CTPARTNERS EXECUTIVE SEARCH INC.
FORM 10-Q (Quarterly Report)
Filed 11/07/14 for the Period Ending 09/30/14 Address
Telephone CIK SIC Code Industry Sector Fiscal Year
1166 AVENUE OF THE AMERICAS 3RD FLOOR NEW YORK, NY 10036 216-682-3108 0001439199 7361 - Employment Agencies Business Support Services Industrials 12/31
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For quarterly period ended September 30, 2014 OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File No. 001-34993
CTPARTNERS EXECUTIVE SEARCH INC. (Exact Name of Registrant as Specified in its Charter)
Delaware
52-2402079
(State or other Jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
1166 Avenue of the Americas, 3rd Fl., New York, NY
10036
(Address of principal executive offices)
(Zip Code)
(212) 588-3500 (Registrant’s telephone number, including area code) Securities registered pursuant to Section 12 (b) of the Act: Common Stock, par value $0.001 per share
NYSE MKT
(Title of each Class)
(Name of each exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act: None. Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulations S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes No Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one) Large Accelerated Filer
Accelerated Filer
Non-Accelerated Filer
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). The number of the registrant’s common shares outstanding as of October 30, 2014 was 7,260,277.
Yes
Smaller Reporting Company
No
TABLE OF CONTENTS Description
Page
PART I. Financial Information
Item 1.
Item 2. Item 4.
Condensed Consolidated Financial Statements Condensed Consolidated Balance Sheets as of September 30, 2014 and December 31, 2013 (unaudited)
3 3
Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2014 and 2013 (unaudited) Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2014 and 2013 (unaudited)
4
Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2014 and 2013 (unaudited)
6
Notes to Condensed Consolidated Financial Statements Management's Discussion and Analysis of Financial Condition and Results of Operations Controls and Procedures
5
8 19 25
Part II. Other Information Item 2. Item 5.
Unregistered Sales of Equity Securities and Use of Proceeds Other Information Signatures
26 26 27
Item 6.
Exhibits EX - 31.1 Chief Executive Officer Certification pursuant to Rule 13a-14(a) under the Exchange Act
28
EX - 31.2 Chief Financial Officer Certification pursuant to Rule 13a-14(a) under the Exchange Act EX - 32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C Section 1350 EX - 32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 EX - 101.INS XBRL INSTANCE DOCUMENT EX - 101.SCH XBRL SCHEMA DOCUMENT EX - 101.CALC XBRL CALCULATION LINKBASE DOCUMENT EX - 101.DEF XBRL DEFINITION LINKBASE DOCUMENT EX - 101.LAB XBRL LABEL LINKBASE DOCUMENT EX - 101.PRE XBRL PRESENTATION LINKBASE DOCUMENT
PART I. Financial Information Item 1. Condensed Consolidated Financial Statements CTPARTNERS EXECUTIVE SEARCH INC. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (in thousands, except share and per share amounts) September 30, 2014
December 31, 2013
Assets Current Assets Cash
$
Accounts receivable, net
7,199
$
38,773
5,654 26,381
Other receivables
455
433
Prepaid expenses
3,932
3,974
Deferred income taxes
2,588
3,184
Other
5,883
4,411
58,830
44,037
Total current assets Non-current assets Leasehold improvements and equipment, net
4,987
4,149
11,305
5,811
Intangibles, net
4,312
3,746
Other assets
7,344
5,517
Deferred income taxes
4,456
Goodwill
5,482
$
91,234
$
68,742
$
4,712
$
4,762
Liabilities and Stockholders’ Equity Current Liabilities Current portion of long-term debt Line of credit
14,496
—
2,946
3,813
Accrued compensation
34,055
25,201
Accrued business taxes
2,557
2,079
974
710
Accounts payable
Income taxes payable Accrued expenses Total current liabilities
3,419
5,571
63,159
42,136
3,268
1,295
734
1,050
4,002
2,345
—
4,088
—
—
Long-Term Liabilities Long-term debt, less current maturities Deferred rent, less current maturities Total long-term liabilities Redeemable noncontrolling interest Stockholders’ Equity Preferred stock: 1,000,000 shares authorized, no shares issued and outstanding Common stock: $0.001 par value, 15,000,000 shares authorized, 7,693,135 and 7,540,821 shares issued; 7,260,277 and 7,110,292 shares outstanding at September 30, 2014 and December 31, 2013, respectively Additional paid-in capital
8
8
38,361
37,778
Accumulated deficit
(9,679)
(14,242)
Accumulated other comprehensive loss, net of tax
(2,478)
(1,275)
Treasury stock at cost 432,858 shares at September 30, 2014 and 430,529 at December 31, 2013. Total stockholders' equity $ See Notes to Consolidated Financial Statements.
3
(2,139)
(2,096)
24,073
20,173
91,234
$
68,742
CTPARTNERS EXECUTIVE SEARCH INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (in thousands except share and per share amounts)
Three months ended September 30, 2014
Nine months ended September 30,
2013
2014
2013
Revenue Net revenue
$
45,439
Reimbursable expenses
$
32,553
$
130,422
$
95,959
1,114
1,088
3,458
3,030
46,553
33,641
133,880
98,989
Compensation and benefits
33,448
24,667
95,700
74,974
General and administrative
9,562
6,872
26,594
23,502
Reimbursable expenses
1,244
1,240
3,881
3,332
44,254
32,779
126,175
101,808
2,299
862
7,705
Total revenue Operating expenses
Total operating expenses Operating income/(loss) Interest expense, net
(12)
Income/(loss) before income taxes
(37)
2,287
Income tax (expense)/benefit
(881)
Net income/(loss)
1,406
Net (income)/loss attributable to redeemable noncontrolling interest
(105)
(2,819)
(140)
(156)
825
7,565
(2,975)
(323)
(2,913)
1,120
502
4,652
(1,855)
156
(89)
98
Net income/(loss) attributable to the Company
$
1,301
$
658
$
4,563
$
(1,757)
Basic income/(loss) per common share
$
0.18
$
0.09
$
0.63
$
(0.25)
Diluted income/(loss) per common share
$
0.17
$
0.09
$
0.59
$
(0.25)
Basic weighted average common shares
7,258,241
7,070,180
7,196,123
7,041,631
Diluted weighted average common shares
7,774,074
7,476,476
7,727,380
7,041,631
See Notes to Condensed Consolidated Financial Statements.
4
CTPARTNERS EXECUTIVE SEARCH INC. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED) (In Thousands)
Three Months Ended September 30, 2014 Net income/(loss)
Nine months ended September 30,
2013
$
1,406
$
2014 502
$
2013 4,652
$
(1,855)
Other comprehensive income/(loss), net of tax (1,342)
Foreign currency translation adjustments Comprehensive income/(loss) Comprehensive (income)/loss attributable to redeemable noncontrolling interest Comprehensive income/(loss) attributable to the Company
64 (105) $
(41)
See Notes to Condensed Consolidated Financial Statements.
5
266
(1,203)
768
3,449
156 $
924
255 (1,600)
(89) $
3,360
98 $
(1,502)
CTPARTNERS EXECUTIVE SEARCH INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (In thousands) For the Nine Months Ended September 30 2014
2013
Cash Flows From Operating Activities Net income/(loss)
$
4,652
$
(1,855)
Adjustments to reconcile net income/(loss) to net cash provided by/(used in) operating activities Depreciation and amortization Reorganization charges Share-based compensation Amortization of discount on seller notes Amortization of post-combination compensation Deferred income taxes
1,762
1,435
—
48
484
577
9
89
—
1,878
1,570
(1,253)
Changes in operating assets and liabilities, net of effect of acquired businesses: Accounts receivable, net Prepaid expenses Income taxes receivable
(12,677)
(878)
1,046
296
—
Other assets and receivables Accounts payable
(605)
(1,232)
(1,895)
(942)
(42)
Accrued compensation
9,097
(498)
Accrued business taxes
603
(194)
129
(259)
Income taxes payable Accrued expenses Deferred rent Net cash provided by/(used in) operating activities
(2,483)
(113)
(279)
(295)
1,739
(3,564)
Cash Flows From Investing Activities Acquisition of businesses
(2,921)
Acquisition of noncontrolling interest
(1,629)
Purchase of leasehold improvements and equipment
(1,740)
(942)
Notes receivable issued
(4,139)
—
1,000
—
Repayment of notes receivable Net cash used in investing activities
(833) 0
(9,429)
(1,775)
Principal payments on long-term debt
(4,779)
(3,625)
Net proceeds from line of credit
14,496
Cash Flows From Financing Activities
Repurchase of common stock Net cash provided by/(used in) financing activities Net increase/(decrease) in cash Effect of foreign currency on cash
—
—
(15)
9,717
(3,640)
2,027
(8,979)
(482)
374
Cash: Beginning
5,654
Ending
$
6
7,199
15,947 $
7,342
CTPARTNERS EXECUTIVE SEARCH INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (Continued) (In thousands) For the Nine Months Ended September 30 2014
2013
Supplemental Disclosure of Non-Cash Investing Activities Acquisition of businesses Total identifiable assets acquired and liabilities assumed
$
Goodwill
2,420
$
5,834
Aggregate purchase price per purchase agreement
$
Seller note
8,254
5,122 $
(4,619)
Redeemable noncontrolling interest $
Less cash acquired
3,635
(3,849) $
(714)
Cash paid for acquisition of a business net of cash acquired
$
7,839 (2,490)
—
Cash paid for acquisition of businesses
2,717
1,500 (667)
2,921
$
833
3,852
$
—
Acquisition of noncontrolling interest Noncontrolling interest redeemed
$
Seller note
(2,223)
Cash paid for redeemable noncontrolling interest
—
$
1,629
$
—
$
473
$
—
Seller financing of fixed asset additions
$
117
$
(518)
Treasury stock acquired in lieu of shareholder receivable
$
—
$
(15)
Employee discount stock purchase award in lieu of cash compensation
$
—
$
275
Forgiveness of notes receivable
Supplemental Disclosure of Non-Cash Financing Activities
See Notes to Condensed Consolidated Financial Statements.
7
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CTPARTNERS EXECUTIVE SEARCH INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (All tables in thousands, except share and per share amounts)
Note 1. Basis of Presentation Description of Business - CTPartners Executive Search Inc., along with its subsidiaries (collectively, “CTPartners” or the “Company”), is a retained executive search firm with global capabilities. The Company operates in North America, Europe and the Middle East (EMEA), Asia Pacific and Latin America. The Company is subject to the rules and regulations of the United States Securities and Exchange Commission (the “SEC”), and the relevant provisions of the Securities Acts of 1933, as amended, and the Securities Exchange Act of 1934, as amended. The Company’s common stock trades on the NYSE MKT exchange under the symbol “CTP.” Principles of Consolidation - The accompanying unaudited condensed consolidated financial statements include the accounts of CTPartners Executive Search Inc., together with its subsidiaries and have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information, and with the instructions to Form10-Q and the requirements of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statement presentation. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended September 30, 2014, are not necessarily indicative of the results that may be expected for the year ended December 31, 2014. The condensed consolidated balance sheet, at December 31, 2013, has been derived from the audited financial statements at that date but does not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. The interim financial statements contained in this report should be read in conjunction with the audited consolidated financial statements and footnotes presented in the Company’s Form 10-K for the year ended December 31, 2013, filed with the SEC on March 12, 2014. Goodwill - Goodwill represents the excess of the purchase price over the fair value of assets acquired and liabilities assumed, if any. The goodwill impairment test compares the fair value of a reporting unit with its carrying amount, including goodwill. If the carrying amount of a reporting unit exceeds its fair value, goodwill of the reporting unit would be considered impaired. To measure the amount of the impairment loss, the implied fair value of a reporting unit’s goodwill is compared to the carrying amount of that goodwill. If the carrying amount of a reporting unit’s goodwill exceeds the implied fair value of that goodwill, an impairment loss is indicated. For this test, the fair value of the Company’s relevant reporting unit is determined using a combination of valuation techniques, including a discounted cash flow methodology. The Company performs an impairment test annually, in the fourth quarter of the fiscal year. As of September 30, 2014, there were no indicators of impairment with respect to the Company’s goodwill. Intangible Assets - Intangible assets primarily consist of customer relationships and developed technology and are recorded at their estimated fair value at the date of acquisition and are amortized using the straight-line method over their estimated useful lives. For intangible assets not subject to amortization, an impairment loss is recognized if the carrying amount of the intangible assets is not recoverable and exceeds fair value. The carrying amount of the intangible assets is considered not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from use of the asset. As of September 30, 2014, there were no indicators of impairment with respect to the Company’s intangible assets. Redeemable Noncontrolling Interest - On May 2, 2013, the Company acquired a 51% controlling ownership interest in Augmentum. The Company had the right to call the remaining 49% interest, and Augmentum shareholders had the right to put the remaining 49% interest for a limited amount of time after the first anniversary of acquisition, at a pre-determined price, adjustable based on certain revenue targets. The Company exercised its call right in September of 2014. The put option requires the noncontrolling interest to be classified as redeemable, recorded in the mezzanine equity on the Company's consolidated balance sheet, and measured at the greater of estimated redemption value, which approximates fair value, at the end of each reporting period or the historic cost basis. The resulting increases or decreases in the estimated redemption amount are affected by corresponding charges or credits against retained earnings, or in the absence of retained earnings, additional paid in capital. If the put option becomes no longer exercisable, the redeemable noncontrolling interest will be reclassified to noncontrolling interest and included in the permanent equity on the Company's consolidated balance sheet. Other Comprehensive Loss - Other comprehensive loss primarily consists of foreign currency translation gains and losses, net of income tax effects.
8
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CTPARTNERS EXECUTIVE SEARCH INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (All tables in thousands, except share and per share amounts) The components of accumulated other comprehensive loss, net of tax, are as follows:
September 30, 2014 Foreign currency translation adjustments
$
Other
December 31, 2013
(2,291)
$
(1,088)
$
(1,275)
(187) $
(2,478)
(187)
Fair Value - The Company measures the fair values of its financial instruments in accordance with accounting guidance that defines fair value, provides guidance for measuring fair value and requires certain disclosures. The guidance also discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow) and the cost approach (cost to replace the service capacity of an asset or replacement cost). The guidance establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:
•
Level 1: Observable inputs such as quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
•
Level 2: Inputs other than quoted prices which are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
•
Level 3: Unobservable inputs that reflect the reporting entity’s own assumptions.
The inputs used in the fair value measurement should be from the highest level available. In instances where the measurement is based on inputs from different levels of the fair value hierarchy, the fair value measurement will fall within the lowest level input that is significant to the fair value measurement in its entirety. Foreign Currency Translation - Venezuela - The Company has a subsidiary in Venezuela. The economy in Venezuela has had significant inflation in the last several years. At the time of the acquisition, the Venezuelan economy was designated as highly inflationary, and is accounted for pursuant to accounting guidance for highly inflationary economies. Therefore, the U.S. dollar is designated to be the functional currency of our Venezuelan operations, and any gain or loss resulting from foreign currency translation is reflected in the general and administrative expenses in Company's results of operations. The Venezuelan government has maintained currency controls and a fixed official exchange rate since February 2003. In June 2010, The Venezuelan Central Bank began operating the Transaction System for Foreign Currency Denominated Securities (SITME), which established a "banded" exchange rate of 5.3 bolivars to the U.S. dollar. In 2011, CADIVI, Commission for the Administration of Currency Exchange, established an official exchange rate of 4.30 bolivars to U.S. dollar, which was available in parallel with the SITME rate. In February 2013, the Venezuelan government set a new official exchange rate of 6.3 bolivars to the U.S. dollar ("Official Rate") and abolished the SITME rate. In March 2013, the Venezuelan government created the Complimentary System of Foreign Currency Acquirement ("SICAD 1"). SICAD 1 is an auction system and allows entities in specific sectors to bid for U.S. dollars. As of September 30, 2014, the SICAD rate was 12.00 bolivars to the U.S. dollar. On February 19, 2014, the Venezuelan government announced plans for another currency exchange mechanism, referred to as “SICAD 2,” which allows authorized foreign exchange operators, such as regulated banks and capital market brokers, to act as intermediaries in the sale or acquisition of foreign currency. The SICAD 2 rate is intended to more closely resemble a market-driven exchange rate compared to the rates provided by Venezuela’s other regulated exchange mechanisms. SICAD 2 became effective on March 24, 2014 and the approximate SICAD 2 rate as of September 30, 2014 was 49.99 bolivars to the U.S. dollar. As of September 30, 2014, there were three legal exchange mechanisms administered by the Venezuelan government, each with a different exchange rate. The recent introduction of the variable SICAD 1 and SICAD 2 mechanisms requires reporting entities to exercise considerable judgment to determine which rate to utilize to remeasure their bolivar denominated monetary assets and liabilities, and to record revenue and expenses. The Company believes that there is significant uncertainty pertaining to the nature of transactions that flow through SICAD 1 auction and how SICAD 1 will operate in the future. The number of SICAD 2 auctions held to date is very limited, and the Company does not intend to utilize SICAD 2 at the prevailing exchange rates. The Company believes that the official rate of 6.3 bolivars to the U.S. dollar remains legally available to us, and therefore continued to measure its bolivar denominated assets, liabilities and associated transactions at the official rate of 6.3 . As of September 30, 2014 the Company had $2.7 million of bolivar denominated assets and $0.9 million of bolivar denominated liabilities. Reclassifications - Certain items in the 2013 condensed consolidated financial statements have been reclassified to conform to the 2014 presentation.
9
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CTPARTNERS EXECUTIVE SEARCH INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (All tables in thousands, except share and per share amounts) Note 2. Acquisitions Park Brown On July 1, 2014, the Company acquired Park Brown International Pty Ltd ("Park Brown"), an executive search firm focusing on the energy, natural resources and infrastructure sectors based in Perth, Australia. The Company paid $0.9 million in cash on the acquisition date, and recorded a seller note payable valued at $2.1 million , payable over three years from the date of acquisition, and subject to adjustment based on certain revenue targets over three years. The following table summarizes the preliminary fair values of the consideration transferred, assets acquired and liabilities assumed, at acquisition date: Fair value of consideration transferred: Cash Seller note payable for contingent consideration Total
$
923 2,096
$
3,019
Recognized amounts of identifiable assets acquired and liabilities assumed Accounts receivable Other assets Trade names and trademarks Database content Customer relationships Property and equipment Accounts payable and accrued expenses
$
Total identifiable net assets Goodwill
328 823 67 141 402 18 (465) 1,314 1,705
$
Total fair value of assets acquired and liabilities assumed
3,019
The weighted average life of total amortizable intangible assets acquired is 9.1 years. The acquisition of Park Brown includes a contingent consideration arrangement that allows for adjustment of payments based upon achievement of certain revenue targets. The fair value of contingent consideration is based upon the future revenues attributable to the acquired business, and was estimated through the use of the Monte Carlo model. The fair value measurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement. These fair value measurements are based on (i) an assumed revenue forecast, (ii) an assumed discount rate of 4.8% , and (iii) assumed market volatility rate range of 10.0% . The fair value of the note payable for contingent consideration recognized on the acquisition date was $2.1 million . As of September 30, 2014, the fair value of the note payable was $ 1.9 million . The fair value of identifiable intangible assets was measured based upon significant inputs that were not observable in the market, and therefore are classified as Level 3. The key assumptions include (i) management's projection of future cash flows based upon past experience and future expectations, and (ii) an assumed discount rate of 20.5% . The goodwill of $1.7 million is attributable to the workforce of the acquired business and the synergies expected to arise in connection with the acquisition. The goodwill relating to the Company's acquisition of Park Brown is fully deductible for United States federal income tax purposes. The Company incurred acquisition related costs of $ 0.3 million , which were recorded as general and administrative expenses in the consolidated statements of operations for the three and nine months ended September 30, 2014. The total revenues and net income attributable to the acquisition, since the acquisition date, included in the consolidated statements of operations for the three and nine months ended September 30, 2014 are as follows:
10
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CTPARTNERS EXECUTIVE SEARCH INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (All tables in thousands, except share and per share amounts)
Three Months Ended September 30, 2014 Total Revenues
$
Net Income/(Loss)
$
Nine Months Ended September 30, 2014
1,177
$
(152)
1,177
$
(152)
The amounts of revenue and net loss related to the acquisition that are included in our consolidated statements of operations and the pro forma financial information as if the acquisition had occurred on January 1, 2013, are presented in the following table. This pro forma information is presented for informational purposes only and is not necessarily indicative of what our actual results of operations would have been had the acquisition happened at such time. Pro forma unaudited total revenues and net income of the combined entity had the acquisition date been January 1, 2013 are as follows: Three Months Ended September 30 2014(1)
Nine Months Ended September 30
2013
2014(2)
2013(3)
Total Revenues
$
46,553
$
34,394
$
135,527
$
Net Income
$
1,613
$
750
$
5,071
$
100,743 (2,185)
(1) Pro forma net income for the three months ended September 30, 2014 is adjusted to exclude $0.3 million of acquisition costs. (2) Pro forma net income for the nine months ended September 30, 2014 is adjusted to exclude $0.3 million of acquisition costs and to include $0.1 million of amortization costs. (3) Pro forma net income for the nine months ended September 30, 2013 is adjusted to include $0.3 million of acquisition costs and $0.1 million of amortization costs.
Johnson Executive Search On March 1, 2014, the Company acquired Johnson Executive Search ("Johnson"), an independent executive search and leadership advisory firm based in Sydney, Australia. The firm works with clients in the financial services, legal and professional services, technology and communications, consumer and industrial sectors. This acquisition expands the Company's presence in Asia-Pacific region. The Company paid $2.3 million in cash on the acquisition date, and recorded a seller note payable valued at $2.5 million , payable over three years from the date of acquisition, and subject to adjustment based on certain revenue targets over three years. The following table summarizes the fair values of the consideration transferred, assets acquired and liabilities assumed, at acquisition date: Fair value of consideration transferred: Cash Seller note payable for contingent consideration Total
11
$
2,336 2,523
$
4,859
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CTPARTNERS EXECUTIVE SEARCH INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (All tables in thousands, except share and per share amounts)
Recognized amounts of identifiable assets acquired and liabilities assumed Accounts receivable Other assets Trade names and trademarks Database content Customer relationships Property and equipment Accounts payable and accrued expenses
$
380 53 189 321 227 187 (251)
Total identifiable net assets Goodwill
1,106 3,753 $
Total fair value of assets acquired and liabilities assumed
4,859
The weighted average life of total amortizable intangible assets acquired is 8 years. The acquisition of Johnson includes a contingent consideration arrangement that allows for adjustment of payments based upon achievement of certain revenue targets over the next three years. The fair value of contingent consideration is based upon the future revenues attributable to the acquired business, and was estimated through the use of the Monte Carlo model. The fair value measurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement. These fair value measurements are based on (i) an assumed revenue forecast, (ii) an assumed discount rate of 8.5% , and (iii) assumed market volatility rate range of 10% . The fair value of the note payable for contingent consideration recognized on the acquisition date was $2.5 million . As of September 30, 2014, the fair value of the note payable was $2.4 million . The fair value of identifiable intangible assets was measured based upon significant inputs that were not observable in the market, and therefore are classified as Level 3. The key assumptions include (i) management's projection of future cash flows based upon past experience and future expectations, and (ii) an assumed discount rate of 13.5% . The goodwill of $3.8 million is attributable to the workforce of the acquired business and the synergies expected to arise in connection with the acquisition. The goodwill relating to the Company's acquisition of Johnson is fully deductible for United States federal income tax purposes. The Company incurred acquisition related costs of $0.6 million , which were recorded as general and administrative expenses in the consolidated statements of operations for the nine months ended September 30, 2014. The total revenues and net income attributable to the acquisition, since the acquisition date, included in the consolidated statements of operations for the nine months ended September 30, 2014 are as follows:
Three Months Ended September 30, 2014 Total Revenues
$
Net Income
$
Nine Months Ended September 30, 2014
761 (1,058)
$
2,240
$
(1,260)
The amounts of revenue and net income related to the acquisition that are included in our consolidated statements of operations and the pro forma financial information as if the acquisition had occurred on January 1, 2013, are presented in the following table. This pro forma information is presented for informational purposes only and is not necessarily indicative of what our actual results of operations would have been had the acquisition happened at such time. Pro forma unaudited total revenues and net income of the combined entity had the acquisition date been January 1, 2013 are as follows: Three Months Ended September 30 2014
Nine Months Ended September 30
2013
2014(1)
2013(2)
Total Revenues
$
46,553
$
35,765
$
135,282
$
Net Income
$
1,301
$
902
$
5,380
$
(1) Pro forma net income for the nine months ended September 30, 2014 is adjusted to exclude $0.6 million of acquisition costs.
12
106,375 (2,821)
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CTPARTNERS EXECUTIVE SEARCH INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (All tables in thousands, except share and per share amounts)
(2) Pro forma net loss for the nine months ended September 30, 2013 is adjusted to include $0.6 million million of acquisition costs and $0.1 million of amortization costs. Augmentum Consulting, Ltd. On May 2, 2013, the Company acquired a 51% controlling ownership interest in Augmentum Consulting, Ltd. ("Augmentum"), a London based search firm. This acquisition complements CTPartners' existing UK business in a variety of practice areas, provides increased competitive advantage and enhances growth opportunity. The Company paid $1.5 million in cash on the acquisition date, recorded a seller note payable valued at $2.5 million , payable in two equal installments on August 31, 2014 and 2015, and a redeemable noncontrolling interest of $3.8 million . The aggregate maximum purchase price may be adjusted based on certain revenue targets over three years, not to exceed $8.5 million in total. The Company had the right to call the remaining 49% interest in Augmentum after August 2, 2014, and Augmentum shareholders have the right to put the remaining 49% interest if the call option has not been exercised, at a pre-determined price, adjustable based on Augmentum's performance. On September 4, 2014 the Company acquired remaining 49% interest in Augmentum for $3.9 million , of which $1.6 million was paid in cash at closing. The remainder will be paid over two years. The acquisition of Augmentum includes a contingent consideration arrangement that allows for adjustment of payments based upon achievement of certain revenue targets over the next three years. The range of undiscounted amounts that the Company could pay is between zero and $3.6 million , denominated in British pounds and translated at the rate in effect at the end of reporting period. The fair value of contingent consideration is contingent upon the future revenues attributable to the acquired business, and was estimated through the use of the Monte Carlo model. These fair value measurements are based on significant inputs not observable in the market and thus represent a Level 3 measurement. These fair value measurements are based on (i) an assumed revenue forecast, (ii) an assumed discount rate of 6.5% , and (iii) assumed market volatility rate range of 10% 12.5% based on the volatility data for companies similar to Augmentum. The fair value of identifiable intangible assets was measured based upon significant inputs that were not observable in the market, and therefore are classified as Level 3. The key assumptions include (i) management's projection of future cash flows based upon past experience and future expectations, and (ii) an assumed discount rate of 18.5% . The goodwill of $5.1 million is attributable to the workforce of the acquired business and the synergies expected to arise in connection with the acquisition. The goodwill relating to the Company's acquisition of Augmentum is fully deductible for United States federal income tax purposes. Cheverny CEO Search, S.A. On October 10, 2012, the Company completed an acquisition of Cheverny CEO Search, S.A., a Paris, France based search firm focused on executive recruiting. The first payment of $0.5 million was made in cash on the acquisition date, and a non-interest bearing seller note was issued for the remainder of the purchase price. The note was payable in two equal installments of $ 0.5 million each on July 12, 2013 and July 12, 2014. A portion of the total purchase price was contingent upon the continued employment certain shareholders of the acquiree. Therefore, the contingent portion of the purchase price was accounted for as compensation for postcombination services, recognized over the requisite service period using the graded-vesting method. During the quarter ending March 31, 2013, the Company modified the terms of the Cheverny CEO Search, S.A. acquisition agreement, terminating all employment contingencies. As a result of the amendment, the Company recognized remaining post-combination compensation and incurred a non-recurring charge of $0.8 million relating to Cheverny CEO Search, S.A. post-combination compensation in the first quarter of 2013. The charge is included in compensation and benefits expenses in the consolidated statement of operations for the nine months ended September 30, 2013. Latin America Effective January 2, 2012, the Company acquired CTPartners Latin America Inc., its independently-owned licensee that had been operating under the name of CTPartners in Latin America for the prior five years . The aggregate purchase price in the agreement was $10.5 million, which was paid in cash and the issuance of a non-interest bearing seller note for $5.3 million, due in equal installments of $2.6 million each on January 2, 2013 and January 2, 2014, respectively. A portion of the total purchase price was contingent upon the continued employment of certain key shareholders. The purchase agreement provides that the selling shareholders are required to repay to the Company up to the aggregate amount of $7.2 million if their employment terminates prior to the 36 -month anniversary of the closing of the transaction. Therefore, the contingent portion of the purchase price was accounted for as compensation for post-combination services, and initially recognized over three years using the graded-vesting method. After accounting for a portion of the purchase price as post-combination compensation, the fair value of the consideration allocation to the assets and liabilities acquired was $3.0 million. During the quarter ending March 31, 2013, the Company modified the terms of the Latin America acquisition agreement, terminating all employment contingencies. As a result of the amendment, the Company recognized the remaining post-combination compensation and incurred a non-recurring charge of $1.1 million relating to Latin America post-combination compensation in the first quarter of 2013. The charge is included in compensation and benefits expenses in the consolidated statement of operations for the nine months ended September 30, 2013.
13
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CTPARTNERS EXECUTIVE SEARCH INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (All tables in thousands, except share and per share amounts)
Note 3. Goodwill and Intangible Assets Goodwill Changes in the carrying value of goodwill for the nine months ended September 30, 3014 are as follows: Balance as of December 31, 2013 Additions Exchange rate fluctuation
$
Balance as of September 30, 2014
$
5,811 5,834 (340) 11,305
Intangible Assets The following is a summary of intangible assets at September 30, 2014:
Gross Carrying Amount
Amortizable Lives Amortized Intangible assets Customer relationships Developed technology
10 years 10 years
Trade names Other
$
3,394 1,508
Accumulated Amortization $
Net Carrying Amount
724 198
1 year
494
274
3 years
83
39
$
5,479
$
1,235
$
2,670 1,310 220 44
$
4,244
$
4,312
Unamortized Intangible Assets 68
Trademarks Total Intangible Assets
Total amortization expense of intangible assets for the three months and nine months ended September 30, 2014 was $0.2 million and $0.6 million respectively, and for the three and nine months ended September 30, 2013 was $0.2 million and $0.4 million respectively. Estimated aggregate future amortization expense for the following five years and thereafter is as follows:
Estimated Aggregate Future Amortization Expense
Years ending December 31, 2014
$
166
2015
661
2016
535
2017
488
2018
488 1,906
Thereafter $
4,244
Note 4. Accounts Receivable The Company extends unsecured credit to customers under normal trade agreements, which generally require payment upon invoice receipt. The allowance for doubtful accounts is based upon management's review of delinquent accounts and an assessment of the Company's historical evidence of collections. The Company also provides a reserve for billing adjustments based upon historical experience. The allowance for doubtful accounts and billing adjustments amounted to $2.1 million and $1.5 million at September 30, 2014, and December 31, 2013, respectively.
14
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CTPARTNERS EXECUTIVE SEARCH INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (All tables in thousands, except share and per share amounts) Note 5. Basic and Diluted Earnings Per Share A reconciliation of the amounts used in the basic and diluted earnings per share computation is shown in the following table.
Three Months Ended September 30
Nine Months Ended September 30
2013 1
2014
2013 1
2014
Numerator Net income/(loss) attributable to the Company
$
1,301
$
658 $
4,563
$
(1,757)
Denominator Basic weighted-average common shares Effect of stock options and restricted stock Diluted weighted-average common shares
7,258,241
7,070,180
7,196,123
7,041,631
515,833
406,296
531,257
—
7,476,476
7,727,380
7,774,074
7,041,631
Basic income/(loss) per common share
$
0.18
$
0.09 $
0.63
$
(0.25)
Diluted income/(loss) per common share
$
0.17
$
0.09 $
0.59
$
(0.25)
(1) For the three months ended September 30, 2013, 101,499 stock options are excluded as the strike price is below the market price at September 30, 2013. For the nine months ended September 30, 2013, 233,418 restricted shares and 158,373 stock options are excluded, as they are anti-dilutive to the net loss per common share. Note 6. Leasehold Improvements and Equipment The components of the leasehold improvements and equipment at September 30, 2014 and December 31, 2013 are as follows:
September 30, 2014 Leasehold improvements
$
3,507
December 31, 2013 $
3,222
Office furniture, fixtures and equipment
3,262
3,050
Computer equipment and software
7,458
6,066
14,227
12,338
(9,240)
(8,189)
Accumulated depreciation and amortization $
4,987
$
4,149
Depreciation and amortization expense relating to leasehold improvements and equipment for the three and nine months ended September 30, 2014 was $0.4 million and $1.2 million respectively, and for the three and nine months ended September 30, 2013 was $0.3 million and $1.0 million respectively.
Note 7. Long-Term Debt Line of Credit. The Company is a party to a credit and security agreement (the “Fourth Amended and Restated Credit and Security Agreement” or “Credit Agreement”) with a bank which includes a revolving credit facility. The Credit Agreement, as amended, has been extended through April 30, 2016. Under the amended terms of the revolving credit facility, the Company may borrow an amount equal to the lesser of $20.0 million or the “Borrowing Base” (the Company’s eligible accounts receivable as defined in the Credit Agreement), with interest calculated at 325 basis points basis points above the LIBOR rate as defined in the revolving Credit Agreement (the adjusted LIBOR rate), which was 2.904% at September 30, 2014. The Company had $14.5 million in borrowings on the revolving credit facility at September 30, 2014 and no borrowings at December 31, 2013. Additionally, the Company has issued letters of credit related to office lease agreements secured by the Credit Agreement in the amount of $4.0 million as of September 30, 2014, and $3.3 million at December 31, 2013. Available borrowings under the revolving credit facility were $5.5 million and $14.0 million at September 30, 2014 and December 31, 2013, respectively.
15
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CTPARTNERS EXECUTIVE SEARCH INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (All tables in thousands, except share and per share amounts)
Notes Payable. Long-term debt consists of the following at September 30, 2014 and December 31, 2013: September 30, 2014 Notes payable - redemption of members’ units
$
Notes payable - seller financed acquisitions
$
310
7,645
5,637
135
110
7,980
6,057
Notes payable - other Less current portion of long-term debt
December 31, 2013 200
4,712 $
4,762
3,268
$
1,295
Notes Payable — Redemption of Members’ Units. Prior to the conversion from a limited liability company to a corporation, the Company periodically purchased member units from former members, with payment in the form of notes, payable over 5 years . The total due on these notes amounted to $0.2 million at September 30, 2014, and 0.3 million at December 31, 2013. The interest on the notes ranges from 2.66% to 5.00% . The carrying value of notes payable approximates its fair value. Notes Payable — Seller Financed Acquisitions. During the year ended December 2013, the Company completed two acquisitions, and during 2014 the Company acquired Johnson Executive Search and Park Brown as further described in Note 2. The aggregate purchase price for these acquisitions was, in part, financed through seller notes. In conjunction with the acquisition of Augmentum, in 2013 the Company recorded a note payable to the seller in connection with the contingent purchase price. During third quarter of 2014, the Company acquired the remaining 49% interest, and recorded an additional note payable for the additional interest acquired. The note was recorded at fair value at acquisition, and is re-measured every reporting period, as further described in Note 2 to the consolidated financial statements. As of September 30, 2014, $3.2 million is outstanding, payable in two installments on August 31, 2015 and August 31, 2016. In conjunction with the acquisition of Johnson, the Company recorded a note payable to the seller in connection with the contingent consideration. The note was recorded at fair value at acquisition, and is re-measured every reporting period, as further described in Note 2 to the consolidated financial statements. As of September 30, 2014, $2.4 million is outstanding, payable in three installments on March 1, of 2015, 2016 and 2017. In conjunction with the acquisition of Park Brown, the Company recorded a note payable to the seller. The note was recorded at fair value at acquisition, and is remeasured every reporting period, as further described in Note 2 to the consolidated financial statements. As of September 30, 2014, $1.9 million is outstanding, payable in three installments on July 1, of 2015, 2016 and 2017.
Note 8. Share-Based Compensation Restricted Shares - Upon effectiveness of conversion to a corporation, the Company adopted the 2010 Equity Incentive Plan. The purpose of the 2010 Equity Incentive Plan is to promote the interests of the Company and its stockholders by (i) attracting, retaining and motivating employees, non-employee directors and independent contractors (including prospective employees), (ii) motivating such individuals to achieve long-term Company goals and to further align their interests with those of the Company’s stockholders by providing incentive compensation opportunities tied to the performance of the common stock of the Company and (iii) promoting increased ownership of the Company's common stock by such individuals. Subject to adjustment for changes in capitalization, the maximum aggregate number of shares of the common stock that may be delivered pursuant to awards granted under the 2010 Equity Incentive Plan is 1.0 million . A summary of the Company’s common stock subject to vesting provisions as of September 30, 2014, is presented below:
Non-Vested Common Stock Non-vested common stock at December 31, 2013 Granted Vested
Common
WeightedAverage Grant-Date
Stock
Fair Value
227,159
$
5.11
8,548
$
9.36
$
6.48
—
$
—
134,358
$
4.43
(101,349)
Forfeited Non-vested common stock at September 30, 2014
Total share-based compensation expense related to vested shares was $0.1 million and $ 0.3 million for the three and nine months ended September 30, 2014, respectively, and $ 0.2 million and $ 0.5 million for the three and nine months ended September 30, 2013, respectively.
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CTPARTNERS EXECUTIVE SEARCH INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (All tables in thousands, except share and per share amounts)
As of September 30, 2014, there was $0.7 million of unrecognized compensation expense related to shares subject to vesting provisions granted under the plan. This expense is expected to be recognized over a weighted-average period of 2.4 years years. In the first quarter of 2013, the Company granted an award subject to recapture provisions. Recapture provisions allow the Company to recapture a portion of stock if certain performance or service conditions are not met. A summary of the Company’s common stock subject to recapture provisions as of September 30, 2014, is presented below:
Common Stock Subject to Recapture Common stock subject to recapture at December 31, 2013
Common
Weighted-Average Grant-Date
Stock
Fair Value 7,019
$
4.70
—
$
—
Granted Expiration of recapture provision
(2,340)
$
4.70
—
$
—
4,679
$
4.70
Forfeited Common stock subject to recapture at September 30, 2014
Total share-based compensation expense related to shares subject to recapture was $ 2,782 and $8,466 for the three and nine months ended September 30, 2014, respectively, and $2,761 and $8,234 for the three and nine months ended September 30, 2013. As of September 30, 2014, there was $13,539 of unrecognized compensation expense related to shares subject to recapture granted under the plan. This expense is expected to be recognized over a weighted-average period of 1.2 years. Non-qualified Stock Options —In April 2014, April 2013 and December 2011, the Company authorized and granted 105,500 , 94,100 , and 102,500 stock options to various employees under its 2010 Equity Incentive Plan. All options have an exercise price that is equal to the fair value of the Company’s common stock on the grant date. Options are subject to ratable vesting over a three year period, and compensation expense is recognized on a straight-line basis over the vesting period. A summary of the Company’s non-qualified stock option activity for the nine months ended September 30, 2014, is presented below:
Number of Nonqualified Stock Options
Weighted Average Remaining Contractual Term (in years)
Weighted Average Exercise Price Per Share
Aggregate Intrinsic Value
Outstanding on December 31, 2013
195,600
$
4.34
8.6
$
247
Granted
105,500
$
10.40
9.5
$
—
$
5.00
—
$
—
$
—
—
$
—
$
4.65
—
$
—
Exercised Expired Forfeited
(2,000) — (1,500)
Outstanding on September 30, 2014
297,600
$
6.48
8.4
$
2,711
Exercisable on September 30, 2014
96,200
$
4.68
—
$
—
The aggregate intrinsic value is based upon the Company's closing stock price of $15.59 at September 30, 2014. The compensation expense related to the options was $76,172 and 182,086 for the three and nine months ended September 30, 2014, respectively, and $31,448 and $81,994 for the three and nine months ended September 30, 2013. As of September 30, 2014, there was $0.5 million of unrecognized compensation expense related to unvested non-qualified stock options, which is expected to be recognized over a weighted-average period of 2.3 years. Employee Stock Purchase Program - The stock discount purchase program allows selected employees to purchase up to $0.1 million of the Company’s stock in lieu of cash bonuses, at a 15% discount to the NYSE MKT trading price of those shares. Shares are subject to ratable vesting over a three -year period, and compensation expense relating to the discount is recognized on a straight-line basis over the vesting
17
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CTPARTNERS EXECUTIVE SEARCH INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (All tables in thousands, except share and per share amounts)
period. A summary of the Company's employee stock purchase program as of September 30, 2014, is presented below:
Employee Stock Purchase Program Non-vested purchased employee stock at December 31, 2013
Common
Weighted-Average Grant-Date
Stock
Fair Value
128,429
$
4.09
—
$
—
Granted Vested
(50,962)
$
4.25
—
$
—
77,467
$
3.98
Forfeited Non-vested common stock at September 30, 2014
Compensation expense relating to the stock purchase discount program was $9,559 and $28,677 for the three and nine months ended September 30, 2014, respectively. For the three and nine months ended September 30, 2013, compensation expense relating to the stock purchase discount program was $ 9,559 and $21,936 respectively. As of September 30, 2014, there was $41,666 of unrecognized compensation expense related to shares subject to vesting provisions granted under the stock purchase discount program. This expense is expected to be recognized over a weighted-average period of 1.3 years. Note 9. Enterprise Geographic Concentrations The Company operates in four principal geographic regions: North America, EMEA, Asia Pacific and Latin America. The revenue by region, for the three and nine months ended September 30, 2014, and 2013, is as follows: Three Months ended September 30, 2014
Three Months ended September 30, 2013
Nine Months ended September 30, 2014
Nine Months ended September 30, 2013
$
$
Revenue North America
$
EMEA Asia Pacific Latin America Net revenue before reimbursable expenses Reimbursable expenses Total
4,354
3,643
77,127 32,062 8,960 12,273
45,439
32,553
130,422
95,959
1,088
3,458
3,030
25,895
$
18,687
11,457
8,596
3,733
1,627
1,114 $
46,553
$
33,641
$
133,880
57,845 23,626 4,535 9,953
$
98,989
Identifiable assets by geographic concentrations are as follows:
December 31, 2013
September 30, 2014 Identifiable Assets North America
$
EMEA Asia Pacific Latin America Global Operations Support
35,149
$
13,979
8,078
3,562
12,004
6,322
1,414
Total
34,006
18,971
1,316
$
75,616
$
59,185
$
2,166
$
2,553
Goodwill and other intangible assets, net: Latin America EMEA
7,028
Asia Pacific
6,424
Total
$
18
15,618
7,004 — $
9,557
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CTPARTNERS EXECUTIVE SEARCH INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (All tables in thousands, except share and per share amounts) Note 10. Reorganization In the third quarter of 2012, the Company’s management initiated a plan to reorganize its operations resulting in certain organizational changes in its Canadian and EMEA locations. The plan consisted of a workforce reorganization, and elimination of redundant or unneeded positions, which allowed the Company to combine business operations in certain geographic locations and serve clients more efficiently. During 2013, the Company expanded its reorganization efforts globally, eliminating certain functions. Changes in reorganization reserves related to the plan described above for the nine months ended September 30, 2014, are as follows: Severance and other employee related costs Balance at December 31, 2012
$
Reorganization charges Cash payments Non-cash charges Balance at December 31, 2013
$
Reorganization charges Cash payments Non-cash charges Balance at September 30, 2014
153 782 (728) (48) 159 — (159) —
$
—
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management’s Discussion and Analysis of Financial Condition and Results of Operations as well as other sections of this quarterly report on Form 10-Q contain forward-looking statements. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements. The forward-looking statements are based on current expectations, estimates, forecasts and projections about the industry in which we operate and management’s beliefs and assumptions. Forward-looking statements may be identified by the use of words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “projects,” “forecasts,” and similar expressions. Forward-looking statements are not guarantees of future performance and involve certain known and unknown risks, uncertainties and assumptions that are difficult to predict. Actual outcomes and results may differ materially from what is expressed, forecasted or implied in the forward-looking statements. Factors that may affect the outcome of the forward-looking statements include, among other things, our expectations regarding our revenues, expenses and operations and our ability to sustain profitability; our ability to recruit and retain qualified executive search consultants to staff our operations appropriately; our ability to expand our customer base and relationships, especially given the off-limit arrangements we are required to enter into with certain of our clients; changes in the global economy and our ability to execute successfully through business cycles; our anticipated cash needs; our anticipated growth strategies and sources of new revenues; unanticipated trends and challenges in our business and the markets in which we operate; social or political instability in markets where we operate; the impact of foreign currency exchange rate fluctuations; price competition; the ability to forecast, on a quarterly basis, variable compensation accruals that ultimately are determined based on the achievement of annual results; the mix of profit and loss by country; and our ability to estimate accurately for purposes of preparing our consolidated financial statements. For more information on the factors that could affect the outcome of forward-looking statements, see Risk Factors in Item 1A of our annual report on Form 10-K, which was filed with the Securities and Exchange Commission on March 12, 2014. We caution the reader that the list of factors may not be exhaustive. We undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Management’s Discussion and Analysis of Financial Condition and Results of operations has been prepared for the three- and nine-month periods ending September 30, 2014 and 2013. Overview Business Overview We are a leading performance-driven executive search firm serving clients across the globe. Committed to a philosophy of partnering with our clients, we offer a proven record in C-suite, senior executive, and board searches, as well as expertise serving private equity and venture capital firms. Our organizational structure is designed to provide high quality, industry-focused executive search services to our clients worldwide. Our executive search consultants are dedicated to specific industry verticals and are leading experts in their given sectors. We believe that industry specialization enables us to better understand our clients' cultures, operations, business strategies and industries. Our nine largest industry practice groups are financial services, professional services, life sciences, technology/media/telecom, consumer/retail and industrial.
19
Third Quarter Overview Net revenue for the three months ended September 30, 2014, increased $12.9 million while operating income improved to $2.3 million from 0.9 million in the third quarter of 2013. Net income for the three months ended September 30, 2014 was $1.4 million , a significant improvement over $0.5 million in the same quarter of 2013. On an adjusted basis, net income, as defined in the reconciliation of non-GAAP measure, was $1.9 million for the three months ended September 30, 2014, as compared to adjusted net income of $0.6 million for three months ended September 30, 2013. For the three months ended September 30, 2014, we were engaged to perform 445 searches. For the three months ended September 30, 2013, we were engaged to perform 341 searches. During the three months ended September 30, 2014, we placed candidates in 135 U.S. searches and in 227 non-U.S searches. For the three months ended September 30, 2013, we placed candidates in 121 U.S. searches and in 132 non-U.S. searches. For the nine months ended September 30, 2014, we were engaged to perform 1,351 searches. For the nine months ended September 30, 2013, we were engaged to perform 1,053 searches. During the nine months ended September 30, 2014, we placed candidates in 421 U.S. searches and in 568 non-U.S searches. For the nine months ended September 30, 2013, we placed candidates in 375 U.S. searches and in 381 non-U.S. searches. Relevant data is set forth below:
Three months ended September 30, 2014
Performance Metrics
Three months ended September 30, 2013
Percentage Increase/ Decrease
Increase/ Decrease
(in thousands, except number of search assignments and search consultants) Number of new search assignments
445
341
104
30.5%
Number of executive search consultants (as of period end) Productivity, as measured by average annualized net revenue per executive search consultant (1)
142
120
22
18.3%
$
Average revenue per executive search $ (1)Productivity calculation is based on full time equivalent consultant headcount.
1,271
$
1,085
$
186
17.1%
100
$
92
$
8
8.7%
Nine months ended September 30, 2014
Performance Metrics
Nine months ended September 30, 2013
Percentage Increase/ Decrease
Increase/ Decrease
(in thousands, except number of search assignments and search consultants) Number of new search assignments Number of executive search consultants (as of period end) Productivity, as measured by average annualized net revenue per executive search consultant (1)
$
Average revenue per executive search $ (1)Productivity calculation is based on full time equivalent consultant headcount.
1,351
1,053
298
28.3%
142
120
22
18.3%
1,269
$
1,066
$
203
19.0%
100
$
92
$
8
8.7%
Adjusted Performance Measure, Excluding Non-Operational Charges Management evaluates the Company’s performance based on Adjusted net income/(loss), Adjusted operating income, Adjusted net income/(loss) per share, Adjusted operating margin, Adjusted EBITDA and Adjusted EBITDA margin. These measures should not be viewed as substitutes for financial information determined in accordance with GAAP, nor are they necessarily comparable to the non-GAAP performance measures that may be presented by other companies. We believe the presentation of these non-GAAP measures provides meaningful supplemental information regarding our performance, excluding certain charges that may not be indicative of our core operating results. We include these non-GAAP measures because we believe they are useful to investors in providing more transparency with respect to operational drivers of the business and the supplemental information used by management in evaluation of our ongoing operations.
20
We calculate Adjusted net income/(loss) as Net income/(loss) excluding the following charges which we do not believe are reflective of our operational results: •
Post-combination compensation expense
•
Reorganization charges
•
Gain or loss on foreign currency related to funding of foreign subsidiaries
•
Fees and expenses incurred by us in connection with the restatement of our 2012 interim financial statements
•
Fees and expenses incurred in connection with acquisitions
•
Tax effect of the above adjustments
Adjusted operating income is defined as Adjusted net income/(loss) plus interest and tax expense/benefit. We calculate Adjusted EBITDA as Adjusted Operating Income less depreciation and amortization expense. We calculate Adjusted earnings/(loss) per common share using the weighted average shares outstanding amounts used in the calculation of diluted earnings per share in accordance with GAAP. Adjusted operating margin is calculated as Adjusted operating income divided by net revenues for the period. Adjusted EBITDA margin is calculated as Adjusted EBITDA divided by net revenues for the period. The following table reconciles non-GAAP measures to net income:
(in thousands, except per share amounts) Three Months Ended Nine Months Ended September 30 September 30 2014
2013
2014
2013
CALCULATION OF "AS ADJUSTED" AND "ADJUSTED EBITDA" PERFORMANCE MEASURE Net income/(loss)
$
1,406
$
502
$
4,652
$
(1,855)
Adjustments: Post-combination compensation and reorganization expense
—
212
Foreign exchange loss/(gain) on funding of foreign subsidiaries
203
(87)
Costs incurred for restatement, acquisition and integration
614
52
(313)
(70)
Tax effect of the adjustments $
Adjusted net income
Interest expense/(income)
$
Tax expense/(benefit) Adjusted operating income Depreciation and amortization $
Adjusted EBITDA
1,910
$
12
$
—
2,516
232
820
1,617
1,137
(708)
609
$
37
$
(1,746)
5,793
$
872
140
$
156
1,194
393
3,621
626
3,116
1,039
9,554
1,654
588
589
1,762
1,435
3,704
$
1,628
$
11,316
$
3,089
Adjusted operating margin
6.9%
3.2%
7.3%
1.7%
Adjusted EBITDA margin
8.2%
5.0%
8.7%
3.2%
Earnings per common share, as adjusted
$
0.25
$
0.08
$
0.76
$
Use of non-GAAP measures: The table above contains selected financial information calculated other than in accordance with U.S. Generally Acceptable Accounting Principles (“GAAP”).
21
0.11
Results of Operations Three-Month Period Ended September 30, 2014 Compared to Three-Month Period Ended September 30, 2013 Net Revenue. Net revenue increased $12.9 million , or 39.6% , to $45.4 million for the three-month period ended September 30, 2014 from $32.6 million for the three months ended September 30, 2013. The increase was driven by strong performance across all geographic regions and practices, new hires and acquisitions. Compensation and Benefits Expenses. Compensation and employee benefits expense increased $8.8 million or 35.6% , to $33.4 million for the threemonth period ended September 30, 2014, from $24.7 million for the three-month period ended September 30, 2013. Excluding the non-operational compensation charges of $0.2 million for the three months ended September 30, 2014 and $0.2 million for the same period in 2013, respectively, compensation and benefits expense decreased to 73.3% of net revenue for the three-month period ended September 30, 2014, compared to 75.1% for the three-month period ended September 30, 2013. The $8.8 million increase in compensation and benefits expense excluding the certain non-operational charges, as defined in reconciliation of non-GAAP measures, is principally due to an increase in consultant compensation and related benefits as a result of the $12.9 million increase in net fee revenue. General and Administrative Expenses. General and administrative expenses increased $2.7 million , to $9.6 million for the three months ended September 30, 2014 as compared to $6.9 million for the three months ended September 30, 2013. Excluding non-operational charges defined in the reconciliation of nonGAAP measures, general and administrative expenses were $8.9 million for the three months ended September 30, 2014, as compared to $6.9 million for the three months ended September 30, 2013. The increase is comprised primarily of the $0.6 million due to acquisitions of Johnson and Park Brown, $0.5 million increase in business development, $0.3 million increase in internal recruiting. Operating Income/Loss. Operating income for the three months ended September 30, 2014 was $2.3 million , compared to an operating income of $0.9 million for the three months ended September 30, 2013. Excluding non-operational charges of $0.8 million and $0.2 million for the three months ended September 30, 2014 and 2013, respectively, as defined in the reconciliation of non-GAAP measures, on an adjusted basis, operating income for the three months ended September 30, 2014 was $3.1 million, as compared to operating income of $1.0 million for three months ended September 30, 2013. Adjusted operating margin improved to 6.9% for the three months ended September 30, 2014, as compared to 3.2% for the same quarter of 2013. The increase of $2.1 million in operating income primarily reflects increase in net revenues of $12.9 million, offset by an increase of $8.8 million in compensation expense, and a $2.0 million increase in general and administrative expenses. Income/Loss Before Taxes and Income Tax Benefit. For the three months ended September 30, 2014, we recorded income before income taxes of $2.3 million and an income tax expense of $0.9 million , compared to income before income taxes of $0.8 million and an income tax expense of $0.3 million for the same period in 2013. The increase in income tax expense is primarily due to a $1.5 million increase in income before income taxes. The Company's effective tax rate was 38.5% for the three months ended September 30, 2014, and 39.2% for the three months ended September 30, 2013. Net Income/Loss. Net income for the three months ended September 30, 2014 was $1.4 million , as compared to a net income of $0.5 million for the same period in 2013. Adjusted net income increased $1.3 million, to an adjusted net income of $1.9 million for the three months ended September 30, 2014, as compared to an adjusted net income of $0.6 million for the three months ended September 30, 2013. Net Income/Loss Attributable to the Company. As fully described in Note 2, we acquired a controlling interest in Augmentum Consulting Ltd. For the three months ended September 30, 2014 and 2013, we allocated $0.1 million of net income and $0.2 million of net loss, respectively, to the redeemable noncontrolling interest. Net income attributable to the Company for the three months ended September 30, 2014 was $ 1.3 million as compared to net income of 0.7 million for the same period in 2013. Earnings/Loss per common share. Basic earnings per common share were $0.18 , and diluted earnings per share were $0.17 for the three months ended September 30, 2014, as compared to basic and diluted loss per common share of $0.09 for the three months ended September 30, 2013. Adjusted earnings per share was $0.25 for the three months ended September 30, 2014, an increase of $0.17 per share as compared to an adjusted earnings per share of $0.08 for the three months ended September 30, 2013.
22
Nine-Month Period Ended September 30, 2014 Compared to nine-Month Period Ended September 30, 2013 Net Revenue. Net revenue increased $34.5 million , or 35.9% , to $130.4 million for the nine-month period ended September 30, 2014 from $96.0 million for the nine-month period ended September 30, 2013. The increase was driven by strong performance across all regions and practices, new hires and acquisitions. Compensation and Benefits Expenses. Compensation and employee benefits expense increased $20.7 million or 27.6% , to $95.7 million for the ninemonth period ended September 30, 2014, from $75.0 million for the nine-month period ended September 30, 2013. Excluding non-operational charges of $0.4 million in the first nine months of 2014 and non-operational charges of $2.4 million in the first nine months of 2013, compensation and benefits expense decreased to 731.% of net revenue for the nine-month period ended September 30, 2014, compared to 75.6% for the nine-month period ended September 30, 2013. The $22.7 million increase in compensation and benefits expense after adjustment for non-operational charges is principally due to an increase in consultant compensation as a result of increase in revenue. General and Administrative Expenses. General and administrative expenses increased $3.1 million , to $26.6 million in 2014 from $23.5 million in 2013. Excluding non-operational charges defined in the reconciliation of non-GAAP measures, general and administrative expenses increased $3.7 million for the nine months ended September 30, 2014, as compared to the nine months ended September 30, 2013, but decreased from 22.4% of net revenue in 2013 to 19.3% in 2014. The increase is primarily a result of an increase in business development, marketing, and amortization expense of the acquired intangible assets and acquisitions of Johnson and Park Brown. Operating Income/Loss. Operating income for the nine months ended September 30, 2014 was $7.7 million , compared to an operating loss of $2.8 million for the nine months ended September 30, 2013. Excluding non-operational charges of $1.8 million and $4.5 million for the nine months ended September 30, 2014 and 2013, respectively, as defined in the reconciliation of non-GAAP measures, on an adjusted basis, operating income for the nine months ended September 30, 2014 was $9.6 million, as compared to an operating income of $1.7 million for the nine months ended September 30, 2013. Net Interest Expense . Net interest expense was $0.1 million the nine-month period ended September 30, 2014 and $0.2 million for the nine months ended September 30, 2013. Income/Loss Before Taxes and Income Taxes. For the nine months ended September 30, 2014, we recorded income before income taxes of $7.6 million and an income tax expense of $2.9 million , compared to a loss before income taxes of $3.0 million and an income tax benefit of $1.1 million in 2013. The Company's effective tax rate was 38.5% for the nine months ended September 30, 2014 and 37.6% for the nine months ended September 30, 2013. Net Income/Loss. Net income for the nine months ended September 30, 2014 was $4.7 million , as compared to a net loss of $1.9 million for the nine months ended September 30, 2013. Adjusted net income increased $4.9 million, to an adjusted net income of $5.8 million for the nine months ended September 30, 2014, as compared to an adjusted net income of $0.9 million for the nine months ended September 30, 2013. Net Income/Loss Attributable to the Company. As fully described in Note 2 to the consolidated financial statements, we acquired a controlling interest in Augmentum. We allocated $0.1 million of net income to the redeemable noncontrolling interest for the nine months ended September 30, 2014, and $0.1 million of loss for the nine months ended September 30, 2013. Net income attributable to the Company for the nine months ended September 30, 2014 is $4.6 million as compared to net loss of $1.8 million for the same period in 2013. Earnings/Loss per common share. Basic earnings per share were $0.63 for the nine months ended September 30, 2014, diluted earnings per share were $0.59 for the same period, compared to basic and diluted loss per share of $0.25 for the nine months ended September 30, 2013. Adjusted earnings per share were $0.76 for the nine months ended September 30, 2014, an increase of $0.64 per share as compared to an adjusted loss per share of $0.11 for the nine months ended September 30, 2013. Liquidity and Capital Resources General . Our primary sources of liquidity are cash, cash flows from operations and borrowing availability under our revolving credit facility. We continually evaluate our liquidity requirements, capital needs and availability of capital resources based on our operating needs. We believe that our existing cash balances together with the funds expected to be generated from operations and funds available under our committed revolving credit facility will be sufficient to finance our operations for the foreseeable future.
23
The following table summarizes our cash flow for the periods shown:
Nine months ended September 30 2014 Net cash provided by/(used in) operating activities
$
Net cash used in investing activities Net cash provided by/(used in) financing activities Net decrease in cash
$
2013 1,739
$
(3,564)
(9,429)
(1,775)
9,717
(3,640)
2,027
$
(8,979)
Cash Flow from Operating Activities . Cash provided by operating activities was $1.7 million in the nine-month period ended September 30, 2014, an increase of $5.3 million compared to cash used in operating activities of $3.6 million in the nine-month period ended September 30, 2013. The increase is primarily due to an increase of $4.6 million in net income, excluding post combination compensation charges. The remainder is attributable to the net increase in working capital due to increased revenue. Cash from Investing Activities . For the nine-month period ended September 30, 2014, cash used in investing activities was $9.4 million compared to $1.8 million for the nine-month period ended September 30, 2013. For the nine-month period ended September 30, 2014, the cash used in investing activities was principally due to the acquisition of Johnson Executive Search and Park Brown, capital expenditures and issuance of notes receivable, offset by a repayment of notes receivable. Cash from Financing Activities . For the nine-month period ended September 30, 2014, cash provided by financing activities was $9.7 million , comprised of $14.5 million borrowing on the line of credit, offset by a $4.8 million payment of principal on long term debt. For the nine months ended September 30, 2013, cash used in financing activities was $3.6 million due to repayment of long term debt. We have amended our credit facility agreement to extend on existing terms through April 30, 2016 and increase the borrowing capacity to $20.0 million. We may borrow U.S. dollars at LIBOR plus 3.25%. The borrowings outstanding under our credit facility were $14.5 million at September 30, 2014. There were no borrowings at December 31, 2013. As of September 30, 2014, we had $5.5 million available to borrow. As of December 31, 2013, we had $14.0 million available to borrow. The Company is required to maintain specified leverage and fixed charge coverage ratios as defined in the Credit Agreement. As of September 30, 2014 and December 31, 2013 , the Company was in compliance with the covenants under the Credit Agreement. Off-Balance Sheet Arrangements . We do not have off-balance sheet arrangements, special purpose entities, trading activities or non-exchange traded contracts.
24
Item 4. Controls and Procedures Disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports filed or submitted under the Securities Exchange Act of 1934 (Exchange Act) is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports filed under the Exchange Act is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. As of September 30, 2014, we carried out an evaluation, under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed in the reports we file, or submit, under the Exchange Act is recorded, processed, summarized and reported as and when required. There were no changes in our internal control over financial reporting identified in the evaluation described in the preceding paragraph that occurred during the third quarter of 2014 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
25
PART II. OTHER INFORMATION Item 2. Unregistered Sale of Equity Securities and Use of Proceeds Issuer Purchases of Equity Securities The following table presents the number of shares purchased monthly under the Company’s stock repurchase program for the three-month period ended September 30, 2014.
(in thousands)
Period July 1, 2014 - July 30, 2014
Average Price Paid per Share
Total Number of Shares Purchased —
August 1, 2013 - August 31, 2014
—
September 1, 2014 - September 30, 2014
—
Total
—
$
$
Approximate Dollar Value of Shares That May Yet Be Purchased Under The Plan
Total Number of Shares Purchased as Part of Publicly Announced Plan
—
—
—
—
$
1,002 1,002
—
—
1,002
—
—
On January 19, 2012, the Company’s Board of Directors authorized a new share repurchase program (“2012 Share Repurchase Program”) to acquire up to $1.0 million of the Company’s outstanding shares of common stock in open-market, privately negotiated transactions and block trades. The 2012 Share Repurchase Program extended the previous program which was authorized in August 2011 (“2011 Share Repurchase Program”). The Company repurchased a cumulative amount of $998,701 under the 2011 Share Repurchase Program. The Board of Directors authorized a new share repurchase program ("2014 Share Repurchase Program") in January, 2014. The 2014 Share Repurchase Program authorizes the company to acquire up to $1.0 million of common stock. No shares were repurchased during the three and nine months ended September 30, 2014. Item 5. Other information Share Sale and Purchase Agreement On November 7, 2014, the Company entered into a share purchase agreement (the “Purchase Agreement”) to acquire all the shares of Neumann Leadership Holding GmbH an executive search and leadership consulting firm with operations in Germany, Austria, Switzerland and a number of countries in Eastern Europe. Initial consideration of approximately $1.5 million will be paid at closing and $0.8 million over the next three years. Additional future contingent consideration of up to $0.8 million is subject to the retention of certain key employees. The above description of the Purchase Agreements does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the form of the Purchase Agreement, which is filed as Exhibit 10.1 to this Quarterly Report on Form 10-Q and is incorporated by reference into this Item 5. Item 6. Exhibits The exhibit listing is attached in the exhibit index.
26
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CTPartners Executive Search Inc. By: /s/ WILLIAM J. KENEALLY William J. Keneally Chief Financial Officer Date: November 7, 2014
27
Exhibits Index
Exhibit No.
Description
2.1
Share Sale and Purchase Agreement of Park Brown International Pty Ltd (incorporated by reference to Exhibit 2.1 to Registrant's Form 8-K/A filed on September 15, 2014)
3.1
Certificate of Amendment to Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to Registrant’s Form 8-K filed on July 27, 2012)
3.2
Form of Bylaws of CTPartners Executive Search Inc. (incorporated herein by reference to Exhibit 3.2 to CTPartners Executive Search Inc’s Quarterly Report on Form 10-Q filed with the Commission on November 7, 2013)
*10.1
Share Sale and Purchase Agreement of Neumann Leadership Holding GmbH
*31.1
Chief Executive Officer Certification pursuant to Rule 13a-14(a) under the Exchange Act.
*31.2
Chief Financial Officer Certification pursuant to Rule 13a-14(a) under the Exchange Act.
*32.1
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350
*32.2
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350
**101
The following financial information from CTPartners Executive Search Inc. Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2014 formatted in Extensible Business Reporting Language (XBRL) and furnished electronically herewith: (i) Condensed Consolidated Balance Sheets; (ii) Condensed Consolidated Statements of Operations; (iii) Condensed Consolidated Statements of Cash Flows; and (iv) related Footnotes to the Condensed Consolidated Financial Statements.
* Filed herewith ** Pursuant to Rule 406T of Regulations S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.
28
CTPartners Executive Search Inc. NLH KG Share Sale and Purchase Agreement
p age 1 Contents 1 Definitions 5 2 Co nditions to Comp letion 14 2.1 Conditio ns 14 2.2 Reasonable endeavours 15 2.3 Waiver 15 2.4 Notice 16 2.5 Termination 16 2.6 Remedies 16 3 Sale and purchase of the Share 16 3.1 Sale and purchase of the Share 1 6 3.2 Transfer of rights 16 4 Purchase Price 16 4.1 Purchase Price 16 4.2 Payment of the Purchase Price 16 4.3 Debt Redemptio n Amount 17 4.4 Completion Payment Amount 17 4.5 Net Wo rking Capital Adjustment Am ount 17 4.6 First Period Payment Amou nt 18 4.7 Second Period Payment Amount 18 4.8 Third Period Payment Amount 18 4.9 Payment AWS 18 4.10 Interest 18 4.11 Set-off 18 5 Conduct of Business until Co mpletion 18 5.1 Ordinary course of Business 18 5.2 Integration Proces s 19 5.3 Seller to notify of potential M aterial Adverse Effect or breach of Seller’s Warranty 20 6 Completion 20 6.1 Date, time and place 20 6.2 Executio n of a Share Transfer Agreement 20 6.3 Seller’s o bligations 20 6.4 Delivery at Business premises 21 6.5 Actions by the managing directors 21 6.6 Buyer’s obligations 21 6.7 In terdependence of obligations 21 6.8 Title and risk 21 7 Completion Accounts 22 7.1 Preparation of Completion Accou nts 22 7.2 Co-operation 22
page 2 7.3 Timing 22 7.4 Seller’s accounting 22 7.5 Dispute Notice 22 7.6 Co ntent of Dis pute Not ice 22 7.7 Independent Accoun tant 23 7.8 Deemed acceptance 23 8 Trade Receivables and Trade Credits 24 9 Third party consents 24 10 Non-co mpetition 24 10.1 Non-compete 24 10.2 Interpretation 25 10.3 Duration of prohibition 25 10.4 Geographic app lication of p rohibition 2 5 10.5 Severability 25 10.6 Acknowledgement 26 10.7 Inju nction 26 11 Seller’s Warranties 26 11.1 Seller’s Warranties 26 11.2 Reliance 26 11.3 Remedies 26 11.4 Ability to claim 27 11.5 Limitation on claims 27 11.6 Dis clos ures 28 11.7 Dis claimer 28 11.8 Payment of Claims 28 11.9 Tax effect 28 12 Indemnities 29 12.1 Seller’s ind emnity 29 13 Buyer’s Warranties 30 13.1 Buyer’s Warranties 30 13.2 Reliance 31 13.3 LRS GmbH 31 14 Action after Completion 31 14. 1 Business Records 31 14.2 Co ntinuing co-operation 31 15 Tax Indemnity 31 16 Tax Claims 32 17 Tax Records 35 1 7.1 Reten tion of Tax Records 35 17.2 Access to Tax Records 3 5 18 Tax Returns 3 6 18.1 Co-operation regarding Tax Returns 36
page 3 19 Costs 36 1 9.1 Legal costs 36 19. 2 Redemption or acquisition of the Comp any's debt 36 20 Notices 36 20.1 General 36 20.2 How to give a commu nicatio n 36 20.3 Particulars for delivery of notices 37 20.4 Communications by p ost 37 20.5 Communications by fax 38 20.6 Communications by email 38 20.7 After hours communications 38 20.8 Process service 3 8 20.9 Change of address 3 8 21 Confidentiality 38 21.1 Definitions 38 21.2 Confiden tiality obligation 39 21.3 Permitted disclosures 39 21.4 Disclosure to other persons 40 21 .5 Destruction or return o f Confid ential Information 40 21.6 Survival 40 22 General 40 22.1 Error, frus tration of contract or shortfall exceed ing fifty percent 40 22.2 Amen dment 40 22.3 Waiver and exercise of rights 40 22.4 Assignment 40 22.5 Consents 41 22.6 Further assurances 41 22.7 Rig hts cumulative 41 22.8 Co ntinuing o bligations 41 22.9 Counterparts 41 22.10 Governing law and jurisdiction 41 22.11 Enti re ag reement 4 2 22.12 Constructio n 42 22.13 Headings 43
page 4 Schedules and Annexes: Schedule 1 - Sellers’ Warranties Schedule 2 - Company’s IP Schedule 3 - Property Schedule 4 - Employees Schedule 5 - Statement of Working Capital Schedule 6 - Business Authorisatio ns Schedu le 7 - Trade Receivables Annexure A - Accounts Annexure B - Data Room Documentation Annexure C - Permitted Encumbrances Annexure D - Disclosure Letter Annexure E - Net Working Capital Amount - Worked Examp le Annexure F - Employment Agreement Annexu re G - Pay ment Ann exure H - Austrian Share Transfer Agreement Annexure I - Non-solicitation declaration
page 5 Date 7 Novemb er 2014 Parties CTPartners Executive Search Inc., 28601 Chagrin Blvd, Suite 600, Cleveland, OH 44122 (Buyer) NLH KG, Schubertring 14, 1010 Vienna (Seller) Background A The Seller is the legal and beneficial owner of the Share which comprises all of the issued share capital of the Company. B Th e Seller has agreed to sell, an d the Buyer has agreed to buy, the Share in accordance with the terms of this document. Agreed t erms 1 Definitions In this document these terms have the following meanings: Accounting Policies The Accounting Standards and any accounting policies of the Business applied by the Company in its financial s tatements as of 31 December 2013. Accounting Standards The applicable accounting standards under the Austrian Commercial Code (Unternehmens gesetzbuch) and, generally accepted accounting principles and p ractices in Aus tria consistently ap plied by the Company. Accounts (a) The unaudited statement of financial position (Bilanz) as at the Accounts Date; (b) the u naudited s tatement of financial performance (Gewinn- und Verlus trechnung) for the 12 month period ending o n the
page 6 Accounts Date; and any notes, statements and reports attached to and forming part of those financial statements, of the Company and the Company's Affiliates as set out in annexure Error! Reference s ource not found.. Accounts Date 30 June 2014. Affiliates With respect to any person, any other person directly or indirectly controlling, co ntrolled by, or under common control with, that person. Assets All right, title and interest of the Company or the Company's Affiliates in: (a) Contracts; (b) Property; (c) Business Authorisations ; (d) Goodwill; (e) Bu siness Records; (f) Company’s IP; (g) Plant and Equipment; and (h) all other assets owned by the Company or the Company's Affiliates and used in the Bus ines s. Business The business carried on by the Company and the Company's Affiliates, being the business of executive search services. Bus ines s Authorisation Includes any authorisation, approval, regis tration, cons ent, p ermit, licence, certifi cation or exemption from, by or with a Governmental Agency that is neces sary for the operation of the Business. Business Day A day which is not a Saturday, Sund ay or bank or public holiday in Vienna, Austria. Business Records All books, files, report s, records , correspo ndence, d ocuments, data, programmes, software and other material (in whatever form stored) owned by the Company [or the Company's Affiliates] and us ed for the p urpos es of the Business including information contained in: (a) books of account, sales literature, market research reports, brochures an d other promotional material (including printing blocks, negatives, sound tracks and any ass ociated material); (b) all sales and purchasing records ; (c) all trad ing an d financial records ; (d) lists of all regu lar customers and s uppliers ; (e) all business plans and sales fo recasts; and (f) minute books and statutory company registers, but excluding Tax Records .
page 7 Buyer’s Warranties The warranties and representations in clause 13. 1. Claim Includes any claim, demand, proceeding, suit, litig ation, investigation, audit, action o r caus e of action in contract, tort, und er statute or otherwis e. Company Neumann Leadersh ip Holding GmbH, a limited liability company (Gesellschaft mit beschränkter Haftung) under Aus trian law with its seat in Vienna, Austria, and its business ad dress at Schubertring 14, 1010 Vienna, Aus tria, registered with the Aus trian companies regis ter under registration number FN 2273 92 a. Company's Affiliates means NL D, NL HK, NP, NP doo, NP k ft, NP sro, NP Spzoo and the Comp any's Offices. Company’s IP Means: (a) all rights subsisting in business names used by the Company and/or the Company's Affiliates in the Bus ines s and the reputation and goodwill associated with such, includin g those business names set out in Part A of schedule 2 (Business Names); (b) all rights subsis ting in d omain names used by the Co mpany and/or the Company's Affiliates in the Business and the reputation and good will associated with such , including thos e domain names set out in Part B of schedule 2 (Domain Names); (c) all logos , symbols, get up , trademarks, trade names, service marks, brand names and similar rights (whether or not reg istered or regis trable) used by the Company an d/or the Company's Affiliates in the Bus ines s and the reputation and goodwill associated with such, including those trademarks s et ou t in Part C of schedule 2 (Trademarks); (d ) all rights subsisting in trade secrets and all rights subsisting in financial, marketing and tech nical in formation, ideas, concepts, know-how, technology, processes an d knowledge which is confiden tial or of a sensitive nature (but excluding that which is in the public domain) includin g customer lists and co ntact details, us ed by the Company and/o r th e Company's Affiliates in the Business; (e) the copyright (if any) in labelling or printing or other subject matters used by the Company and/or the Company's Affiliates in connection with the Business; (f) the copyright and other rights in respect to any comp uter programs , software and circuit layouts used by the Company and/or the Company's Affiliates in the Business; (g) the goodwill o f the Co mpany and/or the Com pany's Affiliates in
page 8 and attaching to th e Bu siness; and (h ) all other Intellectu al Property Rights (exclu ding moral rights) used by the Company and/or the Company's Affiliates in th e Business. Company's Offices means NP BG and NP RO. Company Tax Records Tax Records wholly or predominantly relating to the Company and/or the Company's Affiliates or used (whether before, on or after Completion ) in connection with the Business, or otherwise relating to the Business. Completion The completion of the s ale and purchase of th e Share in accordance with clause 6. Completion Accounts Th e accounts prepared in accordance with this document to determine the amount of the Net Working Capital Amoun t (if any) an example of which is set out in schedule 5. Completion Date The date (which must not be befo re [31 October 2014]) th at is the las t day of the month in which all of the conditions precedent in clau se 2.1 have been satisfied or waived, or such other date as may be agreed by the parties in writing. Compl etion Payment Amount Th e amount specified in annexure G. Contract Any contract, agreemen t, arrangement or commitment entered into by the Company and/or the Comp any's Affiliates in relation to the Business under which any obligation is not fully performed as at the Completion Date. Controlling Party The party that has control of all d iscu ssions and communications in relation to , and control of the con duct, d efence and settlement of, a Tax Claim, Joint Tax Claim or Tax Proceedings (as the case may be) as con templated by clause 16. Credit Agreemen ts The credits listed in schedule 8 granted by Erste Bank der oesterreichis chen Sparkass en AG to the Co mpany. CZK Czech Crown, the lawful currency of the Czech Rep ublic. Data Room Do cumentation Thos e documents listed in annexure Error! Reference source not found., as contained on two identical CDs tabled at Completion, with one being retained by each party. Debt Redempti on Amount EUR 800 ,000 as agreed by the Seller with Erste Bank der oesterreichischen Sparkassen AG as consideration fo r th e assignment of the receivables and relevant rights under the Credit Agreements and the amo unt (if any) to be paid under the final version of the agreement with Erste Bank der oesterreichischen Sparkassen AG in accordance with clause 2.1(e) plus expenses as
pag e 9 security depo sit for the Guarantee Loan. Default Rate 5% per annum. Disclo sures All information contained in the Data Room Documentation. Employees The employees employed by the Company or the Company's Affiliates who are engaged in the Bus ines s as at Completion, with the names and Employment Entitlements of such employees listed in schedu le 4. Encumbrance Any charge, lien , mortgage, pledge, ass ignment by way of security, secured interest, title retention arrangement, preferential right or trus t arrangement or an y arrangement having the same or equivalent effect. Fees of the Business Gross fees, billings, related charges and indirect expenses, but excluding disb ursements and reimburs able expenses, rendered for services provided or products s upplied in the conduct of the Business by the Company and the Company's Affiliates. First Period The period commencing on the Co mpletion Date and ending on the first annivers ary of the Completio n Date. First Period Payment Amount The amount specified in annexure G. Goodwill The good will of the Seller in an d attaching to the Business. Governmental Agency Any g overnment, whether Federal, State or Territory , municipal or local, and any agency, authority, commission, dep artment, ins trumentality, regulato r or tribunal thereof, including the tax authorities of Austria or any of th e juris dictions where the Company [or any of the Comp any's Affili ates] operates. Guarantee Loan The guarantee loan listed in schedule 8 grant ed by Erste Bank der oesterreichischen Sparkassen AG to the Company. HR$ Hong Kong Dollar, the lawful currency of Ho ng Ko ng. HRK Croatian kuna, the lawful currency of the Republic of Croatia. HUF Hun garian forint, the lawful currency of Hungary. Immediately Available Funds Bank cheque, telegraphic transfer or other means of transfer of cleared funds into a bank account nominated in advance b y the p ayee. Indemnified Entity Th e Buyer and the Company an d the Company's Affiliates. In dependent Accountant One of the followin g accoun tants (i) M ag. Georg Bau then (Böcklinstraße 49, 1020 Vienna, Austria) or (ii) Dr. Erich Kandler (Blattgasse 4-6/3/12, 1030 Vienna, Austria) or (iii) Dr. Bernhard Vanas (Teinfaltstraße 9/7, 1010 Vienna, Austria) as elected by the Buy er. Intellectual Any patent, trade mark, service mark, design right, design registratio n, trade name, bus ines s name, copyright, semiconductor
page 10 Property Right and circu it layout right and any right or form of protection of a s imilar nature to any of these that may su bsist anywhere in Austria or any jurisdiction in which the Company or any of the Company's Affiliates operates whether regis tered or unregistered . Joint Tax Claim A Tax Claim that relates: (a) to a period that occurs partly before the Completion Date and p artly after the Completion Date; (b) to two or mo re periods at least one of which o ccurs partly before the Completion Date and partly after the Completion Date; or (c) to two or more periods one or more of which occurs befo re the Completion Date and one o r mo re of which occurs after the Completion Date, bu t does not include a Tax Claim that relates to, or occurs in, a period after Completio n only because interest accrues or penalties are incurred after Completion in res pect of a Tax obligation relating to a p eriod prior to Completion. Jo rda Dr. Hans Jorda, born 17.04.1957. juR quest GmbH juR-quest GmbH, a limited liab ility company (Gesells chaft mit beschränkter Haftung) under German law with its seat in Hambu rg, Germany, and its business address at Fors tenrieder Allee 61, c/o ACTIO Rev ision & Treuhan d GmbH, 81476 München, registered with the commercial register of Hamburg under registration number HRB 10 1511. Law Includes any law or legal requirem ent u nder any statute, regulation or by-law, any condition of any autho ris ation, and any decision, directive, guid ance, guideline o r requirements of any Governmental Agency. Liability Any liability (wheth er actual, contingent or prospective), los s, damage, cos t and expense of whatsoever description and howsoev er arising. Limited Partners Each of Thomas Hölzchen, born 17.09.1956, Prof.Dr. Robert Büchelho fer, born 23. 07.1942, Reinhard Kolvenbach, born 21.01.1950, Andreas Venzke, born 23.11.1965, Helene Krieff, born 14.05.1958, Rudo lf M üller, bo rn 28.03 .1957, Hedvig Vecsei-Zalka, born 12.07.1952, Mag.Dr. Gottfried Gröbl, born 04.12.1951, M ag. Günther Hassler, born 18.01.1959, Dr. Gerlinde Berger, born 29.10.19 69, Dr. Hart mut Müller, born 31.03.1964, Patrick Haberland, born 05.10.1971, Ki rsten Werner-Schäfer, born 26.03.1966, Alin Catalin Pop escu, born 02.07.1971, Dr. Andreas Arthur Georgi, born 17.05.1957. Loss or Loss es The losses and damages, costs and expenses as specified in clause 11.3.
pag e 11 Malanik Dr. Peter M alanik, geb. 29.08.196 1. Material Adverse Effect The meaning given to it in clau se 2.1(c)(i). NL D Neumann Leadership Deutschland GmbH, a limited liability co mpany (Gesellschaft mit beschränkter Haftung) under German law with its seat in Munich, Germany, and its business address at Herzog- Heinrich-Str. 13, 8033 6 Munich, regis tered with the commercial register of Munich under registration number HRB 157090. NL HK Neumann Leadership As ia Pacific Limited, a private company limited by shares under Hon g Kon g law with its seat in Hong Kong, and its business ad dress at 1205-06, Kinwick Centre, 3 2 Hollywood Road, Central, Hong Kong, registered with the companies register in Hong Kong, under registration nu mber 1051597. NP NP Neumann & Partners GmbH, a limited liability company (Ges ellschaft mit beschränkter Haftung) under Aus trian law with its seat in Vienna, Austria, and its b usiness add ress at Schubertring 14, 1010 Vienna, Aus tria, registered with the companies register under registration n umber FN 2 20412 k. NP BG NEUMANN & PARTNERS BRANCH BULGARIA / НОЙМАН ЕНД ПАРТНЪРС КЛОН БЪЛГАРИЯ" КЧТ, a regis tered branch office of the Co mpany with its o ffice at Bulgaria, 1000 Sofia, Sredetz region, r. a. 11 Slavyanska, office 5, registered under Unified Identification Code 202899808. NP doo Neumann & Partners d.o.o. za posredovanje pri zapošljavanju (in English: Neumann & Partners Ltd. for mediation in emplo yment), a limited liability co mpany u nder Croatian law with its s eat in Zagreb, Croatia, and its b usiness add ress at Gajeva 2a, Zagreb, Croatia, registered under no. 080743887. NP kft Neumann & Partners Vezet ıi Tanácsadó Korlátolt Felelısségő Társaság, abbrev iated name: Neumann & Partners Kft, a limited liability company under Hungarian law with its seat in Budapest, Hungary, and its business address at Ali utca 8, 1025 Budapest, Hu ngary, registered under registration numb er 01-09-71 4998. NP RO NP Neumann &Partners GmbH, representative office (Romanian: reprezentanŃă), a repres entativ e office of NP under Romanian law with its reg istered office at 1-3 Remus St., 4th floor, room E4.10, Bucharest, sector 3, Romania, registered with the Ministry of Economy under no. 1744/24. 12.2013, VAT number 32624185 . NP sro Neumann & Partn ers s .r.o., a limited liab ility company under Czech law wi th its s eat in Prague, Czech Republic, and its business address at Národní 10/138, 110 00 Prague 1, Czech Republic, registered with the Commercial Register maintained by the Municipal Court in Prague under registration number 2 67 55 017.
page 12 NP Spzoo Neumann Leadership Poland Sp.z.o.o., a limited liability company under Polish law, with its seat in Warszawa and its bu siness address in ul. Bonifraterska 17, 00-203 WarONIFRATERSKA 17, 00-203 Warszawa, Poland, registered under registration n umber KRS 244781. Net Workin g Capital Adjustment Amount The meaning given to it in clause 4.5. Net Working Capital Amount The net working capital amount set out in accordance with the statement of working capital in schedule 5. General Partners Each of Dr. Hans Jorda, born 17.04.1957 and Dr. Peter M alanik, born 29.08.19 61. Permitted Encumbrance An Encumbrance which is listed in annexure Error! Reference source not found.. Plant and Equipment The plan t, equipment, furniture, fixtures and fittings owned and used b y the Company and /or the Company's Affiliates in the Business as at th e Co mpletion Date. PLN means polish zloty, t he lawfu l currency of the Republic of Poland. Property The leasehold property detailed in s chedule 3. Purchase Price The sum of the: (a) Debt Redemption Amount; (b) Completion Payment Amount; (c) Net Working Capital Adjustment Amount; (d) First Period Payment Amoun t; (e) Second Period Payment Amount ; (f) Third Period Payment Amount. Related Party Liabilities All liabilities (including accrued interest) owing by or to the Company or an y of the Company 's Affiliates to or by any on e or more of the General Partners and/or the Limited Partners. Secon d Period The period commencin g on the day immediately following the end of th e First Period and ending on the second anniversary of the Completion Date. Second Period Payment Amount The amount s pecified in ann exure G. Seller NLH KG, a limited partnership (Kommanditgesellschaft) under Austrian law with its seat in Vienna, Austria, and its business address at Schubertring 14, 1010 Vienna, Au stria, registered with the Au strian companies regi ster under registration n umber FN 3 04926 x.
page 13 Seller’s Tax Records Tax Records relating to the Company or the Company's Affiliates and within the pos sess ion or control of the Seller or any of th e General Partners or Limited Partners of the Seller that might reasonably be expected to support the Tax position of the Company or the Company's Affiliates. Seller ’s Warranties The warranties of the Seller set out in s chedule 1. Share The fu lly paid share in the Company in the amount of EUR 503,000 (registered capital). Stamp Du ty Any stamp, transaction or registration duty or similar charge imposed by any Governmental Agency, including any interes t, fine, penalty, charge or other amount in respect of the above. Tax (a) Any tax, levy, imp ost, deduction, charge, rate, compulsory loan, withhold ing or duty by whatever name called levied, imposed or assessed under Austrian tax law or any oth er Law in Aus tria or elsewh ere (including, without limitation, profits tax, pro perty tax, interest tax, income tax, capital gains tax, tax relating to the franking of dividends, fringe benefits tax, payroll tax, group tax, land tax, VAT, water and municipal rates , customs duties and transaction d uties and s ocial security contributions and any claims derived from such social security contributions); (b) unl ess the context otherwise requires, Stamp Duty; and (c) any interest, penalty, charge, fine or fee or other amount of an y kind asses sed, charge or imposed on or in respect of any thing listed in paragraph (a) or (b). Tax Act The Austrian Income Tax Act 1988 (Einkommensteuergesetz 19 88) as amen ded, th e Austrian Corporate Tax Act 1988 (Körpers chaftsteuergesetz 1988) as amended, as the case may be. Tax Claim The same meaning given in clause 16(a). Tax Indemnity Th e indemnity provided in claus e 15. Tax Law Any Law under which Tax is imposed, assessed, charg ed or administered and includ ing, without limitation, the Tax Act and the tax laws in the countries where the Company's Affiliates operate. Tax Proceedings The same meaning given in clause 16. Tax Records All origin als and copies of books, files, reports, records, correspondence, documen ts, data and other material (whether in electronic or physical fo rm and on whatever media stored) wholly or predominantly related to Tax matters, including Tax Returns and Tax ass essments . Tax Relief Any refund, credit, offset, relief, allowance, deduction, rebate recoupment, compensation, penalty, damag es, restitution, right to
page 14 repayment o r other benefit or saving in relation to Tax. Tax Return Any return relating to Tax including any documen t which must be lodged with a Governmental Agency administerin g a Tax or which a taxpay er must p repare and retain under a Tax Law (such as an activity statement, amended return, s chedule or election and an y attachment). Tax Reviewer An independent Tax expert that the Seller and the Buy er agree to appoint. If su ch agreemen t cannot be reach ed with in a reaso nable time, the in dependen t Tax expert will be nominated by the President for the time bein g of the Austrian Chamber of Public Accountants and Tax Advisors (Kammer der Wirtschaftstreuhänder) (or any successor institution). Tax Warranties The repres entation s and warranties of the Seller contained in warranty 17 of schedule 1. Third Period The period commencing on the day immediately followin g the end of the Seco nd Period and ending on the third an niversary of the Completion Date. Third Period Payment Amount The amount specified in annexure G. Trade Credit Money due from the Company or any of the Company's Affiliates under a invoice issued by a third party to the Company or any of the Company's Affiliates after the Completion Date that cov ers a period that begins prior to the Completio n Date an d ends after the Completion Date. Trade Receivables The receivables set out in schedule 7, being money owed to the Company or any of the Comp any's Affiliates under invoices issued by the Company or an y of the Company 's Affiliates p rio r to the Completion Date that are fully or partly unpaid. Upfront Payment Th e mean ing given to it in claus e 4.5. 2 Conditions to Completion 2.1 Conditions The obligation of the parties to complete is cond itional on the followin g conditions having been satisfied o r waived: (a) the Buyer havin g received in writing from th e lessor of the Property located in Austria unconditional consent to the change of control of the Company to th e Bu yer an d the confirmation that the lease will not be increased as a cons equence of the change of control; (b) the Buyer having receiv ed in writing from the individuals mentioned in annexure I non-solicitation declarations in accordance with annexure I;
page 15 (c) the Buyer (acting reasonably) being satisfied that: (i) there has been no change in th e Bu siness, the financial or trading position of the Business or the operation of the Business since the date of this documen t that has, or is reasonably likely to have, a material and adverse effect on the turnover, profitability, financial conditio n or operation of the Business taken as a whole (a Material Adv erse Effect); and (ii) no Seller’s Warranty is or has become materially false, mis leading or incorrect or wo uld be reas onably likely to result in a Claim being made, or allowed to be made, by th e Buyer; and (d) Jo rda an d Malanik giving notice of their resignation u nder their existing agreements with the Company and entering into new agreements with the Buy er in a form set out in annexure Error! Reference source not found . with regard to the con tract of Malanik ; the form of the co ntract of Jorda to be agreed upon until Completion ; (e) the Company having entered into an agreement with Erste Bank der oesterreichischen Spark assen AG whereb y Erste Bank der oesterreichischen Sparkassen AG agrees to the full release and assignment of the receivables and relevant rights un der the Credit Agreements (including th e release of all collateral of the Company) against the payment of the Debt Redemption Amou nt by the Company or a third party as set out in the draft "Vereinbarung" attached hereto as schedu le 6; (f) application for the renewal of the authorisation of NP RO according to the procedure p rovided by law (Decree no. 122/1990) by th e Ro manian Ministry of Econom y; (g) written confirmation of the termination of the loan agreement en tered into between Mr. Gottfried Gröbl, born December 4, 1951, and the Company, dated September 8, 2010, as amen ded by amendment agreement entered between Mr. Gottfried Gröbl and the Company under acces sion of the Seller, and of the termination of the option granted under the amendment agreement; (h) written confirmation of the termination of the loan agreement entered into between BON Consulting GmbH, registered under FN 302646 v, and the Company, dated September 8, 2010 , as amended by amendment agreement entered between BON Consulting GmbH an d the Company under accession of the Seller, and o f the termination of the option granted under the amendment agreement. 2.2 Reasonable endeavours Each of the parties must use all reaso nable endeavours to procure the satisfactio n of the conditions referred to in clau se 2.1. 2. 3 Waiver The condition s in claus e 2.1 may only be waived by the Buyer in writing.
page 1 6 2.4 Notice The Seller and the Buyer mus t promptly notify the other in writing as soon as it becomes aware that a condit ion to Completion is satisfied or becomes (or is likely to become) incapable of bein g satisfied. 2 .5 Termination If Comp letion has not occurred on or before 1 December 2014 (or such other date as the p arties may hav e agreed in writing) then the Seller or the Buyer may, if not in breach of this document, give written notice to the other terminating this document. 2.6 Remedies If this document is terminated under clause 2.5 then: (a) each party is released from its co ntinuing obligations u nder this document, except those imposing obligations of confiden tiality; (b) each party retains the rights it has against any other party in respect of any prior breach without affecting any rights at Law or in equity; an d (c) the Buyer mu st return to the Seller all do cuments and other materials in any medium in its p osses sion, power or control which contain information relating to the Company [or the Company's Affiliates ] including its working papers and any information obtained from t he Disclosu res. 3 Sale and purchase o f the Share 3 .1 Sale and purchase of the Share Con ditional upon Completion, the Seller agrees to sell to the Buyer and the Buy er agrees to purchase from the Seller, the Share free of all Encumbrances, for the Purchase Price and otherwise on the terms of this document. 3 .2 Transfer of rights The Share will be transferred to the Buyer with all rights, includ ing divid end rights, attached or accruing to them on and from the Completion Date. 4 Purchase Price 4.1 Purchase Price The amount payable by the Buyer to th e Seller for the Share is the Purchas e Price. The Purchase Price shall include the Debt Redemption Amoun t (but not any costs res ulting from Stamp Duties for the redemption or acquisition of the Company's bank debt (see section 4.3)). 4.2 Payment of the Purchase Price The Pu rchas e Price will be paid as follows:
page 17 (a) the Debt Redemption Amou nt will be paid in accordan ce with clause 4.3 (b) the Completion Payment Amount will be paid in accordance with clause 4.4; (c) the Net Working Capital Adjustment Amount will be paid in accordance with clause 4.5; (d) the First Period Payment Amou nt will be paid in accordan ce with clause 4.6; (e) the Second Period Payment Amount will be paid in accordance with clause 4.7; (f) the Third Period Payment Amount will be paid in accordance with claus e 4.8; 4.3 Debt Redemption Amount On or before 31 Decemb er 2014 the Buyer must pay Erste Bank der oesterreichischen Sparkassen to the account named "VK Kreditmanag ment II", IBAN AT5320111400045 22900, BIC GIBAATWWXX, in Immediately Available Funds the Debt Redemption Amount (which will be a non-refund able paymen t). 4 .4 Completion Payment Amount On Completion the Buyer must pay the Seller, or as the Seller directs, in Immediately Available Funds the Completion Payment Amount (which will be a non-refundab le payment). 4.5 Net Working Capital Adjustment Amou nt The Seller will provide the Buyer until December 15, 201 4 wi th a calculation of the Net Working Capital Amou nt as of November 30, 2 014. On or before December 22, 2014 the Buyer mus t pay the Seller (or as the Seller directs) in Immed iately Available Fund s an upfront payment in th e amount of 50% of the Net Work ing Capital Amount ("Upfront Payment") according to the calculation of the Sel ler. Within 5 Business Days of acceptance (or deemed acceptance) of the Completio n Accounts by the Seller, and subject to claus e 8(a): (a) if the positive Net Working Capital Amount min us the Up front Payment is positive the Buyer must pay the Seller (or as the Seller directs ) in Immediately Available Funds the Net Work ing Capital Adjustmen t Amount (which is the Net Working Capital Amount minus the upfront payment); or (b) if the positive or negative Net Working Capital Amount minus the Upfront Payment is negative the Net Working Capital Adjust ment Amount (which is the Net Working Capital Amount minu s the Upfront Payment) shall be deducted from the First Perio d Paymen t Amount and, if the First Period Payment Amount is les s than the Net Working Capital Adju stment Amount, from the Second Period Payment Amount and the Third Period Payment Amou nt (as applicable).
page 18 4.6 First Period Pay ment Amount 12 months after Completion the Buyer must pay the Seller (or as the Seller directs) in Immediately Av ailable Funds the First Period Payment Amount. 4.7 Second Period Pay ment Amount 24 months after Completion the Buyer must pay the Seller (or as the Seller directs) in Immediately Av ailable Funds the Second Period Payment Amount. 4.8 Third Perio d Paymen t Amount 36 months after Completion the Buyer must pay the Seller (or as the Seller directs) in Immediately Available Funds the Third Period Payment Amount. 4.9 Payment AWS The Buyer must within fiv e business days after receipt pay the Seller (or as the Seller directs) in Immediately Available Funds of any payments received by the Company from Erste Bank der oes terreichis chen Sparkass en AG (or Austria Wirtschaftsservice Gesellsch aft mbH) related to the guarantee issued by Austria Wirts chaftsservice Gesellschaft mbH les s any adverse tax effects for the Company and/or the Buyer. 4 .10 Interest If either party does not pay any sum payable by it under this document at the time and otherwise in the manner provided in this do cument, that party must pay interest on such sum from the due date of payment until such su m is paid in full at the Default Rate. Interest accrues and compoun ds daily and is payable on demand. 4.11 Set-off Despite any other p rovision of this do cument, th e Buyer shall set off (aufrechnen) any amount payable by the Buyer under this document against any amount payable by the Seller under this do cument, including any amount payable in connection with: (a) the Net Working Capital Adjustment Amount; (b) an ov erpay ment in respect of any component of the Purchase Price; (c) a Claim for a breach of a Seller’s Warranty by th e Seller; (d) a breach of this document by th e Seller; or (e) a Claim under any indemnity in this document. 5 Cond uct of Business until Completion 5.1 Ordinary course of Business (a) Subject to th e agreement of the Buyer otherwise, until Completion the Seller mus t:
page 19 (i) ensure that the Company and the Company's Affiliates carry on the Business in the ordinary and normal course; (ii) use reas onable endeavours to preserve the goodwill of the Bus ines s; and (iii) promptly notify the Buyer of any Material Adverse Effect in the Business or the Compan y. (b) Except as contemplated by this document or as consented to by the Buyer in writing, the Seller must n ot and must procure that the Company does not, before Completion: (i) increase, reduce or otherwise alter its s hare capital (including by creating, all otting and is suing new share capital) or grant any options fo r the is sue of shares or other securities; (ii) declare, make or pay any dividend; (iii) make a distribution or revaluation of assets; (iv) alter its articles of association; (v) cause or permit any Encumbrance (oth er than a Permitted Encumbrance) to be given or created over any of the As sets or u ndertaking or any material part thereof; (vi) enter into any commitment (oth er than a costumer contract): (A) for more than EUR 10,000 ; (B) with a particular person where the agg regate value of those commitments is more than EUR 20,00 0; or (C) for longer than 2 years ; (vii) dispose of, or agree to dispose of or gran t an op tion to p urchas e, any Asset (or any interes t in an Asset); (viii) acquire or agree to acquire any share, shares or other interest in any company, partnership or oth er ven ture; (ix) engage any new employee, (at the Seller’s initiative) terminate the employment of any Employee, or (except in the ordinary course of business) change the terms of emplo yment (i nclu ding remun eration) of any of the Employees , or pay or provide any bonus to any Employee; or (x) institute, settle or compromise (or agree to do so) any legal proceedings (other than in relation to trade debts in the o rdinary course). 5.2 Integ ration Process The Parties have initiated the integ ration proces s on 21 October 2014. The Seller shall use its best efforts and provide reasonable s upport to continue the integration process prior to the Completion Date.
page 20 5.3 Seller to notify of potential M aterial Adverse Effect or breach of Seller’s Warranty (a) If the Seller becomes aware of any fact, matter or circums tance which results in, or is reasonably likely to result in: (i) a Material Adverse Effect; or (ii) a breach of a Seller’s Warranty, the Seller must give notice to the Buyer as soon as reasonably practicable after becoming aware o f the fact, matter or circumstance, and the notice must set out full details of those facts, matters or circums tances and the po tential Material Adverse Effect or b reach of the Seller’s Warran ty (as applicable). (b) The Seller’s obligations in clause 5 .3(a) apply until Completion. 6 Completion 6.1 Date, time and place Completion mus t take place on the Completion Date at 11am at the offices of Wolf Theiss Rechtsanwälte GmbH & Co KG, Vienna, or such other time and place as the parties may agree in writing. 6.2 Execution of a Share Transfer Agreemen t In order to effectuate the transfer of the Share to the Buyer, the Buyer and the Seller s hall execute a separate share transfer agreement as a notarial deed subs tantially in the form of annexure H. 6.3 Seller’s oblig ations At Completion, the Seller must deliver to the Bu yer: (a) written declaration of Jorda and Malanik, such declaration to acknowledge that the signatory or the companies which pro vide the s ervices of Jorda or M alanik to the Company have no Claim or bas is for a Claim against the Company or any Company's Affiliate in respect of fees, entitlements, salary, or otherwise as of Completion (except as expres sly specified in the written declaration); (b) the Business Records , comp lete and up to date; (c) written non-solicitation declarati ons of all the individuals mentioned in and in the form specified in annexure I; (d) co nsents to change in control of the Company (in form and s ubstance satisfactory to the Buyer) from each of the lessors of the Property required under clause 2.1(a); (e) copy of the applicatio n for the renewal o f the authorisation of NP RO as contemplated by clause 2.1(f); (f) copies of the written confirmations as mentioned above under clau se 2.1(g) an d 2.1(h)
pag e 21 (g) the Company Tax Records; and (h) keys to the Business premises. 6.4 Delivery at Business premises The parties acknowledge and agree that delivery of the items referred to in clauses 6.3(b), 6.3 (g) and 6.3(h) will be deemed to have occurred by those items being left at the Business premises under the control of the Company. 6.5 Actions b y the managing directors On or prior to Completion, the Seller mus t cause the man aging directors of the Company to: (a) execute in notarized form an application for registration of the transfer of the Share and the registratio n of the new man aging directors of the Company in the Austrian companies register and have such appli cation filed with the Austrian companies register; and (b) s ubject to Completion occurring revoke all existing authorities to operate the bank accounts of the Compan y and the Compan y's Affiliates and the pers ons nominated by the Buyer in writing be appointed as signatories of the bank accounts of the Company and the Company's Affiliates; 6.6 Buyer’s obligations At Completion, the Buyer must: (a) deliver to the Company: (i) written consents to act as directors, secretary and public o fficer of the Company or the Company's Affiliates signed by the person s nominated by the Buyer; and (ii) a CD Rom con taining the Data Room Documentatio n; and (b) pay to the Seller the Completion Payment Amount (as directed by the Seller). 6 .7 Interdependence of obligatio ns (a) The obligations of the parties in respect of Completion are i nterdepend ent and if all such obligations have not been performed, then no Completio n may take place. (b) Performance of t he obligations of each party in respect of Completion is treated as taking place simultan eously and no d elivery or payment will be taken to have been made until all deliveries and paym ents have been made. On ce all such obligations have been performed, they must be treated as having been performed simultaneously on the date on which the final obligation is performed. 6.8 Title and ris k Legal and beneficial title to the Share (and property and risk in it) will pass to the Buyer u pon Completi on.
page 22 7 Completion Accounts 7.1 Preparation of Completion Accounts The Buyer must prepare (or procure the preparation by its accountants o f) the unaud ited Completion Accounts as at the Completion Date in a form materially similar to the previo us Accounts and in accordance with the Accounting Standards and Accounting Policies . 7.2 Co-operation The Seller and the Buyer mu st co-operate fully with each other and provide reasonable assist ance in the preparatio n of the Completion Accounts. 7.3 Timing The Buyer must use its reasonable endeavours to prepare (or procure the preparation by its accountants of) the Completion Accou nts as soon as possible but not later than 2 months after the Completion Date. The Buyer must deliver the Completion Accounts to the Seller as soon as the Completion Accounts have been finalised. 7.4 Seller’s accou nting The Seller and its accountants will be entitled to examine and review the Completion Accounts and all working papers of the Buyer and its accountants. 7.5 Dis pute Notice If the Seller disputes: (a) the inclusion, omissio n or calculation of any item in the Completion Accounts; or (b) that the Comp letion Accounts have been drawn up in accordance with the Acco unting Standards and Accounting Policies, then it must give notice of such d ispute (Dispute Notice) to th e Buyer within 15 Busin ess Days after receip t of the Completion Acco unts. 7.6 Conten t of Dispute Notice (a) A Dispute Notice must iden tify: (i) the item in the Completion Accounts in respect of which the dis pute exis ts (by category and location to the extent that the party has that information); (ii) insofar as possible, the amount in dispute; and (iii) the adjustments to the Completion Accounts and Net Working Capital Amount and Purchase Price if the Dispute Notice were to be accepted. (b) The Buyer and the Seller must us e th eir resp ective bes t en deavours to reso lve the dispute the subject o f a Dispute Notice within 10 Business Days of receipt of the Dispute Notice by the Buyer, failing which th e dis pute must
page 23 be resolved in accordance with the dispute resolution mechanism set out in clause 7. 7. (c) The resolutio n of the dis pute, and the Completion Accounts (and the Purchase Price deriv ed from the resolution of the dispute), will be taken to be accepted by the Buyer and th e Seller. 7.7 Independent Accountant (a) If the Buyer and th e Seller fail to resolve any dis pute within 10 Business Days under claus e 7.6(b) the dispute must be su bmitted as soon as reasonably practicable for determination by the Independent Accountant. (b) The Indep endent Accountant must be appointed to act on the following bas is: (i) the Ind ependent Accountant must act as exp erts and not as arbitrators; (ii) the Independent Accountant must determine the matter in dispute as so on as pos sible; (iii) th e Buyer and the Seller: (A) must p rovide th e Independent Accountant with all information the Independent Accountant reasonably req uires; (B) are entitled to make written submissions to the Independent Accountant; and (C) must provide the other with a copy of all information provided and submis sions made to the In dependen t Accountant. (c) The Ind ependent Accountant is entitled (to the extent they consider it appropriate) to base their opinion on the information provided an d submiss ions made by the Buyer and the Seller and on the Business Records . The Independent Accountant may s eek the advi ce of another accountant at its discretion. (d) The determination of the Independent Accountant is (in the absence of manifest error) conclusive and binding on the Buy er and Seller and will be taken to be accepted by the Buyer and the Seller. (e) The costs of the Independent Accountant must be bo rne by the Buyer and Seller equally. 7.8 Deemed acceptance If the Seller does n ot give a Dis pute Notice within the 15 Business Day period required by clause 7.5 it will be taken to have accepted the Completion Accounts and the amount of the Net Wo rking Capital Amount, fees invoiced and Purchas e Price included in the Completion Accounts.
page 24 8 Trade Receivables and Trade Credits (a) Any portion of any Trade Receivable that is overdu e 120 days (or such o ther period as the parties acting reasonab ly agreed) at the Completion Date will: (i) reduce th e Net Workin g Capital Adjustment Amount to be paid by the Buyer in accord ance with clause 4.5(a); or (ii) be added to the Net Wo rking Capital Adjustment Amount to be deducted from the First Perio d Paymen t Amount (or from the Second Period Payment Amount and the Third Period Payment Amount as app licable) in accordance with clause 4.5(b). (b) The Seller shall be in charge of collecting any Trade Receivable that is overdu e 120 days at the Completion Date. Any collected Trade Receivable that is overdue 120 days at the Completion Date shall belong to the Seller. (c) If the Buyer or the Company pays a Trade Credit and there is no provis ion for such Trade Credit in the Completion Accounts, then: (i) following su ch payment the Buyer will provide to th e Seller the Trade Credit and proo f of payment; an d (ii) the percentage o f that t otal payment made by the Buyer that relates to th e period from the commencement of the Trade Credit until the Completion Date shall be ad ded to the Net Work ing Capital Adjustment Amount to be deducted from the First Period Payment Amount (or from the Second Period Payment Amount and the Third Period Payment Amount as applicable) in accordan ce with clau se 4.5(b). 9 Third party consents If any Contract requires the consent of a third party to the con tinuation of that Co ntract as a result of the Buyer acquiring th e Share, and such consent has not been obtain ed on or prior to Completion: (a) the Seller will, following Completion and upon req uest from the Buy er, use all reasonable endeavours to o btain the consent of that third p arty on terms reasonably acceptable to the Buyer; and (b) the Buyer must provide all as sistance and information reasonably required by the Seller to secure such consents. 10 Non-competition 10.1 Non-compete The Seller (in consideration for the Buyer entering into this document) undertakes to the Buyer that it will not: (i) engage in a business or activity that is the s ame as or s ubstantially similar to, or in competitio n with, the Business or the Buyer;
page 25 (ii) solicit, canvass, approach, or accept an approach from a person (including for the purpose of recruiting that person or otherwise inducing that person to leave their employ ment) about engaging in a business or activity that is the same as or substantially similar to, or in competition with, the Business or the Buyer if th at person who was, at any time during the 12 months ending on the Completion Date: (A) an agent or employee o f the Bus ines s or the Buyer; (B) a person occupying a sen ior management position and is (or is likely to be) in possession of confidential information relating to the Business or the Buyer; (C) a person able to materially influence cus tomer or client relationships of the Bus ines s or the Buyer; or (D) a client or a customer of the Business or the Buyer; (iii) interfere with the relationship between either the Company and the Company's Affiliates or the Buyer and their clients, customers, employees or su ppliers ; or (iv ) disclose confiden tial information known about the Company and the Company's Affiliates or the Buyer, except that nothing in this clause will restrict the Seller from holding or acquiring (either directly or indirectly) the issued ordinary shares in the capital of any bo dy corporate listed on a regulated stock exchange. 10.2 Interpretation For the purpo ses of clause 10.1, engage i n means to carry on, participate in, provide finance or services, or otherwise be directly or indirectly involved in, whether as a sh areholder, unit holder, director, consultant, ad viser, contractor, principal, ag ent, manager, employee, beneficiary, partner, associate, trustee or financier. 10.3 Duration of prohibition The un dertakings in clause 10.1 begin on the Completion Date and end on the date th at is three years after the Completi on Date. 10.4 Geographic application of prohibitio n The undertak ings in clause 10.1 apply if, and only to the extent that the activity prohibited occurs within: (a) Austria; (b) Germany; and (c) any other juris diction in which the Company or the Company's Affiliates are operating at the Completion Date. 10.5 Severability The Seller acknowledges that each of the prohibitions and restriction s contained in this clause:
page 26 (a) is to be read and construed and is to hav e effect as a separate severable and indep endent prohibition or restrictio n and will be enforceable accordingly; and (b) co nfers a benefit on the Buyer which is no more than th at which is reas onably and necessarily req uired by the Buyer for the maintenance and protection of the Business. 10.6 Ack nowledgement The Seller acknowled ges that all the p rohibitions and restrict ions contained in this clause 10 are reasonable in the circumstances and necessary to protect th e goodwill of the Business as at the Completion Date. 10.7 Injunction Th e Seller acknowledges that monetary damages alon e will not be adequate compensation to the Buyer from breach of this clause 10 and that the Buyer is entitled to seek (in addition to any other remedi es it may be able to seek b ut subject to the discretion of the court) an injunction from a court of competent jurisdiction if: (a) the Seller fails to comply with or threatens to fail to comply with any of the provisio ns of clause 10.1; or (b) the Buyer has reason to believe that the Seller will not comply with claus e 10.1. 11 Seller’s Warranties 11.1 Seller’s Warranties Subject to the limitations set out in this document the Seller represents and warrants to the Buyer that each of the Seller’s Warran ties set out in s chedule 1 are true and accurate as at the date of this document and as at the Completion Date, if not otherwise explicitly stated in this document. 11.2 Reliance Each of the Seller’s Warranties is to be treated as a separate representation an d warranty and the interpretation of any statement made mu st not be restricted by reference to, o r inference from an y other statement or provision o f this document. 11.3 Remedies (a) Subject to Completion having occured, in the event of breach of any of the Seller's Warranties, the Buyer shall be entitled, subject to further provision s of this clau se 11, at its sole discretion, to claim from the Seller monetary compensatio n for all actual losses and damages , costs and expenses (inclu ding reasonable attorneys' and accountants' fees) incurred by the Buyer and/or the Company and/or the Company's Affiliates (Losses) by reason of such Seller's Warranties not being tru e and accurate (and th us compared to such Seller's Warranties being true and accurate). Any liability
p age 27 for lost profit (entg angener Gewinn) is hereby ex pressly excluded to the extent permitted by law. (b) Except for the Seller's Warranties, the Seller will not except any warranty or other liability with respect to the Share, th e Company o r the Company 's Affiliates, the Business and the As sets. Any guarantee and liability for a certain income from the Share shall specifically be excluded. (c) The remedies for breaches of the Seller's Warranties provided in claus e 11.3(a) sh all be i n lieu of any other remedy (Rechtsbehelf) (including, without limitation, in lieu of any warranty remedy [Gewährleistungs behelf] and/or damag e claims of whatever k ind [Schadenersatzans prüche]) and any other liability claim (Haftungsanspruch) the Buy er may have by law or otherwise in connection with any breach o f the Seller's Warranties. (d) If an event, a fact, a circumstance or a situation simultaneous ly constitu tes a breach of s everal Seller's Warranties, the Buy er shall not b e entitled to multiple compensation for the same Loss. 11 .4 Ab ility to claim (a) The Buyer may not bring a Claim for any breach of a Seller’s Warranty to the extent that: (i) the relevant fact, matter or circumstance was fully and fairly disclosed in the Disclosures so that based on such disclosure the Buyer was – applying the standard of care and diligence of a prudent buyer – in a pos ition to identify, as sess and evaluate the material facts, matters and circums tances forming the basis for its Claim and the ad verse impact (financially or otherwise) of su ch facts, matters and circumstances o n the Business or was within the actu al kno wledge of the Buyer (this clause 11.4(a)(i) does not ap ply to Claims for any breach of a Tax Warranty); or (ii) pro vision or resp ective liability has been made for that fact, matter or circumstance in the Accounts. (b ) The Seller shall not be liable towards the Buyer to the extent th e Loss s uffered in connectio n with the breach o f a Seller's Warranty is compensated by a third party or an insurance company. 11.5 Limitation on claims (a) Any Claim made by the Buyer in respect of a Seller’s Warran ty is subject to and limited as follows: (i) the Buyer must give written notice to the Seller of the Claim within 18 months after the Completion Date; (ii) in the case of a sing le Claim, or a s eries of related Claims, where the amount claimed exceeds EUR 15 ,000; (iii) the Seller will on ly be liable for any Claim if its liability fo r all Claims not excluded by the limitation in clause 11.5(ii) wo uld ex ceed in aggregate EUR 35,000 ; and
page 28 (iv) the maximum aggregate amount which the Buyer may recover from th e Seller in respect of all claims amounts to EUR 1,7 million, except that the Seller's maximum liability to the Buyer for all Claims under the Tax Indemnity under clause 15 and for breaches of a Tax Warranty are unlimited. 11.6 Dis clos ures (a) In the period from the date o f this document until Completion : (i) the Seller mus t, as soon as reasonably practicabl e, dis clos e to the Buyer; and (ii) the Buyer must as soon as reasonably practicable disclose to the Seller, in writing any fact, matter or circumstance of which the Seller or the Buyer become aware and which in its opinion would result or would be likely to result in any Seller’s Warranty not being tru e, complete or accurate. The Seller must use all reasonable endeavours to remedy (if capable of remedy) th e relevant fact, matter or circumstance before Completion. If remedied, th e Buyer has no claim in respect of the fact , matter or circumstance. (b) If any fact, matter or circumstance is disclosed u nder claus e 11.6(a) and is no t remedied before Completion, then, if Completion o ccurs , the Buyer will be entitled to claim damages in accordance with this clause 11 but no right to damages will arise if Completion does not o ccur. 11.7 Disclaimer Nothing in this clause 11 ap plies in relati on to any fraudulent mis representation made by the Seller before the date of this document. 11.8 Payment of Claims All sums payable by the Seller to the Buy er under this documen t in res pect of a Claim for breach of a Tax Warranty, un der the Tax Indemnity or in relation to any Tax Claim or Tax Proceedings referred to in clause 16 must be paid by the later of: (a) 20 Business Days preceding the due date (or any extended d ate for payment permitted by the relevant Governmental Agency) for payment of the Tax Liability to which the Claim relates; or (b) the d ay that is 20 Business Days after notice of the Claim is provided to the Seller. 11.9 Tax effect If any payment by th e Seller to the Buyer under the Tax Indemn ity or otherwise under this do cument, including the payment of an ad ditional amount un der this clause 11.9, would req uire the Buy er to pay Tax on , or as a result of, the amount received by the Buyer, the Seller must pay on demand to the Buyer an additional amount (which amount will not be subject to the limitations in clause 11.5) calculated as follows :
page 29 AA = T)(1 P - P where: AA means the additional amo unt to be paid; P means the amount payab le by the Seller disregarding this clause; and T means the general corporate tax rate (as defined in the Austrian Corporate Tax Act), expres sed as a decimal. The Buyer will provide proof to the Seller that any tax gross-up due under th is claus e is in fact ad ditional tax to be borne by the Buyer caused by the Seller's payments, if any, net of any (current and future) tax benefits available to the Buyer. The Buyer will take all reasonable actions to avoid or mitigate such tax impact and will grant the Seller and his designees the unrestricted opportunity to appeal such assessments on his behalf and fully cooperate in this matter with the Seller and his designees. 12 Indemnities 12.1 Seller’s indemnity (a) Subject to Completion hav ing occurred, th e Seller shall indemnify the Buyer against any Loss suffered or incurred by the Buy er as a res ult of (i) any breach of any warranty of the Seller g iven in Sched ule 1 under Clause 2(a), 2(b), 2(c), 2(d)(i), 2(e) , 2(f) and 2(k); and/o r (ii) any claims that might be issued to the Company under the license agreement entered into between the Company, th e Seller, Mr. Gary Mack ney, Mr. Petrus Gerb aulet and Legal Neumann GmbH; an d/or (iii) any claims from any employee or con tractor, freelancer or cons ultant of the Company and/or any of the Company's Affiliates (e.g. salary claims, overtime, compensatio n for unused vacation) as well as related claims from tax or social insurance agencies (e.g. payroll tax payments and social ins urance contributions) and/or; (iv) any non-compliance of the Company and /or any of the Company's Affiliates with p rovisions under the respective nation al trade law. (b) Clauses 11.4(a)(ii) and (b) as well as clauses 11.5(a)(i) – (iii) app ly to Claims under this clau se 12. However, such indemnification is not excluded or limited due to the fact that any claim is based on a fact, matter, event or circumstance which was fully and fairly disclosed in the Dis clos ures or was within the actual knowledge of the Buyer. (c) If an event, a fact, a circums tance or a situation cons titutes a breach of a Seller's Warran ty and simultaneously entitles the Buyer to be indemnified pursuant to this clause 12, the Buyer shall no t be entitled to multiple compensation for the same Los s.
page 30 13 Buyer’s Warranties 13.1 Buyer’s Warranties The Buyer represents and warrants to the Seller as at the date of this document and as at Completion that: (a) it has full power and authority to enter into this document and has taken all neces sary action to authorise the execution, delivery and performance of this document in accordance with its terms; (b) this document constitutes a legally valid and binding obligation of the Buyer enforceable in accordance with its terms; (c) the execution, delivery and performance of this document by the Buyer will not violate any prov ision of: (i) any law or regulation or any order or decree of any Governmental Agency of Austria or any state or territory or relevant jurisdiction in which it is incorpo rated; (ii) the cons titution of the Buyer or equivalen t cons tituent documents; or (iii) any Encumbrance or other document which is bindin g on the Buyer; (d) no order has been made, or applicatio n filed, or res olution passed or a no tice of intention given to pass a resolution for the winding up of the Buyer and there are no circums tances justifying commencement of any such action; (e) no petition or other process for winding-up or dissolution has been p resented o r th reatened in writin g against the Buyer and, so far as the Buyer is aware, th ere are no circumstances jus tifying such a p etition or other process; (f) no receiver, receiver and manager, liqu idator, admin istrator, controller, trustee o r similar official has been appointed over all or any part of the assets or undert aking of th e Buyer and, so far as the Buyer is aware, there are no circums tances justifying such an appointment; (g) the Buyer has not entered into or taken steps or proposed to enter into any arrangement or composition or compromise with all or a cl ass of its creditors; (h) the Buyer has not: (i) go ne, and is not prop osed to go, into liquidation; (ii) pass ed a winding-up res olution o r commenced steps for winding-up or dissolution; o r (i) no writ of execution has iss ued against the Buyer or any of its assets and, so far as the Buyer is aware, there are no circumstances justifying such a writ; and (j) the Buyer is able to pay its debts as and when they fall due. The Buyer is not taken under applicab le laws to be unable to pay its debts
page 31 and has not stopped o r sus pended, or threatened to stop or suspend, payment of all or a clas s of its debts. 13.2 Reliance Each of the s tatements in clause 13.1 is to be treated as a separate representation and warranty and the in terpretation of any statement made must not be res tricted by reference to or inference from any other s tatement. 13.3 LRS GmbH The Buyer represents and warrants to the Seller the payment of the amount p rovided for in the Accounts (and con sidered in th e Net Working Capital Amount) for the dissolution of the agreement between the Company and LRS GmbH (FN 194030p) by the Company. 14 Action after Completion 14.1 Business Records The Buy er must ensure that the Company does not dis pose of or destroy any of the Bus ines s Records within the period o f 7 years follo wing the Completion Date, unless it has g iven the Seller not les s than one month’s written notice of its intention to do so, and the Seller has no t notified the Buyer within one month of receipt of that notice that it wishes to retain th e Business Records the subject of the notice. 14.2 Continuing co-o peration (a) The Seller and the Bu yer acknowledge and agree that both parties must co- operate with each other in good faith following Completion t o facilitate an orderly and thorough trans ition from the Seller to the Buyer carrying on the Business; (b) Other than to identify person ally the credentials and/o r career history of th e Seller and each of the General Partners and the Limited Partners of the Seller, after Completion the Seller may not use, or authorise the use of: (i) any company or entity name, business name or trade name incorporating or resemblin g the “Neumann” name or likel y to be mistaken for the “Neumann” name or confused with it; or (ii) any logo, symbol or trade mark which is substantially identical with or deceptively similar to the Trade Marks. 15 Tax Indemnity (a) The Seller shall indemnify and keep indemnified the Indemnified Entities agains t: (i) all Liabilities for Tax which an Indemnified Entity may suffer, incur or be liable fo r as a result of or arising out of (and whether directly or indirectly) any Tax matter wh ich is not provided for (to like manner and
page 3 2 extent) in the Accounts and which has arisen before the Completion Date or arises after the Co mpletion Date in respect of any period (or part thereof) before the Completion Date; (ii) all Liabilities for Tax which an Indemnified Entity suffers, incurs o r is liable for, by reason of any matter or thing being other than as represented or warran ted in the Warranties; and (iii) all costs and expens es incurred or payable by an Indemnified Entity in connection with any Liability for Tax referred to in this clause 15, including all legal proceedings relating thereto, an y audit or inves tigation made by a Governmen tal Ag ency in relation to Tax, and the s ettlement o f, and steps taken to mitigate or reso lve any process which could lead to, a Liability for Tax, whether or not it transpires that it does. (b) Subject to clause 16(b), the Seller is not liable for any Claim under the Tax Indemnity to the extent that the Claim is made after the expiry of three months after the expiration of the statutory period within which th e relevant Governm ental Agency may s eek to recover the Tax to which the Claim relates . (c) Ob ligations to pay Taxes resulting from determinations during tax audits co nducted at the Company or the Company's Affiliates in respect of periods prior to the Complet ion Date shall be set off against effective Tax redu ctions relating to those determinations, which will be effective in periods after the Comp letion Date. (d) Claims u nder the Tax Ind emnity are time-barred and shall forfeit, if the Buyer has not notified the Seller in writing of any such claim within three months after the date on which the obligation to pay Taxes was finally determined (materiell rechtskräftig) by the competent au thority (i.e. the competent authority's decis ion is no longer contestable, neither by virtue of an ordinary or extraordinary appeal or otherwise). clauses 11.5(a)(ii) and (iii) apply to Claims under this clause 15 as well. (e) The Seller will pay any amount to the Buyer under this clause 15 in accordance with clause 11.8. 16 Tax Claims (a) If the Buy er or the Company or any of the Company's Affiliates receive any written communication or notice from any Governmental Agency, including a communication or notification of any enquiry (including any request for information, notice to produce documen ts, audit, review or request for a meeting) (Tax Claim) in relatio n to the Company or any of the Company's Affiliates whi ch may directly or indirectly lead to a circums tance as a result of which the Buyer would, or would be lik ely, to bring a Claim for a breach of a Tax Warranty or under the Tax Indemn ity, then the Buyer must promptly notify the Seller in writing and provide the Seller with all information relev ant to the Tax Claim.
pag e 33 (b) If the Tax Claim referred to in clause 16(a) is received by the Buyer or the Company or any of the Company's Affiliates within the time period referred to in clause 15(b), th en the limitation in that clause 15(b) will not apply to the Tax Claim and the Tax Claim will be governed by this claus e 16. (c) Subject to the Tax Claim not being a Join t Tax Claim, the Seller will be the Controlling Party in relation to the relevant Tax Claim and , to the extent the Seller considers app ropriate, will conduct, defend and settle any Tax Claim against the Company and the Buyer (Tax Proceedings) and the Buyer will, or will procure that the Company, provides all reasonable co-operation in relation to the co nduct, defence or s ettlement o f any such Tax Claim or Tax Proceedings. As Controlling Party th e Seller must in relation to the Tax Claim or Tax Proceed ings: (i) act in good faith at all times; (ii) liais e with the Buyer in relation to the Tax Claim or Tax Proceedings ; (iii) make available to the Buyer as soo n as pos sible, but in any event within 5 Business Days of receipt by the Seller, a copy of any notice, correspondence or other document relating to the Tax Claim or Tax Proceedings; (iv) not take an y action which it is objectively unreasonable to take in all the circumstances; (v) bear all costs in relation to the conduct, defence or settlement of the Tax Claim or Tax Proceedings (including th e costs of the Buyer in providing any co-operation); (vi) pay to the Buy er or the Company or the respective Affiliate of th e Company so much of any Tax as is required by the relevan t Governmental Agency to b e paid in relation to the conduct, defence or settlement of any su ch Tax Claim or Tax Proceedings (such payment being made in accordance with clause 11.8 ); and (vii) provide the Buyer with an indemnity in a form agreed to by the Buyer (such agreement not being unreasonably with held o r delayed) against all Loss which may result from any action taken at the request of the Seller by th e Buyer or the Company or in connection with the con duct o f the Tax Claim or Tax Proceedings. (d) If a Tax Claim is a Joint Tax Claim, then the following principles will apply: (i) The Seller and the Buyer acting reasonably must agree that eith er the Seller and the Buyer will jointly control the conduct, defence or settlement of the Joint Tax Claim, or that one party will be th e Controlling Party. (ii) Where the Seller and the Buyer are in joint control of the condu ct, defence o r settlement of the Joint Tax Claim then the Seller and the Buyer must agree to the appropriate manner in which to cond uct, d efend or settle the Joint Tax Claim and no other action may be taken
page 34 without such agreement. The agreement of the Seller and the Buyer must not be un reas onably withheld or delayed. (iii) Where one party is the Controlling Party in respect of the Jo int Tax Claim, the other party must provide all reasonable co-operation in relation to the condu ct, defence or settlement of the Joint Tax Claim. (iv) If: (A) the agreement required by clause 16(d)(i) cannot be reached between the Seller and the Buyer within a reasonable time, the Seller and the Buyer will jointly control the co nduct, defence or s ettlement o f the Joint Tax Claim; (B) the agreement required by clause 16(d)(ii ) cannot be reached between the Seller and the Buy er within a reasonable time, the matter in dispute is to be determined by a Tax Reviewer. In so acting, the Tax Reviewer will act as an expert and not as an arbitrator, and his or her decision will be final and binding on the parties with th e relevant conduct, defence or settlement of the J oint Tax Claim being conducted acco rdin gly. The Seller and the Buyer will each pay one half of the Tax Reviewer’s costs and expenses in respect of any such reference. (v) The Controlling Party must, in relation to the conduct, defence or settlement of the Joint Tax Claim: (A) act in go od faith at all t imes; (B) liaise with th e other party (being the Seller or the Buyer as the case may be) in relation to the conduct, defence or settlement of the Joint Tax Claim; (C) make available to the other party as s oon as possible, but in any event within 5 Bus ines s Days of receipt by the Controlling Party, a copy of any notice, correspondence or other document relating to the conduct, defen ce or s ettlement of the Joint Tax Claim; (D) not take any action which it is objectively unreasonable to take in all the circu mstances; and (E) commence, pursue and conduct the defence or settlement of the Joint Tax Claim with all due skill, care and attention and without regard to the quantum of liability (if any) that each party would b ear if the Joint Tax Claim was ultimately no t successful. (vi) The Seller must pay to the Buyer or the Company s o much of any Tax as is required by the relevant Governmental Agency to be paid in relation to the conduct, defence or settlement of any such Joint Tax Claim (such payment being made in accordance with claus e 11.8); and (vii) Where the Seller is the Controlling Party in relation to the Joint Tax Claim, it must provide the Buyer with an indemnity in a form ag reed to
page 35 by the Buyer (such agreement not b eing u nreas onably withheld or delayed) against all Loss which may result from any action taken at the request of the Seller by the Buyer or the Company or any of the Company's Affiliates or in con nection with the conduct of the Joint Tax Claim. 17 Tax Records 17.1 Retention of Tax Records (a) The Bu yer ag rees that after Completion it will hold for s afe keeping and store any Company Tax Records that relate to a period before Completion (or p art thereof): (i) for the period required under Tax Law; and (ii) otherwise in conformity with the Buyer’s usual records retention policy. (b) The Seller agrees that after Completion it will hold for safe keeping and store any Seller’s Tax Records: (i) for the period required under the Tax Law; and (ii) oth erwise in conformity with the Seller’s usual records retention policy . 17.2 Acces s to Tax Records From Completion : (a) the Buyer will be entitled at the Buyer’s cost to have access at all reas onable times to the Seller’s Tax Records to the extent that such access is reaso nably necess ary to: (i) support the Tax position of the Company; or (ii) in res pect of a J oint Tax Claim in respect of which the Buyer is the Controlling Party or is in joint control with the Seller as contemplated in clause 1 6. The Seller will provide s uch access to the Seller’s Tax Records within a reasonable time of the Buyer making its requ est for access and will otherwis e provide such reas onable assistance as the Buy er requires in respect of such access. However, the Buyer is not entitled to access to any such records that the Seller believes (acting reasonably) may prejudice or adversely affect any Claim th e Seller may hav e against the Buyer or which are the subject of client leg al privileg e or similar administrative concession and in circumstances where the granting of access may waive that privilege or concession; and (b ) the Seller will be entitled at the Seller’s cost to have access at all reasonable times to the pre-Completion Company Tax Records to the extent that they relate to: (i) any Tax Return to be prepared by the Seller or any of its g eneral partners or limited partn ers; or
page 36 (ii) the conduct of any Tax Claim or Joint Tax Claim in respect of which the Seller is the Controlling Party or the Seller is in join t control with the Buyer as contemplated in clause 16. The Buyer will provide su ch access to the Company Tax Records within a reasonable time of the Seller making a request for access and will otherwise provide such reas onable assistance as the Seller requires in respect of such access. However, the Seller is not entitled to acces s to any records which t he Buyer believes (acting reasonably) are the subject of client legal privilege or similar administrative con cession and in circu mstances where the granting of access may waiv e that privilege or con cession. 18 Tax Returns 18.1 Co-operation regarding Tax Returns The Seller mu st provide all reasonab le co -operation and assistance requested by the Buyer in relation to the preparation of any income Tax Return for the Company or the Compan y's Affiliates that relates to a Tax period (or part thereof) before th e Co mpletion Date (including, for the avoidance of doubt, any income Tax Return that relates to a Tax period commencing before the Completion Date and ending after the Completion Date). 1 9 Costs 19.1 Legal costs Each p arty must bear its own legal and other costs and expenses in connection with the preparation, execution an d completion of this document and of o ther related documentation. The Buyer shall pay the cost of the notary and all other expenses in co nnection with the execution of this agreement and all documents under this agreement. 19.2 Redemption or acquisition o f the Co mpany's debt Notwiths tanding clause 19.1, th e Buyer shall bear any cos ts resulting from Stamp Duties for the redemptio n or acquisition of the Company's bank debt. 20 Notices 20.1 Gen eral A notice, demand, certification, process or other communication relating to this document mus t be in wri ting in Eng lish and may be given by an agent of the sender. 2 0.2 How to give a communication In addition to any other lawful means, a communication may be given by being: (a) pers onally delivered;
page 37 (b) left at the party’s current delivery address for notices; (c) sen t to the party’s current po stal address for notices by pre-paid ordinary mail or, if the address is outside of Austria, by pre-paid airmail; (d) sent by fax to the p arty’s current fax numb er fo r notices; or (e) emailed to the email address last notified by the address ee. 20.3 Particulars for delivery of notices (a) The particulars for delivery of no tices are initially: Buyer: Deliv ery ad dress: CTPartners Executive Search Inc., 28601 Chagrin Blvd, Suite 600, Cleveland, OH 4412 2, Un ited States of America Postal address: Same as delivery address Fax: 216-682-3202 Email:
[email protected] Attention: William J. Keneally with a copy to: Delivery address: Wolf Theiss Rechtsanwälte GmbH & Co KG, 1010 Vienn a, Schubertring 6, Austria Pos tal address: Same as delivery address Fax: +43 1 51510 665100 Email: hors t.ebhardt@wolfth eiss .com Attention: Dr. Hors t Ebhardt Seller: Delivery address: c/o Frotz Ried l Rechtsanwälte, Schottengasse 10/12, 1010 Vienna, Austria Postal address : Same as deliv ery ad dress Fax: +43 1 89085 90 88 Email:
[email protected] Attention: Dr. Stephan Frotz (b) Each party may change it s particulars fo r delivery of n otices by n otice to each other party. 20.4 Communications by post Subject to clause 20.7, a communication is given if posted:
page 38 (a) within Austria to an Austrian postal address, 3 Business Days after posting; or (b) outside of Austria to an Austrian postal address or within Au stria to an addres s outside of Austria,10 Business Days after posting . 20.5 Communications by fax Subject to clause 20.7, a communication is given if sent by fax, wh en the sender’s fax machine produ ces a report that the fax was sent in full to the addres see. That report is conclusive evidence that the ad dressee received the fax in full at th e time indicated on that report. 20.6 Communications by email Subject to clause 20.7, if a communication is emailed, a delivery confirmation repo rt received by the sender, which record s the time that the email was delivered to the addressee’s last notified email address is prima facie evidence of its receipt by the address ee, unless the sender receives a delivery failure notification, indicating th at the electronic mail has not been delivered to the addressee. 20.7 After hours communications If a communication is given : (a) after 5.00 pm in the place of receipt; or (b) on a day which is a Saturday, Sunday or bank or public holiday in the place of receipt, it is taken as hav ing been giv en at 9.00 am on the next day which is not a Saturday, Sunday or bank o r public h oliday in that place. 20.8 Process service Any process or other document relating to litigation, administrative or arbitral proceedings relating to this document may be served by any method contemplated by this clause 20 or in accordance with any appl icable law. 20.9 Change of address Any party may change its addres s for receipt of Notices at any time by giving written notice of such change to each other party. 21 Confidentiality 21.1 Definitions In this clause 21: Confidential Information means all information, in whatev er fo rm, relating to: (a) this document; (b) the neg otiations relating to this document; and (c) any expert determinatio n initiated under this document,
page 39 other than information that: (d) at the date of this document, was generally and publicly available, or sub sequently becomes so av ailable other than by breach of any duty or obligation; (e) at the time it was dis clos ed to a party, was in the possession of that party lawfully and without breach of any duty or obligation; or (f) has been dis clos ed to a party and was not generally and publicly available at that date of dis clos ure, but subs equently, through no act or omission of that party (or any person to whom it disclosed that info rmatio n), becomes available from another source and is not subject to any duty or obligation as to confidence. 21.2 Confidentiality obligation Subject to clau se 21.3, each party must treat as confidential, and keep confiden tial, an y Confidential Information provided to it by, or on behalf of, any other party and must: (a) not copy, duplicate or otherwise reproduce any documents cont aining Confidential Informatio n, without the prior consent of the other party, excep t as is necessary in fulfilling its oblig ations under this documen t; (b) use its best endeavours to protect the confidentiality of the Confidential Information; and (c) comply with all reasonable in structions given to it from time to time by the oth er party regarding the protection of that other party’s Confidential Information. 21.3 Permitted disclosures No party may disclose Confidential Information provided to it by any oth er party other than: (a) su bject to claus e 21.4, to its directors , officers, employees (on a need to know bas is), leg al advisers, financial advisers , auditors, financiers and to the legal advisers of its finan cial advisers or financiers; (b) subject to clause 21 .4, purs uant to any press release or other announcement made on or about the date of this document or Completion by the Buyer or the Seller or any Affiliate of either of them (in each case, provided that the form and content of that release or other announcement is agreed in writing by the Buy er and the Seller, such consent not to be unreasonably withheld or delayed); and (c) to the extent: (i) requ ired by: (A) Law; (B) the rules of any stock exch ange; or (C) any applicable accounting standards ; or
page 40 (ii) ordered by any court, having, to the extent practicable, consulted with the other party with a view to agreeing the form, content, timing and manner of disclosure, and to the maxi mum extent possible claimed any rights of confidentiality that it might be afforded under such laws, rules, standard s or court orders. 21.4 Disclosure to other pers ons If a party discloses Confidential Information it must u se reasonable en deavours to ensure that no person to whom it disclosed that Confidentiality Information discloses it to any other person. 2 1.5 Destruction or return of Confidential Information Each party must destroy or return all Confidential Information disclosed to it by any other party (including any Confidential Information which it disclosed to an y other person) if required to do so by the other party. 21 .6 Survival To the extent permitted by law, this clause 21 s urvives for a period of 5 years after the end of this document or such other period as may be necessary to comply with law. 22 General 22 .1 Error, frustration of contract or shortfall exceeding fifty percent Subject to clause 2.5, the parties may not cancel this document or withdraw from this document and avoid or ad just this document for error (Irrtum), frustration of contract (Wegfall der Geschäftsgrundlage) or shortfall exceedin g fifty percent (Verkürzun g über die Hälfte). 22.2 Amendment This document may only be varied or replaced by a document executed by the parties. 22.3 Waiver and exercise of rights (a) A single or partial exercis e or waiver by a party of a right relating to this document does not prevent any other exercise of that right or the exercis e of any other right. (b) A party is not liable for any loss, cost or expense of any oth er party caused or contributed to b y the waiver, exercise, attempted exercise, failure to exercis e or delay in the exercis e of a rig ht. (c) A right relating to this document may only be waived in writing s igned by the party or parties waiving the right. 22.4 Assignment (a) The Seller may not assign any right u nder this document without the prior written cons ent of the Buyer.
page 41 (b) An y purpo rted dealing in breach of this clause is of no effect. (c) The Buyer may, at its sole discretio n, delegate or assign any or all of its rights, oblig ations and responsib ilities u nder this document to any of its Affiliates. ln s uch event the pro visions of this docu ment shall co ntinue to govern the relationship between such Affiliate and the Seller, provided, however, that the Buyer shall continue to be jointly and severally liable for any and all obligation s ass umed by the Affiliate under this docu ment. 22.5 Consents Except as expressly stated otherwise in this d ocument, a party may conditionally or uncondition ally give or withhold any con sent to be given under this document and is not obliged to give its reasons for doing so. 2 2.6 Further assurances Each party ag rees , at its own expense, on th e requ est o f any other party, to do everything reasonably necessary for the purposes of or to give effect to this document and the transactions co ntemplated by it (including th e executio n of documents) and to use all reasonable endeavours to cause relevant third parties to do likewise. 22.7 Rights cumulative Except as expressly stated otherwise in this documen t, the rights of a p arty under this document are cumulative and are in addition to any other rights of that party. 22.8 Con tinuing o bligations All rights and obligations of a party which have not been exercised or performed at Completion are not extinguished or affected by Completion, unless those rights or obligations are s pecifically waived or releas ed in writing by a document signed by all parties. 22 .9 Counterparts This docu ment may consis t of a numb er of counterparts and, if so, the counterparts taken together constitute one d ocument. 22.10 Governing law and jurisdiction (a) Thi s docu ment and the transactions contemp lated by this document are governed by and are to be construed in accordance with the laws ap plicable in Austria excluding any Conflict of Laws Rules of Private International Law and the UN Convention on t he International Sale of Goods. (b) Each party irrevocably and unconditionally submits to the exclusive jurisdiction of the competent cou rts exercising jurisdiction in the firs t district of Vienna, Austria, and an y courts which have jurisdiction to hear appeals from any of those co urts and waives any rig ht to object to any proceed ings being brought in those courts.
page 42 22.11 Entire agreement (a) This documen t cons titutes the entire agreement between th e parties as to the subject matter of this d ocument. (b) All previous negotiations, understandings, representations, warranties, memoran da or commitments concernin g the subject matter of this document are merged in and supersed ed by this document are of no effect. No party is liable to any other party in respect of those matters. (c) No oral explanation or information provided by any p arty to another: (i) affects the meaning or interpretation of this do cument; o r (ii) constitutes any collateral agreement, warranty or understanding between any of the parties. 22.1 2 Construction Unless express ed to the contrary, in this do cument: (a) words in the s ingular include the plural and vice versa; (b) any gender includes the other genders ; (c) if a word or phrase is defined, its other grammatical forms have corresponding meanings; (d) includes means includes without limitation; (e) no ru le of construction will apply to the disadvantage of a party because that party drafted, put forward or would benefit from any term; (f) a reference to: (i) a p erson includes a partnership, joint venture, unincorporated association, corp oration, entity an d a Governmental Agency ; (ii) a person includes the person’s legal personal representatives, successors, assigns and person s substituted by novation; (iii) any legislation includes subordinate legislation under it and includes that legislation and subordinate legislation as modified or replaced; (iv) a right includes a benefit, remedy, discretion or power; (v) time is to local time in Vienna; (v i) EUR or Euro is a reference to Eu ro, the lawful currency of the member states of the European Un ion that adopt the single currency in accordance with the EC Treaty; (vii) writing includes: (A) any mode of representing or reproducing words in tangible and permanently visible form, including fax transmission; and
page 43 (B) words created or stored in any electronic medium an d retrievable in p erceivable form. (viii) this document includes all schedu les and annexures to it; and (ix) a clause, schedule or annexure is a reference to a clause, schedule or annexure, as the case may b e, of this document; and (g) if the date on or by which an y act must be done under this document is no t a Business Day , the act must be done on or by the next Business Day. 22.13 Headings Headings do n ot affect the interpretatio n of this document.
page 44 Schedule 1 Seller’s Warranties 1 Authority (a) The Seller has full power and aut hority to enter into this docu ment and has taken all necessary action to authorise the execution, delivery and performance of this document in accordance with its terms. (b) All necessary action has been taken by the Seller to au thorise the execution an d performance of this document under the articles of association of the Seller. (c) This document constitutes a legally valid an d binding obligation of the Seller enforceabl e in accordance with its terms. (d) The execution, delivery and performance of this docu ment by the Seller will not violate any provision of: (i) any law or regulation or any order or decree of any Governmental Agency of Austria or any state or territory or relevant jurisdiction in which it is in corporated; (ii) the articles of association of the Seller or the Compan y or equivalent constituent documents; and (iii) the articles of association of NP, NL D, NL HK, NP doo, NP k ft or NP sro or equivalent co nstituent documents; and (iv) any Encumbrance or other document which is b inding on the Seller and does not and will not result in the creation or imposition of an y Encumbrance or restriction of any nature over any of its assets or th e acceleration of the date of payment of any obligation existing under any Encumbrance or other document which is binding on the Seller. (e) No pers on is entitled to recover from the Seller or the Company or the Comp any's Affiliates any brokerage, fee or commission in rel ation to this document or any transaction contemplated by it. 2 Share capital and corporate structure (a) The Seller is the legal and beneficial owner of the Share which: (i) constit ute all the issued share capital of the Company; (ii) are and will, on Comp letion, be free of all Encumbrances and oth er third party interests or righ ts; and (iii) are fully paid withou t any money owing in respect of them.
page 45 (b) Th ere are no o ptions, agreements, or understandings (whether exercisable now or in the fu ture and whether contingent or otherwise) which entitle or may entitle any p erson to call for the purchas e or trans fer of th e Share or any other share or security (deb t or equity) of th e Co mpany. (c) Th e Co mpany is the legal and beneficial owner of (i) the share in NP in the amount of EUR 7 0.000 (registered capital) which constitute all the issued share capital of NP; (ii) the share in NP s ro in the amount of CZK 1.300.000 (approximately EUR 4 7.000) which constitute 65 % of th e iss ued sh are capital of NP sro; (iii) the share in NP kft in the amount of HUF 2,100,000 (approximately EUR 6,688) which cons titute 70 % of the issued share capital of NP kft; (iv) the share in NP HK in the amount of HK$ 10 .000 which constitute all the issued share capital of NL HK; (v) the share in NL D in the amount of EUR 300.000 (regis tered capital) which cons titute all the is sued s hare capital of NL D; (vi) the share in NP doo in the amount o f HRK 220.00 0 (approximately EUR 29.000) (registered capital) which constitute all the iss ued share capital of NP doo; (vii) the share in NP Spzoo in the amount of PLN 100,000 (approximately Euro 25,000) (registered capital) which constitute all the issu ed share capital of NP Spzoo; and each of the s hares mentioned above under (i) through (vi) (viii) are and will, on Completion, be free of all Encumbrances and other third party interests or rights ; and (ix ) are fully paid without any money owing in respect of them; and (x) there are no options, agreements, or understandings (whether exercis able now or in the future and whether contingent or otherwise) which entitle or may entitle an y person to call for the p urchas e or transfer of the shares mentioned above under (i) and (iv) throug h (vi) or any other s hare or security (debt or equity ) of the respective comp any. (d) The Company and the Company's Affiliates : (i) are duly established and valid ly existing u nder the respective laws; (ii) have fu ll power to own the Assets and the Bus ines s and to carry on the Business as it is currently conducted; (iii) are not regis tered and are no t required to be registered in any place outside their place of incorporation; (iv ) are duly inco rporated u nder the laws of their reg istered seat.
page 46 (e) The Company and NL D, NL HK, NP, NP doo, NP k ft, NP sro and NP Spzoo do not have any s ubsidiaries or any permanent establishment other than (i) the Company's registered branch office in Bulgaria (11, Slav yanska Str. o ffice 5, Sredets District, 1000 Sofia, registration nu mber 202899808 , (NP BG); and (ii) NP's registered branch office in Austria, Hubert-Sattler-Gass e 13, 502 0 Salzb urg, registration numb er FN 220412 k; and (iii) NP's registered representative office in Romania, 1-3 Remus St. 4th floor, room E4.10, Bu charest, s ector 3, regis tration number 1744 /24.12.2013, (NP RO). (f) NP Spzoo (i) h as sus pended its business activity;; (ii) has terminated (with the exception of the contract with (i) Rödl & Partner, Roed el Outs ourcing sp .z o.o., Warszawa, Po land, regarding book keeping and advisory services, according to which NP Spzo o is obliged to make a monthly payment in the amount of approximately EUR 370,00, and (ii) Regus Zoliborz Sp.z o.o. regarding the lease of office premises in Warsaw, North Gate, ul. Bonifraterska 17, 00-203 Warszawa, Poland, according to which NP Spzoo is obliged t o pay a monthly rental fee in the amount of approximately EUR 260,00) all its contracts with other third parties in particular but not limited to its employees, customers or other contracting parties; (iii) has not conducted any business in the calendar year 2014 and is not obliged to perform any business, commitment, obligation or any other kind of action due to contractual obligations or statutory requirements other than those mentioned abov e under (ii). (g) The Company and the Company's Affiliates are not: (i) a member of any joint venture, (silent) partnership, syndicate agreement or unincorp orated ass ociati on (inclu ding a recog nised trade ass ociation); or (ii) the holder of shares or other securities in any body corporate (wherever incorporated). (h) The Seller has supplied accurate and current copies of the articles of association of the Company and the Company's Affiliates to the Buyer and conducted its bus ines s affairs in accordance with such articles o f associations. (i) No creditor of the Company has demanded or was entitled to demand settlement or secu rity for its claims in course of past capital measures conducted in the Company. (j) The shareholder(s) of the Company and the Company's Affiliates (i) have pass ed all necessary corporate law resolutions; and
page 47 (ii) have no t pas sed any reso lution outside the ordinary cours e of business that could have an advers e effect on the Company and the Company's Affiliates on or after the Completion Date. (k) The Company and the Company's Affiliates are at Completion releas ed from any and all risks and/o r conting ent liab ilities with respect to (i) any s ale of shares, participations or other interests held by the Compan y and/or the Company 's Affiliates in other entities; and/or (ii) any reorganisation to which the Company an d/or any of the Company's Affiliates was party; and/or (iii) the liquidation of entities i n which the Company and/or the Company's Affiliates held shares, particip ations or other in terests (with th e exceptio n of juR quest GmbH). 3 Solvency (a) No order has been made, or application filed, or resolution passed or a notice of intention gi ven to pass a res olution for the winding up of the Seller or the Company or the Company's Affiliates and there are no circumstances justifying commencement of any such action. (b) No receiver, receiver and manager, controller, trustee, administrator or similar o fficial has b een appo inted over, or has possession or control of, all or any part of the assets or undertaki ng of the Seller or the Comp any or the Company's Affiliates nor have the Seller or the Company or the Company's Affiliates entered into any arrangement o r composition or compro mise with all or any class of its creditors. (c) Each of the Seller, the Company and the Company's Affiliates are able to pay their debts as and when they fall due (except for the EUR 800,000 to be paid to Erste Bank der oesterreichischen Sparkassen AG; see Debt Redemption Amoun t). 4 Accuracy of information (a) All information and do cuments provided by or on behalf of the Seller to the Buyer or its advisors are accurate and for the purpose of a due diligence review of a pros pective buyer of the Sh are complete and not mis leading whether b y inclusion or omis sion. (b) The information in the annexures and schedul es is accurate and complete and not mis leading whether b y inclusion or omission. (c) The Seller has disclosed in writing all material information that a prospective buyer of the Share (having regard to the nature of the Busin ess and the Assets) would reasonably require for the purpose of making a decision whether to acquire the Business, Assets and Liabilities.
page 48 (d) All information which wo uld be material to a buyer of the Share (having regard to the nature of the Business and th e Assets and ap plying th e standard of care and diligence of a prudent buyer) has been fully and fairly disclosed in the Disclosures to the Buyer. 5 Accounts (a) The Accounts – applying the standard of care and diligence of a prudent manager –: (i) comp ly with the Accounting Standards; (ii) give a true and fair view of the financial p erfo rmance of the Company and the Company's Affiliates for the year ended on the Accounts Date; (iii) give a true and fair view of the financial p osition of th e Co mpany and the Co mpany's Affiliates, Assets and Liabilities as at the Accoun ts Date; (iv) have been prepared in a manner which is consis tent with the standards, requirements and practices consistently applied b y the Company and the Company's Affiliates; (v) are true and comp lete and not misleading in any particular; an d (vi) are not affected by any unus ual or non-recurring item. (b) The accounting records on wh ich the Accounts were prepared: (i) – ap plying th e standard of care and d iligence of a prudent manager – correctly record and explain the trans actions and financi al p osition of th e Co mpany and the Co mpany's Affiliates; (i i) h ave been kept so th at the Accounts can be conveniently and properly audited or reviewed; and (iii) are in th e possessi on or control of the Company or the respective Company's Affiliate. (c) Except to the extent o f any provision for doubtful debts in the Accounts, all debts owing to and amounts due to the Company or the Company's Affiliates are collectable within the terms of payment gen erally used in the respective industry for their full amo unts and are not subject to any counterclaim or set off. (d) The Compan y and the Company 's Affiliates will not at Completion owe to, or be owed by, th e Seller or any o f the General Partners or Limited Partn ers of the Seller any money. (e) There are no guarantees or other securities in fo rce among the Compan y and the Company 's Affiliates. (f) Th e Company and/or the Co mpany's Affiliates have not concluded a profit distribu tion agreement (with the exception of the "Gruppenbesteuerungs vereinbarung" between the Company and NP).
page 49 (g) The Company and/or the Company's Affiliates have – applying the standard of care and diligence of a prudent manager – b uilt sufficient prov isions/accruals for any guarantee given or any other obligatio n under any Contract. 6 Position since Accounts Date (a) No circumstance outs ide the ordinary course of business has arisen, nor has any information o ut of the o rdin ary become available since the Accounts Date which: (i) if the circumstance o r in formation had arisen or become available when the Accounts were made o ut, would have affected the determination of an amount or particular in the Accounts; or (ii) has materially affected, or may materially affect the operations of the Company or any of the Company's Affiliates, the results of those operations or the state of affairs of the Company or any of th e Company's Affiliates in financial years after the financial year en ded on the Accounts Date. (b) Since the Accou nts Date: (i) the Bus ines s has b een carried on in the course of its ordinary business an d in a proper and efficient manner; (ii) there has b een no Material Adverse Effect in the financial or trading position or in the prospects of t he Compan y or any of the Company's Affiliates; (iii) the Company or any of the Company's Affiliates has not entered into any commitment or arrangement other than those which a business of its kind would usu ally enter into in the course of its ordinary business; (iv) the Company or any of the Company's Affiliates has not engaged any new employee or changed the terms of employment (including remuneration) of any employees engaged in the Business as at the Accoun ts Dat e; and (v) except for the transaction s contemplated by th is document, the Company and the Company's Affiliates have used their best en deavours to ensure that the business organisatio n of the Business has been maintained intact and p reserved the goodwill of its suppliers, employees , customers and others hav ing co mmercial relation s with the Business . (c) The Trad e Receivables (as set out in schedule 7) is a complete list of the Company’s and th e Company's Affiliates' receivables as 30 September 2014.
page 50 7 Assets (a) The Ass ets : (i) are at the Co mpany's or the Company's Affiliates' disposal; and (ii) together with the Property comprise all the as sets used in the Business and necessary for the co nduct of th e Business. (b) The use of the Assets (and the Assets themselves ) do not contravene any laws or other req uirement bin ding on the Company or any of the Company's Affiliates . 8 Intellectual Property (a) The Company or any of the Company's Affiliates: (i) is the legal and beneficial owner of all of the Company’s IP; (ii) has the right to assign to the Buyer all o f the Company’s IP; and (iii) has the lawful right to us e th e Co mpany’s IP. (b) The Company’s IP is free from all Encumbrances. (c) Apart from the license agreements mentio ned in schedule 9 neither the Seller nor the Comp any or any of the Company's Affiliates has granted any rights in the Company’s IP to third parties . (d) The Company is the registered (if applicable) owner of the Trademarks, the Bus ines s Names and the Do main Names disclosed in Part A, Part B and Part C1 of schedule 2 and Part A, Part B and Part C1 and C2 of schedule 2 sets forth a true, correct and complete list of all registered Company's IP. (e) The Company is the non-regis tered owner of, and has valid legal title to, the Trademarks d isclosed in Part C2 and C3 o f schedule 2 , which sets forth a true, correct an d complete list of all non-registered Trademarks of the Company and of the Company's Affiliates. (f) The Company's IP include all of th e assets and rights necessary to enable the Company and the Company's Affiliates to conduct their business in the manner in which such business has been and is being conducted. Neither the Seller no r th e Company or any of the Company's Affiliates hav e entered into any agreements and licences under which the Seller or the Company or any of the Company's Affiliates has the right to us e any third party Intellectual Prop erty Rights. (g) Neither the Seller nor the Company or any of the Comp any's Affiliates have entered in to any agreement or understanding which restricts the disclosure or use by the Company or any of the Company's Affiliates of any of the Co mpany’s IP. (h) There are no rights of any third party which may prejudice the validity or enforceability of any of the Company’s IP.
p age 51 (i) No Claim is p endin g or threatened which involv es any of the Intellectual Property Righ ts an d the Seller has no knowledge of any basis for any s uch Claim. To the best knowledge of the Seller, no other person is infrin ging, mis appropriating, conflicting or making unlawfu l use of the Company's IP. The Comp any does not k now of any use of any Company's IP that has heretofore been or is now being mad e, except by the Company, by the Company's Affiliates or by an y person duly licensed by the Co mpany to use the s ame under an agreement disclosed in schedu le 2. 9 Property (a) Neither the Company nor any o f the Company's Affiliates do o wn any real estate.The Prop erty is the on ly property leased, used or occupied by the Company or the Company's Affiliates Schedule 3 s ets forth a true, correct an d compl ete list of all Property. (b) The Company and the Company's Affiliates have performed all covenants, conditions, agreement s, statutory requirements, by-laws, orders and regulatio ns which are binding on them and affecting the Property and the use of the Property by the Company or any of the Company's Affiliates does not contravene the same. 10 Contracts (a) No Contract: (i) has been entered into o ther than in the ordinary course of business; and (ii) requires the payment of a con sideration in excess of EUR 15,000 for any one item or series of interrelated or connected items relevan t to the Bus ines s in any one year or the aggregate payment over the life of the contract of more than EUR 35,000; and (iii) cannot be terminated with out penalty on 3 months notice or less; or (iv) restricts or in any way inhibits the Company's or the Company's Affiliates' freedom to engage in any bus ines s activity or enterprise. (b) Neither the Company, any of the Company's Affiliates nor (to the knowledge of the Seller) any other party to a particular Contract is in breach of that Contract no r would it be in breach , but for the requirements of notice or laps e of time. (c) The Company or any of the Compan y's Affiliates has not received any notice which may affect any rights of it in res pect of any Contract. (d) None of the Contracts are void, voidable, illegal or unenfo rceable, in whole or in part. (e) Each Contract has been entered into on a commercially soun d basis and has been negotiated on arm’s len gth terms.
page 52 (f) Each Contract can be readily fulfilled or performed by the Company or the Company's Affiliates on time and withou t undue or unu sual expenditure or effort. (g) The Seller is not aware of any circumstances whereby following a change in the ownership of the Company to the Buyer the customers or s uppliers of the Business would not remain customers or s uppliers of the Business to the same extent and on terms no less favourable than the terms of th eir dealing with the Company before the date of this document. (h ) There are no offers, tenders or quotations made by the Compan y or the Seller in respect of the Business which are: (i) outstan ding; and (ii) capable of acceptance by a third party, which would give rise to a contractual oblig ation binding o n the Company or the Seller. (i) With res pect to any Co ntract, loan agreement or other agreement, arrangement or understanding (except for (i) the Cooperation Agreement between the Company and Dotto ReSearch S.r.l., (ii) the lease agreement regarding the o ffice premises in Hong Kong, (iii) the "Kontokorrentkreditvertrag" between NP and Raiffeis en, and (iv) the guarantee iss ued by AWS), the execution or im plementation of this Share Sale and Purchase Agreement will not res ult in (i) any other party being relieved of any obligation or becoming entitled to exercise any right (including any right of termination or any right of pre -emption or other option); or (ii) the Company and/o r th e Company's Affiliates being found in default of any s uch agreement or arrangement or losing any benefit, right or licens e that it currently enjoys; or (iii) a liability or obligation of the Compan y and/or the Company 's Affiliates being created or increased. 11 Employees (a) Schedule 4, which final form has to be pro vided 30 days after Completion by Seller, contains: (i) a complete list of the employees of the Comp any and the Comp any's Affiliates and such independent contractors providing services in the core business of the Company and the Company's Affiliates which ann ual payment exceeds EUR 15,000 of the Comp any and the Company's Affiliates; and (ii) (excep t for contributions to each employee’s nominated retirement fund): (A) an accurate statement of the length of continuous service;
page 53 (B) the entitlements to wages, s alaries, annual leave, l eave loading, long service leave, sick leave, bonu ses and any other remuneration or incentive scheme benefit; and (C) th e basis on which any long service leave and sick leave are accrued, for each of these employees as at the date of this document. (b) The Company or the Company's Affiliates is not under any legal or moral obligation to make nor is it accustomed to making any bonus payments to or fo r the benefit of any consultant or employee of the Company or the Company's Affiliates in the y ear 20 13 and 2014 , except than prov ided for in the Completion Accounts. (c) The Company and the Company's Affiliates have complied with th eir obligations under all legislation and contracts of employment in respect of all employees of th e Company or the Company 's Affiliates in a way where the failure to so comply could have an adverse effect on the Compan y and the Compan y's Affiliates o n or after the Completion Date. (d) There are no outstanding entitlemen ts from any of the Company's or the Company's Affiliates employees or contractors, freel ancers or consultants or any claims – if an y – from tax or social insurance agencies with regard to employees o r contractors, freelancers and consultants. (e) All contractors, freelancers or consultants (in cluding those of natu ral pers ons who work for any such contractor, freelancer o r consultant) have at no time been employees of the Company or the Company's Affiliates under the applicable em ployment tax and social insurance law provisions. 12 Pensions (a) Apart from the insuran ce-backed company pension schem e granted by NL D to Mr. Werner Eickmeyer, born 18 March 1948, the Company and the Company's Affiliates are not under a liability or o bligation, or a party to any ex-gratia arrangement o r promis e, to pay, or accustomed to p aying, pensions, gratuities, superannuation allo wances or the like, or otherwise under any obligation to provide su ch benefits under a Law, to or for any of its pas t or present officers o r employees or their dependants; and there are no retirement benefit, p ension or death benefit or similar s chemes or arrangements in relation to, or bind ing on, the Company and the Comp any's Affiliates or to which the Comp any or the Company's Affiliates contribute. (b) The Co mpany and the Company's Affiliates have paid all contributions due under any pensions legislation, employment contracts of the employees and any oth er pen sion arrangements and the pension-scheme mentioned above in clause 12(a) up to Completio n.
page 54 13 Compliance (a) The Compan y and the Company 's Affil iates h ave at all times complied with all applicable laws in a way where the failure to so comply could have an advers e effect on the Company and the Company's Affiliates on or after the Completion Date. (b) The Company and the Company's Affiliates have, to the best of the Seller's kn owledge: (i) obtained al l authorisations (including Business Authorisatio ns) necessary or required to conduct the Business and have paid all fees due in relation to them and complied with all the conditions under them; or (ii) been granted an exemption from or oth er relief from a Governmental Agency from the need for such authorisation. (c) Without limiting warranty 13 (a) the Company, the Company's Affiliates, their officers, agents and employees have not, within the 3 years precedin g the Completion Date, permitted or omitted to do any act or thing the commiss ion or omission of which is in contravention of any law and which is l ikely to have a Material Adverse Effect on the Bus ines s. 14 Business Records (a) The Business Records – applying th e standard of care and d iligence of a prudent manager –: (i) have been fully, properly and accurately compiled and maintained; (ii) are in the possession of Compan y; and (iii) comp ly with all legal requirements. (b) All returns, p articulars , resolutions and other d ocuments required to be filed with any Governmental Agency in the last 7 years in respect of the Company, the Compan y's Affiliates or the Business have been d uly filed and are correct in a way where the failure to so comply could have an adverse effect on the Company and the Company's Affiliates on or after the Completion Date. 15 Insurances (a) The Company and the Company's Affiliates have, and have had at all material times, valid and adequate insuran ces required by law to be effected by it and in res pect of all risks which are normally insured against by persons carrying o n similar businesses as the Business for such amoun ts as are prudent. (b) The Company and the Company's Affiliates have not done or omitted to do any act or thing which might render any of such insurances void o r voidable
p age 55 an d none of such insurances is rendered void or voidable as a res ult of this document. 16 Litigation (a) As at the date of this documen t the Company and the Company's Affiliates are not party to any prosecutio n, litigation, arbitration or di spute resolution proceedings (except in relation to the recovery of trade debts in individual amoun ts of les s than EUR 10,000) nor party to any investigation, audit or other inquiry by a Governmental Agen cy except than disclosed in schedule 10. (b) There are no p roceedings , investigations, audits or other inquiries of the typ e referred to in warranty 16(a) pending or threatened against the Company or the Company's Affiliates nor any facts or circu mstances which could give rise to such. 17 Taxation (a) All Tax that the Company or the Company's Affiliates are or may beco me liable to pay in respect of th e period up to the Completion Date has or will be paid prior to or on th e Co mpletion Date, o r has been adequately provid ed for in the Accounts or will be paid, or procu red to be paid, by the Seller after Completion . (b) All Tax Returns filed (or to be filed) for and on behalf of the Company and the Company's Affiliates: (i) have been or will be prepared, made and lodged by the due dates for filing such returns ; (ii) have been prepared or made in accordance with the relevant Tax Law; (iii) have been prepared or made having taken reasonable care and with full and true disclosure (to the extent requ ired b y law); and (iv) do not contain any statement that is false or mis leading whether b y omission or otherwise. (c) The Company and the Company's Affiliates have maintained proper, accurate and adequate records to enable them to comply with their obligations to: (i) prepare and submit any information, notices, elections, computations, Tax Returns and payments required in res pect of any Tax Law; (ii) prepare an y accounts necessary for the compliance with any Tax Law;
page 56 (iii) suppo rt the calculation of any adjustable value, and any capital gain or capital loss on disposal, of any asset held by th e Company or the res pective Company's Affiliate at the Completion Date; and (iv) retain necessary records as required by any Tax Law and to support any Tax position taken by the Company or any of the Company's Affiliates, and all such records are held by the Company or the Company's Affiliates at the Completion Date. (d ) Any obligation of the Company and the Company's Affiliates under any Tax Law to withhold amounts at source and/or remit those amounts to a Governmental Agency, has b een complied with. (e) No dividend has been paid b y the Company which has been in violation of the applicable Laws. (f) All Tax los ses of the Company as shown in the accounts of that company or latest tax returns are fully available for use subject to the Company satisfying the conditions under the Tax Act. For the sake o f clearan ce, the Seller d oes not represent or warrant fo r th e availability of the Tax losses as far as the availability is adversely affected by any actio ns of the Buyer or ch anges in th e Company after Completion. (g) The Company has not been a party to any transfers of assets, or transfers of Tax losses or any debt forgiveness , or other transaction which shifts value. (h) All Stamp Du ty arising under a Stamp Duty law in relation to any transaction or document to which the Company or any of the Company's Affiliates is or has been a p arty or by which the Company or any of th e Company's Affiliates derives, or has or will derive, a benefit has been paid or will be paid prior to Completion in accordance with the relevant Stamp Duty law (and whether the Company, any of the Company's Affiliates or a third party is liable for that Stamp Duty). (i) All transactions entered into between the Company and its shareholders and/or the Company's Affiliates and its shareholders have been condu cted on an arms-length and commercial basis. (j) The Company has not entered into any transaction that would attract the operatio n of any transfer pricin g provision in any Tax Law.
page 57 Schedule 2 Company’s IP A Bus ines s Names Name Neuman n Neumann Partners B Domain Names Name lawjobs.at neumannleadership.biz neumann leadership.eu neumannleadership.in fo neumannleadership.net neumannleadership.org neumannleadershipgroup.com neumannleg al.com neumann-legal.com neuman nlegal.de neumann-legal.de neumannpartner.com neumannp artner.de neumannpartners.at neumannpartners.cn neu mannpartners.co.uk neumannpartners.com neumannpartners.com.es neumannp artners. com.mx neumannpartners.com.ua neumannpartners.cz (owned by local company)
page 58 neumannpartners.de neumann partners .dk neumannpartners.es neumannpartners.eu neumannpartn ers.fr neumannpartn ers.hk neumannpartners.hu (owned by lo cal company) neumann-p artners .hu neumannpartners.in neumannpartners.jp neumannpartners.kr neumannp artners .pl neu mann-partners.ru neumannp artners .tw neumannpartners.us n ews-neumannpartners.com talent.cc C Trade Marks
110374 19/8 page 59 C 1 Trademarks registered / applied for in the name of the Company (Neumann Lead ership Holding GmbH) Numb er Name Picture Sys tem Ap plication date Nice classes Stat e Registratio n date Expiry date Further information 12893103 NEUMANN. Partners for Leadership CTM 21/5/2014 35, 41, 45 Not registered, ap plication pend ing End of opposition period : 12/9/201 4 n/a May be licensed to Leader Pro spects India Pvt Ltd and Do tto ReSearch S.r.l. 6876908 NEUMANN (word mark) CTM 29/4/2008 35, 45 Registered 8/1/2013 29/4/201 8 Identical to OEPA 2460 15 still registered in the name of "Neumann International AG", see Annex G.1.1.B 69422 47 neumann: LINKING OUR TALENTS CTM 13/5/2008 35 , 41, 45 Registered 1/10/2011 13/5/2018 Identical to OEPA 246013 still registered in the name of "Neumann Internatio nal AG", s ee Annex G.1.1.B 6942254 neumann: CTM 13 /5/2008 35, 45 Registered 18/8 /2012 13/5/2018 Identical to OEPA 246014 still registered in the name o f "Neumann International AG", see Annex G.1.1.B 6 942262 NEUM ANN LINKING OUR TALENTS (word mark) CTM 13/5/20 08 45 Registered 4/1/2013 13/5 /2018 Identical to OEPA 246016 still registered in the name of
page 60 Number Name Picture System Application date Nice classes State Registration date Expiry date Further information "Neumann In ternational AG", see Annex G.1.1.B 11 654399 NEUM ANN LEGAL CTM 14/3/2013 35, 41, 45 Registered 28/6/2013 14/3/202 3 Pledged as collateral to Ers te Bank 1 1654464 NEUM ANNPARTNERS CTM 14/3/2013 35, 41, 45 Regis tered 28/6/2013 14/3/2023 Pledged as collateral to Erste Bank May be licens ed to NP, NP doo, NP sro and Leader Prospects India Pvt Ltd 11654531 NEUMANN PARTNERS Excellence in Human Capital CTM 14/3/20 13 35, 41, 45 Registered 28/6/2013 14 /3/2023 Pledged as collateral to Erste Bank 1165457 1 NP CTM 14 /3/2013 35, 41 , 45 Registered 05/07/2013 14/3 /2023 Pledged as collateral to Erste Bank My be licens ed to DBSearch In ternational SAS 818404 NEUMANNPARTNERS WIPO n/a 35 Registered 13/11/2003 13/11/2 023 Registered for the following
page 61 Number Name Picture System Application date Nice classes State Registration date Expiry date Further information Des ignations: Bosnia and Herzegovina, Czech Republic, Germany, Croatia, Serbia, Slovenia, Slovakia, Uk raine, The Austrian basic registratio n no. 206742 was deleted on 31/1 0/2012, therefor no pro tection of th is trademark in Austria. May be licensed to NP, NP doo, NP sro and Leader Prospects India Pvt Ltd
page 62 C 2 Trademarks regis tered / applied for in the name of Neumann Holding Aktiengesellschaft, (now Neumann International AG ), FN 42105 w, or Neumann International AG (formerly Neumann Holding Ak tiengesells chaft), FN 42105 w Number Name Picture System Application date Nice clas ses State Registration date Ex piry date Further Information 24 6013 NEUMANN: LINKING OUR TALENTS OEPA 28/04/2008 35, 41, 45 Regis tered 18/7/20 08 28/04/2018 n/a 24 6014 NEUM ANN: OEPA 28/04/2008 35, 41 , 45 Registered 18/7/2008 28/04 /2018 n/a 246016 NEUMANN LINKING OUR TALENTS (word mark) OEPA 28/04/20 08 35, 41, 45 Registered 18/7/2008 2 8/04/2018 n/a 24601 5 NEUMANN (word mark) OEPA 28/04/2008 35 , 41, 45 Registered 18 /7/2008 28/04/2018 n/a 982056 NEUMANN: LINKING OUR TALENTS WIPO n/a 35, 41, 45 Registered 28/4/2008 28/4/2 018 Registered only for the following Designations : Turk ey
page 63 Number Name Picture System Application date Nice classes State Regis tration date Expiry date Further Informat ion 982058 NEUMANN: WIPO n/a 35 , 41, 45 Registered 28/4/2008 28/4/2018 Registered only for the follo wing Designations: United Kingdom, Sweden, Turkey, Bulgaria, Czech Republic, Germany, Sp ain, France, Croatia, Hungary, Italy, Poland, Romania, Russian Federation, Slovenia, Slovakia 982059 NEUMANN LINKING OUR TALENTS (word mark) WIPO n/a 35, 41 , 45 Registered 28/4/2008 28/4/2018 Registered o nly for the followin g Designations: Turkey 98 2057 NEUM ANN (word mark) WIPO n/a 35, 41, 45 Registered 28/4/2008 28/4/2018 Registered only for the following Designation s: United Kingdom, Sweden, Turkey, Bulgaria, Czech Rep ublic, Germany, Spain, France, Croatia, Hungary, Italy, Poland, Romania, Russ ian
page 64 Number Name Picture System Applicatio n date Nice classes State Registration date Expiry date Further Informati on Federation, Slovenia, Slovakia Number Name Picture System Application date Nice classes State Registration date Expiry date Further information 202948 TAKE IT NEUMANN GROUP OEPA 10/01/2002 35, 41, 4 2 Registered 29/3 /2002 31/3/2022 n/a 202949 NEUMANN CONSULTING OEPA 10/01/2002 35, 41, 42 Registered 29/3/2 002 31/3/2022 n/a 2 02951 NEUM ANN CONSULTING (word mark) OEPA 10/01/2002 35, 41, 4 2 Registered 29/3/2002 31/3/2022 n/a 202952 NEUMANN M ANAGEMENT SOLUTION (word mark) OEPA 10/01/20 02 35, 41, 42 Registered 29/3/2002 31 /3/2022 n/a 202953 NEUMANN GROUP OEPA 10/01/2002 35, 41, 42 Reg istered 29/3/2002 31/3/2022 n/a 202954 NEUMANN GROUP (word mark) OEPA 10/01/2002 35, 41, 4 2 Registered 29/3 /2002 31/3/2022 n/a
p age 65 Number Name Picture System Application date Nice clas ses State Registration date Expiry date Further informat ion 191512 NEUMANN MANAGEMENT SOLUTION OEPA 20/06/2000 35, 41, 42 Registered 13/10/2000 31/10 /2020 Registered in the name of "Neumann Holding AG" (presumably us ed as abbreviation for NHA). 756551 NEUMANN MANAGEMENT SOLUTION WIPO n/a 35, 41, 42 Registered 12/2/2 001 12/2/2021 Reg istered in the name of "Neumann Holding AG" (presumably used as abbrev iation for NHA) and only for the following Designations : United Kingdom, Benelux, Switzerland, China, Czech Repu blic, Germany, Spain, France, Croatia, Hungary, Italy, Liechten stein, Poland, Portugal, Romania, Serbia, Russian Federation, Slov enia, Slovakia, Ukraine C 3 Expired / Deleted Trademarks formerly registered in the name of the Company (Neumann Leadership Holding GmbH) or for i n the name of Neumann Holding Ak tiengesells chaft, (no w Neumann International AG ), FN 42105 w, or Neumann Internatio nal AG (formerly Neumann Holding Aktienges ellschaft), FN 42105 w
page 66 Number Name Picture Sys tem Application date Nice classes State Registration date Expiry date Further information 81 6140 NEUM ANN LEADERSHIP SELECTION WIPO n/a 35 Expired 13/11/2003 1 3/11/2013 n/a 20674 2 NEUMANNPARTNERS OEPA 14/06/2002 35 Deleted 29/10/2002 n/a Deleted on 31/10/2012 Number Name Pictu re System Application date Nice classes State Registration d ate Expiry date Further Information 6942271 NEUMANN (word mark) CTM 13/05/2008 35 , 41, 42 Deleted n/a n/a 4/7/200 8 withdrawn Number Name Picture System Applicatio n date Nice classes State Registration date Expiry date Further in formation 73137 EUROTOP OEPA 16/05/1972 35, 42 Deleted 30/1 1/1972 n/a n/a 202946 NEUMANN EXECUTIVE AUDIT OEPA 10/01/2002 35, 41, 42 Deleted 29 /3/2002 n/a n/a 202947 NEUMANN EXECUTIVE (word mark) OEPA 10/01/2002 35, 41, Deleted 29/3/2002 n/a n/a
page 67 Number Name Picture System Application date Nice classes State Regis tration date Expiry date Further info rmatio n AUDIT 42 202950 NEUMANN M ANAGEMENT SOLUTION OEPA 10/01/2002 35, 41, 42 Deleted 29/3/2002 n/a n/a 7861 90 TAKE IT NEUM ANN GROUP WIPO n/a 35, 41, 42 Expired 10/7/2002 10/7/2012 Registered only for the following Designations : Austria, Denmark, Estonia, Finland, United Kingdom, Greece, Lithuania, Norway, Sweden, Singapore, Turkey, Bo snia and Hercegovina, Bulgaria, Ben elux, Switzerland, Ch ina, Czech Republic, Germany, Spain, France, Croatia, Hungary , Italy, Democratic People's Republic of Korea, Liechtenstein, Latvia, Monaco, Montenegro, The former Yugoslav Republic of Macedonia, Po land,
page 68 Numb er Name Picture Sys tem Ap plication date Nice classes State Registratio n date Expiry date Further information Portugal, Romania, Serbia, Russian Federation, Slovenia, Slovakia, Ukraine 786189 NEUMANN CONSULTING WIPO n/a 35, 41 , 42 Expired 10/7/2002 10/7/2012 Registered only for the follo wing Desig nations: Austria, Denmark, Estonia, Finland, United Kingdom, Greece, Lithuania, Norway, Sweden, Singapore, Turkey, Bosnia an d Hercegovina, Bulgaria, Benelux, Switzerland, China, Czech Republic, Germany, Spain, France, Croatia, Hungary, Italy, Democratic People's Republic of Korea, Liechtenstein, Latvia, Monaco, M onten egro, The former Yugos lav Repub lic of M acedonia, Poland, Portugal, Romania, Serbia, Rus sian
page 69 Number Name Picture System Application date Nice clas ses State Registration date Ex piry date Further information Federation, Slovenia, Slovakia, Ukraine 78618 7 NEUMANN CONSULTING (word mark) WIPO n/a 35, 41, 42 Expired 10/7/2002 10 /7/2012 Registered only for the following Designations: Aust ria, Denmark, Estonia, Finland, United Kingdo m, Greece, Lithuania, Norway, Sweden, Singapore, Turkey, Bosnia and Hercegovin a, Bulgaria, Benelux, Switzerlan d, China, Czech Republic, Germany, Spain, France, Croatia, Hungary, Italy, Democratic People's Republic of Korea, Liechtenstein, Latvia, Monaco, Montenegro, The former Yu goslav Republic of Maced onia, Poland, Po rtu gal, Romania, Serbia, Russian Federation, Slovenia, Slo vakia, Ukrain e
page 70 Number Name Picture System Application date Nice clas ses State Registration date Expiry date Further information 7861475 NEUMANN MANAGEMENT SOLUTION (word mark) WIPO n/a 3 5, 41, 42 Expired 10/7/2002 10/7/2012 Regis tered only for the following Designations: Austria, Denmark, Eston ia, Finland, United Kingdom, Greece, Lithuania, Norway, Sweden, Singapore, Turkey , Bosnia and Hercegovina, Bu lgaria, Benelux, Switzerland , China, Czech Republic, Germany, Spain, France, Croatia, Hu ngary, Italy, Demo cratic People's Republic of Korea, Liechtenstein, Latvia, Monaco, Montenegro, The former Yug oslav Republic of M acedo nia, Poland, Portug al, Romania, Serbia, Russian Federation, Slovenia, Slovakia, Ukraine
page 71 Number Name Picture System Application date Nice classes State Registration date Expiry date Further information 786147 3 NEUMANN GROUP WIPO n/a 35, 41, 42 Expired 10/7/20 02 10/7/2012 Registered only for the following Designations: Aus tria, Denmark, Estonia, Finland, United Kingdom, Greece, Lithuania, Norway, Sweden , Singapore, Turkey, Bosnia and Hercegovina, Bulgaria, Benelux, Switzerland, Chin a, Czech Republic, German y, Spain, France, Croatia, Hungary, Italy, Democratic People's Republic of Korea, Liechtenstein , Latvia, Mon aco, Montenegro, The former Yugoslav Republic of Macedonia, Poland, Portugal, Romania, Serbia, Russian Federatio n, Slovenia, Slovakia, Ukraine 7861 470 NEUMANN GROUP (word mark) WIPO n/a 35 , 41, 42 Expired 10/7/2002 10/7/2012 Regis tered only for the following
p age 72 Number Name Picture System Application date Nice clas ses State Registration date Expiry date Further informat ion Des ignations: Austria, Denmark, Estonia, Finland, United Kingdo m, Greece, Lithuania, Norway, Sweden, Singapore, Turkey, Bosnia and Hercegovina, Bulgaria, Benelux, Switzerland, China, Czech Republic, Germany, Spain, France, Croatia, Hungary, Italy, Dem ocratic People's Republic of Korea, Liechtenstein, Latvia, Monaco, Montenegro, The former Yugoslav Republic of Macedonia, Poland, Portugal, Romania, Serbia, Russian Federation, Slovenia, Slo vakia, Ukraine 786318 TAKE IT NEUMANN GROUP (word mark) WIPO n/a 35 , 41, 42 Expired 1 0/7/2002 10/7/2012 Regis tered only for the following Designations: Austria, Den mark,
page 73 Number Name Picture Sy stem Application date Nice classes State Regis tration date Expiry date Further information Es tonia, Finland , United Kingdom, Greece, Lithu ania, Norway, Sweden, Sin gapore, Turkey, Bos nia and Hercego vina, Bulgaria, Benelux, Switzerland, China, Czech Rep ublic, Germany, Spain, France, Croatia, Hungary, Italy, Democratic People's Repu blic of Korea, Liech tens tein, Latv ia, M onaco, Montenegro, Th e former Yugoslav Republic of Macedonia, Poland, Portugal, Romania, Serbia, Russian Federation, Slo venia, Slovak ia, Ukraine
pag e 74 Schedule 3 Property Address Use Les sor Lessee Term Monthly Rental Hubert- Sattler- Gasse 13, 5020 Salzburg, Austria Office premises Miguel Spit zy, Arenberg- s traße 35, 5020 Salzburg NP The agreement will terminate on 31 Decemb er 2014, 12:00 am without any termination notice Gross monthly rent: EUR 2, 516.20 Schubertrin g 14, 1010 Vienna, Austria Office premis es Amisola Imob ilien AG, Freyun g 4/15, 1010 Vienna NP Starting from 1 June 2013, concluded for ten years and will terminate on 31 May 2023 without any termination notice. Gross mon thly rent: EUR 13,860.52 Parking lots no. 230, 229, 228, 227, 274, 272, 201 at Schwarzen- bergplatz 3, 1010 Vienna, Austria Parking lots Generali Versicherung AG, Landskron- gas se 1-3, 1010 Vienna Company Starting from 1 Septemb er 2013, concluded for an infinite term. Gross monthly ren t: EUR 1,244.69 KINWICK CENTRE, No. 32 Hollywood Road, Hong Kong Office premises Provost Estates Limited, 20th floor, Kinox Centre, 9 Hu ng To Road, Kwun To ng, NL HK Starting from January 4 , 2013, con cluded for two years and will terminate on January 3, Total monthly rent: HK$ 66,7 57.1
page 75 Kowloon , Hong Kong 2015. Národní t řída 10, Prague 1, Czech Republic Office premises EUROVIA CS, a.s. NP sro The lease agreement is agreed for an indefinite period. The rent is approx. EUR 1,780 per month (EUR 5,340 per quarter) The rent o f CZK 107,0 02 (approx. EUR 3,862) per month was a Q3 discount on ly; the service ch arge is CZK 7,940 (approx. EUR 287) per month. Ali utca 8, H- 1025 Budapest, Hungary Office premises Ms. Orsolya Hovorka NP kft The lease is for an indefinite p eriod. The monthly rent is HUF 235,000 (app . EUR 750). Friedrich- Ebert-Anlage 30, 69117 Heidelberg, Germany Office p remises Dr. Karl-R. Bassemir NL D Is renewed by 12 mon ths each year, unless terminated 6 months befo rehan d, i.e. until February 28 at the latest. Net ren t: EUR 1,480. Neuer Wall 72 (fifth floo r), 20354 Hamburg, Germany Office premises Martin Johann Paulsen Tes tament NL D The lease will terminate on 30 June 2015. Net rent: EUR 4,452.45 EUR 5, 060,42 incl. VAT
page 76 Grüneburg- weg 9 (second floor), 60322 Frankfurt/Mai n, Germany Office premises Neumann Legal GmbH NL D The s ublease agreement will terminate on 30 June 2 015 upon 3 months' notice. If no party terminates the sublease the agreement s hall be extended automatically in each case by 12 months. Net ren t: EUR 335 Gross mont hly rent: EUR 398,65 Herzog- Heinrich- Strasse 11/13, 80336 Munich, Germany Office premises W2 005/2007 Co burg Asset 1 BV NL D The lease agreement will terminate on 31 May 2015. (option to extend th e lease agreement to 5 years) Net rent: EUR 5,975,41 Gross month ly rent: EUR 7,110.74 Kronprinzs tra ße 14, 70173 Stuttgart, Germany Office premises IVG Imm obilienen twicklungs- und Vermögens- verwaltungsg es.mb H & Co. Grundbes itz KG NL D The lease agreement will terminate on 3 0 September 2019. Net month ly rent: EUR 3,715.- Gros s monthly rent: EUR 4.420,85 Anna- Schneider- Steig 22, 50678 Cologne, Germany Office premises Warburg- Henderson Kapitalanlag egesellschaft für Immobilien mbH NL D According to M r. Frömmer th e lease agreement is terminated and will expire on 31 December, Gross monthly rent: EUR 7,2 73,31 Net monthly rent: EUR 6,112 .02
p age 77 2015. Gajeva 2a, 4th floor, 10 000 Zagreb, Croatia Office premises Smiljana Filipi NP do o The ren ewal of the lease for a further 1 year term is automatic if no p arty cancels the agreement in writing at least 3 months before the expiry of the current lease p eriod. Net monthly rent: EUR 1,000.- Slavianska 11B, office 5, BG-1000 Sofia, Bulgaria Office premises Ms. Savina Valcheva # 42 Manastirska Str., entr. A, fl. 7, app. 2; Sofia NP BG Notice period is 3 months. Landlord must be informed in writing EUR 760,- gross monthly paymen t 3 Remus St., 4th floor, room E4.10, Bucharest, sector 3, Romania Office premises Ibiza Golf Light SRL, Voluntari, Pipera Tunari 198/3 vila 36, Ilfov county NP RO The lease agreement is concluded for a period of 2 years startin g on July 1, 2014 Special agreement” sharing the office with the company Clearpoint Communin - cations. We pay to the landlord a rent of 308,20 EUR + VAT (24%) and utilities / maintenance tax of 107 EUR + VAT (2 4%) and to Clearpoint 680 EUR v ia a contract of PR services (which
page 78 s hould actu ally be considered as rent expenses). Regus Warsaw North Gate, u l. Boni- fraterska 17 , 00-203 Wars aw, Poland Reg us office Regu s Warsaw North Gate NP Spzoo Ends February 28, 201 5 Monthly p ayment PLN 1.190,-
page 79 Schedule 4 Employees
page 80 Schedule 5 Statement of Working Capital (in EUR) Prel iminary Indication J une 30, 20 14 Final Balance November 30, 2 014 Cash (including all deposits for lease agreements and the deposits with BP) 921,145 Client accounts receivable 942,179 Vend or prepayments 41,631 Consultant and other employee bonus accrual -771,761 Vendor accoun ts payable -137,721 VAT receivable 785,399 VAT payable -808,781 Adjustmen t amount regarding overfunding of German pension obligation as of 31 Decemb er 2013 - 133,862.99 Trad e Receivables overdue 120 d ays - 0 Payroll taxes payable - Income taxes payable - Net working capital 972,091 Reconciliation to Group Consolid ated balan ce sheet Shareholders ' equity -1,469,010 Fixed ass ets -152,9 96 Work in progress -1 7,787 Liabilities to ban ks 2,546,260 End-of-year adjustments 65,624
page 81 Net working capital 972,091
p age 82 Schedule 6 Draft Agreement Erste Bank
page 83 Schedule 7 Trade Receivables as of 30 September 2014
page 84 Schedule 8 Credit Agreements and Guarantee Loans
page 85 Schedule 9 Licence Agreements "Vertrag über die Lizenzierung von Namen un d Bezeichnungen" between Mr. Gary Mackney, Mr. Petrus Gerbaulet, Neuman Legal GmbH, NLH KG and Neumann Leaders hip Holding Gmb H as of May 22, 2013 Working Agreement between Neumann Leaders hip Holding GmbH and DBSearch Intern ational SAS as of January 2, 2012
page 86 Schedule 10 Litigation: none
page 87 Execution Executed as an notarial deed. Executed by CTPartners Executive Search Inc. ) ) /s/Hartwig Kienast ............ ......................................... ...... Attorney in fact Hartwig Kienast .................... ....................................... Name of Attorn ey in fact (print) Executed by NHL KG ) ) /s /Dr. Hans Jorda ....................................... .................... Director Dr. Hans Jorda ................................ ........................... Name of Director (print) /s/Dr. Peter Malanik . ........................................ .................. Director Dr. Peter Malanik .................. ........................................ . Name of Director (print)
Exhibit 31.1 CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER RULE 13A-14(A) / 15D-14(A) I, Brian M. Sullivan, certify that: 1.
I have reviewed this quarterly report on Form 10-Q of CTPartners Executive Search Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
5.
Dated:
a.
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.
evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation;
d.
disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a.
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b.
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. November 7, 2014
/s/Brian M. Sullivan Brian M. Sullivan Chief Executive Officer (Principal Executive Officer)
Exhibit 31.2 CERTIFICATION OF THE CHIEF FINANCIAL OFFICER RULE 13A-14(A) / 15D-14(A) I, William J. Keneally, certify that: 1.
I have reviewed this quarterly report on Form 10-Q of CTPartners Executive Search Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
5.
Date:
a.
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.
evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation;
d.
disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a.
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b.
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
November 7, 2014
/s/William J. Keneally William J. Keneally Chief Financial Officer (Principal Financial Officer)
Exhibit 32.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350 In connection with the quarterly report of CTPartners Executive Search Inc. (the “Company”) on Form 10-Q for the three and nine months ended September 30, 2014 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned officer of the Company certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Dated:
November 7, 2014
/s/Brian M. Sullivan Brian M. Sullivan Chief Executive Officer (Principal Executive Officer)
Exhibit 32.2 CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350 In connection with the quarterly report of CTPartners Executive Search Inc. (the “Company”) on Form 10-Q for the three and nine months ended September 30, 2014 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned officer of the Company certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Dated:
November 7, 2014
/s/William J. Keneally William J. Keneally Chief Financial Officer (Principal Financial Officer)
