, contribution and advancement of Expenses provided by, or granted pursuant to this Agreement shall continue as to a person who has ceased to be a director or officer and shall inure to the benefit of the heirs, executors, administrators, legatees and assigns of such a person.
Section 8.11 . Governing Law. This Agreement and the legal relations among the parties shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware, without regard to its conflict of laws rules.
Section 8.12 . Consent To Jurisdiction. Except with respect to any arbitration commenced by Indemnitee pursuant to Section 6.01(a) of this
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Agreement, the Company and Indemnitee hereby irrevocably and unconditionally (i) agree that any action or proceeding arising out of or in connection with this Agreement shall be brought only in the Chancery Court of the State of Delaware (the Delaware Court ), and not in any other state or federal court in the United States of America or any court in any other country, (ii) consent to submit to the exclusive jurisdiction of the Delaware Court for purposes of any action or proceeding arising out of or in connection with this Agreement, (iii) waive any objection to the laying of venue of any such action or proceeding in the Delaware Court, and (iv) waive, and agree not to plead or to make, any claim that any such action or proceeding brought in the Delaware Court has been brought in an improper or inconvenient forum.
Section 8.13 . Headings. The Article and Section headings in this Agreement are for convenience of reference only, and shall not be deemed to alter or affect the meaning or interpretation of any provisions hereof.
Section 8.14 . Counterparts. This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute one and the same Agreement. Only one such counterpart signed by the party against whom enforceability is sought needs to be produced to evidence the existence of this Agreement.
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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered to be effective as of the date first above written.
ASSETMARK FINANCIAL HOLDINGS, INC. | ||
By: |
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Name: | ||
Title: | ||
Address: | ||
Email: | ||
Attention: | ||
With a copy to: | ||
Address: | ||
Email: | ||
Attention: | ||
INDEMNITEE | ||
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Address: | ||
Facsimile: | ||
With a copy to: | ||
Address: | ||
Facsimile: | ||
Attention: |
[ Signature Page to Indemnification Agreement ]
Exhibit 10.13
AssetMark Layoff Plan Summary
Owner: Human Resources
Applies To: All Employees
Effective: October 25, 2016
Introduction
The Layoff Plan is designed to provide a package of benefits to help you and your family through a job transition following a layoff. This section of the summary provides details about the benefits available to eligible employees in the event of a layoff.
Definitions
The following terms used in this section have the following meanings:
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Notice Periodthe period after which you have been notified of your Layoff Date, but are still an active employee of the Company. |
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Layoff Datethe last day you are an active employee of the Company. |
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Release Agreementyou must sign the Release Agreement provided to you by the Company prior to the Layoff Date to receive any severance benefits or payments after the Notice Period. |
In the Event of a Layoff
In the event of a layoff, you may be eligible for severance) and education assistance benefits. A layoff generally means the temporary or permanent elimination of a position due to:
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A business restructuring; |
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A decrease in orders or production volume; |
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A productivity initiative; or |
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The sale, transfer or outsourcing of operations |
A layoff does not include an individuals termination where:
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The individuals position has been eliminated due to a transfer to a successor employer who offers continued employment; |
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The individual has been offered but declines a comparable position; or |
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The individual has been transferred to a comparable position within the Company or any of its affiliates |
You are eligible for benefits at the time of a layoff, if you:
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Are an employee on the active payroll of the Company; |
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Have not been offered a comparable position (see definition under Comparable Position heading below); |
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Have not been transferred to another position anywhere in the Company or any of its affiliates; |
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Have not been offered a position with a successor employer; |
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AssetMark Layoff Plan Summary 10.25.16
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Are absent from work because of a work-related or personal illness or injury, and are released by your doctor to return to work within 6 months of your last day worked; and |
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Execute the Separation Agreement & Release provided to you by the Company at the time you are notified of layoff in the time period allotted |
Comparable Position
A comparable position is one that meets all of the following criteria. The position:
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Is within the Company or any of its affiliates; |
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Is fifty (50) miles or fewer from your current work location; |
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Is at a compensation rate (salary and target bonus) not more than 20% below your current rate; |
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Does not cause your classification under the Fair Labor Standards Act (FLSA) to change from exempt to nonexempt; and |
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Provides benefits that are comparable in the aggregate to the benefits platform in which you currently participate |
Notice Period
If you are on the AssetMark active payroll, you will be provided a Notice Period of at least two (2) weeks. The length of your Notice Period may vary, but in all cases this is a specific period of time on active payroll after you are notified in writing that you are affected by a layoff. Contact your manager or human resources representative for details of the Notice Period that will apply to you. Your Notice Period may end if you become disabled, or if you leave your position before the end of the Notice Period.
You may be expected to work during the Notice Period; if so, you will be provided reasonable time off with pay during the Notice Period to look for a new job. If you have unused, accrued Paid Time Off, you may use it during your Notice Period, with management approval. Unused, accrued Paid Time Off as of the end of your Notice Period will be paid as a lump sum at that time. Your Notice Period may not be extended by taking your unused Paid Time Off.
Severance Benefits
If you lose your job because of a layoff and you execute the Company-provided Separation Agreement & Release in the time period allotted, you will be eligible to receive a lump sum severance payment following the end of the Notice Period, depending upon how long you have been employed by the Company and your employee category as of your Layoff Date. The formula is:
One (1) week of pay for each full year of continuous service; plus one (1) day of pay for each additional 11-week increment of a fractional year of continuous service (maximum 4 days of pay). The minimum total payment is as follows:
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All Employees: 2 weeks; |
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Senior Professional or Manager: 4 weeks; |
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EVP, SVP, VP, or Director: 8 weeks |
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AssetMark Layoff Plan Summary 10.25.16
For the purposes of severance benefits, your pay is based on your normal weekly straight-time base pay in effect on your Layoff Date.
Example: Assume Jane is an Employee earning $750 a week ($150 a day) and has 10 years and 26 weeks (2 full 11-week increments) of continuous service when she is laid off. The total gross severance benefit amount Jane would receive is:
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10 weeks X $750 per week = $7,500 |
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2 days X $150 per day = $300 |
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Total gross severance benefit amount = $7,800 |
If you participate in a Sales Incentive Plan the Company will process any earned Sales Incentive Plan payments up to the Notice Date and will calculate a prorated payment based on the Sales Incentive Plan Target during the Notice Period. Additionally, if you participate in a Sales Incentive Plan, your severance payment will be based on your uncapped Benefits Base Rate beginning the first day of your Notice Period and will not be offset by any Sales Incentive Plan payments.
In addition to the severance pay outlined above, at the expiration of your Notice Period, you will receive a lump sum gross payment in the amount of $2,500, which is intended to provide you with at least one (1) month of payment for COBRA coverage at the current rates. You will be responsible for electing and maintaining COBRA coverage for that period, or for any longer period to which you may be entitled.
Benefits Base Rate
Benefits Base Rate is a calculation used to determine the layoff benefit for those participating in a Sales Incentive Plan. Benefits Base Rate is calculated as follows: Annual Salary + Sales Incentive Plan payments over the previous 12 month period.
Example: Margarets annual salary is $50,000 and she has Sales Incentive Plan payments over the prior 12 months of $40,000. Margarets Annualized Benefits Base Rate is $90,000.
Education Assistance Benefits
Under the layoff provisions of the Tuition Reimbursement Program, you can be reimbursed for up to $4,500 ($2,500 if part-time) of eligible expenses that you incur for approved courses related to education. You may use up to $2,000 ($1,000 if part-time) of your total education assistance benefit for approved vocational training courses. You may begin courses approved in advance at any time after your Layoff Date. You have one year from your Layoff Date to submit courses for approval and two years from your Layoff Date to complete any approved courses.
Although these courses must be approved in advance by the Company Human Resources Department, your course work is not limited to those courses leading to a degree in your current field. Eligible expenses include tuition, registration, fees and books. You must complete and pass the course with a grade of C (or its equivalent) or better for undergraduate courses, or a grade of B or better for graduate courses to receive reimbursement. If a vocational course is not graded, you must complete the course and obtain a certificate of completion to receive reimbursement.
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AssetMark Layoff Plan Summary 10.25.16
The Companys tuition reimbursement benefits will be coordinated with all other sources of financial assistance for education so that no duplicate payments are made. If you are receiving financial assistance from another company program or from a source outside the Company, the other program will pay first and the Tuition Reimbursement Program will pay the difference, up to the limits detailed above.
Outplacement Services
Free outplacement services provided by CareerArc, including a professional resume review and access to a team of professional career counselors, are available to you upon your consent and may provide additional tools and resources as you search for your next opportunity.
Employee Assistance Program Benefit
If you are affected by a job-loss event, you are eligible to use the Cigna Employee Life Assistance Program for the duration of the Notice Period. A counselor can provide you with valuable assistance including financial advice, personal counseling and reviewing your work options as well as help you determine what education or training, if any, would best position you for the future.
Variable Incentive Compensation (if applicable)
At the sole discretion of the Company, you may or may not receive a Variable Incentive Compensation (VIC) payment, less applicable deductions and withholdings, on or before March 15th, following the Notice Date. You shall not receive any other bonus or VIC payments. Eligibility for a discretionary VIC payment will be pro-rated based on the following schedule: Notice Date occurs:
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January 1 June 30 = Not eligible for discretionary VIC |
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July 1 September 30 = Eligible for 50% of discretionary VIC |
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October 1 December 31 = Eligible for 75% of discretionary VIC |
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After December 31 = Eligible for 100% of discretionary VIC |
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AssetMark Layoff Plan Summary 10.25.16
Exhibit 10.14
EXECUTION VERSION
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
This AMENDED AND RESTATED EMPLOYMENT AGREEMENT (as so amended and restated, this Agreement ) is made and entered into as of this 31 st day of October, 2016, by and between AssetMark Financial Holdings, Inc., a Delaware corporation (the Company ), and Charles Goldman ( Executive ).
W I T N E S S E T H :
WHEREAS, the Company and Executive are parties to that certain Employment Agreement dated as of January 10, 2014, as amended through November 18, 2015 (the Prior Agreement ).
WHEREAS, in connection with the transactions contemplated by the Acquisition Agreement (such transactions, the Acquisition , and the consummation of which is the Closing Date ), the Company desires to continue to employ Executive and to amend and restate the Prior Agreement by entering into this Agreement embodying the terms of such continued employment, and Executive desires to enter into this Agreement and to accept such continued employment, subject to the terms and provisions of this Agreement.
NOW, THEREFORE, in consideration of the promises and mutual covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which are mutually acknowledged, the Company and Executive hereby agree as follows:
Section 1. Definitions.
(a) Accrued Obligations shall mean (i) all accrued but unpaid Base Salary through the date of termination of Executives employment, (ii) any unpaid or unreimbursed expenses incurred in accordance with the Companys policy, and (iii) any benefits provided under the Companys employee benefit plans upon a termination of employment, in accordance with the terms contained therein.
(b) Acquisition Agreement shall mean that certain Stock Purchase Agreement, dated as of April 11, 2016, as amended from time to time, by and between Huatai International Finance Ltd., a British Virgin Islands corporation (the Purchaser ), Huatai Securities Co., Ltd., a Peoples Republic of China joint stock company (solely with respect to Article 9) and AqGen Liberty Holdings LLC.
(c) Agreement shall have the meaning set forth in the preamble hereto.
(d) Annual Bonus shall have the meaning set forth in Section 4(b) hereof.
(e) Base Salary shall mean the salary provided for in Section 4(a) hereof.
(f) Board shall mean the Board of Directors of the Company.
(g) Cause shall mean (i) Executives material act or acts of personal dishonesty taken in connection with Executives responsibilities that has, or could be reasonably expected to have, an adverse impact on the performance of Executives duties to the Company Group; (ii) act(s) of willful misconduct in the course of Executives employment; (iii) willful failure or refusal by Executive to perform in any material respect Executives duties or responsibilities; (iv) misappropriation (or attempted misappropriation) by Executive of any assets or material business opportunities of the Company or any other member of the Company Group; (v) embezzlement or fraud committed (or attempted) by Executive, at Executives direction, or with Executives prior actual knowledge; (vi) Executives conviction of or pleading guilty or no contest to, (x) a felony or (y) any other criminal charge, in each case, that has, or could be reasonably expected to have, an adverse impact on the performance of Executives duties to the Company or any other member of the Company Group or otherwise result in a material injury to the reputation or business of the Company or any other member of the Company Group; (vii) material violation by Executive of the written policies of the Company (unless, to the extent such violation is curable, it has been cured within thirty (30) days of the provision by the Company of written notice to Executive of such violation), including but not limited to those relating to sexual harassment or business conduct, and those otherwise set forth in the manuals or statements of policy of the Company that has, or could be reasonably expected to have, an adverse impact on the performance of Executives duties to the Company or any other member of the Company Group or otherwise result in material injury to the reputation or business of the Company or any other member of the Company Group; or (viii) Executives material breach of any confidentiality or restrictive covenants with the Company or any other member of the Company Group to which Executive is subject. If, within ninety (90) days subsequent to Executives termination for any reason other than by the Company for Cause, the Company determines that Executives employment could have been terminated for Cause pursuant to the fourth, fifth or seventh items above, Executives employment will be deemed to have been terminated for Cause for all purposes, and Executive will be required to disgorge to the Company all amounts received on account of such termination that would not have been payable to Executive had such termination been by the Company for Cause.
(h) Code shall mean the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder.
(i) Company shall have the meaning set forth in the preamble hereto.
(j) Company Group shall mean the Company and Parent, together with any of their respective direct and indirect majority-owned subsidiaries.
(k) Delay Period shall have the meaning set forth in Section 13(a) hereof.
(l) Disability shall mean any physical or mental disability or infirmity that prevents the performance of Executives duties for a period of (i) one hundred twenty (120) consecutive days or (ii) one hundred eighty (180) non-consecutive days during any twelve (12)-month period, in each case, or such longer period as is required by applicable law. Any question as to the existence, extent, or potentiality of Executives Disability upon which Executive (or Executives legal representative) and the Company cannot agree shall be determined by a qualified, independent physician selected by the Company and approved by Executive or Executives legal representative, as the case may be (which approval shall not be unreasonably withheld).
(m) Executive shall have the meaning set forth in the preamble hereto.
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(n) Good Reason shall mean, without Executives consent, (i) a substantial and material diminution in Executives base salary, Target Annual Bonus, title, duties, or responsibilities; or (ii) the Companys material breach of a material term of this Agreement, in each case, to the extent that such act or omission is not cured by the Company within forty (40) days of its receipt of written notice from Executive detailing the acts or omissions giving rise to Good Reason. Notwithstanding the foregoing, during the Term, in the event that the Board reasonably believes that Executive may have engaged in conduct that could constitute Cause, the Board may, in its sole and absolute discretion, suspend Executive from performing his duties hereunder for a period of up to fourteen (14) days, and in no event shall any such suspension constitute an event pursuant to which Executive may terminate employment with Good Reason or otherwise constitute a breach by the Company.
(o) Non-Interference Agreement shall mean the Confidentiality, Non- Interference, and Invention Assignment Agreement attached hereto as Exhibit [A] .
(p) Parent shall mean Huatai Securities Co., Ltd., a Peoples Republic of China joint stock company.
(q) Person shall mean any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust (charitable or noncharitable), unincorporated organization, or other form of business entity.
(r) Release of Claims shall mean the Release of Claims in substantially the same form attached hereto as Exhibit [B] (as the same may be revised from time to time by the Company upon the advice of counsel).
(s) Severance Benefits shall have the meaning set forth in Section 8(g) hereof.
(t) Severance Term shall mean the twelve (12) month period following Executives termination by the Company without Cause (other than by reason of death or Disability) or by Executive for Good Reason; provided that, if such termination occurs after January 10, 2019, the Severance Term shall be the twenty-four (24) month period following Executives termination by the Company without Cause (other than by reason of death or Disability) or by Executive for Good Reason.
(u) Target Annual Bonus shall have the meaning set forth in Section 4(b) hereof.
(v) Term shall mean the period specified in Section 2 hereof.
Section 2. Acceptance and Term; Effectiveness of This Agreement.
(a) Acceptance and Term . The Company agrees to continue to employ Executive, and Executive agrees to continue to serve the Company, on the terms and conditions set forth herein. Executives term of employment (the Term) began on the Effective Date (as defined in the Prior Agreement) and shall continue until the earlier of the third-year anniversary of the Closing Date or the termination of Executives employment as provided in Section 8 hereof.
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(b) Effectiveness . The Prior Agreement shall continue to be in effect until immediately prior to the consummation of the Acquisition, as of which this Agreement shall be effective. If the Acquisition does not close for any reason or the Acquisition Agreement is terminated, this Agreement, as amended and restated, and all payments and benefits provided hereunder will be null and void ab initio and therefore of no force and effect, and the Prior Agreement shall continue to be in effect.
Section 3. Position, Duties, and Responsibilities; Place of Performance.
(a) Position, Duties, and Responsibilities . During the Term, Executive shall be employed and serve as the President and Chief Executive Officer of the Company (together with such other position or positions consistent with such title as the Board shall specify from time to time) and shall have such duties and responsibilities as are typically associated with such title, together with such other duties and responsibilities commensurate with such title as assigned by the Board. Executive also agrees to serve as an officer and/or director of any other member of the Company Group, in each case without additional compensation. During the Term, Executive shall also serve as a member of the Board of the Company.
(b) Performance . Executive shall devote his full business time, attention, skill, and best efforts to the performance of his duties under this Agreement and shall not engage in any other business or occupation during the Term, including, without limitation, any activity that (x) conflicts with the interests of the Company or any other member of the Company Group, (y) interferes with the proper and efficient performance of Executives duties for the Company, or (z) interferes with Executives exercise of judgment in the Companys best interests. Notwithstanding the foregoing, nothing herein shall preclude Executive from (i) serving, with the prior written consent of the Board, as a member of the boards of directors or advisory boards (or their equivalents in the case of a non-corporate entity) of non-competing businesses ( it being understood that Executives continued service on (a) the Advisory Board of Green Alpha Advisors, LLC, (b) the board of directors of Personal Capital, (c) the board of directors of Mercer Advisors, and (d) the board of directors of the American Mountain Guides Association is hereby approved), (ii) engaging in charitable activities and community affairs, and (iii) managing his personal investments and affairs; provided , however , that the activities set out in clauses (i), (ii), and (iii) shall be limited by Executive so as not to materially interfere, individually or in the aggregate, with the performance of his duties and responsibilities hereunder.
(c) Principal Place of Employment . The Company recognizes that Executive resides in Boulder, Colorado and does not require Executive to relocate his residence to perform the duties and responsibilities required by this Agreement. Notwithstanding the foregoing, Executive agrees to perform those duties and responsibilities at the Companys headquarters for which the Company agrees to reimburse Executive for the reasonable costs (on an after-tax basis) of his transportation on account of his travels between his residence in Boulder, Colorado and the Companys headquarters. Executive understands and agrees that he may be required to travel from time to time for business reasons.
Section 4. Compensation.
During the Term, Executive shall be entitled to the following compensation:
(a) Base Salary . Executive shall be paid an annualized Base Salary, payable in accordance with the regular payroll practices of the Company, of $500,000 (subject to increases as may be determined by the Board in its sole discretion. The Board shall review Executives compensation on an annual basis).
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(b) Annual Bonus .
(i) Beginning with fiscal year 2017, during each calendar year that ends during the Term, Executive shall be eligible for an annual incentive bonus award (the Annual Bonus ) determined by the Board in respect of each complete fiscal year during the Term. The target Annual Bonus (the Target Annual Bonus ) for each fiscal year beginning with fiscal year 2017 shall be 150% of Base Salary, with the actual Annual Bonus payable being based upon the level of achievement of annual Company and individual performance objectives for such fiscal year, as determined by the Board and communicated to Executive. The Annual Bonus shall be paid to Executive at the same time as annual bonuses are generally payable to other senior executives of the Company subject to Executives continuous employment through the payment date.
(ii) Executive will be eligible to receive a bonus for 2016 determined in accordance with the Prior Agreement based on the annual Company and individual performance objectives for fiscal year 2016.
Section 5. Employee Benefits.
(a) During the Term, Executive shall be entitled to participate in health, insurance, retirement, and other perquisites and benefits provided generally to similarly situated executives of the Company. Executive shall also be entitled to a minimum of twenty (20) vacation days as well as the same number of holidays and sick days, any other benefits, in each case as are generally allowed to similarly situated executives of the Company in accordance with the Company policy as in effect from time to time. Nothing contained herein shall be construed to limit the Companys ability to amend, suspend, or terminate any employee benefit plan or policy at any time without providing Executive notice, and the right to do so is expressly reserved.
(b) Subject to Executives insurability at standard or better insurance rates and his cooperating with any required physical examinations, the Company shall use its reasonable business efforts to obtain and maintain in full force and effect during the Term, life insurance issued by an insurance company(s) covering the life of Executive for the benefit of his designated beneficiary(s) in the amount of $5,000,000.
Section 6. Key-Man Insurance.
At any time during the Term, the Company shall have the right to insure the life of Executive for the sole benefit of the Company, in such amounts, and with such terms, as it may determine. All premiums payable thereon shall be the obligation of the Company. Executive shall have no interest in any such policy, but agrees to cooperate with the Company in procuring such insurance by submitting to physical examinations, supplying all information required by the insurance company, and executing all necessary documents; provided that no financial obligation is imposed on Executive by any such documents.
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Section 7. Reimbursement of Business Expenses.
During the Term, in addition to the expenses referenced in Section 3(c) above, the Company shall pay (or promptly reimburse Executive) for documented, out-of-pocket expenses reasonably incurred by Executive in the course of performing his duties and responsibilities hereunder, which are consistent with the Companys policies in effect from time to time with respect to business expenses, subject to the Companys requirements with respect to reporting of such expenses.
Section 8. Termination of Employment.
(a) General . The Term shall terminate upon the earliest to occur of (i) Executives death, (ii) a termination by reason of a Disability, (iii) a termination by the Company with or without Cause, and (iv) a termination by Executive with or without Good Reason. Upon any termination of Executives employment for any reason, except as may otherwise be requested by the Company in writing and agreed upon in writing by Executive, Executive shall resign from any and all directorships, committee memberships, and any other positions Executive holds with the Company or any other member of the Company Group. Notwithstanding anything herein to the contrary, the payment (or commencement of a series of payments) hereunder of any nonqualified deferred compensation (within the meaning of Section 409A of the Code) upon a termination of employment shall be delayed until such time as Executive has also undergone a separation from service as defined in Treas. Reg. 1.409A-l(h), at which time such nonqualified deferred compensation (calculated as of the date of Executives termination of employment hereunder) shall be paid (or commence to be paid) to Executive on the schedule set forth in this Section 8 as if Executive had undergone such termination of employment (under the same circumstances) on the date of his ultimate separation from service.
(b) Termination Due to Death or Disability . Executives employment shall terminate automatically upon his death. The Company may terminate Executives employment immediately upon the occurrence of a Disability, such termination to be effective upon Executives receipt of written notice of such termination. Upon Executives death or in the event that Executives employment is terminated due to his Disability, Executive or Executives estate or beneficiaries, as the case may be, shall be entitled to:
(i) The Accrued Obligations;
(ii) Any unpaid Annual Bonus in respect of any completed fiscal year that has ended prior to the date of such termination, which amount shall be paid at such time annual bonuses are paid to other senior executives of the Company, but in no event later than the date that is 2 1 ⁄ 2 months following the last day of the fiscal year in which such termination occurred; and
(iii) Subject to achievement of the applicable performance conditions for the fiscal year of the Company in which Executives termination occurs, payment of the Annual Bonus that would otherwise have been earned in respect of the fiscal year in which such termination occurred, pro-rated to reflect the number of days Executive was employed during such fiscal year, such amount to be paid at the same time it would otherwise be paid to Executive had no termination occurred, but in no event later than the date that is 2 1 ⁄ 2 months following the last day of the fiscal year of the Company in which such termination occurred.
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Following Executives death or a termination of Executives employment by reason of a Disability, except as set forth in this Section 8(b), Executive shall have no further rights to any compensation or any other benefits under this Agreement.
(c) Termination by the Company with Cause .
(i) The Company may terminate Executives employment at any time with Cause, effective upon Executives receipt of written notice of such termination; provided , however , that with respect to any Cause termination, to the extent that such act or acts or failure or failures to act are curable, Executive shall be given not less than thirty (30) days written notice by the Board of the Companys intention to terminate Executive with Cause, such notice to state in detail the particular act or acts or failure or failures to act that constitute the grounds on which the proposed termination with Cause is based, and such termination shall be effective at the expiration of such thirty (30) day notice period, unless in the case of Section 1(g)(vii) hereof, Executive has fully cured such act or acts or failure or failures to act that gave rise to Cause during such period.
(ii) In the event that the Company terminates Executives employment with Cause, Executive shall be entitled only to the Accrued Obligations. Following such termination of Executives employment with Cause, except as set forth in this Section 8(c)(i), Executive shall have no further rights to any compensation or any other benefits under this Agreement.
(d) Termination by the Company without Cause . The Company may terminate Executives employment at any time without Cause, effective upon Executives receipt of written notice of such termination. In the event that Executives employment is terminated by the Company without Cause (other than due to death or Disability), Executive shall be entitled to:
(i) The Accrued Obligations;
(ii) Any unpaid Annual Bonus in respect of any completed fiscal year that has ended prior to the date of such termination, which amount shall be paid at such time annual bonuses are paid to other senior executives of the Company, but in no event later than the date that is 2 1 ⁄ 2 months following the last day of the fiscal year in which such termination occurred;
(iii) Subject to achievement of the applicable performance conditions for the fiscal year of the Company in which Executives termination occurs, payment of the Annual Bonus that would otherwise have been earned in respect of the fiscal year in which such termination occurred, pro-rated to reflect the number of days Executive was employed during such fiscal year, such amount to be paid at the same time it would otherwise be paid to Executive had no termination occurred, but in no event later than the date that is 2 1 ⁄ 2 months following the last day of the fiscal year of the Company in which such termination occurred;
(iv) Continued payment of Base Salary during the Severance Term, payable in accordance with the Companys regular payroll practices;
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(v) To the extent permitted by applicable law without any penalty to Executive or any member of the Company Group and subject to Executives election of COBRA continuation coverage under the Companys group health plan, on the first regularly scheduled payroll date of each month of the Severance Term, the Company will pay Executive an amount equal to the monthly COBRA premium cost; provided that the payments pursuant to this clause (v) shall cease earlier than the expiration of the Severance Term in the event that Executive becomes eligible to receive any health benefits, including through a spouses employer, during the Severance Term. In the event that the Companys payment of the premium would result in a violation of the nondiscrimination rules or cause the reimbursement of claims to be taxable under the Patient Protection and Affordable Care Act of 2010, together with the Health Care and Education Reconciliation Act of 2010 (collectively, the Act ) or Section 105(h) of the Code, the Company paid premiums shall be treated as taxable payments and be subject to imputed income tax treatment to the extent necessary to eliminate any discriminatory treatment or taxation under the Act or Section 105(h) of the Code and, to the extent that Executive incurs any additional tax liability as a result of the payment of such premiums by the Company, he shall receive an additional payment in cash, such that he is put in the same after-tax position as if no such additional tax liability had been incurred.
Notwithstanding the foregoing, the payments and benefits described in clauses (ii), (iii), (iv) and (v) above shall immediately terminate, and the Company shall have no further obligations to Executive with respect thereto, in the event that Executive breaches any provision of the Non-Interference Agreement. Following such termination of Executives employment by the Company without Cause, except as set forth in this Section 8(d), Executive shall have no further rights to any compensation or any other benefits under this Agreement. For the avoidance of doubt, Executives sole and exclusive remedy upon a termination of employment by the Company without Cause shall be receipt of the Severance Benefits.
(e) Termination by Executive with Good Reason . Executive may terminate his employment with Good Reason by providing the Company thirty (30) days written notice setting forth in reasonable specificity the event that constitutes Good Reason, which written notice, to be effective, must be provided to the Company within sixty (60) days of the occurrence of such event. During such thirty (30) day notice period, the Company shall have a cure right (if curable), and if not cured within such period, Executives termination will be effective upon the expiration of such cure period, and Executive shall be entitled to the same payments and benefits as provided in Section 8(d) hereof for a termination by the Company without Cause, subject to the same conditions on payment and benefits as described in Section 8(d) hereof. Following such termination of Executives employment by Executive with Good Reason, except as set forth in this Section 8(e), Executive shall have no further rights to any compensation or any other benefits under this Agreement. For the avoidance of doubt, Executives sole and exclusive remedy upon a termination of employment with Good Reason shall be receipt of the Severance Benefits.
(f) Termination by Executive without Good Reason . Executive may terminate his employment without Good Reason by providing the Company thirty (30) days written notice of such termination. In the event of a termination of employment by Executive under this Section 8(g), Executive shall be entitled only to the Accrued Obligations. In the event of termination of Executives employment under this Section 8(f), the Company may, in its sole and absolute discretion, by written notice accelerate such date of termination without changing the characterization of such termination as a termination by Executive without Good Reason, and provide payment to Executive of his Base Salary for the remainder of the notice period. Following such termination of Executives employment by Executive without Good Reason, except as set forth in this Section 8(f), Executive shall have no further rights to any compensation or any other benefits under this Agreement.
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(g) Release . Notwithstanding any provision herein to the contrary, the payment of any amount or provision of any benefit pursuant to subsection (b), (d), or (e) of this Section 8 (other than the Accrued Obligations) (collectively, the Severance Benefits ) shall be conditioned upon Executives execution, delivery to the Company, and non-revocation of the Release of Claims (and the expiration of any revocation period contained in such Release of Claims) within sixty (60) days following the date of Executives termination of employment hereunder. If Executive fails to execute the Release of Claims in such a timely manner so as to permit any revocation period to expire prior to the end of such sixty (60) day period, or timely revokes his acceptance of such release following its execution, Executive shall not be entitled to any of the Severance Benefits. Further, to the extent that any of the Severance Benefits constitutes nonqualified deferred compensation for purposes of Section 409A of the Code, any payment of any amount or provision of any benefit otherwise scheduled to occur prior to the sixtieth (60 th ) day following the date of Executives termination of employment hereunder, but for the condition on executing the Release of Claims as set forth herein, shall not be made until the first regularly scheduled payroll date following such sixtieth (60 th ) day, after which any remaining Severance Benefits shall thereafter be provided to Executive according to the applicable schedule set forth herein. For the avoidance of doubt, in the event of a termination due to Executives death or Disability, Executives obligations herein to execute and not revoke the Release of Claims may be satisfied on Executives behalf by Executives estate or a person having legal power of attorney over his affairs.
Section 9. Non-Interference Agreement; Non-Disparage
(a) As a condition of, and prior to commencement of, Executives employment with the Company, Executive shall have executed and delivered to the Company the Non-Interference Agreement. The parties hereto acknowledge and agree that this Agreement and the Non-Interference Agreement shall be considered separate contracts, and the Non-Interference Agreement will survive the termination of this Agreement for any reason.
(b) Executive agrees that during the Term, and at all times thereafter, Executive shall not make any disparaging or defamatory comments regarding any member of the Company Group or its respective current or former directors, officers, employees or shareholders in any respect or make any comments concerning any aspect of Executives relationship with any member of the Company Group or any conduct or events which precipitated any termination of Executives employment from any member of the Company Group. However, Executives obligations under this subparagraph (b) shall not apply to disclosures required or permitted by applicable law, regulation, or order of a court or governmental agency.
(c) The Company agrees to instruct its officers and directors not to make any disparaging or defamatory comments regarding Executive in any respect or make any comments concerning any aspect of Executives relationship with any member of the Company Group or any conduct or events which precipitated any termination of Executives employment from any member of the Company Group. However, the Companys obligations under this subparagraph (c) shall not apply to disclosures required by applicable law, regulation, or order of a court or governmental agency.
(d) Executive has the right under federal law to certain protections for cooperating with or reporting legal violations to the Securities and Exchange Commission (the SEC ) and/or its Office of the Whistleblower, as well as certain other governmental entities and self-regulatory organizations. As such, nothing in this Agreement, the Non-Interference Agreement or otherwise is intended to prohibit Executive from disclosing this Agreement or the
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Non-Interference Agreement to, or from cooperating with or reporting violations to, the SEC or any other such governmental entity or self-regulatory organization, and Executive may do so without notifying the Company. The Company may not retaliate against Executive for any of these activities, and nothing in this Agreement, the Non-Interference Agreement or otherwise would require Executive to waive any monetary award or other payment that Executive might become entitled to from the SEC or any other governmental entity or self-regulatory organization. Moreover, nothing in this Agreement, the Non-Interference Agreement or otherwise prohibits Executive from notifying the Company that Executive is going to make a report or disclosure to law enforcement.
Section 10. Representations and Warranties of Executive.
Executive represents and warrants to the Company that
(a) Executive is entering into this Agreement voluntarily and that Executives employment hereunder and compliance with the terms and conditions hereof will not conflict with or result in the breach by Executive of any agreement to which Executive is a party or by which Executive may be bound;
(b) Executive has not violated, and in connection with Executives employment with the Company will not violate, any non-solicitation, non-competition, or other similar covenant or agreement of a prior employer by which Executive is or may be bound; and
(c) in connection with Executives employment with the Company, Executive will not use any confidential or proprietary information Executive may have obtained in connection with employment with any prior employer.
Section 11. Taxes.
The Company may withhold from any payments made under this Agreement all applicable taxes, including but not limited to income, employment, and social insurance taxes, as shall be required by law. Executive acknowledges and represents that the Company has not provided any tax advice to Executive in connection with this Agreement and that Executive has been advised by the Company to seek tax advice from his own tax advisors regarding this Agreement and payments that may be made to Executive pursuant to this Agreement, including specifically, the application of the provisions of Section 409A of the Code to such payments.
Section 12. Set Off; Mitigation.
The Companys obligation to pay Executive the amounts provided and to make the arrangements provided hereunder shall be subject to set-off, counterclaim, or recoupment of amounts owed by Executive to the Company or its affiliates; provided, however, that to the extent any amount so subject to set-off, counterclaim, or recoupment is payable in installments hereunder, such set-off, counterclaim, or recoupment shall not modify the applicable payment date of any installment, and to the extent an obligation cannot be satisfied by reduction of a single installment payment, any portion not satisfied shall remain an outstanding obligation of Executive and shall be applied to the next installment only at such time the installment is otherwise payable pursuant to the specified payment schedule. Executive shall not be required to mitigate the amount of any payment provided pursuant to this Agreement by seeking other employment or otherwise, and except as provided in Section 8(d)(iv) hereof, the amount of any payment provided for pursuant to this Agreement shall not be reduced by any compensation earned as a result of Executives other employment or otherwise.
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Section 13. Additional Section 409A Provisions.
Notwithstanding any provision in this Agreement to the contrary
(a) Any payment otherwise required to be made hereunder to Executive at any date as a result of the termination of Executives employment shall be delayed for such period of time as may be necessary to meet the requirements of Section 409A(a)(2)(B)(i) of the Code (the Delay Period ). On the first business day following the expiration of the Delay Period, Executive shall be paid, in a single cash lump sum, an amount equal to the aggregate amount of all payments delayed pursuant to the preceding sentence, and any remaining payments not so delayed shall continue to be paid pursuant to the payment schedule set forth herein.
(b) Each payment in a series of payments hereunder shall be deemed to be a separate payment for purposes of Section 409A of the Code.
(c) To the extent that any right to reimbursement of expenses or payment of any benefit in-kind under this Agreement constitutes nonqualified deferred compensation (within the meaning of Section 409A of the Code), (i) any such expense reimbursement shall be made by the Company no later than the last day of the taxable year following the taxable year in which such expense was incurred by Executive, (ii) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit, and (iii) the amount of expenses eligible for reimbursement or in-kind benefits provided during any taxable year shall not affect the expenses eligible for reimbursement or in-kind benefits to be provided in any other taxable year; provided that the foregoing clause shall not be violated with regard to expenses reimbursed under any arrangement covered by Section 105(b) of the Code solely because such expenses are subject to a limit related to the period the arrangement is in effect.
(d) While the payments and benefits provided hereunder are intended to be structured in a manner to avoid the implication of any penalty taxes under Section 409A of the Code, in no event whatsoever shall the Parent or any of its affiliates (including, without limitation, the Company) be liable for any additional tax, interest, or penalties that may be imposed on Executive as a result of Section 409A of the Code or any damages for failing to comply with Section 409A of the Code (other than for withholding obligations or other obligations applicable to employers, if any, under Section 409A of the Code).
Section 14. Successors and Assigns; No Third-Party Beneficiaries.
(a) The Company . This Agreement shall inure to the benefit of the Company and its respective successors and assigns. Neither this Agreement nor any of the rights, obligations, or interests arising hereunder may be assigned by the Company to a Person (other than another member of the Company Group, or its or their respective successors) without Executives prior written consent (which shall not be unreasonably withheld, delayed, or conditioned); provided , however , that in the event of a sale of all or substantially all of the assets of the Company or any direct or indirect division or subsidiary thereof to which Executives employment primarily relates, the Company shall provide that this Agreement will be assigned to, and assumed by, the acquiror of such assets, it being agreed that in such circumstances, Executives consent will not be required in connection therewith.
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(b) Executive . Executives rights and obligations under this Agreement shall not be transferable by Executive by assignment or otherwise, without the prior written consent of the Company; provided , however , that if Executive shall die, all amounts then payable to Executive hereunder shall be paid in accordance with the terms of this Agreement to Executives devisee, legatee, or other designee, or if there be no such designee, to Executives estate.
(c) No Third-Party Beneficiaries . Except as otherwise set forth in Section 8(b) or Section 14(b) hereof, nothing expressed or referred to in this Agreement will be construed to give any Person other than the Company, the other members of the Company Group, and Executive (or Executives estate or beneficiaries, as applicable) any legal or equitable right, remedy, or claim under or with respect to this Agreement or any provision of this Agreement.
Section 15. Waiver and Amendments.
Any waiver, alteration, amendment, or modification of any of the terms of this Agreement shall be valid only if made in writing and signed by each of the parties hereto; provided , however , that any such waiver, alteration, amendment, or modification must be consented to on the Companys behalf by the Board. No waiver by either of the parties hereto of their rights hereunder shall be deemed to constitute a waiver with respect to any subsequent occurrences or transactions hereunder unless such waiver specifically states that it is to be construed as a continuing waiver.
Section 16. Severability.
If any covenants or such other provisions of this Agreement are found to be invalid or unenforceable by a final determination of a court of competent jurisdiction, (a) the remaining terms and provisions hereof shall be unimpaired, and (b) the invalid or unenforceable term or provision hereof shall be deemed replaced by a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision hereof.
Section 17. Governing Law.
EXCEPT WHERE PREEMPTED BY FEDERAL LAW, THE VALIDITY, INTERPRETATION, CONSTRUCTION, AND PERFORMANCE OF THIS AGREEMENT IS GOVERNED BY AND IS TO BE CONSTRUED UNDER THE LAWS OF THE STATE OF COLORADO APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED IN THAT STATE. WITHOUT REGARD TO CONFLICT OF LAWS RULES. EACH PARTY TO THIS AGREEMENT ALSO HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY IN CONNECTION WITH ANY SUIT, ACTION, OR PROCEEDING UNDER OR IN
CONNECTION WITH THIS AGREEMENT.
Section 18. Notices.
(a) Place of Delivery . Every notice or other communication relating to this Agreement shall be in writing, and shall be mailed to or delivered to the party for whom or which it is intended at such address as may from time to time be designated by it in a notice mailed or delivered to the other party as herein provided; provided that unless and until some other address be so designated, all notices and communications by Executive to the Company shall be mailed or delivered to the Company at its principal executive office, and all notices and communications by the Company to Executive may be given to Executive personally or may be mailed to Executive at Executives last known residential address, as reflected in the Companys records.
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(b) Date of Delivery . Any notice so addressed shall be deemed to be given or received (i) if delivered by hand, on the date of such delivery, (ii) if mailed by courier or by overnight mail, on the first business day following the date of such mailing, and (iii) if mailed by registered or certified mail, on the third business day after the date of such mailing.
(c) Copies .
(i) If notice is provided to the Company pursuant to this Section 18, a copy (which shall not constitute notice) shall be provided to:
Davis Polk & Wardwell LLP
450 Lexington Avenue
New York, NY 10017
Email: john.amorosi@davispolk.com
Attention: John D. Amorosi
and
Davis Polk & Wardwell LLP
2201 China World Office 2
1 Jian Guo Men Wai Avenue
Chaoyang District
Beijing 100004
China
Email: howard.zhang@davispolk.com
Attention: Howard Zhang
(ii) If notice is provided to Executive pursuant to this Section 18, a copy (which shall not constitute notice) shall be provided to:
Paul Hastings LLP
55 Second Street, 24 th Floor
San Francisco, CA 94105
Facsimile: (415) 856-7360
Attention: Mike J. Kennedy
Email: mikekennedy@paulhastings.com
Section 19. Section Headings.
The headings of the sections and subsections of this Agreement are inserted for convenience only and shall not be deemed to constitute a part thereof or affect the meaning or interpretation of this Agreement or of any term or provision hereof.
Section 20. Entire Agreement.
Subject to Section 2(b) hereof, this Agreement, together with any exhibits attached hereto, constitutes the entire understanding and agreement of the parties hereto regarding the employment of Executive. This Agreement supersedes all prior negotiations, discussions, correspondence, communications, understandings, term sheets and agreements between the parties relating to the subject matter of this Agreement (including the provisions of Annex B of the Rollover Agreement entered into with the Purchaser as of April 11, 2016, to the extent related to the subject matter of this Agreement).
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Section 21. Survival of Operative Sections.
Upon any termination of Executives employment, the provisions of Section 8 through Section 22 of this Agreement (together with any related definitions set forth in Section 1 hereof) shall survive to the extent necessary to give effect to the provisions thereof.
Section 22. Counterparts.
This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument. The execution of this Agreement may be by actual or facsimile signature.
* * *
[Signatures to appear on the following page.]
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[ Page Intentionally Left Blank ]
EXHIBIT A
NON-INTERFERENCE AGREEMENT
CONFIDENTIALITY, NON-INTERFERENCE, AND INVENTION ASSIGNMENT
AGREEMENT
As a condition of my becoming employed by AssetMark Financial Holdings, Inc., a Delaware corporation (the Company ), and in consideration of my employment with the Company and my receipt of the compensation now and hereafter paid to me by the Company, I agree to the following:
Section 1. Confidential Information.
(a) Company Group Information. I acknowledge that, during the course of my employment, I will have access to information about Parent and its direct and indirect majority-owned subsidiaries (collectively, the Company Group ) and that my employment with the Company shall bring me into close contact with confidential and proprietary information of the Company Group. In recognition of the foregoing, I agree, at all times during the term of my employment with the Company and thereafter, to hold in confidence, and not to use, except for the benefit of the Company Group, or to disclose to any person, firm, corporation, or other entity without written authorization of the Company, any Confidential Information that I obtain or create. I further agree not to make unauthorized copies of such Confidential Information. I understand that Confidential Information means information that the Company Group has developed, acquired, created, compiled, discovered, or owned or will develop, acquire, create, compile, discover, or own, that has value in or to the business of the Company Group that is not generally known and that the Company wishes to maintain as confidential, including track records. I understand that Confidential Information includes, but is not limited to, any and all non-public information that relates to the actual or anticipated business and/or products, research, or development of the Company, or to the Companys technical data, trade secrets, or know-how. including, but not limited to, research, product plans, or other information regarding the Companys products or services and markets, customer lists, and customers (including, but not limited to, customers of the Company on whom I called or with whom I may become acquainted during the term of my employment), software, developments, inventions, processes, formulas, technology, designs, drawings, engineering, hardware configuration information, marketing, finances, and other business information disclosed by the Company either directly or indirectly in writing, orally, or by drawings or inspection of premises, parts, equipment, or other Company property. Notwithstanding the foregoing, Confidential Information shall not include (i) any of the foregoing items that have become publicly and widely known through no unauthorized disclosure by me or others who were under confidentiality obligations as to the item or items involved or (ii) any information that I am required to disclose to, or by, any governmental or judicial authority; provided, however, that in such event I will give the Company prompt written notice thereof so that the Company Group may seek an appropriate protective order and/or waive in writing compliance with the confidentiality provisions of this Confidentiality, Non-Interference, and Invention Assignment Agreement (this Non-Interference Agreement ).
(b) Former Employer Information. I represent that my performance of all of the terms of this Non-Interference Agreement as an employee of the Company has not breached and will not breach any agreement to keep in confidence proprietary information, knowledge, or data acquired by me in confidence or trust prior or subsequent to the
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commencement of my employment with the Company, and I will not disclose to any member of the Company Group, or induce any member of the Company Group to use, any developments, or confidential or proprietary information or material I may have obtained in connection with employment with any prior employer in violation of a confidentiality agreement, nondisclosure agreement, or similar agreement with such prior employer.
Section 2. Developments.
(a) Developments Retained and Licensed . I have attached hereto, as Schedule A , a list describing with particularity all developments, original works of authorship, improvements, and trade secrets that I can demonstrate were created or owned by me prior to the commencement of my employment (collectively referred to as Prior Developments ), which belong solely to me or belong to me jointly with another, that relate in any way to any of the actual or proposed businesses, products, or research and development of any member of the Company Group, and that are not assigned to the Company hereunder, or if no such list is attached, I represent that there are no such Prior Developments. If, during any period during which I perform or performed services for the Company Group both before or after the date hereof (the Assignment Period ), whether as an officer, employee, director, independent contractor, consultant, or agent, or in any other capacity, I incorporate (or have incorporated) into a Company Group product or process a Prior Development owned by me or in which I have an interest, I hereby grant each member of the Company Group, and each member of the Company Group shall have, a non-exclusive, royalty-free, irrevocable, perpetual, transferable worldwide license (with the right to sublicense) to make, have made, copy, modify, make derivative works of, use, sell, and otherwise distribute such Prior Development as part of or in connection with such product or process.
(b) Assignment of Developments . I agree that I will, without additional compensation, promptly make full written disclosure to the Company, and will hold in trust for the sole right and benefit of the Company all developments, original works of authorship, inventions, concepts, know-how, improvements, trade secrets, and similar proprietary rights, whether or not patentable or registrable under copyright or similar laws, which I may solely or jointly conceive or develop or reduce to practice, or have solely or jointly conceived or developed or reduced to practice, or have caused or may cause to be conceived or developed or reduced to practice, during the Assignment Period, whether or not during regular working hours, provided they either (i) relate at the time of conception, development or reduction to practice to the business of any member of the Company Group, or the actual or anticipated research or development of any member of the Company Group; (ii) result from or relate to any work performed for any member of the Company Group; or (iii) are developed through the use of equipment, supplies, or facilities of any member of the Company Group, or any Confidential Information, or in consultation with personnel of any member of the Company Group (collectively referred to as Developments ). I further acknowledge that all Developments made by me (solely or jointly with others) within the scope of and during the Assignment Period are works made for hire (to the greatest extent permitted by applicable law) for which I am, in part, compensated by my salary, unless regulated otherwise by law, but that, in the event any such Development is deemed not to be a work made for hire, I hereby assign to the Company, or its designee, all my right, title, and interest throughout the world in and to any such Development. If any Developments cannot be assigned, I hereby grant to the Company Group an exclusive, assignable, irrevocable, perpetual, worldwide, sublicenseable (through one or multiple tiers), royalty-free, unlimited license to use, make, modify, sell, offer for sale, reproduce, distribute, create derivative works of, publicly perform, publicly display and digitally perform and display such work in any media now known or hereafter known. Outside the scope of my service,
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whether during or after my employment with any member of the Company Group, I agree not to (i) modify, adapt, alter, translate, or create derivative works from any such work of authorship or (ii) merge any such work of authorship with other Developments. To the extent rights related to paternity, integrity, disclosure and withdrawal (collectively, Moral Rights ) may not be assignable under applicable law and to the extent the following is allowed by the laws in the various countries where Moral Rights exist, I hereby irrevocably waive such Moral Rights and consent to any action of the Company Group that would violate such Moral Rights in the absence of such consent.
(c) Maintenance of Records . I agree to keep and maintain adequate and current written records of all Developments made by me (solely or jointly with others) during the Assignment Period. The records may be in the form of notes, sketches, drawings, flow charts, electronic data or recordings, and any other format. The records will be available to and remain the sole property of the Company Group at all times. I agree not to remove such records from the Companys place of business except as expressly permitted by Company Group policy, which may, from time to time, be revised at the sole election of the Company Group for the purpose of furthering the business of the Company Group.
(d) Intellectual Property Rights . I agree to assist the Company, or its designee, at the Companys expense, in every way to secure the rights of the Company Group in the Developments and any copyrights, patents, trademarks, service marks, database rights, domain names, mask work rights, moral rights, and other intellectual property rights relating thereto in any and all countries, including the disclosure to the Company of all pertinent information and data with respect thereto, the execution of all applications, specifications, oaths, assignments, recordations, and all other instruments that the Company shall deem necessary in order to apply for, obtain, maintain, and transfer such rights and in order to assign and convey to the Company Group the sole and exclusive right, title, and interest in and to such Developments, and any intellectual property and other proprietary rights relating thereto. I further agree that my obligation to execute or cause to be executed, when it is in my power to do so, any such instrument or papers shall continue after the Assignment Period until the expiration of the last such intellectual property right to expire in any country of the world; provided , however , the Company shall reimburse me for my reasonable expenses incurred in connection with carrying out the foregoing obligation. If the Company is unable because of my mental or physical incapacity or unavailability for any other reason to secure my signature to apply for or to pursue any application for any United States or foreign patents or copyright registrations covering Developments or original works of authorship assigned to the Company as above, then I hereby irrevocably designate and appoint the Company and its duly authorized officers and agents as my agent and attorney in fact to act for and in my behalf and stead to execute and file any such applications or records and to do all other lawfully permitted acts to further the application for, prosecution, issuance, maintenance, and transfer of letters patent or registrations thereon with the same legal force and effect as if originally executed by me. I hereby waive and irrevocably quitclaim to the Company any and all claims, of any nature whatsoever, that I now or hereafter have for past, present, or future infringement of any and all proprietary rights assigned to the Company.
Section 3. Returning Company Group Documents.
I agree that at the time of termination of my employment with the Company for any reason, I will deliver to the Company (and will not keep in my possession, recreate, or deliver to anyone else) any and all Confidential Information and all other documents, materials, information, and property developed by me pursuant to my employment or otherwise belonging
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to the Company. I agree further that any property situated on the Companys premises and owned by the Company (or any other member of the Company Group), including disks and other storage media, filing cabinets, and other work areas, is subject to inspection by personnel of any member of the Company Group at any time with or without notice.
Section 4. Disclosure of Agreement.
As long as it remains in effect, I will disclose the existence of this Non-Interference Agreement to any prospective employer, partner, co-venturer, investor, or lender prior to entering into an employment, partnership, or other business relationship with such person or entity.
Section 5. Employee Protections
I have the right under federal law to certain protections for cooperating with or reporting legal violations to the Securities Exchange Commission (the SEC ) and/or its Office of the Whistleblower, as well as certain other governmental entities and self-regulatory organizations. As such, nothing in this Non-Interference Agreement or otherwise is intended to prohibit me from disclosing this Non-Interference Agreement to, or from cooperating with or reporting violations to, the SEC or any other such governmental entity or self-regulatory organization, and I may do so without notifying the Company. The Company may not retaliate against me for any of these activities, and nothing in this Non-Interference Agreement or otherwise would require me to waive any monetary award or other payment that I might become entitled to from the SEC or any other governmental entity. Moreover, nothing in this Non-Interference Agreement or otherwise prohibits me from notifying the Company that I am going to make a report or disclosure to law enforcement.
Section 6. Restrictions on Interfering.
(a) Non-Competition . During the period of my employment with the Company (the Employment Period ) and the Post-Termination Non-Compete Period, I shall not, directly or indirectly, individually or on behalf of any person, company, enterprise, or entity, or as a sole proprietor, partner, stockholder, director, officer, principal, agent, or executive, or in any other capacity or relationship, engage in any Competitive Activities, within the United States or any other jurisdiction in which the Company Group is actively engaged in business.
(b) Non-Interference . During the Employment Period and the Post- Termination Non-Interference Period, I shall not, directly or indirectly for my own account or for the account of any other individual or entity, engage in Interfering Activities.
(c) Definitions . For purposes of this Non-Interference Agreement:
(i) Business Relation shall mean any current or prospective client, customer, licensee, or other business relation of the Company Group, or any such relation that was a client, customer, licensee, supplier, or other business relation within the six (6) month period prior to the expiration of the Employment Period, in each case, to whom I provided services, or with whom I transacted business, or whose identity became known to me in connection with my relationship with or employment by the Company.
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(ii) Competitive Activities shall mean any business activities in which any member of the Company Group is engaged (or has demonstrable plans to engage) during the Employment Period; provided that nothing herein shall prohibit me from providing services to a private equity firm with respect to investments that are not competitive with any member of the Company Group.
(iii) Interfering Activities shall mean (A) encouraging, soliciting, or inducing, or in any manner attempting to encourage, solicit, or induce, the employment or services of, or hire, any person who was known by me to be employed by or was a consultant to any member of the Company Group at the time of the termination of the Employment Period, or within six (6) months prior thereto; provided that the foregoing shall not be violated by general advertising not targeted at employees or consultants of any member of the Company Group, (B) encouraging, soliciting, or inducing, or in any manner attempting to encourage, solicit, or induce investment management or investment advisory services from, or otherwise providing any investment management or investment advisory services to, any limited partner, investor, person, firm, corporation or other entity that was a customer, client, investor, business partner, or employee of any member of the Company Group or prospective customer, investor, business partner or client of any member of the Company Group whom the Company or any of its affiliates had actively solicited within the twelve (12) months prior to termination of the Employment Period, (C) interfering with or damaging, or taking any action that could reasonably be expected to interfere with or damage, or attempting to interfere with or damage, any relationship between any member of the Company Group or any funds managed or advised thereby and their respective clients, investors, business partners, customers or employees, or (D) encouraging, soliciting or inducing, or in any manner attempting to encourage, solicit or induce any customer, supplier, licensee or other business relation of any member of the Company Group to cease doing business with or materially reduce the amount of business conducted with any member of the Company Group or any funds managed or advised thereby, or in any way interfere with the relationship between any such customer, supplier, licensee or business relation and any member of the Company Group.
(iv) Person shall mean any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust (charitable or non-charitable), unincorporated organization, or other form of business entity.
(v) Post-Termination Non-Compete Period shall mean the period commencing on the date of the termination of the Employment Period for any reason and ending on the twelve (12) month anniversary of such date of termination.
(vi) Post-Termination Non-Interference Period shall mean the period commencing on the date of the termination of the Employment Period for any reason and ending on the twelve (12) month anniversary of such date of termination.
Section 7. Reasonableness of Restrictions.
I acknowledge and recognize the highly competitive nature of the Companys business, that access to Confidential Information renders me special and unique within the Companys industry, and that I will have the opportunity to develop substantial relationships with existing and prospective clients, accounts, customers, consultants, contractors, investors, and strategic partners of the Company Group during the course of and as a result of my employment with the Company. In light of the foregoing, I recognize and acknowledge that the restrictions
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and limitations set forth in this Non-Interference Agreement are reasonable and valid in geographical and temporal scope and in all other respects and are essential to protect the value of the business and assets of the Company Group. I acknowledge further that the restrictions and limitations set forth in this Non-Interference Agreement will not materially interfere with my ability to earn a living following the termination of my employment with the Company and that my ability to earn a livelihood without violating such restrictions is a material condition to my employment with the Company.
Section 8. Independence; Severability; Blue Pencil.
Each of the rights enumerated in this Non-Interference Agreement shall be independent of the others and shall be in addition to and not in lieu of any other rights and remedies available to the Company Group at law or in equity. If any of the provisions of this Non-Interference Agreement or any part of any of them is hereafter construed or adjudicated to be invalid or unenforceable, the same shall not affect the remainder of this Non-Interference Agreement, which shall be given full effect without regard to the invalid portions. If any of the covenants contained herein are held to be invalid or unenforceable because of the duration of such provisions or the area or scope covered thereby, I agree that the court making such determination shall have the power to reduce the duration, scope, and/or area of such provision to the maximum and/or broadest duration, scope, and/or area permissible by law, and in its reduced form said provision shall then be enforceable.
Section 9. Injunctive Relief.
I expressly acknowledge that any breach or threatened breach of any of the terms and/or conditions set forth in this Non-Interference Agreement may result in substantial, continuing, and irreparable injury to the members of the Company Group. Therefore, I hereby agree that, in addition to any other remedy that may be available to the Company, any member of the Company Group shall be entitled to injunctive relief, specific performance, or other equitable relief by a court of appropriate jurisdiction in the event of any breach or threatened breach of the terms of this Non-Interference Agreement without the necessity of proving irreparable harm or injury as a result of such breach or threatened breach. Notwithstanding any other provision to the contrary, I acknowledge and agree that the Post-Termination Non-Compete Period or Post-Termination Non-Interference Period, as applicable, shall be tolled during any period of violation of any of the covenants in Section 5 hereof and during any other period required for litigation during which the Company or any other member of the Company Group seeks to enforce such covenants against me if it is ultimately determined that I was in breach of such covenants.
Section 10. Cooperation.
I agree that, following any termination of my employment, I will continue to provide cooperation reasonably requested by the Company and/or any other member of the Company Group and its or their respective counsel in connection with any investigation, administrative proceeding, or litigation relating to any matter that occurred during my employment in which I was involved or of which I have knowledge. As a condition of such cooperation, the Company shall reimburse me for reasonable out-of-pocket expenses incurred at the request of the Company with respect to my compliance with this paragraph. I also agree that, in the event that I am subpoenaed by any person or entity (including, but not limited to, any government agency) to give testimony or provide documents (in a deposition, court proceeding, or otherwise) that in any way relates to my employment by the Company and/or any other member of the Company Group, I will give prompt notice of such request to the Company and will make no disclosure until the Company and/or the other member of the Company Group has had a reasonable opportunity to contest the right of the requesting person or entity to such disclosure.
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Section 11. General Provisions.
(a) Governing Law and Jurisdiction . EXCEPT WHERE PREEMPTED BY FEDERAL LAW, THE VALIDITY, INTERPRETATION, CONSTRUCTION, AND PERFORMANCE OF THIS NON-INTERFERENCE AGREEMENT IS GOVERNED BY AND IS TO BE CONSTRUED UNDER THE LAWS OF THE STATE OF COLORADO APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED IN THAT STATE, WITHOUT REGARD TO CONFLICT OF LAWS RULES. FURTHER, I HEREBY WAIVE ANY RIGHT TO TRIAL BY JURY IN CONNECTION WITH ANY SUIT, ACTION, OR PROCEEDING UNDER OR IN CONNECTION WITH THIS NON-INTERFERENCE AGREEMENT.
(b) Entire Agreement . This Non-Interference Agreement sets forth the entire agreement and understanding between the Company and me relating to the subject matter herein and merges all prior discussions between us. No modification or amendment to this Non-Interference Agreement, nor any waiver of any rights under this Non-Interference Agreement, will be effective unless in writing signed by the party to be charged. Any subsequent change or changes in my duties, obligations, rights, or compensation will not affect the validity or scope of this Non-Interference Agreement.
(c) No Right of Continued Employment . I acknowledge and agree that nothing contained herein shall be construed as granting me any right to continued employment by the Company, and the right of the Company to terminate my employment at any time and for any reason, with or without cause, is specifically reserved, subject to the obligations set forth in my employment agreement with the Company.
(d) Successors and Assigns . This Non-Interference Agreement will be binding upon my heirs, executors, administrators, and other legal representatives and will be for the benefit of the Company, its successors, and its assigns. I expressly acknowledge and agree that this Non-Interference Agreement may be assigned by the Company without my consent to any other member of the Company Group as well as any purchaser of all or substantially all of the assets or stock of the Company or of any business or division of the Company for which I provide services, whether by purchase, merger, or other similar corporate transaction; provided that the license granted pursuant to Section 2(a) may be assigned to any third party by the Company without my consent.
(e) Survival . The provisions of this Non-Interference Agreement shall survive the termination of my employment with the Company and/or the assignment of this Non-Interference Agreement by the Company to any successor in interest or other assignee.
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SCHEDULE A
LIST OF PRIOR DEVELOPMENTS
AND ORIGINAL WORKS OF AUTHORSHIP
EXCLUDED FROM SECTION 2
Title | Date | Identifying Number or | ||
Brief Description |
Ö No Developments or improvements |
Additional Sheets |
Signature of Employee: |
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Print Name of Employee: Charles Goldman |
Date: Nov 1, 2016 |
[Signature Page to Non-Interference Agreement]
[ Page Intentionally Left Blank ]
EXHIBIT C
RELEASE OF CLAIMS
As used in this Release of Claims (this Release), the term claims will include all claims, covenants, warranties, promises, undertakings, actions, suits, causes of action, obligations, debts, accounts, attorneys fees, judgments, losses, and liabilities, of whatsoever kind or nature, in law, in equity, or otherwise.
For and in consideration of the Severance Benefits (as defined in my Employment Agreement, dated [], with AssetMark Financial Holdings, Inc. (my Employment Agreement )), and other good and valuable consideration, I, Charles Goldman, for and on behalf of myself and my heirs, administrators, executors, and assigns, effective as of the date on which this release becomes effective pursuant to its terms, do fully and forever release, remise, and discharge each of the Company, the Parent, and each of their respective direct and indirect subsidiaries and affiliates, and their respective successors and assigns, together with their respective officers, directors, partners, shareholders, employees, and agents (collectively, the Group ), from any and all claims whatsoever up to the date hereof that I had, may have had, or now have against the Group, whether known or unknown, for or by reason of any matter, cause, or thing whatsoever, including any claim arising out of or attributable to my employment or the termination of my employment with the Company, whether for tort, breach of express or implied employment contract, intentional infliction of emotional distress, wrongful termination, unjust dismissal, defamation, libel, or slander, or under any federal, state, or local law dealing with discrimination based on age, race, sex, national origin, handicap, religion, disability, or sexual orientation. This release of claims includes, but is not limited to, all claims arising under the Age Discrimination in Employment Act ( ADEA ), Title VII of the Civil Rights Act, the Americans with Disabilities Act, the Civil Rights Act of 1991, the Family Medical Leave Act, the Equal Pay Act, the Sarbanes-Oxley Act of 2002, 18 U.S.C. § 1514; Sections 748(h)(i), 922(h)(i) and 1057 of the Dodd-Frank Wall Street and Consumer Protection Act (the Dodd Frank Act ), 7 U.S.C. § 26(h), 15 U.S.C. § 78u-6(h)(i) and 12 U.S.C. § 5567(a) but excluding from this release any right I may have to receive a monetary award from the SEC as an SEC Whistleblower, pursuant to the bounty provision under Section 922(a)-(g) of the Dodd Frank Act, 7 U.S.C. Sec. 26(a)-(g), or directly from any other federal or state agency pursuant to a similar program each as may be amended from time to time, and all other federal, state, and local laws, the common law, and any other purported restriction on an employers right to terminate the employment of employees. The release contained herein is intended to be a general release of any and all claims to the fullest extent permissible by law.
I acknowledge and agree that as of the date I execute this Release, I have no knowledge of any facts or circumstances that give rise or could give rise to any claims under any of the laws listed in the preceding paragraph.
By executing this Release, I specifically release all claims relating to my employment and its termination under ADEA, a United States federal statute that, among other things, prohibits discrimination on the basis of age in employment and employee benefit plans. In addition, I am expressly waiving any and all rights under Section 1542 of the Civil Code of the State of California, or any other federal or state statutory rights or rules or principles of common law or equity, or those of any jurisdiction, government, or political subdivision similar to Section 1542 ( similar provision ) in effect as of the signing of this Release, and as a result, may not invoke the benefits of Section 1542 or any similar provision in order to prosecute or assert in any manner any claims that are released under this Release. Section 1542 provides as follows:
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A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor.
Notwithstanding any provision of this Release to the contrary, by executing this Release, I am not releasing (i) any claims relating to my rights under Section 9 of my Employment Agreement, (ii) any claims that cannot be waived by law, or (iii) my right of indemnification as provided by, and in accordance with the terms of, the Companys by-laws, California law, or a Company insurance policy providing such coverage, as any of such may be amended from time to time.
I expressly acknowledge and agree that I -
Am able to read the language, and understand the meaning and effect, of this Release;
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Have no physical or mental impairment of any kind that has interfered with my ability to read and understand the meaning of this Release or its terms, and that I am not acting under the influence of any medication, drug, or chemical of any type in entering into this Release; |
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Am specifically agreeing to the terms of the release contained in this Release because the Company has agreed to pay me the Severance Benefits in consideration for my agreement to accept it in full settlement of all possible claims I might have or ever have had, and because of my execution of this Release; |
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Acknowledge that, but for my execution of this Release, I would not be entitled to the Severance Benefits; |
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Understand that, by entering into this Release, I do not waive rights or claims under ADEA that may arise after the date I execute this Release; |
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Had or could have had [twenty-one (21 )][forty-five ( 45)] 1 days from the date of my termination of employment (the Release Expiration Date ) in which to review and consider this Release, and that if I execute this Release prior to the Release Expiration Date, I have voluntarily and knowingly waived the remainder of the review period; |
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Have not relied upon any representation or statement not set forth in this Release or my Employment Agreement made by the Company or any of its representatives; |
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Was advised to consult with my attorney regarding the terms and effect of this Release; and |
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Have signed this Release knowingly and voluntarily . |
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To be selected based on whether applicable termination was in connection with an exit incentive or other employment termination program (as such phrase is defined in the Age Discrimination in Employment Act of 1967). |
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I represent and warrant that I have not previously filed, and to the maximum extent permitted by law agree that I will not file, a complaint, charge, or lawsuit against any member of the Group regarding any of the claims released herein. If, notwithstanding this representation and warranty, I have filed or file such a complaint, charge, or lawsuit, I agree that I shall cause such complaint, charge, or lawsuit to be dismissed with prejudice and shall pay any and all costs required in obtaining dismissal of such complaint, charge, or lawsuit, including without limitation the attorneys fees of any member of the Group against whom I have filed such a complaint, charge, or lawsuit. This paragraph shall not apply, however, to a claim of age discrimination under ADEA or to any non-waivable right to file a charge with the United States Equal Employment Opportunity Commission (the EEOC ); provided, however, that if the EEOC were to pursue any claims relating to my employment with Company, I agree that I shall not be entitled to recover any monetary damages or any other remedies or benefits as a result and that this Release and Section 8 of my Employment Agreement will control as the exclusive remedy and full settlement of all such claims by me.
I hereby agree to waive any and all claims to re-employment with the Company or any other member of the Company Group and affirmatively agree not to seek further employment with the Company or any other member of the Company Group.
Notwithstanding anything contained herein to the contrary, this Release will not become effective or enforceable prior to the expiration of the period of seven (7) calendar days following the date of its execution by me (the Revocation Period ), during which time I may revoke my acceptance of this Release by notifying the Company and the Board of Directors of the Company, in writing, delivered to the Company at its principal executive office, marked for the attention of its Chief Executive Officer. To be effective, such revocation must be received by the Company no later than 11:59 p.m. on the seventh (7 th ) calendar day following the execution of this Release. Provided that the Release is executed and I do not revoke it during the Revocation Period, the eighth (8 th ) day following the date on which this Release is executed shall be its effective date. I acknowledge and agree that if I revoke this Release during the Revocation Period, this Release will be null and void and of no effect, and neither the Company nor any other member of the Company Group will have any obligations to pay me the Severance Benefits.
Notwithstanding anything in this Release, my Employment Agreement or in any other agreement between me and any member of the Group, or in any Company code of conduct, employee manual, confidentiality policy or similar document, I am aware that I have the right to:
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report possible violations of state or federal law or regulation that have occurred, are occurring, or are about to occur to any governmental agency or entity, or self-regulatory organization; |
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cooperate voluntarily with, or respond to any inquiry from, or provide testimony before any self-regulatory organization or any other federal, state or local regulatory or law enforcement authority; |
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make reports or disclosures to law enforcement or a regulatory authority without prior notice to, or authorization from, the Company; and |
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respond truthfully to a valid subpoena. |
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In addition, I am aware that:
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(i) I have the right to not be retaliated against for reporting, either internally to the Company or to any governmental agency or entity or self-regulatory organization, information which I reasonably believe relates to a possible violation of law, (ii) it is a violation of federal law to retaliate against anyone who has reported such potential misconduct either internally or to any governmental agency or entity or self-regulatory organization (retaliatory conduct includes discharge, demotion, suspension, threats, harassment, and any other manner of discrimination in the terms and conditions of employment because of any lawful act I may have performed) and (iii) it is unlawful for the Company to retaliate against me for reporting possible misconduct either internally or to any governmental agency or entity, or self-regulatory organization; |
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notwithstanding anything contained in this Release or otherwise, I may, to the extent contemplated by my Confidentiality, Non- Interference, and Invention Assignment Agreement dated [], with AssetMark Financial Holdings, Inc., disclose confidential Company information, including the existence and terms of any confidential agreements between me and the Company (including employment or severance agreements), to any governmental agency or entity or self-regulatory organization; |
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the Company cannot require me to withdraw reports or filings alleging possible violations of federal, state or local law or regulation, and may not offer me any kind of inducement, including payment, to do so; |
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my rights and remedies as a whistleblower protected under applicable whistleblower laws, including a monetary award, if any, may not be waived by any agreement, policy, form, or condition of employment, including by a predispute arbitration agreement; and |
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even if I have participated in a possible violation of law, I may be eligible to participate in the confidentiality and retaliation protections afforded under applicable whistleblower laws, and may also be eligible to receive an award under such laws. |
The provisions of this Release shall be binding upon my heirs, executors, administrators, legal personal representatives, and assigns. If any provision of this Release shall be held by any court of competent jurisdiction to be illegal, void, or unenforceable, such provision shall be of no force or effect. The illegality or unenforceability of such provision, however, shall have no effect upon and shall not impair the enforceability of any other provision of this Release.
EXCEPT WHERE PREEMPTED BY FEDERAL LAW, THE VALIDITY, INTERPRETATION, CONSTRUCTION, AND PERFORMANCE OF THIS RELEASE IS GOVERNED BY AND IS TO BE CONSTRUED UNDER THE LAWS OF THE STATE OF COLORADO APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED IN THAT STATE, WITHOUT REGARD TO CONFLICT OF LAWS RULES. FURTHER, I HEREBY WAIVE ANY RIGHT TO TRIAL BY JURY IN CONNECTION WITH ANY SUIT, ACTION, OR PROCEEDING UNDER OR IN CONNECTION WITH THIS RELEASE.
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Capitalized terms used, but not defined herein, shall have the meanings ascribed to such terms in my Employment Agreement.
/s/ [] |
[] |
Date: [] |
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Exhibit 10.15
July 30, 2014
Jerry Chafkin
[***]
Dear Mr. Chafkin:
Congratulations! We are excited that youve decided to join a team of talented and enthusiastic professionals who share a vision of serving advisors who make a difference in the lives of clients. Were very pleased to offer you the position of Chief Investment Officer, reporting to Charles Goldman, CEO at AssetMark Financial, Inc. and look forward to you joining the team.
Title:
Job Location:
Start Date: |
Executive Vice President, Chief Investment Officer
Concord, CA
August 18, 2014 |
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Salary: | Your annual salary will be $450,000.00, which equates to a bi-weekly salary of $17,307.69. You will be paid on a bi-weekly basis. | |
Variable Incentive Compensation: |
In addition to your base salary, you are eligible to participate in the Companys Variable Incentive Compensation Program, which rewards executives for their performance against business and individual goals. The calendar-year program typically pays out on or before March 15th in the year following the performance year.
The annual Variable Incentive Compensation target for your position will be $450,000. For 2014 (payable in early 2015), your target variable incentive compensation will be $180,000 (pro-rated 40% of your normal annual target based on your start date) .
Actual award amounts will vary as they are based on your individual performance as well as the performance of the business. In addition, all VIC awards are subject to management discretion. You must be an active executive on the VIC payment date to be eligible to receive an award. Payments under this program are made at the Companys discretion and the Company may modify, amend or cancel the program at any time. |
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AssetMark Equity Plan | You will receive an equity option grant of 150 basis points (bps) of equity in AssetMark. 50% of the equity grants are time-vested between the third and fifth anniversary of your employment and 50% are performance-vested, are triggered by a change of control and are calculated based upon a Multiple of Invested Capital (MOIC) between 2.0x and 3.0x. See the attached illustration for possible future valuation of the grant. | |
Company Note | You will be employed and paid by AssetMark Financial, Inc. (AssetMark) formerly known as Centurion Capital Group, Inc. (CCGI). All employment documents, whether referencing CCGI or AssetMark, refer to your employment with AssetMark. |
1655 Grant Street, 10th Floor, Concord, CA 94520
Jerry Chafkin Offer Letter Page 2
Hiring Bonus | To facilitate your familys relocation from the east coast, you will receive a lump sum payment of $40,000, less applicable deductions and withholdings, upon acceptance of this job offer. | |||
If within 24 months of your start date, you voluntarily terminate your employment or are terminated for violation of Company policy, you agree to repay the Company for the full amount of the Hiring Bonus paid to you. You authorize the Company, to the extent permitted by law, to deduct and offset any payments, including but not limited to payments of wages, bonuses, or expenses otherwise owed to you upon termination of employment. If these deductions or offsets are insufficient, you agree to reimburse the Company for the balance. | ||||
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August 7, 2014 | |||
Legal Signature | Date | |||
Benefits: | We offer a variety of benefits that support our associates at different stages of their careers and lives. Usually within one week of your start date you will be able to enroll in your benefits and set up your payroll information for direct deposit. You will have 30 days from your start date to complete your benefit enrollment. | |||
Severance: | In the event of termination without cause prior to the vesting of all Equity option grants (mentioned above), you will be paid a pro rated portion of your target bonus for any portion of the current bonus year worked but not paid, plus twelve months of regular base pay ($450,000 divided over 26 pay periods) and one bonus payment ($450,000) one year from termination. | |||
Outside Activities: | Activities outside the normal course of work are governed by our policies and practices guidelines. You have made us aware of the following items: 1) your position as a member of the board of Venovate Holdings; 2) your desire to manage your personal assets in a trust through an LLC; and 3) your interest in participating in a high-frequency FX-trading hedge fund (assuming ownership < 20% and you have no management responsibilities). Our preliminary review indicates that these activities will be permitted under AssetMarks policies, subject to potential guidelines and monitoring. | |||
Paid Time Off: | Paid Time Off (PTO) is accrued daily and is equivalent to an annualized number of 20 days per year with scheduled increases based on years of continuous service. The total number of PTO hours you will accrue depends on the date you are hired and may be used for vacation, sick and personal business. |
To accept this offer and to ensure an effective transition to our payroll and benefits platforms please sign and return the following documents by fax to (925) 521-2795 or to me by email by close of business within 2 business days of receipt of this offer. This offer is no longer valid if not returned within the stated timeframe.
Please sign and return the following pages
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This Offer Letter |
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Conditions of Employment Acknowledgement |
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PIIA (Proprietary Information and Inventions Agreement) |
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Conflicts of Interest Questionnaire |
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Arbitration Agreement |
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Non-Solicitation Agreement |
Jerry Chafkin Offer Letter Page 3
Our offer of employment is contingent upon successful completion of Assetmarks required background investigations, including results from fingerprint submission (if applicable to your position), as described below. Please note that we will contact your current employer immediately to verify employment history, unless you advise us to delay that contact. Your offer of employment may be withdrawn if any component of the background investigations is unsatisfactory.
Individuals who work in, or with, our Investment Adviser business entity and who have access to confidential client or business information or documents may be required, pursuant to securities regulations, to be fingerprinted, even if they will not be registered. Our compliance department will inform you if fingerprinting is required for your position during your orientation process.
Our offer of employment is also contingent upon you having or obtaining proper work authorization in the United States.
Carefully review the AssetMark Financial, Inc. Accepted Candidates Checklist attached to this offer letter to ensure that you have everything you need to begin your first day at AssetMark along with the other materials in this packet.
We look forward to you joining the team and adding value to how we serve financial advisors and their clients. Not only do we believe you will be a terrific addition to our talented team, but we also believe this position will offer you unique opportunities to develop your career. In the interim, if you have any questions, please feel free to call me at 925-521-2790.
Sincerely,
Gary Zyla
EVP, CFO & Human Resources
Enclosures
OFFER PACKET CHECKLIST
1. |
AssetMark Benefits Summary |
2. |
Code of Ethics and Business Conduct |
3. |
Conditions of Employment Acknowledgment |
4. |
PIIA (Proprietary Information and Inventions Agreement) |
5. |
Conflicts of Interest Questionnaire |
6. |
Arbitration Agreement |
7. |
Non-Solicitation Agreement |
8. |
I-9 List of Acceptable Documents |
9. |
Compliance Officer Message |
10. |
Compliance Letter Exhibit B |
11. |
New Hire Orientation |
I accept this offer of employment from AssetMark Financial, Inc.
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August 7, 2014 | |
Legal Signature | Date | |
Jeremiah H. Chafkin | ||
Please print your full legal name (As it appears on your Social Security Card) |
Exhibit 10.16
July 12, 2013
Michael Kim
[***]
Re: Contingent Offer of Employment
Dear Michael
As you are aware, entities controlled by private equity firms Aquiline Capital Partners LLC and Genstar Capital, LLC have entered into an agreement to purchase Genworth Financial Wealth Management, Inc. (GFWM), Genworth Financial Trust Company, and their holding company Centurion Capital Group, Inc. from Genworth Financial, Inc. (Genworth). In anticipation of and contingent upon the close of the transaction (referred to as the Closing Date), which is expected to occur on or about Thursday, August 1, 2013, we want to take this opportunity to offer you employment with Centurion Capital Group, Inc., on behalf of itself and its wholly owned subsidiaries (collectively referred to in this letter as CCGI), beginning on the date immediately following the Closing Date. Your employment with Genworth will automatically terminate upon the Closing Date. The details of your offer are set forth below.
Your employment with CCGI will be in the same position you currently hold with Genworth. Your compensation, including base pay and incentive opportunity (RFS, VIC, SIP, VIP) will remain the same based on your current base pay and incentive opportunity at the time of this offer. Your bi-weekly or hourly rate will remain the same as your current bi-weekly or hourly rate with Genworth, but will be paid one week in arrears for each pay period instead of current. If you are a non-exempt employee, you will continue to be eligible for overtime based upon Federal and State requirements. All compensation is subject to applicable withholding and deductions and is contingent upon your acceptance of this offer and your continued employment.
Please be advised that by accepting this offer, you consent to permit CCGI to conduct a background investigation and continued employment is contingent upon a satisfactory result. This offer and your acceptance are not to be construed as creating an employment contract for any definite period of time. In this regard, your employment is defined as at-will. This means that just as you are free to leave your employment at any time, CCGI reserves the right to terminate your employment at any time and for any reason, with or without cause or notice. CCGI also reserves the right to change its compensation and benefits programs, as well as other terms and conditions of employment, at any time.
For those of you holding securities licenses currently registered at Capital Brokerage Corporation (CBC), please note that CBC will continue to maintain those registrations after the Close Date. For those of you whose role requires such a registration, your continued maintenance of such registrations in good standing with CBC is required during your employment with CCGI.
We have also enclosed the following documents for your review and signature:
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Conditions of Employment Acknowledgment |
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Proprietary Information & Inventions Agreement |
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Conflicts of Interest Questionnaire |
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Arbitration Agreement |
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Non-Solicit Agreement |
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Sales Incentive Plan |
Please note that the GFWM policies and procedures that are in effect as of the Closing Date will continue to apply to your employment with CCGI unless addressed in one of the documents listed above. More information about where you will be able to access these policies and procedures after the Closing Date will be sent to you via email to your company email address.
If you accept this offer, please acknowledge by signing below. Please note that completion of the above listed forms as well as your acknowledgment below, are conditions of employment with CCGI. You must complete these forms on or before July 24, 2013 in order to accept this offer of employment. Please forward this as well as signed originals of all the documents listed above either to your HR Manager, Rebecca Kymer, in person at the Chicago office location on Tuesday, July 16, 2013, at the Regional Consultant Sales Meeting located at the Chicago Hyatt McCormick July 17-18, 2013, or mail to the address listed on the following page. If you should have any questions, please contact Rebecca Kymer at 925-521-2779.
If you should have any questions, please contact your HR Manager or a member of the HR team.
Sincerely, |
/s/ Gurinder S. Ahluwalia |
Gurinder S. Ahluwalia |
President & Chief Executive Officer |
Enclosures:
Checklist for CCGI Offer Document Processing
Code of Ethics
Conditions of Employment Acknowledgment
Proprietary Information & Inventions Agreement
Conflicts of Interest Questionnaire
Arbitration Agreement
Non-Solicit Agreement
Sales Incentive Plan
I accept this contingent offer of employment from CCGI effective upon Close Date.
Michael Kim |
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Printed Legal Employee Name (Preferred Name in parenthesis if applicable) | ||||
/s/ Michael Kim | 7/24/13 | |||
Legal Signature (As it appears on your Social Security Card) |
Date |
Exhibit 21.1
Subsidiaries of the Registrant
Name of Subsidiary |
Jurisdiction of Incorporation |
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AssetMark Financial, Inc. |
Arizona | |
AssetMark, Inc. |
California | |
AssetMark Trust Company |
Arizona | |
AssetMark Brokerage, LLC |
Delaware | |
AssetMark Retirement Services, Inc. |
Pennsylvania | |
Global Financial Private Capital, LLC |
Florida | |
Global Financial Advisory, LLC |
Delaware |
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
We consent to the use in this Registration Statement of AssetMark Financial Holdings, Inc. on Form S-1 of our report dated March 11, 2019 on the 2017 consolidated financial statements of AssetMark Financial Holdings, Inc. and to the reference to us under the heading Experts in the prospectus.
/s/ Crowe LLP
New York, New York
June 24, 2019
Exhibit 23.2
Consent of Independent Registered Public Accounting Firm
The Shareholder and Board of Directors
AssetMark Financial Holdings, Inc.:
We consent to the use of our report dated March 11, 2019 with respect to the consolidated balance sheet of AssetMark Financial Holdings, Inc. and its subsidiaries as of December 31, 2018, the related consolidated statements of income and comprehensive income, stockholders equity and cash flows for the year ended December 31, 2018 and the related notes included herein and to the reference to our firm under the heading Experts in the prospectus.
/s/ KPMG LLP
San Francisco, California
June 24, 2019