<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 19, 1997
REGISTRATION STATEMENT NO. 333-34679
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
AFFILIATED MANAGERS GROUP, INC.
(Exact name of Registrant as specified in its charter)
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DELAWARE 6719 04-32-18510
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
------------------------
TWO INTERNATIONAL PLACE, 23RD FLOOR
BOSTON, MASSACHUSETTS 02110
(617) 747-3300
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive office)
------------------------
WILLIAM J. NUTT
PRESIDENT AND CHIEF EXECUTIVE OFFICER
AFFILIATED MANAGERS GROUP, INC.
TWO INTERNATIONAL PLACE, 23RD FLOOR
BOSTON, MASSACHUSETTS 02110
(617) 747-3300
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------
COPIES TO:
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MARTIN CARMICHAEL III, P.C. DAVID B. HARMS, ESQ.
GOODWIN, PROCTER & HOAR LLP SULLIVAN & CROMWELL
Exchange Place 125 Broad Street
Boston, Massachusetts 02109 New York, New York 10004
(617) 570-1000 (212) 558-4000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the Registration Statement becomes effective.
------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration number of the earlier effective
registration statement for the same offering. [ ] ______________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] ______________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SECTION 8(a), MAY DETERMINE.
================================================================================
<PAGE> 2
EXPLANATORY NOTE
This Amendment No. 1 to the Affiliated Managers Group, Inc. Registration
Statement on Form S-1 is being filed for the purpose of filing certain Exhibits.
<PAGE> 3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment to this Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Boston,
Commonwealth of Massachusetts, on September 19, 1997.
AFFILIATED MANAGERS GROUP, INC.
By: /s/ WILLIAM J. NUTT
----------------------------------
WILLIAM J. NUTT
PRESIDENT, CHIEF EXECUTIVE OFFICER
AND CHAIRMAN OF THE BOARD OF
DIRECTORS
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
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SIGNATURES TITLE DATE
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/s/ WILLIAM J. NUTT President, Chief Executive
----------------------------------- Officer and Chairman of the Board
WILLIAM J. NUTT of Directors (Principal Executive
Officer) September 19, 1997
* Senior Vice President (Principal
----------------------------------- Financial Officer and Principal
BRIAN J. GIRVAN Accounting Officer) September 19, 1997
*
-----------------------------------
RICHARD E. FLOOR Director September 19, 1997
*
-----------------------------------
ROGER B. KAFKER Director September 19, 1997
*
-----------------------------------
P. ANDREWS MCLANE Director September 19, 1997
*
-----------------------------------
W.W. WALKER, JR. Director September 19, 1997
</TABLE>
*By: /s/ NATHANIEL DALTON
--------------------------------------------
NATHANIEL DALTON, ATTORNEY-IN-FACT
II-6
<PAGE> 4
EXHIBIT INDEX
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*1.1 Form of Underwriting Agreement
*1.2 Form of International Underwriting Agreement
+2.1 Purchase Agreement dated August 15, 1997 by and among the Registrant, Tweedy,
Browne Company L.P. and the partners of Tweedy, Browne Company L.P. (excluding
schedules and exhibits, which the Registrant agrees to furnish supplementally to
the Commission upon request)
+2.2 Agreement and Plan of Reorganization dated August 15, 1997 by and among the
Registrant, AMG Merger Sub, Inc., GeoCapital Corporation, GeoCapital, LLC and
the stockholders of GeoCapital Corporation (excluding schedules and exhibits,
which the Registrant agrees to furnish supplementally to the Commission upon
request)
+2.3 Stock Purchase Agreement dated as of January 17, 1996 by and among the
Registrant, First Quadrant Holdings, Inc., Talegen Holdings, Inc., certain
employees of First Quadrant Corp. and the other parties identified therein
(excluding schedules and exhibits, which the Registrant agrees to furnish
supplementally to the Commission upon request)
2.4 Amendment to Stock Purchase Agreement by and among the Registrant, First
Quadrant Holdings, Inc., Talegen Holdings, Inc., certain managers of First
Quadrant Corp. and the Management Corporations identified therein, effective as
of March 28, 1996
+2.5 Partnership Interest Purchase Agreement dated as of June 6, 1995 by and among
the Registrant, Mesirow Asset Management, Inc., Mesirow Financial Holdings,
Inc., Skyline Asset Management, L.P., certain managers of Mesirow Asset
Management, Inc. and the Management Corporations identified therein (excluding
schedules and exhibits, which the Registrant agrees to furnish supplementally to
the Commission upon request)
2.6 Amendment, made by and among Mesirow Financial Holdings, Inc. and the
Registrant, to Partnership Interest Purchase Agreement by and among the
Registrant, Mesirow Asset Management, Inc., Mesirow Financial Holdings, Inc.,
Skyline Asset Management, L.P., certain managers of Mesirow Asset Management,
Inc. and the Management Corporations identified therein, effective as of August
30, 1995
*3.1 Form of Amended and Restated Certificate of Incorporation
*3.2 Form of Restated Certificate of Incorporation
*3.3 Form of Amended and Restated By-laws
*4.1 Specimen certificate for shares of Common Stock of the registrant
+4.2 Form of Credit Agreement dated as of , 1997 by and among Chase
Manhattan Bank and the other lenders identified therein and the Registrant
(excluding schedules and exhibits, which the Registrant agrees to furnish
supplementally to the Commission upon request)
*4.3 Stock Purchase Agreement dated November 7, 1995, by and among the Registrant, TA
Associates, NationsBank, The Hartford, and the additional parties listed on the
signature pages thereto (excluding schedules and exhibits, which the Registrant
agrees to furnish supplementally to the Commission upon request)
*4.4 Preferred Stock and Warrant Purchase Agreement dated August 15, 1997 between the
Registrant and Chase Capital (excluding schedules and exhibits, which the
Registrant agrees to furnish supplementally to the Commission upon request)
*4.5 Securities Purchase Agreement dated August 15, 1997 between the registrant and
Chase Capital (excluding schedules and exhibits, which the Registrant agrees to
furnish supplementally to the Commission upon request)
*5.1 Opinion of Goodwin, Procter & Hoar LLP as to the legality of the securities
being offered
</TABLE>
II-7
<PAGE> 5
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*10.1 Amended and Restated Stockholders' Agreement dated , 1997, by and
among the Registrant and TA Associates, NationsBank, The Hartford, Chase Capital
and the additional parties listed on the signature pages thereto
+10.2 Form of Tweedy, Browne Company LLC Limited Liability Company Agreement dated
, 1997 by and among the Registrant and the other members
identified therein (excluding schedules and exhibits, which the Registrant
agrees to furnish supplementally to the Commission upon request)
+10.3 Form of GeoCapital, LLC Amended and Restated Limited Liability Company Agreement
dated , 1997 by and among the Registrant and the members
identified therein (excluding schedules and exhibits, which the Registrant
agrees to furnish supplementally to the Commission upon request)
+10.4 First Quadrant, L.P. Amended and Restated Limited Partnership Agreement dated
March 28, 1996 by and among the Registrant and the partners identified therein
(excluding schedules and exhibits, which the Registrant agrees to furnish
supplementally to the Commission upon request)
*10.5 Amendment to First Quadrant, L.P. Amended and Restated Limited Partnership
Agreement by and among the Registrant and the partners identified therein,
effective as of October 1, 1996
*10.6 Second Amendment to First Quadrant, L.P. Amended and Restated Limited
Partnership Agreement by and among the Registrant and the partners identified
therein, effective as of December 31, 1996
+10.7 First Quadrant U.K., L.P. Limited Partnership Agreement dated March 28, 1996 by
and among the Registrant and the partners identified therein (excluding
schedules and exhibits, which the Registrant agrees to furnish supplementally to
the Commission upon request)
+10.8 Skyline Asset Management, L.P. Amended and Restated Limited Partnership
Agreement dated August 31, 1995 by and among the Registrant and the partners
identified therein (excluding schedules and exhibits, which the Registrant
agrees to furnish supplementally to the Commission upon request)
*10.9 Amendment to Skyline Asset Management, L.P. Amended and Restated Limited
Partnership Agreement by and among the Registrant and the partners identified
therein, effective as of August 1, 1996
*10.10 Second Amendment to Skyline Asset Management, L.P. Amended and Restated Limited
Partnership Agreement by and among the Registrant and the partners identified
therein, effective as of December 31, 1996
*10.11 Affiliated Managers Group, Inc. 1997 Stock Option and Incentive Plan
*10.12 Affiliated Managers Group, Inc. 1997 Employee Stock Purchase Plan
*11.1 Statement regarding computation of per share earnings
*21.1 Schedule of Subsidiaries
*23.1 Consent of Counsel (to be included in Exhibit 5.1 hereto)
**23.2 Consent of Coopers & Lybrand L.L.P. (Boston)
**23.3 Consent of Coopers & Lybrand L.L.P. (Chicago)
**23.4 Consent of Coopers & Lybrand L.L.P. (New York)
**23.5 Consent of KPMG Peat Marwick LLP
**24.1 Powers of Attorney
**27.1 Financial Data Schedule
</TABLE>
- ---------------
* To be filed by amendment.
** Previously filed.
+ Certain portions of this Exhibit have been omitted pursuant to a confidential
treatment request filed with the Commission. The omitted portions have been
filed separately with the Commission.
II-8
<PAGE> 1
EXHIBIT 2.1
PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED PURSUANT TO A CONFIDENTIAL
TREATMENT REQUEST FILED WITH THE COMMISSION. ASTERISKS (*) IDENTIFY WHERE SUCH
CONFIDENTIAL INFORMATION HAS BEEN OMITTED. THE OMITTED PORTIONS HAVE BEEN FILED
SEPARATELY WITH THE COMMISSION.
PURCHASE AGREEMENT
by and among
AFFILIATED MANAGERS GROUP, INC.
as "Buyer"
TWEEDY, BROWNE COMPANY L.P.
the "Company"
and
The Partners of the Company
August 15, 1997
<PAGE> 2
PURCHASE AGREEMENT
INDEX
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Page
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SECTION 1. SALE OF INTEREST AND PURCHASE PRICE......................................................1
1.1 Sale and Purchase........................................................................1
1.2 Calculation of Purchased Interest and Purchase Price.....................................2
1.3 Time and Place of Closing................................................................5
1.4 Further Assurances.......................................................................5
1.5 Transfer Taxes...........................................................................5
1.6 Additional Consents......................................................................6
1.7 Diligence; ****..........................................................................6
1.8 Purchase Price Allocation................................................................6
SECTION 2. CONVERSION INTO LLC AND EFFECTIVENESS OF LLC
AGREEMENT................................................................................7
2.1 Conversion...............................................................................7
2.2 Effectiveness of LLC Agreement...........................................................7
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE PARTNERS...........................................7
3.1 Making of Representations and Warranties.................................................7
3.2 Organization and Qualification of the Company............................................7
3.3 Capitalization; Beneficial Ownership.....................................................8
3.4 Subsidiaries.............................................................................8
3.5 Authority................................................................................8
3.6 Real and Personal Property...............................................................9
3.7 Assets Under Management.................................................................10
3.8 Financial Statements....................................................................11
3.9 Taxes...................................................................................11
3.10 Accounts Receivable.....................................................................12
3.11 Absence of Certain Changes..............................................................13
3.12 Ordinary Course.........................................................................13
3.13 Banking Relations.......................................................................13
3.14 Intellectual Property...................................................................13
3.15 Contracts...............................................................................14
3.16 Litigation..............................................................................15
3.17 Compliance with Laws....................................................................16
3.18 Business; Registrations.................................................................17
3.19 Insurance...............................................................................18
3.20 Powers of Attorney......................................................................18
3.21 Finder's Fee............................................................................18
</TABLE>
(i)
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3.22 Corporate Records; Copies of Documents..................................................18
3.23 Transactions with Interested Persons....................................................19
3.24 Employee Benefit Programs...............................................................19
3.25 Directors, Officers and Employees.......................................................21
3.26 Code of Ethics..........................................................................22
3.27 Certain Representations and Warranties as to Private Funds..............................22
3.28 Certain Representations and Warranties as to the Mutual Funds...........................24
3.29 Certain Representations and Warranties as to the Offshore Funds and
Offshore Related Partnerships...........................................................27
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE PARTNERS.................................................29
4.1 Authority...............................................................................29
4.2 Ownership of LLC Interests..............................................................30
4.3 Finder's Fee............................................................................30
4.4 Investment Advisory and Brokerage Representation........................................30
4.5 Agreements..............................................................................30
4.6 Employment Data.........................................................................30
SECTION 5. COVENANTS OF THE COMPANY AND THE PARTNERS...............................................31
5.1 Making of Covenants and Agreements......................................................31
5.2 Client Consents.........................................................................31
5.3 Filings and Regulatory Authorizations...................................................32
5.4 Authorization from Others...............................................................33
5.5 Conduct of Business.....................................................................33
5.6 Financial Statements....................................................................34
5.7 Preservation of Business and Assets.....................................................34
5.8 Access..................................................................................35
5.9 Consummation of Agreement...............................................................35
5.10 Cooperation of the Company and Partners.................................................35
5.11 No Solicitation of Other Offers.........................................................35
5.12 Confidentiality.........................................................................35
5.13 Policies and Procedure..................................................................36
5.14 Notification of Certain Matters.........................................................36
5.15 Amendment of Offshore Fund Organizational Documents.....................................36
5.16 Non-Solicitation/Non-Disclosure Agreements..............................................36
SECTION 6. REPRESENTATIONS AND WARRANTIES OF BUYER.................................................36
6.1 Making of Representations and Warranties................................................36
6.2 Organization of Buyer...................................................................37
6.3 Authority of Buyer......................................................................37
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(ii)
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6.4 Litigation..............................................................................37
6.5 Finder's Fee............................................................................37
6.6 Investment Intent.......................................................................37
6.7 Financial Statements....................................................................38
6.8 Compliance with Laws....................................................................38
SECTION 7. COVENANTS OF BUYER......................................................................38
7.1 Making of Covenants and Agreement.......................................................38
7.2 Confidentiality.........................................................................38
7.3 Consummation of Agreement...............................................................39
7.4 Cooperation of Buyer....................................................................39
7.5 Notification of Certain Matters.........................................................39
SECTION 8. CONDITIONS TO THE OBLIGATIONS OF BUYER..................................................39
8.1 Litigation; No Opposition...............................................................39
8.2 Representations, Warranties and Covenants...............................................40
8.3 Client Consents.........................................................................43
8.4 Registration as an Investment Adviser and Registration of Investment Adviser
Representatives.........................................................................43
8.5 Registration as a Broker-Dealer and Registration of Registered
Representatives.........................................................................44
8.6 Other Approvals.........................................................................44
8.7 Conversion..............................................................................44
8.8 LLC Agreement...........................................................................44
8.9 Employment Agreements...................................................................44
8.10 Intentionally Omitted...................................................................44
8.11 Agreements with Respect to Private Funds................................................44
8.12 Agreements with Respect to Offshore Funds...............................................45
8.13 Capitalization, Net Worth and Working Capital of the LLC................................45
8.14 Delivery................................................................................45
8.15 Escrow Agreement........................................................................46
8.16 Evidence of Insurability................................................................47
8.17 Insurance Policies......................................................................47
8.18 Material Adverse Change.................................................................47
SECTION 9. CONDITIONS TO OBLIGATIONS OF THE COMPANY AND THE
PARTNERS................................................................................47
9.1 No Litigation; No Opposition............................................................47
9.2 Representations, Warranties and Covenants...............................................47
</TABLE>
(iii)
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9.3 Client Consent and Approvals............................................................48
9.4 Delivery................................................................................48
SECTION 10. TERMINATION OF AGREEMENT; RIGHTS TO PROCEED...................................................49
10.1 Termination.............................................................................49
10.2 Effect of Termination...................................................................50
10.3 Right to Proceed........................................................................50
SECTION 11. RIGHTS AND OBLIGATIONS SUBSEQUENT TO CLOSING..................................................50
11.1 Survival of Representations, Warranties and Covenants...................................50
11.2 Regulatory Filings......................................................................50
11.3 Covenants With Respect to Section 15(f) of the
Investment Company Act .................................................................51
11.4 Agreement of Certain Partners...........................................................51
SECTION 12. INDEMNIFICATION...............................................................................52
12.1 Indemnification by the Partners.........................................................52
12.2 Limitations on Indemnification by the Partners..........................................53
12.3 Indemnification by Buyer................................................................54
12.4 Limitation on Indemnification by Buyer..................................................54
12.5 Notice; Defense of Claims...............................................................55
12.6 Satisfaction of the Partners' Indemnification Obligations...............................55
12.7 Exclusive Remedy........................................................................56
SECTION 13. DEFINITIONS...................................................................................56
13.1 Definitions.............................................................................56
SECTION 14. MISCELLANEOUS.................................................................................62
14.1 Fees and Expenses.......................................................................62
14.2 Dispute Resolution......................................................................62
14.3 Waivers.................................................................................63
14.4 Governing Law...........................................................................63
14.5 Notices.................................................................................63
14.6 Entire Agreement........................................................................64
14.7 Assignability; Binding Effect...........................................................65
14.8 Amendments..............................................................................65
14.9 Consent to Jurisdiction.................................................................65
14.10 Captions and Gender.....................................................................65
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(iv)
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14.11 Execution in Counterparts...............................................................66
14.12 Publicity and Disclosures...............................................................66
</TABLE>
(v)
<PAGE> 7
EXHIBITS
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Exhibit 2.1A - Form of Certificate of Conversion
Exhibit 2.1B - Form of Certificate of Formation
Exhibit 2.2 - Form of LLC Agreement
Exhibit 5.16 - Form of Non-Solicitation/Non-Disclosure Agreement
Exhibit 8.9 - Form of Employment Agreement
Exhibit 8.14(g) - Form of Release
</TABLE>
(vi)
<PAGE> 8
SCHEDULES ON AUGUST , 1997
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Schedule 1.1 - Allocation of LLC Interest Purchase Price
Schedule 1.2 - Calculation of Gross Revenues and Related Percentages
Schedule 3.3(b) - Capitalization Prior to and Following Conversion
Schedule 3.8(a) - Company's Financial Statements
Schedule 6.7 - Buyer's Financial Statements
</TABLE>
(vii)
<PAGE> 9
PURCHASE AGREEMENT
AGREEMENT entered into as of August 15, 1997, by and among Affiliated
Managers Group, Inc., a Delaware corporation ("Buyer"), Tweedy, Browne Company
L.P., a Delaware limited partnership, Christopher H. Browne, William H. Browne,
John D. Spears and James M. Clark, Jr. (together, the "Partners" and, each
individually, a "Partner").
W I T N E S S E T H:
WHEREAS, the Company is engaged in the business of providing investment
management and advisory services to private accounts of certain institutional
and individual investors and public and private investment companies, and
effecting transactions in securities in connection therewith;
WHEREAS, the Partners own of record and beneficially all of the issued
and outstanding interests of the Company, consisting of general partner
interests and limited partner interests representing in the aggregate one
hundred percent of the capital and all rights to profits of the Company;
WHEREAS, the parties hereto desire and intend, and it is a condition
precedent to the obligations of Buyer hereunder, that, the Company will convert,
and the Partners will cause the Company to be converted, into Tweedy, Browne
Company LLC, a Delaware limited liability company (the "LLC"), as more fully
described below;
WHEREAS, the parties hereto desire to enter into this agreement
providing for the purchase by Buyer of certain interests in the LLC and further
desire that, in connection therewith, the LLC Agreement (as this and other
capitalized terms are defined in Section 13.1) become effective; and
WHEREAS, to induce Buyer to enter into this Agreement, and to receive
the benefits that will accrue to them if Buyer purchases interests in the LLC,
the Company and the Partners have agreed to make certain representations,
warranties and covenants as set forth herein.
NOW, THEREFORE, to consummate such purchase and sale and in
consideration of the mutual agreements set forth herein and other valuable
consideration, the receipt and adequacy whereof are hereby acknowledged, the
parties hereto agree as follows:
SECTION 1. SALE OF INTEREST AND PURCHASE PRICE.
1.1 SALE AND PURCHASE.
(a) Subject to the terms, provisions and conditions contained in this
Agreement and on the basis of the representations, warranties and covenants
herein set forth, each Partner hereby agrees to sell and deliver to Buyer, free
and clear of any restrictions, liens, claims, charges, security interests,
assignments, mortgages, deposit arrangements, pledges or encumbrances of any
<PAGE> 10
kind or nature whatsoever (collectively, "Claims"), other than Claims set forth
in the LLC Agreement, and Buyer hereby agrees to purchase from each Partner, the
portion of the LLC Capital Account and Class A LLC Points of such Partner at the
time of the Closing that is equal to the product obtained by multiplying (i) the
percentage set forth opposite such Partner's name on Schedule 1.1 hereto, by
(ii) the Purchased Percentage calculated pursuant to Section 1.2 below
(together, and in the aggregate for all of the Partners, the "Purchased LLC
Interest"), for a price equal to the product obtained by multiplying (I) the
percentage set forth opposite such Seller's name on Schedule 1.1 hereto, by (II)
the LLC Interest Purchase Price calculated pursuant to Section 1.2 below.
(b) The entire LLC Interest Purchase Price shall be paid in
cash at the Closing; provided, however, that a pro rata portion of the LLC
Interest Purchase Price payable to each Partner, with the aggregate amount
being ********** dollars ($**) of such LLC Interest Purchase Price for all
Partners, shall be placed into and held in escrow as contemplated in the
Escrow Agreement and Section 12.2(a).
1.2 CALCULATION OF PURCHASED INTEREST AND PURCHASE PRICE.
(a) Subject to adjustment as set forth below, the "Free Cash
Flow Percentage" shall be seventy percent (70%), the "Purchased Percentage"
shall be eighty percent (80%) and the "LLC Interest Purchase Price" shall be
three hundred million dollars ($300,000,000).
(b) Set forth as Schedule 1.2 hereto is a detailed calculation
of Gross Revenues as of June 30, 1997 and the resulting Free Cash Flow
Percentage, Purchased Percentage and LLC Interest Purchase Price.
**************** [The remainder of this section (approximately 3 pages) has
been omitted pursuant to the confidential treatment request referred to on the
cover page hereto. The omitted portions have been filed separately with the
Commission.]***************
2
<PAGE> 11
1.3 TIME AND PLACE OF CLOSING. The closing of the purchase and sale
provided for in this Agreement (herein called the "Closing") shall be held at
the offices of Goodwin, Procter & Hoar LLP at Exchange Place, Boston,
Massachusetts at 10:00 a.m. local time on the date of the Closing, which shall
be five (5) business days after the fulfillment or waiver of each of the
conditions set forth in Sections 8 (other than to the extent delivery at the
Closing is specified herein) and 9 (other than to the extent delivery at the
Closing is specified herein) hereof or at such other place, or an earlier or
later date or time as may be mutually agreed upon by Buyer and the Company.
1.4 FURTHER ASSURANCES. The Partners shall and the LLC shall (and the
Partners shall use all commercially reasonable efforts to cause the LLC to),
from time to time after the Closing, at the request of Buyer and without further
consideration, execute and deliver further instruments of transfer and
assignment and take such other action as Buyer may reasonably require to more
effectively transfer and assign to, and vest in, Buyer the Purchased LLC
Interest and all rights thereto, and to fully implement the provisions of this
Agreement.
1.5 TRANSFER TAXES. All transfer Taxes under applicable law incurred in
connection with the sale and transfer of the Purchased LLC Interest under this
Agreement will be borne and paid fifty percent (50%) by the Partners (pro rata
in accordance with the percentages of the LLC Interest Purchase Price to be
received by them) and fifty percent (50%) by Buyer, and the Partners (jointly
and severally) or Buyer, as the case may be, shall promptly reimburse the other
for any such Tax that the Company or the Partners, on the one hand, or Buyer on
the other hand, is required to pay under applicable law.
5
<PAGE> 12
1.6 ADDITIONAL CONSENTS. In the event that any ERISA Client whose
contract either prohibits assignment or terminates by its terms upon
consummation of the transactions contemplated hereby did not Consent at or prior
to the Closing (and Buyer in its sole discretion did not elect to treat such
Client as having Consented at the Closing), then (a) such ERISA Client shall be
treated, for purposes of calculating the Purchase Price, as having withdrawn its
assets, but the Company may continue to provide services to such ERISA Client,
subject in each case to the provisions of this Section 1.6, and an appropriate
modification of the LLC Agreement shall be made to allocate revenues
attributable to such contract of such Client for the sole benefit of the
Non-Manager Members (subject to reallocation as provided in clause (b) below)
and (b) if as of the date that is six (6) months after the date of the Closing,
such Client remains a Client of the Company and has made payments of advisory
fees to the Company since the Closing, then such Client shall remain a Client of
the Company thereafter, all revenues attributable to such contract of such
Client since the Closing shall be reallocated for the benefit of all Members of
the Company and Gross Revenues shall be recalculated, with appropriate
adjustments (consistent with the methodology set forth in Section 1.2 and based
upon the revenues attributable to such contract of such Client at the Closing)
made to the Purchased Percentage and the Free Cash Flow Percentage as determined
by the mutual agreement of the Partners and Buyer, unless (i) Buyer and the
Partners agree otherwise or (ii) Buyer so determines and the Partners are unable
to provide Buyer with an opinion of counsel reasonably satisfactory in form and
substance to Buyer to the effect that under applicable law, an agreement between
the Company and the Client substantially in accordance with the terms of the
written agreement in effect immediately prior to the Closing is in full force
and effect and is valid, binding and enforceable.
1.7 Diligence *****. As promptly as practicable after the date hereof,
and in any event not more than one (1) day after the date hereof, the Company
and the Partners shall permit Buyer and its agents to commence further due
diligence investigations at the offices of the Company and shall make available
to Buyer and its agents all information specifically referenced herein and all
such information and access to employees as may be reasonably requested by
Buyer and its agents. *** [The remainder of this section has been omitted
pursuant to the confidential treatment request referred to on the cover page
hereto. The contents have been filed separately with the Commission.] ***
1.8 PURCHASE PRICE ALLOCATION.
(a) Each of the Partners and Buyer hereby acknowledge and
agree that the LLC Interest Purchase Price is allocable, in its entirety, to (i)
the cash, cash items, accounts receivable, tangible personal property and other
balance sheet items of the Company (which shall be valued at fair market value
as of the Closing) and (ii) the goodwill associated with the business of the
Company (which shall represent the residual balance of the LLC Interest Purchase
Price after taking into account balance sheet items).
(b) Each of the Partners and Buyer hereby agree to take no
position inconsistent with the acknowledgment and agreement set forth in
subparagraph (a) of this Section 1.8 including, without limitation, on any Tax
return or report (including information returns, declarations and reports) or in
any audit or judicial or administrative proceedings before any Taxing Authority
or court of law or otherwise.
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SECTION 2. CONVERSION INTO LLC AND EFFECTIVENESS OF LLC AGREEMENT.
2.1 CONVERSION. Immediately prior to the Closing, the Company shall
convert into the LLC (the "Conversion") in the manner contemplated by Section
18-214 of the Delaware Act, and a certificate of conversion to a limited
liability company in the form attached hereto as Exhibit 2.1A (the "Certificate
of Conversion") and a certificate of formation of a limited liability company in
the form attached hereto as Exhibit 2.1B (the "Certificate of Formation") shall
be filed with the Secretary of State of the State of Delaware and shall become
effective.
2.2 EFFECTIVENESS OF LLC AGREEMENT. Simultaneously with the Closing,
the LLC Agreement in substantially the form attached hereto as Exhibit 2.2 shall
become effective as the operating agreement of the LLC.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE PARTNERS.
3.1 MAKING OF REPRESENTATIONS AND WARRANTIES. As a material inducement
to Buyer to enter into this Agreement and consummate the transactions
contemplated hereby, each Partner hereby makes to Buyer the representations and
warranties contained in this Section 3, which shall be subject to such
exceptions as may be disclosed in Schedules delivered to Buyer pursuant to
Section 1.7 of this Agreement. None of the Partners shall have any right of
indemnity or contribution from the Company or any other right against the
Company with respect to any breach of a representation or warranty by any
Partner hereunder.
3.2 ORGANIZATION AND QUALIFICATION OF THE COMPANY.
(a) The Company is a limited partnership duly organized,
validly existing and in good standing under the laws of the State of Delaware
with full power and authority to own or lease its properties and to conduct its
business in the manner and in the places where such properties are owned or
leased or such business is currently conducted or proposed to be conducted. The
copies of the Company's Certificate of Limited Partnership, as amended to date
(the "Certificate of Limited Partnership"), and of the Company's Agreement of
Limited Partnership, as amended and/or restated to date ("Agreement of Limited
Partnership"), each certified by the Company's Secretary, and heretofore
delivered to Buyer's counsel, are complete and correct, and no amendments
thereto are pending.
(b) The Company is not in violation of any term of its
Organizational Documents.
(c) The Company is duly qualified to do business as a foreign
entity under the laws of each jurisdiction in which the nature of its business
or the ownership or leasing of its properties requires such qualification,
except for those jurisdictions where the failure to so qualify, individually or
in the aggregate, would not have a Material Adverse Effect on the Company.
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3.3 CAPITALIZATION; BENEFICIAL OWNERSHIP.
(a) The authorized interests of the Company are all duly and
validly authorized, issued, outstanding and fully paid. There are no outstanding
options, warrants, rights, commitments, preemptive rights or agreements of any
kind for the issuance or sale of, or outstanding securities convertible into,
any additional interests of any class, series or type of the Company. None of
the Company's interests has been issued in violation of any federal or state
law.
(b) Each Partner owns beneficially and of record the interests
in the Company set forth opposite such Partner's name in Schedule 3.3(b) hereto,
free and clear of any Claims. The Partners are the only beneficial or record
holders of the Company's interests, and the interests shown in Schedule 3.3(b)
are the only interests of the Company held by each Partner or with respect to
which such Partner has any rights. Except as set forth in Schedule 3.3(b)
attached hereto, there are no voting trusts, voting agreements, proxies or other
agreements, instruments or undertakings with respect to the voting of the
interests of the Company to which the Company or any of the Partners is a party.
(c) Except as set forth in this Agreement or in the LLC
Agreement, there are no rights, commitments, agreements or understandings
obligating, or which might obligate the Company, any of the Partners or, to the
knowledge of the Company or any Partner after Due Inquiry, any other Person, to
issue, transfer, sell or redeem any securities or interests in the Company.
3.4 SUBSIDIARIES. The Company has no, nor in the last six (6) year(s)
has it had any, subsidiaries or equity investments in any other Person.
3.5 AUTHORITY. The Company has full right, authority and power to enter
into this Agreement and each contract or agreement specifically referred to in,
or executed and delivered by the Company pursuant to, this Agreement and to
carry out the transactions contemplated hereby and thereby, including without
limitation the Conversion. The execution, delivery and performance by the
Company of this Agreement and each such other agreement, document and instrument
have been duly authorized by all necessary action of the Company and the
Partners, and no other action on the part of the Company or the Partners is
required in connection therewith.
This Agreement and each contract or agreement specifically referenced
in, or executed and delivered by the Company pursuant to, this Agreement
constitutes, or when executed and delivered will constitute, valid and binding
obligations of the Company enforceable against the Company in accordance with
its terms. The execution, delivery and performance by the Company of this
Agreement and each such other contract or agreement:
(a) does not violate any provision of the Organizational
Documents of the Company, each as amended and/or restated to date;
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(b) does not violate any laws of the United States, or any
state or other jurisdiction (domestic or foreign) applicable to the Company or
require the Company to obtain any approval, consent or waiver of, or make any
filing with, any person or entity (governmental or otherwise) that has not been
obtained or made, except as specifically identified in Schedule 3.5 or Schedule
3.7; and
(c) does not result in a breach of, constitute a default
under, accelerate any obligation under, or give rise to a right of termination
of, any agreement, contract, instrument, mortgage, lien, lease, permit,
authorization, order, writ, judgment, injunction, decree, determination or
arbitration award to which the Company is a party, or by which any property of
the Company is bound or affected, or result in the creation or imposition of any
Claim on any of the Company's assets or, except to the extent imposed pursuant
to the Organizational Documents of the Company, on any Person's interest in the
Company.
3.6 REAL AND PERSONAL PROPERTY.
(a) The Company owns no real property. All of the real
property leased by the Company is identified in Schedule 3.6(a) and except as
set forth in therein, the Company does not lease, sublease or otherwise provide
(with or without rent or other consideration and with or without a written
agreement) any interest in real property or rights in connection therewith to
any Person. All leases with respect to real property to which the Company is a
party are identified in Schedule 3.6(a), and true and complete copies thereof
have been delivered to Buyer. Each of such leases has been duly authorized and
executed by the parties thereto and is in full force and effect. The Company is
not in default under any of such leases, nor has any event occurred which, with
notice or the passage of time, or both, would give rise to such a default.
(b) Attached hereto as Schedule 3.6(b) is a list of all the
assets of the Company including Intellectual Property. The Company has
separately provided Buyer the tax basis of each such asset. The Company owns all
its assets free and clear of any Claims and such assets are all of the assets
necessary for the conduct of the business of the Company as currently conducted
and for the conduct of such business by the LLC immediately following the
Conversion and the Closing.
3.7 ASSETS UNDER MANAGEMENT.
(a) The aggregate assets under management by the Company as of
December 31, 1996 and June 30, 1997, are accurately set forth in Schedule 3.7
hereto. In addition, set forth in Schedule 3.7 is a list as of December 31, 1996
and June 30, 1997, of all investment management, advisory or sub-advisory
contracts setting forth the name of the Client under each such contract, the
amount of assets under management with respect to each such contract, the fee
schedule in effect with respect to each such contract, the net contributions or
withdrawals from December 31, 1996 through June 30, 1997 and any material fee
adjustments or material contributions to or withdrawals from assets under
management (it being understood and agreed that contributions or withdrawals
greater than one million dollars ($1,000,000) are material)
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implemented since June 30, 1997, or presently proposed to be instituted, the
consent required for the assignment of each such contract other than those that
by their terms terminate upon assignment (which are so identified), and the
country, if other than the United States of America, of which the Client is a
citizen, if such country is known to the Company. Schedule 3.7 also includes a
separate list of all contracts pursuant to which the Company has agreed to
provide Brokerage Services but does not provide Investment Management Services.
There are no contracts, arrangements or understandings pursuant to which the
Company has undertaken or agreed to cap, waive or reimburse any or all fees or
charges payable by any of the Clients set forth in Schedule 3.7 or pursuant to
any of the contracts set forth in Schedule 3.7. No Client of the Company has
expressed an intention to terminate or reduce its investment or brokerage
relationship with the Company, or adjust the fee schedule with respect to any
contract in a manner which would reduce the fee to the Company (or, after giving
effect to the Conversion, the fee to the LLC) and no fact is known to the
Company or any Partner that adversely affects or would adversely affect any of
the contracts set forth in Schedule 3.7.
(b) Each account to which the Company provides Investment
Management Services that is (i) an employee benefit plan, as defined in Section
3(3) of ERISA that is subject to Title I of ERISA; (ii) a person acting on
behalf of such a plan; or (iii) an entity whose assets include the assets of
such a plan within the meaning of ERISA and applicable regulations (hereinafter
referred to as an "ERISA Client") have been managed by the Company such that the
Company in the exercise of such management is in compliance in all material
respects with the applicable requirements of ERISA.
(c) Set forth in Schedule 3.7 is a list of each Client with
which the Company has a fee based on performance or otherwise providing for
compensation on the basis of a share of capital gains upon, or capital
appreciation of, the funds (or any portion thereof) of any Client, together with
a complete description of such fee or compensation and a calculation thereof for
each of the last three completed years and the most recently completed period.
3.8 FINANCIAL STATEMENTS.
(a) The Company has delivered to Buyer the following financial
statements, copies of which are attached hereto as Schedule 3.8:
(i) Audited statements of financial condition of the
Company at September 30, 1994, September 30, 1995 and September 30,
1996, and audited statements of income, changes in partners' capital
and cash flows for each of the three (3) years then ended. The audited
statement of financial condition of the Company at September 30, 1996
is referred to hereinafter as the "Base Balance Sheet."
(ii) Unaudited statements of financial condition of
the Company at December 31, 1996, March 31, 1997 and June 30, 1997 and
statements of income, changes in partners' capital and cash flows for
each period then ended, certified by the Company's senior financial
officer.
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All of the foregoing financial statements have been prepared in
accordance with GAAP using the accrual method of accounting, applied
consistently during the periods covered thereby (except that the Company's
unaudited financial statements do not include footnote disclosure and are
subject to normal, immaterial audit adjustments), are complete and correct to
the knowledge of the Company and each Partner after Due Inquiry, and (subject to
the foregoing exceptions with respect to unaudited financial statements) present
fairly the financial condition of the Company at the dates of such statements
and the results of its operations for the periods covered thereby.
(b) The Company does not and, as of the date of the Base
Balance Sheet, did not have any liabilities of any nature, whether accrued,
absolute, contingent or otherwise, asserted or unasserted, known or unknown
(including, without limitation, liabilities as guarantor or otherwise with
respect to obligations of others, liabilities for Taxes due or then accrued or
to become due, or contingent or potential liabilities relating to activities of
the Company or the conduct of its businesses prior to the applicable date
regardless of whether claims in respect thereof had been asserted as of such
date), except: (i) liabilities stated or adequately reserved against on the Base
Balance Sheet or the notes thereto; (ii) liabilities reflected in Schedules
furnished to Buyer under Section 1.7 hereof, effective as of the date hereof; or
(iii) immaterial liabilities incurred or recognized in the ordinary course of
business of the Company after the date of, and not in breach of any of the terms
of, this Agreement.
3.9 TAXES.
(a) The Company has paid or caused to be paid all federal,
state, local, foreign or add-on and other taxes, customs duties, government fees
or like amount, including, without limitation, income taxes, estimated taxes,
alternative minimum taxes, franchise taxes, sales taxes, use taxes, ad valorem
or value added taxes, capital stock taxes, employment and payroll-related taxes,
withholding taxes, and transfer taxes, stamp taxes, occupation taxes, windfall
projects taxes, and all deficiencies, or other additions to taxes, interest,
fines and penalties owed by it (collectively, "Taxes"), required to be paid by
it, whether disputed or not. The unpaid Taxes of the Company (i) did not, as of
September 30, 1996, exceed the reserve for tax liability (rather than the
reserve for deferred Taxes established to reflect timing differences between
book and Tax income) set forth in the Base Balance Sheet (rather than in any
notes thereto) and (ii) do not exceed that reserve as adjusted for the passage
of time through the date hereof and the date of the Closing in accordance with
the past custom and practice of the Company filing its Tax Returns.
(b) The Company has, in accordance with applicable law, filed
all federal, state, local and foreign Tax returns required to be filed by it,
and all such returns correctly and accurately set forth the amount of any Taxes
relating to the applicable period. A list of all federal, state, local and
foreign income Tax returns filed with respect to the Company for taxable periods
ended on or after December 31, 1990, is set forth in Schedule 3.9 attached
hereto, and such Schedule indicates those returns that have been audited or
currently are the subject of an audit. For each taxable period of the Company
ended on or after September 30, 1990, the Company has made available to Buyer
correct and complete copies of all federal, state, local and foreign income
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Tax returns, examination reports and statements of deficiencies assessed against
or agreed to by the Company.
(c) Neither the IRS nor any other governmental authority
responsible for the imposition or collection of any Tax (a "Taxing Authority")
is now asserting or, to the knowledge of the Company or any Partner after Due
Inquiry, threatening to assert against the Company any deficiency or claim for
additional Taxes. No claim has ever been made by a Taxing Authority in a
jurisdiction where the Company does not file reports and returns that the
Company is or may be subject to taxation by that jurisdiction. There are no
security interests on any of the assets of the Company that arose in connection
with any failure (or alleged failure) to pay any Taxes.
(d) There has not been any audit of any tax return filed by
the Company for any taxable period ending on or after December 30, 1990, no such
audit is in progress, and the Company has not been notified by any Taxing
Authority that any such audit is contemplated or pending. No extension of time
with respect to any date on which a Tax return was or is to be filed by the
Company is in force, and no waiver or agreement by the Company is in force for
the extension of time for the assessment or payment of any Taxes.
(e) The Company has never been (and has never had any
liability for unpaid Taxes because it once was) a member of an "affiliated
group" (as defined in Section 1504(a) of the Code). The Company has never filed,
and has never been required to file, a consolidated, combined or unitary Tax
return with any other entity. The Company is not a party to any Tax sharing
agreement.
3.10 ACCOUNTS RECEIVABLE. All of the accounts receivable of the Company
shown or reflected on the Company's statement of financial condition as of June
30, 1997, included as part of Schedule 3.8, or existing at the date this
representation is given (less the reserve for bad debts set forth on the
Company's statement of financial condition as of June 30, 1997 included as part
of Schedule 3.8) are valid and enforceable claims and subject to no set off or
counterclaim. The Company has no accounts or loans receivable from any person,
firm or corporation or other entity which is affiliated with the Company or from
any officer, partner or employee of the Company or any member of the Immediate
Family of any Partner.
3.11 ABSENCE OF CERTAIN CHANGES. Since the date of the Base Balance
Sheet there has not been any:
(a) change in the condition (financial or otherwise) of
properties, assets, liabilities, business, or operations of the Company, which
change by itself or in conjunction with all other such changes, whether or not
arising in the ordinary course of business, has had or could reasonably be
expected to have a Material Adverse Effect on the Company.
(b) occurrence, activity, omission or failure to act which
would require the consent of Buyer as Manager Member under Section 3.1(g) of,
would be prohibited under, or would be a violation of, the LLC Agreement if the
LLC Agreement were in effect at the time;
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(c) obligation or liability incurred by the Company to any of
its officers, partners, members or employees, or any member of the Immediate
Family of any Partner, or any loans or advances made by the Company to any of
their respective officers, partners, members or employees or any member of the
Immediate Family of any Partner that remain outstanding;
(d) change in accounting methods or practices, or billing or
collection policies used by the Company; or
(e) agreement or understanding, whether in writing or
otherwise, for the Company to take any of the actions specified in paragraphs
(a) through (d) above.
3.12 ORDINARY COURSE. Since the date of the Base Balance Sheet, other
than with respect to transactions specifically contemplated herein, the Company
has conducted its business only in the ordinary course and consistently with its
prior practices.
3.13 BANKING RELATIONS. All of the arrangements which the Company has
with any banking institution are completely and accurately described in Schedule
3.13 attached hereto, indicating with respect to each such arrangement the type
of arrangement maintained (such as checking account, borrowing arrangements,
etc.) and the person or persons authorized in respect thereof.
3.14 INTELLECTUAL PROPERTY.
(a) The Company has exclusive ownership of, or license to use,
all patent, copyright, trade secret, trademark, trade name, service mark,
formulas, designs, inventions or other proprietary rights (collectively,
"Intellectual Property") used or to be used in the business of the Company as
presently conducted or contemplated to be conducted by the LLC immediately after
giving effect to the Conversion. All of the rights of the Company in any such
Intellectual Property owned by the Company are freely transferable. No
proceedings have been instituted, or are pending or threatened, which challenge
the rights of the Company of any such Intellectual Property. The Company has the
right to use all customer lists, investment or other processes, computer
software, systems, data compilations, research results and other information
required for, or incident to, its services or its business as presently
conducted or contemplated to be conducted by the LLC immediately after giving
effect to the Conversion. Except for readily available Intellectual Property
licensed from others customer lists and related data and rights in and to the
name "Tweedy Browne," the Company has no Intellectual Property material to its
business.
(b) Neither the Company nor any Partner has any knowledge
after Due Inquiry of any infringement by others of any Intellectual Property
rights of the Company.
(c) The present and contemplated business, activities and
products of the Company, do not infringe any rights of any other Person in
Intellectual Property. No proceeding charging the Company with infringement of
any Intellectual Property of any other Person has been
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filed or is threatened to be filed. The Company is not making unauthorized use
of any confidential information or trade secrets of any Person, including
without limitation, any former employer of any past or present employee of the
Company. Neither the Company nor, to the knowledge of the Company and each
Partner, any of the Company's employees have any agreements or arrangements with
any Persons other than the Company related to confidential information or trade
secrets of such Persons or restricting any such employee's ability to engage in
business activities of any nature. The activities of the employees on behalf of
the Company do not violate any such agreements or arrangements known to the
Company.
3.15 CONTRACTS. Except for contracts, commitments, plans, agreements
and licenses described in Schedule 3.7, (true and complete copies of which will
have been made available to Buyer on or prior to the Delivery Date), the Company
is not a party to or subject to any:
(a) investment management or investment advisory or
sub-advisory contract or any other contract for the provision of Investment
Management Services or Brokerage Services;
(b) any agreement with respect to solicitation of prospective
Clients or of prospective investors for the Mutual Funds;
(c) plan or contract providing for bonuses, pensions, options,
stock (or beneficial interest) purchases (or other securities or phantom equity
purchases), deferred compensation, retirement payments, profit sharing, or the
like;
(d) employment contract, other than contracts terminable at
will by the Company without liability for any penalty or severance payment;
(e) contract for services involving payments by the Company in
excess of one hundred thousand dollars ($100,000) per year, which is not
terminable by the Company without liability for any termination payment on not
more than thirty (30) days prior notice;
(f) contract or agreement or series of related contracts or
agreements for the purchase of any assets, material or equipment except purchase
orders in the ordinary course of business for less than one hundred thousand
dollars ($100,000) per contract or agreement or series of related contracts or
agreements;
(g) contract containing covenants limiting the freedom of the
Company (or its Affiliates) to compete in any line of business or with any
person or entity;
(h) agreement providing for the borrowing or lending of money,
and the Company has no obligations, except as disclosed in the Base Balance
Sheet: (i) for borrowed money, (ii) evidenced by bonds, debentures, notes or
similar instruments, (iii) to pay the deferred purchase price of property or
services, (iv) under leases that would, in accordance with GAAP, appear on the
balance sheet of the lessee as a liability, (v) secured by a Claim, (vi) in
respect of letters of credit, or bankers acceptances, contingent or otherwise,
or (vii) in respect of any
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guaranty or endorsement or other obligations to be liable for the debts of
another person or entity; or
(i) other material contract or agreement to which the Company
is a party or by which it is bound.
Each of the contracts described in Schedule 3.6(a), Schedule 3.7,
Schedule 3.15, Schedule 3.24 and Schedule 3.25 is valid and effective in
accordance with its respective terms, and there is not, under any such contract,
an existing breach by the Company or event which, with the giving of notice or
the lapse of time or both, would become such a breach. Assuming that the
Consents set forth in Schedule 3.5 and Schedule 3.7 have been obtained or
Comparable Contracts have been entered into, and after giving effect to the
Conversion and the Closing, each such contract will remain valid and effective
in accordance with its respective terms with the LLC having succeeded to all the
rights and obligations of the Company thereunder, and the LLC will be entitled
to all rights and remedies thereunder to which the Company is entitled on the
date hereof. The Company has complied and is in compliance with the Client's
guidelines and restrictions set forth in any contract described in Schedule 3.7,
including, without limitation, any limitation set forth in the applicable
prospectus, offering memorandum or marketing material for a Private Fund, Mutual
Fund or Offshore Fund or governing documents for any Client delivered to the
Company by the Client. The Company is not bound by any agreement, contract or
arrangement the performance of which by the Company or its agents could have a
Material Adverse Effect on the condition (financial or otherwise), properties,
assets, liabilities, business, operations or prospects of Buyer or the Company.
3.16 LITIGATION. There is no litigation or legal (or other) action,
suit, proceeding or, to the knowledge of the Company and each Partner after Due
Inquiry, investigation, at law or in equity, or before any federal, state,
municipal or other governmental department, commission, bureau, board, agency or
instrumentality, domestic or foreign (including, without limitation, any
voluntary or involuntary proceedings under the Bankruptcy Code or any action,
suit, proceeding or investigation under any foreign, federal or state securities
law, rule or regulation), in which the Company or any officer, partner, member
or employee thereof is engaged, or, to the knowledge of the Company and each
Partner after Due Inquiry, with which any of them is threatened, in connection
with the business, affairs, properties or assets of the Company, or which call
into question the validity or hinder the enforceability or performance of this
Agreement, or of the other contracts or agreements, specifically referenced
herein and the transactions contemplated hereby and thereby. There are no
proceedings pending, or to the knowledge of the Company or any of the Partners
after Due Inquiry, threatened, relating to the termination of, or limitation of,
the rights of the Company under its registration under the Advisers Act as an
investment adviser, its registration under the Exchange Act as a broker-dealer,
its membership in any exchange (as defined under the Exchange Act) or other self
regulatory organization or any similar or related rights under any registrations
or qualifications with various self regulatory bodies, states or other
jurisdictions.
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3.17 COMPLIANCE WITH LAWS. The Company and each of the Partners is, and
at all times has been, in material compliance with all laws and governmental
rules and regulations, domestic or foreign to the extent either (a) such laws,
rules and regulations are applicable to the activities of the Company or such
Partner on behalf of the Company or (b) the violation of such laws, rules and
regulations could give rise to Material Adverse Effect on the Company or would
result in a disqualification under Section 9(a) of the Investment Company Act or
require an affirmative answer to any of the questions in Item 11 of Part I of
the Company's Form ADV (or any similar or successor form) or Item 7 of the
Company's Form BD, including, without limitation: (i) the Advisers Act, the
Investment Company Act, the Exchange Act, ERISA, the Commodity Exchange Act and
the Securities Act and the regulations promulgated under each of them; (ii) the
rules and regulations of the IML and the BMA; (iii) the by-laws, rules and
regulations of self-regulatory organizations including without limitation the
NASD and each applicable exchange (as defined under the Exchange Act); and (iv)
all other foreign, federal or state securities laws and regulations applicable
to the business or affairs or properties or assets of the Company, including
without limitation the business and affairs of the Private Funds and the
Offshore Funds ((i)-(iv), collectively "Investment Laws and Regulations").
Neither the Company, nor any officer, member, partner or employee thereof, is in
default with respect to any judgment, order, writ, injunction, decree, demand or
assessment relating to any aspect of the business or affairs or properties or
assets of the Company and issued by any court or any federal, state, municipal
or other governmental agency, board, commission, bureau, instrumentality or
department, domestic or foreign, or by any self-regulatory authority. Neither
the Company nor any officer, member, partner or employee thereof, is charged or,
to the knowledge of the Company and each Partner after Due Inquiry, threatened
with, or under investigation with respect to, any violation of any provision of
foreign, federal, state, municipal or other law or any administrative rule or
regulation, domestic or foreign, including, without limitation, any Investment
Laws and Regulations relating to any aspect of the business, affairs, properties
or assets of the Company, or the transactions contemplated hereby.
3.18 BUSINESS; REGISTRATIONS.
(a) The Company is engaged solely in the business of providing
Investment Management Services and Brokerage Services. The Company does not
provide Investment Management Services to: (i) any issuer other than the Private
Funds that would be required to register as an investment company (within the
meaning of the Investment Company Act) but for the exemptions contained in
Section 3(c)(1), the final clause of Section 3(c)(3), Section 3(c)(7) or the
third or fourth clauses of Section 3(c)(11) of the Investment Company Act; (ii)
any issuer other than the Offshore Funds that is registered under the laws of
the appropriate securities regulatory authority in the jurisdiction in which the
issuer is domiciled (other than the United States or the states thereof), and is
or holds itself out as engaged primarily in the business of investing,
reinvesting or trading in securities; or (iii) any issuer other than the Mutual
Funds that is required to be registered as an investment company (within the
meaning of the Investment Company Act).
(b) The Company is duly registered as an investment adviser
under the Advisers Act. The Company is duly registered, licensed and qualified
as an investment adviser in all
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jurisdictions where such registration, licensing or qualification is required in
order to conduct its business and where the failure to be so registered,
licensed or qualified could have a Material Adverse Effect on the Company. The
Company is in compliance with all foreign, federal and state laws requiring
registration, licensing or qualification as an investment adviser. The Company
has delivered to Buyer or its representatives, true and complete copies of its
most recent Form ADV, as amended to date, and has made available copies of all
foreign and state registration forms, likewise as amended to date. The
information contained in such forms was true and complete at the time of filing
and is true and complete.
(c) The Company is a member in good standing of the NASD and
duly registered as a broker-dealer under the Exchange Act. The Company is duly
registered, licensed and qualified as a broker-dealer in all jurisdictions where
such registration, licensing or qualification is required in order to conduct
its business and where the failure to be so registered, licensed or qualified
could have a Material Adverse Effect on the Company. The Company and its
Employees do not hold any registrations, memberships or similar membership
privileges with such national securities exchange, board of trade, commodities
exchange, clearing corporation or association, securities dealers association or
similar institutions. A true and compete copy of each agreement with respect to
such registration, membership or privileges has been delivered to Buyer and each
such Agreement is a valid and binding agreement of the Company and the
applicable Employee(s), enforceable in accordance with its terms. The Company is
in compliance with all foreign, federal and state laws requiring registration,
licensing or qualification as a broker-dealer, including without limitation all
net capital requirements. The Company has delivered to Buyer or its
representatives, true and complete copies of its most recent Form BD, as amended
to date, and has made available copies of all foreign and state registration
forms, likewise as amended to date. The information contained in such forms was
true and complete at the time of filing and is true and complete.
(d) Neither the Company nor, to the knowledge of the Company
and each Partner after Due Inquiry, any person "associated" (as defined under
the Advisers Act or the Exchange Act, as appropriate) with the Company, has been
convicted of any crime or has engaged in any conduct that would be a basis for
denial, suspension or revocation of registration of an investment adviser under
Section 203(e) of the Advisers Act or Rule 206(4)-4(b) thereunder, or is
otherwise subject to "statutory disqualification" (within the meaning of the
Exchange Act), and to the knowledge of the Company and each Partner after Due
Inquiry, there is no proceeding or investigation that is reasonably likely to
become the basis for any such disqualification, denial, suspension or
revocation.
(e) Neither the Company nor any of its affiliated persons (as
defined in the Investment Company Act) is subject to any of the restrictions set
forth in Section 9(a) of the Investment Company Act.
(f) The Company has all memberships, permits, registrations,
licenses, franchises, certifications and other approvals (collectively, the
"Licenses") required from self-regulatory bodies and from foreign, federal,
state or local authorities in order for the
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Company to conduct its business. The Company is not subject to any limitation
imposed in connection with one or more of the Licenses which could have a
Material Adverse Effect on the condition (financial or otherwise), properties,
assets, liabilities, business, operations or prospects of the Company or Buyer.
Neither the Company nor any of its officers and employees is required to be
registered as an investment adviser, a broker or dealer, a commodity trading
adviser, a commodity pool operator, a futures commission merchant, an
introducing broker, a registered representative or associated person, a
counseling officer, an insurance agent, a sales person or in any similar
capacity with the SEC, the Commodity Futures Trading Commission, the National
Futures Association, the NASD, the IML, the BMA, the securities commission of
any jurisdiction or any self-regulatory organization.
3.19 INSURANCE. The Company has in full force and effect such insurance
with respect to its business, property and assets (including without limitation
errors and omissions liability insurance) as set forth in Schedule 3.19 hereto
and all bonds required by ERISA and by any contract to which the Company is a
party as set forth in Schedule 3.19 hereto. The Company is not in default under
any such insurance policy or bond.
3.20 POWERS OF ATTORNEY. The Company has not granted to any Person any
power of attorney that remains outstanding.
3.21 FINDER'S FEE. Except for fees to Goldman, Sachs & Co., which fees
will be paid by the Partners, neither the Company nor any Partner has incurred
or become liable for any broker's commission or finder's fee relating to or in
connection with the transactions contemplated by this Agreement.
3.22 CORPORATE RECORDS; COPIES OF DOCUMENTS. On or prior to the
Delivery Date the Company and the Partners will have made available for
inspection and copying by Buyer and its counsel true and correct copies of all
documents referred to in this Agreement or in the Schedules delivered to Buyer
in connection herewith.
3.23 TRANSACTIONS WITH INTERESTED PERSONS. Neither the Company nor any
partner, member, officer, supervisory employee or director of the Company or, to
the knowledge of the Company and each Partner after Due Inquiry, any member of
the Immediate Family of such Partner, (a) is a competitor of, or a party to any
material transaction or material contract or arrangement with, the Company, or
(b) serves as an officer or director or in another similar capacity of, any
competitor or Client of the Company, or any organization which has a material
contract or agreement with the Company or (c) owns directly or indirectly on an
individual or joint-basis, (other than in or through beneficial ownership of
less than five percent (5%) of the outstanding securities of a publicly traded
company), any interests in any competitor or any organization that has a
material contract or agreement with the Company.
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3.24 EMPLOYEE BENEFIT PROGRAMS.
(a) Schedule 3.24, lists every Employee Program (as defined
below) that has been maintained (as defined below) by the Company at any time
during the three-year period ending on the date of this Agreement.
(b) Each Employee Program which is maintained by the Company
and which is intended to qualify under Section 401(a) or 501(c)(9) of the Code
has received a favorable determination or approval letter from the IRS regarding
its qualification under such section and has, in fact, been qualified under the
applicable section of the Code for all time periods necessary for its intended
operations. No event or omission has occurred which would cause any such
Employee Program to lose its qualification under the applicable Code section.
(c) The Company does not know and has no reason to know, of
any failure of any party to comply with any laws applicable to the Employee
Programs that have been maintained by the Company. With respect to any Employee
Program maintained by the Company, there has occurred no "prohibited
transaction," as defined in Section 406 of ERISA or Section 4975 of the Code, or
breach of any duty under ERISA or other applicable law (including, without
limitation, any health care continuation requirements or any other tax law
requirements, or conditions to favorable tax treatment, applicable to such
plan), which could result, directly or indirectly, in any taxes, penalties or
other liability to the LLC or Buyer. No litigation, arbitration, or governmental
administrative proceeding (or investigation) or other proceeding (other than
those relating to routine claims for benefits) is pending or threatened with
respect to any such Employee Program.
(d) Neither the Company nor any ERISA Affiliate (as defined
below) (i) has ever maintained any Employee Program which has been subject to
title IV of ERISA (including, but not limited to, any Multiemployer Plan (as
defined below)) or (ii) has ever provided health care or any other non-pension
benefits to any employees after their employment is terminated (other than as
required by part 6 of subtitle B of title I of ERISA) or has ever promised to
provide such post-termination benefits.
(e) With respect to each Employee Program maintained by the
Company within the three (3) years preceding the Closing, complete and correct
copies of the following documents (if applicable to such Employee Program) have
previously been made available to Buyer: (i) all documents embodying or
governing such Employee Program, and any funding medium for the Employee Program
(including, without limitation, trust agreements) as they may have been amended;
(ii) the most recent IRS determination or approval letter with respect to such
Employee Program under Code Sections 401 or 501(c)(9), and any applications for
determination or approval subsequently filed with the IRS; (iii) the three (3)
most recently filed IRS Forms 5500, with all applicable schedules and
accountants' opinions attached thereto; (iv) the summary plan description for
such Employee Program (or other descriptions of such Employee Program provided
to employees) and all modifications thereto; (v) any insurance policy (including
any fiduciary liability insurance policy) related to such Employee Program; (vi)
any documents evidencing any loan to an Employee Program that is a leveraged
employee stock ownership plan; and (vii) all other
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materials reasonably necessary for Buyer to perform any of its responsibilities
with respect to any Employee Program subsequent to the Closing (including,
without limitation, health care continuation requirements).
(f) For purposes of this section:
(i) "Employee Program" means, whether written or
oral: (A) all employee benefit plans within the meaning of ERISA
Section 3(3), including, but not limited to, multiple employer welfare
arrangements (within the meaning of ERISA Section 3(4)), plans to which
more than one unaffiliated employer contributes and employee benefit
plans (such as foreign or excess benefit plans) which are not subject
to ERISA; and (B) all stock option plans, bonus or incentive award
plans, severance pay policies or agreements, termination pay
arrangements, deferred compensation agreements, supplemental income
arrangements, vacation plans, and all other employee benefit plans,
agreements, and arrangements not described in (A) above. In the case of
an Employee Program funded through an organization described in Code
Section 501(c)(9), each reference to such Employee Program shall
include a reference to such organization.
(ii) An entity "maintains" an Employee Program if
such entity sponsors, contributes to, or provides (or has promised to
provide) benefits under such Employee Program, or has any obligation
(by agreement or under applicable law) to contribute to or provide
benefits under such Employee Program, or if such Employee Program
provides benefits to or otherwise covers employees of such entity, or
their spouses, dependents, or beneficiaries.
(iii) An entity is an "ERISA Affiliate" of the
Company if it would have ever been considered a single employer with
the Company under ERISA Section 4001(b) or part of the same "controlled
group" as the Company for purposes of ERISA Section 302(d)(8)(C).
(iv) "Multiemployer Plan" means a (pension or
non-pension) employee benefit plan to which more than one employer
contributes and which is maintained pursuant to one or more collective
bargaining agreements.
3.25 DIRECTORS, OFFICERS AND EMPLOYEES.
(a) Schedule 3.25(a) hereto contains a true and complete list
of all current partners and officers of the Company. In addition, Schedule
3.25(a) hereto contains a list of all managers, employees and consultants of the
Company who, individually, have received or are scheduled to receive
compensation from the Company for the fiscal year ending December 31, 1997, in
excess of one hundred thousand dollars ($100,000). In each case such Schedule
includes the current job title and aggregate annual compensation of each such
individual.
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(b) To the knowledge of the Company and each Partner after Due
Inquiry, each employee listed in Schedule 3.25(a) hereto is in good health.
(c) As of June 30, 1997, the Company employs the employees
listed in Schedule 3.25(c) (the "Employees") (which schedule indicates which
employees are full-time and part-time employees) and generally enjoys good
employer-employee relationships. No consultant or other Person other than the
Employees renders Investment Management Services to or on behalf of the Company
or renders Brokerage Services in the name of the Company. The Company does not
have any obligation, contingent or otherwise, whether written or oral, under (a)
any collective bargaining or other labor agreement, (b) any retainer or
consulting arrangements, or (c) any other employee or employment-related
contract or non-terminable (whether with or without penalty) employment
arrangement (each, together with any service or employment-related agreements or
contracts disclosed in Schedules 3.15 and 3.24, an "Employment Arrangement").
The Company is not in default with respect to any material term or condition of
any Employment Arrangement, including, without limitation, after the giving of
notice, lapse of time or both. The Company is not delinquent in payments to any
of its employees for any wages, salaries, commissions, bonuses or other direct
compensation for any services performed for it to the date hereof or amounts
required to be reimbursed to such employees. Upon termination of the employment
of any of such employees, neither the Company nor Buyer would, by reason of the
transactions contemplated under this Agreement or anything done prior to the
Closing, be liable to any of such employees for so-called "severance pay" or any
other payments except as set forth in the LLC Agreement. The Company does not
have any policy, practice, plan or program of paying severance pay or any form
of severance compensation in connection with the termination of employment. The
Company is in compliance with all applicable laws and regulations respecting
labor, employment, fair employment practices, work place safety and health,
terms and conditions of employment, and wages and hours. There are no charges of
employment discrimination or unfair labor practices against or involving the
Company. There are no grievances, complaints or charges that have been filed
against the Company under any dispute resolution procedure that might have an
adverse effect on the Company or Buyer or the conduct of their respective
businesses, and there is no arbitration or similar proceeding pending and no
claim therefor has been asserted. The Company has in place all employee policies
required by applicable laws, rules and regulations, and there have been no
violations or alleged violations of any of such policies. None of the Company or
any of the Partners has received any information indicating that any of the
Company's employment policies or practices is currently being audited or
investigated by any federal, state or local government agency. The Company is,
and at all times since November 6, 1986 has been, in compliance with the
requirements of the Immigration Reform Control Act of 1986.
3.26 CODE OF ETHICS. The Company has a written policy regarding insider
trading and a Code of Ethics which complies with all applicable provisions of
Section 204A of the Advisers Act a copy of which has been delivered to Buyer
prior to the date hereof. All employees of the Company have executed
acknowledgments that they are bound by the provisions of such Code of Ethics and
insider trading policy. The policies of the Company with respect to avoiding
conflicts of interest are as set forth in the Company's Code of Ethics. There
have been no material
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violations or allegations of material violations of such Code of Ethics, insider
trading policy or conflicts policy.
3.27 CERTAIN REPRESENTATIONS AND WARRANTIES AS TO PRIVATE FUNDS.
(a) True, correct and complete copies of all of the current
investment advisory agreements and distribution or underwriting contracts,
administrative services and other services agreements, if any, and
organizational and offering documents, pertaining to each of the Private Funds
(i) will have been made available to Buyer prior to the Delivery Date and (ii)
are in full force and effect. Such offering materials did not, at the respective
dates thereof, or at any time at which such materials were distributed or made
available to investors or prospective investors, contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
(b) Each of the Private Funds is duly organized, validly
existing and in good standing in the jurisdiction in which it is organized and
has all requisite power and authority to conduct its business in the manner and
in the places where such business is currently conducted. Each Private Fund is
and, for the ten (10) years preceding the date hereof, has been engaged solely
in the business of investing and reinvesting in securities. Each Private Fund is
and, since its inception, has been in compliance with all Investment Laws and
Regulations to the extent such laws and regulations are applicable to, or
violation thereof could have a Material Adverse Effect on, such Private Fund.
(c) Each of the Private Funds has timely filed all Tax returns
and reports (including information returns, declarations and reports) (the
"Private Fund Tax Returns") required to be filed by it with any Taxing
Authorities for taxable periods ending after December 31, 1990 and has paid, or
withheld and paid over, all Taxes which were shown to be due on the Private Fund
Tax Returns. The information contained in such Private Fund Tax Returns is true,
correct and complete. With respect to each Private Fund, there are no
liabilities for Taxes which have not been paid in prior periods or for which an
adequate reserve for such liability does not exist. With respect to each Private
Fund, no claims have been or are being asserted by any Taxing Authorities with
respect to any Taxes and, to the knowledge of the Company and each Partner after
Due Inquiry, there are no threatened claims for Taxes.
(d) The Company has made available to Buyer true, correct and
complete copies of the audited financial statements, prepared in accordance with
GAAP, of each of the Private Funds for the past three fiscal years (each
hereinafter referred to as a "Private Fund Financial Statement"). Each of the
Private Fund Financial Statements is consistent with the books and records of
the applicable Private Fund, and presents fairly the consolidated financial
position of such Private Funds in accordance with GAAP applied on a consistent
basis (except as otherwise noted therein) at the respective date of such Private
Fund Financial Statement and the results of operations and cash flows for the
respective periods indicated, except in the case of the interim financial
statements which are subject to normal year-end adjustments which in the
aggregate are
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not material. The Private Fund Financial Statements reflect and disclose all
material changes in accounting principles and practices adopted by the
applicable Private Fund during the periods covered by each Private Fund
Financial Statement. The books of account of each of the Private Funds fairly
reflect their respective transactions.
(e) There are no special restrictions, consent judgments or
SEC orders on, or with regard to, any of the Private Funds. Since inception,
each of the Private Funds has been excluded from the definition of an investment
company under the Investment Company Act by virtue of Section 3(c)(1) thereof
and has been duly registered and in good standing under the laws of each
jurisdiction in which such qualification is necessary, except where the failure
to be duly registered and in good standing would not have a Material Adverse
Effect on the respective Private Fund or the Company.
(f) All interests of each of the Private Funds were sold
pursuant to a valid and effective exemption from registration under the
Securities Act and have been duly authorized and are validly issued. Each of the
Private Funds' investments have been made in accordance with its respective
investment policies and restrictions in effect at the time the investments were
made and have been held in accordance with its respective investment policies
and restrictions, to the extent applicable and in effect at the time such
investments were held.
(g) All consent solicitation materials to be prepared for use
by the Private Funds in connection with the transactions contemplated by this
Agreement at the time such information is provided or used, as then amended or
supplemented, in each case, will, insofar as it contains or consists of
information supplied by the Company or the Partners, be accurate and complete
and will not contain any untrue statement of a material fact, or omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
(h) There is no litigation or legal (or other) action, suit,
proceeding or investigation at law or in equity pending or, to the knowledge of
the Company and each Partner after Due Inquiry, threatened in any court or
before or by any governmental agency or instrumentality, department, commission,
board, bureau or agency, or before any arbitrator, by or against any of the
Private Funds. There are no judgments, injunctions, orders or other judicial or
administrative mandates outstanding against or affecting any of the Private
Funds.
(i) Each Private Fund has full right, authority and power to
enter into each Private Fund Management Agreement to which it is a party and to
carry out the transactions contemplated thereby. Each Private Fund Management
Agreement, when executed and delivered by the respective Private Fund, will
constitute the valid and binding obligation of such Private Fund, enforceable in
accordance with its terms. No such Private Fund Management Agreement will
violate any provision of the certificate of limited partnership or the
partnership agreement (or any other organizational document) of the respective
Private Fund (each as amended and/or restated to date) or will result in a
breach of, constitute a default under, accelerate any obligation under, or give
rise to a right of termination of any agreement, contract, instrument, lien,
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authorization, order, writ, judgment, injunction, decree or determination to
which the respective Private Fund is a party, or by which any property of such
respective Private Fund is bound or affected.
3.28 CERTAIN REPRESENTATIONS AND WARRANTIES AS TO THE MUTUAL FUNDS.
(a) True, correct and complete copies of all of the current
investment advisory agreements and distribution or underwriting contracts, plans
adopted pursuant to Rule 12b-1 under the Investment Company Act or arrangements
for the payment of service fees (as such term is defined in Rule 2830 of the
NASD Conduct Rules), and all administrative services and other services
agreements, if any (collectively, the "Mutual Fund Agreements"), pertaining to
each of the Mutual Funds and in effect on the date of this Agreement (i) have
been made available to Buyer prior to the date hereof and (ii) are in full force
and effect. As to each Mutual Fund, there has been in full force and effect an
investment advisory, sub-advisory, distribution or underwriting agreement (as
applicable) at all times since the inception of such Mutual Fund, and each
Mutual Fund Agreement pursuant to which the Company has received compensation
respecting its activities in connection with each of the Mutual Funds was duly
approved in accordance with the applicable provisions of the Investment Company
Act.
(b) There are no special restrictions, consent judgments or
SEC or judicial orders on or with regard to any of the Mutual Funds currently in
effect.
(c) Since inception, Tweedy, Browne Fund, Inc. has been a duly
registered investment company in material compliance with the Investment Company
Act and the rules and regulations promulgated thereunder and duly registered or
licensed and in good standing under the laws of each jurisdiction in which such
qualification is necessary, except where the failure to be duly registered and
in good standing will not and would not reasonably be expected to have a
Material Adverse Effect on the respective Mutual Fund or the Company. Since
their initial offering, shares of each of the Mutual Funds have been duly
qualified for sale under the securities laws of each jurisdiction in which they
have been sold or offered for sale at such time or times during which such
qualification was required, and, if not so qualified, the failure to so qualify
would not have a Material Adverse Effect on the respective Mutual Fund or the
Company. The offering and sale of shares of each of the Mutual Funds have been
registered under the Securities Act during such period or periods for which such
registration is required, the related registration statement has become
effective under the Securities Act, no stop order suspending the effectiveness
of any such registration statement has been issued and no proceedings for that
purpose have been instituted or, to the knowledge of the Company and each
Partner after Due Inquiry, are contemplated. Such registration statement under
the Investment Company Act and/or the Securities Act has, at all times when such
registration statement was effective, complied in all material respects with the
requirements of the Investment Company Act and the Securities Act then in effect
and neither such registration statement nor any amendments thereto contained at
the time such registration statement became effective, an untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading. Copies of the current
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<PAGE> 31
registration statement of Tweedy, Browne Fund, Inc. under the Investment Company
Act and/or the Securities Act have been made available to Buyer. All shares of
each of the Mutual Funds were sold pursuant to an effective registration
statement and have been duly authorized and are validly issued, fully-paid and
non-assessable. Each of the Mutual Funds' investments have been made in
accordance with its investment policies and restrictions set forth in its
registration statement in effect at the time the investments were made and have
been held in accordance with its respective investment policies and
restrictions, to the extent applicable and in effect at the time such
investments were held.
(d) All proxy statements to be prepared for use by Tweedy,
Browne Fund, Inc. in connection with the transactions contemplated by this
Agreement, the written information provided by the Mutual Funds to each Board of
Directors (or equivalent bodies) in connection with this Agreement or the
transactions contemplated hereby at the time such information is provided and,
in the case of a proxy statement, the date of the shareholder vote for which
such proxy statement will be used, as then amended or supplemented, in each
case, will, insofar as it contains or consists of information supplied by the
Company, be accurate and complete and will not contain any untrue statement of a
material fact, or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
(e) Each of the Mutual Funds has satisfied the relevant
requirements of the Code for all taxable years, or parts thereof, of such Mutual
Fund ending prior to the Closing as to its status as a regulated investment
company as defined in Sections 851-855 of the Code. Neither the Company nor, to
the knowledge of the Company and each Partner after Due Inquiry any of the
Mutual Funds has received any notice or other communication relating to or
affecting any Mutual Fund's compliance with any of these relevant requirements.
(f) Each of the Mutual Funds has timely filed all Tax returns
and reports (including information returns, declarations and reports) (the
"Mutual Fund Tax Returns") required to be filed by it with any Taxing
Authorities and has paid, or withheld and paid over, all Taxes which were shown
to be due on the Mutual Fund Tax Returns. The information contained in such
Mutual Fund Tax Returns is true, correct and complete. With respect to each
Mutual Fund, there are no liabilities for Taxes which have not been paid in
prior periods or for which an adequate reserve for such liability does not
exist. With respect to each Mutual Fund, no claims have been or are being
asserted by any Taxing Authorities with respect to any Taxes and, to the
knowledge of the Company and each Partner after Due Inquiry, there are no
threatened claims for Taxes.
(g) Neither the Company, any person who is an "affiliated
person" (as defined in the Investment Company Act) or any other "interested
person" of the Company (as defined in the Investment Company Act), receives or
is entitled to receive any compensation directly or indirectly (i) from any
person in connection with the purchase or sale of securities or other property
to, from or on behalf of any of the Mutual Funds, other than bona fide ordinary
compensation as principal underwriter for any of the Mutual Funds or as broker
in connection with
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the purchase or sale of securities in compliance with Section 17(e) of the
Investment Company Act, or (ii) from any of the Mutual Funds or its security
holders for other than bona fide investment advisory, administrative or other
services. Accurate and complete disclosure of all such compensation arrangements
has been made in the registration statement of Tweedy Browne Fund, Inc. filed
under the federal securities laws.
(h) The Company has made available to Buyer true, correct and
complete copies of the audited financial statements, prepared in accordance with
GAAP, of each of the Mutual Funds for the past three fiscal years (or such
shorter period as such Mutual Fund shall have been in existence), and unaudited
financial statements, prepared in accordance with GAAP, of each of the Mutual
Funds for the first six-months of its most recent fiscal year if the date of the
Mutual Fund's fiscal year end and six-month period financial statements (each
hereinafter referred to as a "Mutual Fund Financial Statement"). Each of the
Mutual Fund Financial Statements is consistent with the books and records of the
related Mutual Fund, and presents fairly the consolidated financial position of
the related Mutual Fund in accordance with GAAP applied on a consistent basis
(except as otherwise noted therein) at the respective date of such Mutual Fund
Financial Statement and the results of operations and cash flows for the
respective periods indicated. The Mutual Fund Financial Statements reflect and
disclose all material changes in accounting principles and practices adopted by
each of the Mutual Funds during the periods covered by each Mutual Fund
Financial Statement. The books of account pertaining to each of the Mutual Funds
fairly reflect their respective transactions.
(i) There is no litigation or legal (or other) action, suit,
proceeding or investigation at law or in equity pending or, to the knowledge of
the Company and each Partner after Due Inquiry, threatened in any court or
before or by any governmental agency or instrumentality, department, commission,
board, bureau or agency, or before any arbitrator, by or against any of the
Mutual Funds, or any officer or director thereof relating to the activities of
the Mutual Funds, any disqualification of the Company or any Partner under
Section 9(a) of the Investment Company Act, or any event which would require the
Company to give an affirmative response to any of the questions in Item 11 of
the Company's Form ADV (or any similar or successor form) or under Item 7 of the
Company's Form BD (or any similar or successor form). There are no judgments,
injunctions, orders or other judicial or administrative mandates outstanding
against or affecting any of the Mutual Funds or any officer or director thereof
relating to the activities of or affecting the Mutual Funds.
(j) Each Mutual Fund complies, and has been maintained in
compliance, in all material respects, with all applicable requirements,
including all reporting and disclosure requirements, prescribed by any and all
Investment Laws and Regulations and orders thereunder.
(k) The exhibit list in the current registration statement of
Tweedy Browne Fund, Inc. includes all of the documents that would be required to
be included thereon if such registration statement were being refiled.
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3.29 CERTAIN REPRESENTATIONS AND WARRANTIES AS TO THE OFFSHORE FUNDS
AND OFFSHORE RELATED PARTNERSHIPS.
(a) True, correct and complete copies of all of the current
investment advisory agreements and distribution or underwriting contracts,
arrangements for the payment of service fees, and all administrative services
and other services agreements, if any (collectively, the "Offshore Fund
Agreements"), pertaining to each of the Offshore Funds (i) will have been made
available to Buyer on or prior to the Delivery Date and (ii) are in full force
and effect. As to each Offshore Fund, there has been in full force and effect an
investment advisory, sub-advisory, distribution or underwriting agreement (as
applicable) at all times since the inception of such Offshore Fund, and each
Offshore Fund Agreement, pursuant to which the Company has received compensation
respecting its activities in connection with each of the Offshore Funds was duly
approved in accordance with the applicable provisions of the Investment Company
Act.
(b) There are no special restrictions, consent judgments or
orders of the SEC, the IML, the BMA or any other regulatory body under any
applicable Investment Laws and Regulations on or with regard to any of the
Offshore Funds or Offshore Related Partnerships currently in effect.
(c) Each of the Offshore Funds is duly organized, validly
existing and in good standing in the jurisdiction in which it is organized and
has all requisite power and authority to conduct its business in the manner and
in the places where such business is currently conducted. Each Offshore Fund is
and, since its inception has been, engaged solely in the business of an
investment company. Each Offshore Fund and Offshore Related Partnership is and,
since its inception has been, in compliance with all Investment Laws and
Regulations and orders thereunder.
(d) All offering materials used by the Offshore Funds and all
proxy or consent statements to be prepared for use by the Offshore Funds in
connection with the transactions contemplated by this Agreement, the written
information provided by the Company to each Board of Directors (or equivalent
bodies) of the Offshore Funds in connection with this Agreement or the
transactions contemplated hereby has been or will be accurate and complete and
has not or will not contain any untrue statement of a material fact, or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading or.
(e) None of the Offshore Funds is engaged in the conduct of a
trade or business in the United States (within the meaning of the Code). Each
Offshore Fund is a passive foreign investment company (within the meaning of the
Code) and is not a controlled foreign corporation (within the meaning of the
Code). Each of the Offshore Funds has in effect a QEF election. Each of the
Offshore Funds and the Related Offshore Partnerships has timely filed all Tax
returns and reports (including information returns, declarations and reports)
(the "Offshore Tax Returns") required to be filed by it with any Taxing
Authorities and has paid, or withheld and paid over, all Taxes which were shown
to be due on the Offshore Tax Returns. The information contained in
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such Offshore Tax Returns is true, correct and complete. With respect to each
Offshore Fund and Offshore Related Partnership, there are no liabilities for
Taxes which have not been paid in prior periods or for which an adequate reserve
for such liability does not exist. With respect to each Offshore Fund and
Offshore Related Partnership, no claims have been or are being asserted by any
Taxing Authorities with respect to any Taxes and, to the knowledge of the
Company and each Partner after Due Inquiry, there are no threatened claims for
Taxes.
(f) The Company has made available to Buyer true, correct and
complete copies of the audited financial statements, prepared in accordance with
GAAP, of each of the Offshore Funds and Offshore Related Partnerships for the
past three fiscal years (each hereinafter referred to as a "Offshore Financial
Statement"). Each of the Offshore Financial Statements is consistent with the
books and records of each of the Offshore Funds, and presents fairly the
consolidated financial position of each of the Offshore Funds in accordance with
GAAP applied on a consistent basis (except as otherwise noted therein) at the
respective date of such Offshore Financial Statements and the results of
operations and cash flows for the respective periods indicated. The Offshore
Financial Statements reflect and disclose all material changes in accounting
principles and practices adopted by the Offshore Funds and Offshore Related
Partnerships during the periods covered by each Offshore Financial Statement.
The books of account of each of the Offshore Funds fairly reflect their
respective transactions.
(g) There is no litigation or legal (or other) action, suit,
proceeding or investigation at law or in equity pending or, to the knowledge of
the Company and each Partner after Due Inquiry threatened in any court or before
or by any governmental agency or instrumentality, department, commission, board,
bureau or agency, or before any arbitrator, by or against any of the Offshore
Funds, or any officer or director thereof, relating to the activities of the
Offshore Funds, any disqualification of the Company an any Partner under Section
9(a) of the Investment Company Act, or any event which would require the Company
to give an affirmative response to any of the questions in Item 11 of the
Company's Form ADV (or any similar or successor form) or under Item 7 of the
Company's Form BD (or any similar or successor form). There are no judgements,
injunctions, orders or other judicial or administrative mandates outstanding
against or affecting any of the Offshore Funds or any officer or director
thereof, relating to the activities of or affecting the Offshore Funds.
(h) Each Offshore Fund complies, and has been maintained in
compliance, in all material respects, with all applicable requirements,
including all reporting and disclosure requirements, prescribed by any and all
Investment Laws and Regulations.
(i) Schedule 3.29(i) contains a true, complete and correct
list, as of the date hereof, of all contracts, agreements and commitments
written or oral, between any Offshore Fund and any Offshore Related Partnership
or by which one or more Offshore Funds and (or any of their respective
properties) one or more Offshore Related Partnerships (or any of their
respective properties) is bound as of the date hereof and such contracts,
agreements and commitments have been previously delivered by the Company and the
Partners to Buyer, and such contracts,
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agreements and commitments contain substantially the entire understanding
between the Offshore Funds and Offshore Related Partnerships with respect to the
subject matter thereof.
(j) Each Offshore Fund has full right, authority and power to
enter into amendments to each Offshore Management Agreement to which it is a
party in order to facilitate the transition contemplated by Section 5.7 of the
LLC Agreement and to carry out the transactions contemplated thereby (except to
the extent that certain provisions may be subject to subject to the receipt of
all necessary consents or approvals and the making of any necessary filings to
effect an amendment to the organizational documents of such Offshore Fund as
contemplated in Section 5.15). Each Offshore Management Agreement, at the time
the foregoing amendments are executed and delivered by the respective Offshore
Fund, will constitute a valid and binding obligation of such Offshore Fund,
enforceable in accordance with its terms (subject to the exception in the
foregoing sentence). No such Offshore Management Agreement will violate any
provision of the by-laws or articles of incorporation (or any other
organizational document) of the respective Offshore Fund (each as amended and/or
restated to date) or will result in a breach of, constitute a default under,
accelerate any obligation under, or give rise to a right of termination of any
agreement, contract, instrument, lien, authorization, order, writ, judgment,
injunction, decree or determination to which the respective Offshore Fund is a
party, or by which any property of such respective Offshore Fund is bound or
affected.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE PARTNERS.
As a material inducement to Buyer to enter into this Agreement and
consummate the transactions contemplated hereby, each Partner hereby makes to
Buyer each of the representations and warranties set forth in this Section 4
with respect to such Partner. No Partner shall have any right of indemnity or
contribution from the Company (or any other right against the Company) with
respect to the breach of any representation or warranty by any Partner
hereunder.
4.1 AUTHORITY. Such Partner has full right, authority, power and
capacity to enter into this Agreement and each contract or agreement
specifically referenced in, or executed and delivered by or on behalf of such
Partner pursuant to, or as contemplated by, this Agreement and to carry out the
transactions contemplated hereby and thereby. This Agreement and each contract
or agreement, specifically referenced in, or executed and delivered by such
Partner pursuant to, this Agreement constitutes, or when executed and delivered
will constitute, a valid and binding obligation of such Partner, enforceable
against such partner in accordance with its respective terms. The execution,
delivery and performance of this Agreement and each such agreement, contract,
document and instrument:
(a) does not and will not violate any provision of any laws of
the United States or any state or other jurisdiction applicable to such Partner,
or require such Partner to obtain any approval, consent or waiver from, or make
any filing with, any person or entity (governmental or otherwise) that has not
been obtained or made; and
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(b) does not and will not result in a breach of, constitute a
default under, accelerate any obligation under, or give rise to a right of
termination of, any agreement, contract, instrument, mortgage, lien, lease,
permit, authorization, order, writ, judgment, injunction, decree, determination
or arbitration award to which such Partner is a party or by which the property
of such Partner is bound or affected.
4.2 OWNERSHIP OF LLC INTERESTS. After giving effect to the Conversion
and the Closing, such Partner will be the record and beneficial owner of an
interest in the LLC, free and clear of any Claims other than restrictions
imposed pursuant to the LLC Agreement, in an amount set forth opposite his name
in Schedule 1.1. Such interest will constitute all the interests in the LLC or
rights in connection with interests in the LLC which are then held by such
Person, directly or indirectly.
4.3 FINDER'S FEE. Except for fees to Goldman, Sachs & Co., which fees
will be paid by the Partners, such Partner has not incurred or become liable for
any broker's commission or finder's fee relating to or in connection with the
transactions contemplated by this Agreement.
4.4 INVESTMENT ADVISORY AND BROKERAGE REPRESENTATION. Except as set
forth in Schedule 4.4, such Partner does not serve as an investment adviser
(within the meaning of the Advisers Act) or broker or dealer (within the meaning
of Exchange Act) to, or provide, directly or indirectly, Investment Management
Services or Brokerage Services to, any person or entity, other than on behalf of
the Company pursuant to an agreement between the Company and a Client thereof.
4.5 AGREEMENTS. There are no agreements, including without limitation,
non-competition, trade secret or confidentiality agreements, not contained
herein or disclosed in a Schedule hereto, to which such Partner is a party
relating to the business of the Company or the LLC or to such Partner's rights
and obligations as a partner, member, director, officer or employee of the
Company.
4.6 EMPLOYMENT DATA. Such Partner's date of birth and date of
commencement of employment with the Company are both accurately reflected in
Schedule 4.6 hereto.
SECTION 5. COVENANTS OF THE COMPANY AND THE PARTNERS.
5.1 MAKING OF COVENANTS AND AGREEMENTS. The Company and each Partner
hereby makes the covenants and agreements set forth in this Section 5 and the
Partners agree to cause the Company to comply with such agreements and
covenants. No Partner shall have any right of indemnity or contribution from the
Company (or any other right against the Company) with respect to the breach of
any covenant or agreement by the Company or any Partner hereunder.
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5.2 CLIENT CONSENTS AND APPROVALS.
(a)
(i) As soon as practicable after the date hereof, but
in any event prior to August 9, 1997, the Company shall notify each of
its Clients (excluding for these purposes the Mutual Funds, Offshore
Funds and Private Funds and shareholders or partners thereof and
Clients who are Clients solely with respect to Brokerage Services) of
the transactions contemplated hereby and by the other agreements,
documents and instruments contemplated hereby. Such notice shall be in
the form of Exhibit 5.2A hereto with respect to those Clients
(excluding for these purposes the Mutual Funds, Offshore Funds and
Private Funds and Clients who are Clients solely with respect to
Brokerage Services) whose contracts require affirmative written consent
for their assignment, and in the form of Exhibit 5.2B with respect to
those Clients (excluding for these purposes the Mutual Funds, Offshore
Funds and Private Fund and Clients who are Clients solely with respect
to Brokerage Services) whose contracts do not require affirmative
written consent for their assignment (in each case, with such changes
to Exhibit 5.2A and Exhibit 5.2B as may be agreed to by Buyer).
(ii) On or prior to September 5, 1997, the Company
shall send to each Client who was sent, but who has not by such date
returned, the notice in substantially the form of Exhibit 5.2A or
Exhibit 5.2B hereto countersigned indicating approval of the
transactions contemplated hereby, an additional notice in the form of
Exhibit 5.2C (with such changes thereto as may be agreed to by Buyer).
(b) With respect to the Offshore Funds, the Company and the
Partners shall use all commercially reasonable efforts to obtain such Consents
from regulatory authorities or investors as may be necessary or appropriate and
satisfactory to Buyer to permit consummation of the transactions contemplated
hereby.
(c) With respect to the Mutual Funds, the Company and the
Partners shall use all commercially reasonable efforts to cause each of the
Mutual Funds to call a meeting of its shareholders to consider, and to solicit
its shareholders with regard to, approval of the investment advisory agreement
with the LLC contemplated under Section 8.3(b), to be in effect at and after the
Closing, consistent with all of the requirements of federal securities laws
applicable to such solicitation.
(d) With respect to the Private Funds, the Company and the
Partners shall use all commercially reasonable efforts to obtain such Consents
from regulatory authorities or investors as may be necessary or appropriate and
satisfactory to Buyer to permit consummation of the transactions contemplated
hereby.
(e) The Company and the Partners shall use all commercially
reasonable efforts to obtain Consents from the Company's Clients in the manner
contemplated by this Section 5.2.
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5.3 FILINGS AND REGULATORY AUTHORIZATIONS.
(a) The Company and each of the Partners will cause the
Company to: (i) file, as soon as practicable after the date hereof, and in any
event prior to August 22, 1997, with the SEC, a Uniform Application for
Investment Adviser Registration on Form ADV to register the LLC as an investment
adviser under the Advisers Act; (ii) file the appropriate applications for
investment adviser registration as soon as practicable with all other
jurisdictions in which the Company is registered as an investment adviser and in
each other jurisdiction where it is necessary or desirable for the LLC to be
registered as an investment adviser in order to conduct its business (including,
without limitation, the business currently conducted by the Company) after the
Conversion and the Closing; (iii) file, as soon as practicable after the date
hereof, and in any event prior to August 22, 1997, with the Central Registration
Depository Operated by the NASD a Uniform Application for Broker-Dealer
Registration on Form BD to register the LLC as a broker-dealer under the
Exchange Act; and (iv) file the appropriate applications for broker-dealer
registration as soon as practicable with all other jurisdictions in which the
Company is registered as a broker-dealer and in each other jurisdiction where it
is necessary or desirable for the LLC to be registered as a broker-dealer in
order to conduct its business (including, without limitation, the business
currently conducted by the Company) after the Conversion and the Closing;
provided, however, that, upon advice of counsel to the Company and Buyer, the
Company and Buyer may elect to rely on successor registration provisions or the
continuance of the Company's current registrations under applicable laws, in
which case such successor or continuance filings shall be made as of the
Closing.
(b) The Partners and the Company will use all commercially
reasonable efforts to cause all applicable Employees to file, as soon as
practicable after the date hereof, such applications for licensing, registration
or qualification (i) of investment adviser representatives (within the meaning
of Rule 203A-3(a) under the Advisers Act) in each jurisdiction where such
applicable investment adviser representative has a place of business (within the
meaning of Rule 203A-3(b) under the Advisers Act) and such licensing,
registration or qualification is necessary in order to conduct the business of
the Company as currently conducted and (ii) of registered representatives,
principals and associated persons with the SEC, the NASD and in each
jurisdiction where such licensing, registration or qualification is necessary in
order to conduct the business of the Company in the manner conducted by the
Company as of the date of this Agreement; provided, however, that, upon advice
of counsel to the Company and Buyer, the Company and Buyer may elect to rely on
successor registration provisions or the continuance of the Company's current
registrations under applicable laws, in which case such successor or continuance
filings shall be made as of the Closing.
(c) The Company and each of the Partners will use all
commercially reasonable efforts to cause the Mutual Funds to prepare and file a
proxy statement and related materials with respect to a meeting of the
shareholders of the Mutual Funds, as contemplated by Section 5.2(c), as soon as
practical following the execution of this Agreement.
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(d) Prior to the Closing, the Partners will use all
commercially reasonable efforts to (i) cause the Company to inform the IML of
the transactions contemplated herein and provide the IML with a draft
publication describing the transaction and (ii) obtain such additional consents
and approvals as may be necessary and appropriate and satisfactory to Buyer in
connection with the consummation of the transactions contemplated hereby; and as
promptly as possible, but no more than seven (7) days after the Closing, the
Partners shall provide to the shareholders of the Offshore Funds, a copy of the
publication referred to above.
(e) Prior to the Closing, the Partners will use all
commercially reasonable efforts to obtain such BMA approval or and/or file such
notice with the BMA as may be necessary under applicable law, and/or obtain such
shareholder approval as may be necessary or appropriate and satisfactory to
Buyer in connection with the consummation of the transactions contemplated
hereby.
(f) The Company and each of the Partners will cause the
Company to make any additional filings necessary to obtain approvals in
connection with securing for the LLC the benefits of memberships and
registrations on Schedule 3.18(c).
(g) The Company and each of the Partners will use all
commercially reasonable efforts to cause the LLC to obtain all authorizations,
consents, orders and approvals of self-regulatory organizations, federal, state
and local regulatory bodies and officials that may be or become necessary for
their respective execution and delivery of, and the performance of their
respective obligations pursuant to, this Agreement and the other agreements,
documents and instruments contemplated hereby, and for the LLC to conduct the
business of the Company in the manner conducted by the Company as of the date of
this Agreement.
5.4 AUTHORIZATION FROM OTHERS. The Company and each of the Partners
will use all commercially reasonable efforts to obtain all authorizations,
consents, approvals, waivers and permits of others required to permit the
consummation by the Partners and the Company of the transactions contemplated by
this Agreement.
5.5 CONDUCT OF BUSINESS. Between the date of this Agreement and the
Closing, without the prior written consent of Buyer:
(a) the Company will conduct its business only in the ordinary
course of business, and consistent with past policies, procedures and practices;
(b) the Company shall not take any action or omit to take any
action if such action or omission would require the consent of Buyer as Manager
Member under Section 3.1(g) of, would be prohibited under, or would be a
violation of, the LLC Agreement if the LLC Agreement were in effect at the time;
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(c) the Company will not make or incur any obligation to make
a change in its Organizational Documents or authorized or issued capital or
interests, except as is contemplated hereunder with respect to the Conversion
and the LLC Agreement;
(d) the Company will not (and each Partner will cause the
Company not to) declare, set aside or pay any dividend or distribution, make (or
incur an obligation to make) any other distribution in respect of its capital or
interests or make (or incur an obligation to make) any direct or indirect
redemption, purchase or other acquisition of its stock or interests if as a
result of such dividend, distribution, redemption, purchase or acquisition, the
Company would be unable to satisfy the conditions set forth in Section 8.13;
(e) the Company will (and each Partner will cause the Company
to) use all commercially reasonable efforts to prevent any change with respect
to its management and supervisory personnel;
(f) the Company will (and each Partner will cause the Company
to) have in effect and maintain at all times all insurance of the kind, in the
amount and with the insurers set forth in Schedule 3.19 hereto or equivalent
insurance with any substitute insurers approved in writing by Buyer;
(g) The Company will not (and each Partner will not and will
cause the Company not to) enter into any agreement or understanding in
connection with any of the matters in paragraphs (a) through (f) above.
5.6 FINANCIAL STATEMENTS. Until the Closing, the Company will furnish
Buyer with copies of unaudited monthly financial information, in such form and
method of presentation as reasonably acceptable to Buyer.
5.7 PRESERVATION OF BUSINESS AND ASSETS. Until the Closing, the Company
and each of the Partners shall use all commercially reasonable efforts to: (a)
preserve the current business of the Company, (b) maintain the present Clients
of the Company, in each case, on terms that are at least as favorable as the
terms of the agreement between the Company and the relevant Client as in effect
on the date hereof, (c) preserve the goodwill of the Company, and (d) preserve
any Licenses required for, or useful in connection with, the business of the
Company (including without limitation all investment adviser and broker-dealer
registrations and all memberships or similar privileges in exchanges or
self-regulatory organizations). In addition, none of the Partners shall take any
material action not in the ordinary course of business relating to the Company
or which might have a material effect on the transactions contemplated hereby,
without the prior consent of Buyer.
5.8 ACCESS. The Company shall afford to Buyer and its representatives
and agents free access, during normal business hours and with reasonable notice,
to the properties and records of the Company in order that Buyer may have full
opportunity to make such investigation as it shall desire for purposes
consistent with this Agreement. The Company shall afford, or use all
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commercially reasonable efforts to cause to be afforded, to Buyer and its
representatives and agents free access, during normal business hours and with
reasonable notice, to the properties and records of the Private Funds, the
Mutual Funds, the Offshore Funds and the Offshore Related Partnerships in order
that Buyer may have full opportunity to make such investigation as it shall
desire for purposes consistent with this Agreement.
5.9 CONSUMMATION OF AGREEMENT. The Company and each of the Partners
shall use all commercially reasonable efforts to perform and fulfill all
conditions and obligations to be performed and fulfilled by each of them under
this Agreement, to the end that the transactions contemplated by this Agreement
shall be fully carried out. During the period from the date of this Agreement
and continuing through the Closing, except as required by applicable law or with
the prior written consent of Buyer, neither the Company nor any of the Partners
shall take any action which, or fail to take any action the failure of which to
be taken, would, or could reasonably be expected to: (a) result in any of the
representations and warranties of the Partners set forth in this Agreement being
or becoming untrue in any respect that would cause Section 8.2 not to be
satisfied; (b) result in any conditions to the Closing set forth in Section 8
not being satisfied; or (c) result in a material violation of any provision of
this Agreement.
5.10 COOPERATION OF THE COMPANY AND PARTNERS. The Company and each of
the Partners shall cooperate with all reasonable requests of Buyer and Buyer's
counsel in connection with the preparation of Schedules and due diligence
investigations contemplated in Section 1.7 hereof and the consummation of the
transactions contemplated hereby and the preparation and filing of a
registration statement or statements (including any supplements or amendments
thereto) with respect to Buyer or securities issued or to be issued by Buyer.)
Each Partner shall cooperate with Buyer in causing the Company to make an
election under Section 754 of the Code with respect to its taxable year ended on
the date of the Closing.
5.11 NO SOLICITATION OF OTHER OFFERS. Until the termination of this
Agreement pursuant to Section 10.1, none of the Company, any of the Partners, or
any of their representatives will, directly or indirectly, solicit, encourage,
assist, initiate discussions or engage in negotiations with, provide any
information to, or enter into any agreement or transaction with, any person,
other than Buyer, relating to the possible acquisition of any equity interests
of the Company, or any of the assets of the Company.
5.12 CONFIDENTIALITY. The Company and the Partners agree that, unless
and until the Closing has been consummated, each of the Company, the Partners
and their officers, partners, members, agents and representatives will hold in
strict confidence, and will not use, any confidential or proprietary data or
information obtained from Buyer with respect to its business or financial
condition except for the purpose of evaluating, negotiating and completing the
transaction contemplated hereby. Information generally known in Buyer's industry
or which has been disclosed to the Company or the Partners by third parties
which have a right to do so shall not be deemed confidential or proprietary
information for purposes of this Agreement. If the transactions contemplated by
this Agreement are not consummated, the Company and the Partners will return,
and cause their respective officers, directors, members, agents and
representatives to
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return, to Buyer (or certify that they have destroyed) all copies of such data
and information, including but not limited to financial information, customer
lists, business and corporate records, worksheets, test reports, tax returns,
lists, memoranda, and other documents prepared by or made available to the
Company or the Partners (and their officers, directors, members, agents and
representatives) in connection with the transaction.
5.13 POLICIES AND PROCEDURES. The Company and the Partners shall, and
shall cause the Employees of the Company to, cooperate with and assist in such
compliance audits and regulatory reviews as may reasonably be requested by
Buyer.
5.14 NOTIFICATION OF CERTAIN MATTERS. The Partners shall give prompt
notice to Buyer of (a) the occurrence, or failure to occur, of any event or
existence of any condition that has caused or could reasonably be expected to
cause any of their representations or warranties contained in this Agreement to
be untrue or inaccurate in any material respect at any time after the date of
this Agreement, up to and including the Closing Date, and (b) any failure on its
part to comply with or satisfy, in any material respect, any covenant, condition
or agreement to be complied with or satisfied by it under this Agreement.
5.15 AMENDMENT OF OFFSHORE FUND ORGANIZATIONAL DOCUMENTS. As promptly
as practicable (which may be following the Closing), the Company and the
Partners shall use all commercially reasonable efforts to cause each Offshore
Fund to amend its organizational documents (and obtain all necessary consents
and approvals in connection therewith) to permit the modification of the
formulas for determination and payment of the Performance Increment thereunder
as, when and to the extent contemplated by the Offshore Management Agreements
and Section 5.7 of the LLC Agreement.
5.16 NON-SOLICITATION/NON-DISCLOSURE AGREEMENTS. Each Partner shall use
all commercially reasonable efforts to cause (a) Robert Q. Wyckoff, Jr. and
Thomas Shrager to enter into a Non-Solicitation/Non-Disclosure Agreement with
the Company in the form attached hereto as Exhibit 5.16, (each, a
"Non-Solicitation Agreement" and collectively, the "Non-Solicitation
Agreements") and (b) each such Non-Solicitation Agreement to be in full force
and effect for the benefit of the LLC at the Closing.
SECTION 6. REPRESENTATIONS AND WARRANTIES OF BUYER.
6.1 MAKING OF REPRESENTATIONS AND WARRANTIES. As a material inducement
to the Company and the Partners to enter into this Agreement and consummate the
transactions contemplated hereby, Buyer hereby makes the representations and
warranties to the Company and the Partners contained in this Section 6.
6.2 ORGANIZATION OF BUYER. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
with full corporate power and authority to own or lease its properties and to
conduct its business in the manner and in the places where such properties are
owned or leased or such business is conducted by it.
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6.3 AUTHORITY OF BUYER. Buyer has full right, authority and power to
enter into this Agreement, the LLC Agreement, and each other contract or
agreement specifically referenced in, or to be executed and delivered by Buyer
pursuant to, or as contemplated by, this Agreement and to carry out the
transactions contemplated hereby and thereby. The execution, delivery and
performance by Buyer of this Agreement, the LLC Agreement and each such other
contract or agreement have been duly authorized by all necessary corporate
action of Buyer and no other corporate action on the part of Buyer is required
in connection therewith. This Agreement, the LLC Agreement and each other
contract or agreement specifically referenced in, or executed and delivered by
Buyer pursuant to, this Agreement constitute, or when executed and delivered
will constitute, valid and binding obligations of Buyer enforceable in
accordance with their terms. The execution, delivery and performance by Buyer of
this Agreement, the LLC Agreement and each such other contract or agreement:
(a) does not violate any provision of the Certificate of
Incorporation or By-laws of Buyer, each as amended to date;
(b) does not violate any laws of the United States or of any
state or any other jurisdiction applicable to Buyer or require Buyer to obtain
any approval, consent or waiver of, or make any filing with, any person or
entity (governmental or otherwise) which has not been obtained or made; and
(c) does not result in a breach of, constitute a default
under, accelerate any obligation under, or give rise to a right of termination
of, any agreement, contract, instrument, mortgage, lien, lease, permit,
authorization, order, writ, judgment, injunction, decree, determination or
arbitration award to which Buyer is a party or by which any property of Buyer is
bound or affected and which is material to the business and financial condition
of Buyer and its affiliated organizations on a consolidated basis.
6.4 LITIGATION. There is no litigation pending or, to its knowledge
after Due Inquiry, threatened against Buyer which would prevent or hinder the
consummation of the transactions contemplated by this Agreement.
6.5 FINDER'S FEE. Buyer has not incurred or become liable for any
broker's commission or finder's fee relating to or in connection with the
transactions contemplated by this Agreement.
6.6 INVESTMENT INTENT. The Purchased LLC Interest will be acquired by
Buyer for investment for Buyer's own account, and Buyer has no present intention
of selling, granting participation in, or otherwise distributing the same. Buyer
represents and warrants that it is an "accredited investor" within the meaning
of Rule 501 promulgated by the SEC under the Securities Act.
6.7 FINANCIAL STATEMENTS. Buyer has delivered to the Company the
following financial statements, copies of which are attached hereto as Schedule
6.7:
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(a) Audited balance sheets of Buyer at December 31, 1994,
December 31, 1995 and December 31, 1996, and unaudited statements of income,
retained earnings and cash flows for each of the three (3) years then ended.
(b) All of the foregoing financial statements have been
prepared in accordance with GAAP using the accrual method of accounting, applied
consistently during the periods covered thereby are complete and correct to the
knowledge of Buyer after Due Inquiry, and present fairly the financial condition
of Buyer at the dates of such statements and the results of its operations for
the periods covered thereby (except that Buyer's unaudited financial statements
do not include footnote disclosure or year-end adjustments).
6.8 COMPLIANCE WITH LAWS. Buyer and each of its Controlled Affiliates
is, and at all times has been, in material compliance with all laws and
governmental rules and regulations, domestic or foreign to the extent applicable
to the activities of Buyer or such Controlled Affiliate, including, without
limitation: the Advisers Act, the Investment Company Act, the Exchange Act,
ERISA, the Commodity Exchange Act and the Securities Act and the regulations
promulgated under each of them, except where the failure to so comply could not
reasonably be expected to have a Material Adverse Effect on Buyer and its
Controlled Affiliates taken as a whole.
SECTION 7. COVENANTS OF BUYER.
7.1 MAKING OF COVENANTS AND AGREEMENT. Buyer hereby makes the covenants
and agreements set forth in this Section 7.
7.2 CONFIDENTIALITY. Buyer agrees that, unless and until the Closing
has been consummated, each of Buyer and its officers, directors, agents and
representatives will hold in strict confidence, and will not use, any
confidential or proprietary data or information obtained from the Company or the
Partners with respect to its business or financial condition except for the
purpose of evaluating, negotiating and completing the transaction contemplated
hereby and except for disclosures to Buyer's lenders and other financing sources
and except to the extent necessary or appropriate in connection with the
preparation and filing with the SEC of a registration statement or statements
(including any supplements or amendments thereto) with respect to Buyer or
securities issued or to be issued by Buyer. Information generally known in the
Company's industry or which has been disclosed to Buyer by third parties which
have a right to do so shall not be deemed confidential or proprietary
information for purposes of this Agreement. If the transactions contemplated by
this Agreement are not consummated, Buyer will return, and will cause its
officers, directors, agents and representatives to return, to the Company (or
certify that they have destroyed) all copies of such data and information,
including but not limited to financial information, customer lists, business and
corporate records, worksheets, test reports, tax returns, lists, memoranda, and
other documents prepared by or made available to Buyer (and its officers,
directors, agents and representatives) in connection with the transaction.
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7.3 CONSUMMATION OF AGREEMENT. Buyer shall use all commercially
reasonable efforts to perform and fulfill all conditions and obligations to be
performed and fulfilled by each of them under this Agreement, to the end that
the transactions contemplated by this Agreement shall be fully carried out.
During the period from the date of this Agreement and continuing through the
Closing, except as required by applicable law or with the prior written consent
of the Company, Buyer shall not take any action which, or fail to take any
action the failure of which to be taken, would, or could reasonably be expected
to: (a) result in any of the representations and warranties of the Company set
forth in this Agreement being or becoming untrue in any respect that would cause
Section 9.2 not to be satisfied; (b) result in any conditions to the Closing set
forth in Section 9 not being satisfied; or (c) result in a material violation of
any provision of this Agreement.
7.4 COOPERATION OF BUYER. Buyer shall cooperate with all reasonable
requests of the Company and the Company's counsel in connection with the
consummation of the transactions contemplated hereby.
7.5 NOTIFICATION OF CERTAIN MATTERS. Buyers shall give prompt notice to
Partners of (a) the occurrence, or failure to occur, of any event or existence
of any condition that has caused or could reasonably be expected to cause any of
their representations or warranties contained in this Agreement to be untrue or
inaccurate in any material respect at any time after the date of this Agreement,
up to and including the Closing Date, and (b) any failure on its part to comply
with or satisfy, in any material respect, any covenant, condition or agreement
to be complied with or satisfied by it under this Agreement.
SECTION 8. CONDITIONS TO THE OBLIGATIONS OF BUYER.
The obligation of Buyer to consummate this Agreement and the
transactions contemplated hereby are subject to the fulfillment (or waiver by
Buyer), prior to or at the Closing, of the following conditions precedent:
8.1 LITIGATION; NO OPPOSITION. No judgment, injunction, order or decree
enjoining or prohibiting any of Buyer, the Company or any of the Partners or
other parties to this Agreement or any of the agreements, documents and
instruments contemplated hereby, from consummating the transactions contemplated
hereby or thereby, shall have been entered and no suit, action or proceeding
shall be pending or threatened at any time prior to or on the date of the
Closing before or by any court or governmental body seeking to restrain or
prohibit, or seeking damages or other relief in connection with, the execution
and delivery of this Agreement or any of the agreements, documents and
instruments contemplated hereby, or the consummation of the transactions
contemplated hereby or thereby or which could be expected to have an adverse
effect on the LLC or Buyer.
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8.2 REPRESENTATIONS, WARRANTIES AND COVENANTS.
(a) Each of the representations and warranties of each of the
Partners (or made by any person authorized by them to make representations on
their behalf) contained in this Agreement and in any Schedule or Exhibit
attached hereto and in each other contract, agreement, or certificate
contemplated hereby shall be true, correct and complete (i) in all material
respects as of the date of this Agreement and (ii) in all material respects as
of the Closing Date as though made on and as of the Closing Date (except to the
extent such representations and warranties speak as of or are limited to an
earlier date); provided, however, that solely for purposes of determining the
satisfaction of the conditions contained in this Section 8.2(a) and not for
purposes of determining liability under Section 12 hereof or otherwise, no
effect shall be given to any exception in such representations and warranties
relating to knowledge, materiality, or a Material Adverse Effect, and such
representations and warranties shall be deemed to be true, correct and complete
in all material respects only if the failure or failures of such representations
and warranties to be so true, correct and complete without regard to knowledge,
materiality, and Material Adverse Effect exceptions do not represent in the
aggregate a Material Adverse Effect on the Company or Buyer, and except that:
(i) the representations of Sections 3.2(a) and 3.3(b)
shall be made as of the time immediately prior to the Conversion,
instead of as of the Closing;
(ii) the representations in Section 3.7 shall also be
made with respect to assets under management and contracts as of a date
which is no more than ten (10) days prior to the Closing, instead of
being made with respect to assets under management and contracts as of
the date of the Closing;
(iii) as contemplated by the definition of "Company,"
all representations made with respect to the Company as of the date of
this Agreement (except the representations in Sections 3.2(a) or
3.3(b)) shall be made at the Closing with respect to the LLC as the
continuation by Conversion of the Company.
Each and all of the agreements, covenants, obligations and conditions to be
performed, complied with or satisfied by the Company (including without
limitation by the LLC as the continuation by conversion of the Company) and each
of the Partners hereunder and under the other contracts and agreements
contemplated hereby at or prior to the Closing shall have been duly performed,
complied with or satisfied.
(b) Each of the Partners shall represent to Buyer that each of
the following representations and warranties is true, correct and complete in
all material respects upon effectiveness of the Conversion and at the Closing
(or immediately prior to the Closing, if so specified below); provided, however,
that solely for purposes of determining the satisfaction of the conditions
contained in this Section 8.2(b) and not for purposes of determining liability
under Section 12 hereof or otherwise, no effect shall be given to any exception
in such representations and warranties relating to knowledge, materiality, or a
Material Adverse Effect, and such
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representations and warranties shall be deemed to be true, correct and complete
in all material respects only if the failure or failures of such representations
and warranties to be so true, correct and complete without regard to knowledge,
materiality, and Material Adverse Effect exceptions do not represent in the
aggregate a Material Adverse Effect on the Company or Buyer.
(i) The LLC is a limited liability company duly
formed, validly existing and in good standing under the laws of the
State of Delaware, with full power and authority under the Delaware Act
and the LLC Agreement to own or lease its properties and to conduct its
business in the manner and in the places where such properties are
owned or leased or such business is conducted or proposed to be
conducted. The copies of the LLC Agreement, certified by the Secretary
of the LLC, and of the Certificate of Conversion and Certificate of
Formation, certified by the Secretary of State of the State of
Delaware, delivered at the Closing are complete and correct, and no
amendments thereto are pending.
(ii) All contracts described in Schedule 3.6(a),
Schedule 3.7, and Schedule 3.15 remain valid and effective in
accordance with their respective terms (except, with respect to
contracts set forth in Schedule 3.7 as to which Consent has not been
provided) with the LLC having succeeded to all the obligations of the
Company thereunder, and the LLC is entitled to all rights and remedies
thereunder to which the Company is entitled on the date of this
Agreement, or such contract has been replaced by a Comparable Contract.
(iii) The LLC has all Licenses required from
self-regulatory bodies and from foreign, federal, state or local
authorities in order for the LLC to conduct the business being
conducted by the Company immediately prior to the Conversion, except to
the extent failure to be so licensed or qualified would not have a
Material Adverse Effect on the Company. Neither the Company nor the LLC
is subject to any limitation imposed in connection with one or more of
the Licenses which could have a Material Adverse Effect on the
condition (financial or otherwise), properties, assets, liabilities,
business, operations or prospects of the Company, the LLC or Buyer.
(iv) Each insurance policy or bond listed in Schedule
3.19 or equivalent policies or bonds are in full force and effect, with
the LLC as the sole owner and beneficiary of each such policy and bond.
(v) All proxy statements to be prepared for use by
Tweedy, Browne Fund, Inc. in connection with the transactions
contemplated by this Agreement, the written information provided by the
Mutual Funds to each Board of Directors in connection with this
Agreement or the transactions contemplated hereby at the time such
information was provided and, in the case of a proxy statement, the
date of the shareholder vote for which such proxy statement was used,
as then amended or supplemented, in each case, insofar as it contains
or consists of information supplied by the Company, has been accurate
and complete and has not contained any untrue statement of a material
fact, or omitted to state
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any material fact (a) required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under
which they were made, not misleading or (b) necessary to correct any
statement in any earlier communication that had become false or
misleading.
(vi) All offering materials used by the Offshore
Funds and all proxy or consent statements to prepared for use by the
Offshore Funds in connection with the transactions contemplated by this
Agreement, the written information provided by the Company to each
Board of Directors (or equivalent bodies) of the Offshore Funds in
connection with this Agreement or the transactions contemplated hereby
has been accurate and complete and has not contained any untrue
statement of a material fact, or omitted to state any material fact (a)
required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading or (b) necessary to correct any statement in any earlier
communication that had become false or misleading.
(c) Each of the Partners shall represent to Buyer that each of
the following representations is true and correct in all material respects:
(i) Upon effectiveness of the Conversion and
immediately prior to the Closing, the Partners are the sole members of
the LLC. After giving effect to the Conversion and the Closing, the
capitalization of the LLC is as set forth in Schedule 8.2 hereto (with
respect to both capital and profits interests), with all such interests
owned beneficially and of record by the entities and in the amounts
indicated in such Schedule 8.2 in each case, free and clear of any
Claims (other than restrictions imposed pursuant to the LLC Agreement).
After giving effect to the Conversion and the Closing, all outstanding
interests in the LLC have been duly authorized and issued under the LLC
Agreement and are fully paid and (except, as to the Non-Manager
Members, in connection with the Offshore Fund Adjustment and, as to all
Members, in connection with the establishment of reserves in accordance
with the provisions of the LLC Agreement) non-assessable. After giving
effect to the Conversion and the Closing, Buyer is the sole Manager
Member (as such term is defined in the LLC Agreement) and manager (as
such term is defined in the Delaware Act) of the LLC, and Buyer will
have good title to its interest in the LLC, as shown in Schedule 8.2.
Except as set forth in this Agreement or in the LLC Agreement, there
are no rights, commitments, agreements or understandings obligating or
which might obligate the LLC, the Company, any of the Partners or, to
the knowledge of the Company and each Partner, any other Person, to
issue, transfer, sell or redeem any securities or interests in the LLC.
Each Partner will be or is the record and beneficial owner of the
interests in the LLC shown as owned by it in Schedule 8.2 hereof, in
each case free and clear of any Claims other than restrictions imposed
pursuant to the LLC Agreement. The interests in the LLC shown as owned
by each Partner in Schedule 8.2 hereof constitute all the interests in
the LLC or rights in connection with interests in the LLC which are
held by such Person, directly or indirectly; and
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(ii) All of the accounts receivable of the Company
included in the Company's net worth or working capital for purposes of
Section 8.13 of this Agreement are enforceable and any reserves for
noncollectibility included in such net worth or working capital are
adequate under the requirements of GAAP.
(d) Each Partner shall have furnished Buyer with a certificate
dated as of the date of the Closing to the foregoing effect.
8.3 CLIENT CONSENTS AND APPROVALS.
(a) Clients of the Company whose advisory agreements provide
for the payment of fees constituting Gross Revenues calculated as of August 31,
1997 under Section 1.2(d) equal to at least ninety percent (90%) of Gross
Revenues calculated as of June 30, 1997 shall have Consented to the transactions
contemplated hereby, and advisory agreements which represent at least ninety
percent (90%) of the Gross Revenues calculated as of June 30, 1997 shall survive
the Conversion and the Closing and then be in full force and effect (or be
replaced by Comparable Contracts which are then in full force and effect).
(b) The Company shall have obtained Consent from each Mutual
Fund.
(c) At the Closing, the Company shall deliver a certificate
representing that Schedule 1.2 hereto is true, complete and correct and
certifying as to the calculation of the LLC Interest Purchase Price pursuant to
Section 1.2 and compliance with the foregoing, which certificate shall include
the calculation of compliance, including a list in the form of Schedule 3.7 of
all investment management or advisory contracts as of the date of calculation,
including all the categories of information set forth in Schedule 3.7.
8.4 REGISTRATION AS AN INVESTMENT ADVISER AND REGISTRATION OF
INVESTMENT ADVISER REPRESENTATIVES.
(a) The LLC shall be registered as an investment adviser under
the Advisers Act and the rules and regulations promulgated thereunder, and under
the laws of each state where such a registration may be necessary to enable the
LLC, after giving effect to the Conversion and the Closing, to conduct the
business of the Company in the manner conducted by the Company as of the date of
this Agreement.
(b) All applicable Employees shall be registered as investment
adviser representatives of the LLC under the laws of each state where such a
registration may be necessary or desirable (in the opinion of Buyer) to enable
the LLC, after giving effect to the Conversion and the Closing, to conduct the
business of the Company in the manner conducted by the Company as of the date of
this Agreement.
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8.5 REGISTRATION AS A BROKER-DEALER AND REGISTRATION OF REGISTERED
REPRESENTATIVES.
(a) The LLC and its Employees shall hold all of the Licenses
held by the Company and its Employees as of the date of this Agreement. The LLC
shall be registered as a broker-dealer under the Exchange Act and the rules and
regulations promulgated thereunder, and under the laws of each state, and shall
have such related Licenses as may be necessary to enable the LLC, after giving
effect to the Conversion and the Closing, to conduct the business of the Company
in the manner conducted by the Company as of the date of this Agreement.
(b) All applicable Employees shall be registered
representatives (within the meaning of the Exchange Act) of the LLC under the
Exchange Act and the laws of each state and shall have such related Licenses as
may be necessary to enable the LLC, after giving effect to the Conversion and
the Closing, to conduct the business of the Company in the manner conducted by
the Company as of the date of this Agreement.
8.6 OTHER APPROVALS. Except as otherwise specifically contemplated
hereby, all actions by or in respect of, or filings with or approvals of, any
self-regulatory organization, governmental body, agency, or official or
authority required to permit the consummation of the transactions contemplated
hereby so that after the Conversion and the Closing, the LLC shall be able to
carry on the business presently being conducted by the Company, in the manner
now conducted by the Company, shall have been taken, made or obtained, and any
and all other material permits, approvals, consents or other actions necessary
to consummate the transactions hereunder shall have been received or taken, and
none of such permits, approvals or consents shall contain any provisions which,
in the reasonable judgment of Buyer, are unduly burdensome.
8.7 CONVERSION. (a) The Conversion shall have occurred and (b) such
additional documents and instruments of transfer or conversion as Buyer shall
reasonably deem necessary in connection therewith, shall have been executed,
delivered and performed.
8.8 LLC AGREEMENT. Each Partner who is receiving interests in the LLC
shall have executed and delivered the LLC Agreement in substantially the form
attached hereto as Exhibit 2.2, with such changes therein as the Company and
Buyer may agree, upon advice of their respective counsel.
8.9 EMPLOYMENT AGREEMENTS. Each Partner (other than Clark) shall have
entered into an Employment Agreement with the Company in the form and substance
materially consistent with Exhibit 8.9 hereto (each, an "Employment Agreement"
and collectively the "Employment Agreements"), and each such Employment
Agreement shall be in full force and effect for the benefit of the LLC at the
Closing.
8.10 INTENTIONALLY OMITTED.
8.11 AGREEMENTS WITH RESPECT TO PRIVATE FUNDS. Each Private Fund shall
have entered into an investment advisory agreement in form and substance
reasonably satisfactory to the
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Company and Buyer pursuant to which the Company shall provide investment
advisory services to such Private Fund, in consideration of a fee in the amount
of one and one half percent (1.5%) per annum of the net asset value of such
Private Fund on each valuation date (the "Private Fund Management Agreements"),
and each Private Fund Management Agreement shall be in full force in effect for
the benefit of the LLC upon the Conversion and at the Closing (having been
approved by all necessary consents or approvals and after the making of any
necessary filings).
8.12 AGREEMENTS WITH RESPECT TO OFFSHORE FUNDS. The Partners and the
managers or general partners of each Offshore Fund shall have entered into an
amendment to the existing management agreements in form and substance reasonably
satisfactory to the Company and Buyer pursuant to which the Company shall
provide investment advisory services to such Offshore Fund, in consideration of
a base fee in the amount of one half of one percent (0.5) per annum of the net
asset value of such Offshore Fund on each valuation date and an additional
payment, which shall initially be zero, but shall increase, subject to the
receipt of all necessary consents or approvals and the making of any necessary
filings to effect an amendment to the organizational documents of such Offshore
Fund as contemplated in Section 5.15, under certain circumstances contemplated
in the LLC Agreement to provide that the Performance Increment Accruals to
Manager Shares shall be reduced and the amount of such reduction paid to the LLC
(the "Offshore Management Agreements"), and each such Offshore Management
Agreement shall be in full force and effect (subject to the foregoing consents,
approvals and filings) for the benefit of the LLC upon the Conversion and at the
Closing.
8.13 CAPITALIZATION, NET WORTH AND WORKING CAPITAL OF THE LLC.
Immediately prior to the Closing, but after giving effect to the Conversion and
taking into account all transaction costs incurred by the Company or the LLC in
performing this Agreement which are not reimbursed by other Persons, the LLC
shall have a tangible net worth of at least one million seven hundred thousand
dollars ($1,700,000), working capital (defined as current assets less current
liabilities) of at least eight hundred thousand dollars ($800,000) and cash on
hand of at least one hundred seventy five thousand dollars ($175,000) (all as
determined in accordance with GAAP using the accrual method of accounting,
consistently applied), or such greater net worth, working capital or amount of
cash on hand as shall be necessary for the operation of the business of the LLC
consistent with past practices of the Company and applicable Investment Laws and
Regulations, including, without limitation, the net capital requirement
applicable to the Company as a registered broker-dealer.
8.14 DELIVERY. Each of the Company and the Partners shall have executed
(where applicable) and delivered to Buyer (or shall have caused to be executed
and delivered to Buyer by the appropriate person) the following:
(a) a copy of the Certificate of Conversion certified by the
Secretary of State of the State of Delaware, a copy of the Certificate of
Formation certified by the Secretary of State of the State of Delaware and all
such other documents of transfer and conversion as Buyer may reasonably require
in connection therewith;
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(b) a certificate issued by the appropriate Secretary of State
of each state in which, after giving effect to the Conversion, the LLC does
business certifying that the LLC, as applicable, is in good standing in such
state as of the most recent practicable date;
(c) true and correct copies of each of the agreements,
documents and instruments contemplated hereby (including, without limitation,
the LLC Agreement), and all agreements, documents, instruments and certificates
delivered or to be delivered in connection therewith;
(d) for each of the Partners of the Company (other than
Clark), evidence that such person has had a physical examination within ninety
(90) days prior to the Closing, including a letter from a licensed physician
familiar with such person's health indicating that such person is in good health
at such date;
(e) a certificate of the Secretary of the LLC, certifying that
the Certificate of Conversion, Certificate of Formation and LLC Agreement in
paragraphs (a) and (c) above are in full force and effect and have not been
amended or modified, and that the officers of the LLC are those persons named in
the certificate;
(f) an opinion from counsel to the Company and the Partners,
in form and substance reasonably satisfactory to Buyer and its counsel;
(g) a release of the LLC from all liabilities other than those
arising out of the transactions or agreements contemplated hereby, from each of
the Partners in the form attached hereto as Exhibit 8.14(g); and
(h) such other certificates and documents as are required
hereby or are reasonably requested by Buyer, which certificates and documents
are hereby deemed to be referenced in this Agreement.
8.15 ESCROW AGREEMENT. Each Partner shall have entered into an Escrow
Agreement with Buyer and an escrow agent reasonably acceptable to the Partners
and Buyer (it being agreed that The Chase Manhattan Bank is acceptable)
providing for the establishment of an escrow fund in the initial aggregate
amount for all Partners of ********** dollars ($**), to be held for a period of
two (2) years plus the pendency of any claims for indemnification of any Buyer
Indemnified Parties asserted under Section 12 of this Agreement on or prior to
the Indemnification Cut-Off Date, which agreement shall be in form and substance
reasonably acceptable to the Partners, Buyer and such escrow agent and shall be
in full force and effect. It is contemplated that the escrow fund will initially
constitute cash and cash equivalents and that, under the Escrow Agreement, the
Partners shall have the authority to cause the escrow fund to be invested in
high grade fixed-income securities or in investment accounts or products made
available by the LLC.
8.16 EVIDENCE OF INSURABILITY. Buyer shall have received such evidence
as it shall deem necessary or appropriate as to the insurability of each of the
Persons listed in Schedule 3.25(b)
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hereto as and in amounts contemplated by the LLC Agreement with respect to both
key-man life insurance and disability insurance policies.
8.17 INSURANCE POLICIES. Each of the Company and the LLC shall have in
place insurance policies (a) with respect to the Company, covering liabilities
of directors and officers, in such amounts as previously disclosed to Buyer; (b)
with respect to the LLC, covering errors and omissions and other liabilities of
managers and officers, in such amounts as the Company and Buyer shall have
previously agreed; and (c) with respect to the LLC, as contemplated by Section
3.19.
8.18 MATERIAL ADVERSE CHANGE. There shall have been no event or
condition or events or conditions, which, either individually or in the
aggregate, is reasonably likely to have a Material Adverse Effect on the
condition (financial or otherwise), properties, assets, liabilities, business
operations or prospects of the LLC, and Buyer shall be provided with a
certificate from the President of the LLC to that effect at the Closing.
SECTION 9. CONDITIONS TO OBLIGATIONS OF THE COMPANY AND THE PARTNERS.
The obligation of the Company and the Partners to consummate this
Agreement and the transactions contemplated hereby is subject to the fulfillment
(or waiver by the Company), prior to or at the Closing, of the following
conditions precedent:
9.1 NO LITIGATION; NO OPPOSITION. No judgment, injunction, order or
decree enjoining or prohibiting any of Buyer or the Company or any of the
Partners or other parties to this Agreement or any of the agreements, documents
and instruments contemplated hereby, from consummating the transactions
contemplated hereby, or thereby shall have been entered and no suit, action or
proceeding shall be pending or threatened on the date of Closing before or by
any court or governmental body seeking to restrain or prohibit the execution and
delivery of this Agreement or any of the agreements, documents or instruments
contemplated hereby or the consummation of the transactions contemplated hereby
or thereby.
9.2 REPRESENTATIONS, WARRANTIES AND COVENANTS. Each of the
representations and warranties of Buyer (or made by any Person authorized by it
to make representations on its behalf) contained in this Agreement and in any
Schedule or Exhibit attached hereto and in each other contract, agreement, or
certificate contemplated hereby shall be true, correct and complete (a) in all
material respects as of the date of this Agreement and (b) in all material
respects as of the Closing Date as though made on and as of the Closing Date
(except to the extent such representations and warranties speak as of or are
limited to an earlier date); provided, however, that solely for purposes of
determining the satisfaction of the condition contained in this Section 9.2(b)
and not for purposes of determining liability under Section 12 hereof or
otherwise, no effect shall be given to any exception in such representations and
warranties relating to knowledge, materiality, or a Material Adverse Effect, and
such representations and warranties shall be deemed
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to be true, correct and complete in all material respects only if the failure or
failures of such representations and warranties to be so true, correct and
complete without regard to knowledge, materiality, and Material Adverse Effect
exceptions do not represent in the aggregate a Material Adverse Effect. Each and
all of the agreements, covenants, obligations and conditions to be performed,
complied with or satisfied by Buyer hereunder and under the other contracts and
agreements contemplated hereby at or prior to the Closing shall have been duly
performed, complied with or satisfied. Buyer shall have furnished the Partners
with a certificate dated as of the date of the Closing to the foregoing effect.
9.3 CLIENT CONSENT AND APPROVALS. The conditions set forth in Section
8.3 through 8.7 shall have been satisfied.
9.4 DELIVERY. Buyer shall have executed and delivered to the Company
and the Partners, the following:
(a) certified copies of resolutions of the board of directors
of Buyer authorizing the execution of this Agreement and each of the other
agreements, documents or instruments contemplated hereby to which Buyer is a
party;
(b) a copy of the Certificate of Incorporation and By-laws of
Buyer which, in the case of the Certificate of Incorporation is certified as of
a recent date by the Secretary of State of the State of Delaware;
(c) a certificate issued by the Secretary of State of the
State of Delaware certifying that Buyer is validly existing and in good standing
in Delaware as of the most recent practicable date;
(d) true and correct copies of each of the agreements,
documents and instruments contemplated hereby (including, without limitation,
the LLC Agreement) to which Buyer is a party, and all agreements, documents,
instruments and certificates delivered or to be delivered in connection
therewith by Buyer;
(e) a certificate of the Secretary of Buyer certifying that
the resolutions, Certificate of Incorporation and By-laws in paragraphs (a) and
(b) above are in full force and effect and have not been amended or modified,
and that the officers of Buyer are those persons named in the certificate; and
(f) an opinion from Goodwin, Procter & Hoar LLP in
substantially the form of Exhibit 9.4(f) hereto.
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SECTION 10. TERMINATION OF AGREEMENT; RIGHTS TO PROCEED.
10.1 TERMINATION. At any time prior to the Closing, this Agreement may
be terminated as follows:
(a) by mutual written consent of Buyer and the Company;
(b) by Buyer, pursuant to written notice by Buyer to the
Company and the Partners, if any of the conditions set forth in Section 8 of
this Agreement have not been satisfied at or prior to October 31, 1997, or if it
has become reasonably and objectively certain that any of such conditions will
not be satisfied at or prior to October 31, 1997, such written notice to set
forth such conditions which have not been or will not be so satisfied;
(c) by the Company, pursuant to written notice by the Company
to Buyer, if any of the conditions set forth in Section 9 of this Agreement have
not been satisfied at or prior to October 31, 1997, or if it has become
reasonably and objectively certain that any of such conditions will not be
satisfied at or prior to October 31, 1997, such written notice to set forth such
conditions which have not been or will not be so satisfied; provided, however,
that if any of the conditions set forth in Section 8 or Section 9 of this
Agreement are not satisfied for any reason other than material breach of this
Agreement by Buyer, then the termination right set forth in this Section 10.1(c)
shall be suspended, and may not be exercised, until December 15, 1997; and
(d) ********** [This subparagraph has been omitted pursuant to
the confidential treatment request referred to on the cover page hereto. The
contents of this subparagraph have been filed separately with the Commission.]
Notwithstanding the foregoing Sections 10.1(b) and (c), a party who is
in material breach of any of its obligations or representations and warranties
hereunder shall not have the right to terminate this Agreement pursuant to
Section 10.1(b) or (c), as the case may be.
10.2 EFFECT OF TERMINATION. All obligations of the parties hereunder
shall cease upon any termination pursuant to Section 10.1; provided, however,
that (a) the provisions of this Section 10 and Sections 5.12, 7.2 and 14 hereof
shall survive any termination of this Agreement; (b) nothing in this Section
10.2 shall relieve any party from any liability for an error or omission in any
of its representations or warranties contained herein or a failure to comply
with any of its covenants, conditions or agreements contained herein, and (c)
any party may proceed as further set forth in Section 10.3 below.
10.3 RIGHT TO PROCEED. Anything in this Agreement to the contrary
notwithstanding, if any of the conditions specified in Section 8 hereof have not
been satisfied, Buyer shall have the right to proceed with the transactions
contemplated hereby without waiving any of its rights hereunder, and if any of
the conditions specified in Section 9 hereof have not been satisfied, the
Partners shall have the right to proceed with the transactions contemplated
hereby without waiving any of their rights hereunder.
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SECTION 11. RIGHTS AND OBLIGATIONS SUBSEQUENT TO CLOSING.
11.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. Each of the
representations, warranties, agreements, covenants and obligations herein or in
any schedule, exhibit or certificate delivered by any party to any other party
incident to the transactions contemplated hereby are material, shall be deemed
to have been relied upon by the other party and shall survive the Closing until
the second anniversary of the date of the Closing, except for the
representations and warranties made in Section 3.9 and each other representation
with respect to Taxes applicable to the Company or Tax related matters of the
Company (but only to the extent so related), which shall survive until the
expiration of the applicable statute of limitations, if any. The expiration of
any representation or warranty shall not affect any claim made prior to the date
of such expiration. All covenants herein not fully performed shall survive the
Closing and continue thereafter until fully performed. Any investigation, audit
or other examination that may have been made or may be made at any time by or on
behalf of the party to whom any such representation or warranty is made shall
not limit or diminish such representations and warranties, and the parties may
rely on the representations and warranties set forth in this Agreement
irrespective of any information obtained by them by any investigation, audit or
examination or otherwise.
11.2 REGULATORY FILINGS. Each of the Partners, the LLC and Buyer will
cooperate to enable Buyer and the LLC to make any and all regulatory filings
required by them with respect to the LLC or the transactions contemplated hereby
(including, by way of example and not of limitation, the filing of tax returns).
11.3 COVENANTS WITH RESPECT TO SECTION 15(f) OF THE INVESTMENT COMPANY
ACT.
(a) In accordance with Section 15(f) of the Investment Company
Act (i) for a period of three (3) years after the Closing, Buyer shall not
cause, and shall use all commercially reasonable efforts not to permit, any
"interested person" (as such term is defined in the Investment Company Act) of
Buyer or the LLC to become or to continue as a member of the Board of Directors
of the Mutual Funds unless, taking into account such interested person, at least
seventy-five percent (75%) of the members of such Board of Directors are not
interested persons of Buyer or the LLC and (ii) for a period of two (2) years
following the Closing, Buyer will not engage in or cause, and will use all
commercially reasonable efforts to prevent its Affiliates from engaging in or
causing, any act, practice or arrangement that imposes an unfair burden on the
Mutual Funds within the meaning of Section 15(f).
(b) In accordance with Section 15(f) of the Investment Company
Act (i) for a period of three (3) years after the effectiveness of the Closing
Date, the Partners and the LLC shall not cause, and shall use all commercially
reasonable efforts to cooperate with reasonable requests made by Buyer so as not
to permit, any "interested person" (as such term is defined in the Investment
Company Act) of Buyer, the Partners or the LLC to become or to continue as a
member of the Board of Directors of the Mutual Funds, and (ii) for a period of
two (2) years
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following the Closing, the Partners and the LLC will not engage in or cause, and
will use all commercially reasonable efforts to prevent their respective
Affiliates from engaging in or causing, any act, practice or arrangement that
imposes an unfair burden on the Mutual Funds within the meaning of Section
15(f), or if the Partners or the LLC and/or any of their respective Affiliates
or the Mutual Funds shall have obtained an order from the SEC providing an
exemption from the provisions of Section 15(f) or an opinion of counsel based on
judicial precedents under applicable federal law with respect to the meaning of
Section 15(f), which opinion is reasonably satisfactory in form and substance to
the Board of Directors of the Mutual Funds, then this Agreement shall be deemed
to be modified to the extent necessary to permit the Partners, the LLC and their
Affiliates to act in a manner consistent with such exemptive order or legal
opinion.
11.4 AGREEMENT OF CERTAIN PARTNERS. Effective for all periods on and
after the Closing, the Partners hereby amend the Agreement dated April 11, 1994
between Christopher H. Browne, William H. Browne, John D. Spears as "Continuing
Partners" and James M. Clark, Jr. in the following respects: (i) the first
sentence of paragraph 4 of the recitals thereto is deleted, and the second
sentence of such paragraph 4 is amended to add the words ", other than
Affiliated Managers Group, Inc., a Delaware corporation, and its successors and
assigns ("AMG")," immediately after the words "any other person"; (ii) the first
sentence of Section 2 thereof is amended to state that "The Continuing Partners
undertake to cause to be allocated to Clark with respect to the Covered Period
an amount equal to the sum of (A) the amounts allocable to him pursuant to
Article IV of the Limited Liability Company Agreement of Tweedy, Browne Company
LLC, dated as of the Closing Date, by and among AMG, the Continuing Partners,
Clark and one or more of Thomas Shrager and Robert Q. Wyckoff, Jr., as amended
from time to time (the "LLC Agreement"), it being understood that Clark's
interest in Tweedy Browne and the Existing Partnerships listed in Exhibit C
shall be diluted pro rata with the Continuing Partners by the interests of AMG
and by interests and/or amounts (not in excess, for any one person, of 5% of the
income and profits of Tweedy Browne and 5% of the Covered Income of Covered
Entities other than Tweedy Browne) allocated and/or paid to Shrager, Wyckoff and
any other person (other than the Continuing Partners) who is active in the
business and becomes a Non-Manager Member (as such term is defined in the
aforementioned LLC Agreement), plus (B) 10% of the aggregate amount of the
salaries and bonuses paid by Tweedy Browne to Covered Persons, plus (C) 10% of
the Covered Income of the Covered Entities other than Tweedy Browne and the
Existing Partnerships listed in Exhibit C, calculated in accordance with Section
6."; (iii) the fourth sentence of Section 2 is amended to delete the phrase
"except that, in accordance with Section 6, the economic results of overlapping
fiscal periods shall be taken into account"; (iv) each of Tweedy Browne and the
Existing Partnerships listed in Exhibit C shall cease to be a Covered Entity for
purposes of Section 4; (v) Section 6 is deleted in its entirety and replaced
with "There shall be no reduction for salaries or bonuses to Covered Persons in
the calculation of Covered Income in the case of any Covered Entity, other than
Tweedy Browne and the Existing Partnerships listed in Exhibit C (it being
understood that the income and profits of Tweedy Browne shall be calculated in
accordance with the LLC Agreement). If any fiscal period of any Covered Entity,
other than Tweedy Browne and the Existing Partnerships listed in Exhibit C, is
partly within and partly without the Covered Period, the calculation of Covered
Income of such Covered Entity for such fiscal period shall be based upon the
income or profits of its entire fiscal period prorated on a daily
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basis."; (vi) Section 7 shall not apply to Tweedy Browne; (vii) Section 18 is
amended to add the words "with the prior written consent of AMG"; and (viii) a
new Section 22 shall be added to state "22. Third Party Beneficiary. AMG is an
intended third party beneficiary of the provisions of this Agreement. This
Agreement shall inure to the benefit of AMG and to any person or firm who may
succeed to substantially all of the assets of AMG."
SECTION 12. INDEMNIFICATION.
12.1 INDEMNIFICATION BY THE PARTNERS. The Partners agree subsequent to
the Closing to indemnify and hold Buyer and its subsidiaries and Affiliates and
persons serving as officers, directors, members, partners, stockholders, or
employees thereof or, to the extent the Loss claimed is suffered by the LLC, the
LLC (individually a "Buyer Indemnified Party" and collectively the "Buyer
Indemnified Parties") harmless from and against any damages, liabilities, losses
(including, without limitation, diminution in value), taxes, fines, penalties,
costs, and expenses (including, without limitation, reasonable fees and expenses
of counsel) of any kind or nature whatsoever (whether or not arising out of
third-party claims and including all amounts paid in investigation, defense or
settlement of the foregoing), and if the indemnified party is the LLC or is
claiming damage or harm through its interest in the LLC, net of any insurance
proceeds actually received by the LLC on account of insurance policies the
premiums on which were paid by the Company prior to the Conversion or by the LLC
out of Operating Cash Flow (as defined in the LLC Agreement), less the aggregate
premiums paid by the LLC for such insurance (collectively, "Losses") which may
be sustained or suffered by any of them arising out of, based upon any of the
following matters:
(a) fraud, intentional misrepresentation or any breach of any
representation, warranty or covenant of the Company or any Partner under this
Agreement or under any agreement, document or instrument contemplated hereby, or
in any certificate, schedule or exhibit delivered pursuant hereto or thereto, or
by reason of any claim, action or proceeding asserted or instituted growing out
of any matter or thing constituting such a breach; provided, however, that for
purposes of determining any such breach no effect shall be given to any
exception in any such representation, warranty or covenant relating to
knowledge, materiality, or a Material Adverse Effect; and
(b) the activities, conduct, business or operation of the
Company, the Private Funds, the Mutual Funds or the Offshore Funds prior to the
Closing, or arising out of facts, events or circumstances regarding the Company,
the Private Funds, the Mutual Funds or the Offshore Funds existing prior to the
Closing.
12.2 LIMITATIONS ON INDEMNIFICATION BY THE PARTNERS. Notwithstanding
the foregoing, the right of Buyer Indemnified Parties to indemnification under
Section 12.1 shall be subject to the following provisions:
(a) No indemnification shall be payable to a Buyer Indemnified
Party for Losses with respect to claims asserted pursuant to Section 12.1 above
(exclusive of any claims for
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indemnification arising out of, related to or based upon (i) fraud of the
Company or any Partner or (ii) Taxes applicable to the Company or based upon or
related to a breach of any representation, warranty or covenant with respect to
Taxes applicable to the Company or Tax related matters of the Company (whether
or not the representation which is breached specifically relates to Taxes
applicable to the Company) after the amount paid to Buyer Indemnified Parties by
the Partners under Section 12.1 of this Agreement exceeds ********** dollars
($**), provided that the purposes of this limitation, any payment to the LLC by
a Partner pursuant to the provisions of Section 12.1 of this Agreement shall be
treated as having been paid to Buyer Indemnified Parties in the amount equal to
the total amount paid to the LLC by such Partner, multiplied by the Free Cash
Flow Percentage (as defined in the LLC Agreement), multiplied by a fraction the
numerator of which is the number of LLC Points held by Buyer and the denominator
of which is the sum of the total number of LLC Points then outstanding and the
total number of Reserved Points (as defined in the LLC Agreement), all as
determined as of the date on which the payment under Section 12.1 is made to the
LLC.
(b) No indemnification shall be payable to a Buyer Indemnified
Party with respect to claims asserted pursuant to Section 12.1 above (exclusive
of any claims arising out of, related to or based upon (i) fraud of the Company
or any Partner or (ii) indemnification for Taxes applicable to the Company or
arising out of, based upon or related to a breach of any representation,
warranty or covenant with respect to Taxes applicable to the Company or Tax
related matters of the Company (whether or not the representation which is
breached specifically relates to Taxes) after the second anniversary of the date
of the Closing (the "Indemnification CutOff Date"); provided, however, that such
expiration shall not affect any claim with respect to which notice was given in
the manner contemplated by Section 12.5 hereof prior to the Indemnification
Cut-Off Date.
(c) ********** [This subparagraph has been omitted pursuant to
the confidential treatment request referred to on the cover page hereto. The
contents of this subparagraph have been filed separately with the Commission.]
12.3 INDEMNIFICATION BY BUYER. Buyer agrees to indemnify and hold the
Partners harmless from and against any Losses which may be sustained or suffered
by the Partners (either indirectly through their ownership of interests in the
Company or directly) arising out of or based upon any breach of any
representation, warranty or covenant made by Buyer in this Agreement or in any
agreement, document or instrument contemplated hereby, or in any certificate,
schedule or exhibit delivered pursuant hereto or thereto, or by reason of any
claim, action or proceeding asserted or instituted growing out of any matter or
thing constituting such a breach.
12.4 LIMITATION ON INDEMNIFICATION BY BUYER. Notwithstanding the
foregoing, the right of the Partners to indemnification under Section 12.3 shall
be subject to the following provisions:
(a) No indemnification shall be payable to the Partners with
respect to claims asserted pursuant to Section 12.3 above in amounts in excess
of twenty five million dollars ($25,000,000), less
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one-third (1/3) of the amount, if any, paid to the Members under Section 7 of
the LLC Agreement prior to the date any such claim is made.
(b) No indemnification shall be payable to the Partners with
respect to claims asserted pursuant to Section 12.3 above after the
Indemnification Cut-Off Date; provided, however, that such expiration shall not
affect any claim with respect to which notice was given in the manner
contemplated by Section 12.5 hereof prior to the Indemnification Cut-Off Date.
(c) No indemnification shall be payable to the Partners with
respect to claims asserted pursuant to Section 12.3 above unless the total of
all claims for indemnification pursuant to Section 12.3 shall exceed two million
five hundred thousand dollars ($2,500,000) in the aggregate, whereupon the full
amount of such claims shall be recoverable in accordance with the terms hereof.
12.5 NOTICE; DEFENSE OF CLAIMS. An indemnified party may make claims
for indemnification hereunder by giving written notice thereof to the
indemnifying party within the period in which indemnification claims can be made
hereunder. If indemnification is sought for a claim or liability asserted by a
third party, the indemnified party shall also give written notice thereof to the
indemnifying party promptly after it receives notice of the claim or liability
being asserted, but the failure to do so shall not relieve the indemnifying
party from any liability except to the extent that it is prejudiced by the
failure or delay in giving such notice. Such notice shall summarize the bases
for the claim for indemnification, the general nature and extent of the Losses
expected to be claimed and the details of any claim or liability being asserted
by a third party; provided, however, that the failure to provide complete
details or description of the general nature and extent of the losses shall not
relieve the indemnifying party from any liability except to the extent that it
is prejudiced by the failure to provide such information. Within twenty (20)
days after receiving such notice the indemnifying party shall give written
notice to the indemnified party stating whether it disputes the claim for
indemnification and whether it will defend against any third party claim or
liability at its own cost and expense. If the indemnifying party fails to give
notice that it disputes an indemnification claim within twenty (20) days after
receipt of notice thereof, it shall be deemed to have accepted and agreed to the
claim, which shall become immediately due and payable. The indemnifying party
shall be entitled to direct the defense against a third party claim or liability
with counsel selected by it (subject to the consent of the indemnified party,
which consent shall not be unreasonably withheld) as long as the indemnifying
party is conducting a good faith and diligent defense. The indemnified party
shall at all times have the right to fully participate in the defense of a third
party claim or liability at its own expense directly or through counsel;
provided, however, that if the named parties to the action or proceeding include
both the indemnifying party and the indemnified parties and the indemnified
parties are advised that representation of both parties by the same counsel
would be inappropriate under applicable standards of professional conduct, the
indemnified parties may engage a single separate counsel at the expense of the
indemnifying party. If no such notice of intent to dispute and defend a third
party claim or liability is given by the indemnifying party, or if such good
faith and diligent defense is not being or ceases to be conducted by the
indemnifying party, the indemnified party shall have the right, at the expense
of the indemnifying party, to undertake the defense of such claim or liability
(with counsel selected by the indemnified party), and, upon five
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(5) days notice to the indemnifying party, to compromise or settle it,
exercising reasonable business judgment. If the third party claim or liability
is one that by its nature cannot be defended solely by the indemnifying party,
then the indemnified party shall make available such information and assistance
as the indemnifying party may reasonably request and shall cooperate with the
indemnifying party in such defense, at the expense of the indemnifying party.
12.6 SATISFACTION OF THE PARTNERS' INDEMNIFICATION OBLIGATIONS. The
indemnification obligations of the Partners under this Section shall be
satisfied first out of the funds held in escrow pursuant to the Escrow
Agreement.
12.7 EXCLUSIVE REMEDY. Except in the case of claims arising out of,
based upon or related to fraud of the Company or any Partner, the
indemnification in this Section 12 shall be the exclusive remedy available to
any indemnified party against any indemnifying party for any Losses arising out
of or based upon the matters set forth in Sections 12.1 and 12.3 of this
Agreement, provided, however, that nothing herein shall limit the non-monetary
equitable remedies of any party hereto in respect to any breach of any covenant
or other agreement of any party required to be performed after the Closing. Any
and all disputes between the parties (except to the extent non-monetary
equitable remedies are sought) shall be resolved as contemplated in Section
14.2.
SECTION 13. DEFINITIONS.
13.1 DEFINITIONS. For purposes of this Agreement and the Exhibits and
Schedules hereto, the following terms shall have the respective meanings
specified in this Section 13.1
"Advisers Act" shall mean the Investment Advisers Act of 1940, as the
same may be amended from time to time, and any successor to such act.
"Affiliates" shall mean, with respect to any Person (herein the "first
party"), any other Person that directly or indirectly controls, or is controlled
by, or is under common control with, such first party. The term "control" as
used herein (including the terms "controlled by" and "under common control
with") means the possession, directly or indirectly, of the power to (a) vote
fifty percent (50%) or more of the outstanding voting securities of such Person
or (b) otherwise direct the management or policies of such Person by contract or
otherwise.
"Agreement of Limited Partnership" shall have the meaning specified in
Section 3.2(a) hereof.
"BMA" shall mean the Bermuda Monetary Authority.
"Base Balance Sheet" shall have the meaning specified in Section
3.8(a)(i) hereof.
"Brokerage Services" any services (other than Investment Management
Services) which involve the effecting of transactions in securities or the
buying and selling of securities as part of a regular business.
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"Buyer" shall have the meaning specified in the preamble hereto.
"Buyer Indemnified Party" shall have the meaning specified in Section
12.1 hereof.
"Certificate of Conversion" shall have the meaning specified in Section
2.1 hereof.
"Certificate of Formation" shall have the meaning specified in Section
2.1 hereof.
"Certificate of Limited Partnership" shall have the meaning specified
in Section 3.2(a) hereof.
"Claims" shall have the meaning specified in Section 1.1(a) hereof.
"Class A LLC Points" shall have the meaning specified in the LLC
Agreement.
"Client" shall mean any Person to whom the Company provides Investment
Management Services or Brokerage Services and, with respect to the Private Funds
and the Offshore Funds (but not the Mutual Funds) shall include each partner or
shareholder of such Private Fund or Offshore Fund.
"Closing" shall have the meaning specified in Section 1.3 hereof.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and any successor code thereto. For purposes of this Agreement,
all references to Sections of the Code shall include any predecessor provisions
to such Sections and any similar provisions of federal, state, local or foreign
law.
"Commodity Exchange Act" shall mean the Commodity Exchange Act, 7
U.S.C. Section 1 et. seq., as the same may be amended from time to time, and any
successor to such act.
"Company" shall mean Tweedy, Browne Company L.P., a Delaware limited
partnership, and shall include, unless otherwise specifically required by the
context, the LLC as a continuation of the Company at and after the Conversion.
"Comparable Contract" means a new contract between the LLC and the
party or parties to a prior contract with the Company which new contract is
substantially the same as such prior contract with the Company and is at least
as favorable in all respects (including without limitation with respect to
advisory fees) to the LLC as such prior contract (as in effect on the date
hereof) was to the Company.
"Consent" shall mean (a) with respect to an ERISA Client whose contract
by its terms terminates upon the consummation of the transactions contemplated
hereby, that the LLC shall have entered into a new contract on substantially
equivalent terms which contract is effective after giving effect to the
Conversion and the Closing; (b) with respect to a Private Fund or an Offshore
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Fund, such Private Fund or Offshore Fund shall have provided such consent as may
be required under the applicable contract and made such filings or obtained such
approvals as may be required by applicable law, and (c) with respect to a Mutual
Fund, the Company shall have obtained from each Mutual Fund (with the approval
of the Board of Directors (including a majority of the members of the Board of
Directors who are not "interested persons" (as such term is defined in the
Investment Company Act) and the shareholders of each Mutual Fund at a
shareholders meeting) new investment advisory contracts that are Comparable
Contracts, effective as of the Closing and (d) with respect to all other
Clients, the Company shall have complied in full with the procedures set forth
in Section 5.2 and not received from such Client a statement or indication that
such Client withholds or refuses to give its Consent as of the Closing.
Notwithstanding the foregoing, no Client of the Company shall be deemed to have
given its Consent or been retained as a Client if such Client has expressed an
intent to terminate its investment relationship with the Company and a Client
shall be deemed to have effected a partial withdrawal of assets to the extent
that such Client has expressed an intent to significantly reduce its investment
relationship with the Company or to adjust the fee schedule with respect to one
or more of its contracts in a manner that would materially reduce the revenues
attributable to such contract(s).
"Conversion" shall have the meaning specified in Section 2.1 hereof.
"Delaware Act" shall mean the Delaware Limited Liability Company Act, 6
Del. C. Section 18-101, et. seq., as amended from time to time, and any
successor to such act.
"Delivery Date" shall have the meaning specified in Section 1.7.
"Due Inquiry" shall mean consultation with each Partner and with the
Company's senior officers, senior employees, members, representatives and agents
but shall not include docket searches or inquiry of other third parties.
"Employees" shall have the meaning specified in Section 3.26.
"Employment Agreement" shall have the meaning specified in Section 8.9.
"Employment Arrangement" shall have the meaning specified in Section
3.26 hereof.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time, and any successor to such act.
"ERISA Client" shall have the meaning specified in Section 3.7(b)
hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, and any successor to such act.
"Free Cash Flow Percentage" shall have the meaning specified in Section
1.2(a) hereof.
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"GAAP" shall mean United States generally accepted accounting
principles as in effect from time to time and, with respect to the Offshore
Funds, shall mean international generally accepted accounting principles in
effect from time to time.
"Global Intrinsic Value Fund" shall mean Global Intrinsic Value Fund, a
mutual fund company organized under the laws of Bermuda.
"Gross Revenues" shall mean, as of the date of measurement, the sum of:
(a) the aggregate revenues from all investment accounts
(excluding the Offshore Funds and excluding the accounts covered by paragraphs
(c) and (e) below) to which the Company provides Investment Management Services
(and excluding for these purposes accounts of any Client whose commitment for
assets to be managed by the Company as set forth in such Client's contract with
the Company has not been fully invested except for cash balances in accordance
with customary practices of the Company), determined by multiplying the net
assets of each such account under management by the Company as of such date by
the applicable annualized advisory services fee rate in effect as of such date
with respect to such Client account (net of any fee reimbursements or waivers
and without giving effect to any performance or incentive fee);
(b) the product of (x) the net assets under management in each
Offshore Fund as of such date and (y) one and one half percent (1.5%), net of
any fee reimbursements and waivers;
(c) with respect to each Client of the Company whose
commitment for assets to be managed by the Company as set forth in such Client's
contract with the Company has not been fully invested (except for cash balances
in accordance with customary practices of the Company), the aggregate revenues
from each such account, determined to be an amount that is the greater of (i)
the product of fifty percent (50%) of the net assets of such account committed
to be managed by the Company as set forth in such Client's contract with the
Company and the applicable annualized advisory services fee rate in effect as of
such date with respect to such account or (ii) the product of the non-cash net
assets of such account under management by the Company as of such date and the
applicable annualized advisory services fee rate in effect as of such date with
respect to such account (in each case, net of any fee reimbursements or
waivers);
(d) one million five hundred thousand dollars ($1,500,000),
which represents an estimate of the annualized positive difference between (i)
the aggregate revenues from the provision of Brokerage Services and (ii)
commission expenses and clearing charges paid by the LLC in connection with the
provision of such Brokerage Services during the current year; and
(e) with respect to each investment account under management
by the Company which has a performance fee component, an amount equal to the
product of (x) the net assets under management in that account as of such date,
and (y) one and one-half percent (1.50%) (net of any fee reimbursements and
waivers).
"IML" shall mean the Institute Monetaire Luxembourgeois.
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"Immediate Family" shall mean, with respect to any individual, such
individual's former spouse, spouse, parents, grandparents, children,
grandchildren and siblings (and estates, trusts, partnerships and other entities
and legal relationships of which a substantial majority in interest of the
beneficiaries, owners, investors, members or participants at all times in
question are, directly or indirectly, one or more of the Persons described above
and/or such individual).
"Indemnification Cut-Off Date" shall have the meaning specified in
Section 12.2(c) hereof.
"Intellectual Property" shall have the meaning specified in Section
3.14(a).
"Investment Company Act" shall mean the Investment Company Act of 1940,
as the same may be amended from time to time, and any successor to such act.
"Investment Laws and Regulations" shall have the meaning specified in
Section 3.17.
"Investment Management Services" shall mean any services which involve
(a) the management of an investment account or fund (or portions thereof or a
group of investment accounts or funds), or (b) the giving of advice with respect
to the investment and/or reinvestment of assets or funds (or any group of assets
or funds).
"IRS" shall mean the Internal Revenue Service.
"Licenses" shall have the meaning specified in Section 3.18(f) hereof.
"LLC" shall have the meaning specified in the preamble hereto.
"LLC Agreement" shall mean the Limited Liability Company Agreement of
the LLC in substantially the form attached hereto as Exhibit 2.2, as the same
may be amended from time to time in accordance with its terms.
"LLC Capital Account" shall mean a Capital Account as defined in the
LLC Agreement.
"LLC Interest Purchase Price" shall have the meaning specified in
Section 1.1(b) hereof.
"LLC Points" shall have the meaning specified in the LLC Agreement.
"Losses" shall have the meaning specified in Section 12.1 hereof.
"Material Adverse Effect" shall mean, with respect to a Person, a
material adverse effect on the condition (financial or otherwise), properties,
assets, liabilities, business, operations or prospects of such Person.
"Mutual Funds" shall mean Tweedy, Browne Global Value Fund and Tweedy,
Browne American Value Fund, each a series of Tweedy, Browne Fund Inc. a Maryland
corporation.
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"Mutual Fund Agreements" shall have the meaning specified in Section
3.28(a).
"Mutual Fund Financial Statements" shall have the meaning specified in
Section 3.28(h).
"Mutual Fund Tax Returns" shall have the meaning specified in Section
3.28(f).
"NASD" shall mean the National Association of Securities Dealers, Inc.
"Offshore Financial Statements" shall have the meaning specified in
Section 3.29(f) hereof.
"Offshore Fund Agreements" shall have the meaning specified in Section
3.29(a) hereof.
"Offshore Funds" shall mean Tweedy, Browne USA Value Fund, Tweedy
Browne International Value Fund and Tweedy Brown International Swiss Franc Fund,
each a series of Tweedy, Browne Value Funds, a societe d'investissement a
capital variable established under the laws of the Grand Duchy of Luxembourg,
and Global Intrinsic Value Fund.
"Offshore Management Agreements" shall have the meaning specified in
Section 8.12 hereof.
"Offshore Tax Returns" shall have the meaning specified in Section
3.29(e) hereof.
"Offshore Related Partnerships" shall mean Alpine, Partners, L.P.,
Belgravia Partners, L.P., Genpar Partners II, L.P., Tweeco Partners, L.P. and 52
Associates, L.P., each a Delaware limited partnership, and any successors
thereto holding interests in the investment portfolio of the Offshore Funds.
"Organizational Documents" shall mean, up to the time of Conversion,
the Certificate of Limited Partnership and the Agreement of Limited Partnership,
and from and after the time of Conversion, the Certificate of Formation and the
LLC Agreement.
"Performance Increment Accruals to Manager Shares" shall mean the
definitive Performance Increment (within the meaning of the organizational
documents of the Offshore Funds) booked for the benefit of the Manager's Shares
(within the meaning of the organizational documents of the Offshore Funds).
"Person" shall mean any individual, partnership (general or limited),
corporation, limited liability company, limited liability partnership,
association, trust, joint venture, unincorporated organization, and any
government, governmental department or agency or political subdivision thereof.
"Private Fund Management Agreements" shall have the meaning specified
in Section 8.11 hereof.
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"Private Fund Financial Statements" shall have the meaning specified in
Section 3.27(d).
"Private Fund Tax Returns" shall have the meaning specified in Section
3.27(c).
"Private Funds" means TBK Partners, L.P., a Delaware limited
partnership, and Vanderbilt Partners, L.P., a Delaware limited partnership.
"Purchased Percentage" shall have the meaning specified in Section
1.2(a) hereof
"Purchased LLC Interest" shall have the meaning specified in Section
1.1 hereof.
"SEC" shall mean the Securities and Exchange Commission, or any
successor agency thereto.
"Securities Act" shall mean the Securities Act of 1933, as the same may
be amended from time to time, and any successor to such act.
"Taxes" shall have the meaning specified in Section 3.9(a) hereof.
"Taxing Authority" shall have the meaning specified in Section 3.9(c)
hereof.
SECTION 14. MISCELLANEOUS.
14.1 FEES AND EXPENSES.
(a) Buyer shall pay its own expenses incident to the
negotiation and consummation of the transactions contemplated by this Agreement
and the agreements, instruments and documents contemplated hereby. The Partners
shall pay their own expenses (and the expenses of the Company, the LLC, the
Private Funds, the Mutual Funds, the Offshore Funds and the Related Offshore
Partnerships) incident to the negotiation and consummation of the transactions
contemplated by this Agreement and the agreements, instruments and documents
contemplated hereby.
(b) The Company will pay all costs incurred, whether at or
subsequent to the Closing, in connection with the transfer of the Purchased LLC
Interest to Buyer as contemplated by this Agreement, including without
limitation, all transfer taxes and charges applicable to such transfer, and all
costs of obtaining permits, waivers, registrations or consents with respect to
any assets, rights or contracts of the Company.
(c) Notwithstanding the foregoing, the Partners collectively
and Buyer shall each be responsible for fifty percent (50%) of the expenses and
costs of printing and mailing the proxy statement and hiring a proxy solicitor
to obtain Consent from the Mutual Funds for the transactions contemplated
hereby.
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14.2 DISPUTE RESOLUTION. All disputes arising in connection with this
Agreement shall be resolved by binding arbitration in accordance with the
applicable rules of the American Arbitration Association. The arbitration shall
be held in The Commonwealth of Massachusetts before a single arbitrator selected
in accordance with Section 12 of the American Arbitration Association Commercial
Arbitration Rules who shall have substantial business experience in the
investment advisory industry, and shall otherwise be conducted in accordance
with the American Arbitration Association Commercial Arbitration Rules.
14.3 WAIVERS. Any waiver of any terms or conditions or of the breach of
any covenant, representation or warranty of this Agreement in any one instance,
shall not operate as or be deemed to be or construed as a further or continuing
waiver of any other breach of such term, condition, covenant, representation or
warranty or any other term, condition, covenant, representation or warranty, nor
shall any failure or delay at any time or times to enforce or require
performance of any provision hereof operate as a waiver of or affect in any
manner such party's right at a later time to enforce or require performance of
such provision or of any provision hereof; provided, however, that no such
waiver, unless it, by its own terms, explicitly provides to the contrary, shall
be construed to effect a continuing waiver of the provision being waived and no
such waiver in any instance shall constitute a waiver in any other instance or
for any other purpose or impair the right of the party against whom such waiver
is claimed in all other instances or for all other purposes to require full
compliance. The rights and remedies herein provided shall be cumulative and not
exclusive of any rights or remedies provided by law.
14.4 GOVERNING LAW. This Agreement shall be construed under and
governed by the internal laws of The Commonwealth of Massachusetts without
regard to its conflict of laws provisions.
14.5 NOTICES. Any notice, request, demand or other communication
required or permitted hereunder shall be in writing and shall be deemed to have
been given if delivered or sent by facsimile transmission, upon receipt, or if
sent by registered or certified mail, upon the sooner of the date on which
receipt is acknowledged or the expiration of three days after deposit in United
States post office facilities properly addressed with postage prepaid. All
notices to a party will be sent to the addresses set forth below or to such
other address or person as such party may designate by notice to each other
party hereunder:
TO BUYER: Affiliated Managers Group, Inc.
Two International Place, 23rd Floor
Boston, MA 02110
Attn: Nathaniel Dalton, Senior Vice President
Facsimile No.: (617) 747-3380
62
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With a copy to: Goodwin, Procter & Hoar LLP
Exchange Place
Boston, MA 02109
Attn: Richard E. Floor, P.C.
Facsimile No.: (617) 523-1231
TO COMPANY: Tweedy, Browne Company L.P.
52 Vanderbilt Avenue
New York, New York 10017
Attn: Christopher H. Browne
Facsimile No.: (212) 916-0637
With a copy to: Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Attn: Richard T. Prins, Esq.
Facsimile No.: (212) 735-2000
TO ANY PARTNER c/o Tweedy, Browne Company L.P.
52 Vanderbilt Avenue
New York, New York 10017
Attn: Christopher H. Browne
Facsimile No.: (212) 916-0637
With a copy to: Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Attn: Richard T. Prins, Esq.
Facsimile No.: (212) 735-2000
TO THE LLC:
Tweedy, Browne Company LLC
52 Vanderbilt Avenue
New York, New York 10017
Attn: Christopher H. Browne
Facsimile No.: (212) 916-0637
With a copy to: Affiliated Managers Group, Inc.
Two International Place, 23rd Floor
Boston, MA 02110
Attn: Nathaniel Dalton, Senior Vice President
Facsimile No.: (617) 747-3380
63
<PAGE> 70
Any notice given hereunder may be given on behalf of any party by his counsel or
other authorized representatives.
14.6 ENTIRE AGREEMENT. This Agreement, including the Schedules and
Exhibits referred to herein and the other writings specifically identified
herein or contemplated hereby, is complete, reflects the entire agreement of the
parties with respect to its subject matter, and supersedes all previous written
or oral negotiations, commitments and writings. No promises, representations,
understandings, warranties and agreements have been made by any of the parties
hereto except as referred to herein or in such Schedules and Exhibits or in such
other writings; and all inducements to the making of this Agreement and the
transactions contemplated hereby which were relied upon by either party hereto
have been expressed herein or in such Schedules or Exhibits or in such other
writings.
14.7 ASSIGNABILITY; BINDING EFFECT. This Agreement or any of the
obligations or rights hereunder (i) may not assigned by Buyer without the prior
written consent of the Company prior to the Closing and the prior written
consent of the Partners after the Closing, except that Buyer may at any time
assign this Agreement or such obligation or rights to a wholly owned subsidiary
of Buyer established either (a) solely for the purpose of holding Buyer's
interest in the Company following the Closing or (b) in connection with a
reincorporation merger or similar transaction of Buyer and (ii) may not be
assigned by any of the Company, the LLC or the Partners without the prior
written consent of Buyer; that Buyer hereby assents and agrees to the assignment
by operation of law of the Agreement from the Company to the LLC pursuant to the
Conversion. Subject to the foregoing, this Agreement shall be binding upon and
enforceable by, and shall inure to the benefit of, the parties hereto and their
respective successors and permitted assigns, including without limitation the
LLC upon the Conversion. Upon assignment permitted hereby, Buyer shall cause the
assignee to perform the obligations of Buyer hereunder and such assignee shall
be substituted for Buyer hereunder except to the extent the context otherwise
specifically requires.
14.8 AMENDMENTS. This Agreement may not be amended or modified, nor may
compliance with any condition or covenant set forth herein be waived, except by
a writing duly and validly executed (a) by Buyer and the Company prior to the
Closing and (b) by Buyer and the Partners after the Closing, or in the case of a
waiver, the party waiving compliance.
14.9 CONSENT TO JURISDICTION. Each of the parties hereby consents to
personal jurisdiction, service of process and venue in the federal or state
courts sitting in The Commonwealth of Massachusetts for any claim, suit or
proceeding arising under this Agreement to enforce any arbitration award or
obtain equitable relief, or in the case of a third party claim subject to
indemnification hereunder, in the court where such claim is brought and hereby
irrevocably agrees that all claims in respect of such action or proceeding may
be heard and determined in such state court or, to the extent permitted by law,
in such federal court. Each of the parties hereby irrevocably consents to the
service of process in any such action or proceeding by the mailing by certified
mail of copies of any service or copies of the summons and complaint and any
other process to such party at the address specified in Section 14.5 hereof. the
parties agree that a final judgment in any such action or proceeding shall be
conclusive and may be
64
<PAGE> 71
enforced in other jurisdictions by suit on the right of a party to service legal
process in any other manner permitted by law or affect the right of a party to
bring any action or proceeding in the courts of other jurisdictions.
14.10 CAPTIONS AND GENDER. The captions in this Agreement are for
convenience only and shall not affect the construction or interpretation of any
term or provision hereof. The use in this Agreement of the masculine pronoun in
reference to a party hereto shall be deemed to include the feminine or neuter,
as the context may require.
14.11 EXECUTION IN COUNTERPARTS. For the convenience of the parties and
to facilitate execution, this Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same document.
14.12 PUBLICITY AND DISCLOSURES. No press releases or public
disclosure, either written or oral, of the transactions contemplated by this
Agreement, shall be made by a party to this Agreement without the prior
knowledge and written consent of Buyer and the Company, except as may be
otherwise required by applicable laws, rules and regulations (including, without
limitation, the Securities Act, the Exchange Act and the rules and regulations
promulgated thereunder in connection with the preparation and filing of one or
more registration statements (including any exhibits, supplements and amendments
thereto) for the purpose of registering securities of Buyer under the Securities
Act or registering Buyer under the Exchange Act).
[END OF TEXT]
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<PAGE> 72
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
executed as of the date set forth above by their duly authorized
representatives.
BUYER:
AFFILIATED MANAGERS GROUP, INC.
By:/s/ William J. Nutt
-------------------------------------
Name: William J. Nutt
-----------------------------------
Title: President and CEO
----------------------------------
COMPANY:
TWEEDY, BROWNE COMPANY L.P.
By:/s/ William H. Browne
-------------------------------------
Name: William H. Browne
-----------------------------------
Title: General Partner
----------------------------------
/s/ Christopher H. Browne
----------------------------------------
Christopher H. Browne
/s/ William H. Browne
----------------------------------------
William H. Browne
/s/ John D. Spears
----------------------------------------
John D. Spears
/s/ James M. Clark, Jr.
----------------------------------------
James M. Clark, Jr.
66
<PAGE> 1
EXHIBIT 2.2
PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED PURSUANT TO A CONFIDENTIAL
TREATMENT REQUEST FILED WITH THE COMMISSION. ASTERISKS (*) IDENTIFY WHERE SUCH
CONFIDENTIAL INFORMATION HAS BEEN OMITTED. THE OMITTED PORTIONS HAVE BEEN FILED
SEPARATELY WITH THE COMMISSION.
AGREEMENT AND PLAN OF REORGANIZATION
by and among
AFFILIATED MANAGERS GROUP, INC.
as "AMG"
AMG MERGER SUB, INC.
as "Merger Sub"
GEOCAPITAL CORPORATION
the "Company"
GEOCAPITAL, LLC
the "LLC"
and
the Stockholders of the Company
Dated August 15, 1997
<PAGE> 2
AGREEMENT AND PLAN OF REORGANIZATION
INDEX
Page
SECTION 1. THE MERGER.................................................. 2
1.1 The Merger.................................................. 2
1.2 Effective Time.............................................. 2
1.3 Effects of the Merger....................................... 2
1.4 Certificate of Incorporation................................ 2
1.5 By-Laws..................................................... 2
1.6 Directors and Officers...................................... 2
1.7 Conversion of Securities of the Company..................... 3
1.8 Time and Place of Closing................................... 3
1.9 Further Assurances.......................................... 4
SECTION 2. RESTATEMENT OF LLC AGREEMENT................................ 4
2.1 Restatement of LLC Agreement................................ 4
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE
STOCKHOLDERS................................................ 4
3.1 Making of Representations and Warranties.................... 4
3.2 Organization and Qualification of the Company and the LLC... 4
3.3 Capitalization; Beneficial Ownership........................ 5
3.4 Subsidiaries................................................ 5
3.5 Authority of the Company.................................... 6
3.6 Real and Personal Property.................................. 7
3.7 Assets Under Management..................................... 7
3.8 Financial Statements........................................ 8
3.9 Taxes....................................................... 9
3.10 Collectibility of Accounts Receivable....................... 11
3.11 Absence of Certain Changes.................................. 11
3.12 Ordinary Course............................................. 12
3.13 Banking Relations........................................... 12
3.14 Intellectual Property....................................... 13
3.15 Contracts................................................... 14
3.16 Litigation.................................................. 15
3.17 Compliance with Laws........................................ 16
3.18 Business; Registrations..................................... 16
3.19 Insurance................................................... 17
3.20 Powers of Attorney.......................................... 17
3.21 Finder's Fee................................................ 17
3.22 Corporate Records; Copies of Documents...................... 17
3.23 Transactions with Interested Persons........................ 18
(i)
<PAGE> 3
Page
3.24 Employee Benefit Programs.................................. 18
3.25 Directors, Officers and Employees.......................... 20
3.26 Code of Ethics............................................. 21
3.27 Certain Representations and Warranties as to Collective
Investment Vehicles........................................ 22
3.28 Disclosure................................................. 23
3.29 No Implied Representation.................................. 24
SECTION 4. REPRESENTATIONS AND WARRANTIES OF INDIVIDUAL
STOCKHOLDERS............................................... 24
4.1 Authority and Organization................................. 24
4.2 Ownership of LLC Interests................................. 26
4.3 Finder's Fee............................................... 26
4.4 Investment Advisory Representation......................... 26
4.5 Agreements................................................. 26
4.6 Employment Data............................................ 27
4.7 Investment Intent.......................................... 27
SECTION 5. COVENANTS OF THE STOCKHOLDERS.............................. 27
5.1 Making of Covenants and Agreements......................... 27
5.2 Client Consents............................................ 27
5.3 Authorizations............................................. 27
5.4 Authorization from Others.................................. 28
5.5 Conduct of Business........................................ 28
5.6 Financial Statements....................................... 30
5.7 Preservation of Business and Assets........................ 30
5.8 Observer Rights and Access................................. 30
5.9 Notice of Default.......................................... 30
5.10 Consummation of Agreement.................................. 31
5.11 Cooperation of the Company and Stockholders................ 31
5.12 No Solicitation of Other Offers............................ 31
5.13 Confidentiality............................................ 31
5.14 Policies and Procedures.................................... 32
5.15 Violation of Existing LLC Agreement........................ 32
5.16 Subsidiaries; Investments in Other Persons................. 32
5.17 LLC Interests.............................................. 32
5.18 Employee Programs.......................................... 32
5.19 Foreign Qualifications..................................... 32
5.20 Liens...................................................... 32
SECTION 6. REPRESENTATIONS AND WARRANTIES OF AMG...................... 33
6.1 Making of Representations and Warranties................... 33
6.2 Organization of AMG........................................ 33
(ii)
<PAGE> 4
Page
6.3 Capitalization............................................. 33
6.4 Subsidiaries............................................... 33
6.5 Authority of AMG........................................... 33
6.6 Financial Statements....................................... 34
6.7 Absence of Changes......................................... 34
6.8 Litigation................................................. 34
6.9 Compliance with Laws....................................... 35
6.10 Finder's Fee............................................... 35
6.11 Permits.................................................... 35
6.12 Merger Sub................................................. 35
6.13 Acquisition of Shares for Investment....................... 35
6.14 No Implied Representations................................. 35
SECTION 7. COVENANTS OF AMG........................................... 36
7.1 Making of Covenants and Agreement.......................... 36
7.2 Confidentiality............................................ 36
7.3 Cooperation of AMG......................................... 36
7.4 Consummation of Agreement.................................. 36
7.5 Organization and Authorization of Merger Sub............... 36
SECTION 8. CONDITIONS TO THE OBLIGATIONS OF AMG AND
MERGER SUB................................................. 37
8.1 Litigation; No Opposition.................................. 37
8.2 Representations, Warranties and Covenants.................. 37
8.3 Advisory Contract Consents................................. 38
8.4 Registration as an Investment Adviser and Registration of
Investment Adviser Representatives......................... 39
8.5 Other Approvals............................................ 40
8.6 Transfer................................................... 40
8.7 Restated LLC Agreement..................................... 40
8.8 Non Solicitation/Non Disclosure Agreements................. 40
8.9 Employment Agreements...................................... 40
8.10 Agreements With Respect to Private Funds................... 40
8.11 Capitalization, Net Worth and Working Capital of the LLC... 41
8.12 Delivery................................................... 41
8.13 Evidence of Insurability................................... 42
8.14 Insurance Policies......................................... 43
8.15 Policies and Procedures.................................... 43
8.16 Material Adverse Change.................................... 43
8.17 HSR Act.................................................... 43
8.18 License to Use Name........................................ 43
(iii)
<PAGE> 5
Page
SECTION 9. CONDITIONS TO OBLIGATIONS OF THE COMPANY................... 43
9.1 No Litigation; No Opposition............................... 43
9.2 Representations, Warranties and Covenants.................. 43
9.3 Advisory Client Consent.................................... 44
9.4 Employment Agreements...................................... 44
9.5 Material Adverse Change.................................... 44
9.6 Delivery................................................... 44
9.7 Tax Opinion................................................ 45
9.8 HSR Act.................................................... 45
9.9 Preferred Shares........................................... 45
SECTION 10. TERMINATION OF AGREEMENT; RIGHTS TO PROCEED................ 45
10.1 Termination................................................ 45
10.2 Effect of Termination; Expenses............................ 46
10.3 Right to Proceed........................................... 46
SECTION 11. RIGHTS AND OBLIGATIONS SUBSEQUENT TO CLOSING............... 46
11.1 Survival of Representations, Warranties and Covenants...... 46
11.2 Regulatory Filings......................................... 47
SECTION 12. INDEMNIFICATION............................................ 47
12.1 Indemnification by the Stockholders........................ 47
12.2 Limitations on Indemnification by the Stockholders......... 48
12.3 Indemnification by AMG..................................... 48
12.4 Limitation on Indemnification by AMG....................... 49
12.5 Notice; Defense of Claims.................................. 49
12.6 Satisfaction of the Stockholders' Indemnification
Obligations................................................ 50
SECTION 13. DEFINITIONS................................................ 50
13.1 Definitions................................................ 50
SECTION 14. MISCELLANEOUS.............................................. 54
14.1 Fees and Expenses.......................................... 54
14.2 Dispute Resolution......................................... 54
14.3 Waivers.................................................... 54
14.4 Governing Law.............................................. 55
14.5 Notices.................................................... 55
14.6 Entire Agreement........................................... 57
14.7 Assignability; Binding Effect.............................. 57
14.8 Amendments................................................. 57
14.9 Consent to Jurisdiction.................................... 57
14.10 Captions and Gender........................................ 57
14.11 Execution in Counterparts.................................. 58
(iv)
<PAGE> 6
14.12 Publicity and Disclosures.................................. 58
EXHIBITS
Exhibit 1.2 - Form of Certificate of Merger
Exhibit 2.1 - Form of Restated LLC Agreement
Exhibit 5.2A - Form of Client Consent (Affirmative)
Exhibit 5.2B - Form of Client Consent (Negative)
Exhibit 8.6 - Form of Asset Transfer Agreement
Exhibit 8.8 - Form of Non Solicitation Agreement
Exhibit 8.9 - Form of Employment Agreement
Exhibit 8.10A - Form of Agreement With Respect to Wheatley
Exhibit 8.10B - Form of Agreement With Respect to Applewood
Exhibit 8.12(k) - Form of Opinion(s) of Counsel to the Company, the
Stockholders and the Management Corporations
Exhibit 8.12(l) - Form of Release
Exhibit 8.12(n) - Form of Subscription Agreement
Exhibit 8.18 - Form of License Agreement
Exhibit 9.6(f) - Form of Opinion of Counsel to AMG and Merger Sub
SCHEDULES
Schedule 1.7 - Allocation of Merger Consideration
Schedule 3.3(b) - Capital Stock; Voting Agreements
Schedule 3.3(c) - LLC Capitalization pre-Closing
Schedule 3.5 - Approvals; Waivers
Schedule 3.6(a) - Real Property
Schedule 3.6(b) - Personal Property
Schedule 3.7 - Advisory Contracts; Assets Under Management
Schedule 3.8 - Financial Statements
Schedule 3.9 - Taxes
Schedule 3.10 - Accounts Receivable
Schedule 3.11 - Adverse Change
Schedule 3.13 - Banking Relationships
Schedule 3.14 - Intellectual Property
Schedule 3.15 - Contracts; Commitments
Schedule 3.19 - Insurance
Schedule 3.23 - Transaction with Interested Persons
Schedule 3.24 - Employee Benefits
Schedule 3.25(a) - Directors and Officers; Certain Employees
Schedule 3.25(b) - Employees Health
Schedule 3.25(c) - Employment Arrangements
Schedule 4.1(c) - Capitalization of the Management Corporations
(v)
<PAGE> 7
Schedule 4.4 - Investment Advisers
Schedule 4.6 - Employment Data
Schedule 5.5 - Conduct of Business; Exceptions
Schedule 6.3 - Capitalization of AMG
Schedule 6.4 - Subsidiaries of AMG
Schedule 6.6 - Financial Statements of AMG
Schedule 6.7 - Adverse Change with respect to AMG
Schedule 6.8 - Litigation with respect to AMG
(vi)
<PAGE> 8
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT entered into as of August 15, 1997, by and among Affiliated
Managers Group, Inc., a Delaware corporation ("AMG"), AMG Merger Sub, Inc., a
Delaware Corporation and a wholly owned subsidiary of AMG ("Merger Sub"),
GeoCapital Corporation, a Delaware corporation (the "Company"), GeoCapital, LLC,
a Delaware limited liability company (the "LLC"), Irwin Lieber, Barry K.
Fingerhut, Seth Lieber, Jonathan C. Lieber, Dana G. Lieber, Andrew J. Fingerhut
and Brooke A. Fingerhut (together, the "Stockholders" and, each individually, a
"Stockholder").
W I T N E S S E T H:
WHEREAS, the Company is engaged in the business of providing investment
management and advisory services to private accounts of certain institutional
and individual investors;
WHEREAS, the Stockholders own of record and beneficially all of the issued
and outstanding capital stock of the Company, consisting of one hundred (100)
shares of the Company's Common Stock, $1.00 par value per share (the "Company
Common Stock");
WHEREAS, the parties hereto desire, and the Boards of Directors of AMG and
the Company have each determined that it is in the best interests of their
respective stockholders, and the stockholders of the Company have determined to
enter into this agreement providing for the acquisition by AMG, by means of a
merger of the Company into Merger Sub, of all of the Company's interest in the
LLC and further desire that, in connection therewith, the LLC's Existing Limited
Liability Company Agreement be amended and restated into the Restated LLC
Agreement (as these and other capitalized terms are defined in Section 13.1);
WHEREAS, the parties hereto desire and intend, and it is a condition
precedent to the obligations of AMG and Merger Sub hereunder, that five full
business days prior to the closing of the transactions contemplated hereby, the
Company will, and the Stockholders will cause the Company to, contribute
substantially all the assets and liabilities of the Company to the LLC, as more
fully described below, in exchange for LLC Points and a Capital Account in the
LLC pursuant to the Asset Transfer Agreement; and
WHEREAS, to induce AMG to enter into this Agreement, and to receive the
benefits that will accrue to them if the Company merges with and into Merger Sub
as contemplated hereby, the Company, the LLC and the Stockholders have agreed to
make certain representations, warranties and covenants as set forth herein.
NOW, THEREFORE, to consummate said merger and in consideration of the
mutual agreements set forth herein and other valuable consideration, the receipt
and adequacy whereof are hereby acknowledged, the parties hereto agree as
follows:
<PAGE> 9
SECTION 1. THE MERGER.
1.1 THE MERGER. Subject to the terms, provisions and conditions contained
in this Agreement, and on the basis of the representations, warranties and
covenants herein set forth, at the Effective Time (as such term is defined in
Section 1.2), in accordance with this Agreement and the Delaware General
Corporation Law, the Company hereby agrees to, and the Stockholders hereby agree
to use their respective best efforts to cause the Company to, merge with and
into Merger Sub (the "Merger"). Merger Sub shall be the surviving corporation
(sometimes referred to herein as the "Surviving Corporation") of the Merger and
shall continue its corporate existence under the laws of the State of Delaware
as a subsidiary of AMG, but shall change its name to "GeoCapital Corporation."
Upon consummation of the Merger, the separate corporate existence of the Company
shall terminate.
1.2 EFFECTIVE TIME. The Merger shall become effective as set forth in the
certificate of merger in the form attached hereto as Exhibit 1.2 (the
"Certificate of Merger") which shall be filed with the Secretary of State of the
State of Delaware on the date of the Closing (as defined in Section 1.8). The
term "Effective Time" shall be the date and time when the Merger becomes
effective, as set forth in the Certificate of Merger. The parties hereto agree
to execute, act on and make all filings or other recordings required in
connection with the Merger.
1.3 EFFECTS OF THE MERGER. At and after the Effective Time, the Merger
shall have the effects provided herein and set forth in the applicable
provisions of the Delaware General Corporation Law. Without limiting the
generality of the foregoing and subject thereto, at the Effective Time, all the
property, rights, privileges, powers and franchises of the Company and Merger
Sub shall vest in the Surviving Corporation, and all debts, liabilities,
obligations, restrictions, disabilities and duties of the Company and Merger Sub
shall become the debts, liabilities, obligations, restrictions, disabilities and
duties of the Surviving Corporation (it being understood that (i) the
Stockholders shall be liable for certain liabilities set forth in Section 12 of
this Agreement and (ii) all liabilities of the Company, other than the Excluded
Liabilities (as such term is defined in the Asset Transfer Agreement) shall have
been transferred to the LLC pursuant to the Asset Transfer).
1.4 CERTIFICATE OF INCORPORATION. The Certificate of Incorporation of the
Surviving Corporation shall be the Certificate of Incorporation of Merger Sub
immediately prior to the Effective Time, until thereafter amended in accordance
with applicable law and such Certificate.
1.5 BY-LAWS. Unless otherwise determined by AMG prior to the Effective
Time, the By-Laws of the Surviving Corporation shall be the By-Laws of Merger
Sub immediately prior to the Effective Time, until thereafter amended in
accordance with applicable law and such By-Laws.
1.6 DIRECTORS AND OFFICERS. Unless otherwise determined by AMG prior to
the Effective Time, the initial directors and officers of the Surviving
Corporation shall be the directors and officers of Merger Sub immediately prior
to the Effective Time, each to hold office in
2
<PAGE> 10
accordance with the Certificate of Incorporation and By-laws of the Surviving
Corporation until their respective successors are duly elected or appointed and
qualified.
1.7 CONVERSION OF SECURITIES OF THE COMPANY.
(a) At the Effective Time, all of the shares of Company Common Stock
issued and outstanding immediately prior to the Effective Time and all rights
attached thereto, shall, by virtue of this Agreement and without any action on
the part of the holder thereof, be converted into the right to receive, subject
to adjustment as provided in this Section 1.7, (i) cash in the aggregate amount
of Fourteen Million and Four Hundred Thousand Dollars ($14,400,000) and (ii) ten
thousand six hundred sixty-six and two-thirds (10,666 2/3) shares of Preferred
Stock (the "Preferred Shares") of AMG having an aggregate purchase price of Nine
Million Six Hundred Thousand Dollars ($9,600,000) (together, the "Merger
Consideration"). The Merger Consideration shall be payable to the Stockholders
in the specific amounts set forth in Schedule 1.7 hereto.
(b) If, as of the Closing, the Company shall have received Consents
from clients whose investment advisory agreements provide for the payment (based
on the Contract Value of each such investment advisory agreement) of fees
constituting less than ninety-five percent (95%) of the Base Fees, then (i) the
cash amount delivered to each Stockholder pursuant to clause (i) of Section
1.7(a) above, will be reduced to an amount equal to the product of (A) the cash
amount set forth in Schedule 1.7 opposite such Stockholder's name, multiplied by
(B) a fraction (the "Adjustment Fraction"), (x) the numerator of which shall be
the sum of the Contract Values of each investment advisory agreement of the
Company which has not been terminated at or prior to the Closing, and with
respect to which the Client of the Company has given its Consent, plus an
additional amount equal to five percent (5%) of Base Fees, and (y) the
denominator of which shall be the Base Fees, and (ii) the number of Preferred
Shares delivered by AMG to each Stockholder pursuant to clause (ii) of Section
1.7(a) above will be reduced to a number equal to the product of (A) the number
of Preferred Shares set forth in Schedule 1.7 opposite such Stockholder's name,
multiplied by (B) the Adjustment Fraction.
(c) All of the shares of Company Common Stock converted into the
right to receive the Merger Consideration pursuant to this Section 1.7 shall no
longer be outstanding and shall automatically be canceled and shall ceased to
exist, and each certificate previously representing any such shares of Company
Common Stock shall thereafter represent only the right to receive the portion of
the Merger Consideration into which the shares of Company Common Stock
represented by such certificate have been converted pursuant to this Section
1.7. Certificates previously representing shares of Company Common Stock shall
be surrendered at the Closing and shall be exchanged for Merger Consideration
paid in consideration therefor, without any interest thereon.
1.8 TIME AND PLACE OF CLOSING. The closing of the Merger and the related
transactions provided for in this Agreement (herein called the "Closing") shall
be held at the offices of Goodwin, Procter & Hoar LLP at Exchange Place, Boston,
Massachusetts at 10:00 a.m. local time
3
<PAGE> 11
on the date of the Closing, which shall be five (5) business days after the
fulfillment or waiver of each of the conditions set forth in Sections 8 (other
than Section 8.13) and 9 (other than Section 9.4) hereof or at such other place,
or an earlier or later date or time as may be mutually agreed upon by AMG and
the Company.
1.9 FURTHER ASSURANCES. The Stockholders shall (and shall use their best
efforts to cause the Company to), from time to time after the Closing, at the
request of AMG and without further consideration, execute and deliver further
instruments of transfer and assignment and take such other action as AMG may
reasonably require to fully implement the provisions of this Agreement.
SECTION 2. RESTATEMENT OF LLC AGREEMENT.
2.1 RESTATEMENT OF LLC AGREEMENT. Simultaneously with the Closing, the
Existing LLC Agreement shall be amended and restated in substantially the form
attached hereto as Exhibit 2.1.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS.
3.1 MAKING OF REPRESENTATIONS AND WARRANTIES. As a material inducement to
AMG and Merger Sub to enter into this Agreement and consummate the transactions
contemplated hereby, the Stockholders jointly and severally hereby make to AMG
and Merger Sub the representations and warranties contained in this Section 3;
provided, however, each of the Stockholders severally and not jointly, makes the
representations set forth in Section 3.3(b) hereof and each Stockholder
severally and not jointly makes any other representation or warranty made solely
by such Stockholder. None of the Stockholders shall have any right of indemnity
or contribution from the Company or the LLC (or any other right against the
Company or the LLC) with respect to any breach of a representation or warranty
hereunder.
3.2 ORGANIZATION AND QUALIFICATION OF THE COMPANY AND THE LLC.
(a) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware with full corporate
power and authority to own or lease its properties and to conduct its business
in the manner and in the places where such properties are owned or leased or
such business is currently conducted or proposed to be conducted. The copies of
the Company's Certificate of Incorporation, as amended to date (the "Certificate
of Incorporation"), certified by the Secretary of State of the State of
Delaware, and of the Company's By-laws, as amended to date, certified by the
Company's Secretary, and heretofore made available to AMG's counsel, are
complete and correct, and no amendments thereto are pending. The Company is not
in violation of any term of its Certificate of Incorporation or By-laws.
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(b) The Company is duly qualified to do business as a foreign
corporation under the laws of each jurisdiction in which the nature of its
business or the ownership or leasing of its properties requires such
qualification, except for those jurisdictions where the failure to so qualify,
individually or in the aggregate, would not have a Material Adverse Effect on
the Company.
(c) The copies of the LLC's Existing LLC Agreement, certified by the
Secretary of the Company in its capacity as manager member of the LLC, and of
the LLC's Existing Certificate of Formation, certified by the Secretary of State
of the State of Delaware, and heretofore delivered to AMG's counsel, are
complete and correct, and no amendments thereto are pending (except, in each
case, as contemplated by Section 2 hereof).
3.3 CAPITALIZATION; BENEFICIAL OWNERSHIP.
(a) The authorized capital stock of the Company consists only of one
hundred (100) shares of Common Stock, $1.00 par value per share, all of which
shares are duly and validly authorized, issued, outstanding, fully paid and
non-assessable and none of which are held directly or indirectly by the Company
or in its treasury. There are no outstanding options, warrants, rights,
commitments, preemptive rights or agreements of any kind for the issuance or
sale of, or outstanding securities convertible into, any additional shares of
capital stock of any class of the Company. None of the Company's capital stock
has been issued in violation of any federal or state law.
(b) Each Stockholder owns beneficially and of record the shares of
the Company's capital stock set forth opposite such Stockholder's name in
Schedule 3.3(b) hereto, free and clear of any Claims. The Stockholders are the
only beneficial or record holders of the Company's capital stock, and the shares
of capital stock shown in Schedule 3.3(b) are the only shares of capital stock
of the Company held by each Stockholder or with respect to which such
Stockholder has any rights. Except as set forth in Schedule 3.3(b) attached
hereto, there are no voting trusts, voting agreements, proxies or other
agreements, instruments or undertakings with respect to the voting of the
capital stock of the Company to which the Company or any of the Stockholders is
a party. No Stockholder has any right of appraisal with respect to the Company's
capital stock.
(c) The records showing that the Company and the Stockholders are
the sole members of the LLC, and the capitalization of the LLC (with respect to
capital accounts and interests in profits), are included in Schedule 3.3(c)
hereto. There are no other records of the LLC and the LLC has not considered,
approved or taken any action other than as set forth in such records. All such
interests are owned beneficially by the Persons and in the amounts indicated in
said Schedule 3.3(c), and no such Person has taken (or omitted to take) any
action that would result in any transfer, hypothecation, mortgage or other claim
being imposed on such interests and no claim has arisen by operation of law with
respect to any such interests.
3.4 SUBSIDIARIES. Other than the Company's interest in the LLC, the
Company has no, nor has it ever had any, subsidiaries or investments in any
other Person.
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3.5 AUTHORITY OF THE COMPANY.
(a) The Company has full right, authority and power to enter into
this Agreement and each agreement, document and instrument to be executed and
delivered by the Company pursuant to, or as contemplated by, this Agreement and
to carry out the transactions contemplated hereby and thereby. The execution,
delivery and performance by the Company of this Agreement and each such other
agreement, document and instrument have been duly authorized by all necessary
action of the Company and the Stockholders (including without limitation under
Section 251 of the Delaware General Corporation Law), and no other action on the
part of the Company or any Stockholder is required in connection therewith.
This Agreement and each agreement, document and instrument executed and
delivered by the Company pursuant to, or as contemplated by, this Agreement
constitutes, or when executed and delivered will constitute, valid and binding
obligations of the Company enforceable in accordance with their terms. The
execution, delivery and performance by the Company of this Agreement and each
such other agreement, document and instrument:
(i) does not and will not violate any provision of the
Certificate of Incorporation or By-laws of the Company, each as amended to
date;
(ii) does not and will not violate any laws of the United
States, or any state or other jurisdiction (domestic or foreign)
applicable to the Company or require the Company to obtain any approval,
consent or waiver of, or make any filing with, any person or entity
(governmental or otherwise) that has not been obtained or made, except as
specifically identified in Schedule 3.5 or Schedule 3.7 which approvals,
consents and waivers identified in such Schedules shall have been received
or made prior to the Closing (except, with respect to investment advisory
agreements, to the extent permitted by Section 8.3 hereof with respect to
the percentage of investment advisory agreements that may terminate prior
to the Closing) or, at any earlier time required hereunder or under
applicable laws, rules and regulations or the provisions of any agreement,
contracts or instruments; and
(iii) except as set forth on Schedule 3.5, does not and will
not result in a breach of, constitute a default under, accelerate any
obligation under, or give rise to a right of termination of, any
agreement, contract, instrument, mortgage, lien, lease, permit,
authorization, order, writ, judgment, injunction, decree, determination or
arbitration award to which the Company is a party or by which the property
of the Company is bound or affected, or result in the creation or
imposition of any Claim on any of the Company's assets or any Person's
interest in the Company.
(b) The Company (in its capacity as manager member of the LLC) has
taken all action required by the Existing LLC Agreement and the Delaware Act to
cause the LLC to enter into this Agreement and each agreement, document and
instrument to be executed and delivered by the LLC pursuant to, or as
contemplated by, this Agreement and to carry out the transactions
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contemplated hereby and thereby and no other action on the part of the LLC, the
Company or any other member is required in connection therewith.
3.6 REAL AND PERSONAL PROPERTY.
(a) All of the real property leased by the Company is identified in
Schedule 3.6(a). The Company does not own any real property. The Company does
not lease, sublease or otherwise provide (with or without rent or other
consideration and with or without a written agreement) any real property to any
Person, except as described in Schedule 3.6(a). All leases with respect to real
property to which the Company is party are identified in Schedule 3.6(a), and
true and complete copies thereof have been made available to AMG. Each of said
leases has been duly authorized and executed by the parties thereto and is in
full force and effect. The Company is not in default under any of said leases,
nor has any event occurred which, with notice or the passage of time, or both,
would give rise to such a default. To the Company's knowledge, the other party
to each of said leases is not in default under any of said leases and there is
no event which, with notice or the passage of time, or both, would give rise to
such a default.
(b) Attached hereto as Schedule 3.6(b) is a list of all the assets
of the Company including Intellectual Property and including as part of such
Schedule, the tax basis of each such asset. Except as set forth in Schedule
3.6(b) hereto, as of the date hereof, the Company owns all its assets free and
clear of any Claims. The assets listed in Schedule 3.6(b) hereto include all the
material assets used in, and all the assets necessary or desirable for, the
conduct of the business of the Company as currently conducted and are suitable
and in an appropriate condition for such purpose.
3.7 ASSETS UNDER MANAGEMENT.
(a) The aggregate assets under management by the Company as of March
31, 1997, June 30, 1997 and August 8, 1997 are accurately set forth in Schedule
3.7 hereto. In addition, set forth in Schedule 3.7 is a list as of December 31,
1997, March 31, 1997 and June 30, 1997, of all investment management, advisory
or sub-advisory contracts setting forth the name of the client under each such
contract, the amount of assets under management with respect to each such
contract, the fee schedule in effect with respect to each such contract and any
material fee adjustments or material adjustments in the amount of assets under
management (it being understood and agreed that adjustments in assets under
management greater than $500,000 are material) implemented between April 1, 1997
and August 12, 1997, or presently proposed to be instituted, the consent
required for the assignment of each such contract other than those that by their
terms terminate upon assignment (which are so identified), and the country, if
other than the United States of America, of which the client is a citizen.
Except as set forth in Schedule 3.7 and expressly described thereon, there are
no contracts, arrangements or understandings pursuant to which the Company has
undertaken or agreed to cap, waive or reimburse any or all fees or charges
payable by any of the clients set forth in Schedule 3.7 or pursuant to any of
the contracts set forth in Schedule 3.7. Except as is set forth in Schedule 3.7
hereto, no client of the Company has stated an intention to terminate or reduce
its investment relationship with the Company, or has requested
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an adjustment to the fee schedule with respect to any contract in a manner which
would reduce the fee to the Company (or, after giving effect to the Asset
Transfer (assuming the due authorization, validity and enforceability of the
Asset Transfer Agreement), the fee to the LLC).
(b) Each account to which the Company provides Investment Management
Services that is (i) an employee benefit plan, as defined in Section 3(3) of
ERISA that is subject to Title I of ERISA; (ii) a person acting on behalf of
such a plan; or (iii) an entity whose assets include the assets of such a plan,
within the meaning of ERISA and applicable regulations (hereinafter referred to
as an "ERISA Client") have been managed by the Company such that the Company in
the exercise of such management is in compliance in all material respects with
the applicable requirements of ERISA. Schedule 3.7 identifies each Client that
is an ERISA Client with an appropriate footnote. The Company is not required,
under any contract to which it is a party, to be a qualified professional asset
manager (as such term is used in Prohibited Transaction Class Exemption 84-14).
(c) Set forth in Schedule 3.7 is a list of each client with which
the Company has a fee based on performance or otherwise provides for
compensation on the basis of a share of capital gains upon or capital
appreciation of the funds (or any portion thereof) of any client, together with
a complete description of such fee or compensation. In addition, with respect to
the performance fee applicable to the Minnesota Account set forth in Schedule
3.7, is a calculation of such fee since the inception of the fee and an
indication of the deficit balance as of the date of this Agreement, which shall
be updated as of a date within five (5) business days prior to the date of the
Closing.
3.8 FINANCIAL STATEMENTS.
(a) The Company has delivered to AMG the following financial
statements, copies of which are attached hereto as Schedule 3.8:
(i) Audited balance sheets of the Company at September 30,
1994, September 30, 1995 and September 30, 1996, and audited statements of
income, retained earnings and cash flows for each of the three (3) years
then ended. The audited balance sheet of the Company at September 30, 1996
(including the notes thereto) is referred to hereinafter as the "Base
Balance Sheet."
(ii) An unaudited balance sheets of the Company at December
31, 1996 and March 31, 1997 and June 30, 1997 and statements of income for
the period then ended, certified by the Company's chief financial officer.
All of the foregoing financial statements have been prepared in accordance
with GAAP using the accrual method of accounting, applied consistently during
the periods covered thereby (except that the Company's unaudited financial
statements do not include footnote disclosure and, other than such statements
prepared for the period ending June 30, 1997, are on a cash basis method of
accounting), are complete and correct and present fairly the financial condition
of the
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Company at the dates of said statements and the results of its operations for
the periods covered thereby.
(b) As of the date of the Base Balance Sheet, the Company did not
have any liabilities of any nature, whether accrued, absolute, contingent or
otherwise, asserted or unasserted, known or unknown (including, without
limitation, liabilities as guarantor or otherwise with respect to obligations of
others, liabilities for Taxes due or then accrued or to become due, or
contingent or potential liabilities relating to activities of the Company or the
conduct of its businesses prior to the date of the Base Balance Sheet regardless
of whether claims in respect thereof had been asserted as of such date), except
immaterial liabilities incurred in the ordinary course of business of the
Company, consistent with past practices, or those stated or adequately reserved
against on the Base Balance Sheet, or reflected in Schedules furnished to AMG
hereunder as of the date hereof.
(c) As of the date hereof (including, with respect to the giving of
this representation pursuant to Section 8.2 hereof at the Closing, after giving
effect to the Asset Transfer) (assuming the due authorization, validity and
enforceability of the Asset Transfer Agreement), the Company has not had and
will not have any liabilities of any nature, whether accrued, absolute,
contingent or otherwise, asserted or unasserted, known or unknown (including,
without limitation, liabilities as guarantor or otherwise with respect to
obligations of others, or liabilities for taxes due or then accrued or to become
due or contingent or potential liabilities relating to activities of the Company
or the conduct of its business prior to the date hereof, regardless of whether
claims in respect thereof had been asserted as of such date), except liabilities
that are: (i) stated or adequately reserved against on the Base Balance Sheet or
the notes thereto, (ii) reflected in Schedules furnished to AMG hereunder on the
date hereof, or (iii) immaterial and were incurred after the date of, and
permitted under, this Agreement.
3.9 TAXES.
(a) The Company has paid or caused to be paid all federal, state,
local, foreign or add-on and other taxes, customs duties, government fee or like
amount, including, without limitation, income taxes, estimated taxes,
alternative minimum taxes, franchise taxes, sales taxes, use taxes, ad valorem
or value added taxes, capital stock taxes, employment and payroll-related taxes,
withholding taxes, and transfer taxes, stamp taxes, occupation taxes, windfall
projects taxes, and all deficiencies, or other additions to tax, interest, fines
and penalties owed by it (collectively, "Taxes"), required to be paid by it,
whether disputed or not. The unpaid Taxes of the Company (i) did not, as of
December 31, 1996 exceed the reserve for Tax liability (rather than the reserve
for deferred Taxes established to reflect timing differences between book and
tax income) set forth in the Base Balance Sheet (rather than in any notes
thereto) and (ii) do not exceed that reserve as adjusted for the passage of time
through the date hereof and the date of the Closing in accordance with the past
custom and practice of the Company in filing its Tax Returns. All Taxes required
to be withheld by the Company, including, but not limited to, Taxes arising as a
result of payments to foreign persons or to employees of the Company, have been
collected and withheld,
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and have been either paid to the respective governmental agencies, set aside in
accounts for such purpose, or accrued, reserved against, and entered upon the
books and records of the Company.
(b) The Company has, in accordance with applicable law, filed all
federal, state, local and foreign tax returns required to be filed by it, and
all such returns correctly and accurately set forth the amount of any Taxes
relating to the applicable period. A list of all federal, state, local and
foreign income Tax returns filed with respect to the Company for taxable periods
ended on or after December 31, 1990, is set forth in Schedule 3.9 attached
hereto, and said Schedule indicates those Tax returns that have been audited or
currently are the subject of an audit. For each taxable period of the Company
ended on or after December 31, 1990, the Company has made available to AMG
correct and complete copies of all federal, state, local and foreign income tax
returns, examination reports and statements of deficiencies assessed against or
agreed to by the Company.
(c) Neither the IRS nor any other governmental authority responsible
for the imposition or collection of any Tax (a "Taxing Authority") is now
asserting or, to the knowledge of the Company or any Stockholder, threatening in
writing to assert against the Company any deficiency or claim for additional
Taxes. No claim has ever been made by a Taxing Authority in a jurisdiction where
the Company does not file reports and returns that the Company is or may be
subject to taxation by that jurisdiction. There are no security interests on any
of the assets of the Company that arose in connection with any failure (or
alleged failure) to pay any Taxes, except for Taxes that are not yet due and
payable or that are being contested in good faith and against which reserves
have been taken in accordance with GAAP.
(d) There has not been any audit of any tax return filed by the
Company, no such audit is in progress, and the Company has not been notified in
writing by any Taxing Authority that any such audit is contemplated or pending.
No extension of time with respect to any date on which a Tax return was or is to
be filed by the Company is in force, and no waiver or agreement by the Company
is in force for the extension of time for the assessment or payment of any
Taxes.
(e) The Company has never been a member of an "affiliated group" (as
defined in Section 1504(a) of the Code). The Company has never filed, or been
required to file, a consolidated, combined or unitary tax return with any other
entity. The Company is not a party to any tax sharing agreement.
(f) The Company (and any predecessor of the Company) has been a
validly electing S corporation within the meaning of Sections 1361 and 1362 of
the Code at all times during its existence, and the Company will be an S
corporation up to the Effective Date.
(g) None of the Company's payroll, property, or receipts, or other
factors used in a particular state's apportionment or allocation formula results
in an apportionment or allocation of business income to any state other than New
York, California or Minnesota, and the Company
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has no non-business income that is allocated, apportioned or otherwise sourced
to any state other than New York, California or Minnesota.
3.10 COLLECTIBILITY OF ACCOUNTS RECEIVABLE. All of the accounts receivable
of the Company shown or reflected on the Company's balance sheet as of June 30,
1997, included as part of Schedule 3.8, or existing at the date this
representation is given (less the reserve for bad debts set forth on the
Company's balance sheet as of June 30, 1997 included as part of Schedule 3.8 are
and will be at the Closing, valid and enforceable claims, fully collectible and
subject to no set off or counterclaim. The Company does not have any accounts or
loans receivable from any person, firm or corporation or other entity which is
affiliated with the Company or from any director, officer, stockholder, member
or employee of the Company except as disclosed in Schedule 3.10 hereto.
3.11 ABSENCE OF CERTAIN CHANGES. Except as disclosed in Schedule 3.11
attached hereto or as expressly provided for herein, since the date of the Base
Balance Sheet there has not been any:
(a) change in the condition (financial or otherwise), properties,
assets, liabilities, business, operations or prospects of the Company which
change by itself or in conjunction with all other such changes, whether or not
arising in the ordinary course of business, could have a Material Adverse Effect
on the Company;
(b) amendment or termination or, to the best knowledge of the
Company and each of the Stockholders, proposed or threatened amendment or
termination, whether written or oral, of any agreement listed in Schedule 3.7
hereto;
(c) obligation or liability of any nature, whether accrued,
absolute, contingent or otherwise, asserted or unasserted, known or unknown
(including, without limitation (i) liabilities for Taxes due or to become due,
or (ii) contingent or potential liabilities relating to services provided by the
Company or the conduct of the business of the Company since the date of the Base
Balance Sheet regardless of whether claims in respect thereof have been
asserted, or (iii) contingent liabilities incurred by the Company as guarantor
or otherwise with respect to the obligations of the Company or others), incurred
by the Company other than obligations and liabilities incurred in the ordinary
course of business consistent with the terms of this Agreement (it being
understood that liability claims in respect of services provided shall not be
deemed to be incurred in the ordinary course of business);
(d) material Claim placed on any of the properties or assets of the
Company;
(e) cancellation of any material debt or claim owing to, or waiver
of any material right of, the Company;
(f) purchase, sale or other disposition, or any agreement or other
arrangement for the purchase, sale or other disposition, of any of the
properties or assets of the Company other
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than pursuant to the Asset Transfer or in the ordinary course of business
consistent with past practices;
(g) damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the properties, assets or business
of the Company;
(h) declaration, setting aside or payment of any dividend or
distribution by the Company, or the making of any other distribution in respect
of the capital stock of the Company , or any direct or indirect redemption,
purchase or other acquisition by the Company of its own capital stock or
interests, respectively;
(i) change in the compensation payable or to become payable by the
Company to any of their respective officers, employees, agents or independent
contractors other than normal merit increases in accordance with its usual
practices, or any bonus payment or arrangement made to or with any of such
officers, employees, agents or independent contractors;
(j) change with respect to the officers or management of the
Company;
(k) material payment or discharge of a Claim or liability of the
Company;
(l) obligation or liability incurred by the Company to any of their
respective officers, directors, stockholders, members or employees, or any loans
or advances made by the Company to any of their respective officers, directors,
stockholders, members or employees, except normal compensation and expense
allowances payable to officers or employees in the ordinary course of business
consistent with past practices;
(m) change in accounting methods or practices, or billing or
collection policies used by the Company;
(n) other transaction entered into by the Company other than
transactions in the ordinary course of business consistent with past practices;
or
(o) agreement or understanding, whether in writing or otherwise, for
the Company to take any of the actions specified in paragraphs (a) through (n)
above.
3.12 ORDINARY COURSE. Since the date of the Base Balance Sheet, other than
with respect to transactions specifically contemplated herein, the Company has
conducted its business only in the ordinary course and consistently with its
prior practices. Since its formation, the LLC has only conducted those
operations necessary for the performance of its obligations hereunder and
activities necessary in connection herewith and therewith.
3.13 BANKING RELATIONS. Schedule 3.13 includes a list of all of the
checking accounts, savings accounts, borrowing arrangements or similar
arrangements which the Company has with
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a banking institution and indicates with respect to each of such arrangements
the person or persons authorized in respect thereof.
3.14 INTELLECTUAL PROPERTY.
(a) Except as described in Schedule 3.14, the Company has exclusive
ownership of, or exclusive license to use, all patent, copyright, trade secret,
trademark, trade name, service mark, formulas, designs, inventions or other
proprietary rights (collectively, "Intellectual Property") used or to be used in
the business of the Company as presently conducted. All of the rights of the
Company in such Intellectual Property are freely transferable. There are no
claims or demands of any other Person pertaining to any of such Intellectual
Property and no proceedings have been instituted, or are pending or to the
knowledge of the Company threatened, which challenge the rights of the Company
in respect thereof. The Company has the right to use, free and clear of any
claims or rights of other Person, all customer lists, investment or other
processes, computer software (other than rights of other Persons in computer
software that is generally available to the public in the retail marketplace),
systems, data compilations, research results and other information required for
or incident to its services or its business as presently conducted.
(b) There are no patents, patent applications, trademarks, trademark
applications and registrations and registered copyrights which are owned by or
licensed to the Company or used or to be used by the Company in its business as
presently conducted or contemplated.
(c) All licenses or other agreements under which the Company is
granted rights in items of Intellectual Property which are material to the
business or operations of the Company are listed in Schedule 3.14. All said
licenses or other agreements are in full force and effect, there is no material
default by any party thereto, and, except as set forth in Schedule 3.14, all of
the rights of the Company thereunder are freely assignable. To the knowledge of
the Company and the Stockholders, the licensors under said licenses and other
agreements have and had all requisite power and authority to grant the rights
purported to be conferred thereby. True and complete copies of all such licenses
or other agreements, and any amendments thereto, have been provided to AMG.
(d) Other than as part of the Asset Transfer or with respect to the
name "GeoCapital" as described in Schedule 3.14, the Company has not granted
rights to others in Intellectual Property owned or licensed by the Company. With
respect to the name "GeoCapital," all rights granted to others are solely the
right to use such name for limited purposes (and do not include any right to
sublease or assign such right) and are subject to the Company's right to revoke
such grant.
(e) The Company's business practices to establish and preserve its
ownership of all Intellectual Property rights with respect to its services and
rights in and to other Intellectual Property conform to practices generally
applied in the investment advisory industry. The Company has not made any of
such information available to any Person other than employees of the Company,
except pursuant to written agreements requiring the recipients to maintain the
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confidentiality of such information and appropriately restricting the use
thereof. The Company has no knowledge of any infringement by others of any
Intellectual Property rights of the Company.
(f) The present business, activities and products of the Company do
not infringe any rights of any other person in Intellectual Property. No
proceeding charging the Company with infringement of any Intellectual Property
of any other person or entity has been filed or, to the knowledge of the
Company, is threatened to be filed. The Company is not making unauthorized use
of any confidential information or trade secrets of any person, including
without limitation, any former employer of any past or present employee of the
Company. Except as set forth in Schedule 3.14, neither the Company, nor, to the
knowledge of the Company and the Stockholders, any of the Company's employees
have any agreements or arrangements with any persons other than the Company
related to confidential information or trade secrets of such persons or
restricting any such employee's ability to engage in business activities of any
nature. The activities of the employees on behalf of the Company do not violate
any such agreements or arrangements known to the Company.
3.15 CONTRACTS. Except for contracts, commitments, plans, agreements and
licenses described in Schedule 3.6, Schedule 3.7, Schedule 3.14 or Schedule 3.15
(true and complete copies of which have been made available to AMG), the Company
is not a party to or subject to any:
(a) investment management or investment advisory or sub-advisory
contract or any other contract for the provision of investment management or
other similar services;
(b) plan or contract providing for bonuses, pensions, options, stock
(or beneficial interest) purchases (or other securities or phantom equity
purchases), deferred compensation, retirement payments, profit sharing, or the
like;
(c) employment contract or contract for services which is not
terminable at will by the Company without liability for any penalty or severance
payment;
(d) contract or agreement for the purchase of any assets, material
or equipment except purchase orders in the ordinary course for less than $10,000
each, such orders not exceeding $50,000 in the aggregate;
(e) other contracts or agreements creating any obligations of the
Company of $50,000 or more with respect to any such contract or agreement not
specifically disclosed elsewhere under this Agreement;
(f) contract or agreement not made in the ordinary course of
business (including, without limitation, any contract for the sale of all or any
material portion of the assets of the Company or any contract for the purchase
of all or any material portion of the assets of any other entity) other than the
Asset Transfer Agreement and the agreements contemplated thereby;
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(g) contract with any investment or research consultant, solicitor
or sales agent;
(h) contract containing covenants limiting the freedom of the
Company (or its respective Affiliates) to compete in any line of business or
with any person or entity;
(i) license agreement (as licensor or licensee);
(j) agreement providing for the borrowing or lending of money, and
the Company has no obligations: (i) for borrowed money, (ii) evidenced by bonds,
debentures, notes or similar instruments, (iii) to pay the deferred purchase
price of property or services, (iv) under leases that would, in accordance with
GAAP, appear on the balance sheet of the lessee as a liability, (v) secured by a
Claim, (vi) in respect of letters of credit, or bankers acceptances, contingent
or otherwise, or (vii) in respect of any guaranty or endorsement or other
obligations to be liable for the debts of another person or entity; or
(k) other material contract or agreement to which the Company is a
party or by which it is bound.
Each of the contracts described in Schedule 3.6(a), Schedule 3.7, Schedule
3.14, Schedule 3.15 or Schedule 3.24 is valid and effective in accordance with
its respective terms, and there is not, under any such contract, an existing
breach or event which, with the giving of notice or the lapse of time or both,
would become such a breach. All of the consents necessary to effectuate the
transfer of each such contract to the LLC pursuant to the Asset Transfer
Agreement are set forth in Schedule 3.5 and Schedule 3.7. The Company has
complied and is in compliance with the client's guidelines and restrictions set
forth in any contract described in Schedule 3.7, including, without limitation,
any limitation set forth in the applicable prospectus, offering memorandum or
marketing material for a collective investment vehicle or governing documents
for any client.
3.16 LITIGATION. There is no litigation or legal (or other) action, suit,
proceeding or, to the Company's and the Stockholders' knowledge, investigation,
at law or in equity, or before any federal, state, municipal or other
governmental department, commission, bureau, board, agency or instrumentality,
domestic or foreign (including, without limitation, any voluntary or involuntary
proceedings under the Bankruptcy Code or any action, suit, proceeding or
investigation under any foreign, federal or state securities law, rule or
regulation), in which the Company or any officer, director, stockholder, or
member or employee thereof is engaged, or, to the knowledge of the Company and
the Stockholders, with which any of them is threatened, in connection with the
business, affairs, properties or assets of the Company, or which might call into
question the validity or hinder the enforceability or performance of this
Agreement, or of the other agreements, documents and instruments contemplated
hereby and the transactions contemplated hereby and thereby. There are no
proceedings pending, or to the knowledge of the Company or any of the
Stockholders, threatened, relating to the termination of, or limitation of, the
rights of the Company under its registration under the Advisers Act, as an
investment adviser, or any similar or related rights under any registrations or
qualifications with various states or other jurisdictions.
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3.17 COMPLIANCE WITH LAWS. The Company is, and at all times has been, in
material compliance with all laws and governmental rules and regulations,
domestic or foreign, including, without limitation, the Advisers Act, the
Investment Company Act, the Exchange Act, ERISA, the Commodity Exchange Act and
the Securities Act and the regulations promulgated under each of them; the rules
and regulations of self-regulatory organizations including, without limitation,
the NASD and each applicable exchange (as defined under the Exchange Act); and
all other foreign, federal or state securities laws and regulations applicable
to the business or affairs or properties or assets of the Company (collectively
"Investment Laws and Regulations"). None of the Company or any officer,
director, member, stockholder or employee thereof, is in default with respect to
any judgment, order, writ, injunction, decree, demand or assessment relating to
any aspect of the business or affairs or properties or assets of the Company and
issued by any court or any federal, state, municipal or other governmental
agency, board, commission, bureau, instrumentality or department, domestic or
foreign, or by any self-regulatory authority. None of the Company nor any
officer, director, member, stockholder or employee thereof, is charged or, to
the knowledge of the Company or any of the Stockholders, under investigation
with respect to, any violation of any provision of foreign, federal, state,
municipal or other law or any administrative rule or regulation, domestic or
foreign, including, without limitation, any Investment Laws and Regulations,
affecting the Company or the transactions contemplated hereby.
3.18 BUSINESS; REGISTRATIONS.
(a) The Company is and has, since its inception, been engaged solely
in the business of providing Investment Management Services. The Company does
not provide Investment Management Services to (i) any of the Private Funds, or
any other issuer that would be an investment company (within the meaning of the
Investment Company Act) but for the exemptions contained in Section 3(c)(1),
Section 3(c)(7), the final clause of Section 3(c)(3) or the third or fourth
clauses of Section 3(c)(11) of the Investment Company Act, (ii) any issuer,
registered under the laws of the appropriate securities regulatory authority in
the jurisdiction in which the issuer is domiciled (other than the United States
or the States thereof), which is or holds itself out as engaged primarily in the
business of investing, reinvesting or trading in securities or (iii) any issuer
that is an investment company (within the meaning of the Investment Company
Act).
(b) The Company is and has, since its inception, been duly
registered as an investment adviser under the Advisers Act. The Company is duly
registered, licensed and qualified as an investment adviser in all jurisdictions
where such registration, licensing or qualification is required in order to
conduct its business and where the failure to be so registered, licensed or
qualified could have a Material Adverse Effect on the Company. The Company is in
compliance with all foreign, federal and state laws requiring registration,
licensing or qualification as an investment adviser. The Company has made
available to AMG or its representatives, true and complete copies of its most
recent Form ADV, as amended to date, and has made available copies of all
foreign and state registration forms, likewise as amended to date. The
information contained in such forms was true and complete at the time of filing
and the Company has made all amendments to such forms as it is required to make
under any applicable laws. Neither the
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Company nor, to the knowledge of the Company and the Stockholders, any person
"associated" (as defined under the Advisers Act or under the Commodity Exchange
Act, as appropriate) with the Company, has been convicted of any crime or is or
has engaged in any conduct that would be a basis for denial, suspension or
revocation of registration of an investment adviser under Section 203(e) of the
Advisers Act or Rule 206(4)-4(b) thereunder, or of similar action under the
Commodity Exchange Act, and to the knowledge of the Company and the
Stockholders, there is no proceeding or investigation that is reasonably likely
to become the basis for any such disqualification, denial, suspension or
revocation. The Company has all permits, registrations, licenses, franchises,
certifications and other approvals (collectively, the "Licenses") required from
foreign, federal, state or local authorities in order for it to conduct the
businesses it presently conducts. The Company is not subject to any limitation
imposed in connection with one or more of the Licenses which is reasonably
likely to have a material adverse effect on the condition (financial or
otherwise), properties, assets, liabilities, business, operations or prospects
of the Company or AMG. The Company is not a "broker" or "dealer" within the
meaning of the Exchange Act, or a "commodity pool operator" or "commodity
trading adviser" within the meaning of the Commodity Exchange Act. None of the
Company or its officers and employees is required to be registered as a broker
or dealer, a commodity trading adviser, a commodity pool operator, a futures
commission merchant, an introducing broker, a registered representative or
associated person, a counseling officer, an insurance agent, a sales person or
in any similar capacity with the SEC, the Commodity Futures Trading Commission,
the National Futures Association, the NASD or the securities commission of any
state or any self-regulatory body.
3.19 INSURANCE. The Company has in full force and effect such insurance
as, to the knowledge of the Company, is customarily maintained by companies of
similar size in the same or a similar business, with respect to its businesses,
properties and assets (including, without limitation, errors and omissions
liability insurance) and all bonds required by ERISA and by any contract to
which the Company is a party, all as listed in Schedule 3.19 hereto. The Company
is not in default under any such insurance policy or bond.
3.20 POWERS OF ATTORNEY. Neither the Company nor with respect to the
Company Common Stock, any Stockholder, has any outstanding power of attorney.
3.21 FINDER'S FEE. Neither the Company nor any Stockholder has incurred or
become liable for any broker's commission or finder's fee relating to or in
connection with the transactions contemplated by this Agreement.
3.22 CORPORATE RECORDS; COPIES OF DOCUMENTS. The record books of the
Company accurately record all corporate action taken by its respective
stockholders or members and board of directors and committees, as applicable,
and true and complete copies of the originals of such documents have been made
available to AMG for review. The Company and the Stockholders have made
available for inspection and copying by AMG and its counsel true and correct
copies of all documents referred to in this Agreement or in the Schedules
delivered to AMG in connection herewith.
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3.23 TRANSACTIONS WITH INTERESTED PERSONS. Except as set forth in Schedule
3.23, neither the Company nor any stockholder, member, officer, supervisory
employee or director of the Company or, to the knowledge of the Company or any
of the Stockholders, any of their respective spouses or family members, is a
party to any material transaction or material contract or arrangement with the
Company, or owns directly or indirectly on an individual or joint basis any
interest in, or serves as an officer or director or in another similar capacity
of, any competitor or client of the Company, or any organization which has a
material contract or arrangement with the Company (in each case, other than as
expressly contemplated hereby).
3.24 EMPLOYEE BENEFIT PROGRAMS.
(a) Schedule 3.24 hereto lists every Employee Program (as defined
below) that has been maintained (as defined below) by the Company at any time
during the three-year period ending on the date of the Closing.
(b) Each Employee Program which has ever been maintained by the
Company and which has at any time been intended to qualify under Section 401(a)
or 501(c)(9) of the Code has received a favorable determination or approval
letter from the IRS regarding its qualification under such section. The Company
does not know, and has no reason to know, of any event or omission that has
occurred which would cause any such Employee Program to lose its qualification
under the applicable Code section.
(c) The Company does not know, and has no reason to know, of any
failure of any party to comply with any laws applicable to the Employee Programs
that have been maintained by the Company. With respect to any Employee Program
ever maintained by the Company, there has occurred no "prohibited transaction,"
as defined in Section 406 of the ERISA or Section 4975 of the Code, or breach of
any duty under ERISA or other applicable law (including, without limitation, any
health care continuation requirements or any other tax law requirements, or
conditions to favorable tax treatment, applicable to such plan), which could
result, directly or indirectly, in any taxes, penalties or other liability to
the LLC, Merger Sub or AMG. No litigation, arbitration, or governmental
administrative proceeding (or investigation) or other proceeding (other than
those relating to routine claims for benefits) is pending or threatened with
respect to any such Employee Program.
(d) Neither the Company nor any ERISA Affiliate has incurred any
liability under title IV of ERISA which has not been paid in full prior to the
Closing. There has been no "accumulated funding deficiency" (whether or not
waived) with respect to any Employee Program ever maintained by the Company or
any Affiliate and subject to Code Section 412 or ERISA Section 302. With respect
to any Employee Program maintained by the Company or an ERISA Affiliate and
subject to title IV of ERISA, there has been no (nor will be any as a result of
the transaction contemplated by this Agreement) (i) "reportable event," within
the meaning of ERISA Section 4043, or the regulations thereunder (for which
notice the notice requirement is not waived under 29 C.F.R. Part 2615) and (ii)
no event or condition which presents a material risk of plan termination or any
other event that may cause the Company or any ERISA Affiliate to incur
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liability or have a lien imposed on its assets under title IV of ERISA. All
payments and/or contributions required to have been made (under the provisions
of any agreements or other governing documents or applicable law) with respect
to all Employee Programs ever maintained by the Company or any Affiliate, for
all periods prior to the Closing, either have been made or have been accrued
(and all such unpaid but accrued amounts are described on Schedule 3.24). Except
as described in Schedule 3.24, no Employee Program maintained by the Company or
an Affiliate and subject to title IV of ERISA (other than a Multiemployer Plan)
has any "unfunded benefit liabilities" within the meaning of ERISA Section
4001(a)(18), as of the Closing Date. Neither the Company nor any Affiliate has
ever maintained a Multiemployer Plan. None of the Employee Programs ever
maintained by the Company or any Affiliate has ever provided health care or any
other non-pension benefits to any employees after their employment is terminated
(other than as required by part 6 of subtitle B of title I of ERISA) or has ever
promised to provide such post-termination benefits. Any Employee Program which
has been subject to Title IV of ERISA has been terminated in accordance with
Section 4041 of ERISA and the regulations promulgated thereunder.
(e) With respect to each Employee Program maintained by the Company
within the three (3) years preceding the Closing, complete and correct copies of
the following documents (if applicable to such Employee Program) have previously
been made available to AMG: (i) all documents embodying or governing such
Employee Program, and any funding medium for the Employee Program (including,
without limitation, trust agreements) as they may have been amended; (ii) the
most recent IRS determination or approval letter with respect to such Employee
Program under Code Sections 401 or 501(c)(9), and any applications for
determination or approval subsequently filed with the IRS; (iii) the three (3)
most recently filed IRS Forms 5500, with all applicable schedules and
accountants' opinions attached thereto; (iv) the summary plan description for
such Employee Program (or other descriptions of such Employee Program provided
to employees) and all modifications thereto; (v) any insurance policy (including
any fiduciary liability insurance policy) related to such Employee Program; (vi)
any documents evidencing any loan to an Employee Program that is a leveraged
employee stock ownership plan; and (vii) all other materials reasonably
necessary for AMG to perform any of its responsibilities with respect to any
Employee Program subsequent to the Closing (including, without limitation,
health care continuation requirements).
(f) Each Employee Program listed on Schedule 3.24 may be amended,
terminated, modified or otherwise revised by the Company, including the
elimination of any and all future benefit accruals under any Employee Program
(except claims incurred but not reported under any welfare plan or any benefit
described in Section 411(d)(6) of the Code).
(g) The GeoCapital Corporation Defined Benefit Pension Plan met the
requirements of Section 4021(b)(13) of ERISA at all times and as a result, was
not required make any filings with the Pension Benefit Guaranty Corporation
including without limitation, filings in connection with the termination of such
plan.
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(h) For purposes of this section:
(i) "Employee Program" means (A) all employee benefit plans
within the meaning of ERISA Section 3(3), including, but not limited to,
multiple employer welfare arrangements (within the meaning of ERISA
Section 3(4)), plans to which more than one unaffiliated employer
contributes and employee benefit plans (such as foreign or excess benefit
plans) which are not subject to ERISA; and (B) all stock option plans,
bonus or incentive award plans, severance pay policies or agreements,
deferred compensation agreements, supplemental income arrangements,
vacation plans, and all other employee benefit plans, agreements, and
arrangements not described in (A) above. In the case of an Employee
Program funded through an organization described in Code Section
501(c)(9), each reference to such Employee Program shall include a
reference to such organization.
(ii) An entity "maintains" an Employee Program if such entity
sponsors, contributes to, or provides (or has promised to provide)
benefits under such Employee Program, or has any obligation (by agreement
or under applicable law) to contribute to or provide benefits under such
Employee Program, or if such Employee Program provides benefits to or
otherwise covers employees of such entity, or their spouses, dependents,
or beneficiaries.
(iii) An entity is an "ERISA Affiliate" of the Company if it
would have ever been considered a single employer with the Company under
ERISA Section 4001(b) or part of the same "controlled group" as the
Company for purposes of ERISA Section 302(d)(8)(C).
(iv) "Multiemployer Plan" means a (pension or non-pension)
employee benefit plan to which more than one employer contributes and
which is maintained pursuant to one or more collective bargaining
agreements.
3.25 DIRECTORS, OFFICERS AND EMPLOYEES.
(a) Schedule 3.25(a) hereto contains a true and complete list of all
current directors and officers of the Company. In addition, Schedule 3.25(a)
hereto contains a list of all managers, employees and consultants of the Company
who, individually, have received or are scheduled to receive compensation from
the Company for the fiscal year ending December 31, 1997, in excess of $75,000.
In each case such Schedule includes the current job title and aggregate annual
compensation of each such individual.
(b) To the knowledge of the Company and the Stockholders, each
employee listed in Schedule 3.25(b) hereto is in good health.
(c) The Company employs 16 full-time employees and 5 part-time
employees, all of whom are listed in Schedule 3.25(c) (the "Employees") and
generally enjoys good employer-employee relationships. Except as specifically
described in Schedule 3.25(c), no consultant or
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other Person other than the Employees renders Investment Management Services to
or on behalf of the Company. Except as set forth in Schedule 3.25(c) hereto (or
Schedule 3.15 or Schedule 3.24 hereto), the Company does not have any
obligation, contingent or otherwise, under (a) any employment, collective
bargaining or other labor agreement, (b) any written or oral agreement
containing severance or termination pay arrangements, (c) any deferred
compensation agreement, retainer or consulting arrangements, (d) any pension or
retirement plan, any bonus or profit-sharing plan, any stock option or stock
purchase plan, or (e) any other employee contract or non-terminable (whether
with or without penalty) employment arrangement (each an "Employment
Arrangement"). The Company is not in default with respect to any material term
or condition of any Employment Arrangement, nor will the Closing or the Asset
Transfer (or the transactions contemplated hereby or thereby, assuming the due
authorization, validity and enforceability of the Asset Transfer Agreement)
result in any such default, including, without limitation, after the giving of
notice, lapse of time or both. The Company is not delinquent in payments to any
of its employees for any wages, salaries, commissions, bonuses or other direct
compensation for any services performed for it to the date hereof or amounts
required to be reimbursed to such employees. Upon termination of the employment
of any of said employees, none of the LLC, Merger Sub nor AMG would, by reason
of the transactions contemplated under this Agreement or anything done prior to
the Closing, be liable to any of said employees for so-called "severance pay" or
any other payments except as set forth in the Restated LLC Agreement. The
Company has not made any payments, is not obligated to make any payments, and is
not a party to any agreement that under certain circumstances could obligate
Merger Sub or the LLC to make any payments that will not be deductible under
Section 280G of the Code. The Company does not have any policy, practice, plan
or program of paying severance pay or any form of severance compensation in
connection with the termination of employment. The Company is in compliance with
all applicable laws and regulations respecting labor, employment, fair
employment practices, work place safety and health, terms and conditions of
employment, and wages and hours. To the knowledge of the Company or the
Stockholders there are no charges of employment discrimination or unfair labor
practices against or involving the Company. To the knowledge of the Company or
the Stockholders there are no grievances, complaints or charges that have been
filed against the Company under any dispute resolution procedure that might have
a Material Adverse Effect on the Company, Merger Sub, the LLC or AMG or the
conduct of their respective businesses, and there is no arbitration or similar
proceeding pending and no claim therefor has been asserted. The Company has in
place all employee policies required by applicable laws, rules and regulations,
and there have been no violations or alleged violations of any of such policies.
None of the Company or any of the Stockholders has received notice that any of
the Company's employment policies or practices is currently being audited or
investigated by any federal, state or local government agency. The Company is,
and at all times since November 6, 1986 has been, in compliance with the
requirements of the Immigration Reform Control Act of 1986, except as would not
have a Material Adverse Effect on the Company.
3.26 CODE OF ETHICS. The Company has a written policy regarding insider
trading and a Code of Ethics which complies with all applicable provisions of
Section 204A of the Advisers Act a copy of which has been delivered to AMG prior
to the date hereof. All employees of the Company and other Persons listed on
Schedule 3.25(a) have executed acknowledgments that they
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are bound by the provisions of such Code of Ethics and insider trading policy.
The policies of the Company with respect to avoiding conflicts of interest are
as set forth in the Company's most recent Form ADV or incorporated by reference
therein. There have been no material violations or allegations of material
violations of such Code of Ethics, insider trading policy or conflicts policy.
3.27 CERTAIN REPRESENTATIONS AND WARRANTIES AS TO COLLECTIVE INVESTMENT
VEHICLES.
(a) True, correct and complete copies of all of the current
investment advisory agreements and distribution or underwriting contracts,
administrative services and other services agreements, if any, and
organizational and offering documents, pertaining to each of the Private Funds
(i) have been made available to AMG prior to the date hereof and (ii) are in
full force and effect. Such offering materials as of the dates as of which they
were prepared and distributed did not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
(b) Each of the Private Funds is duly organized, validly existing
and in good standing in the jurisdiction in which it is organized and has all
requisite power and authority to conduct its business in the manner and in the
places where such business is currently conducted. Each Private Fund is and has,
since its inception, been engaged solely in the business of an investment
company. Each Private Fund is and has, since its inception, been in compliance
with all foreign, federal and state laws requiring registration, licensing or
qualification as an investment company and all Investment Laws and Regulations.
(c) AMG has been furnished true, correct and complete copies of the
audited financial statements, prepared in accordance with GAAP, of each of the
Private Funds for the past three fiscal years (or such shorter period as such
Private Fund shall have been in existence), and unaudited financial statements,
prepared in accordance with GAAP, of each of the Private Funds for the first
six-months of its most recent fiscal year if the date of the Private Fund's
fiscal year end and six-month period financial statements are hereinafter
referred to as a "Fund Financial Statement." Each of the Fund Financial
Statements is consistent with the books and records of each of the Private
Funds, and presents fairly the consolidated financial position of each of the
Private Funds in accordance with GAAP applied on a consistent basis (except as
otherwise noted therein) at the respective date of such Fund Financial
Statements and the results of operations and cash flows for the respective
periods indicated, except in the case of the interim financial statements which
are subject to normal year-end adjustments which in the aggregate are not
material. The Fund Financial Statements reflect and disclose all material
changes in accounting principles and practices adopted by each of the Private
Funds during the periods covered by each Fund Financial Statement. The books of
account of each of the Private Funds fairly reflect their respective
transactions. None of the Private Funds has any direct or indirect liabilities
other than (i) liabilities fully and adequately reflected or reserved against on
the balance sheets contained in the Fund Financial Statements, (ii) immaterial
liabilities incurred in the ordinary course of
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business of the Company consistent with past practices and (iii) liabilities
incurred since the date of the fund Financial Statements and incurred in the
ordinary course of business.
(d) There are no restrictions imposed pursuant to any Investment
Laws and Regulations, consent judgments or SEC orders on or with regard to any
of the Private Funds. Since inception, each of the Private Funds has been
excluded from the definition of an investment company under the Investment
Company Act by virtue of Section 3(c)(1) thereof and has been duly registered or
licensed and in good standing under the laws of each jurisdiction in which such
qualification is necessary, except where the failure to be duly registered and
in compliance would not have a Material Adverse Effect on the respective Private
Fund or the Company.
(e) All interests of each of the Private Funds were sold pursuant to
a valid and effective exemption from registration under the Securities Act and
have been duly authorized and are validly issued. Each of the Private Funds'
investments have been made in accordance with its respective investment policies
and restrictions in effect at the time the investments were made and at all
times when the investments were held.
(f) All consent solicitation materials to be prepared for use by the
Private Funds in connection with the transactions contemplated by this Agreement
at the time such information is provided or used, as then amended or
supplemented, and any information disseminated in respect of the transactions
contemplated hereby at the time such information is disseminated, in each case,
will, insofar as it contains or consists of information supplied by the Company
or the Stockholders, be accurate and complete and will not contain any untrue
statement of a material fact, or omit to state any material fact (i) required to
be stated therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading or (ii) necessary
to correct any statement in any earlier communication that has become false or
misleading.
(g) There is no litigation or legal (or other) action, suit,
proceeding or investigation at law or in equity pending or, to the best
knowledge of the Company and the Stockholders after due inquiry, threatened in
any court or before or by any governmental agency or instrumentality,
department, commission, board, bureau or agency, or before any arbitrator, by or
against any of the Private Funds, or any officer or director thereof. There are
no judgements, injunctions, orders or other judicial or administrative mandates
outstanding against or affecting any of the Private Funds or any officer or
director thereof.
3.28 DISCLOSURE. The representations, warranties and statements contained
in this Agreement and the agreements, documents and instruments contemplated
hereby, and in the certificates, exhibits and schedules delivered by the Company
and the Stockholders to AMG pursuant to this Agreement or any of such other
agreements, documents and instruments, do not contain any untrue statement of a
material fact, and, when taken together, do not omit to state a material fact
required to be stated therein or necessary in order to make such
representations, warranties or statements not misleading in light of the
circumstances under which they were made. There are no facts (other than changes
in general economic or market conditions) which presently
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or may in the future have a material adverse effect on the condition (financial
or otherwise), properties, assets, liabilities, business, operations or
prospects of the Company.
3.29 NO IMPLIED REPRESENTATION. Notwithstanding any provision of this
Agreement, it is the explicit intent of each party hereto that none of the
Company or the Stockholders is making any representation or warranty whatsoever,
express or implied, beyond those expressly given in this Agreement including,
but not limited to, any implied representation as to condition, merchantability,
suitability or fitness for a particular purpose as to any of the physical assets
owned by the Company. It is understood that any cost estimates, projections or
other financial predictions provided to AMG or any of its affiliates, agents or
representatives are not and shall not be deemed to be representations or
warranties of any of the Company or the Stockholders.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF INDIVIDUAL STOCKHOLDERS.
As a material inducement to AMG and Merger Sub to enter into this
Agreement and consummate the transactions contemplated hereby, each Stockholder
hereby severally makes to AMG each of the representations and warranties set
forth in this Section 4 with respect to such Stockholder. In addition, each
Stockholder which is a party to the Restated LLC Agreement and which has elected
to form a Management Corporation to receive his or her LLC Points jointly and
severally with such Management Corporation makes the representations and
warranties set forth in this Section 4 with respect to such Management
Corporation. No Stockholder or Management Corporation shall have any right of
indemnity or contribution from the Company or the LLC (or any other right
against the Company or the LLC) with respect to the breach of any representation
or warranty hereunder.
4.1 AUTHORITY AND ORGANIZATION.
(a) Such Stockholder has full right, authority, power and capacity
to enter into this Agreement and each agreement, document and instrument to be
executed and delivered by or on behalf of such Stockholder pursuant to, or as
contemplated by, this Agreement and to carry out the transactions contemplated
hereby and thereby. This Agreement and each agreement, document and instrument
executed and delivered by such Stockholder pursuant to this Agreement
constitutes, or when executed and delivered will constitute, a valid and binding
obligation of such Stockholder, enforceable in accordance with its respective
terms. The execution, delivery and performance by the Stockholder of this
Agreement and each such other agreement, document and instrument have been duly
authorized by all necessary action (corporate, trust or otherwise) of each
Stockholder which is not an individual, and no other action on the part of such
Stockholder is required in connection therewith. The execution, delivery and
performance of this Agreement and each such agreement, document and instrument:
(i) does not and will not violate any provision of the
organizational documents of any Stockholder which is not a natural person,
or any laws of the United States or any state or other jurisdiction
applicable to such Stockholder, or require such
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Stockholder to obtain any approval, consent or waiver from, or make any
filing with, any person or entity (governmental or otherwise) that has not
been obtained or made; and
(ii) does not and will not result in a breach of, constitute a
default under, accelerate any obligation under, or give rise to a right of
termination of, any agreement, contract, instrument, mortgage, lien,
lease, permit, authorization, order, writ, judgment, injunction, decree,
determination or arbitration award to which such Stockholder is a party or
by which the property of such Stockholder is bound or affected, or result
in the creation or imposition of any Claim on any assets of the Company or
the LLC or on the capital stock of the Company owned by such Stockholder.
(b) Each Management Corporation is duly organized validly existing
and in good standing under the laws of its state of organization with full power
and authority to own and lease its properties and to conduct its business in the
manner and in the places where such properties are owned or leased and such
business is currently conducted or proposed to be conducted. The copies of each
Management Corporation's organizational documents (including any certificate of
organization, by-laws, declaration of trust, certificate of organization,
limited liability company operating agreement or similar documents) as amended
to date, certified by the appropriate Secretary of State or, if such documents
are of a type not typically certified by a Secretary of State, certified by such
Management Corporation's secretary, trustee or similar authorized person, and
heretofore delivered to AMG's counsel, are complete and correct and no
amendments thereto are pending. No Management Corporation is in violation of any
term of its organizational documents.
(c) The authorized and issued equity of each Management Corporation
is as set forth in Schedule 4.1(c) hereof, which schedule includes the record
and beneficial holders thereof. All the outstanding equity of each Management
Corporation has been duly authorized and validly issued and is fully paid and
nonassessable. There are no outstanding options, warrants, rights, commitments,
preemptive rights or agreements for the issuance or sale of, or outstanding
securities convertible into, capital of any Management Corporation.
(d) Each Management Corporation has full right, authority and
corporate power to enter into this Agreement and each agreement, document and
instrument to be executed and delivered by or on behalf of such Management
Corporation pursuant to, or as contemplated by, this Agreement and to carry out
the transactions contemplated hereby and thereby. This Agreement and each
agreement, document and instrument executed and delivered by such Management
Corporation pursuant to this Agreement constitutes, or when executed and
delivered will constitute, a valid and binding obligation of such Management
Corporation, enforceable in accordance with its respective terms. The execution,
delivery and performance by each Management Corporation of this Agreement and
each such other agreement, document and instrument have been duly authorized by
all necessary action of each Management Corporation, and no other action on the
part of any Management Corporation or its stockholder is required in connection
therewith. The execution, delivery and performance of this Agreement and each
such agreement, document and instrument:
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(i) does not and will not violate any provision of the charter
of by-laws of any Management Corporation, or any laws of the United States
or any state or other jurisdiction applicable to such Management
Corporation, or require such Management Corporation to obtain any
approval, consent or waiver from, or make any filing with, any person or
entity (governmental or otherwise) that has not been obtained or made; and
(ii) does not and will not result in a breach of, constitute a
default under, accelerate any obligation under, or give rise to a right of
termination of, any agreement, contract, instrument, mortgage, lien,
lease, permit, authorization, order, writ, judgment, injunction, decree,
determination or arbitration award to which such Management Corporation is
a party or by which the property of such Management Corporation is bound
or affected, or result in the creation or imposition of any Claim on any
assets of the Company or the LLC or on interests of such Management
Corporation in the LLC, or any interests of a Stockholder in such
Management Corporation.
4.2 OWNERSHIP OF LLC INTERESTS. The LLC Interests shown as owned by each
Stockholder and Management Corporation, respectively, in the records set forth
in Schedule 3.3(c) hereof constitute all the interests in the LLC or rights to
purchase interests in the LLC which are held by such Person, directly or
indirectly.
4.3 FINDER'S FEE. No Stockholder or Management Corporation has incurred or
become liable for any broker's commission or finder's fee relating to or in
connection with the transactions contemplated by this Agreement.
4.4 INVESTMENT ADVISORY REPRESENTATION. Such Stockholder does not serve as
an investment adviser (within the meaning of the Advisers Act) to, or provide,
directly or indirectly, Investment Management Services to, any person or entity,
other than on behalf of the Company (and, after giving effect to the Asset
Transfer (assuming the due authorization, validity and enforceability of the
Asset Transfer Agreement), the LLC) pursuant to an investment advisory agreement
between the Company (and, after giving effect to the Asset Transfer, the LLC)
and a client thereof, except as set forth in Schedule 4.4.
4.5 AGREEMENTS. Such Stockholder is not a party to any non-competition,
trade secret or confidentiality agreement with any party other than the Company
or the LLC. There are no agreements or arrangements not contained herein or
disclosed in a Schedule hereto, to which such Stockholder or Management
Corporation is a party relating to the business of the Company or the LLC or to
such Stockholder's or Management Corporation's rights and obligations as a
stockholder, member, director, officer or employee of the Company or the LLC.
Such Stockholder does not own, directly or indirectly, on an individual or joint
basis, any interest in, or serve as an officer or director of, any organization
which has a contract or arrangement with the Company or the LLC.
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4.6 EMPLOYMENT DATA. Such Stockholder's (i) date of birth, and (ii) date
of commencement of employment with the Company, are both accurately reflected in
Schedule 4.6 hereto.
4.7 INVESTMENT INTENT. Each Stockholder who acquires Preferred Shares will
make such acquisition for investment for such Stockholder's own account, and
such Stockholder has no present intention of selling, granting participations in
or otherwise distributing the same. Each Stockholder represents and warrants
that he is an "accredited investor" within the meaning of Rule 501 promulgated
by the SEC under the Securities Act.
SECTION 5. COVENANTS OF THE STOCKHOLDERS.
5.1 MAKING OF COVENANTS AND AGREEMENTS. The Stockholders jointly and
severally hereby make the covenants and agreements set forth in this Section 5
and the Stockholders jointly and severally agree to use their respective best
efforts to cause the Company and the LLC to comply with such agreements and
covenants. No Stockholder shall have any right of indemnity or contribution from
the Company or the LLC (or any other right against the Company or the LLC) with
respect to the breach of any covenant or agreement hereunder.
5.2 CLIENT CONSENTS.
(a) As soon as practicable after the date hereof, but in any event
prior to August 8, 1997, the Company shall notify each of its clients of the
transactions contemplated hereby and by the other agreements, documents and
instruments contemplated hereby. Such notice shall be in the form of Exhibit
5.2A hereto with respect to those clients whose contracts require affirmative
written consent for their assignment and in the form of Exhibit 5.2B with
respect to those clients whose contracts do not require affirmative written
consent for their assignment (in each case, with such changes thereto as may be
agreed to by AMG in writing).
(b) On or prior to September 8, 1997, the Company shall send to each
client who was sent, but who has not by such date returned, the notice in
substantially the form of Exhibit 5.2A or Exhibit 5.2B hereto countersigned
indicating approval of the transactions contemplated hereby, an additional
notice in form and substance acceptable to AMG.
(c) The Company and the LLC shall use their respective best efforts
to, and the Stockholders shall use their best efforts to cause the Company and
the LLC to, obtain consents from their clients in the manner contemplated by
this Section 5.2.
5.3 AUTHORIZATIONS.
(a) The LLC shall, and the Company and each of the Stockholders
shall use their best efforts to cause the LLC to: (i) file, as soon as
practicable after the date hereof, and in any event prior to August 15, 1997,
with the SEC, a Uniform Application for Investment Adviser Registration on Form
ADV to register the LLC as an investment adviser under the Advisers Act;
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and (ii) file the appropriate applications for investment adviser registration
as soon as practicable with all other jurisdictions in which the Company is
registered as an investment adviser and in each other jurisdiction where it is
necessary or desirable for the LLC to be registered as an investment adviser in
order to conduct its businesses (including, without limitation, the businesses
currently conducted by the Company) after the Asset Transfer (assuming the due
authorization, validity and enforceability of the Asset Transfer Agreement) and
the Closing.
(b) The Stockholders shall, and the Company and the LLC shall use
their best efforts to cause all applicable Employees to, file, as soon as
practicable after the date hereof, such applications for licensing, registration
or qualification of investment adviser representatives (within the meaning of
Rule 203A-3(a) under the Advisers Act, upon effectiveness) in each jurisdiction
where such applicable investment adviser representative has a place of business
(within the meaning of Rule 203A-3(b) under the Advisers Act, upon
effectiveness) and in each other jurisdiction where it is necessary or desirable
to effect such licensing, registration or qualification in order to conduct the
business of the LLC (including, without limitation, the business currently
conducted by the Company) after the Asset Transfer and the Closing.
(c) The LLC will, and the Company and each of the Stockholders will
use their best efforts to cause the LLC to, obtain all authorizations, consents,
orders and approvals of federal, state and local regulatory bodies and officials
that may be or become necessary for their respective execution and delivery of,
and the performance of their respective obligations pursuant to, this Agreement
and the other agreements, documents and instruments contemplated hereby, and for
the LLC to conduct the businesses presently being conducted by the Company.
5.4 AUTHORIZATION FROM OTHERS. The Stockholders, the Company and the LLC
will use their respective best efforts to obtain all authorizations, consents,
approvals and permits of others required to permit the consummation by the
Stockholders, the Company and the LLC of the transactions contemplated by this
Agreement.
5.5 CONDUCT OF BUSINESS. Between the date of this Agreement and the
Closing, except as set forth in Schedule 5.5 hereto, without the prior written
consent of AMG:
(a) the Company will conduct its business only in the ordinary
course of business, and consistent with past practices, and the LLC will only
conduct those operations necessary for the performance of its obligations
hereunder and activities necessary in connection therewith (provided, that after
giving effect to the Asset Transfer (assuming the due authorization, validity
and enforceability of the Asset Transfer Agreement), the LLC will conduct the
business it obtains in the Asset Transfer in the ordinary course of business and
consistent with the past practices of the Company);
(b) neither the Company nor the LLC will (i) make (or incur any
obligation to make) any purchase, sale or disposition of any asset or property
other than as specifically provided for in the Asset Transfer, or in the
ordinary course of business consistent with past practices, or (ii) mortgage,
pledge, subject to a Claim or otherwise encumber any of its properties or assets
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(including, without limitation, with respect to the Company, its interest in the
LLC), nor permit any of the foregoing to exist;
(c) neither the Company nor the LLC will incur any contingent or
fixed obligations or liabilities including, without limitation, any liability
(contingent or fixed) as a guarantor or otherwise with respect to the
obligations of others except, with respect to the Company (and, with respect to
the LLC, after the Asset Transfer (assuming the due authorization, validity and
enforceability of the Asset Transfer Agreement)), in the ordinary course of
business consistent with the past practices of the Company;
(d) the Company will not make or incur any obligation to make a
change in its Certificate of Incorporation, By-laws or authorized or issued
capital stock, and the LLC will not make or incur any obligation to make any
change in the Existing LLC Agreement (other than the restatement into the
Restated LLC Agreement as contemplated by Section 2.1 hereof);
(e) neither the Company nor the LLC will declare, set aside or pay
any dividend or distribution, make (or incur an obligation to make) any other
distribution in respect of its capital stock or interests or make (or incur an
obligation to make) any direct or indirect redemption, purchase or other
acquisition of its stock or interests if as a result of such dividend,
distribution, redemption, purchase or acquisition, the Company would be unable
to satisfy the conditions set forth in Section 8.11;
(f) neither the Company nor the LLC will make any change in the
compensation payable or to become payable to any of the Company's officers,
employees, agents or independent contractors, and neither the Company nor the
LLC will hire any directors, officers, employees or agents (other than to fill
vacant positions at the Company), or enter into any collective bargaining
agreement, bonus, equity, option, profit sharing, compensation, welfare,
retirement, or other similar arrangement, or any employment contract;
(g) the Company will not make any change in its borrowing
arrangements, and the LLC will not enter into any borrowing arrangements;
(h) the Company will use its best efforts to prevent any change with
respect to its management and supervisory personnel and banking arrangements;
(i) the Company will have in effect and maintain at all times all
insurance of the kind, in the amount and with the insurers set forth in Schedule
3.19 hereto or equivalent insurance with any substitute insurers approved in
writing by AMG, and prior to the Asset Transfer the LLC will have in effect and
thereafter maintain at all times all insurance of the kind, in the amount and
with the insurers set forth in Schedule 3.19 hereto or equivalent insurance with
any substitute insurers approved in writing by AMG; and
(j) neither the Company nor the LLC will settle any material
litigation.
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5.6 FINANCIAL STATEMENTS. Until the Closing, the Company will furnish AMG
with unaudited monthly balance sheets and statements of income and retained
earnings and cash flows of the Company and the LLC on a consolidated and
consolidating basis within ten (10) days after each month end for each month
ending more than ten (10) days prior to the Closing, certified by the Chairman
of the Company, which financial statements shall be prepared in accordance with
GAAP applied consistently using the accrual method of accounting, shall be
complete and correct in all material respects and shall present fairly in all
material respects the financial condition of the Company and the LLC at the
dates of said statements and the results of their operations for the periods
covered thereby.
5.7 PRESERVATION OF BUSINESS AND ASSETS. Until the Closing, each of the
Company, the LLC and each of the Stockholders shall use their best efforts to:
(a) preserve the current business of the Company, (b) maintain the present
clients of the Company, in each case, on terms that are at least as favorable as
the terms of the agreement between the Company and the relevant client as in
effect on the date hereof, (c) preserve the goodwill of the Company, and (d)
preserve any Licenses required for, or useful in connection with, the business
of the Company (including without limitation all investment adviser
registrations). In addition, none of the Stockholders shall take any material
action not in the ordinary course of business relating to the Company or which
might have a material adverse effect on the transactions contemplated hereby,
without the prior consent of AMG.
5.8 OBSERVER RIGHTS AND ACCESS. Until the Closing: (a) a representative of
AMG shall be entitled to attend and observe all meetings of the Company's
stockholders and directors (or a committee thereof) in a non-voting observer
capacity, (b) AMG shall be entitled to receive all notices and information
furnished by the Company to its stockholders and directors (or a committee
thereof), as well as copies of the minutes of any meetings of the Company's
stockholders and directors (or a committee thereof), and (c) the Company's
stockholders or directors (or a committee thereof) shall not take any action by
written consent in lieu of a meeting unless AMG shall have been given at least
five (5) business days prior written notice which includes a copy of such
written consent by which such action is proposed to be taken. The Company and
the LLC shall afford to AMG and its representatives and agents free access,
during normal business hours and with reasonable notice, to the properties and
records of the Company and the LLC in order that AMG may have full opportunity
to make such investigation as it shall desire for purposes consistent with this
Agreement.
5.9 NOTICE OF DEFAULT. Promptly upon the occurrence of, or promptly upon
the Company, the LLC or a Stockholder becoming aware of the impending or
threatened occurrence of, any event which would cause or constitute a breach or
default, or would have caused or constituted a breach or default had such event
occurred or been known to the Company, the LLC or such Stockholder prior to the
date hereof, of any of the representations, warranties or covenants of the
Company, the LLC or the Stockholders contained in or referred to in this
Agreement or in any Schedule or Exhibit referred to in this Agreement, the
Company, the LLC and such Stockholder shall give detailed written notice thereof
to AMG, and the Company and the Stockholders shall use their best efforts to
prevent or promptly remedy the same.
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5.10 CONSUMMATION OF AGREEMENT. The Stockholders shall, and shall cause
the Company and the LLC to, use their respective best efforts to perform and
fulfill all conditions and obligations to be performed and fulfilled by each of
them under this Agreement, to the end that the transactions contemplated by this
Agreement shall be fully carried out.
5.11 COOPERATION OF THE COMPANY AND STOCKHOLDERS. The Stockholders shall,
and shall cause the Company and the LLC to, cooperate with all reasonable
requests of AMG and AMG's counsel in connection with the consummation of the
transactions contemplated hereby and the making of any filings required in
connection therewith, including without limitation, filings under the HSR Act.
In addition, the Stockholders shall, and shall cause the Company and the LLC to,
cooperate fully, as and to the extent requested by AMG and AMG's counsel, in
connection with the filing of tax returns and any audit, litigation or other
proceeding with respect to Taxes.
5.12 NO SOLICITATION OF OTHER OFFERS. Until a date which is six (6) months
after a termination of this Agreement other than (i) a termination pursuant to
Section 10.1(b) as a result of a material breach by the Company of this
Agreement, in which case until a date which is twelve (12) months after a
termination of this Agreement or (ii) a termination pursuant to Section 10.1(c)
as a result of a material breach by AMG, in which case until the date of such
termination, none of the Company, the LLC, any of the Stockholders, or any of
their representatives will, directly or indirectly, solicit, encourage, assist,
initiate discussions or engage in negotiations with, provide any information to,
or enter into any agreement or transaction with, any person, other than AMG,
relating to the possible acquisition of any capital stock of the Company, the
Company, any equity interests of the LLC or any of the assets of the Company or
the LLC, except for the sale of assets by the Company in the ordinary course of
business consistent with past practices and the terms of this Agreement.
5.13 CONFIDENTIALITY. The Company, the LLC and the Stockholders agree
that, unless and until the Closing has been consummated, each of the Company,
the LLC, the Stockholders and their officers, directors, members, agents and
representatives will hold in strict confidence, and will not use, any
confidential or proprietary data or information obtained from AMG with respect
to its business or financial condition except for the purpose of evaluating,
negotiating and completing the transaction contemplated hereby. Information
generally known in AMG's industry or which has been disclosed to the Company,
the LLC or the Stockholders by third parties which have a right to do so shall
not be deemed confidential or proprietary information for purposes of this
Agreement. If the transactions contemplated by this Agreement are not
consummated, the Company, the LLC and the Stockholders will return, and cause
their respective officers, directors, members, agents and representatives to
return, to AMG (or certify that they have destroyed) all copies of such data and
information, including but not limited to financial information, customer lists,
business and corporate records, worksheets, test reports, tax returns, lists,
memoranda, and other documents prepared by or made available to the Company, the
LLC or the Stockholders (and their officers, directors, members, agents and
representatives) in connection with the transaction.
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5.14 POLICIES AND PROCEDURES. The Company, the LLC and the Stockholders
shall, and shall cause the Employees of the Company to, cooperate with and
assist in such compliance audits and regulatory reviews as may reasonably be
requested by AMG.
5.15 VIOLATION OF EXISTING LLC AGREEMENT. Between the date of this
Agreement and the Closing, none of the Stockholders, the Company nor the LLC
will take any action that is in violation of any term or provision of the
Existing LLC Agreement or would be in violation of any term or provision of the
Restated LLC Agreement if such Restated LLC Agreement were then in effect.
5.16 SUBSIDIARIES; INVESTMENTS IN OTHER PERSONS. Between the date of this
Agreement and the Closing, none of the Stockholders, the Company nor the LLC
will take any action to acquire, form or otherwise establish any subsidiary of
the Company or the LLC or cause the Company or the LLC to make any investment in
any other Person.
5.17 LLC INTERESTS. Between the date of this Agreement and the Closing,
(a) the LLC will take no action to issue any rights or interests in addition to
or different from the interests in the LLC shown in the records set forth on
Schedule 3.3(c), (b) the LLC will take no action that will cause the interests
in the LLC set forth on Schedule 3.3(c) to be revoked, repurchased, rescinded,
terminated, liquidated, transferred, amended or modified in any manner and (c)
no Stockholder will sell, assign, pledge or otherwise transfer or restrict such
Stockholder's interests in the LLC without the prior written consent of AMG. At
the Closing, the LLC shall issue the interests and rights therein set forth in
the Restated LLC Agreement to the Members (as defined in the Restated LLC
Agreement) and shall take such actions as may be reasonably directed by AMG in
connection therewith.
5.18 EMPLOYEE PROGRAMS. Between the date of this Agreement and the
Closing, the LLC will not maintain any Employee Program other than the Employee
Programs listed on Schedule 3.24.
5.19 FOREIGN QUALIFICATIONS. The LLC shall qualify to do business as a
foreign limited liability company under the laws of each jurisdiction where the
Company is, as of the date of this Agreement, qualified to do business as a
foreign corporation and under the laws of each jurisdiction in which the nature
of the business it will conduct after giving effect to the Asset Transfer, or
the ownership or leasing of the properties it will receive in the Asset
Transfer, requires such qualification, except for those jurisdictions where the
failure to so qualify, individually or in the aggregate, would not have a
Material Adverse Effect on the LLC.
5.20 LIENS. Between the date of this Agreement and the Closing, the LLC
shall not cause or permit any of the assets listed in Schedule 3.6(b) to be or
become subject to any Claim.
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SECTION 6. REPRESENTATIONS AND WARRANTIES OF AMG.
6.1 MAKING OF REPRESENTATIONS AND WARRANTIES. As a material inducement to
the Company and the Stockholders to enter into this Agreement and consummate the
transactions contemplated hereby, AMG hereby makes the representations and
warranties to the Company and the Stockholders contained in this Section 6.
6.2 ORGANIZATION OF AMG. AMG is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware with full
corporate power and authority to own or lease its properties and to conduct its
business in the manner and in the places where such properties are owned or
leased or such business is conducted by it.
6.3 CAPITALIZATION. As of the date of this Agreement, the duly authorized
capital stock of AMG consists of those classes, series and numbers of shares as
are set forth in Schedule 6.3 hereto. In addition, set forth in Schedule 6.3
hereto are the numbers of shares of each such class and series which are issued
and outstanding or with respect to which options have been granted as of the
date of this Agreement. All the outstanding shares of capital stock of AMG have
been duly authorized and validly issued and are fully paid and nonassessable.
6.4 SUBSIDIARIES. Except as set forth on Schedule 6.4, as of the date of
this Agreement AMG does not have any ownership interest in any corporation,
partnership, limited liability company, limited liability partnership, joint
venture or other entity. Schedule 6.4 includes a notation indicating which
entities are registered as investment advisers under the Advisers Act and which
are members of IMRO.
6.5 AUTHORITY OF AMG. AMG has full right, authority and power to enter
into this Agreement, the Restated LLC Agreement, and each other agreement,
document and instrument to be executed and delivered by AMG pursuant to or as
contemplated by, this Agreement and subject to approval of its stockholders with
respect to and the effectiveness of an amendment of its Amended and Restated
Certificate of Incorporation, to carry out the transactions contemplated hereby
and thereby. Except with respect to an amendment of AMG's Amended and Restated
Certificate of Incorporation to authorize the Preferred Stock, the execution,
delivery and performance by AMG of this Agreement, the Restated LLC Agreement
and each such other agreement, document and instrument have been duly authorized
by all necessary corporate action of AMG; no other action on the part of AMG is
required in connection therewith; and this Agreement, and each other agreement,
document and instrument executed and delivered by AMG pursuant to this Agreement
constitute, or when executed and delivered will constitute, valid and binding
obligations of AMG enforceable in accordance with their terms. The execution,
delivery and subject to approval of its stockholders with respect to and the
effectiveness of an amendment of its Amended and Restated Certificate of
Incorporation performance by AMG of this Agreement, the Restated LLC Agreement
and each such other agreement, document and instrument:
(i) does not and will not violate any provision of the
Certificate of Incorporation or By-laws of AMG;
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(ii) does not and will not violate any laws of the United
States or of any state or any other jurisdiction applicable to AMG or
require AMG to obtain any approval, consent or waiver of, or make any
filing with, any person or entity (governmental or otherwise) which has
not been obtained or made, except for such filings and approvals as may be
necessary under the HSR Act or which will otherwise be obtained prior to
the Closing; and
(iii) does not and will not result in a breach of, constitute
a default under, accelerate any obligation under, or give rise to a right
of termination of any indenture, loan or credit agreement, or other
agreement, contract, instrument, mortgage, lien, lease, permit,
authorization, order, writ, judgment, decree, determination or arbitration
award to which AMG is a party and which is material to the business and
financial condition of AMG and its affiliated organizations on a
consolidated basis.
6.6 FINANCIAL STATEMENTS.
(a) AMG has delivered to the Company audited balance sheets of AMG
at December 31, 1995 and December 31, 1996, and audited statements of income,
cash flows and stockholders equity for the years then ended, copies of which are
attached hereto as Schedule 6.6.
(b) Said financial statements have been prepared in accordance with
generally accepted accounting principles using the accrual method of accounting,
are complete and correct and present fairly the financial condition of AMG at
the date of said statements and the results of its operations for the period
covered thereby (except that AMG's unaudited financial statements do not include
footnote disclosure or year-end adjustments).
6.7 ABSENCE OF CHANGES. Except as disclosed in Schedule 6.8 or Schedule
6.7 attached hereto or as expressly provided for herein, since December 31, 1996
there has not been any (a) change in the condition (financial or otherwise),
properties, assets, liabilities, business, operations or prospects of AMG, which
change by itself or in conjunction with all other such changes, could have a
Material Adverse Effect on AMG and its Affiliates, or (b) declaration, setting
aside or payment of any dividend or other distribution in respect of the capital
stock of AMG. Notwithstanding the foregoing, no representation is given herein
with respect to (i) the terms or conditions on which AMG is negotiating, or may
have negotiated, debt and/or equity financings, or (ii) the terms or conditions
on which AMG is negotiating or may have negotiated investments in investment
management companies, which investments have not closed, or (iii) any impact on
the condition (financial or otherwise) properties, assets, liabilities,
operations or business relating to any investment of AMG, which investment may
not have closed.
6.8 LITIGATION. There is no litigation pending against AMG or Merger Sub
which would prevent or hinder the consummation of the transactions contemplated
by this Agreement. Notwithstanding the foregoing, set forth on Schedule 6.8
hereto is a description of certain litigation matters.
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6.9 COMPLIANCE WITH LAWS. AMG (with respect to AMG and Merger Sub only,
and not its other Affiliates) is, and at all times has been, in material
compliance with all Investment Laws and Regulations applicable to it, except to
the extent that noncompliance would not have a Material Adverse Effect on AMG
and its Affiliates. None of AMG, Merger Sub nor any officer, director or
employee thereof is in default with respect to any judgment, order, writ,
injunction, decree, demand or assessment relating to any aspect of the business
or affairs or properties or assets of AMG and issued by any court or any
federal, state, municipal or other governmental agency, board, commission,
bureau, instrumentality or department, domestic or foreign, or by any
self-regulatory authority. AMG, nor any officer, director or employee thereof,
is charged or, to the best knowledge of AMG, under investigation with respect
to, any violation of any provision of foreign, federal, state, municipal or
other law or any administrative rule or regulation, domestic or foreign,
including, without limitation, any Investment Laws and Regulations, affecting
AMG, Merger Sub or the transactions contemplated hereby.
6.10 FINDER'S FEE. Neither AMG nor Merger Sub has incurred or become
liable for any broker's commission or finder's fee relating to or in connection
with the transactions contemplated by this Agreement.
6.11 PERMITS. AMG has all material Licenses presently required from
foreign, federal, state or local authorities in order for AMG to conduct the
business presently being conducted by AMG, except for those Licenses, the
absence of which could not reasonably be expected to prevent or hinder the
consummation of the transactions contemplated by this Agreement.
6.12 MERGER SUB. Merger Sub is a newly formed wholly-owned subsidiary of
AMG that contains no assets or liabilities other than those incident to its
formation and the consummation of the transactions contemplated hereby.
6.13 ACQUISITION OF SHARES FOR INVESTMENT. AMG has such knowledge and
experience in financial and business matters that it is capable of evaluating
the merits and risks of its purchase of the shares of Company Common Stock. AMG
confirms that the Stockholders and the Company have made available to AMG the
opportunity to ask questions of the officers and management employees of the
Company and to acquire additional information about the business and financial
condition of the Company and the LLC. AMG is acquiring the shares of Company
Common Stock for investment and not with a view toward or for sale in connection
with any distribution thereof in violation of any federal or state securities or
"blue sky" law, or with any present intention of distributing or selling such
shares in violation or any federal or state securities or "blue sky" law. AMG
understands and agrees that the shares of Company Common Stock may not be sold,
transferred, offered for sale, pledged, hypothecated or otherwise disposed of
without registration under the Securities Act of 1933, as amended, except
pursuant to an exemption from such registration available under such Act, and
without compliance with state, local and foreign securities laws, in each case,
to the extent applicable.
6.14 NO IMPLIED REPRESENTATIONS. Notwithstanding any provision of this
Agreement, it is the explicit intent of each party hereto that neither AMG nor
Merger Sub is making any
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representation or warranty whatsoever, express or implied, beyond those
expressly given in this Agreement. It is understood that any cost estimates,
projections or other financial predictions provided to the Company, the
Stockholders or any of their affiliates, agents or representatives are not and
shall not be deemed to be representations or warranties of AMG or Merger Sub.
SECTION 7. COVENANTS OF AMG.
7.1 MAKING OF COVENANTS AND AGREEMENT. AMG hereby makes the covenants and
agreements set forth in this Section 7.
7.2 CONFIDENTIALITY. AMG agrees that, unless and until the Closing has
been consummated, each of AMG, Merger Sub and their respective officers,
directors, agents and representatives will hold in strict confidence, and will
not use, any confidential or proprietary data or information obtained from the
Company or the Stockholders with respect to its business or financial condition
except for the purpose of evaluating, negotiating and completing the transaction
contemplated hereby and except for disclosures to AMG's lenders and other
financing sources and except to the extent required by any Investment Laws and
Regulations. Information generally known in the Company's industry or which has
been disclosed to AMG or Merger Sub by third parties which have a right to do so
shall not be deemed confidential or proprietary information for purposes of this
Agreement. If the transactions contemplated by this Agreement are not
consummated, AMG will return, and will cause Merger Sub and their respective
officers, directors, agents and representatives to return, to the Company (or
certify that they have destroyed) all copies of such data and information,
including but not limited to financial information, customer lists, business and
corporate records, worksheets, test reports, tax returns, lists, memoranda, and
other documents prepared by or made available to AMG (and Merger Sub and their
respective officers, directors, agents and representatives) in connection with
the transaction.
7.3 COOPERATION OF AMG. AMG shall cooperate and shall cause Merger Sub to
cooperate with all reasonable requests of the Company in connection with the
Company's compliance with its covenants in Sections 5.2, 5.3 and 5.4 hereof. AMG
shall cooperate and shall cause Merger Sub to cooperate with all reasonable
requests of the Company and the Company's counsel in connection with the
consummation of the transactions contemplated hereby, including without
limitation, filings under the HSR Act.
7.4 CONSUMMATION OF AGREEMENT. AMG shall use its best efforts to perform
and fulfill and to cause Merger Sub to perform and fulfill all conditions and
obligations to be performed and fulfilled by AMG or Merger Sub, as applicable,
under this Agreement, to the end that the transactions contemplated by this
Agreement shall be fully carried out.
7.5 ORGANIZATION AND AUTHORIZATION OF MERGER SUB. AMG shall take such
action as is necessary or appropriate to organize Merger Sub as a wholly owned
subsidiary of AMG and (as the sole stockholder of Merger Sub) to authorize
Merger Sub to become a party to this Agreement and perform and carry out the
transactions contemplated by this Agreement.
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SECTION 8. CONDITIONS TO THE OBLIGATIONS OF AMG AND MERGER SUB.
The obligations of AMG and Merger Sub to consummate this Agreement and the
transactions contemplated hereby are subject to the fulfillment (or waiver by
AMG), prior to or at the Closing, of the following conditions precedent:
8.1 LITIGATION; NO OPPOSITION. No judgment, injunction, order or decree
enjoining or prohibiting any of AMG, Merger Sub, the Company, the LLC, any of
the Stockholders, any of the Management Corporations or any of the other parties
to this Agreement or any of the agreements, documents and instruments
contemplated hereby, from consummating the transactions contemplated hereby or
thereby, shall have been entered and no suit, action or proceeding shall be
pending at any time prior to or on the date of the Closing before or by any
court or governmental body seeking to restrain or prohibit, or seeking damages
or other relief in connection with, the execution and delivery of this Agreement
or any of the agreements, documents and instruments contemplated hereby, or the
consummation of the transactions contemplated hereby or thereby or which could
be expected to have a Material Adverse Effect on the LLC, Merger Sub or AMG.
8.2 REPRESENTATIONS, WARRANTIES AND COVENANTS.
(a) Each of the representations and warranties of each of the
Stockholders contained in this Agreement and in any Schedule or Exhibit attached
hereto and in each other agreement, document, instrument or certificate
contemplated hereby or otherwise made in writing by any of them or made by any
person authorized by them to make representations on their behalf, shall be true
and correct in all material respects (except for such representations and
warranties that are qualified by their terms as to materiality, which
representations and warranties as so qualified shall be true in all respects) as
of the date of this Agreement and at and as of the Closing as though newly made
at such time; except that
(i) the representations in Section 3.7 shall also be made with
respect to assets under management and advisory contracts as of a date
which is no more than ten (10) days prior to the Closing (but is prior to
the Asset Transfer), instead of being made with respect to assets under
management and advisory contracts as of the date of the Closing;
(ii) the representations in Section 3.15 shall be true and
correct as of the date of this Agreement and shall be made at and as of
the Closing with any change since such date having occurred in compliance
with the terms and conditions of this Agreement including, without
limitation, the provisions of Section 5.5; and
(iii) the representations and warranties in Sections 3.6,
3.14(a), 3.14(b), 3.14(c), 3.25(c) and the first sentence of Section
3.18(a) with respect to the Company shall be true and correct in all
material respects (except for such representations and warranties that are
qualified by their terms as to materiality, which representations and
warranties as
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so qualified shall be true in all respects) only as of the date of this
Agreement and at and as of the date of the Asset Transfer.
(b) Upon the assumption that the Asset Transfer has occurred in
accordance with the terms of the Asset Transfer Agreement, each of the
representations and warranties of each of the Stockholders contained in the
following Sections of this Agreement with respect to the Company: 3.4
(Subsidiaries), 3.6 (Real and Personal Property), 3.8(c) (Financial Statements),
3.9 (Taxes), 3.10 (Collectibility of Accounts Receivable), 3.11 (Absence of
Certain Changes), 3.12 (Ordinary Course), 3.13 (Banking Relations), 3.14
(Intellectual Property), 3.15 (Contracts), 3.16 (Litigation), 3.17 (Compliance
with Laws), 3.18 (Business; Registrations), 3.19 (Insurance), 3.20 (Powers of
Attorney), 3.21 (Finder's Fee), 3.22 (Corporate Records; Copies of Documents),
3.23 (Transactions with Interested Persons), 3.24 (Employee Benefit Programs),
3.25 (Directors; Officers and Employees), 3.26 (Code of Ethics), 3.28
(Disclosure) and 3.29 (No Implied Representation) shall be true and correct in
all material respects (except for such representations and warranties that are
qualified by their terms as to materiality, which representations and warranties
as so qualified shall be true in all respects) at and as of the Closing with
respect to the LLC and all references therein to the Company and its
Stockholders shall be deemed to be references to the LLC and its Members,
respectively.
(c) Each and all of the agreements and conditions to be performed or
satisfied by the Company, the LLC, each of the Stockholders hereunder and under
the other agreements, documents and instruments contemplated hereby at or prior
to the Closing shall have been duly performed or satisfied.
(d) The Company, the LLC, each of the Stockholders shall have
furnished AMG and Merger Sub with a certificate or certificates dated as of the
date of the Closing with respect to each of the foregoing.
8.3 ADVISORY CONTRACT CONSENTS. Clients of the Company whose advisory
agreements provide for the payment (based on the Contract Value of each such
advisory agreement) of fees constituting at least eighty-five percent (85%) of
the Base Fees shall have Consented to the transactions contemplated hereby. For
purposes of this Section 8.3:
(i) "Base Fees" shall mean the annual advisory fees (other
than incentive or performance fees) payable to the Company under all its
contracts calculated based on assets under management and the fee
schedules set forth in the relevant agreements as of December 31, 1996;
(ii) "Consent" shall mean (A) with respect to a client whose
contract by its terms terminates upon the consummation of the transactions
contemplated hereby, that the LLC shall have entered into a new contract
on substantially equivalent terms which contract is effective after giving
effect to the Asset Transfer and the Closing, (B) with respect to a client
whose contract requires written consent from a party or parties thereto
for it to survive the transactions contemplated hereby, that the Company
shall have
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obtained all such written consents as may be required under such contract,
and (C) with respect to a client whose contract does not require written
consent from any party thereto for it to survive the transactions
contemplated hereby, that the Company shall have obtained such consents as
may be required under such contract (including, with respect to the
requirement for contracts to include provisions requiring consent to
transfer set forth under the Advisers Act, that the Company has complied
with Section 5.2 hereof with respect to such contract). Notwithstanding
the foregoing, no client of the Company shall be deemed to have given its
Consent if such client has expressed an intent to terminate or
significantly reduce its investment relationship with the Company (or,
after giving effect to the Asset Transfer (assuming the due authorization,
validity and enforceability of the Asset Transfer Agreement) and the
Closing, the LLC) or to adjust the fee schedule with respect to one or
more of its contracts in a manner that would materially reduce the fee to
the LLC.
(iii) "Contract Value" shall mean, (A) with respect to an
advisory contract which was in effect on June 30, 1997, the product of
four (4) and the quarterly advisory fees (other than incentive or
performance fees) payable to the Company as of June 30, 1997 (adjusted for
any additions and/or withdrawals since June 30,1997 and for any amendments
to the fee schedule since such date), and (B) with respect to an advisory
contract which is entered into by the Company after June 30,1997, the
annual advisory fees (other than incentive or performance fees) payable to
the Company based on the fee schedule and assets under management set
forth in the relevant agreement on the date of such agreement (adjusted
for any additions or withdrawals since that date and for any amendments to
the fee schedule since such date). For purposes of the definition of
"Contract Value," each so called "wrap-fee" program shall be considered an
advisory contract and the addition and withdrawal of participants in each
such program shall be treated as an addition or withdrawal of funds.
At the Closing, the Company shall deliver a certificate certifying as to
compliance with the foregoing, which certificate includes the calculation of
compliance, including a list in the form of subsection (a) of Schedule 3.7 of
all investment management or advisory contracts as of the date of calculation,
including all the categories of information set forth in subsection (a) of
Schedule 3.7.
8.4 REGISTRATION AS AN INVESTMENT ADVISER AND REGISTRATION OF INVESTMENT
ADVISER REPRESENTATIVES.
(a) The LLC shall have become registered as an investment adviser
under the Advisers Act and the rules and regulations promulgated thereunder, and
under the laws of each state where such a registration may be necessary or
desirable (in the opinion of AMG) to enable the LLC, after giving effect to the
Asset Transfer (assuming the due authorization, validity and enforceability of
the Asset Transfer Agreement) and the Closing, to conduct the businesses
presently conducted by the Company.
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(b) All applicable Employees shall have become registered as
investment adviser representatives (within the meaning of Rule 203A-3(a) under
the Advisers Act, upon effectiveness) of the LLC under the laws of each state
where such a registration may be necessary or desirable (in the opinion of AMG)
to enable the LLC, after giving effect to the Asset Transfer (assuming the due
authorization, validity and enforceability of the Asset Transfer Agreement) and
the Closing, to conduct the business presently conducted by the Company.
8.5 OTHER APPROVALS. Except as otherwise specifically contemplated hereby,
all actions by or in respect of, or filings with, any governmental body, agency,
or official or authority required to permit the consummation of the transactions
contemplated hereby so that after the Asset Transfer (assuming the due
authorization, validity and enforceability of the Asset Transfer Agreement) and
the Closing, the LLC shall be able to carry on the business presently being
conducted by the Company, in the manner now conducted by the Company, shall have
been taken, made or obtained, and any and all other material permits, approvals,
consents or other actions necessary to consummate the transactions hereunder
shall have been received or taken, and none of such permits, approvals or
consents shall contain any provisions which, in the reasonable judgment of AMG,
are unduly burdensome.
8.6 TRANSFER. (a) The transactions contemplated by the Asset Transfer
Agreement in the form attached hereto as Exhibit 8.6 (and the schedules and
exhibits thereto) shall have occurred (assuming the due authorization, validity
and enforceability of the Asset Transfer Agreement) and (b) such other and
additional documents and instruments of transfer as AMG shall reasonably deem
necessary in connection therewith, shall have been executed, delivered and
performed.
8.7 RESTATED LLC AGREEMENT. Each Stockholder who is receiving (direct or
indirect) interests in the LLC (and, in the case of each Stockholder who has
elected to form a corporation to receive his or her interests in the LLC, such
Management Corporation) has executed and delivered the Restated LLC Agreement.
8.8 NON SOLICITATION/NON DISCLOSURE AGREEMENTS. Each Employee Stockholder
(and in the case of each Stockholder who has elected to form a wholly-owned
corporation to receive his or her interests in the LLC, such Management
Corporation) shall have entered into a Non Solicitation/Non Disclosure Agreement
with the LLC and its Manager Member (each a "Non Solicitation Agreement") in the
form attached hereto as Exhibit 8.8, and each such Non Solicitation Agreement
shall be in full force and effect.
8.9 EMPLOYMENT AGREEMENTS. Each of Irwin Lieber and Barry K. Fingerhut,
shall have entered into an Employment Agreement with the LLC and its Manager
Member in the form attached hereto as Exhibit 8.9 (the "Employment Agreements"),
and each such Employment Agreement shall be in full force and effect.
8.10 AGREEMENTS WITH RESPECT TO PRIVATE FUNDS. The Stockholders and the
managers or general partners of each Private Fund shall have entered into
agreements in the form attached hereto as Exhibit 8.10A and Exhibit 8.10B, and
each such agreement shall be in full force in effect
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(having been approved by all necessary consents or approvals and after the
making of any necessary filings).
8.11 CAPITALIZATION, NET WORTH AND WORKING CAPITAL OF THE LLC. The LLC's
capitalization, including capital and profits interests and other rights to
purchase interests in the LLC shall be as set forth in Schedule 3.3(c) hereto.
At the Closing, and after giving effect to the Asset Transfer (assuming the due
authorization, validity and enforceability of the Asset Transfer Agreement) and
taking into account all transaction costs of the LLC, the LLC shall have a
tangible net worth (determined in accordance with GAAP using the accrual based
method of accounting, consistently applied) of at least $3,600,000, working
capital (defined as current assets less current liabilities and excluding, for
these purposes, the accounts receivable listed in Schedule 3.10) of at least
$3,263,000 and cash on hand of at least $100,000 or such greater net worth,
working capital or amount of cash on hand as shall be necessary for the
operation of the business of the LLC consistent with past practices of the
Company.
8.12 DELIVERY. Each of the Company, the Stockholders and the Management
Corporations shall have executed (where applicable) and delivered to AMG (or
shall have caused to be executed and delivered to AMG by the appropriate person
including, without limitation, the LLC) the following:
(a) the Asset Transfer Agreement (including all agreements and
documents which are schedules thereto) and all such other documents of transfer
and assignment as AMG may reasonably require in connection therewith;
(b) certified copies of resolutions of the board of directors (and,
if necessary, the shareholders) of the Company and each Management Corporation
authorizing the execution of this Agreement and each of the agreements,
documents and instruments contemplated hereby to which the Company or a
Management Corporation is a party (and which the Company executes on behalf of
the LLC);
(c) a copy of the charter and by-laws of the Company and each of the
Management Corporations which, in the case of the charter, is certified as of a
recent date by the Secretary of State of the relevant state of incorporation;
(d) a copy of the Certificate of Formation of the LLC certified as
of a recent date by the Secretary of State of the State of Delaware;
(e) a copy of the Limited Liability Company Agreement of the LLC as
in effect immediately prior to the restatement into the Restated LLC Agreement;
(f) a certificate issued by the appropriate Secretary of State
certifying that the Company and each of the Management Corporations is validly
existing and in good standing in such state as of the most recent practicable
date;
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(g) a certificate issued by the appropriate Secretary of State of
each state in which each of the Company and, after giving effect to the Asset
Transfer, the LLC does business certifying that each of the Company and the LLC,
as applicable, are in good standing in such state as of the most recent
practicable date;
(h) true and correct copies of each of the agreements, documents and
instruments contemplated hereby (including, without limitation, the Restated LLC
Agreement), and all agreements, documents, instruments and certificates
delivered or to be delivered in connection therewith;
(i) for each of the individuals listed in Schedule 3.25(b), evidence
that such person has had a physical examination within thirty (30) days prior to
the Closing, including a letter from a licensed physician familiar with such
person's health indicating that such person is in good health at such date;
(j) a certificate of the Secretary of the Company, the LLC and each
of the Management Corporations, certifying that the resolutions, charter,
limited liability company agreement and by-laws in paragraphs (b), (c) and (e)
above are in full force and effect and have not been amended or modified, and
that the officers of such corporation or limited liability company are those
persons named in the certificate;
(k) an opinion from counsel to the Company, the Stockholders and the
Management Corporations, in substantially the form of Exhibit 8.12(k) hereto;
(l) a release of the LLC from all liabilities other than those
arising out of the transactions or agreements contemplated hereby, from each of
the Company and the Stockholders in the form attached hereto as Exhibit 8.12(l);
(m) all corporate record books of the Company, including minutes of
all meetings of stockholders, directors and committees of the Board of
Directors, if any, and the stock records of the Company (including all original
stock certificates surrendered by the Stockholders);
(n) a Subscription Agreement in the form attached as Exhibit 8.12(n)
hereto;
(o) the Certification attached to the signature pages hereto
certifying stockholder approval of this Agreement; and
(p) such other Certificates and documents as are required hereby or
are reasonably requested by AMG.
8.13 EVIDENCE OF INSURABILITY. AMG shall have received such evidence as it
shall deem necessary or appropriate as to the insurability of each of the
Persons listed in Schedule 3.25(b) hereto as and in amounts contemplated by
Section 3.5(e) of the Restated LLC Agreement with respect to both key-man life
insurance and disability insurance policies.
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8.14 INSURANCE POLICIES. Each of the Company and the LLC shall have in
place insurance policies (a) with respect to the Company, covering liabilities
of directors and officers, in such amounts as AMG shall reasonably deem
necessary, and (b) with respect to the LLC, as contemplated by Section 3.19.
8.15 POLICIES AND PROCEDURES. The LLC and its employees shall have adopted
such maternity leave and similar employment policies, Code of Ethics, insider
trading policies, policies with respect to soft dollars, trade allocation
policies, client intake procedures and Supervisory Procedures Manuals as are
reasonably acceptable to AMG.
8.16 MATERIAL ADVERSE CHANGE. There shall have been no event or condition
or events or conditions, which, either individually or in the aggregate, could
have a material adverse effect on the condition (financial or otherwise),
properties, assets, liabilities, business operations or prospects of the LLC,
and AMG shall be provided with a certificate from the Chairman of the Company to
that effect at the Closing.
8.17 HSR ACT. Any applicable waiting period under the HSR Act (including
any extensions thereof) shall have expired or been terminated.
8.18 LICENSE TO USE NAME. The Company and the LLC shall have entered into
an agreement substantially in the form of Exhibit 8.18 attached hereto granting
to GeoCapital Ventures a limited irrevocable license to use the name
"GeoCapital."
SECTION 9. CONDITIONS TO OBLIGATIONS OF THE COMPANY.
The obligation of the Company to consummate this Agreement and the
transactions contemplated hereby is subject to the fulfillment (or waiver by the
Company), prior to or at the Closing, of the following conditions precedent:
9.1 NO LITIGATION; NO OPPOSITION. No judgment, injunction, order or decree
enjoining or prohibiting any of AMG, the Company, the LLC, any of the
Stockholders, the Management Corporations or other parties to this Agreement or
any of the agreements, documents and instruments contemplated hereby, from
consummating the transactions contemplated hereby, or thereby shall have been
entered and no suit, action or proceeding shall be pending or threatened on the
date of Closing before or by any court or governmental body seeking to restrain
or prohibit the execution and delivery of this Agreement or any of the
agreements, documents or instruments contemplated hereby or the consummation of
the transactions contemplated hereby or thereby.
9.2 REPRESENTATIONS, WARRANTIES AND COVENANTS. Each of the representations
and warranties of AMG contained in this Agreement and in any Schedule or Exhibit
attached hereto and in the other agreements, documents or instruments
contemplated hereby or otherwise made in writing by AMG or by any person
authorized by AMG to make representations on its behalf shall be true and
correct in all material respects at and as of the Closing as though newly made
at such time. Each and all the agreements and conditions to be performed or
satisfied by AMG
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hereunder and under the other agreements, documents as instruments contemplated
hereby at or prior to the Closing shall have been duly performed or satisfied.
AMG shall have furnished the Stockholders with a certificate dated as of the
date of the Closing to the foregoing effect.
9.3 ADVISORY CLIENT CONSENT. The condition set forth in Section 8.3 shall
have been met.
9.4 EMPLOYMENT AGREEMENTS. Merger Sub, as Manager Member of the LLC, shall
have caused the LLC to execute and deliver at the Closing the Employment
Agreements of each of Irwin Lieber and Barry K. Fingerhut.
9.5 MATERIAL ADVERSE CHANGE. There shall have been no change in the
condition (financial or otherwise), properties, assets, liabilities, business,
operations or prospects of AMG, which change by itself or in conjunction with
all other such changes, could have a Material Adverse Effect on AMG and its
Affiliates and the Company shall be provided with a certificate from the
President or any Senior Vice President of AMG to that effect at the Closing.
Notwithstanding the foregoing, this Section 9.5 shall not apply the entrance
into any letter of intent, commitment letter, contract or other agreement with
respect to, or the incurrence of any debt, claim or obligation arising from, (i)
debt and/or equity financings which AMG is negotiating, or may have negotiated,
or (ii) investments in investment management companies which AMG is negotiating
or may have negotiated, which investments have not closed, or (iii) the
properties, assets, liabilities, operations or business relating to any
investment of AMG, which investment may not have closed.
9.6 DELIVERY. AMG shall have executed and delivered to the Company, the
following:
(a) certified copies of resolutions of the board of directors of AMG
and Merger Sub authorizing the execution of this Agreement and each of the other
agreements, documents or instruments contemplated hereby to which AMG is a
party;
(b) a copy of the Amended and Restated Certificate of Incorporation
and By-laws of AMG and Merger Sub which, in the case of the Certificate of
Incorporation, is certified as of a recent date by the Secretary of State of the
State of Delaware;
(c) a certificate issued by the Secretary of State of the State of
Delaware certifying that each of AMG and Merger Sub is validly existing and in
good standing in Delaware as of the most recent practicable date;
(d) true and correct copies of each of the agreements, documents and
instruments contemplated hereby (including, without limitation, the Restated LLC
Agreement) to which AMG or Merger Sub is a party, and all agreements, documents,
instruments and certificates delivered or to be delivered in connection
therewith by AMG or Merger Sub, as applicable;
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(e) a certificate of the Secretary of AMG and Merger Sub certifying
that (i) the resolutions, Amended and Restated Certificate of Incorporation and
By-laws in paragraphs (a) and (b) above are in full force and effect and have
not been amended or modified, (ii) the Preferred Shares have been duly
authorized and if, when and as issued hereunder will be validly issued, fully
paid and nonassessable and (iii) that the officers of AMG are those persons
named in the certificate;
(f) an opinion from Goodwin, Procter & Hoar LLP in substantially the
form of Exhibit 9.6(f) hereto; and
(g) the Certification attached to the signature pages hereto.
9.7 TAX OPINION. The Company shall have received an opinion of Wachtell,
Lipton, Rosen & Katz, counsel to the Company, dated the date of the Closing,
based upon facts and assumptions set forth in such opinion, to the effect that
(i) the Merger will constitute a "reorganization" within the meaning of Section
368(a) of the Code and (ii) the Company, AMG and Merger Sub will each be a party
to such reorganization within the meaning of Section 368(b) of the Code. In
rendering such opinion, counsel may require and rely upon representations
contained in letters from the Company, AMG and the Stockholders.
9.8 HSR ACT. Any applicable waiting period under the HSR Act (including
any extensions thereof) shall have expired or been terminated.
9.9 PREFERRED SHARES. AMG shall have amended its Amended and Restated
Certificate of Incorporation to authorize the issuance of the Preferred Shares.
SECTION 10. TERMINATION OF AGREEMENT; RIGHTS TO PROCEED.
10.1 TERMINATION. At any time prior to the Closing, this Agreement may be
terminated as follows:
(a) by mutual written consent of AMG and the Company;
(b) by AMG, pursuant to written notice by AMG to the Company and the
Stockholders, if any of the conditions set forth in Section 8 of this Agreement
have not been satisfied at or prior to October 31, 1997, or if it has become
reasonably and objectively certain that any of such conditions, will not be
satisfied at or prior to October 31, 1997, such written notice to set forth such
conditions which have not been or will not be so satisfied; and
(c) by the Company, pursuant to written notice by the Company to
AMG, if any of the conditions set forth in Section 9 of this Agreement have not
been satisfied at or prior to October 31, 1997, or if it has become reasonably
and objectively certain that any of such conditions, will not be satisfied at or
prior to October 31, 1997, such written notice to set forth such conditions
which have not been or will not be so satisfied.
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10.2 EFFECT OF TERMINATION; EXPENSES.
(a) All obligations of the parties hereunder shall cease upon any
termination pursuant to Section 10.1; provided, however, that (i) such
termination shall not relieve any party hereto of any liability for any willful
breach of this Agreement and related agreement and (ii) the provisions of this
Section 10, Sections 5.12, 5.13, and 7.2, and the provisions of Section 14
hereof shall survive any termination of this Agreement.
(b) If this Agreement is terminated pursuant to Section 10.1(b) as a
result of a material breach by the Company of this Agreement, the Company shall
be liable to AMG for all actual out-of-pocket expenses incurred by AMG in
connection with the entering into of this Agreement. If this Agreement is
terminated pursuant to Section 10.1(c) as a result of a material breach by AMG
of this Agreement, AMG shall be liable to the Company for all actual
out-of-pocket expenses incurred by the Company in connection with the entering
into of this Agreement. For purposes of this Section 10.2(b), it is understood
that the failure to satisfy a condition shall not in and of itself constitute a
breach of this Agreement. In all other circumstances, expenses shall be paid as
contemplated in Section 14.1.
10.3 RIGHT TO PROCEED. Anything in this Agreement to the contrary
notwithstanding, if any of the conditions specified in Section 8 hereof have not
been satisfied, AMG shall have the right to proceed with the transactions
contemplated hereby without waiving any of its rights hereunder, and if any of
the conditions specified in Section 9 hereof have not been satisfied, the
Company shall have the right to proceed with the transactions contemplated
hereby without waiving any of their rights hereunder.
SECTION 11. RIGHTS AND OBLIGATIONS SUBSEQUENT TO CLOSING.
11.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. Each of the
representations, warranties, agreements and obligations herein or in any
schedule, exhibit or certificate delivered by any party to any other party
incident to the transactions contemplated hereby are material, shall be deemed
to have been relied upon by the other party and shall survive the Closing until
the date that is sixty (60) days following AMG's receipt of audited financial
statements of the LLC for the period ending December 31, 1998, except for the
representations and warranties made in Sections 3.9, 3.24 and, to the extent it
relates thereto, Section 3.28, which shall survive until the expiration of the
applicable statute of limitations, if any and except that all covenants herein
not fully performed shall survive the Closing and continue thereafter until
fully performed. The expiration of any representation or warranty shall not
affect any claim made prior to the date of such expiration. Any investigation,
audit or other examination that may have been made or may be made at any time by
or on behalf of the party to whom any such representation or warranty is made
shall not limit or diminish such representations and warranties, and the parties
may rely on the representations and warranties set forth in this Agreement
irrespective of any information obtained by them by any investigation, audit or
examination or otherwise.
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11.2 REGULATORY FILINGS. Each of the Company and the Stockholders will
cooperate with AMG and Merger Sub and their counsel to enable AMG, Merger Sub
and the LLC to make any and all regulatory filings required by them with respect
to the LLC or the transactions contemplated hereby (including, by way of example
and not of limitation, the filing of tax returns).
SECTION 12. INDEMNIFICATION.
12.1 INDEMNIFICATION BY THE STOCKHOLDERS. The Stockholders jointly and
severally with respect to the representations, warranties and covenants of the
Stockholders and of each Stockholder severally but not jointly with respect to
the representations and warranties that relate only to such Stockholder agree
subsequent to the Closing to indemnify and hold the LLC, Merger Sub, AMG and
their respective subsidiaries and Affiliates and persons serving as officers,
directors, partners stockholders or employees thereof (individually a "AMG
Indemnified Party" and collectively the "AMG Indemnified Parties") harmless from
and against any damages, liabilities, losses (including, without limitation,
diminution in value), taxes, fines, penalties, costs, and expenses (including,
without limitation, reasonable fees of counsel) of any kind or nature whatsoever
(whether or not arising out of third-party claims and including all amounts paid
in investigation, defense or settlement of the foregoing), and, if the AMG
Indemnified Party is the LLC, net of any insurance proceeds actually received by
the LLC (less the aggregate premiums paid by the LLC for such insurance), which
may be sustained or suffered by any of them arising out of or based upon any of
the following matters:
(a) fraud, intentional misrepresentation or a deliberate or willful
breach by the Company, the LLC or any Stockholder or Management Corporation of
any of their representations, warranties or covenants under this Agreement or
any agreement, document or instrument contemplated hereby or in any certificate,
schedule or exhibit delivered pursuant hereto or thereto;
(b) any breach of any representation, warranty or covenant of the
Company, the LLC or any Stockholder or Management Corporation under this
Agreement or under any agreement, document or instrument contemplated hereby, or
in any certificate, schedule or exhibit delivered pursuant hereto or thereto, or
by reason of any claim, action or proceeding asserted or instituted growing out
of any matter or thing constituting such a breach;
(c) the activities, conduct, business or operation of the Company or
the LLC prior to the Closing, or arising out of facts, events or circumstances
regarding the Company or the LLC existing prior to the Closing other than
executory obligations to be performed after the Closing that arise pursuant to
the obligations expressly assumed by the LLC as Assumed Obligations pursuant to
the Asset Transfer Agreement; and
(d) any payments required to be made to the Minnesota State Board of
Investment on account of the performance of the Company in managing assets under
the control of the Minnesota State Board of Investment (the "Minnesota Account")
prior to the Closing (including, without limitation, an account of (i) Residual
(as such term is described on Exhibit C
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to the Minnesota Agreement) in existence on the date of Closing, (ii) any
Carryover (as such term is described on Exhibit C to the Minnesota Agreement) in
existence on the date of Closing, and (iii) the performance of the Minnesota
Account prior to the date of Closing).
12.2 LIMITATIONS ON INDEMNIFICATION BY THE STOCKHOLDERS. Notwithstanding
the foregoing, the right of AMG Indemnified Parties to indemnification under
Section 12.1 other than Section 12.1(d) shall be subject to the following
provisions:
(a) No indemnification shall be payable pursuant to an AMG
Indemnified Party with respect to claims asserted to Section 12.1(b) or 12.1(c)
above, unless the aggregate amount of all claims for indemnification pursuant to
Section 12.1 shall exceed $250,000 in the aggregate, whereupon the full amount
of such claims shall be recoverable in accordance with the terms hereof.
(b) No indemnification shall be payable to an AMG Indemnified Party
with respect to claims asserted pursuant to Section 12.1(b) or 12.1(c) above
(exclusive of any claims for indemnification for Taxes or based upon or related
to a breach of any representation, warranty or covenant with respect to Taxes or
tax related matters (whether or not the representation which is breached
specifically relates to Taxes), Employee Programs or Investment Laws and
Regulations) in amounts in excess of the sum of (i) ********** Dollars ($**) and
(ii) any and all amounts of principal under any promissory note issued to such
Stockholder (or the Management Corporation of which he is a stockholder)
pursuant to the provisions of Section 3.12 of the Restated LLC Agreement
(whether or not then due and payable) in accordance with the terms of such note.
(c) No indemnification shall be payable to an AMG Indemnified Party
with respect to claims asserted pursuant to Section 12.1(b) or 12.1(c) above
(exclusive of any claims for indemnification for Taxes or based upon or related
to a breach of any representation, warranty or covenant with respect to Taxes or
tax related matters (whether or not the representation which is breached
specifically relates to Taxes), Employee Programs or Investment Laws and
Regulations) after the date that is sixty (60) days following AMG's receipt of
audited financial statements of the LLC for the period ended December 31, 1998
(the "Indemnification Cut-Off Date"); provided, however, that such expiration
shall not affect any claim with respect to which notice was given in the manner
contemplated by Section 12.5 hereof prior to the Indemnification Cut-Off Date.
12.3 INDEMNIFICATION BY AMG. AMG agrees to indemnify and hold the
Stockholders harmless from and against any damages, liabilities, losses and
expenses (including, without limitation, reasonable fees of counsel) of any kind
or nature whatsoever (whether or not arising out of third-party claims and
including all amounts paid in investigation, defense or settlement of the
foregoing) which may be sustained or suffered by the Stockholders (directly or
indirectly through their interests in the LLC net of insurance proceeds and tax
benefits received by the LLC) arising out of or based upon any breach of any
representation, warranty or covenant made by AMG in this Agreement or in any
agreement, document or instrument contemplated hereby, or
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<PAGE> 56
in any certificate, schedule or exhibit delivered pursuant hereto or thereto, or
by reason of any claim, action or proceeding asserted or instituted growing out
of any matter or thing constituting such a breach.
12.4 LIMITATION ON INDEMNIFICATION BY AMG. Notwithstanding the foregoing,
the right of the Stockholders to indemnification under Section 12.3 shall be
subject to the following provisions:
(a) No indemnification shall be payable to the Stockholders with
respect to claims asserted pursuant to Section 12.3 above unless the total of
all claims for indemnification pursuant to Section 12.3 shall exceed $250,000 in
the aggregate, whereupon the full amount of such claims shall be recoverable in
accordance with the terms hereof.
(b) No indemnification shall be payable to the Stockholders with
respect to claims asserted pursuant to Section 12.3 above in amounts in excess
of ********** Dollars ($**).
(c) No indemnification shall be payable to the Stockholders with
respect to claims asserted pursuant to Section 12.3 above after the
Indemnification Cut-Off Date; provided, however, that such expiration shall not
affect any claim with respect to which notice was given in the manner
contemplated by Section 12.5 hereof prior to the Indemnification Cut-Off Date.
12.5 NOTICE; DEFENSE OF CLAIMS. An indemnified party may make claims for
indemnification hereunder by giving written notice thereof to the indemnifying
party within the period in which indemnification claims can be made hereunder.
If indemnification is sought for a claim or liability asserted by a third party,
the indemnified party shall also give written notice thereof to the indemnifying
party promptly after it receives notice of the claim or liability being
asserted, but the failure to do so shall not relieve the indemnifying party from
any liability except to the extent that it is prejudiced by the failure or delay
in giving such notice. Such notice shall summarize the bases for the claim for
indemnification and any claim or liability being asserted by a third party.
Within twenty (20) days after receiving such notice the indemnifying party shall
give written notice to the indemnified party stating whether it disputes the
claim for indemnification and whether it will defend against any third party
claim or liability at its own cost and expense. If the indemnifying party fails
to give notice that it disputes an indemnification claim within twenty (20) days
after receipt of notice thereof, it shall be deemed to have accepted and agreed
to the claim, which shall become immediately due and payable. The indemnifying
party shall be entitled to direct the defense against a third party claim or
liability with counsel selected by it (subject to the consent of the indemnified
party, which consent shall not be unreasonably withheld) as long as the
indemnifying party is conducting a good faith and diligent defense. The
indemnified party shall at all times have the right to fully participate in the
defense of a third party claim or liability at its own expense directly or
through counsel; provided, however, that if the named parties to the action or
proceeding include both the indemnifying party and the indemnified party and the
indemnified party is advised that representation of both parties by the same
counsel would be inappropriate under applicable standards of professional
conduct, the indemnified party may engage separate counsel at the expense of the
indemnifying party. If no such notice of intent
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<PAGE> 57
to dispute and defend a third party claim or liability is given by the
indemnifying party, or if such good faith and diligent defense is not being or
ceases to be conducted by the indemnifying party, the indemnified party shall
have the right, at the expense of the indemnifying party, to undertake the
defense of such claim or liability (with counsel selected by the indemnified
party), and to compromise or settle it, exercising reasonable business judgment.
If the third party claim or liability is one that by its nature cannot be
defended solely by the indemnifying party, then the indemnified party shall make
available such information and assistance as the indemnifying party may
reasonably request and shall cooperate with the indemnifying party in such
defense, at the expense of the indemnifying party.
12.6 SATISFACTION OF THE STOCKHOLDERS' INDEMNIFICATION OBLIGATIONS. In
order to satisfy the indemnification obligations of the Stockholders pursuant to
Section 10.1 above, an AMG Indemnified Party shall have the right (in addition
to collecting directly from the Stockholders) to set off its indemnification
claims against any and all amounts of interest and principal under any
promissory note issued to such Stockholder (or the Management Corporation of
which he is a stockholder) pursuant to the provisions of Section 3.12(e) of the
Restated LLC Agreement (whether or not then due and payable) in accordance with
the terms of such note.
SECTION 13. DEFINITIONS.
13.1 DEFINITIONS. For purposes of this Agreement and the Exhibits and
Schedules hereto, the following terms shall have the respective meanings set
forth in this Section 13.1.
"Adjustment Fractions" shall have the meaning specified in Section
1.7(b)(i).
"Advisers Act" shall mean the Investment Advisers Act of 1940, as the same
may be amended from time to time, and any successor to such act.
"Affiliate" shall mean, with respect to any person or entity (herein the
"first party"), any other person or entity that directly or indirectly controls,
or is controlled by, or is under common control with, such first party. The term
"control" as used herein (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly, of the power to (a)
vote fifty percent (50%) or more of the outstanding voting securities of such
person or entity, or (b) otherwise direct the management or policies of such
person or entity by contract or otherwise.
"AMG" shall have the meaning specified in the preamble hereto.
"AMG Indemnified Party" shall have the meaning specified in Section 12.1
hereof.
"Asset Transfer" shall mean each of the transactions contemplated by the
Asset Transfer Agreement as well as each of the other agreements, documents and
instruments contemplated thereby.
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"Asset Transfer Agreement" shall mean the Asset Transfer Agreement in the
form attached hereto as Exhibit 8.6.
"Base Balance Sheet" shall have the meaning specified in Section 3.8
hereof.
"Base Fees" shall have the meaning specified in Section 8.3 hereof.
"Certificate of Incorporation" shall mean the Company's Certificate of
Incorporation, as amended to the date of this Agreement.
"Certificate of Merger" shall have the meaning specified in Section 1.2
hereof.
"Claims" shall mean any restrictions, liens, claims, charges, security
interests, assignments, mortgages, deposit arrangements, pledges or encumbrances
of any kind or nature whatsoever.
"Closing" shall have the meaning specified in Section 1.8 hereof.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time, and any successor code thereto. For purposes of this Agreement, all
references to Sections of the Code shall include any predecessor provisions to
such Sections and any similar provisions of federal, state, local or foreign
law.
"Commodity Exchange Act" shall mean the Commodity Exchange Act, 7 U.S.C.
Section 1 et. seq., as the same may be amended from time to time, and any
successor to such act.
"Company" shall have the meaning specified in the preamble hereto.
"Consent" shall have the meaning specified in Section 8.3 hereof.
"Contract Value" shall have the meaning specified in Section 8.3 hereof.
"Delaware Act" shall mean the Delaware Limited Liability Company Act, 6
Del. C. Section 18-101, et. seq., as amended from time to time, and any
successor to such act.
"Effective Time" shall have the meaning specified in Section 1.2 hereof.
"Employees" shall have the meaning specified in Section 3.25(c) hereof.
"Employment Agreement" shall have the meaning specified in Section 8.9
hereof.
"Employment Arrangement" shall have the meaning specified in Section
3.25(c) hereof.
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"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor to such act.
"ERISA Client" shall have the meaning specified in Section 3.7(b) hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended
from time to time, and any successor to such act.
"Existing Certificate of Formation" shall mean the Certificate of
Formation of the LLC, as amended to the date of this Agreement.
"Existing LLC Agreement" shall mean the Limited Liability Company
Agreement of the LLC dated as of August __, 1997, which is the Limited Liability
Company Agreement of the LLC on the date of this Agreement and immediately prior
to its amendment and restatement into the Restated LLC Agreement.
"GAAP" shall mean United States generally accepted accounting principles
as in effect from time to time.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, and the rules and regulations promulgated thereunder.
"IMRO" shall mean the United Kingdom Investment Management Regulatory
Organization Ltd., or any successor organization thereto.
"Indemnification Cut-Off Date" shall have the meaning specified in Section
12.2(c) hereof.
"Intellectual Property" shall have the meaning specified in Section
3.14(a).
"Investment Company Act" shall mean the Investment Company Act of 1940, as
the same may be amended from time to time, and any successor to such act.
"Investment Laws and Regulations" shall have the meaning specified in
Section 3.17.
"Investment Management Services" shall mean any services which involve (a)
the management of an investment account or fund (or portions thereof or a group
of investment accounts or funds), or (b) the giving of advice with respect to
the investment and/or reinvestment of assets or funds (or any group of assets or
funds), and activities related or incidental thereto.
"IRS" shall mean the Internal Revenue Service.
"Licenses" shall have the meaning specified in Section 3.18(b) hereof.
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<PAGE> 60
"LLC" shall mean GeoCapital, LLC, a Delaware limited liability company.
"LLC Points" shall have the meaning specified in the Restated LLC
Agreement.
"Management Corporation" shall have the meaning specified in the preamble
hereof.
"Material Adverse Effect" shall mean, with respect to a Person, a material
adverse effect on the condition (financial or otherwise), properties, assets,
liabilities, business, operations or prospects of such Person.
"Merger" shall have the meaning specified in Section 1.1 hereof.
"Merger Consideration" shall have the meaning specified in Section 1.7
hereof.
"Minnesota Account" shall have the meaning specified in Section 12.1(d)
hereof.
"Minnesota Agreement" shall mean the Investment Advisory Agreement dated
as of July 1, 1993 between the Company and the Minnesota State Board of
Investment.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"Non Solicitation Agreement" shall mean a Non Solicitation/Non Disclosure
Agreement substantially in the form attached hereto as Exhibit 8.8.
"Person" shall mean any individual, partnership (general or limited),
corporation, limited liability company, limited liability partnership,
association, trust, joint venture, unincorporated organization, and any
government, governmental department or agency or political subdivision thereof.
"Preferred Shares" shall have the meaning specified in Section 1.7(a)
hereof.
"Preferred Stock" shall mean Series B-1 Preferred Stock, $.01 par value
per share, of AMG; provided, however, that if AMG has created or believes it is
likely to create a class or series of convertible preferred stock, then at the
option of AMG, "Preferred Stock" shall mean Class D Preferred Stock, $.01 par
value per share on substantially the terms and conditions provided to the
Stockholders by AMG as of the date of this Agreement as being the terms and
conditions of the proposed Class C Preferred Stock, $.01 per value per share.
"Private Funds" shall mean Applewood Associates, L.P., Wheatley Partners,
L.P. and Wheatley Foreign Partners, L.P.
"Restated LLC Agreement" shall mean the Amended and Restated Limited
Liability Company Agreement of the LLC in substantially the form attached hereto
as Exhibit 2.1, as the same may be amended from time to time in accordance with
its terms.
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"SEC" shall mean the Securities and Exchange Commission, or any successor
agency thereto.
"Securities Act" shall mean the Securities Act of 1933, as the same may be
amended from time to time, and any successor to such act.
"Stockholder" shall have the meaning specified in the preamble hereof.
"Surviving Corporation" shall have the meaning specified in Section 1.1
hereof.
"Taxes" shall have the meaning specified in Section 3.9(a) hereof.
"Taxing Authority" shall have the meaning specified in Section 3.9(c)
hereof.
SECTION 14. MISCELLANEOUS.
14.1 FEES AND EXPENSES. Subject to Section 10.2(b), the rights and
obligations of the parties with respect to fees and expenses are set forth in
this Section 14.1. AMG shall pay its own expenses incident to the negotiation
and consummation of the transactions contemplated by this Agreement and the
agreements, instruments and documents contemplated hereby, including without
limitation, any filing fees under the HSR Act. The Stockholders shall pay their
own expenses and the expenses of the Company and the LLC incident to the
negotiation and consummation of the transactions contemplated by this Agreement
and the agreements, instruments and documents contemplated hereby, including
without limitation the reasonable costs of such reviews or audits as may be
requested by AMG pursuant to Section 5.14 and the reasonable costs incurred in
connection with the policies and procedures contemplated in Section 8.15;
provided, however, that AMG shall pay the filing and registration fees incurred
by the LLC in connection with the transactions contemplated hereby.
14.2 DISPUTE RESOLUTION. All disputes arising in connection with this
Agreement shall be resolved by binding arbitration in accordance with the
applicable rules of the American Arbitration Association. The arbitration shall
be held in The Commonwealth of Massachusetts before a single arbitrator selected
in accordance with Section 12 of the American Arbitration Association Commercial
Arbitration Rules who shall have substantial business experience in the
investment advisory industry, and shall otherwise be conducted in accordance
with the American Arbitration Association Commercial Arbitration Rules.
14.3 WAIVERS. Any waiver of any terms or conditions or of the breach of
any covenant, representation or warranty of this Agreement in any one instance,
shall not operate as or be deemed to be or construed as a further or continuing
waiver of any other breach of such term, condition, covenant, representation or
warranty or any other term, condition, covenant, representation or warranty, nor
shall any failure or delay at any time or times to enforce or require
performance of any provision hereof operate as a waiver of or affect in any
manner such party's
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right at a later time to enforce or require performance of such provision or of
any provision hereof; provided, however, that no such waiver, unless it, by its
own terms, explicitly provides to the contrary, shall be construed to effect a
continuing waiver of the provision being waived and no such waiver in any
instance shall constitute a waiver in any other instance or for any other
purpose or impair the right of the party against whom such waiver is claimed in
all other instances or for all other purposes to require full compliance. The
rights and remedies herein provided shall be cumulative and not exclusive of any
rights or remedies provided by law.
14.4 GOVERNING LAW. This Agreement shall be construed under and governed
by the internal laws of The Commonwealth of Massachusetts without regard to its
conflict of laws provisions.
14.5 NOTICES. Any notice, request, demand or other communication required
or permitted hereunder shall be in writing and shall be deemed to have been
given if delivered or sent by facsimile transmission, upon receipt, or if sent
by registered or certified mail, upon the sooner of the date on which receipt is
acknowledged or the expiration of three days after deposit in United States post
office facilities properly addressed with postage prepaid. All notices to a
party will be sent to the addresses set forth below or to such other address or
person as such party may designate by notice to each other party hereunder:
TO AMG: Affiliated Managers Group, Inc.
Two International Place, 23rd Floor
Boston, MA 02110
Attn: Nathaniel Dalton, Senior Vice President
Facsimile No.: (617) 747-3380
With a copy to: Goodwin, Procter & Hoar LLP
Exchange Place
Boston, MA 02109
Attn: Elizabeth Shea Fries
Facsimile No.: (617) 523-1231
TO Merger Sub: c/o Affiliated Managers Group, Inc.
Two International Place, 23rd Floor
Boston, MA 02110
Attn: Nathaniel Dalton, Senior Vice President
Facsimile No.: (617) 747-3380
With a copy to: Goodwin, Procter & Hoar LLP
Exchange Place
Boston, MA 02109
Attn: Elizabeth Shea Fries
Facsimile No.: (617) 523-1231
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<PAGE> 63
TO COMPANY: GeoCapital Corporation
767 Fifth Avenue
New York, NY 10153-4590
Attn: Irwin Lieber
Facsimile No.: (212) 486-4469
With a copy to: Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, NY 10019-6150
Attn: Craig M. Wasserman
Facsimile No.: (212) 403-2000
TO ANY STOCKHOLDER: c/o GeoCapital Corporation
767 Fifth Avenue
New York, NY 10153-4590
Attn: Irwin Lieber
Facsimile No.: (212) 486-4469
With a copy to: Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, NY 10019-6150
Attn: Craig M. Wasserman
Facsimile No.: (212) 403-2000
TO THE LLC:
Prior to the Closing to: GeoCapital Corporation
767 Fifth Avenue
New York, NY 10153-4590
Attn: Irwin Lieber
Facsimile No.: (212) 486-4469
Following the Closing to: c/o Affiliated Managers Group, Inc.
Two International Place, 23rd Floor
Boston, MA 02110
Attn: Nathaniel Dalton, Senior Vice President
Facsimile No.: (617) 747-3380
Any notice given hereunder may be given on behalf of any party by his counsel or
other authorized representatives.
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14.6 ENTIRE AGREEMENT. This Agreement, including the Schedules and
Exhibits referred to herein and the other writings specifically identified
herein or contemplated hereby, is complete, reflects the entire agreement of the
parties with respect to its subject matter, and supersedes all previous written
or oral negotiations, commitments and writings. No promises, representations,
understandings, warranties and agreements have been made by any of the parties
hereto except as referred to herein or in such Schedules and Exhibits or in such
other writings; and all inducements to the making of this Agreement and the
transactions contemplated hereby which were relied upon by either party hereto
have been expressed herein or in such Schedules or Exhibits or in such other
writings.
14.7 ASSIGNABILITY; BINDING EFFECT. This Agreement or any of the
obligations or rights hereunder (i) may only be assigned by AMG to an entity
under the control of AMG other than with the prior written consent of the
Company, and (ii) may not be assigned by any of the Company, the LLC or the
Stockholders without the prior written consent of AMG. This Agreement shall be
binding upon and enforceable by, and shall inure to the benefit of, the parties
hereto and their respective successors and permitted assigns.
14.8 AMENDMENTS. This Agreement may not be amended or modified, nor may
compliance with any condition or covenant set forth herein be waived, except by
a writing duly and validly executed by AMG and the Company, or in the case of a
waiver, the party waiving compliance.
14.9 CONSENT TO JURISDICTION. Each of the parties hereby consents to
personal jurisdiction, service of process and venue in the federal or state
courts sitting in the Commonwealth of Massachusetts for any claim, suit or
proceeding arising under this Agreement, or in the case of a third party claim
subject to indemnification hereunder, in the court where such claim is brought
and hereby irrevocably agrees that all claims in respect of such action or
proceeding may be heard and determined in such state court or, to the extent
permitted by law, in such federal court. Each of the parties hereby irrevocably
consents to the service of process in any such action or proceeding by the
mailing by certified mail of copies of any service or copies of the summons and
complaint and any other process to such party at the address specified in
Section 14.5 hereof. The parties agree that a final judgment in any such action
or proceeding shall be conclusive and may be enforced in other jurisdictions by
suit or in any other manner permitted by law and shall affect the right of a
party to service legal process or to bring any action or proceeding in the
courts of other jurisdictions.
14.10 CAPTIONS AND GENDER. The captions in this Agreement are for
convenience only and shall not affect the construction or interpretation of any
term or provision hereof. The use in this Agreement of the masculine pronoun in
reference to a party hereto shall be deemed to include the feminine or neuter,
as the context may require.
14.11 EXECUTION IN COUNTERPARTS. For the convenience of the parties and to
facilitate execution, this Agreement may be executed by facsimile (if followed
by an original delivered
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within two (2) business days) in two or more counterparts, each of which shall
be deemed an original, but all of which shall constitute one and the same
document.
14.12 PUBLICITY AND DISCLOSURES. No press releases or public disclosure,
either written or oral, of the transactions contemplated by this Agreement,
shall be made by a party to this Agreement without the prior knowledge and
written consent of AMG and the Company, except as may be otherwise required by
applicable laws, rules and regulations (including, without limitation, the
Securities Act, the Exchange Act and the rules and regulations promulgated
thereunder).
[END OF TEXT]
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IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
executed as of the date set forth above by their duly authorized
representatives.
AMG:
AFFILIATED MANAGERS GROUP, INC.
By: /s/ William J. Nutt
-----------------------------
Name: William J. Nutt
Title: President and CEO
MERGER SUB:
AMG MERGER SUB, INC.
By: /s/ Sean M. Healey
-----------------------------
Name: Sean M. Healey
Title: President
COMPANY:
GEOCAPITAL CORPORATION
By: /s/ Barry K. Fingerhut
-----------------------------
Name: Barry K. Fingerhut
Title: President
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LLC:
GEOCAPITAL, LLC
By: GeoCapital Corporation, manager
member
By: /s/ Barry K. Fingerhut
-----------------------------
Name: Barry K. Fingerhut
Title: President
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STOCKHOLDERS:
/s/ Irwin Lieber
--------------------------------
Irwin Lieber
/s/ Barry K. Fingerhut
--------------------------------
Barry K. Fingerhut
/s/ Seth Lieber
--------------------------------
Seth Lieber
/s/ Jonathan C. Lieber
--------------------------------
Jonathan C. Lieber
/s/ Andrew J. Fingerhut
--------------------------------
Andrew J. Fingerhut
/s/ Brooke A. Fingerhut
--------------------------------
Brooke A. Fingerhut
/s/ Dana G. Lieber
--------------------------------
Dana G. Lieber
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Certifications
The undersigned, being the Secretary of Merger Sub, hereby certifies that
this Agreement has been adopted by the Board of Directors of Merger Sub pursuant
to Section 251(f) of the Delaware General Corporation Law and that (1) this
Agreement does not amend the Certificate of Incorporation, (2) each outstanding
share of Merger Sub prior to the Merger is identical to those shares outstanding
after the Effective Date, and (3) no shares of Merger Sub are to be issued or
delivered pursuant to this Agreement.
__________________________________
Nathaniel Dalton
Secretary
Dated: _____________, 1997
The undersigned, being the Secretary of GeoCapital Corporation, hereby
certifies that all of the outstanding shares of each class of GeoCapital
Corporation entitled to vote on this Agreement have voted for the adoption of
such Agreement.
__________________________________
[Barry Fingerhut]
Secretary
Dated: _____________, 1997
62
<PAGE> 1
EXHIBIT 2.3
PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED PURSUANT TO A CONFIDENTIAL
TREATMENT REQUEST FILED WITH THE COMMISSION. ASTERISKS (*) IDENTIFY WHERE SUCH
CONFIDENTIAL INFORMATION HAS BEEN OMITTED. THE OMITTED PORTIONS HAVE BEEN FILED
SEPARATELY WITH THE COMMISSION.
STOCK PURCHASE AGREEMENT
DATED AS OF JANUARY 17, 1996
BY AND AMONG
TALEGEN HOLDINGS, INC.,
AFFILIATED MANAGERS GROUP, INC.,
FIRST QUADRANT HOLDINGS, INC.
CERTAIN MANAGERS OF FIRST QUADRANT CORP.
AND
THE MANAGEMENT CORPORATIONS NAMED HEREIN
<PAGE> 2
TABLE OF CONTENTS
Page
----
ARTICLE I - DEFINITIONS......................................................2
Section 1.1 Definitions................................................2
ARTICLE II - PURCHASE OF SHARES.............................................11
Section 2.1 Purchase of Shares........................................11
Section 2.2 Purchase Price and Related Adjustments....................11
ARTICLE III - THE CLOSING...................................................13
Section 3.1 Closing...................................................13
Section 3.2 Deliveries by the Parties; Payment of Purchase Price......13
Section 3.3 Further Assurances........................................17
Section 3.4 Transfer Taxes............................................17
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF SELLER.......................17
Section 4.1 Organization of the Company and Related Matters...........17
Section 4.2 Organization of the Subsidiary and Related Matters........18
Section 4.3 Organization of Seller and Related Matters................18
Section 4.4 Organization of Partnership and Related Matters...........19
Section 4.5 Non-Contravention.........................................19
Section 4.6 Stock Ownership...........................................20
Section 4.7 Regulatory Documents......................................20
Section 4.8 Financial Statements......................................21
Section 4.9 Ineligible Persons........................................22
Section 4.10 No Other Broker..........................................22
Section 4.11 Legal Proceedings........................................22
Section 4.12 Permits; Compliance with Applicable Law..................23
Section 4.13 Assets...................................................24
Section 4.14 Assets Under Management..................................25
Section 4.15 Employment Arrangements..................................25
Section 4.16 Employee Benefit Plans; ERISA............................26
Section 4.17 Taxes....................................................27
Section 4.18 Contracts................................................28
Section 4.19 No Material Adverse Change...............................28
Section 4.20 Broker Dealer............................................30
Section 4.21 Insurance Policies.......................................30
Section 4.22 Disclosure...............................................30
ARTICLE V - REPRESENTATIONS AND WARRANTEES OF BUYER AND AMG.................30
Section 5.1 Organization and Related Matters..........................30
Section 5.2 Authority; No Violation...................................31
Section 5.3 Consents and Approvals....................................31
Section 5.4 Legal Proceedings.........................................32
Section 5.5 Investment Intent of Buyer................................32
(i)
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Page
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Section 5.6 Ineligible Persons........................................32
Section 5.7 No Broker.................................................32
ARTICLE VI - REPRESENTATIONS AND WARRANTIES OF EACH MANAGER
AND EACH MANAGEMENT CORPORATION.......................................32
Section 6.1 Individual Power and Authority............................33
Section 6.2 Corporate Organization and Authority......................33
Section 6.3 Non-Contravention.........................................33
Section 6.4 Consents and Approvals....................................34
Section 6.5 Capitalization............................................34
Section 6.6 Litigation and Compliance with Laws.......................34
Section 6.7 Brokerage.................................................36
Section 6.8 Investment Advisory Representation........................36
Section 6.9 Good Health...............................................36
Section 6.10 Assets Under Management..................................36
Section 6.11 Employment Arrangements..................................36
Section 6.12 Ordinary Course of Business..............................37
ARTICLE VII - COVENANTS.....................................................37
Section 7.1 Seller Matters............................................37
Section 7.2 Conduct of Business Prior to Closing......................37
Section 7.3 Client Consents...........................................39
Section 7.4 Confidentiality and Announcements.........................40
Section 7.5 Expenses..................................................41
Section 7.6 Covenants with Respect to Agreement.......................41
Section 7.7 Access; Certain Communications............................41
Section 7.8 Regulatory Matters; Third Party Consents..................42
Section 7.9 Releases..................................................43
Section 7.10 Notification of Certain Matters..........................44
Section 7.11 Maintenance of Records...................................44
Section 7.12 Employees and Employee Plans.............................44
ARTICLE VIII - CONDITIONS TO CLOSING........................................48
Section 8.1 Conditions to Buyer's Obligations.........................48
Section 8.2 Conditions to Seller's Obligations........................52
Section 8.3 Mutual Conditions.........................................52
ARTICLE IX - SURVIVAL; INDEMNIFICATION......................................54
Section 9.1 Survival..................................................54
Section 9.2 Indemnification by Seller.................................55
Section 9.3 Indemnification by Buyer and AMG..........................56
Section 9.4 Indemnification by Management Corporations................56
Section 9.5 Notice and Opportunity to Defend..........................56
(ii)
<PAGE> 4
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Section 9.6 Basket......................................................57
ARTICLE X - TERMINATION.......................................................58
Section 10.1 Termination.................................................58
Section 10.2 Obligations Upon Termination................................59
ARTICLE XI - TAX COOPERATION AND INDEMNIFICATION..............................59
Section 11.1 Tax Cooperation.............................................59
Section 11.2 Tax Records.................................................60
Section 11.3 Liability of Seller.........................................60
Section 11.4 Liability of Buyer and Others...............................61
Section 11.5 Apportionment of Taxes; Transfer Taxes......................62
Section 11.6 Payment and Survival of Tax Claims..........................62
Section 11.7 Election under Sections 338(g) and 338(h)(10) of the Code...62
Section 11.8 Tax Dispute Resolution Mechanism............................63
ARTICLE XII - MISCELLANEOUS...................................................63
Section 12.1 Amendment...................................................63
Section 12.2 Entire Agreement............................................64
Section 12.3 Interpretation..............................................64
Section 12.4 Severability................................................64
Section 12.5 Notices.....................................................64
Section 12.6 Binding Effect; Persons Benefiting; No Assignment...........65
Section 12.7 Counterparts................................................66
Section 12.8 No Prejudice................................................66
Section 12.9 Governing Law...............................................66
Section 12.10 Specific Performance........................................66
(iii)
<PAGE> 5
LIST OF EXHIBITS
Exhibit 1.1(a) - Form of Asset Transfer Agreement
Exhibit 1.1(b) - Form of Interim Partnership Agreement
Exhibit 3.2(d) - Form of Restated Partnership Agreement
Exhibit 4.4(a) - Initial Partnership Agreement
Exhibit 7.3 - Form of Client Notice
Exhibit 8.1(f) - Form of Non Solicitation Agreement
Exhibit 8.1(h)(i) - Form of U.K. Partnership Agreement
Exhibit 8.1(h)(ii) - Form of Stock Contribution Agreement
Exhibit 8.1(j) - Form of Representation Certificate
(iv)
<PAGE> 6
LIST OF SCHEDULES
Schedule 1.1(a) - Company Employees (and Former Employees)
Schedule 1.1(b) - Persons Not Company Employees
Schedule 1.1(c) - Investment Advisory Agreements
Schedule 4.1 - Officers and Directors of the Company and its Subsidiary
Schedule 4.2(b) - Partnerships and Joint Ventures
Schedule 4.5(b) - Consents
Schedule 4.7 - Regulatory Documents
Schedule 4.8(a) - Company Financial Statements
Schedule 4.8(b) - Pro-Forma Financial Statements
Schedule 4.8(c) - Material Liabilities and Indebtedness
Schedule 4.8(d) - Accounts Receivable
Schedule 4.11 - Legal Proceedings
Schedule 4.12(a) - Permits
Schedule 4.12(c) - Government Proceedings
Schedule 4.13(a) - Real Property Leases
Schedule 4.13(b) - Assets
Schedule 4.13(c) - Intellectual Property
Schedule 4.14 - Assets Under Management
Schedule 4.15 - Employment Arrangements
Schedule 4.16(a) - ERISA Matters
Schedule 4.17(a) - Tax Matters
Schedule 4.17(g) - Assets and Tax Basis
Schedule 4.18 - Contracts
Schedule 4.19 - Material Adverse Changes
Schedule 4.21 - Insurance
Schedule 6.6 - Government Proceedings
Schedule 6.8 - Investment Advice
Schedule 8.1(f)(i) - Managers
Schedule 8.1(f)(ii) - U.K. Managers
Schedule 8.1(h) - U.K. Partnership Capitalization
Schedule 8.3(a) - Annual Advisory Fees
(v)
<PAGE> 7
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of January 17, 1996, by and among
Talegen Holdings, Inc., a Delaware corporation ("Seller"), Affiliated Managers
Group, Inc., a Delaware corporation ("AMG"), First Quadrant Holdings, Inc., a
Delaware corporation ("Buyer"), R. D. Arnott Corp., a California corporation
("Arnott Corporation"), Culonbois Corporation, a California corporation
("Culonbois"), Luck Monster Corporation, a California corporation ("Luck
Corporation"), AYPWIP Corporation, a California corporation ("AYPWIP"), R.M.
Darnell Corporation, a California corporation ("Darnell Corporation"), T.S.
Meckel Ruhestands Corporation, a Massachusetts corporation ("Meckel
Corporation"), Lovell, Inc., a New Jersey corporation ("Lovell Inc." and,
together with Arnott Corporation, Culonbois, Luck Corporation, AYPWIP, Darnell
Corporation, Meckel Corporation, the "Management Corporations" and each,
individually, a "Management Corporation"), Mr. Robert D. Arnott ("Arnott"), Curt
J. Ketterer ("Ketterer"), Christopher G. Luck ("Luck"), David J. Leinweber
("Leinweber"), R. Max Darnell ("Darnell"), Timothy S. Meckel ("Meckel"), Robert
M. Lovell, Jr. ("Lovell"), William A.R. Goodsall ("Goodsall") and Robert Brown
("Brown"). Messrs. Arnott, Ketterer, Luck, Leinweber, Darnell, Meckel, Lovell,
Goodsall and Brown are each referred to herein individually as a "Manager" and
collectively as the "Managers".
RECITALS
WHEREAS, Seller is the owner of the Shares (as hereinafter defined) of
First Quadrant Corp., a New Jersey corporation (the "Company"), which Shares
constitute all of the issued and outstanding shares of the Company's capital
stock;
WHEREAS, Buyer desires to purchase the Shares of the Company from Seller
in accordance with and subject to the terms and conditions set forth herein;
WHEREAS, Seller desires to sell the Shares to Buyer in accordance with and
subject to the terms and conditions set forth herein;
WHEREAS, the Company is the sole general partner of the Partnership;
WHEREAS, in connection with Buyer's purchase of the Shares of the Company
from Seller, the Partnership's Interim Partnership Agreement (as such term is
defined in Section 1.1 hereof) shall be amended and restated in the form
attached hereto as Exhibit 3.2(d) (the "Restated Partnership Agreement") and in
connection therewith, the Management Corporations and certain of the Managers
(as set forth therein) shall be issued certain Partnership Points and Options
(as such terms are defined in Article I hereof);
WHEREAS, it is a condition precedent to the obligations of Buyer hereunder
that, prior to the Asset Transfer (as such term is defined in Section 1.1
hereof), the Company and each of the Management Corporations and certain of the
Managers (as set forth therein) have entered into the Interim Partnership
Agreement (as such term is defined in Section 1.1 hereof);
<PAGE> 8
WHEREAS, it is a condition precedent to the obligations of Buyer
hereunder, that, one (1) full business day prior to the closing of the
transactions contemplated hereby, the Company will contribute all its assets
involved in its investment management business and all its working capital to
the Partnership, as more fully described below, in exchange for Partnership
Points and a Capital Account therein, all pursuant to the Asset Transfer
Agreement in the form attached hereto as Exhibit 1.1(a) (the "Asset Transfer
Agreement") and the agreements and documents which are attached as exhibits and
schedules thereto;
WHEREAS, it is a condition precedent to the obligations of Buyer
hereunder, that the Company, the Management Corporations and certain of the
Managers (as set forth therein) enter into the U.K. Partnership Agreement (as
hereinafter defined) and, in connection therewith, the Company contribute all
the capital stock of its Subsidiary to the U.K Partnership (as such terms are
hereinafter defined) and, in connection therewith the Company, the Management
Corporations and certain of the Managers (as set forth therein) will be issued
certain U.K. Partnership Points (as hereinafter defined); and
WHEREAS, the parties hereto have agreed to make certain representations,
warranties and covenants as set forth herein.
NOW THEREFORE, in consideration of the mutual covenants, representations,
warranties and agreements contained herein, and of other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
intending to be bound hereby, the parties agree as follows:
ARTICLE I - DEFINITIONS
Section 1.1 Definitions. For all purposes of this Agreement and the
Schedules hereto, the following terms shall have the respective meanings set
forth in this Section 1.1 (such definitions to be equally applicable to both the
singular and plural forms of the terms herein defined):
"Advisers Act" means the Investment Advisers Act of 1940, as amended, and
the rules and regulations of the SEC thereunder.
"Affiliate" means, with respect to any Person, any other Person who
directly or indirectly controls, is controlled by or is under common control
with such Person (the term "control," for purposes of this definition, meaning
the power to (a) direct or cause the direction of the management or policies of
the controlled Person or (b) vote twenty-five percent (25%) or more of the
outstanding voting securities of such Person); provided, however, that Managers
and Management Corporations shall not be deemed to be Affiliates of Seller, the
Company, its Subsidiary, the Partnership or Buyer or AMG.
"Agreement" means this Stock Purchase Agreement, as it may hereafter be
amended.
2
<PAGE> 9
"AMG" means Affiliated Managers Group, Inc., a Delaware corporation.
"Am Re Documents" has the meaning set forth in Section 7.9 hereof.
"Annualized Advisory Fee" shall mean the amounts set forth opposite each
fee arrangement on Schedule 8.3(a) hereto under the heading "Annualized Advisory
Fees".
"Applicable Law" means any domestic or foreign, federal, state or local
statute, law, ordinance, rule, administrative interpretation, regulation, order,
writ, injunction, directive, judgment, decree, policy, guideline or other
requirement applicable to (as the context may require) Seller, the Company, the
Partnership, Buyer or any of their respective Affiliates, properties, assets,
businesses, officers, directors, employees or agents.
"Asserted Liability" has the meaning set forth in Section 9.5(a) hereof.
"Asset Transfer" means the consummation of the transactions to be effected
pursuant to the Asset Transfer Agreement, as set forth in Section 8.1(e) hereof.
"Asset Transfer Agreement" means that certain Agreement for the Transfer
of the Assets and Liabilities of First Quadrant Corp., a form of which is
attached hereto as Exhibit 1.1(a).
"Base Fees" has the meaning set forth in Section 8.3(a) hereof.
"Business Day" means any day other than a Saturday, a Sunday or a day on
which banks in Seattle, Washington or New York, New York are not required or
authorized to close for regular banking business.
"Buyer" means First Quadrant Holdings, Inc., a Delaware corporation.
"Buyer Material Adverse Effect" means a material adverse effect on the
business, assets, financial condition, results of operations or (solely with
reference to the existing business of Buyer) financial prospects of Buyer, or on
the ability of Buyer to complete the transactions contemplated hereby.
"Capital Account" has the meaning specified in the Restated Partnership
Agreement.
"Claims Notice" has the meaning set forth in Section 9.5(a) hereof.
"Closing" means the completion of the transactions contemplated by Section
3.1 of this Agreement.
"Closing Date" has the meaning set forth in Section 3.1 hereof.
3
<PAGE> 10
"Code" means the Internal Revenue Code of 1986, as amended, and
regulations promulgated thereunder.
"Code of Ethics" shall mean the Code of Ethics to be adopted by the
Partnership.
"Company" shall mean First Quadrant Corp., a New Jersey corporation.
"Company Clients" shall mean those clients of the Company and its
Subsidiary for which they provide investment advisory services.
"Company Employees" shall mean those current or former employees of the
Company or its Subsidiary who are set forth on Schedule 1.1(a) and who, at the
time of the Closing, are:
(1) actively employed by the Company or its Subsidiary, including
those who are absent from employment due to illness, injury, military service,
or other authorized absence (including those who are "disabled" within the
meaning of either the short-term or the long-term disability plan currently
applicable to the Company (collectively, the "Disability Plan");
(2) former employees of the Company or its Subsidiary who, on the
Closing Date, are receiving long-term disability benefits under the Disability
Plan; and
(3) former employees of the Company or its Subsidiary who have
previously satisfied the requirements for retiree medical and/or life insurance
coverage under any of the arrangements disclosed pursuant to Section 4.16(a);
but (i) other former employees of the Company or its Subsidiary, (ii) employees
otherwise not actively employed by the Company or its Subsidiary (other than as
specifically included above), and (iii) those employees of the Company or its
Subsidiary whose names are set forth on Schedule 1.1(b) are not Company
Employees.
"Company Financial Statements" has the meaning specified in Section 4.8(a)
hereof.
"Company Material Adverse Effect" means a material adverse effect on the
business, assets, financial condition, results of operations or (solely with
reference to the existing business of the Company and its Subsidiary) financial
prospects of the Company and its Subsidiary, taken as a whole.
"Confidentiality Agreement" means that certain letter agreement dated
December 15, 1994, between Seller and TA Associates, Inc., to which AMG joined
as a party on October 4, 1995, with respect to the confidentiality of
information with respect to the Company, Seller and their respective Affiliates
and other related Persons, provided by Seller or the Company to Buyer, as it may
have been or may hereafter be amended from time to time.
4
<PAGE> 11
"Consent" has the meaning specified in Section 8.3(a) hereof.
"Contracts" means any Investment Advisory Agreements to which the Company
or its Subsidiary is a party and any lease, license or other agreement to which
the Company or its Subsidiary is a party, and all rights and interests of the
Company or its Subsidiary arising thereunder or in connection therewith.
"Delaware Act" means the Delaware Revised Uniform Limited Partnership Act
(6 Del. C. Section 7-101, et. seq.) as it may be amended from time to time, and
any successor to such act.
"Designated Cash Amount" means the sum of (i) Three Million Four Hundred
Thirty-One Thousand Dollars ($3,431,000).
"Designated Receivables Amount" means the sum of Nine Million Three
Hundred Thousand Dollars ($9,300,000).
"Disability Plan" means The LTD Income Protection Plan of Talegen
Holdings, Inc.
"Effective Time" has the meaning specified in the Asset Transfer
Agreement.
"Employee Stockholder" has the meaning specified in the Restated
Partnership Agreement.
"Employment Arrangement" has the meaning set forth in Section 4.15 hereof.
"Encumbrance" means any lien, pledge, security interest, claim, charge,
easement, limitation, commitment, encroachment, restriction or encumbrance of
any kind or nature whatsoever.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the regulations thereunder.
"Exchange Act" means the Securities Exchange Act of 1934, as the same may
be amended from time to time, and any successor to such act.
"Fee Arrangement Value" has the meaning specified in Section 8.3(a)
hereof.
"Financial Statements" has the meaning set forth in Section 4.8(b) hereof.
"First Quadrant Insurance" means those assets and liabilities of the
Company which were transferred to American Re Asset Management, Inc. pursuant to
that certain Asset Purchase Agreement dated as of August 11, 1995, by and
between First Quadrant Corp. and American Re Asset Management, Inc. and the
businesses associated with such assets and liabilities.
5
<PAGE> 12
"Former Employees" means former employees of the Company or its Subsidiary
who are not Company Employees.
"GAAP" means generally accepted accounting principles as used in the
United States of America as in effect at the time any applicable financial
statements were prepared or any act requiring the application of GAAP was
performed.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof, any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government, including the SEC or any other government authority, agency,
department, board, commission or instrumentality of the United States, any
foreign government, any State of the United States or any political subdivision
thereof, and any court, tribunal or arbitrator(s) of competent jurisdiction, and
any governmental or nongovernmental self-regulatory organization, agency or
authority (including the National Association of Securities Dealers, Inc., the
Commodity Futures Trading Commission, the National Futures Association and
IMRO).
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, and the rules and regulations promulgated thereunder.
"IMRO" means the United Kingdom Investment Management Regulatory
Organization Ltd., or any successor or similar organization.
"IMRO Rules" means the rules promulgated by IMRO as amended from time to
time.
"Incentive Compensation Plan" means that certain First Quadrant Corp.
Incentive Compensation Plan (As Amended and Restated As of January 1, 1990).
"Indebtedness" means all obligations (i) for borrowed money, (ii)
evidenced by bonds, debentures, notes or similar instruments, (iii) to pay the
deferred purchase price of property or services (other than accrued expenses
arising in the ordinary course of business), (iv) under leases that would, in
accordance with GAAP, appear on the balance sheet of the lessee as liabilities,
(v) secured by a lien except for minor imperfections of title or insignificant
liens which do not, in the aggregate, detract from the value of any assets, or
interfere with the present or proposed uses thereof or the business of the
Company (or, following the Asset Transfer, the Partnership) or any Subsidiary
thereof, (vi) in respect of letters of credit, or bankers acceptances,
contingent or otherwise, or (vii) in respect of any guaranty or endorsement or
other obligations to be liable for the debts of another Person.
"Indemnifying Party" has the meaning set forth in Section 9.5(a) hereof.
"Indemnitee" has the meaning set forth in Section 9.5(a) hereof.
6
<PAGE> 13
"Independent Accounting Firm" means any "Big Six" accounting firm or its
successor, except for the respective independent public accountants of Seller
and Buyer or their respective Affiliates or Subsidiaries.
"Initial Partnership Agreement" means the Partnership's limited
partnership agreement as in effect on the date hereof, a copy of which is
attached hereto as Exhibit 4.4(a).
"Intellectual Property" has the meaning set forth in Section 4.13(c)
hereof.
"Interim Financial Statements" has the meaning set forth in Section
7.10(b) hereof.
"Interim Partnership Agreement" means the Partnership's partnership
agreement as amended and restated in the form attached hereto as Exhibit 1.1(b)
to admit, as limited partners, each of the Management Corporations and certain
of the Managers (as defined therein), which amendment and restatement shall
occur prior to the Asset Transfer.
"Investment Advisory Agreements" means the Contracts set forth in Schedule
1.1(c) and any other contract or agreement whereby the Company or any Subsidiary
thereof has agreed to act as an investment adviser or sub-adviser or to manage
any investment or trading of another Person and includes investment advisory
agreements entered into by the Company or any Subsidiary thereof prior to the
Closing Date.
"IRP" means The Individual Retirement Plan of Talegen Holdings, Inc.
"IRS" means the Internal Revenue Service.
"Knowledge" means, with respect to any Person which is other than an
individual, the actual knowledge of the executive officers and directors of such
Person and its Subsidiaries (provided, however, that (a) with respect to Seller,
Knowledge shall mean the actual knowledge of the executive officers and
directors of Seller, the Company, its Subsidiary and the Managers and (b) with
respect to AMG, Knowledge shall mean the actual knowledge of the executive
officers and directors of AMG and Buyer), and with respect to a Person who is an
individual, the actual knowledge of such Person.
"Limited Partner" has the meaning ascribed thereto in the Restated
Partnership Agreement.
"Loss" means any and all claims, losses (including, without limitation,
diminution in value), liabilities, costs, penalties, fines and expenses
(including attorney's, accountant's, consultant's and expert's fees and
expenses), damages, obligations to third parties, expenditures, proceedings,
judgments, awards or demands that are imposed upon or otherwise incurred or
suffered by the relevant party.
"Management Corporation" has the meaning ascribed thereto in the preamble
hereof.
7
<PAGE> 14
"Manager" has the meaning ascribed thereto in the preamble hereof.
"Material Adverse Effect" means a material adverse effect on the business,
assets, financial condition, results of operations or (solely with reference to
the existing business of such Person or Persons) financial prospects of such
Person or Persons, as the case may be, or on the ability of any of the parties
to complete the transactions contemplated hereby.
"NFA" means the National Futures Association.
"Non Solicitation Agreement" means one of the Non Solicitation/Non
Disclosure Agreements by and among the Company, the Partnership, the U.K.
Partnership, each Manager and his Management Corporation (if any) through which
a Manager will hold his or her Partnership Interests and U.K. Partnership
Interests, in form and substance reasonably acceptable to Buyer and in substance
materially consistent with Exhibit 8.1(f)(i) hereto.
"Option" has the meaning ascribed thereto in the Restated Partnership
Agreement.
"Partnership" means First Quadrant, L.P., a Delaware limited partnership.
"Partnership Interests" has the meaning ascribed thereto in the Restated
Partnership Agreement.
"Partnership Points" has the meaning ascribed thereto in the Restated
Partnership Agreement.
"Permits" has the meaning specified in Section 4.12(a) hereof.
"Person" means any individual, corporation, company, partnership (limited
or general), joint venture, limited liability company, association, trust or
other entity, and any government, governmental department or agency or political
subdivision thereof.
"Pre-Closing Transaction Documents" means all Transaction Documents
executed by or on behalf of Seller, the Company, its Subsidiary, the Partnership
or the U.K. Partnership, other than the Restated Partnership Agreement, the Non
Solicitation Agreements and any other Transaction Documents (other than
Transaction Documents executed by Seller) to the extent entered into in
connection with the Restated Partnership Agreement or the Non Solicitation
Agreements but not to the extent entered into in connection with any of the
Pre-Closing Transaction Documents.
"Pro-Forma Financial Statements" has the meaning specified in Section
4.8(b) hereof.
"Purchase Price" has the meaning specified in Section 2.2 hereof.
8
<PAGE> 15
"Records" means all records and original documents in Seller's, the
Company's or its Subsidiary's possession which pertain to or are utilized by the
Company or its Subsidiary to administer, reflect, monitor, evidence or record
information respecting the business or conduct of the Company or its Subsidiary.
"Restated Partnership Agreement" means the Partnership's Amended and
Restated Limited Partnership Agreement in form and substance reasonably
acceptable to Buyer and in substance materially consistent with Exhibit 3.2(d)
hereto.
"Retirement Plan" means the Retirement Plan of Talegen Holdings, Inc.
"SEC" means the Securities and Exchange Commission.
"SEC Documents" means all reports and registration statements filed, or
required to be filed, by law, by contract or otherwise, by an entity pursuant to
the Securities Laws.
"Securities Laws" means the Securities Act of 1933, as amended (the
"Securities Act"); the Exchange Act; the Advisers Act; the Investment Company
Act of 1940, as amended, and the rules and regulations of the SEC promulgated
thereunder; foreign securities and investment advisory and/or management laws,
rules and regulations; and state "blue sky" laws.
"Seller" means Talegen Holdings, Inc., a Delaware corporation.
"Seller Entities" means Seller, the Company, the Partnership, the U.K.
Partnership and the Company's Subsidiary.
"Seller's Welfare Plans" has the meaning set forth in Section 7.12(b)(i)
hereof.
"SERP" means the Supplemental Executive Retirement Plan of Talegen
Holdings, Inc.
"Shares" means 1,000 shares of common stock, par value $1.00 per share,
which shares constitute all of the issued and outstanding shares of the
Company's capital stock.
"SIRP" means the Supplemental IRP of Talegen Holdings, Inc.
"Stock Contribution Agreement" has the meaning specified in Section
8.1(h)(ii) hereof.
"Subsidiary" means any corporation or other Person more than fifty percent
(50%) of the outstanding securities or other interests having voting power of
which shall be owned or controlled, directly or indirectly, by such other entity
and, when the phrase "its Subsidiary" is used with respect to the Company, it
means First Quadrant Limited, a United Kingdom corporation.
9
<PAGE> 16
"Tax Dispute Accountants" has the meaning set forth in Section 11.8
hereof.
"Taxes" shall mean all federal, state, local and foreign taxes, and other
tax assessments (whether imposed directly or through withholding), including any
interest, additions to tax, or penalties applicable thereto.
"Tax Returns" shall mean all federal, state, local and foreign tax
returns, declarations, statements, reports, schedules, forms and information
returns and any amended tax returns relating to Taxes; provided that the federal
income Tax Return of the Company shall be a pro forma Tax Return, prepared as if
the Company constituted a separate affiliate.
"Tax Sharing Agreement" means that certain Crum and Forster, Inc. Federal
Income Tax Allocation Agreement dated as of January 11, 1983, as amended by
Amendment No. 1 thereto dated as of April 15, 1992, to which Seller and the
Company are parties.
"Transaction Documents" means this Agreement, the Asset Transfer Agreement
(and all the agreements, documents and certificates which are exhibits thereto
or included on the schedules thereto), the Stock Contribution Agreement, the
Initial Partnership Agreement, the Interim Partnership Agreement, the Restated
Partnership Agreement, the U.K. Partnership Agreement, the XFS Indemnification
Agreement, the Non Solicitation Agreements and all the agreements, documents,
instruments and certificates entered into in connection herewith or therewith.
"Transfer Tax" has the meaning set forth in Section 11.5(b) hereof.
"Third-Party Claim" has the meaning specified in Section 9.2 hereof.
"U.K. Capital Account" has the meaning specified in the U.K. Partnership
Agreement.
"U.K. Partnership" means First Quadrant U.K., L.P., a Delaware limited
partnership to be formed by the Company (as its general partner) pursuant to the
provisions of Section 8.1(h) hereof.
"U.K. Partnership Agreement" has the meaning specified in Section 8.1(h)
hereof.
"U.K. Partnership Interests" shall mean "Partnership Interests" as such
term is defined in the U.K. Partnership Agreement.
"U.K. Partnership Points" has the meaning specified in the U.K.
Partnership Agreement.
"Wire Transfer" means a payment in immediately available funds by wire
transfer in lawful money of the United States of America to such account or
accounts as shall have been designated by notice to the paying party.
10
<PAGE> 17
"Xerox Financial Services" means Xerox Financial Services, Inc., a
Delaware corporation.
"XFS Indemnification Agreement" means that certain Indemnification
Agreement by and among Xerox Financial Services, the Company, the Buyer and AMG,
which is contemplated by Section 8.1(n) hereto.
ARTICLE II - PURCHASE OF SHARES
Section 2.1 Purchase of Shares. Upon the terms and subject to the
conditions set forth in this Agreement, Seller shall, at the Closing, sell to
Buyer, and Buyer shall (and AMG shall cause Buyer to) purchase from Seller, the
Shares for the Purchase Price. The Shares shall be free and clear of any
Encumbrances.
Section 2.2 Purchase Price and Related Adjustments.
(a) The purchase price for the Shares (the "Purchase Price") shall
be ********** Dollars ($**), subject to increase or decrease as provided in this
Section 2.2.
(b) Notwithstanding anything else set forth herein to the contrary,
if, and only if, as of the Closing Date, the Company and its Subsidiary shall
have received Consents from Clients whose Investment Advisory Agreements provide
for the payment (based on the Fee Arrangement Values of each such Investment
Advisory Agreement) of fees constituting less than ninety-five percent (95%) of
the Base Fees, then the Purchase Price shall be adjusted as follows: the
Purchase Price shall then equal (i) the Purchase Price set forth in Section
2.2(a) above, multiplied by (ii) a fraction, (A) the numerator of which shall be
the sum of the Fee Arrangement Values of each Investment Advisory Agreement
which has not been terminated at or prior to the Closing, and with respect to
which the Client of the Company has given its Consent, and an additional amount
equal to 5% of Base Fees, and (B) the denominator of which shall be the Base
Fees. The calculation set forth in this Section 2.2(b) shall be done prior to
any adjustment or permitted dividend pursuant to Sections 2.2(c) and 2.2(d)
below.
(c) If the Company and its Subsidiary collectively had, at the close
of business on December 31, 1995, cash in excess of the Designated Cash Amount,
then, notwithstanding the provisions of Section 7.2(viii) hereof, on the Closing
Date and immediately prior to the Closing, the Partnership may distribute to the
Company and the Company may dividend to Seller, an amount equal to the amount of
such excess, in cash. If, however, at the close of business on December 31,
1995, the Company and its Subsidiary collectively had cash which was less than
the Designated Cash Amount, then the Purchase Price for the Shares shall be
reduced by an amount equal to the amount of such deficiency.
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(d) If the Company and its Subsidiary collectively had, at the close
of business on December 31, 1995, receivables in excess of the Designated
Receivables Amount, then, provided that the Closing shall have occurred, Buyer
shall pay, or cause to be paid by the Partnership or the Company, to Seller, on
April 1, 1996, an amount in cash equal to forty and one-half percent (40.5%) of
the amount of such excess. If, however, at the close of business on December 31,
1995, the Company and its Subsidiary collectively had receivables which were
less than the Designated Receivables Amount, then, provided that the Closing
shall have occurred, Seller shall pay to the Company, on April 1, 1996, an
amount in cash equal to forty and one-half percent (40.5%) of the amount of such
deficiency.
(e) In order to effectuate the provisions of Sections 2.2(c) and
2.2(d) above, the parties agree as follows:
(i) Not less than three (3) Business Days prior to the
Closing, Seller shall cause the senior financial officer of the Company to
certify to Buyer the amounts of cash and receivables which the Company and its
Subsidiary had at the close of business on December 31, 1995, which amounts
shall be used as the cash and receivables amounts for purposes of Sections
2.2(c) and 2.2(d) above.
(ii) As soon as is reasonably practicable after the Company's
receipt thereof, the Company shall provide each of Buyer and Seller with a copy
of the Company's audited consolidated balance sheet as of December 31, 1995,
accompanied by the audit report of KPMG Peat Marwick LLP. In the event that
either Buyer or Seller disagrees with the amount of cash and/or receivables
reflected on such balance sheet, then such party shall notify the other within
five (5) days after delivery of such balance sheet of the existence of such
disagreement and Buyer and Seller shall in good faith attempt to negotiate a
settlement to such disagreement. If Buyer and Seller are unable to negotiate a
resolution of the disagreement within fifteen (15) days after the delivery of
the notice of such disagreement then, within five (5) business days after the
expiration of such fifteen (15) day period, each of Buyer and Seller shall
designate an accounting firm, which accounting firms shall jointly designate a
single Independent Accounting Firm, which Independent Accounting Firm shall
perform such procedures as it may deem necessary or desirable to determine the
amounts of cash and receivables which the Company and its Subsidiary had at the
close of business on December 31, 1995. The costs of the three accounting firms
shall be borne one-half (1/2) by Seller and one-half (1/2) by Buyer, unless the
amounts of cash and receivables as determined by the Independent Accounting Firm
referred to above are not materially (for purposes of this paragraph, the term
material shall mean that either cash or receivables is different by an amount
equal to or greater than $50,000) different from those reflected on the
Company's consolidated balance sheet as of December 31, 1995, in which case, the
party which disagreed with such amount shall bear the costs of all three
accounting firms.
(iii) Within ten (10) business days after (A) if there is no
disagreement under clause (ii) above, receipt by Buyer and Seller of the
Company's audited consolidated balance sheet as of December 31, 1995, or (B) if
there is a disagreement under clause (ii)
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above, receipt of the calculation of cash and receivables by the Independent
Accounting Firm referred to in paragraph (ii) above, either Seller or Buyer
shall make any payments required so that the net amounts received pursuant to
Sections 2.2(c) and 2.2(d) above together with any such payments are equal to
the amounts which the Persons described in such Sections would have received if
the cash and receivables amounts in the Company's audited consolidated financial
statements (or, if applicable, the amounts determined by the Independent
Accounting Firm) had been certified by the Company's senior financial officer
prior to the Closing.
ARTICLE III - THE CLOSING
Section 3.1 Closing. Subject to the terms and conditions of this
Agreement, the closing of the purchase and sale of the Shares (the "Closing")
shall be at 10:00 A.M. at the offices of Goodwin, Procter & Hoar, Exchange
Place, Boston, Massachusetts 02109, or at such other location designated by
Seller (and agreed by Buyer) on the third Business Day following the date on
which all of the conditions set forth in Article VIII (other than the Asset
Transfer and those conditions designating instruments, certificates or other
documents to be delivered at the Closing) shall have been satisfied or waived,
or such other date as Buyer and Seller shall agree upon in writing, and shall be
one full Business Day after the Asset Transfer (which itself shall take place
after the restatement of the Initial Partnership Agreement into the Interim
Partnership Agreement), such date being hereinafter called the "Closing Date."
Section 3.2 Deliveries by the Parties; Payment of Purchase Price.
(a) At the Closing, Seller shall deliver, or shall cause to be
delivered, to Buyer the following:
(1) one or more certificates representing all of the Shares
duly executed in blank or accompanied by stock powers duly executed in blank, in
proper form for transfer, with such other documents as may be reasonably
required by Buyer to effect a valid transfer of such Shares by Seller, free and
clear of any Encumbrance;
(2) Records of the Company, its Subsidiary, the Partnership
and the U.K. Partnership in the possession of Seller (to the extent such Records
are not also located at the offices of the Company or its Subsidiary);
(3) a certificate of the Secretary of State of the State of
New Jersey as to the good standing of the Company (including tax good standing)
dated as of a date not earlier than ten (10) days prior to the Closing Date,
together with a copy of the Amended and Restated Certificate of Incorporation,
as amended, of the Company, certified by the Secretary of State of the State of
New Jersey, and a certificate of the Secretary of State of the State of Delaware
as to the good standing of Seller dated as of a date not earlier than ten (10)
days prior to the Closing Date, together with a copy of the Certificate of
Incorporation, as amended, of Seller, certified by the Secretary of State of the
State of Delaware;
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(4) the By-laws of the Company, certified by the Secretary of
the Company as of the Closing Date, and the By-laws of Seller, certified by the
Secretary or Assistant Secretary of the Seller as of the Closing Date;
(5) certificates of the Secretary of State of the State of
Delaware as to the good standing of the Partnership and the U.K. Partnership
dated as of a date not earlier than ten (10) days prior to the Closing Date,
together with copies of the Certificate of Limited Partnership of the
Partnership and of the U.K. Partnership, each certified by the Secretary of
State of the State of Delaware;
(6) a certificate issued by the appropriate official of each
jurisdiction in which the Company (and, on the Closing Date, the Partnership)
does business certifying that the Company and the Partnership are in good
standing in such state, to the extent applicable, as of a date not earlier than
ten (10) days prior to the Closing Date;
(7) a certificate of the Registrar of Companies at Cardiff
regarding First Quadrant Limited, dated as of a date not earlier than ten (10)
days prior to the Closing Date, together with a copy of the charter documents of
First Quadrant Limited, certified by an authorized officer;
(8) resolutions of the boards of directors (and, if necessary,
the shareholders) of Seller and the Company, authorizing the execution and
delivery of each of the Pre-Closing Transaction Documents to which such Person
is a party and, in the case of the Company, to which the Partnership is a party)
and approving all other actions required to be taken or approved in connection
with this Agreement and the other Pre-Closing Transaction Documents and the
transactions contemplated hereby and thereby, but excluding approval of the
Transaction Documents which are not Pre-Closing Transaction Documents and
actions required to be taken or approved solely in connection with Transaction
Documents which are not Pre-Closing Transaction Documents in each case,
certified by the Secretary or Assistant Secretary of the relevant Person;
(9) the Asset Transfer Agreement and the Stock Contribution
Agreement and all such other documents of transfer and assignment as Buyer may
reasonably have requested to effectuate the Asset Transfer and the transfer of
the stock of First Quadrant Limited to the U.K. Partnership;
(10) true and correct copies of each of the Transaction
Documents (other than this Agreement) to which the Seller Entities are parties;
(11) a certificate of each of the Secretary or Assistant
Secretary of Seller and the Company, certifying that its respective resolutions,
charter and by-laws described above are in full force and effect and have not
been amended or modified, and that the officers of such corporation are those
persons named in the certificate;
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(12) the releases contemplated by Section 7.9 hereof;
(13) an opinion from Skadden, Arps, Slate, Meagher & Flom,
counsel to Seller, in form and substance reasonably acceptable to Buyer but
including as one of the opinions set forth therein, the opinion included in
Exhibit 3.2(a)(13) hereto;
(14) such other certificates and other documents as Buyer, or
Goodwin, Procter & Hoar as counsel to Buyer, may reasonably have requested in
connection with the transactions contemplated hereby and by the other
Transaction Documents.
(b) At the Closing, the Managers shall deliver, or shall cause to be
delivered, to Buyer the following:
(1) a certificate issued by the appropriate Secretary of State
certifying that each Management Corporation is validly existing and in good
standing in such state as of a date not earlier than ten (10) days prior to the
Closing Date;
(2) a copy of the charter and bylaws of each of the Management
Corporations which, in the case of the charter, is certified as of a date not
earlier than ten (10) days prior to the Closing Date by the Secretary of State
of the relevant state of incorporation;
(3) resolutions of the boards of directors (and, if necessary,
the shareholders) of each Management Corporation, authorizing the execution and
delivery of each of the Transaction Documents to which such Person is a party
and approving all other actions required to be taken or approved in connection
with this Agreement and the other Transaction Documents and the transactions
contemplated hereby and thereby, in each case, certified by the Secretary of the
relevant Person;
(4) true and correct copies of each of the Transaction
Documents (other than this Agreement) to which the Managers or the Management
Corporations are parties;
(5) a certificate of the Secretary of each of the Management
Corporations, certifying that its respective resolutions, charter and by-laws
described above are in full force and effect and have not been amended or
modified, and that the officers of such corporation are those persons named in
the certificate;
(6) for each of the Managers, evidence that such Person has
had a physical examination within thirty (30) days (or such longer period as may
be agreed in writing by AMG with respect to any Manager) prior to the Closing,
including a letter from a licensed physician familiar with such Person's health
indicating that such Person is in good health at such date;
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(7) an opinion from Munger, Tolles and Olson, counsel to the
Managers and the Management Corporations, in form and substance reasonably
acceptable to Buyer but including, as one of the opinions set forth therein, an
opinion as to the valid, binding and enforceable nature as against the Managers
and the Management Corporations of each of the Transaction Documents to which
any such Manager or Management Corporation is a party; and
(8) such other certificates and other documents as Buyer, or
Goodwin, Procter & Hoar as counsel to Buyer, may reasonably have requested in
connection with the transactions contemplated hereby and by the other
Transaction Documents;
provided, however, that no Manager (or, to the extent
applicable, Management Corporation) shall have any obligation to make the
foregoing deliveries, if such Manager has terminated his employment with the
Company prior to the date of execution of the Interim Partnership Agreement
although this shall have no effect on any of the conditions set forth in Section
8.1 hereof or otherwise.
(c) At the Closing, AMG and Buyer shall deliver, or shall cause to
be delivered, to Seller (and, with respect to the items in (1), (2), (3) and (4)
below, to each of the Managers):
(1) a certificate of the Secretary of State of the State of
Delaware as to the good standing of each of AMG and Buyer dated as of a date not
earlier than ten (10) days prior to the Closing Date, together with a copy of
the Certificate of Incorporation, as amended (in the case of AMG), of each of
AMG and Buyer, certified by the Secretary of State of the State of Delaware;
(2) the By-laws of each of AMG and Buyer, certified by the
Secretary of AMG and the Secretary of Buyer as of the Closing Date;
(3) resolutions of the board of directors (and, if necessary,
the shareholders) of Buyer and AMG, authorizing the execution and delivery of
this Agreement and approving all other actions required to be taken or approved
in connection with this Agreement and the transactions contemplated hereby, in
each case, certified by the Secretary of Buyer and the Secretary of AMG,
respectively;
(4) a certificate of the Secretary of Buyer and the Secretary
of AMG, respectively, certifying that the resolutions, charter and by-laws
described above are in full force and effect and have not been amended or
modified, and that the officers of Buyer and AMG are those persons named in the
respective certificate;
(5) an amount equal to the Purchase Price (determined as set
forth in Section 2.2 hereof) payable by Wire Transfer to an account of Seller of
which Seller has informed Buyer in writing not less than three (3) days prior to
the Closing Date;
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(6) an opinion from Goodwin, Procter & Hoar, as counsel to
Buyer, in form and substance reasonably acceptable to Seller; and
(7) such other certificates and other documents as Seller,
Skadden, Arps, Slate, Meagher & Flom (as counsel to Seller), the Managers, the
Management Corporations and Munger, Tolles & Olsen, as counsel to the Managers
and the Management Corporations, may reasonably have requested in connection
with the transactions contemplated hereby.
(d) In connection with and as a condition precedent to the Closing,
the Interim Partnership Agreement of the Partnership shall be amended and
restated in form and substance reasonably acceptable to Buyer and in substance
materially consistent with Exhibit 3.2(d) hereto (the "Restated Partnership
Agreement").
(e) Immediately following the Closing, Buyer shall deliver to the
Managers an opinion of Goodwin, Procter & Hoar, as counsel to Buyer, in form and
substance reasonably satisfactory to Arnott Corporation, regarding the valid,
binding and enforceable nature of the Restated Partnership Agreement as against
the Company.
Section 3.3 Further Assurances. Seller from time to time after the Closing
at the request of Buyer and without further consideration shall execute and
deliver further instruments of transfer and assignment and take such other
action as Buyer may reasonably request to remove any Encumbrances on the Shares.
In addition, each of the parties hereto shall, whether prior to or after the
Closing Date, execute such documents and other papers and perform such further
acts as may be reasonably requested by another party hereto to carry out the
provisions hereof and the transactions contemplated hereby.
Section 3.4 Transfer Taxes. All transfer taxes, fees and duties under
Applicable Law incurred in connection with the sale and transfer of the Shares
under this Agreement will be borne and paid by Seller, and Seller shall promptly
reimburse the Company and Buyer for any such tax, fee or duty which any of them
is required to pay under Applicable Law.
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer and AMG as follows:
Section 4.1 Organization of the Company and Related Matters. The Company
is a corporation, duly incorporated, validly existing and in good standing under
the laws of the State of New Jersey. The Company has full corporate power and
authority to execute and deliver each of the Transaction Documents to which it
is or will be a party and to consummate the transactions contemplated hereby and
thereby. The Company has the corporate power and authority to carry on its
business as it is now being conducted and to own all of its assets, and is duly
licensed or qualified to do business in each jurisdiction in which the nature of
the
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business conducted by it or the character of the assets owned by it makes such
qualification or licensing necessary, except where the failure to be so
qualified or licensed would not have a Company Material Adverse Effect. The
copies of the Certificate of Incorporation and By-laws and any amendments
thereto of the Company heretofore delivered to Buyer are complete and correct
copies of such instruments as in effect as of the date hereof. Schedule 4.1
attached hereto contains a true and complete list of all current officers and
directors of the Company and its Subsidiary.
Section 4.2 Organization of the Subsidiary and Related Matters.
(a) All of the outstanding shares of capital stock of First Quadrant
Limited are owned beneficially and of record by the Company, free and clear of
any Encumbrances and all such shares were duly authorized, validly issued and
are fully paid and nonassessable. There is no outstanding option, warrant,
right, subscription, call, unsatisfied pre-emptive right or other agreement or
right of any kind to purchase or otherwise acquire from Seller or any of its
Subsidiaries any capital stock of such Subsidiary, whether issued and
outstanding, authorized but unissued or treasury shares. The Subsidiary is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation, and has the corporate power and authority
to carry on its business as it is now being conducted and to own all of its
assets and is duly licensed or qualified to do business in each jurisdiction in
which the nature of the business conducted by it or the character of the assets
owned by it makes such qualification or licensing necessary, except where the
failure to be so qualified or licensed would not have a Company Material Adverse
Effect. The copies of the charter documents of First Quadrant Limited heretofore
delivered to Buyer are complete and correct copies of such instruments as in
effect as of the date hereof.
(b) Except for the stock of its Subsidiary and its interest in the
Partnership and except for portfolio investments made in the ordinary course of
business and set forth (together with the basis thereof) on Schedule 4.17(h),
there are no Persons in which the Company owns, of record or beneficially, any
direct or indirect equity interest or any right (contingent or otherwise) to
acquire the same. Other than as set forth on Schedule 4.2(b), the Company is not
a member of (nor does it conduct any part of its business through) any
partnership or joint venture or similar Person.
Section 4.3 Organization of Seller and Related Matters. Seller is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware. Seller has full corporate power and authority to
execute and deliver this Agreement and each other Transaction Document to which
Seller is a party and to consummate the transactions contemplated hereby and
thereby. The execution and delivery of this Agreement and each other Transaction
Document to which Seller is or will be a party and the consummation of the
transactions contemplated hereby and thereby have been duly and validly approved
by all requisite corporate action on the part of Seller, and no other corporate
proceedings on the part of Seller are necessary to approve this Agreement or any
other Transaction Document or to consummate the transactions contemplated hereby
and thereby. No action on the part of any
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person or entity controlling Seller (for purposes hereof, the term "controlling"
means having the power to direct the management or policies of the Seller
whether by virtue of ownership of equity, official position, contract or
otherwise) is required in connection herewith, other than such actions as have
been previously taken (other than the approval of the Board of Directors of
Xerox Financial Services or a committee thereof which is required to approve
only the XFS Indemnification Agreement). This Agreement has been duly and
validly executed and delivered by Seller and (assuming the due authorization,
execution and delivery of this Agreement by Buyer, the Managers and the
Management Corporations) constitutes a valid and binding obligation of Seller,
enforceable against Seller in accordance with its terms, except as enforcement
may be limited by general principles of equity whether applied in a court of law
or a court of equity and by bankruptcy, insolvency, moratorium and similar laws
affecting creditors' rights and remedies generally.
Section 4.4 Organization of Partnership and Related Matters.
(a) The Partnership is a limited partnership duly formed, validly
existing and in good standing under the laws of the State of Delaware, and a
copy of the Partnership's limited partnership agreement (the "Initial
Partnership Agreement") is attached hereto as Exhibit 4.4(a).
(b) As of the date of this Agreement, the Company is the sole
general partner of the Partnership and FQC, Inc., a Delaware corporation, is the
sole limited partner of the Partnership, with all interests owned beneficially
and of record by such Persons, in each case, free and clear of any Encumbrances
other than restrictions imposed by the Initial Partnership Agreement or this
Agreement or by Applicable Law. Except as set forth in this Agreement, there are
no outstanding options, warrants, rights, subscriptions, calls, unsatisfied
pre-emptive rights or other agreements or rights of any kind to purchase or
otherwise acquire from Seller or any of its Subsidiaries any interest in the
Partnership. As of the date of this Agreement, all outstanding interests in the
Partnership have been authorized and issued in accordance with the provisions of
the Initial Partnership Agreement. Except as set forth in this Agreement, there
are no existing rights, agreements or commitments obligating or which could
obligate the Partnership to issue, transfer, sell or redeem any securities.
Section 4.5 Non-Contravention.
(a) Neither the execution and delivery by any of the Seller Entities
of this Agreement or the other Pre-Closing Transaction Documents, nor the
consummation by any of the Seller Entities of the transactions contemplated
hereby (excluding any transactions effectuated by the Transaction Documents
which are not Pre-Closing Transaction Documents) and thereby, nor compliance by
any of the Seller Entities with any of the terms or provisions hereof and
thereof, will (i) violate any provision of the charter, by-laws or partnership
agreement, as applicable, of such Seller Entity, (ii) assuming that the consents
and approvals referred to in Section 7.3 and 8.3 and Schedule 4.5(b) hereof are
duly obtained, (x) violate in any material respect any Applicable Law with
respect to the Seller Entities, or any of their
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respective material properties or assets, (y) result in the creation of any
Encumbrance upon any of the Shares or any of the assets of the Company, its
Subsidiary or the Partnership, or (z) violate, conflict with, result in a breach
of any provision of, or constitute a default under any note, bond, mortgage,
indenture, deed of trust, license, lease, agreement or other instrument or
obligation to which any of the Seller Entities is a party or by which any of the
Seller Entities or any of their respective properties or assets is bound or
affected, except (in the case of clause (x) and (z) above) for such violations,
conflicts, breaches or defaults which, either individually or in the aggregate,
would not have and could not reasonably be expected to have a Company Material
Adverse Effect or a Material Adverse Effect with respect to Seller.
(b) Except for (i) consents, approvals, notices and filings set
forth in Sections 7.3 and 8.3 and Schedule 4.5(b) hereto, (ii) the applicable
filings under the HSR Act and (iii) such other filings, authorizations, consents
or approvals the failure to make or obtain which would not have and could not
reasonably be expected to have a Company Material Adverse Effect, no consents or
approvals of, filings or registrations with or notices to any Governmental
Authority or third party are necessary in connection with (A) the execution and
delivery by the Seller Entities of the Pre-Closing Transaction Documents or (B)
the consummation by the Seller Entities of the transactions contemplated hereby
or thereby.
Section 4.6 Stock Ownership. Seller owns, beneficially and of record and
free and clear of Encumbrances, all of the Shares to be sold to Buyer by Seller,
and Seller has the full and unrestricted power to sell, assign, transfer and
deliver the Shares to Buyer in accordance with the terms of this Agreement free
and clear of any Encumbrances. There are no shares of capital stock of the
Company issued or outstanding other than the Shares. All of the Shares are duly
authorized, validly issued, fully paid, nonassessable and free of any
pre-emptive rights. There is no outstanding option, warrant, right,
subscription, call, unsatisfied pre-emptive right or other agreement or right of
any kind to purchase or otherwise acquire from the Company or Seller any capital
stock of the Company, whether issued and outstanding, authorized but unissued or
treasury shares. Seller has not granted any outstanding powers of attorney to
dispose of or vote the Shares.
Section 4.7 Regulatory Documents.
(a) Except as set forth in Schedule 4.7, since January 1, 1991,
Seller (to the extent such a filing is necessary for the operation of the
Company or its Subsidiary), the Company and its Subsidiary have each filed all
reports, registration statements and other documents, together with any
amendments required to be made with respect thereto, that it was required to
file with any Governmental Authority, including, without limitation, the SEC and
the NFA, and has paid all fees and assessments due and payable in connection
therewith, and the information contained in such filings was accurate and
complete (in accordance with the instructions for such filings and relevant
interpretations thereof) at the time of filing in all material respects.
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(b) Except as set forth in Schedule 4.7, as of their respective
dates, the SEC Documents of each Seller Entity complied in all material respects
with the requirements of the Securities Laws, as the case may be, to the extent
applicable to such SEC Documents. The Company has previously delivered or made
available to Buyer a complete copy of each SEC Document of each Seller Entity
filed with the SEC or the NFA after January 1, 1991 and prior to the date hereof
(including a composite Form ADV for the Company as in effect on the date
hereof), and will deliver to Buyer at the same time as the filing thereof a
complete copy of each SEC Document filed by each Seller Entity after the date
hereof and prior to the Closing Date.
Section 4.8 Financial Statements.
(a) Seller has previously delivered to Buyer copies of (i) the
audited consolidated balance sheets of the Company as of December 31, 1993 and
December 31, 1994, and the related audited statements of income, change in
stockholder's equity and cash flow for each fiscal year then ended, accompanied
by the audit report of KPMG Peat Marwick, independent public accountants with
respect to the Company, and (ii) the Company's unaudited consolidating and
consolidated balance sheets dated as of September 30, 1995, and unaudited
consolidating and consolidated statements of income for the nine-month period
then ended (collectively, the statements referred to above being referred to as
the "Company Financial Statements"). The Company Financial Statements referred
to in the previous sentence (including the related notes, where applicable)
fairly present, in all material respects, the financial position of the Company
as of the respective dates thereof or the results of operations for the periods
covered thereby, and all the Company Financial Statements have been prepared in
accordance with GAAP (subject, in the case of the September 30, 1995 Financial
Statements, to normal year-end adjustments and the absence of footnotes)
applied, in the case of the Company Financial Statements as of and for the
period ended September 30, 1995, in a manner consistent with the audited Company
Financial Statements as of and for the period ended December 31, 1994. The
Company Financial Statements are attached hereto as Schedule 4.8(a).
(b) Seller has previously delivered to Buyer copies of the unaudited
pro-forma consolidated statements of income of the Company for the fiscal years
ended December 31, 1993 and December 31, 1994 and the six-month period ended
June 30, 1995, which have been prepared pro-forma for the sale of First Quadrant
Insurance as if such sale had occurred prior to January 1, 1993 (collectively,
the statements referred to above being referred to as the "Pro-Forma Income
Statements" and, together with the Company Financial Statements, the "Financial
Statements"). The Pro-Forma Income Statements (including the related notes
attached as part of Schedule 4.8(b), fairly present, in all material respects,
the results of operations of the Company for the periods covered thereby in
accordance with GAAP applied, in the case of the Pro-Forma Income Statements for
the period ended December 31, 1993, in a manner consistent with the Statement of
Income included in the Company Financial Statements for the period ended
December 31, 1993 and in the case of the Pro-Forma Statements for the periods
ended December 31, 1994 and June 30, 1995, in a manner consistent with the
Statement of Income included in the Company Financial Statements
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for the period ended December 31, 1994, but are pro-forma for the sale of First
Quadrant Insurance as if such sale had occurred prior to January 1, 1993. The
Pro-Forma Income Statements are attached hereto as Schedule 4.8(b).
(c) Except as and to the extent reflected or reserved therefor in
the balance sheet of the Company at September 30, 1995 contained in Schedule
4.8(a), or as otherwise set forth as part of Schedule 4.8(c), (i) neither the
Company nor its Subsidiary has any material liability (as would be required to
be currently accrued or otherwise disclosed under GAAP) or related liabilities
which are together material (as defined below) and (ii) there are no facts of
which Seller has Knowledge or of which Seller would have Knowledge except for
the negligence or misconduct (including, without limitation, any failure to
comply with any Applicable Laws or any failure to comply with or enforce the
internal policies and procedures of the Company or its Subsidiary) of any of the
Seller Entities or the Managers or any of the executive officers or directors of
any of the Seller Entities which could reasonably be expected to result in the
Company, its Subsidiary or the Partnership incurring any material liability (as
defined above) or related liabilities which are together material (as defined
below). For purposes of this Section 4.8(c), the term "material" shall mean any
liability or related liabilities (as defined above) equal to or greater than
$100,000. Except as set forth on Schedule 4.8(c), neither the Company nor its
Subsidiary has any material Indebtedness.
(d) To the Knowledge of Seller, all of the accounts receivable of
the Company, its Subsidiary and the Partnership are fully collectible in the
ordinary course of business after deducting the reserves set forth in the
balance sheet dated as of September 30, 1995, as adjusted since that date as set
forth on Schedule 4.8(d) hereto, which reserves are reasonable estimates of
uncollectible accounts. To the Knowledge of Seller, except as set forth on
Schedule 4.8(d), neither the Company nor its Subsidiary has any accounts or
loans receivable from any Person which is affiliated with the Company or its
Subsidiary or from any director, officer or employee of the Company or its
Subsidiary.
Section 4.9 Ineligible Persons. Neither the Company, nor any "associated
person" (as defined in the Advisers Act) thereof, is subject to any
disqualification under the provisions of Section 203(e) of the Advisers Act or
is ineligible to serve as an investment adviser or as an associated person to a
registered investment adviser.
Section 4.10 No Other Broker. Other than Morgan Stanley & Co.
Incorporated, the fees and expenses of which will be paid by Seller, no broker,
finder or similar intermediary has acted for or on behalf of Seller, the Company
or its Subsidiary, or is entitled to any broker's, finder's or similar fee or
other commission from Seller, the Company or its Subsidiary, in connection with
this Agreement or the transactions contemplated hereby.
Section 4.11 Legal Proceedings. Except as set forth in Schedule 4.11,
neither the Company nor its Subsidiary is a party to any, and there are no
pending or, to Seller's Knowledge, overtly threatened, legal, administrative,
arbitration or other proceedings, claims, actions or governmental or regulatory
investigations of any nature against the Company or its
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Subsidiary or their respective properties or assets or challenging the validity
or propriety of the transactions contemplated by this Agreement and the other
Transaction Documents, and there is no injunction, order, judgment, decree, or
regulatory restriction imposed upon the Company or its Subsidiary or any of
their respective properties or assets. Seller is not a party to, and there are
no pending or, to Seller's Knowledge, overtly threatened, legal, administrative,
arbitration or other proceedings, claims, actions or governmental or regulatory
investigations of any nature against Seller or otherwise affecting the Shares or
its ownership thereof or challenging the validity or propriety of the
transactions contemplated by this Agreement and the other Transaction Documents
with respect to any of the Seller Entities, and there is no injunction, order,
judgment, decree or regulatory restriction imposed on Seller which could
reasonably affect the Shares or its ownership thereof, or which could reasonably
call into question or hinder the enforceability or performance by Seller of this
Agreement or any of the other Transaction Documents to which it is or will be a
party, or the transactions contemplated hereby or thereby.
Section 4.12 Permits; Compliance with Applicable Law.
(a) Except as disclosed in Schedule 4.12(a), each of the Company,
its Subsidiary and the Partnership holds all material licenses, franchises,
permits, approvals and authorizations, including those issuable by any domestic
or foreign self regulatory organization (collectively, "Permits") necessary for
the lawful ownership and use of its properties and assets and the conduct of its
business under and pursuant to Applicable Laws relating to the Company, its
Subsidiary and the Partnership, except for Permits the failure to hold which
would not have a Company Material Adverse Effect, and there has been no material
violation of any of the above nor has Seller received notice asserting any such
violation. All such Permits are valid and in good standing and are not subject
to any suspension, modification or revocation or proceedings related thereto.
(b) Each of the Company and its Subsidiary is and at all times has
been in compliance with each Applicable Law relating to it or any of its assets,
properties or operations, except where noncompliance with any such Applicable
Law would not have a Company Material Adverse Effect.
(c) Since January 1, 1991, except as disclosed in Schedule 4.12(c),
and except for normal examinations conducted by any Governmental Authority in
the regular course of the business of the Company or its Subsidiary, no
Governmental Authority has initiated any proceeding with respect to or, to the
Knowledge of Seller, investigation into the business or operations of the
Company or its Subsidiary and to the Seller's Knowledge, no Governmental
Authority is now threatening to initiate any proceeding or investigation into
the business or operations of the Company or its Subsidiary.
(d) With respect to any employee benefit plans described in Section
3(3) of ERISA or governmental plans described in Section 3(32) of ERISA for
which the Company serves as investment manager, Seller has no Knowledge, nor
would Seller have Knowledge
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except for the negligence or misconduct (including, without limitation, any
failure to comply with any Applicable Laws or any failure to comply with or
enforce the internal policies or procedures of the Company or its Subsidiary) of
any of the Seller Entities or the Managers or any of the executive officers or
directors of any of the Seller Entities, of any material breach of any fiduciary
duty under ERISA, any "prohibited transaction" as defined in Section 406 of
ERISA or Section 4975 of the Code, or any material breach of state laws
governing governmental plans, which could reasonably result, directly or
indirectly, in any material taxes, material penalties or other material
liability to the Company or its Subsidiary or the Partnership.
Section 4.13 Assets.
(a) Neither the Company nor its Subsidiary owns any real property.
Schedule 4.13(a) hereto lists all real property leased by the Company and its
Subsidiary, together with the location of such property, the total square
footage under lease, monthly lease payments and lease termination dates.
Assuming due authorization, execution and delivery by the parties thereto other
than the Company or its Subsidiary, all such leases are valid and effective in
accordance with their terms, and there is not under any such lease any existing
breach or event which, with the giving of notice, the lapse of time, or both,
would become a breach.
(b) Except as set forth on Schedule 4.13(b) hereto, as of the date
hereof, each of the Company and its Subsidiary owns all of the material assets
owned by it (the "Owned Assets") free and clear of any Encumbrances except for
minor imperfections of title or insignificant liens which do not, in the
aggregate, detract from the value of such assets, taken as a whole, or interfere
with the present or proposed uses thereof, the business of the Company or its
Subsidiary or the transfer of the assets of the Company to the Partnership or
the transfer of the stock of the Company's Subsidiary to the U.K. Partnership.
The assets listed on Schedule 4.17(g) hereto together with the Leased Assets (as
such term is defined below) include all the material assets used in, and all the
material assets necessary for, the conduct of the business of the Company and
its Subsidiary as currently conducted. The Company and its Subsidiary lease
certain of the assets used in the conduct of their business pursuant to leases
which are (assuming due authorization, execution and delivery by the parties
thereto other than the Company or its Subsidiary) valid and effective, and under
which there is not any existing breach or event which, with the giving of
notice, the lapse of time, or both, would become a breach (the "Leased Assets").
(c) (i) Attached hereto as Schedule 4.13(c) is a list of all
material (A) domestic and foreign registered trademarks and service marks,
registered copyrights and patents, (B) applications for registration or
grant of any of the foregoing, and (C) unregistered trademarks, service
marks, trade names, logos and assumed names owned by Company or its
Subsidiary and used in or necessary to conduct the business of Company or
its Subsidiary. The items on Schedule 4.13(c), together with all other
material trademarks, service marks, trade names, logos, assumed names,
patents,
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copyrights, trade secrets, computer software, formula, designs and
inventions currently used in or necessary to conduct the business of
Company or its Subsidiaries, constitute the "Intellectual Property."
(ii) Neither the Company nor its Subsidiary has materially
infringed or violated, in any way, any trademark, trade name, patent,
copyright, trade secret or other intellectual property right or
contractual relation of another. None of the Seller Entities has received
any notice, claim or protest respecting any such infringement or
violation, or given any indemnification to any Person reporting any such
infringement or violation.
(iii) The Company or its Subsidiary has, as the case may be,
ownership of or such rights by license, lease or other agreement in and to
the Intellectual Property as necessary to conduct its business as
presently conducted, free and clear of any Encumbrances on the right to
exercise such rights in the conduct of its business as presently
conducted, except for Encumbrances which would not have a Company Material
Adverse Effect.
(iv) None of Seller or any of its Affiliates (other than the
Company and its Subsidiary or the Partnership) will have as of the Closing
any possession of or rights in or to (whether by license, lease, other
agreement or otherwise) any material Intellectual Property of the Company
or its Subsidiary.
Section 4.14 Assets Under Management. The aggregate assets under
management by each of the Company and its Subsidiary as of September 30, 1995,
are set forth on Schedule 4.14 hereto. In addition, set forth on Schedule 4.14
is a list as of September 30, 1995, of all Investment Advisory Agreements
setting forth the name of the client under each such contract, the amount of
assets under management with respect to each such contract and any material
adjustments in fee rates or structures or other fee adjustments agreed to with
such client or material adjustments in the amount of assets under management (it
being understood and agreed that adjustments in assets under management greater
than $3,000,000 are material) implemented since September 30, 1995, or which the
Company and such client have agreed to institute, or of which the Company has
given notice or been given written notice of a proposal to be instituted. To
Seller's Knowledge, except as is set forth on Schedule 4.14 hereto, no client of
the Company or its Subsidiary has informed Seller, the Company or its Subsidiary
of its intention to terminate or reduce its investment relationship with the
Company or its Subsidiary, or adjust the fee schedule with respect to any
contract in any manner.
Section 4.15 Employment Arrangements. Except as set forth on Schedule 4.15
hereto, neither the Company nor its Subsidiary has any obligation, contingent or
otherwise, under (i) any employment, collective bargaining or other labor
agreement, (ii) any written or oral agreement containing severance or
termination pay arrangements or any written or oral agreement containing any
provision for payment upon or related to a change in control of the Company or
its Subsidiary (or anticipated change in control of the Company or its
Subsidiary),
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whether upon a signing of this Agreement, the Closing or otherwise, (iii) any
deferred compensation agreement, retainer or consulting arrangements, (iv) any
pension or retirement plan, any bonus or profit-sharing plan, any stock option
or stock purchase plan, or (v) any other employee contract or non-terminable
(whether with or without penalty) employment arrangement (each an "Employment
Arrangement"). Neither the Company nor its Subsidiary is in default with respect
to any material term or condition of any Employment Arrangement, nor except as
set forth on Schedule 4.15, after obtaining the consents set forth in Sections
7.3 and 8.3 and on Schedule 4.5(b), will the Closing result in any such default
or any acceleration of any obligation under any Employment Arrangement,
including, without limitation, after the giving of notice, lapse of time or
both, except for such defaults or accelerations which would not have a Company
Material Adverse Effect.
Section 4.16 Employee Benefit Plans; ERISA.
(a) Except as set forth in Schedule 4.16(a), no employee benefit
plans or arrangements of any type (including, without limitation, plans
described in section 3(3) of ERISA) are maintained by the Company or its
Subsidiary and neither the Company nor its Subsidiary is obligated to contribute
to any "multiemployer plan" (within the meaning of section 4001(a)(3) of ERISA).
Each of the employee benefit plans identified on Schedule 4.16(a) as a plan
qualified under Section 401(a) of the Code has received a favorable
determination letter from the IRS and no event has occurred since the date of
such letter that will cause such plan to lose its qualified status.
(b) The Company and its Subsidiary have complied with requirements
of section 4980B of the Code, except where any such noncompliance would not have
a Company Material Adverse Effect.
(c) The consummation of the transactions contemplated by this
Agreement will not (i) entitle any Company Employee to severance pay; (ii)
accelerate the time of payment or vesting of, or increase the amount of,
compensation due to any Company Employee (other than as contemplated by Section
7.12(c) or (d) hereof); or (iii) result in the payment to any Company Employee
of an amount that will be an "excess parachute payment" (within the meaning of
section 28OG(b)(1) of the Code).
(d) Except with respect to the plans identified on Schedule 4.16(a),
neither the Company nor its Subsidiary has any liability with respect to any
"welfare plan" (as defined in section 3(l) of ERISA) that provides benefits to
retired employees (other than as required by section 601 of ERISA). With respect
to any welfare plan identified on Schedule 4.16(a) that provides benefits to
retired employees, the Company has reserved the right to amend or terminate such
plan.
(e) Neither the Company nor its Subsidiary has either incurred or
reasonably expects to incur any material liability under Title IV of ERISA
(other than for retirement
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benefits and Pension Benefit Guaranty Corporation insurance premiums payable in
the ordinary course) or section 412(f) or 412(n) of the Code.
(f) The Company's Subsidiary does not have any separate pension
plan.
Section 4.17 Taxes.
(a) As of December 31, 1995, each of the Company and its Subsidiary
had paid or caused to be paid all material Taxes owed by it through December 31,
1995 other than Taxes which are the subject of a bona-fide dispute (which are
set forth in Schedule 4.17(a)) or for which the Company had adequately reserved
against on the December 31, 1995 balance sheet which has been delivered under
Section 7.10(b).
(b) Each of the Company and its Subsidiary has, in accordance with
Applicable Law, filed all material Tax Returns required to be filed by it
through the date hereof, and all such returns correctly and accurately set forth
the amount of any Taxes relating to the applicable period. A list of all
material Tax Returns filed with respect to the Company for taxable periods ended
on or after December 31, 1990, is set forth in Schedule 4.17(a) attached hereto,
and said Schedule indicates those returns that have been audited or currently
are the subject of an audit. For each taxable period of the Company ended on or
after December 31, 1990, the Company has delivered to Buyer correct and complete
copies of all material Tax Returns, examination reports and statements of
deficiencies assessed against or agreed to by the Company or its Subsidiary.
Schedule 4.17(a) sets forth all material tax elections under the Code that are
in effect with respect to the Company or for which an application by the Company
is pending.
(c) Except as set forth in Schedule 4.17(a), no Governmental
Authority is now asserting or, to the Knowledge of Seller, threatening to assert
against the Company or its Subsidiary any deficiency or claim for additional
Taxes.
(d) Except as set forth in Schedule 4.17(a) attached hereto, there
are no current audits of any tax return filed by the Company or its Subsidiary
and neither the Company nor its Subsidiary has been notified by any tax
authority that any such audit is contemplated or pending. Except as set forth in
Schedule 4.17(a), no extension of time with respect to any date on which a tax
return was or is to be filed by the Company or its Subsidiary is in force, and
no waiver or agreement by the Company or its Subsidiary is in force for the
extension of time for the assessment or payment of any Taxes.
(e) Each of the Company and its Subsidiary has withheld and paid all
taxes required to have been withheld and paid in connection with amounts paid or
owing to any employee, independent contractor, creditor, stockholder or other
third party.
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(f) For purposes of this Agreement, all references to Sections of
the Code shall include any predecessor provisions to such Sections and any
similar provisions of federal, state, local or foreign law.
(g) Attached hereto as Schedule 4.17(g) is a list of all assets of
the Company (including Intellectual Property to the extent it has a tax basis)
and including as part of such Schedule, the tax basis of each such asset, in
each case, as of the date set forth on such Schedule.
(h) Seller's United States taxpayer identification number is
22-3258266 and the Company is not a "foreign person" within the meaning of
Section 1445 of the Code and Treasury Regulations Section 1.1445-2.
(i) The taxable periods of the Company and of its Subsidiary, for
Federal, state and foreign tax purposes, end on December 31.
Section 4.18 Contracts. Schedule 4.18 sets forth a complete and accurate
list of any Contract to which the Company or its Subsidiary is a party or by
which any of their respective assets are bound which: (a) contains obligations
of the Company or its Subsidiary in excess of $250,000; (b) involves payments
based on profits or revenues of the Company or its Subsidiary; (c) by its terms
does not terminate or is not terminable without penalty by the Company or its
Subsidiary within six months after the date hereof; (d) involves the sale of its
services not made in the ordinary course of business, consistent with past
practices; (e) contains covenants limiting the freedom of the Company or its
Subsidiary to compete in any line of business or with any person or entity; (f)
relates to Indebtedness of the Company or its Subsidiary; (g) is a contract or
agreement with Seller, any officer, employee, director of Seller or any of its
Affiliates, or with any persons or organizations controlled by or Affiliated
with any of them; (h) is a partnership, joint venture or other similar contract,
agreement or arrangement; or (i) if not effectively transferred to the
Partnership in full force and effect as part of the Asset Transfer or the other
transactions contemplated by this Agreement, would have a Company Material
Adverse Effect, other than Investment Advisory Agreements listed on Schedule
1.1(c). Assuming due authorization, execution and delivery by all parties
thereto other than any Seller Entity, all such contracts are valid, binding and
enforceable in accordance with their respective terms, and there is not, under
any such contract, an existing material breach or event which, with the giving
of notice or the lapse of time or both, would become such a breach. Other than
this Agreement and such other agreements and contracts as are contemplated
hereby, the Partnership is not a party to any obligations, agreements,
commitments, powers of attorney or contracts and there are no other contracts
relating to, the transfer of the Shares or the transfer of the assets of the
Company or its Subsidiary.
Section 4.19 No Material Adverse Change. Since September 30, 1995, other
than as otherwise disclosed on Schedule 4.19 hereto, there has been no change in
the financial condition, properties, assets, liabilities, business, operations,
results of operations or shareholder's equity of the Company or its Subsidiary
which has had or could reasonably be
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expected to have a Company Material Adverse Effect, and each of the Company and
its Subsidiary has, except as expressly contemplated hereby, conducted its
operations in the ordinary course of business consistent in all material
respects with past practices. In addition, except as expressly contemplated
hereby or disclosed on Schedule 4.19 hereto, since September 30, 1995, there has
not been:
(a) any change in accounting methods or practices by any of the
Seller Entities;
(b) except as listed on Schedule 4.19, any declaration, setting
aside or payment of any dividend or other distribution with respect to, or any
direct or indirect redemption or acquisition of, any of the Shares or, payment
by the Company or its Subsidiary to Seller or any of its Affiliates;
(c) except for the increases in salary and bonus compensation set
forth on Schedule 4.19, any increase in the salary or other compensation payable
or to become payable by any of the Company or its Subsidiary to any officers,
directors, consultants or employees of the Company or its Subsidiary or the
declaration, payment or commitment or obligation of any kind for the payment by
the Company or its Subsidiary of a bonus or other additional salary or
compensation to any such persons other than in the ordinary course of business
as heretofore conducted, with the prior written consent of Buyer, or as
expressly contemplated hereby;
(d) any amendment or termination or, to the Knowledge of Seller,
proposed or threatened amendment or termination, whether written or oral, of any
agreement listed on Schedule 4.18 or Schedule 1.1(c) to which the Company or its
Subsidiary is a party;
(e) Indebtedness incurred by the Company or its Subsidiary;
(f) mortgage, pledge or other encumbrance of any of the assets of
the Company or its Subsidiary;
(g) waiver or release of any material right or claim of the Company
or its Subsidiary;
(h) any purchase, sale or other disposition of any of the properties
or assets of the Company or its Subsidiary other than in the ordinary course of
business;
(i) any other material transaction entered into by the Company or
its Subsidiary other than in the ordinary course of business consistent with
past practices;
(j) any action taken by the Partnership (including, without
limitation, any of the foregoing items (a) - (i)); or
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(k) any agreement by any of the Company, its Subsidiary or the
Partnership to do, or agreement by Seller or any Affiliate of Seller to cause
any of them to do, any of the things described in the preceding clauses (a)-(j),
except as otherwise specifically contemplated hereby.
Section 4.20 Broker Dealer. Neither the Company nor its Subsidiary is a
"broker" or "dealer" within the meaning of the Exchange Act or any state
securities laws.
Section 4.21 Insurance Policies. Each of the Company and its Subsidiary
has in full force and effect such insurance as is customarily maintained by
companies of similar size in the same or a similar business, with respect to
each of their businesses, properties and assets, (including, without limitation,
errors and omissions liability insurance) as listed on Schedule 4.21 hereto.
Neither the Company nor its Subsidiary is in material default under any such
policy and Seller and the Managers will use commercially reasonable efforts to
continue such policies in full force and effect through the Closing. Buyer
understands and agrees that except as otherwise agreed by Buyer and Seller,
these insurance policies (other than the policy relating to errors and omissions
liability insurance) will terminate as of the Closing.
Section 4.22 Disclosure. There are no facts with respect to the Company,
its Subsidiary or the Partnership or their respective businesses or activities
of which Seller has Knowledge which could reasonably be expected to have a
Company Material Adverse Effect and which are not (a) set forth in this
Agreement or the Exhibits or Schedules hereto, or (b) set forth in other
materials provided by Seller to AMG or Buyer or their agents in a format from
which AMG or Buyer could reasonably be expected to discern both the facts and
that such facts together with other facts of which AMG or Buyer has knowledge
could reasonably be expected to have a Company Material Adverse Effect.
ARTICLE V - REPRESENTATIONS AND WARRANTEES OF BUYER AND AMG.
Buyer and AMG hereby jointly and severally represent and warrant to
Seller, each of the Managers and each of the Management Corporations as follows:
Section 5.1 Organization and Related Matters. Each of AMG and Buyer is a
corporation, duly incorporated, validly existing and in good standing under the
laws of the State of Delaware. Each Transaction Document to which Buyer or AMG
is a party, and the consummation of the transactions contemplated hereby and
thereby, have been duly and validly approved by all requisite corporate action
on the part of Buyer and AMG, and no other corporate proceedings on the part of
Buyer or AMG are necessary to approve the Transaction Documents to which Buyer
or AMG is a party or to consummate the transactions contemplated hereby and
thereby.
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Section 5.2 Authority; No Violation.
(a) Each of Buyer and AMG has full corporate power and authority to
execute and deliver this Agreement and each of the other Transaction Documents
to which it is a party and to consummate the transactions contemplated hereby
and thereby. The execution and delivery of this Agreement and each other
Transaction Document to which Buyer or AMG is a party and the consummation of
the transactions contemplated hereby and thereby have been duly and validly
approved by all requisite corporate action on the part of Buyer and AMG, and no
other corporate proceedings on the part of Buyer or AMG are necessary to approve
this Agreement or any other Transaction Document to which Buyer or AMG is a
party or to consummate the transactions contemplated hereby and thereby. Each
Transaction Document to which Buyer or AMG is a party has been (or, to the
extent it is not required to be delivered until after the date hereof, will have
been as of such date) duly and validly executed and delivered by Buyer and/or
AMG, as applicable, and (assuming the due authorization, execution and delivery
of this Agreement by each party thereto other than Buyer and AMG) constitutes
(or when executed and delivered will constitute) a valid and binding obligation
of Buyer and/or AMG, as applicable, enforceable against Buyer and/or AMG, as
applicable, in accordance with its terms, except as enforcement may be limited
by general principles of equity whether applied in a court of law or a court of
equity and by bankruptcy, insolvency, moratorium and similar laws affecting
creditors' rights and remedies generally.
(b) Neither the execution and delivery of this Agreement and each of
the other Transaction Documents to which Buyer is a party by Buyer or AMG, nor
the consummation by Buyer of the transactions contemplated hereby and thereby to
be performed by either of them, nor compliance by either of them with any of the
terms or provisions hereof and thereof, will (i) violate any provision of the
Certificate of Incorporation or by-laws of Buyer or AMG, respectively, or (ii)
assuming that the consents and approvals referred to in Sections 7.3 and 8.3 and
Schedule 4.5(b) hereof are duly obtained, (x) violate in any material respect
any Applicable Law with respect to Buyer or AMG, or any of their material
properties or assets, or (y) violate, conflict with, result in a breach of any
provision of, or constitute a default under any note, bond, mortgage, indenture,
deed of trust, license, lease, agreement or other instrument or obligation to
which Buyer or AMG is a party or by which any of their respective properties or
assets may be bound or affected, except for such violations, conflicts, breaches
or defaults which could not reasonably be expected to call into question the
validity or hinder the enforceability or performance by Buyer or AMG of this
Agreement or of the other Transaction Documents to which Buyer is a party.
Section 5.3 Consents and Approvals. Except for (w) the applicable filings
under the HSR Act, (x) consents, approvals, notices and filings set forth in
Sections 7.3 and 8.3 and Schedule 4.5(b) hereto, (y) prior notification to IMRO
and IMRO's clearance of their becoming control persons of First Quadrant Limited
under applicable provisions of the rules promulgated by IMRO as from time to
time in effect, and (z) such other filings, authorizations, consents or
approvals the failure to make or obtain which could not reasonably be expected
to call into question the validity or hinder the enforceability or performance
by Buyer or AMG of
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this Agreement or any of the other Transaction Documents to which it is a party,
no consents or approvals of or filings or registrations with any Governmental
Authority or any third party are necessary in connection with (i) the execution
and delivery by Buyer or AMG of this Agreement and (ii) the consummation by
Buyer of the transactions contemplated hereby.
Section 5.4 Legal Proceedings. Neither Buyer nor AMG is a party to any,
and there are no pending or, to AMG's Knowledge, overtly threatened, legal,
administrative, arbitration or other proceedings, claims or governmental or
regulatory investigations of any nature against or otherwise affecting, directly
or indirectly, Buyer or AMG or their respective properties or assets or
challenging the validity or propriety of the transactions contemplated by this
Agreement which, if adversely determined, individually or in the aggregate,
might call into question the validity or hinder the enforceability or
performance by Buyer or AMG of this Agreement or of the other Transaction
Documents to which either of them is a party, and there is no injunction, order,
judgment, decree, or regulatory restriction imposed upon Buyer or AMG or their
respective properties or assets which might call into question the validity or
hinder the enforceability or performance by Buyer or AMG of this Agreement or of
the other Transaction Documents to which either of them is a party.
Section 5.5 Investment Intent of Buyer. Buyer is acquiring the Shares
hereunder for its own account for investment and not with a view to the
distribution thereof. Buyer and AMG acknowledge that they have received from
Seller, and carefully reviewed, all relevant information regarding the Shares,
the Company and its Subsidiary.
Section 5.6 Ineligible Persons. Neither Buyer nor any "associated person"
(as defined in the Advisers Act) thereof is subject to any disqualification
under the provision of Section 203(e) of the Advisers Act or is otherwise
ineligible to serve as an investment adviser or as an associated person to a
registered investment adviser.
Section 5.7 No Broker. No broker, finder or similar intermediary has acted
for or on behalf of Buyer or any Affiliate of Buyer, or is entitled to any
broker's, finder's or similar fee or other commission from Buyer or any
Affiliate of Buyer, in connection with this Agreement or the transactions
contemplated hereby.
ARTICLE VI - REPRESENTATIONS AND WARRANTIES OF EACH MANAGER
AND EACH MANAGEMENT CORPORATION
As a material inducement to Buyer and AMG entering into this Agreement
each Manager severally and, if such Manager owns stock in a Management
Corporation, jointly but with that Management Corporation only, represents to
Buyer with respect to that Manager and, if such Manager owns stock in a
Management Corporation, such Management Corporation as follows:
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Section 6.1 Individual Power and Authority. Such Manager has full right,
power and authority to execute and deliver this Agreement and each other
Transaction Document to which he is a party or by which he is bound and to
consummate the transactions contemplated hereby and thereby. This Agreement and
each of the other Transaction Documents to which such Manager is a party
constitutes, or when executed and delivered will constitute, the valid and
legally binding obligation of such Manager, enforceable against such Manager in
accordance with its terms, except as enforcement may be limited by general
principles of equity whether applied in a court of law or a court of equity and
by bankruptcy, insolvency, moratorium and similar laws affecting creditors'
rights and remedies generally.
Section 6.2 Corporate Organization and Authority. Such Management
Corporation is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation. Such Management
Corporation is duly licensed or qualified to do business in each jurisdiction in
which the nature of the business conducted by it or the character of the assets
owned by it makes such qualification or licensing necessary, except where the
failure to be so qualified or licensed would not have a Material Adverse Effect
on it or its business. Such Management Corporation has the corporate power and
authority to carry on its business as it is now being conducted and own all its
assets and possess all Permits necessary to conduct its business as presently
carried on by it and as contemplated to be carried on by it after the Closing
hereunder and the closing of the transactions contemplated hereby. Such
Management Corporation has full corporate power and authority to execute and
deliver this Agreement and the other Transaction Documents to which such
Management Corporation is a party and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
and each other Transaction Document to which such Management Corporation is a
party and the consummation of the transactions contemplated hereby and thereby
have been duly and validly approved by all requisite corporate action of such
entity, and (assuming the due execution and delivery by each of the parties
thereto other than such Manager and Management Corporation) this Agreement and
each of the other Transaction Documents to which such Management Corporation is
a party constitutes or, when executed and delivered, will constitute, the valid
and legally binding obligation of such Management Corporation, enforceable
against such Management Corporation in accordance with its terms, except as
enforcement may be limited by general principles of equity whether applied in a
court of law or a court of equity and by bankruptcy, insolvency, moratorium and
similar laws affecting creditors' rights and remedies generally.
Section 6.3 Non-Contravention. Neither the execution and delivery by such
Manager and/or Management Corporation of this Agreement or the other Transaction
Documents to which either of them is a party, nor the consummation by such
Manager and/or Management Corporation of the transactions contemplated hereby
and thereby, nor compliance by such Manager and/or such Management Corporation
with any of the terms or provisions hereof and thereof, will: (a) violate any
provision of the charter or by-laws of such Management Corporation; (b) violate
in any material respect any Applicable Law with respect to such Manager or
Management Corporation; or (c) violate, conflict with, result in a breach of any
provision of, or constitute a default under any note, bond, mortgage, indenture,
deed of trust,
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license, lease, agreement or other instrument or obligation to which such
Manager or Management Corporation is a party or by which any of their respective
properties or assets may be bound or affected, except for such violations,
conflicts, breaches or defaults which, individually or in the aggregate, would
not have and could not reasonably be expected to have a Material Adverse Effect
on such Manager or Management Corporation.
Section 6.4 Consents and Approvals. Except for filings, authorizations,
consents or approvals the failure to make or obtain which could not reasonably
be expected to have a Material Adverse Effect on such Manager or Management
Corporation, no consents or approvals of or filings or registrations with any
Governmental Authority or any third party are necessary in connection with (i)
the execution and delivery by such Manager or Management Corporation of this
Agreement and the other Transaction Documents to which either of them is a party
and (ii) the consummation by such Manager or Management Corporation of the
transactions contemplated hereby and thereby.
Section 6.5 Capitalization. The duly authorized capital stock of such
Management Corporation consists of 1,000 shares of Common Stock, $.01 par value
per share, of which 100 shares are issued and outstanding and held beneficially
and of record by such Manager. All the outstanding shares of capital stock of
such Management Corporation have been duly authorized and validly issued and are
fully paid and nonassessable. Except as contemplated by this Agreement, there
are no existing rights, agreements or commitments obligating or which might
obligate such Management Corporation to issue, transfer, sell or redeem any
securities or might obligate such Manager to transfer any securities in such
Management Corporation.
Section 6.6 Litigation and Compliance with Laws.
(a) Except as set forth on Schedule 6.6 hereto, there is no
litigation or governmental or administrative action, suit, proceeding or
investigation (including, without limitation, any voluntary or involuntary
proceeding under the Bankruptcy Code or any action, suit, proceeding or
investigation under any federal or state securities law or regulation) pending
or, to the best knowledge of each such Manager and Management Corporation,
threatened, before any federal, state, municipal or other governmental
department, commission, board, agency or instrumentality, domestic or foreign,
at law or in equity or otherwise, to which such Manager or Management
Corporation or any officer, director or stockholder thereof is a party, (i)
which is related to the business, affairs, properties or assets of such
Management Corporation, the Company, its Subsidiary or the Partnership or (ii)
which might call into question the validity or hinder the enforceability or
performance of this Agreement or the other Transaction Documents or any of the
contracts described on Schedule 4.18 or Schedule 1.1(c) hereto. Each such
Manager and Management Corporation is, and at all times has been, in material
compliance with all laws and governmental rules and regulations, domestic or
foreign, including, without limitation, all federal or state securities laws
applicable to the business, affairs, properties or assets of such Management
Corporation, the Company, its Subsidiary or the Partnership, except where
non-compliance therewith, in any individual instance or any series of related
instances, would not have a Material Adverse
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Effect as such Manager or Management Corporation or a Company Material Adverse
Effect. None of such Managers or Management Corporations (nor any officer,
director or stockholder thereof) is in material default with respect to any
judgment, order, writ, injunction, decree, demand or assessment issued by any
court or any federal, state, municipal or other governmental agency, board,
commission, bureau, instrumentality or department, domestic or foreign, relating
to any aspect of the business, affairs, properties or assets of any of such
Management Corporations, the Company, its Subsidiary or the Partnership. None of
such Managers, nor to the best knowledge of such Managers, any other Person, has
violated the Company's code of ethics.
(b) To the best of such Manager's Knowledge, except as set forth in
Schedule 4.11, neither the Company nor its Subsidiary is a party to any, and
there are no pending or overtly threatened, legal, administrative, arbitration
or other proceedings, claims, actions or governmental or regulatory
investigations of any nature against or otherwise affecting the Company or its
Subsidiary or their respective properties or assets or challenging the validity
or propriety of the transactions contemplated by this Agreement and the other
Transaction Documents, and there is no injunction, order, judgment, decree or
regulatory restriction imposed upon the Company or its Subsidiary or any of
their respective properties or assets.
(c) To such Manager's Knowledge, except as disclosed in Schedule
4.12(a), each of the Company, its Subsidiary and the Partnership holds all
Permits necessary for the lawful ownership and use of its properties and assets
and the conduct of its business under and pursuant to Applicable Laws relating
to the Company, its Subsidiary and the Partnership, except for Permits the
failure to hold which would not have a Company Material Adverse Effect, and, to
such Manager's knowledge, there has been no material violation of any of the
above nor has, to such Manager's Knowledge, any such entity received notice
asserting any such violation. To the Knowledge of such Manager, all such Permits
are valid and in good standing and are not subject to any suspension,
modification or revocation or proceedings related thereto. To the Manager's
Knowledge, after giving effect to the Asset Transfer and the Closing, and after
obtaining the consents required by Sections 7.3 and 8.3 and Schedule 4.5(b), the
Partnership will have all the Permits necessary to own the property it receives
in the Asset Transfer and to conduct the businesses presently conducted by the
Company.
(d) To such Manager's Knowledge, each of the Company and its
Subsidiary is and at all times has been in compliance with each Applicable Law
relating to it or any of its assets, properties or operations, except where
noncompliance with any such Applicable Law would not have a Company Material
Adverse Effect.
(e) To such Manager's Knowledge, since January 1, 1991, except as
disclosed in Schedule 4.12(c), and except for normal examinations conducted by
any Governmental Authority in the regular course of business of the Company and
its Subsidiary, no Governmental Authority has initiated any proceeding with
respect to or investigation into the business or operations of the Company or
its Subsidiary and, to such Manager's
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Knowledge, no Governmental Authority is now threatening to initiate any
proceeding or investigation into the business or operations of the Company or
its Subsidiary.
Section 6.7 Brokerage. Neither such Manager nor, to the extent applicable,
such Management Corporation has incurred any obligation for a brokerage
commission or finders fee in connection with the transactions contemplated
hereby.
Section 6.8 Investment Advisory Representation. Except as set forth on
Schedule 6.8 hereto, and except for advice given to members of such Manager's
immediate family (and with respect to assets that are not material in amount),
such Manager does not provide investment advisory or investment management
services to any person or entity, other than on behalf of the Company or its
Subsidiary pursuant to an investment advisory agreement between the Company or
its Subsidiary and a client.
Section 6.9 Good Health. To his Knowledge, such Manager is in good health.
Section 6.10 Assets Under Management. To such Manager's Knowledge, the
aggregate assets under management by each of the Company and its Subsidiary as
of September 30, 1995, are accurately described on Schedule 4.14 hereto. In
addition, to such Manager's Knowledge, set forth on Schedule 4.14 is a list as
of September 30, 1995 of all Investment Advisory Agreements, setting forth the
name of the client under each such contract, the amount of assets under
management with respect to each such contract and any material adjustments in
fee rates or structures or other fee adjustments agreed to with such client, or
material adjustments in the amount of assets under management (it being
understood and agreed that adjustments in assets under management greater than
$3,000,000 are material) implemented since September 30, 1995, or presently
proposed to be instituted. To such Manager's Knowledge, except as set forth on
Schedule 4.14 hereto, no client of the Company or its Subsidiary has informed
the Company or its Subsidiary of its intention to terminate or reduce its
investment relationship with the Company or its Subsidiary, or to adjust the fee
schedule with respect to any contract in any manner.
Section 6.11 Employment Arrangements. Except as set forth on Schedule 4.15
hereto, neither the Company nor its Subsidiary has any obligation to the
Manager, contingent or otherwise, under (i) any employment, collective
bargaining or other labor agreement, (ii) any written or oral agreement
containing severance or termination pay arrangements or any written or oral
agreement containing any provision for payment upon or related to a change in
control of the Company or its Subsidiary (or anticipated change in control of
the Company or its Subsidiary), whether upon a signing of this Agreement, the
Closing or otherwise, (iii) any deferred compensation agreement, retainer or
consulting arrangements, (iv) any pension or retirement plan, any bonus or
profit-sharing plan, any stock option or stock purchase plan, or (v) any
Employment Arrangement. To the best of such Manager's knowledge, neither the
Company nor its Subsidiary is in default with respect to any material term or
condition of any Employment Arrangement to which the Manager is a party or
subject, nor, to the best of such Manager's knowledge, except as set forth on
Schedule 4.15, after obtaining the consents set
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forth in Sections 7.3 and 8.3 and Schedule 4.5(b), will the Closing result in
any such default or any acceleration of any obligation under any Employment
Arrangement to which the Manager is a party or subject, including, without
limitation, after the giving of notice, lapse of time or both, except for such
defaults or accelerations which would not have a Company Material Adverse
Effect.
Section 6.12 Ordinary Course of Business. Since September 30, 1995, to
such Manager's Knowledge, each of the Company and its Subsidiary has, except as
expressly contemplated hereby, conducted its operations in the ordinary course
of business consistent in all material respects with past practices.
ARTICLE VII - COVENANTS
Section 7.1 Seller Matters.
(a) Prior to the Closing, Seller shall enter into an agreement in
form and substance satisfactory to Buyer whereby Seller forgoes any tax payment
due from the Company or its Subsidiary pursuant to the terms of the Tax Sharing
Agreement with the liabilities of the parties to be determined under this
Agreement. In addition, except for the termination of the Tax Sharing Agreement,
as contemplated by this Agreement, Seller shall not consent to any amendment of
or modification to the Tax Sharing Agreement which could be adverse to the
Company, the Partnership, Buyer or AMG, and, except as provided in this Section
7.1(a) and shall comply with it in accordance with its terms.
(b) Effective as of the Closing, the following existing agreements
shall be terminated (i) the General Services Agreement between the Company and
Seller, (ii) the Information Services Agreement between the Company and Apprise
Corp., and (iii) the Confidentiality Agreement to the extent it relates to AMG.
Section 7.2 Conduct of Business Prior to Closing. During the period from
the date of this Agreement through the Closing Date, except as contemplated by
this Agreement or with the consent of Buyer, or as required by Applicable Law,
Seller and the Managers (provided, however, that nothing set forth in this
Section 7.2 shall prevent a Manager from terminating his employment with the
Company or its Subsidiary prior to the date of the execution of the Interim
Partnership Agreement) shall use their respective reasonable best efforts to
cause the Company and its Subsidiary to, in all material respects, (a) carry on
its business in the ordinary course consistent with past practice and in
compliance in all material respects with all Applicable Laws; (b) preserve its
present business organization and relationships; (c) keep available the present
services of its significant employees; (d) preserve the rights, franchises,
goodwill and relations of the Company Clients and others with whom material
business relationships exist; and (e) preserve any Permits required in
connection with the business of the Company, its Subsidiary or the Partnership
(including without limitation all investment adviser and commodity adviser
registrations). In addition, none of Seller, the Company, its
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Subsidiary, the Managers or the Management Corporations shall take any material
action not in the ordinary course of business relating to the Company, its
Subsidiary, or the Partnership or which could reasonably have a Material Adverse
Effect on the transactions contemplated hereby, without giving Buyer prior
written notice thereof. Without limiting the generality of the foregoing, except
as contemplated by this Agreement or consented to by Buyer, or as required by
Applicable Law (provided, that with respect to those actions which are required
by Applicable Law, Buyer shall have been given at least three (3) days prior
written notice) between the date of this Agreement and the Closing Date:
(i) none of the Company, its Subsidiary or the Partnership shall,
take any action impairing its rights in any material Contract other than
in the ordinary course of business;
(ii) none of the Company, its Subsidiary or the Partnership shall
make any change in its charter documents, by-laws, or partnership
agreement, as applicable;
(iii) except as set forth in Section 2.2(c), none of the Company,
its Subsidiary or the Partnership shall make any change in its
capitalization;
(iv) none of the Company, its Subsidiary or the Partnership shall
(i) create, incur or assume any material Indebtedness, (ii) make any
loans, advances or capital contributions to or investments in, any person
or entity, or (iii) settle any material litigation;
(v) none of the Company, its Subsidiary or the Partnership shall
acquire any assets or make any capital expenditures, or sell, lease or
dispose of any assets, in each case, other than in the ordinary course of
business;
(vi) none of the Company, its Subsidiary or the Partnership shall
mortgage, pledge or subject to any Encumbrance, any properties or assets,
nor permit any of the foregoing to exist, except for minor imperfections
of title or insignificant liens which do not, in the aggregate, detract
from the value of such assets, taken as a whole, or interfere with the
present or proposed uses thereof or the business of such entity;
(vii) Seller shall not mortgage, pledge or subject to any
Encumbrance, the Shares, nor permit any of the foregoing to exist;
(viii)except as set forth in Section 2.2(c), the Company shall not
declare, set aside or pay any dividend or make any other distribution in
respect of its capital stock, make any direct or indirect redemption,
purchase or other acquisition of its stock, or otherwise make any payments
to Seller or its Affiliates;
(ix) in each case, except in the ordinary course of business
consistent with past practice, and except as set forth in Schedule 4.15
under existing arrangements, (i)
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neither the Company nor its Subsidiary shall materially increase the rate
of compensation payable or to become payable to any director, officer,
employee or agent, and (ii) none of the Company, its Subsidiary or the
Partnership shall hire any directors, officers, employees or agents other
than, in the case of the Company and its Subsidiary, to fill vacant
positions on terms no less favorable to the Company or its Subsidiary than
the terms of the departing director, officer, employee or agent, or enter
into any collective bargaining agreement, bonus, equity option, profit
sharing, compensation, pension, welfare, retirement or other similar
arrangement, or any employment contract;
(x) none of the Company, its Subsidiary or the Partnership shall
commit any act which constitutes a material breach or default under any
material Contract or material Permit to which it is a party or by which it
or any of its properties is bound;
(xi) Seller shall not permit any of the Company, its Subsidiary, the
Partnership or the U.K. Partnership to voluntarily incur any material
liabilities which are incurred other than in the ordinary course of
business, consistent with past practices;
(xii) Without limiting the right or ability of officers of Seller to
sit on the Board of Directors of the Company (or any committee thereof)
and to fulfill their duties at meetings of the Board of Directors of the
Company or of such committees or to take any other action in the ordinary
course of business consistent with past practices, Seller shall not
exercise any control over the business of the Company or its Subsidiary,
except to the extent contemplated by this Agreement, to cause them to
comply with the covenants and other provisions set forth herein and in the
other Transaction Documents, or as otherwise consented to by Buyer in
writing (in respect of the foregoing, Seller shall cause the Company to
promptly (but in any event within ten (10) days after the occurrence
thereof) provide Buyer with the minutes of each meeting of the Board of
Directors of the Company (and any committee thereof) which occurs after
the date hereof);
(xiii) Seller shall not permit the Partnership or the U.K.
Partnership to engage in any activity other than as contemplated or
required hereby or as otherwise consented to by Buyer, in writing; and
(xiv) none of Seller, the Company, its Subsidiary, the Partnership
or the U.K. Partnership shall agree (by contract or otherwise) to do any
of the foregoing except as permitted above.
Section 7.3 Client Consents. The Company has informed each of the Company
Clients in writing of the transactions contemplated by this Agreement by sending
each such client a notice in substantially the form of Exhibit 7.3 hereto and
has, in compliance with the Advisers Act and all other Applicable Laws, to the
extent applicable, requested their consent to the assignment of their Investment
Advisory Agreements. Seller, the Company, the
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Partnership and each of the Managers (with the reasonable cooperation of Buyer
and AMG) shall use all commercially reasonable efforts to obtain such consent.
Buyer agrees that the Company may satisfy this obligation, insofar as it relates
to any Investment Advisory Agreement by providing each such Company Client with
the notice contemplated by the first sentence of this Section 7.3 and obtaining
its consent in the form of an actual written consent or in the form of an
implied consent and complying with any other requirements of all Applicable
Laws, including to the extent applicable, the disclosure requirements of Rule
204-3 of the Advisers Act, and any requirements of the Company's contract with
such Company Client. It is understood that such implied consent may be obtained,
to the extent permitted by (i) Applicable Laws other than the Advisers Act, and
(ii) the applicable contract with such client, by requesting written consent as
aforesaid and informing such Company Client of: (x) the Company's intention to
assign such Investment Advisory Agreement; (y) Buyer's (or its applicable
Subsidiary's or Affiliate's) intention to continue the advisory services,
pursuant to the existing Investment Advisory Agreement, with such Company Client
after the Closing Date if such Company Client does not terminate such Investment
Advisory Agreement prior to the Closing Date; and (z) that the consent of such
Company Client will be implied if such Company Client continues to accept such
advisory services without termination and a period of forty-five (45) days have
elapsed since the date such Company Client received such notice. Each of the
parties hereto acknowledges that the form of notice set forth in Exhibit 7.3
satisfies the requirements of each of (x), (y) and (z) above.
Section 7.4 Confidentiality and Announcements.
(a) Without limiting in any way the terms of the Confidentiality
Agreement, no party hereto, nor any of their respective Affiliates, shall
disclose publicly (i) the fact of execution and delivery hereof other than with
the prior written consent of Seller and Buyer or (ii) any of the contents hereof
other than as required by law upon prior notice to Seller and Buyer and other
than with the prior consent of Seller and Buyer; provided, however, that nothing
contained herein shall prohibit any party (or any Affiliate thereof), following
notification to Seller and Buyer if practicable, from making any disclosure
which its counsel determines to be required by law. Notwithstanding the
foregoing or anything else set forth herein to the contrary, the parties hereto
acknowledge and agree that (i) all required filings with Governmental
Authorities regulating Buyer, Seller, the Company and its Subsidiary (and,
following the Asset Transfer, the Partnership and the U.K. Partnership) and
their Affiliates or by Applicable Laws in accordance with the operation of the
business of the foregoing and any actions they may wish to undertake, (ii) all
required filings under the HSR Act and responses to questions with respect
thereto, and (iii) disclosures to Buyer's lenders and other financing services
are all expressly permitted.
(b) Schedule 1.1(a) sets forth all of the employees and certain
former employees of the Company and its Subsidiary as of the date of this
Agreement. The Partnership has no employees. Seller covenants and agrees with
Buyer, that for a period of two (2) years after the Closing, none of Seller or
any of its Affiliates on the date hereof, shall, without the express written
consent of Buyer, directly or indirectly, whether as owner,
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part-owner, shareholder, partner, or in any other capacity, on behalf of itself
or any firm, corporation or other business organization: (i) solicit or induce
any individual which, to such party's Knowledge, was an employee or former
employee of the Company or its Subsidiary set forth on Schedule 1.1(a) to
terminate his or her employment relationship or consulting relationship with the
Company, its Subsidiary, the Partnership, the U.K. Partnership or any direct or
indirect subsidiary of AMG, or (ii) hire any individual which, to such party's
Knowledge, was such a Person.
Section 7.5 Expenses. Regardless of whether any or all of the transactions
contemplated by this Agreement are consummated, and except as otherwise
expressly provided herein, each of the Parties hereto shall each bear their
respective direct and indirect expenses incurred in connection with the
negotiation and preparation of this Agreement and the consummation of the
transactions contemplated hereby; provided, however, that Buyer shall bear all
costs and expenses incurred by Seller and which would not have to be borne but
for the use of the Partnership structure, which expenses, to the extent incurred
prior to the Closing Date (it being understood and agreed that no costs or
expenses shall be reimbursed after the Closing Date if they are incurred without
the prior written approval of Buyer or AMG) shall be billed to Buyer prior to or
at the Closing, with such specificity as Buyer may reasonably require.
Section 7.6 Covenants with Respect to Agreement. During the period from
the date of this Agreement through the Closing Date, except as required by
Applicable Law or with the prior written consent of Buyer and Seller: (a) no
party to this Agreement shall take any action that would, or could reasonably be
expected to: (i) result in any of such party's representations and warranties
set forth in this Agreement being or becoming untrue in any material respect;
(ii) result in any of the conditions to the Closing set forth in Article VIII
not being satisfied; (iii) result in a material violation of any provision of
this Agreement; or (iv) adversely affect or materially delay the receipt of any
of the requisite regulatory approvals, and (b) each party hereto shall use its
respective commercially reasonable efforts to cause to be satisfied all
conditions to the Closing set forth in Article VIII which are within the
reasonable control of such party. Nothing set forth in this Section 7.6 shall
prevent a Manager from terminating his employment with the Company prior to the
date of the execution of the Interim Partnership Agreement.
Section 7.7 Access; Certain Communications. Between the date of this
Agreement and the Closing Date, subject to Applicable Laws relating to the
exchange of information, Seller shall cause the Company and its Subsidiary to
afford to Buyer and its authorized agents and representatives access, upon
reasonable notice and during normal business hours, to all contracts, documents
and information of or relating to the assets, liabilities, business, operations,
personnel and other aspects of the business of the Company and its Subsidiary
(including any information which Buyer or Goodwin, Procter & Hoar shall request
in connection with the legal opinion contemplated by Section 3.2(e) hereof),
Seller shall cause the Company and its Subsidiary to cause their respective
personnel to provide reasonable assistance to Buyer in Buyer's investigation of
matters relating to the transactions contemplated
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hereby; provided, however, that Buyer's investigation shall be conducted in a
manner which does not unreasonably interfere with the Company's and its
Subsidiary's normal operations, customers, and employee relations. Without
limiting any of the terms thereof, the terms of the Confidentiality Agreement
(except to the extent that they conflict with a provision hereof) shall govern
Buyer's and its agents' and representatives' obligations with respect to all
confidential information with respect to the Company or any Affiliate thereof
provided or made available to them at any time, including the period between the
date of this Agreement and the Closing Date.
Section 7.8 Regulatory Matters; Third Party Consents.
(a) Seller, Buyer, AMG, the Company, its Subsidiary, the
Partnership, the Managers and the Management Corporations shall cooperate (and
Seller shall cause the Company and its Subsidiary to cooperate) with each other
and use all reasonable efforts promptly to prepare and file all necessary
documentation, to effect all applications, notices, petitions and filings, and
to obtain as promptly as practicable all permits, consents, approvals, waivers
and authorizations of all third parties and Governmental Authorities which are
necessary or considered advisable by either Seller or Buyer to consummate the
transactions contemplated by this Agreement (it being understood that Seller
and/or the Company shall be responsible for communications with parties with
whom the Company is in contractual privity including all investment advisory
clientele). Seller and Buyer will have the right to review in advance, and will
consult with the others on, in each case subject to Applicable Laws relating to
the exchange of information, all the information relating to Seller, the
Company, its Subsidiary, or Buyer, as the case may be, and any of their
respective Affiliates which appear in any filing made with, or written materials
submitted to, any third party or any Governmental Authority in connection with
the transactions contemplated by this Agreement, provided, however, that nothing
contained herein shall be deemed to provide any party with a right to review any
information provided to any Governmental Authority on a confidential basis in
connection the transactions contemplated hereby. The parties hereto agree that
they will consult with each other with respect to the obtaining of all permits,
consents, approvals and authorizations of all third parties and Governmental
Authorities necessary or advisable to consummate the transactions contemplated
by this Agreement and each party will keep the others apprised of the status of
matters relating to completion of the transactions contemplated herein. The
party responsible for a filing as set forth above shall promptly deliver to the
other parties evidence of the filing of all applications, filings, registrations
and notifications relating thereto (except for any confidential portions
thereof), and any supplement, amendment or item of additional information in
connection therewith (except for any confidential portions thereof). The party
responsible for a filing shall also promptly deliver to the other party a copy
of each material notice, order, opinion and other item of correspondence
received by such filing party from any Governmental Authority in respect of any
such application (except for any confidential portions thereof). In exercising
the foregoing rights and obligations, Seller and Buyer shall act reasonably and
as promptly as practicable.
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(b) Seller, Buyer and AMG shall, upon request, furnish each other
with all information concerning themselves, their Affiliates, directors,
officers and stockholders and such other matters as may be reasonably necessary
in connection with any statement, filing, notice or application made by or on
behalf of Buyer, the Company or any of their respective Affiliates to any
Governmental Authority in connection with the transactions contemplated by this
Agreement (except to the extent that such information would be, or relates to
information that would be, filed under a claim of confidentiality).
(c) Seller, Buyer and AMG shall (and Seller shall cause the Company
to) promptly (but in any event within one (1) business day) provide Seller,
Buyer and AMG with copies of any communication from any Governmental Authority
whose consent or approval is required for consummation of the transactions
contemplated by this Agreement or which regulates a substantial portion of the
business of the Company or its Subsidiary.
(d) Seller shall (and shall cause the Company to) provide Buyer with
regular written updates as to the progress of any investigations undertaken or
underway by any Governmental Authority with respect to the Company or its
Subsidiary (including, without limitation, a written description of areas of
inquiry and any areas which are indicated as areas of concern) and shall, in the
case of any so-called "exit interview" or other meeting regarding any
investigation by any Governmental Authority, promptly (but in any event within
one (1) business day) provide Buyer with a written description of such meeting
which includes a complete description of each matter discussed.
Section 7.9 Releases.
(a) Seller shall use its best efforts to deliver to Buyer general
releases signed by Seller and Apprise Corp. as may be requested by Buyer,
releasing all claims which any of them have against the Company, its Subsidiary
or the Partnership in a form reasonably acceptable to Buyer.
(b) Seller shall use its best efforts to obtain for the Company
releases from all the Company's liabilities under that certain Asset Purchase
Agreement dated as of August 11, 1995, by and between the Company and American
Re Asset Management, Inc., other than pursuant to Section 6.14(a) thereof
(relating to certain non-competition Covenants) (in form and substance
satisfactory to Buyer) and all the agreements and documents entered into in
connection therewith (the "Am Re Documents"), including, without limitation,
releases from the provisions of Section 3.3 Purchase Price Adjustment, and
Section 8.2 Indemnification by Seller of such Asset Purchase Agreement and
releases from the provisions of the Indemnity and Minimum Revenue Agreement (as
such term is defined in the Asset Purchase Agreement referred to above).
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Section 7.10 Notification of Certain Matters.
(a) Each party shall give prompt notice to the other parties hereto
of (i) the occurrence, or failure to occur, of any event or existence of any
condition that has caused or could reasonably be expected to cause any of its
representations or warranties contained in this Agreement to be untrue or
inaccurate in any material respect at any time after the date of this Agreement,
up to and including the Closing Date, and (ii) any failure on its part to comply
with or satisfy, in any material respect, any covenant, condition or agreement
to be complied with or satisfied by it under this Agreement.
(b) The Company shall, within fifteen (15) days after the end of
each month (commencing with the month of January, 1996) (and has, with respect
to the month of December, 1995), provide to Buyer interim unaudited balance
sheets, statements of income, changes in stockholders' equity and cash flows
(the "Interim Financial Statements"). The Interim Financial Statements shall
fairly present in all material respects the financial position and results of
operations of the Company and its Subsidiary as of the date thereof and for the
period covered thereby, and shall be prepared in accordance with GAAP (subject
to normal year-end adjustments and the absence of footnotes) applied in a manner
consistent with the audited Company Financial Statements as of and for the
period ended December 31, 1994.
Section 7.11 Maintenance of Records. The Company and its Subsidiary will
maintain the Records in all material respects in the same manner and with the
same care that the Records have been maintained prior to the execution of this
Agreement. From and after the Closing Date, the Company and each of the parties
hereto shall permit the parties hereto reasonable access to any applicable
Records in its possession arising on or before the Closing Date and reasonably
necessary in connection with any claim, action, litigation or other proceeding
involving the party requesting access to such Records or in connection with any
legal obligation owed by such party to any present or former customer of the
Company.
Section 7.12 Employees and Employee Plans.
(a) General.
(i) No provision of this Agreement shall be construed to
prohibit the Company from having the right to terminate the employment of
any individual employed by the Company after the Closing, with or without
cause, or to amend or to terminate any employee benefit plan, established,
maintained or contributed to by the Company after the Closing.
(ii) Service by the Company Employees with the Company, Seller
or any of their Affiliates shall be recognized under each benefit plan or
arrangement established, maintained or contributed to by Buyer, the
Company or any of their Affiliates after the Closing for the benefit of
any Company Employee for purposes of eligibility to participate and
vesting, but in no event shall such service be taken into
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account in determining the accrual of benefits under any such benefit plan
or arrangement, including, but not limited to, a defined benefit plan.
(b) Welfare Plans.
(i) The Company Employees shall cease active participation in
the employee benefit plans maintained by Seller, the Company or any of
their Affiliates applicable to Company Employees prior to the Closing that
are "welfare plans" (as defined in Section 3(1) of ERISA) as of the
Closing Date ("Seller's Welfare Plans"); provided, however, that at the
option of Buyer, Buyer may elect, by written notice to Seller, at least
twenty-five (25) days prior to the Closing Date, to continue coverage of
the Company Employees under any or all of Seller's Welfare Plans specified
in such election for the period commencing on the Closing Date and ending
on a date specified by Buyer (not later than the date set forth in clause
(ii) below). If Buyer makes such election, Buyer shall reimburse Seller on
a monthly basis, within ten (10) Business Days of notification by Seller
of the amount of such costs, for the monthly costs incurred in providing
such coverage. The costs of coverage shall be determined by Seller in
accordance with substantially the same methods and procedures under which
such costs of coverage were determined by Seller immediately prior to the
Closing Date.
(ii) In no event shall any Company Employee continue to be
covered under Seller's Welfare Plans after the 60th day following the
Closing Date, except as required by applicable law or otherwise agreed to
in writing by the parties or provided in (iii) or (v) below.
(iii) Company Employees who, on the Closing Date, are
receiving disability benefits under the Disability Plan shall remain
covered under the Disability Plan, subject to the provisions of the
Disability Plan, and neither the Company, its Subsidiary, Buyer nor the
Partnership shall have any responsibility or liability for the payment of
such benefits. Company Employees who have previously satisfied the
requirements for retiree medical and/or life insurance coverage provided
under Seller's Welfare Plans shall remain eligible for such coverage,
subject to the provisions of Seller's Welfare Plans, and neither the
Company, its Subsidiary, Buyer nor the Partnership shall have any
responsibility or liability for the payment of such benefits.
(iv) Seller's Welfare Plans shall retain the liability for all
benefit claims which are incurred by Company Employees and Former
Employees under the Seller's Welfare Plans prior to the Closing Date,
including all claims incurred before the Closing Date, and neither the
Company, its Subsidiary, Buyer nor the Partnership shall have any
responsibility or liability for the payment of such benefits; provided,
however, that (i) the Company shall, at the Closing, assign to Seller that
certain $20,000 deposit held by Apprise Corp., and (ii) the Partnership
shall, at the Closing, pay to Seller an amount equal to $667.00 for each
day in the period beginning with
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January 18, 1996, and ending on the earlier to occur of (A) the Closing
Date, (b) February 17, 1996 or (C) the date on which the Company puts into
place a new welfare plan providing medical coverage to employees of the
Company and its Subsidiary which is acceptable to Buyer and Seller and
which then replaces the Seller's Welfare Plan which is providing medical
coverage to employees of the Company and its Subsidiary.
(v) Seller's Welfare Plans shall retain liability for the
continuation of coverage for all Former Employees and beneficiaries of
Former Employees or Company Employees who are receiving benefits required
to be provided by Part 6 of Subtitle B of Title I of ERISA as of the
Closing Date, and neither the Company, its Subsidiary, the Buyer nor the
Partnership shall have any responsibility or liability for the payment of
such benefits.
(c) Defined Benefit Plans. The Retirement Plan and the SERP cover
certain of the Company Employees and the Former Employees. The Retirement Plan
shall retain liability for all benefits accrued through the Closing Date with
respect to the Company Employees and the Former Employees. Effective as of the
Closing Date, Company Employees described in the first paragraph of the
definition of Company Employees shall be deemed, for all purposes in applying
the Retirement Plan and SERP, to have become 100% vested in their accrued
benefits and to have terminated their service on that date.
As of the Closing Date, the Company and its Subsidiary shall cease to be
participating employers in the Retirement Plan, and Seller at its expense shall
take such steps as may be required to effectuate the cessation of participating
employer status by the Company and its Subsidiary.
(d) Defined Contribution Plans. The IRP and the SIRP cover certain
of the Company Employees and the Former Employees. Effective as of the Closing,
Seller shall cause all accruals of benefits in respect of the Company Employees
described in the first paragraph of the definition of Company Employees to cease
under the IRP and the SIRP. The IRP shall retain liability for all benefits
accrued through the Closing Date with respect to the Company Employees and the
Former Employees. Effective as of the Closing Date, all Company Employees
described in the first paragraph of the definition of Company Employees shall be
deemed, for all purposes in applying the IRP and the SIRP, to have become 100%
vested in their accrued benefits and to have terminated their service on that
date.
(e) Benefit Plans. Prior to the Closing, Seller shall take all
action necessary to assume all liabilities of the Company arising under, in
connection with, or relating to, any Benefit Plan that provides nonqualified
pension or deferred compensation benefits, including, but not limited to, the
SERP and the SIRP, but excluding liabilities under the Company's Incentive
Compensation Plan. Effective as of the Closing, the Incentive Compensation Plan
shall be amended in accordance with the provisions of Section 8 thereof so that
it is in form and substance acceptable to Buyer. Buyer shall cause the Company
to provide for payment of
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all amounts payable on or after December 31, 1995, under the Company's Incentive
Compensation Plan, as amended (the "ICP"). With respect to amounts payable under
the ICP, to which employees become vested as of December 31, 1995 and which are
payable in 1996, Buyer agrees that (i) it will notify Seller immediately of the
payment of such amounts, (ii) it will not take any deduction for federal or
state income tax purposes for the payment of such amounts, and, (iii) it will
cause such amounts to be received by the employees entitled thereto within 2 and
1/2 months of December 31, 1995 within the meaning of Treasury Regulations
section 1.404(b)-1T(A-2)(b)(1). With respect to all other amounts payable under
the ICP ("Post-1995 ICP Payments"), neither Buyer, including any of its
Affiliates (including the Partnership), nor Seller, including any of its
Affiliates, shall treat for any purpose such amounts as additional consideration
paid to Seller or as other than compensation paid by Buyer or any of its
Affiliates (including the Partnership). Buyer shall also indemnify, on an
after-tax basis, Seller and its Affiliates for any Taxes, along with any
reasonable accountants and attorneys fees, incurred by Seller and its Affiliates
that are attributable to any Post-1995 ICP Payment being treated as additional
consideration paid to Seller ("Additional Income") if Seller or another
member(s) of the affiliated group of which it is a member is not entitled to
receive an offsetting deduction, either in the same taxable year of Seller (or
such other member) or a subsequent taxable year ("Offsetting Deduction"). In
addition, if a Post-1995 ICP Payment is treated as Additional Income paid to
Seller in one taxable year but Seller (or another member or members of its
affiliated group) is entitled to receive an Offsetting Deduction in a subsequent
taxable year, Buyer shall pay to Seller, the Annual Deferral Amount. For each
taxable year, the Annual Deferral Amount shall be calculated as follows: the sum
of: (i) the product of (x) the amount by which the cumulative amount of the
Additional Income exceeds the cumulative amount of the Offsetting Deduction that
has accrued to Seller (or other member(s) of its affiliated group) for federal
income tax purposes in such taxable year or in a prior taxable year, (y) the
highest marginal rate of taxes payable by a corporation for federal income tax
purposes in effect for such taxable year, and (z) the applicable rate of
interest (which may be a fluctuating rate) under section 6621(a)(2) of the Code,
and (ii) the amount of Taxes that are incurred by Seller as a consequence of
receipt of the Annual Deferral Amount. Any indemnity claims hereunder shall be
subject to the procedures set forth in Section 9.5 but any dispute regarding the
interpretation of the language of this Section 7.12(e) shall be resolved as set
forth in Section 11.8.
(f) Further Assurances. Seller and Buyer agree to cooperate to carry
out the duties and responsibilities contained in this Section 7.12. In addition,
Seller agrees to make available to Buyer such information as Buyer may
reasonably request to facilitate the determination of (i) the period of service
of any Company Employee and Former Employee with the Company, Seller or any of
their Affiliates prior to the Closing Date, (ii) individual service accruals and
salary histories of Company Employees and Former Employees, and (iii) such other
information as Buyer may reasonably request to carry out the provisions of this
Section 7.12.
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ARTICLE VIII - CONDITIONS TO CLOSING
Section 8.1 Conditions to Buyer's Obligations. In addition to the
conditions set forth in Section 8.3 hereof, the obligations of Buyer to effect
the Closing shall be subject to the following conditions, any one or more of
which may be waived in writing, in whole or in part, by Buyer:
(a) Representations and Warranties. The representations and
warranties of Seller, the Company, its Subsidiary, the Managers and the
Management Corporations set forth in this Agreement (and in any Schedule or
Exhibit attached hereto) and in each other Transaction Document or otherwise
made in writing by any of them (including, without limitation, in the
Representation Certificate in the form attached hereto as Exhibit 8.1(j)) or any
person on their behalf shall be true and correct in all material respects as of
the date of this Agreement and (except to the extent such representations and
warranties speak only as of an earlier date) as of the Closing Date as though
made on and as of the Closing Date, except that the representations in Section
4.14 shall also be made with respect to assets under management and advisory
contracts as of a date which is not more than ten (10) days prior to Closing.
(b) Covenants. The Seller Entities, the Managers and the Management
Corporations shall have performed and complied in all material respects with all
agreements, covenants and obligations required by this Agreement and the other
Transaction Documents to be performed or complied with by them on or prior to
the Closing Date. Each of the Seller Entities, the Managers and the Management
Corporations shall have furnished Buyer with a certificate dated as of the
Closing Date with respect to each of the matters set forth in Sections 8.1(a)
and 8.1(b) with respect to such Person.
(c) Registration.
(i) The Partnership shall be eligible to operate as an
investment adviser under the Advisers Act and the rules and regulations
promulgated thereunder and shall have become registered and be eligible to
operate as a Commodity Trading Advisor under the Commodity Exchange Act
and the rules and regulations promulgated thereunder, in each case, upon
consummation of the transactions contemplated hereby, and the Partnership,
the U.K. Partnership, the Company and its Subsidiary shall have all other
material Permits if and to the extent necessary or reasonably deemed
necessary to enable the Partnership to conduct the businesses presently
being conducted by the Company, and to enable the Company's Subsidiary to
continue to conduct the businesses presently being conducted by the
Company's Subsidiary in each case, upon consummation of the transactions
contemplated hereby.
(ii) Buyer and its direct and indirect equity holders shall
have become registered with, or obtained approvals from, any Governmental
Authority or industry self-regulatory body (including, without limitation,
IMRO) to the extent reasonably necessary in connection with the
transactions contemplated hereby.
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(iii) Each Seller Entity (and, to the extent applicable, such
other of their Affiliates as may be necessary) shall have notified IMRO,
and obtained IMRO's clearance, of the changes of control of the Company
and its Subsidiary to the extent required by Chapter IV of the IMRO Rules
and Part VII of the Investment Services Regulations 1995.
(d) Consents. Except as otherwise specifically contemplated hereby,
all actions by or in respect of, or filings with, any Governmental Authority
required to permit the consummation of the transactions contemplated hereby so
that upon consummation of the transactions contemplated hereby, the Company's
Subsidiary shall be able to continue to carry on its business in all material
respects in the manner now conducted by it, so that the Partnership shall be
able to carry on the businesses presently being conducted by the Company in all
material respects in the manner now conducted by the Company and so that the
Company shall be able to act as general partner of the Partnership and the U.K.
Partnership, shall have been taken, made or obtained, and any and all other
material permits, approvals, consents (including, but without limitation,
consents required under the contracts listed on Schedule 4.5(b)) or other action
commercially necessary to consummate the transactions hereunder shall have been
received or taken, and none of such permits, approvals or consents shall contain
any provisions which, in the reasonable judgment of Buyer, are unduly burdensome
(including any materially greater costs under any contracts) (provided, that a
restriction imposed on the Partnership or the Company's Subsidiary shall not be
unduly burdensome if it is not materially greater than a restriction currently
imposed on the Company or its Subsidiary, respectively, as of the date hereof)
(or, with respect to the contracts listed on Schedule 4.5(b), equivalent
contracts shall have been entered into by the Partnership on substantially
equivalent terms and at costs which are not materially greater).
(e) Asset Transfer. (i) The transactions contemplated by the Asset
Transfer Agreement (together with the Schedules and Exhibits contained in such
Agreement) shall have occurred and at least one (1) full business day shall have
elapsed from the Effective Time, and (ii) such other and additional documents
and instruments of transfer as Buyer shall reasonably have requested to
effectuate the asset and liability transfers thereunder shall have been executed
and delivered.
(f) Non Solicitation/Non Disclosure Agreements. Each Manager and
each Management Corporation shall have entered into a Non Solicitation Agreement
with the Partnership, the U.K. Partnership, the Company and Buyer in
substantially the form attached hereto as Exhibit 8.1(f) with respect to the
Managers listed on Schedule 8.1(f)(i) hereto and, with respect to those Managers
listed on Schedule 8.1(f)(ii), in form and substance reasonably satisfactory to
Buyer and in substance materially consistent with the form attached hereto as
Exhibit 8.1(f), and each such Non Solicitation Agreement shall be in full force
and effect.
(g) Partnership. Prior to the Asset Transfer, the Company and each
of the Managers and Management Corporations shall have entered into the Interim
Partnership Agreement. In addition, the Interim Partnership Agreement shall have
been amended and
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restated into the Restated Partnership Agreement by the Company and each of the
Managers and each of the Management Corporations. The Partnership's
capitalization, including Partnership Points and options and other rights to
purchase Partnership Points, and the Capital Accounts in the Partnership shall
be as set forth on Schedule 4.4(b) hereto.
(h) U.K. Partnership. The U.K. Partnership Agreement in form and
substance reasonably satisfactory to Buyer and in substance materially
consistent with Exhibit 8.1(h)(i) (the "U.K. Partnership Agreement") shall have
become effective with each of the Managers and the Management Corporations
having entered into such U.K. Partnership Agreement. The transactions
contemplated by the Stock Contribution Agreement in a form materially consistent
with that attached hereto as Exhibit 8.1(h)(ii) (the "Stock Contribution
Agreement") shall have occurred, and such other and additional documents and
instruments of transfer as Buyer shall have reasonably requested to effectuate
the stock contribution shall have been executed and delivered. The U.K.
Partnership's capitalization, including U.K. Partnership Points and options and
other rights to purchase U.K. Partnership Points, and U.K. Capital Accounts in
the U.K. Partnership shall be as set forth as Schedule 8.1(h) hereto.
(i) Resignations. The Company shall have delivered to Buyer the
resignations of such Directors of the Company as may be requested by the Buyer
at least three (3) days prior to the Closing, such resignations to be effective
at the Closing. The Company's Subsidiary shall have delivered to Buyer the
resignations of such Directors of the Company's Subsidiary as may be requested
by Buyer at least three (3) days prior to the Closing (provided, however, that
the Buyer will not at any time through the Closing Date request the resignation
of any of Messrs. Arnott, Goodsall or Brown at any time when such Person is
employed by the Company or its Subsidiary), such resignations to be effective at
the Closing, with all related necessary filings having been made effective as of
such time.
(j) Representation Certificate and Related Matters. Seller shall
have delivered to Buyer a representation certificate in the form attached hereto
as Exhibit 8.1(j). In addition (i) Buyer shall be reasonably satisfied with the
compliance of the Company's disclosure to its clients under Sections 204 and 205
of the Advisers Act; and (ii) the on sight SEC examination of the Company
referred to on Schedule 4.12(c) shall have been completed, Seller shall have
provided Buyer with a written summary of all material areas of inquiry and
concern communicated to the Company or Seller and how any material questions
(including, without limitation, any indicated deficiencies or violations or
possible violations of Securities Laws) raised during such examination were
resolved, and either (A) the Company shall have been informed that no so-called
"deficiency letter" will be issued and no adverse action will be taken by the
SEC, or (B) Buyer shall have learned either (x) through a written summary of a
so-called "exit interview" provided to Buyer by Seller pursuant to Section
7.8(d) hereof, or (y) through other means reasonably acceptable to Buyer, that
such SEC examination has concluded with no indication that the examiners have
found any violations or possible violations of any Securities Laws or other
deficiencies which, or the basis of which, could reasonably be expected to have
a Material Adverse Effect on any of AMG, the Company or the Partnership.
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(k) Power of Attorney. Seller shall have terminated or caused to be
terminated any outstanding powers of attorney with respect to the Company or its
Subsidiary.
(l) Insurance Policies. Each of the Partnership and the Company's
Subsidiary shall have in place insurance policies (a) which Buyer may reasonably
deem necessary (it being agreed that insurance policies which provide equivalent
coverage to those listed on Schedule 4.21 hereto shall be satisfactory) and (b)
which survive the Closing for such period as Buyer shall reasonably deem
necessary.
(m) Releases. The Company shall have obtained the releases
contemplated by Section 7.9 hereof.
(n) Xerox Financial Services Indemnification Agreement. Xerox
Financial Services shall have entered into an Indemnification Agreement covering
Tax and ERISA representations and matters herein) with the Company, the Buyer
and AMG (the "XFS Indemnification Agreement"), which agreement shall be in form
and substance reasonably satisfactory to Buyer.
(o) Confidentiality Agreement. Seller shall have entered into an
agreement respecting confidentiality of information relating to the Company, its
Subsidiary, the Partnership, the U.K. Partnership and AMG in form and substance
satisfactory to Buyer.
(p) Welfare Plans. The Partnership and the Company's Subsidiary
shall have in place such welfare and benefit plans (a) which Buyer may
reasonably deem necessary (it being agreed that plans which are in compliance
with all Applicable Laws and provide benefits at least equal to those presently
received by employees of the Company and its Subsidiary shall be satisfactory),
(b) which survive the Closing for a period of at least six months, and (c) which
do not cost materially more than $22,500 per month.
(q) Each Seller Entity (and, to the extent applicable, such other of
their Affiliates as may be necessary) shall have notified IMRO, and obtained
IMRO's clearance, of the changes of control of the Company and its Subsidiary in
accordance with Chapter IV of the IMRO Rules and Part VII of the Investment
Services Regulations 1995.
(q) Liabilities. None of the Company, its Subsidiary, the
Partnership or the U.K. Partnership shall have incurred any liabilities, nor
shall any liabilities of any of the foregoing exist, other than (i) liabilities
set forth on Schedule 4.8(a) or Schedule 4.8(c) hereto, (ii) liabilities
incurred after the date hereof in the ordinary course of business of the Company
and its Subsidiary, consistent with past practices, and (iii) liabilities to
which Buyer has given its prior written consent.
(r) Code of Ethics. The Partnership shall have adopted a Code of
Ethics in form and substance reasonably satisfactory to Buyer.
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(s) Legal Opinions. The Buyer and AMG shall have received the legal
opinions described in Section 3.2(a)(13) and 3.2(b)(7).
Section 8.2 Conditions to Seller's Obligations. In addition to the
conditions set forth in Section 8.3 hereof, the obligations of Seller to effect
the Closing shall be subject to the following conditions, any one or more of
which may be waived in writing, in whole or in part, by Seller:
(a) Representations and Warranties. The representations and
warranties of Buyer and AMG set forth in this Agreement shall be true and
correct in all material respects as of the date of this Agreement and (except to
the extent such representations and warranties speak only as of an earlier date)
as of the Closing Date as though made on and as of the Closing Date, except
where the failure to be so true and correct would not have a material adverse
effect on Buyer's ability to consummate the transactions contemplated herein;
and
(b) Covenants. Buyer and AMG shall have performed and complied in
all material respects with all covenants and obligations required by this
Agreement to be performed or complied with by Buyer on or prior to the Closing
Date. Buyer and AMG shall have furnished Seller with a certificate dated as of
the Closing Date with respect to the matters set forth in Sections 8.2(a) and
8.2(b).
(c) Legal Opinion. Seller shall have received the legal opinion
described in Section 3.2(c)(6).
Section 8.3 Mutual Conditions. The obligations of each of Seller, Buyer
and AMG to effect the Closing shall be subject to the following conditions, any
one or more of which may be waived in writing by either of the parties (as to
itself):
(a) Advisory Client Consents. The conditions under this Section
8.3(a) shall have been fulfilled when the conditions set forth in both (X) and
(Y) below have been satisfied.
(X) Company Clients whose Investment Advisory Agreements provide for
the payment (based on the sum of the Fee Arrangement Values of each such
Investment Advisory Agreement) of fees constituting at least ninety
percent (90%) of the Base Fees shall have given Consent to the
transactions contemplated hereby, and Investment Advisory Agreements which
(based on their Fee Arrangement Values) represent ninety percent (90%) of
the Base Fees shall not have been terminated at or prior to the Closing
and shall then be in full force and effect. For purposes of this Section
8.3:
(i) "Base Fees" shall mean $22,222,540.
(ii) "Consent" shall mean (A) with respect to a client whose
contract by its terms terminates upon the consummation of the transactions
contemplated hereby,
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that the Partnership shall have entered into a new contract on
substantially equivalent terms which contract is effective after giving
effect to the Closing, (B) with respect to a client whose contract by its
terms requires written consent from a party or parties thereto for its
assignment by virtue of the transactions contemplated hereby, that the
Company and the Partnership shall have obtained all such written consents
as may be required for the consummation of the transactions, and (C) with
respect to a client whose contract by its terms does not require written
consent from any party thereto for its assignment by virtue of the
transactions contemplated hereby, that the Company and the Partnership
shall either have obtained written consent from each party thereto or
shall have obtained such consents for the assignment of the client's
Investment Advisory Contract as may be required under such contract and
under Applicable Laws. Notwithstanding the foregoing, any Company Client
which has terminated an investment relationship with the Company or its
Subsidiary (or, after giving effect to the Closing, the Partnership) or
any Company Client which has, in writing (which writing has not been
countermanded by a subsequent writing), expressed its intent to terminate
an investment relationship with the Company or its Subsidiary within six
(6) months of the date of such writing, shall be deemed not to have
Consented, and with respect to any Company Client which has withdrawn
assets from the Company's management or which has, in writing (which
writing has not been countermanded by a subsequent writing), expressed its
intent to withdraw assets from the Company's management (or that of its
Subsidiary) within six (6) months of the date of such writing, such
Company Client shall be deemed to have consented only with respect to that
portion of the assets which are not and would not be so withdrawn.
(iii) "Fee Arrangement Value" shall mean, (A) with respect to
each fee arrangement under each advisory contract which was in effect on
September 30, 1995, the Annualized Advisory Fees payable to the Company
based on assets under management under such fee arrangement as set forth
in the relevant agreement as of September 30, 1995, and set forth on
Schedule 8.3(a) hereto, (B) with respect to each fee arrangement under
each advisory contract which was entered into after September 30, 1995,
but prior to the date hereof, the Annualized Advisory Fees payable to the
Company based on assets under management under such fee arrangement as set
forth in the relevant agreement as of the date of such agreement and set
forth on Schedule 8.3(a) hereto, and (C) with respect to each fee
arrangement under each advisory contract (or each new fee arrangement
under an existing contract) which is entered into after the date hereof,
the annualized investment advisory fees payable to the Company based on
assets under management under that fee arrangement as of the date assets
are first managed under that fee arrangement, computed as follows: (I) in
the case of an advisory fee arrangement which is based on assets under
management, by multiplying the assets under management under that fee
arrangement by the relevant annual fee, and (II) in the case of an
advisory fee arrangement which is a so-called "incentive" or "performance
based" fee arrangement, by the Managers estimating the value of such fee
in a manner consistent with the computations leading to the determinations
of other
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advisory fees as set forth on Schedule 8.3(a), which estimate shall be
included as the annualized advisory fee under such fee arrangement upon
its acceptance by Buyer.
If any additions or withdrawals are made to the assets under management
under a fee arrangement, the Fee Arrangement Value of such fee arrangement shall
be the value as determined above with respect to such fee arrangement multiplied
by a fraction, the numerator of which is the assets under management under such
fee arrangement as set forth on Schedule 8.3(a) or, in the case of Clause (C)
above, as of the date funds are first managed under that fee arrangement,
together with all additions or withdrawals, and the denominator of which is the
assets under management under such fee arrangement as set forth on Schedule
8.3(a) or, in the case of Clause (C) above, as of the date funds are first
managed under that fee arrangement;
and (Y) either (i) all Company Clients shall have Consented or responded
negatively to the notice described in Section 7.3, or (ii) forty-five (45) days
shall have elapsed since the date the notice described in Section 7.3 was sent.
At the Closing, Seller shall deliver a certificate certifying as to the
computation under this Section 8.3(a) and compliance with the foregoing.
(b) No order, injunction or decree issued by any court or agency of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the transactions contemplated by this Agreement shall be in
effect. No proceeding initiated by any Governmental Authority seeking an
injunction against the transactions contemplated by this Agreement shall be
pending. No statute, rule, regulation, order, injunction or decree shall have
been enacted, entered, promulgated or enforced by any Governmental Authority
which prohibits, restricts or makes illegal consummation of the transactions
contemplated hereby.
(c) In respect of the notifications of Seller and Buyer pursuant to
the HSR Act, the applicable waiting period and any extensions thereof shall have
expired or been terminated.
ARTICLE IX - SURVIVAL; INDEMNIFICATION
Section 9.1 Survival.
(a) The representations and warranties contained herein and in any
certificate or other writing delivered pursuant hereto (including, without
limitation, the Representation Certificate in the form attached hereto as
Exhibit 8.1(j)) shall only survive the Closing and the consummation of any or
all of the transactions contemplated hereby through March 31, 1997 except (i)
for any representations and warranties made pursuant to Sections 4.6, 4.16 and
4.17 and, to the extent and only to the extent the matters covered thereby
involve ownership of the Shares, Taxes or ERISA matters, Section 4.22, which
shall survive until the expiration of the applicable statutes of limitations (if
any), and (ii) to the extent any such
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representation or warranty was fraudulently made or contained intentional
misrepresentations, in which case each such representation and/or warranty shall
survive through March 31, 1999. The expiration of any representation or warranty
shall not affect any claim made in writing with reasonable specificity prior to
the date of such expiration, but after the expiration of a representation or
warranty (except to the extent it is extended pursuant to this paragraph (a)),
no new claim may be brought alleging a breach of that representation or
warranty.
(b) All unwaived covenants herein not fully performed shall survive
the Closing Date and continue thereafter until fully performed, but a covenant
the non-performance of which has been disclosed to Buyer with reasonable
specificity prior to the Closing Date, and which has been waived in a writing
making reference to such covenant (including by virtue of the Buyer
countersigning a disclosure schedule appended to the certificate provided by
Seller pursuant to Section 8.1(b)) shall not survive the Closing. Any
investigation, audit or other examination that may have been made or may be made
at any time by or on behalf of the party to whom any such representation or
warranty is made shall not limit or diminish such representations and
warranties, and the parties may rely on the representations and warranties set
forth in this Agreement irrespective of any information obtained by them by any
investigation, audit or examination or otherwise. Any, fact or occurrence after
the date of this Agreement which is disclosed to Buyer with reasonable
specificity prior to the Closing Date and accepted by Buyer in a writing making
reference to such representation (including by virtue of the Buyer
countersigning a disclosure schedule appended to the certificate provided by
Seller pursuant to Section 8.1(b)) shall be deemed to be a scheduled disclosure
to the representation and shall qualify such representation.
(c) The rights of the parties hereto to recourse on the
representations and warranties set forth herein shall not be limited by the fact
that a representation or warranty was not breached due to its limitation to
occurrences that do not cause a Material Adverse Effect on one or more Persons
(except for those representations and warranties which are so modified in
Sections 4.1, 4.2, 4.12(b) and 4.19).
Section 9.2 Indemnification by Seller. Subject to the limitations
contained in Section 9.1 and Section 9.6, Seller shall indemnify, reimburse,
defend and hold harmless Buyer, AMG and their respective directors, officers,
employees, Affiliates (including, without limitation, the Company), and their
respective successors and assigns (the "Buyer Indemnified Parties") from and
against any Loss arising from a claim asserted by an unaffiliated (with the
Indemnitee) third party (including, without limitation, any Governmental
Authority) against the Indemnitee (a "Third-Party Claim") and incurred by any of
them based upon, arising out of or otherwise in respect of (i) any inaccuracy in
or any breach of any representation by any Seller Entity contained herein, in
the other Pre-Closing Transaction Documents, in any certificate (including,
without limitation, the Representation Certificate) or other writing delivered
pursuant hereto or thereto (including the Schedules of exceptions to such
representations), and (ii) the nonfulfillment on the part of Seller, the
Company, its Subsidiary or the Partnership of any unwaived covenant set forth in
this Agreement or the other Pre-Closing Transaction Documents which survives the
Closing Date.
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Section 9.3 Indemnification by Buyer and AMG. Subject to the limitations
contained in Section 9.1 and Section 9.6, Buyer and AMG shall indemnify,
reimburse, defend and hold harmless Seller and its directors, officers,
employees and Affiliates (the "Seller Indemnified Parties"), and their
respective successors and assigns from and against any Loss arising from a
Third-Party Claim and incurred by any of them based upon, arising out of or
otherwise in respect of (i) any inaccuracy in or breach of any representation by
Buyer or AMG contained herein, or in any certificate or other writing delivered
pursuant hereto (including the Schedules of exceptions to such representations),
and (ii) the nonfulfillment on the part of AMG or Buyer of any unwaived covenant
set forth in this Agreement which survives the Closing Date in accordance with
Section 9.1 hereof.
Section 9.4 Indemnification by Management Corporations. Subject to the
limitations contained in Section 9.1 and Section 9.6, each Management
Corporation and each Manager shall jointly and severally indemnify, reimburse,
defend and hold harmless the Buyer Indemnified Parties from and against any Loss
arising from a Third-Party Claim against any such Indemnitee and incurred by any
of them based upon, arising out of or otherwise in respect of (i) any inaccuracy
in or breach of any representation by such Management Corporation or Manager
contained herein, in the other Transaction Documents, or in any certificate or
other writing delivered pursuant hereto or thereto (including the Schedules of
exceptions to such representations) and (ii) the nonfulfillment on the part of
such Manager or Management Corporation of any unwaived covenant or agreement set
forth in this Agreement which survives the Closing Date in accordance with
Section 9.1 hereof. Notwithstanding anything in this Agreement to the contrary,
no Manager or Management Corporation shall have any liability under this Section
9.4(a) with respect to the representations and warranties set forth in Article
VI, unless the Indemnitee shall have fully pursued any claims he, she or it may
have against the Seller (including under Section 9.2) with respect to any breach
of the representations or warranties of Seller which gave rise to the
Third-Party Claim and the assets of Seller shall be insufficient to satisfy any
such claims, and (b) such recourse is limited to the Manager's or Management
Corporation's interest in the Partnership and the U.K. Partnership (and such
Manager's interest in a Management Corporation, if any).
Section 9.5 Notice and Opportunity to Defend.
(a) Notice of Asserted Liability. Promptly after receipt by any
party entitled to indemnification hereunder (the "Indemnitee") from any third
party of notice of any demand, claim or circumstance that, immediately or with
the lapse of time, would reasonably be expected to give rise to a claim or the
commencement (or threatened commencement) of any action, proceeding or
investigation (an "Asserted Liability") that could reasonably be expected to
result in a Loss, the Indemnitee shall give notice thereof (the "Claims Notice")
to any other party obligated to provide indemnification pursuant to Section 9.2,
9.3 or 9.4 (an "Indemnifying Party"); provided, however, that a failure to give
such notice shall not prejudice the Indemnitee's right to indemnification
hereunder except to the extent that the Indemnifying Party is actually
prejudiced thereby. The Claims Notice shall describe the Asserted Liability in
such reasonable detail as is practicable under the circumstances, and
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shall, to the extent practicable under the circumstances, indicate the amount
(estimated, if necessary) of the Loss that has been or may be suffered by the
Indemnitee.
(b) Opportunity to Defend. The Indemnifying Party may elect to
compromise or defend, at its own expense and by its own counsel, any Asserted
Liability; provided, however, that if the named parties to any action or
proceeding include (or could reasonably be expected to include) both the
Indemnitee and the Indemnifying Party, or more than one Indemnitee, and the
Indemnitee is advised that representation of both parties by the same counsel
would be inappropriate under applicable standards of professional conduct, the
Indemnitee may engage separate counsel at the expense of the Indemnifying Party.
If the Indemnifying Party elects to compromise or defend such Asserted
Liability, it shall within 20 Business Days (or sooner, if the nature of the
Asserted Liability so requires) notify the Indemnitee of its intent to do so,
and the Indemnitee shall cooperate, at the expense of the Indemnifying Party, in
the compromise of, or defense against, such Asserted Liability. If the
Indemnifying Party elects not to compromise or defend the Asserted Liability,
fails to notify the Indemnitee of its election as herein provided, contests its
obligation to provide indemnification under this Agreement, or fails to make or
ceases making a good faith and diligent defense, the Indemnitee may pay,
compromise or defend such Asserted Liability all at the expense of the
Indemnitee. Except as set forth in the preceding sentence, neither the
Indemnifying Party nor the Indemnitee may settle or compromise any claim over
the objection of the other; provided, however, that consent to settlement or
compromise shall not be unreasonably withheld. In any event, the Indemnitee and
the Indemnifying Party may participate at their own expense, in the defense of
such Asserted Liability. If the Indemnifying Party chooses to defend any claim,
the Indemnitee shall make available to the Indemnifying Party any books, records
or other documents within its control that are necessary or appropriate for such
defense, all at the expense of the Indemnifying Party.
Section 9.6 Basket. No Buyer Indemnified Party shall have any right to
seek indemnification under Sections 9.2, or 9.4 of this Agreement until Losses
of Buyer Indemnified Parties, taken collectively, that would otherwise be
indemnifiable under Sections 9.2 or 9.4 hereof (but excluding any losses
described in Section 9.8(b) hereof to the extent paid or reimbursed) exceed
$1,625,000 (in the aggregate) (the "Buyer Threshold"), at which time, the full
amount of such Losses shall be recoverable in accordance with the terms hereof;
provided, however, no single Loss shall be included for purposes of determining
the Buyer Threshold unless it, together with any related Losses, exceeds
$15,000. No Seller Indemnified Party shall have any right to seek
indemnification under Section 9.3 of this Agreement until Losses of the Seller
Indemnified Parties, taken collectively, that would otherwise be indemnifiable
under Section 9.2 hereof exceed $1,625,000 (in the aggregate) (the "Seller
Threshold"), at which time, the full amount of such Losses shall be recoverable
in accordance with the terms hereof; provided, however, no single Loss shall be
included for purposes of determining the Seller Threshold unless it, together
with any related Losses, exceeds $15,000.
Section 9.7 Limitation on Liability of Managers and Management
Corporations. Notwithstanding anything in this Agreement to the contrary, no
Manager or Management
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Corporation shall have any liability to any of the Buyer Indemnified Parties for
a breach of a representation or warranty in Article VI unless the party seeking
to assert such liability shall have first fully pursued any claims he, she or it
may have against Seller with respect to any breach of a similar representation
or warranty by Seller. In addition, any recourse by any of the Buyer Indemnified
Parties against any Manager or Management Corporation for a breach of a
representation or warranty in Article VI shall be limited to such Manager's or
Management Corporation's interest in the Partnership and the U.K. Partnership
(and such Manager's interest in a Management Corporation, if any).
Section 9.8 Exceptions.
(a) Notwithstanding anything herein to the contrary, the Buyer
Indemnified Parties shall not be subject to any limitation pursuant to Section
9.6 hereof in seeking indemnification with respect to losses arising from a
breach by the Seller of any of the representations and warranties contained in
Sections 4.6, 4.16, 4.17 and, to the extent and only to the extent the matters
covered thereby involve ownership of the Shares, Taxes or ERISA matters, Section
4.22;
(b) Notwithstanding anything herein to the contrary, the Buyer
Indemnified Parties shall not be subject to any limitation pursuant to Sections
9.1(a) or 9.6 hereof in seeking indemnification with respect to losses arising
out of or resulting from the Am Re Documents or the transactions contemplated
thereby.
ARTICLE X - TERMINATION
Section 10.1 Termination.
(a) This Agreement may be terminated on or prior to the Closing Date
only as follows:
(i) by written consent of both Seller and Buyer;
(ii) at the election of either Buyer or Seller, if the Closing
Date shall not have occurred on or before seventy-five (75) days following
the notice in Section 7.3, provided that neither party shall be entitled
to terminate this Agreement pursuant to this clause (ii) if such party's
failure to fulfill any obligation under this Agreement has been the cause
of, or resulted in, the failure of the Closing to occur on or before such
date,
(iii) by either Buyer or Seller if a court of competent
jurisdiction shall have issued an order, decree or ruling permanently
restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement, and such order, decree, ruling or other
action shall have become final and nonappealable; or
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(iv) by either Buyer or Seller if a condition to its
obligation to perform becomes incapable of fulfillment or if it has become
reasonably and objectively certain that any of such conditions will not be
fulfilled prior to the date set forth in Section 10.1(a)(ii).
Notwithstanding the foregoing, the right to terminate this Agreement under
this Section 10.1(a)(iv) shall not be available to any party if its
condition to perform became incapable of fulfillment or if it has become
reasonably and objectively certain that any of such conditions will not be
fulfilled prior to the date set forth in Section 10.1(a)(ii) due to its
failure to fulfill any obligation under this Agreement.
Section 10.2 Obligations Upon Termination.
(a) In the event that this Agreement shall be terminated pursuant to
Section 10.1 hereof, all obligations of the parties hereto under this Agreement
shall terminate and there shall be no liability of any party hereto to any other
party except (i) as set forth in Article IX and this Article X hereof, and (ii)
that nothing herein will relieve any party from liability for any breach of this
Agreement.
(b) The termination of this Agreement shall be effectuated by the
delivery by the party terminating this Agreement to each other party of a
written notice of such termination.
ARTICLE XI - TAX COOPERATION AND INDEMNIFICATION
Section 11.1 Tax Cooperation.
(a) Seller and Buyer shall each, and Buyer shall cause the Company
to: (i) cooperate in the preparation of any Tax Returns which any other party is
responsible for preparing and filing; (ii) cooperate fully in preparing for any
audits of, or disputes with taxing authorities; (iii) make available to the
other parties and to any taxing authority, as reasonably requested on a timely
basis, all information, records, and documents relating to Taxes; and (iv)
furnish within ten (10) days the other parties with copies of all correspondence
or notice of assessments received from any taxing authority in connection with
any audit or information request with respect to Taxes for which any other party
may be liable. Seller shall have the sole right to represent the interests of
the Company in any tax audit or administrative or court proceeding to the extent
relating to Tax Returns filed by Seller or filed by Buyer to the extent it
relates solely to a matter for which Seller has agreed to indemnify Buyer, and
employ counsel of its choice at its expense, provided that Seller shall keep
Buyer reasonably informed on an ongoing basis. Buyer shall cooperate, and shall
cause the Company to cooperate, with Seller, with respect to any Tax audit or
administrative or court proceeding referred to in this paragraph. Such
cooperation shall include providing prompt notice of any Tax deficiency,
assessment or audit relating to the Company or relating to any event for which
another party to this Agreement may be liable and all relevant information that
is available to Buyer or the
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Company, as the case may be, with respect to any such audit or proceeding,
making personnel available at reasonable times and, including, without
limitation, preparation of responses to requests for information on a timely
basis, provided that the foregoing shall be done in a manner so as not to
interfere unreasonably with the conduct of the business of Buyer and the
Company.
(b) The parties agree that any Tax Sharing Agreements will be
terminated as to the Company as of the Closing Date and will be of no further
force and effect after the Closing Date, and that following the Closing Date the
provisions of this Agreement shall apply in lieu thereof.
(c) Any refunds or credits of Taxes of the Company plus interest
paid thereon with respect to taxable periods or portions thereof ending on or
before the Closing Date shall be for the account of Seller.
Section 11.2 Tax Records. No party shall dispose of or destroy any
business records or files relating to Taxes or Tax Returns pertaining to the
Company until the expiration (with valid extensions) of the applicable statute
of limitations, and shall not dispose of or destroy such records without first
offering to turn over possession thereof to the other party (at such party's
expense) by written notice to such other party at least thirty (30) days prior
to the proposed date of such disposition or destruction.
Section 11.3 Liability of Seller. Except as otherwise provided in this
Agreement, Seller shall be liable for and pay all Taxes payable with respect to
the assets and operations of the Company for all periods ending on or before
December 31, 1995 (and shall, to the extent such Taxes are not satisfied on or
before the Closing Date, remain liable therefor), and Buyer shall cause the
Company to provide Seller with appropriate information to prepare and file the
Tax Returns of the Company for all periods ending on or prior to the Closing
Date, and Seller shall be responsible for filing the appropriate Tax Returns
with respect to the operations of the Company for all periods ending on or
before the Closing Date. Seller shall file on behalf of the Company state Tax
Returns for the period ended on the Closing Date for each state for which such a
return is permitted to be filed. To the extent that Seller's liability for
Taxes, as determined under this Section 11.3 exceeds the tax payments made with
respect thereto for periods ending on or before December 31, 1995, such excess
shall be paid by Seller to Company. To the extent that the tax payments made
with respect to the periods ending on or before December 31, 1995 exceed
Seller's liability for Taxes, as determined under this Section 11.3, and the
Company receives or has the right to receive a refund of such excess, such
excess (i.e., the amount of the refund or credit) shall be paid by the Company,
Buyer, the Partnership or AMG to Seller. Seller shall remit payment of any
liability under this Section to Buyer within 15 days of notice and demand for
payment. In addition, Seller shall indemnify Buyer and its Affiliates and hold
them harmless from and against all liability for Taxes and expenses including
reasonable accountants' and attorneys' fees arising from its membership in an
"affiliated group" (as defined in Section 1504(a) of the Code) prior to the
Closing Date
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under Treasury Regulation Section 1.1502-6 (or similar provisions of state,
local, or foreign law) as a transferee or successor, by contract or law.
Section 11.4 Liability of Buyer and Others. Buyer, AMG, the Company and
the Partnership shall be liable for, and shall indemnify Seller and its
Affiliates and hold them harmless from and against, all liability for Taxes
payable with respect to the assets or operations of the Company (including,
without limitation, all income attributable to such assets) for any taxable
period ending after December 31, 1995. Seller shall determine the Federal Tax
liability for the Company for the period beginning on January 1, 1996 and ending
on the Closing Date calculated using the highest marginal corporate tax rate in
effect for such period multiplied by the Federal taxable income of the Company
for such period. Except as otherwise provided in this Agreement, such taxable
income shall exclude taxable income attributable to the Election as defined in
Section 11.7(a) of this Agreement. Buyer, AMG, the Company or the Partnership
shall remit payment of any liability under this Section to Seller within 15 days
of notice and demand for payment. Buyer and AMG shall also be liable for, and
shall indemnify Seller and its Affiliates and hold them harmless on an after-tax
basis from and against, all Taxes arising from or attributable to (i) the
formation or the operation of the Partnership or the U.K. Partnership, or (ii)
the transactions contemplated by the Asset Transfer Agreement or the
contribution by the Company of all of the capital stock of its Subsidiary to the
U.K. Partnership. Seller will pay any Taxes attributable to the making of the
Election (as defined below) and will indemnify AMG, Buyer, the Company, its
Subsidiary, the Partnership and the U.K. Partnership against any Loss arising
out of any failure to pay such taxes. Notwithstanding the foregoing sentence,
Buyer and AMG shall indemnify Seller and its Affiliates, on an after-tax basis,
for any Taxes and expenses, including reasonable accountants' and attorneys'
fees, arising from or attributable to (i) the formation or the operation of the
Partnership or the U.K. Partnership, (ii) the transactions contemplated by the
Asset Transfer Agreement or the contribution by the Company of all of the
capital stock of its Subsidiary to the U.K. Partnership or (iii) any increase in
Taxes payable by Seller and its Affiliates in connection with the deemed sale of
assets pursuant to the Election as compared to the Taxes that would have been
payable by Seller and its Affiliates if the Election had not been made, except
to the extent that such increase is attributable to (a) Seller's tax basis in
the stock of the Company being greater than or less than the aggregate tax basis
of the assets of the Company immediately prior to the formation of the
Partnership or the formation of the U.K. Partnership, (b) the Company having a
Section 481 adjustment, (c) Seller or its Affiliates having net operating or
capital losses available to offset the gain from the sale of the stock of the
Company that would be recognized by Seller if the Election were not made, and
(d) any part of the gain recognized by the Company as a result of the Election
being treated as ordinary income rather than capital gain.
Section 11.5 Apportionment of Taxes; Transfer Taxes.
(a) Notwithstanding the provisions of Section 11.3 hereof, all real,
personal and intangible property Taxes, or any other similar Tax liability that
relates to any period commencing before and ending after the Closing Date, of
the Company shall be apportioned
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between Buyer, the Company and the Partnership (on the one hand) and Seller (on
the other hand) in accordance with the principles under Section 164(d) of the
Code.
(b) Buyer, the Company and the Partnership shall pay all sales, use,
transfer, filing, conveyance, recording, and other similar Taxes and fees,
including without limitation all applicable real estate transfer Taxes and
recording fees (collectively, "Transfer Taxes"), arising out of or in connection
with the transactions effected pursuant to the Asset Transfer Agreement. The
party which has primary responsibility under applicable law for the payment of
any particular Transfer Tax shall prepare and file the relevant Tax Return, and
notify the other party in writing of the Transfer Taxes shown on such Tax Return
and how such Transfer Taxes were calculated, and, if the other party is Buyer,
the Company or the Partnership, such party shall reimburse Seller for the amount
of such Transfer Taxes in immediately available funds within ten days of receipt
of such notice.
Section 11.6 Payment and Survival of Tax Claims. Any claim for payment of
a Tax liability for which a Person is liable under this Article XI shall be paid
within thirty (30) days following the receipt of notice of such claim by the
party obligated to make such payment. Any claim for indemnification hereunder
must be paid within thirty (30) days following the receipt of notice of such
claim by the party obligated to indemnify. The representations and provisions of
Article IV, Section 4.17, relating to Taxes and Tax Returns, Section 7.12(e) and
this Article XI shall survive the Closing and shall not expire until the
expiration (with valid extensions) of the applicable statute of limitations.
Section 11.7 Election under Sections 338(g) and 338(h)(10) of the Code.
(a) (a) If Buyer requests, Seller agrees to join with Buyer in
making elections under Sections 338(g) and 338(h)(10) of the Code (collectively,
the "Election") for federal income tax purposes, but not for state income tax
purposes, with respect to the Company.
(b) Seller and Buyer agree to cooperate fully with respect to the
making of the Election. Such cooperation shall include, without limitation, the
calculation of Adjusted Grossed-Up Basis, within the meaning of Treas. Reg.
Section 1.338(b)-1, and the allocation of the Purchase Price with respect to the
transactions contemplated under this Agreement in accordance with Section
11.7(f) hereof, and the preparation and delivery of any other related
documentation required by the applicable taxing authorities.
(c) Subject to the provisions of Section 11.7(c) hereof, Buyer shall
deliver to Seller as soon as practicable after the Closing, a fully-completed
and executed IRS Form 8023-A, including all additional data and materials
required to be attached to such Form 8023-A pursuant to the Treasury Regulations
under Section 338 of the Code. Seller agrees to attach a copy of such Form
8023-A to the consolidated federal income Tax Return in which Seller joins for
the taxable period which includes the Closing Date.
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(d) Seller and Buyer agree to jointly file Form 8023-A with the IRS
in accordance with Section 338 of the Code and the regulations thereunder no
later than the 15th day of the ninth month beginning after the month that
includes the Closing Date.
(e) Buyer shall determine with the consent of Seller, (which consent
will not be unreasonably withheld) the appropriate allocation of the Purchase
Price to the assets conveyed pursuant to this Agreement using a reasonable asset
valuation which will be supplied to Seller by Buyer no later than ninety (90)
days after the Closing Date. In all events, however, Seller and Buyer agree to
consistently report such allocations of the Purchase Price determined by Buyer.
Section 11.8 Tax Dispute Resolution Mechanism. Any dispute with respect to
Sections 11.3, 11.4, 11.5 or 11.7 of this Agreement shall be resolved in
accordance with this Section 11.8. The parties will in good faith attempt to
negotiate a settlement of the dispute. If the parties are unable to negotiate a
resolution of the dispute within thirty (30) days after notice of such dispute
is given, in accordance with Section 12.5 hereof, by either party to the other
party, the dispute will be submitted to (i) an Independent Accounting Firm
mutually agreed-upon by Seller and Buyer, or (ii) if the parties are unable to
so agree, an Independent Accounting Firm as selected by lot by a representative
of KPMG Peat Marwick LLP in the presence of the parties (the "Tax Dispute
Accountants"). The parties will present their arguments to the Tax Dispute
Accountants upon submission of the dispute to the Tax Dispute Accountants. The
Tax Dispute Accountants will resolve the dispute, in a fair and equitable manner
and in accordance with the applicable Tax law, within thirty (30) days after the
parties have presented their arguments to the Tax Dispute Accountants, whose
decision shall be final, conclusive and binding on the parties. The fees and
expenses of the Tax Dispute Accountants will become equally by Seller and Buyer.
ARTICLE XII - MISCELLANEOUS
Section 12.1 Amendment. Except as otherwise expressly provided herein,
subject to compliance with applicable law, this Agreement may not be amended,
altered or modified except by written instrument executed by the parties hereto
affected by any such amendment, alteration or modification; provided, however,
that any modification to Section 9.4 shall require the consent of all the
parties hereto.
Section 12.2 Entire Agreement. This Agreement (including Schedules,
Exhibits, certificates and lists referred to herein, and any documents executed
by the parties simultaneously herewith or pursuant thereto (including, without
limitation, the Representation Certificate when executed and delivered)
constitutes the entire understanding of the parties hereto with respect to the
transactions contemplated hereby, and supersede all prior agreements and
understandings, written and oral, among the parties with respect to the subject
matter hereof (other than the Confidentiality Agreement to the extent it does
not conflict with the provisions of this Agreement).
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Section 12.3 Interpretation. When a reference is made in this Agreement to
Sections, Exhibits or Schedules, such reference shall be to a Section of or
Exhibit or Schedule to this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitations. The phrases "the date of this Agreement," "the date hereof' and
terms of similar import, unless the context otherwise requires, shall be deemed
to refer to the date set forth in the first paragraph of this Agreement.
Section 12.4 Severability. Any term or provision of this Agreement which
is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction,
be ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
Section 12.5 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given if (a) delivered in person, (b)
transmitted by telecopy (with confirmation), (c) two (2) business days following
the date on which it is mailed by certified or registered mail (return receipt
requested) or (d) one (1) business day following the date on which it is
delivered by an express courier (with confirmation) to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
To Seller:
Talegen Holdings, Inc.
1011 Western Avenue
Suite 1000
Seattle, Washington 98104
Telecopy: (206) 654-2601
Attention: Richard N. Frasch, Esq.
General Counsel
With a copy to:
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
Telecopy: (212) 735-2000
Attention: Peter Allan Atkins, Esq.
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To Buyer or AMG:
First Quadrant Holdings, Inc.
c/o Affiliated Managers Group, Inc.
Two International Place, 23rd Floor
Boston, Massachusetts 02110
Telecopy: (617) 346-7115
Attention: William J. Nutt, President and Chief Executive
Officer
With a copy to:
Goodwin, Procter & Hoar
Exchange Place
Boston, MA 02109
Telecopy: (617) 523-1231
Attention: Richard E. Floor, P.C.
If to a Manager or Management Corporation:
To the Manager at the address set forth on such Manager's
signature page hereto.
With a copy to:
Munger, Tolles & Olson
355 South Grand Avenue
Los Angeles, CA 90071
Telecopy: (213) 687-3702
Attention: R. Gregory Morgan, Esq.
Section 12.6 Binding Effect; Persons Benefiting; No Assignment. This
Agreement shall inure to the benefit of and be binding upon the parties hereto
and the respective successors and assigns of the parties and such persons.
Nothing in this Agreement is intended or shall be construed to confer upon any
entity or person other than the parties hereto and their respective successors
and permitted assigns any right, remedy or claim under or by reason of their
Agreement or any part hereof. Except as otherwise provided herein, without the
prior written consent of the parties hereto, this Agreement may not be assigned
by either of the parties hereto, nor may either of the parties hereto delegate
any of their obligations hereunder (except, in either case, that Buyer may
assign any of its rights or duties hereunder to AMG).
Section 12.7 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same agreement, it being understood that
all of the parties need not sign the same counterpart.
65
<PAGE> 72
Section 12.8 No Prejudice. This Agreement has been jointly prepared by the
parties hereto and the terms hereof shall not be construed in favor of or
against any party on account of its participation in such preparation.
Section 12.9 Governing Law. This Agreement, the legal relation between the
parties, and the adjudication and the enforcement thereof, shall be governed by
and interpreted and construed in accordance with the substantive laws of the
State of New York, without regard to the choice of law principals thereof.
Section 12.10 Specific Performance. Each of the parties hereto
acknowledges and agrees that the other party hereto would be irreparably damaged
in the event any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. Accordingly,
each of the parties hereto agrees that they each shall be entitled to an
injunction or injunctions to prevent breaches of the provisions of this
Agreement and to enforce specifically this Agreement and the terms and
provisions hereof in any action instituted in any court of the United States or
any state thereof having subject matter jurisdiction, in addition to any other
remedy to which either of the parties may be entitled, at law or in equity.
Section 12.11 Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
[INTENTIONALLY LEFT BLANK]
66
<PAGE> 73
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date first set forth above.
SELLER: TALEGEN HOLDINGS, INC.,
a Delaware corporation
By:/s/ Richard N. Frasch
-----------------------------------------
Name: Richard N. Frasch
Title: Secretary
BUYER: FIRST QUADRANT HOLDINGS, INC., a
Delaware corporation
By:/s/ William J. Nutt
-----------------------------------------
Name: William J. Nutt
Title:
AMG: AFFILIATED MANAGERS GROUP, INC.,
a Delaware corporation
By:/s/ William J. Nutt
-----------------------------------------
Name: William J. Nutt
Title: President and Chief Executive
Officer
MANAGERS: /s/ Robert D. Arnott
--------------------------------------------
Name: Robert D. Arnott
/s/ Robert Brown
--------------------------------------------
Name: Robert Brown
/s/ William A.R. Goodsall
--------------------------------------------
Name: William A. R. Goodsall
/s/ R. Max Darnell
--------------------------------------------
Name: R. Max Darnell
67
<PAGE> 74
/s/ Curt J. Ketterer
--------------------------------------------
Name: Curt J. Ketterer
/s/ David J. Leinweber
--------------------------------------------
Name: David J. Leinweber
/s/ Robert M. Lovell, Jr.
--------------------------------------------
Name: Robert M. Lovell, Jr.
/s/ Christopher G. Luck
--------------------------------------------
Name: Christopher G. Luck
/s/ Timothy S. Meckel
--------------------------------------------
Name: Timothy S. Meckel
MANAGEMENT CORPORATIONS:
R.D. ARNOTT CORPORATION
By:/s/ Robert D. Arnott
-----------------------------------------
Robert D. Arnott
President
CULONBOIS CORPORATION
By:/s/ Curt J. Ketterer
-----------------------------------------
Curt J. Ketterer
President
LUCK MONSTER CORPORATION
By:/s/ Christopher G. Luck
-----------------------------------------
Christopher G. Luck
President
68
<PAGE> 75
AYPWIP CORPORATION
By:/s/ David J. Leinweber
-----------------------------------------
David J. Leinweber
President
R.M. DARNELL CORPORATION
By:/s/ Max Darnell
-----------------------------------------
Max Darnell
President
T.S. MECKEL RUHESTANDS
CORPORATION
By:/s/ Timothy S. Meckel
-----------------------------------------
Timothy S. Meckel
President
LOVELL, INC.
By:/s/ Robert M. Lovell, Jr.
-----------------------------------------
Robert M. Lovell, Jr.
President
69
<PAGE> 1
EXHIBIT 2.4
AMENDMENT TO THE
STOCK PURCHASE AGREEMENT
This AMENDMENT (this "Amendment") is made effective as of March 28,
1996, to the STOCK PURCHASE AGREEMENT (the "Agreement"), dated as of January 17,
1996, by and among Talegen Holdings, Inc., a Delaware corporation ("Seller"),
Affiliated Managers Group, Inc., a Delaware corporation ("AMG"), First Quadrant
Holdings, Inc., a Delaware corporation ("Buyer"), certain managers (the
"Managers") of First Quadrant Corp., a New Jersey corporation (the "Company")
and the management corporations (the "Management Corporations") named therein.
Capitalized terms used herein and not otherwise defined shall have the meanings
set forth in the Agreement.
WHEREAS, Section 12.1 of the Agreement provides that the Agreement may
be amended by a written instrument executed by the parties to the Agreement who
are affected by any such amendment; and
NOW, THEREFORE, the parties hereto agree as follows:
1. Section 7.12(e) shall be amended and restated in its entirety so
that it reads as follows:
(e) Benefit Plans. Prior to the Closing, Seller shall take all
action necessary to assume all liabilities of the Company arising
under, in connection with, or relating to, any Benefit Plan that
provides nonqualified pension or deferred compensation benefits,
including, but not limited to, the SERP and the SIRP, but excluding
liabilities under the Company's Incentive Compensation Plan. Effective
as of the Closing, the Incentive Compensation Plan shall be amended in
accordance with the provisions of Section 8 thereof so that it is in
form and substance acceptable to Buyer. The parties agree and
acknowledge that prior to March 15, 1996, the Company was entitled to
pay all amounts under the Company's Incentive Compensation Plan, as
amended (the "ICP") to which employees became vested on or before
January 2, 1996, and which were payable under the ICP prior to March
15, 1996. With respect to such payments, Buyer agrees that it will not
take any deduction for federal or state income tax purposes. With
respect to all other amounts payable under the ICP ("Post-1995 ICP
Payments"), neither Buyer, including any of its Affiliates (including
the Partnership), nor Seller, including any of its Affiliates, shall
treat for any purpose such amounts as additional consideration paid to
Seller or as other than compensation paid by Buyer or any of its
Affiliates (including the Partnership). Buyer shall also indemnify, on
an after-tax basis, Seller and its Affiliates for any Taxes, along with
any reasonable accountants and attorneys fees, incurred by Seller and
its Affiliates that are attributable to any Post-1995 ICP Payment being
treated as additional consideration paid to Seller ("Additional
Income") if Seller or another member(s) of the affiliated group of
which it is a member is not entitled to receive an offsetting
deduction, either in the same taxable year of Seller (or such other
member) or a subsequent taxable year ("Offsetting
<PAGE> 2
Deduction"). In addition, if a Post-1995 ICP Payment is treated as
Additional Income paid to Seller in one taxable year but Seller (or
another member or members of its affiliated group) is entitled to
receive an Offsetting Deduction in a subsequent taxable year, Buyer
shall pay to Seller, the Annual Deferral Amount. For each taxable year,
the Annual Deferral Amount shall be calculated as follows: the sum of:
(i) the product of (x) the amount by which the cumulative amount of the
Additional Income exceeds the cumulative amount of the Offsetting
Deduction that has accrued to Seller (or other member(s) of its
affiliated group) for federal income tax purposes in such taxable year
or in a prior taxable year, (y) the highest marginal rate of taxes
payable by a corporation for federal income tax purposes in effect for
such taxable year, and (z) the applicable rate of interest (which may
be a fluctuating rate) under section 6621(a)(2) of the Code, and (ii)
the amount of Taxes that are incurred by Seller as a consequence of
receipt of the Annual Deferral Amount. Any indemnity claims hereunder
shall be subject to the procedures set forth in Section 9.5 but any
dispute regarding the interpretation of the language of this Section
7.12(e) shall be resolved as set forth in Section 11.8.
2. The adjustments related to the Purchase Price pursuant to Sections
2.2(c) and (d) are hereby agreed to result in an increase to the Purchase Price
in the amount of $635,890. Such amount is computed as follows: (a) cash on
December 31, 1995 in excess of the Designated Cash Amount, in accordance with
Section 2.2(c) resulting in an increase to the Purchase Price in the amount of
$891,249; less (b) the product of (i) receivables on December 31, 1995 less than
the Designated Receivables Amount, multiplied by (ii) 40.5%, in accordance with
Section 2.2(d) resulting in a decrease to the Purchase Price in the amount of
$255,359. Furthermore, in consideration of the agreement by the parties in the
amount of this adjustment to the Purchase Price, the parties acknowledge that
there is no disagreement with the computation of this adjustment to the Purchase
Price pursuant to Sections 2.2(c) and (d) and accordingly each waive any and all
rights under Section 2.2(e). The parties further agree that the aggregate effect
of this adjustment to the Purchase Price pursuant to Sections 2.2(c) and (d) in
the amount of $635,890 shall be distributed to Seller from the Company
immediately prior to Closing.
3. The parties agree and acknowledge that the SEC audit of the Company
that was commenced on or about January 16, 1996 (the "SEC Audit") has resulted
in a deficiency letter dated March 26, 1996 (the "SEC Letter"), and that the SEC
Letter imposes a number of obligations on the Company (collectively, the "SEC
Requirements"). The SEC Letter has been reviewed by Seller, Buyer, AMG and the
Managers. The parties hereto agree as follows with regard to the SEC Letter, the
SEC Audit and the SEC Requirements, and hereby amend the Agreement as follows:
(a) Indemnity. Subject to clause (b) below, Seller's obligations and
liabilities under the Agreement (including, without limitation, Article IX
thereof) arising from breaches of representations and warranties with respect to
the matters described in the SEC Letter or that were the subject of the SEC
Requirements shall not be limited in any way by reason of Buyer or AMG having
learned of the SEC Audit, the SEC Letter, the matters described in the
2
<PAGE> 3
SEC Letter, the SEC Requirements, or the matters that were the subject of the
SEC Requirements, prior to the Closing. By way of example and not of limitation,
Seller's obligations with respect to Losses arising from Claims asserted by (i)
clients or former clients of the Company and the Partnership (and their
respective successors and assigns), or (ii) any Governmental Authority, with
respect to the SEC Audit, the SEC Letter, the matters described in the SEC
Letter, the SEC Requirements, or the matters that were the subject of the SEC
Requirements, shall not be limited in any way by reason of Buyer or AMG having
learned of the SEC Audit, the SEC Letter, the matters described in the SEC
Letter, the SEC Requirements, or the matters that were the subject of the SEC
Requirements, prior to the Closing. Furthermore, the limitations imposed with
respect to the Buyer Threshold described in Section 9.6 shall not be applicable
to Losses for which indemnity is to be provided by Seller with respect to
breaches of such representations or warranties.
(b) Excluded Losses. Notwithstanding the foregoing or anything else in
the Stock Purchase Agreement, neither Buyer nor AMG shall have any right to (nor
shall they permit any other person or entity controlled by them to) assert or
maintain any claim against Seller on account of Losses incurred on account of
the SEC Audit to date, in responding to the SEC Letter or in complying with the
SEC Requirements as set forth in the SEC Letter. In addition, neither Buyer nor
AMG shall have any right to assert or maintain (nor shall they permit any other
person or entity controlled by them to assert or maintain) any claim against
Seller on account of any Losses (i) attributable or alleged to be attributable
to any Company Clients terminating their investment advisory relationship with
the Company or the Partnership, or (ii) attributable or alleged to be
attributable to any Company withdrawing assets under management, or (iii)
attributable to any Person not becoming a Company Client, in each case on
account of the SEC Audit, the SEC Letter or the SEC Requirements.
(c) Failure to Comply with SEC Requirements. In no event shall Seller
be liable for any Losses occasioned by the failure of the Company, the
Subsidiary or the Partnership to comply with the SEC Requirements as set forth
in the SEC Letter. However, Seller shall remain liable for all other Losses that
would otherwise be indemnifiable under the Agreement and for Losses resulting
from breaches of representations and warranties in the Agreement.
4. This Amendment may be executed in any number of counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument. This Amendment shall be construed under and
governed by the internal laws of the State of Delaware, without giving effect to
the choice or conflicts of law provisions thereof. This Amendment shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns.
3
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Amendment as of the date first above written.
TALEGEN HOLDINGS, INC.,
a Delaware corporation
By: /s/ Gary C. Tolman
--------------------------------------------
Name: Gary C. Tolman
Title: Treasurer
FIRST QUADRANT HOLDINGS, INC.,
a Delaware corporation
By: /s/ William J. Nutt
--------------------------------------------
Name: William J. Nutt
Title: President
AFFILIATED MANAGERS GROUP, INC.,
a Delaware corporation
By: /s/ William J. Nutt
--------------------------------------------
Name: William J. Nutt
Title: President and Chief Executive Officer
Amendment to the Stock Purchase Agreement
4
<PAGE> 1
EXHIBIT 2.5
PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED PURSUANT TO A CONFIDENTIAL
TREATMENT REQUEST FILED WITH THE COMMISSION. ASTERISKS (*) IDENTIFY WHERE SUCH
CONFIDENTIAL INFORMATION HAS BEEN OMITTED. THE OMITTED PORTIONS HAVE BEEN FILED
SEPARATELY WITH THE COMMISSION.
PARTNERSHIP INTEREST PURCHASE AGREEMENT
BY AND AMONG
AFFILIATED MANAGERS GROUP, INC.,
MESIROW ASSET MANAGEMENT, INC.,
MESIROW FINANCIAL HOLDINGS, INC.,
SKYLINE ASSET MANAGEMENT, L.P.,
CERTAIN MANAGERS OF
MESIROW ASSET MANAGEMENT, INC.
AND
THE MANAGEMENT CORPORATIONS NAMED HEREIN
DATED AS OF JUNE 6, 1995
<PAGE> 2
TABLE OF CONTENTS
Page
SECTION 1. PURCHASE AND SALE OF PARTNERSHIP INTERESTS AND
RESTATEMENT OF PARTNERSHIP AGREEMENT......................... 2
1.1 Sale and Purchase............................................ 2
1.2 Purchase Price............................................... 2
1.3 Closing...................................................... 3
1.4 Restatement of Partnership Agreement......................... 3
SECTION 2. REPRESENTATIONS AND WARRANTIES OF MESIROW ASSET
MANAGEMENT AND MESIROW HOLDINGS.............................. 3
2.1 Organization................................................. 3
2.2 Authority.................................................... 4
2.3 Non-Contravention............................................ 5
2.4 Capitalization............................................... 5
2.5 Indebtedness and Subsidiaries................................ 6
2.6 Business..................................................... 6
2.7 Assets....................................................... 6
2.8 Assets Under Management...................................... 7
2.9 Contracts.................................................... 8
2.10 Employment Arrangements...................................... 8
2.11 Financial Statements......................................... 8
2.12 Ordinary Course of Business.................................. 9
2.13 Litigation and Compliance with Laws.......................... 9
2.14 Broker Dealer................................................ 10
2.15 Code of Ethics............................................... 10
2.16 Insurance Policies........................................... 10
2.17 Absence of Certain Changes................................... 10
2.18 Tax Matters.................................................. 11
2.19 Certain Transactions......................................... 12
2.20 Employee Benefit Plans....................................... 12
2.21 Managers' Health............................................. 13
2.22 Brokerage.................................................... 13
2.23 Mesirow Growth Fund.......................................... 13
2.24 The Skyline Funds............................................ 14
2.25 Material Information......................................... 17
SECTION 3. REPRESENTATIONS AND WARRANTIES OF AMG........................ 17
3.1 Organization................................................. 17
3.2 Authority.................................................... 17
3.3 Non-Contravention............................................ 18
3.4 Investment Representation.................................... 18
(i)
<PAGE> 3
Page
3.5 Business..................................................... 18
3.6 Litigation and Compliance with Laws.......................... 18
3.7 Broker Dealer................................................ 19
3.8 Brokerage.................................................... 19
SECTION 4. REPRESENTATIONS AND WARRANTIES OF EACH MANAGER AND
EACH MANAGEMENT CORPORATION.................................. 19
4.1 Individual Power and Authority............................... 19
4.2 Corporate Organization and Authority......................... 20
4.3 Non-Contravention............................................ 20
4.5 Litigation and Compliance with Laws.......................... 21
4.6 Brokerage.................................................... 22
4.7 Investment Advisory Representation........................... 22
4.8 Good Health.................................................. 22
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE MANAGEMENT
CORPORATIONS................................................. 22
5.1 Assets Under Management...................................... 22
5.2 Ordinary Course of Business.................................. 23
5.3 Litigation and Compliance with Laws.......................... 23
SECTION 6. CONDITIONS PRECEDENT TO AMG'S OBLIGATION..................... 23
6.1 Litigation; No Opposition.................................... 23
6.2 Representations, Warranties and Covenants.................... 24
6.3 Advisory Contract Consents................................... 24
6.4 Registration as an Investment Adviser........................ 25
6.5 Other Approvals.............................................. 25
6.6 Asset Transfer............................................... 25
6.7 Non Solicitation/Non Disclosure Agreements................... 25
6.8 Working Capital and Tangible Net Worth of the Partnership.... 25
6.9 Delivery..................................................... 26
6.10 Code of Ethics, etc.......................................... 27
6.11 Resignations................................................. 27
6.12 Elections.................................................... 27
6.13 Termination of Mesirow Growth Fund........................... 28
6.14 New Fund Contracts........................................... 28
6.15 Termination of Existing Advisory and Distribution
Arrangements................................................. 28
6.16 Termination of Covenant Concerning Confidential Information.. 28
SECTION 7. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF .................. 28
7.1 No Litigation; No Opposition................................. 29
7.2 Representations, Warranties and Covenants.................... 29
(ii)
<PAGE> 4
Page
7.3 Delivery..................................................... 29
7.4 Advisory Contract Consents................................... 29
7.5 New Fund Distribution Arrangements........................... 30
SECTION 8. COVENANTS OF THE PARTIES..................................... 30
8.1 Client Consents.............................................. 30
8.2 Conduct of Business.......................................... 31
8.3 Preservation of Business and Assets.......................... 32
8.4 Observer Rights and Access................................... 32
8.5 Termination of Reserve Fund Arrangements..................... 32
8.6 Use of Skyline Name.......................................... 32
8.7 SEC Filings.................................................. 32
8.8 Interim Financial Statements................................. 33
8.9 Confidentiality.............................................. 33
8.10 Expenses..................................................... 34
8.11 Covenants With Respect to Section 15(f) of the Investment
Company Act.................................................. 34
8.12 Retirement Plans............................................. 35
8.13 Agreement with Mesirow Financial............................. 35
8.14 Mesirow Growth Fund.......................................... 35
8.15 Tax Compliance............................................... 35
SECTION 9. INDEMNIFICATION.............................................. 36
9.1 Indemnification by Mesirow Asset Management and Mesirow
Holdings..................................................... 36
9.2 Indemnification by Management Corporations................... 36
9.3 Indemnification by AMG....................................... 37
9.4 Survival of Indemnification Obligations...................... 37
9.5 Defense of Claims............................................ 38
9.6 Prompt Payment............................................... 39
SECTION 10. DEFINITIONS.................................................. 39
10.1 Definitions.................................................. 39
10.2 Survival of Representations, Warranties and Covenants........ 42
10.3 Certain Activities........................................... 43
10.4 Termination of Agreement..................................... 43
10.5 Waivers...................................................... 44
10.6 Modifications................................................ 44
10.7 Further Assurances........................................... 44
10.8 Law Governing................................................ 44
10.9 Notices...................................................... 44
10.10 Prior Agreements Superseded.................................. 47
10.11 Assignability................................................ 47
(iii)
<PAGE> 5
10.12 Captions..................................................... 47
10.13 Gender and Number............................................ 47
10.14 Severability................................................. 47
10.15 Counterparts................................................. 47
Exhibits
Exhibit 1.4(a) Form of Restated Partnership Agreement
Exhibit 1.4(b) Form of Restated Certificate of Limited Partnership
Exhibit 2.1 Form of Partnership Agreement
Exhibit 6.6 Form of Asset Transfer Agreement
Exhibit 6.7 Form of Non Solicitation/Non Disclosure Agreement
Exhibit 6.9(k) Form of Opinion of Mayer, Brown & Platt
Exhibit 6.9(l) Form of Opinion of Bell, Boyd & Lloyd
Exhibit 6.9(m) Form of Trademark, Tradename and Service Mark
Assignment
Exhibit 7.3(f) Form of Opinion of Goodwin, Procter & Hoar
Exhibit 8.1(a) Form of Consent Letter, Version A
Exhibit 8.1(b) Form of Consent Letter, Version B
Schedules
Schedule 2.3 Lender Consents
Schedule 2.4(a) Partnership Capitalization
Schedule 2.6(a) Jurisdictions Where Mesirow Asset Management is
Registered as an Investment Adviser
Schedule 2.6(b) Clients of the Institutional Business
Schedule 2.6(c) Clients of the Portfolio Business
(iv)
<PAGE> 6
Schedule 2.7(c)(i) Persons Claiming Rights to Trademarks, Trade Names and
Service Marks
Schedule 2.7(c)(ii) List of Trademarks, Trade Names and Service Marks to
be Transferred
Schedule 2.8 Assets under Management in the Institutional Business
Schedule 2.10(a) List of Employees
Schedule 2.10(b) Employment Arrangements
Schedule 2.10(c) Confidentiality, Non Disclosure, Non Solicitation and
Non Competition Agreements
Schedule 2.11 Financial Statements
Schedule 2.17(d) Compensation Increases Since December 31, 1994
Schedule 2.24(e) Skyline Trust Contracts
Schedule 2.24(f) Skyline Trust Tax Matters
Schedule 2.24(m) Skyline Trust Insurance Policies
Schedule 6.6 Partnership Capitalization and Capital Accounts
(v)
<PAGE> 7
PARTNERSHIP INTEREST PURCHASE AGREEMENT
PARTNERSHIP INTEREST PURCHASE AGREEMENT dated as of June 6, 1995, by and
among Affiliated Managers Group, Inc., a Delaware corporation ("AMG"), Mesirow
Asset Management, Inc., an Illinois corporation ("Mesirow Asset Management"),
Mesirow Financial Holdings, Inc., a Delaware corporation ("Mesirow Holdings"),
Skyline Asset Management, L.P., a Delaware limited partnership (the
"Partnership"), WMD Corp., an Illinois corporation ("Duttoncorp"), KSK Corp., an
Illinois corporation ("Kailincorp"), GXL Corp. an Illinois corporation
("Lutzcorp"), MXM Corp., an Illinois corporation ("Maloneycorp" and, together
with Duttoncorp, Kailincorp and Lutzcorp, the "Management Corporations"), Mr.
William M. Dutton of Hinsdale, Illinois ("Dutton"), Mr. Kenneth S. Kailin of
Evanston, Illinois ("Kailin"), Mr. Geoffrey Lutz of Glenview, Illinois ("Lutz")
and Mr. Michael Maloney of Chicago, Illinois ("Maloney"). Dutton, Kailin, Lutz
and Maloney are each referred to herein individually as a "Manager" and
collectively as the "Managers."
W I T N E S S E T H:
WHEREAS, Mesirow Asset Management is engaged in the business of providing
investment management and advisory services to private accounts of certain
institutional and individual investors and private investment partnerships, as
well as to portfolio series of certain mutual funds which are registered
investment companies under the Investment Company Act of 1940, as amended (the
"Investment Company Act"); and
WHEREAS, on the date hereof, Mesirow Holdings owns all of the outstanding
capital stock of Mesirow Financial Services, Inc., an Illinois corporation
("Mesirow Financial"), which in turn owns all of the outstanding capital stock
of Mesirow Asset Management; and
WHEREAS, the parties hereto desire to enter into this agreement providing
for the purchase by AMG of all of Mesirow Asset Management's interest in the
Partnership and that, in connection therewith, that the Partnership's
Partnership Agreement be amended and restated in the form attached hereto as
Exhibit 1.4(a) (the "Restated Partnership Agreement"); and
WHEREAS, Mesirow Asset Management, Mesirow Holdings and the other parties
hereto desire and intend, and it is a condition precedent to the obligations of
AMG hereunder, that, one full business day prior to the closing of the
transactions contemplated hereby, Mesirow Holdings will cause Mesirow Asset
Management to, and Mesirow Asset Management will, contribute assets involved in
the institutional division of its investment management business and working
capital to the Partnership, as more fully described below, in exchange for
Partnership Points and a Capital Account therein pursuant to the Asset Transfer
Agreement in the form attached hereto as Exhibit 6.6 (the "Asset Transfer
Agreement"); and
WHEREAS, in order to induce the other parties hereto to enter into this
Agreement, and in order to receive the benefits that will accrue to them if AMG
purchases Mesirow Asset
<PAGE> 8
Management's interest in the Partnership and the other benefits they will derive
from the transactions contemplated hereby, Mesirow Holdings, Mesirow Asset
Management, the Management Corporations and the Managers have agreed to make
certain representations, warranties and covenants as set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants herein contained
and other valuable consideration, the receipt and adequacy whereof are hereby
acknowledged, the parties hereto do hereby severally covenant and agree as
follows:
SECTION 1. PURCHASE AND SALE OF PARTNERSHIP INTERESTS AND RESTATEMENT OF
PARTNERSHIP AGREEMENT.
1.1 Sale and Purchase. Subject to the terms, provisions and conditions
contained in this Agreement, and on the basis of the representations, warranties
and covenants herein set forth:
(a) Mesirow Asset Management hereby agrees, and Mesirow Holdings
hereby agrees to cause Mesirow Asset Management, to sell and deliver to AMG,
free and clear of any restrictions, liens, claims, charges, pledges or
encumbrances of any kind or nature whatsoever (collectively, "Claims"), all of
Mesirow Asset Management's interest in the Partnership, which shall include (i)
a Capital Account equal to ********** Dollars ($**) which is one hundred percent
(100%) of the Mesirow Capital Account (as such term is defined in the Restated
Partnership Agreement), and (ii) Partnership Points held by Mesirow Asset
Management on the date of this Agreement as reflected on Schedule 2.4(a) (the
"Purchased Partnership Interest"), and AMG hereby agrees to purchase the
Purchased Interest from Mesirow Asset Management for the Partnership Interest
Purchase Price (as such term is defined in Section 1.2 below).
(b) Mesirow Holdings hereby agrees to assign, sell and transfer all
right, title and interest in and to the Marks (as such term is defined in the
Trademark, Tradename and Service Mark Assignment in the form of Exhibit 6.9(m)
hereto), together with (i) the registration of the Marks, (ii) the goodwill of
the business symbolized by and associated with the Marks and the registration
thereof, and (iii) the right to sue and recover for, and the right to profits or
damages due or accrued arising out of or in connection with, any and all past,
present or future infringements or dilution of or damage or injury to the Marks
or the registration thereof or such associated goodwill (the "Purchased
Intellectual Property Interest"), and AMG hereby agrees to purchase the
Purchased Intellectual Property Interest from Mesirow Asset Management for the
Intellectual Property Interest Purchase Price (as such term is defined in
Section 1.2 below).
1.2 Purchase Price.
(a) The aggregate purchase price for the Purchased Partnership
Interest shall be ********** Dollars ($**), subject to adjustment as provided in
Section 1.2(b) (as so adjusted, the "Partnership Interest Purchase Price"),
payable at the Closing by wire transfer to an account
2
<PAGE> 9
specified by Mesirow Asset Management to AMG in writing at least two business
days prior to the Closing.
(b) In the event that at or prior to the Closing clients of the
Institutional Business of Mesirow Asset Management (including the Skyline
Funds) shall have either (i) terminated advisory agreements (or given notice of
their intention to do so) following December 31, 1994 or (ii) failed to consent
to the transactions contemplated hereby or, in the case of registered
investment companies, failing to enter into Comparable Contracts (collectively,
"Non-Consenting Clients"), such that the Aggregate Contract Payments provided
for in the advisory contracts between Mesirow Asset Management and all such
Non-Consenting Clients exceeds ten percent (10%) of Base Fees, then the
unadjusted purchase price for the Purchased Partnership Interest of **********
Dollars ($**) shall be reduced in an amount equal to Seventy-Five Thousand
Dollars ($75,000) for each one percent (1%) of Aggregate Contract Payments
provided for in the advisory contracts between Mesirow Asset Management and
such Non-Consenting Clients, as a percentage of Base Fees (rounded to the
nearest whole percent), that is in excess of ten percent (10%) of Base Fees,
subject in any event to Section 6.3(c) and Section 7.4 hereof.
(c) The aggregate purchase price for the Purchased Intellectual
Property Interest shall be Twenty Thousand Dollars ($20,000) (the "Intellectual
Property Purchase Price" and, together with the Partnership Interest Purchase
Price, the "Purchase Price"), payable at the Closing by wire transfer to an
account specified by Mesirow Holdings AMG in writing at least two business days
prior to the Closing.
1.3 Closing. The closing of the purchase, sale and acceptance of the
Purchased Interest and the payment therefor (the "Closing") shall take place at
the offices of the Partnership in Chicago, Illinois, at 10:00 a.m., local time,
on the closing date, which shall be the last business day of the calendar month
in which the last of the conditions set forth in Sections 6 and 7 hereof is
fulfilled or waived, or such other date (or at such other place) as shall be
mutually agreed upon by Mesirow Holdings and AMG, and shall be one full business
day after the Asset Transfers, such date being herein called the "Closing Date."
1.4 Restatement of Partnership Agreement. Simultaneously with and at the
Closing, the Partnership Agreement of the Partnership shall be amended and
restated in the form attached hereto as Exhibit 1.4(a), and the Certificate of
Limited Partnership of the Partnership shall be amended and restated in the form
attached hereto as Exhibit 1.4(b) (the "Restated Certificate"), which Restated
Certificate shall have become effective simultaneously with the Closing.
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SECTION 2. REPRESENTATIONS AND WARRANTIES OF MESIROW ASSET MANAGEMENT AND
MESIROW HOLDINGS.
As a material inducement to AMG to enter into this Agreement, Mesirow
Asset Management and Mesirow Holdings, jointly and severally, make each of the
representations, warranties and agreements contained in this Section 2 to AMG.
2.1 Organization. Each of Mesirow Asset Management and Mesirow Financial
is a corporation duly organized, legally existing and in good standing under the
laws of the State of Illinois, and Mesirow Holdings is a corporation duly
organized, legally existing and in good standing under the laws of the State of
Delaware (Mesirow Asset Management, Mesirow Financial and Mesirow Holdings,
together with the Partnership to the extent and during the time that Mesirow
Asset Management is the general partner thereof, hereinafter being referred to
separately as a "Mesirow Entity" and collectively as the "Mesirow Entities").
The Partnership is a limited partnership duly formed, validly existing and in
good standing under the laws of the State of Delaware; and a copy of the
Partnership's Limited Partnership Agreement (the "Partnership Agreement") is
attached hereto as Exhibit 2.1. Each of the Mesirow Entities is duly authorized
to conduct its business and is in good standing under the laws of each
jurisdiction in which the nature of its business or the ownership or leasing of
its properties requires such qualification, except where the failure to be so
licensed or qualified does not have a Material Adverse Effect on the entity
failing to be so licensed or qualified.
2.2 Authority. (a) Mesirow Asset Management has all requisite corporate
power and authority to own its assets and conduct its business and possesses all
material licenses, franchises, registrations, permits, approvals and other
rights (collectively, "Licenses") necessary to conduct its business as presently
carried on by it. Each of the Mesirow Entities has all requisite corporate power
and authority to execute, deliver and perform this Agreement, the other
Transaction Documents to which it is a party and to carry out the transactions
contemplated herein and therein. This Agreement and each other Transaction
Document to which any Mesirow Entity is a party has been duly and validly
approved by all necessary action of such entity, and this Agreement and each
other such Transaction Document represents or, when executed and delivered, will
represent, the valid and legally binding obligation of such Mesirow Entity,
enforceable in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights.
(b) The Partnership has all requisite partnership power and
authority under the Partnership Agreement (and, after giving effect to the
Closing and the execution, delivery and effectiveness of the Restated
Partnership Agreement, under the Restated Partnership Agreement) and under the
Delaware Act, to own its assets and conduct its business (and, after giving
effect to the Asset Transfers, to conduct the Institutional Business), and
possesses all Licenses necessary to conduct its business (and, after giving
effect to the Asset Transfers, to conduct the Institutional Business). The
Partnership has all requisite partnership power and authority under the
Partnership Agreement (and, after giving effect to the Closing and the
execution, delivery and effectiveness
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of the Restated Partnership Agreement, under the Restated Partnership Agreement)
and under the Delaware Act, to execute, deliver and perform this Agreement, and
the other Transaction Documents to which it is a party and to carry out the
transactions contemplated herein and therein. This Agreement and each other
Transaction Document to which the Partnership is a party has been duly and
validly approved by all necessary action of the Partnership (including all
necessary action of the General Partner) and this Agreement and each other such
Transaction Document represents or, when executed and delivered, will represent
the valid and legally binding obligation of the Partnership, enforceable against
the Partnership in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights.
2.3 Non-Contravention. The execution, delivery and performance of this
Agreement, each other Transaction Document and each other agreement, document
and instrument to be executed, delivered and performed by each of the Mesirow
Entities in connection with the transactions contemplated hereby and thereby
does not and will not: (a) violate any provision of the charter or by-laws, or
partnership agreement, respectively, of such Mesirow Entity; (b) violate,
conflict with, result in a default under, accelerate any obligation under or
give rise to a right of termination of any indenture or loan or credit agreement
or any other contract, agreement, instrument, mortgage, lien, lease, permit,
writ, order, judgment, authorization, injunction, decree, determination,
arbitration award or other obligation to which any Mesirow Entity is a party or
by which it or its assets are bound (except that in order to consummate the
transactions contemplated by this Agreement Mesirow Holdings is required to
obtain consent under each of the loan or credit agreements listed on Schedule
2.3, which consents will have been received prior to the Closing or at any
earlier time required under such agreements); (c) violate or result in a
violation of, or constitute a default under, any provision of any law,
regulation or rule, or any order of, or any restriction imposed by, any court or
other governmental agency, authority or entity; (d) require any Mesirow Entity
to obtain any approval, consent or waiver of, or make any filing with, any
person or entity that has not been obtained or made (except as contemplated by
Sections 6.3 and 6.4, which approvals, consents, waivers or filings, as
applicable, will have been received prior to the Closing or, at any earlier time
required hereunder or under applicable laws, rules and regulations); or (e)
except as provided by this Agreement, result in the creation or imposition of
any Claim on any of the assets of any Mesirow Entity or any of the interests of
Mesirow Asset Management in the Partnership.
2.4 Capitalization.
(a) Mesirow Asset Management is the sole general partner of the
Partnership, and the capitalization of the Partnership is as set forth on
Schedule 2.4(a), with all such interests owned beneficially and of record by the
persons and in the amounts indicated on Schedule 2.4(a), in each case free and
clear of any Claims other than restrictions imposed pursuant to the Partnership
Agreement. All outstanding Partnership Interests have been duly authorized and
validly issued. After giving effect to the Closing, AMG will be the sole general
partner of the Partnership, and will have good title to the Partnership
Interests purchased hereby, free and clear of any Claims other than restrictions
either imposed pursuant to the Partnership Agreement or
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created by, or with the written consent of, AMG. Except as set forth in this
Agreement, there are no existing rights, agreements or commitments obligating or
which might obligate the Partnership or any of its Partners to issue, transfer,
sell or redeem any securities.
(b) The duly authorized capital stock of Mesirow Asset Management
consists of ten thousand (10,000) shares of Common Stock, one dollar ($1.00) par
value per share, one thousand (1,000) of which shares are issued and outstanding
and held by Mesirow Financial, and the duly authorized capital stock of Mesirow
Financial consists of five thousand (5,000) shares of Common Stock, ten dollars
($10.00) par value per share, four hundred (400) of which are issued and
outstanding and held by Mesirow Holdings. All the outstanding shares of capital
stock of Mesirow Asset Management and Mesirow Financial have been duly
authorized and validly issued and are fully paid and nonassessable.
2.5 Indebtedness and Subsidiaries. Neither Mesirow Asset Management nor
the Partnership has any Indebtedness, nor is either of them a party to any
agreement providing for the borrowing or lending of money. After giving effect
to the Asset Transfers and immediately after the Closing, the Partnership will
not have any Indebtedness, nor will it be a party to any agreement providing for
the borrowing or lending of money, except to the extent that AMG as general
partner of the Partnership takes action to cause the Partnership to incur
indebtedness at or after the Closing. The Institutional Business has been
conducted by Mesirow Asset Management directly and not through any subsidiary,
joint venture, partnership or other entity.
2.6 Business. Mesirow Asset Management is engaged solely in the business
of providing investment management and investment advisory services. Mesirow
Asset Management is duly registered as an investment adviser under the Advisers
Act, is duly registered, licensed and qualified as an investment adviser in each
of the jurisdictions set forth on Schedule 2.6(a), which are all jurisdictions
(a) where such registration, licensing or qualification is required in order to
conduct its business or (b) where the failure to be so registered, licensed or
qualified would have a Material Adverse Effect on the Institutional Business.
Mesirow Asset Management has delivered to AMG or its representatives, true and
complete copies of its Form ADV, as amended to date, and has made available
copies of all state registration forms, likewise as amended to date. The
information contained in such forms was true and complete at the time of filing
in all material respects and is true and complete as of the date hereof. Each
Mesirow Entity has filed all material registration forms and holds all other
Licenses required under applicable federal and state laws in connection with the
Institutional Business (as defined below). After giving effect to the Asset
Transfers and the Closing, and after obtaining the consents required by Sections
6.3, 6.4 and 6.5, the Partnership will have all the Licenses necessary to own
the property it receives in the Asset Transfers and to conduct the businesses
presently conducted by Mesirow Asset Management with respect to all clients of
the institutional division of Mesirow Asset Management listed on Schedule 2.6(b)
hereto (the "Institutional Business"), but expressly excluding the investment
advisory and business conducted by Mesirow Asset Management with respect to
clients of its portfolio division listed on Schedule 2.6(c) hereto (the
"Portfolio Business"). The Partnership has conducted no business, owned no
assets and incurred no liabilities except (x) pursuant to the Asset Transfers,
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(y) with the written consent of AMG or (z) as otherwise necessary to facilitate
the transactions contemplated hereby.
2.7 Assets.
(a) The Partnership does not own any real property. The Partnership
does not and will not own any leasehold or other interest in any real property.
(b) Mesirow Asset Management owns all of the assets listed on
Schedule 1(a) of the Asset Transfer Agreement included in Exhibit 6.6 hereto
free and clear of any Claims except for (i) the Claims of the Partnership and
AMG and (ii) minor imperfections of title or insignificant liens which do not,
in the aggregate, detract from the value of such assets, taken as a whole, or
interfere with the present or proposed uses thereof or the Institutional
Business or, following the Asset Transfers, the Partnership. All the assets
listed on Schedule 1(a) of the Asset Transfer Agreement included in Exhibit 6.6
hereto are being transferred to the Partnership as part of the Asset Transfers
and, after giving effect to the Asset Transfers and the Closing, the Partnership
will own all such assets free and clear of any Claims except those set forth in
clause (ii) above.
(c) To the best knowledge of the Mesirow Entities, none of the
Mesirow Entities nor Skyline Trust has infringed or violated, in any way, any
trademark, trade name, patent, copyright, trade secret or other intellectual
property right or contractual relation of another person. None of the Mesirow
Entities nor the Skyline Trust has received any notice, claim or protest
respecting any such infringement or violation. Set forth on Schedule 2.7(c)(i)
is a list of each other Person known to the Mesirow Entities to claim rights to
any trademark, trade name or service mark involving the name "Skyline" for use
in the banking or financial services industry, together with a brief description
of such claim; and as to each such Person and claim or otherwise, to the best
knowledge of the Mesirow Entities, there has not been any incident of confusion
with the Institutional Business. Except for (i) the trademarks, trade names and
service marks described on Schedule 2.7(c)(ii), all of which are being
transferred to AMG pursuant to the Assignment of Trademarks and (ii) computer
software that is commercially available in the retail marketplace, Mesirow Asset
Management neither owns nor uses any material franchises, permits, licenses,
trademarks, trade names, patents, patent applications, copyrights, trade
secrets, computer software, formulas, designs, inventions (together,
"Intellectual Property") or ideas, in the conduct of the Institutional Business
as presently conducted, and no such Intellectual Property is necessary for the
conduct of the Institutional Business as proposed to be conducted by the
Partnership after the Closing.
All of the registrations and applications listed on Schedule 2.7(c)(ii)
have been duly registered in, filed in or issued by the United States Patent and
Trademark Office or the corresponding office of other jurisdictions as
identified on said Schedule, and have been properly maintained and renewed in
accordance with all applicable provisions of law and administrative regulations
of the United States and each such jurisdiction. Each Mesirow Entity has taken
all
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steps required in accordance with sound business practice to establish and
preserve its ownership of all Intellectual Property rights listed on Schedule
2.7(c)(ii).
2.8 Assets Under Management. The aggregate assets under management in the
Institutional Business as of December 31, 1994 and March 31, 1995, are
accurately described on Schedule 2.8 hereto. In addition, set forth on Schedule
2.8 is a list as of March 31, 1995, of all investment management, advisory or
sub-advisory contracts constituting the Institutional Business, setting forth
the name of the client under each such contract, the amount of assets under
management with respect to each such contract, the fee schedule in effect with
respect to each such contract as of each such date (the "Fee Schedule") and each
guideline, exhibit, schedule or letter agreement in connection therewith. Since
December 31, 1994, no client of the Institutional Business has given any
indication of its intent to terminate or reduce its investment relationship with
Mesirow Asset Management or, after the Asset Transfers and the Closing, the
Partnership, or adjust the Fee Schedule with respect to any contract in a manner
which would reduce the fee to Mesirow Asset Management or the Partnership, as
applicable.
2.9 Contracts. Each of the material contracts, agreements and obligations
used in, constituting or relevant to the Institutional Business, including each
of the investment advisory contracts that constitutes part of the Institutional
Business, is described on Schedule 2.8 hereof. All such contracts are valid and
effective in accordance with their respective terms, and there is not, under any
such contract, an existing material breach or event which, with the giving of
notice or the lapse of time or both, would become such a breach. All of the
rights and obligations of Mesirow Asset Management under each such contract are
being transferred to the Partnership as part of the Asset Transfers and, after
obtaining the consents set forth in Sections 6.3 and 6.4, and giving effect to
the Asset Transfers and the Closing, (a) each such contract will, immediately
after the Closing, remain valid and effective in accordance with its respective
terms, and the Partnership will be entitled to all rights and remedies
thereunder to which Mesirow Asset Management is now entitled, or (b) to the
extent that applicable law or the terms of such contract provide for an
automatic termination thereof upon an assignment thereof, such contract will
have been replaced by a Comparable Contract. Other than this Agreement and such
other agreements and contracts as are contemplated hereby, the Partnership is
not a party to any obligations, agreements, commitments, powers of attorney or
contracts and there are no other contracts relating to the Institutional
Business.
2.10 Employment Arrangements. Attached hereto as Schedule 2.10(a) is a
list of all employees of the Institutional Business. Except as set forth in
Schedule 2.10(b), no Mesirow Entity has any obligation, contingent or otherwise,
in connection with the Institutional Business of Mesirow Asset Management or
with any of the Persons on such Schedule under (a) any employment, collective
bargaining or other labor agreement, (b) any written or oral agreement
containing severance or termination pay arrangements, (c) any deferred
compensation agreement, retainer or consulting arrangements, (d) any pension or
retirement plan, any bonus or profit-sharing plan, any stock option or stock
purchase plan, or (f) any other employee contract or non-terminable (whether
with or without penalty) employment arrangement (each an
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"Employment Arrangement"). Except as set forth on Schedule 2.10(c), none of the
Persons on Schedule 2.10(a) has any obligation, contingent or otherwise under
any confidentiality, non disclosure, non solicitation or non competition
agreement (the "Employee Contracts"). No Mesirow Entity is in default with
respect to any material term or condition of any of the foregoing, nor, after
obtaining the consents set forth in Section 6.3, will the Asset Transfers or the
Closing result in default, including, without limitation, after the giving of
notice, lapse of time or both. The Partnership has no obligations, contingent or
otherwise, under any Employment Arrangement, and each Employment Arrangement
under which any Mesirow Entity has any obligation on the date of this Agreement
and each Employee Contract under which any of the Persons on Schedule 2.10(a)
has any obligation will, prior to the Closing, have terminated on terms
acceptable to AMG.
2.11 Financial Statements.
(a) Attached hereto as Schedule 2.11 are (i) audited balance sheets
at March 31, 1994 and March 31, 1993, together with unaudited statements of
income for each of the two years in the period ended March 31, 1994, for Mesirow
Asset Management, (ii) unaudited balance sheets at March 31, 1995, together with
the unaudited statements of income for the year ended March 31, 1995, for
Mesirow Asset Management, (iii) unaudited statements of income for the
Institutional Business for each of the three years ended March 31, 1995, and
(iv) audited balance sheets of Mesirow Holdings at March 31, 1994 and March 31,
1993, all of which financial statements, together with the notes thereto
(together with the audited balance sheets at March 31, 1995, together with the
statements of income and cash flows for the year ended March 31, 1995, for
Mesirow Asset Management and Mesirow Holdings, which shall be delivered to AMG
as soon as practicable and in any event prior to the Closing) and together with
the Interim Financial Statements, are collectively referred to as the "Company
Financial Statements."
(b) The Company Financial Statements have been prepared in
accordance with generally accepted accounting principles, methods and practices
consistently applied using the accrual method of accounting and fairly present
in all material respects the financial position of Mesirow Asset Management or
Mesirow Holdings, as applicable, as of the respective dates thereof, and the
results of their respective operations for the respective periods covered
thereby. The audited financial statements have been certified by Mesirow
Holdings's accountants, an independent accounting firm.
(c) Except as and to the extent reflected or reserved therefor in
the balance sheet of Mesirow Asset Management at March 31, 1995 contained in
Schedule 2.11, including the footnotes and schedules thereto (the "Base Balance
Sheet"), or as otherwise set forth as part of Schedule 2.11, Mesirow Asset
Management has no material liability or liabilities arising other than in the
ordinary course of business.
(d) All of the accounts receivable of the Institutional Business,
shown or reflected on the Base Balance Sheet or the Interim Financial
Statements, were valid and
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enforceable claims, and all of the outstanding accounts receivable of the
Institutional Business of Mesirow Asset Management are valid and enforceable
claims, in each case, subject to no known set-offs or counterclaims. All of the
accounts receivable of the Institutional Business of Mesirow Asset Management
are, to the knowledge of each Mesirow Entity, fully collectible in the ordinary
course of business.
2.12 Ordinary Course of Business. Except as specifically contemplated by
this Agreement, since March 31, 1995, Mesirow Asset Management has operated its
business in the normal, usual and customary manner in the ordinary and regular
course of business, consistent in all material respects with prior practice.
2.13 Litigation and Compliance with Laws. There is no litigation or
governmental or other administrative action, suit, proceeding or investigation
(including, without limitation, any voluntary or involuntary proceeding under
the Bankruptcy Code or any action, suit, proceeding or investigation under any
federal or state securities law or regulation) pending or, to the best knowledge
of the Mesirow Entities, threatened, to which any Mesirow Entity or any officer,
director, stockholder or partner thereof is a party before any federal, state,
municipal or other governmental department, commission, board, agency or
instrumentality, domestic or foreign, at law or in equity or otherwise, (i)
which is related to the business, affairs, properties or assets of Mesirow Asset
Management or the Partnership or (ii) which might call into question the
validity or hinder the enforceability or performance of this Agreement or the
other Transaction Documents or any of the transactions contemplated hereby and
thereby or any of the contracts described on Schedule 2.8 hereof. There are no
proceedings pending, or to the best knowledge of the Mesirow Entities and the
Partnership, threatened, relating to the termination of, or limitation of, any
License held by Mesirow Asset Management or the Partnership, including, without
limitation, the registrations as investment advisers of Mesirow Asset Management
and the Partnership under the Advisers Act, or any similar statute or regulation
of any other jurisdiction. Each Mesirow Entity is, and at all times has been, in
material compliance with all laws and governmental rules and regulations,
domestic or foreign, including, without limitation, all federal or state
securities laws applicable to the business or affairs or properties or assets of
Mesirow Asset Management with respect to the Institutional Business or of the
Partnership. None of the Mesirow Entities nor any officer, director, stockholder
or partner thereof is in material default with respect to any judgment, order,
writ, injunction, decree, demand or assessment issued by any court or any
federal, state, municipal or other governmental agency, board, commission,
bureau, instrumentality or department, domestic or foreign, relating to any
aspect of the business or affairs or properties or assets of Mesirow Asset
Management with respect to the Institutional Business or of the Partnership.
2.14 Broker Dealer. None of Mesirow Asset Management, Mesirow Holdings or
the Partnership is a "broker" or "dealer" within the meaning of the Exchange Act
or any state securities laws.
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2.15 Code of Ethics. The Skyline Trust, Mesirow Asset Management and
Mesirow Financial have each adopted a Code of Ethics which complies with all
applicable provisions of Rule 17j-1 promulgated under the Investment Company
Act, a copy of which has been delivered to AMG. There has been no material
violation or allegation of a material violation of such Code of Ethics.
2.16 Insurance Policies. Upon the effectiveness of the Asset Transfers,
the Partnership has in full force and effect such insurance as is customarily
maintained by companies of a size similar to the Institutional Business in the
same or a similar business, with respect to its business, properties and assets
(including, without limitation, errors and omissions liability insurance). The
Partnership is not in material default under any such policy and each of the
Partnership and Mesirow Asset Management will use all commercially reasonable
efforts to continue such policies in full force and effect through the Closing.
After giving effect to the Asset Transfers, each such insurance policy or
equivalent policies will be in full force and effect through the Closing with
the Partnership as the sole owner and beneficiary of each such policy.
2.17 Absence of Certain Changes. Since December 31, 1994, except as
expressly provided for in this Agreement (or with the prior written consent of
AMG), none of the Mesirow Entities has suffered any change which, individually
or in connection with any other changes, has had or could be expected to have a
Material Adverse Effect on the Institutional Business. In addition, except as
expressly contemplated hereby (or with the prior written consent of AMG), since
December 31, 1994, there has not been:
(a) any adverse change in the financial condition, properties,
assets, liabilities, business or operations of the Institutional Business or the
Partnership;
(b) any change in accounting methods or practices by Mesirow Asset
Management or the Partnership;
(c) any declaration, setting aside or payment of any dividend or
other distribution with respect to, or any direct or indirect redemption or
acquisition of, any of the partnership interests of the Partnership;
(d) except for the increases in salary and bonus compensation set
forth on Schedule 2.17(d), any increase in the salary or other compensation
payable or to become payable by any Mesirow Entity to any officers, directors,
consultants or employees of the Institutional Business or of the Partnership, or
the declaration, payment or commitment or obligation of any kind for the payment
by any Mesirow Entity of a bonus or other additional salary or compensation to
any such persons other than in the ordinary course of business as heretofore
conducted, with the prior written consent of AMG, or as expressly contemplated
hereby;
(e) any amendment or termination or, to the best knowledge of each
Mesirow Entity, proposed or threatened amendment or termination, whether written
or oral, of any
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agreement listed on Schedule 2.8, or License to which Mesirow Asset Management
or the Partnership is a party;
(f) loan or contingent liability incurred by Mesirow Asset
Management or the Partnership to any person or entity, or guaranty by Mesirow
Asset Management or the Partnership of any loan or other obligation;
(g) mortgage, pledge or other encumbrance of any of the assets of
the Partnership;
(h) waiver or release of any material right or claim of Mesirow
Asset Management with respect to the Institutional Business or of the
Partnership;
(i) any purchase, sale or other disposition of any of the properties
or assets of the Institutional Business or the Partnership other than in the
ordinary course of business;
(j) any other transaction entered into by Mesirow Asset Management
or the Partnership other than in the ordinary course of business; or
(k) agreement by any of the Mesirow Entities to do, or agreement to
cause the Partnership to do, any of the things described in the preceding
clauses (a)-(j), except as otherwise specifically contemplated hereby.
2.18 Tax Matters. Mesirow Asset Management has (a) paid, or caused to be
paid, all material federal, state, county, local, foreign, and other taxes, and
all deficiencies, or other additions to tax, interest, fines and penalties
(collectively, "Taxes") owed and required to be paid by it (other than current
taxes the liability for which is adequately provided in the Company Financial
Statements), and (b) in accordance with applicable law, filed all federal,
state, county, local and foreign tax returns which are required to be filed by
it, and all such returns correctly and accurately set forth the amount of any
Taxes relating to the applicable period. No taxing authority is now asserting
or, to the best knowledge of the Mesirow Entities, threatening to assert against
Mesirow Asset Management or the Partnership, any deficiency or claim for
additional Taxes.
2.19 Certain Transactions. Other than as contemplated by this Agreement
(or any Schedule or Exhibit hereto), none of the officers, directors,
stockholders, partners or employees of any Mesirow Entity is presently a party
to any material transaction with respect to the Institutional Business or the
clients of the Institutional Business listed on Schedule 2.6(b), including,
without limitation, any material contract, agreement or other material
arrangement providing for the furnishing of services to or by or otherwise
requiring payments to or from, any such officer, director, stockholder, partner
or employee, any member of a family of any such officer, director or
stockholder, or any corporation, partnership, trust or other entity in which any
such officer, director, stockholder, partner or employee has an interest or is
an officer, director, stockholder, trustee or partner.
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2.20 Employee Benefit Plans.
(a) The Partnership has never maintained any Employee Plan (as
defined in paragraph (d) below). Each Employee Plan which Mesirow Asset
Management maintains (or has maintained) or which is or was maintained by any
other member of the Controlled Group (as defined in paragraph (d) below) (the
"Plans") which is (or was) intended to be qualified under Section 401(a) of the
Code, has in fact been so qualified from its effective date through and
including the Closing Date (or such Plan's termination date, if earlier). No
event or omission has occurred which would cause any such Plan to lose its
qualification under Section 401(a) of the Code or its related trust to lose its
exemption under Section 501(a) of the Code.
(b) Neither Mesirow Asset Management nor any other member of the
Controlled Group has ever maintained, or had an obligation to contribute to, a
Multiemployer Plan (as defined in Section 4001(a)(13) of ERISA) or a plan
subject to Title IV of ERISA. None of the Plans has ever promised or provided
health care or other non-pension benefits to former employees (other than
benefits required to be provided by Part 6 of Subtitle B of Title I of ERISA).
(c) With respect to each Plan, there has been no "prohibited
transaction", as such term is defined in Section 406 of ERISA and Section 4975
of the Code, which could result in any material tax, penalty or liability of
Mesirow Asset Management. All of the Plans have complied in all material
respects with the requirements prescribed by any and all applicable statutes,
orders or governmental rules or regulations in effect with respect thereto. Each
member of the Controlled Group has performed all material obligations required
to be performed by it under, and is not in any material respect in default under
or in violation of, and none of the Mesirow Entities has any knowledge of any
material default or violation by any other party with respect to, any such Plan.
There are no material actions, suits or claims pending (other than routine
claims for benefits) or, to the best knowledge of each Mesirow Entity
threatened, with respect to any of the Plans. Each member of the Controlled
Group has made all payments due from it to date under or with respect to each
Plan, and all amounts properly accrued to date as liabilities of Mesirow Asset
Management under or with respect to each Plan for the current plan years have
been recorded on the books of Mesirow Asset Management.
(d) For the purposes of this Section, (i) the term "Employee Plan"
or "Plan" includes any employee benefit plan as defined in Section 3(3) of
ERISA, and any bonus, stock option, or other benefit plan or arrangement,
whether or not subject to ERISA, but shall not include any such plan or
arrangement which is, or is similar to, a payroll practice as defined in 29 CFR
Section 2510.3-1(b), and (ii) "Controlled Group" means each Mesirow Entity, and
all the entities within the same "controlled group" as Mesirow Asset Management
within the meaning of Section 302(d)(8)(C) of ERISA.
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(e) To the best knowledge of each Mesirow Entity, there is no matter
pending (other than routine qualification determination filings) with respect to
any of the Plans before the IRS, the PBGC or the Department of Labor.
(f) With respect to any employee benefit plan within the meaning of
Section 3(3) of ERISA which is sponsored, maintained or contributed to, or has
been sponsored, maintained or contributed to by any member of the Controlled
Group, (i) no accumulated funding deficiency, whether or not waived, within the
meaning of Section 302 of ERISA or Section 412 of the Code has been incurred,
and (ii) all contributions (including installments) to such plan required by
Section 302 of ERISA and Section 412 of the Code have been timely made.
2.21 Managers' Health. To the knowledge of the Mesirow Entities (based
solely on each such person's actual knowledge, excluding knowledge obtained from
health or insurance records of any Mesirow Entity with respect to any Manager to
the extent that such records are subject to legal protection or privilege for
the benefit of any Manager), each Manager is in good health.
2.22 Brokerage. None of the Mesirow Entities has incurred any obligation
for a brokerage commission or finders fee in connection with the transaction
contemplated hereby.
2.23 Mesirow Growth Fund.
(a) Compliance with Laws; Legal Proceedings. Mesirow Growth Fund is
in compliance in all material respects with (i) all applicable laws, rules and
regulations, including, without limitation, the Investment Company Act, the
Advisers Act, the Securities Act, the Exchange Act and all applicable state
securities laws and (ii) the investment policies and restrictions set forth in
all offering materials used in connection with the offer or sale of its Units or
interests and with its Agreement of Limited Partnership. There are no legal or
governmental actions, investigations, inquiries or proceedings before any court,
arbitrator or federal, state, local or foreign governmental or regulatory agency
or authority or self-regulatory authority, pending or threatened against Mesirow
Growth Fund or affecting its properties or assets.
(b) Termination. The termination and liquidation of Mesirow Growth
Fund, as described in Section 6.13, and the execution of the transactions
contemplated in connection with such termination and liquidation, does not and
will not: (a) violate any provision of the partnership agreement of Mesirow
Growth Fund, (b) violate or result in a violation of, or constitute a default
under, any provision of any law, regulation or rule, or any order of, or any
restriction imposed by, any court or other governmental agency, authority or
entity (including without limitation Section 17 of the Investment Company Act
and the rules promulgated thereunder); and (c) require Mesirow Growth Fund to
obtain any approval, consent of waiver of, or make any filing with, any person
or entity that has not been obtained or made.
2.24 The Skyline Funds.
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(a) Registration and Regulation of the Trust. The Skyline Trust is
duly registered with the SEC as an investment company under the Investment
Company Act and all shares of each Skyline Fund which have been or are being
offered for sale have been duly registered under the Securities Act and have
been duly registered, qualified or are exempt from registration or qualification
under the securities laws of each state or other jurisdiction in which such
shares have been or are being offered for sale; and no action has been taken by
the Skyline Trust to revoke or rescind any such registration or qualification.
The Skyline Trust and each of the Skyline Funds are in compliance in all
material respects with all applicable laws, rules and regulations, including,
without limitation, the Investment Company Act, the Advisers Act, the Securities
Act, the Exchange Act, the Commodity Exchange Act, the Code and all applicable
state securities laws. The Skyline Trust and each of the Skyline Funds are in
compliance in all material respects with the investment policies and
restrictions set forth in the Skyline Trust's registration statement currently
in effect and the value of each Skyline Fund's net assets is determined using
portfolio valuation methods that comply in all material respects with the
requirements of the Investment Company Act and the terms of the Skyline Trust's
registration statement. There are no legal or governmental actions,
investigations, inquiries or proceedings pending or threatened against the
Skyline Trust or any of the Skyline Funds which would question the right, power
or capacity of Mesirow Asset Management or the Partnership to act as manager or
investment adviser to the Skyline Trust or any of the Skyline Funds contemplated
hereby.
(b) Organization and Standing. The Skyline Trust is a Massachusetts
business trust duly formed, validly existing and in good standing under the laws
of the Commonwealth of Massachusetts. The Skyline Trust has the requisite power
and authority to own all of its properties and asset and to issue its shares of
beneficial interest.
(c) Financial Statements. The books of account and related records
of the Skyline Trust fairly reflect in reasonable detail its assets, liabilities
and transactions in accordance with generally accepted accounting principles
applied on a consistent basis. The audited financial statements of each Skyline
Fund for fiscal years ended December 31, 1994, 1993 and 1992 and the unaudited
financial statements of each Skyline Fund for the quarter ended March 31, 1995
previously delivered to the AMG (the "Skyline Trust's Financial Statements")
present fairly in all material respects the financial position of each Skyline
Fund in accordance with generally accepted accounting principles applied on a
consistent basis as at the dates indicated and the results of operations and
cash flows for the periods then ended (subject, in the case of unaudited
financial statements, to the inclusion of notes and to customary year-end
adjustments which are not expected to be material). The audited financial
statements have been certified by the Skyline Trust's accountants, an
independent accounting firm.
(d) No Material Adverse Changes. Since December 31, 1994, no
material adverse change has occurred in the financial condition, results of
operations, business, assets or liabilities of the Skyline Trust or the status
of any Skyline Fund as a regulated investment company under the Code, other than
changes resulting from any change in general conditions in the
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financial or securities markets or the performance of any investments made by a
Skyline Fund and other than changes occurring in the ordinary course of business
of each Skyline Fund.
(e) Contracts. Except for contracts and agreements set forth on
Schedule 2.24(e), full and complete copies of which have been provided to AMG,
the Skyline Trust (including each Skyline Fund) is not a party to or subject to
any contract with any of the Mesirow Entities or any of their respective
Affiliates or any material contract, debt instrument, plan, lease, franchise,
license or permit (other than permits issued under any state securities law) of
any kind or nature whatsoever. No material default exists under any of the
contracts and agreements listed on Schedule 2.24(e).
(f) Taxes. All Tax returns required to be filed by the Skyline Trust
or the Skyline Funds on or prior to the Closing Date have been or will be timely
filed and such returns are correct in all material respects, and all Taxes shown
as payable on such returns have been or will be timely paid. For any period for
which Federal Tax returns of the Skyline Trust or the Skyline Funds are not
required to have been filed in accordance with the previous sentence by the
Closing Date, the Skyline Trust or the appropriate Skyline Fund has made, or
will make by the Closing Date, an adequate accrual on its books of any Federal
Taxes due or to become due, if any, as a result of actions occurring on or
before the Closing Date. Except as described on Schedule 2.24(f), (i) each
Skyline Fund has qualified as a regulated investment company under the Code in
respect of each taxable year of such Skyline Fund since commencement of its
operations, (ii) as of March 31, 1995, each Skyline Fund was in compliance with
the applicable requirements for qualification as a regulated investment company
under Section 851 of Sub-chapter M of the Code and (iii) each Skyline Fund has
paid any Taxes, including without limitation any excise taxes, it was required
to pay.
(g) Books. The books and records of the Skyline Trust reflecting,
among other things, the purchase and sale of shares of the Skyline Trust by
shareholders of the Skyline Trust, the number of issued and outstanding shares
owned by each shareholder and the state or other jurisdiction in which such
shares were offered and sold, are complete and accurate in all material
respects.
(h) Registration Statement. The registration statement of the
Skyline Trust, a copy of which has been previously furnished to AMG, did not
contain as of the date of filing and of each amendment thereto any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in
light of the circumstances in which they were made and the current prospectus
and statement of additional information for the Skyline Funds, copies of which
have been previously furnished to AMG, as supplemented by any supplement thereto
dated on or prior to the Closing Date, do not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statement therein not misleading.
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(i) Ability to Conduct the Business. The Skyline Trust is not
subject to, or bound by, any judgment, order, writ, injunction or decree of any
court, or of any governmental body, including the SEC, or of any arbitrator,
that, after the Closing Date, would prevent the conduct of business material to
the Skyline Trust in accordance with current practice or have a Material Adverse
Effect on any Skyline Fund.
(j) Litigation or Proceeding. No litigation, investigation, inquiry
or governmental proceeding is pending or, to the best knowledge of the Mesirow
Entities, threatened against or affecting the Skyline Trust or the properties,
assets or business of the Skyline Trust before any court, arbitrator or federal,
state, local or foreign governmental or regulatory agency or authority or
self-regulatory authority (including, but not limited to, the SEC, the
Commodities Futures Trading Commission, the National Association of Securities
Dealers and the Internal Revenue Service) that would be reasonably likely to
have a Material Adverse Effect on any Skyline Fund or delay, hinder or prohibit
the solicitation of proxies from shareholders of the Skyline Trust in the manner
contemplated hereby, or the execution or delivery of the New Fund Contracts by
the Skyline Trust.
(k) Absence of Undisclosed Liabilities. As of the date of this
Agreement, the Skyline Trust has no material debts, obligations or liabilities,
whether due or to become due, absolute, contingent or otherwise, that are
required to be reflected in the Skyline Trust's Financial Statements in
accordance with generally accepted accounting principles, that are not so
reflected, except for debts, obligations or liabilities incurred in the ordinary
course of business since December 31, 1994 or that would not be material.
(l) No Pending Transaction. The Skyline Trust is not a party to or
bound by any agreement, undertaking or commitment (i) to merge or consolidate
with, or acquire all or substantially all of the property and assets of, any
other corporation, trust or person, or (ii) to sell, lease or exchange all or
substantially all of its property and assets to any other corporation, trust or
Person.
(m) Insurance. Attached hereto as Schedule 2.24(m) is a complete and
correct list of all policies of insurance of which the Skyline Trust is the
owner, insured or beneficiary, or covering any of its property, indicating for
each policy the carrier, risks insured, the amounts of coverage, deductible,
premium rate, expiration date and any pending claims thereunder, as of the date
of this Agreement. All such policies are outstanding and in full force and
effect, to the time of Closing, and may either terminate or continue thereafter,
as the case may be. (Mesirow Asset Management shall notify AMG no less than
forty-five (45) days prior to Closing of any intended termination to occur at
the time of Closing.) There is no default with respect to any provision
contained in any such policy, nor has there been any failure to give any notice
or present any claim under such policy in a timely fashion or in the manner or
detail required by the policy, which default or failure, individually or in the
aggregate, could reasonably be expected to affect adversely to a material extent
the ability of the Partnership or the Skyline Trust to recover on a claim under
any such policy. No notice of cancellation or non-renewal with respect to, or
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disallowance of any claim by or on behalf of the Skyline Trust under, any such
policy has been received by any Mesirow Entity, the Skyline Trust or any Skyline
Fund, within the five years preceding the date of this Agreement.
2.25 Material Information. None of the written information or
documentation furnished by any Mesirow Entity to AMG or any of its
representatives contained or contains any untrue statement of a material fact,
nor does it omit to state a material fact necessary to make the statements or
facts contained herein or therein, taken as a whole, not misleading in light of
the circumstances in which they were made. There have been no events or
transactions or information (other than changes in general economic and market
conditions) which has come to the attention of any Mesirow Entity which could
reasonably be expected to materially and adversely affect the business,
prospects, operations, affairs, conditions or assets of the Partnership or of
Mesirow Asset Management with respect to the Institutional Business, which has
not been set forth in this Agreement or in an Exhibit or Schedule hereto.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF AMG
AMG represents and warrants to each of Mesirow Asset Management, Mesirow
Holdings, each Manager and each Management Corporation that:
3.1 Organization. It is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware.
3.2 Authority. AMG has all requisite corporate power and authority to (a)
own its assets and to conduct its business, and possess all Licenses necessary
to conduct its business as presently carried on, and (b) execute, deliver and
perform this Agreement, the other Transaction Documents and each of the other
agreements, documents and instruments to be executed, delivered and performed by
it in connection with this Agreement and the transactions contemplated herein
and therein. This Agreement, each other Transaction Document, and each other
agreement, document and instrument to be executed, delivered and performed by
AMG in connection with the transactions contemplated herein and therein have
been duly and validly approved by all necessary action of AMG, and this
Agreement, each of the other Transaction Documents and each of such other
agreements, documents and instruments to which it is a party represents, or when
executed will represent, the valid and legally binding obligation of AMG,
enforceable in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights.
3.3 Non-Contravention. The execution, delivery and performance of this
Agreement, each other Transaction Document and each other agreement, document
and instrument to be executed, delivered and performed by AMG in connection with
the transactions contemplated hereby and thereby does not and will not: (a)
violate any provision of the charter or by-laws of AMG; (b) violate, conflict
with, result in a default under, accelerate any obligation under or give
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<PAGE> 25
rise to a right of termination of any indenture or loan or credit agreement or
any other contract, agreement, instrument, mortgage, lien, lease, permit, writ,
order, judgment, authorization, injunction, decree, determination, arbitration
award or other obligation to which AMG is a party or by which it or its assets
are bound; (c) violate or result in a violation of, or constitute a default
under, any provision of any law, regulation or rule, or any order of, or any
restriction imposed by, any court or other governmental agency; (d) require AMG
to obtain any approval, consent or waiver of, or make any filing with, any
person or entity that has not been obtained or made except for approvals,
consents, waivers or filings, as applicable, which will have been received prior
to the Closing or at any earlier time required hereunder or under applicable
laws, rules and regulations.
3.4 Investment Representation.
(a) The Purchased Interest AMG acquires hereunder will be acquired
by it for its own account for investment and not with a view to or for sale in
connection with any distribution thereof or with any present intention of
selling or distributing all or any part thereof. AMG acknowledges that none of
the Purchased Interest has been registered under the Securities Act, or the
securities laws of any state or other jurisdiction, and cannot be disposed of
unless such Purchase Interest is registered under the Securities Act, and any
applicable state laws, or an exemption from such registration is available.
(b) AMG is sufficiently knowledgeable and experienced in the making
of investments of this type so as to be able to evaluate the risks and merits of
its investment and is able to bear the economic risk of its investment in the
Partnership. AMG acknowledges that interests in the Partnership are illiquid,
that no market for interests in the Partnership exists, and that none is
contemplated to be created.
3.5 Business. AMG is and has, since its inception, been engaged solely in
the business of investing in firms which provide investment management and
investment advisory services and activities reasonably related thereto.
3.6 Litigation and Compliance with Laws. There is no litigation or legal
or other action, suit, proceeding or, to AMG's best knowledge, investigation, at
law or in equity, or before any federal, state, municipal or other governmental
department, commission, board, agency or instrumentality, domestic or foreign,
in which AMG or any officer or director thereof is engaged, or, to the best
knowledge of AMG, with which any of them is threatened, in connection with the
business, affairs, properties or assets of AMG or which might call into question
the validity or hinder the enforceability or performance of this Agreement, or
of the other Transaction Documents or any of the other agreements and
transactions contemplated hereby and thereby. None of AMG nor any of its
officers or directors is engaged in any litigation or legal or other actions,
suits, proceedings or, to AMG's best knowledge, investigations, at law or in
equity, or before any federal, state, municipal or other governmental
department, commission, board, agency or instrumentality, domestic or foreign
(including, without limitation, any voluntary or involuntary
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proceedings under the Bankruptcy Code), in each case in connection with the
business, affairs, properties or assets of AMG. AMG is, and at all times has
been, in material compliance with all laws and governmental rules and
regulations, domestic or foreign, including, without limitation, all federal or
state securities laws applicable to the business, affairs, properties or assets
of AMG, except where non-compliance therewith, in any individual instance or any
series of related instances, would not have a Material Adverse Effect on AMG.
None of AMG nor any officer or director thereof, is in material default with
respect to any judgment, order, writ, injunction, decree, demand or assessment
issued by any court or any federal, state, municipal or other governmental
agency, board, commission, bureau, instrumentality or department, domestic or
foreign, relating to any aspect of the business, affairs, properties or assets
of AMG. None of AMG nor any officer or director thereof, is charged or, to the
best knowledge of AMG, threatened with, or under investigation with respect to,
any material violation of any provision of federal, state, municipal or other
law or any administrative rule or regulation, domestic or foreign, affecting AMG
or the transactions contemplated hereby.
3.7 Broker Dealer. AMG is not a "broker" or "dealer" within the meaning of
the Exchange Act or any state securities laws.
3.8 Brokerage. AMG has not incurred any obligation for a brokerage
commission or finders fee in connection with the transactions contemplated
hereby.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF EACH MANAGER AND EACH MANAGEMENT
CORPORATION.
As a material inducement to AMG entering into this Agreement, Duttoncorp
and Dutton jointly and severally make the following representations with respect
to Duttoncorp and Dutton, Kailincorp and Kailin jointly and severally make the
following representations with respect to Kailincorp and Kailin, Lutzcorp and
Lutz jointly and severally make the following representations with respect to
Lutzcorp and Lutz and Maloneycorp and Maloney jointly and severally make the
following representations with respect to Maloneycorp and Maloney.
4.1 Individual Power and Authority. Such Manager has full right, power and
authority to execute, deliver and perform this Agreement, the other Transaction
Documents and each of the other agreements, documents and instruments to be
executed, delivered and performed by him in connection with this Agreement and
the transactions contemplated herein and therein. This Agreement, each of the
other Transaction Documents, and each other agreement, document and instrument
to be executed, delivered and performed by such Manager in connection with the
transactions contemplated herein and therein represents, or when executed will
represent, the valid and legally binding obligation of such Manager, enforceable
in accordance with its terms, subject to applicable, bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights.
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4.2 Corporate Organization and Authority. Each Management Corporation is a
corporation duly organized, legally existing and in good standing under the laws
of the State of Delaware. Each Management Corporation is duly authorized to
conduct its business and is in good standing under the laws of each jurisdiction
in which the nature of its business or the ownership or leasing of its
properties requires such qualification, except for failures to be so authorized
or be in good standing that would not in the aggregate have a Material Adverse
Effect on its business or the ownership or leasing of its properties. Each
Management Corporation has all requisite corporate power and authority to (a)
own its assets and conduct its business and possess all Licenses necessary to
conduct its business as presently carried on by it and as contemplated to be
carried on by it after the Closing hereunder and the closing of the transactions
contemplated hereby, and (b) execute, deliver and perform this Agreement, the
other Transaction Documents to which such Management Corporation is a party and
the transactions contemplated herein and therein. This Agreement, each other
Transaction Document to which such Management Corporation is a party and each
other agreement, document and instrument to be executed, delivered and performed
by such Management Corporation have been duly and validly approved by all
necessary action of such entity, and this Agreement and each of the other
Transaction Documents to which such Management Corporation is a party represents
or, when executed, will represent, the valid and legally binding obligation of
each Management Corporation, as applicable, enforceable in accordance with its
terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting creditors' rights.
4.3 Non-Contravention. The execution, delivery and performance of this
Agreement by such Manager and such Management Corporation, each other
Transaction Document and each other agreement, document and instrument to be
executed, delivered and performed by such Manager or such Management Corporation
in connection with the transactions contemplated hereby and thereby does not and
will not: (a) violate any provision of the charter or by-laws of each Management
Corporation, as applicable; (b) violate, conflict with, result in a default
under, accelerate any obligation under or give rise to a right of termination of
any indenture or loan or credit agreement or any other contract, agreement,
instrument, mortgage, lien, lease, permit, writ, order, judgment, authorization,
injunction, decree, determination, arbitration award or other obligation to
which such Manager or Management Corporation is a party or by which he or it is
bound, or cause the creation of any encumbrance on his or its assets; (c)
violate or result in a violation of, or constitute a default under, any
provision of any law, regulation or rule, or any order of, or any restriction
imposed by, any court or other governmental agency; (d) require such Manager or
Management Corporation to obtain any approval, consent or waiver of, or make any
filing with, any person or entity that has not been obtained or made, which
approvals, consents, waivers or filings, as applicable, will have been received
prior to the Closing, or at any earlier time required hereunder or under
applicable laws, rules and regulations; or (e) except as provided by this
Agreement, result in the creation or imposition of any Claim on any of the
assets of the Partnership or any of the interests of the Manager (directly or
indirectly through any other Person), the Management Corporation or Mesirow
Asset Management in the Partnership.
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4.4 Capitalization.
(a) The duly authorized capital stock of Duttoncorp consists of
1,000 shares of Common Stock, $.01 par value per share, of which 100 shares are
issued and outstanding and held beneficially and of record by Dutton. All the
outstanding shares of capital stock of Duttoncorp have been duly authorized and
validly issued and are fully paid and nonassessable. Except as contemplated by
this Agreement, there are no existing rights, agreements or commitments
obligating or which might obligate Duttoncorp to issue, transfer, sell or redeem
any securities.
(b) The duly authorized capital stock of Kailincorp consists of
1,000 shares of Common Stock, $.01 par value per share, of which 100 shares are
issued and outstanding and held beneficially and of record by Kailin. All the
outstanding shares of capital stock of Kailincorp have been duly authorized and
validly issued and are fully paid and nonassessable. Except as contemplated by
this Agreement, there are no existing rights, agreements or commitments
obligating or which might obligate Kailincorp to issue, transfer, sell or redeem
any securities.
(c) The duly authorized capital stock of Lutzcorp consists of 1,000
shares of Common Stock, $.01 par value per share, of which 100 shares are issued
and outstanding and held beneficially and of record by Lutz. All the outstanding
shares of capital stock of Lutzcorp have been duly authorized and validly issued
and are fully paid and nonassessable. Except as contemplated by this Agreement,
there are no existing rights, agreements or commitments obligating or which
might obligate Lutzcorp to issue, transfer, sell or redeem any securities.
(d) The duly authorized capital stock of Maloneycorp consists of
1,000 shares of Common Stock, $.01 par value per share, of which 100 shares are
issued and outstanding and held beneficially and of record by Maloney. All the
outstanding shares of capital stock of Maloneycorp have been duly authorized and
validly issued and are fully paid and nonassessable. Except as contemplated by
this Agreement, there are no existing rights, agreements or commitments
obligating or which might obligate Maloneycorp to issue, transfer, sell or
redeem any securities.
4.5 Litigation and Compliance with Laws. There is no litigation or
governmental or administrative action, suit, proceeding or investigation
(including, without limitation, any voluntary or involuntary proceeding under
the Bankruptcy Code or any action, suit, proceeding or investigation under any
federal or state securities law or regulation) pending or, to the best knowledge
of each Manager and each Management Corporation, threatened, before any federal,
state, municipal or other governmental department, commission, board, agency or
instrumentality, domestic or foreign, at law or in equity or otherwise, to which
any Manager or any Management Corporation or any officer, director or
stockholder thereof is a party, (i) which is related to the business, affairs,
properties or assets of any Management Corporation, Mesirow Asset Management or
the Partnership or (ii) which might call into question the validity or hinder
the enforceability or performance of this Agreement or the other Transaction
Documents or any of the contracts described on Schedule 2.8 hereto. Each of the
Managers and Management Corporations
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is, and at all times has been, in material compliance with all laws and
governmental rules and regulations, domestic or foreign, including, without
limitation, all federal or state securities laws applicable to the business,
affairs, properties or assets of each Management Corporation, Mesirow Asset
Management or the Partnership, except where non-compliance therewith, in any
individual instance or any series of related instances, would not have a
Material Adverse Effect on the Institutional Business, Mesirow Asset Management
or the Partnership. None of the Managers or Management Corporations (nor any
officer, director or stockholder thereof), is in material default with respect
to any judgment, order, writ, injunction, decree, demand or assessment issued by
any court or any federal, state, municipal or other governmental agency, board,
commission, bureau, instrumentality or department, domestic or foreign, relating
to any aspect of the business, affairs, properties or assets of any of the
Management Corporations, the Institutional Business, Mesirow Asset Management or
the Partnership. None of the Managers, nor to the best knowledge of the
Managers, any other Person, has violated the Code of Ethics of the Skyline
Trust, Mesirow Asset Management or Mesirow Financial described in Section 2.15
hereof.
4.6 Brokerage. None of the Management Corporations or Managers has
incurred any obligation for a brokerage commission or finders fee in connection
with the transactions contemplated hereby.
4.7 Investment Advisory Representation. Except for advice given to members
of such Manager's immediate family, such Manager does not provide investment
advisory or investment management services to any person or entity, other than
on behalf of Mesirow Asset Management, pursuant to an investment advisory
agreement between Mesirow Asset Management and a client (including for these
purposes a client that is a registered or private investment company).
4.8 Good Health. To his knowledge, such Manager is in good health.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE MANAGEMENT CORPORATIONS.
As a material inducement to AMG entering into this Agreement, the
Management Corporations, jointly and severally, make the following
representations to AMG.
5.1 Assets Under Management. The aggregate assets under management in the
Institutional Business as of December 31, 1994 and March 31, 1995, are
accurately described on Schedule 2.8 hereto. In addition, set forth on Schedule
2.8 is a list as of March 31, 1995, of all investment management, advisory or
sub-advisory contracts constituting the Institutional Business, setting forth
the name of the client under each such contract, the amount of assets under
management with respect to each such contract, the Fee Schedule and each
guideline, exhibit, schedule or letter agreement in connection therewith. Since
December 31, 1994, except as is set forth on Schedule 2.8 hereto, no client of
the Institutional Business has given any indication of its intent to terminate
or reduce its investment relationship with Mesirow Asset Management or, after
the Asset Transfers and the Closing, the Partnership, or adjust the Fee Schedule
with respect to
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any contract in a manner which would reduce the fee to Mesirow Asset Management
or the Partnership, as applicable.
5.2 Ordinary Course of Business. Since March 31, 1995, the Institutional
Business has been operated in the normal, usual and customary manner in the
ordinary and regular course of business, consistent in all material respects
with prior practice.
5.3 Litigation and Compliance with Laws. To the best knowledge of the
Management Corporations and the Managers, there is no litigation or governmental
or other administrative action, suit, proceeding or investigation (including,
without limitation, any voluntary or involuntary proceeding under the Bankruptcy
Code or any action, suit, proceeding or investigation under any federal or state
securities law or regulation) pending or threatened, to which Mesirow Asset
Management or the Partnership or any officer, director, stockholder or partner
thereof is a party before any federal, state, municipal or other governmental
department, commission, board, agency or instrumentality, domestic or foreign,
at law or in equity or otherwise, (i) which is related to the business, affairs,
properties or assets of the Institutional Business or the Partnership or (ii)
which might call into question the validity or hinder the enforceability or
performance of this Agreement or the other Transaction Documents or any of the
transactions contemplated hereby and thereby. To the best knowledge of the
Management Corporations and the Managers, there are no proceedings pending or
threatened, relating to the termination of, or limitation of, any License held
by Mesirow Asset Management or the Partnership, including, without limitation,
the registrations as investment advisers of Mesirow Asset Management and the
Partnership under the Advisers Act, or any similar statute or regulation of any
other jurisdiction. To the best knowledge of the Management Corporations and the
Managers, Mesirow Asset Management is, and at all times has been, in material
compliance with all laws and governmental rules and regulations, domestic or
foreign, including, without limitation, all federal or state securities laws
applicable to the Institutional Business or the Partnership.
SECTION 6. CONDITIONS PRECEDENT TO AMG'S OBLIGATION.
The obligation of AMG to purchase and accept transfer and delivery of the
Purchased Interest is subject to the satisfaction on or, where appropriate,
prior to the Closing Date, of the following conditions, except to the extent
that any such condition may have been waived in writing by AMG on or prior to
the Closing Date:
6.1 Litigation; No Opposition. No judgment, injunction, order or decree
enjoining or prohibiting any of AMG, Mesirow Asset Management, Mesirow Holdings,
the Partnership, any of the Management Corporations or any of the Managers or
other parties to any of the Transaction Documents, from consummating the
transactions contemplated hereby or thereby shall have been entered and no suit,
action or proceeding shall be pending or threatened at any time prior to or on
the Closing Date before or by any court or governmental body seeking to restrain
or prohibit, or seeking damages or other relief in connection with, the
execution and delivery of this Agreement
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or any of the Transaction Documents, or the consummation of the transactions
contemplated hereby or thereby or which could be expected to have a Material
Adverse Effect on AMG, Mesirow Asset Management or the Partnership.
6.2 Representations, Warranties and Covenants. Each of the representations
and warranties of Mesirow Asset Management, Mesirow Holdings, the Partnership,
each of the Management Corporations, and each of the Managers contained in this
Agreement and in any schedule or exhibit attached hereto (including any
supplement to any such schedule or exhibit) and in each other Transaction
Document and each other agreement, document and instrument to be executed,
delivered and performed by AMG in connection with the transactions contemplated
herein and therein or otherwise made in writing by any of them or on their
behalf shall be true and correct (a) at and as of the date of this Agreement,
(b) at and as of the Asset Transfers as though newly made at such time, and (c)
at and as of the Closing as though newly made at such time, except that the
Company Financial Statements must continue to be true only as of the respective
dates covered thereby. Each and all of the agreements and conditions to be
performed or satisfied by Mesirow Asset Management, Mesirow Holdings, the
Partnership, each of the Management Corporations and each of the Managers
hereunder and under the other Transaction Documents and each other agreement,
document and instrument to be executed, delivered and performed by AMG in
connection with the transactions contemplated herein and therein at or prior to
the Closing shall have been duly performed or satisfied; and Mesirow Asset
Management, Mesirow Holdings, the Partnership, each of the Management
Corporations and each of the Managers shall have furnished AMG with a
certificate or certificates dated as of the Closing Date with respect to each of
the foregoing.
6.3 Advisory Contract Consents.
(a) Mesirow Asset Management and the Partnership (i) shall have, at
least sixty (60) days in advance of the Closing Date, requested the consent from
the clients of the Institutional Business to the transactions contemplated
hereby in the manner set forth in Section 8.2, and, (ii) except as otherwise
agreed in writing by AMG, shall have obtained from each registered investment
company for which Mesirow Asset Management serves as a subadviser (with the
approval by the trustees (including a majority of the independent trustees) and
the shareholders of each such company) new investment advisory contracts
effective as of the Closing that are Comparable Contracts;
(b) the Partnership shall have obtained from each Skyline Fund (with
the approval by the trustees (including a majority of the independent trustees)
and the shareholders of each Skyline Fund) new investment advisory contracts
effective as of the Closing that are Comparable Contracts;
(c) clients of Mesirow Asset Management (including the Skyline
Funds) which are party to advisory agreements that provide for Aggregate
Contract Payments constituting at least seventy-five percent (75%) of the Base
Fees shall have affirmatively consented in writing to
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the transactions contemplated hereby (by countersigning a notice substantially
in the form of Exhibit 8.1(a) or Exhibit 8.1(b) such that the advisory contracts
(or Comparable Contracts as provided above with respect to registered investment
companies) in effect as of the date of this Agreement survive the transactions
contemplated hereby without impermissible assignment; and
(d) at the Closing, Mesirow Asset Management, Mesirow Holdings, each
Management Corporation and each Manager shall deliver a certificate certifying
as to compliance with the foregoing.
6.4 Registration as an Investment Adviser. Mesirow Asset Management and
the Managers shall have caused the Partnership to become registered as an
investment adviser under the Advisers Act and the rules and regulations
promulgated thereunder in all jurisdictions in which Mesirow Asset Management is
registered in connection with the Institutional Business on the date of this
Agreement and in each other jurisdiction where it is desirable for the
Partnership to be registered as an investment adviser in order to conduct after
the Asset Transfers and Closing the Institutional Business presently conducted
by Mesirow Asset Management.
6.5 Other Approvals. Except as otherwise specifically contemplated hereby,
all actions by or in respect of, or filings with, any governmental body, agency,
or official or authority required to permit the consummation of the transactions
contemplated hereby so that the Partnership shall be able to carry on the
Institutional Business after the Closing Date substantially in the manner now
conducted by Mesirow Asset Management, shall have been taken, made or obtained,
and any and all other material permits, approvals, consents or other action
necessary to consummate the transactions hereunder shall have been received or
taken, and none of such permits, approvals or consents shall contain any
provisions which, in the reasonable judgment of AMG, are unduly burdensome.
6.6 Asset Transfer. (a) The transactions contemplated by the Asset
Transfer Agreement in the form attached hereto as Exhibit 6.6 shall have
occurred and at least one (1) full business day shall have elapsed from such
occurrence, (b) such other documents and instruments of transfer as AMG shall
reasonably deem necessary shall have been executed and delivered, and (c) the
Partnership's capitalization, including Partnership Points and options and other
rights to purchase Partnership Points, and the Capital Accounts in the
Partnership shall be as set forth on Schedule 6.6 hereto.
6.7 Non Solicitation/Non Disclosure Agreements. Each Manager and each
Management Corporation shall have entered into a Non Solicitation/Non Disclosure
Agreement with the Partnership (each a "Non Solicitation Agreement") in the form
attached hereto as Exhibit 6.7, and each such Non Solicitation Agreement shall
be in full force and effect.
6.8 Working Capital and Tangible Net Worth of the Partnership. After the
Asset Transfers, and at the Closing, and after taking into account all
transaction costs which are assumed or to be assumed by the Partnership, the
Partnership shall have a tangible net worth (determined
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in accordance with generally accepted accounting principles using the accrual
based method of accounting, consistently applied) of at least $600,000 and at
least $200,000 of working capital (defined as current assets less current
liabilities). The Partnership shall also have all of the assets and cash
necessary for the operation of the Institutional Business consistent with past
practices. After the Asset Transfers and immediately prior to the Closing, the
adjusted tax basis of the assets of the Partnership consisting of office
furniture and computer equipment and other equipment as agreed to by AMG shall
be at least $400,000.
6.9 Delivery. Each Mesirow Entity, the Partnership, each Management
Corporation and each Manager shall have executed (where applicable) and
delivered to AMG (or shall have caused to be executed and delivered to AMG by
the appropriate person) the following:
(a) the Asset Transfer Agreement and all such other documents of
transfer and assignment as AMG may reasonably require;
(b) certified copies of resolutions of the board of directors or
trustees (and, if necessary, the shareholders or partners) of the Mesirow
Entities, each Management Corporation and the Skyline Funds, authorizing the
execution and delivery of each of the Transaction Documents to which such Person
is a party and approving all other actions required to be taken or approved in
connection with this Agreement and the other Transaction Documents and the
transactions contemplated herein and therein;
(c) a copy of the charter and by-laws of Mesirow Asset Management
and each of the Management Corporations which, in the case of the charter, is
certified as of a recent date by the Secretary of State of the relevant state of
incorporation;
(d) a copy of the Agreement and Declaration of Trust and by-laws of
the Skyline Trust which, in the case of the Agreement and Declaration of Trust,
is certified as of a recent date by the Secretary of State of the Commonwealth
of Massachusetts;
(e) a certificate issued by the appropriate Secretary of State
certifying that Mesirow Asset Management, Mesirow Financial, Mesirow Holdings,
the Partnership, each Management Corporation and the Skyline Trust is validly
existing and in good standing in such state as of the most recent practicable
date;
(f) a certificate issued by the appropriate Secretary of State of
each state in which each of Mesirow Asset Management and, after giving effect to
the Asset Transfers, the Partnership does business certifying that Mesirow Asset
Management and the Partnership, as applicable, are in good standing in such
state as of the most recent practicable date;
(g) true and correct copies of each of the Transaction Documents,
and all agreements, documents, instruments and certificates delivered or to be
delivered in connection therewith;
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(h) for each of the Managers evidence that such Person has had a
physical examination within ninety (90) days prior to the Closing, including a
letter from a licensed physician familiar with such Person's health indicating
that such Person is in good health at such date;
(i) a certificate of the Secretary of Mesirow Asset Management,
Mesirow Financial, Mesirow Holdings, and each of the Management Corporations and
the Skyline Trust, certifying that its respective resolutions, charter and
by-laws described in paragraphs (b) and (c) above are in full force and effect
and have not been amended or modified, and that the officers of such corporation
are those persons named in the certificate;
(j) an opinion from Mayer, Brown & Platt, counsel to Mesirow Asset
Management, Mesirow Holdings and the Partnership, in form and substance
materially consistent with Exhibit 6.9(k);
(k) an opinion from Bell, Boyd & Lloyd, counsel to the Skyline
Trust, in form and substance materially consistent with Exhibit 6.9(l);
(l) a Trademark, Tradename and Service Mark Assignment, in form and
substance materially consistent with Exhibit 6.9(m);
(m) all records of the Skyline Trust that are customarily maintained
by the Skyline Trust's investment adviser or are required to be maintained by
the adviser under Section 31 of the Investment Company Act and regulations
promulgated thereunder, together with all records customarily maintained on
behalf of the Skyline Trust by its distributor;
(n) complete copies, and access upon the request of the Partnership
to the originals, of all records of the Institutional Business that are
customarily maintained by Mesirow Asset Management or are required to be
maintained under the Advisers Act and regulations promulgated thereunder; and
(o) such other certificates and other documents as Goodwin, Procter
& Hoar as counsel to AMG may reasonably request in connection with the
transactions contemplated herein and in the other Transaction Documents.
6.10 Code of Ethics, etc. The Partnership shall have adopted such Code of
Ethics, Insider Trading Policies, Trade Allocation Policies and Supervisory
Procedures Manuals as are acceptable to AMG.
6.11 Resignations. Mesirow Asset Management shall have delivered or caused
to be delivered to AMG the resignations, to be effective upon the Closing, of
all officers of the Skyline Trust who are not the Managers and of all trustees
of the Skyline Trust except Dutton.
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6.12 Elections. Persons acceptable to AMG and the Managers shall have been
duly elected as trustees of the Skyline Trust.
6.13 Termination of Mesirow Growth Fund. At or prior to the Closing,
Mesirow Growth Fund shall have been terminated and all liquidating payments or
similar distributions shall have been made to the limited partners therein, all
in accordance with the terms and provisions of the Mesirow Growth Fund Amended
and Restated Agreement of Limited Partnership dated as of May 5, 1992 and in
accordance with applicable law.
6.14 New Fund Contracts. The Skyline Trust shall have entered into
arrangements satisfactory to AMG with (a) one or more money market mutual
fund(s) to and from which shares of the Skyline Trust may be exchanged and, (b)
if so requested by AMG, a third party distributor, and in connection therewith
the Skyline Trust and the Mesirow Entities shall have given all notices to
shareholders of the Skyline Trust as may be required by applicable law or
regulation and within any required time periods. The agreements described in the
foregoing sentence, together with the advisory agreements described in Section
6.3(b) and any administrative or similar contracts and any plans in connection
therewith that may be determined by AMG to be necessary or appropriate for the
Skyline Trust, shall all have received any approvals of shareholders, trustees
and independent trustees of the Skyline Trust or the Skyline Funds as may be
necessary or appropriate and shall be referred to herein as the "New Fund
Contracts."
6.15 Termination of Existing Advisory and Distribution Arrangements.
Except as contemplated in Section 8.13, all advisory agreements and distribution
arrangements between the Skyline Funds and Mesirow Holdings, Mesirow Asset
Management and any of their Affiliates, shall have been terminated effective as
of the Closing, or in the case of the investment advisory agreement between
Mesirow Asset Management and each of the Skyline Funds, upon effectiveness of
the corresponding agreement with the Partnership as contemplated by Section
6.3(b).
6.16 Termination of Covenant Concerning Confidential Information. At or
prior to the Closing, Mesirow Asset Management shall have delivered to AMG
evidence that (i) each of the agreements listed on Schedule 2.10(c) hereto has
terminated on terms acceptable to AMG and its counsel, and (ii) except as
otherwise consented to by AMG (which consent shall not be unreasonably
withheld), each of such employees from and after the termination of such
agreement shall have no liability or obligation whatsoever under such agreement
to Mesirow Financial or any of its Affiliates.
SECTION 7. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF MESIROW ASSET MANAGEMENT
AND MESIROW HOLDINGS
The obligations of Mesirow Asset Management to sell and deliver the
Purchased Interest, and of Mesirow Holdings to cause such sale and delivery, to
AMG are subject to the satisfaction at or prior to the Closing Date of the
following conditions, except to the extent that any such
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condition may have been waived in writing by Mesirow Asset Management prior to
the Closing Date.
7.1 No Litigation; No Opposition. No judgment, injunction, order or decree
enjoining or prohibiting any of AMG, any Mesirow Entity, any Management
Corporation or any Manager or other parties to any of the Transaction Documents,
from consummating the transactions contemplated hereby or thereby shall have
been entered and no suit, action or proceeding shall be pending or threatened
prior to or on the Closing Date before or by any court or governmental body
seeking to restrain or prohibit the execution and delivery of this Agreement or
any of the Transaction Documents or the consummation of the transactions
contemplated hereby or thereby.
7.2 Representations, Warranties and Covenants. Each of the representations
and warranties of AMG contained in this Agreement and in any schedule or exhibit
attached hereto (including any supplement to any such schedule or exhibit) and
in each other Transaction Document or otherwise made in writing by AMG or on its
behalf shall be true and correct at and as of the Closing as though newly made
at such time. Each and all the agreements and conditions to be performed or
satisfied by AMG hereunder and under the other Transaction Documents at or prior
to the Closing Date shall have been duly performed or satisfied in all material
respects; and AMG shall have furnished Mesirow Asset Management and Mesirow
Holdings with a certificate dated as of the Closing Date to the foregoing
effect.
7.3 Delivery. AMG shall have executed and delivered to Mesirow Asset
Management and Mesirow Holdings, the following:
(a) certified copies of resolutions of the board of directors (and,
if necessary, the shareholders) of AMG authorizing the execution of this
Agreement and each of the other Transaction Documents to which AMG is a party;
(b) a copy of the charter and by-laws of AMG which, in the case of
the charter, is certified as of a recent date by the Secretary of State of the
State of Delaware;
(c) a certificate issued by the Secretary of State of the State of
Delaware certifying that AMG is validly existing in Delaware as of the most
recent practicable date;
(d) true and correct copies of each of the Transaction Documents,
and all agreements, documents, instruments and certificates delivered or to be
delivered in connection therewith to which AMG is a party;
(e) a certificate of the Secretary of AMG certifying that the
resolutions, charter and by-laws in paragraphs (a) and (b) above are in full
force and effect and have not been amended or modified, and that the officers of
AMG are those persons named in the certificate; and
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(f) an opinion from Goodwin, Procter & Hoar in form and substance
materially consistent with Exhibit 7.3(f).
7.4 Advisory Contract Consents. At the Closing, clients of Mesirow Asset
Management (including the Skyline Funds) which are party to advisory agreements
that provide for Aggregate Contract Payments constituting at least seventy-five
percent (75%) of the Base Fees shall have affirmatively consented in writing to
the transactions contemplated hereby (by countersigning a notice substantially
in the form of Exhibit 8.1(a) or Exhibit 8.1(b) such that the advisory contracts
(or Comparable Contracts as provided in Sections 6.3(a) and (b) hereof with
respect to registered investment companies) in effect as of the date of this
Agreement survive the transactions contemplated hereby without impermissible
assignment.
7.5 New Fund Distribution Arrangements. The Skyline Trust shall have
entered into arrangements satisfactory to the independent trustees of the
Skyline Trust with respect to the distribution of shares of the Skyline Trust.
SECTION 8. COVENANTS OF THE PARTIES.
From and after the date hereof (subject to Section 11.2 hereof), each of
the Partnership, Mesirow Asset Management and Mesirow Holdings, jointly and
severally, and each Management Corporation and each of the Managers, severally
but not jointly, agrees with AMG that it (or he) will perform the actions
contemplated to be performed by it (or him) under this Section 8, and AMG agrees
with each of the Partnership, Mesirow Asset Management, Mesirow Holdings, each
Management Corporation and each Manager that it will perform the actions
contemplated to be performed by it under this Section 8:
8.1 Client Consents.
(a) As soon as practicable after the date hereof, Mesirow Asset
Management shall notify all its clients (other than the Skyline Funds) of the
transactions contemplated hereby and by the other Transaction Documents. Such
notice shall be substantially in the form of Exhibit 8.1(a) hereto unless
otherwise agreed by Mesirow Asset Management and AMG with respect to a
particular client or group of clients.
(b) On or prior to June 30, 1995, Mesirow Asset Management shall
send to each client who received a notice in substantially the form of Exhibit
8.1(a) hereto, and who has not returned such notice, a notice in substantially
the form of Exhibit 8.1(b) hereto; unless otherwise agreed by Mesirow Asset
Management and AMG with respect to a particular client or group of clients.
(c) The parties hereto will cooperate and use all commercially
reasonable efforts to obtain, as soon as practicable, the written consent of
each client of Mesirow Asset Management (other than the Skyline Funds) to the
assignment of such client's investment advisory contract,
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where such client's investment advisory contract requires such written consent
for the transactions contemplated hereby.
(d) With respect to the Skyline Funds, subject in all cases to the
fiduciary duties to which it may be subject, Mesirow Holdings and Mesirow Asset
Management shall use all commercially reasonable efforts (including, without
limitation, the payment of reasonable printing, soliciting and similar expenses)
to cause each of the Skyline Funds to call a meeting of its shareholders to
consider, and to solicit its shareholders with regard to, the transactions
contemplated hereby, including the investment advisory agreement with the
Partnership contemplated under Section 6.3(b), the subsequent change in control
of the Partnership to occur at the Closing, the investment advisory agreement
contemplated to be in effect at and after the Closing and the election of
trustees as contemplated in Section 6.12, consistent with all of the
requirements of federal securities laws applicable to such solicitation.
8.2 Conduct of Business. Until the Closing, except as specifically
contemplated by this Agreement (or except with the prior written consent of
AMG):
(a) the business of each of Mesirow Asset Management and the
Partnership shall be conducted only in the ordinary course and in a manner
consistent in all material respects with past practices, and in compliance in
all material respects with all applicable laws, rules and regulations;
(b) the Mesirow Entities, the Management Corporations and the
Managers shall not make or assist in making any change in the charter documents
or by-laws of Mesirow Asset Management or in the Partnership Agreement of the
Partnership;
(c) the Partnership shall not (i) declare, set aside, make or pay
any distribution or dividend in respect of its equity interests, or direct or
indirect issuance, redemption, purchase or other acquisition of its own capital
stock or other equity interests, or (ii) make any change in its capitalization,
and none of the Mesirow Entities shall cause or permit any such event;
(d) neither Mesirow Asset Management nor the Partnership shall (i)
create, incur or assume any Indebtedness, (ii) make any loans, advances or
capital contributions to or investments in, any person or entity, (iii) make any
capital expenditure, or (iv) settle any litigation;
(e) neither Mesirow Asset Management nor the Partnership shall
acquire, sell, lease or dispose of any assets other than in the ordinary course
of business;
(f) neither Mesirow Asset Management nor the Partnership shall
mortgage, pledge or subject to any lien, lease, security interest or other
Claim, any properties or assets; and
(g) in each case, except in the ordinary course of business
consistent with past practices, (i) none of the Mesirow Entities or the
Partnership shall increase the rate of
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compensation payable or to become payable to any director, officer, employee or
agent currently employed by Mesirow Asset Management or the Partnership, and
(ii) neither Mesirow Asset Management nor the Partnership (nor Mesirow Holdings
to the extent it may affect Mesirow Asset Management or the Partnership) without
the prior written consent of AMG shall hire any directors, officers, employees
or agents, or enter into any collective bargaining agreement, bonus, stock
option, profit sharing, compensation, pension, welfare, retirement or other
similar arrangement, or any employment contract.
8.3 Preservation of Business and Assets. Until the Closing, each of
Mesirow Asset Management, Mesirow Holdings, the Partnership and each Manager
shall use all commercially reasonable efforts, consistent with past practices,
to: (a) preserve the current Institutional Business, (b) maintain the present
clients of the Institutional Business until the Asset Transfers, and thereafter
to maintain such clients as clients of the Partnership, in each case, on terms
that are at least as favorable as the terms of the agreements between Mesirow
Asset Management and the relevant client as in effect on the date hereof, (c)
preserve the goodwill of Mesirow Asset Management until the Asset Transfers, and
thereafter to preserve such goodwill as goodwill of the Partnership, and (d)
preserve any Licenses required in connection with the business of Mesirow Asset
Management (including without limitation all investment adviser registrations).
In addition, none of Mesirow Asset Management, Mesirow Holdings (to the extent
it may affect Mesirow Asset Management or the Partnership), the Partnership, any
of Management Corporations or any of the Managers shall take any material action
not in the ordinary course of business without giving AMG prior written notice
thereof.
8.4 Observer Rights and Access. Until the Closing, Mesirow Asset
Management shall use all commercially reasonable efforts to cause the board of
trustees of the Skyline Trust to permit a representative of AMG to attend and
observe all meetings of the board of trustees of the Skyline Trust in a
non-voting observer capacity. Mesirow Asset Management and Mesirow Holdings
shall afford to AMG and its representatives free access to the properties and
records of Mesirow Asset Management and Mesirow Holdings (to the extent it may
affect Mesirow Asset Management and the Partnership), the Skyline Funds and the
Partnership in order that AMG may have full opportunity to make such
investigation as it shall desire for purposes consistent with this Agreement.
8.5 Termination of Reserve Fund Arrangements. Mesirow Holdings and Mesirow
Asset Management will cooperate with AMG and the Skyline Funds and will use all
commercially reasonable efforts to terminate, and to cause the Skyline Funds to
terminate, all existing agreements in connection with the Reserve Fund and each
series thereof as such agreements apply to the Skyline Funds.
8.6 Use of Skyline Name. The Mesirow Entities will use all commercially
reasonable efforts to cease all use, and to cause their Affiliates and the
Reserve Fund to cease all use, on and after the Closing Date of the word
"Skyline," and the logo used by the Skyline Trust and all other trademarks,
trade names or service marks related thereto.
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8.7 SEC Filings.
(a) The parties hereto will cooperate to file, as soon as
practicable following the execution of this Agreement and on behalf of the
Partnership, with the SEC a Uniform Application for Investment Adviser
Registration on Form ADV to register the Partnership as an investment adviser
under the Advisers Act, and will cooperate to file the appropriate application
for investment adviser registration as soon as practicable following the
execution of this Agreement on behalf of the Partnership, with all other
jurisdictions in which Mesirow Asset Management is registered as an investment
adviser and in each other jurisdiction where it is desirable for the Partnership
to be registered as an investment adviser in order to conduct after the Asset
Transfers and the Closing the Institutional Business presently conducted by
Mesirow Asset Management (together with the application on Form ADV, the
"Applications").
(b) The parties hereto will cooperate with each other and will each
use all commercially reasonable efforts to cause the Skyline Funds to file a
post-effective amendment to the Skyline Funds' registration statement on Form
N-1A at least sixty (60) days prior to the Closing, which amendment shall
reflect all changes in the Skyline Funds' affairs as a consequence of the
transactions contemplated hereby, and shall cooperate with one another in
causing the Skyline Funds to make any other filing necessary to satisfy
disclosure requirements to enable the public distribution of the shares of
beneficial interest of the Skyline Funds to continue unabated after the Closing.
Each party covenants that any information describing such party or its
Affiliates or provided by such party or its Affiliates or their respective
operations or plans that is contained in any such post-effective amendment will
not contain, at the time any such amendment becomes effective, any untrue
statement of material fact or omit to state any material fact required to be
stated therein, where necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading.
(c) The parties hereto will cooperate with each other and will each
use all commercially reasonable efforts to cause the Skyline Funds, with the
assistance of counsel to AMG, to prepare and file a proxy statement and related
materials, as contemplated by Section 8.1(d) as soon as practical following the
execution of this Agreement. Each party covenants that any information
describing such party or its Affiliates or provided by such party or its
Affiliates or their respective operations or plans that is contained in any
solicitation materials will not contain, at the time such materials are
furnished or at the time of the shareholder meeting contemplated thereby, any
untrue statement of material fact or omit to state any material fact required to
be stated therein, where necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading.
8.8 Interim Financial Statements. Until the Closing, on or prior to the
penultimate business day of each calendar month, Mesirow Asset Management shall
furnish to AMG unaudited balance sheets of Mesirow Asset Management as the end
of the preceding month, together with the related unaudited statements of income
and cash flows of the Institutional Business for the period from March 31, 1995
through such month end, which financial statements shall have been
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prepared in accordance with generally accepted accounting principles, methods
and practices using the accrual method of accounting consistently applied
(except that they do not include footnotes) and fairly present in all material
respects the financial position and the results of operations of Mesirow Asset
Management for the period covered thereby and then ended, subject to year-end
audit adjustments which individually, or in the aggregate, are not material
(together, such financial statements are referred to as the "Interim Financial
Statements"). At the time the Interim Financial Statements are given to AMG,
they shall be accompanied by a certificate of Mesirow Asset Management to the
foregoing effect.
8.9 Confidentiality. Each of the parties hereto agrees, on behalf of
itself and its representatives and agents, to keep confidential any and all
information and data of a proprietary or confidential nature with respect to
another party in its possession or which it has received as a result of any
investigation made in connection with this Agreement; provided, however, that
notwithstanding the foregoing, each of the parties hereto shall be free to
disclose any such information or data (a) to the extent required by applicable
law, order, rule or regulation (including without limitation applicable federal
and state securities laws) and (b) during the course of or in connection with
any litigation, arbitration or other proceeding based upon or in connection with
the subject matter of this Agreement; provided, however, that prior to
disclosing any such information in connection with any such litigation,
arbitration or proceeding, the applicable party shall give prior notice to the
other interested parties and shall use reasonable efforts to obtain confidential
treatment therefor. In addition, the timing and content of any news or other
media release regarding the transactions contemplated hereby shall be mutually
agreed to in advance by AMG and Mesirow Holdings.
8.10 Expenses. Except as otherwise expressly provided herein, each of the
parties hereto shall pay its own expenses incident to the negotiation and
consummation of the transactions contemplated by this Agreement and the
Transaction Documents and the preparation and carrying out of this Agreement and
the transactions contemplated hereby or thereby; provided, however, that AMG
shall pay the fees and disbursements of Goodwin, Procter & Hoar in connection
with the preparation and filing of the proxy statement described in Section
8.8(c) and all filing and registration fees incurred by the Partnership in
connection with the transactions contemplated hereby or pursuant to its
obligations hereunder.
8.11 Covenants With Respect to Section 15(f) of the Investment Company
Act.
(a) In accordance with Section 15(f) of the Investment Company Act
(i) for a period of three (3) years after the effectiveness of the Asset
Transfers, AMG shall not cause, and shall use all commercially reasonable
efforts not to permit, any "interested person" of Mesirow Asset Management or
the Partnership, as such term is defined in the Investment Company Act, to
become or to continue as a member of the Board of Trustees of the Skyline Trust
unless, taking into account such interested person, at least seventy-five
percent (75%) of the members of such Board of Trustees are not interested
persons of Mesirow Asset Management or the Partnership, and (ii) for a period of
two (2) years following the Closing Date, AMG will not engage in or
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cause, and will use all commercially reasonable efforts to prevent any Affiliate
of the Partnership from engaging in or causing, any act, practice or arrangement
that imposes an unfair burden on the Skyline Trust within the meaning of Section
15(f), or if the Partnership or any of its Affiliates shall have obtained an
order from the SEC exempting it from the provisions of Section 15(f) or an
opinion of counsel based on judicial precedents under applicable federal law
with respect to the meaning of Section 15(f), which opinion is reasonably
satisfactory in form and substance to the Board of Trustees of the Skyline
Trust, then this representation shall be deemed to be modified to the extent
necessary to permit the Partnership and its Affiliates to act in a manner
consistent with such exemptive order or legal opinion.
(b) In accordance with Section 15(f) of the Investment Company Act
(i) for a period of three years after the effectiveness of the Asset Transfers,
neither Mesirow Asset Management nor Mesirow Holdings shall knowingly cause, and
shall use all commercially reasonable efforts to cooperate with reasonable
requests made by AMG so as not to permit any "interested person" of Mesirow
Asset Management, as such term is defined in the Investment Company Act, to
become or to continue as a member of the Board of Trustees of the Skyline Trust
unless, taking into account such interested person, at least seventy-five
percent (75%) of the members of such Board of Trustees are not interested
persons of Mesirow Asset Management or the Partnership, and (ii) for a period of
two (2) years following the Closing Date, neither Mesirow Asset Management nor
Mesirow Holdings will engage in or cause, and each will use all commercially
reasonable efforts to prevent any Affiliate of each of them from engaging in or
causing, and act, practice or arrangement that imposes an unfair burden on the
Skyline Trust within the meaning of Section 15(f); provided, however, that if
Mesirow Asset Management or any of its Affiliates shall have obtained an order
from the SEC exempting it from the provisions of Section 15(f) or an opinion of
counsel based on judicial precedents under applicable federal law with respect
to the meaning of Section 15(f), which opinion is reasonably satisfactory in
form and substance to the Board of Trustees of the Skyline Trust, then this
representation shall be deemed to be modified to the extent necessary to permit
Mesirow Asset Management and its Affiliates to act in a manner consistent with
such exemptive order or legal opinion.
8.12 Retirement Plans. As of the effectiveness of the Closing, the
Partnership shall execute and deliver an employee retirement plan satisfactory
to the Managers and AMG, which provides for employee contributions toward
retirement and permits, among other things, the investment of contributions in
the Skyline Funds.
8.13 Agreement with Mesirow Financial. During the period from the Closing
Date through the second anniversary of the Closing Date, Mesirow Holdings shall
take any and all action necessary to cause Mesirow Financial to pay all
compensation or fees received by it pursuant to any selling group, selected
dealer, distribution, service or similar agreement with respect to shares of any
of the Skyline Funds ("Fees") to the registered representative(s) or similar
customer service provider(s) responsible for the customers who hold the shares
of the Skyline Funds with respect to which such fees are being received.
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8.14 Mesirow Growth Fund. The Mesirow Entities shall use all commercially
reasonable efforts to cause the trustees of the Skyline Trust to permit limited
partners in the Mesirow Growth Fund to purchase shares of Skyline Special
Equities Portfolio with a net asset value equal to the fair market value of the
distributions that such limited partners are entitled to receive upon
liquidation of Mesirow Growth Fund. The Mesirow Entities shall cause to be sent
to the limited partners of Mesirow Growth Fund, together with any notice,
report, consent or similar document that sets forth the intention of any of the
Mesirow Entities to take action that will cause Mesirow Growth Fund to
terminate, a notice indicating that such limited partners may make investments
in the Skyline Special Equities Portfolio, together with a prospectus,
application and such other information with respect to the Skyline Special
Equities Portfolio as AMG, the Managers and the Mesirow Entities may reasonably
agree to be appropriate or necessary.
8.15 Tax Compliance. Mesirow Asset Management shall recommend that, and
after such course of action has been approved by the board of trustees of
Skyline Trust shall take all actions necessary to cause, Skyline Special
Equities II, within thirty (30) days after the execution of this Agreement, to
prepare and file an amended federal income tax return for the 1993 tax year (and
any other documentation required by the IRS in connection therewith) and pay any
deficiency related to such tax year and other additions to tax, interest, fines
and penalties relating thereto.
SECTION 9. INDEMNIFICATION.
9.1 Indemnification by Mesirow Asset Management and Mesirow Holdings. From
and after the Closing Date, Mesirow Asset Management and Mesirow Holdings shall
jointly and severally defend, indemnify, save and hold harmless AMG, AMG's
Affiliates and subsidiaries and their respective employees, representatives,
officers, directors, partners and agents, from and against any and all actions,
suits, claims, proceedings, demands, assessments and judgments, costs, Taxes,
losses (including, without limitation, diminution in value), liabilities,
damages, deficiencies and expenses, including without limitation, interest,
penalties, reasonable attorneys' and accountants' fees and all reasonable
amounts paid in investigation, defense or settlement of any of the foregoing,
incurred in connection with, arising out of, resulting from or incident to (a)
any misrepresentation, breach of any warranty, covenant or agreement, the
inaccuracy of any representation, or the default or nonfulfillment of any
agreement on the part of Mesirow Asset Management or Mesirow Holdings and, prior
to the Closing, the Partnership, under this Agreement or any of the Transaction
Documents or any of the documents, instruments or certificates contemplated
hereby or thereby or in any schedule, exhibit, certificate or financial
statement delivered hereunder, or any claim, action or proceeding asserted or
instituted or growing out of any matter or thing covered by such
representations, warranties, covenants or agreements, (b) the operation of
Mesirow Asset Management including, without limitation the operation of the
Partnership prior to the Closing, (c) the administration or management of the
Skyline Funds including, without limitation, the administration or management of
the Skyline Funds prior to the Closing, and the Tax matters described on
Schedule 2.24(f) or (d) any contracts, leases or agreements not assumed by the
Partnership; provided, however, that the indemnification obligations of the
Mesirow Entities hereunder (other than obligations with respect to
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indemnification for Taxes or based upon or related to a breach of any
representation or warranty or covenant with respect to Taxes, Employee Plans or
environmental laws or based upon or related to the Tax matters described on
Schedule 2.24(f)) shall be limited in the aggregate to an amount equal to the
Purchase Price.
9.2 Indemnification by Management Corporations. From and after the Closing
Date, each of the Management Corporations, shall severally defend, indemnify,
save and hold harmless AMG, AMG's Affiliates and subsidiaries, the Managers
(other than any Manager holding stock in such Management Corporation), the other
Management Corporations, and their respective employees, representatives,
officers, directors, partners and agents from and against any and all actions,
suits, claims, proceedings, demands, assessments and judgments, costs, losses
(including, without limitation, diminution in value), liabilities, damages,
deficiencies and expenses, including, without limitation, interest, penalties,
reasonable attorneys' and accountants' fees and all reasonable amounts paid in
investigation, defense or settlement of any of the foregoing, incurred in
connection with, arising out of, resulting from or incident to any
misrepresentation, breach of warranty, covenant or agreement, the inaccuracy of
any representation, or the default or nonfulfillment of any agreement, in each
case on the part of such party or their respective stockholders, under this
Agreement or any of the Transaction Documents or any of the documents,
instruments or certificates contemplated hereby or thereby, or any schedule,
exhibit, or certificate delivered hereunder or thereunder, or any claim, action,
or proceeding asserted or instituted or growing out of any matter or thing
covered by such representations, warranties, covenants or agreements.
9.3 Indemnification by AMG.
(a) From and after the Closing Date, AMG shall defend, indemnify,
save and hold harmless Mesirow Asset Management, Mesirow Holdings, the Managers
and the Management Corporations and their respective officers and directors from
and against any and all actions, suits, claims, proceedings, demands,
assessments and judgments, costs, Taxes, losses, liabilities, damages,
deficiencies and expenses, including without limitation, interest, penalties,
reasonable attorneys' and accountants' fees and all reasonable amounts paid in
investigation, defense or settlement of any of the foregoing, incurred in
connection with or arising out of or resulting from or incident to any
misrepresentation, breach of any warranty, covenant or agreement, the inaccuracy
of any representation, or the default or nonfulfillment of any agreement on the
part of AMG under this Agreement or any of the Transaction Documents or any of
the documents, instruments, or certificates contemplated hereby or thereby, or
any schedule, exhibit, or certificate delivered hereunder or thereunder, or any
claim, action or proceeding asserted or instituted or growing out of any matter
or thing covered by such representations, warranties, covenants or agreements.
(b) From and after the Closing Date, AMG shall defend, indemnify, save and
hold harmless Mesirow Asset Management, Mesirow Holdings and their respective
officers and directors from and against any and all costs, expenses and
attorneys' fees and disbursements
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incurred in connection with or arising out of or resulting from or incident to
any suit, claim, or proceedings to which any of the foregoing indemnified
parties is made party; provided that such suit, claim or proceeding results from
the operation of the Partnership after the Closing Date, and; provided further
that none of the foregoing indemnified parties is found in such proceeding or
otherwise by a court or tribunal of competent jurisdiction to have acted with,
or failed to act as a result of, willful misconduct, recklessness or gross
negligence.
9.4 Survival of Indemnification Obligations. The indemnification
obligations of Mesirow Asset Management, Mesirow Holdings, the Partnership, each
Management Corporation, and AMG contained in this Section 9 shall terminate
three (3) years after the Closing Date except that with respect to the
representations and warranties contained in Sections 2.18, 2.20, and 2.24(f)
and, to the extent it relates to such Sections, Section 2.25, such
indemnification obligations shall survive until the expiration of the applicable
statutes of limitations, including extensions thereof. Notwithstanding the
foregoing, if prior to such expiration date a specific state of facts shall have
become known which may constitute or give rise to any loss as to which such
indemnity may be payable and an indemnified party shall have given notice of
such facts to the indemnifying party specifying and describing the basis of the
relevant indemnity claim, then the right to indemnification with respect thereto
shall remain in effect without regard to when such matter shall have been
finally determined and disposed of according to the date on which notice of the
applicable claim is given.
9.5 Defense of Claims. If any action, suit, claim, Tax audit, proceeding,
demand, assessment or enforcement action is filed or initiated against any party
entitled to the benefit of indemnity hereunder, the indemnified party shall give
written notice thereof to the indemnifying party or parties as promptly as
practicable (and in any event within thirty (30) days after the service of the
citation or summons); provided, however, that the failure of any indemnified
party to give timely notice shall not affect the rights of such party to
indemnification hereunder except to the extent that the indemnifying party
demonstrates actual damage caused by such failure. After such notice and a
reasonable period of time to allow for analysis of the relevant claim, if the
indemnifying party shall acknowledge in writing to such indemnified party that
such indemnifying party shall be obligated under the terms of its indemnity
hereunder for all liabilities of the indemnified party in connection with such
action, suit, claim, tax audit, proceeding, demand, assessment or enforcement
action (subject to the following sentence), then the indemnifying party shall be
entitled, if it so elects and with counsel reasonably satisfactory to the
indemnified party, to take control of the defense and investigation of such
action, suit, claim, tax audit, proceeding, demand, assessment or enforcement
action, and to employ and engage attorneys to handle and defend the same, at the
indemnifying party's cost, risk and expense; and the indemnified party shall
cooperate in all reasonable respects, at the indemnifying party's request and
cost, risk and expense, with the indemnifying party and its attorneys in the
investigation, trial and defense of such action, suit, claim, tax audit,
proceeding, demand, assessment or enforcement action, and any appeal arising
therefrom; provided, however, that the indemnified party may, at its own cost,
participate in such investigation, trial and defense of such action, suit,
claim, tax audit, proceeding, demand, assessment or enforcement action, and any
appeal arising therefrom; and
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provided further, that the indemnifying party shall have an obligation to keep
the indemnified party apprised of the status of the action, suit, claim, tax
audit, proceeding, demand, assessment or enforcement action, to furnish the
indemnified party with all documents and information that the indemnified party
shall reasonably request in connection therewith, and to consult with the
indemnified party prior to acting on major matters involved in such action,
suit, claim, tax audit, proceeding, demand, assessment or enforcement action,
including settlement discussions, it being understood that no settlement of any
action for which indemnification may be payable hereunder shall be made without
the prior written consent of the indemnified party. Notwithstanding any other
provision of this Section 9.5, if an indemnified party withholds its consent to
a settlement or elects to defend any claim, where but for such action the
indemnifying party could have settled such claim, the indemnifying party shall
be required to indemnify the indemnified party only up to a maximum of the bona
fide settlement offer for which the indemnifying party could have settled such
claim. The indemnified party shall be entitled to defend, settle or proceed in
such other manner as it deems fit, in its sole discretion, in connection with
any action, suit, claim, proceeding, demand, assessment or enforcement action as
to which the indemnifying party has not acknowledged its obligations in writing
in accordance with the foregoing sentence; and no actions taken by the
indemnified party in connection therewith shall affect or limit the obligations
of the indemnifying party pursuant to this Section 9.5.
9.6 Prompt Payment. Any indemnity payable pursuant to this Section 9 shall
be paid within the later of ten (10) days of the indemnified party's request
therefor or ten (10) days prior to the date on which the liability upon which
the indemnity is based is required to be satisfied by the indemnified party.
SECTION 10. DEFINITIONS.
10.1 Definitions. Capitalized terms used in this Agreement and not
otherwise defined herein shall have the meanings set forth below.
"Advisers Act" means the Investment Advisers Act of 1940, as the
same may be amended from time to time, and any successor to such act.
"Affiliate" of a Person means a Person that directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under
common control with, the first Person. As used in this definition, the term
"control" (including the terms "controlled by" and "under common control with")
means the possession, directly or indirectly, of the power to (a) vote
twenty-five percent (25%) or more of the outstanding voting securities of such
Person, or (b) otherwise direct the management policies of such Person by
contract or otherwise.
"Aggregate Contract Payments" means the aggregate amount of all
investment advisory, management, administration or similar fees provided for in
investment advisory contracts between Mesirow Asset Management and its clients,
determined on an annualized basis
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and based upon (a) assets under management as of December 31, 1994 or any
subsequent account inception date and (b) the contractual rate of such fees
provided for in the relevant agreement(s).
"Applications" has the meaning set forth in Section 8.8 hereof.
"Asset Transfers" means the consummation of the transactions to be
effected pursuant to the Asset Transfer Agreement, as more fully described in
Section 6.6.
"Asset Transfer Agreement" means that certain Asset Transfer
Agreement, a form of which is attached hereto as Exhibit 6.6.
"Base Fees" means all Aggregate Contract Payments under all
investment advisory contracts constituting the Institutional Business as of
December 31, 1994.
"Capital Account" has the meaning ascribed thereto in the
Partnership Agreement and the Restated Partnership Agreement.
"Claims" has the meaning set forth in Section 1.1(a) hereof.
"Closing" has the meaning ascribed thereto in Section 1.3 hereof.
"Closing Date" has the meaning ascribed thereto in Section 1.3
hereof.
"Code" means the Internal Revenue Code of 1986, as the same may be
amended from time to time, and any successor to such code.
"Company Financial Statements" has the meaning set forth in Section
2.11(a) hereof.
"Comparable Contract" means a new contract between the Partnership
and the party or parties to a prior contract with Mesirow Asset Management which
new contract is substantially the same as such prior contract with Mesirow Asset
Management and is at least as favorable in all respects (including without
limitation with respect to advisory fees) to the Partnership as such prior
contract (as in effect on March 31, 1995) was to Mesirow Asset Management.
"Delaware Act" means the Delaware Revised Uniform Limited
Partnership Act (6 Del. C. Section 7-101, et. seq.), as it may be amended from
time to time, and any successor to such act.
"Employee Contract" has the meaning set forth in Section 2.10
hereof.
"Employee Stockholder" has the meaning ascribed thereto in the
Restated Partnership Agreement.
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"Employment Arrangement" has the meaning set forth in Section 2.10
hereof.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"Exchange Act" means the Securities Exchange Act of 1934, as the
same may be amended from time to time, and any successor to such act.
"Fee Schedule" has the meaning set forth in Section 2.8 hereof.
"Indebtedness" means all obligations (i) for borrowed money, (ii)
evidenced by bonds, debentures, notes or similar instruments, (iii) to pay the
deferred purchase price of property or services (other than accrued expenses
arising in the ordinary course of business), (iv) under leases that would, in
accordance with generally accepted accounting principles, appears on the balance
sheet of the lessee as liabilities, (v) secured by a lien, (vi) in respect of
letters of credit, or bankers acceptances, contingent or otherwise, or (vii) in
respect of any guaranty or endorsement or other obligations to be liable for the
debts of another Person.
"Interim Financial Statements" has the meaning set forth in Section
8.8 hereof.
"Institutional Business" has the meaning set forth in Section 2.6
hereof.
"Investment Company Act" means the Investment Company Act of 1940,
as the same may be amended from time to time, and any successor to such act.
"License" has the meaning set forth in Section 2.2 hereof.
"Limited Partner" has the meaning ascribed thereto in the Restated
Partnership Agreement.
"Management Corporation" has the meaning set forth in the preamble
hereof.
"Manager" has the meaning set forth in the preamble hereof.
"Material Adverse Effect" means a material adverse effect on the
business, assets, condition (financial or otherwise) or prospects of such Person
or Persons, as the case may be.
"Mesirow Asset Management Financial Statements" has the meaning set
forth in Section 2.11(a) hereof.
"Mesirow Entity"has the meaning set forth in Section 2.1 hereof.
"New Fund Contracts" has the meaning set forth in Section 6.14
hereof.
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"Non Solicitation Agreement" means one of the Non Solicitation/Non
Disclosure Agreements by and among the Partnership, each Employee Stockholder,
and the Limited Partner through which such Employee Stockholder holds his or her
Partnership Interests, in the form attached hereto as Exhibit 6.7.
"Partnership" means Skyline Asset Management, L.P., a Delaware
Limited Partnership.
"Partnership Agreement" means the Partnership's Limited Partnership
Agreement in the form attached hereto as Exhibit 2.1, which Partnership
Agreement shall be amended and restated simultaneously with the Closing.
"Partnership Interests" has the meaning ascribed thereto in the
Restated Partnership Agreement.
"Partnership Points" has the meaning ascribed thereto in the
Restated Partnership Agreement.
"Person" means any individual, partnership (general or limited),
corporation, limited liability company, limited liability partnership,
association, trust, joint venture, unincorporated organization, and any
government, governmental department or agency or political subdivision thereof.
"Portfolio Business" has the meaning set forth in Section 2.6
hereof.
"Purchased Interest" has the meaning set forth in Section 1.1
hereof.
"Restated Partnership Agreement" means the Partnership's Amended and
Restated Limited Partnership Agreement in the form attached hereto as Exhibit
1.4(a).
"SEC" has the meaning set forth in Section 2.23 hereto.
"Securities Act" means the Securities Act of 1933, as the same may
be amended from time to time, and any successor to such act.
"Skyline Funds" means Skyline Special Equities Portfolio and Skyline
Special Equities II (including their respective predecessors), each a separate
portfolio series of the Skyline Trust.
"Skyline Trust" means Skyline Fund, a Massachusetts business trust
established pursuant to an Agreement and Declaration of Trust dated February 4,
1987, of which each of the Skyline Funds is a separate series.
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"Subsidiary" means any entity more than fifty percent (50%) of whose
outstanding voting securities, or any partnership, joint venture or other entity
more than fifty percent (50%) of whose total equity interest, are directly or
indirectly owned by such person.
"Taxes" has the meaning set forth in Section 2.18 hereof.
"Transaction Documents" means this Agreement, the Asset Transfer
Agreements (and all the agreements, documents and certificates which are
exhibits thereto), the Non Solicitation Agreements, the Restated Partnership
Agreement, the New Fund Contracts and all the agreements, documents, instruments
and certificates entered into in connection herewith or therewith.
10.2 Survival of Representations, Warranties and Covenants. The
representations and warranties contained herein and in any certificate or other
writing delivered pursuant hereto shall survive the Closing Date and the
consummation of any or all of the transactions contemplated hereby for a period
of three (3) years after the Closing Date except for any representations and
warranties made pursuant to Sections 2.18, 2.20 and 2.24(f) and, to the extent
it relates to such Sections, Section 2.25, which shall survive until the
expiration of the applicable statutes of limitations (if any), including
extensions thereof; provided, however, that if any party has disclosed in the
certificates delivered at the Closing as contemplated by Section 6.2 or Section
7.2 hereof, an exception to the accuracy of a representation or warranty made
herein by such party, and the party or parties to which such certificate was
delivered nevertheless shall have consented to consummate the transactions
contemplated hereby, then such consenting party or parties shall be deemed to
have waived all rights to indemnification under Section 9 hereof (for
themselves, their Affiliates, the Managers, the Management Corporations and all
their respective employees, representatives, officers, directors, partners and
agents) to the extent of such exception. The expiration of any representation or
warranty shall not affect any claim made prior to the date of such expiration.
All covenants herein not fully performed shall survive the Closing Date and
continue thereafter until fully performed. Any investigation, audit or other
examination that may have been made or may be made at any time by or on behalf
of the party to whom any such representation or warranty is made shall not limit
or diminish such representations and warranties, and the parties may rely on the
representations and warranties set forth in this Agreement irrespective of any
information obtained by them by any investigation, audit or examination or
otherwise.
10.3 Certain Activities. AMG and certain of its Affiliates possess and
intend to possess interests in other business ventures which are competitive
with the Partnership and/or the Mesirow Entities and none of the Partnership,
any of the Mesirow Entities, any of the Management Corporations or any of the
Managers shall have any rights to the ideas, concepts and ventures which AMG may
undertake or suggest to any such entities.
10.4 Termination of Agreement.
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(a) Notwithstanding any other provision herein to the contrary, this
Agreement may be terminated (i) at the election of AMG upon written notice to
Mesirow Holdings and the Managers, if it has become reasonably, objectively
certain that any condition required to be satisfied under Section 6 hereof,
other than a condition that is reasonably within AMG's control, will not be
satisfied on or prior to December 31, 1995 (the "Termination Date") and (ii) at
the election of Mesirow Holdings upon written notice to AMG and the Managers, if
it has become reasonably, objectively certain that any condition required to be
satisfied under Section 7 hereof, other than a condition that is reasonably
within the control of the Mesirow Entities, will not be satisfied on or prior to
the Termination Date.
(b) In the event that this Agreement is terminated at the election of
either AMG or Mesirow Holdings pursuant to Section 10.4(a), except as provided
in Section 10.4(c), the parties hereto shall each bear their own expenses
incident to the negotiation of this Agreement and the Transaction Documents
provided that no party shall be relieved from any liabilities or damages arising
out of its breach of any provision of this Agreement.
(c) The parties hereto have agreed, as a condition of Mesirow Asset
Management's and Mesirow Holding's willingness, and in order to induce Mesirow
Asset Management and Mesirow Holdings, to enter into this Agreement and to
reimburse Mesirow Asset Management and Mesirow Holdings for incurring the costs
and expenses related to entering into this Agreement and the transactions
contemplated hereby, that in the event that this Agreement is terminated at any
time after (x) the Trustees (including a majority of the independent Trustees)
of each Skyline Fund have approved the new advisory contracts contemplated by
Section 6.3(b) and (y) clients of Mesirow Asset Management (excluding the
Skyline Funds) which are party to advisory agreements that provide for Aggregate
Contract Payments constituting at least seventy-five percent (75%) of the Base
Fees (other than Base Fees with respect to the Skyline Funds) shall have
affirmatively consented in writing to the transactions contemplated hereby (by
countersigning a notice substantially in the form of Exhibit 8.1(a) or Exhibit
8.1(b) hereto) such that the advisory contracts in effect on the date of this
Agreement survive the transactions contemplated hereby without impermissible
assignment, by Mesirow Holdings pursuant to Section 10.4(a)(ii) and because of a
failure of the conditions under Section 7 to be satisfied, which failure is
caused by acts or omissions of AMG which acts and omissions are in breach of
this Agreement, then AMG shall make a cash payment to Mesirow Holdings of Five
Hundred Thousand Dollars ($500,000) within a reasonable time (not to exceed
thirty (30) days) after the effectiveness of such termination.
10.5 Waivers. Any waiver of any terms or conditions or of the breach of
any covenant, representation or warranty of this Agreement in any one instance,
shall not operate as or be deemed to be or construed as a further or continuing
waiver of any other breach of such term, condition, covenant, representation or
warranty or any other term, condition, covenant, representation or warranty, nor
shall any failure or delay at any time or times to enforce or require
performance of any provision hereof operate as a waiver of or affect in any
manner such party's right at a later time to enforce or require performance of
such provision or of any other provision hereof; provided, however, that no such
waiver, unless it, by its own terms, explicitly provides
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to the contrary, shall be construed to effect a continuing waiver of the
provision being waived and no such waiver in any instance shall constitute a
waiver in any other instance or for any other purpose or impair the right of the
party against whom such waiver is claimed in all other instances or for all
other purposes to require full compliance.
10.6 Modifications. Except as otherwise expressly provided in this
Agreement, neither this Agreement (including any exhibits or schedules hereto)
nor any term hereof (or thereof) may be changed, amended, modified, waived,
discharged or terminated except to the extent that the same is effected and
evidenced by the written consent of Mesirow Holdings and AMG.
10.7 Further Assurances. Each of the parties hereto agrees to execute all
such further instruments and documents and to take all such further action as
any other party may reasonably require in order to effectuate the terms and
purposes of this Agreement.
10.8 Law Governing. This Agreement shall be construed under and governed
by the internal laws of the State of Delaware, without giving effect to the
choice or conflicts of law provisions thereof.
10.9 Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
delivered as follows:
If to AMG, to:
Affiliated Managers Group, Inc.
One International Place
Boston, Massachusetts 02110
Fax: 617-346-7115
Attn: William J. Nutt, President
and Chief Executive Officer
With a copy to:
Goodwin, Procter & Hoar
Exchange Place
Boston, MA 02109
Fax: 617-523-1231
Attn: Richard E. Floor, P.C.
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If to Mesirow Asset Management or Mesirow Holdings, to:
Mesirow Financial
350 North Clark Street
Chicago, Illinois 60610
Fax: 312-595-7208
Attn: James C. Tyree,
Chairman, Chief Executive Officer and President
With a copy to:
Mayer, Brown & Platt
190 South LaSalle Street
Chicago, Illinois 60603
Fax: 312-701-7711
Attn: David B. Weinberg, Esq.
If to the Partnership to:
Skyline Asset Management, L.P.
c/o Mesirow Asset Management, Inc.
350 North Clark Street
Chicago, Illinois 60610
Fax: 312-595-7203
Attn:
With a copy to:
Affiliated Managers Group, Inc.
One International Place
Boston, Massachusetts 02110
Fax: 617-346-7115
Attn: William J. Nutt, President
and Chief Executive Officer
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And a copy to:
Goodwin, Procter & Hoar
Exchange Place
Boston, MA 02109
Fax: 617-523-1231
Attn: Richard E. Floor, P.C.
And a copy to:
Sonnenschein Nath & Rosenthal
8000 Sears Tower
233 South Wacker
Chicago, Illinois 60606-6404
Fax: 312-876-7334
Attn: Paul J. Miller, Esq.
If to any of the Management Corporations or any of the Managers:
[Name of applicable Management Corporation
or Manager]
c/o Mesirow Asset Management, Inc.
350 North Clark Street
Chicago, Illinois 60610
Fax: 312-595-7203
Attn: [Name of applicable Manager]
With a copy to:
Sonnenschein Nath & Rosenthal
8000 Sears Tower
233 South Wacker
Chicago, Illinois 60606-6404
Fax: 312-876-7334
Attn: Paul J. Miller, Esq.
or such other address or facsimile, telex or telecopy number as such party may
hereafter specify for the purpose by notice to the other parties hereto. Each
such notice, request or other communication shall be effective (i) if given by
facsimile, telex or telecopy, when such facsimile, telex or telecopy is
transmitted to the facsimile, telex or telecopy number specified in this Section
10.9 and the appropriate answer back is received or (ii) if given by any other
means, when actually delivered at the address specified in this Section 10.9.
48
<PAGE> 55
10.10 Prior Agreements Superseded. This Agreement together with the
Schedules and Exhibits hereto supersedes all prior understandings and agreements
among the parties relating to the subject matter hereof.
10.11 Assignability. Except as otherwise specifically provided for herein,
neither this Agreement nor any rights or obligations hereunder shall be
assignable by any party to any other person without the written consent of the
other parties. This Agreement shall be binding upon and enforceable by, and
shall inure to the benefit of, the parties hereto and their respective
successors, heirs, executors, administrators and permitted assigns and
transferees, and no others.
10.12 Captions. The captions in this Agreement are for convenience only
and shall not affect the construction or interpretation of any term or provision
hereof.
10.13 Gender and Number. Whenever used herein, the singular number shall
include the plural, the plural shall include the singular, and the use of any
gender shall include all genders.
10.14 Severability. If any provision of this Agreement shall be held or
deemed to be, or shall in fact be, invalid, inoperative or unenforceable as
applied to any particular case in any jurisdiction or jurisdictions, or in all
jurisdictions or in all cases, because of the conflict of any provision with any
constitution or statute or rule of public policy or for any other reason, such
circumstance shall not have the effect of rendering the provision or provisions
in question, invalid, inoperative or unenforceable in any other jurisdiction or
in any other case or circumstance or of rendering any other provision or
provisions herein contained invalid, inoperative or unenforceable to the extent
that such other provisions are not themselves actually in conflict with such
constitution, statute or rule of public policy, but this Agreement shall be
reformed and construed in any such jurisdiction or case as if such invalid,
inoperative or unenforceable provision had been modified or deleted in such a
manner so as to make this Agreement, as so modified, legal and enforceable to
the maximum extent permitted in such jurisdiction or in such case.
10.15 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
[Intentionally left blank]
49
<PAGE> 56
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as a sealed instrument as of the date set forth above by such parties
or their duly authorized representatives.
AFFILIATED MANAGERS GROUP, INC.,
a Delaware corporation
By: /s/ William J. Nutt
-----------------------------------------
Name: William J. Nutt
Title: President and Chief Executive Officer
MESIROW FINANCIAL HOLDINGS,
INC., a Delaware corporation
By: /s/ James C. Tyree
-----------------------------------------
Name: James C. Tyree
Title: Chairman and Chief Executive Officer
MESIROW ASSET MANAGEMENT, INC.,
an Illinois corporation
By: /s/ James C. Tyree
-----------------------------------------
Name: James C. Tyree
Title: Chairman and Chief Executive Officer
50
<PAGE> 57
SKYLINE ASSET MANAGEMENT,
L.P., a Delaware limited partnership
By: Mesirow Asset Management,
Inc., its general partner
By: /s/ James C. Tyree
-------------------------------------
Name: James C. Tyree
Title: Chairman and Chief Executive Officer
WMD CORP., an Illinois corporation
By: /s/ William M. Dutton
-----------------------------------------
Name: William M. Dutton
Title: President
KSK CORP.,
an Illinois corporation
By: /s/ Kenneth S. Kailin
-----------------------------------------
Name: Kenneth S. Kailin
Title: President
GXL CORP.,
an Illinois corporation
By: /s/ Geoffrey P. Lutz
-----------------------------------------
Name: Geoffrey P. Lutz
Title: President
51
<PAGE> 58
MXM CORP.,
an Illinois corporation
By: /s/ Michael Maloney
-----------------------------------------
Name: Michael Maloney
Title: President
/s/ William M. Dutton
--------------------------------------------
William M. Dutton
/s/ Kenneth S. Kailin
--------------------------------------------
Kenneth S. Kailin
/s/ Geoffrey P. Lutz
--------------------------------------------
Geoffrey P. Lutz
/s/ Michael Maloney
--------------------------------------------
Michael Maloney
52
<PAGE> 1
EXHIBIT 2.6
AMENDMENT TO THE
PARTNERSHIP INTEREST PURCHASE AGREEMENT
This AMENDMENT (this "Amendment") dated as of August 30, 1995, to the
PARTNERSHIP INTEREST PURCHASE AGREEMENT (the "Agreement"), dated as of June 6,
1995, by and among Affiliated Managers Group, Inc., a Delaware corporation
("AMG"), Mesirow Asset Management, Inc., an Illinois corporation ("MAMI"),
Mesirow Financial Holdings, Inc., a Delaware corporation ("Mesirow Holdings"),
Skyline Asset Management, L.P., a Delaware corporation, certain managers of MAMI
and the management corporations named therein, is made by and among Mesirow
Holdings and AMG. Capitalized terms used herein and not otherwise defined shall
have the meanings set forth in the Agreement.
WHEREAS, Section 10.6 of the Agreement provides that Agreement may be
amended by the written consent of Mesirow Holdings and AMG; and
NOW, THEREFORE, the parties agree as follows:
1. The introductory clause of Section 2.23(b) of the Agreement shall be
deleted in its entirety and replaced with the following:
"The reorganization of Mesirow Growth Fund, as described in Section
6.13, and the consummation of the transactions contemplated in connection
with such reorganization, do not and will not:"
2. Section 6.13 of the Agreement (Termination of Mesirow Growth Fund)
shall be deleted in its entirety and replaced with the following
"6.13 Reorganization of Mesirow Growth Fund.
(a) At or prior to the Closing, (i) Mesirow Growth Fund shall
have obtained approval of the Amendment and Dissolution Agreement of
Mesirow Growth Fund by Mesirow Financial as the general partner and by
holders of a majority of the units of limited partnership of Mesirow
Growth Fund then outstanding; (ii) Mesirow Financial, as general partner
of Mesirow Growth Fund, shall have adopted and implemented the Plan of
Reorganization dated August 31, 1995 (the "Plan of Reorganization"), in
accordance with the terms and provisions of the Mesirow Growth Fund
Amended and Restated Agreement of Limited Partnership dated as of May 5,
1992 (the "Mesirow Growth Fund Limited Partnership Agreement") as further
amended by the Amendment and Dissolution Agreement and in accordance with
applicable law; (iii) Mesirow Financial shall have filed a certificate of
formation of Skyline Growth Fund, L.L.C., a Delaware limited liability
company ("Skyline LLC"); (iv) Mesirow Growth Fund shall have executed a
Limited Liability Company Agreement for Skyline LLC; (v) Mesirow Growth
Fund shall have taken all action to
<PAGE> 2
approve the Plan of Reorganization and the transaction contemplated
hereby; (vi) Mesirow Growth Fund and Mesirow Financial shall have executed
all documents required to implement the Plan of Reorganization and
delivered such executed documents into escrow held by Bell, Boyd & Lloyd
pending final determination of the net asset value of Mesirow Growth Fund
at the close of business on the Closing Date, which escrow shall not be
rescinded or revoked without the agreement of AMG and the Partnership.
(b) At or prior to the Closing, Skyline LLC and the
Partnership shall have entered into an investment advisory agreement in
the form attached hereto as Exhibit 6.13(b), which will become effective
immediately after the consummation of the transactions contemplated by the
Plan of Reorganization."
3. Section 8.14 of the Agreement shall be deleted in its entirety and
replaced with the following:
"Section 8.14 Mesirow Growth Fund. The Mesirow Entities shall use
all commercially reasonable efforts to consummate the transactions
contemplated by the Plan of Reorganization."
4. This Amendment may be executed in any number of counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument. This Amendment shall be construed under and
governed by the internal laws of the State of Delaware, without giving effect to
the choice or conflicts of law provisions thereof. This Amendment shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
2
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Amendment as of the date first above written.
AFFILIATED MANAGERS GROUP, INC.,
a Delaware corporation
By:/s/ Jeffrey S. Murphy
----------------------------------------
Name: Jeffrey S. Murphy
Title: Assistant Vice President
MESIROW FINANCIAL HOLDINGS,
INC., a Delaware corporation
By:/s/ Ruth C. Hannenberg
----------------------------------------
Name: Ruth C. Hannenberg
Title: Executive Vice President
3
<PAGE> 1
EXHIBIT 4.2
PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED PURSUANT TO A CONFIDENTIAL
TREATMENT REQUEST FILED WITH THE COMMISSION. ASTERISKS (*) IDENTIFY WHERE SUCH
CONFIDENTIAL INFORMATION HAS BEEN OMITTED. THE OMITTED PORTIONS HAVE BEEN FILED
SEPARATELY WITH THE COMMISSION.
FORM OF
$300,000,000
CREDIT AGREEMENT
among
Affiliated Managers Group, Inc.
The Several Lenders
from Time to Time Parties Hereto
and
The Chase Manhattan Bank,
as Administrative Agent
Dated as of September __, 1997
<PAGE> 2
TABLE OF CONTENTS
-----------------
Page
----
SECTION 1. DEFINITIONS...................................................... 1
1.1 Defined Terms....................................................... 1
1.2 Other Definitional Provisions....................................... 17
SECTION 2. AMOUNT AND TERMS OF TERM LOAN COMMITMENTS........................ 17
2.1 Tranche A Term Loans and Tranche B Term Loans....................... 17
2.2 Procedure for Term Loan Borrowing................................... 18
2.3 Repayment of Tranche A Term Loans and Tranche B Term Loans.......... 18
2.4 Evidence of Tranche A Term Loan and Tranche B Term Loan Debt........ 19
SECTION 3. AMOUNT AND TERMS OF REVOLVING CREDIT COMMITMENTS................. 21
3.1 Revolving Credit Commitments........................................ 21
3.2 Procedure for Borrowing............................................. 21
3.3 Commitment Fee...................................................... 21
3.4 Termination or Reduction of Revolving Credit Commitments............ 22
3.5 Repayment of Loans; Evidence of Debt................................ 22
SECTION 4. GENERAL PROVISIONS APPLICABLE TO THE LOANS....................... 23
4.1 Optional Prepayments................................................ 23
4.2 Mandatory Prepayments............................................... 23
4.3 Conversion and Continuation Options................................. 24
4.4 Minimum Amounts and Maximum Number of Tranches...................... 24
4.5 Interest Rates and Payment Dates.................................... 25
4.6 Computation of Interest and Fees.................................... 25
4.7 Inability to Determine Interest Rate................................ 25
4.8 Pro Rata Treatment and Payments..................................... 26
4.9 Illegality.......................................................... 27
4.10 Requirements of Law................................................ 27
4.11 Taxes.............................................................. 28
4.12 Indemnity.......................................................... 29
4.13 Change of Lending Office........................................... 30
SECTION 5. REPRESENTATIONS AND WARRANTIES................................... 30
5.1 Financial Condition................................................. 30
5.2 No Change........................................................... 31
5.3 Corporate Existence; Compliance with Law............................ 31
5.4 Corporate Power; Authorization; Enforceable Obligations............. 31
5.5 No Legal Bar........................................................ 32
5.6 No Material Litigation.............................................. 32
i
<PAGE> 3
Page
----
5.7 No Default.......................................................... 32
5.8 Ownership of Property; Liens........................................ 32
5.9 Taxes .............................................................. 32
5.10 Federal Regulations................................................ 32
5.11 ERISA.............................................................. 33
5.12 Investment Company Act............................................. 33
5.13 Investment Advisory Agreements..................................... 33
5.14 Subsidiaries and Other Ownership Interests......................... 34
5.15 Purpose of Loans................................................... 34
5.16 Accuracy and Completeness of Information........................... 34
SECTION 6. CONDITIONS PRECEDENT............................................. 34
6.1 Conditions to Initial Loans......................................... 34
6.2 Conditions to Each Loan............................................. 37
SECTION 7. AFFIRMATIVE COVENANTS............................................ 38
7.1 Financial Statements................................................ 38
7.2 Certificates; Other Information..................................... 38
7.3 Payment of Obligations.............................................. 40
7.4 Conduct of Business and Maintenance of Existence.................... 40
7.5 Maintenance of Property; Insurance.................................. 40
7.6 Inspection of Property; Books and Records; Discussions.............. 40
7.7 Notices............................................................. 40
7.8 Stock Pledges....................................................... 41
7.9 Guarantees.......................................................... 42
SECTION 8. NEGATIVE COVENANTS............................................... 42
8.1 Financial Condition Covenants....................................... 42
8.2 Limitation on Indebtedness.......................................... 43
8.3 Limitation on Liens................................................. 44
8.4 Limitation on Guarantee Obligations................................. 45
8.5 Limitation on Fundamental Changes................................... 45
8.6 Limitation on Sale of Assets........................................ 46
8.7 Limitation on Leases................................................ 46
8.8 Limitation on Dividends............................................. 46
8.9 Limitation on Capital Expenditures.................................. 47
8.10 Limitation on Investments, Loans and Advances...................... 47
8.11 Limitation on Optional Payments and Modifications of Debt
Instruments and Other Documents............................... 48
8.12 Restriction on Amendments to Revenue Sharing Agreements............ 49
8.13 Limitation on Transactions with Affiliates......................... 49
8.14 Limitation on Changes in Fiscal Year............................... 49
ii
<PAGE> 4
Page
----
SECTION 9. EVENTS OF DEFAULT................................................ 49
SECTION 10. THE ADMINISTRATIVE AGENT........................................ 52
10.1 Appointment........................................................ 52
10.2 Delegation of Duties............................................... 52
10.3 Exculpatory Provisions............................................. 52
10.4 Reliance by Administrative Agent................................... 52
10.5 Notice of Default.................................................. 53
10.6 Non-Reliance on Administrative Agent and Other Lenders............. 53
10.7 Indemnification.................................................... 54
10.8 Administrative Agent in Its Individual Capacity.................... 54
10.9 Successor Administrative Agent..................................... 54
SECTION 11. MISCELLANEOUS................................................... 55
11.1 Amendments and Waivers............................................. 55
11.2 Notices............................................................ 55
11.3 No Waiver; Cumulative Remedies..................................... 56
11.4 Survival of Representations and Warranties......................... 56
11.5 Payment of Expenses and Taxes...................................... 56
11.6 Successors and Assigns; Participations and Assignments............. 57
11.7 Adjustments; Set-off............................................... 59
11.8 Counterparts....................................................... 60
11.9 Severability....................................................... 60
11.10 Integration....................................................... 60
11.11 GOVERNING LAW..................................................... 60
11.12 Submission To Jurisdiction; Waivers............................... 60
11.13 Acknowledgements.................................................. 61
11.14 WAIVERS OF JURY TRIAL............................................. 61
11.15 Confidentiality................................................... 61
iii
<PAGE> 5
ANNEXES
Annex I - Pricing Grid
SCHEDULES
Schedule I - Lender Commitments
Schedule 5.1 - Financial Condition
Schedule 5.9 - Taxes
Schedule 5.14 - Subsidiaries and Other Ownership Interests
Schedule 8.2(g) - Existing Indebtedness
Schedule 8.3(j) - Existing Liens
Schedule 8.10 - Loans to Management
Schedule 8.13 - Transactions with Affiliates
EXHIBITS
Exhibit A-1 - Form of Tranche A Term Note
Exhibit A-2 - Form of Tranche B Term Note
Exhibit A-3 - Form of Revolving Credit Note
Exhibit B-1 - Form of Stock Pledge Agreement
Exhibit B-2 - Form of Partnership Pledge Agreement
Exhibit B-3 - Form of Limited Liability Company Pledge Agreement
Exhibit C - Form of Borrowing Certificate
Exhibit D - Form of Opinion of Borrower's Counsel
Exhibit E - Form of Assignment and Acceptance
Exhibit F - Form of Confidentiality Agreement
Exhibit G - Terms and Conditions of Subordinated Indebtedness
iv
<PAGE> 6
CREDIT AGREEMENT, dated as of September __, 1997, among Affiliated
Managers Group, Inc., a Delaware corporation (the "BORROWER"), the several banks
and other financial institutions from time to time parties to this Agreement
(the "LENDERS") and The Chase Manhattan Bank, a New York banking corporation, as
administrative agent for the Lenders hereunder (in such capacity, the
"ADMINISTRATIVE AGENT").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Borrower intends to acquire (the "TBC ACQUISITION"),
directly or indirectly, a majority interest in Tweedy, Browne Company L.P. or
its successor and its related entities ("TBC"); and
WHEREAS, the Borrower has acquired, and intends to acquire, directly or
indirectly, majority and other equity interests (together with the TBC
Acquisition, each an "ACQUISITION") in investment management companies (together
with TBC, each as hereinafter further defined, a "MANAGEMENT COMPANY"), and such
Management Companies intend to acquire, directly or indirectly, majority and
other equity interests (each also an "Acquisition") in other investment
management companies (each also a "MANAGEMENT COMPANY"); and
WHEREAS, the Borrower currently has loans outstanding under the existing
$125,000,000 Credit Agreement, dated as of March 6, 1996 among the Borrower, the
several lenders parties thereto and The Chase Manhattan Bank (formerly known as
Chemical Bank), as administrative agent (the "EXISTING FACILITY"); and
WHEREAS, the Borrower has requested loans of up to $300,000,000 on a
term and a revolving basis to refinance the Existing Facility, to finance the
TBC Acquisition and other Acquisitions, to pay the related fees and expenses of
the TBC Acquisition and other Acquisitions, to finance certain additional costs
related to the TBC Acquisition and other Acquisitions and to finance the working
capital and business requirements of the Borrower and its Subsidiaries; and
WHEREAS, the Lenders are willing to make Loans to the Borrower, subject
to the terms and conditions set forth in this Agreement;
NOW, THEREFORE, the parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS
1.1 DEFINED TERMS. As used in this Agreement, the following terms
shall have the following meanings:
"ABR": for any day, a rate per annum (rounded upwards, if
necessary, to the next 1/16 of 1%) equal to the greatest of (a) the
Prime Rate in effect on such day,
<PAGE> 7
(b) the Base CD Rate in effect on such day plus 1% and (c) the Federal
Funds Effective Rate in effect on such day plus 1/2 of 1%. For purposes
hereof: "PRIME RATE" shall mean the rate of interest per annum publicly
announced from time to time by the Administrative Agent as its prime
rate in effect at its principal office in New York City (the Prime Rate
not being intended to be the lowest rate of interest charged by Chemical
Bank in connection with extensions of credit to debtors); "BASE CD RATE"
shall mean the sum of (a) the product of (i) the Three-Month Secondary
CD Rate and (ii) a fraction, the numerator of which is one and the
denominator of which is one minus the C/D Reserve Percentage and (b) the
C/D Assessment Rate; "THREE- MONTH SECONDARY CD RATE" shall mean, for
any day, the secondary market rate for three-month certificates of
deposit reported as being in effect on such day (or, if such day shall
not be a Business Day, the next preceding Business Day) by the Board of
Governors of the Federal Reserve System (the "BOARD") through the public
information telephone line of the Federal Reserve Bank of New York
(which rate will, under the current practices of the Board, be published
in Federal Reserve Statistical Release H.15(519) during the week
following such day), or, if such rate shall not be so reported on such
day or such next preceding Business Day, the average of the secondary
market quotations for three-month certificates of deposit of major money
center banks in New York City received at approximately 10:00 A.M., New
York City time, on such day (or, if such day shall not be a Business
Day, on the next preceding Business Day) by the Administrative Agent
from three New York City negotiable certificate of deposit dealers of
recognized standing selected by it; and "FEDERAL FUNDS EFFECTIVE RATE"
shall mean, for any day, the weighted average of the rates on overnight
federal funds transactions with members of the Federal Reserve System
arranged by federal funds brokers, as published on the next succeeding
Business Day by the Federal Reserve Bank of New York, or, if such rate
is not so published for any day which is a Business Day, the average of
the quotations for the day of such transactions received by the
Administrative Agent from three federal funds brokers of recognized
standing selected by it. Any change in the ABR due to a change in the
Prime Rate, the Three-Month Secondary CD Rate or the Federal Funds
Effective Rate shall be effective as of the opening of business on the
effective day of such change in the Prime Rate, the Three-Month
Secondary CD Rate or the Federal Funds Effective Rate, respectively.
"ABR LOANS": Loans the rate of interest applicable to which is
based upon the ABR.
"ACQUISITION": as defined in the recitals hereto.
"ADJUSTED EBITDA": as at the end of any fiscal quarter of the
Borrower, the average of the Consolidated EBITDA of the Borrower and its
Subsidiaries (a) for such fiscal quarter (on an annualized (I.E., times
four) and consolidated basis) and (b) for the preceding four fiscal
quarters, in each case after giving effect on a PRO FORMA basis to
Acquisitions completed during such fiscal period.
2
<PAGE> 8
"ADJUSTMENT DATE": each date that is the Second Business Day
following receipt by the Administrative Agent of the financial
statements required to be delivered pursuant to subsection 7.1.
"ADMINISTRATIVE AGENT": The Chase Manhattan Bank, together with
its affiliates, as the administrative agent for the Lenders under this
Agreement and the other Loan Documents.
"AFFILIATE": as to any Person, any other Person (other than a
Subsidiary or a Management Company) which, directly or indirectly, is in
control of, is controlled by, or is under common control with, such
Person. For purposes of this definition, "control" of a Person means the
power, directly or indirectly, either to (a) vote 10% or more of the
securities having ordinary voting power for the election of directors of
such Person or (b) direct or cause the direction of the management and
policies of such Person, whether by contract or otherwise.
"AGREEMENT": this Credit Agreement, as amended, supplemented or
otherwise modified from time to time.
"APPLICABLE MARGIN": the rate per annum as adjusted on each
Adjustment Date to the applicable rates per annum set forth on ANNEX I
hereto which corresponds to the ratio of Senior Indebtedness to Adjusted
EBITDA for the four most recent fiscal quarters of the Borrower,
determined from the quarterly financial statements referred to in
subsection 7.1(b) and with respect to fiscal quarters ended prior to
the date hereof, the financial statements heretofore provided to the
Administrative Agent; PROVIDED that in the event that the financial
statements required to be delivered pursuant to subsection 7.1 are not
delivered when due, then
(a) if such financial statements are delivered after the
date required (without giving effect to any applicable cure period) and
the Applicable Margin increases from that previously in effect as a
result of the delivery of such financial statements, then the Applicable
Margin during the period from the date upon which such financial
statements were required to be delivered (without giving effect to any
applicable cure period) until the date upon which they actually are
delivered shall be, except as otherwise provided in clause (c) below,
the Applicable Margin as so increased;
(b) if such financial statements are delivered after the
date required and the Applicable Margin decreases from that previously
in effect as a result of the delivery of such financial statements, then
such decrease in the Applicable Margin shall not become applicable until
the date upon which the financial statements actually are delivered; and
(c) if such financial statements are not delivered prior to
the expiration of the applicable cure period, then, effective upon such
expiration, for the period from the
3
<PAGE> 9
date upon which such financial statements were required to be delivered
(after the expiration of the applicable cure period) until two Business
Days following the date upon which they actually are delivered, the
Applicable Margin shall be 2.50%, in the case of Eurodollar Loans, and
1.50%, in the case of ABR Loans (it being understood that the foregoing
shall not limit the rights of the Administrative Agent and the Lenders
set forth in Section 9).
"ASSET SALE": any sale, issuance, conveyance, transfer, lease or
other disposition, including by way of merger, consolidation or sale and
leaseback transaction (any of the foregoing, a "transfer"), directly or
indirectly, in one or a series of related transactions, of (i) all or
substantially all of the properties and assets (other than marketable
securities, including "margin stock" within the meaning of Regulation U,
liquid investments and other financial instruments) of the Borrower or
its Subsidiaries, or (ii) any other properties or assets of the Borrower
or any Subsidiary, other than in the ordinary course of business, to any
Persons other than the Borrower or any of its Subsidiaries. For the
purposes of this definition, the term "Asset Sale" shall not include (a)
any transfer of properties and assets to the extent that the gross
proceeds from the transfer thereof do not exceed (i) $1,000,000 in any
transaction or series of related transactions, taken as a whole, or (ii)
$5,000,000 (irrespective of the size of the individual transactions) in
the aggregate for all such transactions or series of related
transactions on or after the Closing Date, and (b) any transfer of the
Capital Stock of any Management Company or any of the Subsidiaries of
the Borrower to a partner, officer, director, shareholder or member (or
any entity owned or controlled by such Person) of a Management Company
which is a Subsidiary of the Borrower or in which the Borrower or a
Subsidiary has an ownership interest (any such transfer described in
this clause (b), a "SHAREHOLDER ASSET SALE"). In addition, with regard
to a Subsidiary of the Borrower, the term "Asset Sale" shall include
only that portion of the gross proceeds to such Subsidiary from the
transfer thereof representing the percentage of such proceeds equal to
the percentage of the Borrower's ownership interest in such Subsidiary.
"ASSIGNEE": as defined in subsection 11.6(c).
"AVAILABLE REVOLVING CREDIT COMMITMENT": as to any Revolving
Credit Lender at any time, an amount equal to the excess, if any, of (a)
the amount of such Revolving Credit Lender's Revolving Credit Commitment
over (b) the aggregate principal amount of all Revolving Credit Loans
made by such Revolving Credit Lender then outstanding.
"BORROWING DATE": any Business Day specified in a notice
pursuant to subsection 2.2 or 3.2 as a date on which the Borrower
requests the Lenders to make Loans hereunder.
4
<PAGE> 10
"BUSINESS DAY": a day other than a Saturday, Sunday or other day
on which commercial banks in New York City are authorized or required by
law to close.
"CAPITAL STOCK": any and all shares, interests, participations
or other equivalents (however designated) of capital stock of a
corporation, any and all equivalent ownership interests in a Person
(other than a corporation) and any and all warrants or options to
purchase any of the foregoing.
"C/D ASSESSMENT RATE": for any day as applied to any ABR Loan
based upon the Base CD Rate the annual assessment rate in effect on such
day which is payable by a member of the Bank Insurance Fund maintained
by the Federal Deposit Insurance Corporation (the "FDIC") classified as
well-capitalized and within supervisory subgroup "B" (or a comparable
successor assessment risk classification) within the meaning of 12
C.F.R. ss. 327.4 (or any successor provision) to the FDIC (or any
successor) for the FDIC's (or such successor's) insuring time deposits
at offices of such institution in the United States.
"C/D RESERVE PERCENTAGE": for any day as applied to any ABR Loan
based on the Base CD Rate, that percentage (expressed as a decimal)
which is in effect on such day, as prescribed by the Board of Governors
of the Federal Reserve System (or any successor) (the "BOARD"), for
determining the maximum reserve requirement for a Depositary Institution
(as defined in Regulation D of the Board) in respect of new non-personal
time deposits in Dollars having a maturity of 30 days or more.
"CHANGE OF CONTROL": the occurrence of any of the following
events: (i) any Person or "group" (within the meaning of Section 13(d)
or 14(d) of the Securities Exchange Act of 1934, as amended) other than
TA Associates, Inc. (and entities associated therewith) shall have
acquired beneficial ownership of Capital Stock having 50% or more of the
ordinary voting power in the election of directors of the Borrower or
(ii) TA Associates, Inc. (and entities associated therewith) shall cease
to own beneficially and of record at least 50% of the issued and
outstanding Capital Stock of the Borrower controlled by them
collectively as of the Closing Date (x) other than as a result of a
distribution to the investors in TA Associates, Inc. (and the entities
associated therewith) after consummation of an Initial Public Offering,
(y) other than as a direct result of or in connection with an Initial
Public Offering and (z) other than after an Initial Public Offering.
"CHASE": The Chase Manhattan Bank, a New York banking
corporation.
"CLOSING DATE": the date on which the conditions precedent set
forth in subsection 6.1 shall be satisfied.
"CODE": the Internal Revenue Code of 1986, as amended from time
to time.
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<PAGE> 11
"COLLATERAL": as defined in the Stock Pledge Agreement.
"COMMITMENT": with respect to any Lender, the collective
reference to such Lender's Tranche A Term Loan Commitment, Tranche B
Term Loan Commitment and/or Revolving Credit Commitment; collectively,
as to all the Lenders, the "COMMITMENTS".
"COMMITMENT PERCENTAGE": as to any Lender at any time, the
percentage which (i) the sum of (a) such Lender's then Available
Revolving Credit Commitment and other unused Commitments (other than
Revolving Credit Commitments) PLUS (b) such Lender's Loans then
outstanding then constitutes of (ii) the sum of (x) the aggregate
Available Revolving Credit Commitments of the Revolving Credit Lenders
and the other unused Commitments of all the Lenders (other than
Revolving Credit Commitments) PLUS (y) the aggregate principal amount of
Loans of all the Lenders then outstanding.
"COMMONLY CONTROLLED ENTITY": an entity, whether or not
incorporated, which is under common control with the Borrower within the
meaning of Section 4001 of ERISA or is part of a group which includes
the Borrower and which is treated as a single employer under Section 414
of the Code.
"CONSOLIDATED EBITDA": for any fiscal period the consolidated
EBITDA of the Borrower and its Subsidiaries for such period, in each
case after giving effect on a PRO FORMA basis to Acquisitions completed
during such fiscal period.
"CONSOLIDATED INTEREST EXPENSE": for any period, the amount of
interest expense, both expensed and capitalized, of the Borrower and, to
the extent payable out of Free Cash Flow (and not Operating Cash Flow)
under the relevant Revenue Sharing Agreement, its Subsidiaries on a
consolidated basis, net of the portion thereof attributable to minority
interests, for such period, as determined in accordance with GAAP.
"CONSOLIDATED NET INCOME" (or "CONSOLIDATED NET LOSS"): for any
fiscal period, consolidated net income (or loss) by the Borrower and its
Subsidiaries for such fiscal period, determined in accordance with GAAP.
"CONSOLIDATED NET WORTH": as at any date, all amounts included
under shareholders' equity on a consolidated balance sheet of the
Borrower and its Subsidiaries as at such date, as determined on a
consolidated basis in accordance with GAAP and any Subordinated
Indebtedness; PROVIDED that such Subordinated Indebtedness shall have no
scheduled payments of interest prior to [the date which is seven years
after the Closing Date] (other than payments of interest which may, at
the option of the Borrower, be made by increasing the principal and
other than payments of interest with respect to the Senior Subordinated
Contingent Payment Notes).
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<PAGE> 12
"CONTRACTUAL OBLIGATION": as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
property is bound.
"CONVERTIBLE PREFERRED STOCK": as defined in subsection 6.1(n).
"DEFAULT": any of the events specified in Section 9, whether or
not any requirement for the giving of notice, the lapse of time, or
both, has been satisfied.
"DOLLARS" and "$": dollars in lawful currency of the United
States of America.
"EBITDA": for any Person for any period, the sum (without
duplication) of the amount for such Person for such period of (a) its
net income before taxes, (b) its interest expense (including capitalized
interest expense), (c) its depreciation expense, (d) its amortization
expense and (e) its Non-Cash Based Compensation Costs, in each case as
determined in accordance with GAAP.
"ERISA": the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"EUROCURRENCY RESERVE REQUIREMENTS": for any day as applied to a
Eurodollar Loan, the aggregate (without duplication) of the rates
(expressed as a decimal fraction) of reserve requirements in effect on
such day (including, without limitation, basic, supplemental, marginal
and emergency reserves under any regulations of the Board of Governors
of the Federal Reserve System or other Governmental Authority having
jurisdiction with respect thereto) dealing with reserve requirements
prescribed for eurocurrency funding (currently referred to as
"Eurocurrency Liabilities" in Regulation D of such Board) maintained by
a member bank of such System.
"EURODOLLAR BASE RATE": with respect to each day during each
Interest Period pertaining to a Eurodollar Loan, the rate per annum
equal to the rate offered by Chase for Dollar deposits at or about 10:00
A.M., New York City time, two Business Days prior to the beginning of
such Interest Period in the interbank eurodollar market where the
eurodollar and foreign currency and exchange operations in respect of
its Eurodollar Loans are then being conducted for delivery on the first
day of such Interest Period for the number of days comprised therein and
in an amount comparable to the amount of its Eurodollar Loan to be
outstanding during such Interest Period.
"EURODOLLAR LOANS": Loans the rate of interest applicable to
which is based upon the Eurodollar Rate.
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<PAGE> 13
"EURODOLLAR RATE": with respect to each day during each Interest
Period pertaining to a Eurodollar Loan, a rate per annum determined for
such day in accordance with the following formula (rounded upward to the
nearest 1/100th of 1%):
EURODOLLAR BASE RATE
----------------------------------------
1.00 - Eurocurrency Reserve Requirements
"EVENT OF DEFAULT": any of the events specified in Section 9,
PROVIDED that any requirement for the giving of notice, the lapse of
time, or both, or any other condition, has been satisfied.
"EXISTING AGREEMENT": the $125,000,000 Credit Agreement, dated
as of March 6, 1996, among AMG, the several lenders parties thereto and
The Chase Manhattan Bank (formerly known as Chemical Bank), as agent.
"FINANCING LEASE": any lease of property, real or personal, the
obligations of the lessee in respect of which are required in accordance
with GAAP to be capitalized on a balance sheet of the lessee.
"FREE CASH FLOW": as defined in the relevant Revenue Sharing
Agreement.
"FUNDS": the collective reference to all Investment Companies
and other investment accounts or funds (in whatever form and whether
personal or corporate) for which the Borrower or any of its Subsidiaries
or Management Companies provides advisory, management or administrative
services.
"GAAP": generally accepted accounting principles in the United
States of America in effect from time to time.
"GOVERNMENTAL AUTHORITY": any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"GUARANTEE OBLIGATION": as to any Person (the "GUARANTEEING
PERSON"), any obligation of (a) the guaranteeing person or (b) another
Person (including, without limitation, any bank under any letter of
credit) to induce the creation of which the guaranteeing person has
issued a reimbursement, counterindemnity or similar obligation, in
either case guaranteeing or in effect guaranteeing any Indebtedness,
leases, dividends or other obligations (the "PRIMARY OBLIGATIONS") of
any other third Person (the "PRIMARY OBLIGOR") in any manner, whether
directly or indirectly, including, without limitation, any obligation of
the guaranteeing person, whether or not contingent, (i) to purchase any
such primary obligation or any property constituting direct or indirect
security therefor, (ii) to advance or supply funds (1) for
8
<PAGE> 14
the purchase or payment of any such primary obligation or (2) to
maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency of the primary obligor,
(iii) to purchase property, securities or services primarily for the
purpose of assuring the owner of any such primary obligation of the
ability of the primary obligor to make payment of such primary
obligation or (iv) otherwise to assure or hold harmless the owner of any
such primary obligation against loss in respect thereof; PROVIDED,
HOWEVER, that the term Guarantee Obligation shall not include
endorsements of instruments for deposit or collection in the ordinary
course of business. The amount of any Guarantee Obligation of any
guaranteeing person shall be deemed to be the lower of (a) an amount
equal to the stated or determinable amount of the primary obligation in
respect of which such Guarantee Obligation is made and (b) the maximum
amount for which such guaranteeing person may be liable pursuant to the
terms of the instrument embodying such Guarantee Obligation, unless such
primary obligation and the maximum amount for which such guaranteeing
person may be liable are not stated or determinable, in which case the
amount of such Guarantee Obligation shall be such guaranteeing person's
maximum reasonably anticipated liability in respect thereof as
determined by the Borrower in good faith.
"INITIAL PUBLIC OFFERING": any initial public offering of common
(or other voting) stock of the Borrower.
"INDEBTEDNESS": of any Person at any date and without
duplication, (a) all indebtedness of such Person for borrowed money or
for the deferred purchase price of property or services (other than
current trade liabilities incurred in the ordinary course of business
and payable in accordance with customary practices), (b) any other
indebtedness of such Person which is evidenced by a note, bond,
debenture or similar instrument, (c) all obligations of such Person
under Financing Leases, (d) all obligations of such Person in respect of
acceptances issued or created for the account of such Person, (e) all
obligations of such Person under noncompetition agreements reflected as
liabilities on a balance sheet of such Person in accordance with GAAP,
(f) all liabilities secured by any Lien on any property owned by such
Person even though such Person has not assumed or otherwise become
liable for the payment thereof, and (g) all net obligations of such
Person under interest rate, commodity, foreign currency and financial
markets swaps, options, futures and other hedging obligations (valued,
at such date, in accordance with the Borrower's customary practices, as
approved by its independent certified public accountants). For purposes
of the foregoing definition, with regard to a Subsidiary of the
Borrower, the term "Indebtedness" shall include only that portion of its
Indebtedness representing the percentage of its Indebtedness equal to
the percentage of the Borrower's ownership interest in such Subsidiary.
"INSOLVENCY": with respect to any Multiemployer Plan, the
condition that such Plan is insolvent within the meaning of Section 4245
of ERISA.
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<PAGE> 15
"INSOLVENT": pertaining to a condition of Insolvency.
"INTEREST PAYMENT DATE": (a) as to any ABR Loan, the last day of
each March, June, September and December to occur while such Loan is
outstanding, (b) as to any Eurodollar Loan having an Interest Period of
three months or less, the last day of such Interest Period, and (c) as
to any Eurodollar Loan having an Interest Period longer than three
months, each day which is three months or a whole multiple thereof,
after the first day of such Interest Period and the last day of such
Interest Period.
"INTEREST PERIOD": with respect to any Eurodollar Loan:
(i) initially, the period commencing on the
borrowing or conversion date, as the case may be, with respect
to such Eurodollar Loan and ending one, two, three or six months
thereafter, as selected by the Borrower in its notice of
borrowing or notice of conversion, as the case may be, given
with respect thereto; and
(ii) thereafter, each period commencing on
the last day of the next preceding Interest Period applicable to
such Eurodollar Loan and ending one, two, three or six months
thereafter, as selected by the Borrower by irrevocable notice to
the Administrative Agent not less than three Business Days prior
to the last day of the then current Interest Period with respect
thereto;
PROVIDED that, the foregoing provisions relating to Interest Periods are
subject to the following:
(1) if any Interest Period pertaining to a
Eurodollar Loan would otherwise end on a day that is not a
Business Day, such Interest Period shall be extended to the next
succeeding Business Day unless the result of such extension
would be to carry such Interest Period into another calendar
month in which event such Interest Period shall end on the
immediately preceding Business Day;
(2) no Interest Period that would otherwise extend
beyond the Termination Date in the case of Revolving Credit
Loans or Tranche A Term Loans, or beyond the Tranche B Term Loan
Termination Date, in the case of the Tranche B Term Loans, shall
be selected by the Borrower; and
(3) any Interest Period pertaining to a Eurodollar
Loan that begins on the last Business Day of a calendar month
(or on a day for which there is no numerically corresponding day
in the calendar month at the end of such Interest Period) shall
end on the last Business Day of a calendar month.
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<PAGE> 16
"INVESTMENT ADVISERS ACT": the Investment Advisers Act of 1940,
and the rules and regulations promulgated thereunder, as such may be
amended from time to time.
"INVESTMENT COMPANY": an "investment company" as such term is
defined in the Investment Company Act.
"INVESTMENT COMPANY ACT": the Investment Company Act of 1940,
and the rules and regulations promulgated thereunder, as such may be
amended from time to time.
"LIEN": any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), charge or other
security interest or any preference, priority or other security
agreement or preferential arrangement of any kind or nature whatsoever
(including, without limitation, any conditional sale or other title
retention agreement and any Financing Lease having substantially the
same economic effect as any of the foregoing).
"LLC PLEDGE AGREEMENT": the Limited Liability Pledge Agreement
to be executed and delivered by the Borrower, substantially in the form
of Exhibit B-3, as the same may be amended, supplemented or otherwise
modified from time to time (including as supplemented by the execution
and delivery of any Pledge Agreement Supplement in the form of Annex I
to said Exhibit B-3 (a "Pledge Agreement Supplement")).
"LOAN": any Tranche A Term Loan, Tranche B Term Loan or
Revolving Credit Loan; collectively, the "LOANS".
"LOAN DOCUMENTS": this Agreement, any Notes, and the Pledge
Agreements.
"MANAGEMENT COMPANY": any Subsidiary or other Person engaged,
directly or indirectly, primarily in the business of providing
investment advisory, management, distribution or administrative services
to Funds (or investment accounts or funds which will be included as
Funds after the Borrower acquires an interest in such other Person) and
in which the Borrower, directly or indirectly, has purchased or
otherwise acquired, or has entered into an agreement to purchase or
otherwise acquire, Capital Stock or other interests, entitling the
Borrower, directly or indirectly, to a share of the revenues, earnings
or value thereof.
"MATERIAL ADVERSE EFFECT": a material adverse effect on (a) the
business, operations, property or condition (financial or otherwise) of
each of (i) the Borrower and its Subsidiaries (after giving effect to
the TBC Acquisition) taken as a whole and (ii) TBC, (b) the ability of
the Borrower after the TBC Acquisition to perform its obligations under
the Loan Documents or (c) the validity or enforceability of this or
11
<PAGE> 17
any of the other Loan Documents or the rights or remedies of the
Administrative Agent or the Lenders hereunder or thereunder.
"MULTIEMPLOYER PLAN": a Plan which is a multiemployer plan as
defined in Section 4001(a)(3) of ERISA.
"NET PROCEEDS": with respect to any Asset Sale the net amount
equal to the aggregate amount received in cash (including any cash
received by way of deferred payment pursuant to a note receivable, other
non-cash consideration or otherwise, but only as and when such cash is
so received) in connection with such Asset Sale MINUS the sum of (a) the
reasonable fees, commissions and other out-of-pocket expenses incurred
by the Borrower or any of its Subsidiaries, as applicable, in connection
with such Asset Sale (other than amounts payable to Affiliates of the
Person making such disposition) and (b) federal, state and local taxes
incurred in connection with such Asset Sale, whether or not payable at
such time.
"NON-CASH BASED COMPENSATION COSTS": for any period, the amount
of non- cash expense or costs computed under APB No. 25 and related
interpretations or FAS 123 and related interpretations, which relate to
the issuance of interests in any Subsidiary or Management Company.
"NON-EXCLUDED TAXES": as defined in subsection 4.11.
"NOTES": collectively, the Revolving Credit Notes, Tranche A
Term Notes and Tranche B Term Notes, if any.
"OPERATING CASH FLOW": as defined in the relevant Revenue
Sharing Agreement.
"PARTICIPANT": as defined in subsection 11.6(b).
"PARTNERSHIP PLEDGE AGREEMENT": the Partnership Pledge Agreement
to be executed and delivered by the Borrower, substantially in the form
of Exhibit B-2, as the same may be amended, supplemented or otherwise
modified from time to time (including as supplemented by the execution
and delivery of any Pledge Agreement Supplement in the form of Annex I
to said Exhibit B-2 (a "PLEDGE AGREEMENT SUPPLEMENT")).
"PBGC": the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA.
"PERSON": an individual, partnership, corporation, limited
liability company, business trust, joint stock company, trust,
unincorporated association, joint venture, Governmental Authority or
other entity of whatever nature.
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<PAGE> 18
"PLAN": at a particular time, any employee benefit plan which is
covered by ERISA and in respect of which the Parent or a Commonly
Controlled Entity is (or, if such plan were terminated at such time,
would under Section 4069 of ERISA be deemed to be) an "employer" as
defined in Section 3(5) of ERISA.
"PLEDGE AGREEMENTS": the collective reference to the Partnership
Pledge Agreement, the LLC Pledge Agreement and the Stock Pledge
Agreement.
"PLEDGED COLLATERAL": as defined in the Partnership Pledge
Agreement and the LLC Pledge Agreement.
"REGISTER": as defined in subsection 11.6(d).
"REGULATION U": Regulation U of the Board of Governors of the
Federal Reserve System as in effect from time to time.
"REORGANIZATION": with respect to any Multiemployer Plan, the
condition that such plan is in reorganization within the meaning of
Section 4241 of ERISA.
"REPORTABLE EVENT": any of the events set forth in Section
4043(b) of ERISA, other than those events as to which the thirty day
notice period is waived under subsections .13, .14, .16, .18, .19 or .20
of PBGC Reg. ss.2615.
"REQUIRED LENDERS": at any time, Lenders the Commitment
Percentages of which aggregate at least 51%.
"REQUIREMENT OF LAW": as to any Person, any law, treaty, rule or
regulation or determination of an arbitrator or a court or other
Governmental Authority, in each case applicable to or binding upon such
Person or any of its property or to which such Person or any of its
property is subject.
"RESPONSIBLE OFFICER": the chief executive officer, the
president and the executive vice president of the Borrower or, with
respect to financial matters, the senior financial officer of the
Borrower.
"REVENUE SHARING AGREEMENT": each agreement entered into by the
Borrower or a Subsidiary with a Management Company pursuant to which a
specified percentage of the adjusted gross revenues of the partnership
or limited liability company or other similar entity organized under
such agreement or the Person to which such agreement relates is deemed
Free Cash Flow to be distributed among partners, shareholders or members
of such Management Company, PRO RATA, in accordance with such partners',
shareholders' or members' ownership percentages, or any similar other
agreement providing for the distribution of income, revenues or assets
of a Management Company.
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<PAGE> 19
"REVOLVING CREDIT COMMITMENT": as to any Revolving Credit
Lender, the obligation of such Lender to make Revolving Credit Loans to
the Borrower hereunder in an aggregate principal amount at any one time
outstanding not to exceed the amount set forth opposite such Lender's
name on Schedule I under the heading "Revolving Credit Commitment", as
such amount may be reduced from time to time in accordance with the
provisions of this Agreement.
"REVOLVING CREDIT COMMITMENT PERCENTAGE": as to any Revolving
Credit Lender at any time, the percentage which such Lender's Revolving
Credit Commitment then constitutes of the aggregate Revolving Credit
Commitments (or, at any time after the Revolving Credit Commitments
shall have expired or terminated, the percentage which the aggregate
principal amount of such Lender's Revolving Credit Loans then
outstanding constitutes of the aggregate principal amount of the
Revolving Credit Loans then outstanding).
"REVOLVING CREDIT COMMITMENT PERIOD": the period from and
including the date hereof to but not including the Termination Date or
such earlier date on which the Revolving Credit Commitments shall
terminate as provided herein.
"REVOLVING CREDIT LENDER": any Lender with an unused Revolving
Credit Commitment hereunder and/or any Revolving Credit Loans
outstanding hereunder; collectively, the "REVOLVING CREDIT LENDERS".
"REVOLVING CREDIT LOANS": as defined in subsection 3.1(a).
"REVOLVING CREDIT NOTE": as defined in subsection 3.5(e).
"SECURITIES ACTS": The Securities Act of 1933 and the Securities
Exchange Act of 1934, and the rules and regulations promulgated
thereunder, in each case as such may be amended from time to time.
"SENIOR INDEBTEDNESS": at any time, Total Indebtedness minus
Subordinated Indebtedness.
"SENIOR SUBORDINATED CREDIT AGREEMENT": the Securities Purchase
Agreement dated as of August 15, 1997, as amended, modified or otherwise
supplemented from time to time in accordance with subsection 8.11 among
the Borrower, and the purchasers listed therein.
"SENIOR SUBORDINATED FACILITY DOCUMENTS": the collective
reference to the Senior Subordinated Credit Agreement, the notes issued
pursuant thereto, and each of the other instruments and documents
executed and delivered pursuant to any of the foregoing (but excluding,
for the avoidance of doubt, the Senior Subordinated
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<PAGE> 20
Indenture, the Senior Subordinated Notes and each of the other
instruments and documents executed and delivered pursuant to any of the
foregoing).
"SENIOR SUBORDINATED INDENTURE": either of the following, in
each case as amended, waived, supplemented or otherwise modified from
time to time in accordance with subsection 8.11: (a) if and when entered
into, the Senior Subordinated Indenture, substantially in the form of
Exhibit D attached to the Senior Subordinated Credit Agreement (with
such changes therein as the Administrative Agent and the Borrower shall
approve), if and when executed and delivered by the Borrower and a
trustee thereunder, relating to the Exchange Notes (as defined in the
Senior Subordinated Credit Agreement) or (b) in the event that the
Indebtedness under the Senior Subordinated Credit Agreement is
refinanced as contemplated thereby, the indenture or credit agreement
under which such refinancing Indebtedness is issued and outstanding.
"SENIOR SUBORDINATED LOANS": Indebtedness of the Borrower under
the Senior Subordinated Facility Documents and the Senior Subordinated
Notes Documents.
"SENIOR SUBORDINATED NOTES": the notes issued under the Senior
Subordinated Indenture.
"SENIOR SUBORDINATED NOTES DOCUMENTS": the collective reference
to the Senior Subordinated Notes and the Senior Subordinated Indenture
and each of the other instruments and documents executed and delivered
pursuant to any of the foregoing, as the same may be amended,
supplemented, waived or otherwise modified from time to time in
accordance with subsection 8.11 to the extent applicable; individually a
"SENIOR SUBORDINATED NOTE DOCUMENT."
"SINGLE EMPLOYER PLAN": any Plan which is covered by Title IV of
ERISA, but which is not a Multiemployer Plan.
"STOCK PLEDGE AGREEMENT": the Stock Pledge Agreement to be
executed and delivered by the Borrower, substantially in the form of
Exhibit B-1, as the same may be amended, supplemented or otherwise
modified from time to time (including as supplemented by the execution
and delivery of any Pledge Agreement Supplement in the form of Annex I
to said Exhibit B-1 (a "PLEDGE AGREEMENT SUPPLEMENT")).
"SUBORDINATED CONTINGENT PAYMENT NOTES": the collective
reference to (i) the Subordinated Contingent Payment Notes issued by the
Borrower pursuant to the Partnership Interest Purchase Agreement dated
March 8, 1995 among the Borrower, Systematic Financial Management, Inc.,
Cash Flow Investors, Inc., Systematic Financial Management, L.P. and
certain stockholders of Systematic Financial Management, Inc., (ii) the
Subordinated Deferred Payment Note issued by the
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<PAGE> 21
Borrower on November 9, 1995 pursuant to the Partnership Interest
Purchase Agreement dated August 11,1995 among the Borrower, Renaissance
Investment Management, Inc., Descartes, Inc., Renaissance Investment
Management, the stockholders of Renaissance Investment Management and
certain stockholders of Descartes, Inc., (iii) the Subordinated
Contingent Payment Notes issued by the Borrower pursuant to the Stock
Purchase and Contribution Agreement, dated October 11, 1996, among the
Borrower, The Burridge Group Inc. and the stockholders of The Burridge
Group Inc. and (iv) the Subordinated Contingent Payment Notes issued by
the Borrower pursuant to the Limited Liability Company Interest Purchase
Agreement, dated March 5, 1997, among the Borrower, Gofen and Glossberg,
Inc., Gofen and Glossberg, L.L.C. and the stockholders of Gofen and
Glossberg, Inc.
"SUBORDINATED INDEBTEDNESS": (a) the Indebtedness of the
Borrower under the Subordinated Contingent Payment Notes, (b) the Senior
Subordinated Loans and (c) any other unsecured Indebtedness of the
Borrower (i) for which the Borrower is directly or primarily liable and
in respect of which none of the Subsidiaries of the Borrower is
contingently or otherwise obligated, (ii) the payment of the principal
of and interest on which and other obligations of the Borrower in
respect of which are subordinated to the prior payment in full of the
principal of and interest (including post-petition interest whether or
not allowed as a claim in any proceeding) on the Loans and all other
obligations and liabilities of the Borrower to the Administrative Agent
and the Lenders hereunder, and (iii) which are generally consistent with
terms and conditions set forth in Exhibit G hereof (with any variations
to such terms and conditions being subject to approval by the
Administrative Agent) or otherwise satisfactory in form and substance to
the Required Lenders.
"SUBSIDIARY": as to any Person, a corporation, partnership,
limited liability company or other entity of which Capital Stock having
ordinary voting power (other than Capital Stock having such power only
by reason of the happening of a contingency) to elect a majority of the
board of directors or other managers of such corporation, partnership,
limited liability company or other entity are at the time owned, or the
management of which is otherwise controlled, directly or indirectly
through one or more intermediaries, or both, by such Person. Unless
otherwise qualified, all references to a "Subsidiary" or to
"Subsidiaries" in this Agreement shall refer to a Subsidiary or
Subsidiaries of the Borrower.
"TBC": as defined in the recitals thereto.
"TBC ACQUISITION": as defined in the recitals hereto.
"TERM LOAN LENDER": any Lender with an unused Term Loan
Commitment hereunder and/or any Term Loans outstanding hereunder;
collectively, the "TERM LOAN LENDERS".
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<PAGE> 22
"TERM LOANS": the collective reference to the Tranche A Term
Loans and the Tranche B Term Loans.
"TERM NOTE": as defined in subsection 2.4(d); collectively, the
"TERM NOTES".
"TERMINATION DATE": the date which is seven years after the
Closing Date or such earlier date when the Revolving Credit Commitments
hereunder are terminated.
"TOTAL INDEBTEDNESS": at any time, the aggregate principal
amount (including capitalized interest) of all Indebtedness of the
Borrower and its Subsidiaries (including without limitation, pursuant to
the Loans, purchase money obligations and amounts payable under
noncompetition agreements) reflected as liabilities on the consolidated
balance sheet of the Borrower and its Subsidiaries.
"TRANCHE": the collective reference to Eurodollar Loans having
Interest Periods that began or will begin on the same date and end on
the same later date (whether or not such Loans shall originally have
been made on the same day).
"TRANCHE A TERM LOAN": as defined in subsection 2.1(a);
collectively, the "TRANCHE A TERM LOANS".
"TRANCHE A TERM LOAN COMMITMENT": as to any Tranche A Term Loan
Lender, its obligation to make a Tranche A Term Loan to the Borrower in
an amount equal to the amount set forth opposite such Tranche A Term
Loan Lender's name in Schedule I under the heading "Tranche A Term Loan
Commitment", as such amount may be reduced from time to time pursuant to
this Agreement or as such amount may be adjusted from time to time
pursuant to subsection 11.6; collectively, as to all such Tranche A Term
Loan Lenders, the "TRANCHE A TERM LOAN COMMITMENTS".
"TRANCHE A TERM LOAN COMMITMENT PERCENTAGE": as to any Tranche A
Term Loan Lender at any time, the percentage of the aggregate Tranche A
Term Loan Commitments then constituted by such Tranche A Term Loan
Lender's Tranche A Term Loan Commitments (or, after the Tranche A Term
Loans have been made, the percentage of the aggregate Tranche A Term
Loans then constituted by such Tranche A Term Loan Lender's Tranche A
Term Loans).
"TRANCHE A TERM LOAN LENDER": any Lender with an unused Tranche
A Term Loan Commitment hereunder and/or any Tranche A Term Loans
outstanding hereunder; collectively, the "TRANCHE A TERM LOAN LENDERS".
"TRANCHE A TERM LOAN TERMINATION DATE": the date which is seven
years after the Closing Date or, if such date is not a Business Day, the
Business Day next preceding such date.
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<PAGE> 23
"TRANCHE A TERM NOTE": as defined in subsection 2.4(d);
collectively, the "TRANCHE A TERM NOTES".
"TRANCHE B TERM LOAN": as defined in subsection 2.1(b);
collectively, the "TRANCHE B TERM LOANS".
"TRANCHE B TERM LOAN COMMITMENT": as to any Tranche B Term Loan
Lender, its obligation to make a Tranche B Term Loan to the Borrower in
an amount equal to the amount set forth opposite such Lender's name in
Schedule I under the heading "Tranche B Term Loan Commitment", as such
amount may be reduced from time to time pursuant to this Agreement or as
such amount may be adjusted from time to time pursuant to subsection
11.6; collectively, as to all such Tranche B Term Loan Lenders, the
"TRANCHE B TERM LOAN COMMITMENTS".
"TRANCHE B TERM LOAN COMMITMENT PERCENTAGE": as to any Tranche B
Term Loan Lender at any time, the percentage of the aggregate Tranche B
Term Loan Commitments then constituted by such Tranche B Term Loan
Lender's Tranche B Term Loan Commitments (or, after the Tranche B Term
Loans are made, the percentage of the aggregate Tranche B Term Loans
then constituted by such Tranche B Term Loan Lender's Tranche B Term
Loans).
"TRANCHE B TERM LOAN LENDER": any Lender with an unused Tranche
B Term Loan Commitment hereunder and/or any Tranche B Term Loans
outstanding hereunder; collectively, the "TRANCHE B TERM LOAN LENDERS".
"TRANCHE B TERM LOAN TERMINATION DATE": the date which is eight
years after the Closing Date or, if such date is not a Business Day, the
Business Day next preceding such date.
"TRANCHE B TERM NOTE": as defined in subsection 2.4(d);
collectively, the "TRANCHE B TERM NOTES".
"TRANSFEREE": as defined in subsection 11.6(f).
"TYPE": as to any Loan, its nature as an ABR Loan or a
Eurodollar Loan.
1.2 OTHER DEFINITIONAL PROVISIONS. (a) Unless otherwise
specified therein, all terms defined in this Agreement shall have the defined
meanings when used in any Notes or any certificate or other document made or
delivered pursuant hereto.
(b) As used herein and in any Notes, and any certificate or
other document made or delivered pursuant hereto, accounting terms relating to
the Borrower and its Subsidiaries not defined in subsection 1.1 and accounting
terms partly defined in subsection 1.1, to the extent not defined, shall have
the respective meanings given to them under GAAP.
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<PAGE> 24
(c) The words "hereof", "herein" and "hereunder" and words
of similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and Section,
subsection, Schedule and Exhibit references are to this Agreement unless
otherwise specified.
(d) The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such terms.
SECTION 2. AMOUNT AND TERMS OF TERM LOAN COMMITMENTS
2.1 TRANCHE A TERM LOANS AND TRANCHE B TERM LOANS. (a)
Subject to the terms and conditions hereof, each Tranche A Term Loan Lender
severally agrees to make a term loan (a "TRANCHE A TERM LOAN"; collectively, the
"TRANCHE A TERM LOANS") to the Borrower on the Closing Date in an amount equal
to the amount of the Tranche A Term Loan Commitment of such Tranche A Term Loan
Lender then in effect.
(b) Subject to the terms and conditions hereof, each Tranche
B Term Loan Lender severally agrees to make a term loan (a "TRANCHE B TERM
LOAN"; collectively, the "TRANCHE B TERM LOANS", and together with the Tranche A
Term Loans, the "TERM LOANS") to the Borrower on the Closing Date in an amount
equal to the amount of the Tranche B Term Loan Commitment of such Tranche B Term
Loan Lender then in effect.
(c) The Tranche A Term Loans and Tranche B Term Loans may
from time to time be (i) Eurodollar Loans, (ii) ABR Loans or (iii) a combination
thereof, as determined by the Borrower and notified to the Administrative Agent
in accordance with subsections 2.2 and 4.3.
2.2 PROCEDURE FOR TERM LOAN BORROWING. The Borrower hereby
requests (i) a Tranche A Term Loan borrowing on the Closing Date in an amount
equal to the aggregate amount of the Tranche A Term Loan Commitments of the
Tranche A Term Loan Lenders and (ii) a Tranche B Term Loan borrowing on the
Closing Date in an amount equal to the aggregate amount of the Tranche B Term
Loan Commitments of the Tranche B Term Loan Lenders. The Tranche A Term Loans
and Tranche B Term Loans made on the Closing Date shall initially be ABR Loans.
Each Tranche A Term Loan Lender and Tranche B Term Loan Lender will make the
amount of its PRO RATA share of the Tranche A Term Loans and Tranche B Term
Loans, as the case may be, available to the Administrative Agent for the account
of the Borrower at the office of the Administrative Agent specified in
subsection 11.2 prior to 10:00 A.M., New York City time, on the Closing Date in
Dollars and in funds immediately available to the Administrative Agent. The
Administrative Agent shall credit the account of the Borrower by 11:00 A.M., New
York City time, on the Closing Date, on the books of such office of the
Administrative Agent or such other account as specified by the Borrower with the
aggregate of the amounts made available to the Administrative Agent by the
Tranche A Term
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<PAGE> 25
Loan Lenders and Tranche B Term Loan Lenders and in like funds as received by
the Administrative Agent.
2.3 REPAYMENT OF TRANCHE A TERM LOANS AND TRANCHE B TERM
LOANS. (a) The Borrower hereby unconditionally promises to pay to the
Administrative Agent for the account of each Tranche A Term Loan Lender the
principal amount of the Tranche A Term Loans made by such Tranche A Term Loan
Lender in fourteen consecutive semi-annual installments, payable on the first
day of May and November of each calendar year commencing May 1, 1998 (or such
earlier date on which the Tranche A Term Loans become due and payable pursuant
to Section 9), each of which installments on any such date shall be in an amount
equal to such Tranche A Term Loan Lender's Tranche A Term Loan Commitment
Percentage of the amount set forth below opposite such installment, PROVIDED
that the final installment of the Tranche A Term Loans shall be payable on the
Termination Date:
<TABLE>
<CAPTION>
INSTALLMENT PRINCIPAL AMOUNT
----------- ----------------
<S> <C>
May 1, 1998 $2,500,000
November 1, 1998 $2,500,000
May 1, 1999 $2,500,000
November 1, 1999 $2,500,000
May 1, 2000 $2,500,000
November 1, 2000 $2,500,000
May 1, 2001 $2,500,000
November 1, 2001 $2,500,000
May 1, 2002 $5,000,000
November 1, 2002 $5,000,000
May 1, 2003 $5,000,000
November 1, 2003 $5,000,000
May 1, 2004 $5,000,000
September [__], 2004 $5,000,000.
</TABLE>
The Borrower hereby further agrees to pay to the Administrative Agent for the
account of each Tranche A Term Loan Lender interest on the unpaid principal
amount of the Tranche A Term Loans from time to time outstanding from the
Closing Date until payment in full thereof at the rates per annum, and on the
dates, set forth in subsection 4.5.
(b) The Borrower hereby unconditionally promises to pay to
the Administrative Agent for the account of each Tranche B Term Loan Lender the
principal amount of the Tranche B Term Loans made by such Tranche B Term Loan
Lender in sixteen consecutive semi-annual installments, payable on the first day
of May and November of each calendar year commencing May 1, 1998 (or such
earlier date on which the Tranche B Term Loans become due and payable pursuant
to Section 9), each of which installments on any such date shall be in an amount
equal to such Tranche B Term Loan Lender's Tranche B Term Loan Commitment
Percentage of the amount set forth below opposite such installment, PROVIDED
that the final
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<PAGE> 26
installment of the Tranche B Term Loans shall be payable on the Tranche B Term
Loan Termination Date:
<TABLE>
<CAPTION>
INSTALLMENT PRINCIPAL AMOUNT
----------- ----------------
<S> <C>
May 1, 1998 $ 250,000
November 1, 1998 $ 250,000
May 1, 1999 $ 250,000
November 1, 1999 $ 250,000
May 1, 2000 $ 250,000
November 1, 2000 $ 250,000
May 1, 2001 $ 250,000
November 1, 2001 $ 250,000
May 1, 2002 $ 250,000
November 1, 2002 $ 250,000
May 1, 2003 $ 250,000
November 1, 2003 $ 250,000
May 1, 2004 $11,750,000
November 1, 2004 $11,750,000
May 1, 2005 $11,750,000
September [__], 2005 $11,750,000.
</TABLE>
The Borrower hereby further agrees to pay to the Administrative Agent for the
account of each Tranche B Term Loan Lender interest on the unpaid principal
amount of the Tranche B Term Loans from time to time outstanding from the
Closing Date until payment in full thereof at the rates per annum, and on the
dates, set forth in subsection 4.5.
2.4 EVIDENCE OF TRANCHE A TERM LOAN AND TRANCHE B TERM LOAN
DEBT. (a) Each Tranche A Term Loan Lender and Tranche B Term Loan Lender shall
maintain in accordance with its usual practice an account or accounts evidencing
indebtedness of the Borrower to such Tranche A Term Loan Lender or Tranche B
Term Loan Lender resulting from the Tranche A Term Loan or Tranche B Term Loan,
as the case may be, made by such Tranche A Term Loan Lender or Tranche B Term
Loan Lender, including the amounts of principal and interest payable and paid to
such Tranche A Term Loan Lender or Tranche B Term Loan Lender from time to time
under this Agreement.
(b) The Administrative Agent shall record in the Register,
with separate subaccounts therein for each Tranche A Term Loan Lender and
Tranche B Term Loan Lender, (i) the amount of each Tranche A Term Loan and
Tranche B Term Loan made hereunder, the Type thereof and, in the case of
Eurodollar Loans, each Interest Period applicable thereto, (ii) the amount of
any principal or interest due and payable or to become due and payable from the
Borrower to each Tranche A Term Loan Lender and each Tranche B Term Loan Lender
hereunder and (iii) both the amount of any sum received by the Administrative
Agent
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<PAGE> 27
hereunder from the Borrower and each Tranche A Term Loan Lender's or Tranche B
Term Loan Lender's, as the case may be, share thereof, if any.
(c) The entries made in the Register pursuant to subsection
2.4(b) shall, to the extent permitted by applicable law, be PRIMA FACIE evidence
of the existence and amounts of the obligations of the Borrower therein
recorded; PROVIDED, HOWEVER, that the failure of any Tranche A Term Loan Lender
or Tranche B Term Loan Lender to maintain any account pursuant to subsection
2.4(a) or the Administrative Agent to make recordings in the Register pursuant
to subsection 2.4(b), or any error therein, shall not in any manner affect the
obligation of the Borrower to repay (with applicable interest) the Tranche A
Term Loan or Tranche B Term Loan, as the case may be, made to the Borrower by
such Tranche A Term Loan Lender or Tranche B Term Loan Lender in accordance with
the terms of this Agreement.
(d) The Borrower agrees that, upon the request to the
Administrative Agent by any Tranche A Term Loan Lender or Tranche B Term Loan
Lender, which request is communicated to the Borrower, the Borrower will execute
and deliver (i) to such Tranche A Term Loan Lender, a promissory note of the
Borrower dated the Closing Date evidencing the Tranche A Term Loans made by such
Tranche A Term Loan Lender, substantially in the form of Exhibit A-1 (a "TRANCHE
A TERM NOTE"), payable to the order of such Tranche A Term Loan Lender and in a
principal amount equal to the unpaid principal amount of the Tranche A Term
Loans made by such Tranche A Term Loan Lender and/or (ii) to such Tranche B Term
Loan Lender a promissory note of the Borrower dated the Closing Date evidencing
the Tranche B Term Loans made by such Tranche B Term Loan Lender, substantially
in the form of Exhibit A-2 (a "TRANCHE B TERM NOTE"), payable to the order of
such Tranche B Term Loan Lender and in a principal amount equal to the unpaid
principal amount of the Tranche B Term Loans made by such Tranche B Term Loan
Lender. Each Tranche A Term Loan Lender and each Tranche B Term Loan Lender is
hereby authorized to record the date, Type and amount of each Tranche A Term
Loan or Tranche B Term Loan, as the case may be, made by such Tranche A Term
Loan Lender or Tranche B Term Loan Lender, the date and amount of each payment
or prepayment of principal thereof, each continuation thereof, each conversion
of all or a portion thereof to another Type and, in the case of Eurodollar
Loans, the length of each Interest Period and Eurodollar Rate with respect
thereto, on the schedule (or any continuation of the schedule) annexed to and
constituting a part of its Tranche A Term Note or its Tranche B Term Note, as
the case may be, and any such recordation shall, to the extent permitted by
applicable law, constitute PRIMA FACIE evidence of the accuracy of the
information so recorded, PROVIDED that the failure to make any such recordation
(or any error therein) shall not affect the obligation of the Borrower to repay
(with applicable interest) the Tranche A Term Loans or the Tranche B Term Loans,
as the case may be, made to the Borrower in accordance with the terms of this
Agreement.
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<PAGE> 28
SECTION 3. AMOUNT AND TERMS OF REVOLVING CREDIT COMMITMENTS
3.1 REVOLVING CREDIT COMMITMENTS. (a) Subject to the terms
and conditions hereof, each Revolving Credit Lender severally agrees to make
revolving credit loans ("REVOLVING CREDIT LOANS") (provided, that any repricing
or conversion of an outstanding Revolving Credit Loan shall not be considered a
making of a Revolving Credit Loan), to the Borrower from time to time during the
Revolving Credit Commitment Period in an aggregate principal amount at any one
time outstanding not to exceed the amount of such Revolving Credit Lender's
Revolving Credit Commitment. During the Revolving Credit Commitment Period the
Borrower may use the Revolving Credit Commitments by borrowing, prepaying the
Revolving Credit Loans in whole or in part, and reborrowing, all in accordance
with the terms and conditions hereof.
(b) The Revolving Credit Loans may from time to time be (i)
Eurodollar Loans, (ii) ABR Loans or (iii) a combination thereof, as determined
by the Borrower and notified to the Administrative Agent in accordance with
subsections 3.2 and 4.3, PROVIDED that no Revolving Credit Loan shall be made as
a Eurodollar Loan after the day that is one month prior to the Termination Date.
3.2 PROCEDURE FOR BORROWING. The Borrower may borrow under
the Revolving Credit Commitments during the Revolving Credit Commitment Period
on any Business Day, PROVIDED that the Borrower shall give the Administrative
Agent irrevocable notice (which notice must be received by the Administrative
Agent prior to 10:00 A.M., New York City time, (a) three Business Days prior to
the requested Borrowing Date, if all or any part of the requested Revolving
Credit Loans are to be initially Eurodollar Loans, or (b) one Business Day prior
to the requested Borrowing Date, if all of the requested Revolving Credit Loans
are to be initially ABR Loans), specifying (i) the amount to be borrowed, (ii)
the requested Borrowing Date, (iii) whether the borrowing is to be of Eurodollar
Loans, ABR Loans or a combination thereof and (iv) if the borrowing is to be
entirely or partly of Eurodollar Loans, the respective amounts of each such Type
of Revolving Credit Loan and the respective lengths of the initial Interest
Periods for such Eurodollar Loans. The Revolving Credit Loans made on the
Closing Date shall initially be ABR Loans. Each borrowing under the Revolving
Credit Commitments shall be in an amount equal to $1,000,000 or a whole multiple
of $100,000 in excess thereof. Upon receipt of any such notice from the
Borrower, the Administrative Agent shall promptly notify each Lender thereof.
Each Revolving Credit Lender will make the amount of its pro rata share of each
borrowing available to the Administrative Agent for the account of the Borrower
at the office of the Administrative Agent specified in subsection 11.2 prior to
12:00 Noon, New York City time, on the Borrowing Date requested by the Borrower
in funds immediately available to the Administrative Agent. Such borrowing will
then be made available to the Borrower by the Administrative Agent crediting the
account of the Borrower on the books of such office with the aggregate of the
amounts made available to the Administrative Agent by the Revolving Credit
Lenders and in like funds as received by the Administrative Agent. The failure
of any Revolving Credit Lender to make the Revolving
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<PAGE> 29
Credit Loan to be made by it as part of any borrowing shall not relieve any
other Revolving Credit Lender of its obligation to make available its share of
such borrowing.
3.3 COMMITMENT FEE. The Borrower agrees to pay to the
Administrative Agent for the account of each Revolving Credit Lender a
commitment fee for the period from and including the first day of the Revolving
Credit Commitment Period to the Termination Date, computed at the rate of 1/2 of
1% per annum on the average daily amount of the Available Revolving Credit
Commitment of such Revolving Credit Lender during the period for which payment
is made, payable quarterly in arrears on the last day of each March, June,
September and December and on the Termination Date or such earlier date as the
Revolving Credit Commitments shall terminate as provided herein, commencing on
the first of such dates to occur after the date hereof.
3.4 TERMINATION OR REDUCTION OF REVOLVING CREDIT
COMMITMENTS. The Borrower shall have the right, upon not less than five Business
Days' notice to the Administrative Agent, to terminate the Revolving Credit
Commitments or, from time to time, to reduce the amount of the Revolving Credit
Commitments. Any such reduction shall be in an amount equal to $5,000,000 or a
whole multiple thereof and shall reduce permanently the Revolving Credit
Commitments then in effect.
3.5 REPAYMENT OF LOANS; EVIDENCE OF DEBT. (a) The Borrower
hereby unconditionally promises to pay to the Administrative Agent for the
account of each Revolving Credit Lender the then unpaid principal amount of each
Revolving Credit Loan of such Revolving Credit Lender on the Termination Date
(or such earlier date on which the Revolving Credit Loans become due and payable
pursuant to Section 9). The Borrower hereby further agrees to pay interest on
the unpaid principal amount of the Revolving Credit Loans from time to time
outstanding from the date hereof until payment in full thereof at the rates per
annum, and on the dates, set forth in subsection 4.5.
(b) Each Revolving Credit Lender shall maintain in
accordance with its usual practice an account or accounts evidencing
indebtedness of the Borrower to such Revolving Credit Lender resulting from each
Revolving Credit Loan of such Revolving Credit Lender from time to time,
including the amounts of principal and interest payable and paid to such
Revolving Credit Lender from time to time under this Agreement.
(c) The Administrative Agent shall maintain the Register
pursuant to subsection 11.6(d), and a subaccount therein for each Revolving
Credit Lender, in which shall be recorded (i) the amount of each Revolving
Credit Loan made hereunder, the Type thereof and each Interest Period applicable
with respect to each Eurodollar Loan, (ii) the amount of any principal or
interest due and payable or to become due and payable from the Borrower to each
Revolving Credit Lender hereunder and (iii) both the amount of any sum received
by the Administrative Agent hereunder from the Borrower and each Revolving
Credit Lender's share thereof.
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<PAGE> 30
(d) The entries made in the Register and the accounts of
each Lender maintained pursuant to subsection 3.5(b) shall, to the extent
permitted by applicable law, be PRIMA FACIE evidence of the existence and
amounts of the obligations of the Borrower therein recorded; PROVIDED, HOWEVER,
that the failure of any Revolving Credit Lender or the Administrative Agent to
maintain the Register or any such account, or any error therein, shall not in
any manner affect the obligation of the Borrower to repay (with applicable
interest) the Revolving Credit Loans made to such Borrower by such Revolving
Credit Lender in accordance with the terms of this Agreement.
(e) The Borrower agrees that, upon the request to the
Administrative Agent by any Revolving Credit Lender, the Borrower will execute
and deliver to such Revolving Credit Lender a promissory note of the Borrower
evidencing the Revolving Credit Loans of such Revolving Credit Lender,
substantially in the form of Exhibit A-3 with appropriate insertions as to date
and principal amount (a "REVOLVING CREDIT NOTE").
SECTION 4. GENERAL PROVISIONS APPLICABLE TO THE LOANS
4.1 OPTIONAL PREPAYMENTS. The Borrower may at any time and
from time to time prepay the Loans, in whole or in part, without premium or
penalty, upon irrevocable notice to the Administrative Agent, at least four
Business Days' prior to the date of prepayment if all or any part of the Loans
to be prepaid are Eurodollar Loans, and at least one Business Day prior to the
date of prepayment if all of the Loans to be prepaid are ABR Loans, specifying
the date and amount of prepayment and whether the prepayment is of Eurodollar
Loans, ABR Loans or a combination thereof, and, if of a combination thereof, the
amount allocable to each. Upon receipt of any such notice, the Administrative
Agent shall promptly notify each Lender thereof. If any such notice is given,
the amount specified in such notice shall be due and payable on the date
specified therein, together with any amounts payable pursuant to subsection 4.12
and, in the case of prepayments of the Term Loans only, accrued interest to such
date on the amount prepaid. Prepayments of the Term Loans pursuant to this
subsection 4.1 shall be applied to the prepayment of the Tranche A Term Loans
and the Tranche B Term Loans PRO RATA. Partial prepayments of the Tranche A Term
Loans and Tranche B Term Loans pursuant to this subsection 4.1 shall be applied
to the remaining installments of principal thereof PRO RATA. Amounts prepaid on
account of the Term Loans may not be reborrowed. Partial prepayments shall be in
an aggregate principal amount of $1,000,000 or whole multiples thereof.
4.2 MANDATORY PREPAYMENTS. (a) In the event that the
Borrower or any of its Subsidiaries shall effect (i) an Asset Sale or (ii) a
Shareholder Asset Sale if, after giving effect to such Shareholder Asset Sale,
the Borrower does not continue to hold in excess of a 50% ownership interest in
the relevant Subsidiary or Management Company, the Borrower shall promptly
notify the Administrative Agent thereof and, unless the Required Lenders
otherwise consent, as promptly as possible, but in no case later than five
Business Days after receipt of the Net Proceeds of such Asset Sale or
Shareholder Asset Sale, as the case may be, shall apply an amount equal to 100%
of the Net Proceeds of such Asset Sale or Shareholder Asset Sale, as
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<PAGE> 31
the case may be, to prepay outstanding Loans, together with accrued interest on
the principal being prepaid to the date of prepayment and, in the case of
Eurodollar Loans which are prepaid prior to the last day of the Interest Period
therefor, the amounts required by subsection 4.12. The Borrower shall, to the
extent reasonably practicable, give notice to the Administrative Agent of any
prepayment required by this subsection 4.2 (which notice need not be given more
than four Business Days prior to the date of prepayment).
(b) All prepayments of Loans pursuant to this subsection 4.2
shall be without premium or penalty, other than amounts required by subsection
4.12.
(c) Outstanding Loans shall be prepaid, together with
accrued and unpaid interest thereon to the date of prepayment, to the extent
that the aggregate amount of outstanding Revolving Credit Loans exceeds the
aggregate Revolving Credit Commitments of the Revolving Credit Lenders then in
effect.
(d) Prepayments of the Loans pursuant to subsection
4.2(a)(i) shall be applied, FIRST, to the prepayment of the Tranche A Term Loans
and the Tranche B Term Loans PRO RATA and shall be applied to the remaining
installments thereof on a PRO RATA basis and, SECOND, to the prepayment of the
Revolving Credit Loans. Prepayments of the Loans pursuant to subsection
4.2(a)(ii) shall be applied to the prepayment of the Revolving Credit Loans
without any accompanying reduction of the Revolving Credit Commitments of the
Revolving Credit Lenders. Amounts to be applied pursuant to this subsection
4.2(d) to the prepayment of Term Loans and/or Revolving Credit Loans shall be
applied, as applicable, first to reduce outstanding Term Loans and/or Revolving
Credit Loans which are ABR Loans. Any amounts remaining after each such
application shall be applied to prepay Term Loans and/or Revolving Credit Loans
which are Eurodollar Loans.
4.3 CONVERSION AND CONTINUATION OPTIONS. (a) The Borrower
may elect from time to time to convert Eurodollar Loans to ABR Loans by giving
the Administrative Agent at least two Business Days' prior irrevocable notice of
such election, PROVIDED that any such conversion of Eurodollar Loans may only be
made on the last day of an Interest Period with respect thereto. The Borrower
may elect from time to time to convert ABR Loans to Eurodollar Loans by giving
the Administrative Agent at least three Business Days' prior irrevocable notice
of such election. Any such notice of conversion to Eurodollar Loans shall
specify the length of the initial Interest Period or Interest Periods therefor.
Upon receipt of any such notice the Administrative Agent shall promptly notify
each affected Lender thereof. All or any part of outstanding Eurodollar Loans
and ABR Loans may be converted as provided herein, PROVIDED that (i) no Loan may
be converted into a Eurodollar Loan when any Event of Default has occurred and
is continuing and the Administrative Agent has or the Required Lenders have
determined that such a conversion is not appropriate and (ii) no Loan may be
converted into a Eurodollar Loan after the date that is one month prior to the
Termination Date (in the case of conversions of Revolving Credit Loans) or the
date of the final installment of principal of the respective Term Loans (in the
case of any conversions of any Term Loans).
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<PAGE> 32
(b) Any Eurodollar Loans may be continued as such upon the
expiration of the then current Interest Period with respect thereto by the
Borrower giving notice to the Administrative Agent, in accordance with the
applicable provisions of the term "Interest Period" set forth in subsection 1.1,
of the length of the next Interest Period to be applicable to such Loans,
PROVIDED that no Eurodollar Loan may be continued as such (i) when any Event of
Default has occurred and is continuing and the Administrative Agent has or the
Required Lenders have determined that such a continuation is not appropriate or
(ii) after the date that is one month prior to the Termination Date (in case of
conversions of Revolving Credit Loans) or the date of the final installment of
principal of the respective Term Loans (in the case of any conversions of any
Term Loans) and PROVIDED, FURTHER, that if the Borrower shall fail to give such
notice or if such continuation is not permitted such Eurodollar Loans shall be
automatically converted to ABR Loans on the last day of such then expiring
Interest Period.
4.4 MINIMUM AMOUNTS AND MAXIMUM NUMBER OF TRANCHES. All
borrowings, conversions and continuations of Loans hereunder and all selections
of Interest Periods hereunder shall be in such amounts and be made pursuant to
such elections so that, after giving effect thereto, the aggregate principal
amount of the Loans comprising each Eurodollar Tranche shall be equal to
$5,000,000 or a whole multiple of $1,000,000 in excess thereof. In no event
shall there be more than eight Eurodollar Tranches outstanding at any time.
4.5 INTEREST RATES AND PAYMENT DATES. (a) Each Eurodollar
Loan shall bear interest for each day during each Interest Period with respect
thereto at a rate per annum equal to the Eurodollar Rate determined for such day
plus the Applicable Margin.
(b) Each ABR Loan shall bear interest at a rate per annum
equal to the ABR plus the Applicable Margin.
(c) If all or a portion of (i) the principal amount of any
Loan, (ii) any interest payable thereon or (iii) any commitment fee or other
amount payable hereunder shall not be paid when due (whether at the stated
maturity, by acceleration or otherwise), such overdue amount shall bear interest
at a rate per annum which is (x) in the case of overdue principal, the rate that
would otherwise be applicable thereto pursuant to the foregoing provisions of
this subsection plus 2% or (y) in the case of overdue interest, commitment fee
or other amount, the rate described in paragraph (b) of this subsection plus 2%,
in each case from the date of such non-payment until such amount is paid in full
(as well after as before judgment).
(d) Interest shall be payable in arrears on each Interest
Payment Date, PROVIDED that interest accruing pursuant to paragraph (c) of this
subsection shall be payable from time to time on demand.
4.6 COMPUTATION OF INTEREST AND FEES. (a) Whenever it is
calculated on the basis of the Prime Rate, interest shall be calculated on the
basis of a 365- (or 366-, as the case may be) day year for the actual days
elapsed; and, otherwise, interest as well as commitment fees shall be calculated
on the basis of a 360-day year for the actual days elapsed. The
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<PAGE> 33
Administrative Agent shall as soon as practicable notify the Borrower and the
Lenders of each determination of a Eurodollar Rate. Any change in the interest
rate on a Loan resulting from a change in the ABR, the Eurocurrency Reserve
Requirements, the C/D Assessment Rate or the C/D Reserve Percentage shall become
effective as of the opening of business on the day on which such change becomes
effective. The Administrative Agent shall as soon as practicable notify the
Borrower and the Lenders of the effective date and the amount of each such
change in interest rate.
(b) Each determination of an interest rate by the
Administrative Agent pursuant to any provision of this Agreement shall be
conclusive and binding on the Borrower and the Lenders in the absence of
manifest error. The Administrative Agent shall, at the request of the Borrower,
deliver to the Borrower a statement showing the quotations used by the
Administrative Agent in determining any interest rate pursuant to subsection
4.5(a).
4.7 INABILITY TO DETERMINE INTEREST RATE. If prior to the
first day of any Interest Period:
(a) the Administrative Agent shall have determined (which
determination shall be conclusive and binding upon the Borrower) that,
by reason of circumstances affecting the relevant market, adequate and
reasonable means do not exist for ascertaining the Eurodollar Rate for
such Interest Period, or
(b) the Administrative Agent shall have received notice from
Chase that the Eurodollar Rate determined or to be determined for such
Interest Period will not adequately and fairly reflect the cost to the
Lenders generally (as conclusively certified by Chase) of making or
maintaining their affected Loans during such Interest Period,
the Administrative Agent shall give telecopy or telephonic notice thereof to the
Borrower and the affected Lenders as soon as practicable thereafter. If such
notice is given (x) any Eurodollar Loans requested to be made on the first day
of such Interest Period shall be made as ABR Loans, (y) any ABR Loans that were
to have been converted on the first day of such Interest Period to Eurodollar
Loans shall be continued as ABR Loans and (z) any outstanding Eurodollar Loans
shall be converted, on the first day of such Interest Period, to ABR Loans.
Until such notice has been withdrawn by the Administrative Agent, no further
Eurodollar Loans shall be made or continued as such, nor shall the Borrower have
the right to convert Loans to Eurodollar Loans.
4.8 PRO RATA TREATMENT AND PAYMENTS. (a) Each borrowing by
the Borrower from the Lenders hereunder, each payment by the Borrower on account
of any commitment fee hereunder and any reduction of the Revolving Credit
Commitments, the Tranche A Term Loan Commitments or the Tranche B Term Loan
Commitments, as the case may be, of the Lenders shall be made PRO RATA according
to the respective Revolving Credit Commitment Percentages, the Tranche A Term
Loan Commitment Percentages, or the Tranche B Term Loan Commitment Percentages,
as the case may be, of the Lenders. Each payment (including each
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prepayment) by the Borrower on account of principal of and interest on the Loans
shall be made PRO RATA according to the respective outstanding principal amounts
of the Loans then held by the Lenders. All payments (including prepayments) to
be made by the Borrower hereunder, whether on account of principal, interest,
fees or otherwise, shall be made without set off or counterclaim and shall be
made prior to 12:00 Noon, New York City time, on the due date thereof to the
Administrative Agent, for the account of the Revolving Credit Lenders or the
Term Loan Lenders, as the case may be, at the Administrative Agent's office
specified in subsection 11.2, in Dollars and in immediately available funds. The
Administrative Agent shall distribute such payments to the Lenders promptly upon
receipt (and if such payment is received prior to 12:00 Noon, on the same day)
in like funds as received. If any payment hereunder becomes due and payable on a
day other than a Business Day, such payment shall be extended to the next
succeeding Business Day, and, with respect to payments of principal, interest
thereon shall be payable at the then applicable rate during such extension and
such extension of time shall in such case be included in the computation of
payment of interest or fees, as the case may be.
(b) Unless the Administrative Agent shall have been notified in
writing by any Lender prior to a borrowing that such Lender will not make the
amount that would constitute its portion of such borrowing available to the
Administrative Agent, the Administrative Agent may assume that such Lender is
making such amount available to the Administrative Agent, and the Administrative
Agent may, in reliance upon such assumption, make available to the Borrower a
corresponding amount. If such amount is not made available to the Administrative
Agent by the required time on the Borrowing Date therefor, such Lender shall pay
to the Administrative Agent, on demand, such amount with interest thereon at a
rate equal to the daily average Federal Funds Effective Rate for the period
until such Lender makes such amount immediately available to the Administrative
Agent. A certificate of the Administrative Agent submitted to any Lender with
respect to any amounts owing under this subsection shall be conclusive in the
absence of manifest error. If such Lender's portion of such borrowing is not
made available to the Administrative Agent by such Lender within three Business
Days of such Borrowing Date, the Administrative Agent shall also be entitled to
recover such amount with interest thereon at the rate per annum applicable to
ABR Loans hereunder, on demand, from the Borrower.
(c) In the event that a Revolving Credit Lender fails to make
available after a period of three Business Days to the Administrative Agent its
portion of a borrowing, the Borrower may, upon not less than five Business Days
prior irrevocable written notice to the Administrative Agent, immediately
terminate the Revolving Credit Commitment of such Revolving Credit Lender, and
designate an acceptable replacement Revolving Credit Lender (which may be one of
the other Revolving Credit Lenders) to purchase all of the Revolving Credit
Lender's interests in accordance with the provisions of subsection 11.6(c). Any
Revolving Credit Lender being so replaced by the Borrower agrees to transfer its
interest in this Agreement and, if applicable, its Revolving Credit Note, to the
substitute Revolving Credit Lender pursuant to subsection 11.6(c), provided that
concurrently with such transfer, such Revolving Credit Lender so substituted
shall be paid all amounts owing to it hereunder and all
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costs reasonably determined by it to be attributable to such transfer.
Notwithstanding the foregoing, the Revolving Credit Lender being replaced shall
not be deemed to be released from any of its rights or obligations under any
Loan Document (including, without limitation, subsection 10.7) for actions taken
or failed to be taken by it prior to the date of such substitution.
4.9 ILLEGALITY. Notwithstanding any other provision herein,
if the adoption of or any change in any Requirement of Law or in the
interpretation or application thereof shall make it unlawful for any Lender to
make or maintain Eurodollar Loans as contemplated by this Agreement, (a) the
commitment of such Lender hereunder to make Eurodollar Loans, continue
Eurodollar Loans as such and convert ABR Loans to Eurodollar Loans shall
forthwith be cancelled and (b) such Lender's Loans then outstanding as
Eurodollar Loans, if any, shall be converted automatically to ABR Loans on the
respective last days of the then current Interest Periods with respect to such
Loans or within such earlier period as required by law. If any such conversion
of a Eurodollar Loan occurs on a day which is not the last day of the then
current Interest Period with respect thereto, the Borrower shall pay to such
Lender such amounts, if any, as may be required pursuant to subsection 4.12.
4.10 REQUIREMENTS OF LAW. (a) If the adoption of or any
change in any Requirement of Law or in the interpretation or application thereof
or compliance by any Lender with any request or directive (whether or not having
the force of law) from any central bank or other Governmental Authority made
subsequent to the date hereof:
(i) shall subject any Lender to any tax of any kind
whatsoever with respect to this Agreement, any Note or any Eurodollar
Loan made by it, or change the basis of taxation of payments to such
Lender in respect thereof (except for Non-Excluded Taxes covered by
subsection 4.11 and changes in the rate of tax on the overall net income
of such Lender);
(ii) shall impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirement against assets
held by, deposits or other liabilities in or for the account of,
advances, loans or other extensions of credit by, or any other
acquisition of funds by, any office of such Lender which is not
otherwise included in the determination of the Eurodollar Rate
hereunder; or
(iii) shall impose on such Lender any other condition;
and the result of any of the foregoing is to increase the cost to such Lender,
by an amount which such Lender deems to be material, of making, converting into,
continuing or maintaining Eurodollar Loans or to reduce any amount receivable
hereunder in respect thereof, then, in any such case, the Borrower shall
promptly pay such Lender such additional amount or amounts as will compensate
such Lender for such increased cost or reduced amount receivable.
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(b) If any Lender shall have determined that the adoption of or any
change in any Requirement of Law regarding capital adequacy or in the
interpretation or application thereof or compliance by such Lender or any
corporation controlling such Lender with any request or directive regarding
capital adequacy (whether or not having the force of law) from any Governmental
Authority made subsequent to the date hereof shall have the effect of reducing
the rate of return on such Lender's or such corporation's capital as a
consequence of its obligations hereunder to a level below that which such Lender
or such corporation could have achieved but for such adoption, change or
compliance (taking into consideration such Lender's or such corporation's
policies with respect to capital adequacy) by an amount deemed by such Lender to
be material, then from time to time, the Borrower shall promptly pay to such
Lender such additional amount or amounts as will compensate such Lender for such
reduction.
(c) If any Lender becomes entitled to claim any additional amounts
pursuant to this subsection, it shall promptly notify the Borrower (with a copy
to the Administrative Agent) of the event by reason of which it has become so
entitled; PROVIDED, that no additional amount shall be payable under this
subsection 4.10 for a period longer than one year prior to such notice to the
Borrower. A certificate as to any additional amounts payable pursuant to this
subsection submitted by such Lender to the Borrower (with a copy to the
Administrative Agent) shall be conclusive in the absence of manifest error. The
agreements in this subsection shall survive for a period of one year the
termination of this Agreement and the payment of the Loans and all other amounts
payable hereunder.
4.11 TAXES. (a) All payments made by the Borrower under this
Agreement and any Notes shall be made free and clear of, and without deduction
or withholding for or on account of, any present or future income, stamp or
other taxes, levies, imposts, duties, charges, fees, deductions or withholdings,
now or hereafter imposed, levied, collected, withheld or assessed by any
Governmental Authority, excluding net income taxes and franchise taxes (imposed
in lieu of net income taxes) imposed on the Administrative Agent or any Lender
as a result of a present or former connection between the Administrative Agent
or such Lender and the jurisdiction of the Governmental Authority imposing such
tax or any political subdivision or taxing authority thereof or therein (other
than any such connection arising solely from the Administrative Agent or such
Lender having executed, delivered or performed its obligations or received a
payment under, or enforced, this Agreement or any Note). If any such
non-excluded taxes, levies, imposts, duties, charges, fees deductions or
withholdings ("NON-EXCLUDED TAXES") are required to be withheld from any amounts
payable to the Administrative Agent or any Lender hereunder or under any Note,
the amounts so payable to the Administrative Agent or such Lender shall be
increased to the extent necessary to yield to the Administrative Agent or such
Lender (after payment of all Non-Excluded Taxes) interest or any such other
amounts payable hereunder at the rates or in the amounts specified in this
Agreement, PROVIDED, HOWEVER, that the Borrower shall not be required to
increase any such amounts payable to any Lender that is not organized under the
laws of the United States of America or a state thereof if such Lender fails to
comply with the requirements of paragraph (b) of this subsection. Whenever any
Non-Excluded Taxes are payable by the Borrower, as promptly as possible
thereafter the Borrower shall send to the Administrative Agent for its own
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account or for the account of such Lender, as the case may be, a certified copy
of an original official receipt received by the Borrower showing payment
thereof. If the Borrower fails to pay any Non-Excluded Taxes when due to the
appropriate taxing authority or fails to remit to the Administrative Agent the
required receipts or other required documentary evidence, the Borrower shall
indemnify the Administrative Agent and the Lenders for any incremental taxes,
interest or penalties that may become payable by the Administrative Agent or any
Lender as a result of any such failure. The agreements in this subsection shall
survive for a period of one year the termination of this Agreement and the
payment of the Loans and all other amounts payable hereunder.
(b) Each Lender that is not incorporated under the laws of
the United States of America or a state thereof shall:
(i) deliver to the Borrower and the Administrative Agent (A)
two duly completed copies of United States Internal Revenue Service Form
1001 or 4224, or successor applicable form, as the case may be, and (B)
an Internal Revenue Service Form W-8 or W-9, or successor applicable
form, as the case may be;
(ii) deliver to the Borrower and the Administrative Agent two
further copies of any such form or certification on or before the date
that any such form or certification expires or becomes obsolete and
after the occurrence of any event requiring a change in the most recent
form previously delivered by it to the Borrower; and
(iii) obtain such extensions of time for filing and complete
such forms or certifications as may reasonably be requested by the
Borrower or the Administrative Agent;
unless in any such case an event (including, without limitation, any change in
treaty, law or regulation) has occurred prior to the date on which any such
delivery would otherwise be required which renders all such forms inapplicable
or which would prevent such Lender from duly completing and delivering any such
form with respect to it and such Lender so advises the Borrower and the
Administrative Agent. Such Lender shall certify (i) in the case of a Form 1001
or 4224, that it is entitled to receive payments under this Agreement without
deduction or withholding of any United States federal income taxes and (ii) in
the case of a Form W-8 or W-9, that it is entitled to an exemption from United
States backup withholding tax. Each Person that shall become a Lender or a
Participant pursuant to subsection 9.6 shall, upon the effectiveness of the
related transfer, be required to provide all of the forms and statements
required pursuant to this subsection, provided that in the case of a Participant
such Participant shall furnish all such required forms and statements to the
Lender from which the related participation shall have been purchased.
4.12 INDEMNITY. The Borrower agrees to indemnify each Lender
and to hold each Lender harmless from any loss or expense which such Lender may
sustain or incur as a consequence of (a) default by the Borrower in making a
borrowing of, conversion into or
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continuation of Eurodollar Loans after the Borrower has given a notice
requesting the same in accordance with the provisions of this Agreement, (b)
default by the Borrower in making any prepayment after the Borrower has given a
notice thereof in accordance with the provisions of this Agreement or (c) the
making of a prepayment of Eurodollar Loans on a day which is not the last day of
an Interest Period with respect thereto. Such indemnification may include an
amount equal to the excess, if any, of (i) the amount of interest which would
have accrued on the amount so prepaid, or not so borrowed, converted or
continued, for the period from the date of such prepayment or of such failure to
borrow, convert or continue to the last day of such Interest Period (or, in the
case of a failure to borrow, convert or continue, the Interest Period that would
have commenced on the date of such failure) in each case at the applicable rate
of interest for such Loans provided for herein (excluding, however, the
Applicable Margin included therein, if any) over (ii) the amount of interest (as
reasonably determined by such Lender) which would have accrued to such Bank on
such amount by placing such amount on deposit for a comparable period with
leading banks in the interbank eurodollar market. This covenant shall survive
the termination of this Agreement and the payment of the Loans and all other
amounts payable hereunder.
4.13 CHANGE OF LENDING OFFICE. Each Lender agrees that if it
makes any demand for payment under subsection 4.10 or 4.11(a), or if any
adoption or change of the type described in subsection 4.9 shall occur with
respect to it, it will use reasonable efforts (consistent with its internal
policy and legal and regulatory restrictions and so long as such efforts would
not be unreasonably disadvantageous to it, as determined in its sole discretion)
to designate a different lending office if the making of such a designation
would reduce or obviate the need for the Borrower to make payments under
subsection 4.10 or 4.11(a), or would eliminate or reduce the effect of any
adoption or change described in subsection 4.9.
SECTION 5. REPRESENTATIONS AND WARRANTIES
To induce the Administrative Agent and the Lenders to enter into
this Agreement and to make the Loans, the Borrower hereby represents and
warrants to the Administrative Agent and each Lender that:
5.1 FINANCIAL CONDITION. The Borrower has heretofore
furnished to each Lender copies of (i) the audited consolidated balance sheet of
the Borrower and its consolidated Subsidiaries as at December 31, 1996 and the
related audited consolidated statements of income and of cash flows for the
fiscal year ended on such date, audited by Coopers & Lybrand LLC and (ii) the
unaudited consolidated balance sheet of the Borrower and its consolidated
Subsidiaries as at June 30, 1997 and the related unaudited consolidated
statements of income and of cash flows for the six-month period ended on such
date, in each case certified by a Responsible Officer (the "FINANCIAL
STATEMENTS"). The Financial Statements present fairly, in all material respects,
the consolidated financial condition of the Borrower and its consolidated
Subsidiaries as at December 31, 1996 and June 30, 1997 and present fairly, in
all material respects, the consolidated results of their operations and their
consolidated cash flows
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for the periods then ended (subject to normal year-end audit adjustments and the
absence of footnote disclosure). The Financial Statements, including the related
schedules and notes thereto, have been prepared in accordance with GAAP applied
consistently throughout the period involved. Except as set forth on Schedule
5.1, neither the Borrower nor any of its consolidated Subsidiaries had, at
December 31, 1996 or at the date hereof, any material Guarantee Obligation,
material contingent liability or material liability for taxes, or any material
long-term lease or unusual material forward or long-term commitment, including,
without limitation, any interest rate or foreign currency swap or exchange
transaction, which is not reflected in the foregoing statements or in the notes
thereto. Except as set forth on Schedule 5.1, during the period from December
31, 1996 to and including the date hereof there has been no sale, transfer or
other disposition by the Borrower or any of its consolidated Subsidiaries of any
material part of its business or property and no purchase or other acquisition
of any business or property (including any capital stock of any other Person)
material in relation to the consolidated financial condition of the Borrower and
its Subsidiaries as at December 31, 1996.
5.2 NO CHANGE. (a) From December 31, 1996 except as set forth in
the Pro Forma Balance Sheet, there has been no development or event which has
had or could have a Material Adverse Effect, and (b) during the period from
December 31, 1996 to and including the date hereof, no dividends or other
distributions have been declared, paid or made upon the Capital Stock of the
Borrower nor has any of the Capital Stock of the Borrower been redeemed,
retired, purchased or otherwise acquired for value by the Borrower or any of its
Subsidiaries.
5.3 CORPORATE EXISTENCE; COMPLIANCE WITH LAW. Each of the
Borrower and its Subsidiaries (a) is duly organized, validly existing and in
good standing under the laws of the jurisdiction of its organization, (b) has
the power and authority, and the legal right, to own and operate its property,
to lease the property it operates as lessee and to conduct the business in which
it is currently engaged, (c) is duly qualified as a foreign corporation,
partnership or limited liability company, as applicable, and in good standing
under the laws of each jurisdiction where its ownership, lease or operation of
property or the conduct of its business requires such qualification except where
the failure to be so qualified or in good standing would not have a Material
Adverse Effect and (d) is in compliance with its certificate of incorporation
and by-laws or other similar organizational or governing documents and with all
Requirements of Law, except to the extent that the failure to comply therewith
could not, in the aggregate, have a Material Adverse Effect.
5.4 CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS.
The Borrower has the corporate power and authority, and the legal right, to
make, deliver and perform the Loan Documents to which it is a party and to
borrow hereunder and has taken all necessary corporate action to authorize the
borrowings on the terms and conditions of this Agreement and any Notes and to
authorize the execution, delivery and performance of the Loan Documents to which
it is a party. No consent or authorization of, filing with, notice to or other
act by or in respect of, any Governmental Authority or any other Person is
required in connection with the
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borrowings hereunder or with the execution, delivery, performance, validity or
enforceability of the Loan Documents to which the Borrower is a party; PROVIDED
that the Administrative Agent's rights under the Pledge Agreement are subject to
the terms and provisions thereof. This Agreement has been, and each other Loan
Document to which it is a party will be, duly executed and delivered on behalf
of the Borrower. This Agreement constitutes, and each other Loan Document to
which it is a party when executed and delivered will constitute, a legal, valid
and binding obligation of the Borrower enforceable against the Borrower in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and by general equitable principles
(whether enforcement is sought by proceedings in equity or at law).
5.5 NO LEGAL BAR. The execution, delivery and performance of
the Loan Documents to which the Borrower is a party, the borrowings hereunder
and the use of the proceeds thereof will not violate any certificate of
incorporation and by-laws or other similar organizational or governing
documents, Requirement of Law or Contractual Obligation of the Borrower or of
any of its Subsidiaries, except for such violations which could not reasonably
be likely to have a Material Adverse Effect, and will not result in, or require,
the creation or imposition of any Lien on any of its or their respective
properties or revenues pursuant to any such organizational or governing
document, Requirement of Law or Contractual Obligation, except pursuant to this
Agreement.
5.6 NO MATERIAL LITIGATION. No litigation, investigation or
proceeding of or before any arbitrator or Governmental Authority is pending or,
to the knowledge of the Borrower, threatened by or against the Borrower or any
of its Subsidiaries or against any of its or their respective properties or
revenues which is in the Borrower's reasonable opinion reasonably like to have a
Material Adverse Effect.
5.7 NO DEFAULT. Neither the Borrower nor any of its
Subsidiaries is in default under or with respect to any of its Contractual
Obligations in any respect which could have a Material Adverse Effect. No
Default or Event of Default has occurred and is continuing.
5.8 OWNERSHIP OF PROPERTY; LIENS. Each of the Borrower and
its Subsidiaries has good record and marketable title in fee simple to, or a
valid leasehold interest in, all its material real property, and good title to,
or a valid leasehold interest in, all its other material property, and none of
such property is subject to any Lien except as permitted by subsection 8.3.
5.9 TAXES. Each of the Borrower and its Subsidiaries has
filed or caused to be filed all material tax returns which, to the knowledge of
the Borrower, are required to be filed or has timely filed a request for an
extension of such filing and has paid all taxes shown to be due and payable on
said returns or extension requests or on any assessments made against it or any
of its property and except as set forth on Schedule 5.9, all other taxes, fees
or other charges imposed on it or any of its property by any Governmental
Authority (other than any
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the amount or validity of which are currently being contested in good faith by
appropriate proceedings and with respect to which reserves in conformity with
GAAP have been provided on the books of the Borrower or its Subsidiaries, as the
case may be and any which the failure to pay would not have a Material Adverse
Effect); no tax Lien has been filed, and, to the knowledge of the Borrower, no
material claim is being asserted, with respect to any such tax, fee or other
charge.
5.10 FEDERAL REGULATIONS. (a) No part of the proceeds of any
Loans will be used for "purchasing" or "carrying" any "margin stock" within the
respective meanings of each of the quoted terms under Regulation G or Regulation
U of the Board of Governors of the Federal Reserve System as now and from time
to time hereafter in effect. If requested by any Lender or the Administrative
Agent, the Borrower will furnish to the Administrative Agent and each Lender a
statement to the foregoing effect in conformity with the requirements of FR Form
G-1 or FR Form U-1 referred to in said Regulation G or Regulation U, as the
case may be.
(b) The Borrower is not subject to regulation under any
Federal or State statute or regulation (other than Regulation X of the Board of
Governors of the Federal Reserve System) which limits its ability to incur
Indebtedness.
5.11 ERISA. No Reportable Event has occurred during the
five-year period prior to the date on which this representation is made or
deemed made with respect to any Plan, and each Plan has complied in all material
respects with the applicable provisions of ERISA and the Code. The present value
of all accrued benefits under each Single Employer Plan maintained by the Parent
or any Commonly Controlled Entity (based on those assumptions used to fund the
Plans) did not, as of the last annual valuation date prior to the date on which
this representation is made or deemed made, exceed the value of the assets of
such Plan allocable to such accrued benefits. There are no Multiemployer Plans.
Neither the Parent nor any Commonly Controlled Entity has had a complete or
partial withdrawal from any Multiemployer Plan.
5.12 INVESTMENT COMPANY ACT. (a) Neither the Borrower nor any
of its Subsidiaries or other Management Companies is, or, after giving effect to
any Acquisition, will be, an "investment company", or a company "controlled" by
an "investment company", within the meaning of the Investment Company Act.
(b) Each of the Subsidiaries of the Borrower and each of its
other Management Companies is, to the extent required thereby, duly registered
as an investment adviser under the Investment Advisers Act. The Borrower is not
an "investment adviser" within the meaning of the Investment Advisers Act. Each
Fund which is sponsored by any Subsidiary or other Management Company and which
is required to be registered as an "investment company" under the Investment
Company Act is duly registered as such thereunder.
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(c) The Borrower is not required to be duly registered as a
broker-dealer under the Securities Acts (and each Subsidiary and other
Management Company required to be so registered is so duly registered).
(d) Each of the Borrower and its Subsidiaries and other
Management Companies is duly registered, licensed or qualified as an investment
adviser or broker-dealer in each State of the United States where the conduct of
its business requires such registration, licensing or qualification and is in
compliance in all material respects with all Federal and State laws requiring
such registration, licensing or qualification, except to the extent where the
failure to be so registered, licensed or qualified or to be in such compliance
will not have a Material Adverse Effect.
5.13 INVESTMENT ADVISORY AGREEMENTS. Each of the investment
advisory agreements, distribution agreements and shareholder or other servicing
contracts to which the Borrower or any of its Subsidiaries or other Management
Companies is a party is a legal, valid and binding obligation of the parties
thereto enforceable against such parties in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law) except for failures
which individually and in the aggregate will not have a Material Adverse Effect;
and neither the Borrower nor any of its Subsidiaries or other Management
Companies is in breach or violation of or in default under any such agreement or
contract in any material respect which would individually or in the aggregate
have a Material Adverse Effect. The parties hereto understand that all customers
have the right to terminate such investment advisory agreements at will.
5.14 SUBSIDIARIES AND OTHER OWNERSHIP INTERESTS. The
Subsidiaries listed on Schedule 5.14 hereto constitute the only Subsidiaries of
the Borrower as at the date hereof. The Borrower has as at the date hereof an
equity or other ownership interest in Management Companies of the Borrower and
each other Person listed on Schedule 5.14 and other than as set forth on such
schedule, the Borrower has no such interest in any other Management Company or
Person.
5.15 PURPOSE OF LOANS. (a) The proceeds of the Term Loans
shall be used by the Borrower (i) to refinance loans outstanding under the
Existing Agreement, (ii) to finance a portion of the purchase price for the TBC
Acquisition and (iii) to pay fees and expenses to be incurred in connection
therewith and in connection with the execution and delivery of the Loan
Documents.
(b) The proceeds of the Revolving Credit Loans shall be used
by the Borrower (i) to refinance loans outstanding under the Existing Agreement,
(ii) to finance a portion of the purchase price for the TBC Acquisition, (iii)
for working capital purposes, up to $10,000,000 at any time outstanding, (iv) to
make Acquisitions and (iv) to pay fees and expenses to be
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incurred in connection therewith and in connection with the execution and
delivery of the Loan Documents.
5.16 ACCURACY AND COMPLETENESS OF INFORMATION. To the best of
the Borrower's knowledge, the documents furnished and the statements made in
writing to the Lenders by or on behalf of the Borrower in connection with the
negotiation, preparation or execution of this Agreement or any of the other Loan
Documents, taken as a whole, do not contain any untrue statement of fact
material to the credit worthiness of the Borrower or omit to state any such
material fact necessary in order to make the statements contained therein not
misleading, in either case which has not been corrected, supplemented or
remedied by subsequent documents furnished or statements made in writing to the
Lenders prior to the date hereof.
SECTION 6. CONDITIONS PRECEDENT
6.1 CONDITIONS TO INITIAL LOANS. The agreement of each
Lender to make the initial Loan requested to be made by it is subject to the
satisfaction, immediately prior to or concurrently with the making of such Loan
on the Closing Date, of the following conditions precedent:
(a) LOAN DOCUMENTS. The Administrative Agent shall have
received (i) this Agreement, executed and delivered by a duly authorized
officer of the Borrower, with a counterpart for each Lender, and (ii)
each of the Stock Pledge Agreement, LLC Pledge Agreement and Partnership
Pledge Agreement each executed and delivered by a duly authorized
officer of the party thereto, with a counterpart or a conformed copy for
each Lender.
(b) RELATED AGREEMENTS. The Administrative Agent shall have
received, true and correct copies, of each of the existing Revenue
Sharing Agreements and any purchase agreements executed in connection
with an Acquisition or proposed Acquisition, and such other documents or
instruments as may be reasonably requested by the Administrative Agent,
(including, without limitation, a copy of any debt instrument, security
agreement or other material contract to which the Borrower, or one of
its Subsidiaries may be a party).
(c) NOTES. The Administrative Agent shall have received, for
the account of each Lender that has requested the same, a Note made by
the Borrower conforming to the requirements of this Agreement, and
executed by a duly authorized officer of the Borrower.
(d) BORROWING CERTIFICATE. The Administrative Agent shall
have received, with a counterpart for each Lender, a certificate of the
Borrower, dated the Closing Date, substantially in the form of Exhibit
C, with appropriate insertions and attachments,
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satisfactory in form and substance to the Administrative Agent, executed
by two Responsible Officers of the Borrower.
(e) CORPORATE PROCEEDINGS OF THE BORROWER. The
Administrative Agent shall have received, with a counterpart for each
Lender, a copy of the resolutions, in form and substance satisfactory to
the Administrative Agent, of the Board of Directors of the Borrower
authorizing (i) the execution, delivery and performance of this
Agreement and the other Loan Documents to which it is a party, (ii) the
borrowings contemplated hereunder and (iii) the granting by it of the
Liens created pursuant to the Pledge Agreements, certified by the
Secretary or an Assistant Secretary of the Borrower as of the Closing
Date, which certificate shall be in form and substance satisfactory to
the Administrative Agent and shall state that the resolutions thereby
certified have not been amended, modified, revoked or rescinded.
(f) BORROWER INCUMBENCY CERTIFICATE. The Administrative
Agent shall have received, with a counterpart for each Lender, a
Certificate of the Borrower, dated the Closing Date, as to the
incumbency and signature of the officers of the Borrower executing any
Loan Document satisfactory in form and substance to the Administrative
Agent, executed by the President or any Vice President and the Secretary
or any Assistant Secretary of the Borrower.
(g) CORPORATE DOCUMENTS. The Administrative Agent shall have
received, with a counterpart for each Lender, true and complete copies
of the certificate of incorporation and by-laws of the Borrower,
certified as of the Closing Date as complete and correct copies thereof
by the Secretary or an Assistant Secretary of the Borrower.
(h) FEES. All fees payable by the Borrower to the
Administrative Agent and any Lender on or prior to the Closing Date
pursuant to this Agreement or pursuant to the Commitment Letter and Fee
Letter, each dated June 26, 1997, among The Chase Manhattan Bank, Chase
Securities Inc., as arranger of the Commitments and the Borrower shall
have been paid in full, in each case in the amounts and on the dates set
forth herein or therein.
(i) LEGAL OPINION. The Administrative Agent shall have
received, with a counterpart for each Lender, the executed legal opinion
of Goodwin, Procter & Hoar LLP, counsel to the Borrower, substantially
in the form of Exhibit D. Such legal opinion shall cover such other
matters incident to the transactions contemplated by this Agreement as
the Administrative Agent may reasonably require.
(j) PLEDGED STOCK AND OTHER EQUITY INTERESTS; TRANSFER
POWERS. The Administrative Agent shall have received any certificates
representing the shares of Capital Stock pledged pursuant to the Stock
Pledge Agreement, together with an undated transfer power, in form and
substance satisfactory to the Administrative Agent, for each such
certificate executed in blank by a duly authorized officer of the
pledgor thereof.
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(k) ACTIONS TO PERFECT LIENS. The Administrative Agent shall
have received evidence in form and substance satisfactory to it that all
filings, recordings, registrations and other actions, including, without
limitation, the filing of duly executed financing statements on form
UCC-1, necessary or, in the opinion of the Administrative Agent,
desirable to perfect the Liens created by the Pledge Agreements shall
have been completed.
(l) LIEN SEARCHES. The Administrative Agent shall have
received the results of a recent search by a Person satisfactory to the
Administrative Agent, of the Uniform Commercial Code, judgement and tax
lien filings which may have been filed with respect to personal property
of the Borrower, and the results of such search shall be satisfactory to
the Administrative Agent.
(m) PRO FORMA BALANCE SHEET. The Administrative Agent shall
have received a PRO FORMA balance sheet of the Borrower as at June 30,
1997, after giving effect to the transactions contemplated hereby to be
consummated on the Closing Date and the most recent unaudited
consolidated financial statements of the Borrower and its subsidiaries.
(n) CONVERTIBLE PREFERRED STOCK. As of the Closing Date, the
Administrative Agent shall have received evidence reasonably
satisfactory to it that the Borrower shall have issued at least
$30,000,000 of convertible preferred stock or warrants to purchase
convertible preferred stock (the "CONVERTIBLE PREFERRED STOCK") upon
terms and conditions satisfactory to the Lenders for cash and/or as part
of the TBC Acquisition closing prior to or simultaneous with the Closing
Date.
(o) SENIOR SUBORDINATED BRIDGE FACILITY. The Administrative
Agent shall have received evidence reasonably satisfactory to it that
the Borrower shall have received financing pursuant to the Senior
Subordinated Credit Agreement in an amount equal to the lesser of (x)
$60,000,000 or (y) $90,000,000 minus the value of the Convertible
Preferred Stock, which Senior Subordinated Loans shall (a) be
subordinated in all respects to the Loans (except as otherwise
contemplated herein), and (b) otherwise be in form and substance
satisfactory to the Lenders.
(p) CONDITIONS TO TBC ACQUISITION. There shall be no
material conditions to the consummation of the TBC Acquisition which
have not been satisfied or waived with the prior consent of the
Administrative Agent, and there have been no material amendments to the
documentation relating to the TBC Acquisition without the prior consent
of the Administrative Agent.
(q) PURCHASE PRICE, FEES AND EXPENSES FOR TBC ACQUISITION.
The Administrative Agent shall have received satisfactory evidence that
(a) the aggregate consideration paid in connection with the TBC
Acquisition shall not exceed $300,000,000 in the aggregate and (b) the
fees and expenses to be incurred by the Borrower in connection with the
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TBC Acquisition and the financing thereof shall not exceed $15,000,000
in the aggregate.
(r) CONSENTS, AUTHORIZATIONS AND FILINGS. All material
governmental and third party approvals necessary or advisable in
connection with the TBC Acquisition, the financing contemplated hereby
and the continuing operations of the Borrower and its subsidiaries
(after giving effect to the consummation of the TBC Acquisition) shall
have been obtained and be in full force and effect, and all applicable
waiting periods shall have expired without any action being taken or
threatened by any competent authority which would restrain, prevent or
otherwise impose material adverse conditions on the TBC Acquisition or
the financing thereof.
(s) CAPITAL STRUCTURE; CORPORATE STRUCTURE. The
Administrative Agent shall be satisfied that there have been no material
adverse changes in the capital structure or corporate structure of the
Borrower and its subsidiaries since the execution of definitive
documentation for the TBC Acquisition.
(t) PROJECTIONS. The Borrower shall have furnished to each
Lender a copy of financial projections for the period from 1997 through
2004 for the Borrower and its Subsidiaries. Such projections shall have
been, in the opinion of the Borrower, prepared on the basis of
reasonable assumptions and sound business principles.
6.2 CONDITIONS TO EACH LOAN. The agreement of each Lender to
make any Loan requested to be made by it on any date (including, without
limitation, its initial Loan but excluding any repricing or conversion of any
then outstanding Loan) is subject to the satisfaction of the following
conditions precedent:
(a) REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties made by the Borrower in or pursuant to
the Loan Documents shall be true and correct in all material respects on
and as of such date as if made on and as of such date; PROVIDED that (i)
representations and warranties made with reference to a specific date
shall remain true and correct as of such date and (ii) representations
and warranties shall not be required to remain true to the extent
changes have resulted from actions permitted hereunder.
(b) NO DEFAULT. No Default or Event of Default shall have
occurred and be continuing on such date or after giving effect to the
Loans requested to be made on such date.
(c) NOTICE OF BORROWING. The Administrative Agent shall have
received a notice of borrowing pursuant to subsection 3.2.
(d) USE OF PROCEEDS. A Responsible Officer shall have
delivered to the Administrative Agent a certificate to the effect that
the proceeds of such Loan will be
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used in accordance with subsection 5.15 and specifying in reasonable
detail the proposed use of the proceeds thereof.
Each borrowing by the Borrower hereunder shall constitute a representation and
warranty by the Borrower as of the date thereof that the conditions contained in
this subsection have been satisfied.
SECTION 7. AFFIRMATIVE COVENANTS
The Borrower hereby agrees that, so long as the Commitments
remain in effect or any amount is owing to any Lender or the Administrative
Agent hereunder or under any other Loan Document, the Borrower shall and (except
in the case of delivery of financial information, reports and notices) shall
cause each of its Subsidiaries to:
7.1 FINANCIAL STATEMENTS. Furnish to the Administrative
Agent (which shall promptly furnish to the other Lenders):
(a) as soon as available, but in any event within 90 days
after the end of each fiscal year of the Borrower, copies of the
consolidated and consolidating balance sheet of the Borrower and its
Subsidiaries as at the end of such year and the related consolidated and
consolidating statements of income and retained earnings and of cash
flows for such year, and setting forth in each case in comparative form
the figures for the previous year and, in the case of the consolidated
statements, reported on without a "going concern" or like qualification
or exception, or qualification arising out of the scope of the audit, by
Coopers & Lybrand or other independent certified public accountants of
nationally recognized standing; and
(b) as soon as available, but in any event not later than 45
days after the end of each of the first three quarterly periods of each
fiscal year of the Borrower, copies of the unaudited consolidated and
consolidating balance sheet of the Borrower and its Subsidiaries as at
the end of such quarter and the related unaudited consolidated and
consolidating statements of income and retained earnings and of cash
flows for such quarter and the portion of the fiscal year through the
end of such quarter, and setting forth in each case in comparative form
the figures for the previous year, certified by a Responsible Officer as
being fairly stated in all material respects (subject to normal year-end
audit adjustments);
all such financial statements shall be complete and correct in all material
respects and shall be prepared in reasonable detail and in accordance with GAAP
applied consistently throughout the periods reflected therein and with prior
periods (subject, in the case of interim financial statements, to year end
adjustments and the absence of footnotes).
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7.2 CERTIFICATES; OTHER INFORMATION. Furnish to the
Administrative Agent (which shall promptly furnish to the other Lenders):
(a) concurrently with the delivery of the financial
statements referred to in subsection 7.1(a), a certificate of the
independent certified public accountants reporting on such financial
statements stating that in making the examination necessary therefor no
knowledge was obtained of any Default or Event of Default specified in
subsection 9(c), except as specified in such certificate;
(b) concurrently with the delivery of the financial
statements referred to in subsections 7.1(a) and (b), (i) a copy of the
most recent audited (or, if later, unaudited) financial statements
received by the Borrower or any of its Subsidiaries of each of its
Management Companies and (ii) a certificate of a Responsible Officer
stating that, to the best of such Officer's knowledge, that such Officer
has obtained no knowledge of any Default or Event of Default except as
specified in such certificate;
(c) within five days after the same are filed, copies of all
financial statements and reports which the Borrower may make to, or file
with, the Securities and Exchange Commission or any successor or
analogous Governmental Authority;
(d) within 45 days after the end of each fiscal quarter of
the Borrower, a schedule analyzing changes in the assets under
management of the Borrower, its Subsidiaries and Management Companies to
the extent such changes are material, in each case prepared under the
direct supervision of the senior financial officer of the Borrower and
in form and substance satisfactory to the Administrative Agent;
(e) at the request of the Administrative Agent, a report
discussing the views of the Borrower concerning the recent performance
and near and intermediate term prospects of (i) the businesses in which
the Borrower and its Subsidiaries and Management Companies are
principally engaged and (ii) the Borrower and its Subsidiaries and
Management Companies, including a discussion of trends concerning assets
under management, advisory fees and competition and of strategic
initiatives by the Borrower and its Subsidiaries and Management
Companies (or, upon reasonable notice by the Administrative Agent, the
Borrower shall attend a meeting with the Lenders to discuss the
foregoing);
(f) within five Business Days after the consummation of any
Acquisition, other than the TBC Acquisition or an Acquisition of any
interest in a Person that is already a Subsidiary or a Management
Company and with respect to which the Borrower does not borrow
additional funds hereunder, and within 45 days after the consummation of
the TBC Acquisition (A) copies of the most recent audited (and, if
later, or, if audited statements are not available, unaudited) financial
statements of the Management Company which is the subject of such
Acquisition, (B) copies of the purchase agreement or other acquisition
document executed or to be executed by the Borrower or
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any of its Subsidiaries in connection with the Acquisition, (C) an
unaudited PRO FORMA consolidated balance sheet of the Borrower and its
Subsidiaries as at a recent date but prepared as though the closing of
such Acquisition had occurred on or prior to such date and related PRO
FORMA calculations, indicating compliance on a PRO FORMA basis as at
such date and for the periods then ended with the financial covenants
set forth in subsection 8.1 and (D) a copy of the most recent Form ADV,
if any, filed under the Investment Advisers Act in respect to any
Management Company which is the subject of such Acquisition; and
(g) promptly, such additional financial and other
information as any Lender may, through the Administrative Agent, from
time to time reasonably request.
7.3 PAYMENT OF OBLIGATIONS. Pay, discharge or otherwise
satisfy at or before maturity or before they become delinquent, as the case may
be, all its obligations of whatever nature, except where the amount or validity
thereof is currently being contested in good faith by appropriate proceedings
and reserves in conformity with GAAP with respect thereto have been provided on
the books of the Borrower or its Subsidiaries, as the case may be and except
where the failure to do so could not have a Material Adverse Effect.
7.4 CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE.
Continue to engage in business of the same general type as now conducted and
purported to be conducted by it and preserve, renew and keep in full force and
effect its corporate existence and take all reasonable action to maintain all
rights, registrations, licenses, privileges and franchises necessary or
desirable in the normal conduct of its business (including, without limitation,
all such registrations under the Investment Advisers Act and all material
investment advisory agreements, distribution agreements and shareholding and
other administrative servicing contracts) except as otherwise permitted pursuant
to subsection 8.5 and except for failures which individually and in the
aggregate will not have a Material Adverse Effect; comply, and to the extent
reasonably within its control, cause each Management Company and Fund to comply,
with all Contractual Obligations and Requirements of Law except to the extent
that failure to comply therewith could not, in the aggregate, be reasonably
expected to have a Material Adverse Effect.
7.5 MAINTENANCE OF PROPERTY; INSURANCE. Keep all property
useful and necessary in its business in good working order and condition, except
where the failure to do so would not have a Material Adverse Effect; maintain
with financially sound and reputable insurance companies insurance on all its
property in at least such amounts and against at least such risks as are usually
insured against in the same general area by companies engaged in the same or a
similar business, except where the failure to do so could not have a Material
Adverse Effect; and furnish to the Administrative Agent, upon written request,
full information as to the insurance carried.
7.6 INSPECTION OF PROPERTY; BOOKS AND RECORDS; DISCUSSIONS.
Keep proper books of records and account in which full, true and correct entries
in all material respects in
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conformity with GAAP and all Requirements of Law shall be made of all dealings
and transactions in relation to its business and activities, except where the
failure to do so would not have a Material Adverse Effect; and permit
representatives of any Lender to visit and inspect any of its properties and
examine and make abstracts from any of its books and records at any reasonable
time and as often as may reasonably be desired and upon at least three days
prior notice or such lesser period of time as may be acceptable to the Borrower
or the relevant Subsidiary, as the case may be, and to discuss the business,
operations, properties and financial and other condition of the Borrower and its
Subsidiaries with officers and employees of the Borrower and its Subsidiaries
and with its independent certified public accountants.
7.7 NOTICES. Promptly give notice to the Administrative
Agent and each Lender of:
(a) the occurrence of any Default or Event of Default;
(b) any (i) default or event of default under any
Contractual Obligation of the Borrower or any of its Subsidiaries or
(ii) litigation, investigation or proceeding which may exist at any time
between the Borrower or any of its Subsidiaries and any Governmental
Authority, which in either case, if not cured or if adversely
determined, as the case may be, could have a Material Adverse Effect;
(c) any litigation or proceeding affecting the Borrower or
any of its Subsidiaries or any "affiliated person" of the Borrower or
any of its Subsidiaries within the meaning of the Investment Company Act
in which the amount involved is $5,000,000 or more and not covered by
insurance or in which injunctive or similar relief is sought and which
could reasonably be expected to have a Material Adverse Effect;
(d) the following events, as soon as possible and in any
event within 30 days after the Borrower knows or has reason to know
thereof: (i) the occurrence or expected occurrence of any Reportable
Event with respect to any Plan, or any withdrawal from, or the
termination, Reorganization or Insolvency of any Multiemployer Plan or
(ii) the institution of proceedings or the taking of any other action by
the PBGC or the Borrower or any Commonly Controlled Entity or any
Multiemployer Plan with respect to the withdrawal from, or the
terminating, Reorganization or Insolvency of, any Plan;
(e) any suspension or termination of the registration of any
Subsidiary or Management Company of the Borrower as an investment
adviser under the Investment Advisers Act, or of any registration as a
broker-dealer under the Securities Acts or under any applicable state
statute which is material to the business thereof, or any cancellation
or expiration without renewal of any investment advisory agreement,
distribution agreement or shareholder or other administrative servicing
contract to which the Borrower or any of its Subsidiaries or Management
Companies is a party the revenues under which have exceeded in the most
recent fiscal year of the Borrower or any such Management Company, as
the case may be, $1,000,000; and
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(f) any event which would have a Material Adverse Effect on
the Borrower and its Subsidiaries taken as a whole.
Each notice pursuant to this subsection shall be accompanied by a statement of a
Responsible Officer setting forth details of the occurrence referred to therein
and stating what action the Borrower proposes to take with respect thereto, if
any.
7.8 STOCK PLEDGES. Promptly upon the consummation of the
Acquisition of a Management Company or the formation of any new Subsidiary,
execute and deliver or cause to be executed and delivered to the Administrative
Agent a Pledge Agreement Supplement with respect to the pledge of the Capital
Stock of such Management Company or new Subsidiary, held, directly by the
Borrower or by any wholly owned Subsidiary of the Borrower, in form and
substance reasonably satisfactory to the Administrative Agent, together with
evidence in form and substance reasonably satisfactory to the Administrative
Agent that all deliveries, filings, recordings, registrations and other actions,
including, without limitation, the delivery of any certificates representing
such Capital Stock, together, in the case of stock certificates, with an undated
transfer power, in form and substance reasonably satisfactory to the
Administrative Agent, for each such certificate executed in blank by a duly
authorized officer of the pledgor thereof, and the filing of duly executed
financing statements on form UCC-1, necessary or, in the opinion of the
Administrative Agent, desirable to perfect the Liens created by such Pledge
Agreement Supplement shall have been completed.
7.9 GUARANTEES. In the case of any Subsidiary of the
Borrower which at any time is wholly owned, promptly upon the request of the
Administrative Agent, execute and deliver to the Administrative Agent, on behalf
of the Lenders, a guarantee of such Subsidiary, in form and substance
satisfactory to the Administrative Agent, with respect to the performance of the
obligations of the Borrower under this Agreement and the other Loan Documents.
SECTION 8. NEGATIVE COVENANTS
The Borrower hereby agrees that, from and after the Closing Date
and so long as the Commitments remain in effect or any amount is owing to any
Lender or the Administrative Agent hereunder or under any other Loan Document,
the Borrower shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly:
8.1 FINANCIAL CONDITION COVENANTS.
(a) MAINTENANCE OF NET WORTH. Permit Consolidated Net Worth
at any time during any period to be less than ********** (the remainder
of this section has been omitted pursuant to the confidential treatment
request referenced on the cover page hereto. The omitted information has
been filed separately with the Commission.**********
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(b) INTEREST COVERAGE. Permit for any period of four
consecutive fiscal quarters ending during any "Test Period" set forth
below the ratio of (i) Consolidated EBITDA to (ii) Consolidated Interest
Expense to be less than the ratio set forth opposite such Test Period
below:
Test Period Interest Coverage Ratio
----------- -----------------------
********** (the remainder of this section has been omitted
pursuant to the confidential treatment request referenced on the cover page
hereto. The omitted information has been filed separately with the
Commission.**********
(c) LEVERAGE RATIO OF SENIOR INDEBTEDNESS TO ADJUSTED
EBITDA. Permit at any time during any "Test Period" set forth below the ratio of
(i) Senior Indebtedness to (ii) Adjusted EBITDA at the end of the most recently
completed fiscal quarter to exceed the ratio set forth opposite such Test Period
below:
Test Period Leverage Ratio
----------- --------------
********** (the remainder of this section has been omitted
pursuant to the confidential treatment request referenced on the cover page
hereto. The omitted information has been filed separately with the
Commission.**********
8.2 LIMITATION ON INDEBTEDNESS. Create, incur, assume or suffer
to exist any Indebtedness, except:
(a) Indebtedness of the Borrower under this Agreement and
the other Loan Documents;
(b) unsecured Indebtedness of any Subsidiary owing to the
Borrower or any other Subsidiary or secured Indebtedness of any Subsidiary owing
to the Borrower;
(c) Indebtedness of the Borrower or any of its Subsidiaries
incurred to finance its working capital (or the working capital of any
Subsidiary of the Borrower) in an aggregate principal amount not exceeding as to
it $1,000,000 at any time outstanding;
(d) Indebtedness of the Borrower or any of its Subsidiaries
incurred to finance its acquisition of fixed or capital assets (whether pursuant
to a deferred purchase arrangement with a vendor, a loan, a Financing Lease or
otherwise) in an aggregate principal amount not exceeding as to it $200,000 at
any time outstanding;
(e) Indebtedness of a Person which becomes a Subsidiary
after the date hereof, PROVIDED that (i) such indebtedness existed at the time
such Person became a Subsidiary and was not created in anticipation thereof and
(ii) immediately after giving effect to the
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acquisition of such Person by the Borrower no Default or Event of
Default shall have occurred and be continuing;
(f) Indebtedness in respect of (i) the Senior Subordinated
Credit Agreement or the Senior Subordinated Indenture or evidenced by
the Senior Subordinated Notes; PROVIDED that such Indebtedness shall not
be extended, renewed, replaced, refinanced or otherwise amended, except
(x) by the incurrence of Indebtedness under the Senior Subordinated
Indenture or evidenced by Senior Subordinated Notes or (y) for
amendments permitted by subsection 8.11, (ii) the Subordinated
Contingent Payment Notes and (iii) other Subordinated Indebtedness;
(g) Indebtedness of the Borrower and its Subsidiaries
(including, without limitation, TBC and GeoCapital, LLC) existing on the
date hereof, as described on Schedule 8.2(g);
(h) Indebtedness of the type described in clause (g) of the
definition of Indebtedness incurred by the Borrower or any of its
Subsidiaries in the ordinary course of business with reputable financial
institutions and not for speculative purposes;
(i) Indebtedness of the Borrower or any of its Subsidiaries
incurred to the seller of an interest in any Management Company or
Subsidiary; and
(j) Indebtedness in the nature of deferred compensation to
employees in an aggregate principal amount not exceeding as to the
Borrower and its Subsidiaries (i) $1,000,000 at any time outstanding
prior to the consummation of an Initial Public Offering and (ii)
$5,000,000 at any time outstanding thereafter.
8.3 LIMITATION ON LIENS. Create, incur, assume or suffer to
exist any Lien upon any of its property, assets or revenues, whether now
owned or hereafter acquired, except for:
(a) Liens for taxes, assessments and other governmental
charges not yet due or which are being contested in good faith by
appropriate proceedings, PROVIDED that adequate reserves with respect
thereto are maintained on the books of the Borrower or its Subsidiaries,
as the case may be, in conformity with GAAP;
(b) carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other like Liens arising in the ordinary course of
business which are not overdue for a period of more than 60 days or
which are being contested in good faith by appropriate proceedings;
(c) pledges or deposits in connection with workers'
compensation, unemployment insurance and other social security
legislation;
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(d) deposits to secure the performance of bids, trade
contracts (other than for borrowed money), leases, statutory
obligations, surety and appeal bonds, performance bonds and other
obligations of a like nature incurred in the ordinary course of
business;
(e) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which, in the
aggregate, are not substantial in amount and which do not in any case
materially detract from the value of the property subject thereto or
materially interfere with the ordinary conduct of the business of the
Borrower or such Subsidiary;
(f) Liens securing Indebtedness of the Borrower and its
Subsidiaries permitted by subsection 8.2(d) incurred to finance the
acquisition of fixed or capital assets, PROVIDED that (i) such Liens
shall be created substantially simultaneously with the acquisition of
such fixed or capital assets, (ii) such Liens do not at any time
encumber any property other than the property financed by such
Indebtedness, (iii) the amount of Indebtedness secured thereby is not
increased and (iv) the principal amount of Indebtedness secured by such
Lien shall at no time exceed the purchase price of such property;
(g) Liens on the property or assets of a Person which
becomes a Subsidiary after the date hereof securing Indebtedness
permitted by subsection 8.2(e), PROVIDED that (i) such Liens existed at
the time such Person became a Subsidiary and were not created in
anticipation thereof, (ii) any such Lien is not spread to cover any
property or assets of such Person after the time such Person becomes a
Subsidiary, and (iii) the amount of Indebtedness secured thereby is not
increased;
(h) Liens arising by reason of any judgment, decree or order
of any court or other Governmental Authority, (i) if appropriate legal
proceedings which have been initiated for the review of such judgment,
decree or order are being diligently prosecuted and shall not have been
finally terminated or the period within which such proceedings may be
initiated shall not have expired or (ii) if such judgment, decree or
order shall have been discharged, within 45 days of the entry thereof or
execution thereof has been stayed pending appeal;
(i) Liens created pursuant to the Pledge Agreements
(including, without limitation, Liens to secure obligations with respect
to letters of credit permitted under subsection 8.4);
(j) Liens existing, or provided for under arrangements
existing, as of the date hereof as described on Schedule 8.3(j); and
(k) Liens permitted under subsection 4 of the Stock Pledge
Agreement and subsection 3 of each of the Partnership Pledge Agreement
and the LLC Pledge Agreement.
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8.4 LIMITATION ON GUARANTEE OBLIGATIONS. Create, incur,
assume or suffer to exist any Guarantee Obligation except guarantees by the
Borrower or any Subsidiary or Management Company of obligations of any of the
Subsidiaries, which obligations are otherwise permitted under this Agreement,
and except for (a) other Guarantee Obligations not exceeding $1,500,000 in the
aggregate at any time, (b) Guarantee Obligations which constitute Indebtedness
permitted under subsection 8.2 or (c) Guarantee Obligations in the nature of
letters of credit issued by any Lender in an aggregate principal amount not
exceeding $2,500,000.
8.5 LIMITATION ON FUNDAMENTAL CHANGES. Enter into any
merger, consolidation or amalgamation, or liquidate, wind up or dissolve itself
(or suffer any liquidation or dissolution), or convey, sell, lease, assign,
transfer or otherwise dispose of, all or substantially all of its property,
business or assets (each a "disposition"), or make any material change in its
present method of conducting business; PROVIDED that, unless, (i) with respect
to a merger, consolidation or amalgamation of a Subsidiary of the Borrower, if
prior to such event the Borrower owned at least a 51% ownership interest, the
Borrower shall continue to own at least a 51% ownership interest in such
Subsidiary or the surviving Person of such merger, consolidation or amalgamation
or, after such event it shall have no ownership interest, (ii) with respect to
the liquidation, winding up or dissolution of a direct or indirect Subsidiary of
the Borrower, the assets of such Subsidiary shall have been transferred to the
Borrower or a Subsidiary of the Borrower and the other shareholders, partners or
members of a Subsidiary, or another Subsidiary of the Borrower, and (iii) with
respect to any disposition described above, the Net Proceeds thereof shall have
been applied as set forth in subsection 4.2 to the extent required.
8.6 LIMITATION ON SALE OF ASSETS. Convey, sell, lease,
assign, transfer or otherwise dispose (including in connection with sale
leaseback transactions) of any of its property, business or assets (including,
without limitation, receivables and leasehold interests), whether now owned or
hereafter acquired, or, in the case of any Subsidiary, issue or sell any shares
of such Subsidiary's Capital Stock to any Person other than the Borrower or any
wholly owned Subsidiary, except:
(a) the sale or other disposition of obsolete or worn out
property in the ordinary course of business;
(b) the sale or other disposition of any property in the
ordinary course of business;
(c) the sale or discount without recourse of accounts
receivable arising in the ordinary course of business in connection with
the compromise or collection thereof;
(d) the sale, issuance or other disposition of the Capital
Stock or other ownership interest of any Subsidiary of the Borrower or
of a Management Company in which the Borrower owns an ownership interest
to partners, officers or directors of such Subsidiary or Management
Company; provided that, if prior to such sale, issuance or
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disposition, the Borrower owns in excess of a 50% ownership interest in
such Subsidiary or Management Company, the Borrower shall at all times
continue to own in excess of a 50% ownership interest in such Subsidiary
or Management Company or after such sale, issuance or disposition shall
have no ownership interest; and
(e) the sale, contribution or other transfer of (i) all or
substantially all the Capital Stock of a Subsidiary or Management
Company (including both Capital Stock held by the Borrower and its
Subsidiaries and by the other holders of Capital Stock of such
Subsidiary or Management Company), or (ii) all or substantially all the
Assets of a Subsidiary or Management Company, in each case, to another
Subsidiary or Management Company in a transaction or series of related
transactions which results in the Borrower having at least a
substantially equivalent economic interest in, and a substantially
equivalent level of management and control over, the Subsidiary or
Management Company.
8.7 LIMITATION ON LEASES. Permit the amount paid by the
Borrower for lease obligations under operating leases to which the Borrower is a
party (including any such leases entered into in connection with sale leaseback
transactions) for any fiscal year of the Borrower to exceed $750,000 or permit a
Subsidiary of the Borrower to make any such payment in respect of lease
obligations except to the extent that any such payment is made out of that
portion of its revenues designated as Operating Cash Flow (and not Free Cash
Flow) under the relevant Revenue Sharing Agreement.
8.8 LIMITATION ON DIVIDENDS. Declare or pay any dividend
(other than dividends payable solely in common stock of the Borrower) on, or
make any payment on account of, or set apart assets for a sinking or other
analogous fund for, the purchase, redemption, defeasance, retirement or other
acquisition of, any shares of any class of Capital Stock of the Borrower or any
warrants or options to purchase any such Capital Stock, whether now or hereafter
outstanding, or make any other distribution in respect thereof, either directly
or indirectly, whether in cash or property or in obligations of the Borrower or
any Subsidiary in an aggregate amount not exceeding as to the Borrower and its
Subsidiaries $500,000; PROVIDED, HOWEVER, that the Borrower may make the
payments described in or contemplated by Section 1.5 of the Amended and Restated
Stockholders Agreement dated as of August 15, 1997 among the Borrower and the
stockholders of the Borrower party thereto and may make the deposit of funds
into escrow described in and contemplated by such Section 1.5 and the funds so
deposited may be released pursuant to the terms of the Escrow Agreement dated as
of September [ ], 1997.
8.9 LIMITATION ON CAPITAL EXPENDITURES. Make or commit to
make (by way of the acquisition of securities of a Person or otherwise) any
expenditure in respect of the purchase or other acquisition of fixed or capital
assets (excluding any such asset acquired in connection with normal replacement
and maintenance programs properly charged to current operations) except in the
case of the Borrower, for expenditures in the ordinary course of business not
exceeding, in the aggregate for the Borrower during any fiscal year of the
Borrower
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$2,500,000 and except in the case of a Subsidiary of the Borrower, expenditures
in respect of fixed or capital assets to the extent that such expenditures are
made out of that portion of its revenues designated as Operating Cash Flow (and
not Free Cash Flow) under the relevant Revenue Sharing Agreement.
8.10 LIMITATION ON INVESTMENTS, LOANS AND ADVANCES. Make any
advance, loan, extension of credit or capital contribution to, or purchase any
stock, bonds, notes, debentures or other securities of or any assets
constituting a business unit of, or make any other investment in, any Person,
except:
(a) extensions of trade credit in the ordinary course of
business;
(b) investments in cash equivalents, including any such
investment that may be readily sold or otherwise liquidated in any Fund
for which any Subsidiary or other Management Company provides
management, advisory or administrative services and which principally
invests in cash equivalents;
(c) any investment in or loan or advance to a Management
Company or a Subsidiary or in any Person which, after giving effect to
such investment, will become a Subsidiary or a Management Company, if,
after giving effect to such investment, no Default or Event of Default
shall have occurred and be continuing;
(d) loans to officers of the Borrower or its Subsidiaries
listed on Schedule 8.10 in aggregate principal amounts outstanding not
to exceed the respective amounts set forth for such officers on said
schedule;
(e) (i) loans and advances to employees of the Borrower or
its Subsidiaries for travel, entertainment and relocation expenses in
the ordinary course of business in an aggregate amount for the Borrower
and its Subsidiaries not to exceed $150,000 at any one time outstanding
(other than as permitted in subsection 8.10(f)) and (ii) in the case of
a Subsidiary of the Borrower, loans and advances to employees for
travel, entertainment and relocation expenses in the ordinary course of
business to the extent that such loans and advances are made out of that
portion of its revenues designated as Operating Cash Flow (and not Free
Cash Flow) under the relevant Revenue Sharing Agreement; and
(f) to the extent made out of the portion of the revenues of
a Subsidiary of the Borrower which is designated as Operating Cash Flow
(and not Free Cash Flow) under the relevant Revenue Sharing Agreements.
8.11 LIMITATION ON OPTIONAL PAYMENTS AND MODIFICATIONS OF
DEBT INSTRUMENTS AND OTHER DOCUMENTS (a) Except as provided in subsection
8.11(b), make any payment (including any cash payment of interest) or prepayment
on or redemption, defeasance or purchase of any Subordinated Indebtedness;
PROVIDED, HOWEVER, as long as there is no Default or Event of
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Default, the Borrower may make payments due on the Subordinated Contingent
Payment Notes and Subordinated Deferred Payment Note as required thereunder and
up to $10,000,000 in the aggregate of payments (including any cash payment of
interest) and prepayments on or redemption, defeasance or purchase of
Subordinated Indebtedness.
(b) Make any optional payment or prepayment on or repurchase
or redemption of the Senior Subordinated Credit Agreement or any Senior
Subordinated Notes (other than, to the extent permitted thereunder, with the
proceeds of an Initial Public Offering or, in the case of the Senior
Subordinated Credit Agreement, with the proceeds of any offering of Senior
Subordinated Notes or other Subordinated Indebtedness), including, without
limitation, any payments on account of, or for a sinking or other analogous fund
for, the repurchase, redemption, defeasance or other acquisition thereof, except
mandatory payments of principal, interest, fees and expenses required by the
terms of the Senior Subordinated Credit Agreement, the Senior Subordinated
Notes, the Senior Subordinated Facility Documents, the Senior Subordinated Notes
Documents and the Senior Subordinated Note Indenture, as the case may be, only
to the extent permitted under the subordination provisions, if any, applicable
thereto.
(c) In the event of the occurrence of a Change of Control
(as defined in the Senior Subordinated Note Indenture), repurchase the Senior
Subordinated Notes or any portion thereof, unless the Borrower shall have (i)
made payment in full of the Loans and any other amounts then due and owing to
any Lender or the Administrative Agent hereunder and under any Note on terms
reasonably satisfactory to the Administrative Agent or (ii) made an offer to pay
the Loans, and any amounts then due and owing to each Lender and the
Administrative Agent hereunder and under any Note in respect of each Lender and
shall have made payment in full thereof to each such Lender or the
Administrative Agent which has accepted such offer.
(d) Amend, supplement, waive or otherwise modify any of the
provisions of any of the Senior Subordinated Facility Notes and Senior
Subordinated Notes or the Senior Subordinated Facility Documents or the Senior
Subordinated Notes Documents:
(i) which amends or modifies the subordination provisions,
if any, contained therein;
(ii) which shortens the fixed maturity or increases the
principal amount of, or increases the rate or shortens the time of
payment of interest on, or increases the amount or shortens the time of
payment of any principal or premium payable whether at maturity, at a
date fixed for prepayment or by acceleration or otherwise of the
Indebtedness under the Senior Subordinated Credit Facility or evidenced
by the Senior Subordinated Notes, or increases the amount of, or
accelerates the time of payment of, any fees or other amounts payable in
connection therewith;
(iii) which relates to any material affirmative or negative
covenants or any events of default or remedies thereunder and the effect
of which is to subject the Borrower or any of its Subsidiaries, to any
more onerous or more restrictive provisions; or
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(iv) which otherwise adversely affects the interests of the Lenders as
senior creditors with respect to the Senior Subordinated Credit Facility
or the Senior Subordinated Notes or the interests of the Lenders under
this Agreement or any other Loan Document in any material respect.
8.12 RESTRICTION ON AMENDMENTS TO REVENUE SHARING AGREEMENTS.
Amend or modify the terms of a Revenue Sharing Agreement such that, as a result
of such amendment or modification a Material Adverse Effect would occur.
8.13 LIMITATION ON TRANSACTIONS WITH AFFILIATES. Except as
described on Schedule 8.13, enter into any transaction, including, without
limitation, any purchase, sale, lease or exchange of property or the rendering
of any service, with any Affiliate unless such transaction is (a) otherwise
expressly permitted under this Agreement or (b) in the ordinary course of the
Borrower's or such Subsidiary's business and upon fair and reasonable terms no
less favorable to the Borrower or such Subsidiary, as the case may be, than it
would obtain in a comparable arm's length transaction with a Person which is not
an Affiliate, provided that (i) transactions between the Borrower and its
Subsidiaries and (ii) transactions between the Borrower or any of its
Subsidiaries or any officer, director, individual stockholder, partner or member
(or an entity wholly owned by such an individual) and any Fund or other
Investment Company sponsored by the Borrower or any Subsidiary or for which the
Borrower or any Subsidiary provides advisory, administrative, supervisory,
management, consulting or similar services, that are otherwise permissible under
the Investment Company Act, the Investment Advisers Act and the applicable
management contracts shall be permitted under this subsection 8.13.
8.14 LIMITATION ON CHANGES IN FISCAL YEAR. Permit the fiscal
year of the Borrower to end on a day other than December 31.
SECTION 9. EVENTS OF DEFAULT
If any of the following events shall occur and be continuing:
(a) The Borrower shall fail to pay any principal of any Loan
when due in accordance with the terms thereof or hereof; or the Borrower
shall fail to pay any interest on any Loan, or any other amount payable
hereunder, within five days after any such interest or other amount
becomes due in accordance with the terms thereof or hereof; or
(b) Any representation or warranty made or deemed made by
the Borrower or any of its Subsidiaries herein or in any other Loan
Document or which is contained in any certificate, document or financial
or other statement furnished by it at any time under or in connection
with this Agreement or any such other Loan Document shall prove to have
been incorrect in any material respect on or as of the date made or
deemed made; or
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(c) The Borrower or any of its Subsidiaries shall default in
the observance or performance of any agreement contained in Section 6
and Section 5 of the Stock Pledge Agreement and Section 4 and Section 5
of each of the Partnership Pledge Agreement and the LLC Pledge
Agreement; or
(d) The Borrower or any of its Subsidiaries shall default in
the observance or performance of any other agreement contained in this
Agreement or any other Loan Document (other than as provided in
paragraphs (a) through (c) of this Section), and such default shall
continue unremedied for a period of 30 days; or
(e) The Borrower or any of its Subsidiaries shall (i)
default in any payment of principal of or interest on any Indebtedness
(other than the Loans) or in the payment of any Guarantee Obligation, in
either case in an outstanding principal amount in excess of $500,000,
beyond the period of grace (not to exceed 30 days), if any, provided in
the instrument or agreement under which such Indebtedness or Guarantee
Obligation was created; or (ii) default in the observance or performance
of any other agreement or condition relating to any such Indebtedness or
Guarantee Obligation or contained in any instrument or agreement
evidencing, securing or relating thereto, or any other event shall occur
or condition exist, the effect of which default or other event or
condition is to cause, or to permit the holder or holders of such
Indebtedness or beneficiary or beneficiaries of such Guarantee
Obligation (or a trustee or agent on behalf of such holder or holders or
beneficiary or beneficiaries) to cause, with the giving of notice if
required, such Indebtedness to become due prior to its stated maturity
or such Guarantee Obligation to become payable; or
(f) (i) The Borrower or any of its Subsidiaries shall
commence any case, proceeding or other action (A) under any existing or
future law of any jurisdiction, domestic or foreign, relating to
bankruptcy, insolvency, reorganization or relief of debtors, seeking to
have an order for relief entered with respect to it, or seeking to
adjudicate it a bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, winding-up, liquidation, dissolution,
composition or other relief with respect to it or its debts, or (B)
seeking appointment of a receiver, trustee, custodian, conservator or
other similar official for it or for all or any substantial part of its
assets, or the Borrower or any of its Subsidiaries shall make a general
assignment for the benefit of its creditors; or (ii) there shall be
commenced against the Borrower or any of its Subsidiaries any case,
proceeding or other action of a nature referred to in clause (i) above
which (A) results in the entry of an order for relief or any such
adjudication or appointment or (B) remains undismissed, undischarged or
unbonded for a period of 60 days; or (iii) there shall be commenced
against the Borrower or any of its Subsidiaries any case, proceeding or
other action seeking issuance of a warrant of attachment, execution,
distraint or similar process against all or any substantial part of its
assets which results in the entry of an order for any such relief which
shall not have been vacated, discharged, or stayed or bonded pending
appeal within 60 days from the entry thereof; or (iv) the Borrower or
any of its Subsidiaries shall take any action in
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furtherance of, or indicating its consent to, approval of, or
acquiescence in, any of the acts set forth in clause (i), (ii), or (iii)
above; or (v) the Borrower or any of its Subsidiaries shall generally
not, or shall be unable to, or shall admit in writing its inability to,
pay its debts as they become due; or
(g) (i) Any Person shall engage in any "prohibited
transaction" (as defined in Section 406 of ERISA or Section 4975 of the
Code) involving any Plan maintained by the Borrower or any of its
Subsidiaries, (ii) any "accumulated funding deficiency" (as defined in
Section 302 of ERISA), whether or not waived, shall exist with respect
to any Plan maintained by the Borrower or any of its Subsidiaries, (iii)
a Reportable Event shall occur with respect to, or proceedings shall
commence to have a trustee appointed, or a trustee shall be appointed,
to administer or to terminate, any Single Employer Plan, which
Reportable Event or commencement of proceedings or appointment of a
trustee is, in the reasonable opinion of the Required Lenders, likely to
result in the termination of such Plan for purposes of Title IV of
ERISA, (iv) any Single Employer Plan shall terminate for purposes of
Title IV of ERISA, (v) the Borrower or any Commonly Controlled Entity
shall, or in the reasonable opinion of the Required Lenders is likely
to, incur any liability in connection with a withdrawal from, or the
Insolvency or Reorganization of, a Multiemployer Plan or (vi) any other
event or condition shall occur or exist, with respect to a Plan; and in
each case in clauses (i) through (vi) above, such event or condition,
together with all other such events or conditions, if any, could have a
Material Adverse Effect; or
(h) One or more judgments or decrees shall be entered
against the Borrower or any of its Subsidiaries involving in the
aggregate a liability (not paid or fully covered by insurance or
indemnification) of $5,000,000 or more, and all such judgments or
decrees shall not have been vacated, discharged, stayed or bonded
pending appeal within 60 days from the entry thereof; or
(i) (i) Any of the Pledge Agreements shall cease, for any
reason, to be in full force and effect, or the Borrower or any of its
Subsidiaries party thereto shall so assert or (ii) the Lien created by
any of the Pledge Agreements shall cease to be enforceable and of the
same effect and priority purported to be created thereby; or
(j) A Change of Control shall have occurred.
then, and in any such event, (A) if such event is an Event of Default specified
in clause (i) or (ii) of paragraph (f) of this Section with respect to the
Borrower, automatically the Commitments shall immediately terminate and the
Loans hereunder (with accrued interest thereon) and all other amounts owing
under this Agreement shall immediately become due and payable, and (B) if such
event is any other Event of Default, either or both of the following actions may
be taken: (i) with the consent of the Required Lenders, the Administrative Agent
may, or upon the request of the Required Lenders, the Administrative Agent
shall, by notice to the Borrower declare the Commitments to be terminated
forthwith, whereupon the
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Commitments shall immediately terminate; and (ii) with the consent of the
Required Lenders, the Administrative Agent may, or upon the request of the
Required Lenders, the Administrative Agent shall, by notice to the Borrower,
declare the Loans hereunder (with accrued interest thereon) and all other
amounts owing under this Agreement to be due and payable forthwith, whereupon
the same shall immediately become due and payable. Except as expressly provided
above in this Section, presentment, demand, protest and all other notices of any
kind are hereby expressly waived.
SECTION 10. THE ADMINISTRATIVE AGENT
10.1 APPOINTMENT. Each Lender hereby irrevocably designates
and appoints the Administrative Agent as the agent of such Lender under this
Agreement and the other Loan Documents, and each such Lender irrevocably
authorizes the Administrative Agent, in such capacity, to take such action on
its behalf under the provisions of this Agreement and the other Loan Documents
and to exercise such powers and perform such duties as are expressly delegated
to the Administrative Agent by the terms of this Agreement and the other Loan
Documents, together with such other powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary elsewhere in this Agreement, the
Administrative Agent shall not have any duties or responsibilities, except those
expressly set forth herein, or any fiduciary relationship with any Lender, and
no implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or any other Loan Document or
otherwise exist against the Administrative Agent.
10.2 DELEGATION OF DUTIES. The Administrative Agent may
execute any of its duties under this Agreement and the other Loan Documents by
or through agents or attorneys-in-fact and shall be entitled to advice of
counsel concerning all matters pertaining to such duties. The Administrative
Agent shall not be responsible for the negligence or misconduct of any agents or
attorneys in-fact selected by it with reasonable care.
10.3 EXCULPATORY PROVISIONS. Neither the Administrative Agent
nor any of its officers, directors, employees, agents, attorneys-in-fact or
Affiliates shall be (i) liable for any action lawfully taken or omitted to be
taken by it or such Person under or in connection with this Agreement or any
other Loan Document (except for its or such Person's own gross negligence or
willful misconduct) or (ii) responsible in any manner to any of the Lenders for
any recitals, statements, representations or warranties made by the Borrower or
any officer thereof contained in this Agreement or any other Loan Document or in
any certificate, report, statement or other document referred to or provided for
in, or received by the Administrative Agent under or in connection with, this
Agreement or any other Loan Document or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any other Loan
Document or for any failure of the Borrower to perform its obligations hereunder
or thereunder. The Administrative Agent shall not be under any obligation to any
Lender to ascertain or to inquire as to the observance or performance of any of
the agreements
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contained in, or conditions of, this Agreement or any other Loan Document, or to
inspect the properties, books or records of the Borrower.
10.4 RELIANCE BY ADMINISTRATIVE AGENT. The Administrative
Agent shall be entitled to rely, and shall be fully protected in relying, upon
any Note, writing, resolution, notice, consent, certificate, affidavit, letter,
telecopy, telex or teletype message, statement, order or other document or
conversation believed by it to be genuine and correct and to have been signed,
sent or made by the proper Person or Persons and upon advice and statements of
legal counsel (including, without limitation, counsel to the Borrower),
independent accountants and other experts selected by the Administrative Agent.
The Administrative Agent may deem and treat the payee of any Note as the owner
thereof for all purposes unless a written notice of assignment, negotiation or
transfer thereof shall have been filed with the Administrative Agent. The
Administrative Agent shall be fully justified in failing or refusing to take any
action under this Agreement or any other Loan Document unless it shall first
receive such advice or concurrence of the Required Lenders as it deems
appropriate or it shall first be indemnified to its satisfaction by the Lenders
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action. The Administrative Agent shall
in all cases be fully protected in acting, or in refraining from acting, under
this Agreement and the other Loan Documents in accordance with a request of the
Required Lenders, and such request and any action taken or failure to act
pursuant thereto shall be binding upon all the Lenders and all future holders of
the Loans.
10.5 NOTICE OF DEFAULT. The Administrative Agent shall not be
deemed to have knowledge or notice of the occurrence of any Default or Event of
Default hereunder unless the Administrative Agent has received notice from a
Lender or the Borrower referring to this Agreement, describing such Default or
Event of Default and stating that such notice is a "notice of default". In the
event that the Administrative Agent receives such a notice, the Administrative
Agent shall give notice thereof to the Lenders, or, if such notice is received
from a Lender, to the Borrower. The Administrative Agent shall take such action
with respect to such Default or Event of Default as shall be reasonably directed
by the Required Lenders; PROVIDED that unless and until the Administrative Agent
shall have received such directions, the Administrative Agent may (but shall not
be obligated to) take such action, or refrain from taking such action, with
respect to such Default or Event of Default as it shall deem advisable in the
best interests of the Lenders.
10.6 NON-RELIANCE ON ADMINISTRATIVE AGENT AND OTHER LENDERS.
Each Lender expressly acknowledges that neither the Administrative Agent nor any
of its officers, directors, employees, agents, attorneys-in-fact or Affiliates
has made any representations or warranties to it and that no act by the
Administrative Agent hereinafter taken, including any review of the affairs of
the Borrower, shall be deemed to constitute any representation or warranty by
the Administrative Agent to any Lender. Each Lender represents to the
Administrative Agent that it has, independently and without reliance upon the
Administrative Agent or any other Lender, and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, operations, property, financial and other
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condition and creditworthiness of the Borrower and made its own decision to make
its Loans hereunder and enter into this Agreement. Each Lender also represents
that it will, independently and without reliance upon the Administrative Agent
or any other Lender, and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit analysis,
appraisals and decisions in taking or not taking action under this Agreement and
the other Loan Documents, and to make such investigation as it deems necessary
to inform itself as to the business, operations, property, financial and other
condition and creditworthiness of the Borrower. Except for notices, reports and
other documents expressly required to be furnished to the Lenders by the
Administrative Agent hereunder, the Administrative Agent shall not have any duty
or responsibility to provide any Lender with any credit or other information
concerning the business, operations, property, condition (financial or
otherwise), prospects or creditworthiness of the Borrower which may come into
the possession of the Administrative Agent or any of its officers, directors,
employees, agents, attorneys-in-fact or Affiliates.
10.7 INDEMNIFICATION. The Lenders agree to indemnify the
Administrative Agent in its capacity as such (to the extent not reimbursed by
the Borrower and without limiting the obligation of the Borrower to do so),
ratably according to their respective Commitment Percentages in effect on the
date on which indemnification is sought (or, if indemnification is sought after
the date upon which the Commitments shall have terminated and the Loans shall
have been paid in full, ratably in accordance with their Commitment Percentages
immediately prior to such date), from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind whatsoever which may at any time
(including, without limitation, at any time following the payment of the Loans)
be imposed on, incurred by or asserted against the Administrative Agent in any
way relating to or arising out of, the Commitments, this Agreement, any of the
other Loan Documents or any documents contemplated by or referred to herein or
therein or the transactions contemplated hereby or thereby or any action taken
or omitted by the Administrative Agent under or in connection with any of the
foregoing; PROVIDED that no Lender shall be liable for the payment of any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting solely from the
Administrative Agent's gross negligence or willful misconduct. The agreements in
this subsection shall survive the payment of the Loans and all other amounts
payable hereunder.
10.8 ADMINISTRATIVE AGENT IN ITS INDIVIDUAL CAPACITY. The
Administrative Agent and its Affiliates may make loans to, accept deposits from
and generally engage in any kind of business with the Borrower as though the
Administrative Agent were not the agent hereunder and under the other Loan
Documents. With respect to the Loans made by it, the Administrative Agent shall
have the same rights and powers under this Agreement and the other Loan
Documents as any Lender and may exercise the same as though it were not the
Administrative Agent, and the terms "Lender" and "Lenders" shall include the
Administrative Agent in its individual capacity.
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10.9 SUCCESSOR ADMINISTRATIVE AGENT. The Administrative Agent
may resign as Administrative Agent upon 30 days' notice to the Lenders. If the
Administrative Agent shall resign as Administrative Agent under this Agreement
and the other Loan Documents, then the Required Lenders shall appoint from among
the Lenders a successor agent for the Lenders, which successor agent shall be
approved by the Borrower; provided that, in the event such Lenders are unable to
agree upon such successor, the resigning Administrative Agent shall appoint a
successor agent from the existing Lenders, whereupon such successor agent shall
succeed to the rights, powers and duties of the Administrative Agent, and the
term "Administrative Agent" shall mean such successor agent effective upon such
appointment and approval, and the former Administrative Agent's rights, powers
and duties as Administrative Agent shall be terminated, without any other or
further act or deed on the part of such former Administrative Agent or any of
the parties to this Agreement or any holders of the Loans. After any retiring
Administrative Agent's resignation as Administrative Agent, the provisions of
this Section 10 shall inure to its benefit as to any actions taken or omitted to
be taken by it while it was Administrative Agent under this Agreement and the
other Loan Documents.
SECTION 11. MISCELLANEOUS
11.1 AMENDMENTS AND WAIVERS. Neither this Agreement nor any
other Loan Document, nor any terms hereof or thereof may be amended,
supplemented or modified except in accordance with the provisions of this
subsection. The Required Lenders may, or, with the written consent of the
Required Lenders, the Administrative Agent may, from time to time, (a) enter
into with the Borrower written amendments, supplements or modifications hereto
and to the other Loan Documents for the purpose of adding any provisions to this
Agreement or the other Loan Documents or changing in any manner the rights of
the Lenders or of the Borrower hereunder or thereunder or (b) waive, on such
terms and conditions as the Required Lenders or the Administrative Agent, as the
case may be, may specify in such instrument, any of the requirements of this
Agreement or the other Loan Documents or any Default or Event of Default and its
consequences; PROVIDED, HOWEVER, that no such waiver and no such amendment,
supplement or modification shall (i) reduce the amount or extend the scheduled
date of final maturity of any Loan, or reduce the stated rate of any interest or
fee payable hereunder or extend the scheduled date of any payment thereof or
increase the amount or extend the expiration date of any Lender's Commitment, in
each case without the consent of each Lender directly affected thereby, or (ii)
amend, modify or waive any provision of this subsection or reduce the percentage
specified in the definition of Required Lenders, or consent to the assignment or
transfer by the Borrower of any of its rights and obligations under this
Agreement and the other Loan Documents or release all or substantially all of
the Collateral or Pledged Collateral, in each case without the written consent
of all the Lenders, (iii) amend, modify or waive any provision of Section 10
without the written consent of the then Administrative Agent, (iv) change the
allocation among the Tranche A Term Loans and Tranche B Term Loans of
prepayments to be made pursuant to subsections 4.1 and 4.2 or waive or amend any
provision of subsection 4.2 without the prior written consent of (1) Lenders
holding more than 50% of the aggregate outstanding principal amount of the
Tranche
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A Term Loans and (2) Lenders holding more than 50% of the aggregate outstanding
principal amount of the Tranche B Term Loans, (v) change the application of
prepayments of Tranche A Term Loans pursuant to subsections 4.1 and 4.2 without
the prior written consent of Lenders holding more than 50% of the aggregate
outstanding principal amount of the Tranche A Term Loans or (vi) change the
application of prepayments of Tranche B Term Loans pursuant to subsections 4.1
and 4.2 without the prior written consent of Lenders holding more than 50% of
the aggregate outstanding principal amount of the Tranche B Term Loans. Any such
waiver and any such amendment, supplement or modification shall apply equally to
each of the Lenders and shall be binding upon the Borrower, the Lenders, the
Administrative Agent and all future holders of the Loans. In the case of any
waiver, the Borrower, the Lenders and the Administrative Agent shall be restored
to their former positions and rights hereunder and under the other Loan
Documents, and any Default or Event of Default waived shall be deemed to be
cured and not continuing; no such waiver shall extend to any subsequent or other
Default or Event of Default or impair any right consequent thereon.
11.2 NOTICES. All notices, requests and demands to or upon
the respective parties hereto to be effective shall be in writing (including by
facsimile transmission), and, unless otherwise expressly provided herein, shall
be deemed to have been duly given or made when delivered, or 5 days after being
deposited in the mail, postage prepaid, or, in the case of telecopy notice, when
received, addressed as follows in the case of the Borrower and the
Administrative Agent, and as set forth in Schedule I in the case of the other
parties hereto, or to such other address as may be hereafter notified by the
respective parties hereto:
The Borrower: Affiliated Managers Group
Two International Place, 23rd Floor
Boston, Massachusetts 02110
Attention: Sean Healey, Executive Vice President
Fax: (617) 346-7115
The Administrative
Agent: The Chase Manhattan Bank
One Chase Manhattan Plaza
8th Floor
New York, New York 10081
Attention: Laura Rebecca
Fax: (212) 552-7490
PROVIDED that any notice, request or demand to or upon the Administrative Agent
or the Lenders pursuant to subsection 2.2, 3.2, 3.4, 4.1, 4.3 or 4.8 shall not
be effective until received.
11.3 NO WAIVER; CUMULATIVE REMEDIES. No failure to exercise
and no delay in exercising, on the part of the Administrative Agent or any
Lender, any right, remedy, power or privilege hereunder or under the other Loan
Documents shall operate as a waiver thereof;
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nor shall any single or partial exercise of any right, remedy, power or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privilege. The rights, remedies,
powers and privileges herein provided are cumulative and not exclusive of any
rights, remedies, powers and privileges provided by law.
11.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties made hereunder, in the other Loan Documents and
in any document, certificate or statement delivered pursuant hereto or in
connection herewith shall survive the execution and delivery of this Agreement
and the making of the Loans hereunder through the Termination Date.
11.5 PAYMENT OF EXPENSES AND TAXES. The Borrower agrees (a)
to pay or reimburse the Administrative Agent for all its out-of-pocket costs and
expenses incurred in connection with the development, preparation and execution
of, and any amendment, supplement or modification to, this Agreement and the
other Loan Documents and any other documents prepared in connection herewith or
therewith, and the consummation and administration of the transactions
contemplated hereby and thereby, including, without limitation, the reasonable
fees and disbursements of counsel to the Administrative Agent, (b) to pay or
reimburse each Lender and the Administrative Agent for all its costs and
expenses incurred in connection with the enforcement or preservation of any
rights under this Agreement, the other Loan Documents and any such other
documents during the continuance of an Event of Default, including, without
limitation, the fees and disbursements of counsel to each Lender and of counsel
to the Administrative Agent, (c) to pay, indemnify, and hold each Lender and the
Administrative Agent harmless from, any and all recording and filing fees and
any and all liabilities with respect to, or resulting from any delay in paying,
stamp, excise and other taxes other than Non-Excluded Taxes, if any, which may
be payable or determined to be payable in connection with the execution and
delivery of, or consummation or administration of any of the transactions
contemplated by, or any amendment, supplement or modification of, or any waiver
or consent under or in respect of, this Agreement, the other Loan Documents and
any such other documents, and (d) to pay, indemnify, and hold each Lender and
the Administrative Agent harmless from and against any and all other
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever with respect
to the execution, delivery, enforcement, performance and administration of this
Agreement, the other Loan Documents (all the foregoing in this clause (d),
collectively, the "indemnified liabilities"), PROVIDED, that the Borrower shall
have no obligation hereunder to the Administrative Agent or any Lender with
respect to indemnified liabilities arising from (i) the gross negligence, bad
faith or willful misconduct of the Administrative Agent or any such Lender or
(ii) legal proceedings commenced against the Administrative Agent or any such
Lender by any security holder or creditor thereof arising out of and based upon
rights afforded any such security holder or creditor solely in its capacity as
such. Any statement for reasonable expenses of counsel to the Administrative
Agent and the Lenders payable by the Borrower pursuant to this subsection 11.5
shall be sent to a Responsible Officer of the Borrower within six months of the
termination of the event giving
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rise to such expenses. The agreements in this subsection shall survive repayment
of the Loans and all other amounts payable hereunder.
11.6 SUCCESSORS AND ASSIGNS; PARTICIPATIONS AND ASSIGNMENTS.
(a) This Agreement shall be binding upon and inure to the benefit of the
Borrower, the Lenders, the Administrative Agent and their respective successors
and assigns, except that the Borrower may not assign or transfer any of its
rights or obligations under this Agreement without the prior written consent of
each Lender.
(b) Any Lender may, in the ordinary course of its commercial
banking business and in accordance with applicable law, and with the consent of
the Borrower (which consent shall not be unreasonably withheld), at any time
sell to one or more banks or other entities ("PARTICIPANTS") participating
interests in any Loan owing to such Lender, any Commitment of such Lender or any
other interest of such Lender hereunder and under the other Loan Documents. In
the event of any such sale by a Lender of a participating interest to a
Participant, such Lender's obligations under this Agreement to the other parties
to this Agreement shall remain unchanged, such Lender shall remain solely
responsible for the performance thereof, such Lender shall remain the holder of
any such Loan for all purposes under this Agreement and the other Loan
Documents, and the Borrower and the Administrative Agent shall continue to deal
solely and directly with such Lender in connection with such Lender's rights and
obligations under this Agreement and the other Loan Documents. The Borrower
agrees that if amounts outstanding under this Agreement are due or unpaid, or
shall have been declared or shall have become due and payable upon the
occurrence of an Event of Default, each Participant shall, to the maximum extent
permitted by applicable law, be deemed to have the right of setoff in respect of
its participating interest in amounts owing under this Agreement to the same
extent as if the amount of its participating interest were owing directly to it
as a Lender under this Agreement, PROVIDED that, in purchasing such
participating interest, such Participant shall be deemed to have agreed to share
with the Lenders the proceeds thereof as provided in subsection 11.7(a) as fully
as if it were a Lender hereunder. The Borrower also agrees that each Participant
shall be entitled to the benefits of subsections 4.10, 4.11, 4.12 with respect
to its participation in the Commitments and the Loans outstanding from time to
time as if it was a Lender; PROVIDED that, in the case of subsection 4.11, such
Participant shall have complied with the requirements of said subsection and
PROVIDED, FURTHER, that no Participant shall be entitled to receive any greater
amount pursuant to any such subsection than the transferor Lender would have
been entitled to receive in respect of the amount of the participation
transferred by such transferor Lender to such Participant had no such transfer
occurred.
(c) Any Lender may, in the ordinary course of its commercial
banking business and in accordance with applicable law, at any time and from
time to time assign to any Lender or any affiliate thereof or, with the consent
of each of the Administrative Agent and the Borrower (which in each case shall
not be unreasonably withheld), to an additional bank or financial institution
("an ASSIGNEE") all or any part of its rights and obligations under this
Agreement and the other Loan Documents pursuant to an Assignment and Acceptance,
substantially in the
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form of Exhibit E, executed by such Assignee, such assigning Lender (and, in the
case of an Assignee that is not then a Lender or an affiliate thereof, by the
Administrative Agent) and delivered to the Administrative Agent for its
acceptance and recording in the Register, PROVIDED that, in the case of any such
assignment to an additional bank or financial institution, the sum of the
aggregate principal amount of the Loans and the aggregate amount of the unused
Commitments being assigned and, if such assignment is of less than all of the
rights and obligations of the assigning Lender, the sum of the aggregate
principal amount of the Loans and the aggregate amount of the unused Commitments
remaining with the assigning Lender are each not less than 10% of the aggregate
principal amount of the Loans and the aggregate amount of the unused Commitments
of all the Lenders then outstanding (or such lesser amount as may be agreed to
by the Borrower and the Administrative Agent). Upon such execution, delivery,
acceptance and recording, from and after the effective date determined pursuant
to such Assignment and Acceptance, (x) the Assignee thereunder shall be a party
hereto and, to the extent provided in such Assignment and Acceptance, have the
rights and obligations of a Lender hereunder with a Commitment as set forth
therein, and (y) the assigning Lender thereunder shall, to the extent provided
in such Assignment and Acceptance, be released from its obligations under this
Agreement (and, in the case of an Assignment and Acceptance covering all or the
remaining portion of an assigning Lender's rights and obligations under this
Agreement, such assigning Lender shall cease to be a party hereto).
(d) The Administrative Agent, on behalf of the Borrower,
shall maintain at the address of the Administrative Agent referred to in
subsection 11.2 a copy of each Assignment and Acceptance delivered to it and a
register (the "REGISTER") for the recordation of the names and addresses of the
Lenders and the Commitments of, and principal amounts of the Loans owing to,
each Lender from time to time. The entries in the Register shall be conclusive,
in the absence of manifest error, and the Borrower, the Administrative Agent and
the Lenders may (and, in the case of any Loan or other obligation hereunder not
evidenced by a Note, shall) treat each Person whose name is recorded in the
Register as the owner of a Loan or other obligation hereunder as the owner
thereof for all purposes of this Agreement and the other Loan Documents,
notwithstanding any notice to the contrary. Any assignment of any Loan or other
obligation hereunder not evidenced by a Note shall be effective only upon
appropriate entries with respect thereto being made in the Register. The
Register shall be available for inspection by the Borrower or any Lender at any
reasonable time and from time to time upon reasonable prior notice.
(e) Upon its receipt of an Assignment and Acceptance
executed by an assigning Lender and an Assignee (and, in the case of an Assignee
that is not then a Lender or an affiliate thereof, by the Administrative Agent
with the approval of the Borrower) together with payment by the Lenders parties
thereto to the Administrative Agent of a registration and processing fee of
$3,500, the Administrative Agent shall (i) promptly accept such Assignment and
Acceptance and (ii) on the effective date determined pursuant thereto record the
information contained therein in the Register and give notice of such acceptance
and recordation to the Lenders and the Borrower.
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(f) The Borrower authorizes each Lender to disclose to any
Participant or Assignee (each, a "TRANSFEREE") and any prospective Transferee
approved by the Borrower, which approval shall not be unreasonably withheld,
subject to the provisions of subsection 11.15, any and all financial information
in such Lender's possession concerning the Borrower and its Affiliates which has
been delivered to such Lender by or on behalf of the Borrower pursuant to this
Agreement or which has been delivered to such Lender by or on behalf of the
Borrower in connection with such Lender's credit evaluation of the Borrower and
its Affiliates prior to becoming a party to this Agreement, PROVIDED, HOWEVER,
that prior to such disclosure each such prospective Transferee shall have
executed a confidentiality agreement substantially in the form of Exhibit F.
(g) For avoidance of doubt, the parties to this Agreement
acknowledge that the provisions of this subsection concerning assignments of
Loans and Notes relate only to absolute assignments and that such provisions do
not prohibit assignments creating security interests, including, without
limitation, any pledge or assignment by a Lender of any Loan or Note to any
Federal Reserve Bank in accordance with applicable law.
11.7 ADJUSTMENTS; SET-OFF. (a) If any Lender (a "BENEFITTED
LENDER") shall at any time receive any payment of all or part of its Loans, or
interest thereon, or receive any collateral in respect thereof (whether
voluntarily or involuntarily, by set-off, pursuant to events or proceedings of
the nature referred to in Section 9(f), or otherwise), in a greater proportion
than any such payment to or collateral received by any other Lender, if any, in
respect of such other Lender's Loans, or interest thereon, such benefitted
Lender shall purchase for cash from the other Lenders a participating interest
in such portion of each such other Lender's Loan, or shall provide such other
Lenders with the benefits of any such collateral, or the proceeds thereof, as
shall be necessary to cause such benefitted Lender to share the excess payment
or benefits of such collateral or proceeds ratably with each of the Lenders;
PROVIDED, HOWEVER, that if all or any portion of such excess payment or benefits
is thereafter recovered from such benefitted Lender, such purchase shall be
rescinded, and the purchase price and benefits returned, to the extent of such
recovery, but without interest.
(b) In addition to any rights and remedies of the Lenders
provided by law, each Lender shall have the right, without prior notice to the
Borrower, any such notice being expressly waived by the Borrower to the extent
permitted by applicable law, upon any amount becoming due and payable by the
Borrower hereunder (whether at the stated maturity, by acceleration or
otherwise) to set-off and appropriate and apply against such amount any and all
deposits (general or special, time or demand, provisional or final), in any
currency, and any other credits, indebtedness or claims, in any currency, in
each case whether direct or indirect, absolute or contingent, matured or
unmatured, at any time held or owing by such Lender or any branch or agency
thereof to or for the credit or the account of the Borrower. Each Lender agrees
promptly to notify the Borrower and the Administrative Agent after any such
set-off and application made by such Lender, PROVIDED that the failure to give
such notice shall not affect the validity of such set-off and application.
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11.8 COUNTERPARTS. This Agreement may be executed by one or
more of the parties to this Agreement on any number of separate counterparts
(including by facsimile transmission), and all of said counterparts taken
together shall be deemed to constitute one and the same instrument. A set of the
copies of this Agreement signed by all the parties shall be lodged with the
Borrower and the Administrative Agent.
11.9 SEVERABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
11.10 INTEGRATION. This Agreement and the other Loan Documents
represent the agreement of the Borrower, the Administrative Agent and the
Lenders with respect to the subject matter hereof, and there are no promises,
undertakings, representations or warranties by the Administrative Agent or any
Lender relative to subject matter hereof not expressly set forth or referred to
herein or in the other Loan Documents.
11.11 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
11.12 SUBMISSION TO JURISDICTION; WAIVERS. The Borrower hereby
irrevocably and unconditionally:
(a) submits for itself and its property in any legal action
or proceeding relating to this Agreement and the other Loan Documents to
which it is a party, or for recognition and enforcement of any judgement
in respect thereof, to the non-exclusive general jurisdiction of the
Courts of the State of New York, the courts of the United States of
America for the Southern District of New York, and appellate courts from
any thereof;
(b) consents that any such action or proceeding may be
brought in such courts and waives any objection that it may now or
hereafter have to the venue of any such action or proceeding in any such
court or that such action or proceeding was brought in an inconvenient
court and agrees not to plead or claim the same;
(c) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form of mail), postage
prepaid, to the Borrower at its address set forth in subsection 11.2 or
at such other address of which the Administrative Agent shall have been
notified pursuant thereto;
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(d) agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law or shall
limit the right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any
right it may have to claim or recover in any legal action or proceeding
referred to in this subsection any special, exemplary, punitive or
consequential damages.
11.13 ACKNOWLEDGEMENTS. The Borrower hereby acknowledges that:
(a) it has been advised by counsel in the negotiation,
execution and delivery of this Agreement and the other Loan Documents;
(b) neither the Administrative Agent nor any Lender has any
fiduciary relationship with or duty to the Borrower arising out of or in
connection with this Agreement or any of the other Loan Documents, and
the relationship between Administrative Agent and Lenders, on one hand,
and the Borrower, on the other hand, in connection herewith or therewith
is solely that of debtor and creditor; and
(c) no joint venture is created hereby or by the other Loan
Documents or otherwise exists by virtue of the transactions contemplated
hereby among the Lenders or among the Borrower and the Lenders.
11.14 WAIVERS OF JURY TRIAL. TO THE EXTENT PERMITTED BY LAW,
THE BORROWER, THE ADMINISTRATIVE AGENT AND THE LENDERS HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING
TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
11.15 CONFIDENTIALITY. Each Lender agrees to keep confidential
any written or oral information (a) provided to it by or on behalf of the
Borrower or any of its Subsidiaries pursuant to or in connection with this
Agreement or (b) obtained by such Lender based on a review of the books and
records of the Borrower or any of its Subsidiaries; PROVIDED that nothing herein
shall prevent any Lender from disclosing any such information (i) to the
Administrative Agent or any other Lender, (ii) to any Transferee which agrees in
writing to comply with the provisions of this subsection, (iii) to its
employees, directors, agents, attorneys, accountants and other professional
advisors who are directly involved in the execution of the transactions
contemplated by this Agreement and have been informed of their obligations under
this subsection 11.15, (iv) upon the request or demand of any Governmental
Authority having jurisdiction over such Lender, (v) in response to any order of
any court or other Governmental Authority or as may otherwise be required
pursuant to any Requirement of Law (notice of which shall be provided promptly
to the Borrower), (vi) which has been publicly disclosed other than in breach of
this Agreement, or (vii) in connection with the exercise of any remedy
hereunder.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their proper and duly authorized
officers as of the day and year first above written.
AFFILIATED MANAGERS GROUP, INC.
By:
----------------------------------------
Title:
THE CHASE MANHATTAN BANK, as
Administrative Agent and as a Lender
By:
-----------------------------------------
Title:
LENDERS
68
<PAGE> 1
EXHIBIT 10.2
PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED PURSUANT TO A CONFIDENTIAL
TREATMENT REQUEST FILED WITH THE COMMISSION. ASTERISKS (*) IDENTIFY WHERE SUCH
CONFIDENTIAL INFORMATION HAS BEEN OMITTED. THE OMITTED PORTIONS HAVE BEEN FILED
SEPARATELY WITH THE COMMISSION.
FORM OF
TWEEDY, BROWNE COMPANY LLC
LIMITED LIABILITY COMPANY AGREEMENT
_________, 1997
<PAGE> 2
TWEEDY, BROWNE COMPANY LLC
LIMITED LIABILITY COMPANY AGREEMENT
TABLE OF CONTENTS
Page
ARTICLE I - DEFINITIONS........................................................1
Section 1.1 Definitions...................................................1
ARTICLE II - ORGANIZATION AND GENERAL PROVISIONS..............................15
Section 2.1 Conversion; Continuation.....................................15
Section 2.2 Name.........................................................15
Section 2.3 Term.........................................................16
Section 2.4 Registered Agent and Registered Office.......................16
Section 2.5 Principal Place of Business..................................16
Section 2.6 Qualification in Other Jurisdictions.........................16
Section 2.7 Purposes and Powers..........................................16
Section 2.8 Title to Property............................................17
ARTICLE III - MANAGEMENT OF THE LLC...........................................18
Section 3.1 Manager Member...............................................18
Section 3.2 Management Board; Non-Manager Members........................22
Section 3.3 Officers.....................................................24
Section 3.4 Employees of the LLC.........................................25
Section 3.5 Operation of the Business of the LLC.........................25
Section 3.6 Compensation and Expenses of the Members.....................26
Section 3.7 Non-Manager Members and Non-Solicitation Agreements..........27
Section 3.8 Non-Solicitation and Non-Disclosure by Non-Manager Members...27
Section 3.9 Remedies Upon Breach.........................................30
Section 3.10 No Employment Obligation.....................................30
Section 3.11 Funding Obligation...........................................30
Section 3.12 Miscellaneous................................................31
Section 3.13 Members......................................................32
ARTICLE IV - CAPITAL ACCOUNTS; ALLOCATIONS; DISTRIBUTIONS.....................32
Section 4.1 Capital Accounts.............................................32
Section 4.2 Allocations..................................................33
Section 4.3 Capital Contribution for Offshore Shortfalls.................36
Section 4.4 Distributions................................................37
Section 4.5 Distributions Upon Dissolution; Establishment of a
Reserve Upon Dissolution.....................................40
(i)
<PAGE> 3
Page
Section 4.6 Proceeds from Capital Contributions and the Sale of
Securities; Insurance Proceeds; Certain Special Allocations
and Distributions............................................41
Section 4.7 Federal Tax Allocations......................................42
ARTICLE V - TRANSFER OF LLC INTERESTS BY NON-MANAGER MEMBERS;
RESIGNATION, REDEMPTION AND WITHDRAWAL BY NON-MANAGER MEMBERS;
ADMISSION OF ADDITIONAL NON-MANAGER MEMBERS................................43
Section 5.1 Assignability of LLC Interests...............................43
Section 5.2 Substitute Non-Manager Members...............................44
Section 5.3 Allocation of Distributions Between Transferor and
Transferee; Successor to Capital Accounts...................45
Section 5.4 Resignation, Redemptions and Withdrawals.....................46
Section 5.5 Issuance of Additional LLC Interests.........................46
Section 5.6 Additional Requirements......................................47
Section 5.7 Transition Planning with Respect to Certain Clients..........47
Section 5.8 Representation of Members....................................48
ARTICLE VI - TRANSFER OF LLC INTERESTS BY THE MANAGER MEMBER;
REDEMPTION, REMOVAL AND WITHDRAWAL.........................................48
Section 6.1 Assignability of Interest....................................48
Section 6.2 Resignation, Redemption, and Withdrawal......................49
ARTICLE VII - PUTS AND CALLS OF LLC INTERESTS................................50
Section 7.1 Puts.........................................................50
Section 7.2 Calls........................................................52
Section 7.3 Repurchase Upon Termination of Employment or Transfer
by Operation of Law..........................................53
Section 7.4 Election Rights of Manager Member to Pay in Shares of
AMG Stock....................................................56
Section 7.5 Class B Puts; Increase in Free Cash Flow Percentage..........57
ARTICLE VIII - DISSOLUTION AND TERMINATION....................................60
Section 8.1 No Dissolution...............................................60
Section 8.2 Events of Dissolution........................................60
Section 8.3 Notice of Dissolution........................................60
Section 8.4 Liquidation..................................................60
Section 8.5 Termination..................................................61
Section 8.6 Claims of the Members........................................61
ARTICLE IX - RECORDS AND REPORTS..............................................61
(ii)
<PAGE> 4
Page
Section 9.1 Books and Records............................................61
Section 9.2 Accounting...................................................61
Section 9.3 Financial and Compliance Reports.............................61
Section 9.4 Meetings.....................................................63
Section 9.5 Tax Matters..................................................63
ARTICLE X - LIABILITY, EXCULPATION AND INDEMNIFICATION........................64
Section 10.1 Liability...................................................64
Section 10.2 Exculpation.................................................64
Section 10.3 Fiduciary Duty..............................................64
Section 10.4 Indemnification.............................................65
Section 10.5 Notice; Opportunity to Defend and Expenses..................65
Section 10.6 Miscellaneous...............................................66
ARTICLE XI - MISCELLANEOUS....................................................67
Section 11.1 Notices.....................................................67
Section 11.2 Successors and Assigns......................................67
Section 11.3 Amendments..................................................67
Section 11.4 No Partition................................................68
Section 11.5 No Waiver; Cumulative Remedies..............................68
Section 11.6 Dispute Resolution..........................................68
Section 11.7 Prior Agreements Superseded.................................68
Section 11.8 Captions....................................................68
Section 11.9 Counterparts................................................68
Section 11.10 Applicable Law; Jurisdiction................................68
Section 11.11 Interpretation..............................................69
Section 11.12 Severability................................................69
Section 11.13 Creditors...................................................69
EXHIBITS
Exhibit A - Incentive Program of Tweedy, Browne Company LLC
Exhibit B - Form of Non-Solicitation/Non-Disclosure Agreement for
Non-Manager Members
Exhibit C - Form of Promissory Note for Repurchases
(iii)
<PAGE> 5
Page
SCHEDULES
Schedule A - LLC Interests and Capital Accounts
Schedule B - Initial Management Board Members
Schedule C - Model Repurchase Calculation
(iv)
<PAGE> 6
TWEEDY, BROWNE COMPANY LLC
LIMITED LIABILITY COMPANY AGREEMENT
_____________________________________________________
This Limited Liability Company Agreement of Tweedy, Browne Company LLC
(the "LLC") is made and entered into as of __________, 1997 (the "Effective
Date"), by and among the Persons identified as the Manager Member and the
Non-Manager Members on Schedule A attached hereto as Members of the LLC, and the
Persons who become Members of the LLC in accordance with the provisions hereof.
WHEREAS, the Original Principals and Clark were the sole partners of
Tweedy, Browne Company L.P., a Delaware limited partnership (the "Predecessor"),
immediately prior to the Effective Date;
WHEREAS, the Original Principals and Clark have converted the
Predecessor into a Delaware limited liability company pursuant to Section 18-214
of the Delaware Limited Liability Company Act, 6 Del. C. Section 18-101, et seq.
(as it may be amended from time to time and any successor to such act, the
"Act") and, in connection therewith, filed a Certificate of Conversion and a
Certificate of Formation of the LLC with the Office of the Secretary of State of
the State of Delaware as of the Effective Date;
WHEREAS, the Original Principals and Clark desire to sell a majority of
their interests in the LLC to Affiliated Managers Group, Inc., a Delaware
corporation ("AMG"), and the Original Principals desire to sell a portion of
their remaining interests to Shrager and Wyckoff; and
WHEREAS, the Original Principals, Clark, Shrager, Wyckoff and AMG
desire to continue the business of the Predecessor as a limited liability
company under the Act from and after the Effective Date, with AMG designated as
the Manager Member and, in connection therewith, to enter into this Agreement,
which has heretofore been approved by the Predecessor, to set forth their
relative rights and obligations.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, and in consideration of the mutual
covenants hereinafter set forth, the parties hereby agree as follows:
ARTICLE I - DEFINITIONS.
SECTION 1.1 DEFINITIONS. Unless the context otherwise requires, the
terms defined in this Article I shall, for the purposes of this Agreement, have
the meanings herein specified.
"1940 Act" shall mean the Investment Company Act of 1940, as it may be
amended from time to time, and any successor to such act.
"Act" shall have the meaning set forth in the preamble of this
Agreement.
<PAGE> 7
"Additional Non-Manager Members" shall have the meaning specified in
Section 5.5 hereof.
"Advisers Act" shall mean the Investment Advisers Act of 1940, as it
may be amended from time to time, and any successor to such act.
"Affiliate" shall mean, with respect to any Person (herein the "first
party"), any other Person that directly or indirectly controls, or is controlled
by, or is under common control with, such first party. The term "control" as
used herein (including the terms "controlled by" and "under common control
with") means the possession, directly or indirectly, of the power (a) to vote or
dispose of, or direct the voting or disposition of, fifty percent (50%) or more
of the outstanding voting securities of such Person or (b) otherwise to direct
the management or policies of such Person by contract or otherwise.
"Agreement" shall mean this Limited Liability Company Agreement, as it
may be amended, supplemented or restated from time to time.
"AMG" shall have the meaning set forth in the preamble of this
Agreement.
"AMG Stock" shall have the meaning specified in Section 7.4(a) hereof.
"AMG's Average Stock Price" shall have the meaning specified in Section
7.4(c)(i) hereof.
"Asserted Liability" shall have the meaning specified in Section
10.5(a) hereof.
"Board Vote" shall have the meaning specified in Section 3.2(c) hereof.
"Brokerage Services" shall mean any services that either involve the
negotiation of contracts for, and the execution of, the purchase and sale of
securities or otherwise relate to the securities brokerage business.
"Call" shall have the meaning specified in Section 7.2(a) hereof.
"Capital Account" shall mean the capital account maintained by the LLC
for each Member in accordance with the capital accounting rules described in
Section 4.2 hereof.
"Capital Contribution" shall mean, as to each Member, the aggregate
amount of cash and the Fair Market Value of any property contributed to the
capital of the LLC by such Member (or any prior holders of the Capital Account
of such Member) pursuant to Section 2.1(c) or Section 4.3 hereof or in
connection with the issuance of additional LLC Interests or otherwise.
"Certificate" shall mean the Certificate of Formation of the LLC
required under the Act, as such Certificate may be amended and/or restated from
time to time.
"Claims Notice" shall have the meaning specified in Section 10.5(a)
hereof.
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<PAGE> 8
"Clark" shall mean James M. Clark, Jr.
"Class B Interest" shall mean, as of a measurement date, (i) an amount
equal to ********** (**) of the Class B Profit of the LLC in the fiscal year
ended on, or most recently prior to, the measurement date, if, in each of the
two (2) fiscal years of the LLC ended on, or most recently prior to the
measurement date, the LLC had Class B Profit, or (ii) zero (0) as of that
measurement date, if, in either of such two fiscal years, the LLC did not have
Class B Profit.
"Class B Notice" shall have the meaning specified in Section 7.5(c)
hereof.
"Class B Notice Deadline" shall have the meaning specified in Section
7.5(c) hereof.
"Class B Payment" shall have the meaning specified in Section 7.5(d)
hereof.
"Class B Points" shall mean the Class B Points (or fraction thereof)
authorized by the LLC pursuant hereto, entitling the holders thereof to the
relative rights, title and interests in the LLC at any particular time as are
set forth in this Agreement, and any and all other benefits to which a holder
thereof may be entitled as provided in this Agreement. The Class B Points do not
entitle the holders thereof to any right to vote on any matter concerning the
LLC whatsoever. With respect to a Member as of any date, "Class B Points" shall
mean the number of Class B Points held by such Member as of such date as set
forth on Schedule A hereto, as amended from time to time in accordance with the
terms hereof, and as in effect on such date.
"Class B Profit" shall mean, for any period, the amount, if any, by
which Revenues From Operations for such period exceed the sum of (a) the Free
Cash Flow for such period, (b) operating expenses of the LLC incurred during or
relating to such period consistent with the then past practices of the LLC, not
including salaries, bonuses or other compensation paid or payable other than out
of Free Cash Flow to the Non-Manager Members in respect of such period or other
distributions made or makeable to the Non-Manager Members other than out of Free
Cash Flow in respect of such period and (c) **********.
"Class B Put" shall have the meaning specified in Section 7.5(a)
hereof.
"Class B Put Date" shall have the meaning specified in Section 7.5(a)
hereof.
"Class B Value" shall have the meaning specified in Section 7.5(b)
hereof.
"Client" shall mean all Past Clients, Present Clients and Potential
Clients, subject to the following general rule that with respect to each Client,
the term shall also include (i) any Persons which are known to a Non-Manager
Member to be Affiliates of such Client, (ii) Persons who are members of the
Immediate Family of such Client or any of its Affiliates or (iii) with respect
to the LLC, investors in each of the Private Funds and the Offshore Funds
(sponsored or marketed by the LLC, by any Controlled Affiliate of the LLC or
(directly or indirectly) by any Non-Manager Member).
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<PAGE> 9
"Code" or "Internal Revenue Code" shall mean the United States Internal
Revenue Code of 1986, as from time to time amended, and any successor code
thereto. A reference to a specific section of the Code refers not only to such
specific section but also to any corresponding provision of any federal tax
statute enacted after the Effective Date, as such specific section or
corresponding provision is in effect on the date of application of the
provisions of this Agreement containing such reference.
"Controlled Affiliate" shall mean, with respect to a Person, any
Affiliate of such Person under its "control," as the term "control" is defined
in the definition of Affiliate, but shall include, with respect to the LLC, any
of the Mutual Funds, the Offshore Funds and the Private Funds that are managed
or advised by the LLC as of the date of such determination.
"Covered Person" shall mean a Member, any Affiliate of a Member, any
officer, director, shareholder, partner, employee or member of a Member or any
of its Affiliates, or any Officer.
"Date of Default" shall have the meaning specified in Section 4.3(c)
hereof.
"Defaulting Member" shall have the meaning specified in Section 4.3(c)
hereof.
"Due Date" shall have the meaning specified in Section 4.3(b) hereof.
"Effective Date" shall have the meaning specified in the preamble of
this Agreement.
"Employment Agreement" shall have the meaning ascribed thereto in the
Purchase Agreement.
"Encumbrances" shall mean any restrictions, liens, claims, charges,
pledges or encumbrances of any kind or nature whatsoever.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC promulgated thereunder.
"Fair Market Value" shall mean the fair market value as agreed upon by
the Manager Member (or, for purposes of Section 4.5 hereof, if there shall be no
Manager Member, the Liquidating Trustee) and the Management Board or, in the
absence of such agreement, as determined by an appraiser selected by the Manager
Member (or, for purposes of Section 4.5 hereof, if there shall be no Manager
Member, the Liquidating Trustee) with the prior consent of the Management Board,
which consent will not be unreasonably withheld.
"For Cause" shall mean, with respect to the termination of a
Non-Manager Member's employment with the LLC, any of the following:
(a) The Non-Manager Member has engaged in any criminal act which is
or involves a violation of federal or state securities laws or regulations (or
equivalent laws or regulations of any country or political subdivision
thereof), embezzlement, fraud, wrongful taking or misappropriation of
property, theft or any other crime involving dishonesty or other serious felony
offense and has been convicted (whether or not subject to appeal) or pled nolo
contendere (or any similar plea) to any criminal offense in connection with or
relating to such act;
(b) The Management Board and the Manager Member, acting in good faith
and in consultation with each other, have determined that the Non-Manager
Member has persistently and willfully neglected his duties and such neglect has
continued for a period of not less than thirty (30) days following written
notice from the Manager Member or the Management Board specifying the nature of
the Non-Manager Member's neglect; or
(c) The Non-Manager Member has (i) violated or breached any material
provision of his Employment Agreement or Non-Solicitation Agreement or (ii)
engaged in any of the activities prohibited by Section 3.8 hereof and, in
each case, the Management Board or the Manager Member has determined that harm
that is not immaterial or insignificant has or is likely to occur to the LLC or
the Manager Member as a result of such violation, breach or activity.
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<PAGE> 10
"Free Cash Flow" shall mean, for any period (a) the Free Cash Flow
Percentage multiplied by Revenues From Operations of the LLC for such period,
minus (b) the Free Cash Flow Expenditures for such period.
"Free Cash Flow Expenditure" shall have the meaning specified in
Section 3.5(a) hereof.
"Free Cash Flow Percentage" shall initially mean the percentage
determined pursuant to Section 1.2(a) of the Purchase Agreement, as adjusted, if
applicable, pursuant to Sections 1.2(b) through 1.2(g) of the Purchase
Agreement, subject to increase as set forth in Section 7.5 hereof.
"GCT" shall have the meaning specified in Section 4.6(g) hereof.
"Global Intrinsic Value Fund" shall mean Global Intrinsic Value Fund
Limited, an open-end investment company incorporated in Bermuda as a mutual fund
with limited liability, and any successor entities thereto.
"Governmental Authority" shall mean any foreign, federal, state or
local court, governmental authority or regulatory body.
"Immediate Family" shall mean, with respect to any individual, such
individual's spouse, former spouse, parents, grandparents, children,
grandchildren, siblings (and estates, trusts, partnerships and other entities
and legal relationships of which a substantial majority in interest of the
beneficiaries, owners, investors, members or participants at all times in
question are, directly or indirectly, one or more of the Persons described above
and/or such individual).
"Incentive Program" shall mean the Tweedy, Browne Company LLC Incentive
Program in the form attached hereto as Exhibit A.
"Income Tax Regulations" shall mean the income tax regulations,
including temporary regulations, promulgated under the Code, as such regulations
may be amended from time to time (including corresponding provisions of
succeeding regulations).
"Indebtedness" shall mean, with respect to a Person, (a) all
indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services (other than current trade liabilities incurred in
the ordinary course of business and payable in accordance with customary
practices), (b) any other indebtedness of such Person which is evidenced by a
note, bond, debenture or similar instrument, (c) all obligations of such Person
under any financing leases, (d) all obligations of such Person in respect of
acceptances issued or created for the account of such Person, (e) all
obligations of such Person under noncompetition agreements reflected as
liabilities on a balance sheet of such Person in accordance with generally
accepted accounting principles, (f) all liabilities secured by any Lien on any
property owned by such Persons even though such Person has not assumed or
otherwise become liable for the payment thereof, and (g) all net obligations of
such Person under interest rate, commodity, foreign currency and financial
markets swaps, options, futures and other hedging obligations.
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<PAGE> 11
"Independent Public Accountants" shall mean any independent certified
public accountant satisfactory to the Manager Member and retained by the LLC.
"Ineligible Manager" shall have the meaning specified in Section 6.2(b)
hereof.
"Intellectual Property" shall have the meaning specified in Section
3.9(c) hereof.
"Investment Management Services" shall mean any services that involve
(a) the management of an investment account or fund (or portions thereof or a
group of investment accounts or funds), or (b) the giving of advice with respect
to the investment and/or reinvestment of assets or funds (or any group of assets
or funds), in each case, for compensation other than out-of-pocket expenses and
good faith director's or trustee's fees.
"IRS" shall mean the Internal Revenue Service of the United States
Department of the Treasury.
"Lien" shall mean any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (statutory or other), charge or other
security interest or any preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever (including, without
limitation, any conditional sale or other title retention agreement and any
financing lease having substantially the same economic effect as any of the
foregoing).
"Liquidating Trustee" shall have the meaning specified in Section 8.4
hereof.
"LLC" shall have the meaning set forth in the preamble of this
Agreement.
"LLC Interests" shall mean the units representing the outstanding
limited liability company interests (as defined in the Act) of the Members in
the LLC, including, without limitation, such Member's LLC Points, Class B
Points, Capital Account, voting rights and any other rights, benefits and
obligations of such Member under this Agreement and the Act.
"LLC Points" shall mean the LLC Points authorized by the LLC pursuant
hereto, entitling the holders thereof to the relative rights, title and
interests in the profits, losses, deductions and credits of the LLC at any
particular time as are set forth in this Agreement, and any and all other
benefits to which a holder thereof may be entitled as provided in this Agreement
(including, without limitation, certain limited voting rights as set forth
herein), but specifically excluding the Class B Points authorized hereunder.
With respect to a Member as of any date "LLC Points" shall mean the aggregate
number of LLC Points belonging to such Member as set forth on Schedule A hereto,
as amended from time to time in accordance with the terms hereof, and as in
effect on such date.
"LLC Repurchase" shall have the meaning specified in Section 7.3(a)
hereof.
"Management Board" shall have the meaning specified in Section 3.2(a).
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<PAGE> 12
"Manager Member" shall mean AMG, and any Person who becomes a successor
Manager Member as provided herein.
"Manager Member Excess Loss Allocations" shall mean, as of any
measurement date (including, without limitation, a Put/Call Measurement Date or
a termination of employment), any amount by which the cumulative amount of items
of LLC loss and deduction allocated to the Manager Member pursuant to Sections
4.2(b)(ii), 4.2(b)(iii) and 4.2(d), hereof exceed the cumulative amount of items
of LLC income and gain allocated to the Manager Member pursuant to Sections
4.2(a)(ii) and 4.2(c)(i) hereof, in each case, calculated through the date that
is one (1) year prior to the last day of the calendar quarter in which the
measurement date occurs.
"Manager Shares" shall mean [the Manager Shares (as defined in the
respective organizational documents) of each of the Offshore Funds held, as of
the date of this Agreement, by the Offshore Related Partnerships.] [Subject to
confirmation in due diligence]
"Member" shall mean any Person admitted to the LLC as a "member" within
the meaning of the Act, which includes the Manager Member and the Non-Manager
Members (excluding, for this purpose, Transferees until admitted as Members
pursuant to the provisions hereof), unless otherwise indicated, and includes any
Person admitted as an Additional Non-Manager Member or a substitute Non-Manager
Member pursuant to the provisions of this Agreement, in such Person's capacity
as a Member of the LLC, unless otherwise indicated. For purposes of the Act, the
Members shall constitute one (1) class or group of members.
"Mutual Funds" shall mean Tweedy, Browne Global Value Fund and the
Tweedy, Browne American Value Fund, each a series of TBF, and any additional
series of TBF or any other investment company registered with the SEC as such
established after the Effective Date and any successor entities thereto.
"Non-Manager Member" shall mean any Person who is or becomes a
Non-Manager Member pursuant to the terms hereof (and, other than for purposes of
Article III hereof and any other provision hereof permitting or requiring any
action, consent or approval by a Non-Manager Member, it being understood that
the rights under such provisions shall always be exercised solely by such
Non-Manager Member and not by any Transferee), their respective Transferees, if
any, under Section 5.1(b) or Section 5.1(c) or, to the extent set forth in any
consent of the Manager Member pursuant to Section 5.1(a), their respective
Transferees under Section 5.1(a), unless otherwise indicated.
"Non-Solicitation Agreement" shall have the meaning set forth in
Section 3.8 hereof.
"Notice Deadline" shall have the meaning specified in Section 7.1(d)
hereof.
"Notices" shall have the meaning specified in Section 11.1 hereof.
"Officers" shall have the meaning specified in Section 3.3 hereof.
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<PAGE> 13
"Offshore Adjustment" shall mean, with respect to each Offshore Fund
and for any period not greater than one fiscal year of such Offshore Fund, (a)
the sum of (i) the net assets in such Offshore Fund on each date as of which the
net assets are determined multiplied by (ii) the Offshore Fund Fee Rate in
effect for such Offshore Fund as of each such date during such period as of
which the net assets are determined, divided by (b) the number of times during
such period the net assets of such fund are determined, multiplied by (c) a
fraction, the numerator of which is the number of days in such period and the
denominator of which is 365 or 366, as the case may be.
"Offshore Deemed Revenues" shall mean for each Offshore Fund with
respect to each applicable period, any Performance Increment that has been
definitively calculated and booked by such Offshore Fund during such period with
respect to Manager Shares held by an Offshore Related Partnership. [Confirm the
result is net of solicitor/broker fees.]
"Offshore Fund Fee Rate" shall initially mean, for each Offshore Fund
(including the Global Intrinsic Value Fund), one and one-half percent (1.5%),
in each case, subject to adjustment as follows:
(a) On each date on which the rate applicable to the
Performance Increment payable to the LLC under the Offshore Management Agreement
for such Offshore Fund increases pursuant to Section ___ thereof, the Offshore
Fund Fee Rate for that Offshore Fund shall be decreased by an amount equal to
the product of the Offshore Fund Fee Rate then in effect and a fraction (i) the
numerator of which is the difference between the increased rate applicable to
the Performance Increment and the rate originally applicable, and (ii) the
denominator of which is the rate originally applicable to the Performance
Increment (subject to adjustment under clause (b) hereof).
(b) On each date on which the rate applicable to the
Performance Increment increases (other than for the reason described in clause
(a) of this definition) or decreases, in each case, pursuant to Section __
thereof, the Offshore Fund Fee Rate for that Offshore Fund shall, (i) in the
event of such an increase, be decreased in an amount equal to the product of the
Offshore Fund Fee Rate then in effect and a fraction (A) the numerator of which
is the difference between the increased rate applicable to the Performance
Increment and the rate originally applicable, and (B) the denominator of which
is the rate originally applicable to the Performance Increment and, (ii) in the
event of such a decrease, be increased in an amount equal to the product of the
Offshore Fund Fee Rate then in effect and a fraction (I) the numerator of which
is the difference between the rate originally applicable to the Performance
Increment and the rate applicable after the proposed decrease, and (II) the
denominator of which is the rate originally applicable to the Performance
Increment.
(c) The Management Board may give the LLC and the Manager
Member an irrevocable written notice that the Non-Manager Members who are
partners in the Offshore Related Partnerships wish to terminate the Offshore
Adjustment and related calculations. Effective for all periods after the first
calendar quarter end that is at least twenty-four (24) months after the date of
such notice (or on such earlier or later date as is agreed to by the Management
Board and the Manager Member), and conditioned upon termination of any award of
Performance Increment
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<PAGE> 14
by any of the Offshore Funds to any of the Offshore Related Partnerships with
respect to any period on and after such Effective Date and upon the
corresponding increase in the Performance Increment to the LLC under the
provisions of Section __ of the applicable related Offshore Management
Agreement, the Offshore Fund Fee Rate for each of the Offshore Funds shall be
reduced to zero (0) [i.e. the LLC shall receive the amount of the actual
Performance Increment in lieu of the Offshore Fund Fee Rate]. [This provision
will be included in the Offshore Management Agreement.]
"Offshore Funds" shall mean (a) each Value Sub-Fund, (b) the Global
Intrinsic Value Fund and (c) any other investment fund organized outside the
U.S. which the Manager Member and the Management Board agree to treat as an
Offshore Fund, and any successor entities thereto, in each case so long as the
LLC or any Controlled Affiliate thereof is providing Investment Management
Services to such investment fund. Whenever a provision of this Agreement refers
to assets in an Offshore Fund, that reference shall not be deemed to include
assets in an Offshore Fund which are managed without any compensation therefor.
"Offshore Management Agreement" shall mean [__________________], as
amended, as contemplated by Section 5.7 hereof.
"Offshore Related Partnerships" shall mean Alpine Partners, L.P.,
Belgravia Partners, L.P., Genpar Partners II, L.P., Tweeco Partners, L.P. and 52
Associates, L.P., each a Delaware limited partnership, and any successors
thereto or other entities which are entitled to receive Performance Increments
with respect to one or more Offshore Funds and in which one or more of the
Non-Manager Members or the Immediate Family of any of them have an interest.
"Offshore Shortfall" shall mean the amount, if any, by which (a) the
sum of the items of LLC loss and deduction for such quarter to be allocated
under Section 4.2(b) exceeds (b) the sum of the items of LLC income and gain for
such quarter to be allocated under Section 4.2(a)(v), together with items of LLC
income earned and collected in prior quarters that was reserved for use in
paying operating expenses of the LLC, and was so used in such quarter, up to an
aggregate maximum amount for any quarter of the sum of (x) the amount of LLC
income and gain allocated to the Manager Member under clause (B) of Section
4.2(a)(i) for such quarter and (y) the amount of LLC income and gain allocated
to the Non-Manager Members under clause (B) of Section 4.2(a)(iii) for such
quarter.
"Operating Cash Flow" shall mean, for any period, an amount equal to
(a) Revenues From Operations of the LLC for such period, minus (b) Free Cash
Flow for such period.
"Operating Shortfall" shall mean, as of any measurement date
(including, without limitation, a Put/Call Measurement Date or a termination of
employment), the amount, if any, by which the actual operating expenses of the
LLC exceeded the Operating Cash Flow of the LLC (including previously reserved
Operating Cash Flow) during the twelve (12) months ending on the last day of the
calendar quarter in which the measurement date occurs.
"Option Exercise" shall have the meaning set forth in Section 7.1(c)
hereof.
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<PAGE> 15
"Original Principals" shall mean each of Messrs. Christopher H. Browne,
William H. Browne and John D. Spears (and, other than for purposes of Article
III hereof and any other provision hereof permitting or requiring any action,
consent or approval by a Non-Manager Member, it being understood that the rights
under such provisions shall always be exercised solely by such Non-Manager
Member and not by any Transferee), their respective Transferees, if any, under
Section 5.1(b) or Section 5.1(c) or, to the extent set forth in any consent of
the Manager Member pursuant to Section 5.1(a), their respective Transferees
under Section 5.1(a)).
"Past Client" shall mean at any particular time, any Person who at any
point prior to such time had been an investment advisory client of, or recipient
of Investment Management Services or Brokerage Services from, the LLC
(including, without limitation, the Predecessor) or any of its Controlled
Affiliates but at such time is not an advisee or investment advisory client of,
or recipient of Investment Management Services or Brokerage Services from, the
LLC or any of its Controlled Affiliates.
"Performance Increment" shall mean, with respect to Manager Shares
issued by an Offshore Fund to an Offshore Related Partnership, the Performance
Increment or similar performance fee or profit allocation as defined in the
organizational documents of such Offshore Fund or, with respect to the Offshore
Management Agreement in respect of an Offshore Fund, the Performance Increment
(or similar performance fee or profit allocation) as defined in such Offshore
Management Agreement. [Confirm the result is net of solicitor/broker fees.]
"Permanent Incapacity" shall mean, with respect to a Non-Manager
Member, that such Non-Manager Member has been permanently and totally unable, by
reason of injury, illness or other similar cause (determined pursuant to the
process set forth in the following sentence) to have performed his substantial
and material duties and responsibilities for a period of three hundred
sixty-five (365) consecutive days, which injury, illness or similar cause (as
determined pursuant to such process) would render such Non-Manager Member
incapable of operating in a similar capacity in the future. The foregoing
determination shall be made by a licensed physician selected by the Manager
Member; provided, however, that if the Manager Member or the LLC has purchased
lump-sum key-man disability insurance with respect to such Non-Manager Member,
which policy is then in effect, then such determination shall be made either (i)
by an agreement between such physician and a physician selected by the insurance
company with which the Manager Member or the LLC has entered into a lump-sum
key-man disability policy with respect to such Non-Manager Member, or, if the
two physicians cannot arrive at an agreement, a third physician will be chosen
by the first two physicians, and the majority decision of the three physicians
will then be binding), or (ii) if the Manager Member or the LLC has entered into
a lump-sum key-man disability policy with respect to such Non-Manager Member,
and a different procedure is then required under such policy, then by using such
other procedure as may then be required by such insurance policy. [UNDER REVIEW
BY INSURANCE AGENT, TO BE CONSISTENT WITH INSURANCE REQUIREMENTS]
"Person" shall mean any individual, partnership (limited or general),
corporation, limited liability company, limited liability partnership,
association, trust, joint venture, unincorporated organization or any similar
entity.
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<PAGE> 16
"Potential Client" shall mean, at any particular time, any Person to
whom the LLC (including, without limitation, the Predecessor) or any of its
Controlled Affiliates, through any of their officers, employees, agents or
consultants (or persons acting in any similar capacity), has, within two years
prior to such time, offered (by means of a personal meeting, telephone call, or
a letter or a written proposal specifically directed to the particular Person)
to provide Investment Management Services or Brokerage Services, but who is not
at such time an investment advisory client of, or recipient of Investment
Management Services or Brokerage Services from, the LLC or any of its Controlled
Affiliates. The preceding sentence is meant to exclude form letters, blanket
mailings, cold calls and initial marketing efforts that do not result in a
request by the recipient for further information or a presentation.
"Predecessor" shall have the meaning set forth in the preamble of this
Agreement.
"Present Client" shall mean, at any particular time, any Person who is
at such time an investment advisory client of, or recipient of Investment
Management Services or Brokerage Services from, the LLC or any of its Controlled
Affiliates.
"Prime Rate" shall mean the rate of interest per annum publicly
announced from time to time by Chase Manhattan Bank (or any successor thereto)
as its prime rate as in effect at its principal office.
"Private Funds" shall mean TBK Partners and Vanderbilt Partners, and
any other investment funds organized within or without the United States after
the Effective Date that the Manager Member and the Management Board agree to
treat as a Private Fund, and any successor entities thereto, in each case so
long as the LLC or any Controlled Affiliate thereof is providing Investment
Management Services to such investment fund. Whenever a provision of this
Agreement refers to assets in a Private Fund, that reference shall not be deemed
to include assets in a Private Fund which are managed without any compensation
therefor.
"Public Offering" shall have the meaning specified in Section 7.4(a)
hereof.
"Purchase Agreement" shall mean that certain Purchase Agreement dated
as of August 15, 1997, by and among AMG, Tweedy, Browne Company, L.P. and all
the partners of Tweedy, Browne Company L.P., as the same has been and is
hereafter amended from time to time.
"Purchase Date" shall have the meaning specified in Section 7.1(b)
hereof.
"Put" shall have the meaning specified in Section 7.1(a) hereof.
"Put LLC Points" shall have the meaning specified in Section 7.1(d)
hereof.
"Put/Call Measurement Date" shall have the meaning specified in Section
7.1(e) hereof.
"Put Notice" shall have the meaning specified in Section 7.1(d) hereof.
"Put Price" shall have the meaning specified in Section 7.1(e) hereof.
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"Receipts Account" shall have the meaning specified in Section 4.4(c)
hereof.
"Repurchase" shall have the meaning specified in Section 7.3(a)(ii)
hereof.
"Repurchase Closing Date" shall have the meaning specified in Section
7.3(b) hereof.
"Repurchased Member" shall have the meaning specified in Section 7.3(a)
hereof.
"Repurchase Price" shall have the meaning specified in Section 7.3(c)
hereof.
"Required Capital Contributions" shall have the meaning specified in
Section 4.3(a) hereof.
"Reserved Points" shall mean the LLC Points (initially 8) reserved for
issuance pursuant to the terms of the Incentive Program but not yet issued by
the LLC.
"Retirement" shall mean, with respect to a Non-Manager Member, the
termination by such Non-Manager Member of such Non-Manager Member's employment
with the LLC and its Affiliates: (a) after the date such Non-Manager Member
shall have been continuously employed by the LLC for a period of fifteen (15)
years commencing with the later of the Effective Date or the date such
Non-Manager Member becomes a Non-Manager Member of the LLC, as applicable, or
such other period as the Management Board and the Manager Member may determine
in a writing referring to a specific Non-Manager Member and (b) pursuant to a
written notice given to the LLC not less than one (1) year prior to the date of
such termination. Notwithstanding the foregoing, with respect to each of Messrs.
Christopher H. Browne, William H. Browne and John D. Spears, the term
"Retirement" shall mean the termination by him of his employment with the LLC
after the tenth (10th) anniversary of the Effective Date and pursuant to a
written notice given to the LLC not less than one (1) year prior to the date of
such termination.
"Revenues From Operations" shall mean, for any period, the gross
revenues of the LLC (except as set forth herein and except as otherwise agreed
by the Manager Member and the Management Board in a writing making reference to
this definition), determined on an accrual basis in accordance with generally
accepted accounting principles consistently applied; provided, however, that
Revenues From Operations shall not include (i) proceeds during such period from
the sale, exchange or other disposition of all, or a substantial portion of, the
assets of the LLC, (ii) revenues from the issuance by the LLC of additional LLC
Interests or (iii) payments received pursuant to any insurance policies other
than with respect to business interruption insurance; and, provided further,
that Revenues From Operations shall be determined net of any positive difference
between revenues from the provision of Brokerage Services and commission
expenses and clearing charges paid by the LLC during the twelve (12) month
period ending as of the end of the calendar quarter ending immediately prior to
the measurement date in connection with the provision of such Brokerage Services
(assuming for this purpose that the LLC continues to follow past practices with
respect to such revenues and charges).
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"Run-Rate Free Cash Flow" shall mean, as of any measurement date, an
amount equal to the product of (i) the Run-Rate Revenues of the LLC as of such
date and (ii) the Free Cash Flow Percentage as of such date (without giving
effect to any transactions on such date).
"Run-Rate Revenues" shall mean, as of any measurement date, the sum of
(a) the aggregate revenues from all investment accounts
(excluding the Offshore Funds) to which the LLC provides Investment Management
Services (and excluding for these purposes accounts of any Present Client of the
LLC who has not yet fully invested (except for cash balances in accordance with
customary practices of the LLC) the assets managed by the LLC as set forth in
such Client's contract with the LLC), determined by multiplying the net assets
of each such account under management by the LLC as of such date by the
applicable annualized advisory services fee rate in effect as of such date with
respect to such Client account (net of any fee reimbursements or waivers);
provided, however, that with respect to each investment account which has a
performance fee component, there shall be added to Run Rate Revenues an amount
equal to the lesser of (i) fifty percent (50%) of the fees including performance
fees that have been definitively calculated, booked and paid by such investment
account with respect to such account over the twenty-four (24) months ending as
of the end of the calendar quarter immediately prior to the measurement date and
(ii) the assets managed by the LLC as set forth in such Client's contract with
the LLC as of such date, multiplied by the prevailing advisory fee rate in
effect as of such date with respect to separate account clients of the LLC;
(b) the lesser of (i) the sum for all of the Offshore Funds,
of the product of (x) the net assets under management in each Offshore Fund as
of such date and (y) the Offshore Fund Fee Rate then in effect for each such
Offshore Fund or (ii) the sum for all of the Offshore Funds, of (A) fifty
percent (50%) of the base investment advisory fees received by the LLC from the
Offshore Funds for the twenty-four (24) months ending as of the end of the
calendar quarter immediately prior to the measurement date and (B) fifty percent
(50%) of the Offshore Deemed Revenues for each Offshore Fund in each of the last
two (2) fiscal years immediately prior to the measurement date;
(c) with respect to each Present Client of the LLC whose
commitment for assets to be managed by the LLC as set forth in such Client's
contract with the LLC has not been fully invested (except for cash balances in
accordance with customary practices of the LLC), the aggregate revenues from all
such accounts, determined to be an amount that is the greater of (i) the product
of fifty percent (50%) of the net assets of such accounts committed to be
managed by the LLC as set forth in such Client's contract with the LLC and the
applicable advisory services fee rate in effect as of such date with respect to
such account and (ii) the product of the non-cash net assets and the applicable
advisory services fee rate in effect as of such date with respect to such
account (in each case, net of any fee reimbursements or waivers); and
(d) any positive difference between revenues from the
provision of Brokerage Services during the twelve (12) month period ending as of
the end of the calendar quarter ending immediately prior to the measurement date
and commission expenses and clearing charges paid by the LLC in connection with
the provision of such Brokerage Services.
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"SEC" shall mean the Securities and Exchange Commission, and any
successor Governmental Authority thereto.
"Securities Act" shall mean the Securities Act of 1933, as it may be
amended from time to time, and any successor thereto.
"Shrager" means Thomas Shrager.
"Stock Price"shall have the meaning specified in Section 7.4(c)(ii)
hereof.
"TBF" shall mean Tweedy, Browne Fund Inc., an open-end management
investment company registered under the 1940 Act.
"TBK Partners" shall mean TBK Partners, L.P., a Delaware limited
partnership, and any successor entity thereto.
"Transfer" shall mean any sale, assignment, transfer, exchange, charge,
pledge, gift, hypothecation, conveyance or encumbrance (such meaning to be
equally applicable to verb and noun forms of such term), or any offer to do any
of the foregoing.
"Tweedy, Browne Value Funds" shall mean the Tweedy, Browne Value Funds,
an investment company organized under the laws of the Grand Duchy of Luxemburg
as a Societe d'Investissement a Capital Variable (including the Value
Sub-Funds), and including any successor entities thereto.
"UBT" shall have the meaning specified in Section 4.6(g) hereof.
"Unsatisfactory Performance" shall mean a written determination by the
Management Board with the written consent of the Manager Member, that a
Non-Manager Member has failed to meet minimum requirements of satisfactory
performance of his job, after such Non-Manager Member has received written
notice that the Management Board was considering such a determination and the
Non-Manager Member has had a reasonable opportunity to respond in writing or in
person (at such Non-Manager Member's request) after his receipt of such notice.
"Value Sub-Funds" shall mean each sub-fund of the Tweedy, Browne Value
Funds, including Tweedy, Browne USA Value Fund, Tweedy, Browne International
Value Fund and Tweedy, Browne International Swiss Franc Value Fund and any
additional sub-funds thereof established after the Effective Date and any
successor entities thereto.
"Vanderbilt Partners" shall mean Vanderbilt Partners, L.P., a Delaware
limited partnership, and any successor entity thereto.
"Wyckoff" means Robert Q. Wyckoff, Jr.
In addition to the foregoing, other capitalized terms used in this
Agreement shall have the meaning ascribed thereto in the text of this Agreement.
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ARTICLE II - ORGANIZATION AND GENERAL PROVISIONS.
SECTION 2.1 CONVERSION; CONTINUATION.
(a) The Original Principals and Clark have agreed to continue
the business of the Predecessor as a limited liability company under and
pursuant to the provisions of the Act, and the Members hereby agree to further
continue the business as a limited liability company under and pursuant to the
provisions of the Act, and agree that the rights, duties and liabilities of the
Members shall be as provided in the Act, except as otherwise provided herein.
(b) Upon the execution of this Agreement or a counterpart of
this Agreement, the Non-Manager Members as of the Effective Date shall continue
as members of the LLC.
(c) The name, LLC Interests and Capital Contributions of each
Member (including the Fair Market Value of such Capital Contributions) shall be
listed on Schedule A attached hereto. The Manager Member shall update Schedule A
from time to time as it deems necessary to reflect accurately the information to
be contained therein. Any amendment or revision to Schedule A shall not be
deemed an amendment to this Agreement. Any reference in this Agreement to
Schedule A shall be deemed to be a reference to Schedule A as amended and in
effect from time to time and maintained with the records of the LLC.
(d) The Manager Member, as an authorized person within the
meaning of the Act, shall execute, deliver and file any certificates required or
permitted by the Act to be filed in the office of the Secretary of State of the
State of Delaware.
SECTION 2.2 NAME. Pursuant to the conversion of the Predecessor into
the LLC, the name of the Predecessor has been changed to Tweedy, Browne Company
LLC. At any time, the Management Board, with the written consent of the Manager
Member, may change the name of the LLC. The business of the LLC may be
conducted, upon compliance with all applicable laws, under any other name
designated by the Management Board with the written consent of the Manager
Member.
SECTION 2.3 TERM. As a result of the conversion of the Predecessor into
the LLC pursuant to Section 18-214 of the Act, the existence of the LLC is
deemed to have commenced as of ________, the date the Predecessor commenced its
existence. The term of the LLC shall continue in perpetuity, until the LLC is
dissolved in accordance with the provisions of this Agreement.
SECTION 2.4 REGISTERED AGENT AND REGISTERED OFFICE. The LLC's
registered agent and registered office in Delaware shall be as set forth in the
Certificate. At any time, the Manager Member may designate another registered
agent and/or registered office.
SECTION 2.5 PRINCIPAL PLACE OF BUSINESS. The principal place of
business of the LLC shall be at 52 Vanderbilt Avenue, New York, New York. At any
time, the Management Board may change the location of the LLC's principal place
of business; provided, however, that if the
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principal place of business is to be located outside of New York, New York, such
action must be approved by the Manager Member.
SECTION 2.6 QUALIFICATION IN OTHER JURISDICTIONS. The Management Board
shall cause the LLC to be qualified or registered (under assumed or fictitious
name if necessary) in any jurisdiction in which such qualification, formation or
registration is required.
SECTION 2.7 PURPOSES AND POWERS. The principal business activity and
purposes of the LLC shall initially be to provide Investment Management Services
and Brokerage Services, and any businesses related thereto or useful in
connection therewith. In addition, the LLC shall have the authority to engage in
any other lawful business, purpose or activity permitted by the Act which is
agreed upon in writing by the Manager Member and the Management Board, and it
shall possess and may exercise all of the powers and privileges granted by the
Act or which may be exercised by any Person, together with any powers incidental
thereto, so far as such powers or privileges are necessary or convenient to the
conduct, promotion or attainment of the business purposes or activities of the
LLC, including without limitation the following powers:
(a) to conduct its business and operations and to have and
exercise the powers granted to a limited liability company by the Act in any
state, territory or possession of the United States or in any foreign country or
jurisdiction;
(b) to purchase, receive, take, lease or otherwise acquire,
own, hold, improve, maintain, use or otherwise deal in and with, sell, convey,
lease, exchange, transfer or otherwise dispose of, mortgage, pledge, encumber or
create a security interest in all or any of its real or personal property, or
any interest therein, wherever situated;
(c) to borrow or lend money or obtain or extend credit and
other financial accommodations, to invest and reinvest its funds in any type of
security or obligation of or interest in any public, private or governmental
entity, and to give and receive interests in real and personal property as
security for the payment of funds so borrowed, loaned or invested;
(d) to make contracts, including contracts of insurance, incur
liabilities and give guaranties, including without limitation, guaranties of
obligations of other Persons who are interested in the LLC or in whom the LLC
has an interest;
(e) to guarantee the signatures of customers or others
whenever such guarantees are convenient in the conduct of the LLC's business;
(f) to employ and terminate Officers, employees, agents and
other Persons, to organize committees and boards of the LLC, to delegate to such
Persons, committees and boards any or, except as otherwise specifically set
forth in this Agreement or provided in the Act, all its power and authority, to
fix the compensation and define the duties and obligations of such personnel, to
establish and carry out retirement, incentive and benefit plans for such
personnel, and to indemnify such personnel to the extent permitted by this
Agreement and the Act;
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(g) to make donations irrespective of benefit to the LLC for
the public welfare or for community, charitable, religious, educational,
scientific, civic or similar purposes;
(h) to institute, prosecute, and defend any legal action or
arbitration proceeding involving the LLC, and to pay, adjust, compromise,
settle, or refer to arbitration any claim by or against the LLC or any of its
assets;
(i) to indemnify any Person to the fullest extent permitted by
law and to obtain any and all types of insurance;
(j) to negotiate, enter into, renegotiate, extend, renew,
terminate, modify, amend, waive, execute, acknowledge or take any other action
with respect to any lease, contract or security agreement in respect of any
assets of the LLC;
(k) to form, sponsor, organize or enter into joint ventures,
general or limited partnerships, limited liability companies, trusts and any
other combinations or associations formed for investment purposes;
(l) to make, execute, acknowledge and file any and all
documents or instruments necessary, convenient or incidental to the
accomplishment of the purposes of the LLC; and
(m) to cease its activities and cancel its Certificate.
SECTION 2.8 TITLE TO PROPERTY. All property owned by the LLC, real or
personal, tangible or intangible, shall be deemed to be owned by the LLC as an
entity, and no Member, individually, shall have any ownership of such property.
ARTICLE III - MANAGEMENT OF THE LLC.
SECTION 3.1 MANAGER MEMBER.
(a) Subject to the other terms and conditions of this
Agreement, including the delegations of power and authority set forth herein,
the management and control of the business of the LLC shall be vested
exclusively in the Manager Member, and the Manager Member shall have exclusive
power and authority, in the name of and on behalf of the LLC, to perform all
acts and do all things which, in its sole discretion, it deems necessary or
desirable to conduct the business of the LLC, without the vote or consent of the
Members in their capacity as such. No Member other than the Manager Member shall
have the power to sign for or bind the LLC to any agreement or document in its
capacity as Member, but the Manager Member may delegate the power to sign for or
bind the LLC to one or more members of the Management Board or Officers of the
LLC.
(b) The Manager Member shall, subject to all applicable
provisions of this Agreement, be authorized in the name of and on behalf of the
LLC: (i) to enter into, execute,
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amend, supplement, acknowledge and deliver any and all contracts, agreements,
leases or other instruments for the operation of the LLC's business; and (ii) in
general to do all things and execute all documents necessary or appropriate to
conduct the business of the LLC as set forth in Section 2.7 hereof, or to
protect and preserve the LLC's assets. The Manager Member may delegate any or
all of the foregoing powers.
(c) The Manager Member is required to be a Member, and shall
hold office until its resignation or removal in accordance with the provisions
hereof. The Manager Member is a "manager" (within the meaning of the Act) of the
LLC. The Manager Member shall devote such time to the business and affairs of
the LLC as it deems necessary, in its sole discretion, for the performance of
its duties, but in any event, shall not be required to devote full time to the
performance of such duties and may delegate its duties and responsibilities as
provided in this Agreement.
(d) Any action taken by the Manager Member, and the signature
of the Manager Member (or an authorized representative thereof) on any
agreement, contract, instrument or other document on behalf of the LLC, shall be
sufficient to bind the LLC and shall conclusively evidence the authority of the
LLC with respect thereto.
(e) Any Person dealing with the LLC, the Manager Member or any
Member may rely upon a certificate signed by the Manager Member as to (i) the
identity of the Manager Member or any Member; (ii) any factual matters relevant
to the affairs of the LLC; (iii) the Persons who are authorized to execute and
deliver any document on behalf of the LLC; or (iv) any action taken or omitted
by the LLC or the Manager Member.
(f) Notwithstanding the foregoing, the Manager Member shall
have no power or authority whatsoever to make recommendations with respect to or
to determine which transactions the LLC shall cause or recommend any client to
enter into, or the time at which, the party with which or the terms on which any
such transaction shall be entered into, or to exercise any right, power or
privilege with respect to the account of any Client or any of the securities or
other instruments in accounts of Clients.
(g) The LLC shall not do, and the Non-Manager Members
(including with respect to those Non-Manager Members who are members of the
Management Board or Officers, in their capacities as such) shall use all
commercially reasonable efforts to prevent the LLC from doing, any of the
following without the prior written consent of the Manager Member (which written
consent makes specific reference to this Section 3.1(g)):
(i) enter into, amend, modify or terminate any
contract, agreement or understanding (written or oral) if such
action or the resulting contract, agreement or understanding
could reasonably be expected to conflict with the provisions
of this Agreement;
(ii) take any action or series of related actions or
enter into, amend, modify or terminate any contract, agreement
or understanding (written or oral) or series of related
contracts, agreements or understandings if such action or the
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resulting contract, agreement or understanding or series
thereof could reasonably be expected to: (A) reduce the
percentage of Operating Cash Flow available in the current or
future periods for non-fixed amount bonus and incentive
payment to less than one-quarter (1/4) of Operating Cash Flow
reasonably anticipated for the relevant period or periods or
(B) effect a material reduction in the availability of Free
Cash Flow for distribution by the LLC in the then current or
future periods, or (C) have a material adverse effect on the
condition (financial or otherwise), properties, assets,
liabilities, business, operations or prospects of the LLC;
provided, however, that no consent of the Manager Member shall
be required for decisions by the Management Board in the
exercise of its reasonable good faith judgment relating to the
commencement, termination or modification of any agreement for
the provision by the LLC or any of its Controlled Affiliates
of Investment Management Services or Brokerage Services,
including rates and other terms and conditions with respect to
Investment Management Services and Brokerage Services, unless
such decision directly or indirectly benefits a Non-Manager
Member or a member of the Immediate Family of a Non-Manager
Member to the detriment of the LLC or the Manager Member;
(iii) create, incur, assume, or suffer to exist any
Indebtedness of the LLC (or its Controlled Affiliates, to the
extent such Indebtedness would be required to be included in
the consolidated balance sheet of the LLC in accordance with
GAAP), except Indebtedness of the LLC incurred to finance the
acquisition of fixed or capital assets (whether pursuant to a
deferred purchase arrangement with a vendor, a loan, a
financing lease or otherwise) in an amount outstanding at any
time not to exceed one hundred fifty thousand dollars
($150,000) (which shall be an obligation to be repaid solely
out of Operating Cash Flow); [Insert re B-D Requirement]
(iv) take any action, enter into, amend, modify or
terminate any contract, agreement or understanding (written or
oral) if such action or the resulting contract, agreement or
understanding (A) has the effect of creating a Lien upon any
of the assets of the LLC, other than Liens securing permitted
Indebtedness of the LLC incurred to finance the acquisition of
fixed or capital assets (whether pursuant to a deferred
purchase agreement with a vendor, a loan, a financing lease or
otherwise), provided that (1) such Liens shall be created
simultaneously with the acquisition of such fixed or capital
assets, (2) such Liens do not at any time encumber any
property other than the property financed by such
Indebtedness, (3) the amount of Indebtedness secured thereby
is not increased, and (4) the principal amount of Indebtedness
secured by such Lien shall at no time exceed the purchase
price of such property; or (B) has the effect of creating a
Lien upon any of that portion of the revenues of the LLC which
is included in Free Cash Flow;
(v) take any action (or omit to take any action) if
such action (or omission) could reasonably be expected to
result in the termination of the employment (including,
without limitation, a so-called constructive termination under
applicable law) by the LLC of any Non-Manager Member or enter
into,
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amend, modify or terminate any Employment Agreement or other
employment commitment or binding understanding with respect to
employment matters with any Non-Manager Member or member of
the Immediate Family of a Non-Manager Member or waive any
rights of the LLC thereunder;
(vi) establish or modify any significant compensation
arrangement (other than salary and cash bonuses in the
ordinary course) or program (whether cash or non-cash
benefits) applicable to any employee, which (A) requires the
Manager Member or any of its Affiliates (other than the LLC)
to take any action which the Manager Member views as being
contrary to the interest of the Manager Member and the
interest of any of its Affiliates and which it would not take
but for the action contemplated by the LLC or the Non-Manager
Members or Officers or (B) prevents the Manager Member or any
of its Affiliates (other than the LLC) from taking any action
which the Manager Member views as being in the interest of the
Manager Member and the interest of any of its Affiliates and
which it would otherwise have been able to take but for the
action contemplated by the LLC or the Non-Manager Members or
Officers (and in addition, each Non-Manger Member will use his
commercially reasonable efforts to cause the LLC to give the
Manager Member not less than thirty (30) days prior written
notice before the LLC establishes, terminates or modifies any
significant compensation arrangement (other than salary and
cash bonuses in the ordinary course) or program);
(vii) establish or modify any plan subject to ERISA;
(viii) enter into any line of business other than the
provision of Investment Management Services or Brokerage
Services and businesses related thereto or useful in
connection therewith;
(ix) take any action, enter into, amend, modify or
terminate any contract or agreement with any of the Offshore
Funds or the Offshore Related Partnerships (including, without
limitation, the relevant Offshore Management Agreement and the
organizational documents of such Offshore Fund) either (A)
that would have the effect of benefitting one or more of the
Non-Manager Members or members of their Immediate Family to
the detriment of the LLC or the Manager Member, or (B) that
would alter the arrangements described in Section 5.7(a); or
(x) take any action which (A) may be taken only by
the Manager Member with or without the consent of the
Non-Manager Members pursuant to any provision of this
Agreement, or (B) requires the approval or consent of the
Manager Member pursuant to any provision of this Agreement.
Whenever in this Agreement an action or determination requires the
consent of the Manager Member, such consent shall only be effective if it is
given in a writing which reasonably describes, or responds affirmatively to a
written request which reasonably describes, both the action which is proposed to
be taken and the consent which is being requested or given, and,
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unless otherwise specified in this Agreement, such consent of the Manager Member
may be given or withheld by the Manager Member acting in its reasonable
discretion.
(h) In addition to, and not in limitation of, the Manager
Member's powers and authority under this Agreement, the Manager Member shall
also have the power, in its reasonable discretion, after consultation with the
Management Board (to the extent feasible), to take any or all of the following
actions:
(i) such actions as it deems necessary or appropriate
to cause the LLC or, insofar as it is within the authority of
the LLC, any Controlled Affiliate of the LLC, or any officer,
employee, member, manager, partner, or agent thereof, to
comply with laws, rules or regulations applicable to the LLC
or such Controlled Affiliate or such Person in relation to the
LLC or such Controlled Affiliate, or any actions required by
the Manager Member in accordance with its duties hereunder;
(ii) any other action that the Manager Member is
authorized to take pursuant to the terms of this Agreement
(subject to having obtained any required Management Board
approval) and any other action necessary or appropriate to
prevent actions that require the Manager Member's consent
pursuant to the terms of this Agreement if such consent has
not then been given;
(iii) establish and mandate that the LLC participate
in employee benefit plans which are subject to ERISA or
require qualification under Section 401 of the Internal
Revenue Code in order to make the expenses of such plans
deductible and establish or modify the terms of any such plan
and take such actions as may be necessary or desirable in
connection therewith but only to the extent that the Manager
Member reasonably believes that such participation is required
by law and to the further extent the Manager Member reasonably
believes necessary to make the expense by the LLC under such
plans deductible or to comply with ERISA, as the case may be;
(iv) such actions as it deems necessary or
appropriate to coordinate any initiative which involves the
LLC (or a Controlled Affiliate of the LLC) and the Manager
Member and/or one or more of its Affiliates, but only on such
terms and conditions as the participation of the LLC in such
initiative has been approved by the Management Board; and
(v) such actions as it deems necessary or appropriate
to cause the LLC to fulfill its obligations and exercise its
rights under the Purchase Agreement.
(i) The Manager Member and its Affiliates may engage,
independently or with others, in other business ventures of every nature and
description, including the acquisition, creation, financing, trading in, and
operation and disposition of interests in, investment managers and brokers and
other businesses that may be competitive with the LLC's businesses. Neither the
LLC nor any of the Non-Manager Members shall have any right in or to any other
such ventures by virtue of this Agreement or the limited liability company
created or continued hereby, nor shall
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any such activity by the Manager Member or such Affiliates be deemed wrongful or
improper or result in any liability to the Manager Member or such Affiliates.
The Manager Member shall not be obligated to present any opportunity to the LLC
even if such opportunity is of such a character which, if presented to the LLC,
would be suitable for the LLC.
SECTION 3.2 MANAGEMENT BOARD; NON-MANAGER MEMBERS.
(a) The LLC shall have a Management Board of the LLC (the
"Management Board"). Subject to the specific rights and powers expressly
reserved to the Manager Member in this Agreement (including, without limitation,
in Sections 3.1(g) and 3.1(h) hereof), to the agreement, consent or
determination of the Manager Member in those circumstances where such agreement,
consent or determination is expressly provided for in this Agreement and to the
provisions of Section 3.1 to the extent necessary or appropriate to effectuate
the foregoing, the Manager Member hereby irrevocably delegates, to the greatest
extent permitted by applicable law, to the Management Board all of its power and
authority, in the name of and on behalf of the LLC, to perform all acts and do
all things which the Management Board, in the reasonable exercise of its good
faith judgment, deems necessary or desirable to conduct the business of the LLC,
without the vote or consent of any Member in its capacity as such. In order to
effectuate the foregoing, the Management Board shall have the rights and powers
of the Manager Member set forth in Section 3.1(b) (subject to Sections 3.1(g)
and (h)), Section 3.1(d) and Section 3.1(e) hereof. Without in any way limiting
the scope of the foregoing delegation, the Management Board shall have the sole
and exclusive power and authority to make recommendations with respect to and to
determine which transactions then Present Clients of the LLC shall enter into,
and the time at which, the parties with which and the terms on which all such
transactions shall be entered into and to exercise any rights, powers and
privileges of the LLC with respect to the accounts of Clients or any of the
securities or other instrument in accounts of Clients and shall have the power
and authority to delegate any of the powers and authorities delegated to it to
Officers and employees of the LLC as provided herein.
(b) The Management Board shall consist of Non-Manager Members
determined as follows:
(i) The Management Board shall initially have three
(3) members and shall initially consist of those Non-Manager
Members listed on Schedule B hereto. The number of members of
the Management Board may be increased by the Management Board.
No Person who is not a Non-Manager Member may be, become or
remain a member of the Management Board.
(ii) Any vacancy in the Management Board however
occurring (including a vacancy resulting from the increase in
size of the Management Board) may be filled by any other
Non-Manager Member elected by the Management Board; provided,
however, that if more than one Non-Manager Member is available
to fill such vacancy, the Manager Member shall have the right
to consent as to which Non-Manager Member shall fill such
vacancy. In lieu of filling any such vacancy, the Management
Board may determine to reduce the number of members of the
Management Board, but not, without the prior written consent
of
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the Manager Member, to a number less than three (3). If any
vacancy on the Management Board is not filled in accordance
with the first sentence of this clause (ii) and such failure
to act results in the number of members of the Management
Board being less than three (3) members for sixty (60) or more
days after the date on which the Manager Member gives the
Management Board notice of its intent to fill any such vacancy
and one (1) or more Non-Manager Members are available to fill
such vacancy, then the Manager Member may appoint one or more
Non-Manager Members to the Management Board, until the number
of members of the Management Board equals three (3), which
Person or Persons shall immediately resign if subsequent
thereto the remaining member or members of the Management
Board fill such vacancy or vacancies in the manner
contemplated by the first sentence of this clause (ii).
(iii) Non-Manager Members who are members of the
Management Board shall remain members of the Management Board
until their resignation, removal or death. Any member of the
Management Board may resign by delivering his written
resignation to any member of the Management Board and the
Manager Member. Any member of the Management Board may be
removed from such position with or without cause by the
Management Board acting by a Board Vote, with the prior
written consent of the Manager Member. Any Non-Manager Member
shall be deemed to have resigned from the Management Board and
shall no longer be a member of the Management Board
immediately upon such Non-Manager Member ceasing to be an
employee of the LLC or otherwise ceasing to be a Non-Manager
Member, in each case, for whatever reason. Any Non-Manager
Member shall be deemed to have resigned from the Management
Board and shall no longer be a member of the Management Board
immediately upon such Non-Manager Member reaching the age of
seventy (70), unless the Management Board with the prior
written consent of the Manager Member waives or modifies the
requirements of this sentence with respect to a particular
Non-Manager Member.
(c) At any meeting of the Management Board, presence in person
or by telephone (or other electronic means) of fifty percent (50%) or more of
the members of the Management Board shall constitute a quorum. At any meeting of
the Management Board at which a quorum is present, a majority of the members of
the Management Board present, which majority shall include at least fifty
percent (50%) of the Original Principals who are members of the Management Board
for so long as at least two (2) of the Original Principals are members of the
Management Board, may take any action on behalf of the Management Board (any
such action taken by such members of the Management Board is sometimes referred
to herein as a "Board Vote"). Any action required to be taken at any meeting of
the Management Board may be taken by the Management Board without a meeting of
the Management Board, if (i) a written consent thereto is signed by all the
members of the Management Board and (ii) the Manager Member has been given a
copy of such written consent not less than forty-eight (48) hours prior to such
action. Notice of the time, date and place of all meetings of the Management
Board shall be given to all members of the Management Board and, upon request,
to the Manager Member at least forty-eight (48) hours in advance of the meeting.
A representative of the Manager Member shall be entitled
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to attend each meeting of the Management Board. Notice need not be given to any
member of the Management Board or the Manager Member if a waiver of notice is
given (orally or in writing) by such member of the Management Board or the
Manager Member (as applicable), before, at or after the meeting. Members of the
Management Board are not "managers" (within the meaning of the Act) of the LLC.
SECTION 3.3 OFFICERS. The Management Board may designate employees of
the LLC as officers of the LLC (the "Officers") as it deems necessary or
desirable to carry on the business of the LLC. Any two or more offices may be
held by the same Person. New offices may be created and filled by the Management
Board. Each Officer shall hold office until his successor is designated by the
Management Board or until his earlier death, resignation or removal. Any Officer
may resign at any time upon written notice to the LLC and the Manager Member.
Any Officer designated by the Management Board may be removed by the Management
Board (excluding the Person being considered) For Cause or not For Cause at any
time, subject to the terms of such Officer's Employment Agreement with the LLC,
if any. A vacancy in any office occurring because of death, resignation, removal
or otherwise may be filled by the Management Board. Any designation of Officers,
a description of any duties delegated to such Officers, and any removal of such
Officers shall be approved by the Management Board in writing, which shall be
delivered to the Manager Member. The Officers are not "managers" (within the
meaning of the Act) of the LLC. The Management Board may delegate any or all of
the power and authority delegated to it to one or more of such Officers subject
to the right of the Management Board to modify or withdraw any or all of any
such delegation and, unless otherwise set forth in a written delegation of power
and authority by the Management Board, to the right of any member of the
Management Board to withdraw any or all of any such delegation by written notice
to the Officer or Officers in question, which notice shall, upon receipt, have
the same effect as a Board Vote.
SECTION 3.4 EMPLOYEES OF THE LLC.
(a) The terms of employment of any employee of the LLC who is
not a Non-Manager Member (including, without limitation, with respect to the
hiring, promoting, demoting and terminating of such employees), shall be
determined by the Management Board or such Person or Persons to whom the
Management Board may delegate such power and authority, subject, in all cases,
to compliance with all applicable laws, rules and regulations and, in the case
of compensation, to the provisions of 3.5 hereof. Notwithstanding the foregoing,
the Manager Member may terminate the employment by the LLC of any employee who
has engaged in any activity included in the definition of "For Cause;" (subject,
in the case of clause (b) of the definition of For Cause to the joint
determination of the Management Board and the Manager Member as set forth
therein) provided, however, that the Manager Member may not so terminate the
employment of any such employee without having first consulted with the
Management Board and given written notice to the Management Board specifying the
reasons for such decision.
(b) The granting or Transferring of LLC Interests in
connection with any hiring or promotion of an employee shall be subject to the
terms and conditions set forth in Articles V and VI hereof.
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(c) Any Person who is a Non-Manager Member may have his
employment with the LLC terminated by the LLC only: (i) in the case of a
termination For Cause, by either the Manager Member or the Management Board
acting with the prior written consent of the Manager Member, or (ii) in the case
of any other termination by the LLC, by the Management Board with the prior
written consent of the Manager Member.
(d) Subject to the other provisions of this Agreement
(including, without limitation, Section 3.5), the compensation and other terms
of employment of an employee who is a Non-Manager Member shall be set by the
Management Board.
SECTION 3.5 OPERATION OF THE BUSINESS OF THE LLC.
(a) The Operating Cash Flow of the LLC for any period (reduced
by any portion thereof attributable to performance fees accrued in such period
but not paid in such period and increased by the portion of any performance fees
paid in such period that were included in Operating Cash Flow of a previous
quarter) shall be used by the LLC to provide for and pay its business expenses
and expenditures as determined by the Management Board; including, without
limitation, compensation and benefits to its employees, including the Officers.
Without the prior written consent of the Manager Member (which written consent
makes specific reference to this Section 3.5(a)), the LLC shall not incur (and
the Non-Manager Members shall use all commercially reasonable efforts to prevent
the LLC from incurring) any expenses or obligations that exceed its ability to
pay or provide for them out of its Operating Cash Flow (as adjusted in
accordance with the parenthetical set forth in the first sentence of this
Section 3.5(a)) on a current or previously reserved basis. Except to the extent
otherwise required by applicable law, the LLC shall only make payments of
compensation to the Non-Manager Members who are employees of the LLC out of the
balance of its Operating Cash Flow (as adjusted in accordance with the
parenthetical set forth in the first sentence of this Section 3.5(a)) remaining
after the payment (or reservation for payment) of all the other business
expenses and expenditures for the applicable period. Any excess Operating Cash
Flow (as adjusted in accordance with the parenthetical set forth in the first
sentence of this Section 3.5(a)) remaining for any fiscal year following the
payment (or reservation for payment) of all business expenses and expenditures
may be used by the LLC in such fiscal year or any or all of such excess
Operating Cash Flow may be reserved for use in future fiscal years for any
permissible purpose. Revenues From Operations other than the portion which
constitutes Operating Cash Flow may be used to provide for and pay the business
expenses of the LLC only to the extent agreed to in writing by the Manager
Member and the Management Board (any such use being referred to herein as a
"Free Cash Flow Expenditure").
(b) The LLC will maintain (and the Non-Manager Members shall
use all commercially reasonable efforts to cause the LLC to maintain), in full
force and effect, such insurance as is customarily maintained by companies of
similar size in the same or similar businesses (including, without limitation,
errors and omissions liability insurance but excluding key-man life insurance),
the premiums on which will be paid out of Operating Cash Flow. The LLC may or
the Manager Member may maintain key-man life insurance and disability insurance
policies on each Non-Manager Member, from time to time, and the Non-Manager
Members will use all commercially reasonable efforts to cooperate with the
Manager Member and the LLC to effectuate the foregoing; provided, however, that
the LLC shall not maintain such insurance unless
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the Management Board and the Manager Member so agree, in which case, they may
also agree to treat the premiums thereon as a Free Cash Flow Expenditure.
(c) Notwithstanding any of the provisions of this Agreement to
the contrary, all accounting, financial reporting and bookkeeping procedures of
the LLC shall be established in conjunction with policies and procedures
determined under the supervision of the Manager Member in connection with
similar matters for other Affiliates of the Manager Member. The LLC shall have a
continuing obligation to keep the Manager Member's chief financial officer
informed of material financial developments with respect to the LLC.
Notwithstanding any of the provisions of this Agreement to the contrary, all
legal, compliance and regulatory matters of the LLC shall be coordinated with
the Manager Member, and the LLC shall have an ongoing obligation to keep the
Manager Member informed of all legal, compliance and related activities, in
accordance with procedures to be established by the Manager Member and the
Management Board.
(d) Notwithstanding any of the provisions of this Agreement to
the contrary, the Non-Manager Members will cooperate with the Manager Member and
its Affiliates in implementing any initiative which involves the LLC (or a
Controlled Affiliate of the LLC) and the Manager Member and/or one or more of
its other Affiliates, but only on such terms and conditions as the participation
of the LLC in such initiative has been approved by the Management Board.
SECTION 3.6 COMPENSATION AND EXPENSES OF THE MEMBERS. The Manager
Member may receive compensation for services provided to the LLC only to the
extent approved by the Management Board. The LLC shall, however, pay and/or
reimburse the Manager Member for all reasonable travel expenses incurred by the
Manager Member in accordance with Section 9.4 as well as (i) any expenses
incurred by the Manager Member in connection with the operation of the LLC as
approved or directed by the Management Board or any duly authorized Officer,
(ii) the applicable portion of any expenses incurred by the Manager Member in
connection with any initiative which involves the LLC and/or one or more of the
Manager Member's other Affiliates, but only on such terms and conditions as the
participation of the LLC in such initiative has been approved by the Management
Board, and (iii) any expenses incurred by the Manager Member in connection with
its exercise of its powers under Section 3.1(h)(i) of this Agreement. Without
limiting the generality of the foregoing, the Manager Member's general overhead
items (including, without limitation, salaries and rent) shall not be reimbursed
by the LLC. Stockholders, officers, directors, managers, members and agents of
Members may serve as employees of the LLC and be compensated therefor out of
Operating Cash Flow as determined by the Management Board.
SECTION 3.7 NON-MANAGER MEMBERS AND NON-SOLICITATION AGREEMENTS. Each
of the Original Principals has entered into an Employment Agreement with the LLC
as of the Effective Date in the form attached to the Purchase Agreement as
Exhibit 8.9 thereto. Each of the Members hereby consents to each such Employment
Agreement. Each Non-Manager Member, other than such Original Principals and
Clark, has provided the LLC with a Non-Solicitation/Non-Disclosure Agreement in
form and substance substantially similar to Exhibit B hereto (the
"Non-Solicitation Agreement") (and, in the case of any substitute Non-Manager
Member (pursuant to Section 5.2 hereof) or Additional Non-Manager Member who is
not already bound by a Non-Solicitation Agreement, he shall, prior to and as a
condition precedent to becoming a Non-Manager Member, provide the LLC with such
an agreement (together with any changes or modifications thereto as
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the Manager Member with the consent of the Management Board may deem necessary
or desirable) and such agreements shall, at all times, provide that each of the
LLC and the Manager Member shall be entitled to enforce the provisions of such
agreements on its own behalf and that the Manager Member shall be entitled to
enforce the provisions of such agreements on behalf of the LLC.
SECTION 3.8 NON-SOLICITATION AND NON-DISCLOSURE BY NON-MANAGER MEMBERS.
(a) Each Non-Manager Member (other than Clark) agrees, for the
benefit of the LLC and the other Members, that such Non-Manager Member shall
not, while employed by the LLC or any of its Affiliates, without the express
written consent of the Manager Member and the Management Board, directly or
indirectly, whether as owner, part-owner, shareholder, partner, member,
director, officer, manager, trustee, employee, agent or consultant, or in any
other capacity, on behalf of himself or any firm, corporation or other business
organization other than the LLC and its Controlled Affiliates, engage in any
activity described in Section 3.8(b), including, with respect to Section
3.8(b)(i), without regard to whether any such Person is a Client.
(b) In addition to, and not in limitation of, the provisions
of Section 3.8(a) hereto, each Non-Manager Member (other than Clark) agrees, for
the benefit of the LLC and the other Members, that such Non-Manager Member shall
not, during the period beginning on the date such Non-Manager Member becomes a
Non-Manager Member, and continuing until the date which is two (2) years after
the termination of such Non-Manager Member's employment with the LLC and its
Controlled Affiliates (unless a different period is agreed to by the Manager
Member and the Management Board in a writing making specific reference to this
Section 3.8(b) and naming the Manager Member to whom such different period is to
apply), without the express written consent of the Manager Member and the
Management Board, directly or indirectly, whether as owner, part-owner,
shareholder, partner, member, director, officer, manager, trustee, employee,
agent or consultant, or in any other capacity, on behalf of himself or any firm,
corporation or other business organization other than the LLC and its Controlled
Affiliates:
(i) provide Investment Management Services or
Brokerage Services to any Person that is a Client of the LLC or any of
its Controlled Affiliates;
(ii) solicit or induce, whether directly or
indirectly, any Person for the purpose (which need not be the sole or
primary purpose) of (A) causing any funds with respect to which the LLC
provides Investment Management Services or Brokerage Services to be
withdrawn from such management, or (B) causing any Client of the LLC
(including any Potential Clients) not to engage the LLC or any of its
Controlled Affiliates to provide Investment Management Services or
Brokerage Services for any additional funds;
(iii) contact or communicate with, in either case in
connection with Investment Management Services or Brokerage Services,
whether directly or indirectly, any Client of the LLC; or
(iv) solicit or induce, or attempt to solicit or
induce, directly or indirectly, any employee or agent of, or consultant
to, the LLC or any of its Controlled
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Affiliates to terminate its, his relationship therewith, hire any such
employee, agent or consultant, or former employee, agent or consultant,
or work in any enterprise involving Investment Management Services or
Brokerage Services with any employee, agent or consultant or former
employee, agent or consultant, of the LLC or its Controlled Affiliates
who was employed by or acted as an agent or consultant to the LLC or
its Controlled Affiliates at any time preceding the termination of such
Non-Manager Member's employment (excluding for all purposes of this
sentence, secretaries and individuals holding other similar positions).
(c) For purposes of Sections 3.8(a) and 3.8(b), in determining
who is included in the definition of "Client" of the LLC, (x) the term "Past
Client" shall be limited to those Past Clients who were advisees or investment
advisory clients of, or recipients of Investment Management Services or
Brokerage Services from, the LLC and its Controlled Affiliates (including the
Predecessor) at the date of termination of such Non-Manager Member's employment
or at any time during the twelve (12) months immediately preceding the date of
such termination, (y) the term "Potential Client" shall be limited to those
Persons to whom an offer was made within two (2) years prior to the date of
termination of such Non-Manager Member's employment, and (z) neither the term
"Client" nor the term "Person" shall include any Person who is included in the
definition of "Immediate Family" with respect to such Non-Manager Member.
Notwithstanding the provisions of Sections 3.8(a) and 3.8(b) hereof,
any Non-Manager Member may make passive investments in the Manager Member or in
a competitive enterprise the shares or other equity interests of which are (A)
publicly traded, provided his holding therein, together with any holdings of his
Affiliates and members of his Immediate Family, are less than five percent (5%)
of the outstanding shares of comparable interests in such entity at the time
such investments are made or (B) not publicly traded, provided such holdings do
not at any time exceed such percentage, and such enterprise, either by itself or
together with its Affiliates does not derive more than 20% of its gross revenues
from competitive activities.
(d) Each Non-Manager Member agrees that any and all presently
existing investment advisory businesses of the LLC and its Controlled Affiliates
(including the Predecessor), and all businesses developed by the LLC and its
Controlled Affiliates, including by such Non-Manager Member or any other
employee of the LLC (including the Predecessor), including without limitation,
all investment methodologies, all investment advisory contracts, fees and fee
schedules, commissions, records, data, client lists, agreements, trade secrets,
and any other incident of any business developed by the LLC (or the Predecessor)
or its Controlled Affiliates or earned or carried on by the Non-Manager Member
for the LLC or the Predecessor or their respective Controlled Affiliates other
than any such matters that are in the public record (unless they are so
available by virtue of a breach of the provisions of this Section 3.8), and all
trade names, service marks and logos under which the LLC or its Affiliates do
business, and any combinations or variations thereof and all related logos, are
and shall be the exclusive property of the LLC or such Controlled Affiliate, as
applicable, for its or their sole use, and (where applicable) shall be payable
directly to the LLC or such Controlled Affiliate. In addition, each Non-Manager
Member acknowledges and agrees that the investment performance of the accounts
managed by the LLC (and the Predecessor) was attributable to the efforts of the
team of professionals of the LLC (or the Predecessor, as applicable) and not to
the efforts of any single
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individual, and that therefore, the performance records of the accounts managed
by the LLC (and the Predecessor) are and shall be the exclusive property of the
LLC. Each Non-Manager Member acknowledges that, in the course of performing
services hereunder and otherwise (including, without limitation, for the
Predecessor), the Non-Manager Member has had, and will from time to time have,
access to information of a confidential or proprietary nature, including without
limitation, confidential or proprietary investment methodologies, trade secrets,
proprietary or confidential plans, client identities and information, client
lists, service providers, business operations or techniques, records and data
("Intellectual Property") owned or used in the course of business by the LLC or
its Controlled Affiliates. Each Non-Manager Member agrees always to keep secret
and not ever publish, divulge, furnish, use or make accessible to anyone
(otherwise than in the regular business of the LLC) any Intellectual Property of
the LLC or any Controlled Affiliate thereof that is not otherwise publicly
available (other than Intellectual Property that is publicly available by virtue
of a breach of the provisions of this Section 3.8). At the termination of the
Non-Manager Member's services to the LLC, all data, memoranda, client lists,
notes, programs and other papers, items and tangible media, and reproductions
thereof relating to the foregoing matters in the Non-Manager Member's possession
or control, shall be returned to the LLC and remain in the LLC's possession
(except where the return of such items shall be unreasonable or impractical in
relation to the importance or confidentiality of such items).
(e) Each Non-Manager Member acknowledges that, in the course
of entering into this Agreement, the Non-Manager Member has had and, in the
course of the operation of the LLC, the Non-Manager Member will from time to
time have, access to Intellectual Property owned by or used in the course of
business by the Manager Member. Each Non-Manager Member agrees, for the benefit
of the LLC and its Members, and for the benefit of the Manager Member, always to
keep secret and not ever publish, divulge, furnish, use or make accessible to
anyone (otherwise than with the Manager Member's consent) any knowledge or
information regarding Intellectual Property of the Manager Member that is not
otherwise publicly available (other than Intellectual Property that is publicly
available by virtue of a breach of the provisions of this Section 3.8). At the
termination of the Non-Manager Member's service to the LLC, all data, memoranda,
documents, notes and other papers, items and tangible media, and reproductions
thereof relating to the foregoing matters in the Non-Manager Member's possession
or control shall be returned to the Manager Member and remain in its possession.
(f) The provisions of this Section 3.8 shall not be deemed to
limit any of the rights of the LLC or the Manager Member under any of the
Employment Agreements, Non-Solicitation Agreements or under applicable law, but
shall be in addition to the rights set forth in each of the Employment
Agreements and Non-Solicitation Agreements, and those which arise under
applicable law.
SECTION 3.9 REMEDIES UPON BREACH.
(a) In the event that, following the termination of his
employment with the LLC, a Non-Manager Member (i) breaches any of the provisions
of Section 3.8 hereof, or (ii) breaches any of the provisions of the Employment
Agreement or Non-Solicitation Agreement to which he is a party (in each case, in
a manner that causes or could reasonably be expected to cause harm that is not
immaterial or insignificant to the LLC or the Manager Member), then (A) such
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Non-Manager Member shall forfeit its right to receive any distributions under
Section 4.4 hereof not yet received, (B) such Non-Manager Member shall forfeit
its right to receive any payment for its LLC Interests under Sections 7.1, 7.2,
7.3 or 7.4 hereof if such payment has not yet been received, and (C) the Manager
Member (or its assignees) shall have no further obligations under any promissory
note theretofore issued to such Non-Manager Member pursuant to Section 7.3(e)
hereof, and such promissory note shall be deemed to be canceled as of such
breach.
(b) Each Non-Manager Member agrees that any breach of the
provisions of Section 3.8 of this Agreement or of the provisions of the
Employment Agreement or Non-Solicitation Agreement by such Non-Manager Member
could cause irreparable damage to the LLC, the other Non-Manager Members and the
Manager Member. The LLC and the Manager Member, shall have the right to an
injunction or other equitable relief (in addition to other legal remedies) to
prevent any violation of a Non-Manager Member's obligations hereunder or
thereunder.
SECTION 3.10 NO EMPLOYMENT OBLIGATION. Each Non-Manager Member
acknowledges that neither this Agreement nor the provisions of the
Non-Solicitation Agreement create an obligation on the part of the LLC to
continue the employment of such Non-Manager Member with the LLC, and that such
Non-Manager Member, unless he is a party to an Employment Agreement, is an
employee at will of the LLC.
SECTION 3.11 FUNDING OBLIGATION. Each of the Original Principals
covenants and agrees to place under investment management of the LLC either
directly or in one or more of the Mutual Funds, Private Funds or Offshore Funds,
as such Original Principal may select, an additional (i.e., in addition to those
amounts which such Original Principals currently have, directly or indirectly,
under investment management of the LLC at the Effective Date) aggregate amount
equal to [_____%] of that portion of the LLC Interest Purchase Price (as defined
in the Purchase Agreement) paid by AMG to that Original Principal, and to
maintain such additional invested amount for a period of time not shorter than
that period commencing on the date such additional funds are placed under
investment management of the LLC and ending on the later of (i) the tenth (10th)
anniversary of the Effective Date or (ii) the termination of employment of such
Original Principal with the LLC for any reason or, if earlier, the date on which
(A) there shall have occurred a change in control of the Manager Member as a
result of an unaffiliated third party acquiring in excess of forty percent (40%)
of the outstanding capital stock of the Manager Member other than in the
context of an acquisition by the Manager Member, (B) all of the Original
Principals shall have ceased to be Members other than as a result of their
resignation or termination For Cause prior to the stated terms of the Employment
Agreements, or (C) such Original Principal shall have died or become Permanently
Incapacitated. The Original Principals, the LLC and the other Members of the LLC
hereby acknowledge and agree that none of the Original Principals may withdraw
any such additional invested amount until expiration of the applicable period
set forth in the preceding sentence, unless such amount is simultaneously placed
under management of the LLC by such Original Principal either directly or in one
or more of the Mutual Funds, Private Funds or Offshore Funds as such Original
Principal may select; provided, however, that an Original Principal is permitted
to withdraw from the management of the LLC any amounts representing amounts
which such Original Principal has, directly or indirectly, under management of
the LLC at the Effective Date, any appreciation thereon, any appreciation over
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such Original Principal's additional invested amount and any amounts necessary
to pay taxes on any gains realized with respect to investments made with such
additional amount, provided, further, however, that (i) such amounts shall not
be withdrawn from the escrow established pursuant to Section 8.15 of the
Purchase Agreement except as set forth in the Escrow Agreement (as defined in
the Purchase Agreement) and (ii) with respect to such amounts as may be
withdrawn for purposes of paying taxes, such amounts shall not be withdrawn
except to the extent the realized appreciation on the additional invested amount
available for distribution is insufficient to pay such taxes. Each Original
Principal shall place the required amount of funds under management of the LLC
during the first twelve (12) months after the Effective Date at a rate not less
than twenty-five percent (25%) of such amount per three-month period. All funds
of Clark, each of the Original Principals and each Person treated as a member of
the Immediate Family of any of the foregoing placed under direct or indirect
management of the LLC may, in the sole discretion of the Management Board, be
managed by the LLC and its Controlled Affiliates without the imposition of any
investment advisory fees or profit allocations or similar costs by the LLC with
respect to any account of any such Person or with respect to the interest of any
such Person in any Private Fund, Offshore Fund or, to the extent not
inconsistent with the tax status thereof and subject to the consent of the
Manager Member (which consent shall not be unreasonably withheld), Mutual Fund
to which the LLC provides Investment Management Services.
SECTION 3.12 MISCELLANEOUS. Each Non-Manager Member agrees that the
enforcement of the provisions of Sections 3.8 and 3.9 hereof, and the
enforcement of the provisions of the Employment Agreements and Non-Solicitation
Agreements are necessary to ensure the protection and continuity of the
business, goodwill and confidential business information of the LLC for the
benefit of each of the Members. Each Non-Manager Member agrees that, due to the
proprietary nature of the LLC's business, the restrictions set forth in Section
3.8 hereof and in the Employee Agreements and Non-Solicitation Agreements are
reasonable as to duration and scope. If any provision contained in this Article
III shall for any reason be held invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provision of this Article III. It is the intention of the parties hereto
that if any of the restrictions or covenants contained herein is held to cover a
geographic area or to be for a length of time that is not permitted by
applicable law, or is any way construed to be too broad or to any extent
invalid, such provision shall not be construed to be null, void and of no
effect, but to the extent such provision would then be valid or enforceable
under applicable law, such provision shall be construed and interpreted or
reformed to provide for a restriction or covenant having the maximum enforceable
geographic area, time period and other provisions as shall be valid and
enforceable under applicable law.
Each Non-Manager Member acknowledges that the obligations and rights
under Sections 3.8, 3.9 and 3.11 hereof and this Section 3.12 shall survive the
termination of the employment of such Non-Manager Member with the LLC and/or the
withdrawal or removal of such Non-Manager Member from the LLC, regardless of the
manner of such termination, withdrawal or removal in accordance with the
provisions hereof and of the relevant Employment Agreement or Non-Solicitation
Agreement. Except as agreed to by the Manager Member, in advance, in a writing
making specific reference to this Article III, no Non-Manager Member shall enter
into any agreement or arrangement which is inconsistent with the terms and
provisions of this Agreement.
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SECTION 3.13 MEMBERS. Members, in their capacity as such, shall have no
right to amend or terminate this Agreement or to appoint, select, vote for or
remove the Manager Member, the Officers or their agents or to exercise voting
rights or call a meeting of the Members, except as specifically provided in this
Agreement.
ARTICLE IV - CAPITAL ACCOUNTS; ALLOCATIONS; DISTRIBUTIONS.
SECTION 4.1 CAPITAL ACCOUNTS.
(a) There shall be established for each Member a Capital
Account which shall initially be equal to the Capital Account of such Member as
set forth on Schedule A hereto. No Member shall have the right to withdraw any
part of his (including their predecessors in interest) Capital Account
(including, without limitation, such Member's Capital Contributions) until the
dissolution and winding up of the LLC, except as distributions pursuant to this
Article IV may represent returns of capital, in whole or in part. No Member
shall be entitled to receive any interest on any Capital Account balance
(including, without limitation, such Member's Capital Contributions). No Member
shall have any personal liability for the repayment of any Capital Contribution
of any other Member. Except as may be agreed to in connection with the issuance
of additional LLC Interests, as specifically set forth herein (including,
without limitation in Section 4.3 hereof), or as may be required under
applicable law, the Members shall not be required to make any further
contributions to the LLC. No Member shall make any contribution to the LLC
without the prior consent of the Manager Member, except Required Capital
Contributions pursuant to Section 4.3 hereof, reservations of Operating Cash
Flow not utilized in a particular fiscal year or, at the option of any
Non-Manager Member, to fund any portion of any amounts by which regular
operating expenses exceed Operating Cash Flow.
(b) The Capital Account of each Member shall be adjusted in
the following manner. Each Capital Account shall be increased by such Member's
allocable share of income and gain, if any, of the LLC (as well as the Capital
Contributions made by a Member after the Effective Date) and shall be decreased
by such Member's allocable share of deductions and losses, if any, of the LLC,
and by the amount of all distributions made to such Member. The amount of any
distribution of assets other than cash shall be deemed to be the Fair Market
Value of such assets (net of any liabilities encumbering such property that the
distributee Member is considered to assume or take subject to). Capital Accounts
shall also be adjusted upon the issuance of additional LLC Interests as set
forth in Section 5.5(c) hereof. Capital Accounts may also be adjusted upon the
Transfer of LLC Interests as set forth in Section 5.2(b).
SECTION 4.2 ALLOCATIONS.
(a) Subject to Sections 4.2 (c), 4.2(e) and 4.6 hereof, all
items of LLC income and gain shall be allocated among the Members' Capital
Accounts at the end of every quarter as follows: *** [The remainder of this
section (approximately 3 pages) has been omitted pursuant to the confidential
treatment request referenced on the cover page hereto. The omitted portion has
been filed separately with the Commission.] ***
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SECTION 4.3 CAPITAL CONTRIBUTION FOR OFFSHORE SHORTFALLS.
(a) By no later than the thirtieth (30th) day (the "Due Date")
following the end of each fiscal quarter of the LLC, each Original Principal and
Clark shall be required to make a Capital Contribution to the LLC in an amount
equal to his Offshore Shortfall for that quarter (the "Required Capital
Contributions"). Unless otherwise determined by a writing signed by each of the
Original Principals and Clark who is then a Member (and delivered to the LLC and
the Manager Member), the Offshore Shortfall for each Original Principal or Clark
shall equal the product of the aggregate Offshore Shortfall and a fraction the
numerator of which is the number of LLC Points held by such Original Principal
and Clark on the first day of such quarter and the denominator of which is the
number of LLC Points held by all Original Principals or Clark on the first day
of such quarter. For purposes hereof, each Original Principal and Clark will be
treated as if he holds, in addition to his LLC Points, that number of LLC Points
equal to the number of Reserved Points set forth opposite his name on Schedule A
hereto as of the effective date of the transaction.
(b) All Required Capital Contributions shall be paid to the
LLC by transfer (by wire or otherwise) of immediately available funds (or by
such other means as an Original Principal or Clark and the Manager Member may
agree) on or before the Due Date for that Required Capital Contribution.
(c) If an Original Principal or Clark fails to pay his
Required Capital Contribution under this Section 4.3 on the Due Date therefor,
then the LLC or the Manager Member shall notify such Original Principal or Clark
of such failure within two (2) days after such payment is due (which notice may
be by telephone followed by confirmation by telecopy (receipt confirmed),
overnight carrier or registered or certified mail), provided that the failure to
give such notice shall not affect the liability of such Original Principal or
Clark to make such Required Capital Contribution or subject the LLC or any
Member (including, without limitation, the Manager Member, but excluding such
Original Principal or Clark) to any liability hereunder or otherwise. An
Original Principal or Clark who fails to make Required Capital Contribution
prior to the expiration of seven (7) days after such notice (the "Date of
Default") shall be a "Defaulting Member." The obligation of a Defaulting Member
to make a Required Capital Contribution shall bear interest from and after the
Date of Default at a rate equal to the Prime Rate plus five percent (5%) per
annum, which interest shall compound quarterly. Any distributions or other
payments by the LLC or the Manager Member to which the Defaulting Member would
otherwise be entitled pursuant to this Agreement (including, without limitation,
pursuant to Sections 4.4, 4.5 and 4.6 hereof) shall be applied by the LLC or the
Manager Member to the debt of the Defaulting Member hereunder until such debt
shall be repaid and any such distribution or other payment shall be deemed to
have been distributed or paid to the Defaulting Member. In addition, any
discretionary bonus or other discretionary payment (as opposed to regular
salary) to which the Defaulting Member would otherwise be entitled pursuant to
the provisions of Section 3.3 or otherwise, shall be applied by the LLC to the
debt of the Defaulting Member hereunder until such debt shall be repaid.
Any Defaulting Member shall also pay, on demand, all costs, including
court costs and reasonable attorneys' fees, paid or incurred by the LLC or the
Manager Member in collecting a
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Required Capital Contribution from a Defaulting Member. If the Defaulting Member
fails to make such payments immediately after the demand for payment thereof,
then provisions of the foregoing paragraph shall apply to such amounts as if the
demand were a notice of default (and the date thereof were the Date of Default),
with the seventh day preceding such notice being the Due Date.
The provisions of this Section 4.3(c) are hereby expressly limited so
that in no contingency or event whatsoever shall the amount paid or agreed to be
paid to the LLC exceed the maximum amount of interest permitted by law, and in
the event any interest hereunder were to exceed the maximum amount of interest
permitted by law, such excess interest shall be deemed to be a mistake and shall
either be reduced immediately and automatically to the maximum amount permitted
by law or, if required to comply with applicable law, be canceled automatically
and, if theretofore paid, be credited on the principal amount of the obligation
of the Defaulting Member for his share of a Offshore Shortfall outstanding and,
to the extent such a credit is insufficient, be refunded.
SECTION 4.4 DISTRIBUTIONS.
****************[This section (approximately 3 pages) has been omitted
pursuant to the confidential treatment request referred to on the cover page
hereto. The omitted portions have been filed separately with the
Commission.]***************
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SECTION 4.5 DISTRIBUTIONS UPON DISSOLUTION; ESTABLISHMENT OF A RESERVE
UPON DISSOLUTION. Upon the dissolution of the LLC, after payment (or the making
of reasonable provision for the payment) of all liabilities of the LLC owing to
creditors, the Manager Member, or if there is none, the Liquidating Trustee
appointed as set forth in Section 8.4 hereof, shall set up such reserves as it
deems reasonably necessary for any contingent, conditional or unmatured
liabilities or other obligations of the LLC. Such reserves may be paid over by
the Manager Member or Liquidating Trustee to a bank (or other third party), to
be held in escrow for the purpose of paying any such contingent, conditional or
unmatured liabilities or other obligations. At the expiration of such period(s)
as the Manager Member or Liquidating Trustee may deem advisable, such reserves,
if any (and any other assets available for distribution), or a portion thereof,
shall be distributed to the Members (i) in accordance with the positive balance
(if any) in their respective Capital Accounts (as determined immediately prior
to each such distribution) until all such positive Capital Account balances have
been reduced to zero (0), and (ii) thereafter, among the Members as of the date
of dissolution in accordance with their respective numbers of LLC Points as of
the date of dissolution. If any assets of the LLC are to be distributed in kind
in connection with such liquidation, such assets shall be distributed on the
basis of their Fair Market Value net of any liabilities encumbering such assets
and, to the greatest extent possible, shall be distributed pro-rata in
accordance with the total amounts to be distributed to each Member. Immediately
prior to the effectiveness of any such distribution-in-kind, each item of gain
and loss that would have been recognized by the LLC had the property being
distributed been sold at Fair Market Value shall be determined and allocated to
those persons who were Members immediately prior to the effectiveness of such
distribution in accordance with Sections 4.3(c) and 4.3(d) hereof.
SECTION 4.6 PROCEEDS FROM CAPITAL CONTRIBUTIONS AND THE SALE OF
SECURITIES; INSURANCE PROCEEDS; CERTAIN SPECIAL ALLOCATIONS AND DISTRIBUTIONS.
(a) Capital Contributions made by any Member after the
Effective Date other than Required Capital Contributions from Original
Principals, and other proceeds from the issuance of securities by the LLC may,
in the sole discretion of the Manager Member, be used for the benefit of the LLC
(including, without limitation, the repurchase or redemption of LLC Interests),
or, may be distributed by the LLC, in which case, any such proceeds shall be
allocated and distributed among the Members in accordance with their respective
LLC Points immediately prior to the date of such contribution or issuance of
securities; it being understood that in the case the proceeds are a note
receivable, any such distribution shall only occur, if at all, upon receipt by
the LLC of any cash in respect thereof.
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(b) In the event of the death or Permanent Incapacity of a
Non-Manager Member covered by key-man life or disability insurance, as
applicable, the premiums on which have been paid by the LLC, the proceeds of any
such policy shall first be used by the LLC to fund (to the extent thereof) the
Repurchase of LLC Interests from the Non-Manager Member in accordance with
Section 7.3 hereof and, if the proceeds exceed the amounts so required to effect
such Repurchase, then the amount of such excess proceeds may, in the sole
discretion of the Manager Member, be used for the benefit of the LLC, or, may be
distributed by the LLC, in which case, any such proceeds shall be allocated and
distributed among the Members in accordance with their respective LLC Points
immediately following the Repurchase of the LLC Interests from such Non-Manager
Member.
(c) Items of depreciation or amortization (as calculated for
book purposes in accordance with generally accepted accounting principles,
consistently applied, except that the gross book value of the property of the
LLC on the Effective Date shall be marked to the fair market value of such
property based upon the purchase price paid by the Manager Member for its LLC
Interest as reflected on Schedule A) on account of the property of the LLC on
the Effective Date, shall be specially allocated among the Members in accordance
with Capital Accounts on the Effective Date. All items of depreciation or
amortization (as calculated for book purposes in accordance with generally
accepted accounting principles, consistently applied) on account of property
purchased out of Operating Cash Flow (other than Free Cash Flow Expenditures)
shall be allocated as set forth in Section 4.2(b) hereof, and all items of
depreciation or amortization (as calculated for book purposes in accordance with
generally accepted accounting principles, consistently applied) on account of
property purchased out of Free Cash Flow Expenditures shall be allocated among
the Members [other than Clark] in the same proportion as such Members' allocated
portions of Free Cash Flow were reduced in order to reserve funds for the
purchase of such property.
(d) All items of LLC loss and deduction on account of Free
Cash Flow Expenditures (other than those covered by Section 4.6(c)) shall be
allocated among the Members in amounts equal to the amounts that Free Cash Flow
to be distributed under Section 4.4(c) was reduced for the purpose of making
such Free Cash Flow Expenditure.
(e) All items of LLC deduction arising in connection with any
Offshore Shortfall shall be specially allocated in their entirety solely to the
Original Principals and Clark who are then Members of the LLC in proportion to
their respective contributions making up such Offshore Shortfall.
(f) The amount, if any, of income and gain allocated to the
LLC on account of the performance of Investment Management Services by the LLC
on behalf of the Offshore Funds (other than any such income or gain equal to the
amounts actually accrued and paid under the terms of the Offshore Management
Agreements), shall be (i) allocated to the Original Principals and Clark in
proportion to their LLC Points and Reserved Points and (ii) shall be deemed to
have been distributed to such Original Principals and Clark, reducing the
Capital Accounts of such Original Principals and Clark in accordance with
Section 4.1(b) hereof.
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(g) All items of LLC loss and deduction on account of New York
City unincorporated business tax payable by the LLC ("UBT") shall be specially
allocated on a quarterly basis to each Member in an amount equal to the amount
of such UBT multiplied by a fraction the numerator of which is total net income
of the LLC allocated (after taking into account any losses, deductions or
expenses allocated under Article IV), and guaranteed payments and bonus payments
made by the LLC, to such Member, and the denominator of which is total net
income of the LLC allocated (after taking into account any losses, deductions or
expenses allocated under Article IV), and guaranteed payments and bonus payments
made by the LLC, to all Members for such period; provided, however, that if the
provisions of [New York City Administrative Code Section 11-604(18)] or any
successor or analog provision thereof providing for the right of corporate
partners (or corporate members of limited liability companies) to claim their
allocable portion of such UBT as a credit for purposes of New York City general
corporation tax ("GCT") are changed so as to reduce or eliminate the right of
corporations organized in the state in which the Manager Member is organized and
doing business in the states in which the Manager Member does business and that
have sufficient GCT liability against which to apply such credit for purposes of
the GCT, then the portion of such UBT no longer so claimable as a credit because
of such change in law shall be allocated pursuant to Section 4.2(b) rather than
pursuant to this Section 4.6(g). In the event that the UBT otherwise payable by
the LLC is reduced by reason of the step-up in the tax basis of the property of
the LLC that is triggered under Section 754 of the Code upon the purchase by the
Manager Member of its LLC Interest, the Manager Member's share of the UBT of the
LLC otherwise determined under this Section 4.6(g) shall be reduced by the same
amount.
SECTION 4.7 FEDERAL TAX ALLOCATIONS. The Manager Member shall, in its
reasonable discretion, allocate the ordinary income and losses and capital gains
and losses of the LLC as determined for U.S. Federal income tax purposes (and
each item of income, gain, loss, deduction or credit entering into the
computation thereof), as the case may be, among the Members for tax purposes in
a manner that, to the greatest extent possible: (a) reflects the economic
arrangement of the Members under this Agreement (determined after taking into
account the allocation provisions of Sections 4.2, 4.5 and 4.6 hereof, and the
distribution provisions of Sections 4.4, 4.5 and 4.6 hereof) and (b) is
consistent with the principles of Sections 704(b) and 704(c) of the Code. The
Members understand and agree that, with respect to any item of property (other
than cash) contributed (or deemed to be contributed for U.S. federal income tax
purposes) by a Member to the capital of the LLC, the initial tax basis of such
property in the hands of the LLC will be the same as the tax basis of such
property in the hands of such Member at the time so contributed. The Members
further understand and agree that the taxable income and taxable loss of the LLC
is to be computed for Federal income tax purposes by reference to the initial
tax basis to the LLC of any assets and properties contributed by the Members
(and not by reference to the Fair Market Value of such assets and properties at
the time contributed). The Members also understand that, pursuant to Section
704(c) of the Code, all taxable items of income, gain, loss and deduction with
respect to such assets and properties shall be allocated among the Members for
Federal income tax purposes so as to take account of any difference between the
initial tax basis of such assets and properties to the LLC and their Fair Market
Values at the time contributed, using any method authorized by the Income Tax
Regulations under Section 704(c) and selected by the Manager Member, in its
reasonable discretion. For purposes of maintaining the Capital Accounts of the
Members, items of income, gain, loss and deduction relating to any asset or
property contributed
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to the LLC that are required to be allocated for tax purposes pursuant to
Section 704(c) of the Code shall not be reflected in the Capital Accounts of the
Members.
ARTICLE V - TRANSFER OF LLC INTERESTS BY NON-MANAGER
MEMBERS; RESIGNATION, REDEMPTION AND WITHDRAWAL BY
NON-MANAGER MEMBERS;
ADMISSION OF ADDITIONAL NON-MANAGER MEMBERS.
SECTION 5.1 ASSIGNABILITY OF LLC INTERESTS. No LLC Interests held by
any Non-Manager Member may be Transferred and no Transfer by a Non-Manager
Member shall be binding upon the LLC or any Member, unless, in each case, it is
expressly permitted by this Article V and the Manager Member receives an
executed copy of the documents effecting such Transfer, which shall be in form
and substance reasonably satisfactory to the Manager Member. A Transferee of LLC
Interests may become a substitute Non-Manager Member only upon the terms and
conditions set forth in Section 5.2 hereof. If a Transferee of LLC Interests of
a Non-Manager Member in the LLC does not become (and until any such Transferee
becomes) a substitute Non-Manager Member in accordance with the provisions of
Section 5.2 hereof, such Person shall not be entitled to exercise or receive any
of the rights, powers or benefits of a Non-Manager Member other than the right,
if any, to receive allocations of profits and losses and distributions which
have been Transferred to such Person. No Non-Manager Member's LLC Interests may
be Transferred except:
(a) with the prior written consent of the Manager Member,
which consent may be granted or withheld by the Manager Member in its reasonable
discretion (provided, that the Manager Member may not withhold its consent in
the case of a proposed Transfer to a bona-fide charitable organization in an
amount that will be required to be Put on account of a Put Notice, for such
twelve-month period previously given by the Transferring Non-Manager Member);
(b) upon the death of such Non-Manager Member, his LLC
Interests may be Transferred by will or the laws of descent and distribution
without the consent of the Manager Member, but subject to the provisions of
Section 7.3 hereof; and
(c) a Non-Manager Member may Transfer LLC Interests to members
of his Immediate Family (excluding for this purpose former spouses) without the
consent of the Manager Member;
provided, that in each case, (i) the Transferee enters into an agreement with
the LLC agreeing to be bound by the provisions hereof (and if such Transferee
is, or in connection with such Transfer is becoming, an employee of the LLC and
is not already a party to a Non-Solicitation Agreement, the Transferee enters
into a Non-Solicitation Agreement) and (ii) whether or not the Transferee enters
into such an agreement, the Transferred LLC Interests shall thereafter remain
subject to this Agreement (and, if applicable, the relevant Non-Solicitation
Agreement) to the same extent they would be if held by such Non-Manager Member;
provided, however, that the provisions of Sections 3.7, 3.8 and 3.9 will not,
solely by virtue of such Transfer, apply to any Transferee unless such
Transferee is an employee of the LLC (or any of its Controlled Affiliates) or
such
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Transferee is a Controlled Affiliate of such an employee or the LLC (although if
such provisions were otherwise applicable to such Transferee, they will continue
to apply to such Person).
For all purposes of this LLC Agreement, any Transfers of LLC Interests
shall be deemed to occur as of the end of the last day of the calendar quarter
in which any such Transfer would otherwise have occurred. Upon any Transfer of
LLC Interests, the Manager Member shall make the appropriate revisions to
Schedule A hereto.
No LLC Interests of a Non-Manager Member in the LLC may be pledged,
hypothecated, optioned or encumbered, nor may any offer to do any of the
foregoing be made without the prior consent of the Management Board and the
Manager Member; provided that the consent of the Manager Member will not be
unreasonably withheld if the purpose of any such pledge or encumbrance is to
secure financing to enable the Transferee to purchase LLC Interests.
SECTION 5.2 SUBSTITUTE NON-MANAGER MEMBERS.
(a) No Transferee of LLC Interests of a Non-Manager Member
shall become a Member except in accordance with this Section 5.2. The Manager
Member may admit, in its sole discretion as a substitute Non-Manager Member
(with respect to all or a portion of the LLC Interests held by a Person), any
Person that acquires LLC Interests by Transfer from another Non-Manager Member
pursuant to Section 5.1 hereof, or that acquires LLC Interests from the Manager
Member pursuant to Section 6.1 hereof. The admission of a Transferee as a
substitute Non-Manager Member shall, in all events, be conditioned upon the
execution of an instrument satisfactory to the Manager Member whereby such
Transferee becomes a party to this Agreement as a Non-Manager Member as well as
compliance by such Transferee with the provisions of Section 3.7 hereof. Upon
the admission of a Transferee as a substitute Non-Manager Member, the Manager
Member shall make the appropriate revisions to Schedule A hereto, and such
Person shall cease to be a "Transferee" for purposes of this Agreement.
(b) Immediately prior to the effectiveness of (x) the
admission of a Transferee of LLC Interests of a Non-Manager Member as a
substitute Non-Manager Member with respect to such LLC Interests pursuant to the
provisions of this Section 5.2, or (y) the admission of a Transferee of LLC
Interests from the Manager Member as an additional Non-Manager Member with
respect to such LLC Interests, the Manager Member may, in its sole discretion,
elect to revalue the Capital Accounts of all the Members effective immediately
prior to such admission. If the Manager Member elects, in its sole discretion,
to revalue the Capital Accounts of all the Members, then the Capital Accounts of
all the Members shall be adjusted as follows:
(i) the Manager Member shall determine the proceeds
which would be realized if the LLC sold all its assets
immediately prior to the effectiveness of such admission, for
a price equal to the Fair Market Value of such assets
determined as provided for herein, and
(ii) The Manager Member shall allocate amounts equal
to the net gain or net loss which would have been realized
upon such a sale to the Capital Accounts of all the Members
immediately prior to the effectiveness of such
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admission, in accordance with the provisions of Section 4.2(c)
or Section 4.2(d) hereof, as applicable.
SECTION 5.3 ALLOCATION OF DISTRIBUTIONS BETWEEN TRANSFEROR AND
TRANSFEREE; SUCCESSOR TO CAPITAL ACCOUNTS.
(a) Upon the Transfer of LLC Interests pursuant to this
Article V, distributions pursuant to Article IV after the date of such Transfer
shall be made to the Transferee at the date of distribution, unless the
Transferor and Transferee otherwise agree and so direct the LLC and the Manager
Member in a written statement signed by both the Transferor and Transferee. In
connection with a Transfer by a Member of LLC Points, the Transferee shall
succeed to a pro-rata (based on the percentage of such Member's LLC Points
Transferred) portion of the Transferor's Capital Account, unless the Transferor
and Transferee otherwise agree and so direct the LLC and the Manager Member in a
written statement signed by both the Transferor and Transferee and, unless such
agreement makes no change other than to reserve to the Transferor all or a
portion of distributions pursuant to Article IV or sales price pursuant to
Article VII, consented to by the Manager Member.
(b) Upon a Transfer of LLC Interests but prior to the
Transferee being admitted as a substitute Member with respect to such LLC
Interests, the Transferee shall receive allocations and distributions pursuant
to the provisions of Sections 4.2, 4.4, 4.5, 4.6 and 4.7 hereof as if such
Transferee were a Manager Member, Non-Manager Member who is an Original
Principal or Non-Manager Member who is not an Original Principal to the same
extent and proportionately with the Transferor of such LLC Interests. For all
other purposes of this Agreement (including, without limitation, the provisions
of Section 4.3, Article VII (except to the extent the LLC and the Manager Member
have been directed in writing to make payments of the proceeds of a Put, a Call
or a Repurchase to the Transferee of such LLC Interests)), upon a Transfer of
LLC Interests but prior to the Transferee being admitted as a substitute Member
with respect to such LLC Interests, the Transferor shall be treated as holding
the LLC Interests so Transferred.
SECTION 5.4 RESIGNATION, REDEMPTIONS AND WITHDRAWALS. No Non-Manager
Member shall have the right to resign, to cause the redemption of its LLC
Interests, in whole or in part, or to withdraw from the LLC, except (a) with the
consent of the Manager Member, or (b) as is expressly provided for in Article
VII hereof. Upon any resignation, redemption or withdrawal, the Non-Manager
Member shall only be entitled to the consideration, if any, provided for by
Article VII hereof. Upon the resignation, redemption or withdrawal, in whole or
in part, by a Non-Manager Member, the Manager Member shall make the appropriate
revisions to Schedule A hereto. Notwithstanding the foregoing, without any
action on his part or on the part of the LLC, the Management Board or any
Member, effective March 31, 1999, Clark shall automatically cease to be a Member
of the LLC and his interest in the LLC shall be reallocated among the Original
Principals who are Members at such time, in proportion to their respective LLC
Point and Reserved Points, and the Manager Member shall make appropriate
revisions to Schedule A hereto.
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SECTION 5.5 ISSUANCE OF ADDITIONAL LLC INTERESTS.
(a) Additional Non-Manager Members (the "Additional
Non-Manager Members" and each an "Additional Non-Manager Member") may be
admitted to the LLC and such Additional Non-Manager Members may be issued LLC
Interests, only upon approval of the Management Board and the consent of the
Manager Member and upon such terms and conditions as may be established by the
Manager Member with the consent of the Management Board (including, without
limitation, upon such Additional Non-Manager Member's execution of an instrument
satisfactory to the Manager Member whereby such Person becomes a party to this
Agreement as a Non-Manager Member as well as, in the case of employees of the
LLC (or its Controlled Affiliates) or any Controlled Affiliate of any such
employee, such Person's compliance with the provisions of Section 3.7 hereof);
provided, that, the Management Board and the Manager Member shall take all
commercially reasonable steps to ensure that there are at least three (3)
Non-Manager Members at all times.
(b) Except as provided by Section 5.4, existing Non-Manager
Members may be issued additional LLC Interests by the LLC only with the consent
of, and upon such terms and conditions as may be established by the Management
Board with the consent of the Manager Member. The Manager Member may only be
issued additional LLC Interests by the LLC upon approval by the Management
Board.
(c) Each time other than as provided by Section 5.4 additional
LLC Interests are issued, the Capital Accounts of all the Members (other than
Clark) shall be adjusted as follows: (i) the Manager Member shall determine the
proceeds which would be realized if the LLC sold all its assets at such time for
a price equal to the Fair Market Value of such assets determined as provided
herein, and (ii) the Manager Member shall allocate amounts equal to the net gain
or net loss which would have been realized upon such a sale to the Capital
Accounts of all the Members immediately prior to the effectiveness of such
issuance in accordance with the provisions of Section 4.2(c) or Section 4.2(d)
hereof, as applicable (provided, that LLC Points and Reserved Points of Clark
shall be deemed to have been allocated in accordance with the last sentence of
Section 5.4 at the time provided therein).
(d) Upon the issuance of additional LLC Interests, the Manager
Member shall make the appropriate revisions to Schedule A hereto.
SECTION 5.6 ADDITIONAL REQUIREMENTS. As additional conditions to the
validity of (x) any Transfer of a Non-Manager Member's LLC Interests (pursuant
to Section 5.1 above), or (y) the issuance of additional LLC Interests (pursuant
to Section 5.5 above), such Transfer or issuance shall not: (i) violate the
registration provisions of the Securities Act or the securities laws of any
applicable jurisdiction, (ii) cause the LLC or any class of its securities to
become subject to registration under the Exchange Act, (iii) cause the LLC to
become subject to regulation as an "investment company" under the 1940 Act and
the rules and regulations of the SEC thereunder, (iv) result in the termination
of any contract to which the LLC is a party and which individually or in the
aggregate are material (it being understood and agreed that any contract
pursuant to which the LLC provides Investment Management Services or Brokerage
Services is material), or
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(v) result in the treatment of the LLC as an association taxable as a
corporation or as a "publicly traded partnership" for Federal or state income
tax purposes.
The Manager Member may require reasonable evidence as to the foregoing,
including, without limitation, a favorable opinion of counsel, which expense
shall be borne by the parties to such transaction (and to the extent the LLC is
such a party, shall be paid from Operating Cash Flow).
To the fullest extent permitted by law, any Transfer that violates the
conditions of this Section 5.6 shall be null and void.
SECTION 5.7 TRANSITION PLANNING WITH RESPECT TO CERTAIN CLIENTS.
(a) It shall be a condition precedent to the exercise by any
Original Principal of a Put of any of his or its LLC Interests or a Repurchase
upon termination of employment from an Original Principal, that each Offshore
Management Agreement shall provide that, effective upon completion of a sale of
LLC Points by such Original Principal or Transferee thereof pursuant to Article
VII, the formulas for determination of the Performance Increment payable to the
LLC pursuant to such agreements shall be increased by an amount correlative to
the proportion of the amount allocable to Manager Shares or other profit
allocation or performance fee structure represented by a fraction, the numerator
of which is the number of LLC Points being sold at that time by such Original
Principal or Transferee, and the denominator of which is the number of LLC
Points of the Original Principals and their Transferees at the time of the first
such sale by any of the Original Principals or their Transferees. The LLC and
each of the Non-Manager Members shall use all commercially reasonable efforts to
cause the LLC and each of the Offshore Funds to comply with this Section 5.7.
Notwithstanding any other provision of this Agreement to the contrary, this
covenant shall survive the withdrawal or removal of a Non-Manager Member from
the LLC. No Non-Manager Member shall enter into any agreement or arrangement or
take any action which is inconsistent with the terms of this Section 5.7, and
the Non-Manager Members shall use all commercially reasonable efforts to prevent
the LLC or any of the Offshore Funds from entering into any agreement or
arrangement or taking any action which is inconsistent with the terms of this
Section 5.7.
(b) Each of the Original Principals hereby covenants and
agrees that, without the prior written consent of the Manager Member, such
Original Principal shall not permit any Offshore Related Partnership to cause or
otherwise permit the Offshore Fund in which any such Offshore Related
Partnership holds interests to (A) terminate the LLC as Investment Advisor to
such Offshore Fund (B) or otherwise modify the LLC's relationship with such
Offshore Fund (including, without limitation, any amendment to the relevant
Offshore Management Agreement or organizational documents of such Offshore Fund)
either (I) in a manner that would have the effect of benefitting one or more of
the Non-Manager Members or members of their Immediate Family to the detriment of
the LLC or the Manager Member or (II) under any circumstances, to effect any
change in the arrangements described in Section 5.7(a).
SECTION 5.8 REPRESENTATION OF MEMBERS. The Manager Member and each
Non-Manager Member (including each Additional Non-Manager Member) hereby
represents and warrants to the
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LLC and each other Member, and acknowledges, that (a) it has such knowledge and
experience in financial and business matters that it is capable of evaluating
the merits and risks of an investment in the LLC and making an informed
investment decision with respect thereto, (b) it is able to bear the economic
and financial risk of an investment in the LLC for an indefinite period of time,
(c) it is acquiring an interest in the LLC for investment only and not with a
view to, or for resale in connection with, any distribution to the public or
public offering thereof, (d) the LLC Interests have not been registered under
the securities laws of any jurisdiction and cannot be disposed of unless they
are subsequently registered and/or qualified under applicable securities laws
and the provisions of this Agreement have been complied with, and (e) the
execution, delivery and performance of this Agreement by such Member do not
require it to obtain any consent or approval that has not been obtained and do
not contravene or result in a default under any provision of any existing law or
regulation applicable to it, or any agreement or instrument to which it is a
party or by which it is bound.
ARTICLE VI - TRANSFER OF LLC INTERESTS BY THE
MANAGER MEMBER; REDEMPTION, REMOVAL
AND WITHDRAWAL
SECTION 6.1 ASSIGNABILITY OF INTEREST.
(a) Except as set forth in this Section 6.1, without the
approval of the Management Board, the Manager Member's LLC Interests may not be
Transferred; provided, however, (i) it is understood and agreed that, in
connection with the operation of the business of the Manager Member (including,
without limitation, the financing of its LLC Interests and direct or indirect
interests in additional investment management companies), the Manager Member's
LLC Interests will be pledged and encumbered, and lien holders of the Manager
Member's LLC Interests shall have, and be able to exercise, the rights of
secured creditors with respect to such LLC Interests, (ii) the Manager Member
may sell some (but not a majority) of its LLC Interests to a Person who is not a
Member but who is an Officer or employee of the LLC or who becomes an Officer or
employee of the LLC in connection with such issuance, or a Person wholly owned
by any such Person, (iii) the Manager Member may sell some (but not a majority)
of its LLC Interests to existing Non-Manager Members, and (iv) the Manager
Member may sell all or any portion of its LLC Interests to a wholly-owned
Controlled Affiliate of the Manager Member. Notwithstanding anything else set
forth herein, the Manager Member may, with the approval of the Management Board,
sell all its LLC Interests in a single transaction or a series of related
transactions, and, in any such case, each of the Non-Manager Members shall be
required to sell, in the same transaction or transactions, all their LLC
Interests; provided, that the price to be received by all the Members shall be
allocated among the Members as follows: (a) an amount equal to the sum of the
positive balances, if any, of the Capital Accounts shall be allocated among the
Members having such Capital Accounts in proportion to such positive balances,
and (b) the excess, if any, shall be allocated among all Members in accordance
with their respective number of LLC Points at the time of such sale. Upon any of
the foregoing transactions, the Manager Member shall make the appropriate
revisions to Schedule A hereto. Solely for purposes of the foregoing sentence,
Clark shall, for as long as he is a Member, be deemed to have a Capital Account
equal to the sum of the Capital Accounts of the Original Principals multiplied
by a
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fraction, the numerator of which is the number of LLC Points held by him at the
time of such transaction or transactions and the denominator of which is the
total number of LLC Points then held by Original Principals and each other
Original Principal shall be deemed to have a Capital Account, equal to his
Capital Account multiplied by a fraction which is one (1) minus the fraction
determined above with respect to Clark.
(b) In the case of any Transfer upon foreclosure pursuant to
Section 6.1(a)(i) above, each Transferee shall sign a counterpart signature page
to this Agreement agreeing thereby to become either a Non-Manager Member or a
Manager Member (provided, however, that once one such other Transferee elects to
become a Manager Member, no Transferee (other than a subsequent Transferee of
such new Manager Member) may elect to be a Manager Member hereunder). If the
Transferees pursuant to Section 6.1(a)(i) above receive all the Manager Member's
LLC Interests, and none of such Transferees elects to become a Manager Member,
then that shall be deemed to be an event of withdrawal by the Manager Member.
If, however, one of the Transferees elects to become a Manager Member, and
executes a counterpart signature page to this Agreement agreeing thereby to
become a Manager Member, then notwithstanding any other provision hereof to the
contrary, the old Manager Member shall thereupon be permitted to withdraw from
the LLC as Manager Member.
(c) In the case of a Transfer pursuant to the penultimate
sentence of Section 6.1(a) above, the Manager Member shall be deemed to have
withdrawn, and its Transferee shall be deemed to have become the Manager Member.
SECTION 6.2 RESIGNATION, REDEMPTION, AND WITHDRAWAL.
(a) To the fullest extent permitted by law, except as set
forth in Section 6.1 hereof, without approval by the Management Board, the
Manager Member shall not have the right to resign or withdraw from the LLC as
Manager Member. With approval by the Management Board, the Manager Member may
resign or withdraw as Manager Member upon prior written notice to the LLC.
Without approval by the Management Board, the Manager Member shall have no right
to have all or any portion of its LLC Interests redeemed. Any resigned or
withdrawn Manager Member shall retain its interest in the capital of the LLC and
its other economic rights under this Agreement as a Non-Manager Member having
the number of LLC Points held by the Manager Member prior to its resignation or
withdrawal. If a Manager Member who has resigned or withdrawn no longer has any
economic interest in the LLC, then upon such resignation or withdrawal, such
Person shall cease to be a Member of the LLC. The Manager Member may not be
removed by the Members of the LLC for any reason.
(b) *** [This subsection has been omitted pursuant to the
confidential treatment request referenced on the cover page hereto. The omitted
portion has been filed separately with the Commission.] ***
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ARTICLE VII - PUTS AND CALLS OF LLC INTERESTS
SECTION 7.1 PUTS.
(a) Each Non-Manager Member may, subject to the terms and
conditions set forth in this Section 7.1, cause the Manager Member to purchase
portions of the LLC Interests held by such Non-Manager Member in the LLC (each a
"Put").
(b) Each Original Principal may, subject to the terms and
conditions set forth in this Agreement, cause the Manager Member to purchase
from such Original Principal on the last business day in February (or, if later
in any year starting in the year 2003, the month end after which the Manager
Member has had the information necessary to determine the Put Price for a period
of not less than fifteen (15) days) starting with such date in the year 2003
(each a "Purchase Date"), all or a portion of the LLC Interests held by such
Original Principal as of the Effective Date. It is a condition precedent to the
exercise by any Original Principal of a Put that such Original Principal, the
LLC, the Offshore Related Partnerships and the Offshore Funds shall have
complied with the provisions of Section 5.7 hereof.
(c) Each Non-Manager Member who is not entitled to any rights
under Section 7.1(b) may, subject to the terms and conditions set forth in this
Agreement, cause the Manager Member to purchase from such Non-Manager Member any
number of LLC Points that is less than or equal to ten percent (10%) of the LLC
Points issued or Transferred to such Non-Manager Member at any time (including,
without limitation, pursuant to the Incentive Program or upon the exercise of
any options granted under the Incentive Program) as of any five (5) separate
Purchase Dates (but only up to an aggregate of a number of LLC Points as is
equal to fifty percent (50%) of the LLC Points issued or Transferred to such
Non-Manager Member), starting on the first Purchase Date which is at least five
(5) years following the date of a particular issuance or Transfer (with LLC
Interests acquired upon exercise of an option being deemed to have been acquired
on the date of grant of such option).
(d) If a Non-Manager Member desires to exercise his rights
under Section 7.1(b) or 7.1(c) above, he shall give the Manager Member, each
other Non-Manager Member and the LLC irrevocable written notice (a "Put Notice")
on or prior to the preceding December 31 (the "Notice Deadline"), stating that
he is electing to exercise such rights and the number of LLC Points (the "Put
LLC Points") to be sold in the Put. Puts in any given calendar year for which
Put Notices are received before the Notice Deadline for that calendar year shall
be completed as follows: the Manager Member shall purchase from each Non-Manager
Member that number of Put LLC Points designated in the Put Notice; provided,
however, that, prior to the tenth (10th) anniversary of the Effective Date, in
no event shall the aggregate number of LLC Points the Manager Member is required
to purchase on any Purchase Date under Section 7.1(b) and Section 7.1(c),
together with all LLC Points purchased by the Manager Member pursuant to Puts
under Section 7.1(b) and Section 7.1(c) within twelve (12) months prior to such
Purchase Date, exceed two and one-half (2.5) LLC Points; and, provided further,
that in the case of a Put under Section 7.1(c) above, in no event shall the
Manager Member be required to purchase LLC Points in excess of either (A) the
maximum number permitted by Section 7.1(c) above with respect to that
Non-Manager Member, that portion of his LLC Points and that year, or (B) the
aggregate number
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of LLC Points that may be Put by that Non-Manager Member with respect to that
portion of the LLC Points issued or transferred to him. If the number of LLC
Points for which Put Notices are received under Section 7.1(b) and Section
7.1(c) before the Notice Deadline for any such twelve (12) month period prior to
the tenth (10th) anniversary of the Effective Date exceeds two and one-half
(2.5) LLC Points, then the Manager Member shall purchase an aggregate of two and
one-half (2.5) LLC Points from among all Non-Manager Members who have provided
timely Put Notices in such proportion as shall result in each such Non-Manager
Member (together with his Transferees) having sold under Section 7.1(b) and
Section 7.1(c) an aggregate percentage of the highest number of LLC Points held
by such Member and his Transferees at any time after the Effective Date that is
as nearly the same as practicable.
(e) The purchase price for a Put (the "Put Price") shall be an
amount equal to (A) ********** (**) multiplied by the amount, if any, equal to
*** [The remainder of this subsection has been omitted pursuant to the
confidential treatment request referenced on the cover page hereto. The omitted
portion has been filed separately with the Commission.] ***
(f) In the case of any Put pursuant to the provisions of
Section 7.1(b) or Section 7.1(c) hereof, the Put Price shall be paid by the
Manager Member (or, if the Manager Member shall have assigned its obligation
pursuant to paragraph (h) below, the assignee(s) thereof) on the relevant
Purchase Date by wire transfer or certified check issued to such Non-Manager
Member or Transferee, in each case, against delivery of such documents or
instruments of Transfer as may reasonably be requested by the Manager Member or
the assignee or assignees thereof, as applicable, and in each case including
representations that at the effective time of such transaction the Non-Manager
Member or Transferee thereof making such Transfer is the record and beneficial
owner of the LLC Interests being Put, free and clear of any Encumbrances other
than those imposed by this Agreement.
(g) The Manager Member may, with consent of the Management
Board, assign any or all of its rights and obligations to purchase LLC Interests
under this Section 7.1, in one or more instances, to the LLC or, if the Manager
Member shall have made a pro-rata offer to the Non-Manager Members, to such
Non-Manager Members as accept such offer.
(h) As of any Purchase Date, the Non-Manager Member or
Transferee thereof making such Transfer shall cease to hold the LLC Interests
purchased on the Purchase Date, and shall cease to hold a pro-rata portion of
such Non-Manager Member's Capital Account and shall no longer have any rights
with respect to such portion of his LLC Interests. Each Transferee of a
Non-Manager Member shall be required to Put such number of LLC Points at such
times as may be directed by the Transferor Non-Manager Member (subject to the
restrictions set forth in Sections 7.1(b), 7.1(c) and 7.1(d) which shall
continue to apply as if the LLC Points were held by the Transferor Non-Manager
Member.
SECTION 7.2 CALLS.
(a) The Manager Member may, subject to the terms and
conditions set forth in this Section 7.2, cause each Non-Manager Member to sell
portions of the LLC Interests held by each such Non-Manager Member in the LLC
(each a "Call").
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(b) The Manager Member may cause each Non-Manager Member (and
any Transferee thereof) to sell up to twenty percent (20%) of the highest total
number of LLC Points (excluding any Reserved Points) held by such Non-Manager
Member at any time, to the Manager Member on any Purchase Date starting with the
first Purchase Date which is after the 65th birthday of such Non-Manager Member.
(c) If the Manager Member desires to exercise its rights under
Section 7.2(b), it shall give each Non-Manager Member and the LLC irrevocable
written notice (a "Call Notice") on or prior to the immediately preceding Notice
Deadline, stating that it is electing to exercise such rights, the Non-Manager
Member with respect to whom the Call is being exercised and the number of LLC
Points to be purchased in the Call.
(d) The purchase price for a Call (the "Call Price") shall be
an amount equal to (A) ********** (**) multiplied by the amount, if any, equal
to *** [The remainder of this subsection has been omitted pursuant to the
confidential treatment request referenced on the cover page hereto. The omitted
portion has been filed separately with the Commission.] ***
(e) As of any Purchase Date, the Non-Manager Member (and its
Transferees to the extent applicable) selling LLC Points under this Section 7.2
shall cease to hold the LLC Interests purchased on the Purchase Date, and shall
cease to hold a pro-rata portion of such Non-Manager Member's Capital Account
and shall no longer have any rights with respect to such portion of its LLC
Interests.
SECTION 7.3 REPURCHASE UPON TERMINATION OF EMPLOYMENT OR TRANSFER BY
OPERATION OF LAW.
(a) In the event that the employment by the LLC of any
Non-Manager Member other than Clark terminates for any reason, then:
(i) if the termination of the Non-Manager Member
occurred because of the death or Permanent Incapacity of such
Non-Manager Member and the LLC has purchased key-man life or
lump-sum disability insurance on such Non-Manager Member, the
LLC shall purchase and the Non-Manager Member (and any
Transferees thereof who have not been admitted as Non-Manager
Members) (together a "Repurchased Member") shall sell to the
LLC for cash, that number of LLC Points then held by such
Repurchased Member (before taking into account any Repurchase
hereunder) the Repurchase Price of which is equal to the cash
proceeds of any key-man life insurance policies or lump-sum
disability insurance policies, as applicable, maintained by
the LLC on the life or health of such Non-Manager Member (an
"LLC Repurchase"), and
(ii) in each other such case (and, in the case of the
death or Permanent Incapacity of a Non-Manager Member, to the
extent the Repurchase Price exceeds the proceeds described in
clause (i) of this Section 7.3(a) (determined after all such
proceeds have been collected)), the Manager Member shall
purchase and the Repurchased Member shall sell (each a
"Manager Member Repurchase") all (or,
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in the case of the death or Permanent Incapacity of a
Non-Manager Member, such remaining portion as is not required
to be purchased by the LLC under clause (i) of this Section
7.3(a)) of the LLC Points held by the Repurchased Member, in
each case, pursuant to the terms of this Section 7.3. For
purposes hereof, each LLC Repurchase and each Manager Member
Repurchase together with the related LLC Repurchase, if any,
is referred to as a "Repurchase."
(b) The closing of the Repurchase will take place on a date
set by the Manager Member (the "Repurchase Closing Date"), which shall be within
sixty (60) days after the last day of the calendar quarter in which the
Non-Manager Member's employment with the LLC is terminated or, if longer,
fifteen (15) days after the Manager Member receives the information necessary to
calculate the Repurchase Price; provided, however, that if the employment by the
LLC of such Non-Manager Member is terminated because of the death or Permanent
Incapacity of such Non-Manager Member and the LLC or the Manager Member has
purchased key-man life or lump-sum disability insurance on such Non-Manager
Member, then the Repurchase Closing Date shall be a date set by the Manager
Member which is as soon as reasonably practicable after the LLC or the Manager
Member has received all proceeds of all key-man life insurance policies or
disability insurance policies, as applicable, maintained by the LLC on the life
or health of such Non-Manager Member; and, provided, further, that it shall be a
condition precedent to any Repurchase of LLC Interests from an Original
Principal that such Non-Manager Member (or his heirs and assigns), the LLC and
the Offshore Funds shall have complied with the provisions of Section 5.7
hereof.
(c) The purchase price for the Repurchase (the "Repurchase
Price") shall be determined as follows: the Repurchase Price shall be calculated
as of the last day of the calendar quarter in which the termination of such
Non-Manager Member's employment occurs and shall equal (A) ********** (**)
multiplied by the amount, if any, equal to *** [The remainder of this subsection
has been omitted pursuant to the confidential treatment request referenced on
the cover page hereto. The omitted portion has been filed separately with the
Commission.] ***
(d) The rights of the Manager Member, the LLC and their
assignees hereunder are in addition to and shall not affect any other rights
which the Manager Member, the LLC or their assigns may otherwise have to
repurchase LLC Interests (including, without limitation, pursuant to any
agreement entered into by an Additional Non-Manager Member which provides for
the vesting of LLC Points).
(e) On the Repurchase Closing Date, the Manager Member and/or
the LLC (as applicable) shall pay to the Repurchased Member the Repurchase Price
for the LLC Interests repurchased in the manner set forth in this Section 7.3,
and upon such payment the Repurchased Member shall cease to hold any LLC
Interests, and such Repurchased Member shall be deemed to have withdrawn from
the LLC and shall cease to be a Member of the LLC and shall no longer have any
rights hereunder; provided, however, that the provisions of Article III and
Sections 10.4, 10.5 and 10.6 shall continue as set forth therein. On the
Repurchase Closing Date, the Repurchased Member and the LLC (and if the Manager
Member is purchasing LLC Interests from the Repurchased Member, the Manager
Member) (or their assignees) shall execute an agreement reasonably acceptable to
the Manager Member in which the Repurchased Member represents and
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warrants to the Manager Member and/or the LLC, as applicable (or their
assignees), that it has sole record and beneficial title to the Repurchased
Interest, free and clear of any Encumbrances at the date of the transaction
other than those imposed by this Agreement. Payment of the Repurchase Price
shall be made on the Repurchase Closing Date as follows: (i) in the case of
termination of employment of an Original Principal or, in the case of any other
Non-Manager Member, because of death or Permanent Incapacity of such Non-Manager
Member (to the extent of the collected proceeds of any insurance policies under
which the LLC or the Manager Member is the beneficiary upon the death or
Permanent Incapacity of such Non-Manager Member), by wire transfer of
immediately available funds to an account designated by the Repurchased Member
in writing at least three (3) business days prior to the Repurchase Closing
Date, and (ii) in the case of any other termination of employment of a
Non-Manager Member who is not an Original Principal other than a Retirement (but
including a termination of employment because of Permanent Incapacity to the
extent the obligation exceeds the proceeds of any key-man disability insurance
policies described above), with a promissory note in the form attached hereto as
Exhibit C, the principal of which promissory note would be paid in four (4)
equal installments, the first installment would be paid on the Repurchase Date,
and the second, third and fourth installments would be paid fourteen (14)
months, twenty-six (26) months and thirty-eight (38) months, respectively, after
the first installment.
(f) The Manager Member may, with the consent of the Management
Board, assign any or all of its rights and obligations under this Section 7.3,
in one or more instances, to the LLC; provided, that the foregoing shall have no
effect on the LLC's obligation set forth in Section 7.3(a)(i) regarding the use
of the proceeds of a key-man life or disability insurance policy.
(g) In the event that a Non-Manager Member or a Transferee
thereof is required to sell its LLC Interests pursuant to the provisions of this
Section 7.3, and in the further event that such Non-Manager Member or any
Transferee thereof refuses to, is unable to, or for any reason fails to, execute
and deliver the documents required by this Section 7.3, the LLC or the Manager
Member, as applicable (or their respective assign(s)) may deposit the purchase
price, if any, therefor (including cash and/or promissory notes) with any bank
doing business within fifty (50) miles of the LLC's principal place of business,
or with the LLC's accounting firm, as agent or trustee, or in escrow, for such
Non-Manager Member or Transferee, to be held by such bank or accounting firm for
the benefit of and for delivery to such Non-Manager Member or Transferee. Upon
such deposit by the LLC or the Manager Member (or their respective assign(s))
and upon notice thereof given to such Non-Manager Member or Transferee, such
Non-Manager Member's LLC Interests shall be deemed to have been Transferred to
the LLC or the Manager Member (or their assign(s)), as applicable, the
Non-Manager Member and/or any such Transferee shall have no further rights with
respect thereto (other than the right to withdraw any payment therefor held in
escrow), and the Manager Member shall record such Transfer or repurchase on
Schedule A hereto.
SECTION 7.4 ELECTION RIGHTS OF MANAGER MEMBER TO PAY IN SHARES OF AMG
STOCK.
(a) If the Manager Member has, at the time of a Put or a
Repurchase completed a registration of shares of its common stock for sale under
the Securities Act (other than a registration on Form S-8 or its then equivalent
form) or a registration effected solely to implement
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an employee benefit plan, a transaction under Rule 145 or to which any other
similar rule of the SEC under the Securities Act is applicable or registration
on a form not available for registering securities for sale to the public (a
"Public Offering"), then the Manager Member may elect to pay all or a portion of
the Put Price for the relevant Put, or Repurchase Price for the Repurchase in
shares of the Manager Member's Common Stock (the "AMG Stock") in accordance with
the provisions of this Section 7.4. If the Manager Member elects to pay a
portion of the Put Price or Repurchase Price in shares of AMG Stock in
accordance with the provisions of this Section 7.4, the portion of the
consideration which is paid in AMG Stock shall reduce the cash portion of the
Put Price or Repurchase Price.
(b) An election under this Section 7.4 must be made by the
Manager Member at least sixty (60) days prior to the relevant Purchase Date, by
giving written notice to the LLC and the Non-Manager Member who has exercised a
Put (or with respect to whom a Call is being exercised) or Repurchased Member,
as applicable, of such election, which election, once made, shall only be
revocable within thirty (30) days after being made.
(c) The number of shares of AMG Stock to be issued upon
exercise of the Put, or upon the Repurchase shall equal the quotient obtained by
dividing the portion of the Put Price or Repurchase Price (as applicable)
payable in AMG Stock by AMG's Average Stock Price, where:
(i) "AMG's Average Stock Price" is defined to mean
the average (arithmetic mean) Stock Price of AMG Stock during
the forty (40) trading days prior to the date of the closing
of the Put or Call or Repurchase; and
(ii) "Stock Price" is defined to mean, for any day,
the closing price for the AMG Stock, which shall be the last
sale price or, in the case no such sale takes place on such
day, the average of the closing bid and asked prices, in
either case as reported in the principal consolidated
transaction reporting system with respect to securities listed
on the principal national securities exchange or other market
on which the AMG Stock is listed or admitted to trading; or,
if not listed or admitted to trading on any national
securities exchange, the last quoted price (or, if not so
quoted, the average of the last quoted high bid and low asked
prices) in the over-the-counter market, as reported by NASDAQ
or such other system then in use; or, if on any such date no
bids are quoted by any such organization, the average of the
closing bid and asked prices as furnished by a professional
market maker making a market in such security reasonably
selected by the Board of Directors of AMG; PROVIDED, HOWEVER,
that if at the time AMG makes such election, the product of
AMG's Average Stock Price multiplied by the number of shares
of AMG Stock owned beneficially by persons who are not
executive officers or directors of AMG or entities which are
currently beneficial owners of more than ten percent (10%) of
AMG Stock within the meaning of Rule 16a-1 of the Exchange Act
does not exceed five hundred million dollars ($500,000,000),
then the Stock Price shall be reduced by an illiquidity
factor, if any, determined by an investment banking firm
reasonably acceptable to the Manager Member and the Management
Board.
In the event that there is any stock split (or reverse stock split), stock
dividend or other similar event, equitable and appropriate adjustments shall be
made in the application of the foregoing calculation of AMG's Average Stock
Price to take account of such event.
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(d) The maximum portion of the Put Price or Repurchase Price
payable in AMG Stock without the consent of the Non-Manager Member (or his
estate or representative) shall be 100% minus the maximum combined federal,
state and local marginal tax rate applicable to sales of capital assets held by
such Non-Manager Member for the period he held such interests; provided,
however, that such portion shall be 0% if a stockholder of the Manager Member on
the Effective Date beneficially has purchased more than 40% of the outstanding
AMG Stock other than in connection with an investment (by merger or otherwise)
by the Manager Member or if the Non-Manager Member has died and the AMG Stock to
be received by his estate, heirs, beneficiaries or Transferees is not
immediately salable without registration or any other restriction.
SECTION 7.5 CLASS B PUTS; INCREASE IN FREE CASH FLOW PERCENTAGE.
(a) Each Non-Manager Member holding Class B Points may cause
the Manager Member to purchase all (and not less than all) of such Class B
Points for the Class B Payment on any one Purchase Date on or after the tenth
(10th) anniversary of the Effective Date (a "Class B Put Date"), subject to and
in accordance with the terms and conditions set forth in this Section 7.5 (each,
a "Class B Put"). Upon the closing of any such Class B Put as of the Class B Put
Date, the Class B Points purchased by the Manager Member shall be automatically
converted into that number of new LLC Points as is specified below, and the Free
Cash Flow Percentage shall thereafter be increased as provided herein.
(b) Each Non-Manager Member who has been issued Class B Points
pursuant to this Agreement, as set forth on Schedule A hereto (and as amended
from time to time), is entitled, upon exercise of the Class B Put, to the
corresponding Class B Value. For purposes of this Section 7.5, the "Class B
Value" shall mean, as of any Class B Put Date, (i) the Class B Interest as of
the end of the fiscal year ending on or most recently prior to the applicable
Class B Put Date, if any, multiplied by (ii) a fraction, the numerator of which
is the total number of Class B Points held by such Non-Manager Member, and the
denominator of which is the aggregate number of Class B Points outstanding as of
such Class B Put Date immediately prior to exercise of such Class B Put.
(c) If a Non-Manager Member desires to exercise its Class B
Put, it shall give the Manager Member, each other Non-Manager Member and the LLC
irrevocable written notice (a "Class B Notice") (together, in the case of an
Original Principal, with his notice of Retirement) on or prior to the preceding
December 31 (the "Class B Notice Deadline") stating that he is electing to
exercise such Class B Put.
(d) Upon the first Class B Put Date immediately following
delivery of a Class B Notice, the Manager Member shall pay the Non-Manager
Member exercising his Class B Put an amount (the "Class B Payment") equal to
such Non-Manager Member's Class B Value as of such Class B Put Date multiplied
by ********** (**). Upon payment of the Class B Payment as of such Class B Put
Date, the Non-Manager Member who has exercised his Class B Put shall cease to
hold any Class B Points and shall no longer have any rights hereunder with
respect to such Class B Points.
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(e) Immediately upon payment of the Class B Put Payment to the
Non-Manager Member exercising his Class B Put,
(i) the Class B Points purchased by the Manager
Member shall automatically convert into that number of new LLC
Points equal to the product of (x) the aggregate number of LLC
Points (excluding Reserved Points, if any) outstanding
immediately prior to the applicable Class B Put Date and (y) a
fraction, the numerator of which is such Non-Manager Member's
Class B Value as of such Class B Put Date, and the denominator
of which is the Free Cash Flow for the preceding fiscal year;
and
(ii) the Free Cash Flow Percentage shall be increased
to an amount equal to the sum of (x) the Free Cash Flow
Percentage immediately prior to the applicable Class B Put
Date and (y) a fraction, the numerator of which is such
Non-Manager Member's Class B Value as of such Class B Put
Date, and the denominator of which is the Revenues From
Operations for the preceding fiscal year.
(f) The Class B Payment shall be paid by the Manager Member
(or its assigns) on the relevant Class B Put Date either (i) by wire transfer or
certified check issued to such Non-Manager Member, or (ii) subject to the
limitations set forth in Section 7.4 with respect to Puts, at the election of
the Manager Member if the Manager Member has, at that time, completed a Public
Offering, by the delivery to such Non-Manager Member of that number of shares of
AMG Stock as it would be required to deliver under Section 7.4(c) if the Class B
Payment were the Put Price and the Class B Put Date were the Purchase Date, in
each case, immediately following the Manager Member's receipt of any
documentation it may deem necessary to evidence the conversion of the Class B
Point into additional LLC Points and the increase in the Free Cash Flow
Percentage, including, without limitation, an acknowledgment of the foregoing
executed by each of the Members of the LLC.
(g) In the event that the employment by the LLC of any
Non-Manager Member terminates for any reason at any time on or after the tenth
(10th) anniversary of the Effective Date, then such Non-Manager Member (or his
or her estate, heirs or legal representatives, as the case may be) may cause the
Manager Member to purchase all (and not less than all) of the Class B Points
held by such Non-Manager Member as of the date of such termination (with respect
to which no Class B Notice had previously been given to the Manager Member) for
the Class B Payment on the Class B Put Date immediately following the date of
such termination, subject to and in accordance with the terms and conditions set
forth herein. For purposes of applying this clause (g) only, each reference to
"Non-Manager Member" in the other clauses of this Section 7.5 (other than clause
(h) of this Section 7.5) shall be deemed to include the estate, heirs and legal
representatives of any such Non-Manager Member, and, except for purposes of
Section 7.5(h) hereof, any purchase of Class B Points pursuant to this clause
(g) shall be included within the definition of "Class B Put." In the event that
the employment by the LLC of any Non-Manager Member terminates for any reason at
any time prior to the tenth (10th) anniversary of the Effective Date, then any
Class B Points held by such Non-Manager Member as of the date of such
termination shall be automatically canceled and shall be null and void, and such
Non-Manager
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Member (and his or her estate, heirs or legal representatives, as applicable)
shall no longer have any rights hereunder with respect to such Class B Points.
(h) If a Non-Manager Member who has previously exercised his
Class B Put thereafter (i) exercises a Put under Section 7.1 hereof, (ii) is
subject to a Call under Section 7.2 hereof, or (iii) is subject to a Repurchase
under Section 7.3 hereof, then, the following shall occur:
(i) The Manager Member shall determine whether, as of
the effective date of such Put, Call or Repurchase after
giving pro-forma effect to such Put, Call or Repurchase, the
Class B Interest in the aggregate (the "Pro-Forma Class B
Interest") is greater than zero (0);
(ii) If the Pro-Forma Class B Interest is greater
than zero (0), then on the first Class B Put Date following
the closing of such Put, Call or Repurchase, the Manager
Member shall pay to such Non-Manager Member an amount equal to
(x) ********** (**), multiplied by (y) such Pro-Forma Class B
Interest minus the actual Class B Interest as of the effective
date of such Put, Call or Repurchase, multiplied by (z) a
fraction, the numerator of which is the number of Class B
Points held by such Non-Manager Member immediately prior to
his Class B Put, and the denominator of which is the sum of
the number of Class B Points outstanding as of the effective
date of such Put, Call or Repurchase together with the number
of Class B Points held by such Non-Manager Member immediately
prior to his Class B Put;
(iii) Upon such payment, a number of new LLC Points
shall be issued to the Manager Member as is equal to (x) the
product of the aggregate number of LLC Points (and Reserved
Points, if any) outstanding and (y) a fraction, the numerator
of which is the product of subclauses (y) and (z) under clause
(ii) above, and the denominator of which is such product, plus
the Free Cash Flow for the fiscal year preceding the date of
the payment under clause (ii) above; and
(iv) The Free Cash Flow Percentage shall than also be
increased to an amount equal to the sum of (x) the Free Cash
Flow Percentage immediately prior to the payment under clause
(ii) above and (y) a fraction (expressed as a percentage), the
numerator of which is the product of subclauses (y) and (z)
under clause (ii) above, and the denominator of which is
Revenues From Operations for the preceding fiscal year.
ARTICLE VIII - DISSOLUTION AND TERMINATION.
SECTION 8.1 NO DISSOLUTION. The LLC shall not be dissolved by the
admission of Additional Non-Manager Members, substitute Non-Manager Members or
substitute Manager Members or by the death, retirement, resignation, expulsion,
bankruptcy or dissolution of any Member of the LLC.
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SECTION 8.2 EVENTS OF DISSOLUTION. The LLC shall be dissolved and its
affairs wound up upon the occurrence of any of the following events:
(a) a date designated in writing by the Manager Member with
the consent of the Management Board; or
(b) upon the entry of a decree of judicial dissolution under
Section 18-802 of the Act.
SECTION 8.3 NOTICE OF DISSOLUTION. The Manager Member shall promptly
notify the Members of any dissolution of the LLC pursuant to Section 8.2 hereof
or otherwise pursuant to the Act.
SECTION 8.4 LIQUIDATION. Upon the dissolution of the LLC, the Manager
Member, or if there is none, the Person or Persons approved by the holders of
more than fifty percent (50%) of the LLC Points then outstanding (including the
Person that was the Manager Member) shall carry out the winding up of the LLC
(in such capacity, the "Liquidating Trustee") and shall immediately commence to
wind up the LLC's affairs; provided, however, that a reasonable time shall be
allowed for the orderly liquidation of the assets of the LLC and the
satisfaction of liabilities to creditors so as to enable the Members to minimize
the normal losses attendant upon a liquidation. The Members shall continue to
share in allocations and distributions during liquidation in the same
proportions, as specified in Article IV hereof, as before liquidation. The
proceeds of liquidation shall be distributed as set forth in Section 4.5 hereof.
SECTION 8.5 TERMINATION. The LLC shall terminate when all of the assets
of the LLC, after payment of or due provision for all debts, liabilities and
obligations of the LLC, shall have been distributed to the Members in the manner
provided for in Section 4.5 hereof and the Certificate shall have been canceled
in the manner required by the Act.
SECTION 8.6 CLAIMS OF THE MEMBERS. All Members and former Members shall
look solely to the LLC's assets for any return of their Capital Contributions
and if the assets of the LLC remaining after payment of or due provision for all
debts, liabilities and obligations of the LLC are insufficient to return such
Capital Contributions, the Members and former Members shall have no recourse
against the LLC or any other Member.
ARTICLE IX - RECORDS AND REPORTS.
SECTION 9.1 BOOKS AND RECORDS. The LLC shall, and the Non-Manager
Members who are members of the Management Board shall use all commercially
reasonable efforts to cause the LLC to, keep complete and accurate books of
account with respect to the operations of the LLC, prepared in accordance with
generally accepted accounting principles, using the accrual method of
accounting, consistently applied. Such books shall reflect that the LLC
Interests have not been registered under the Securities Act, and that the LLC
Interests may not be Transferred without registration under the Securities Act
or exemption therefrom and without compliance with Article V or Article VI of
this Agreement, as applicable. Such books shall be maintained at the principal
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office of the LLC in New York, New York or at such other principal place of
business as determined pursuant to Section 2.5 hereof.
SECTION 9.2 ACCOUNTING. The LLC's books of account shall be kept on the
accrual method of accounting, or on such other method of accounting as the
Manager Member may from time to time determine, with the advice of the
Independent Public Accountants, and shall be closed and balanced at the end of
each LLC fiscal year. The taxable year of the LLC shall be the twelve (12)
months ended December 31 or such other taxable year as the Manager Member may
designate, with the written advice of the Independent Public Accountants.
SECTION 9.3 FINANCIAL AND COMPLIANCE REPORTS. The LLC shall, and each
Non-Manager Member who is a member of the Management Board shall use all
commercially reasonable efforts to cause the LLC to, furnish to the Manager
Member each of the following:
(a) within ten (10) days after the end of each month and each
fiscal quarter, an unaudited financial report of the Revenues From Operations of
the LLC and the net assets of each Offshore Fund on each date as of which the
net assets thereof were determined during such period, which report shall be
prepared in accordance with generally accepted accounting principles using the
accrual method of accounting, consistently applied (except that the financial
report may (i) be based on estimates to the extent actual data is not available
and be subject to adjustments of such estimates within seventeen (17) days after
the end of each month and each fiscal quarter, (ii) be subject to normal
year-end audit adjustments which are neither individually nor in the aggregate
material and (iii) not contain all notes thereto which may be required in
accordance with generally accepted accounting principles) and shall be certified
by the most senior financial Officer of the LLC to have been so prepared;
(b) as soon as practicable and in any event within seventeen
(17) days after the end of each month and each fiscal quarter, a report prepared
in a similar manner and certified by the most senior financial Officer of the
LLC to have been so prepared, which shall include:
(i) statements of operations, changes in Members'
Capital Accounts and cash flows for such month or quarter, together
with a cumulative income statement from the first day of the
then-current fiscal year to the last day of such month or quarter;
(ii) a balance sheet as of the last day of such month
or quarter; and
(iii) with respect to the quarterly financial report,
a detailed computation of Free Cash Flow for such quarter;
(c) within fifteen (15) days after the end of each fiscal year
of the LLC, a financial report of Revenues From Operations of the LLC for such
year and the net assets of each Offshore Fund on each date as of which the net
assets thereof were determined during such year, in each case, as to which the
audit procedures applicable to such item shall have been performed by
Independent Public Accountants satisfactory to the Manager Member;
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(d) within seventeen (17) days after the end of each fiscal
year of the LLC or within such other time as the Manager Member and the
Management Board agree, audited financial statements of the LLC, which shall
include statements of operations, changes in Members' Capital Accounts and cash
flows for such year and a balance sheet as of the last day thereof, each
prepared in accordance with generally accepted accounting principles, using the
accrual method of accounting, consistently applied, certified by Independent
Public Accountants satisfactory to the Manager Member;
(e) if requested by the Manager Member, within twenty-five
(25) days after the end of each calendar quarter, the LLC's operating budget for
each of the next four (4) fiscal quarters, in such form and containing such
estimates as may be requested by the Manager Member from time to time;
(f) copies of all financial statements, reports, notices,
press releases and other documents released to the public;
(g) as promptly as is reasonably possible following request by
the Manager Member from time to time, such operations and/or performance data as
may be requested; and
(h) any other financial or other information available to the
Officers as the Manager Member shall have reasonably requested on a timely
basis.
SECTION 9.4 MEETINGS.
(a) The LLC and its Officers shall hold such regular meetings
at the LLC's principal place of business with representatives of the Manager
Member not more frequently than quarterly (except in special circumstances) as
may be reasonably requested by the Manager Member from time to time. These
meetings shall be attended (either in person or by telephone) by such of the
Officers and other employees of the LLC as may be reasonably requested by the
Manager Member or any of the Officers. The LLC will reimburse the reasonable
travel expenses of any representative of the Manager Member who attends each
such meeting.
(b) At each meeting, the Officers shall make such
presentations regarding the LLC and its performance, operations and/or budgets
as may be reasonably requested by the Manager Member, and each of the attendees
(whether in person or by telephone) at such meeting shall have the right to
submit proposals and suggestions regarding the LLC, and the attendees at the
meeting shall discuss and consider such proposals and suggestions.
SECTION 9.5 TAX MATTERS.
(a) The Manager Member shall cause to be prepared and filed on
or before the due date (or any extension thereof) Federal, state, local and
foreign tax or information returns required to be filed by the LLC and shall
provide to the other Members, as soon as reasonably practicable following the
close of each taxable year of the LLC, any information which the Manager Member
has which is necessary to allow the Members to timely prepare and file any
federal, state or local income tax returns (including IRS Schedule K-1). The
Manager Member,
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to the extent that LLC funds are available, shall cause the LLC to pay any taxes
payable by the LLC (it being understood that the expenses of preparation and
filing of such tax returns, and the amounts of such taxes (except that UBT shall
be paid out of Free Cash Flow prior to the distribution thereof, except to the
extent UBT is allocated pursuant to the provisions of Section 4.6(g) hereof to
Non-Manager Members in respect of such guaranteed payments and bonus payments or
by operation of the proviso of the first sentence of Section 4.6(g)), are to be
treated as operating expenses of the LLC to be paid from Operating Cash Flow);
provided that the Manager Member shall not be required to cause the LLC to pay
any tax so long as the Manager Member or the LLC is in good faith and by
appropriate legal proceedings contesting the validity, applicability or amount
thereof and such contest does not materially endanger any right or interest of
the LLC and adequate reserves therefor have been set aside by the LLC. Neither
the LLC nor any Non-Manager Member shall do anything or take any action which
would be inconsistent with the foregoing or with the Manager Member's actions as
authorized by the foregoing provisions of this Section 9.5(a). Each Non-Manager
Member shall cooperate with the Manager Member in causing the LLC to make an
election under Section 754 of the Code with respect to its fiscal year ended
Effective Date.
(b) The Manager Member shall be the "tax matters partner" for
the LLC pursuant to Sections 6221 through 6233 of the Code.
ARTICLE X - LIABILITY, EXCULPATION AND INDEMNIFICATION.
SECTION 10.1 LIABILITY. Except as otherwise provided by the Act, the
debts, obligations and liabilities of the LLC, whether arising in contract, tort
or otherwise, shall be solely the debts, obligations and liabilities of the LLC,
and no Covered Person shall be obligated personally for any such debt,
obligation or liability of the LLC solely by reason of being a Covered Person.
SECTION 10.2 EXCULPATION.
(a) No Covered Person shall be liable to the LLC or any other
Covered Person for any loss, damage or claim incurred by reason of any act or
omission performed or omitted by such Covered Person in good faith on behalf of
the LLC and in a manner reasonably believed to be within the scope of authority
conferred on such Covered Person by this Agreement, except that a Covered Person
shall be liable for any such loss, damage or claim incurred by reason of any
action or inaction of such Covered Person which constituted fraud, gross
negligence, bad faith, willful misconduct or a breach of this Agreement or, in
the case of a Non-Manager Member, the Non-Solicitation Agreement to which he is
a party.
(b) A Covered Person shall be fully protected in relying in
good faith upon the records of the LLC and upon such information, opinions,
reports or statements presented to the Covered Person by any Person as to
matters the Covered Person reasonably believes are within such other Person's
professional or expert competence and who has been selected with reasonable care
by or on behalf of the LLC of such Covered Person.
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SECTION 10.3 FIDUCIARY DUTY.
(a) To the extent that, at law or in equity, a Covered Person
has duties (including fiduciary duties) and liabilities relating thereto to the
LLC or to any Member, a Covered Person acting under this Agreement shall not be
liable to the LLC or to any Member for its good faith reliance on the provisions
of this Agreement. The provisions of this Agreement, to the extent that they
restrict the duties and liabilities of a Covered Person otherwise existing at
law or in equity, are agreed by the parties hereto to replace such other duties
and liabilities of such Covered Person.
(b) Unless otherwise expressly provided herein, (i) whenever a
conflict of interest exists or arises between the Manager Member and any other
Member the resolution or manner of resolution of which is not specifically
provided for herein, or (ii) whenever this Agreement or any other agreement
contemplated herein or therein provides that the Manager Member shall act in a
manner that is, or provides terms that are, fair and reasonable to the LLC or
any Member, the Manager Member shall resolve such conflict of interest, take
such action or provide such terms, considering in each case the relative
interest of each party (including its own interest) to such conflict, agreement,
transaction or situation and the benefits and burdens relating to such
interests, any customary or accepted industry practices, and any applicable
generally accepted accounting practices or principles. In the absence of bad
faith by the Manager Member, the resolution, action or term so made, taken or
provided by the Manager Member shall not constitute a breach of this Agreement
or any other agreement contemplated herein or of any duty or obligation of the
Manager Member at law or in equity or otherwise.
(c) Whenever in this Agreement the Manager Member is permitted
or required to make a decision (i) in its "sole discretion" or under a grant of
similar authority or latitude, the Manager Member shall be entitled to consider
such interests and factors as it desires, including its own interests, and shall
have no duty or obligation to give any consideration to any interest of or
factors affecting the LLC or any other Person, or (ii) in its "good faith",
"reasonable discretion" or under another express standard, the Manager Member
shall act under such express standard and shall not be subject to any other or
different standard imposed by this Agreement or other applicable law.
(d) Wherever in this Agreement a factual determination is
called for and the applicable provision of this Agreement does not indicate what
party or parties are to make the applicable factual determination, and/or the
applicable standard to be used in making the factual determination, such
determination shall be made by the Manager Member in the exercise of its good
faith discretion.
SECTION 10.4 INDEMNIFICATION. To the fullest extent permitted by
applicable law, a Covered Person shall be entitled to indemnification from the
LLC for any loss, damage or claim (including any amounts paid in settlement of
any such claims) incurred by such Covered Person by reason of any act or
omission performed or omitted by such Covered Person in good faith on behalf of
the LLC and in a manner reasonably believed to be within the scope of authority
conferred on such Covered Person by this Agreement, except that no Covered
Person shall be entitled to be indemnified in respect of any loss, damage or
claim incurred by such Covered
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Person by reason of any action or inaction of such Covered Person which
constituted fraud, gross negligence, bad faith, willful misconduct or a breach
of this Agreement, the Purchase Agreement or, in the case of the Non-Manager
Member, the Non-Solicitation Agreement to which he is a party; provided,
however, that any indemnity under this Section 10.4 shall be provided out of and
to the extent of LLC assets only, and no Covered Person shall have any personal
liability to provide indemnity on account thereof.
SECTION 10.5 NOTICE; OPPORTUNITY TO DEFEND AND EXPENSES.
(a) Promptly after receipt by any Covered Person from any
third party of notice of any demand, claim or circumstance that, immediately or
with the lapse of time, would reasonably be expected to give rise to a claim or
the commencement (or threatened commencement) of any action, proceeding or
investigation (an "Asserted Liability") that could reasonably be expected to
result in any loss, damage or claim with respect to which the Covered Person
might be entitled to indemnification from the LLC under Section 10.4, the
Covered Person shall give notice thereof (the "Claims Notice") to the LLC;
provided, however, that a failure to give such notice shall not prejudice the
Covered Person's right to indemnification hereunder except to the extent that
the LLC is actually prejudiced thereby. The Claims Notice shall describe the
Asserted Liability in such reasonable detail as is practicable under the
circumstances, and shall, to the extent practicable under the circumstances,
indicate the amount (estimated, if necessary) of the loss or damage that has
been or may be suffered by the Covered Person.
(b) The LLC may elect to compromise or defend, at its own
expense and by its own counsel, any Asserted Liability; provided, however, that
if the named parties to any action or proceeding include (or could reasonably be
expected to include) both the LLC and a Covered Person, or more than one Covered
Persons, and the LLC is advised that representation of both parties by the same
counsel would be inappropriate under applicable standards of professional
conduct, the Covered Person may engage separate counsel at the expense of the
LLC. If the LLC elects to compromise or defend such Asserted Liability, it shall
within twenty (20) business days (or sooner, if the nature of the Asserted
Liability so requires) notify the Covered Person of its intent to do so, and the
Covered Person shall cooperate, at the expense of the LLC, in the compromise of,
or defense against, such Asserted Liability. If the LLC elects not to compromise
or defend the Asserted Liability, fails to notify the Covered Person of its
election as herein provided, contests its obligation to provide indemnification
under this Agreement, or fails to make or ceases making a good faith and
diligent defense, the Covered Person may pay, compromise or defend such Asserted
Liability all at the expense of the Covered Person. Except as set forth in the
preceding sentence, neither the LLC nor the Covered Person may settle or
compromise any claim over the objection of the other; provided, however, that
consent to settlement or compromise shall not be unreasonably withheld. In any
event, the LLC and the Covered Person may participate at their own expense, in
the defense of such Asserted Liability. If the Covered Person chooses to
participate in the defense of any claim, the Covered Person shall make available
to the LLC any books, records or other documents within its control that are
necessary or appropriate for such defense, all at the expense of the LLC.
(c) If the LLC elects not to compromise or defend an Asserted
Liability, or fails to notify the Covered Person of its election as above
provided, then, to the fullest extent permitted
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by applicable law, expenses (including legal fees) incurred by a Covered Person
in defending any Asserted Liability, shall, from time to time, be advanced by
the LLC prior to the final disposition of such claim, demand, action, suit or
proceeding upon satisfaction of any conditions required by applicable law and
receipt by the LLC of an undertaking by or on behalf of the Covered Person to
repay such amount if it shall be determined that the Covered Person is not
entitled to be indemnified as authorized in Section 10.4 hereof. The LLC may, if
the Manager Member deems it appropriate, require any Covered Person for whom
expenses are advanced, to deliver adequate security to the LLC for his
obligation to repay such indemnification.
SECTION 10.6 MISCELLANEOUS.
(a) The right of indemnification hereby provided shall not be
exclusive of, and shall not affect, any other rights to which a Covered Person
may be entitled. Nothing contained in this Article X shall limit any lawful
rights to indemnification existing independently of this Article X.
(b) The indemnification rights provided by this Article X
shall also inure to the benefit of the heirs, executors, administrators,
successors and assigns of a Covered Person and any officers, directors,
partners, shareholders, employees and Affiliates of such Covered Person (and any
former officer, director, member, shareholder or employee of such Covered
Person, if the loss, damage or claim was incurred while such person was an
officer, director, member, shareholder or employee of such Covered Person). The
Manager Member or the Management Board may extend the indemnification called for
by Section 10.4 to non-employee agents of the LLC, the Manager Member or its
Affiliates.
ARTICLE XI - MISCELLANEOUS.
SECTION 11.1 NOTICES. All notices, requests, elections, consents or
demands permitted or required to be made under this Agreement ("Notices") shall
be in writing, signed by the Person or Persons giving such notice, request,
election, consent or demand and shall be delivered personally or by confirmed
facsimile, or sent by registered or certified mail, or by commercial courier to
the other Members, at their addresses set forth on the signature pages hereof or
on Schedule A hereto, or at such other addresses as may be supplied by written
notice given in conformity with the terms of this Section 11.1. All Notices to
the LLC shall be made to the Manager Member at the address set forth on the
signature pages hereof or on Schedule A hereto, with a copy (which shall not
constitute notice) to the President of the LLC at the principal offices of the
LLC. The date of any such personal or facsimile delivery or the date of delivery
by an overnight courier or the date five (5) days after the date of mailing by
registered or certified mail, as the case may be, shall be the date of such
notice.
SECTION 11.2 SUCCESSORS AND ASSIGNS. Subject to the restrictions on
Transfer set forth herein, this Agreement shall be binding upon and shall inure
to the benefit of the Members, their respective successors, successors-in-title,
heirs and assigns, and each and every successors-in-interest to any Member,
whether such successor acquires such interest by way of
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gift, purchase, foreclosure or by any other method, and each shall hold such
interest subject to all of the terms and provisions of this Agreement.
SECTION 11.3 AMENDMENTS. No amendments may be made to this Agreement
without the prior written consent of (i) the Manager Member and (ii) the
Management Board; provided, however, that, without the vote, consent or approval
of any other Member, the Manager Member shall make such amendments and additions
to Schedule A hereto as are required by the provisions hereof; and, provided
further, that the Manager Member may amend this Agreement to correct any
printing, stenographic or clerical errors or omissions. Except as otherwise
specifically provided for herein, (a) an amendment or modification changing
adversely the rights of a Non-Manager Member with respect to distributions or
allocations or Puts, Calls or Repurchases (on a basis that is disproportionate
to any changes effected with respect to the rights of other Non-Manager Members
holding LLC Interests of the same class) shall be effective only with that
Non-Manager Member's consent (unless such change is expressly provided for by
this Agreement), (b) an amendment or a modification increasing any liability of
a Non-Manager Member to the LLC or the other Members, or adversely affecting the
limitation of the liability of a Non-Manager Member with respect to the LLC,
shall be effective only with that Non-Manager Member's consent, (c) an amendment
or modification reducing the required percentage of LLC Points for any consent
or vote in this Agreement shall be effective only with the consent or vote of
Members having the percentage of LLC Points theretofore required. and (d) an
amendment or modification which significantly and adversely affects a particular
Non-Manager Member differently from some other Non-Manager Member, shall be
effective only with the prior written consent of the Member which would be so
affected or with the vote or consent of three quarters (3/4) of the Management
Board.
SECTION 11.4 NO PARTITION. No Member nor any successor-in-interest to
any Member, shall have the right while this Agreement remains in effect to have
the property of the LLC partitioned, or to file a complaint or institute any
proceeding at law or in equity to have the property of the LLC partitioned, and
each Member, on behalf of himself, his successors, representatives, heirs and
assigns, hereby waives any such right. It is the intent of the Members that
during the term of this Agreement, the rights of the Members and their
successors-in-interest, as among themselves, shall be governed by the terms of
this Agreement, and that the right of any Member or successors-in-interest to
Transfer or otherwise dispose of his interest in the LLC shall be subject to the
limitations and restrictions of this Agreement.
SECTION 11.5 NO WAIVER; CUMULATIVE REMEDIES. The failure of any Member
to insist upon strict performance of a covenant hereunder or of any obligation
hereunder, irrespective of the length of time for which such failure continues,
shall not be a waiver of such Member's right to demand strict compliance in the
future. No consent or waiver, express or implied, to or of any breach or default
in the performance of any obligation hereunder, shall constitute a consent or
waiver to or of any other breach or default in the performance of the same or
any other obligation hereunder. The rights and remedies provided by this
Agreement are cumulative and the use of any one right or remedy by any party
shall not preclude or waive its right to use any or all other remedies. Said
rights and remedies are given in addition to any other rights the parties may
have by law, statute, ordinance or otherwise.
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SECTION 11.6 DISPUTE RESOLUTION. All disputes arising in connection
with this Agreement shall be resolved by binding arbitration in accordance with
the applicable rules of the American Arbitration Association. The arbitration
shall be held in Massachusetts before a single arbitrator selected in accordance
with Section 12 of the American Arbitration Association Commercial Arbitration
Rules who shall have substantial business experience in the investment advisory
industry, and shall otherwise be conducted in accordance with the American
Arbitration Association Commercial Arbitration Rules.
SECTION 11.7 PRIOR AGREEMENTS SUPERSEDED. This Agreement and the
schedules and exhibits hereto supersede the prior understandings and agreements
among the parties with respect to the subject matter hereof and thereof.
SECTION 11.8 CAPTIONS. Titles or captions of Articles or Sections
contained in this Agreement are inserted as a matter of convenience and for
reference, and in no way define, limit, extend or describe the scope of this
Agreement or the intent of any provision hereof.
SECTION 11.9 COUNTERPARTS. This Agreement may be executed in a number
of counterparts, all of which together shall for all purposes constitute one
Agreement, binding on all the Members notwithstanding that all Members have not
signed the same counterpart.
SECTION 11.10 APPLICABLE LAW; JURISDICTION. This Agreement and the
rights and obligations of the parties hereunder shall be governed by and
interpreted, construed and enforced in accordance with the laws of the State of
Delaware, without applying the choice of law or conflicts of law provisions
thereof.
SECTION 11.11 INTERPRETATION. All terms herein using the singular shall
include the plural; all terms using the plural shall include the singular; in
each case, the term shall be as appropriate to the context of each sentence.
Throughout this Agreement, nouns, pronouns and verbs shall be construed as
masculine, feminine and neuter, whichever shall be applicable.
SECTION 11.12 SEVERABILITY. The invalidity or unenforceability of any
particular provision of this Agreement shall not affect the other provisions
hereof, and this Agreement shall be construed in all respects as if such invalid
or unenforceable provision were omitted.
SECTION 11.13 CREDITORS. None of the provisions of this Agreement shall
be for the benefit of or enforceable by any creditor of (i) any Member or (ii)
the LLC, other than a Member who is also a creditor of the LLC.
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IN WITNESS WHEREOF the Non-Manager Members and the Manager Member have
executed and delivered this Limited Liability Company Agreement as of the day
and year first above written.
MANAGER MEMBER
Name and Signature Address
AFFILIATED MANAGERS GROUP, INC. Two International Place, 23rd Floor
Boston, MA 02110
Telephone: (617) 747-3300
By:________________________________ Facsimile: (617) 747-3380
Name:
Title:
NON-MANAGER MEMBERS
Name and Signature Address
<PAGE> 1
EXHIBIT 10.3
PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED PURSUANT TO A CONFIDENTIAL
TREATMENT REQUEST FILED WITH THE COMMISSION. ASTERISKS (*) IDENTIFY WHERE SUCH
CONFIDENTIAL INFORMATION HAS BEEN OMITTED. THE OMITTED PORTIONS HAVE BEEN FILED
SEPARATELY WITH THE COMMISSION.
FORM OF
GEOCAPITAL, LLC
AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT
_________, 1997
<PAGE> 2
GEOCAPITAL, LLC
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
TABLE OF CONTENTS
Page
ARTICLE I - DEFINITIONS..................................................... 1
Section 1.1 Definitions................................................ 1
ARTICLE II - ORGANIZATION AND GENERAL PROVISIONS............................ 13
Section 2.1 Continuation............................................... 13
Section 2.2 Name....................................................... 13
Section 2.3 Term....................................................... 13
Section 2.4 Registered Agent and Registered Office..................... 13
Section 2.5 Principal Place of Business................................ 14
Section 2.6 Qualification in Other Jurisdictions....................... 14
Section 2.7 Purposes and Powers........................................ 14
Section 2.8 Title to Property.......................................... 15
ARTICLE III - MANAGEMENT OF THE LLC......................................... 15
Section 3.1 Management in General...................................... 15
Section 3.2 Management Board of the LLC................................ 16
Section 3.3 Officers of the LLC........................................ 18
Section 3.4 Employees of the LLC....................................... 19
Section 3.5 Operation of the Business of the LLC....................... 19
Section 3.6 Compensation and Expenses of the Members................... 23
Section 3.7 Other Business of the Manager Member and its Affiliates.... 23
Section 3.8 Non-Manager Members and Non Solicitation Agreements........ 24
Section 3.9 Non Solicitation and Non Disclosure by Non-Manager Members
and Employee Stockholders................................. 24
Section 3.10 Additional Permitted Outside Advisory Clients.............. 28
Section 3.11 Remedies Upon Breach....................................... 31
Section 3.12 Repurchase Upon Termination of Employment or Transfer by
Operation of Law........................................... 32
Section 3.13 No Employment Obligation................................... 37
Section 3.14 Miscellaneous.............................................. 37
Section 3.15 Capitalization of Excess Operating Cash Flow............... 37
ARTICLE IV - CAPITAL CONTRIBUTIONS;CAPITAL ACCOUNTS
AND ALLOCATIONS; DISTRIBUTIONS.......................................... 38
Section 4.1 Capital Contributions...................................... 38
Section 4.2 Capital Accounts; Allocations.............................. 38
Section 4.3 Distributions.............................................. 41
(i)
<PAGE> 3
Page
Section 4.4 Distributions Upon Dissolution; Establishment of a Reserve
Upon Dissolution............................................... 43
Section 4.5 Proceeds from Capital Contributions and the Sale of Securities;
Insurance Proceeds; Certain Special Allocations................ 43
Section 4.6 Federal Tax Allocations........................................ 44
ARTICLE V - TRANSFER OF LLC INTERESTS BY NON-MANAGER
MEMBERS; RESIGNATION, REDEMPTION AND WITHDRAWAL BY
NON-MANAGER MEMBERS; ADMISSION OF ADDITIONAL
NON-MANAGER MEMBERS........................................................ 45
Section 5.1 Assignability of Interests..................................... 45
Section 5.2 Substitute Non-Manager Members................................. 46
Section 5.3 Allocation of Distributions Between Assignor and Assignee;
Successor to Capital Accounts.................................. 46
Section 5.4 Resignation, Redemptions and Withdrawals....................... 47
Section 5.5 Issuance of Additional LLC Interests........................... 47
Section 5.6 Additional Requirements........................................ 48
Section 5.7 Representation of Members...................................... 48
ARTICLE VI - TRANSFER OF LLC INTERESTS BY THE
MANAGER MEMBER; REDEMPTION, REMOVAL
AND WITHDRAWAL............................................................. 49
Section 6.1 Assignability of Interest...................................... 49
Section 6.2 Resignation, Redemption, and Withdrawal........................ 50
ARTICLE VII - PUT OF LLC INTERESTS........................................... 50
Section 7.1 Mandatory Puts................................................. 50
Section 7.2 Election Rights of Non-Manager Members to Receive AMG Stock.... 53
Section 7.3 Registration Rights............................................ 55
Section 7.4 Restrictions................................................... 57
Section 7.5 Limitation of Registration Rights. ............................ 58
ARTICLE VIII - DISSOLUTION AND TERMINATION................................... 58
Section 8.1 No Dissolution................................................. 58
Section 8.2 Events of Dissolution.......................................... 58
Section 8.3 Notice of Dissolution.......................................... 59
Section 8.4 Liquidation.................................................... 59
Section 8.5 Termination.................................................... 60
Section 8.6 Claims of the Members.......................................... 60
ARTICLE IX - RECORDS AND REPORTS............................................. 60
Section 9.1 Books and Records.............................................. 60
Section 9.2 Accounting..................................................... 60
(ii)
<PAGE> 4
Page
Section 9.3 Financial and Compliance Reports........................ 60
Section 9.4 Meetings................................................ 61
Section 9.5 Tax Matters............................................. 62
ARTICLE X - LIABILITY, EXCULPATION AND INDEMNIFICATION..................... 62
Section 10.1 Liability............................................... 62
Section 10.2 Exculpation............................................. 62
Section 10.3 Fiduciary Duty.......................................... 63
Section 10.4 Indemnification......................................... 64
Section 10.5 Notice; Opportunity to Defend and Expenses.............. 64
Section 10.6 Miscellaneous........................................... 65
ARTICLE XI - MISCELLANEOUS................................................. 65
Section 11.1 Notices................................................. 65
Section 11.2 Successors and Assigns.................................. 66
Section 11.3 Amendments.............................................. 66
Section 11.4 No Partition............................................ 66
Section 11.5 No Waiver; Cumulative Remedies.......................... 66
Section 11.6 Dispute Resolution...................................... 66
Section 11.7 Prior Agreements Superseded............................. 67
Section 11.8 Captions................................................ 67
Section 11.9 Counterparts............................................ 67
Section 11.10 Applicable Law; Jurisdiction............................ 67
Section 11.11 Interpretation.......................................... 67
Section 11.12 Severability............................................ 67
Section 11.13 Creditors............................................... 67
EXHIBITS
Exhibit A - Form of Non Solicitation/Non Disclosure Agreement for Employee
Stockholders
Exhibit B - Form of Promissory Note for Repurchases
SCHEDULES
Schedule A - LLC Points and Capital Accounts
Schedule B - Pro Forma Minnesota Calculations
Schedule C - Model Permitted Outside Advisory Client Calculation
Schedule D - Model Repurchase Calculation
(iii)
<PAGE> 5
GEOCAPITAL, LLC
AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT
This Amended and Restated Limited Liability Company Agreement (the
"Agreement") of GeoCapital, LLC (the "LLC" or the "Company") is made and entered
into as of __________, 1997 (the "Effective Date"), by and among the persons
identified as the Manager Member and the Non-Manager Members on Schedule A
attached hereto as members of the LLC, and the Persons who become members of the
LLC in accordance with the provisions hereof.
WHEREAS, a limited liability company has been formed pursuant to the
Delaware Limited Liability Company Act, 6 Del. C Section 18-101, et seq., as it
may be amended from time to time and any successor to such Act (the "Act"), by
filing a Certificate of Formation of the LLC with the office of the Secretary of
State of the State of Delaware on August ___, 1997, and entering into a Limited
Liability Company Agreement of the LLC, dated as of August ___, 1997; and
WHEREAS, pursuant to the Merger Agreement, GeoCapital Corporation, a
Delaware corporation, is being merged with and into AMG Merger Sub, Inc., a
wholly owned subsidiary of Affiliated Managers Group, Inc. ("Merger Sub"),
effective as of the Closing (as defined in the Merger Agreement) and the Members
desire to continue the LLC as a limited liability company under the Act with
Merger Sub as Manager Member, and to amend and restate the Limited Liability
Company Agreement of the LLC, dated as of August ___, 1997 in its entirety.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, and in consideration of the mutual
covenants hereinafter set forth, the parties hereby agree as follows:
ARTICLE I - DEFINITIONS.
SECTION 1.1 DEFINITIONS. Unless the context otherwise requires, the
terms defined in this Article I shall, for the purposes of this Agreement, have
the meanings herein specified.
"1940 Act" shall mean the Investment Company Act of 1940, as it may be
amended from time to time, and any successor to such act.
"Act" shall mean the Delaware Limited Liability Company Act, 6 Del. C
Section 18-101, et seq., as it may be amended from time to time and any
successor to such act.
"Additional Interest" shall have the meaning specified in Section 3.8
hereof.
"Additional Non-Manager Members" shall have the meaning specified in
Section 5.5.
"Advisers Act" shall mean the Investment Advisers Act of 1940, as it
may be amended from time to time, and any successor to such act.
<PAGE> 6
"Affiliate" shall mean, with respect to any person or entity (herein
the "first party"), any other person or entity that directly or indirectly
controls, or is controlled by, or is under common control with, such first
party. The term "control" as used herein (including the terms "controlled by"
and "under common control with") means the possession, directly or indirectly,
of the power to (a) vote fifty percent (50%) or more of the outstanding voting
securities of such person or entity, or (b) otherwise direct the management or
policies of such person or entity by contract or otherwise.
"Agreement" shall mean this Amended and Restated Limited Liability
Company Agreement, as it may from time to time be amended, supplemented or
restated.
"AMG" shall mean Affiliated Managers Group, Inc., a Delaware
corporation, and any successors or assigns thereof.
"AMG Stock" shall have the meaning specified in Section 7.2(a) hereof.
"Asset Transfer" shall have the meaning ascribed thereto in the Merger
Agreement.
"Asset Transfer Agreement" shall have the meaning ascribed thereto in
the Merger Agreement.
"Board Vote" shall have the meaning specified in Section 3.2(b)(iv)
hereof.
"Capital Account" shall mean the capital account maintained by the LLC
with respect to each Member in accordance with the capital accounting rules
described in Section 4.2 hereof.
"Capital Contribution" shall mean, as to each Member, the amount of
money and/or the agreed fair market value of any property (net of any
liabilities encumbering such property that the LLC is considered to assume or
take subject to) contributed to the capital of the LLC by such Member.
"Carried Interest" shall have the meaning specified in Section 3.10(c)
hereof.
"Certificate" shall mean the original Certificate of Formation of the
LLC required under the Act, as such Certificate may be amended and/or restated
from time to time.
"Client" shall mean all Past Clients, Present Clients and Potential
Clients, subject to the following general rules: (i) with respect to each
Client, the term shall also include any persons or entities which are known to
the Employee Stockholder to be Affiliates of such Client or persons who are
members of the Immediate Family of such Client or any of its Affiliates; and
(ii) with respect to so-called "wrap programs," both the sponsor of the program
and the underlying participants in the program (or clients who have selected the
LLC or a Controlled Affiliate under their contract with the sponsor) shall be
included as Clients.
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<PAGE> 7
"Code" or "Internal Revenue Code" shall mean the United States Internal
Revenue Code of 1986, as from time to time amended, and any successor thereto,
together with all regulations promulgated thereunder.
"Collective Investment Vehicle" shall mean any limited partnership,
limited liability company, trust or any other issuer that would be an investment
company (within the meaning of the 1940 Act) but for the exceptions contained in
Section 3(c)(1) or Section 3(c)(7) of such Act.
"Controlled Affiliate" shall mean, with respect to a Person, any
Affiliate of such Person under its "control", as the term "control" is defined
in the definition of Affiliate, but shall include, with respect to the LLC,
[___________], [__________] and [____________] etc.
"Controlling Person" shall have the meaning specified in Section 7.3(e)
hereof.
"Covered Person" shall mean a Member, any Affiliate of a Member, any
officer, director, shareholder, partner, employee or member of a Member or any
of its Affiliates, or any Officer.
"Effective Date" shall have the meaning specified in the preamble of
this Agreement.
"Eligible Person" shall have the meaning specified in Section 3.2(b)(i)
hereof.
"Employee Stockholder" shall mean (a) in the case of a Non-Manager
Member which is not an individual, that certain employee of the LLC who is the
owner of all the issued and outstanding capital stock of such Non-Manager
Member, and is listed as such on Schedule A hereto, and (b) in the case of a
Non-Manager Member which is an individual, such Non-Manager Member.
"Employment Agreement" shall have the meaning ascribed thereto in the
Merger Agreement.
"Encumbrances" shall mean any restrictions, liens, claims, charges,
pledges or encumbrances of any kind or nature whatsoever.
"Fair Market Value" shall mean the fair market value as reasonably
determined by the Manager Member or, for purposes of Section 4.4 hereof, if
there shall be no Manager Member, the Liquidating Trustee.
"For Cause" shall mean, with respect to the termination of an Employee
Stockholder's employment with the LLC, any of the following:
(a) The Employee Stockholder has engaged in any criminal offense
which involves a violation of federal or state securities laws or regulations
(or equivalent laws or regulations of any country or political subdivision
thereof), embezzlement, fraud, wrongful taking or misappropriation of property,
theft, or any other crime involving dishonesty and (i) has been convicted
(whether or not subject to appeal) or pled nolo contendere or any similar plea
to any criminal offense in connection with or relating to such act; (ii) has
entered into a settlement with or consented to the issuance of an order by any
Governmental Authority in connection with or relating to such act; or (iii) as
a result of or in relation to such act, an event has occurred which requires an
affirmative answer to any of the questions in Item 11 of Part I of the LLC's
Form ADV (or any similar or successor provision or form);
(b) The Employee Stockholder has persistently and willfully failed to
perform his or her duties or failed to devote substantially all of his or her
working time to the performance of such duties except, in the case of an
Employee Stockholder who is a party to an Employment Agreement or a
Non-Solicitation Agreement, as may be specifically permitted by the terms of
such Employment Agreement or a Non-Solicitation Agreement; or
(c) The Employee Stockholder has (i) engaged in a Prohibited
Competition Activity, (ii) violated or breached any material provision of his
or her Employment Agreement or Non-Solicitation Agreement or (iii) engaged in
any of the activities prohibited by Section 3.9 hereof and either (i) the
activity of the Employee Stockholder has harmed or would reasonably be expected
to harm the LLC or the Manager Member (which harm would not be immaterial), or
(ii) the Employee Stockholder fails to or is unable to cease such activity and
cause any harm to the LLC and/or the Manager Member within ten (10) days after
such Employee Stockholder becomes aware that, or the Manager Member gives such
Employee Stockholder notice that he or she has engaged in a Prohibited
Competition Activity, or violated or breached any material provision of his or
her Employment Agreement or Non-Solicitation Agreement, or engaged in any of
the activities prohibited by Section 3.7 hereof.
3
<PAGE> 8
"Free Cash Flow" shall mean, for any period, ********** percent (**%)
of the Revenues From Operations of the LLC for such period, subject to
adjustment as contemplated in Section 3.15.
"Free Cash Flow Expenditure" shall have the meaning specified in
Section 3.3(c) hereof.
"Governmental Authority" shall mean any foreign, federal, state or
local court, governmental authority or regulatory body.
"Guaranteed Interest" shall have the meaning specified in Section
3.10(c) hereof.
"Holders" shall have the meaning specified in Section 7.3(a) hereof.
"Immediate Family" shall mean, with respect to any person, such
person's spouse, parents, grandparents, children, grandchildren and siblings.
"Indebtedness" shall mean, with respect to a Person, (a) all
indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services (other than current trade liabilities incurred in
the ordinary course of business and payable in accordance with customary
practices), (b) any other indebtedness of such Person which is evidenced by a
note, bond, debenture or similar instrument, (c) all obligations of such Person
under any financing leases, (d) all obligations of such person in respect of
acceptances issued or created for the account of such Person, (e) all
obligations of such Person under noncompetition agreements reflected as
liabilities on a balance sheet of such Person in accordance with generally
accepted accounting principles, (f) all liabilities secured by any Lien on any
property owned by such Persons even though such Person has not assumed or
otherwise become liable for the payment thereof, and (g) all net obligations of
such Person under interest rate, commodity, foreign currency and financial
markets swaps, options, futures and other hedging obligations.
"Independent Public Accountants" shall mean any independent certified
public accountant satisfactory to the Manager Member and retained by the LLC.
"Initial Members" shall mean those Persons which are Members on the
Effective Date after the effectiveness of the Merger.
"Initial LLC Points" means, with respect to a Non-Manager Member
(including his (or its) Related Non-Manager Members) and their respective
Permitted Transferees, those LLC Points held by such Non-Manager Member and his
(or its) Related Non-Manager Members in the LLC on the Effective Date, provided
that LLC Points shall cease to be Initial LLC Points from and after the date on
which they are acquired by the Manager Member (or its assignee) pursuant to
Section 3.12 or Article VII hereof.
"Intellectual Property" shall have the meaning specified in Section
3.7(c) hereof.
4
<PAGE> 9
"Investment Management Services" shall mean any services which involve
(a) the management of an investment account or fund (or portions thereof or a
group of investment accounts or funds), or (b) the giving of advice with respect
to the investment and/or reinvestment of assets or funds (or any group of assets
or funds).
"IRS" shall mean the Internal Revenue Service of the United States
Department of the Treasury.
"Lien" shall mean any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (statutory or other), charge or other
security interest or any preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever (including, without
limitation, any conditional sale or other title retention agreement and any
financing lease having substantially the same economic effect as any of the
foregoing).
"Liquidating Trustee" shall have the meaning specified in Section 8.4
hereof.
"LLC" means GeoCapital, LLC, the limited liability company heretofore
formed and continued under and pursuant to the Act and this Agreement, as the
same may be amended and/or restated from time to time.
"LLC Interest" means a Member's limited liability company interest in
the LLC, which includes such Member's LLC Points as well as such Member's
Capital Account and other rights under this Agreement and the Act.
"LLC Points" shall mean, as of any date, with respect to a Member, the
number of LLC Points of such Member as set forth on Schedule A hereto, as
amended from time to time in accordance with the terms hereof, and as in effect
on such date.
"LLC Repurchase" shall have the meaning specified in Section 3.11(a)
hereof.
"Majority Vote" shall mean the affirmative approval, by vote or written
consent, of Non-Manager Members holding two-thirds of the outstanding Vested LLC
Points then held by all Non-Manager Members. For purposes of determining a
Majority Vote, all LLC Points held by a Related Non-Manager Member of Irwin
Lieber shall be voted by Irwin Lieber, and all LLC Points held by a Related
Non-Manager Member of Barry K. Fingerhut shall be voted by Barry K. Fingerhut.
"Management Board" shall have the meaning specified in Section 3.2(a)
hereof.
"Manager Member" shall mean Merger Sub, and any Person who becomes a
successor Manager Member as provided herein.
"Members" shall mean any Person admitted to the LLC as a "member"
within the meaning of the Act, which includes the Manager Member and the
Non-Manager Members, unless otherwise indicated, and includes any Person
admitted as an Additional Non-Manager Member or a substitute
5
<PAGE> 10
Non-Manager Member pursuant to the provisions of this Agreement, in such
Person's capacity as a member of the LLC, unless otherwise indicated. For
purposes of the Act, the Members shall constitute one (1) class or group of
members.
"Merger Agreement" shall mean that certain Agreement and Plan of
Reorganization dated as of August __, 1997, by and among Affiliated Managers
Group, Inc., Merger Sub, GeoCapital Corporation, the LLC and all the
Stockholders of GeoCapital Corporation, as the same has been amended from time
to time.
"Minnesota Agreement" shall mean that certain Investment Advisory
Agreement dated as of July 1, 1993, by and between GeoCapital Corporation and
the Minnesota State Board of Investment, as the same may be amended from time to
time, and/or restated or replaced, with the prior written consent of the Manager
Member.
"NASD" shall have the meaning specified in Section 7.3(d) hereof.
"Non-Manager Member" shall mean any Person who is or becomes a
Non-Manager Member pursuant to the terms hereof, unless otherwise indicated.
"Non Solicitation Agreement" shall have the meaning set forth in
Section 3.8 hereof.
"Notice Deadline" shall have the meaning specified in Section 7.1(d)
hereof.
"Officers" shall have the meaning specified in Section 3.3(a).
"Operating Cash Flow" shall mean, for any period, an amount equal to
the positive difference, if any, between Revenues From Operations of the LLC for
such period and Free Cash Flow for such period.
"Past Client" shall mean at any particular time, any Person who at any
point prior to such time had been an advisee or investment advisory customer of,
or recipient of Investment Management Services from, the LLC (including, without
limitation, its predecessor, GeoCapital Corporation) but at such time is not an
advisee or investment advisory customer or client of, or recipient of Investment
Management Services from, the LLC.
"Permanent Incapacity" shall mean, with respect to an Employee
Stockholder, that such Employee Stockholder has been permanently and totally
unable, by reason of injury, illness or other similar cause (determined pursuant
to the process set forth in the following sentence) to have performed his or her
substantial and material duties and responsibilities for a period of three
hundred sixty-five (365) consecutive days, which injury, illness or similar
cause (as determined pursuant to such process) would render such Employee
Stockholder incapable of operating in a similar capacity in the future. The
foregoing determination shall be made reasonably by a licensed physician
selected by the Manager Member; provided, however, that if the LLC has purchased
lump-sum key-man disability insurance with respect to such Employee Stockholder,
which policy is then in effect, then such determination shall be made reasonably
either (i) by an agreement
6
<PAGE> 11
between such physician and a physician selected by the insurance company with
which the LLC has entered into a lump-sum key-man disability policy with respect
to such Employee Stockholder, or, if the two physicians cannot arrive at an
agreement, a third physician will be chosen by the first two physicians, and the
majority decision of the three physicians will then be binding), or (ii) if the
LLC has entered into a lump-sum key-man disability policy with respect to such
Employee Stockholder, and a different procedure is then required under such
policy, then by using such other procedure as may then be required by such
insurance company.
"Permitted Outside Advisory Client" shall mean:
(a) With respect to Irwin Lieber, Barry K. Fingerhut, Seth Lieber
and Jonathan Lieber, the following: (i) Applewood Associates, L.P., a New York
limited partnership, (ii) Wheatley Partners, L.P., a Delaware limited
partnership, (iii) Wheatley Foreign Partners, L.P., a Delaware limited
partnership, and (iv) 21st Century Communications Partners, L.P., a Delaware
limited partnership; provided, however, that if the LLC is no longer providing
Investment Management Services for compensation with respect to any Partnerships
in clause (i), (ii) or (iii), such Partnership shall cease to be a Permitted
Outside Advisory Client.
(b) With respect to Irwin Lieber, Barry K. Fingerhut, Seth Lieber
and Jonathan Lieber and, to the extent agreed to by the Manager Member, other
Non-Manager Members of the LLC, the following: each Collective Investment
Vehicle which is a client of the LLC as contemplated by Section 3.10(c), and in
which the Manager Member or an Affiliate of the Manager Member has received its
Guaranteed Interest in accordance with the provisions of Section 3.10(d) hereof,
and with respect to which the Manager Member or an Affiliate of the Manager
Member has had an opportunity to purchase its Additional Interest in accordance
with the provisions of Section 3.10(e) hereof.
"Permitted Transferee" shall mean, with respect to any Non-Manager
Member, its transferees pursuant to the provisions of Sections 5.1(b) and 5.1(c)
hereof and, to the extent set forth in any consent of the Manager Member
pursuant to Section 5.1(a), its transferees pursuant to Section 5.1(a) hereof.
"Person" means any individual, partnership (limited or general),
corporation, limited liability company, limited liability partnership,
association, trust, joint venture, unincorporated organization or any similar
entity.
"Potential Client" shall mean, at any particular time, any Person to
whom the LLC (including, without limitation, its predecessor, GeoCapital
Corporation) or any of its Controlled Affiliates, through any of their officers,
employees, agents or consultants (or persons acting in any similar capacity),
has, within five years prior to such time, offered (by means of a personal
meeting, telephone call, or a letter or a written proposal specifically directed
to the particular Person) to serve as investment adviser or otherwise provide
Investment Management Services, but who is not at such time an advisee or
investment advisory customer of, or recipient of Investment Management Services
from, the LLC or any of its Controlled Affiliates. The preceding sentence is
meant to exclude form letters and blanket mailings.
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<PAGE> 12
"Present Client" shall mean, at any particular time, any Person who is
at such time an advisee or investment advisory customer of, or recipient of
Investment Management Services from, the LLC or any of its Controlled
Affiliates.
"Pro Forma Minnesota Allocation" shall mean, with respect to any period
in which a performance fee would be payable if earned (previously any
twelve-month period ended June 30), an amount equal to the difference between
(a) the Pro Forma Performance Fee, and (b) the Actual Performance Fee.
Appropriate adjustments will be made to the period and date set forth above to
correspond to any amendment in the Minnesota Agreement. As provided in Section
3.5(d), no amendment or modification may be made to the Minnesota Agreement
(other than with respect to resetting the Option Limitation (as such term is
defined in the Minnesota Agreement)) without the prior written consent of the
Manager Member.
For purposes of this definition,
the term "Actual Performance Fee" shall mean the performance fee
actually payable to the LLC under the Minnesota Agreement in
respect of a twelve-month period ended June 30 as calculated
pursuant to the provisions of Exhibit C to the Minnesota
Agreement; and
the term "Pro Forma Performance Fee" shall mean the performance
fee that would be payable to the LLC under the Minnesota Agreement
in respect of that same twelve-month period ended June 30 as
calculated pursuant to the provisions of Exhibit C to the
Minnesota Agreement, but calculated as if (i) the so-called
"Residual" described in Part B of such Exhibit C (being the
residual negative performance fee from periods ended on or prior
to June 30, 1997) were zero as of the end of the twelve-month
period ended June 30, 1997, and (ii) there were no so-called
"Debits" (as such term is used in Part B of said Exhibit C) from
or attributable to any measurement periods ended on or prior to
June 30, 1997.
Set forth on Schedule B hereto are sample calculations under this definition of
Pro Forma Minnesota Allocation.
From and after the effective date of the first purchase by AMG (or its
assignee) of Initial LLC Points (whether pursuant to Section 3.12 or Article
VII), the Pro Forma Minnesota Allocation shall, with respect to any subsequent
end of a period, be equal to the Pro Forma Minnesota Allocation (determined as
set forth above) multiplied by a fraction, (x) the numerator of which is the
number of Initial LLC Points outstanding on the Effective Date (i.e. **********
LLC Points) minus the total number of Initial LLC Points purchased by the
Manager Member (or its assignee) since the Effective Date (whether pursuant to
Section 3.12 or Article VII) but prior to the effective date of the purchase
with respect to which such determination is being made, and (y) the denominator
of which is the number of Initial LLC Points outstanding on the Effective Date
(i.e. ********** LLC Points).
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<PAGE> 13
"Prohibited Competition Activity" shall mean any of the following
activities:
(a) directly or indirectly, whether as owner, part owner, member,
director, officer, trustee, employee, agent or consultant for or on behalf of
any Person other than the LLC: (i) diverting or taking away any funds or
investment accounts with respect to which the LLC or any Controlled Affiliate of
the LLC is performing investment management or advisory services; or (ii)
soliciting any Person to divert or take away any such funds or investment
accounts; or
(b) directly or indirectly, whether as owner, part owner,
partner, member director, officer, trustee, employee, agent or consultant, for
or on behalf of any Person other than the LLC or any Controlled Affiliate of the
LLC, performing any Investment Management Services (provided that an Employee
Stockholder who directly performs Investment Management Services for a member of
his or her Immediate Family shall not be considered to have engaged in a
Prohibited Competition Activity);
except, in the case of an Employee Stockholder who is a party to an Employment
Agreement or a Non Solicitation Agreement, with respect to the provision of
Investment Management Services to a Permitted Outside Advisory Client to the
extent (and only to the extent) specifically excluded from this definition of
Prohibited Competition Activity by the terms and conditions of such Employment
Agreement or Non Solicitation Agreement.
"Prospect" shall have the meaning set forth in Section 3.9(b) hereof.
"Public Offering" shall have the meaning specified in Section 7.1(f)
hereof.
"Purchase Date" shall have the meaning specified in Section 7.1(b)
hereof.
"Put" shall have the meaning specified in Section 7.1(a) hereof.
"Put LLC Points" shall have the meaning specified in Section 7.1(d)
hereof.
"Put Notice" shall have the meaning specified in Section 7.1(d) hereof.
"Put Price" shall have the meaning specified in Section 7.1(e) hereof.
"Registrable Securities" shall have the meaning specified in Section
7.3(b) hereof.
"Registration" shall have the meaning specified in Section 7.3(a)
hereof.
"Registration Expenses" shall have the meaning specified in Section
7.3(d) hereof.
"Registration Statement" shall have the meaning specified in Section
7.3(a) hereof.
"Related Entity" shall have the meaning specified in Section 3.10(b)
hereof.
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<PAGE> 14
"Related Non-Manager" shall mean, (a) with respect to Irwin Lieber, the
following: Dana G. Lieber and _____________; and (b) with respect to Barry K.
Fingerhut, the following: Andrew J. Fingerhut and Brooke A. Fingerhut and
_______________ . [other e.g. trusts?].
"Remaining Minnesota Carryover Amount" shall mean, as of any date of
determination, the difference, if any, between the Actual Residual and the Pro
Forma Residual as of such date. Appropriate adjustments will be made to this
definition to correspond to any amendments in the Minnesota Agreement.
For purposes of this definition,
the term "Actual Residual" shall mean the so-called "Residual"
described in Part B of Exhibit C to the Minnesota Agreement (being the
residual negative performance fee from periods ended on or prior to the
date of determination); and
the term "Pro Forma Residual" shall mean the so-called "Residual"
attributable to performance for periods ended on or prior to the date
of determination, but calculated as if the Residual were zero (0) as of
the end of the twelve-month period ended June 30, 1997.
Set forth on Schedule B hereto are sample calculations under this definition of
Remaining Minnesota Carryover Amount.
From and after the effective date of the first purchase by AMG (or its
assignee) of Initial LLC Points (whether pursuant to Section 3.12 or Article
VIII), the Remaining Minnesota Carryover Amount shall, as of any subsequent date
of determination be equal to the Remaining Minnesota Carryover Amount
(determined as set forth above) multiplied by a fraction, (x) the numerator of
which is the number of Initial LLC Points outstanding on the Effective Date
(i.e., ********** LLC Points) minus the total number of Initial LLC Points which
were purchased by AMG (or its assignee) since the Effective Date (whether
pursuant to Section 3.12 or Article VII) but prior to the effective date of the
purchase with respect to which such determination is being made, and (y) the
denominator of which is the number of Initial LLC Points outstanding on the
Effective Date (i.e., ********** LLC Points).
"Remaining Minnesota Cumulative Debits" shall mean, as of any date of
determination, the difference, if any, between the Actual Debits as of such date
and the Pro Forma Debits as of such date. Appropriate adjustments will be made
to this definition to correspond to any amendments to the Minnesota Agreement.
For purposes of this definition,
the term "Actual Debits" shall mean the sum of all so-called "Debits"
and "Credits" as such terms are used in Part B of Exhibit C to the
Minnesota Agreement (being the Debits and Credits attributable to
performance prior to the date of determination); and
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the term "Pro Forma Debits" shall men the sum of all so-called Debits
and Credits attributable to performance prior to the date of
determination, but calculated as if there were no Debits or Credits as
of the end of the twelve-month period ended June 30, 1997.
Set forth on Schedule B hereto are sample calculations under this definition of
Remaining Minnesota Cumulative Debits.
From and after the effective date of the first purchase by AMG (or its
assignee) of Initial LLC Points (whether pursuant to Section 3.12 or Article
VII), the Remaining Minnesota Cumulative Debits shall, as of any subsequent date
of determination, be equal to the Remaining Minnesota Cumulative Debits
(determined as set forth above) multiplied by a fraction, (x) the numerator of
which is the number of Initial LLC Points outstanding on the Effective Date
(i.e. ********** LLC Points) minus the cumulative number Initial LLC Points
which were purchased by AMG (or its assignee) since the Effective Date (whether
pursuant to Section 3.12 or Article VII) but prior to the effective date of the
purchase with respect to which such determination is being made, and (y) the
denominator of which is the number of Initial LLC Points outstanding on the
Effective Date (i.e. ********** LLC Points).
"Repurchase" shall mean a purchase or repurchase of LLC Interests made
pursuant to Section 3.12(a).
"Repurchase Closing Date" shall have the meaning specified in Section
3.12 hereof.
"Repurchased Member" shall have the meaning specified in Section
3.12(a).
"Repurchase Price" shall have the meaning specified in Section 3.12(c).
"Retirement" shall mean, with respect to an Employee Stockholder, the
termination by such Employee Stockholder of such Employee Stockholder's
employment with the LLC and its Affiliates: (a) after the date such Employee
Stockholder shall have been continuously employed by the LLC for a period of
fifteen (15) years commencing with the later of the Effective Date or the date
such Employee Stockholder commenced his or her employment with the LLC (not
including its predecessor, GeoCapital Corporation), as applicable, and (b)
pursuant to a written notice given to the LLC not less than one (1) year prior
to the date of such termination. Notwithstanding the foregoing, with respect to
(i) Mr. Irwin Lieber, the term "Retirement" shall mean the termination by him of
his employment with the LLC after the seventh anniversary of the Effective Date
and pursuant to a written notice given to the LLC not less than one (1) year
prior to the date of such termination, and (ii) Mr. Barry K. Fingerhut, the term
"Retirement" shall mean the termination by him of his employment with the LLC
after the ninth anniversary of the Effective Date and pursuant to a written
notice given to the LLC not less than one (1) year prior to the date of such
termination.
"Revenues From Operations" shall mean, for any period, the gross
revenues of the LLC (except as set forth herein), determined on an accrual basis
in accordance with generally accepted
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accounting principles consistently applied; provided, however, that Revenues
From Operations shall be determined without regard to (a) proceeds during such
period from the sale, exchange or other disposition of all, or a substantial
portion of, the assets of the LLC, (b) revenues from the issuance by the LLC of
additional LLC Points, other LLC Interests, or other securities issued by the
LLC, and (c) payments received pursuant to any insurance policies other than
with respect to business interruption insurance.
"SEC" shall mean the Securities and Exchange Commission, and any
successor Governmental Authority thereto.
"Securities Act" shall mean the Securities Act of 1933, as it may be
amended from time to time, and any successor thereto.
"Suspension Period" shall have the meaning specified in Section 7.4(c)
hereof.
"Transfer" shall have the meaning specified in Section 5.1 hereof.
"Unsatisfactory Performance" shall mean a written determination by a
Majority Vote with the written consent of the Manager Member, that an Employee
Stockholder has failed to meet minimum requirements of satisfactory performance
of his or her job, after such Employee Stockholder has received written notice
that the Non-Manager Members were considering such a determination and the
Employee Stockholder has had a reasonable opportunity to respond in writing or
in person (at such Employee Stockholder's request) after his or her receipt of
such notice.
In addition to the foregoing, other capitalized terms used in this
Agreement shall have the meaning ascribed thereto in the text of this Agreement.
ARTICLE II - ORGANIZATION AND GENERAL PROVISIONS.
SECTION 2.1 CONTINUATION.
(a) The Members hereby agree to continue the LLC as a limited
liability company under and pursuant to the provisions of the Act, and agree
that the rights, duties and liabilities of the Members shall be as provided in
the Act, except as otherwise provided herein.
(b) Upon the execution of this Agreement or a counterpart of
this Agreement, the Initial Members shall continue as members of the LLC.
(c) The name, LLC Points and Capital Contribution of each
Member (including the agreed value of such Capital Contribution) shall be listed
on Schedule A attached hereto. The Manager Member shall update Schedule A from
time to time as it deems necessary, to accurately reflect the information to be
contained therein. Any amendment or revision to Schedule A shall
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not be deemed an amendment to this Agreement. Any reference in this Agreement to
Schedule A shall be deemed to be a reference to Schedule A as amended and in
effect from time to time.
(d) The Manager Member, as an authorized person within the meaning of
the Act, shall execute, deliver and file any certificates required or permitted
by the Act to be filed in the office of the Secretary of State of the State of
Delaware.
SECTION 2.2 NAME. The name of the LLC heretofore formed and continued
hereby is GeoCapital, LLC. At any time, the Manager Member may, with a Majority
Vote, change the name of the LLC. The business of the LLC may be conducted upon
compliance with all applicable laws under any other name designated by the
Manager Member.
SECTION 2.3 TERM. The term of the LLC commenced on the date the
Certificate was filed in the Office of the Secretary of State of the State of
Delaware and shall continue until the LLC is dissolved in accordance with the
provisions of this Agreement.
SECTION 2.4 REGISTERED AGENT AND REGISTERED OFFICE. The LLC's
registered agent and registered office in Delaware shall be The Corporation
Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington,
Delaware 19801. At any time, the Manager Member may designate another registered
agent and/or registered office.
SECTION 2.5 PRINCIPAL PLACE OF BUSINESS. The principal place of
business of the LLC shall be at 767 Fifth Avenue, New York, New York. At any
time, the Manager Member may change the location of the LLC's principal place of
business; provided, however, that if the principal place of business is to be
located outside of Manhattan, New York, New York, such action must be approved
by a Majority Vote.
SECTION 2.6 QUALIFICATION IN OTHER JURISDICTIONS. The Members shall
cause the LLC to be qualified or registered (under assumed or fictitious name if
necessary) in any jurisdiction in which the LLC transacts business or in which
such qualification, formation or registration is required.
SECTION 2.7 PURPOSES AND POWERS. The principal business activity and
purposes of the LLC shall initially be to engage in the investment advisory and
investment management business and any businesses related thereto or useful in
connection therewith. However, the business and purposes of the LLC shall not be
limited to its initial principal business activities and, unless the Manager
Member otherwise determines, it shall have authority to engage in any lawful
business, purpose or activity permitted by the Act, and it shall possess and may
exercise all of the powers and privileges granted by the Act or which may be
exercised by any Person, together with any powers incidental thereto, so far as
such powers or privileges are necessary or convenient to the conduct, promotion
or attainment of the business purposes or activities of the LLC, including
without limitation the following powers:
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(a) to conduct its business and operations and to have and
exercise the powers granted to a limited liability company by the Act in any
state, territory or possession of the United States or in any foreign country or
jurisdiction;
(b) to purchase, receive, take, lease or otherwise acquire, own,
hold, improve, maintain, use or otherwise deal in and with, sell, convey, lease,
exchange, transfer or otherwise dispose of, mortgage, pledge, encumber or create
a security interest in all or any of its real or personal property, or any
interest therein, wherever situated;
(c) to borrow or lend money or obtain or extend credit and other
financial accommodations, to invest and reinvest its funds in any type of
security or obligation of or interest in any public, private or governmental
entity, and to give and receive interests in real and personal property as
security for the payment of funds so borrowed, loaned or invested;
(d) to make contracts, including contracts of insurance, incur
liabilities and give guaranties, including without limitation, guaranties of
obligations of other Persons who are interested in the LLC or in whom the LLC
has an interest;
(e) to employ Officers, employees, agents and other persons, to
fix the compensation and define the duties and obligations of such personnel, to
establish and carry out retirement, incentive and benefit plans for such
personnel, and to indemnify such personnel to the extent permitted by this
Agreement and the Act;
(f) to make donations irrespective of benefit to the LLC for the
public welfare or for community, charitable, religious, educational, scientific,
civic or similar purposes;
(g) to institute, prosecute, and defend any legal action or
arbitration proceeding involving the LLC, and to pay, adjust, compromise,
settle, or refer to arbitration any claim by or against the LLC or any of its
assets;
(h) to indemnify any Person in accordance with the Act and to
obtain any and all types of insurance;
(i) to negotiate, enter into, renegotiate, extend, renew,
terminate, modify, amend, waive, execute, acknowledge or take any other action
with respect to any lease, contract or security agreement in respect of any
assets of the LLC;
(j) to form, sponsor, organize or enter into joint ventures,
general or limited partnerships, limited liability companies, trusts and any
other combinations or associations formed for investment purposes;
(k) to make, execute, acknowledge and file any and all documents
or instruments necessary, convenient or incidental to the accomplishment of the
purposes of the LLC; and
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(l) to cease its activities and cancel its Certificate.
SECTION 2.8 TITLE TO PROPERTY. All property owned by the LLC, real or
personal, tangible or intangible, shall be deemed to be owned by the LLC as an
entity, and no Member, individually, shall have any ownership of such property.
ARTICLE III - MANAGEMENT OF THE LLC.
SECTION 3.1 MANAGEMENT IN GENERAL.
(a) The management and control of the business of the LLC shall
be vested exclusively in the Manager Member, and the Manager Member shall have
exclusive power and authority, in the name of and on behalf of the LLC, to
perform all acts and do all things which, in its sole discretion, it deems
necessary or desirable to conduct the business of the LLC; with or without the
vote or consent of the Members in their capacity as such, except as specifically
provided in this Agreement; provided, however, that the Manager Member shall not
have the power to execute, or cause the execution of, transactions in, or
exercise any powers or privileges with respect to, securities and other
instruments in accounts of clients of the LLC, which powers and privileges are
hereby delegated exclusively to the Management Board pursuant to Section 3.3
hereof. Members, in their capacity as such, shall have no right to amend or
terminate this Agreement or to appoint, select, vote for or remove the Manager
Member, the Officers or their agents or to exercise voting rights or call a
meeting of the Members, except as specifically provided in this Agreement. No
Member other than the Manager Member shall have the power to sign for or bind
the LLC to any agreement or document in its capacity as a Member, but the
Manager Member may delegate the power to sign for or bind the LLC to one or more
Officers.
(b) The Manager Member shall, subject to all applicable
provisions of this Agreement and the Act, be authorized in the name of and on
behalf of the LLC: (i) to enter into, execute, amend, supplement, acknowledge
and deliver any and all contracts, agreements, leases or other instruments for
the operation of the LLC's business; and (ii) in general to do all things and
execute all documents necessary or appropriate to conduct the business of the
LLC as set forth in Section 2.7 hereof, or to protect and preserve the LLC's
assets. The Manager Member may delegate any or all of the foregoing powers to
one or more of the Officers.
(c) The Manager Member is required to be a Member, and shall
hold office until its resignation or removal in accordance with the provisions
hereof. The Manager Member is a "manager" (within the meaning of the Act) of the
LLC. The Manager Member shall devote such time to the business and affairs of
the LLC as it deems necessary, in its sole discretion, for the performance of
its duties, but in any event, shall not be required to devote full time to the
performance of such duties and may delegate its duties and responsibilities as
provided in Section 3.3.
(d) Any action taken by the Manager Member, and the signature
of the Manager Member (or an authorized representative thereof) on any
agreement, contract, instrument or other
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document on behalf of the LLC, shall be sufficient to bind the LLC and shall
conclusively evidence the authority of the Manager Member and the LLC with
respect thereto.
(e) Any Person dealing with the LLC, the Manager Member or any
Member may rely upon a certificate signed by the Manager Member as to (i) the
identity of the Manager Member or any Member; (ii) any factual matters relevant
to the affairs of the LLC; (iii) the Persons who are authorized to execute and
deliver any document on behalf of the LLC; or (iv) any action taken or omitted
by the LLC or the Manager Member.
SECTION 3.2 MANAGEMENT BOARD OF THE LLC.
(a) The LLC shall have a Management Board (the "Management Board").
The Manager Member has delegated power and authority under Section 3.5(b) of
this Agreement to the Management Board to conduct the day-to-day operations,
business and activities of the LLC.
(b) The Management Board shall consist of Non-Manager Members
determined as follows:
(i) The Management Board shall initially have two (2) members and
shall initially consist of Irwin Lieber and Barry K. Fingerhut.
The number of members of the Management Board may be increased by
the Management Board, with the written consent of the Manager
Member at any time. In addition, in the event that the Management
Board is deadlocked and unable to resolve any issue that is
material in the judgement of the Manager Member or the Management
Board for a period of five business days or more, the Manager
Member may consent or vote with respect to such issue. No Person
who is not both an active employee of the LLC and a Non-Manager
Member (an "Eligible Person") may be, become or remain a member
of the Management Board.
(ii) Any vacancy in the Management Board however occurring (including
a vacancy resulting from the increase in size of the Management
Board) may be filled by any other Eligible Person elected by a
Majority Vote, with the written consent of the Manager Member. In
lieu of filling any such vacancy, the Management Board, with the
consent of the Manager Member, may determine to reduce the number
of members of the Management Board, but not to a number less than
two (2), provided that if at any time there are fewer than two
(2) members of the Management Board, such vacancies must be
filled and no consent or vote may be taken on any matter during
the existence of such a vacancy.
(iii) Members of the Management Board shall remain members of the
Management Board until their resignation, removal or death. Any
member of the Management Board may resign by delivering his or
her written resignation to any member of the Management Board and
the Manager Member. At any time that there are more than two
members of the Management Board, any member of the Management
Board may be removed from such position with cause at any time or
without cause
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at any time after the date that is 270 days following such
Member's appointment: (A) by the Management Board acting by a
Board Vote (with such Board Vote being calculated for all
purposes as if the member of the Management Board whose removal
is being considered were not a member of the Management Board)
with the prior written consent of the Manager Member, or (B) by
the Non-Manager Members acting by a Majority Vote, with the prior
written consent of the Manager Member. Any Non-Manager Member
shall be deemed to have resigned from the Management Board and
shall no longer be a member of the Management Board immediately
upon such Non-Manager Member ceasing to be an active employee of
the LLC or otherwise ceasing to be a Non-Manager Member, in each
case, for whatever reason.
(iv) At any meeting of the Management Board, presence in person or by
telephone (or other electronic means) of a majority of the
members of the Management Board shall constitute a quorum. At any
meeting of the Management Board at which a quorum is present, a
majority of the members of the Management Board may take any
action on behalf of the Management Board (any such action taken
by such members of the Management Board is sometimes referred to
herein as a "Board Vote"). Any action required or permitted to be
taken at any meeting of the Management Board may be taken without
a meeting of the Management Board, if (A) a written consent
thereto is signed by all the members of the Management Board and
(B) the Manager Member has been given a copy of such written
consent not less than forty-eight (48) hours prior to such
action. Notice of the time, date and place of all meetings of the
Management Board shall be given to all members of the Management
Board and, upon request, to the Manager Member at least
forty-eight (48) hours in advance of the meeting. A
representative of the Manager Member shall be entitled to attend
each meeting of the Management Board. Notice need not be given to
any member of the Management Board or the Manager Member if a
waiver of notice is given (orally or in writing) by such member
of the Management Board or the Manager Member (as applicable),
before, at or after the meeting. Members of the Management Board
are not "managers" (within the meaning of the Act) of the LLC.
(c) Without a Board Vote and the prior written consent of the Manager
Member, the LLC will not (and will not permit any of its subsidiaries to):
(i) amend its Certificate of Formation or this Agreement, or other
organizational documents;
(ii) incur any indebtedness for borrowed money, guarantee any such
indebtedness or issue or sell any debt securities, in excess of
$10,000 in the aggregate, or prepay or refinance any indebtedness
for borrowed money;
(iii) engage in any Interested Party Transaction;
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(iv) acquire any assets or properties for cash or otherwise for an
amount in excess of $25,000 in the aggregate in one year;
(v) enter into any transaction involving in excess of $10,000 other
than in the ordinary course of business;
(vi) sell or otherwise dispose of assets material to the Company and
its subsidiaries taken as a whole; or
(vii) enter into any agreement with respect to the foregoing.
SECTION 3.3 OFFICERS OF THE LLC. The Management Board may designate
employees of the LLC as officers of the LLC (the "Officers") as it deems
necessary or desirable to carry on the business of the LLC. Any two or more
offices may be held by the same Person. New offices may be created and filled by
the Management Board. Each Officer shall hold office until his or her successor
is designated by the Management Board or until his or her earlier death,
resignation or removal. Any Officer may resign at any time upon written notice
to the LLC and the Manager Member. Any Officer designated by the Management
Board may be removed from his or her office (with or without a concurrent
termination of employment) by the Management Board (excluding the Person being
considered) or by the Manager Member For Cause or not For Cause at any time,
subject to the terms of such Officer's Employment Agreement with the LLC, if
any. A vacancy in any office occurring because of death, resignation, removal or
otherwise may be filled by the Management Board. Any designation of Officers, a
description of any duties delegated to such Officers, and any removal of such
Officers shall be approved by the Management Board in writing, which shall be
delivered to the Manager Member. The Officers are not "managers" (within the
meaning of the Act) of the LLC.
SECTION 3.4 EMPLOYEES OF THE LLC.
(a) The terms of employment of any employee of the LLC who is not a
Non-Manager Member (including, without limitation, with respect to hiring,
promoting, demoting and terminating of such employees), shall be determined by
the Management Board or such Person or Persons to whom the Management Board may
delegate such power and authority (subject, in all instances, to the power of
the Management Board to revoke such delegation in whole or in part (by a Board
Vote that excludes any Person to whom such power and authority has been
delegated)), subject, in all cases, to compliance with all applicable laws,
rules and regulations and, in the case of compensation, to the provisions of
Section 3.5 hereof. Notwithstanding the foregoing, the Manager Member may
terminate the employment by the LLC of any employee who has engaged in any
activity included in the definition of "For Cause," with notice to the
Management Board specifying the reasons for such decision.
(b) The granting or Transferring of LLC Interests in connection with
any hiring or promotion of an employee shall be subject to the terms and
conditions set forth in Articles V and VI hereof.
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(c) Any Person who is a Non-Manager Member may have his or her
employment with the LLC terminated by the LLC only: (i) in the case of a
termination For Cause, either by the Manager Member or by the Management Board
(excluding the Person whose termination is being considered), with the prior
written consent of the Manager Member, or (ii) in the case of any other
termination by the LLC, by the Management Board (excluding for all purposes the
Person whose termination is being considered), with the prior written consent of
the Manager Member.
SECTION 3.5 OPERATION OF THE BUSINESS OF THE LLC.
(a) Subject to the terms hereof, the Management Board is hereby
given the exclusive power and authority to execute, or cause the execution of,
transactions in, and to exercise all rights, powers and privileges with respect
to, securities and other instruments in accounts of clients of the LLC, which
power and authority may be delegated to the Officers of the LLC from time to
time in the discretion of the Management Board.
(b) Subject to the Manager Member's rights, duties and
obligations set forth in the Act and in Section 3.1 above, the Officers are
hereby delegated the power and authority from the Manager Member to manage the
day-to-day operations, business and activities of the LLC; including, without
limitation, the power and authority, in the name of and on behalf of the LLC,
to:
(i) determine the use of the Operating Cash Flow as set
forth in Section 3.5(c) below;
(ii) execute such documents and do such acts as are
necessary to register (or provide or qualify for exemptions from
any such registrations) or qualify the LLC under applicable
Federal and state securities laws;
(iii) enter into contracts and other agreements with respect
to the provision of Investment Management Services and execute
other instruments, documents or reports on behalf of the LLC in
connection therewith; and
(iv) act for and on behalf of the LLC in all matters
incidental to the foregoing and other day-to-day matters.
(c) The Operating Cash Flow of the LLC for any period shall be
used by the LLC to provide for and pay its business expenses and expenditures as
determined by the Management Board; including, without limitation, compensation
and benefits to its employees, including the Officers. Without the prior written
consent of the Manager Member (which written consent makes specific reference to
this Section 3.5(c)), the LLC shall not incur (and the Employee Stockholders
shall use their best efforts to prevent the LLC from incurring) any expenses or
take any action to incur other obligations which expenses and obligations are
reasonably expected to exceed the ability of the LLC to pay or provide for them
out of its Operating Cash Flow on a current or previously reserved basis. Except
to the extent otherwise required by applicable law, the LLC shall only make
payments of compensation (including
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bonuses) to its employees (including any Officers) out of the balance of its
Operating Cash Flow remaining after the payment (or reservation for payment) of
all the other business expenses and expenditures for the applicable period. Any
excess Operating Cash Flow remaining for any fiscal year following the payment
(or reservation for payment) of all business expenses and expenditures may be
used by the LLC in such fiscal year and/or in future fiscal years in accordance
with the preceding sentence. Free Cash Flow may be used to provide for and pay
the business expenses of the LLC only to the extent specified in Section 3.5(e)
with respect to key-man life insurance and disability insurance, Section 4.3
with respect to certain extraordinary expenses and as otherwise agreed to in
writing by the Manager Member and the Non-Manager Members acting by a Majority
Vote (any such use being referred to herein as a "Free Cash Flow Expenditure").
(d) The LLC shall not do, and the Employee Stockholders shall use
their best efforts to prevent the LLC from doing, any of the following without
the prior written consent of the Manager Member (which written consent makes
specific reference to this Section 3.5(d)):
(i) enter into, amend, modify or terminate any contract,
agreement or understanding (written or oral) if such action or the
resulting contract, agreement or understanding could reasonably be
expected to conflict with the provisions of this Section 3.5;
(ii) enter into, amend, modify or terminate any contract,
agreement or understanding (written or oral) if such action or the
resulting contract, agreement or understanding (individually or in
the aggregate) could reasonably be expected to have a material
adverse impact on the availability of Operating Cash Flow of the
LLC in future periods (including, without limitation, long-term
leases or employment contracts);
(iii) enter into, amend, modify or terminate any contract,
agreement or understanding (written or oral) if such action or the
resulting contract, agreement or understanding has the effect of
creating a Lien upon any of the assets of the LLC or upon any of
that portion of the revenues of the LLC which is included in Free
Cash Flow (other than with respect to permitted Free Cash Flow
Expenditures hereunder);
(iv) take any action (or omit to take any action) if such
action (or omission) could reasonably be expected to result in the
termination of the employment by the LLC of any Employee
Stockholder (provided, that the foregoing shall not impose any
limitation on the ability of an Employee Stockholder to terminate
his or her employment with the LLC in accordance with the
provisions hereof);
(v) create, incur, assume, or suffer to exist any
Indebtedness;
(vi) establish or modify any significant compensation
arrangement (other than salary and cash bonuses in the ordinary
course) or program (whether cash or
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non-cash benefits) applicable to any employee, which is subject to
ERISA, which requires qualification under the Code, or which
otherwise (A) requires the Manager Member or any of its Affiliates
to take any action which it would not take but for the action
contemplated by the LLC or the Employee Stockholders or Officers
or (B) prevents the Manager Member or any of its Affiliates from
taking any action which it would otherwise have been able to take
but for the action contemplated by the LLC or the Employee
Stockholders or Officers (and in addition, each Employee
Stockholder will use his or her commercially reasonable efforts to
cause the LLC to give the Manager Member not less than thirty (30)
days prior written notice before the LLC establishes or modifies
any significant compensation arrangement (other than salary and
cash bonuses in the ordinary course) or program);
(vii) enter into any line of business other than the
provision of Investment Management Services;
(viii) amend or modify the Minnesota Agreement (other than
with respect to resetting the Option Limitation (as such term is
defined in the Minnesota Agreement)) or amend or modify any
agreement between the LLC and any Permitted Outside Advisory
Client; or
(ix) (A) take any action which pursuant to any provision of
this Agreement other than Section 3.1 may be taken by the Manager
Member with or without the consent of the Non-Manager Members or
the Employee Stockholders, or (B) take any action which requires
the approval or consent of the Manager Member pursuant to any
provision of this Agreement.
(e) The LLC will maintain (and the Employee Stockholders shall
use their best efforts to cause the LLC to maintain), in full force and effect,
such insurance as is customarily maintained by companies of similar size in the
same or similar businesses (including, without limitation, errors and omissions
liability insurance), the premiums on which will be paid out of Operating Cash
Flow. The LLC will maintain such key-man life insurance and disability insurance
policies on each Employee Stockholder as the Manager Member shall deem necessary
or desirable, from time to time, and the Employee Stockholders will use their
reasonable best efforts to effectuate the foregoing. The LLC will receive the
proceeds of the above-referenced insurance policies, and the Members agree with
each other and the LLC that the LLC will pay the premiums on such key-man life
and disability policies, as well as any reasonable additional insurance policies
that the Manager Member deems necessary, out of Free Cash Flow.
(f) In addition to, and not in limitation of, the Manager
Member's powers and authority under this Agreement (including, without
limitation, pursuant to Section 3.1(a) hereof), the Manager Member shall also
have the power, in its sole discretion, whether or not they involve day-to-day
operations, business and activities of the LLC, to take any or all of the
following actions:
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(i) such actions as it deems necessary or appropriate to
cause the LLC or any Affiliate of the LLC, or any officer,
employee, member, partner, or agent thereof, to comply with
applicable laws, rules or regulations;
(ii) any other action that the Manager Member is authorized
to take pursuant to the terms of this Agreement and any other
action necessary or appropriate to prevent actions that require
the Manager Member's consent pursuant to the terms of this
Agreement if such consent has not then been given;
(iii) such actions as it deems necessary or appropriate to
coordinate any initiative which could materially affect the
Manager Member, AMG and/or any of its Affiliates; and
(iv) such actions as it deems necessary or appropriate to
cause the LLC to fulfill its obligations and exercise its rights
under the Merger Agreement.
(g) Notwithstanding any of the provisions of this Agreement to
the contrary, all accounting, financial reporting and bookkeeping procedures of
the LLC shall be established in conjunction with policies and procedures
determined under the supervision of the Manager Member. The LLC shall have a
continuing obligation to keep AMG's chief financial officer informed of material
financial developments with respect to the LLC. Notwithstanding any of the
provisions of this Agreement to the contrary, all legal, compliance and
regulatory matters of the LLC shall be coordinated with the Manager Member
and/or its Affiliates, and the LLC's legal compliance activities shall be
conducted and established in conjunction with policies and procedures determined
under the supervision of the Manager Member.
(h) Notwithstanding any of the provisions of this Agreement to
the contrary, the Manager Member shall have the power to establish and mandate
that the LLC participate in employee benefit plans which are subject to ERISA or
require qualification under Section 401 of the Internal Revenue Code in order to
make the expenses of such plans deductible and may establish or modify the terms
of any such plan.
(i) Notwithstanding any of the provisions of this Agreement to
the contrary, the Management Board and Officers of the LLC will cooperate with
the Manager Member and its Affiliates in implementing any initiative generally
involving a number of such Affiliates.
SECTION 3.6 COMPENSATION AND EXPENSES OF THE MEMBERS. The Manager
Member may receive compensation for services provided to the LLC to the extent
approved by a Majority Vote. The LLC shall, however, pay and/or reimburse the
Manager Member for all reasonable travel expenses incurred by the Manager Member
or AMG in accordance with Section 9.4 as well as any extraordinary expenses
incurred by the Manager Member or AMG directly in connection with the operation
of the LLC. Without limiting the generality of the foregoing, the Manager
Member's and AMG's general overhead items (including, without limitation,
salaries and rent) shall not be reimbursed by the LLC. Stockholders, officers,
directors, Members and agents of Members may serve as employees of the LLC and
be compensated therefor out of Operating Cash Flow as
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determined by the Management Board (or its delegate(s)) pursuant to Section
3.5(c). Except in respect of their provision of services as employees of the LLC
for which they may be compensated out of Operating Cash Flow as contemplated by
the preceding sentence, Non-Manager Members may not receive compensation on
account of the provision of services to the LLC.
SECTION 3.7 OTHER BUSINESS OF THE MANAGER MEMBER AND ITS AFFILIATES.
The Manager Member, AMG and their respective Affiliates may engage,
independently or with others, in other business ventures of every nature and
description, including the acquisition, creation, financing, trading in, and
operation and disposition of interests in, investment managers and other
businesses that may be competitive with the LLC's business. Neither the LLC nor
any of the Non-Manager Members shall have any right in or to any other such
ventures by virtue of this Agreement or the limited liability company created or
continued hereby, nor shall any such activity by the Manager Member, AMG or such
Affiliates be deemed wrongful or improper or result in any liability to the
Manager Member, AMG or such Affiliates. Neither the Manager Member nor any of
its Affiliates (including, without limitation, AMG) shall be obligated to
present any opportunity to the LLC even if such opportunity is of such a
character which, if presented to the LLC, would be suitable for the LLC.
Notwithstanding any provision of this Section 3.7 to the contrary, neither the
Manager Member, AMG nor any Affiliate of AMG or the Manager Member shall solicit
or induce, whether directly or indirectly, any Person for the purpose (which
need not be the sole or primary purpose) of causing any funds with respect to
which the LLC provides Investment Management Services to be withdrawn from such
management.
SECTION 3.8 NON-MANAGER MEMBERS AND NON SOLICITATION AGREEMENTS. Each
Employee Stockholder and, if there is one, the Non-Manager Member of which it is
a stockholder (its Non-Manager Member) other than Irwin Lieber and Barry K.
Fingerhut, has provided the LLC with a Non Solicitation/Non Disclosure Agreement
in form and substance substantially similar to Exhibit A hereto (the "Non
Solicitation Agreement") (and, in the case of any substitute Non-Manager Member
(pursuant to Section 5.2 hereof) or Additional Non-Manager Member (as defined in
Section 5.5 hereof) which is not already bound by a Non Solicitation Agreement,
it shall, prior to and as a condition precedent to becoming a Non-Manager
Member, provide the LLC with such an agreement (together with any changes or
modifications thereto as the Manager Member may deem necessary or desirable) and
such agreements do and shall, at all times, provide that each of the LLC and the
Manager Member shall be entitled to enforce the provisions of such agreements on
its own behalf and that the Manager Member shall be entitled to enforce the
provisions of such agreements on behalf of the LLC. Each of Irwin Lieber and
Barry K. Fingerhut has entered into an Employment Agreement with the LLC.
SECTION 3.9 NON SOLICITATION AND NON DISCLOSURE BY NON-MANAGER MEMBERS
AND EMPLOYEE STOCKHOLDERS.
(a) Each Non-Manager Member and each Employee Stockholder
agrees, for the benefit of the LLC and the other Members, that such Non-Manager
Member and such Employee Stockholder shall not, while employed by the LLC or any
of its Affiliates, engage in any Prohibited Competition Activity.
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(b) In addition to, and not in limitation of, the provisions of
Section 3.9(a) hereto, each Non-Manager Member and each Employee Stockholder
agrees, for the benefit of the LLC and the other Members, that such Non-Manager
Member and such Employee Stockholder shall not, during the period beginning on
the date such Non-Manager Member becomes a Non-Manager Member, and until the
date which is two (2) years after the termination of such Employee Stockholder's
employment with the LLC and its Affiliates, without the express written consent
of the Manager Member, directly or indirectly, whether as owner, part-owner,
shareholder, partner, member, director, officer, trustee, employee, agent or
consultant, or in any other capacity, on behalf of himself or any firm,
corporation or other business organization other than the LLC and its Controlled
Affiliates:
(i) provide Investment Management Services to any Person
that is a Past, Present or Potential Client of the LLC (other than a Present
Client of the LLC to the extent such Present Client is also a Permitted Outside
Advisory Client of the LLC); provided, however, that this clause (i) shall not
be applicable to clients of the LLC (including Potential Clients) who are also
members of the Immediate Family of the Employee Stockholder;
(ii) solicit or induce, whether directly or indirectly, any
Person for the purpose (which need not be the sole or primary purpose) of (A)
causing any funds with respect to which the LLC provides Investment Management
Services to be withdrawn from such management, or (B) causing any Client of the
LLC (including any Potential Clients) not to engage the LLC or any of its
Affiliates to provide Investment Management Services for any or additional
funds;
(iii) contact or communicate with, in either case in
connection with Investment Management Services, whether directly or indirectly,
any Past, Present or Potential Clients of the LLC (other than a Present Client
of the LLC to the extent such Present Client is also a Permitted Outside
Advisory Client of the LLC); provided, however, that this clause (iii) shall not
be applicable to clients of the LLC (including Potential Clients) who are also
members of the Immediate Family of the Employee Stockholder; or
(iv) solicit or induce, or attempt to solicit or induce,
directly or indirectly, any employee or agent of, or consultant to, the LLC or
any of its Controlled Affiliates to terminate its, his or her relationship
therewith, hire any such employee, agent or consultant, or former employee,
agent or consultant, or work in any enterprise involving investment advisory
services with any employee, agent or consultant or former employee, agent or
consultant, of the LLC or its Controlled Affiliates who was employed by or acted
as an agent or consultant to the LLC or its Controlled Affiliates at any time
preceding the termination of the Employee Stockholder's employment (excluding
for all purposes of this sentence, secretaries and persons holding other similar
positions).
For purposes of this Section 3.9(b), (x) the term "Past Client" shall be limited
to those past Clients who were advisees or investment advisory customers of, or
recipients of Investment Management Services from, the LLC and its Controlled
Affiliates (including its predecessor, GeoCapital Corporation) at the date of
termination of the Employee Stockholder's employment or at any time
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during the twelve (12) months immediately preceding the date of such
termination; and (y) the term "Potential Client" shall be limited to those
Persons to whom an offer was made within two years prior to the date of
termination of the Employee Stockholder's employment.
Notwithstanding the provisions of Sections 3.9(a) and 3.9(b), any Employee
Stockholder may make passive investments in an enterprise which is competitive
with the Manager Member (certain examples of which have been provided to the
Non-Manager Members by the Manager Member) the shares or other equity interests
of which are publicly traded provided his holding therein together with any
holdings of his Affiliates and members of his Immediate Family, do not, at the
time such investments are made, exceed four and nine-tenths of one percent
(4.9%) of the outstanding shares of comparable interests in such entity. Subject
to the foregoing, an employee, Member or Employee Stockholder may engage in
investing for his personal account if (i) each such investment is made in
accordance with the Code of Ethics of the LLC, and (ii) if the aggregate amount
of any actual or proposed investment by such Person, members of his Immediate
Family and accounts for the benefit of any of the foregoing, collectively, in a
single issuer exceeds Five Hundred Thousand Dollars ($500,000) then such
investment shall be disclosed in writing to the Managing Member promptly.
Notwithstanding any other provision of this Agreement, the Members agree that
the Non-Management Members and Employee Stockholders shall be entitled to
continue to serve in their respective present capacities on the boards of
companies set forth in Schedule 3.9 of this Agreement, and to serve on the
boards of directors of private companies and of public companies that are not,
at the time such position is accepted or while such position is held, reasonably
likely to be considered by the LLC for investment by the LLC or by any Person or
account (excluding any Controlled Affiliates) for which the LLC provides
Investment Management Services and may receive and retain individually (and not
for the benefit of the LLC or any other Member) compensation from such companies
for such service as a member of the Board of Directors, provided that (x) prior
to the acceptance of such position or the receipt of any compensation, the
Non-Manager Member or Employee Stockholder notifies the Management Board and the
Manager Member in writing of the terms and conditions of the prospective
position and compensation, including a brief description of the Company and
explanation why it is not reasonably likely to be considered for investment as
contemplated herein, and the Management Board and the Manager Member consent in
writing to the acceptance of such position and compensation and (y) at no time
during such service shall the LLC make or recommend (for itself or any Person or
account for which the LLC directly provides Investment Management Services
excluding any Controlled Affiliates) an acquisition of any securities issued by
such company.
(c) Each Member and each Employee Stockholder agrees that any and
all presently existing investment advisory businesses of the LLC and its
Controlled Affiliates (including its predecessor, GeoCapital Corporation), and
all businesses developed by the LLC and its Controlled Affiliates, including by
such Employee Stockholder or any other employee of the LLC (including, without
limitation, employees of its predecessor, GeoCapital Corporation), including
without limitation, all investment methodologies, all investment advisory
contracts, fees and fee schedules, commissions, records, data, client lists,
agreements, trade secrets, and any other incident of any business developed by
the LLC (or its predecessor, GeoCapital Corporation)
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or its Controlled Affiliates or earned or carried on by the Employee Stockholder
for the LLC or its predecessor, GeoCapital Corporation or their respective
Controlled Affiliates, and all trade names, service marks and logos under which
the LLC or its Affiliates do business, and any combinations or variations
thereof and all related logos, are and shall be the exclusive property of the
LLC or such Controlled Affiliate, as applicable, for its or their sole use, and
(where applicable) shall be payable directly to the LLC or such Controlled
Affiliate, except that the LLC has authorized another entity to use the name
"GeoCapital" for limited purposes as described in that certain Letter Agreement
dated August __, 1997, between GeoCapital Corporation and __________. In
addition, each Member and each Employee Stockholder acknowledges and agrees that
the investment performance of the accounts managed by the LLC (and its
predecessor, GeoCapital Corporation) was attributable to the efforts of the team
of professionals of the LLC (or its predecessor, GeoCapital Corporation, as
applicable) and not to the efforts of any single individual, and that therefore,
the performance records of the accounts managed by the LLC (and its predecessor,
GeoCapital Corporation) are and shall be the exclusive property of the LLC. Each
Member and each Employee Stockholder acknowledges that, in the course of
performing services hereunder and otherwise (including, without limitation, for
the LLC's predecessor, GeoCapital Corporation), such Member and Employee
Stockholder has had, and will from time to time have, access to information of a
confidential or proprietary nature, including without limitation, all
confidential or proprietary investment methodologies, trade secrets, proprietary
or confidential plans, client identities and information, client lists, service
providers, business operations or techniques, records and data ("Intellectual
Property") owned or used in the course of business by the LLC or its Controlled
Affiliates. Each Non-Manager Member and each Employee Stockholder agrees always
to keep secret and not ever publish, divulge, furnish, use or make accessible to
anyone (otherwise than in the regular business of the LLC and its Controlled
Affiliates or unless compelled by judicial or administrative process) any
Intellectual Property of the LLC or any Controlled Affiliate thereof unless such
information can be shown to be (i) previously known on a nonconfidential basis
by such Non-Manager Member or Employee Stockholder, (ii) in the public domain
through no fault of such Non-Manager Member or Employee Stockholder or (iii)
lawfully acquired by such Non-Manager Member or Employee Stockholder from other
sources. At the termination of the Employee Stockholder's services to the LLC,
all data, memoranda, client lists, notes, programs and other papers, items and
tangible media, and reproductions thereof relating to the foregoing matters in
the Non-Manager Member's or Employee Stockholder's possession or control, shall
be returned to the LLC and remain in its possession (except where the return of
such items shall be unreasonable or impractical in relation to the importance or
confidentiality of such items). In addition, the Manager Member acknowledges
that in its capacity as Manager Member it will from time to time have access to
Intellectual Property owned or used in the business by the LLC or its Controlled
Affiliates relating to (i) investment analysis and decisions and to (ii) clients
or accounts of the LLC or its Controlled Affiliates. The Manager Member agrees
always to keep secret and not ever publish, diverge, furnish, use or make
accessible to anyone (otherwise than in the regular business of the Manager
Member or the LLC and its Controlled Affiliates) any such Intellectual Property
unless such information can be shown to be (i) previously known on a
nonconfidential basis by the Manager Member or its Affiliates, (ii) in the
public domain through no fault of the Manager Member or its Affiliates or (iii)
lawfully acquired by the Manager Member or its Affiliates from other sources;
provided, however, that nothing in this Section 3.9(c) shall prevent the Manager
Member from making such disclosures regarding the LLC and its Controlled
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Affiliates as may be necessary or appropriate either at the request of the
Manager Member's lenders or other financing sources or under applicable law
(including pursuant to judicial or administrative process).
(d) Each Non-Manager Member and each Employee Stockholder
acknowledges that, in the course of entering into this Agreement, the
Non-Manager Member and the Employee Stockholder have had and, in the course of
the operation of the LLC, the Non-Manager Member and Employee Stockholder will
from time to time have, access to Intellectual Property owned by or used in the
course of business by AMG. Each Non-Manager Member and each Employee Stockholder
agrees, for the benefit of the LLC and its Members, and for the benefit of the
Manager Member and AMG, always to keep secret and not ever publish, divulge,
furnish, use or make accessible to anyone (otherwise than at the Manager
Member's request) any knowledge or information regarding Intellectual Property
(including, by way of example and not of limitation, the transaction structures
utilized by the Manager Member) of AMG unless such information can be shown to
be (i) previously known on a nonconfidential basis by such Non-Manager Member or
Employee Stockholder, (ii) in the public domain through no fault of such
Non-Manager Member or Employee Stockholder or (iii) lawfully acquired by such
Non-Manager Member or Employee Stockholder from other sources. At the
termination of the Employee Stockholder's service to the LLC, all data,
memoranda, documents, notes and other papers, items and tangible media, and
reproductions thereof relating to the foregoing matters in the Non-Manager
Member's or Employee Stockholder's possession or control shall be returned to
the Manager Member and remain in its possession.
(e) The provisions of this Section 3.9 shall not be deemed to
limit any of the rights of the LLC or the Members under any of the Employment
Agreements, Non Solicitation Agreements or under applicable law, but shall be in
addition to the rights set forth in each of the Employment Agreements and Non
Solicitation Agreements, and those which arise under applicable law.
SECTION 3.10 ADDITIONAL PERMITTED OUTSIDE ADVISORY CLIENTS. If an
Employee Stockholder wishes to cause a Collective Investment Vehicle to become a
Permitted Outside Advisory Client of such Employee Stockholder under the
provisions of paragraph (b) of the definition of Permitted Outside Advisory
Client, then such Employee Stockholder shall so notify the Manager Member and
such Collective Investment Vehicle shall be designated as a "Permitted Outside
Advisory Client"of that Employee Stockholder, provided that the Employee
Stockholder and the Collective Investment Vehicle comply with the conditions set
forth in this Section 3.10. Each Employee Stockholder hereby covenants and
agrees to take no action as a partner, member, equityholder or other Affiliate
of a Permitted Outside Advisory Client that would authorize or permit the
termination of any agreement between such Permitted Outside Advisory Client (or
between a partner, member or manager of such Permitted Outside Advisory Client)
and the LLC or the Manager Member or Affiliates of the Manager Member; provided,
however, that each Employee Stockholder may take such action as may be required
by applicable law if such Employee Stockholder provides the Manager Member with
an opinion of counsel, reasonably satisfactory in form and substance to the
Manager Member, to the effect that such action is required under applicable law.
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(a) Such Employee Stockholder and such Collective Investment
Vehicle shall provide the LLC and the Manager Member and AMG with such
information regarding the Collective Investment Vehicle as the Manager Member or
AMG may reasonably request (including, by way of example and not of limitation,
the organizational documents, financial statements (if any) and offering
materials of the Collective Investment Vehicle and any other material or related
documents and agreements), as well as such evidence as the Manager Member or AMG
may reasonably request (including, without limitation, opinions of counsel
reasonably acceptable to the Manager Member or AMG) regarding the compliance of
such Collective Investment Vehicle with applicable laws, rules and regulations
(including, by way of example and not of limitation, the compliance of the
Collective Investment Vehicle after giving effect to the arrangements
contemplated by this Section 3.10).
(b) If, after the date hereof, any Employee Stockholder or any
entity in which such Employee Stockholder is or becomes an owner, part-owner,
shareholder, partner, member, director, officer, trustee, employee, agent or
consultant (or with respect to which he serves in any similar capacity) (a
"Related Entity"), is or becomes entitled to receive from such Collective
Investment Vehicle any consulting, administrative, advisory, management or
similar fee or allocation (other than a Carried Interest (as defined below)),
then such fee or allocation shall be transferred or assigned to the LLC on such
terms and conditions (which shall be substantially similar to the terms and
conditions applicable to the Employee Stockholder and Related Entity) and
pursuant to such agreements, documents and instruments, all as may be reasonably
satisfactory to the Employee Stockholder or Related Entity and the Manager
Member or AMG.
(c) If, after the date hereof, any one or more Employee
Stockholder(s) or any Related Entities is or becomes entitled to receive any
"carried interest" or other items of gain allocated (directly or indirectly) to
such Employee Stockholder(s) or Related Entities (other than allocations which
are made pro-rata based on contributed capital to all partners, members,
beneficiaries or other holders of similar economic interests in the Collective
Investment Vehicle (together a "Carried Interest"), then, unless the Manager
Member waives the provisions of this Section 3.10(c) with respect to that
Collective Investment Vehicle, ten percent (10%) of the rights with respect to
such Carried Interest (the "Guaranteed Interest") shall be issued, transferred,
assigned or allocated to the Manager Member (or an Affiliate of the Manager
Member which is selected by the Manager Member and of which the Employee
Stockholder is given notice) for nominal consideration or other remuneration and
otherwise on such other terms and conditions presented to the Manager Member
(which shall be substantially similar to the other terms and conditions
applicable to the Employee Stockholder and Related Entity) and pursuant to such
agreements, documents and instruments as, all as may be reasonably satisfactory
to the Employee Stockholder or Related Entity and the Manager Member, provided
that such terms and conditions (i) shall permit the Manager Member (or such
selected Affiliate) to retain limited liability (with no liability for any
"clawback," deficit restoration or similar obligation), and (ii) shall not
require the Manager Member to devote any specified resources to, perform any
obligations for, or be bound by any restriction covenants for the benefit of,
such Collective Investment Vehicle; provided, however, that if the conditions
contemplated by this Section 3.10 with respect to issuance, transfer, assignment
or allocation of the Guaranteed Interest to the order of the Manager Member are
not satisfied, then no Non-Manager Member, Employee Stockholder or Related
Entity
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shall be permitted to acquire a Carried Interest in such Collective Investment
Vehicle and such Collective Investment Vehicle shall not be a Permitted Outside
Advisory Client.
(d) The Manager Member (or an Affiliate of the Manager Member
which is selected by the Manager Member and of which the Employee Stockholder is
given notice) shall be granted an option to purchase additional portions of the
Carried Interest (its "Additional Interest") on such terms and conditions
presented to the Manager Member and pursuant to such agreements, documents and
instruments, all as may be reasonably satisfactory to the Employee Stockholder
or Related Entity and the Manager Member in accordance with the following:
(i) Prior to any Employee Stockholder or Related Entity
receiving (or being granted the option or right to receive) a
Carried Interest in a Collective Investment Vehicle, the Employee
Stockholder shall give notice to the Manager Member (which notice
shall be acknowledged by the Collective Investment Vehicle) of the
terms (including any amendments or modifications thereto) on which
the Carried Interest and any other interests in the Collective
Investment Vehicle are expected to be received by or granted to
the Employee Stockholder or a Related Entity (including, without
limitation, a complete description of the Carried Interest and
such other interests, and the price, if any, being paid for such
Carried Interest and such other interests) which notice shall
constitute an irrevocable offer by the Collective Investment
Vehicle to transfer or issue to the Manager Member such portion of
the Carried Interest and other such interests as is equal to:
(A x B) - C
where
A = (i) a fraction, the numerator of which is the number of LLC
Points held by the Manager Member on the date Carried
Interests in that Collective Investment Vehicle are first
received by or granted to such Employee Stockholder and his
Related Entities, and the denominator of which is the total
number of LLC Points then outstanding, multiplied by (ii)
that percentage Free Cash Flow then constitutes of Revenues
From Operations;
B = the Carried Interest which is then held (or being received)
by or granted to the Employee Stockholder and his Related
Entities (or which such Employee Stockholder and his Related
Entities have (or will receive) the option or right to
acquire) before giving effect to the Guaranteed Interest that
may then be held (or is to be received) by the Manager Member
(or a Related Entity) pursuant to the provisions of paragraph
(c) above; and
C = the Guaranteed Interest then to be held (or to be received)
by the Manager Member (or an Affiliate of the Manager Member)
pursuant to the provisions of paragraph (c) above.
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at a price (the "Purchase Price") equal to the cash purchase price
which is proportionate to the price which the Employee Stockholder
or his or her Related Entity would have to pay for the Carried
Interest and such other related interests in the Collective
Investment Vehicle which the Employee Stockholder or his or her
Related Entity would have to purchase in order to receive the
Carried Interest, based on the portion of the Carried Interest
being offered to the Manager Member under this Section 3.10(d).
(ii) At any time within thirty (30) days after the date on
which the Manager Member receives the notice described in clause
(i) above, the Manager Member (or any Affiliate of the Manager
Member selected by the Manager Member with notice to the Employee
Stockholder) may accept the offer set forth in the notice by
agreeing to pay the Collective Investment Vehicle the Purchase
Price at the same time and in the same proportionate amounts as
the Employee Stockholder or a Related Entity. Notwithstanding the
foregoing sentence, if the Manager Member has been kept apprised
of all negotiations and has been provided all drafts relating to
the terms of the offer, and the offer contained in the notice
described in clause (i) is substantially the same as that
contained in prior drafts and the initial draft of the terms was
distributed to the Manager Member not less than twenty-one (21)
days before the date of the notice described in clause (i), then
the Manager Member shall have ten (10) days to accept the offer
set forth in the notice.
(iii) At any time when subsequent interests are granted or
made available to any Employee Stockholder or Related Entity, and
at any time when the terms and conditions upon which interests are
granted or made available to any Employee Stockholder or Related
Entity change or are modified in any respect, appropriate
provisions will be made to give effect to the intent of this
Section 3.10, in order to permit the relevant Collective
Investment Vehicle to remain a Permitted Outside Advisory Client
under this Section 3.10 and, if appropriate provisions are not
made to the reasonable satisfaction of the Manager Member, then
either (x) such change or modification shall not be made at all or
(y) if any change or modification is made, then such Collective
Investment Vehicle shall cease to be a Permitted Outside Advisory
Client effective upon the effectiveness of such change or
modification.
(iv) It is agreed and acknowledged, in furtherance and not
in limitation of the foregoing, that if the Manager Member (or an
Affiliate of the Manager Member as contemplated by this paragraph
(d)) exercises its option under this paragraph (d) to acquire any
additional Carried Interest (and any other interests in the
Collective Investment Vehicle), such acquisition shall be on the
same terms (including any amendments or modifications thereto) on
which the Carried Interest and any other interests in the
Collective Investment Vehicle are received by or granted to the
Employee Stockholder or a Related Entity and the Purchase Price
paid by the Manager Member (or such Affiliate) shall be a cash
purchase price which is proportionate to the price paid by the
Employee Stockholder or Related
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Entity based on the portion of the Carried Interest acquired
pursuant to such option under this Section 3.10(d).
Attached hereto as Schedule C are sample calculations under this
Section 3.10.
SECTION 3.11 REMEDIES UPON BREACH.
(a) In the event that a Member or its Employee Stockholder (i)
breaches any of the provisions of Section 3.9 or 3.10 hereof, or (ii) breaches
any of the provisions of the Employment Agreement or Non Solicitation Agreement
to which it or he is a party (in each case, including, without limitation,
following the termination of his or her employment with the LLC), then (A) such
Non-Manager Member shall forfeit its right to receive any payment for its LLC
Interests under Section 3.12, and (B) AMG (or its assignees) shall have no
further obligations under any promissory note theretofore issued to such
Non-Manager Member pursuant to Section 3.12(e).
(b) Each Member and each Employee Stockholder agrees that any
breach of the provisions of Section 3.9 of this Agreement or of the provisions
of the Employment Agreement or Non Solicitation Agreement by such Member or
Employee Stockholder could cause irreparable damage to the LLC and the other
Members. The LLC and/or the applicable Member, shall have the right to an
injunction or other equitable relief (in addition to other legal remedies) to
prevent any violation of a Member's or Employee Stockholder's obligations
hereunder or thereunder.
SECTION 3.12 REPURCHASE UPON TERMINATION OF EMPLOYMENT OR TRANSFER BY
OPERATION OF LAW.
(a) In the event that the employment by the LLC of any Employee
Stockholder terminates for any reason, then:
(i) if the termination of the Employee Stockholder occurred
because of the death or Permanent Incapacity of such Employee
Stockholder, the LLC shall purchase and the Non-Manager Member (or
the Non-Manager Member of which such Employee Stockholder was the
owner, as applicable) (as indicated on Schedule A hereto) and his
(or its) Related Non-Manager Members (and their respective
Permitted Transferees, if any) (each a "Repurchased Member") shall
sell to the LLC for cash, LLC Points up to the portion of the
Repurchase Price (as such term is defined below) which is equal to
the cash proceeds of any key-man life insurance policies or
lump-sum disability insurance policies, as applicable, maintained
by the LLC on the life or health of such Employee Stockholder (an
"LLC Repurchase"), and
(ii) in each other such case (and, in the case of the death
or Permanent Incapacity of an Employee Stockholder, to the extent
the Repurchase Price (as such term is defined in Section 3.12(c)
below) exceeds the proceeds described in clause (i) of this
Section 3.12(a) (determined after all such proceeds have been
collected)),
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AMG shall purchase and the Non-Manager Member (or the Non-Manager
Member of which such Employee Stockholder was the owner, as
applicable) (as indicated on Schedule A hereto) and his (or its)
Related Non-Manager Members (and their respective Permitted
Transferees) (each a "Repurchased Member") shall sell (each a
"Manager Member Repurchase") all (or, in the case of the death or
Permanent Incapacity of an Employee Stockholder, such portion as
is not required to be purchased by the LLC under clause (i) of
this Section 3.12(c)) of the LLC Interests held by the Repurchased
Member, in each case, pursuant to the terms of this Section 3.12.
For purposes hereof, each LLC Repurchase and each Manager Member
Repurchase together with the related LLC Repurchase, if any, is
referred to as a "Repurchase."
(b) The closing of the Repurchase will take place on a date set
by the Manager Member (the "Repurchase Closing Date") which shall be after the
last day of the calendar quarter in which the Employee Stockholder's employment
with the LLC is terminated but which is not more than one hundred eighty (180)
days after the date on which the termination of the employment by the LLC of the
relevant Employee Stockholder occurred; provided, however, that (i) if the
employment by the LLC of such Employee Stockholder is terminated because of the
death or Permanent Incapacity of such Employee Stockholder, then the Repurchase
Closing Date shall be a date set by the Manager Member which is as soon as
reasonably practicable after the later of (A) one hundred eighty (180) days
after the death or Permanent Incapacity, as applicable, of such Employee
Stockholder or (B) ninety (90) days after the LLC has received the proceeds of
all key-man life insurance policies or disability insurance policies, as
applicable, maintained by the LLC on the life or health of such Employee
Stockholder.
(c) The purchase price for the Repurchase (the "Repurchase
Price") shall be determined as follows:
(i) If the Employee Stockholder's employment with the LLC is
terminated because of the death, Permanent Incapacity or
Retirement of the Employee Stockholder or if such Employee
Stockholder's employment with the LLC was terminated by the LLC on
such date other than For Cause, then the Repurchase Price shall
equal *** [The remainder of this subparagraph has been omitted
pursuant to the confidential treatment request referenced on the
cover page hereto. The omitted portion has been filed separately
with the Commission.] ***
(ii) In all other cases, (including, without limitation, the
resignation of an Employee Stockholder or the termination of such
Employee Stockholder For Cause or for Unsatisfactory Performance),
the Repurchase Price shall equal *** [The remainder of this
subparagraph has been omitted pursuant to the confidential
treatment request referenced on the cover page hereto. The omitted
portion has been filed separately with the Commission.] ***
If a Repurchase Price must be determined prior to ********** after the
Effective Date, then the amount of the LLC's Free Cash Flow for the portion of
the relevant ********** period
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before the Effective Date shall be calculated on a pro-forma basis such that the
Free Cash Flow of the LLC shall be deemed to be equal to ********** percent
(**%) of the Revenues From Operations of the LLC's predecessor, GeoCapital
Corporation attributable to the assets transferred to the LLC pursuant to the
Asset Transfer.
(d) The rights of AMG, the Manager Member, the LLC and their
assignees hereunder are in addition to and shall not affect any other rights
which AMG, the Manager Member, the LLC or their assigns may otherwise have to
repurchase LLC Interests (including, without limitation, pursuant to any
agreement entered into by an Additional Non-Manager Member which provides for
the vesting of LLC Points).
(e) On the Repurchase Closing Date, AMG and/or the LLC or their
respective assignees (as applicable) shall pay to the Repurchased Member the
Repurchase Price for the LLC Interests repurchased in the manner set forth in
this Section 3.12, and upon such payment the Repurchased Member shall cease to
hold any LLC Interests, and such Repurchased Member shall be deemed to have
withdrawn from the LLC and shall cease to be a Member of the LLC and shall no
longer have any rights hereunder; provided, however, that the provisions of this
Article III shall continue as set forth in Section 3.12 below. On the Repurchase
Closing Date, the Repurchased Member and the LLC (and if AMG is purchasing LLC
Interests from the Repurchased Member, AMG) (or their assignees) shall execute
an agreement reasonably acceptable to the Repurchased Member and the Manager
Member in which the Repurchased Member represents and warrants to the Manager
Member and/or AMG and/or the LLC, as applicable (or their assignees), that it
has sole record and beneficial title to the Repurchased Interest, free and clear
of any Encumbrances other than those imposed by this Agreement. Payment of the
Repurchase Price shall be made on the Repurchase Closing Date as follows: (i) in
the case of termination of employment because of death or Permanent Incapacity
(to the extent of the collected proceeds of any disability insurance policies
under which the LLC is the beneficiary upon the permanent incapacity of such
Employee Stockholder), by wire-transfer of immediately available funds to an
account designated by the Repurchased Member at least three (3) business days
prior to the Repurchase Closing Date, and (ii) in the case of any other
termination of employment other than a Retirement (but including a termination
of employment because of Permanent Incapacity to the extent the obligation
exceeds the proceeds of any key-man disability insurance policies described
above), (A) in the case of a termination by the LLC other than For Cause, on the
Repurchase Date; and (B) in the case of any other termination, on the later to
occur of (x) the Repurchase Date or (y) the date which is the first business day
after the fifth anniversary of the Effective Date (provided, that such
obligation shall bear interest at a rate equal to that set forth in Section 1(b)
of Exhibit B, from and after the Repurchase Date) provided that for each
Non-Manager Member that is not a Member as of the date of this Agreement, such
payment may be made with a promissory note in the form attached hereto as
Exhibit B, the principal of which promissory note would be paid in four (4)
equal (except as contemplated by Section 3.12(f)) installments, the first
installment would be paid (A) in the case of a termination by the LLC other than
For Cause, on the Repurchase Date; and (B) in the case of any other termination,
on the later to occur of (x) the Repurchase Date or (y) the date which is the
first business day after the fifth anniversary of the Effective Date, and the
second, third and fourth
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installments would be paid fourteen (14) months, twenty-six (26) months and
thirty-eight (38) months, respectively, after the first installment.
(f) If an Employee Stockholder's employment with the LLC is
terminated because such Employee Stockholder has resigned or was terminated For
Cause or for Unsatisfactory Performance, then the amounts of the second, third
and fourth installments of the promissory note set forth in Section 3.12(e)
above shall equal the lesser of (i) twenty-five percent (25%) of the Repurchase
Price (determined as set forth in Section 3.12(c) hereof) on the Repurchase
Closing Date, or (ii) twenty-five percent (25%) of the Repurchase Price,
determined as if the Repurchase Closing Date were taking place on the second,
third or fourth anniversary of the Repurchase Closing Date, respectively (in
each case, together with interest computed on the principal amount of such
promissory note (determined as set forth in this Section 3.12(f)) from the date
of issuance of such promissory note through the date of payment of such
installment as set forth on Exhibit B). At least forty-five (45) days prior to
the date an installment to which this Section 3.12(f) applies would be paid, the
Manager Member shall cause the LLC to certify to the Repurchased Member who is
to receive such installment, in writing, a calculation setting forth the amount
of such installment based on clauses (i) and (ii) in the preceding sentence.
Each Repurchased Member to whom this Section 3.12(f) applies, may defer receipt
of an installment on one (1) occasion, by written notice received by the LLC and
the Manager Member not less than fifteen (15) days prior to the date an
installment is due to be paid. If a Repurchased Member defers an installment,
the due date of each remaining installment of the promissory note issued to such
Repurchased Member pursuant to Section 3.12(e) above shall be extended by twelve
(12) months.
(g) AMG may assign and/or delegate any or all of its rights and
obligations under this Section 3.12, in one or more instances, to the Manager
Member; provided, however, that no such assignment or delegation shall relieve
AMG of its obligation to make payment of a Repurchase Price. AMG may, with a
Majority Vote (excluding, for purposes of determining such Majority Vote, the
Non-Manager Member whose interest is being repurchased), assign any or all of
its rights and obligations under this Section 3.12, in one or more instances, to
the LLC; provided, that (i) AMG shall guarantee the performance of such
obligations by the LLC, and (ii) the foregoing limitation shall have no effect
on the LLC's obligation set forth in Section 3.12(a)(i) regarding the use of the
proceeds of a key-man life or disability insurance policy.
(h) In the event that a Non-Manager Member or Employee Stockholder
(i) has filed a voluntary petition under the bankruptcy laws or a petition for
the appointment of a receiver or makes any assignment for the benefit of
creditors, (ii) is subject involuntarily to such a petition or assignment or to
an attachment or other legal or equitable interest with respect to any of its
LLC Interests or, in the case of an Employee Stockholder which is not a
Non-Manager Member, its interests in the Non-Manager Member which it owns, and
such involuntary petition or assignment or attachment is not discharged within
sixty (60) days after its effective date, or (iii) is subject to a transfer of
any of its LLC Interests or, in the case of an Employee Stockholder which is not
a Non-Manager Member, its interests in the Non-Manager Member which it owns, by
court order or decree or by operation of law, then AMG shall purchase all the
LLC Interests held by such Non-Manager Member (including the Non-Manager Member
through which such
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Employee Stockholder holds his or her interest in the LLC) pursuant to the terms
of this Section 3.12 as if such Non-Manager Member was a Repurchased Member with
the purchase price determined pursuant to Section 3.12(c)(ii) and the date of
the closing to be determined by the Manager Member in its discretion. In order
to give effect to clause (iii) of the foregoing, if any of the interests of a
Non-Manager Member in the LLC, or of an Employee Stockholder in a Non-Manager
Member, become subject to transfer (or purport to be or have been transferred)
by a court order or decree or by operation of law, the Non-Manager Member (whose
interest in the LLC or the interests in which are subject to such transfer)
shall cease to be a Member of the LLC, and the transferee by court order or
decree or by operation of law shall not become a Member, and AMG shall have the
right to purchase from the Non-Manager Member which has ceased to be a
Non-Manager Member, all his, her or its interest in the LLC as set forth in the
preceding sentence.
(i) In the event that a Non-Manager Member is required to sell its
LLC Interests pursuant to the provisions of this Section 3.12, and in the
further event that such Non-Manager Member refuses to, is unable to, or for any
reason fails to, execute and deliver the agreements required by this Section
3.12, the LLC or AMG, as applicable (or their respective assigns) may deposit
the purchase price, if any, therefor (including cash and/or promissory notes)
with any bank doing business within fifty (50) miles of the LLC's principal
place of business, or with the LLC's accounting firm, as agent or trustee, or in
escrow, for the Non-Manager Member, to be held by such bank or accounting firm
for the benefit of and for delivery to such Non-Manager Member. Upon such
deposit by the LLC or AMG (or their respective assigns) and upon notice thereof
given to the Non-Manager Member, such Non-Manager Member's LLC Interests shall
be deemed to have been sold, transferred, conveyed and assigned to the LLC or
AMG (or their assigns), as applicable, the Non-Manager Member shall have no
further rights with respect thereto (other than the right to withdraw the
payment therefor, if any, held in escrow), and the Manager Member shall record
such transfer or repurchase on Schedule A hereto.
SECTION 3.13 NO EMPLOYMENT OBLIGATION. Each Non-Manager Member and each
Employee Stockholder acknowledges that neither this Agreement nor the provisions
of the Non Solicitation Agreement creates an obligation on the part of the LLC
to continue the employment of an Employee Stockholder with the LLC, and that
such Employee Stockholder, unless he or she is a party to an Employment
Agreement, is an employee at will of the LLC.
SECTION 3.14 MISCELLANEOUS. Each Member and each Employee Stockholder
agrees that the enforcement of the provisions of Sections 3.8, 3.9, 3.10, and
3.12 hereof, and the enforcement of the provisions of the Employment Agreements
and Non Solicitation Agreements are necessary to ensure the protection and
continuity of the business, goodwill and confidential business information of
the LLC for the benefit of each of the Members. Each Member and each Employee
Stockholder agrees that, due to the proprietary nature of the LLC's business,
the restrictions set forth in Section 3.9 hereof and in the Employment
Agreements and the Non Solicitation Agreements are reasonable as to duration and
scope. If any provision contained in this Article III shall for any reason be
held invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Article III. It is the intention of the parties hereto that if any of the
restrictions or covenants contained herein is held
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to cover a geographic area or to be for a length of time that is not permitted
by applicable law, or is any way construed to be too broad or to any extent
invalid, such provision shall not be construed to be null, void and of no
effect, but to the extent such provision would then be valid or enforceable
under applicable law, such provision shall be construed and interpreted or
reformed to provide for a restriction or covenant having the maximum enforceable
geographic area, time period and other provisions as shall be valid and
enforceable under applicable law.
Each Member and Employee Stockholder acknowledges that the obligations
and rights under Sections 3.8, 3.9, 3.10, 3.11 and 3.12 and this Section 3.14
shall survive the termination of the employment of an Employee Stockholder with
the LLC and/or the withdrawal or removal of a Member from the LLC, regardless of
the manner of such termination, withdrawal or removal in accordance with the
provisions hereof and of the relevant Employment or Non Solicitation Agreement.
Moreover, each Member agrees that the remedies provided herein, are reasonably
related to the anticipated loss that the LLC and the Members (including, without
limitation, the Manager Member which would be purchasing LLC Interests from a
Non-Manager Member) would suffer upon a breach of such provisions. Except as
agreed to by the Manager Member, in advance, in a writing making specific
reference to this Article III, no Employee Stockholder or Non-Manager Member
shall enter into any agreement or arrangement which is inconsistent with the
terms and provisions hereof.
SECTION 3.15 CAPITALIZATION OF EXCESS OPERATING CASH FLOW. At any time
the Management Board believes that the Operating Cash Flow of the LLC will
exceed the actual expenses of the LLC (taking into account business conditions
at the time and including both a reasonable allowance for executive compensation
increases, and a reasonable allowance for either a loss of business or a change
in margins in the business) at the request of the Management Board,
representatives of the Manager Member shall meet with the Management Board for
the purpose of considering an appropriate means to permit the Non-Manager
Members to utilize such excess Operating Cash Flow, while retaining sufficient
Operating Cash Flow (including reserves) to operate the business of the LLC
consistent with past practices. Such appropriate means may include (but shall
not be limited to) the following: an increase in the percentage of Revenues from
Operations that constitutes Free Cash Flow (together with the grant of put
rights applicable to such adjusted Free Cash Flow on terms comparable to those
set forth in Article VII), the purchase of all or a portion of any excess by AMG
or the Manager Member (or its designee(s)) on terms comparable to the terms set
forth in Article VII with respect to Puts or Section 3.10 with respect to
Repurchases or any combination of the foregoing.
ARTICLE IV - CAPITAL CONTRIBUTIONS;
CAPITAL ACCOUNTS AND ALLOCATIONS; DISTRIBUTIONS.
SECTION 4.1 CAPITAL CONTRIBUTIONS.
(a) On ________, 1997, GeoCapital Corporation contributed to the
LLC certain of its assets, properties, rights, powers, privileges and business
(and the goodwill associated therewith), and the Members agree that such Capital
Contribution had a value of $24,000,000.
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Except as may be agreed to in connection with the issuance of additional LLC
Points, as specifically set forth herein, or as may be required under applicable
law, the Members shall not be required to make any further contributions to the
LLC. No Member shall make any contribution to the LLC without the prior consent
of the Manager Member.
(b) No Member shall have the right to withdraw any part of his,
her or its (or their predecessors in interest) Capital Contribution until the
dissolution and winding up of the LLC, except as distributions pursuant to this
Article IV may represent returns of capital, in whole or in part. No Member
shall be entitled to receive any interest on any Capital Contribution made by it
(or its predecessors in interest) to the LLC. No Member shall have any personal
liability for the repayment of any Capital Contribution of any other Member.
(c) Simultaneous with the effectiveness of this Agreement,
Merger Sub is acquiring by means of the Merger all of the right, title and
interest of GeoCapital Corporation in and to interests in the LLC (including all
Capital Account and LLC Points and other LLC Interests), and GeoCapital
Corporation is merging with and into Merger Sub and will cease to exist.
SECTION 4.2 CAPITAL ACCOUNTS; ALLOCATIONS.
(a) There shall be established for each Member a Capital
Account (a "Capital Account") which, in the case of each Member, shall initially
be equal to the Capital Contribution of such Member as set forth on Schedule A
hereto.
(b) The Capital Account of each Member shall be adjusted in the
following manner. Each Capital Account shall be increased by such Member's
allocable share of income and gain, if any, of the LLC (as well as the Capital
Contributions made by a Member after the Effective Date) and shall be decreased
by such Member's allocable share of deductions and losses, if any, of the LLC
and by the amount of all distributions made to such Member. The amount of any
distribution of assets other than cash shall be deemed to be the Fair Market
Value of such assets (net of any liabilities encumbering such property that the
distributee Member is considered to assume or take subject to). Capital Accounts
shall also be adjusted upon the issuance of additional LLC Interests as set
forth in Section 5.5(c) and upon the redemption of LLC Interests.
(c) Subject to Sections 4.2(e), 4.2(g) and 4.5 hereof, all
items of LLC income and gain shall be allocated among the Members' Capital
Accounts at the end of every quarter as follows: *** [The remainder of this
subsection (approximately 2 pages) has been omitted pursuant to the confidential
treatment request referenced on the cover page hereto. The omitted portion has
been filed separately with the Commission.] ***
SECTION 4.3 DISTRIBUTIONS.
**************** [This section (approximately 1 and 1/2 pages) has
been omitted pursuant to the confidential treatment request referred to on the
cover page hereto. The omitted portions have been filed separately with the
Commission.]***************
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SECTION 4.4 DISTRIBUTIONS UPON DISSOLUTION; ESTABLISHMENT OF A RESERVE
UPON DISSOLUTION. Upon the dissolution of the LLC, after payment (or the making
of reasonable provision for the payment) of all liabilities of the LLC owing to
creditors, the Manager Member, or if there is none, the Liquidating Trustee
appointed as set forth in Section 8.4 hereof, shall set up such reserves as it
deems reasonably necessary for any contingent, conditional or unmatured
liabilities or other obligations of the LLC. Such reserves may be paid over by
the Manager Member or Liquidating Trustee to a bank (or other third party), to
be held in escrow for the purpose of paying any such contingent, conditional or
unmatured liabilities or other obligations. At the expiration of such period(s)
as the Manager Member or Liquidating Trustee may deem advisable, such reserves,
if any (and any other assets available for distribution), or a portion thereof,
shall be distributed to the Members (i) in accordance with (and in proportion
to) the positive balance (if any) in their respective Capital Accounts (as
determined immediately prior to each such distribution) until all such positive
Capital Account balances have been reduced to zero, and (ii) thereafter, among
the Members as of the date of dissolution in accordance with their respective
numbers of LLC Points as of the date of dissolution. If any assets of the LLC
are to be distributed in kind in connection with such liquidation, such assets
shall be distributed on the basis of their Fair Market Value net of any
liabilities encumbering such assets and, to the greatest extent possible, shall
be distributed pro-rata in accordance with the total amounts to be distributed
to each Member. Immediately prior to the effectiveness of any such
distribution-in-kind, each
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item of gain and loss that would have been recognized by the LLC had the
property being distributed been sold at Fair Market Value shall be determined
and allocated to those persons who were Members immediately prior to the
effectiveness of such distribution in accordance with Section 4.2(d).
SECTION 4.5 PROCEEDS FROM CAPITAL CONTRIBUTIONS AND THE SALE OF
SECURITIES; INSURANCE PROCEEDS; CERTAIN SPECIAL ALLOCATIONS.
(a) Capital Contributions made by any Member after the
Effective Date, and other proceeds from the issuance of securities by the LLC
may, in the sole discretion of the Manager Member, be used for the benefit of
the LLC (including, without limitation, the repurchase or redemption of LLC
Interests), or, may be distributed by the LLC, in which case, any such proceeds
shall be allocated and distributed among the Members in accordance with their
respective LLC Points immediately prior to the date of such contribution or
issuance of securities; it being understood that in the case the proceeds are a
note receivable, any such distribution shall only occur, if at all, upon receipt
by the LLC of any cash in respect thereof.
(b) In the event of the death or Permanent Incapacity of an
Employee Stockholder covered by key-man life or disability insurance, as
applicable, the premiums on which have been paid by the LLC, the proceeds of any
such policy shall first be used by the LLC to fund (to the extent thereof) the
Repurchase of LLC Interests from the Employee Stockholder or Non-Manager Member
through which such Employee Stockholder holds or held his or her interest in the
LLC in accordance with Section 3.12 hereof and, if the proceeds exceed the
amounts so required to effect such Repurchase, then the amount of such excess
proceeds may, in the sole discretion of the Manager Member, be used for the
benefit of the LLC, or, may be distributed by the LLC, in which case, any such
proceeds shall be allocated and distributed among the Members in accordance with
their respective LLC Points immediately following the Repurchase of the LLC
Interests from such Non-Manager Member.
(c) Items of depreciation or amortization (as calculated for
book purposes in accordance with generally accepted accounting principles,
consistently applied) on account of the property of the LLC on the Effective
Date, shall be specially allocated to the Manager Member. All items of
depreciation or amortization (as calculated for book purposes in accordance with
generally accepted accounting principles, consistently applied) on account of
property purchased out of Operating Cash Flow shall be allocated as set forth in
Section 4.2(c)(iii), and all items of depreciation or amortization (as
calculated for book purposes in accordance with generally accepted accounting
principles, consistently applied) on account of property purchased out of Free
Cash Flow shall be allocated among the Members in accordance with their
respective numbers of LLC Points on the date the property was purchased.
SECTION 4.6 FEDERAL TAX ALLOCATIONS. The Manager Member shall, in its
sole discretion, allocate the ordinary income and losses and capital gains and
losses of the LLC as determined for U.S. Federal income tax purposes (and each
item of income, gain, loss, deduction or credit entering into the computation
thereof), as the case may be, among the Members for tax purposes in a manner
that, to the greatest extent possible: (a) reflects the economic arrangement
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of the Members under this Agreement (determined after taking into account the
allocation provisions of Sections 4.2, 4.4 and 4.5 hereof, and the distribution
provisions of Sections 4.3, 4.4 and 4.5 hereof) and (b) is consistent with the
principles of Sections 704(b) and 704(c) of the Code. The Members understand and
agree that, with respect to any item of property (other than cash) contributed
(or deemed to be contributed for U.S. federal income tax purposes) by a Member
to the capital of the LLC, the initial tax basis of such property in the hands
of the LLC will be the same as the tax basis of such property in the hands of
such Member at the time so contributed. The Members further understand and agree
that the taxable income and taxable loss of the LLC is to be computed for
Federal income tax purposes by reference to the initial tax basis to the LLC of
any assets and properties contributed by the Members (and not by reference to
the fair market value of such assets and properties at the time contributed).
The Members also understand that, pursuant to Section 704(c) of the Code, all
taxable items of income, gain, loss and deduction with respect to such assets
and properties shall be allocated among the Members for Federal income tax
purposes so as to take account of any difference between the initial tax basis
of such assets and properties to the LLC and their fair market values at the
time contributed, using any method authorized by the Income Tax Regulations
under Section 704(c) and selected by the Manager Member, in its sole discretion.
For purposes of maintaining the Capital Accounts of the Members, items of
income, gain, loss and deduction relating to any asset or property contributed
to the LLC that are required to be allocated for tax purposes pursuant to
Section 704(c) of the Code shall not be reflected in the Capital Accounts of the
Members.
ARTICLE V - TRANSFER OF LLC INTERESTS BY NON-MANAGER
MEMBERS; RESIGNATION, REDEMPTION AND WITHDRAWAL BY
NON-MANAGER MEMBERS;
ADMISSION OF ADDITIONAL NON-MANAGER MEMBERS.
SECTION 5.1 ASSIGNABILITY OF INTERESTS. No interest of a Non-Manager
Member in the LLC may be sold, assigned, transferred, gifted or exchanged, nor
may any Non-Manager Member offer to do any of them (each, a "Transfer"), nor may
any interest in any Non-Manager Member be Transferred, nor may any stockholder
in any Non-Manager Member which is not an individual offer to do any of them,
and no Transfer by a Non-Manager Member or stockholder of a Non-Manager Member
shall be binding upon the LLC or any Non-Manager Member unless it is expressly
permitted by this Article V and the Manager Member receives an executed copy of
the documents effecting such Transfer, which shall be in form and substance
reasonably satisfactory to the Manager Member. The assignee of such interest in
the LLC may become a substitute Non-Manager Member only upon the terms and
conditions set forth in Section 5.2. If an assignee or transferee of an interest
of a Non-Manager Member in the LLC does not become (and until any such assignee
or transferee becomes) a substitute Non-Manager Member, in accordance with the
provisions of Section 5.2, such Person shall not be entitled to exercise or
receive any of the rights, powers or benefits of a Non-Manager Member other than
the right to receive distributions which the assigning Non-Manager Member has
sold, transferred or assigned to such Person. No Non-Manager Member's interest
in the LLC or, in the case of a Non-Manager Member which is not an individual,
none of the direct and indirect interests of a beneficial owner of such
Non-Manager Member, may be Transferred except:
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(a) with the prior written consent of the Manager Member, which
consent may be granted or withheld by the Manager Member in its sole discretion;
(b) upon the death of such beneficial owner, their interests in
the LLC or in the Non-Manager Member may be Transferred by will or the laws of
descent and distribution (subject, in all cases, to the provisions of Section
3.12 hereof); and
(c) a Non-Manager Member (and its beneficial owners) may Transfer
interests in the LLC or in such Non-Manager Member to members of his or her
Immediate Family (or trusts for their benefit and of which the beneficial owner
is the settlor and/or trustee, provided that any such trust does not require or
permit distribution of such interests).
provided, that in the case of (b) or (c) above, (i) the transferee enters into
an agreement with the LLC agreeing to be bound by the provisions hereof (and if
such transferee is not already a party to a Non Solicitation Agreement, the
transferee enters into a Non Solicitation Agreement) (to the extent such Person
then would hold any interest in the LLC), and (ii) whether or not the transferee
enters into such an agreement, such LLC Interests, and interests in such
Non-Manager Member, shall thereafter remain subject to this Agreement (and, if
applicable, the relevant Non Solicitation Agreement) to the same extent they
would be if held by such Non-Manager Member or beneficial owner, as applicable.
Notwithstanding the foregoing, no Non-Manager Member's interest in the LLC may
be Transferred if, giving effect to such Transfer, the total number of Members
of the LLC would exceed one hundred (100) (as determined in accordance with
Treasury Regulation Section 1.7704-1(h)(3), which provides, in general, that
under certain circumstances a Person owning an interest in (A) a partnership for
federal income tax purposes, (B) a "grantor trust," any portion of which is
treated as owned by the grantor(s) or other person(s) under sections 671-679 of
the Code, or (C) an "S corporation" within the meaning of section 1361(a) of the
Code (each, a "flow-through entity") that owns, directly or through other
flow-through entities, an interest in the LLC shall be treated as a Member),
unless either such Transfer is a Transfer described in Treasury Regulation
Section 1.7704-1(e) or such Transfer is pursuant to a Put right under Article
VII and the sum of the percentage interests in profits or capital of the LLC
Transferred during the taxable year of the LLC (other than in Transfers
described in Treasury Regulation Section 1.7704-1(e)) would, taking the Transfer
in question into account and assuming the maximum exercise of the Non-Manager
Members' Put rights under Article VII, exceed ten percent (10%) of the total
interests in profits or capital of the LLC.
For all purposes of this LLC Agreement, any Transfers of LLC Interests
shall be deemed to occur as of the end of the last day of the calendar month in
which any such Transfer would otherwise have occurred. Upon any Transfer of LLC
Interests, the Manager Member shall make the appropriate revisions to Schedule A
hereto.
No interests of a Non-Manager Member in the LLC may be pledged,
hypothecated, optioned or encumbered, nor may any interests in a Non-Manager
Member be pledged, hypothecated, optioned or encumbered, nor may any offer to do
any of the foregoing be made.
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SECTION 5.2 SUBSTITUTE NON-MANAGER MEMBERS. No transferee of interests
of a Non-Manager Member shall become a Member except in accordance with this
Section 5.2. The Manager Member may admit, in its sole discretion as a
substitute Non-Manager Member (with respect to all or a portion of the LLC
Interests held by a Person), any Person that acquires an LLC Interest by
Transfer from another Non-Manager Member pursuant to Section 5.1 hereof, or that
acquires an LLC Interest from the Manager Member pursuant to Section 6.1 hereof.
The admission of an assignee as a substitute Non-Manager Member shall, in all
events, be conditioned upon the execution of an instrument satisfactory to the
Manager Member whereby such assignee becomes a party to this Agreement as a
Non-Manager Member as well as compliance by such assignee with the provisions of
Section 3.6 hereof. Upon the admission of a substitute Non-Manager Member, the
Manager Member shall make the appropriate revisions to Schedule A hereto.
SECTION 5.3 ALLOCATION OF DISTRIBUTIONS BETWEEN ASSIGNOR AND ASSIGNEE;
SUCCESSOR TO CAPITAL ACCOUNTS. Upon the Transfer of an LLC Interest pursuant to
this Article V, distributions pursuant to Article IV shall be made to the Person
owning the LLC Interest at the date of distribution, unless the assignor and
assignee otherwise agree and so direct the LLC and the Manager Member in a
written statement signed by both the assignor and assignee. In connection with a
Transfer by a Member of LLC Points, the assignee shall succeed to a pro-rata
(based on the percentage of such Person's LLC Points transferred) portion of the
assignor's Capital Account, unless the assignor and assignee otherwise agree and
so direct the LLC and the Manager Member in a written statement signed by both
the assignor and assignee and consented to by the Manager Member.
SECTION 5.4 RESIGNATION, REDEMPTIONS AND WITHDRAWALS. No Non-Manager
Member shall have the right to resign, to cause the redemption of its interest
in the LLC, in whole or in part, or to withdraw from the LLC, except (a) with
the consent of the Manager Member, (b) as is expressly provided for in Section
3.12 hereof; or (c) as is expressly provided for in Section 7.1 hereof. Upon any
resignation, redemption or withdrawal, the Non-Manager Member shall only be
entitled to the consideration, if any, provided for by Section 3.12 or Section
7.1 hereof, if and to the extent that one of such Sections is applicable. Upon
the resignation, redemption or withdrawal, in whole or in part, by a Non-Manager
Member, the Manager Member shall make the appropriate revisions to Schedule A
hereto.
SECTION 5.5 ISSUANCE OF ADDITIONAL LLC INTERESTS.
(a) Additional Non-Manager Members (the "Additional Non-Manager
Members" and each an "Additional Non-Manager Member") may be admitted to the LLC
and such Additional Non-Manager Members may be issued LLC Points, only upon
receipt of a Majority Vote and the consent of the Manager Member and upon such
terms and conditions as may be established by the Manager Member with a Majority
Vote (including, without limitation, upon such Additional Non-Manager Member's
execution of an instrument satisfactory to the Manager Member whereby such
Person becomes a party to this Agreement as a Non-Manager Member as well as such
Person's compliance with the provisions of Section 3.6 hereof).
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(b) Existing Non-Manager Members may be issued additional LLC
Points (or other LLC Interests), only by the LLC with the consent of, and upon
such terms and conditions as may be established by, the Manager Member. The
Manager Member may only be issued new additional LLC Points (or other LLC
Interests) upon the receipt of a Majority Vote.
(c) Each time additional LLC Interests are issued (including,
without limitation, additional LLC Points), the Capital Accounts of all the
Members shall be adjusted as follows: (i) the Manager Member shall determine the
proceeds which would be realized if the LLC sold all its assets at such time for
a price equal to the Fair Market Value of such assets, and (ii) the Manager
Member shall allocate amounts equal to the gain or loss which would have been
realized upon such a sale to the Capital Accounts of all the Members immediately
prior to such issuance in accordance with Section 4.2(d) hereof.
(d) Upon the issuance of additional LLC Interests, the Manager
Member shall make the appropriate revisions to Schedule A hereto.
(e) Notwithstanding anything in this Agreement to the contrary,
(i) no additional LLC Interests may be issued if, giving effect to such
Transfer, the total number of Members would exceed one hundred (100) as
determined in accordance with Treasury Regulation Section 1.7704-1(h)(3)) and
(ii) no LLC Interests may be issued (A) in a transaction that is required to be
registered under the Securities Act or (B) in a transaction that is not required
to be registered under the Securities Act by reason of Regulation S thereunder
unless the offering and sale of the LLC Interests would not have been required
to be registered under the Securities Act if the LLC Interests had been offered
and sold within the United States.
SECTION 5.6 ADDITIONAL REQUIREMENTS. As additional conditions to the
validity of (x) any Transfer of a Non-Manager Member's interest in the LLC (or,
in the case of a Non-Manager Member which is not an individual, the interests of
the direct and indirect beneficial owners of such Non-Manager Member) (pursuant
to Section 5.1 above), or (y) the issuance of additional LLC Interests (pursuant
to Section 5.5 above), such Transfer or issuance shall not: (i) violate the
registration provisions of the Securities Act or the securities laws of any
applicable jurisdiction, (ii) cause the LLC to become subject to regulation as
an "investment company" under the 1940 Act, and the rules and regulations of the
SEC thereunder, including by resulting in there being one hundred (100) or more
beneficial holders of interests in the LLC, (iii) result in the termination of
any contract to which the LLC is a party and which individually or in the
aggregate are material (it being understood and agreed that any contract
pursuant to which the LLC provides Investment Management Services is material),
or (iv) result in the treatment of the LLC as an association taxable as a
corporation or as a "publicly traded partnership" for Federal income tax
purposes.
The Manager Member may require reasonable evidence as to the foregoing,
including, without limitation, a favorable opinion of counsel, which expense
shall be borne by the parties to such transaction (and to the extent the LLC is
such a party, shall be paid from Operating Cash Flow).
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To the fullest extent permitted by law, any Transfer that violates the
conditions of this Section 5.6 shall be null and void.
SECTION 5.7 REPRESENTATION OF MEMBERS. The Manager Member and each
Non-Manager Member (including each Additional Non-Manager Member) hereby
represents and warrants to the LLC and each other Member, and acknowledges, that
(a) it has such knowledge and experience in financial and business matters that
it is capable of evaluating the merits and risks of an investment in the LLC and
making an informed investment decision with respect thereto, (b) it is able to
bear the economic and financial risk of an investment in the LLC for an
indefinite period of time, (c) it is acquiring an interest in the LLC for
investment only and not with a view to, or for resale in connection with, any
distribution to the public or public offering thereof, (d) the equity interests
in the LLC have not been registered under the securities laws of any
jurisdiction and cannot be disposed of unless they are subsequently registered
and/or qualified under applicable securities laws and the provisions of this
Agreement have been complied with, and (e) the execution, delivery and
performance of this Agreement by such Member do not require it to obtain any
consent or approval that has not been obtained and do not contravene or result
in a default under any provision of any existing law or regulation applicable to
it, any provision of its charter, by-laws or other governing documents or any
agreement or instrument to which it is a party or by which it is bound.
ARTICLE VI - TRANSFER OF LLC INTERESTS BY THE
MANAGER MEMBER; REDEMPTION, REMOVAL
AND WITHDRAWAL
SECTION 6.1 ASSIGNABILITY OF INTEREST.
(a) Except as set forth in this Section 6.1, without a Majority
Vote the Manager Member's interest in the LLC may not be Transferred; provided,
however, (i) it is understood and agreed that, in connection with the operation
of the business of AMG and the Manager Member (including, without limitation,
the financing of its interest herein and direct or indirect interests in
additional investment management companies), the Manager Member's interest in
the LLC will be pledged and encumbered and lien holders of the Manager Member's
interest shall have and be able to exercise the rights of secured creditors with
respect to such interest, (ii) the Manager Member may sell some (but not all or
substantially all) of its LLC Interests to a Person who is not a Member but who
is an Officer or employee of the LLC or who becomes an Officer or employee of
the LLC in connection with such issuance, or a Person wholly owned by any such
Person, (iii) the Manager Member may sell some (but not all or substantially
all) of its LLC Interests to existing Non-Manager Members, and (iv) the Manager
Member may sell all or any portion of its LLC Interests to an Affiliate of the
Manager Member. Notwithstanding the foregoing, the Manager Member's interest in
the LLC may not be Transferred if, giving effect to such Transfer, the total
number of Members of the LLC would exceed one hundred (100) (as determined in
accordance with Treasury Regulation Section 1.7704-1(h)(3), which provides, in
general, that under certain circumstances a Person owning an interest in (A) a
partnership for federal income tax purposes, (B) a "grantor trust," any portion
of which is treated as owned by the grantor(s) or other
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person(s) under sections 671-679 of the Code, or (C) an "S corporation" within
the meaning of section 1361(a) of the Code (each, a "flow-through entity") that
owns, directly or through other flow-through entities, an interest in the LLC
shall be treated as a Member), unless such Transfer is a Transfer described in
Treasury Regulation Section 1.7704-1(e). Notwithstanding anything else set forth
herein, the Manager Member may, with a Majority Vote, sell or transfer as a
result of a merger or consolidation all its interests in the LLC in a single
transaction or a series of related transactions, and, in any such case, each of
the Non-Manager Members shall be required to sell or transfer, in the same
transaction or transactions, all their interests in the LLC; provided, that the
price to be received by all the Members shall be allocated among the Members as
follows: (a) an amount equal to the sum of the positive balances, if any, in
positive Capital Accounts shall be allocated among the Members having such
Capital Accounts in proportion to such positive balances, and (b) the excess, if
any, shall be allocated among all Members in accordance with their respective
number of LLC Points at the time of such sale. Upon any of the foregoing
transactions, the Manager Member shall make the appropriate revisions to
Schedule A hereto.
(b) In the case of any transfer upon foreclosure pursuant to
Section 6.1(a)(i) above, each transferee shall sign a counterpart signature page
to this Agreement agreeing thereby to become either a Non-Manager Member or a
Manager Member (provided, however, that once one such other transferee elects to
become a Manager Member, no transferee (other than a subsequent transferee of
such new Manager Member) may elect to be a Manager Member hereunder). If the
transferees pursuant to Section 6.1(a)(i) above receive all the Manager Member's
LLC Interests, and none of such transferees elects to become a Manager Member,
then that shall be deemed to be an event of withdrawal by the Manager Member.
If, however, one of the transferees elects to become a Manager Member, and
executes a counterpart signature page to this Agreement agreeing thereby to
become a Manager Member, then notwithstanding any other provision hereof to the
contrary, the old Manager Member shall thereupon be permitted to withdraw from
the LLC as Manager Member.
(c) In the case of a transfer pursuant to the penultimate
sentence of Section 6.1(a) above, the Manager Member shall be deemed to have
withdrawn, and its transferee shall be deemed to have become the Manager Member.
SECTION 6.2 RESIGNATION, REDEMPTION, AND WITHDRAWAL. To the fullest
extent permitted by law, except as set forth in Section 6.1, without a prior
Majority Vote, the Manager Member shall not have the right to resign or withdraw
from the LLC as Manager Member. With a prior Majority Vote, the Manager Member
may resign or withdraw as Manager Member upon prior written notice to the LLC.
Without a prior Majority Vote, the Manager Member shall have no right to have
all or any portion of its interest in the LLC redeemed. Any resigned, withdrawn
or removed Manager Member shall retain its interest in the capital of the LLC
and its other economic rights under this Agreement as a Non-Manager Member
having the number of LLC Points held by the Manager Member prior to its
resignation, withdrawal or removal. If a Manager Member who has resigned,
withdrawn or been removed no longer has any economic interest in the LLC, then
upon such resignation, withdrawal or removal such Person shall cease to be a
Member of the LLC.
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ARTICLE VII - PUT OF LLC INTERESTS
SECTION 7.1 MANDATORY PUTS.
(a) Each Non-Manager Member may, at such Non-Manager Member's
option, subject to the terms and conditions set forth in this Section 7.1, cause
AMG to purchase portions of the LLC Points held by such Non-Manager Member in
the LLC (a "Put").
(b) Each Non-Manager Member (other than Mr. Irwin Lieber or
Mr. Barry K. Fingerhut or their Related Non-Manager Members and their
respective Permitted Transferees) may, subject to the terms and conditions set
forth in this Agreement, cause AMG to purchase up to ten percent (10%) of the
Initial LLC Points of such Non-Manager Member from such Non-Manager Member
(and/or any Permitted Transferee of such Non-Manager Member), on the last
business day in September (each a "Purchase Date") (but only up to an aggregate
of fifty (50%) of such Non-Manager Member's Initial LLC Points) starting with
the last business day in September, 2002 and ending with the last business day
in September, 2012.
(c) Mr. Irwin Lieber (and each of his Related Non-Management
Members) and any of their respective Permitted Transferees may cause AMG to
purchase from them collectively twenty-five percent (25%) of the Initial LLC
Points of Mr. Irwin Lieber (and his Related Non-Management Members), on the
Purchase Date occurring on the last business day in September, 2001 or any
Purchase Date thereafter. Mr. Barry K. Fingerhut and each of his Related
Non-Management Members) and any of their respective Permitted Transferees may
cause AMG to purchase from them collectively twenty percent (20%) of the
Initial LLC Points of Mr. Barry K. Fingerhut (and his Related Non-Manager
Members), on the Purchase Date occurring on the last business day in September,
2002 or any Purchase Date thereafter.
(d) If a Non-Manager Member desires to exercise its rights
under Section 7.1(b) or 7.1(c) above, it and its Employee Stockholder shall give
the Manager Member, AMG, each other Employee Stockholder and the LLC irrevocable
written notice (a "Put Notice") on or prior to the preceding May 31 (the "Notice
Deadline"), stating that it is electing to exercise such rights and the number
of LLC Points (the "Put LLC Points") to be sold in the Put. Puts in any given
calendar year for which Put Notices are received before the Notice Deadline for
that calendar year shall be completed as follows: AMG shall purchase from each
Non-Manager Member (and his (or its) Related Non-Manager Members) and their
respective Permitted Transferees that number of Put LLC Points as is equal to
the number of Put LLC Points designated in the Put Notice, up to the maximum
number permitted by Section 7.1(b) or Section 7.1(c) above with respect to that
year and the aggregate number of Initial LLC Points that may be Put by the
Non-Manager Member (and his (or its) Related Non-Manager Members) and their
respective Permitted Transferees.
(e) The purchase price for a Put (the "Put Price") shall be an
amount equal to *** [The remainder of this subsection has been omitted pursuant
to the confidential treatment request referenced on the cover page hereto. The
omitted portion has been filed separately with the Commission.] ***
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(f) In the case of any Put pursuant to the provisions of
Section 7.1(b) hereof, the Put Price shall be paid by AMG (or, if AMG shall have
assigned its obligation to the Manager Member or the LLC pursuant to paragraph
(h) below, the Manager Member or the LLC) (or their respective assigns) on the
relevant Purchase Date by certified check issued to such Non-Manager Member, in
each case, against delivery of such documents or instruments of transfer as may
reasonably be requested by AMG, the Manager Member or the LLC, as applicable,
and in each case including representations that the transferring Non-Manager
Member is the record and beneficial owner of the LLC Interests being Put, free
and clear of any Encumbrances other than those imposed by this Agreement. In the
case of any Put pursuant to the provisions of Section 7.1(c) hereof: (i) if AMG
has, at that time, not completed a registration of shares of its common stock
for sale under the Securities Act (other than a registration on Form S-8 (or its
then equivalent form) or a registration affected solely to implement an employee
benefit plan, a transaction under Rule 145 or to which any other similar rule of
the SEC under the Securities Act is applicable or registration on a form not
available for registering securities for sale to the public) (a "Public
Offering"), then the Put Price shall be paid by AMG (or, if AMG shall have
assigned its obligations to the Manager Member or the LLC pursuant to paragraph
(h) below, the Manager Member or the LLC) (or their respective assigns) on the
relevant Purchase Date by certified check issued to such Non-Manager Member, or
(ii) if AMG has, at that time, completed a Public Offering, then the Put Price
shall be paid by AMG on the relevant Purchase Date by issuing to such
Non-Manager Member, that number of shares of AMG Stock (as such term is defined
in Section 7.2(a) hereof) as is equal to the Put Price divided by AMG's Average
Stock Price (as such term is defined in Section 7.2(c) hereof) on the relevant
Purchase Date.
(g) Notwithstanding any other provision of this Section 7.1 to
the contrary, no purchase by AMG pursuant to this Section 7.1 (or, upon
assignment of any of AMG's obligations to the Management Member or the LLC
pursuant to paragraph (h) hereof, purchase by the Manager Member or redemption
by the LLC) shall occur if it would result in the Manager Member and AMG (taken
together) owning, directly or indirectly, in excess of eighty percent (80%)
of the LLC Points outstanding after giving effect to any such sale or
redemption. If some, but not all, of the LLC Points which Non-Manager Members
have requested be purchased can be so purchased without the Manager Member's and
AMG's (taken together) ownership, directly or indirectly, exceeding eighty
percent (80%) of the outstanding LLC Points, then AMG or the Manager Member
shall purchase, or shall assign their obligations to the LLC, and the LLC shall
redeem, LLC Points from the Non-Manager Members having Put LLC Interests in
proportion to the LLC Points then held by such Non-Manager Members up to the
maximum extent that would not cause the Manager Member and AMG (taken together)
to own, directly or indirectly, in excess of eighty percent (80%) of the
outstanding LLC Points (in each case, subject to the maximum amount set forth in
Sections 7.1(b), 7.1(c) and 7.1(d) hereof).
(h) AMG may assign and/or delegate any or all of its rights and
obligations to purchase LLC Points under this Section 7.1, in one or more
instances, to the Manger Member; provided that no such assignment or delegation
shall relieve AMG of its obligation to make the payment for a Put as required by
this Section 7.1 (or the method of payment (i.e., AMG Stock) to be used). The
Manager Member may, only with a Majority Vote, assign any or all of its rights
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and obligations to purchase LLC Points under this Section 7.1, in one or more
instances, to the LLC.
(i) As of any Purchase Date, the Non-Manager Member shall cease
to hold the LLC Points purchased on the Purchase Date, and shall cease to hold a
pro-rata portion of such Non-Manager Member's Capital Account and shall no
longer have any rights with respect to such portion of its LLC Interests.
SECTION 7.2 ELECTION RIGHTS OF NON-MANAGER MEMBERS TO RECEIVE AMG
STOCK.
(a) If AMG has, at the time of a Put, completed a Public
Offering, then the Non-Manager Member which is exercising a Put may elect to
cause AMG to pay all or a portion of the Put Price (as such term is defined in
Section 7.1(e) above) for the relevant Put in shares of AMG's Common Stock, $.01
par value per share (the "AMG Stock") in accordance with the provisions of this
Section 7.2. If the Non-Manager Member elects to cause AMG to pay a portion of
the Put Price in shares of AMG Stock in accordance with the provisions of this
Section 7.2, the portion of the consideration which is paid in AMG Stock shall
reduce the cash portion of the Put Price pursuant to Section 7.1(e) and shall
eliminate any obligation to make any payments under Section 7.1(f).
(b) An election under this Section 7.2 must be made by the
Non-Manager Member at least sixty (60) days prior to the relevant Purchase Date,
by giving written notice to the LLC, AMG and the Manager Member of such
election, which election, once made, shall be irrevocable without the prior
written consent of AMG.
(c) The number of shares of AMG Stock to be issued upon
exercise of the Put shall be determined in accordance with the following
formula:
Number of Shares of AMG Stock =
FCF x Percentage Put x AMG's EBITDA Multiple x .75
--------------------------------------------------
AMG's Average Stock Price
Where:
FCF = ****************[This definition has been omitted
pursuant to the confidential treatment request
referred to on the cover page hereto. The omitted
portions have been filed separately with the
Commission.]***************
Percentage Put = a fraction, the numerator of which is the number of
LLC Points to be purchased from the Non-Manager
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Member on the Purchase Date, and the denominator of
which is the number of LLC Points outstanding on
the Purchase Date before giving effect to any Puts
or any issuances or redemptions of LLC Points on
such date.
AMG's EBITDA Multiple = a fraction, the numerator of which is (a) the
number of shares of AMG Stock issued and
outstanding immediately prior to the closing of the
Put, multiplied by AMG's Average Stock Price, plus
(b) the long-term indebtedness (including the
current portion thereof) of AMG as of the date of
its most recent public financial reports prior to
the closing of the Put, and the denominator of
which is AMG's earnings before interest, taxes,
depreciation and amortization for the twelve (12)
month period ending on December 31 prior to the
date of the closing of the Put.
AMG's Average Stock Price = the average (arithmetic mean) Stock Price of AMG
Stock during the forty (40) trading days prior to
the date of the closing of the Put. The term "Stock
Price" shall mean the closing price for each day
for the AMG Stock which shall be the last sale
price or, in the case no such sale takes place on
such day, the average of the closing bid and asked
prices in either case as reported in the principal
consolidated transaction reporting system with
respect to securities listed on the principal
national securities exchange on which the AMG Stock
is listed or admitted to trading; or, if not listed
or admitted to trading on any national securities
exchange, the last quoted price (or, if not so
quoted, the average of the last quoted high bid and
low asked prices) in the over-the-counter market,
as reported by NASDAQ or such other system then in
use; or, if on any such date no bids are quoted by
any such organization, the average of the closing
bid and asked prices as furnished by a professional
market maker making a market in such security
reasonably selected by the Board of Directors of
AMG.
In the event that there is any stock split (or
reverse stock split), stock dividend or other
similar event, equitable and appropriate
adjustments shall be made in the application of the
foregoing calculation of AMG's Average Stock Price
to take account of such event.
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(d) If AMG completes a Public Offering, AMG shall, as soon as
reasonably practicable, provide notice thereof to each Employee Stockholder.
(e) If requested in writing by the managing underwriter(s), if
any, of any underwritten public offering of AMG Stock, each Non-Manager Member
and each Employee Stockholder agrees not to offer, sell, contract to sell or
otherwise dispose of any shares of AMG Stock (or any securities convertible into
or exchangeable for AMG Stock) except as part of such underwritten public
offering within thirty (30) days before or one hundred and eighty (180) days
after the effective date of the registration statement filed with respect to
said offering.
SECTION 7.3 REGISTRATION RIGHTS.
(a) If at any time or times following the completion of its
initial public offering, AMG shall determine to file a registration statement
("Registration Statement") (which excludes a registration on Form S-8 (or its
then equivalent form) or a registration statement filed solely to implement an
employee benefit plan, a transaction under Rule 145 or to which any other
similar rule of the SEC under the Securities Act is applicable or registration
statement on a form not available for registering securities for sale to the
public) other than on Form S-4 (or its then equivalent form) and other than with
respect to securities to be issued solely in connection with any acquisition of
any securities or assets of any entity or business, then AMG will give written
notice thereof to the Non-Manager Members which are holders of Registrable
Securities (as hereinafter defined) then outstanding (the "Holders") at least
twelve (12) days prior to the filing of a registration statement with the SEC,
and, subject to the terms and conditions of this Section 7.3, will use
commercially reasonable efforts to effect the registration under the Securities
Act (a "Registration") of all Registrable Securities which the Holders request
in a writing delivered to AMG within ten (10) days after the notice given by
AMG. AMG shall have the right to postpone or withdraw any Registration without
any obligation to any Holder.
(b) For the purposes of this Section 7.3, the term "Registrable
Securities" shall mean any AMG Stock held by a Non-Manager Member which was
acquired by such Non-Manager Member pursuant to the Merger Agreement and any
equity securities issued or issuable with respect to such AMG Stock by way of a
stock dividend or stock split or in connection with a combination of shares.
(c) Whenever under the preceding provisions of this Section
7.3, AMG is required hereunder to register Registrable Securities, AMG agrees
that it shall also do the following:
(i) use commercially reasonable efforts to prepare
diligently for filing with the SEC a Registration Statement and such
amendments and supplements to such Registration Statement and the
prospectus used in connection therewith as may be necessary for the
duration of such Registration;
(ii) use commercially reasonable efforts to maintain the
effectiveness of any Registration Statement pursuant to which any of
the Registrable Securities are being sold on a delayed or continuous
basis under Rule 415 (or any successor or similar rule) under the
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Securities Act (other than a registration statement in connection with
an underwritten offering) until the earlier of (A) the completion of
the distribution of all Registrable Securities offered pursuant thereto
or (B) ninety (90) days after the effective date of such Registration
Statement, provided that if a Suspension Period (as defined below) has
occurred during the pendency of a Registration, AMG shall in good faith
use reasonable efforts to extend the effectiveness of such Registration
so that there are ninety (90) days during which such Registration is
effective and a Suspension Period is not in effect; and
(iii) furnish to each selling Holder such copies of each
preliminary and final prospectus and such other documents as such
Holder may reasonably request to facilitate the public offering of its
Registrable Securities in accordance with customary practices.
(d) All reasonable expenses incident to AMG's performance of or
compliance with this Section 7.3, including SEC and securities exchange or
National Association of Securities Dealers, Inc. ("NASD") registration and
filing fees, fees and expenses of compliance with securities or blue sky laws,
printing expenses, fees and disbursements of counsel for AMG and its independent
certified public accountants incurred in connection with each registration
hereunder (excluding any fees or disbursements of counsel for the Holders, or
any underwriting fees, discounts or commissions attributable to the sale of
Registrable Securities, which shall be borne by each applicable Holder) (all
such included expenses being herein called "Registration Expenses"), will be
borne by AMG; provided, however, that if AMG is not selling securities in such
offering, then each Holder shall bear a portion of such expenses equal to such
expenses multiplied by a fraction, the numerator of which is the number of
shares sold by such Holder and the denominator of which is the total number of
shares sold in the offering.
(e) (i) Incident to any registration statement referred to in this
Section 7.3(e), and subject to applicable law, AMG will indemnify each
underwriter, each Holder of Registrable Securities so registered, and
each person controlling any of them ("Controlling Person") against all
claims, losses, damages and liabilities, including legal and other
expenses reasonably incurred in investigating or defending against the
same, arising out of any untrue statement of a material fact contained
therein, or any omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not
misleading, or arising out of any violation by AMG of the Securities
Act, any other federal securities laws, any state securities or
"blue-sky" laws or any rule or regulation thereunder in connection with
such registration, except insofar as the same may have been caused by
an untrue statement or omission based upon information furnished to AMG
by or on behalf of such underwriter, Holder or Controlling Person
expressly for use therein, and with respect to such untrue statement or
omission in the information furnished to AMG by or on behalf of such
underwriter, Holder or Controlling Person, such underwriter, Holder or
Controlling Person so providing such information to AMG (or on whose
behalf such information was so provided) will indemnify AMG, its
directors and officers, and the other underwriters, Holders and
Controlling Persons against any losses, claims, damages, expenses or
liabilities to which any of them may become subject to the same extent.
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(ii) If the indemnification provided for in this Section 7.3(e)
from the indemnifying party is unavailable to an indemnified party
hereunder in respect of any losses, claims, damages, liabilities or
expenses referred to therein, then the indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount
paid or payable by such indemnified party as a result of such losses,
claims, damages, liabilities or expenses in such proportion as is
appropriate to reflect the relative fault of the indemnifying party and
indemnified parties in connection with the actions which resulted in
such losses, claims, damages, liabilities or expenses, as well as any
other relevant equitable considerations. The relative fault of such
indemnifying party and indemnified parties shall be determined by
reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact,
has been made by, or relates to information supplied by, such
indemnifying party or indemnified parties, and the parties' relative
intent, knowledge, access to information and opportunity to correct or
prevent such action. The amount paid or payable by a party as a result
of the losses, claims, damages, liabilities and expenses referred to
above shall be deemed to include any reasonable legal or other fees or
expenses reasonably incurred by such party in connection with any
investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 7.3(e) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 7.3(e)(ii), no Holder shall be
required to contribute any amount in excess of the amount by which the total
price at which the Registrable Securities of such Holder were offered to the
public exceeds the amount of any damages which such Holder has otherwise been
required to pay by reason of such untrue statement or omission. No Person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation.
If indemnification is available under this Section 7.3(e), the
indemnifying parties shall indemnify each indemnified party to the full extent
provided in Section 7.3(e)(i) without regard to the relative fault of said
indemnifying party or indemnified party or any other equitable consideration
provided for in this Section 7.3(e)(ii).
SECTION 7.4 RESTRICTIONS. Notwithstanding anything herein to the
contrary, the parties agree as follows:
(a) In the event that in connection with an underwritten public
offering, the managing underwriter(s) shall in good faith impose a limitation on
the number of securities which may be included in such Registration for
marketing purposes, AMG shall not be required to register Registrable Securities
in excess of such limitation, provided that the reduction in the number of
securities which may be included in such Registration to comply with such
limitation is imposed pro rata (based either (as determined by AMG, in its sole
discretion) on relative number of securities held or relative number of
securities sought to be included in such Registration) with respect to the
Holders and all managers of companies providing Investment Management Services
in which AMG
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may invest after the date hereof and which have so-called incidental or
piggyback registration rights (it being understood that such limitation may be
imposed as to all holders of such securities and the Holders prior to the
imposition of any limitation on other holders of AMG securities).
(b) If requested in writing by the managing underwriter(s), if
any, of any underwritten public offering of AMG Stock, each Non-Manager Member
and each Employee Stockholder agrees not to offer, sell, contract to sell or
otherwise dispose of any shares of AMG Stock (or any securities convertible into
or exchangeable for AMG Stock) except as part of such underwritten public
offering within thirty (30) days before or one hundred and eighty (180) days
after the effective date of the registration statement filed with respect to
said offering.
(c) Following the effectiveness of a Registration (including,
without limitation a Registration for sale on a delayed or continuous basis
under Rule 415 under the Securities Act), each Holder and each Employee
Stockholder agrees not to effect any sales of AMG Stock after they have received
notice from AMG to suspend sales as a result of the commencement of any
Suspension Period. Each Holder may recommence effecting sales of AMG Stock
following further notice to such effect from AMG, which shall be given by AMG
not later than five (5) business days after the conclusion of each Suspension
Period. For purposes hereof, a "Suspension Period" shall mean the pendency or
occurrence of an event that would make it impractical or inadvisable (i) to
cause a Registration Statement to remain in effect or (ii) to permit the sale of
AMG Stock by Holders and by limited partners, members or management employees of
other entities in which AMG is a general partner or manager member (without
prejudice to any particular holder), and shall include, without limitation,
pending negotiations relating to, or consummation of, a transaction or the
pendency or occurrence of any other event that would require additional
disclosure of material information by AMG in a registration statement as to
which AMG has a bona fide business purpose for preserving confidentiality or
which renders AMG unable to comply with applicable legal requirements.
SECTION 7.5 LIMITATION OF REGISTRATION RIGHTS. Notwithstanding the
foregoing, AMG shall not be required to effect a Registration of Registrable
Securities under this Agreement if, in the written opinion of counsel for AMG,
the Holders of Registrable Securities may then sell all the Registrable
Securities proposed to be sold without registration under the Securities Act.
SECTION 7.6 OPTION OF RECEIVING FUTURE PIGGYBACK REGISTRATION RIGHTS.
Notwithstanding any provisions of this Section 7, if AMG offers to any Person
engaged in the business of providing Investment Management Services in which AMG
may invest pursuant to an acquisition or investment transaction closing after
the date hereof any form of piggyback registration rights ("New Registration
Rights"), AMG agrees that at each such occasion it shall provide Holders of
Registrable Securities with the option of either retaining the registration
rights then in force for such Registrable Securities or replacing such
registration rights with the New Registration Rights, subject to the limitation
set forth in Section 7.5.
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ARTICLE VIII - DISSOLUTION AND TERMINATION.
SECTION 8.1 NO DISSOLUTION. The LLC shall not be dissolved by the
admission of Additional Non-Manager Members or substitute Non-Manager Members or
substitute Manager Members in accordance with the Act and the provisions of this
Agreement.
SECTION 8.2 EVENTS OF DISSOLUTION.
(a) The LLC shall be dissolved and its affairs wound up upon
the occurrence of any of the following events:
(i) a date designated in writing by the Manager Member
with the consent of the Non-Manager Members acting by a Majority Vote;
or
(ii) upon the entry of a decree of judicial dissolution
under Section 18-802 of the Act.
(b) Each Non-Manager Member and each Employee Stockholder and
each other Person who accepts LLC Interests constitutes and appoints each of the
Manager Member (and any successor thereof by merger, transfer, election or
otherwise), and each of the Manager Member's authorized officers and
attorneys-in-fact, with full power of substitution, as its, his or her true and
lawful agents and attorneys-in-fact, with full power and authority in its, his
or her name, place and stead to: execute, swear to, acknowledge, deliver, file
and record in the appropriate public offices all certificates and other
instruments including, at the option of the Manager Member, this Agreement and
the Certificate and all amendments and restatements thereof or any of the
foregoing relating to the continuation of the LLC as contemplated by paragraph
(a)(ii) above, that the Manager Member reasonably deems appropriate or necessary
to exercise any powers of the Manager Member or to carry out the purposes of
this Agreement and to continue the existence or operation of the continuing LLC
as a Limited Liability Company in the State of Delaware and under the Act and in
all jurisdictions in which the LLC may or may wish to conduct business or own
property.
The foregoing power of attorney is hereby declared to be irrevocable
and a power coupled with an interest, and it shall survive, and shall not be
affected by, the subsequent death, incompetence, dissolution, disability,
incapacity, bankruptcy or termination of any grantor and the transfer of all or
any portion of his LLC Interest and shall extend to such Person's heirs,
successors and assigns. Each Person who accepts LLC Interests is deemed to
consent to be bound by any representations made by the Manager Member or the
authorized officers and attorneys-in-fact thereof, acting in good faith pursuant
to such power of attorney. Each Person who accepts LLC Interests is deemed to
consent to and waive any and all defenses that may be available to contest,
negate or disaffirm any action of the Manager Member or the authorized officers
and attorneys-in-fact thereof, taken in good faith under such power of attorney.
Each Non-Manager Member shall execute and deliver to the Manager Member within
fifteen (15) days after receipt of the Manager Member's request therefor, such
further designations, powers of attorney and other instruments as the Manager
Member deems necessary to effectuate this Section 8.2(b).
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SECTION 8.3 NOTICE OF DISSOLUTION. Upon the dissolution of the LLC the
Manager Member shall promptly notify the Members of such dissolution.
SECTION 8.4 LIQUIDATION. Upon the dissolution of the LLC, the Manager
Member, or if there is none, the Person or Persons approved by the holders of
more than fifty percent (50%) of the LLC Points then outstanding (including the
Person that was the Manager Member) shall carry out the winding up of the LLC
(in such capacity, the "Liquidating Trustee"), shall immediately commence to
wind up the LLC's affairs; provided, however, that a reasonable time shall be
allowed for the orderly liquidation of the assets of the LLC and the
satisfaction of liabilities to creditors so as to enable the Members to minimize
the normal losses attendant upon a liquidation. The Members shall continue to
share in allocations and distributions during liquidation in the same
proportions, as specified in Article IV hereof, as before liquidation. The
proceeds of liquidation shall be distributed as set forth in Section 4.4 hereof.
SECTION 8.5 TERMINATION. The LLC shall terminate when all of the assets
of the LLC, after payment of or due provision for all debts, liabilities and
obligations of the LLC, shall have been distributed to the Members in the manner
provided for in Section 4.4 and the Certificate shall have been canceled in the
manner required by the Act.
SECTION 8.6 CLAIMS OF THE MEMBERS. The Members and former Members shall
look solely to the LLC's assets for the return of their Capital Contributions,
and if the assets of the LLC remaining after payment of or due provision for all
debts, liabilities and obligations of the LLC are insufficient to return such
Capital Contributions, the Members and former Members shall have no recourse
against the LLC or any other Member.
ARTICLE IX - RECORDS AND REPORTS.
SECTION 9.1 BOOKS AND RECORDS. The Officers and the Manager Member
shall cause the LLC to keep complete and accurate books of account with respect
to the operations of the LLC, prepared in accordance with generally accepted
accounting principles, using the accrual method of accounting, consistently
applied. Such books shall reflect that the interests in the LLC have not been
registered under the Securities Act, and that the interests may not be sold or
transferred without registration under the Securities Act or exemption therefrom
and without compliance with Article V or Article VI of this Agreement. Such
books shall be maintained at the principal office of the LLC in New York, New
York or at such other place as the Manager Member shall determine.
SECTION 9.2 ACCOUNTING. The LLC's books of account shall be kept on the
accrual method of accounting, or on such other method of accounting as the
Manager Member may from time to time determine, with the advice of the
Independent Public Accountants, and shall be closed and balanced at the end of
each LLC fiscal year and shall be maintained for each fiscal year in a manner
consistent with the manner in which the LLC's books were maintained during the
fiscal year ended December 31, 1997, except to the extent otherwise determined
by the Management Board, with the written consent of the Manager Member or as
otherwise required in accordance with changes in generally accepted accounting
principles or policies of AMG applied consistently with respect to its
Controlled
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Affiliates so long as no such change in policies affects the calculation of the
Repurchase Price or the Put Price (or, if it does, only after appropriate
provision is made to hold the Non-Manager Members harmless from the effect of
any such change). The taxable year of the LLC shall be the twelve months ending
December 31 or such other taxable year as the Manager Member may designate, with
the written advice of the Independent Public Accountants.
SECTION 9.3 FINANCIAL AND COMPLIANCE REPORTS. The LLC shall furnish to
the Manager Member, each of the following:
(a) Within five (5) days after the end of each month and each
fiscal quarter, an unaudited financial report of the LLC, which report shall be
prepared in accordance with generally accepted accounting principles using the
accrual method of accounting, consistently applied (except that the financial
report may (i) be subject to normal year-end audit adjustments which are neither
individually nor in the aggregate material and (ii) not contain all notes
thereto which may be required in accordance with generally accepted accounting
principles) and shall be certified by the most senior financial officer of the
LLC to have been so prepared, and which shall include the following:
(i) Statements of operations, changes in members' capital
and cash flows for such month or quarter, together with a cumulative
income statement from the first day of the then-current fiscal year to
the last day of such month or quarter;
(ii) a balance sheet as of the last day of such month or
quarter; and
(iii) with respect to the quarterly financial report, a
detailed computation of Free Cash Flow for such quarter.
(b) Within fifteen (15) days after the end of each fiscal year
of the LLC, audited financial statements of the LLC, which shall include
statements of operations, changes in members' capital and cash flows for such
year and a balance sheet as of the last day thereof, each prepared in accordance
with generally accepted accounting principles, using the accrual method of
accounting, consistently applied, certified by Independent Public Accountants
satisfactory to the Manager Member.
(c) If requested by the Manager Member, within twenty-five (25)
days after the end of each calendar quarter, the LLC's operating budget for each
of the next four (4) fiscal quarters, in such form and containing such estimates
as may be requested by the Manager Member from time to time, certified by the
most senior financial officer of the LLC.
(d) Copies of all financial statements, reports, notices, press
releases and other documents released to the public.
(e) As promptly as is reasonably possible following request by
the Manager Member from time to time, such operations and/or performance data as
may be requested, in each case certified by the most senior financial officer of
the LLC if such a certification is requested by the Manager Member.
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(f) Any other financial or other information available to the
Officers as the Manager Member shall have reasonably requested on a timely
basis.
SECTION 9.4 MEETINGS.
(a) The LLC and its Officers shall hold such regular meetings
at the LLC's principal place of business with representatives of the Manager
Member as may be reasonably requested by the Manager Member from time to time.
These meetings shall be attended (either in person or by telephone) by such of
the Officers and other employees of the LLC as may be requested by the Manager
Member or any of the Officers.
(b) At each meeting, the Officers shall make such presentations
regarding the LLC and its performance, operations and/or budgets as may be
reasonably requested by the Manager Member, and each of the attendees (whether
in person or by telephone) at such meeting shall have the right to submit
proposals and suggestions regarding the LLC, and the attendees at the meeting
shall discuss and consider such proposals and suggestions.
SECTION 9.5 TAX MATTERS.
(a) The Manager Member shall cause to be prepared and filed on
or before the due date (or any extension thereof) Federal, state, local and
foreign tax or information returns required to be filed by the LLC. The Manager
Member, to the extent that LLC funds are available, shall cause the LLC to pay
any taxes payable by the LLC (it being understood that the expenses of
preparation and filing of such tax returns, and the amounts of such taxes, are
to be treated as operating expenses of the LLC to be paid from Operating Cash
Flow); provided that the Manager Member shall not be required to cause the LLC
to pay any tax so long as the Manager Member or the LLC is in good faith and by
appropriate legal proceedings contesting the validity, applicability or amount
thereof and such contest does not materially endanger any right or interest of
the LLC and adequate reserves therefor have been set aside by the LLC. Neither
the LLC nor any Employee Stockholder or Non-Manager Member shall do anything or
take any action which would be inconsistent with the foregoing or with the
Manager Member's actions as authorized by the foregoing provisions of this
Section 9.5(a). Each Non-Manager Member shall cooperate with the Manager Member
in causing the LLC to make an election under Section 754 or the Code with
respect to the LLC's fiscal year ended as of the date of this Agreement.
(b) The Manager Member shall be the tax matters partner for the
LLC pursuant to Sections 6221 through 6233 of the Code.
ARTICLE X - LIABILITY, EXCULPATION AND INDEMNIFICATION.
SECTION 10.1 LIABILITY. Except as otherwise provided by the Act, the
debts, obligations and liabilities of the LLC, whether arising in contract, tort
or otherwise, shall be solely the debts, obligations and liabilities of the LLC,
and no Covered Person shall be obligated personally for any such debt,
obligation or liability of the LLC solely by reason of being a Covered Person.
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SECTION 10.2 EXCULPATION.
(a) No Covered Person shall be liable to the LLC or any other
Covered Person for any loss, damage or claim incurred by reason of any act or
omission performed or omitted by such Covered Person in good faith on behalf of
the LLC and in a manner reasonably believed to be within the scope of authority
conferred on such Covered Person by this Agreement, except that a Covered Person
shall be liable for any such loss, damage or claim incurred by reason of any
action or inaction of such Covered Person which constituted fraud, gross
negligence, willful misconduct or a breach of this Agreement, the Merger
Agreement or, in the case of a Non-Manager Member or Employee Stockholder, the
Non Solicitation Agreement to which he, she or it is a party.
(b) A Covered Person shall be fully protected in relying in
good faith upon the records of the LLC and upon such information, opinions,
reports or statements presented to the Covered Person by any Person as to
matters the Covered Person reasonably believes are within such other Person's
professional or expert competence and who has been selected with reasonable care
by or on behalf of the LLC of such Covered Person.
SECTION 10.3 FIDUCIARY DUTY.
(a) To the extent that, at law or in equity, a Covered Person
has duties (including fiduciary duties) and liabilities relating thereto to the
LLC or to any Member, a Covered Person acting under this Agreement shall not be
liable to the LLC or to any Member for its good faith reliance on the provisions
of this Agreement. The provisions of this Agreement, to the extent that they
restrict the duties and liabilities of a Covered Person otherwise existing at
law or in equity, are agreed by the parties hereto to replace such other duties
and liabilities of such Covered Person.
(b) Unless otherwise expressly provided herein, (i) whenever a
conflict of interest exists or arises between the Manager Member and any other
Member, or (ii) whenever this Agreement or any other agreement contemplated
herein or therein provides that the Manager Member shall act in a manner that
is, or provides terms that are, fair and reasonable to the LLC or any Member,
the Manager Member shall resolve such conflict of interest, take such action or
provide such terms, considering in each case the relative interest of each party
(including its own interest) to such conflict, agreement, transaction or
situation and the benefits and burdens relating to such interests, any customary
or accepted industry practices, and any applicable generally accepted accounting
practices or principles. The resolution, action or term so made, taken or
provided by the Manager Member shall not constitute a breach of this Agreement
or any other agreement contemplated herein or of any duty or obligation of the
Manager Member at law or in equity or otherwise unless the Managing Member did
not act in good faith.
(c) Whenever in this Agreement the Manager Member is permitted
or required to make a decision (i) in its "discretion" or under a grant of
similar authority or latitude, the Manager Member shall be entitled to consider
such interests and factors as it desires, including its own interests, and shall
have no duty or obligation to give any consideration to any interest of or
factors affecting the LLC or any other Person, or (ii) in its "good faith" or
under another express standard, the Manager Member shall act under such express
standard and shall not be subject to any other or
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different standard imposed by this Agreement or other applicable law; provided,
however, that if such standard is qualified by "reasonable," then the Manager
Member shall exercise its discretion or good faith only in a reasonable manner.
(d) Wherever in this Agreement a factual determination is
called for and the applicable provision of this Agreement does not indicate what
party or parties are to make the applicable factual determination, and/or the
applicable standard to be used in making the factual determination, such
determination shall be made by the Manager Member in the exercise of reasonable
discretion.
SECTION 10.4 INDEMNIFICATION. To the fullest extent permitted by
applicable law, a Covered Person shall be entitled to indemnification from the
LLC for any loss, damage or claim (including any amounts paid in settlement of
any such claims) incurred by such Covered Person by reason of any act or
omission performed or omitted by such Covered Person in good faith on behalf of
the LLC and in a manner reasonably believed to be within the scope of authority
conferred on such Covered Person by this Agreement, except that no Covered
Person shall be entitled to be indemnified in respect of any loss, damage or
claim incurred by such Covered Person by reason of any action or inaction of
such Covered Person which constituted fraud, gross negligence, willful
misconduct or a breach of this Agreement, the Merger Agreement or, in the case
of the Non-Manager Member or Employee Stockholder, the Non Solicitation
Agreement to which he, she or it is a party; provided, however, that any
indemnity under this Section 10.4 shall be provided out of and to the extent of
Company assets only, and no Covered Person shall have any personal liability to
provide indemnity on account thereof.
SECTION 10.5 NOTICE; OPPORTUNITY TO DEFEND AND EXPENSES.
(a) Promptly after receipt by any Covered Person from any third
party of notice of any demand, claim or circumstance that, immediately or with
the lapse of time, would reasonably be expected to give rise to a claim or the
commencement (or threatened commencement) of any action, proceeding or
investigation (an "Asserted Liability") that could reasonably be expected to
result in any loss, damage or claim with respect to which the Covered Person
might be entitled to indemnification from the LLC under Section 10.4, the
Covered Person shall give notice thereof (the "Claims Notice") to the LLC;
provided, however, that a failure to give such notice shall not prejudice the
Covered Person's right to indemnification hereunder except to the extent that
the LLC is actually prejudiced thereby. The Claims Notice shall describe the
Asserted Liability in such reasonable detail as is practicable under the
circumstances, and shall, to the extent practicable under the circumstances,
indicate the amount (estimated, if necessary) of the loss or damage that has
been or may be suffered by the Covered Person.
(b) The LLC may elect to compromise or defend, at its own
expense and by its own counsel, any Asserted Liability; provided, however, that
if the named parties to any action or proceeding include (or could reasonably be
expected to include) both the LLC and a Covered Person, or more than one Covered
Persons, and the LLC is advised that representation of both parties by the same
counsel would be inappropriate under applicable standards of professional
conduct, the Covered Person may engage separate counsel at the expense of the
LLC. If the LLC elects to compromise or
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defend such Asserted Liability, it shall within twenty (20) business days (or
sooner, if the nature of the Asserted Liability so requires) notify the Covered
Person of its intent to do so, and the Covered Person shall cooperate, at the
expense of the LLC, in the compromise of, or defense against, such Asserted
Liability. If the LLC elects not to compromise or defend the Asserted Liability,
fails to notify the Covered Person of its election as herein provided, contests
its obligation to provide indemnification under this Agreement, or fails to make
or ceases making a good faith and diligent defense, the Covered Person may pay,
compromise or defend such Asserted Liability all at the expense of the Covered
Person. Except as set forth in the preceding sentence, neither the LLC nor the
Covered Person may settle or compromise any claim over the objection of the
other; provided, however, that consent to settlement or compromise shall not be
unreasonably withheld. In any event, the LLC and the Covered Person may
participate at their own expense, in the defense of such Asserted Liability. If
the Covered Person chooses to defend any claim, the Covered Person shall make
available to the LLC any books, records or other documents within its control
that are necessary or appropriate for such defense, all at the expense of the
LLC.
(c) If the LLC elects not to compromise or defend an Asserted
Liability, or fails to notify the Covered Person of its election as above
provided, then, to the fullest extent permitted by applicable law, expenses
(including legal fees) incurred by a Covered Person in defending any Asserted
Liability, shall, from time to time, be advanced by the LLC prior to the final
disposition of such claim, demand, action, suit or proceeding upon receipt by
the LLC of an undertaking by or on behalf of the Covered Person to repay such
amount if it shall be determined that the Covered Person is not entitled to be
indemnified as authorized in Section 10.4 hereof. The LLC may, if the Manager
Member deems it appropriate, require any Covered Person for whom expenses are
advanced, to deliver adequate security to the LLC for his or her obligation to
repay such indemnification.
SECTION 10.6 MISCELLANEOUS.
(a) The right of indemnification hereby provided shall not be
exclusive of, and shall not affect, any other rights to which a Covered Person
may be entitled. Nothing contained in this Article X shall limit any lawful
rights to indemnification existing independently of this Article X.
(b) The indemnification rights provided by this Article X shall
also inure to the benefit of the heirs, executors, administrators, successors
and assigns of a Covered Person and any officers, directors, partners,
shareholders, employees and Affiliates of such Covered Person (and any former
officer, director, member, shareholder or employee of such Covered Person, if
the loss, damage or claim was incurred while such person was an officer,
director, member, shareholder or employee of such Covered Person). The Manager
Member may extend the indemnification called for by Section 10.4 to non-employee
agents of the LLC, the Manager Member or its Affiliates.
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ARTICLE XI - MISCELLANEOUS.
SECTION 11.1 NOTICES. All notices, requests, elections, consents or
demands permitted or required to be made under this Agreement ("Notices") shall
be in writing, signed by the Person or Persons giving such notice, request,
election, consent or demand and shall be delivered personally or by confirmed
facsimile, or sent by registered or certified mail, or by commercial courier to
the other Members, at their addresses set forth on the signature pages hereof or
on Schedule A hereto, or at such other addresses as may be supplied by written
notice given in conformity with the terms of this Section 11.1. All Notices to
the LLC shall be made to the Manager Member at the address set forth on the
signature pages hereof or on Schedule A hereto, with a copy (which shall not
constitute notice) to the Chairman of the LLC at the principal offices of the
LLC. The date of any such personal or facsimile delivery or the date of delivery
by an overnight courier or the date five (5) days after the date of mailing by
registered or certified mail, as the case may be, shall be the date of such
notice.
SECTION 11.2 SUCCESSORS AND ASSIGNS. Subject to the restrictions on
transfer set forth herein, this Agreement shall be binding upon and shall inure
to the benefit of the Members, their respective successors, successors-in-title,
heirs and assigns, and each and every successors-in-interest to any Member,
whether such successor acquires such interest by way of gift, purchase,
foreclosure or by any other method, and each shall hold such interest subject to
all of the terms and provisions of this Agreement.
SECTION 11.3 AMENDMENTS. No amendments may be made to this Agreement
without the prior written consent of (i) the Manager Member and (ii) a Majority
Vote of the Non-Manager Members; provided, however, that, without the vote,
consent or approval of any other Member, the Manager Member shall make such
amendments and additions to Schedule A hereto as are required by the provisions
hereof; and, provided further, that the Manager Member may amend this Agreement
to correct any printing, stenographic or clerical errors or omissions. Except as
otherwise specifically provided for herein, no amendment may be made to this
Agreement which materially and adversely affects a Non-Manager Member in a
manner different from all the other Non-Manager Members, without the prior
written consent of the Non-Manager Member which would be so affected.
SECTION 11.4 NO PARTITION. No Member nor any successor-in-interest to
any Member, shall have the right while this Agreement remains in effect to have
the property of the LLC partitioned, or to file a complaint or institute any
proceeding at law or in equity to have the property of the LLC partitioned, and
each Member, on behalf of himself, his successors, representatives, heirs and
assigns, hereby waives any such right. It is the intent of the Members that
during the term of this Agreement, the rights of the Members and the Employee
Stockholders and their successors-in-interest, as among themselves, shall be
governed by the terms of this Agreement, and that the right of any Member or
successors-in-interest to assign, transfer, sell or otherwise dispose of his
interest in the LLC shall be subject to the limitations and restrictions of this
Agreement.
SECTION 11.5 NO WAIVER; CUMULATIVE REMEDIES. The failure of any Member
to insist upon strict performance of a covenant hereunder or of any obligation
hereunder, irrespective of the length
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of time for which such failure continues, shall not be a waiver of such Member's
right to demand strict compliance in the future. No consent or waiver, express
or implied, to or of any breach or default in the performance of any obligation
hereunder, shall constitute a consent or waiver to or of any other breach or
default in the performance of the same or any other obligation hereunder. The
rights and remedies provided by this Agreement are cumulative and the use of any
one right or remedy by any party shall not preclude or waive its right to use
any or all other remedies. Said rights and remedies are given in addition to any
other rights the parties may have by law, statute, ordinance or otherwise.
SECTION 11.6 DISPUTE RESOLUTION. All disputes arising in connection
with this Agreement shall be resolved by binding arbitration in accordance with
the applicable rules of the American Arbitration Association. The arbitration
shall be held in Massachusetts before a single arbitrator selected in accordance
with Section 12 of the American Arbitration Association Commercial Arbitration
Rules who shall have substantial business experience in the investment advisory
industry, and shall otherwise be conducted in accordance with the American
Arbitration Association Commercial Arbitration Rules.
SECTION 11.7 PRIOR AGREEMENTS SUPERSEDED. This Agreement and the
schedules and exhibits hereto supersede the prior understandings and agreements
among the parties with respect to the subject matter hereof and thereof.
SECTION 11.8 CAPTIONS. Titles or captions of Articles or Sections
contained in this Agreement are inserted as a matter of convenience and for
reference, and in no way define, limit, extend or describe the scope of this
Agreement or the intent of any provision hereof.
SECTION 11.9 COUNTERPARTS. This Agreement may be executed in a number
of counterparts, all of which together shall for all purposes constitute one
Agreement, binding on all the Members notwithstanding that all Members have not
signed the same counterpart.
SECTION 11.10 APPLICABLE LAW; JURISDICTION. This Agreement and the
rights and obligations of the parties hereunder shall be governed by and
interpreted, construed and enforced in accordance with the laws of the State of
Delaware, without applying the choice of law or conflicts of law provisions
thereof.
SECTION 11.11 INTERPRETATION. All terms herein using the singular shall
include the plural; all terms using the plural shall include the singular; in
each case, the term shall be as appropriate to the context of each sentence.
Throughout this Agreement, nouns, pronouns and verbs shall be construed as
masculine, feminine and neuter, whichever shall be applicable.
SECTION 11.12 SEVERABILITY. The invalidity or unenforceability of any
particular provision of this Agreement shall not affect the other provisions
hereof, and this Agreement shall be construed in all respects as if such invalid
or unenforceable provision were omitted.
63
<PAGE> 67
SECTION 11.13 CREDITORS. None of the provisions of this Agreement shall
be for the benefit of or enforceable by any creditor of (i) any Member, (ii) any
Employee Stockholder or (iii) the LLC, other than a Member who is also a
creditor of the LLC.
[INTENTIONALLY LEFT BLANK]
64
<PAGE> 68
IN WITNESS WHEREOF the Initial Non-Manager Members and the Manager
Member have executed and delivered this Amended and Restated Limited Liability
Company Agreement as of the day and year first above written.
MANAGER MEMBER
Name and Signature Address
GEOCAPITAL CORPORATION Two International Place, 23rd Floor
(formerly known as Merger Sub) Boston, MA 02110
By:____________________________________
Name:
Title:
NON-MANAGER MEMBERS
Name and Signature Address
<PAGE> 69
ACKNOWLEDGMENT
The undersigned is executing this Agreement solely (i) to acknowledge
and agree to be bound by the provisions of Section 3.12, Article VII and the
relevant provisions of Article XI hereof (ii) to represent that the undersigned
is the sole owner of all of the outstanding capital stock of the Managing
Member, and (iii) to agree that, without a Majority Vote, for so long as Merger
Sub is the Managing Member of the LLC, the undersigned shall not in any manner
directly or indirectly sell, transfer, assign, pledge, hypothecate or otherwise
encumber or dispose of any of the capital stock of the Managing Member, subject
to the exceptions set forth in clause (i) and clause (ii) of Section 6.1(a).
AFFILIATED MANAGERS GROUP, INC.
Two International Place
23rd Floor
Boston, MA 02110
By:_____________________
Name:___________________
Title:__________________
66
<PAGE> 1
EXHIBIT 10.4
PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED PURSUANT TO A CONFIDENTIAL
TREATMENT REQUEST FILED WITH THE COMMISSION. ASTERISKS (*) IDENTIFY WHERE SUCH
CONFIDENTIAL INFORMATION HAS BEEN OMITTED. THE OMITTED PORTIONS HAVE BEEN FILED
SEPARATELY WITH THE COMMISSION.
FIRST QUADRANT, L.P.
AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT
March 28, 1996
<PAGE> 2
FIRST QUADRANT, L.P.
AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
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<S> <C>
ARTICLE I - DEFINITIONS.......................................................................................... 1
Section 1.1 Definitions........................................................................... 1
ARTICLE II - ORGANIZATION AND GENERAL PROVISIONS................................................................. 8
Section 2.1 Continuation of Partnership........................................................... 8
Section 2.2 Name of the Partnership............................................................... 9
Section 2.3 Purposes of the Partnership........................................................... 9
Section 2.4 Place of Business; Registered Agent................................................... 9
Section 2.5 Duration of the Partnership........................................................... 9
Section 2.6 Title to Property..................................................................... 10
Section 2.7 Liability of Partners................................................................. 10
Section 2.8 Fiscal Year........................................................................... 10
ARTICLE III - MANAGEMENT OF THE PARTNERSHIP...................................................................... 10
Section 3.1 Management in General................................................................. 10
Section 3.2 Officers of the Partnership........................................................... 11
Section 3.3 Operation of the Business of the Partnership.......................................... 11
Section 3.4 Compensation and Expenses of the Partner.............................................. 13
Section 3.5 Other Business of the General Partner and its Affiliates.............................. 13
Section 3.6 Limited Partners and Non Solicitation Agreements...................................... 14
Section 3.7 Non Solicitation and Non-Disclosure by Limited Partners and Employee
Stockholders.......................................................................... 14
Section 3.8 Remedies Upon Breach.................................................................. 17
Section 3.9 Repurchase Upon Termination of Employment or Bankruptcy............................... 17
Section 3.10 No Employment Obligation.............................................................. 23
Section 3.11 Miscellaneous......................................................................... 23
Section 3.12 Exculpation; Indemnification.......................................................... 24
ARTICLE IV - CAPITAL CONTRIBUTIONS; DISTRIBUTIONS;
CAPITAL ACCOUNTS AND ALLOCATIONS........................................................................ 25
Section 4.1 Capital Contributions................................................................. 25
Section 4.2 Capital Accounts; Allocations......................................................... 28
Section 4.3 Distributions......................................................................... 29
Section 4.4 Distributions Upon Liquidation; Establishment of a Reserve Upon
Liquidation.................................................................................... 31
Section 4.5 Proceeds from the Sale of Securities; Insurance Proceeds; Certain
Special Allocations............................................................................ 32
</TABLE>
(i)
<PAGE> 3
<TABLE>
<CAPTION>
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<S> <C>
Section 4.6 Federal Tax Allocations............................................................... 33
ARTICLE V - TRANSFER OF PARTNERSHIP INTERESTS OTHER THAN
BY THE GENERAL PARTNER, ADMISSION OF ADDITIONAL
PARTNERS, REDEMPTION AND WITHDRAWAL..................................................................... 34
Section 5.1 Assignability of Interests............................................................ 34
Section 5.2 Substitute Limited Partners........................................................... 35
Section 5.3 Additional Requirements............................................................... 35
Section 5.4 Allocation of Distributions Between Assignor and Assignee; Successor to
Capital Accounts............................................................................... 36
Section 5.5 Redemptions and Withdrawals........................................................... 36
Section 5.6 Issuance of Additional Partnership Interests.......................................... 36
Section 5.7 Representation of Partners............................................................ 37
ARTICLE VI - TRANSFER OF PARTNERSHIP INTEREST BY THE
GENERAL PARTNER; REDEMPTION, REMOVAL
AND WITHDRAWAL.......................................................................................... 38
Section 6.1 Assignability of Interest............................................................. 38
Section 6.2 Resignation, Redemption, and Withdrawal............................................... 38
ARTICLE VII - PUT/CALL OF PARTNERSHIP INTERESTS;
REGISTRATION RIGHTS..................................................................................... 39
Section 7.1 Mandatory Puts........................................................................ 39
Section 7.2 Election Rights of Limited Partners to Receive AMG Stock.............................. 42
Section 7.3 General Partner Call Option........................................................... 42
Section 7.4 AMG Call Option....................................................................... 43
Section 7.5 Registration Rights................................................................... 45
Section 7.6 Limitations........................................................................... 48
Section 7.7 Limitation of Registration Rights..................................................... 48
ARTICLE VIII - DISSOLUTION AND TERMINATION....................................................................... 49
Section 8.1 Events of Dissolution................................................................. 49
ARTICLE IX - RECORDS AND REPORTS................................................................................. 51
Section 9.1 Books and Records..................................................................... 51
Section 9.2 Accounting............................................................................ 51
Section 9.3 Financial Reports..................................................................... 51
Section 9.4 Meetings.............................................................................. 52
Section 9.5 Tax Matters........................................................................... 53
ARTICLE X - MISCELLANEOUS........................................................................................ 53
Section 10.1 Notices............................................................................... 53
Section 10.2 Successors and Assigns................................................................ 53
</TABLE>
(ii)
<PAGE> 4
<TABLE>
<CAPTION>
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<S> <C> <C>
Section 10.3 Amendments............................................................................ 54
Section 10.4 No Partition.......................................................................... 54
Section 10.5 No Waiver............................................................................. 54
Section 10.6 Dispute Resolution.................................................................... 54
Section 10.7 Prior Agreements Superseded........................................................... 54
Section 10.8 Captions.............................................................................. 55
Section 10.9 Counterparts.......................................................................... 55
Section 10.10 Applicable Law; Jurisdiction.......................................................... 55
Section 10.11 Singular and Plural................................................................... 55
Section 10.12 Creditors............................................................................. 55
</TABLE>
EXHIBITS
Exhibit A - Form of Executive Retention Option
Exhibit B - Incentive Program
Exhibit C(i) - Form of Non Solicitation/Non Disclosure Agreement
for Employee Stockholders employed by First Quadrant, L.P.
Exhibit C(ii) - Form of Non Solicitation/Non Disclosure Agreement for Employee
Stockholders employed by First Quadrant Limited
Exhibit D - Form of Promissory Note for Repurchases
Exhibit E - Form of Promissory Note for Funds Call
SCHEDULES
Schedule A - Partnership Points and Capital Accounts
Schedule 3.3(b) - Incentive Compensation Plan Payments
(iii)
<PAGE> 5
FIRST QUADRANT, L.P.
AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT
This Amended and Restated Limited Partnership Agreement (the
"Agreement") is made and entered into as of March 28, 1996 (the "Effective
Date"), by and among First Quadrant Corp., a New Jersey corporation (the
"General Partner"), the other partners named on Schedule A hereto (collectively,
the "Limited Partners" and individually, a "Limited Partner"). The General
Partner and the Limited Partners are sometimes herein referred to collectively
as the "Partners" and individually as a "Partner."
This Agreement amends and completely restates that certain Amended and
Restated Limited Partnership Agreement of First Quadrant, L.P. entered into as
of March 25, 1996, by and among the General Partner and the Limited Partners.
FOR GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency of
which is hereby acknowledged, and in consideration of the mutual agreements
hereinafter set forth, including, but not limited to, their capital
contributions, the parties hereby agree as follows:
ARTICLE I - DEFINITIONS.
SECTION 1.1 DEFINITIONS. For purposes of this Agreement:
"Additional Limited Partner" shall have the meaning specified in
Section 5.6.
"Advisers Act" shall mean the Investment Advisers Act of 1940, as it
may be amended from time to time, and any successor to such Act.
"Affiliate" shall mean, with respect to any person or entity (herein
the "first party"), any other person or entity that directly or indirectly
controls, or is controlled by, or is under common control with, such first
party. The term "control" as used herein (including the terms "controlled by"
and "under common control with") means the possession, directly or indirectly,
of the power to (a) vote 50% or more of the outstanding voting securities of
such person or entity or (b) otherwise direct the management or policies of such
person or entity by contract or otherwise.
"Agreement" shall mean this Amended and Restated Limited Partnership
Agreement, as it may from time to time be amended, supplemented or restated.
"AMG" shall mean Affiliated Managers Group, Inc., a Delaware
corporation.
"Asset Transfer" shall have the meaning ascribed thereto in the Stock
Purchase Agreement.
<PAGE> 6
"Capital Account" shall mean the capital account maintained by the
Partnership with respect to each Partner in accordance with the capital
accounting rules described in Section 4.2 hereof.
"Capital Contribution" shall mean, as to each Partner, the amount of
money and/or the agreed fair market value of any property (net of any
liabilities encumbering such property that the Partnership is considered to
assume or take subject to) contributed to the capital of the Partnership by such
Partner.
"Certificate of Limited Partnership" shall mean the certificate of
limited partnership for the Partnership required under the Partnership Act, as
such Certificate may be amended or restated from time to time.
"Closing" shall have the meaning set forth in the Stock Purchase
Agreement.
"Code" or "Internal Revenue Code" shall mean the United States Internal
Revenue Code of 1986, as from time to time amended, and any successor thereto,
together with all regulations promulgated thereunder.
"Effective Date" shall have the meaning specified in the preamble of
this Agreement.
"Employee Stockholder" shall mean (i) in the case of a Limited Partner
which is not an individual, that certain officer and/or employee of the
Partnership or First Quadrant Limited (or, in the case of Lovell, Inc., Robert
M. Lovell, Jr.) who is the owner of all the issued and outstanding capital stock
of a Limited Partner, and is listed as such on Schedule A hereto and, (ii) in
the case of a Limited Partner which is an individual, such Limited Partner.
"Encumbrances" shall have the meaning ascribed thereto in the Stock
Purchase Agreement.
"Executive Retention Options" shall mean one or more of those Executive
Retention Options in the form attached hereto as Exhibit A which was issued on
the date hereof to one or more Partners.
"Executive Retention Reserve" shall mean the ten (10) Partnership
Points as are reserved for issuance pursuant to the terms of one or more
Executive Retention Options. The ten (10) Partnership Points in the Executive
Retention Reserve shall be deemed to be outstanding Partnership Points held by
the General Partner for all purposes of this Agreement (other than the
determination of "Majority Vote" as set forth herein and for determining
"Capital Calls" as set forth in Section 4.1 hereof), except for those
Partnership Points as have been issued pursuant to the Executive Retention
Options.
"Fair Market Value" shall mean the fair market value as reasonably
determined in good faith by the Board of Directors of the General Partner.
2
<PAGE> 7
"First Quadrant Limited" shall mean First Quadrant Limited, a United
Kingdom corporation.
"First Quadrant Limited's Share" shall mean the FQ Limited Share as
such term is defined in the Revenue Agreement.
"First Quadrant Limited's Revenues" shall mean Revenues, as such term
is defined in the Revenue Agreement.
"For Cause" shall mean, with respect to the termination of an Employee
Stockholder's employment, with the Partnership or First Quadrant Limited, any of
the following:
(a) The Employee Stockholder has engaged in any criminal offense
which involves a violation of federal or state securities laws or regulations,
embezzlement, fraud, wrongful taking or misappropriation of property, theft, or
any other crime involving dishonesty and (i) has been convicted (whether or not
subject to appeal) or plead nolo contendere or any similar plea to any criminal
offense in connection with or relating to such act, or (ii) as a result of or
in relation to such act, an event has occurred which would require an
affirmative answer to any of the questions in Items 11A, B, C, D, E or F
(except, with respect to question 2 in each of Items 11C, D or E, for an
immaterial violation of securities laws or regulations which results in an
affirmative answer which could not reasonably be expected to have an adverse
effect on the Partnership, First Quadrant Limited or their respective
businesses) of Part I of the Partnership's Form ADV;
(b) The General Partner with a Majority Vote (excluding, for purposes
of determining such Majority Vote, the Employee Stockholder or Limited Partner
of the Employee Stockholder which is the subject of such termination, as if the
Partnership Points held by such Limited Partner were not outstanding) has
determined that the Employee Stockholder has persistently and willfully
neglected his or her duties or failed to devote substantially all of his or her
working time, energy and skills to the faithful and diligent performance of
such duties, after the Partnership and/or First Quadrant Limited, as
applicable, has given the Employee Stockholder written notice specifying such
conduct by the Employee Stockholder and giving the Employee Stockholder a
reasonable period of time (not less than 30 days), to conform his or her conduct
to such duties; or
(c) The Employee Stockholder has engaged in Prohibited Competition
Activity or violated or breached any material provision of his or her Non
Solicitation Agreement or engaged in any of the activities prohibited by
Section 3.7 hereof or Section 3.7 of the U.K. Partnership Agreement.
"Free Cash Flow" shall mean, for any period, the sum of (a) **********
percent (**%) of the Revenues From Operations of the Partnership for such
period, and (b) the amount (measured in U.S. dollars as reasonably determined by
the General Partner) by which ********** percent (**%) of First Quadrant
Limited's Revenues for such period exceeds the dividends paid by First Quadrant
Limited to the U.K. Partnership during such period.
"Free Cash Flow Expenditures" shall have the meaning specified in
Section 3.3(b).
"General Partner" shall mean First Quadrant Corp., a New Jersey
corporation, and any Person who becomes a successor or additional General
Partner as provided herein.
"General Partner Preference Amount" shall mean $274,755.
"Governmental Authority" shall mean any foreign, federal, state or
local court, governmental authority or regulatory body.
"Immediate Family" shall mean, with respect to any person, such
person's spouse, parents, grandparents, children, grandchildren and siblings.
"Incentive Program" shall mean the First Quadrant, L.P. and First
Quadrant U.K., L.P. Incentive Program in the form attached hereto as Exhibit B.
"Incentive Reserve" shall mean the number of Partnership Points
(initially twenty-four and fourteen one-hundredths (24.14)), as are reserved for
issuance pursuant to the terms of the Incentive Program. The twenty-four and
fourteen one-hundredths (24.14) Partnership Points in the Incentive Reserve
shall be deemed to be outstanding Partnership Points held by the General Partner
for all purposes of this Agreement, except for those Partnership Points as have
vested and have been issued pursuant to the Incentive Program.
3
<PAGE> 8
"Independent Public Accountants" shall mean any independent certified
public accountant satisfactory to the General Partner and retained by the
Partnership.
"Intercompany Services Agreement" shall mean that certain Intercompany
Services Agreement by and between the Partnership and First Quadrant Limited
which is dated as of the date hereof, as the same may be amended and/or restated
from time to time.
"Initial Partners" shall mean those entities which are Partners on the
Effective Date.
"Initial Partnership Points" means, with respect to a Limited Partner,
that number of Partnership Points held by such Limited Partner in the
Partnership immediately after giving effect to the Closing.
"Initial U.K. Partnership Points" means, with respect to a Limited
Partner, that number of U.K. Partnership Points held by such Limited Partner
immediately after giving effect to the Closing.
"Investment Management Services" shall mean any services which involve
(a) the management, for a fee or other remuneration, of an investment account or
fund (or portions thereof or a group of investment accounts or funds), or (b)
the giving of advice, for a fee or other remuneration, with respect to the
investment and/or reinvestment of assets or funds (or any group of assets or
funds).
"IRS" shall mean the Internal Revenue Service of the United States
Department of the Treasury.
"Limited Partner" shall mean any person or entity who is or becomes a
Limited Partner pursuant to the terms hereof.
"Majority Vote" shall mean the affirmative approval by vote or consent
of (a) the holders of the largest number and second largest number of Vested
Partnership Points (or if more than one Person holds an equal number of Vested
Partnership Points, which number is the largest or second largest number of
Vested Partnership Points, any one of such Persons) and any one other holder of
Vested Partnership Points, or (b) the holders of eighty percent (80%) of the
Vested Partnership Points then held by all Limited Partners excluding the holder
of the largest number of Vested Partnership Points (and, if more than one Person
holds an equal number of Vested Partnership Points, which number is the largest
number of Vested Partnership Points, then the holders of a majority of the
Vested Partnership Points then held by all Limited Partners) and, in the case of
either (a) or (b), excluding the General Partner and its Affiliates. If an
affirmative or negative vote is received under clause (a) above, but the holders
of eighty percent (80%) of the Vested Partnership Points determined as set forth
in clause (b) above disagree and their aggregate vote percentage exceeds that of
the aggregate vote percentage of clause (a) above, then such vote under clause
(a) shall be disregarded, otherwise, the vote under clause (b) above shall be
disregarded. For purposes of determining a "Majority
4
<PAGE> 9
Vote," the Partnership Points in the Executive Retention Reserve shall be deemed
to be outstanding Partnership Points held by a single Limited Partner designated
by the Chief Executive Officer or, if the Chief Executive Officer fails to so
designate a Limited Partner, the General Partner.
"Non Solicitation Agreement" shall have the meaning set forth in
Section 3.6 hereof.
"Operating Cash Flow" shall mean, for any period, an amount equal to
the positive difference, if any, between Revenues From Operations of the
Partnership for such period and Free Cash Flow for such period.
"Partners" shall mean the General Partner and the Limited Partners,
unless otherwise indicated.
"Partnership" shall mean the partnership organized under the
Predecessor Agreement and continued under this Agreement, as the same may be
amended and/or restated from time to time.
"Partnership Act" shall mean the Delaware Revised Uniform Limited
Partnership Act (6 Del. C. Section 17-101 et seq.), as it may be amended from
time to time, and any successor to such Act.
"Partnership Interests" shall mean the interests (including Capital
Accounts and Partnership Points) of the Partners in the Partnership.
"Partnership Points" shall mean as of any date, with respect to a
Partner, the number of Partnership Points of such Partner as set forth on
Schedule A hereto, as amended from time to time in accordance with its terms and
the terms hereof, and as in effect on such date.
"Permanent Incapacity" shall mean, with respect to an Employee
Stockholder, that such Employee Stockholder is totally unable, by reason of
injury, illness or other similar cause (as determined by a licensed physician,
selected by the Employee Stockholder or his or her representative and approved
by the General Partner, which approval shall not be unreasonably withheld), to
have performed his or her substantial and material duties and responsibilities
for a period of three hundred sixty-five (365) consecutive days, which injury,
illness or similar cause (as determined by such physician) would render such
Employee Stockholder incapable of operating in a similar capacity in the future.
"Person" means any individual, partnership, corporation, limited
liability company, association, trust, joint venture, unincorporated
organization or any similar entity.
"Predecessor Agreement" shall mean that certain Limited Partnership
Agreement of First Quadrant, L.P. entered into on December 15, 1995, as amended
and restated by that certain Amended and Restated Limited Partnership Agreement
of First Quadrant, L.P. dated March 25, 1996 by and among the General Partner
and the Limited Partners, pursuant to
5
<PAGE> 10
which this Partnership was continued, which partnership agreement is being
amended and restated by this Agreement.
"Prohibited Competition Activity" shall mean any of the following
activities:
(a) directly or indirectly, whether as owner, part owner,
partner, director, officer, trustee, employee, agent or consultant for or on
behalf of any Person, firm, corporation or other entity other than the
Partnership or any Affiliate of the Partnership, (i) diverting or taking away
any funds or investment accounts with respect to which the Partnership or any
Affiliate of the Partnership is performing investment management or advisory
services, or (ii) soliciting any person or entity for the purpose of diverting
or taking away any such funds or investment accounts; or
(b) directly or indirectly, whether as owner, part owner,
partner, director, officer, trustee, employee, agent or consultant for or on
behalf of any Person other than the Partnership or any Affiliate of the
Partnership, performing any Investment Management Services.
"Repurchase" shall mean a purchase or repurchase of Partnership
Interests made pursuant to Section 3.9(a).
"Repurchase Closing Date" shall mean the date upon which payment is
made with respect to a Repurchase, or if payment is made in more than one
installment, the date upon which the first such installment is paid.
"Repurchased Partner" shall have the meaning specified in Section
3.9(a).
"Repurchase Price" shall have the meaning specified in Section 3.9(c).
"Retirement" shall mean, with respect to an Employee Stockholder, the
termination by such Employee Stockholder of such Employee Stockholder's
employment with the Partnership and its Affiliates: (x) after the date such
Employee Stockholder shall have been continuously employed by the Partnership or
First Quadrant Limited for a period of ten (10) years commencing with the later
of the Effective Date or the date such Employee Stockholder commenced his or
her employment with the Partnership or First Quadrant Limited, as applicable,
and (y) pursuant to a written notice given to the Partnership not less than six
(6) months prior to the date of such termination.
"Revenues From Operations" shall mean, for any period, the gross
revenues of the Partnership (except as set forth herein), determined on an
accrual basis in accordance with generally accepted accounting principles
consistently applied; provided, however, that Revenues From Operations shall be
determined without regard to (a) proceeds during such period from the sale,
exchange or other disposition of all, or a substantial portion of, the assets of
the Partnership, (b) revenues from the issuance by the Partnership of additional
Partnership Points, other Partnership Interests, or other securities issued by
the Partnership, and (c)
6
<PAGE> 11
payments received pursuant to any insurance policies other than with respect to
business interruption insurance.
"Revenue Agreement" shall mean that certain Revenue Agreement dated as
of March 28, 1996, by and among First Quadrant Limited, the U.K. Partnership and
the partners of the U.K. Partnership.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as it may be
amended from time to time, and any successor thereto.
"Stock Purchase Agreement" shall mean that certain Stock Purchase
Agreement dated as of January 17, 1996, by and among AMG, Talegen Holdings,
Inc., a Delaware corporation ("Talegen"), the Partnership, the Initial Partners
which are Limited Partners, and certain other parties as set forth therein, as
the same has been amended from time to time prior to the date hereof.
"Transfer" shall have the meaning specified in Section 5.1.
"Treasury Regulations" shall mean the income tax regulations
promulgated under the Code, as such regulations may be amended from time to time
(including corresponding provisions of succeeding regulations).
"U.K. Free Cash Flow" shall have the meaning ascribed to such term in
the U.K. Partnership Agreement.
"U.K. Non Solicitation Agreement" shall have the meaning ascribed to
such term in the U.K. Partnership Agreement.
"U.K. Partnership" shall mean First Quadrant U.K., L.P., a Delaware
limited partnership.
"U.K. Partnership Agreement" shall have the meaning specified in
Section 3.7(d).
"U.K. Partnership Points" has the meaning ascribed to such term in the
U.K. Partnership Agreement.
"Vested Partnership Points" shall mean, at any time and with respect to
any Partner, the number of Partnership Points held by such Partner which have
vested at such time, as determined pursuant to an agreement between the
Partnership and such Partner in connection with the issuance of such Partnership
Points. The number of Vested Partnership Points held by each Partner and the
vesting schedule with respect to any Partnership Points which are not vested,
shall be indicated on Schedule A hereto, which Schedule shall be updated by the
General Partner as additional Partnership Points are issued and/or vest from
time to time.
7
<PAGE> 12
In addition to the foregoing, other capitalized terms used in this
Agreement shall have the meaning ascribed thereto in the text of this Agreement.
ARTICLE II - ORGANIZATION AND GENERAL PROVISIONS.
SECTION 2.1 CONTINUATION OF PARTNERSHIP. The parties hereby continue
the partnership formed under the Predecessor Agreement, under and pursuant to
the Partnership Act and the terms of this Agreement. The rights, duties,
liabilities and obligations of the Partners, and the administration and
termination of this Partnership, shall be governed by the Partnership Act,
except as otherwise provided in this Agreement. The General Partner is
authorized to cause the Partnership to comply with all requirements of the
Partnership Act and to qualify the Partnership to do business as a limited
partnership in any jurisdiction where the General Partner shall deem it
necessary, appropriate or advisable from time to time. The General Partner is
authorized to file and/or record any other instrument(s) as may be required or
advisable to be filed and/or recorded by this Partnership in accordance with
applicable laws, rules and regulations.
SECTION 2.2 NAME OF THE PARTNERSHIP. The name of the Partnership shall
be First Quadrant, L.P. or such other name as the General Partner with a
Majority Vote may from time to time determine. The General Partner and the
Officers shall cause to be filed on behalf of the Partnership such partnership
or assumed or fictitious business name statements or certificates as the General
Partner or such Officers shall deem necessary, appropriate or desirable.
SECTION 2.3 PURPOSES OF THE PARTNERSHIP. The Partnership was organized
and is continued for the following purposes:
(a) to engage in the investment advisory and investment
management businesses and any and all activities
reasonably related thereto;
(b) to make and perform all contracts and engage in all
activities and transactions and to do any and all
things necessary or advisable to carry out the
foregoing purposes; and
(c) to engage in any other act or activity which is
lawful for partnerships under the Partnership Act and
which is approved by the General Partner; provided,
however, that the General Partner will not cause a
business which is unrelated to the Partnership's
businesses to become a substantial part of the
Partnership without a prior Majority Vote.
SECTION 2.4 PLACE OF BUSINESS; REGISTERED AGENT.
(a) The principal place of business of the Partnership shall
be 800 East Colorado Boulevard, Suite 900, Pasadena, California 91101.
8
<PAGE> 13
(b) The Partnership's resident agent for service of process in
Delaware is The Corporation Trust Company, 1209 Orange Street, Wilmington,
Delaware 19801, and its registered office in Delaware shall be in care of such
resident agent.
(c) The General Partner may, at any time and from time to
time: (i) change the location of the Partnership's principal place of business
and establish such additional place or places of business of the Partnership as
it may determine; provided, that if the principal place of business is to be
located outside of Pasadena, California, such action must be approved by a
Majority Vote, (ii) change the Partnership's registered office in Delaware, and
(iii) change the Partnership's resident agent for service of process in
Delaware; provided, however, that the General Partner shall promptly give each
Limited Partner notice of any such change.
SECTION 2.5 DURATION OF THE PARTNERSHIP. The Partnership term shall
continue until December 31, 2095, unless extended or terminated earlier in
accordance with the provisions hereof. The Partnership's term may be extended by
the General Partner at any time and from time to time.
SECTION 2.6 TITLE TO PROPERTY. All property owned by the Partnership,
whether real or personal, tangible or intangible, shall be deemed to be owned by
the Partnership as an entity, and no Partner, individually, shall have any
ownership of such property.
SECTION 2.7 LIABILITY OF PARTNERS; NO DEFICIT RESTORATION OBLIGATION.
(a) The General Partner shall have such liability for the
repayment, satisfaction and discharge of the debts, liabilities and obligations
of the Partnership as is provided by the Partnership Act for the general partner
of a limited partnership.
(b) A Limited Partner which receives the return of any part of
its Capital Contribution shall be liable to the Partnership for the amount of
its Capital Contribution so returned to the extent, and only to the extent,
provided by the Partnership Act. No Limited Partner shall otherwise be liable to
the Partnership, another Partner or any third party for the repayment,
satisfaction, or discharge of the Partnership's debts, liabilities, and
obligations or otherwise have any obligation to contribute money or any other
asset to the Partnership other than payment of such Limited Partner's Capital
Contribution, and as otherwise specifically provided in this Agreement.
(c) Except as otherwise specifically set forth in this Section
2.7 or in Section 4.3 hereof, no Limited Partner with a deficit balance in its
Capital Account shall have any obligation to restore such deficit (or make any
contribution to the capital of the Partnership, or otherwise pay any amount,
with respect to such deficit), and such deficit shall not be considered as a
debt of such Limited Partner to the Partnership or to any other Partner for any
purpose whatsoever.
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SECTION 2.8 FISCAL YEAR. The fiscal year of the Partnership shall be
the calendar year unless otherwise determined by the General Partner.
ARTICLE III - MANAGEMENT OF THE PARTNERSHIP.
SECTION 3.1 MANAGEMENT IN GENERAL
(a) Subject to the provisions of this Agreement, the
management and control of the business of the Partnership shall be vested
exclusively in the General Partner, and the General Partner shall have exclusive
power and authority, in the name of and on behalf of the Partnership, to perform
all acts and do all things which, in its sole discretion, it deems necessary or
desirable to conduct the business of the Partnership; provided, however, that
the General Partner shall not have the power to execute, or cause the execution
of, transactions in, or exercise any powers or privileges with respect to,
securities and other instruments in accounts of clients of the Partnership. No
Partner other than the General Partner shall have the power to sign for or bind
the Partnership to any agreement or document, but the General Partner may
delegate the power to sign for or bind the Partnership to one or more Officers
of the Partnership. Subject to the provisions of this Agreement, the General
Partner shall be authorized to act, and to execute documents and instruments
alone on all material matters affecting the Partnership's business; provided,
however, that the General Partner shall not cause the Partnership to borrow
substantial funds or to guarantee the repayment of such borrowings, in each
case, to the extent such borrowing or guarantee is to be repaid out of Operating
Cash Flow.
(b) The General Partner shall, subject to all applicable
provisions of this Agreement, be authorized in the name of and on behalf of the
Partnership: (i) to enter into, execute, amend, supplement, acknowledge and
deliver any and all contracts, agreements, leases or other instruments for the
operation of the Partnership's business; and (ii) in general to do all things
and execute all documents necessary or appropriate to conduct the business of
the Partnership as set forth in Section 2.3 hereof, or to protect and preserve
the Partnership's assets. The General Partner may delegate any or all of the
foregoing powers to one or more of the Officers of the Partnership.
SECTION 3.2 OFFICERS OF THE PARTNERSHIP.
(a) The officers of the Partnership (the "Officers") shall
consist of a President/Chief Executive Officer and such other subordinate
officers as the Chief Executive Officer or the General Partner may, after
consulting with the other, determine are necessary or appropriate. The Officers
of the Partnership may only include persons who take an active role in the
day-to-day operations of the Partnership.
(b) No Officer of the Partnership shall be held personally
liable, by virtue of his or her status as an Officer, for any losses, debts or
obligations of the Partnership.
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(c) The Chief Executive Officer may be removed from and
appointed to, his or her office by the General Partner acting in its sole
discretion. Officers of the Partnership other than the Chief Executive Officer
shall be appointed to, and may be removed from, their offices by the Chief
Executive Officer or by the General Partner acting in its sole discretion;
provided, however, that if such an Officer of the Partnership who has not been
terminated For Cause is removed by the General Partner without either (i) the
consent of the Chief Executive Officer or (ii) a Majority Vote, then the Chief
Executive Officer may treat such appointment or removal as a termination of the
Chief Executive Officer's employment other than For Cause. Any Officer of the
Partnership may resign from his or her office upon prior written notice to the
Partnership and the General Partner.
(d) The Chief Executive Officer shall initially be Robert D.
Arnott.
SECTION 3.3 OPERATION OF THE BUSINESS OF THE PARTNERSHIP.
(a) Subject to recognizing that the General Partner has the
rights, duties and obligations set forth in Section 3.1 above, the Officers of
the Partnership are hereby given a non-exclusive delegation of authority from
the General Partner to manage the day-to-day operations, business and activities
of the Partnership; including, without limitation, the power, in the name of and
on behalf of the Partnership, to:
(i) determine the use of the Operating Cash Flow as set
forth in Section 3.3(b) below;
(ii) execute such documents and do such acts as are
necessary to register (or provide or qualify for exemptions
from any such registrations) or qualify the Partnership under
applicable Federal and state securities laws;
(iii) execute, or cause the execution of, transactions
in, and hold and exercise all rights, powers and privileges
with respect to, securities and other instruments on behalf of
clients of the Partnership; and
(iv) act for and on behalf of the Partnership in all
matters incidental to the foregoing.
(b) The Operating Cash Flow of the Partnership for any period
shall be used by the Partnership to provide for and pay its business expenses
and expenditures as determined by the Officers of the Partnership or by a
Majority Vote; including, without limitation, compensation and benefits to its
employees, including the Officers of the Partnership. Without the prior written
consent of the General Partner, the Partnership shall incur no expenses or
obligations that exceed its ability to pay or provide for them out of its
Operating Cash Flow on a current or previously reserved basis, except as
otherwise expressly provided in the following sentence. The Partnership shall
only make payments of compensation (including bonuses) to its employees
(including any Officers of the Partnership) out of the balance of its Operating
Cash Flow remaining after the payment (or reservation for payment) of all the
other business
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expenses and expenditures (including, without limitation, any payments required
under the Intercompany Services Agreement) for the applicable period; provided,
however, that the Partnership may make certain payments pursuant to the First
Quadrant Corp. Incentive Compensation Plan (as amended and restated as of
January 1, 1990, as further amended by Amendment Number 1 dated as of March 28,
1996, and as further amended and restated as of March 28, 1996 (the "ICP")), in
accordance with the provisions attached hereto as Schedule 3.3(b) and the
certificates thereunder previously provided to the General Partner, but without
any interest or other fees accruing on any unpaid portion thereof. Any excess
Operating Cash Flow remaining for any fiscal year following the payment (or
reservation for payment) of all business expenses and expenditures may be used
by the Partnership in such fiscal year and/or in future fiscal years in
accordance with the preceding sentence. The Partnership shall not, without the
prior written consent of the General Partner, enter into any contracts or other
agreements which could reasonably be foreseen to conflict with the provisions of
this Section 3.3(b), to have a material adverse impact on the Operating Cash
Flow of the Partnership in future periods or to encumber the assets of the
Partnership. Free Cash Flow may be used to provide for and pay the business
expenses of the Partnership to the extent specified in Section 3.3(c) with
respect to key-man life insurance and disability insurance as well as directors
and officers liability insurance for the benefit of the directors and officers
of the General Partner, Section 3.4 with respect to certain extraordinary
expenses and otherwise as agreed to in writing by the General Partner and the
Limited Partners by a Majority Vote (any such use being referred to herein as a
"Free Cash Flow Expenditure").
(c) The Partnership will maintain, in full force and effect,
such insurance as is customarily maintained by companies of similar size in the
same or similar businesses (including, without limitation, errors and omissions
liability insurance), the premiums on which will be paid out of Operating Cash
Flow. The Partnership will maintain such key-man life insurance and disability
insurance policies on each Employee Stockholder as the General Partner shall
deem necessary or desirable, from time to time, and the Employee Stockholders
will use their reasonable best efforts to effectuate the foregoing. The
Partnership will receive the proceeds of the above referenced insurance
policies, and the Partners agree with each other and the Partnership that the
Partnership will pay the premiums on such key-man life and disability policies,
as well as any reasonable additional insurance policies that the General Partner
deems necessary, out of Free Cash Flow. Without limiting the generality of the
foregoing, the Partnership will pay the premiums on reasonable directors and
officers liability insurance for the benefit of the directors and officers of
the General Partner that the General Partner deems necessary, out of Free Cash
Flow.
SECTION 3.4 COMPENSATION AND EXPENSES OF THE PARTNERS. No Partner shall
be entitled to any compensation on account of its provision of services to the
Partnership hereunder. The Partnership shall, however, pay and/or reimburse the
General Partner for all reasonable travel expenses incurred by the General
Partner in accordance with Section 9.4(a) as well as any extraordinary expenses
incurred by the General Partner directly in connection with the operation of the
Partnership. With respect to any reimbursement of the General Partner in respect
of extraordinary expenses incurred by the General Partner, the first $25,000 of
such expenses incurred in any calendar year shall be treated as paid from
Operating Cash
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Flow, and any amounts thereafter shall be treated as Free Cash Flow Expenditures
unless such extraordinary expenses are incurred by the General Partner (i) as a
direct result of fraud, intentional misconduct or gross negligence of the
Officers or Limited Partners or (ii) relating to a compliance audit or AIMR
audit or other similar occurrence resulting from a reasonable concern of the
General Partner, the cause or causes of which could be expected to result in a
material adverse effect on the Partnership or its business or prospects, in
which case such expenses shall also be treated as paid from Operating Cash Flow.
Without limiting the generality of the foregoing, the General Partner's general
overhead items (including, without limitation, salaries and rent) shall not be
reimbursed by the Partnership. Stockholders, officers, directors, partners and
agents of Partners may serve as employees of the Partnership and be compensated
therefor as determined by the Officers pursuant to Section 3.3(b).
SECTION 3.5 OTHER BUSINESS OF THE GENERAL PARTNER AND ITS AFFILIATES.
The General Partner and its Affiliates may engage, independently or with others,
in other business ventures of every nature and description, including the
acquisition, creation, financing, trading in, and operation and disposition of
interests in investment managers and other businesses that may be competitive
with the Partnership's business. Neither the Partnership nor any of the Limited
Partners shall have any right in or to any other such ventures by virtue of this
Agreement or the Partnership created hereby, nor shall any such activity be
deemed wrongful or improper by such Affiliates. The General Partner shall not be
obligated to present any opportunity to the Partnership even if such opportunity
is of such a character which, if presented to the Partnership, would be suitable
for the Partnership.
SECTION 3.6 LIMITED PARTNERS AND NON SOLICITATION AGREEMENTS. Each
Employee Stockholder and, to the extent applicable, its Limited Partner, have
provided pursuant to a Non Solicitation/Non Disclosure Agreement in form and
substance substantially similar to Exhibit C(i) hereto (and, in the case of an
Employee Stockholder who is employed by First Quadrant Limited, Exhibit C(ii)
hereto) (the "Non Solicitation Agreement") (and in the case of any Additional
Limited Partner (as defined in Section 5.6), it shall, prior to and as a
condition precedent to, becoming a Partner, provide by such an agreement
satisfactory to the General Partner) with the Partnership for the performance by
such Employee Stockholder of the obligations provided for on such Exhibit C(i)
or Exhibit C(ii) (as applicable) and such agreements do and shall, at all times,
provide that the Partnership shall be entitled to enforce the provisions of such
agreements on its own behalf and in the name of the Limited Partner (if the
Limited Partner is not an individual).
SECTION 3.7 NON SOLICITATION AND NON-DISCLOSURE BY LIMITED PARTNERS
AND EMPLOYEE STOCKHOLDERS.
(a) Each Limited Partner and each Employee Stockholder agrees,
for the benefit of the Partnership and the other Partners, that such Employee
Stockholder shall not, while employed by the Partnership or any of its
Affiliates, engage in any Prohibited Competition Activity (provided that an
Employee Stockholder may engage in certain charitable activities which have been
approved by the General Partner, in its sole discretion, in a writing making
specific reference to this Section 3.7(a)).
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(b) Each Limited Partner and each Employee Stockholder agrees,
for the benefit of the Partnership and the other Partners, that such Limited
Partner and such Employee Stockholder shall not, during the period beginning on
the date such Limited Partner becomes a Limited Partner, and until the date
which is two (2) years after the termination of such Employee Stockholder's
employment with the Partnership and its Affiliates, without the express written
consent of the General Partner, directly or indirectly, whether as owner,
part-owner, shareholder, partner, director, officer, trustee, employee, agent or
consultant, or in any other capacity, on behalf of himself or any firm,
corporation or other business organization other than the Partnership or First
Quadrant Limited: (i) provide Investment Management Services to any person or
entity that is a client of the Partnership or First Quadrant Limited (for this
purpose, upon any termination of the Employee Stockholder's employment for any
reason, only the following shall be deemed a "client of the Partnership or First
Quadrant Limited" (i) clients of the Partnership and its Affiliates (including
its predecessor, First Quadrant Corp.) at the date of such termination or at any
time during the six (6) months immediately preceding the date of termination, or
(ii) up to fifteen (15) additional persons or entities with whom the Partnership
or First Quadrant Limited was actively attempting to develop an investment
advisory or investment management relationship (as evidenced by a contact other
than a mass mailing (which may include prior clients of the Partnership or its
Affiliates) (a "Prospect") with such Prospects to be designated by the General
Partner with the advice of the Officers; provided, however, that this paragraph
(A) shall not prohibit the Employee Stockholder from providing Investment
Management Services to any person or entity that is not a client of the
Partnership or First Quadrant Limited (including Prospects) as contemplated
herein, (B) shall not be applicable with respect to any such client who is, as
of the relevant date of termination, also a client of the person or entity with
which the Employee Stockholder is subsequently employed or affiliated so long as
the Employee Stockholder can demonstrate by clear and convincing evidence that
he or she has no direct or indirect involvement with the management of such
client's accounts or the provision of advice or other services with respect
thereto (it being understood and agreed that mere participation in the
refinement of an existing model (as opposed to the creation or development of a
new model or any other activities) used for providing investment advice shall
not be deemed to be direct or indirect involvement with the management of any
accounts which are managed utilizing such model) and that he or she has
refrained from contacting such clients directly or indirectly, and (C) shall not
be applicable to clients of the Partnership or First Quadrant Limited who are
also members of the Immediate Family of the Employee Stockholder; or (ii)
solicit or induce any employee of, or consultant to, First Quadrant Limited, the
Partnership or any of its Affiliates to terminate his or her relationship
therewith, hire any such employee or consultant, or former employee or work in
any enterprise involving investment advisory services with any employee or
consultant or former employee of First Quadrant Limited, the Partnership or its
Affiliates who was employed by or acted as consultant to the Partnership or its
Affiliates at any time during the twelve (12) months immediately preceding the
termination of the Employee Stockholder's employment (excluding for all purposes
of this sentence, secretaries and persons holding other similar positions).
Notwithstanding the provisions of Section 3.7(a) and 3.7(b), any Employee
Stockholder may make passive investments in a competitive enterprise the shares
or other equity interests of
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which are publicly traded provided his holding therein together with any
holdings of his Affiliates, do not exceed 1% of the outstanding shares of
comparable interests in such entity at the time such investments are made.
(c) Each Limited Partner and each Employee Stockholder agrees
that any and all presently existing investment advisory business of the
Partnership and its Affiliates (including its predecessor, First Quadrant
Corp.), and all business developed by the Partnership and its Affiliates or any
other employee of First Quadrant Limited or the Partnership, including without
limitation, all investment advisory contracts, fees, commissions, compensation
records, client lists, agreements, and any other incident of any business
developed by the Partnership or its Affiliates or earned or carried on by the
Employee Stockholder for the Partnership or its Affiliates and all trade names,
service marks and logos under which the Partnership or its Affiliates do
business, and any combinations or variations thereof and all related logos, are
and shall be the exclusive property of the Partnership or such Affiliate, as
applicable, for its or their sole use, and (where applicable) shall be payable
directly to the Partnership or such Affiliate. Each Limited Partner and each
Employee Stockholder acknowledges that, in the course of performing services
hereunder and otherwise, the Employee Stockholder has had, and will from time to
time have, access to confidential records, data, client lists, trade secrets and
similar confidential information owned or used in the course of business by the
Partnership or its Affiliates. Each Limited Partner and each Employee
Stockholder agrees always to keep secret and not ever publish, divulge, furnish,
use or make accessible to anyone (otherwise than in the regular business of the
Partnership or any Affiliate thereof at the Partnership's request) any knowledge
or information of a confidential or proprietary nature with respect to any trade
secrets, proprietary plans, clients, client requirements, service providers,
business operations or techniques of the Partnership or any Affiliate thereof
other than information which (a) is or becomes generally available to the public
other than as a result of disclosure by such Limited Partner or Employee
Stockholder in violation of this Agreement, or (b) is required by law or
government regulation to be disclosed to a court or government regulatory body;
provided, however, that prior to disclosing such information, the applicable
Limited Partner and Employee Stockholder shall give the Partnership and the
General Partner notice and shall use its respective best efforts to obtain
confidential treatment therefor ("Nonconfidential Information"); provided, that
the Partnership shall reimburse such Limited Partner or Employee Stockholder for
costs incurred in excess of $1,000. At the termination of the Employee
Stockholder's services to the Partnership or First Quadrant Limited, all data,
memoranda, client lists, notes, programs and other papers, items and tangible
media, and reproductions thereof relating to the foregoing matters in the
Limited Partner's or Employee Stockholder's possession or control, shall be
returned to the Partnership and remain in its possession (except where the
return of such items shall be unreasonable or impractical in relation to the
importance or confidentiality of such items).
(d) Each Limited Partner and each Employee Stockholder
acknowledges that, in the course of negotiating this Restated Partnership
Agreement, the U.K. Partnership's Limited Partnership Agreement (the "U.K.
Partnership Agreement") and the Stock Purchase Agreement, the Limited Partner
and the Employee Stockholder have had and, in the course of the operation of the
Partnership, the Limited Partner and Employee Stockholder will from time
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to time have, access to confidential records, data, plans, strategies, trade
secrets and similar confidential information owned or used in the course of
business by the General Partner's parent, AMG. Each Limited Partner and each
Employee Stockholder agrees, for the benefit of the Partnership and its
partners, and for the benefit of the General Partner's parent, AMG, always to
keep secret and not ever publish, divulge, furnish, use or make accessible to
anyone (otherwise than at the General Partner's request) any knowledge or
information of a confidential or proprietary nature with respect to any records,
data, plans, strategies, business operations or techniques (including, by way of
example and not of limitation, the transaction structure utilized by AMG) of
AMG, the General Partner or the Partnership other than Nonconfidential
Information. At the termination of the Employee Stockholder's service to the
Partnership and First Quadrant Limited, all data, memoranda, documents, notes
and other papers, items and tangible media, and reproductions thereof relating
to the foregoing matters in the Limited Partner's or Employee Stockholder's
possession or control shall be returned to the General Partner and remain in its
possession (except where the return of such items shall be unreasonable or
impractical in relation to the importance or confidentiality of such items).
SECTION 3.8 REMEDIES UPON BREACH.
(a) In the event that a Limited Partner or its Employee
Stockholder (i) breaches any of the provisions of Section 3.7, (ii) breaches any
of the provisions of Section 3.7 of the U.K. Partnership Agreement, or (iii)
breaches any of the provisions of the Non Solicitation Agreement to which it or
he is a party, then such Limited Partner shall forfeit its right to receive any
payment for its Partnership Interests under Section 3.9 and, with respect to
Lovell, Inc., under Section 7.1(c), and the General Partner shall have no
further obligations under any promissory note theretofore issued to such Limited
Partner (or any other Limited Partner (including upon a distribution pursuant to
Section 3.9(j)) which was or is a stockholder in such Limited Partner) pursuant
to Section 3.9(e) and, with respect to Lovell, Inc., under Section 7.1(f).
(b) Each Limited Partner and each Employee Stockholder agrees
that any breach of the provisions of Section 3.7 of this Agreement, Section 3.7
of the U.K. Partnership Agreement or of the Non Solicitation Agreement or U.K.
Non Solicitation Agreement by such Limited Partner or Employee Stockholder could
cause irreparable damage to the Partnership, First Quadrant Limited, the U.K.
Partnership, the other Partners and AMG. The Partnership, any of the Partners
and AMG shall, except as provided in this Section 3.8(b), have the right to an
injunction or other equitable relief (in addition to other legal remedies) to
prevent any violation of a Limited Partner's or Employee Stockholder's
obligations hereunder or thereunder. Notwithstanding the foregoing, none of the
Partnership, any of the Partners or AMG shall have the right to an injunction or
other equitable relief to prevent a violation of Section 3.7(b)(i) unless: (i)
the party or one of the parties against which such relief is sought is Robert D.
Arnott, R.D. Arnott Corporation, a Chief Executive Officer of the Partnership or
an entity through which a Chief Executive Officer of the Partnership owns an
interest in the Partnership, or (ii) one of the parties seeking to obtain an
injunction or other equitable relief to prevent such violation of Section
3.7(b)(i) has obtained a Majority Vote.
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SECTION 3.9 REPURCHASE UPON TERMINATION OF EMPLOYMENT OR BANKRUPTCY.
(a) In the event that the employment by the Partnership or
First Quadrant Limited of any Employee Stockholder terminates for any reason,
then: (i) if the termination of the Employee Stockholder occurred because of the
death or Permanent Incapacity of such Employee Stockholder, the Partnership
shall purchase for cash up to the extent of the cash proceeds of any key-man
life insurance policies or disability insurance policies, as applicable,
maintained by the Partnership on the life or health of such Employee
Stockholder, and (ii) in each other such case (and, in the case of the death or
Permanent Incapacity of an Employee Stockholder, to the extent the obligation
exceeds the proceeds described in clause (i) of this Section 3.9(a)), AMG shall
purchase (each a "Repurchase") all the Partnership Interests held by the Limited
Partner (or the Limited Partner of which such employee was the Employee
Stockholder, as applicable) (as indicated on Schedule A hereto) (the
"Repurchased Partner"), in each case, pursuant to the terms of this Section 3.9.
(b) The closing of the Repurchase will take place on a date
(the "Repurchase Closing Date") which is not more than ninety (90) days after
the date on which the termination of the employment by the Partnership and First
Quadrant Limited of the relevant Employee Stockholder occurred; provided,
however, that (i) if the employment by the Partnership and First Quadrant
Limited of such Employee Stockholder is terminated because of the death or
Permanent Incapacity of such Employee Stockholder, then the Repurchase Closing
Date shall be a date set by the General Partner which is as soon as reasonably
practicable after the later of (A) ninety (90) days after the death or Permanent
Incapacity, as applicable, of such Employee Stockholder or (B) ninety (90) days
after the Partnership has received the proceeds of any key-man life insurance
policy or disability insurance policy, as applicable, maintained by the
Partnership on the life or health of such Employee Stockholder. The Partnership
shall make a claim under such key-man or disability policy within thirty (30)
days of any Officer and the General Partner becoming aware of the death or
Permanent Incapacity, as applicable, of an Employee Stockholder.
(c) The purchase price for the Repurchase (the "Repurchase
Price") shall be determined as follows:
(i) If the Employee Stockholder's employment with the
Partnership and First Quadrant Limited is terminated because
of the death, Permanent Incapacity, Retirement or if such
Employee Stockholder was terminated by the Partnership or
First Quadrant Limited on such date other than For Cause, then
the Repurchase Price shall equal (A) ****************
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;provided, however, that in the case of a Retirement, if,
within the twelve (12) months preceding the effective date of
such Employee Stockholder's Retirement, (x) two (2) other
Employee Stockholders have terminated their employment by
Retirement, or (y) one (1) other Employee Stockholder has
terminated his employment by Retirement and the Limited
Partner owned by that Employee Stockholder (or such Limited
Partner in the case of a Limited Partner which is an
individual) held at the time of such Retirement, and the
Limited Partner owned by that Employee Stockholder (or such
Limited Partner in the case of a Limited Partner which is an
individual) who is terminating his employment by Retirement
holds, a number of Vested Partnership Points as is equal to or
greater than the Median Number of Limited Partners' Vested
Partnership Points at the time any Employee Stockholder
terminated his or her employment by Retirement during such
twelve (12) month period, then the Repurchase Price for the
Partnership Points of the Limited Partner owned by that
Employee Stockholder (or such Limited Partner in the case of a
Limited Partner which is an individual) who is terminating his
employment by Retirement shall be determined pursuant to
paragraph (ii) below. For purposes of this Section 3.9(c)(i),
the term Median Number of Limited Partners' Vested Partnership
Points shall mean that number of Vested Partnership Points as
is equal to the median number of Vested Partnership Points
then held by the Limited Partners (e.g., if there are five
Limited Partners with 5, 2, 2, 2 and 1 Vested Partnership
Points, the "median number" of Vested Partnership Points is 2
for all purposes hereof).
(ii) In all other cases, (including, without
limitation, the resignation of an Employee Stockholder or the
termination of such Employee Stockholder For Cause) then the
Repurchase Price shall equal (A) ****************[The
remainder of this subsection has been omitted pursuant to the
confidential treatment request referred to on the cover page
hereto. The omitted portions have been filed separately with
the Commission.]***************
If a Repurchase Price must be determined prior to twenty-four (24)
months after the Effective Date, then the amount of the Partnership's Free Cash
Flow for the portion of the
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relevant twenty-four (24) month period before the Effective Date shall be
calculated on a pro-forma basis such that the Free Cash Flow of the Partnership
shall be deemed to be equal to ********** percent (**%) of the Revenues From
Operations of the General Partner attributable to the assets transferred to the
Partnership pursuant to the Asset Transfer.
Notwithstanding anything else set forth herein to the contrary, if a
Limited Partner fails to comply with the provisions of Section 3.9(j) hereof,
AMG: (i) shall have no obligation to Repurchase Partnership Points from such
Limited Partner, and (ii) may, at any time, Repurchase Partnership Points from
such Limited Partner for a Repurchase Price equal to the lesser of (x) the
amount determined under Section 3.9(c)(ii) or (y) the Capital Account of such
Repurchased Partner.
(d) The rights of AMG, the General Partner, the Partnership
and their assignees hereunder are in addition to and shall not affect any other
rights which the Partnership or its assigns may otherwise have to repurchase
Partnership Interests (including, without limitation, pursuant to any agreement
entered into by an Additional Limited Partner which provides for the vesting of
Partnership Points).
(e) On the Repurchase Closing Date, AMG or the Partnership
shall pay to the Repurchased Partner the Repurchase Price for the Partnership
Interests repurchased in the manner set forth in this Section 3.9, and upon such
payment the Repurchased Partner shall cease to hold any Partnership Interests
repurchased, and such Repurchased Partner shall be deemed to have withdrawn from
the Partnership and shall cease to be a Partner of the Partnership and shall no
longer have any rights hereunder; provided, however, that the provisions of this
Article III shall continue as set forth in Section 3.11 below. On the Repurchase
Closing Date, the Repurchased Partner, the Partnership and AMG shall execute an
agreement reasonably acceptable to the General Partner in which the Repurchased
Partner represents and warrants that it has sole record and beneficial title to
the Repurchased Interest to AMG (or its assignee), free and clear of any
Encumbrances. Payment of the Repurchase Price shall be made on the Repurchase
Closing Date as follows: (a) in the case of termination of employment because of
death (to the extent of the collected proceeds of any key-man life insurance
policies maintained by the Partnership on the life of such Employee
Stockholder), by wire-transfer of immediately available funds to an account
designated by the Repurchased Partner at least three (3) business days prior to
the Repurchase Closing Date, and (b) in the case of any other termination of
employment (and including a termination of employment because of death to the
extent the obligation exceeds the proceeds of any key-man life insurance
policies) with a promissory note in the form attached hereto as Exhibit D, the
principal of which promissory note would be paid in four (4) equal (except as
contemplated by this Section 3.9(e) or Section 3.9(f)) installments, the first
installment would be paid (A) in the case of a termination because of death or a
termination by the Partnership or First Quadrant Limited other than For Cause,
on the Repurchase Date and (B) in the case of any other termination, on the
later to occur of (x) the Repurchase Date or (y) the date which is the first
business day after the fifth anniversary of the Effective Date, and the second,
third and fourth installments would be paid fourteen (14) months, twenty-six
(26) months and thirty-eight (38) months, respectively, after such date.
Notwithstanding the foregoing, if the Repurchased
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Partner is also a Defaulting Partner (as such term is defined in Section 4.1(g)
hereof), then any payments to the Repurchased Partner shall be reduced as
follows: (A) in the case of termination of employment because of death, the
amount of any payment to be made by the Partnership to the Repurchased Partner
shall be reduced by the amount which the Repurchased Partner owes as a
Defaulting Partner pursuant to Section 4.1(g), including interest thereon (in
the manner provided by Section 4.1(g)) through the Repurchase Date and (B) in
the case of any other termination of employment (including a termination of
employment because of death to the extent the obligation exceeds the proceeds of
any key-man life insurance policies): (x) to the extent the Partnership was
assigned the obligation to purchase Partnership Interests, any payment to be
made by the Partnership to the Repurchased Partner shall be reduced by the
amount which the Repurchased Partner owes as a Defaulting Partner pursuant to
Section 4.1(g), including interest thereon (in the manner provided by Section
4.1(g)) through the Repurchase Date; and (y) to the extent the obligations are
obligations of AMG or the General Partner, the payments to be made to the
Repurchased Partner shall be reduced by the amount which the Repurchased Partner
owes as a Defaulting Partner pursuant to Section 4.1(g) including interest
thereon (in the manner provided by Section 4.1(g)) through the Repurchase Date,
with such reduction being applied to the payments of principal or installments
provided by this Section 3.9(e) in the order in which the obligations to make
payments arise (i.e., such reduction shall be applied to the first payment of
principal or installment and, if such reduction exceeds the amount of the first
payment of principal or installment, it shall then be applied to the second
payment of principal or installment), and such payments shall be made, instead,
to the Partnership at the times called for by this Section 3.9(e), and
appropriate modifications shall be made to the promissory note (if any) to be
issued to the Repurchased Partner.
(f) If an Employee Stockholder's employment with the
Partnership or First Quadrant Limited is terminated because of the Retirement of
such Employee Stockholder prior to March 28, 2011, then the amounts of the
second, third and fourth installments of the promissory note set forth in
Section 3.9(e) above shall equal the lesser of (i) twenty-five percent (25%) of
the Repurchase Price (determined as set forth in Section 3.9(c) hereof) on the
Repurchase Closing Date, or (ii) twenty-five percent (25%) of the Repurchase
Price, determined as if the Repurchase Closing Date were taking place on the
second, third or fourth anniversary of the Repurchase Closing Date, respectively
(in each case, together with interest computed on the principal amount of such
promissory note (determined as set forth in this Section 3.9(f)) from the date
of issuance of such promissory note through the date of payment of such
installment as set forth on Exhibit D). At least forty-five (45) days prior to
the date an installment to which this Section 3.9(f) applies would be paid, the
General Partner shall cause the Partnership to certify to the Repurchased
Partner who is to receive such installment, in writing, a calculation setting
forth the amount of such installment based on clauses (i) and (ii) in the
preceding sentence. Each Repurchased Partner to whom this Section 3.9(f)
applies, may defer receipt of an installment on one (1) occasion, by written
notice received by the Partnership and the General Partner not less than fifteen
(15) days prior to the date an installment is due to be paid. If a Repurchased
Partner defers an installment, the due date of each remaining installment of the
promissory note issued to such Repurchased Partner pursuant to Section 3.9(e)
above shall be extended by twelve (12) months.
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(g) If AMG should fail to pay an installment on a promissory
note issued to a Repurchased Partner under paragraph (e) above, within thirty
(30) business days after the date such payment is due, then the Repurchased
Partner may, after complying with the provisions of the second paragraph of this
Section 3.9(g), repurchase the Subject Partnership Points by forgiving any
remaining installments on the promissory note issued pursuant to Section 3.9(e)
above and returning such promissory note to AMG marked "canceled and paid in
full." For purposes of this Section 3.9(g), the term "Subject Partnership
Points" shall mean in the case of any failure by AMG to pay an installment on a
promissory note: (i) if only the first installment in connection with such
Repurchase has been paid, seventy-five percent (75%) of the Partnership Points
purchased from the Repurchased Partner in the Repurchase, (ii) if the first and
second installments in connection with such Repurchase have been paid, fifty
percent (50%) of the Partnership Points purchased from the Repurchased Partner
in the Repurchase, and (iii) if the first three installments in connection with
such Repurchase have been paid, twenty-five percent (25%) of the Partnership
Points purchased from the Repurchased Partner in the Repurchase.
In order to exercise its rights under this Section 3.9(g), a
Repurchased Partner shall be required to give not less than fifteen (15) days
prior written notice to AMG and, if such Repurchased Partner is aware that AMG
has pledged its interest in the Partnership, to the beneficiary of such pledge.
Notwithstanding the foregoing, if AMG has pledged its interest in the
Partnership, the beneficiary of such pledge may either (x) fulfill AMG's
obligation (or cause AMG to fulfill its obligation) to pay the installment on a
promissory note which gave rise to such Repurchased Partner becoming entitled to
exercise its rights under this Section 3.9(g), whereupon such failure shall be
deemed to have been cured and such Repurchased Partner shall no longer be
entitled to exercise its rights under this Section 3.9(g) unless and until AMG
shall fail to pay another installment on a promissory note held by such
Repurchased Partner whereupon this Section 3.9(g) shall only apply with respect
to such later failure, or (y) pay all remaining amounts due to such Repurchased
Partner under such promissory note, whereupon such Repurchased Partner shall
return the promissory note marked "canceled and paid in full" and shall have no
further rights hereunder.
If a Repurchased Partner has exercised its rights under this Section
3.9(g) and repurchased any Subject Partnership Points, either AMG or the
Partnership may, at their respective options and at any time, repurchase or
redeem (as applicable) such Subject Partnership Points for a payment, in cash,
equal to the installments which were outstanding under the promissory note
issued under Section 3.9(e) and upon which AMG defaulted, at the time of such
default.
(h) AMG may, with a Majority Vote (excluding, for purposes of
determining such Majority Vote, the Limited Partner whose interest is being
repurchased), assign any or all of its rights and obligations under this Section
3.9, in one or more instances, to the General Partner or the Partnership;
provided, that the foregoing limitation shall have no effect on the
Partnership's obligation set forth in Section 3.9(a)(i) regarding the use of the
proceeds of a key-man life or disability insurance policy.
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(i) In the event that a Limited Partner or Employee
Stockholder has filed a petition under the United States Bankruptcy Code, or
sixty (60) days after the filing by another person against such Limited Partner
or Employee Stockholder of a petition under the United States Bankruptcy Code
which petition is not dismissed, or if such Limited Partner has ceased to carry
on a business because of a voluntary liquidation (such date of filing, sixtieth
day or effective date of liquidation, the "Bankruptcy Event"), the General
Partner shall purchase all the Partnership Interests held by such Limited
Partner (including the Limited Partner through which such Employee Stockholder
holds his or her interest in the Partnership) pursuant to the terms of this
Section 3.9 as if such Limited Partner was a Repurchased Partner with the
purchase price determined pursuant to Section 3.9(c)(ii) and the date of the
closing to be determined by the General Partner in its sole discretion.
(j) In the event that the employment by the Partnership or
First Quadrant Limited of any Employee Stockholder which is not a Limited
Partner terminates for any reason other than the death of such Employee
Stockholder, then the Limited Partner of which such Person is the Employee
Stockholder (the "Distributing Partner") shall, at the request of the General
Partner (in a writing making reference to this paragraph (j) and Section 5.1(f)
hereof), distribute up to twenty-five percent (25%) of the Partnership Points
held by such Limited Partner to the stockholder of such Limited Partner after
such Limited Partner and each such stockholder has complied with the provisions
of Section 5.1 hereof, whereupon each such stockholder shall become a
Repurchased Partner for purposes of this Section 3.9, and all the interests of
such Repurchased Partners shall be Repurchased on the same Repurchase Closing
Date determined in accordance with Section 3.9(b) and upon such payment each
such Repurchased Partner shall cease to hold any Partnership Interests, each
such Repurchased Partner shall be deemed to have withdrawn from the Partnership,
shall cease to be a Partner of the Partnership, and shall no longer have any
rights hereunder. In connection with the Repurchase from each such Repurchased
Partner, such Repurchased Partner shall execute a bill of sale in form and
substance reasonably satisfactory to AMG. In connection with any Repurchase
pursuant to this Section 3.9(j), and notwithstanding the provisions of Section
3.9(e) to the contrary, the payment of the Repurchase Price to the stockholder
and the Distributing Partner shall be made as follows: the payment of the
Repurchase Price to the stockholder shall be made entirely in cash on the
Repurchase Date, the first installment of the promissory note to be issued to
the Limited Partner of which such Person is a stockholder shall be reduced by
the amount of such cash payment, and the dollar amount of such reduction shall
be added one-third (1/3) to each of the second, third and fourth installments of
the promissory note to be issued to the Limited Partner of which such Person is
or was a stockholder.
SECTION 3.10 NO EMPLOYMENT OBLIGATION. Each Limited Partner and each
Employee Stockholder acknowledges that neither this Agreement nor the provisions
of the Non Solicitation Agreement creates an obligation on the part of the
Partnership or First Quadrant Limited to continue the employment of an Employee
Stockholder with the Partnership or First Quadrant Limited.
SECTION 3.11 MISCELLANEOUS. Each Limited Partner and each Employee
Stockholder agrees that the enforcement of the provisions of Sections 3.6, 3.7,
3.8, 3.9, and 3.10 and the
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provisions of the Non Solicitation Agreements are necessary to ensure the
protection and continuity of the business, goodwill and confidential business
information of the Partnership and First Quadrant Limited for the benefit of
each of the Partners. Each Limited Partner and each Employee Stockholder agrees
that, due to the proprietary nature of the Partnership's business and the
businesses of First Quadrant Limited, the restrictions set forth in Section 3.7
hereof and in the Non Solicitation Agreements are reasonable as to duration and
scope. Each Limited Partner and Employee Stockholder acknowledges that the
obligations and rights under Sections 3.6, 3.7, 3.8, 3.9 and 3.11 shall survive
the termination of the employment of an Employee Stockholder with the
Partnership and First Quadrant Limited and/or the withdrawal or removal of a
Limited Partner from the Partnership, regardless of the manner of such
termination in accordance with the provisions hereof and of the relevant Non
Solicitation Agreement. Moreover, each Partner agrees that the remedies provided
herein, including the waiver of a right to receive certain payments hereunder,
is reasonably related to the anticipated loss that the Partnership and the
Partners (including, without limitation, the General Partner or AMG which would
be purchasing Partnership Interests from the Limited Partners) would suffer upon
a breach of such provisions. Each Partner confirms his understanding and
agreement that the provisions of Sections 3.6, 3.7, 3.8, 3.9 and 3.11 have been
adopted in conformance with Section 16602 of the California Business and
Professional Code. Except as agreed to by the General Partner, in writing, no
Employee Stockholder or Limited Partner shall enter into any agreement or
arrangement which is inconsistent with the terms and provisions hereof.
SECTION 3.12 EXCULPATION; INDEMNIFICATION.
(a) No Partner nor any of their officers, directors,
employees, stockholders or Affiliates, nor any of the Officers (each herein
referred to as an "Indemnified Party") shall have any liability to the
Partnership or to any Partner for any loss suffered by the Partnership (a
"Partnership Loss") which arises out of any action or inaction of such
Indemnified Party in its capacity as any of the foregoing; provided, however,
that such course of conduct did not constitute fraud, gross negligence, willful
misconduct or a material breach of this Agreement, the Stock Purchase Agreement
or, in the case of each Employee Stockholder, the Non Solicitation Agreement of
such Employee Stockholder or the breach of any of the foregoing by the Limited
Partner of which he or she is an Employee Stockholder. Each such Indemnified
Party shall be indemnified to the fullest extent permitted by law by the
Partnership against any losses, judgments, liabilities, expenses and amounts
paid in settlement of any claims sustained by any of them in their capacity as
an Indemnified Party in connection with the business or operations of the
Partnership, or the exercise and performance of any Partner's or Officer's
powers or duties in accordance with the terms of this Agreement; provided the
same was not the result of fraud, gross negligence, willful misconduct, or a
material breach of this Agreement, the Stock Purchase Agreement or, in the case
of each Employee Stockholder, the Non Solicitation Agreement of such Employee
Stockholder or the breach of any of the foregoing by the Limited Partner of
which he or she is an Employee Stockholder. The indemnification authorized by
this Section 3.12 shall include the payment of reasonable attorneys' fees and
other reasonable expenses incurred in settling or defending any claims,
threatened actions or finally adjudicated legal proceedings. Prior to any final
disposition of
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any claim or proceeding with respect to which an Indemnified Party may be
entitled to indemnification hereunder, the Partnership shall pay to such
Indemnified Party, as the case may be, in advance of such final disposition, an
amount equal to all reasonable out-of-pocket expenses of said Indemnified Party
as incurred in defense of said claim or proceeding; provided that such advance
payments shall be made only upon the Partnership's receipt of a written
undertaking of said Indemnified Party to repay the Partnership the amount so
advanced if it shall be finally determined that said Indemnified Party was not
entitled to indemnification hereunder.
(b) The right of indemnification hereby provided shall not be
exclusive of, and shall not affect, any other rights to which an Indemnified
Party may be entitled. Nothing contained in this Section 3.12 shall limit any
lawful rights to indemnification existing independently of this Section 3.12.
(c) The indemnification rights provided by this Section 3.12
shall also inure to the benefit of the heirs, executors, administrators,
successors and assigns of an Indemnified Party and any officers, directors,
partners, shareholders, employees and Affiliates of such Indemnified Party (and
any former officer, director, partner, shareholder or employee of such
Indemnified Party, if the Partnership Loss was incurred while such person was an
officer, director, partner, shareholder or employee of such Indemnified Party).
The General Partner may extend the indemnification called for by Section 3.12(a)
to non-employee agents of the Partnership, the General Partner or its
Affiliates.
ARTICLE IV - CAPITAL CONTRIBUTIONS; DISTRIBUTIONS;
CAPITAL ACCOUNTS AND ALLOCATIONS
SECTION 4.1 CAPITAL CONTRIBUTIONS.
(a) Prior to the effectiveness of this Agreement, the General
Partner contributed to the Partnership certain of its assets, properties,
rights, powers, privileges and business, and the Partners agree that such
Capital Contribution has a value of $**. Except as may be agreed to in
connection with the issuance of additional Partnership Points, as specifically
set forth herein, and as may be required under applicable law, the Partners
shall not be required to make any further contributions to the Partnership. No
Partner shall make any contribution to the Partnership without the prior consent
of the General Partner.
(b) No Partner shall have the right to withdraw any part of
the capital it (or its predecessors in interest) contributed to the Partnership
until the termination, dissolution and winding up of all the Partnership, except
as distributions pursuant to this Article IV may represent returns of capital,
in whole or in part; provided, however, to the extent of any payment made by the
General Partner or any Affiliate thereof other than the Partnership pursuant to
Section 2.2(d) of the Stock Purchase Agreement, the General Partner may withdraw
capital it has contributed to the Partnership. No Partner shall be entitled to
receive
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any interest on any Capital Contribution made by it (or its predecessors in
interest) to the Partnership.
(c) If, at any time, the General Partner determines that the
Partnership requires additional capital, the General Partner may cause the
Partnership to make a "Funds Call;" provided, however, that the Partnership
shall make no Funds Call without a Majority Vote at any time when the aggregate
amount of Funds Calls funded by the General Partner (and, if it is then a
Limited Partner, AMG) exceeds $1,000,000 (net of any principal repayments of the
loans made in Loan Calls (as hereinafter defined)). A call made pursuant to this
Section 4.1(c) may, in the General Partner's sole discretion, be either a
requirement that each of the Partners contributes additional capital to the
Partnership (a "Capital Call") or a requirement that each of the Partners loan
funds to the Partnership (a "Loan Call"). Any Capital Call or Loan Call must be
made to all Partners pro-rata in proportion to the number of Partnership Points
held by such Partners (provided, however, that for purposes of this Section 4.1,
all the Partnership Points in the Executive Retention Reserve shall be deemed to
be outstanding Partnership Points held by the Chief Executive Officer or, if he
or she is not a Limited Partner but holds his or her interest in the Partnership
through a Limited Partner, by such Limited Partner); provided, however, that the
aggregate maximum amount of Capital Calls and Loan Calls funded by the General
Partner (and if it is then a Limited Partner, AMG) shall not exceed $1,000,000
(net of any principal repayments of the loans made in Loan Calls). If the
aggregate amount of Capital Calls and Loan Calls funded by the General Partner
(and if it is then a Limited Partner, AMG) equals $1,000,000 (net of any
principal repayments of the loans made in Loan Calls), then any additional
Capital Calls and Loan Calls shall be made pro-rata among all Partners other
than the General Partner (and if it is then a Limited Partner, AMG).
(d) The General Partner shall cause the Partnership to deliver
notices setting forth the type of Funds Call ("Call Notices") to the General
Partner and Limited Partners in accordance with Section 10.1 below not less than
twenty (20) days in advance of the date on which the General Partner determines
the payment in response to such notice is due (the "Due Date"). All Capital
Calls and Loan Calls shall be paid on their Due Date.
(e) All payments of the Partners hereunder in respect of a
Capital Call or a Loan Call shall be made to the Partnership by transfer by wire
or otherwise of federal funds or other immediately available funds (or by such
other means as the Partnership may designate) by such time as the Partnership
shall designate in the applicable Call Notice on the relevant Due Date to the
Receipts Account (as hereinafter defined). If the Funds Call is a Loan Call, the
Partnership shall issue, upon receipt of funds, a promissory note to each such
Partner in an original principal amount equal to the amount paid by such
Partner, with such promissory note to be in the form attached hereto as Exhibit
E.
(f) Each Call Notice shall specify:
(i) the scheduled Due Date;
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(ii) the aggregate amount of payments to be made
on the Due Date by all Partners;
(iii) the required payment to be made by the
Partner to which the Call Notice is delivered;
(iv) the account to which such payment shall be
paid; and
(v) whether such call is a Loan Call or a
Capital Call (provided, however, that the General Partner may
cause the Partnership to change a Loan Call to a Capital Call
and a Capital Call to a Loan Call, with one (1) days prior
written notice to the Partners; provided, further, that the
General Partner may not cause the Partnership to change a Loan
Call to a Capital Call or a Capital Call to a Loan Call
without a Majority Vote at any time when the aggregate amount
of Capital Calls and Loan Calls funded by the General Partner
(and if it is then a Limited Partner, AMG) exceeds $1,000,000
(net of any principal payments of the loans made in Loan
Calls)), and a description of the use of proceeds of such
Funds Call.
(g) If a Partner fails to fund a Loan Call or a Capital
Call as required under this Section 4.1 on the Due Date then the Partnership
shall notify such Partner of such failure within two (2) days after such payment
is due (which notice may be by telephone followed by confirmation by telecopy
(receipt confirmed), overnight carrier or registered or certified mail),
provided that the failure to give such notice shall not affect in any way the
liability of such Partner to make such payment or subject the Partnership or the
General Partner to any liability hereunder or otherwise. A Partner which fails
to make such payment prior to the expiration of seven (7) days after such notice
(the "Date of Default") shall be a "Defaulting Partner," and the following
provisions (the "Default Provisions") shall apply: The obligation of a
Defaulting Partner shall bear interest at the rate of twenty percent (20%) per
annum, which interest shall compound quarterly and bear interest at the rate of
twenty percent (20%) per annum. Any distributions or other payments by the
Partnership to which the Defaulting Partner would otherwise be entitled pursuant
to the provisions of Section 4.3 hereof or otherwise (including, without
limitation, pursuant to Sections 4.4 and 4.5 hereof) shall be forfeited by such
Limited Partner to the extent of the debt of such Defaulting Partner and applied
by the Partnership to the debt of the Defaulting Partner hereunder but for all
purposes of this Partnership Agreement other than this Section 4.1 and Section
4.3, shall be treated as having been distributed to the Defaulting Partner. In
addition, any discretionary bonus or other discretionary payment (as opposed to
regular salary) to which the Employee Stockholder of such Defaulting Partner
would otherwise be entitled pursuant to the provisions of Section 3.3(b) or
otherwise, shall be forfeited by such Employee Stockholder to the extent of the
debt of such Defaulting Partner and applied by the Partnership to the debt of
the Defaulting Partner hereunder.
Any Defaulting Partner shall also pay, on demand, all costs, including
court costs and reasonable attorneys' fees, paid or incurred by the Partnership
in collecting a Funds Call from a Defaulting Partner. If the Defaulting Partner
fails to make such payments immediately after
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the demand for payment thereof, then the Default Provisions set forth above
shall apply to such amounts.
The provisions of this Section 4.1(g) are hereby expressly limited so
that in no contingency or event whatsoever shall the amount paid or agreed to be
paid to the Partnership exceed the maximum amount of interest permitted by law,
and in the event any interest hereunder were to exceed the maximum amount of
interest permitted by law, such excess interest shall be deemed a mistake and
shall either be reduced immediately and automatically to the maximum amount
permitted by law or, if required to comply with applicable law, be canceled
automatically and, if theretofore paid, be credited on the principal amount of
the obligation of the Defaulting Partner under the Funds Calls outstanding and,
to the extent such a credit is insufficient, be refunded.
SECTION 4.2 CAPITAL ACCOUNTS; ALLOCATIONS.
(a) Capital Accounts. There shall be established for each
Partner a Capital Account (a "Capital Account") which, in the case of the
General Partner, shall be in the amount set forth in Section 4.1(a) above, and
in the case of each other Partner, shall initially be equal to the Capital
Contribution of such Partner as set forth on Schedule A hereto.
(b) Adjustments to Capital Accounts. The Capital Account of
each Partner shall be adjusted in the following manner. Each Capital Account
shall be increased by such Partner's allocable share of income and gain, if any,
of the Partnership (as well as the Capital Contributions made by a Partner after
the Effective Date) and shall be decreased by such Partner's allocable share of
deductions and losses, if any, of the Partnership and by the amount of all
distributions made to such Partner. The amount of any distribution of assets
other than cash shall be deemed to be the Fair Market Value of such assets (net
of any liabilities encumbering such property that the distributee Partner is
considered to assume or take subject to). Capital Accounts shall also be
adjusted upon the issuance of additional Partnership Interests as set forth in
Section 5.6(c) and upon the redemption of Partnership Interests.
(c) Allocation of Income and Loss. Subject to Sections 4.2(d)
and 4.2(e) and Sections 4.4 and 4.5 hereof, all items of Partnership income,
deduction, gain and loss shall be allocated among the Partners' Capital
Accounts at the end of every month as follows: *** [The remainder of this
subsection has been omitted pursuant to the confidential treatment request
referenced on the cover page hereto. The omitted portion has been filed
separately with the Commission.] ***
(d) *** [This subsection has been omitted pursuant to the
confidential treatment request referenced on the cover page hereto. The omitted
portion has been filed separately with the Commission.] ***
(e) Interim Closings. In the event that during any calendar
month (or any fiscal year) there is any change of Partners or Partnership Points
(whether as a result of the admission of an Additional Limited Partner, the
redemption by the Partnership of all (or any portion of) any Limited Partner's
Partnership Points, a transfer of any Partnership Points or otherwise), the
following shall apply: (i) such transfer shall be deemed to have occurred as of
the close of business on the last day of the month in which such change
occurred, (ii) the books
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of account of the Partnership shall be closed effective as of the close of
business on the effective date of any such change as set forth in clause (i) and
such fiscal year shall thereupon be divided into two or more portions, (iii)
each item of income gain, loss, deduction shall be determined (on the closing of
the books basis) for the portion of such fiscal year ending with the date on
which the books of account of the Partnership are so closed, and (iv) each such
item for such portion of such fiscal year shall be allocated (pursuant to the
provisions of Section 4.2(c) hereof) to those persons who were Partners during
such portion of such fiscal year in accordance with their respective Partnership
Points during such period.
SECTION 4.3 DISTRIBUTIONS.
**************** [ This section (approximately 2 pages) has
been omitted pursuant to the confidential treatment request referred to on the
cover page hereto. The omitted portions have been filed separately with the
Commission.]***************
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SECTION 4.4 DISTRIBUTIONS UPON LIQUIDATION; ESTABLISHMENT OF A RESERVE
UPON LIQUIDATION. Upon the liquidation of the Partnership, after payment (or the
making of reasonable provision for the payment) of all liabilities of the
Partnership owing to creditors, the General Partner (or liquidator) shall set up
such reserves as it deems reasonably necessary for any contingent, conditional
or unmatured liabilities or other obligations of the Partnership. Such reserves
may be paid over by the General Partner (or liquidator) to a bank (or other
third party), to be held in escrow for the purpose of paying any such
contingent, conditional or unmatured liabilities or other obligations. At the
expiration of such period(s) as the General Partner (or liquidator) may deem
advisable, such reserves, if any (and any other assets available for
distribution), or a portion thereof, shall be distributed to the Partners in
accordance with their respective Capital Accounts. If any assets of the
Partnership are to be distributed in kind in connection with such liquidation,
such assets shall be distributed on the basis of their Fair Market Value net of
any liabilities encumbering such assets and, to the greatest extent possible,
shall be distributed pro-rata in accordance with the total amounts to be
distributed to each Partner. Immediately prior to the effectiveness of any such
distribution-in-kind, each item of gain and loss that would have been recognized
by the Partnership had the property being distributed been sold at Fair Market
Value shall be determined and allocated to those persons who were Partners
immediately prior to the effectiveness of such distribution in accordance with
Section 4.2(d).
SECTION 4.5 PROCEEDS FROM THE SALE OF SECURITIES; INSURANCE PROCEEDS;
CERTAIN SPECIAL ALLOCATIONS.
(a) Capital Contributions made by any Partner after the
Effective Date (other than Capital Contributions made pursuant to Section 4.1(c)
hereof, which shall be used solely for the purpose or purposes set forth in the
Call Notice), and other proceeds from the issuance of securities by the
Partnership may, in the sole discretion of the General Partner, be used for the
benefit of the Partnership (including, without limitation, the repurchase or
redemption of Partnership Interests), or, may be distributed by the Partnership,
in which case, any such proceeds shall be allocated and distributed among the
Partners in accordance with their respective Partnership Points immediately
prior to the date of such contribution; it being understood that in the case the
proceeds are a note receivable, any such distribution shall occur upon receipt
by the Partnership of any cash in respect thereof.
(b) In the event of the death of an Employee Stockholder
covered by key-man life insurance, the proceeds of such policy shall first be
used by the Partnership to fund (to the extent thereof) the Repurchase of
Partnership Interests from the Employee Stockholder or Limited Partner through
which such Employee Stockholder held his or her interest in the Partnership in
accordance with Section 3.9 hereof and, if the proceeds exceed the amounts so
required to effect such Repurchase, then the amount of such excess proceeds may,
in the sole discretion of the General Partner, be used for the benefit of the
Partnership,
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or, may be distributed by the Partnership, in which case, any such proceeds
shall be allocated and distributed among the Partners in accordance with their
respective Partnership Points immediately following the Repurchase of the
Partnership Interests from such Limited Partner.
(c) Items of Tax Depreciation (as such term is defined below)
on account of the property of the Partnership on the Effective Date, shall be
specially allocated among the Partners in accordance with the positive balances
in their Capital Accounts on the Effective Date. All items of Tax Depreciation
on account of property purchased out of Operating Cash Flow shall be allocated
as set forth in Section 4.2(c)(iv) and all items of Tax Depreciation on account
of property purchased out of Free Cash Flow shall be allocated among the
Partners in accordance with their respective numbers of Partnership Points.
(d) The items of income, deduction, gain and loss allocable
pursuant to this Partnership Agreement shall generally be determined in
accordance with the Partnership's books of account; provided, however, that in
lieu of the depreciation, amortization, and other cost recovery deductions taken
into account in keeping the Partnership's books of account, there shall be taken
into account "Tax Depreciation" as defined below. "Tax Depreciation" means, for
any allocation period, an amount equal to the depreciation, amortization, and
other cost recovery deductions allowable for Federal income tax purposes with
respect to an asset or other capitalized amount for such allocation period
(regardless of whether such depreciation, amortization, or other cost recovery
deductions arise from the common tax basis of Partnership property or the tax
basis of Partnership property attributable to a particular Partner because of a
Code Section 754 election or otherwise); provided, however, that if the book
value of an asset differs from its adjusted tax basis at the beginning of such
allocation period, Tax Depreciation for that asset shall be an amount that bears
the same ratio to such beginning book value as the Federal income tax
depreciation, amortization, or other cost recovery deduction for that asset for
such allocation period bears to such beginning adjusted tax basis; provided,
further, however, that if the adjusted tax basis of an asset at the beginning of
such allocation period is zero, Tax Depreciation for that asset shall be
determined with reference to the appropriate Federal income tax recovery period.
(e) Items of deduction on account of payments made under the ICP shall
be specially allocated to the General Partner; provided, however, that if a
Limited Partner contributes capital pursuant to a Capital Call in order to fund
payments made under the ICP, items of deduction with respect to such payment
(i.e. payments made under the ICP funded by a Capital Call) shall be specially
allocated pro-rata among the General Partner and the Limited Partners who
contributed capital in such Capital Call, in proportion to such capital
contributions.
SECTION 4.6 FEDERAL TAX ALLOCATIONS. The General Partner shall allocate
the ordinary income and losses and capital gains and losses of the Partnership
as determined for U.S. Federal income tax purposes (and each item of income,
gain, loss, deduction or credit entering into the computation thereof), as the
case may be, among the Partners for tax purposes in a manner that, to the
greatest extent possible (i) reflects the economic arrangement of the Partners
under this Agreement (determined after taking into account the allocation
provisions
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of Sections 4.2, 4.4 and 4.5 hereof, and the distributions provisions of
Sections 4.3, 4.4 and 4.5 hereof) and (ii) is consistent with the principles of
Sections 704(b) and 704(c) of the Code. Pursuant to the foregoing, the General
Partner shall allocate items of income, deduction, gain and loss for tax
purposes in the same manner as, and in proportion to, the book allocations of
corresponding items made pursuant to this Partnership Agreement, except (i) as
provided below with respect to allocations required under the principles of Code
Section 704(c), and (ii) as required by Code Section 704(b) and the Treasury
Regulations thereunder ("Required Allocations"). Any Required Allocations shall
be taken into account in computing other and subsequent tax allocations so that
the amount of tax items allocated to each Partner, to the greatest extent
possible, shall be equal to the amount of tax items that would have been
allocated to each Partner in the absence of such Required Allocations. The
Partners understand and agree that, with respect to any item of property (other
than cash) contributed (or deemed to be contributed for U.S. federal income tax
purposes) by a Partner to the capital of the Partnership, the initial tax basis
of such property in the hands of the Partnership will be the same as the tax
basis of such property in the hands of such Partner at the time so contributed.
The Partners further understand and agree that the taxable income and taxable
loss of the Partnership is to be computed for Federal income tax purposes by
reference to the initial tax basis to the Partnership of any assets and
properties contributed by the Partners (and not by reference to the fair market
value of such assets and properties at the time contributed). The Partners also
understand that, pursuant to Section 704(c) of the Code, all taxable items of
income, gain, loss and deduction with respect to such assets and properties
shall be allocated among the Partners for Federal income tax purposes so as to
take account of any difference between the initial tax basis of such assets and
properties to the Partnership and their fair market values at the time
contributed, using any method authorized by the Income Tax Regulations under
Section 704(c) and selected by the General Partner in its sole discretion,
subject to its fiduciary duties to the Partners as a whole. For purposes of
maintaining the Capital Accounts of the Partners, items of income, gain, loss
and deduction relating to any asset or property contributed to the Partnership
that are required to be allocated for tax purposes pursuant to Section 704(c) of
the Code shall not be reflected in the Capital Accounts of the Partners.
ARTICLE V - TRANSFER OF PARTNERSHIP INTERESTS OTHER THAN
BY THE GENERAL PARTNER, ADMISSION OF ADDITIONAL
PARTNERS, REDEMPTION AND WITHDRAWAL
SECTION 5.1 ASSIGNABILITY OF INTERESTS. No interest of a Limited
Partner in the Partnership may be sold, assigned, transferred, pledged,
hypothecated, gifted, exchanged, optioned or encumbered (each, a "Transfer"),
nor may any interest in any Limited Partner be Transferred, and no Transfer
shall be binding upon the Partnership or any Limited Partner unless it is
expressly permitted by this Article V and the General Partner receives an
executed copy of such assignment, which shall be in form and substance
reasonably satisfactory to the General Partner. The assignee of such interest in
the Partnership may become a substitute Limited Partner only upon the terms and
conditions set forth in Section 5.2. No Limited Partner's interest in the
Partnership or, in the case of a Limited Partner which is not an
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individual, the direct and indirect interests of a beneficial owner of such
Limited Partner, may be Transferred except:
(a) to the General Partner;
(b) to AMG pursuant to the provisions of Section 3.9, 7.1 or
7.3 hereof or pursuant to the provisions of such other agreement as may be
entered into by the Partnership in connection with the issuance of Partnership
Points;
(c) upon the death of such beneficial owner, their interests
in the Partnership or in the Limited Partner may be Transferred by will or the
laws of descent and distribution;
(d) a Limited Partner (and its beneficial owners) may Transfer
interests in the Partnership or in such Limited Partner to members of his or her
Immediate Family (or trusts for their benefit and of which the beneficial owner
is the settlor and/or trustee, provided that any such trust does not require or
permit distribution of such interests); and
(e) another Limited Partner, with the prior written consent of
the General Partner, which consent may be granted or withheld by the General
Partner in its sole discretion (provided, however, unless William J. Nutt is the
President and Chief Executive Officer of AMG, Limited Partners may, with a
Majority Vote, transfer an aggregate of up to 1.5 Partnership Points without the
consent of, but with at least fifteen (15) days prior written notice to, the
General Partner (which transfer or transfers may take place on one or more dates
and subject to such terms and conditions as may be set by a Majority Vote,
subject to a maximum number of 1.5 Partnership Points for all such transfers on
all such occasions taken together); and
(f) the stockholders of such Limited Partner, with the prior
written approval of the General Partner and subject to such Limited Partner and
such stockholders making such representations and warranties regarding the
ownership of such Limited Partner and such stockholder as the General Partner
may deem necessary or appropriate.
; provided, that in the case of (c), (d) or (f) above, (i) the transferee enters
into an agreement with the Partnership agreeing to be bound by the provisions
hereof (and the transferee enters into (A) if such transferee is not already a
party to a Non Solicitation Agreement, the relevant Non Solicitation Agreement
and (B) if the transferee is (or has an equityholder which is) an employee of
First Quadrant Limited, the Revenue Agreement) as a Limited Partner (to the
extent such Person then would hold any interest in the Partnership), and (ii)
whether or not the transferee enters into such an agreement, such Partnership
Interests, and interests in such Limited Partner, shall thereafter remain
subject to this Agreement (and, if applicable, the relevant Non Solicitation
Agreement) to the same extent they would be if held by such Limited Partner or
beneficial owner, as applicable.
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For all purposes of this Partnership Agreement, any Transfers of
Partnership Interests shall be deemed to occur as of the close of business on
the last day of the calendar month in which any such Transfer would otherwise
have occurred.
SECTION 5.2 SUBSTITUTE LIMITED PARTNERS. No transferee of interests of
a Limited Partner shall become a Partner except in accordance with this Section
5.2. The General Partner may, with a Majority Vote of the Limited Partners,
admit as a substitute Limited Partner any Person that acquires a Partnership
Interest by Transfer from another Limited Partner in accordance with the
provisions of Section 5.1. The admission of an assignee as a substitute Limited
Partner shall in all events be conditioned upon the execution of an instrument
satisfactory to the General Partner whereby such assignee becomes a party to
this Agreement as a Limited Partner. Upon the admission of a substitute Limited
Partner, the General Partner shall make the appropriate revisions to Schedule A
hereto. Notwithstanding the foregoing, upon a Transfer of Partnership Interests
to AMG in compliance with the provisions of Section 5.1(b) above, AMG shall be
admitted to the Partnership as a Limited Partner with respect to the Partnership
Interests so transferred, without the necessity for a Majority Vote.
SECTION 5.3 ADDITIONAL REQUIREMENTS. As additional conditions to the
validity of (x) any Transfer of a Limited Partner's interest in the Partnership
(or, in the case of a Limited Partner which is not an individual, the interests
of the direct and indirect beneficial owners of such Limited Partner) or (y) the
issuance of additional Partnership Interests (pursuant to Section 5.6 below),
such Transfer or issuance shall not: (i) violate the registration provisions of
the Securities Act or the securities laws of any applicable jurisdiction, (ii)
cause the Partnership to become subject to regulation as an "investment company"
under the Investment Company Act, and the rules and regulations of the SEC
thereunder, including by resulting in there being one hundred (100) or more
beneficial holders of interests in the Partnership, (iii) result in the
termination of any contract to which the Partnership is a party and which
individually or in the aggregate are material (it being understood and agreed
that any contract pursuant to which the Partnership provides Investment
Management Services is material), or (iv) result in the treatment of the
Partnership as an association taxable as a corporation or as a "publicly traded
limited partnership" for Federal income tax purposes.
The General Partner may require reasonable evidence as to the
foregoing, including, without limitation, a favorable opinion of counsel, which
expense shall be borne by the parties to such transaction (and to the extent the
Partnership is such a party, shall be paid from Operating Cash Flow).
As an additional condition to the validity of (x) any Transfer of a
Limited Partner's interest in the Partnership (or, in the case of a Limited
Partner which is not an individual, the interests of the direct and indirect
beneficial owners of such Limited Partner) or (y) the issuance of additional
Partnership Interests (pursuant to Section 5.6 below), an equal interest in the
U.K. Partnership must be so transferred or issued to the transferee or recipient
by the transferor or issuer.
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To the fullest extent permitted by law, any Transfer that violates the
conditions of this Section 5.3 shall be null and void ab initio.
SECTION 5.4 ALLOCATION OF DISTRIBUTIONS BETWEEN ASSIGNOR AND ASSIGNEE;
SUCCESSOR TO CAPITAL ACCOUNTS. Upon the Transfer of a Partnership Interest
pursuant to this Article V, distributions pursuant to Article IV shall be made
to the Person owning the Partnership Interest at the date of distribution,
unless the assignor and assignee otherwise agree and so direct the General
Partner in a written statement signed by both. In connection with a Transfer by
a Partner of Partnership Points, the assignee shall succeed to a pro-rata (based
on the percentage of such Person's Partnership Interests transferred) portion of
the assignor's Capital Account, unless the assignor and assignee otherwise agree
and so direct the General Partner in a written statement signed by both and
consented to by the General Partner.
SECTION 5.5 REDEMPTIONS AND WITHDRAWALS. No Limited Partner shall have
the right to redeem its interest in the Partnership, in whole or in part, or to
withdraw from the Partnership, except (a) upon receipt of a Majority Vote and
with the consent of the General Partner, (b) as is expressly provided for in
Section 3.9 hereof or (c) as is expressly provided for in Section 7.1 and 7.3
hereof. Upon the redemption or withdrawal, in whole or in part, by a Limited
Partner, the General Partner shall make the appropriate revisions to Schedule A
hereto.
SECTION 5.6 ISSUANCE OF ADDITIONAL PARTNERSHIP INTERESTS.
(a) Additional Limited Partners (the "Additional Limited
Partners" and each an "Additional Limited Partner") may be admitted to the
Partnership and such Additional Limited Partners may be issued Partnership
Points, upon receipt of a Majority Vote and the consent of the General Partner
and upon such terms and conditions as may be established by the General Partner
with a Majority Vote (including, without limitation, upon such Additional
Limited Partner's execution of an instrument satisfactory to the General Partner
whereby such Person becomes a party to this Agreement as a Limited Partner);
provided, however, that upon a transfer pursuant to Section 6.1(ii) hereof, the
General Partner may admit the transferee as an Additional Limited Partner
without a Majority Vote.
(b) Existing Limited Partners may be issued additional
Partnership Points (or other Partnership Interests) by the Partnership with the
consent of, and upon such terms and conditions as may be established by, the
General Partner with a Majority Vote (without including the Limited Partner to
be issued additional Partnership Points). Except as provided in the last
sentence of the definition of "Incentive Reserve" or "Executive Retention
Reserve," the General Partner may only be issued additional Partnership Points
(or other Partnership Interests) upon the receipt of a Majority Vote.
(c) Each time additional Partnership Interests are issued
(including, without limitation, additional Partnership Points), the Capital
Accounts of all the Partners shall be adjusted as follows: (i) the General
Partner shall determine the proceeds which would be realized if the Partnership
sold all its assets at such time for a price equal to the Fair Market
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Value of such assets, and (ii) the General Partner shall allocate amounts equal
to the gain or loss which would have been realized upon such a sale to the
Capital Accounts of all the Partners immediately prior to such issuance in
accordance with Section 4.2(d) hereof.
(d) In connection with the issuance of additional Partnership
Interests, such issuances, except as set forth herein and in the Options, are
not subject to the preemptive rights of any Person.
(e) Upon the issuance of additional Partnership Interests, the
General Partner shall make the appropriate revisions to Schedule A hereto.
SECTION 5.7 REPRESENTATION OF PARTNERS. The General Partner and each
Limited Partner (including each Additional Limited Partner) hereby represents
and warrants to the Partnership and each other Partner, and acknowledges, that
(a) it has such knowledge and experience in financial and business matters that
it is capable of evaluating the merits and risks of an investment in the
Partnership and making an informed investment decision with respect thereto, (b)
it is able to bear the economic and financial risk of an investment in the
Partnership for an indefinite period of time, (c) it is acquiring an interest in
the Partnership for investment only and not with a view to, or for resale in
connection with, any distribution to the public or public offering thereof, (d)
the equity interests in the Partnership have not been registered under the
securities laws of any jurisdiction and cannot be disposed of unless they are
subsequently registered and/or qualified under applicable securities laws and
the provisions of this Agreement have been complied with, and (e) the execution,
delivery and performance of this Agreement by such Partner do not require it to
obtain any consent or approval that has not been obtained and do not contravene
or result in a default under any provision of any existing law or regulation
applicable to it, any provision of its charter, by-laws or other governing
documents or any agreement or instrument to which it is a party or by which it
is bound.
ARTICLE VI - TRANSFER OF PARTNERSHIP INTEREST BY THE
GENERAL PARTNER; REDEMPTION, REMOVAL
AND WITHDRAWAL
SECTION 6.1 ASSIGNABILITY OF INTEREST. Without a Majority Vote,
neither the General Partner's interest in the Partnership nor the stock of the
General Partner may be sold or transferred; provided, however, (i) it is
understood and agreed that, in connection with the operation of the business of
AMG (including, without limitation, the financing of direct or indirect
investments in additional investment management companies), the General
Partner's interest in the Partnership and the stock of the General Partner may
be pledged or encumbered pursuant to a bona fide pledge or encumbrance and under
such circumstances, lien holders shall have and be able to exercise the rights
of secured creditors with respect to such interest, (ii) the General Partner may
sell some (but not all or substantially all) of its Partnership Interests to a
person or entity who is not a Partner but who is an Officer of the Partnership
or who becomes an Officer in connection with such issuance, or an entity wholly
owned by any such person, and (iii) the General Partner may sell some (but not
all or substantially all) of its
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Partnership Interests to existing Limited Partners. Notwithstanding anything
else set forth herein, the General Partner may, with a Majority Vote, sell all
its interests in the Partnership in a single transaction or a series of related
transactions, and, in any such case, each of the Limited Partners of the
Partnership shall be required to sell, in the same transaction or transactions,
all their interest in the Partnership; provided, that the price to be received
by all the Partners shall be allocated among the Partners as follows: (a) an
amount equal to the sum of the positive balances, if any, in positive Capital
Accounts shall be allocated among the Partners having such Capital Accounts in
proportion to such positive balances, and (b) the excess, if any, shall be
allocated among all Partners in accordance with their respective number of
Partnership Points at the time of such sale.
SECTION 6.2 RESIGNATION, REDEMPTION, AND WITHDRAWAL. To the fullest
extent permitted by law, except as set forth in the last sentence of Section
6.1, without a prior Majority Vote, the General Partner shall not have the right
to resign or withdraw from the Partnership. Without a prior Majority Vote, the
General Partner shall have no right to have all or any portion of its interest
in the Partnership redeemed. Any resigned, withdrawn or removed General Partner
shall retain its interest in the capital of the Partnership and its other
economic rights under this Agreement.
ARTICLE VII - PUT/CALL OF PARTNERSHIP INTERESTS;
REGISTRATION RIGHTS
SECTION 7.1 MANDATORY PUTS.
(a) Each Limited Partner may, subject to the terms and
conditions set forth in this Section 7.1, cause AMG to purchase portions of the
Partnership Interests held by such Limited Partner in the Partnership (a "Put").
(b) Each Limited Partner other than Lovell, Inc. may, subject
to the terms and conditions set forth in this Partnership Agreement, cause AMG
to purchase up to twelve and one-half percent (12.5%) of the Initial Partnership
Points held by such Limited Partner, on the last business day in March (each, a
"Purchase Date") on any five (5) separate occasions (but only up to an aggregate
of fifty percent (50%) of such Limited Partner's Initial Partnership Points)
starting with the last business day in March, 2001 and ending with the last
business day in March, 2011. Notwithstanding any other provisions set forth
herein, each Limited Partner may only exercise its rights under this Section
7.1(b) if the Limited Partner simultaneously causes AMG to purchase an equal
number of U.K. Partnership Points in the U.K. Partnership pursuant to the
provisions of Section 7.1(b) of the U.K. Partnership Agreement.
(c) Lovell, Inc. may, subject to the terms and conditions set
forth in this Partnership Agreement, cause AMG to purchase up to twenty percent
(20%) of the Initial Partnership Points held by Lovell, Inc., on each Purchase
Date starting with the first Purchase Date in March, 2001. Notwithstanding any
other provision set forth herein, Lovell, Inc. may
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only exercise its rights under this Section 7.1(c) if Lovell, Inc.
simultaneously causes AMG to purchase an equal number of U.K. Partnership Points
in the U.K. Partnership pursuant to the provisions of Section 7.1(c) of the U.K.
Partnership Agreement.
(d) Each Limited Partner may, subject to the terms and
conditions set forth in this Partnership Agreement, cause AMG to purchase a
number of Partnership Points as is equal to up to twelve and one-half percent
(12.5%) of the positive difference, if any, between (i) the Partnership Points
issued to such Limited Partner pursuant to the Incentive Program or upon the
exercise of any options issued pursuant thereto (each such issuance or issuance
upon the exercise of an option, an "Option Exercise") and (ii) any Partnership
Points purchased from such Limited Partner pursuant to a GP Call under Section
7.3 hereof on any five (5) separate Purchase Dates (but only up to an aggregate
of a number of Partnership Points as is equal to fifty percent (50%) of the
positive difference, if any, between (x) the Partnership Points issued in such
Option Exercise and (y) any Partnership Points purchased from such Limited
Partner pursuant to a GP Call under Section 7.3 hereof) starting on the first
Purchase Date which is at least five (5) years following the date of such
Option Exercise and ending on the first Purchase Date which is at least fifteen
(15) years following the date of such Option Exercise. Notwithstanding any
other provisions set forth herein, each Limited Partner may only exercise its
rights under this Section 7.1(d) if the Limited Partner simultaneously causes
AMG to purchase an equal number of Partnership Points in the Partnership
pursuant to the provisions of this Section 7.1(d) and U.K. Partnership Points
in the U.K. Partnership pursuant to the provisions of Section 7.1(d) of the
U.K. Partnership Agreement.
(e) If a Limited Partner desires to exercise its rights under
Section 7.1(b), 7.1(c) or 7.1(d) above, it and its Employee Stockholder shall
give AMG, each other Employee Stockholder, the General Partner and the
Partnership irrevocable written notice (a "Put Notice") on or prior to the
preceding November 30 (the "Notice Deadline") stating that it is electing to
exercise such rights and the number of Partnership Points (the "Put Partnership
Points") to be sold in the Put and whether or to what extent such Put is a Put
of Initial Partnership Points (including, without limitation, a Put by Lovell,
Inc. pursuant to Section 7.1(c) above) (the "Initial Put Partnership Points") or
Partnership Points issued pursuant to an Option Exercise (together, the "Option
Put Partnership Points"). Puts in any given calendar year for which Put Notices
are received before the Notice Deadline for that calendar year shall be done as
follows: AMG shall purchase from each Limited Partner that number of Put
Partnership Points as is equal to the sum of (i) the number of Initial Put
Partnership Points designated as such in the Put Notice, up to the maximum
number permitted by Section 7.1(b) or Section 7.1(c) above with respect to that
year and the aggregate number of Initial Partnership Points that may be Put by
the Limited Partner, and (ii) the number of Option Put Partnership Points
designated as such in the Put Notice, up to the maximum number permitted by
Section 7.1(d) above with respect to the Option Exercise and that year and the
aggregate number of Partnership Points that may be Put by the Limited Partner
with respect to the Option Exercise; provided, however, that in no event shall
the number of Partnership Points which AMG is required to purchase on any
Purchase Date pursuant to Puts under this Section 7.1 exceed Two and Four-Tenths
(2.4) Partnership Points; and, provided further, that if the number of
Partnership Points for which Put Notices are received before the Notice Deadline
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for that calendar year exceeds two and four tenths (2.4) Partnership Points,
then AMG shall purchase an aggregate of Two and Four-Tenths (2.4) Partnership
Points among all Limited Partners as follows: AMG shall purchase from each
Limited Partner that number of Partnership Points as is equal to (A) Two and
Four-Tenths (2.4) Partnership Points multiplied by (B) a fraction, the numerator
of which is the number of Partnership Points set forth in such Limited Partner's
Put Notice (up to the maximum number of Partnership Points permitted by Sections
7.1(b), 7.1(c) and 7.1(d) above with respect to that Purchase Date and the
aggregate number of Initial Put Partnership Points and Option Put Partnership
Points which may be Put by that Limited Partner on that Purchase Date) and the
denominator of which is the number of Partnership Points set forth in all the
Put Notices (with respect to each such Put Notice, up to the maximum number of
Partnership Points permitted by Sections 7.1(b), 7.1(c) and 7.1(d) above with
respect to that Purchase Date) (provided, that in the case of the purchase of a
number of Partnership Points that is less than the number of Partnership Points
set forth in a Limited Partner's Put Notice, such Limited Partner may allocate
the Partnership Points to be purchased among the Initial Put Partnership Points
and Option Put Partnership Points set forth in its Put Notice).
(f) The purchase price for a Put (the "Put Price") shall be an
amount equal to
******************************************************************************
******************************************************************************
******************************************************************************
The Put Price shall be paid by AMG (or, if AMG shall have assigned its
obligation to the Partnership pursuant to paragraph (g) below, the Partnership
in such proportions as may be determined by AMG with a Majority Vote) on the
relevant Purchase Date by certified checks to such Limited Partner, in each
case, against delivery of such documents or instruments of transfer as may
reasonably be requested by AMG or the Partnership, as applicable; provided,
however, that in the case of a Put by Lovell, Inc. under this Section 7.1, if
after giving effect to the Put, Lovell, Inc. would hold less than one and
five-tenths (1.5) Partnership Points, then the Put Price may, in AMG's sole
discretion, be paid with a promissory note in the form attached hereto as
Exhibit C, the principal of which promissory note would be paid in four (4)
installments, the first installment would be paid on the Purchase Date, and the
second, third and fourth installments would be paid twelve (12) months,
twenty-four (24) months and thirty-six (36) months, respectively, after such
Purchase Date, provided, that if Lovell, Inc. is also a Defaulting Partner, the
amount of any payment shall be reduced in the manner set forth in the last
sentence of Section 3.9(e) hereof.
(g) No purchase by AMG pursuant to this Section 7.1 (or, upon
assignment of any of AMG's obligations to the Partnership pursuant to this
paragraph (g) hereof, redemption by the Partnership) shall occur if it would
result in AMG owning, directly or indirectly, in excess of eighty percent (80%)
of the Partnership Points outstanding after giving effect to any such sale or
redemption. If some, but not all, of the Partnership Points which Employee
Stockholders have requested be purchased can be so purchased without AMG's
ownership, directly or indirectly, exceeding eighty percent (80%) of the
outstanding Partnership Points, then AMG shall purchase, or shall assign its
obligations to the
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Partnership, and the Partnership shall redeem, Partnership Points from the
Limited Partners having Put Partnership Interests in proportion to the
Partnership Points then held by such Limited Partners up to the maximum extent
that would not cause AMG to own, directly or indirectly, in excess of eighty
percent (80%) of the outstanding Partnership Points (in each case, subject to
the maximum amount set forth in Section 7.1(b), 7.1(c) and 7.1(d) hereof).
(h) AMG may, only with a Majority Vote, assign any or all of
its rights and obligations to purchase Partnership Points under this Section
7.1, in one or more instances, to the General Partner or the Partnership;
provided, however, that if AMG (with a Majority Vote) assigns any or all its
rights and obligations to purchase Partnership Points under this Section 7.1 to
the General Partner or the Partnership, then AMG shall assign the identical and
proportional rights and obligations to purchase U.K. Partnership Points under
Section 7.1 of the U.K. Partnership Agreement to the General Partner (in the
case where rights or obligations to purchase Partnership Points were assigned to
the General Partner) or the U.K. Partnership (in the case where rights or
obligations to purchase Partnership Points were assigned to the Partnership).
SECTION 7.2 ELECTION RIGHTS OF LIMITED PARTNERS TO RECEIVE AMG STOCK.
(a) If AMG does not assign to the Partnership or the General
Partner the right or obligation pursuant to Section 7.1(h) above to purchase
Partnership Interests from a Limited Partner, and AMG has, at that time,
completed a registration of shares of its common stock for sale under the
Securities Act (other than a registration on Form S-8 (or its then equivalent
form) or a registration affected solely to implement an employee benefit plan, a
transaction under Rule 145 or to which any other similar rule of the SEC under
the Securities Act is applicable or registration on a form not available for
registering securities for sale to the public) (a "Public Offering"), then such
Limited Partner may elect to cause AMG to pay up to one-half of the Put Price
(as such term is defined in Section 7.1(f) above) for the relevant Put in shares
of AMG's Common Stock, $.01 par value per share (the "AMG Stock").
(b) An election under this Section 7.2 must be made by the
Limited Partner at least sixty (60) days prior to the relevant Purchase Date, by
giving written notice to the Partnership and AMG of such election, which
election, once made, shall be irrevocable without the prior written consent of
AMG.
(c) The number of shares of AMG Stock to be issued upon
exercise of the Put shall be determined in accordance with the following
formula:
Number of Shares of AMG Stock = OS x F
---
1-F
where OS is the number of issued and outstanding shares of AMG Stock immediately
prior to the closing of the Put, and F is a fraction, the numerator of which is
the Put Price of a Put pursuant to Section 7.1(f) above, multiplied by
.75, and the denominator of which is
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an amount equal to the sum of (A) ********** of AMG's earnings before interest,
amortization and taxes for the twenty-four (24) month period ending on the last
day of the calendar year prior to the date of the closing of such Put
(determined in accordance with generally accepted accounting principles,
consistently applied) plus (B) the Put Price of a Put.
(d) If AMG completes a Public Offering, AMG shall, as soon as
reasonably practicable, provide notice thereof to each Employee Stockholder.
SECTION 7.3 GENERAL PARTNER CALL OPTION.
(a) The General Partner may, subject to the terms and
conditions set forth in this Section 7.3, purchase eight and twenty-four one
hundredths (8.24) Partnership Points from the Limited Partners (the "GP Call").
(b) The General Partner shall exercise its rights under this
Section 7.3 if ten (10) Partnership Points have been made available to the
Incentive Reserve (as such term is defined in the Incentive Program and not as
such term is defined herein) pursuant to Section 3(f) of the Incentive Program;
provided, however, that the General Partner may give the GP Call Notice (as such
term is hereinafter defined) prior to the date such a determination is made.
Simultaneously with the General Partner's exercise of its rights under this
Section 7.3, the General Partner shall exercise its rights under Section 7.3(b)
of the U.K. Partnership Agreement.
(c) If the General Partner exercises its rights under this
Section 7.3, it shall give written notice (the "GP Call Notice") to the Chief
Executive Officer and each Limited Partner stating its exercise of such rights.
Within Five (5) days after delivery of the Call Notice, the General Partner
shall allocate the GP Call among the Limited Partners in its sole discretion and
shall so indicate the allocation in a writing delivered to the Chief Executive
Officer and the Limited Partners; and, provided further, that any allocation by
the General Partner shall only be effective if an equivalent allocation is made
pursuant to Section 7.3(c) of the U.K. Partnership Agreement. The closing of a
GP Call shall take place on a date which is fifteen (15) days after the date of
the GP Call Notice.
(d) The Purchase Price for a GP Call shall be an amount equal
to (i) Four Hundred and Twenty-Eight One Thousandths (.428) of the Partnership's
cumulative Revenues from Operations for the Period beginning on the Effective
Date and ending on December 31, 2000, for each Partnership Point for which the
General Partner exercises its rights under this Section 7.3 (subject, in any
event, to any equitable adjustments which the General Partner may deem necessary
or appropriate (in its sole discretion) if there is any change in the portion of
Revenues From Operations which is Free Cash Flow or in the allocation of Free
Cash Flow under this Agreement), minus (ii) the taxes incurred (calculated as
set forth in this clause) by the General Partner in respect of such
distributions, calculated on the assumption that such distributions are not less
than one-half of the highest marginal federal, state and foreign tax rates
applicable to the General Partner and not more than the highest marginal
federal, state and foreign tax rates applicable to the General Partner (with the
taxes incurred within such
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range to be determined by the General Partner in its sole discretion), plus
(iii) an amount equal to each cash distribution described in clause (i) above,
net of any taxes attributable thereto (calculated as described in clause (ii)
above) multiplied by the Prime Rate established by Chemical Bank (or any
successor thereto) from time to time, as in effect on the date of each such cash
distribution.
SECTION 7.4 AMG CALL OPTION.
(a) AMG may, subject to the terms and conditions set forth in
this Section 7.4, purchase portions of the Partnership Interests held by the
Limited Partners in the Partnership (each a "Call"). Notwithstanding anything
else set forth herein to the contrary, the consent of the Chief Executive
Officer shall be required prior to any Call other than a Call of Partnership
Points held by the Chief Executive Officer or the Limited Partner of which the
Chief Executive Officer is the Employee Stockholder.
(b) AMG may purchase up to five percent (5%) of the Initial
Partnership Points of any of the Limited Partners on the last business day in
March (each a "Call Date") of each calendar year (but only up to an aggregate
of twenty-five percent (25%) of the Initial Partnership Points issued to such
Limited Partner) starting with the last business day in March of the calendar
year 2002. Notwithstanding any other provision set forth herein, AMG may only
exercise its rights under this Section 7.3(b) if it purchases an equal number
of Initial Partnership Points in the Partnership and Initial U.K. Partnership
Points in the U.K. Partnership.
(c) AMG may purchase a number of Partnership Points as is
equal to up to five percent (5%) of the positive difference, if any, between
(i) the Partnership Points issued in an Option Exercise and (ii) any
Partnership Points purchased from such Limited Partner pursuant to a GP Call
under Section 7.3 hereof, on a Call Date (but only up to an aggregate of a
number of Partnership Points as is equal to twenty-five percent (25%) of the
positive difference, if any, between (x) the Partnership Points issued in such
Option Exercise and (y) any Partnership Points purchased from such Limited
Partner pursuant to a GP Call under Section 7.3 hereof) starting with the first
Call Date which is at least six (6) years following the date of such Option
Exercise. Notwithstanding any other provision set forth herein, AMG may only
exercise its rights under this Section 7.4(c) if it purchases an equal number
of Partnership Points in the Partnership and U.K. Partnership Points in the
U.K. Partnership.
(d) If AMG desires to exercise its rights under Section 7.4(b)
or (c) above, it shall give irrevocable written notice (a "Call Notice") on or
prior to the preceding November 30, to each Limited Partner, First Quadrant, and
the Partnership, stating its election to exercise such rights, the Limited
Partner(s) from whom it intends to purchase Partnership Points, and the number
of Partnership Points to be purchased in the Call (the "Call Partnership
Points"). The number of Partnership Points purchased from a given Limited
Partner must be equal to the number of U.K. Partnership Points being purchased
at the same time from such Limited Partner.
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(e) The purchase price for Call Partnership Points purchased
from a Limited Partner in a Call (each a "Call Price") shall be an amount equal
to (i) **************** The Call Price shall be paid by AMG (or, if AMG shall
have assigned its rights to the Partnership pursuant to paragraph (f) below, the
Partnership in such proportions as may be determined by AMG with a Majority
Vote) on the relevant Call Date by certified checks, against delivery of such
documents or instruments of transfer as may reasonably be requested by AMG and
the Partnership, as applicable.
(f) AMG may, with a Majority Vote, assign any or all of its
rights and obligations to purchase Partnership Points under this Section 7.4, in
one or more instances, to the General Partner or the Partnership; provided,
however, that if AMG (with a Majority Vote) assigns any or all its rights and
obligations to purchase Partnership Points under this Section 7.3 to the General
Partner or the Partnership, then AMG shall assign the identical and proportional
rights and obligations to purchase U.K. Partnership Points under this Section
7.3 of the U.K. Partnership Agreement to First Quadrant (in the case where
rights or obligations to purchase Partnership Points were assigned to First
Quadrant) or the U.K. Partnership (in the case where rights or obligations to
purchase Partnership Points were assigned to the Partnership).
SECTION 7.5 REGISTRATION RIGHTS.
(a) Piggy-back Registrations. If at any time or times
following the completion of its initial public offering, AMG shall determine to
file a registration statement ("Registration Statement") (which excludes a
registration on Form S-8 (or its then equivalent form) or a registration
statement filed solely to implement an employee benefit plan, a transaction
under Rule 145 or to which any other similar rule of the SEC under the
Securities Act is applicable or registration statement on a form not available
for registering securities for sale to the public) other than on Form S-4 (or
its then equivalent form) and other than with respect to securities to be issued
solely in connection with any acquisition of any securities or assets of any
entity or business, then AMG will promptly give written notice thereof to the
Limited Partners which are holders of Registrable Securities (as hereinafter
defined) then outstanding (the "Holders"), and, subject to the terms and
conditions of this Section 7.4, will use all commercially reasonable efforts to
effect the registration under the Securities Act (a "Registration") of all
Registrable Securities which the Holders request in a writing delivered to AMG
within thirty (30) days after the notice given by AMG. AMG shall have the right
to postpone or withdraw any Registration without any obligation to any Holder.
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(b) Registrable Securities. For the purposes of this
Section 7.5, the term "Registrable Securities" shall mean any AMG Stock held by
a Limited Partner which was acquired by such Limited Partner pursuant to the
terms of Section 7.2 or Section 7.2 of the U.K. Partnership Agreement, and any
equity securities issued or issuable with respect to such AMG Stock by way of a
stock dividend or stock split or in connection with a combination of shares.
(c) Further Obligations of AMG. Whenever under the
preceding provisions of this Section 7.5, AMG is required hereunder to register
Registrable Securities, AMG agrees that it shall also do the following:
(i) use commercially reasonable efforts to
prepare diligently for filing with the SEC a Registration Statement and
such amendments and supplements to such Registration Statement and the
prospectus used in connection therewith as may be necessary for the
duration of such Registration;
(ii) use commercially reasonable efforts to
maintain the effectiveness of any Registration Statement pursuant to
which any of the Registrable Securities are being sold on a delayed or
continuous basis under Rule 415 (or any successor or similar rule)
under the Securities Act (other than a registration statement in
connection with an underwritten offering) until the earlier of (i) the
completion of the distribution of all Registrable Securities offered
pursuant thereto or (ii) ninety (90) days after the effective date of
such Registration Statement, provided that if a Suspension Period (as
defined below) has occurred during the pendency of a Registration, AMG
shall in good faith use reasonable efforts to extend the effectiveness
of such Registration so that there are ninety (90) days during which
such Registration is effective and a Suspension Period is not in
effect;
(iii) furnish to each selling Holder such copies
of each preliminary and final prospectus and such other documents as
such Holder may reasonably request to facilitate the public offering of
its Registrable Securities in accordance with customary practices;
(iv) file all reports required to be filed by it
under the Exchange Act, and the rules and regulations promulgated by
the SEC thereunder, during the period the Registration Statement is
required to remain effective hereunder; and
(v) use commercially reasonable efforts to cause
the Registrable Securities to be listed on such securities exchange or
quoted on such automated quotation system on which AMG's common shares
are then listed or quoted.
(d) Registration Expenses. All reasonable expenses
incident to AMG's performance of or compliance with this Section 7.5, including
SEC and securities exchange or National Association of Securities Dealers, Inc.
("NASD") registration and filing fees, fees and expenses of compliance with
securities or blue sky laws, printing expenses, fees and
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disbursements of counsel for AMG and its independent certified public
accountants incurred in connection with each registration hereunder (but not
including any fees or disbursements of counsel for the Holders (which shall be
borne by the Holders), or any underwriting fees, discounts or commissions
attributable to the sale of Registrable Securities (which shall be borne by each
applicable Holder) (all such included expenses being herein called "Registration
Expenses"), will be borne by AMG; provided, however, that if AMG is not selling
in such offering, then each Holder shall bear a portion of such expenses equal
to such expenses multiplied by a fraction, the numerator of which is the number
of shares sold by such Holder and the denominator of which is the total number
of shares sold in the offering.
(e) Indemnification; Contribution.
(i) Indemnification. Incident to any registration
statement referred to in this Section 7.5(e), and subject to applicable
law, AMG will indemnify each underwriter, each Holder of Registrable
Securities so registered, and each person controlling any of them
("Controlling Person") against all claims, losses, damages and
liabilities, including legal and other expenses reasonably incurred in
investigating or defending against the same, arising out of any untrue
statement of a material fact contained therein, or any omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or arising out
of any violation by AMG of the Securities Act, any other federal
securities laws, any state securities or "blue-sky" laws or any rule or
regulation thereunder in connection with such registration, except
insofar as the same may have been caused by an untrue statement or
omission based upon information furnished to AMG by or on behalf of
such underwriter, Holder or Controlling Person expressly for use
therein, and with respect to such untrue statement or omission in the
information furnished to AMG by or on behalf of such underwriter,
Holder or Controlling Person, such underwriter, Holder or Controlling
Person so providing such information to AMG (or on whose behalf such
information was so provided) will indemnify AMG, its directors and
officers, and the other underwriters, Holders and Controlling Persons
against any losses, claims, damages, expenses or liabilities to which
any of them may become subject to the same extent.
(ii) Contribution. If the indemnification provided
for in this Section 7.5(e) from the indemnifying party is unavailable
to an indemnified party hereunder in respect of any losses, claims,
damages, liabilities or expenses referred to therein, then the
indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified
party as a result of such losses, claims, damages, liabilities or
expenses in such proportion as is appropriate to reflect the relative
fault of the indemnifying party and indemnified parties in connection
with the actions which resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable
considerations. The relative fault of such indemnifying party and
indemnified parties shall be determined by reference to, among other
things, whether any action in question, including any untrue or alleged
untrue statement of a material fact, has been made by, or relates to
information supplied by,
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such indemnifying party or indemnified parties, and the parties'
relative intent, knowledge, access to information and opportunity to
correct or prevent such action. The amount paid or payable by a party
as a result of the losses, claims, damages, liabilities and expenses
referred to above shall be deemed to include any reasonable legal or
other fees or expenses reasonably incurred by such party in connection
with any investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 7.5(e) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 7.5(e)(ii), no Holder shall be
required to contribute any amount in excess of the amount by which the total
price at which the Registrable Securities of such Holder were offered to the
public exceeds the amount of any damages which such Holder has otherwise been
required to pay by reason of such untrue statement or omission. No Person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation.
If indemnification is available under this Section 7.5(e), the
indemnifying parties shall indemnify each indemnified party to the full extent
provided in Section 7.5(e)(i) without regard to the relative fault of said
indemnifying party or indemnified party or any other equitable consideration
provided for in this Section 7.5(e)(ii).
SECTION 7.6 LIMITATIONS. Notwithstanding anything herein to the
contrary, the parties agree as follows:
(a) In the event that in connection with an underwritten
public offering, the managing underwriter(s) shall in good faith impose a
limitation on the number of securities which may be included in such
Registration for marketing purposes, AMG shall not be required to register
Registrable Securities in excess of such limitation, provided that the reduction
in the number of securities which may be included in such Registration to comply
with such limitation is imposed pro rata (based either on relative number of
securities held or relative number of securities sought to be included in such
Registration) with respect to the Holders and all managers of companies
providing Investment Management Services in which AMG may invest after the date
hereof and which have so-called incidental or piggyback registration rights (it
being understood that such limitation may be imposed as to all holders of such
securities and the Holders prior to the imposition of any limitation on other
holders of AMG securities).
(b) If requested in writing by the managing underwriter(s), if
any, of any underwritten public offering of AMG Stock, each Limited Partner
agrees not to offer, sell, contract to sell or otherwise dispose of any shares
of AMG Stock except as part of such underwritten public offering within thirty
(30) days before or one hundred and eighty (180) days after the effective date
of the registration statement filed with respect to said offering.
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(c) Following the effectiveness of a Registration
(including, without limitation a Registration for sale on a delayed or
continuous basis under Rule 415 under the Securities Act), each Holder agrees
not to effect any sales of AMG Stock after they have received notice from AMG to
suspend sales as a result of the commencement any Suspension Period. Each Holder
may recommence effecting sales of AMG Stock following further notice to such
effect from AMG. For purposes hereof, a "Suspension Period" shall mean the
pendency or occurrence of an event that would make it impractical or inadvisable
(i) to cause a Registration Statement to remain in effect or (ii) to permit the
sale of AMG Stock by Holders, and shall include, without limitation, pending
negotiations relating to, or consummation of, a transaction or the pendency or
occurrence of any other event that would require additional disclosure of
material information by AMG in a registration statement.
SECTION 7.7 LIMITATION OF REGISTRATION RIGHTS. Notwithstanding
the foregoing, AMG shall not be required to effect a Registration of Registrable
Securities under this Agreement if, in the opinion of counsel for AMG, the
Holders of Registrable Securities may then sell the Registrable Securities
proposed to be sold without registration under the Securities Act.
ARTICLE VIII - DISSOLUTION AND TERMINATION.
SECTION 8.1 EVENTS OF DISSOLUTION.
(a) The Partnership shall be dissolved and its affairs
wound up:
(i) on a date designated in writing by the
General Partner;
(ii) upon the occurrence of an event of
withdrawal (as defined in the Partnership
Act) with respect to the General Partner;
(iii) upon the sale or other disposition of all
(or a substantial portion of) the
Partnership's assets;
(iv) upon the effective date of the resignation
or withdrawal of the General Partner
pursuant to Section 6.2 hereof;
(v) upon a Repurchase Closing Date;
(vi) in any event, at midnight on December 31,
2095 unless the Partnership's term is
extended pursuant to Section 2.5 hereof; or
(vii) upon the entry of a decree of judicial
dissolution under Section 17-802 of the
Partnership Act.
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(b) Dissolution of the Partnership shall be effective at the
close of business on the day on which the event occurs giving rise to the
dissolution, whereupon the Partnership shall be wound up and liquidated in an
orderly manner, as soon as reasonably practicable, but the Partnership shall not
terminate until the assets of the Partnership shall have been distributed as
provided herein. Notwithstanding the dissolution of the Partnership, prior to
the termination of the Partnership, as aforesaid, the business of the
Partnership and the affairs of the Partners, as such, shall continue to be
governed by this Agreement. The General Partner or, if there be none, a
liquidator approved by a Majority Vote, shall liquidate the assets of the
Partnership and apply and distribute the proceeds thereof as contemplated by
Section 4.4 hereof.
(c) Upon an event described in Section 8.1(a)(ii) or 8.1(a)(v)
that would otherwise result in a dissolution of the Partnership, the Partnership
shall not be dissolved if, with thirty (30) days after the event described in
either of such Sections, the holders of more than fifty percent (50%) of the
Partnership Points then outstanding (including the General Partner and including
as outstanding Partnership Points held by the General Partner any Partnership
Points in the Executive Retention Reserve or Incentive Reserve) (or such greater
percentage in interest as may be required under applicable law) in writing agree
to continue the business of the Partnership and to the selection, effective as
of the date of such event, of a successor general partner (which, to the extent
permitted by applicable law, may be the General Partner). In such event, the
Partnership shall continue until dissolved in accordance with this Section 8.
(d) Within one hundred and eighty (180) days following an
event described in Section 8.1(a)(v) that results in the dissolution of the
Partnership, the General Partner and the holders of more than fifty percent
(50%) of the Partnership Points then outstanding (including the General Partner)
(or such greater percentage of holders of Partnership Interests as may then be
required under applicable law) may elect in writing to reconstitute and continue
the business of the Partnership by forming a new limited partnership on the same
terms and provisions as are set forth in this Agreement. If such an election is
timely made, all the Limited Partners of the Partnership shall continue as
limited partners of the reconstituted partnership and the General Partner of the
Partnership shall continue as general partner of the reconstituted partnership.
Upon any such election by the holders of more than fifty percent (50%) of the
Partnership Points then outstanding (or such greater percentage of holders of
Partnership Interests as may then be required under applicable law), all holders
of Partnership Interests shall be bound thereby and shall be deemed to have
approved thereof. Upon any such election by the holders of more than fifty
percent (50%) of the Partnership Points then outstanding (or such greater
percentage of holders of Partnership Interests as may then be required under
applicable law), all necessary steps shall be taken to cancel this Agreement and
the Certificate of Limited Partnership of the Partnership and to enter into a
new partnership agreement (which is identical to this Agreement) and certificate
of limited partnership of the reconstituted partnership, and the General Partner
may for this purpose and all purposes stated in such agreement or certificate,
exercise the power of attorney granted pursuant to Section 8.1(d) below.
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(e) Each Limited Partner and each Employee Stockholder and
each other Person who accepts Partnership Interests constitutes and appoints
each of the General Partner (and any successor thereof by merger, transfer,
election or otherwise), and each of the General Partner's authorized officers
and attorneys-in-fact, with full power of substitution, as its, his or her true
and lawful agents and attorneys-in-fact, with full power and authority in its,
his or her name, place and stead to: execute, swear to, acknowledge, deliver,
file and record in the appropriate public offices all certificates and other
instruments including, at the option of the General Partner, this Agreement and
the Certificate of Limited Partnership and all amendments and restatements
thereof or any of the foregoing relating to the continuation of the Partnership
as contemplated by paragraph (c) above or the reconstituted partnership, as
contemplated by paragraph (d) above, that the General Partner deems appropriate
or necessary to exercise any powers of the General Partner or to carry out the
purposes of this Agreement and to form, qualify, or continue the existence or
qualification of the Partnership or the reconstituted partnership, as
contemplated by paragraph (c) or paragraph (d) above, as a limited partnership
in the State of Delaware and under the Delaware Act and in all jurisdictions in
which the Partnership may or may wish to conduct business or own property.
The foregoing power of attorney is hereby declared to be irrevocable
and a power coupled with an interest, and it shall survive, and shall not be
affected by, the subsequent death, incompetence, dissolution, disability,
incapacity, bankruptcy or termination of any grantor and the transfer of all or
any portion of his Partnership Interest and shall extend to such Person's heirs,
successors and assigns. Each Person who accepts Partnership Interests is deemed
to consent to be bound by any representations made by the General Partner or the
authorized officers and attorneys-in-fact thereof, acting in good faith pursuant
to such power of attorney. Each Person who accepts Partnership Interests is
deemed to consent to and waive any and all defenses that may be available to
contest, negate or disaffirm any action of the General Partner or the authorized
officers and attorneys-in-fact thereof, taken in good faith under such power of
attorney. Each Limited Partner shall execute and deliver to the General Partner
within fifteen (15) days after receipt of the General Partner's request
therefor, such further designations, powers of attorney and other instruments as
the General Partner deems necessary to effectuate this Section 8.1(e).
ARTICLE IX - RECORDS AND REPORTS
SECTION 9.1 BOOKS AND RECORDS. The Officers of the Partnership and the
General Partner shall cause the Partnership to keep complete and accurate books
of account with respect to the operations of the Partnership, prepared in
accordance with generally accepted accounting principles, using the accrual
method of accounting, consistently applied. Such books shall reflect that the
interests in the Partnership have not been registered under the Securities Act,
and that the interests may not be sold or transferred without registration under
the Securities Act or exemption therefrom and without compliance with Article V
or Article VI of this Agreement. Such books shall be maintained at the principal
office of the Partnership in Pasadena, California or at such other place as the
General Partner shall determine.
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SECTION 9.2 ACCOUNTING. The Partnership's books of account shall be
kept on the accrual method of accounting, or on such other method of accounting
as the General Partner may from time to time determine, with the advice of the
Independent Public Accountants, and shall be closed and balanced at the end of
each Partnership fiscal year. The taxable year of the Partnership shall be the
twelve months ending December 31 or such other taxable year as the General
Partner may designate, with the written advice of the Independent Public
Accountants.
SECTION 9.3 FINANCIAL REPORTS. Each Limited Partner whose Employee
Stockholder is an Officer of the Partnership, agrees on its behalf and on behalf
of such Employee Stockholder, and each Employee Stockholders agree to cause the
Partnership to furnish to the General Partner each of the following:
(a) Within twenty-five (25) days after the end of each
month and each fiscal quarter, an unaudited financial report of Partnership,
which report shall be prepared in accordance with generally accepted accounting
principles using the accrual method of accounting, consistently applied (except
that the financial report may (i) be subject to normal year-end audit
adjustments which are neither individually nor in the aggregate material and
(ii) not contain all notes thereto which may be required in accordance with
generally accepted accounting principles) and shall be certified by the most
senior financial officer of the Partnership to have been so prepared, and which
shall include the following:
(i) Statements of operations, changes in
partners' capital and cash flows for such month or quarter, together
with a cumulative income statement from the first day of the
then-current fiscal year to the last day of such month or quarter;
(ii) a balance sheet as of the last day of such
month or quarter; and
(iii) with respect to the quarterly financial
report, a detailed computation of Free Cash Flow for such quarter.
(b) Within sixty (60) days after the end of each fiscal
year of the Partnership, audited financial statements of the Partnership, which
shall include statements of operations, changes in partners' capital and cash
flows for such year and a balance sheet as of the last day thereof, each
prepared in accordance with generally accepted accounting principles, using the
accrual method of accounting, consistently applied, certified by Independent
Public Accountants satisfactory to the General Partner.
(c) Within twenty-five (25) days after the end of each
calendar quarter, the Partnership's operating budget for each of the next four
(4) fiscal quarters, in such form and containing such estimates as may be
requested by the General Partner from time to time, certified by the most senior
financial officer of the Partnership.
(d) Copies of all financial statements, reports, notices,
press releases and other documents released to the public.
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(e) As promptly as is reasonably possible following request by
the General Partner from time to time, such operations and/or performance data
as may be requested, in each case certified by the most senior financial officer
of the Partnership if such a certification is requested by the General Partner.
(f) Any other financial or other information available to the
Officers as the General Partner shall have reasonably requested on a timely
basis.
SECTION 9.4 MEETINGS.
(a) The Partnership and its Officers shall hold such regular
meetings at the Partnership's principal place of business with representatives
of the General Partner as may be reasonably requested by the General Partner
from time to time. These meetings shall be attended (either in person or by
telephone) by such of the Officers and other employees of the Partnership as may
be requested by the General Partner or any of the Officers. The Partnership will
reimburse the reasonable travel expenses of any representative of the General
Partner who attends each such meeting.
(b) At each meeting, the Officers of the Partnership shall
make such presentations regarding the Partnership and its performance,
operations and/or budgets as may be reasonably requested by the General Partner,
and each of the attendees (whether in person or by telephone) at such meeting
shall have the right to submit proposals and suggestions regarding the
Partnership, and the attendees at the meeting shall discuss and consider such
proposals and suggestions.
SECTION 9.5 TAX MATTERS.
(a) The General Partner shall cause to be prepared and filed
on or before the due date (or any extension thereof) Federal, state, local and
foreign tax or information returns required to be filed by the Partnership. The
General Partner, to the extent that Partnership funds are available, shall cause
the Partnership to pay any taxes payable by the Partnership (it being understood
that the expenses of preparation and filing of such tax returns, and the amounts
of such taxes, are to be treated as Operating Expenses of the Partnership to be
paid from Operating Cash Flow); provided that the General Partner shall not be
required to cause the Partnership to pay any tax so long as the General Partner
or the Partnership is in good faith and by appropriate legal proceedings
contesting the validity, applicability or amount thereof and such contest does
not materially endanger any right or interest of the Partnership and adequate
reserves therefor have been set aside by the Partnership.
(b) The General Partner shall be the tax matters partner for
the Partnership pursuant to Sections 6221 through 6233 of the Code.
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ARTICLE X - MISCELLANEOUS.
SECTION 10.1 NOTICES. All notices, requests, elections, consents or
demands permitted or required to be made under this Agreement shall be in
writing, signed by the Partner or Partners giving such notice, request,
election, consent or demand and shall be delivered personally or by confirmed
facsimile, or sent by registered or certified mail, or by commercial courier to
the other Partners, at their addresses set forth on the signature pages hereof
or on Schedule A hereto, or at such other addresses as may be supplied by
written notice given in conformity with the terms of this Section 10.1. The date
of any such personal or facsimile delivery or the date of delivery by an
overnight courier or the date five (5) days after the date of mailing by
registered or certified mail, as the case may be, shall be the date of such
notice.
SECTION 10.2 SUCCESSORS AND ASSIGNS. Subject to the restrictions on
transfer set forth herein, this Agreement shall be binding upon and shall inure
to the benefit of the Partners, their respective successors,
successors-in-title, heirs and assigns, and each and every
successors-in-interest to any Partners, whether such successor acquires such
interest by way of gift, purchase, foreclosure or by any other method, and each
shall hold such interest subject to all of the terms and provisions of this
Agreement.
SECTION 10.3 AMENDMENTS. No amendments may be made to this Agreement
without the prior written consent of (i) the General Partner and (ii) a Majority
Vote of the Limited Partners and, with respect to Section 3.9 hereof, AMG;
provided, however, that the General Partner shall make such amendments and
additions to Schedule A hereto as are required by the provisions hereof; and,
provided further, that the General Partner may amend this Agreement to correct
any printing, stenographic or clerical errors or omissions. Except as otherwise
provided for herein, no amendment may be made to this Agreement which materially
and adversely affects a Limited Partner in a manner different from all the other
Limited Partners, without the prior written consent of the Limited Partner which
would be so affected.
SECTION 10.4 NO PARTITION. No Partner nor any successors-in-interest to
any Partner, shall have the right while this Agreement remains in effect to have
the property of the Partnership partitioned, or to file a complaint or institute
any proceeding at law or in equity to have the property of the Partnership
partitioned, and each Partner, on behalf of himself, his successors,
representatives, heirs and assigns, hereby waives any such right. It is the
intent of the Partners that during the term of this Agreement, the rights of the
Partners and their successors-in-interest, as among themselves, shall be
governed by the terms of this Agreement, and that the right of any Partner or
successors-in-interest to assign, transfer, sell or otherwise dispose of his
interest in the Partnership shall be subject to the limitations and restrictions
of this Agreement.
SECTION 10.5 NO WAIVER. The failure of any Partner to insist upon
strict performance of a covenant hereunder or of any obligation hereunder,
irrespective of the length of time for which such failure continues, shall not
be a waiver of such Partner's right to demand strict compliance in the future.
No consent or waiver, express or implied, to or of any
52
<PAGE> 56
breach or default in the performance of any obligation hereunder, shall
constitute a consent or waiver to or of any other breach or default in the
performance of the same or any other obligation hereunder.
SECTION 10.6 DISPUTE RESOLUTION. All disputes arising in connection
with this Agreement shall be resolved by binding arbitration in accordance with
the applicable rules of the American Arbitration Association. The arbitration
shall be held in Delaware before a single arbitrator selected in accordance with
Section 12 of the American Arbitration Association Commercial Arbitration Rules
who shall have substantial business experience in the investment advisory
industry, and shall otherwise be conducted in accordance with the American
Arbitration Association Commercial Arbitration Rules.
SECTION 10.7 PRIOR AGREEMENTS SUPERSEDED. This Agreement, (including
without limitation, the schedules and exhibits hereto), supersedes the prior
understandings and agreements among the parties with respect to the subject
matter hereof.
SECTION 10.8 CAPTIONS. Titles or captions of Articles or Sections
contained in this Agreement are inserted as a matter of convenience and for
reference, and in no way define, limit, extend or describe the scope of this
Agreement or the intent of any provision hereof.
SECTION 10.9 COUNTERPARTS. This Agreement may be executed in a number
of counterparts, all of which together shall for all purposes constitute one
Agreement, binding on all the Partners notwithstanding that all Partners have
not signed the same counterpart.
SECTION 10.10 APPLICABLE LAW; JURISDICTION. This Agreement and the
rights and obligations of the parties hereunder shall be governed by and
interpreted, construed and enforced in accordance with the laws of the State of
Delaware, without applying the choice of law provisions thereof.
SECTION 10.11 SINGULAR AND PLURAL. All terms herein using the singular
shall include the plural; all terms using the plural shall include the singular;
in each case, the term shall be as appropriate to the context of each sentence.
SECTION 10.12 CREDITORS. None of the provisions of this Agreement shall
be for the benefit of or enforceable by any creditor of (i) any Partner, (ii)
any Employee Stockholder or (iii) the Partnership, other than a Partner who is
also a creditor of the Partnership.
[INTENTIONALLY LEFT BLANK]
53
<PAGE> 57
IN WITNESS WHEREOF the General Partner and the Initial Limited Partners
have executed and delivered this Amended and Restated Limited Partnership
Agreement as of the day and year first above written.
GENERAL PARTNER
Name and Signature Address
FIRST QUADRANT CORP. 800 East Colorado Blvd.
Suite 900
Pasadena, CA 91101
By:/s/ William J. Nutt
---------------------------
William J. Nutt
President
LIMITED PARTNERS
Name and Signature Address
R.D. ARNOTT CORPORATION 800 East Colorado Blvd.
Suite 900
Pasadena, CA 91101
By:/s/ Robert D. Arnott
---------------------------
Robert D. Arnott
President
CULONBOIS CORPORATION 800 East Colorado Blvd.
Suite 900
Pasadena, CA 91101
By:/s/ Curtis J. Ketterer
---------------------------
Curtis J. Ketterer
President
LUCK MONSTER CORPORATION 800 East Colorado Blvd.
Suite 900
Pasadena, CA 91101
By:/s/ Christopher G. Luck
---------------------------
Christopher G. Luck
President
<PAGE> 58
AYPWIP CORPORATION 800 East Colorado Blvd.
Suite 900
Pasadena, CA 91101
By:/s/ David J. Leinweber
---------------------------
David J. Leinweber
President
R.M. DARNELL CORPORATION 800 East Colorado Blvd.
Suite 900
Pasadena, CA 91101
By:/s/ R. Max Darnell
---------------------------
R. Max Darnell
President
T.S. MECKEL RUHESTANDS 56 Ledgeways
CORPORATION Wellesley, MA 02181
By:/s/ Timothy S. Meckel
---------------------------
Timothy S. Meckel
President
LOVELL, INC. P.O. Box 561
Featherbed Lane
Mt. Vernon, NJ 07976
By:/s/ Robert M. Lovell, Jr.
---------------------------
Robert M. Lovell, Jr.
President
WILLIAM A.R. GOODSALL 17 Old Park Lane
London W1Y 3LG
United Kingdom
/s/ William A.R. Goodsall
- ---------------------------
ROBERT H. BROWN 17 Old Park Lane
London W1Y 3LG
United Kingdom
/s/ Robert H. Brown
- ---------------------------
<PAGE> 59
ACKNOWLEDGMENT
For good and valuable consideration, the receipt of which is hereby
acknowledged, each of the undersigned hereby acknowledges the provisions of this
Agreement, agrees that he constitutes an Employee Stockholder hereunder and
agrees to fulfill all of the rights and duties of an Employee Stockholder
hereunder.
/s/ Robert D. Arnott
- ---------------------------
Robert D. Arnott
/s/ Curtis J. Ketterer
- ---------------------------
Curtis J. Ketterer
/s/ Christopher G. Luck
- ---------------------------
Christopher G. Luck
/s/ David J. Leinweber
- ---------------------------
David J. Leinweber
/s/ R. Max Darnell
- ---------------------------
R. Max Darnell
/s/ Timothy S. Meckel
- ---------------------------
Timothy S. Meckel
/s/ Robert M. Lovell, Jr.
- ---------------------------
Robert M. Lovell, Jr.
The undersigned is executing this Agreement solely to acknowledge and
agree to be bound by the provisions of Section 3.9, the relevant provisions of
Article VII, and Section 10.6 hereof.
AFFILIATED MANAGERS GROUP, INC. Address
Two International Place
By:/s/ William J. Nutt 23rd Floor
---------------------------
Name: William J. Nutt Boston, MA 02110
Title: President and
Chief Executive Officer
<PAGE> 1
EXHIBIT 10.7
PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED PURSUANT TO A
CONFIDENTIAL TREATMENT REQUEST FILED WITH THE COMMISSION. ASTERISKS (*) IDENTIFY
WHERE SUCH CONFIDENTIAL INFORMATION HAS BEEN OMITTED. THE OMITTED PORTIONS HAVE
BEEN FILED SEPARATELY WITH THE COMMISSION.
FIRST QUADRANT U.K., L.P.
LIMITED PARTNERSHIP AGREEMENT
March 28, 1996
<PAGE> 2
FIRST QUADRANT U.K., L.P.
LIMITED PARTNERSHIP AGREEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
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----
<S> <C>
ARTICLE I - DEFINITIONS.......................................................................1
Section 1.1 Definitions................................................................1
ARTICLE II - ORGANIZATION AND GENERAL PROVISIONS..............................................8
Section 2.1 Formation of Partnership...................................................8
Section 2.2 Name of the Partnership....................................................8
Section 2.3 Purposes of the Partnership................................................8
Section 2.4 Place of Business; Registered Agent........................................9
Section 2.5 Duration of the Partnership................................................9
Section 2.6 Title to Property..........................................................9
Section 2.7 Liability of Partners......................................................9
Section 2.8 Fiscal Year...............................................................10
ARTICLE III - MANAGEMENT OF THE PARTNERSHIP..................................................10
Section 3.1 Management in General.....................................................10
Section 3.2 Officers of the Partnership...............................................10
Section 3.3 Operation of the Business of the Partnership..............................11
Section 3.4 Compensation and Expenses of the Officers and Partner.....................11
Section 3.5 Other Business of the General Partner and its Affiliates..................11
Section 3.6 Limited Partners and Non Solicitation Agreements..........................12
Section 3.7 Non Solicitation and Non-Disclosure by Limited Partners and Employee
Stockholders..............................................................12
Section 3.8 Remedies Upon Breach......................................................15
Section 3.9 Repurchase Upon Termination of Employment or Bankruptcy...................15
Section 3.10 No Employment Obligation..................................................21
Section 3.11 Miscellaneous.............................................................21
Section 3.12 Exculpation; Indemnification..............................................21
ARTICLE IV - CAPITAL CONTRIBUTIONS; DISTRIBUTIONS;
CAPITAL ACCOUNTS AND ALLOCATIONS........................................................22
Section 4.1 Capital Contributions.....................................................22
Section 4.2 Capital Accounts; Allocations.............................................23
Section 4.3 Distributions.............................................................24
Section 4.4 Distributions Upon Liquidation; Establishment of a Reserve Upon
Liquidation...............................................................25
Section 4.5 Proceeds from the Sale of Securities; Insurance Proceeds; Certain
Special Allocations.......................................................26
Section 4.6 Federal Tax Allocations...................................................27
</TABLE>
(i)
<PAGE> 3
<TABLE>
<CAPTION>
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<S> <C>
ARTICLE V - TRANSFER OF PARTNERSHIP INTERESTS OTHER THAN
BY THE GENERAL PARTNER, ADMISSION OF ADDITIONAL
PARTNERS, REDEMPTION AND WITHDRAWAL.......................................................28
Section 5.1 Assignability of Interests..................................................28
Section 5.2 Substitute Limited Partners.................................................29
Section 5.3 Additional Requirements.....................................................30
Section 5.4 Allocation of Distributions Between Assignor and Assignee; Successor to
Capital Accounts............................................................30
Section 5.5 Redemptions and Withdrawals.................................................30
Section 5.6 Issuance of Additional Partnership Interests................................31
Section 5.7 Representation of Partners..................................................31
ARTICLE VI - TRANSFER OF PARTNERSHIP INTEREST BY THE
GENERAL PARTNER; REDEMPTION, REMOVAL
AND WITHDRAWAL............................................................................32
Section 6.1 Assignability of Interest...................................................32
Section 6.2 Resignation, Redemption, and Withdrawal.....................................32
ARTICLE VII - PUT/CALL OF PARTNERSHIP INTERESTS;
REGISTRATION RIGHTS.......................................................................33
Section 7.1 Mandatory Puts..............................................................33
Section 7.2 Election Rights of Limited Partners to Receive AMG Stock....................36
Section 7.3 General Partner Call Option.................................................36
Section 7.4 AMG Call Option.............................................................37
ARTICLE VIII - DISSOLUTION AND TERMINATION.....................................................39
Section 8.1 Events of Dissolution.......................................................39
ARTICLE IX - RECORDS AND REPORTS...............................................................41
Section 9.1 Books and Records...........................................................41
Section 9.2 Accounting..................................................................41
Section 9.3 Financial Reports...........................................................42
Section 9.4 [Reserved]..................................................................42
Section 9.5 Tax Matters.................................................................43
ARTICLE X - MISCELLANEOUS......................................................................43
Section 10.1 Notices.....................................................................43
Section 10.2 Successors and Assigns......................................................43
Section 10.3 Amendments..................................................................43
Section 10.4 No Partition................................................................44
Section 10.5 No Waiver...................................................................44
Section 10.6 Dispute Resolution..........................................................44
</TABLE>
(ii)
<PAGE> 4
<TABLE>
<CAPTION>
Page
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<S> <C>
Section 10.7 Prior Agreements Superseded.................................................44
Section 10.8 Captions....................................................................44
Section 10.9 Counterparts................................................................44
Section 10.10 Applicable Law; Jurisdiction................................................44
Section 10.11 Singular and Plural.........................................................45
Section 10.12 Creditors...................................................................45
EXHIBITS
Exhibit A(i) - Form of Non Solicitation/Non Disclosure Agreement for Employee
Stockholders employed by First Quadrant, L.P.
Exhibit A(ii) - Form of Non Solicitation/Non Disclosure Agreement for Employee
Stockholders employed by First Quadrant Limited
Exhibit B - Form of Promissory Note for Repurchases
SCHEDULES
Schedule A - Partnership Points and Capital Accounts
</TABLE>
(iii)
<PAGE> 5
FIRST QUADRANT U.K., L.P.
LIMITED PARTNERSHIP AGREEMENT
This Limited Partnership Agreement (the "Agreement") is made and
entered into as of March 28, 1996 (the "Effective Date"), by and among First
Quadrant Corp., a New Jersey corporation (the "General Partner"), the other
partners named on Schedule A hereto (collectively, the "Limited Partners" and
individually, a "Limited Partner"). The General Partner and the Limited Partners
are sometimes herein referred to collectively as the "Partners" and individually
as a "Partner."
FOR GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency of
which is hereby acknowledged, and in consideration of the mutual agreements
hereinafter set forth, including, but not limited to, their capital
contributions, the parties hereby agree as follows:
ARTICLE I - DEFINITIONS.
SECTION 1.1 DEFINITIONS. For purposes of this Agreement:
"Additional Limited Partner" shall have the meaning specified in
Section 5.6.
"Advisers Act" shall mean the Investment Advisers Act of 1940, as it
may be amended from time to time, and any successor to such Act.
"Affiliate" shall mean, with respect to any person or entity (herein
the "first party"), any other person or entity that directly or indirectly
controls, or is controlled by, or is under common control with, such first
party. The term "control" as used herein (including the terms "controlled by"
and "under common control with") means the possession, directly or indirectly,
of the power to (a) vote 50% or more of the outstanding voting securities of
such person or entity or (b) otherwise direct the management or policies of such
person or entity by contract or otherwise.
"Agreement" shall mean this Limited Partnership Agreement, as it may
from time to time be amended, supplemented or restated.
"AMG" shall mean Affiliated Managers Group, Inc., a Delaware
corporation.
"Capital Account" shall mean the capital account maintained by the
Partnership with respect to each Partner in accordance with the capital
accounting rules described in Section 4.2 hereof.
"Capital Contribution" shall mean, as to each Partner, the amount of
money and/or the agreed fair market value of any property (net of any
liabilities encumbering such property that
<PAGE> 6
the Partnership is considered to assume or take subject to) contributed to the
capital of the Partnership by such Partner.
"Certificate of Limited Partnership" shall mean the certificate of
limited partnership for the Partnership required under the Partnership Act, as
such Certificate may be amended or restated from time to time.
"Closing" shall have the meaning set forth in the Stock Purchase
Agreement.
"Code" or "Internal Revenue Code" shall mean the United States
Internal Revenue Code of 1986, as from time to time amended, and any successor
thereto, together with all regulations promulgated thereunder.
"Effective Date" shall have the meaning specified in the preamble of
this Agreement.
"Employee Stockholder" shall mean (i) in the case of a Limited
Partner which is not an individual, that certain officer and/or employee of the
Partnership or First Quadrant Limited (or, in the case of Lovell, Inc., Robert
M. Lovell, Jr.) who is the owner of all the issued and outstanding capital stock
of a Limited Partner, and is listed as such on Schedule A hereto, and (ii) in
the case of a Limited Partner which is an individual, such Limited Partner.
"Encumbrances" shall have the meaning ascribed thereto in the Stock
Purchase Agreement.
"Executive Retention Options" shall mean one or more of those
Executive Retention Options in the form attached as Exhibit A to the U.S.
Partnership Agreement which was issued on the date hereof to one or more
Partners.
"Executive Retention Reserve" shall mean the ten (10) Partnership
Points as are reserved for issuance pursuant to the terms of one or more
Executive Retention Options. The ten (10) Partnership Points in the Executive
Retention Reserve shall be deemed to be outstanding Partnership Points held by
the General Partner for all purposes of this Agreement (other than the
determination of "Majority Vote" as set forth herein and for determining
"Capital Calls" as set forth in Section 4.1 hereof), except for those
Partnership Points as have been issued pursuant to the Executive Retention
Options.
"Fair Market Value" shall mean the fair market value as reasonably
determined in good faith by the Board of Directors of the General Partner.
"First Quadrant Limited" shall mean First Quadrant Limited, a United
Kingdom corporation.
"For Cause" shall mean, with respect to the termination of an
Employee Stockholder's employment, with the U.S. Partnership or First Quadrant
Limited, any of the following:
(a) The Employee Stockholder has engaged in any criminal
offense which involves a violation of federal or state securities laws or
regulations, embezzlement, fraud, wrongful taking or misappropriation of
property, theft, or any other crime involving dishonesty and (i) has been
convicted (whether or not subject to appeal) or plead nolo contendre or any
similar plea to any criminal offense in connection with or relating to such
act, or (ii) as a result of or in relation to such act, an event has occurred
which would require an affirmative answer to any of the questions in Items 11A,
B, C, D, E or F (except, with respect to question 2 in each of Items 11C, D or
E, for an immaterial violation of securities laws or regulations which results
in an affirmative answer which could not reasonably be expected to have an
adverse effect on the U.S. Partnership, First Quadrant Limited or their
respective businesses) of Part I of the Partnership's Form ADV;
(b) The General Partner with a Majority Vote (excluding,
for purposes of determining such Majority Vote, the Employee Stockholder or
Limited Partner of the Employee Stockholder which is the subject of such
termination, as if the Partnership Points held by such Limited Partner were not
outstanding) has determined that the Employee Stockholder has persistently and
willfully neglected his or her duties or failed to devote substantially all of
his or her working time, energy and skills to the faithful and diligent
performance of such duties, after the U.S. Partnership and/or First Quadrant
Limited, as applicable, has given the Employee Stockholder written notice
specifying such conduct by the Employee Stockholder and giving the Employee
Stockholder a reasonable period of time (not less than 30 days), to conform his
or her conduct to such duties; or
(c) The Employee Stockholder has engaged in Prohibited
Competition Activity or violated or breached any material provision of his or
her Non Solicitation Agreement or engaged in any of the activities prohibited by
Section 3.7 hereof or Section 3.7 of the U.S. Partnership Agreement.
2
<PAGE> 7
"Free Cash Flow" shall mean, for any period, the Revenues From
Operations of the Partnership for such period.
"General Partner" shall mean First Quadrant Corp., a New Jersey
corporation, and any Person who becomes a successor or additional General
Partner as provided herein.
"Governmental Authority" shall mean any foreign, federal, state or
local court, governmental authority or regulatory body.
"Immediate Family" shall mean, with respect to any person, such
person's spouse, parents, grandparents, children, grandchildren and siblings.
"Incentive Program" shall mean the First Quadrant, L.P. and First
Quadrant U.K., L.P. Incentive Program in the form attached to the U.S.
Partnership Agreement as Exhibit B.
"Incentive Reserve" shall mean the number of Partnership Points
(initially twenty-four and fourteen one-hundredths (24.14)), as are reserved for
issuance pursuant to the terms of the Incentive Program. The twenty-four and
fourteen one-hundredths (24.14) Partnership Points in the Incentive Reserve
shall be deemed to be outstanding Partnership Points held by the General Partner
for all purposes of this Agreement, except for those Partnership Points as have
vested and have been issued pursuant to the Incentive Program.
"Independent Public Accountants" shall mean any independent
certified public accountant satisfactory to the General Partner and retained by
the Partnership.
"Initial Partners" shall mean those entities which are Partners on
the Effective Date.
"Initial Partnership Points" means, with respect to a Limited
Partner, that number of Partnership Points held by such Limited Partner in the
Partnership immediately after giving effect to the Closing.
"Initial U.S. Partnership Points" means, with respect to a Limited
Partner, that number of U.S. Partnership Points held by such Limited Partner
immediately after giving effect to the Closing.
"Investment Management Services" shall mean any services which
involve (a) the management, for a fee or other remuneration, of an investment
account or fund (or portions thereof or a group of investment accounts or
funds), or (b) the giving of advice, for a fee or other remuneration, with
respect to the investment and/or reinvestment of assets or funds (or any group
of assets or funds).
3
<PAGE> 8
"IRS" shall mean the Internal Revenue Service of the United States
Department of the Treasury.
"Limited Partner" shall mean any person or entity who is or becomes
a Limited Partner pursuant to the terms hereof.
"Majority Vote" shall mean the affirmative approval by vote or
consent of (a) the holders of the largest number and second largest number of
Vested Partnership Points (or if more than one Person holds an equal number of
Vested Partnership Points, which number is the largest or second largest number
of Vested Partnership Points, any one of such Persons) and any one other holder
of Vested Partnership Points, or (b) the holders of eighty percent (80%) of the
Vested Partnership Points then held by all Limited Partners excluding the holder
of the largest number of Vested Partnership Points (and, if more than one Person
holds an equal number of Vested Partnership Points, which number is the largest
number of Vested Partnership Points, then the holders of a majority of the
Vested Partnership Points then held by all Limited Partners) and, in the case of
either (a) or (b), excluding the General Partner and its Affiliates. If an
affirmative or negative vote is received under clause (a) above, but the holders
of eighty percent (80%) of the Vested Partnership Points determined as set forth
in clause (b) above disagree and their aggregate vote percentage exceeds that of
the aggregate vote percentage of clause (a) above, then such vote under clause
(a) shall be disregarded, otherwise, the vote under clause (b) above shall be
disregarded. For purposes of determining a "Majority Vote," the Partnership
Points in the Executive Retention Reserve shall be deemed to be outstanding
Partnership Points held by a single Limited Partner designated by the Chief
Executive Officer or, if the Chief Executive Officer fails to so designate a
Limited Partner, the General Partner.
"Non Solicitation Agreement" shall have the meaning set forth in
Section 3.6 hereof.
"Partners" shall mean the General Partner and the Limited Partners,
unless otherwise indicated.
"Partnership" shall mean the partnership organized under this
Agreement, as the same may be amended and/or restated from time to time.
"Partnership Act" shall mean the Delaware Revised Uniform Limited
Partnership Act (6 Del. C. Section 17-101 et seq.), as it may be amended from
time to time, and any successor to such Act.
"Partnership Interests" shall mean the interests (including Capital
Accounts and Partnership Points) of the Partners in the Partnership.
"Partnership Points" shall mean as of any date, with respect to a
Partner, the number of Partnership Points of such Partner as set forth on
Schedule A hereto, as amended from time to time in accordance with its terms and
the terms hereof, and as in effect on such date.
4
<PAGE> 9
"Partnership Share" shall have the meaning ascribed to such term in
the Revenue Agreement.
"Permanent Incapacity" shall mean, with respect to an Employee
Stockholder, that such Employee Stockholder is totally unable, by reason of
injury, illness or other similar cause (as determined by a licensed physician,
selected by the Employee Stockholder or his or her representative and approved
by the General Partner, which approval shall not be unreasonably withheld), to
have performed his or her substantial and material duties and responsibilities
for a period of three hundred sixty-five (365) consecutive days, which injury,
illness or similar cause (as determined by such physician) would render such
Employee Stockholder incapable of operating in a similar capacity in the future.
"Person" means any individual, partnership, corporation, limited
liability company, association, trust, joint venture, unincorporated
organization or any similar entity.
"Prohibited Competition Activity" shall mean any of the following
activities:
(a) directly or indirectly, whether as owner, part owner,
partner, director, officer, trustee, employee, agent or consultant for or on
behalf of any Person, firm, corporation or other entity other than the
Partnership or any Affiliate of the Partnership, (i) diverting or taking away
any funds or investment accounts with respect to which the Partnership or any
Affiliate of the Partnership is performing investment management or advisory
services, or (ii) soliciting any person or entity for the purpose of diverting
or taking away any such funds or investment accounts; or
(b) directly or indirectly, whether as owner, part owner,
partner, director, officer, trustee, employee, agent or consultant for or on
behalf of any Person other than the Partnership or any Affiliate of the
Partnership, performing any Investment Management Services.
"Repurchase" shall mean a purchase or repurchase of Partnership
Interests made pursuant to Section 3.9(a).
"Repurchase Closing Date" shall mean the date upon which payment is
made with respect to a Repurchase, or if payment is made in more than one
installment, the date upon which the first such installment is paid.
"Repurchased Partner" shall have the meaning specified in Section
3.9(a).
"Repurchase Price" shall have the meaning specified in Section
3.9(c).
"Retirement" shall mean, with respect to an Employee Stockholder,
the termination by such Employee Stockholder of such Employee Stockholder's
employment with the Partnership and its Affiliates: (x) after the date such
Employee Stockholder shall have been continuously employed by the Partnership or
First Quadrant Limited for a period of ten (10) years
5
<PAGE> 10
commencing with the later of the Effective Date or the date such Employee
Stockholder commenced his or her employment with the Partnership or First
Quadrant Limited, as applicable, and (y) pursuant to a written notice given to
the Partnership not less than six (6) months prior to the date of such
termination.
"Revenues From Operations" shall mean, for any period, the gross
revenues of the Partnership (except as set forth herein), determined on an
accrual basis in accordance with generally accepted accounting principles
consistently applied; provided, however, that Revenues From Operations shall be
determined without regard to (a) proceeds during such period from the sale,
exchange or other disposition of all, or a substantial portion of, the assets of
the Partnership or First Quadrant Limited, (b) revenues from the issuance by the
Partnership of additional Partnership Points, other Partnership Interests, or
other securities issued by the Partnership, and (c) payments received pursuant
to any insurance policies other than with respect to business interruption
insurance.
"Revenue Agreement" shall mean that certain Revenue Agreement of
even date herewith by and among the Partnership, the General Partner, the
Limited Partners and First Quadrant Limited.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as it may be
amended from time to time, and any successor thereto.
"Stock Purchase Agreement" shall mean that certain Stock Purchase
Agreement dated as of January 17, 1996, by and among AMG, Talegen Holdings,
Inc., a Delaware corporation ("Talegen"), the Initial Partners which are Limited
Partners, and certain other parties as set forth therein, as the same has been
amended from time to time prior to the date hereof.
"Transfer" shall have the meaning specified in Section 5.1.
"Treasury Regulations" shall mean the income tax regulations
promulgated under the Code, as such regulations may be amended from time to time
(including corresponding provisions of succeeding regulations).
"U.K. Free Cash Flow" shall mean "Free Cash Flow" as such term is
defined herein.
"U.K. Non Solicitation Agreement" shall mean "Non Solicitation
Agreement" as such term is defined herein.
"U.K. Partnership" shall mean this Partnership.
"U.K. Partnership Agreement" shall mean this Agreement.
6
<PAGE> 11
"U.K. Partnership Points" shall mean "Partnership Points" as such
term is defined herein.
"U.S. Free Cash Flow" shall mean "Free Cash Flow" as such term is
defined in the U.S. Partnership Agreement.
"U.S. Non Solicitation Agreement" shall mean a "Non Solicitation
Agreement" as such term is defined in the U.S. Partnership Agreement.
"U.S. Partnership" shall mean First Quadrant, L.P., a Delaware
limited partnership.
"U.S. Partnership Agreement" shall mean the Amended and Restated
Limited Partnership Agreement of First Quadrant, L.P., a Delaware limited
partnership, dated as of the date hereof, as the same may be amended and/or
restated from time to time after the date hereof.
"U.S. Partnership Points" shall mean "Partnership Points" as such
term is defined in the U.S. Partnership Agreement.
"Vested Partnership Points" shall mean, at any time and with respect
to any Partner, the number of Partnership Points held by such Partner which have
vested at such time, as determined pursuant to an agreement between the
Partnership and such Partner in connection with the issuance of such Partnership
Points. The number of Vested Partnership Points held by each Partner and the
vesting schedule with respect to any Partnership Points which are not vested,
shall be indicated on Schedule A hereto, which Schedule shall be updated by the
General Partner as additional Partnership Points are issued and/or vest from
time to time.
In addition to the foregoing, other capitalized terms used in this
Agreement shall have the meaning ascribed thereto in the text of this Agreement.
ARTICLE II - ORGANIZATION AND GENERAL PROVISIONS.
SECTION 2.1 FORMATION OF PARTNERSHIP. The parties hereby form this
Partnership under and pursuant to the Partnership Act and the terms of this
Agreement. The rights, duties, liabilities and obligations of the Partners, and
the administration and termination of this Partnership, shall be governed by the
Partnership Act, except as otherwise provided in this Agreement. The General
Partner is authorized to cause the Partnership to comply with all requirements
of the Partnership Act and to qualify the Partnership to do business as a
limited partnership in any jurisdiction where the General Partner shall deem it
necessary, appropriate or advisable from time to time. The General Partner is
authorized to file and/or record any other instrument(s) as may be required or
advisable to be filed and/or recorded by this Partnership in accordance with
applicable laws, rules and regulations.
7
<PAGE> 12
SECTION 2.2 NAME OF THE PARTNERSHIP. The name of the Partnership
shall be First Quadrant U.K., L.P. or such other name as the General Partner
with a Majority Vote may from time to time determine. The General Partner and/or
the Officers shall cause to be filed on behalf of the Partnership such
partnership or assumed or fictitious business name statements or certificates as
the General Partner and/or the Officers shall deem necessary, appropriate or
desirable.
SECTION 2.3 PURPOSES OF THE PARTNERSHIP. The Partnership was
organized and is continued for the following purposes:
(a) to engage in and hold interests in other Persons
(both within and outside the United States of
America) who engage in the investment advisory and
investment management businesses and any and all
activities reasonably related thereto;
(b) to make and perform all contracts and engage in all
activities and transactions and to do any and all
things necessary or advisable to carry out the
foregoing purposes; and
(c) to engage in any other act or activity which is
lawful for partnerships under the Partnership Act and
which is approved by the General Partner; provided,
however, that the General Partner will not cause a
business which is unrelated to the Partnership's
businesses to become a substantial part of the
Partnership without a prior Majority Vote.
SECTION 2.4 PLACE OF BUSINESS; REGISTERED AGENT.
(a) The principal place of business of the Partnership shall
be c/o Affiliated Managers Group, Inc., Two International Place, 23rd Floor,
Boston, MA 02110.
(b) The Partnership's resident agent for service of process
in Delaware is The Corporation Trust Company, 1209 Orange Street, Wilmington,
Delaware 19801, and its registered office in Delaware shall be in care of such
resident agent.
(c) The General Partner may, at any time and from time to
time: (i) change the location of the Partnership's principal place of business
and establish such additional place or places of business of the Partnership as
it may determine, (ii) change the Partnership's registered office in Delaware,
and (iii) change the Partnership's resident agent for service of process in
Delaware; provided, however, that the General Partner shall promptly give each
Limited Partner notice of any such change.
SECTION 2.5 DURATION OF THE PARTNERSHIP. The Partnership term shall
continue until December 31, 2095, unless extended or terminated earlier in
accordance with the provisions hereof. The Partnership's term may be extended by
the General Partner at any time and from time to time.
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SECTION 2.6 TITLE TO PROPERTY. All property owned by the
Partnership, whether real or personal, tangible or intangible, shall be deemed
to be owned by the Partnership as an entity, and no Partner, individually, shall
have any ownership of such property.
SECTION 2.7 LIABILITY OF PARTNERS; NO DEFICIT RESTORATION
OBLIGATION.
(a) The General Partner shall have such liability for the
repayment, satisfaction and discharge of the debts, liabilities and obligations
of the Partnership as is provided by the Partnership Act for the general partner
of a limited partnership.
(b) A Limited Partner which receives the return of any part
of its Capital Contribution shall be liable to the Partnership for the amount of
its Capital Contribution so returned to the extent, and only to the extent,
provided by the Partnership Act. No Limited Partner shall otherwise be liable to
the Partnership, another Partner or any third party for the repayment,
satisfaction, or discharge of the Partnership's debts, liabilities, and
obligations or otherwise have any obligation to contribute money or any other
asset to the Partnership other than payment of such Limited Partner's Capital
Contribution, and as otherwise specifically provided in this Agreement.
(c) Except as otherwise specifically set forth in this
Section 2.7 or in Section 4.3 hereof, no Limited Partner with a deficit balance
in its Capital Account shall have any obligation to restore such deficit (or
make any contribution to the capital of the Partnership, or otherwise pay any
amount, with respect to such deficit), and such deficit shall not be considered
as a debt of such Limited Partner to the Partnership or to any other Partner for
any purpose whatsoever.
SECTION 2.8 FISCAL YEAR. The fiscal year of the Partnership shall be
the calendar year unless otherwise determined by the General Partner.
ARTICLE III - MANAGEMENT OF THE PARTNERSHIP.
SECTION 3.1 MANAGEMENT IN GENERAL
(a) Subject to the provisions of this Agreement, the
management and control of the business of the Partnership shall be vested
exclusively in the General Partner, and the General Partner shall have exclusive
power and authority, in the name of and on behalf of the Partnership, to perform
all acts and do all things which, in its sole discretion, it deems necessary or
desirable to conduct the business of the Partnership. No Partner other than the
General Partner shall have the power to sign for or bind the Partnership to any
agreement or document, but the General Partner may delegate the power to sign
for or bind the Partnership to one or more Officers of the Partnership. The
General Partner shall be authorized to act, and to execute documents and
instruments alone on all material matters affecting the Partnership's business.
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(b) The General Partner shall, subject to all applicable
provisions of this Agreement, be authorized in the name of and on behalf of the
Partnership: (i) to enter into, execute, amend, supplement, acknowledge and
deliver any and all contracts, agreements, leases or other instruments for the
operation of the Partnership's business; and (ii) in general to do all things
and execute all documents necessary or appropriate to conduct the business of
the Partnership as set forth in Section 2.3 hereof, or to protect and preserve
the Partnership's assets. The General Partner may delegate any or all of the
foregoing powers to one or more of the Officers of the Partnership.
SECTION 3.2 OFFICERS OF THE PARTNERSHIP.
(a) The Officers of the Partnership shall consist of such
officers as the General Partner may determine are necessary or appropriate.
(b) No Officer of the Partnership shall be held personally
liable, by virtue of his or her status as an Officer, for any losses, debts or
obligations of the Partnership.
(c) Officers of the Partnership shall be appointed to, and
may be removed from, their offices by the General Partner acting in its sole
discretion. Any Officer of the Partnership may resign from his or her office
upon prior written notice to the Partnership and the General Partner.
(d) The Chief Executive Officer shall initially be Robert D.
Arnott and the Chief Financial Officer shall initially be Curt J. Ketterer.
SECTION 3.3 OPERATION OF THE BUSINESS OF THE PARTNERSHIP.
(a) Subject to recognizing that the General Partner has the
rights, duties and obligations set forth in Section 3.1 above, the Officers of
the Partnership are hereby given a non-exclusive delegation of authority from
the General Partner to manage the day-to-day operations, business and activities
of the Partnership.
(b) Without the prior written consent of the General
Partner, the Partnership shall incur no material expenses or obligations. The
Partnership shall not, without the prior written consent of the General Partner,
enter into any material contracts or other material agreements. Free Cash Flow
may be used to provide for and pay the business expenses of the Partnership or
encumber the assets of the Partnership to the extent specified in Section 3.3(c)
with respect to key-man life insurance and disability insurance, Section 3.4
with respect to certain extraordinary expenses and otherwise as agreed to in
writing by the General Partner (any such use being referred to herein as a "Free
Cash Flow Expenditure").
(c) The Partnership will maintain such key-man life
insurance and disability insurance policies on each Employee Stockholder as the
General Partner shall deem necessary or desirable, from time to time, and the
Employee Stockholders will use their reasonable best efforts to effectuate the
foregoing. The Partnership will receive the proceeds of the above
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<PAGE> 15
referenced insurance policies, and the Partners agree with each other and the
Partnership that the Partnership will pay the premiums on such key-man life and
disability policies, as well as any reasonable additional insurance policies
that the General Partner deems necessary, out of Free Cash Flow.
SECTION 3.4 COMPENSATION AND EXPENSES OF THE OFFICERS AND PARTNERS.
No Officer or Partner shall be entitled to any compensation on account of its
provision of services to the Partnership hereunder. The Partnership shall,
however, pay and/or reimburse the General Partner for all reasonable travel
expenses incurred by the General Partner in accordance with Section 9.4(a) as
well as any extraordinary expenses incurred by the General Partner directly in
connection with the operation of the Partnership. Without limiting the
generality of the foregoing, the General Partner's general overhead items
(including, without limitation, salaries and rent) shall not be reimbursed by
the Partnership. Stockholders, officers, directors, partners and agents of
Partners may serve as employees of the Partnership and be compensated therefor
as determined by the General Partner.
SECTION 3.5 OTHER BUSINESS OF THE GENERAL PARTNER AND ITS
AFFILIATES. The General Partner and its Affiliates may engage, independently or
with others, in other business ventures of every nature and description,
including the acquisition, creation, financing, trading in, and operation and
disposition of interests in investment managers and other businesses that may be
competitive with the Partnership's business and the business of Persons which
are Affiliates of the Partnership. Neither the Partnership nor any of the
Limited Partners shall have any right in or to any other such ventures by virtue
of this Agreement or the Partnership created hereby, nor shall any such activity
be deemed wrongful or improper by such Affiliates. The General Partner shall not
be obligated to present any opportunity to the Partnership even if such
opportunity is of such a character which, if presented to the Partnership, would
be suitable for the Partnership.
SECTION 3.6 LIMITED PARTNERS AND NON SOLICITATION AGREEMENTS. Each
Employee Stockholder and, to the extent applicable, its Limited Partner, have
provided pursuant to a Non Solicitation/Non Disclosure Agreement in form and
substance satisfactory to the General Partner which may be similar to Exhibit
A(i) hereto (and, in the case of an Employee Stockholder who is employed by
First Quadrant Limited, Exhibit (A)(ii) hereto) (the "Non Solicitation
Agreement") (and in the case of any Additional Limited Partner (as defined in
Section 5.6), it shall, prior to and as a condition precedent to, becoming a
Partner, provide by such an agreement satisfactory to the General Partner) with
the Partnership for the performance by such Employee Stockholder of the
obligations provided for on such Exhibit A(i) or Exhibit A(ii) (as applicable)
and such agreements do and shall, at all times, provide that the Partnership
shall be entitled to enforce the provisions of such agreements on its own behalf
and in the name of the Limited Partner (if the Limited Partner is not an
individual).
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SECTION 3.7 NON SOLICITATION AND NON-DISCLOSURE BY LIMITED PARTNERS
AND EMPLOYEE STOCKHOLDERS.
(a) Each Limited Partner and each Employee Stockholder
agrees, for the benefit of the Partnership and the other Partners, that such
Employee Stockholder shall not, while employed by the Partnership or any of its
Affiliates, engage in any Prohibited Competition Activity (provided that an
Employee Stockholder may engage in certain charitable activities which have been
approved by the General Partner, in its sole discretion, in a writing making
specific reference to this Section 3.7(a) or Section 3.7(a) of the U.S.
Partnership Agreement).
(b) Each Limited Partner and each Employee Stockholder
agrees, for the benefit of the Partnership and the other Partners, that such
Limited Partner and such Employee Stockholder shall not, during the period
beginning on the date such Limited Partner becomes a Limited Partner, and until
the date which is two (2) years after the termination of such Employee
Stockholder's employment with the Partnership and its Affiliates, without the
express written consent of the General Partner, directly or indirectly, whether
as owner, part-owner, shareholder, partner, director, officer, trustee,
employee, agent or consultant, or in any other capacity, on behalf of himself or
any firm, corporation or other business organization other than the Partnership
or First Quadrant Limited: (i) provide Investment Management Services to any
person or entity that is a client of the U.S. Partnership or First Quadrant
Limited (for this purpose, upon any termination of the Employee Stockholder's
employment for any reason, only the following shall be deemed a "client of the
U.S. Partnership or First Quadrant Limited": (i) clients of First Quadrant
Limited, the U.S. Partnership or its Affiliates (including its predecessor,
First Quadrant Corp.) at the date of such termination or at any time during the
six (6) months immediately preceding the date of termination, or (ii) up to
fifteen (15) additional persons or entities with whom the Partnership or First
Quadrant Limited was actively attempting to develop or regain an investment
advisory or investment management relationship (as evidenced by a contact other
than a mass mailing) which may include prior clients of the Partnership, First
Quadrant Limited or their Affiliates) (a "Prospect") with such Prospects to be
designated by the General Partner with the advice of the Officers; provided,
however, that this paragraph (A) shall not prohibit the Employee Stockholder
from providing Investment Management Services to any person or entity that is
not a client of the U.S. Partnership or First Quadrant Limited (including
Prospects) as contemplated herein, (B) shall not be applicable with respect to
any such client who is, as of the relevant date of termination, also a client of
the person or entity with which the Employee Stockholder is subsequently
employed or affiliated so long as the Employee Stockholder can demonstrate by
clear and convincing evidence that he or she has no direct or indirect
involvement with the management of such client's accounts or the provision of
advice or other services with respect thereto (it being understood and agreed
that mere participation in the refinement of an existing model (as opposed to
the creation or development of a new model or any other activities) used for
providing investment advice shall not be deemed to be direct or indirect
involvement with the management of any accounts which are managed utilizing such
model) and that he or she has refrained from contacting such clients directly or
indirectly, and (C) shall not be applicable to clients of the U.S. Partnership
or First Quadrant Limited who are
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also members of the Immediate Family of the Employee Stockholder; or (ii)
solicit or induce any employee of, or consultant to, First Quadrant Limited, the
U.S. Partnership or any of its Affiliates to terminate his or her relationship
therewith, hire any such employee or consultant, or former employee or work in
any enterprise involving investment advisory services with any employee or
consultant or former employee of First Quadrant Limited, the U.S. Partnership or
its Affiliates who was employed by or acted as consultant to First Quadrant
Limited, the Partnership or its Affiliates at any time during the twelve (12)
months immediately preceding the termination of the Employee Stockholder's
employment (excluding for all purposes of this sentence, secretaries and persons
holding other similar positions).
Notwithstanding the provisions of Section 3.7(a) and 3.7(b), any Employee
Stockholder may make passive investments in a competitive enterprise the shares
or other equity interests of which are publicly traded provided his holding
therein together with any holdings of his Affiliates, do not exceed 1% of the
outstanding shares of comparable interests in such entity at the time such
investments are made.
(c) Each Limited Partner and each Employee Stockholder
agrees that any and all presently existing investment advisory business of First
Quadrant Limited, the U.S. Partnership and its Affiliates (including its
predecessor, First Quadrant Corp.), and all business developed by First Quadrant
Limited, the U.S. Partnership and its Affiliates or any other employee of First
Quadrant Limited or the U.S. Partnership, including without limitation, all
investment advisory contracts, fees, commissions, compensation records, client
lists, agreements, and any other incident of any business developed by First
Quadrant Limited, the U.S. Partnership or its Affiliates or earned or carried on
by the Employee Stockholder for First Quadrant Limited, the U.S. Partnership or
its Affiliates and all trade names, service marks and logos under which First
Quadrant Limited, the U.S. Partnership or its Affiliates do business, and any
combinations or variations thereof and all related logos, are and shall be the
exclusive property of First Quadrant Limited, the U.S. Partnership or such
Affiliate, as applicable, for its or their sole use, and (where applicable)
shall be payable directly to First Quadrant Limited, the U.S. Partnership or
such Affiliate. Each Limited Partner and each Employee Stockholder acknowledges
that, in the course of performing services hereunder and otherwise, the Employee
Stockholder has had, and will from time to time have, access to confidential
records, data, client lists, trade secrets and similar confidential information
owned or used in the course of business by First Quadrant Limited, the U.S.
Partnership or its Affiliates. Each Limited Partner and each Employee
Stockholder agrees always to keep secret and not ever publish, divulge, furnish,
use or make accessible to anyone (otherwise than in the regular business of
First Quadrant Limited, the U.S. Partnership or any Affiliate thereof at the
Partnership's request) any knowledge or information of a confidential or
proprietary nature with respect to any trade secrets, proprietary plans,
clients, client requirements, service providers, business operations or
techniques of First Quadrant Limited, the U.S. Partnership or any Affiliate
thereof other than information which (a) is or becomes generally available to
the public other than as a result of disclosure by such Limited Partner or
Employee Stockholder in violation of this Agreement, or (b) is required by law
or government regulation to be disclosed to a court or government regulatory
body; provided, however, that prior to disclosing such information, the
applicable Limited Partner and Employee Stockholder shall
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<PAGE> 18
give the Partnership and the General Partner notice and shall use its respective
best efforts to obtain confidential treatment therefor ("Nonconfidential
Information"); provided, that the Partnership shall reimburse such Limited
Partner or Employee Stockholder for costs incurred in excess of $1,000. At the
termination of the Employee Stockholder's services to the U.S. Partnership or
First Quadrant Limited, all data, memoranda, client lists, notes, programs and
other papers, items and tangible media, and reproductions thereof relating to
the foregoing matters in the Limited Partner's or Employee Stockholder's
possession or control, shall be returned to the Partnership or the U.S.
Partnership and remain in its possession (except where the return of such items
shall be unreasonable or impractical in relation to the importance or
confidentiality of such items).
(d) Each Limited Partner and each Employee Stockholder
acknowledges that, in the course of negotiating this Restated Partnership
Agreement, the U.K. Partnership's Limited Partnership Agreement (the "U.K.
Partnership Agreement") and the Stock Purchase Agreement, the Limited Partner
and the Employee Stockholder have had and, in the course of the operation of the
Partnership, the Limited Partner and Employee Stockholder will from time to time
have, access to confidential records, data, plans, strategies, trade secrets and
similar confidential information owned or used in the course of business by the
General Partner's parent, AMG. Each Limited Partner and each Employee
Stockholder agrees, for the benefit of the Partnership and its partners, and for
the benefit of the General Partner's parent, AMG, always to keep secret and not
ever publish, divulge, furnish, use or make accessible to anyone (otherwise than
at the General Partner's request) any knowledge or information of a confidential
or proprietary nature with respect to any records, data, plans, strategies,
business operations or techniques (including, by way of example and not of
limitation, the transaction structure utilized by AMG) of AMG, the General
Partner or the Partnership other than Nonconfidential Information. At the
termination of the Employee Stockholder's service to the Partnership and First
Quadrant Limited, all data, memoranda, documents, notes and other papers, items
and tangible media, and reproductions thereof relating to the foregoing matters
in the Limited Partner's or Employee Stockholder's possession or control shall
be returned to the General Partner and remain in its possession (except where
the return of such items shall be unreasonable or impractical in relation to the
importance or confidentiality of such items).
SECTION 3.8 REMEDIES UPON BREACH.
(a) In the event that a Limited Partner or its Employee
Stockholder (i) breaches any of the provisions of Section 3.7, (ii) breaches any
of the provisions of Section 3.7 of the U.S. Partnership Agreement, or (iii)
breaches any of the provisions of the Non Solicitation Agreement to which it or
he is a party, then such Limited Partner shall forfeit its right to receive any
payment for its Partnership Interests under Section 3.9 and, with respect to
Lovell, Inc., under Section 7.1(c), and the General Partner shall have no
further obligations under any promissory note theretofore issued to such Limited
Partner (or any other Limited Partner (including upon a distribution pursuant to
Section 3.9(j)) which was a stockholder in such Limited Partner) pursuant to
Section 3.9(e) and, with respect to Lovell, Inc., under Section 7.1(f).
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(b) Each Limited Partner and each Employee Stockholder
agrees that any breach of the provisions of Section 3.7 of this Agreement,
Section 3.7 of the U.S. Partnership Agreement or of the Non Solicitation
Agreement or U.S. Non Solicitation Agreement by such Limited Partner or Employee
Stockholder could cause irreparable damage to the Partnership, First Quadrant
Limited, the U.S. Partnership, the other Partners and AMG. The Partnership, any
of the Partners and AMG shall, except as provided in this Section 3.8(b) have
the right to an injunction or other equitable relief (in addition to other legal
remedies) to prevent any violation of a Limited Partner's or Employee
Stockholder's obligations hereunder or thereunder. Notwithstanding the
foregoing, none of the Partnership, any of the Partners or AMG shall have the
right to an injunction or other equitable relief to prevent a violation of
Section 3.7(b)(i) unless: (i) the party or one of the parties against which such
relief is sought is Robert D. Arnott, R.D. Arnott Corporation, the Chief
Executive Officer of the U.S. Partnership or an entity through which a Chief
Executive Officer of the U.S. Partnership owns an interest in the Partnership,
or (ii) one of the parties seeking to obtain an injunction or other equitable
relief to prevent a violation of Section 3.7(b)(i) has obtained a Majority Vote.
SECTION 3.9 REPURCHASE UPON TERMINATION OF EMPLOYMENT OR BANKRUPTCY.
(a) In the event that the employment by the U.S. Partnership
or First Quadrant Limited of any Employee Stockholder terminates for any reason,
then: (i) if the termination of the Employee Stockholder occurred because of the
death or Permanent Incapacity of such Employee Stockholder, the Partnership
shall purchase for cash up to the extent of the cash proceeds of any key-man
life insurance policies or disability insurance policies, as applicable,
maintained by the Partnership on the life or health of such Employee
Stockholder, and (ii) in each other such case (and, in the case of the death or
Permanent Incapacity of an Employee Stockholder, to the extent the obligation
exceeds the proceeds described in clause (i) of this Section 3.9(a)), AMG shall
purchase (each a "Repurchase") all the Partnership Interests held by the Limited
Partner (or the Limited Partner of which such employee was the Employee
Stockholder, as applicable) (as indicated on Schedule A hereto) (the
"Repurchased Partner"), in each case, pursuant to the terms of this Section 3.9.
(b) The closing of the Repurchase will take place on a date
(the "Repurchase Closing Date") which is not more than ninety (90) days after
the date on which the termination of the employment by the U.S. Partnership and
First Quadrant Limited of the relevant Employee Stockholder occurred; provided,
however, that (i) if the employment by the Partnership and First Quadrant
Limited of such Employee Stockholder is terminated because of the death or
Permanent Incapacity of such Employee Stockholder, then the Repurchase Closing
Date shall be a date set by the General Partner which is as soon as reasonably
practicable after the later of (A) ninety (90) days after the death or Permanent
Incapacity, as applicable, of such Employee Stockholder or (B) ninety (90) days
after the Partnership has received the proceeds of any key-man life insurance
policy or disability insurance policy, as applicable, maintained by the
Partnership on the life or health of such Employee Stockholder. The Partnership
shall make a claim under such key-man or disability policy within thirty (30)
days of any Officer and the General Partner becoming aware of the death or
Permanent Incapacity, as applicable, of an Employee Stockholder.
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(c) The purchase price for the Repurchase (the "Repurchase
Price") shall be determined as follows:
(i) If the Employee Stockholder's employment with the
U.S. Partnership and First Quadrant Limited is terminated
because of the death, Permanent Incapacity, Retirement or if
such Employee Stockholder was terminated by the Partnership or
First Quadrant Limited on such date other than For Cause, then
the Repurchase Price shall equal (A) ************************
*************************************************************
*************************************************************
provided, however, that in the case of a Retirement, if,
within the twelve (12) months preceding the effective date of
such Employee Stockholder's Retirement, (x) two (2) other
Employee Stockholders have terminated their employment by
Retirement, or (y) one (1) other Employee Stockholder has
terminated his employment by Retirement and the Limited
Partner owned by that Employee Stockholder (or such Limited
Partner in the case of a Limited Partner which is an
individual) held at the time of such Retirement, and the
Limited Partner owned by that Employee Stockholder (or such
Limited Partner in the case of a Limited Partner which is an
individual) who is terminating his employment by Retirement
holds, a number of Vested Partnership Points as is equal to
or greater than the Median Number of Limited Partners' Vested
Partnership Points at the time any Stockholder terminated his
or her employment by Retirement during such twelve (12) month
period, then the Repurchase Price for the Partnership Points
of the Limited Partner owned by that Employee Stockholder (or
such Limited Partner in the case of a Limited Partner which
is an individual) who is terminating his employment by
Retirement shall be determined pursuant to paragraph (ii)
below. For purposes of this Section 3.9(c)(i), the term
Median Number of Limited Partners' Vested Partnership Points
shall mean that number of Vested Partnership Points as is
equal to the median number of Vested Partnership Points then
held by the Limited Partners (e.g., if there are five Limited
Partners with 5, 2, 2, 2 and 1 Vested Partnership Points, the
"median number" of Vested Partnership Points is 2 for all
purposes hereof).
(ii) In all other cases, (including, without
limitation, the resignation of an Employee Stockholder or the
termination of such Employee Stockholder For Cause) then the
Repurchase Price shall equal (A) ****************[The
remainder of this subsection has been omitted pursuant to the
confidential treatment request referred to on the cover page
hereto. The omitted portions have been filed separately with
the Commission.]***************
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If a Repurchase Price must be determined prior to twenty-four (24)
months after the Effective Date, then the amount of the Partnership's Free Cash
Flow for the portion of the relevant twenty-four (24) month period before the
Effective Date shall be included as zero ($0.00).
Notwithstanding anything else set forth herein to the contrary, if a
Limited Partner fails to comply with the provisions of Section 3.9(j) hereof,
AMG: (i) shall have no obligation to Repurchase Partnership Points from such
Limited Partner, and (ii) may, at any time, Repurchase Partnership Points from
such Limited Partner for a Repurchase Price equal to the lesser of (x) the
amount determined under Section 3.9(c)(ii) or (y) the Capital Account of such
Repurchased Partner.
(d) The rights of AMG, the General Partner, the Partnership
and their assignees hereunder are in addition to and shall not affect any other
rights which the Partnership or its assigns may otherwise have to repurchase
Partnership Interests (including, without limitation, pursuant to any agreement
entered into by an Additional Limited Partner which provides for the vesting of
Partnership Points).
(e) On the Repurchase Closing Date, AMG or the Partnership
shall pay to the Repurchased Partner the Repurchase Price for the Partnership
Interests repurchased in the manner set forth in this Section 3.9, and upon such
payment the Repurchased Partner shall cease to hold any Partnership Interests
repurchased, and such Repurchased Partner shall be deemed to have withdrawn from
the Partnership and shall cease to be a Partner of the Partnership and shall no
longer have any rights hereunder; provided, however, that the provisions of this
Article III shall continue as set forth in Section 3.11 below. On the Repurchase
Closing Date, the Repurchased Partner, the Partnership and AMG shall execute an
agreement reasonably acceptable to the General Partner in which the Repurchased
Partner represents and warrants that it has sole record and beneficial title to
the Repurchased Interest to AMG (or its assignee), free and clear of any
Encumbrances. Payment of the Repurchase Price shall be made on the Repurchase
Closing Date as follows: (a) in the case of termination of employment because of
death (to the extent of the collected proceeds of any key-man life insurance
policies maintained by the Partnership on the life of such Employee
Stockholder), by wire-transfer of immediately available funds to an account
designated by the Repurchased
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Partner at least three (3) business days prior to the Repurchase Closing Date,
and (b) in the case of any other termination of employment (and including a
termination of employment because of death to the extent the obligation exceeds
the proceeds of any key-man life insurance policies) with a promissory note in
the form attached hereto as Exhibit B, the principal of which promissory note
would be paid in four (4) equal (except as contemplated by this Section 3.9(e)
or Section 3.9(f)) installments, the first installment would be paid (A) in the
case of a termination because of death or a termination by the U.S. Partnership
or First Quadrant Limited other than For Cause, on the Repurchase Date, and (B)
in the case of any other termination, on the later to occur of (x) the
Repurchase Date or (y) the date which is the first business day after the fifth
anniversary of the Effective Date, and the second, third and fourth installments
would be paid fourteen (14) months, twenty-six (26) months and thirty-eight (38)
months, respectively, after such date.
(f) If an Employee Stockholder's employment with the U.S.
Partnership or First Quadrant Limited is terminated because of the Retirement of
such Employee Stockholder prior to March 28, 2011, then the amounts of the
second, third and fourth installments of the promissory note set forth in
Section 3.9(e) above shall equal the lesser of (i) twenty-five percent (25%) of
the Repurchase Price (determined as set forth in Section 3.9(c) hereof) on the
Repurchase Closing Date, or (ii) twenty-five percent (25%) of the Repurchase
Price, determined as if the Repurchase Closing Date were taking place on the
second, third or fourth anniversary of the Repurchase Closing Date, respectively
(in each case, together with interest computed on the principal amount of such
promissory note (determined as set forth in this Section 3.9(f)) from the date
of issuance of such promissory note through the date of payment of such
installment as set forth on Exhibit B). At least forty-five (45) days prior to
the date an installment to which this Section 3.9(f) applies would be paid, the
General Partner shall cause the Partnership to certify to the Repurchased
Partner who is to receive such installment, in writing, a calculation setting
forth the amount of such installment based on clauses (i) and (ii) in the
preceding sentence. Each Repurchased Partner to whom this Section 3.9(f)
applies, may defer receipt of an installment on one (1) occasion, by written
notice received by the Partnership and the General Partner not less than fifteen
(15) days prior to the date an installment is due to be paid. If a Repurchased
Partner defers an installment, the due date of each remaining installment of the
promissory note issued to such Repurchased Partner pursuant to Section 3.9(e)
above shall be extended by twelve (12) months.
(g) If AMG should fail to pay an installment on a promissory
note issued to a Repurchased Partner under paragraph (e) above, within thirty
(30) business days after the date such payment is due, then the Repurchased
Partner may, after complying with the provisions of the second paragraph of this
Section 3.9(g), repurchase the Subject Partnership Points by forgiving any
remaining installments on the promissory note issued pursuant to Section 3.9(e)
above and returning such promissory note to AMG marked "canceled and paid in
full." For purposes of this Section 3.9(g), the term "Subject Partnership
Points" shall mean in the case of any failure by AMG to pay an installment on a
promissory note: (i) if only the first installment in connection with such
Repurchase has been paid, seventy-five percent (75%) of the Partnership Points
purchased from the Repurchased Partner in the Repurchase, (ii) if the first and
second installments in connection with such Repurchase have been paid, fifty
percent
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(50%) of the Partnership Points purchased from the Repurchased Partner in the
Repurchase, and (iii) if the first three installments in connection with such
Repurchase have been paid, twenty-five percent (25%) of the Partnership Points
purchased from the Repurchased Partner in the Repurchase.
In order to exercise its rights under this Section 3.9(g), a
Repurchased Partner shall be required to give not less than fifteen (15) days
prior written notice to AMG and, if such Repurchased Partner is aware that AMG
has pledged its interest in the Partnership, to the beneficiary of such pledge.
Notwithstanding the foregoing, if AMG has pledged its interest in the
Partnership, the beneficiary of such pledge may either (x) fulfill AMG's
obligation (or cause AMG to fulfill its obligation) to pay the installment on a
promissory note which gave rise to such Repurchased Partner becoming entitled to
exercise its rights under this Section 3.9(g), whereupon such failure shall be
deemed to have been cured and such Repurchased Partner shall no longer be
entitled to exercise its rights under this Section 3.9(g) unless and until AMG
shall fail to pay another installment on a promissory note held by such
Repurchased Partner, whereupon this Section 3.9(g) shall only apply with respect
to such later failure, or (y) pay all remaining amounts due to such Repurchased
Partner under such promissory note, whereupon such Repurchased Partner shall
return the promissory note marked "canceled and paid in full" and shall have no
further rights hereunder.
If a Repurchased Partner has exercised its rights under this Section
3.9(g) and repurchased any Subject Partnership Points, either AMG or the
Partnership may, at their respective options and at any time, repurchase or
redeem (as applicable) such Subject Partnership Points for a payment, in cash,
equal to the installments which were outstanding under the promissory note
issued under Section 3.9(e) and upon which AMG defaulted, at the time of such
default.
(h) AMG may, with a Majority Vote (excluding, for purposes
of determining such Majority Vote, the Limited Partner whose interest is being
repurchased), assign any or all of its rights and obligations under this Section
3.9, in one or more instances, to the General Partner or the Partnership;
provided, that the foregoing limitation shall have no effect on the
Partnership's obligation set forth in Section 3.9(a)(i) regarding the use of the
proceeds of a key-man life or disability insurance policy.
(i) In the event that a Limited Partner or Employee
Stockholder has filed a petition under the United States Bankruptcy Code, or
sixty (60) days after the filing by another person against such Limited Partner
or Employee Stockholder of a petition under the United States Bankruptcy Code
which petition is not dismissed, or if such Limited Partner has ceased to carry
on a business because of a voluntary liquidation (such date of filing, sixtieth
day or effective date of liquidation, the "Bankruptcy Event"), then the General
Partner shall purchase all the Partnership Interests held by such Limited
Partner (including the Limited Partner through which such Employee Stockholder
holds its interest in the Partnership) pursuant to the terms of this Section 3.9
as if such Limited Partner was a Repurchased Partner with the purchase price
determined pursuant to Section 3.9(c)(ii) and the date of the closing to be
determined by the General Partner in its sole discretion.
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(j) In the event that the employment by First Quadrant
Limited or the U.S. Partnership of any Employee Stockholder which is not a
Limited Partner terminates for any reason other than the death of such Employee
Stockholder, then the Limited Partner of which such Person is the Employee
Stockholder (the "Distributing Partner") shall, at the request of the General
Partner (in a writing making reference to this paragraph (j) and Section 5.1(f)
hereof), distribute up to twenty-five percent (25%) of the Partnership Points
held by such Limited Partner to the stockholders of such Limited Partner after
such Limited Partner and each such stockholder has complied with the provisions
of Section 5.1 hereof, whereupon each such stockholder shall become a
Repurchased Partner for purposes of this Section 3.9, and all the interests of
such Repurchased Partners shall be Repurchased on the same Repurchase Closing
Date determined in accordance with Section 3.9(b), and upon such payment each
such Repurchased Partner shall cease to hold any Partnership Interests, each
such Repurchased Partner shall be deemed to have withdrawn from the Partnership,
shall cease to be a Partner of the Partnership, and shall no longer have any
rights hereunder. In connection with the Repurchase from each such Repurchased
Partner, such Repurchased Partner shall execute a bill of sale in form and
substance reasonably satisfactory to AMG. In connection with any Repurchase
pursuant to this Section 3.9(j), and notwithstanding the provisions of Sections
3.9(e) to the contrary, the payment of the Repurchase Price to the stockholder
and the Distributing Partner shall be made as follows: the payment of the
Repurchase Price to the stockholder shall be made entirely in cash on the
Repurchase Date, the first installment of the promissory note to be issued to
the Limited Partner of which such Person is a stockholder shall be reduced by
the amount of such cash payment, and the dollar amount of such reduction shall
be added one-third (1/3) to each of the second, third and fourth installments of
the promissory note to be issued to the Limited Partner of which such Person is
or was a stockholder.
SECTION 3.10 NO EMPLOYMENT OBLIGATION. Each Limited Partner and each
Employee Stockholder acknowledges that neither this Agreement nor the provisions
of the Non Solicitation Agreement creates an obligation on the part of the U.S.
Partnership or First Quadrant Limited to continue the employment of an Employee
Stockholder with the Partnership or First Quadrant Limited.
SECTION 3.11 MISCELLANEOUS. Each Limited Partner and each Employee
Stockholder agrees that the enforcement of the provisions of Sections 3.6, 3.7,
3.8, 3.9, and 3.10 and the provisions of the Non Solicitation Agreements are
necessary to ensure the protection and continuity of the business, goodwill and
confidential business information of the U.S. Partnership, the Partnership and
First Quadrant Limited for the benefit of each of the Partners. Each Limited
Partner and each Employee Stockholder agrees that, due to the proprietary nature
of the U.S. Partnership's business and the businesses of First Quadrant Limited,
the restrictions set forth in Section 3.7 hereof and in the Non Solicitation
Agreements are reasonable as to duration and scope. Each Limited Partner and
Employee Stockholder acknowledges that the obligations and rights under Sections
3.6, 3.7, 3.8, 3.9 and 3.11 shall survive the termination of the employment of
an Employee Stockholder with the U.S. Partnership and First Quadrant Limited
and/or the withdrawal or removal of a Limited Partner from the Partnership,
regardless of the manner of such termination in accordance with the provisions
hereof and of the relevant Non Solicitation Agreement. Moreover, each Partner
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agrees that the remedies provided herein, including the waiver of a right to
receive certain payments hereunder, is reasonably related to the anticipated
loss that the Partnership and the Partners (including, without limitation, the
General Partner or AMG which would be purchasing Partnership Interests from the
Limited Partners) would suffer upon a breach of such provisions. Each Partner
confirms his understanding and agreement that the provisions of Sections 3.6,
3.7, 3.8, 3.9 and 3.11 have been adopted in conformance with Section 16602 of
the California Business and Professional Code. Except as agreed to by the
General Partner, in writing, no Employee Stockholder or Limited Partner shall
enter into any agreement or arrangement which is inconsistent with the terms and
provisions hereof.
SECTION 3.12 EXCULPATION; INDEMNIFICATION.
(a) No Partner nor any of their officers, directors,
employees, stockholders or Affiliates, nor any of the Officers (each herein
referred to as an "Indemnified Party") shall have any liability to the
Partnership or to any Partner for any loss suffered by the Partnership (a
"Partnership Loss") which arises out of any action or inaction of such
Indemnified Party in its capacity as any of the foregoing; provided, however,
that such course of conduct did not constitute fraud, gross negligence, willful
misconduct or a material breach of this Agreement, the Stock Purchase Agreement
or, in the case of each Employee Stockholder, the Non Solicitation Agreement of
such Employee Stockholder or the breach of any of the foregoing by the Limited
Partner of which he or she is an Employee Stockholder. Each such Indemnified
Party shall be indemnified to the fullest extent permitted by law by the
Partnership against any losses, judgments, liabilities, expenses and amounts
paid in settlement of any claims sustained by any of them in their capacity as
an Indemnified Party in connection with the business or operations of the
Partnership, or the exercise and performance of any Partner's or Officer's
powers or duties in accordance with the terms of this Agreement; provided the
same was not the result of fraud, gross negligence, willful misconduct, or a
material breach of this Agreement, the Stock Purchase Agreement or, in the case
of each Employee Stockholder, the Non Solicitation Agreement of such Employee
Stockholder or the breach of any of the foregoing by the Limited Partner of
which he or she is an Employee Stockholder. The indemnification authorized by
this Section 3.12 shall include the payment of reasonable attorneys' fees and
other reasonable expenses incurred in settling or defending any claims,
threatened actions or finally adjudicated legal proceedings. Prior to any final
disposition of any claim or proceeding with respect to which an Indemnified
Party may be entitled to indemnification hereunder, the Partnership shall pay to
such Indemnified Party, as the case may be, in advance of such final
disposition, an amount equal to all reasonable out-of-pocket expenses of said
Indemnified Party as incurred in defense of said claim or proceeding; provided
that such advance payments shall be made only upon the Partnership's receipt of
a written undertaking of said Indemnified Party to repay the Partnership the
amount so advanced if it shall be finally determined that said Indemnified Party
was not entitled to indemnification hereunder.
(b) The right of indemnification hereby provided shall not
be exclusive of, and shall not affect, any other rights to which an Indemnified
Party may be entitled. Nothing
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contained in this Section 3.12 shall limit any lawful rights to indemnification
existing independently of this Section 3.12.
(c) The indemnification rights provided by this Section 3.12
shall also inure to the benefit of the heirs, executors, administrators,
successors and assigns of an Indemnified Party and any officers, directors,
partners, shareholders, employees and Affiliates of such Indemnified Party (and
any former officer, director, partner, shareholder or employee of such
Indemnified Party, if the Partnership Loss was incurred while such person was an
officer, director, partner, shareholder or employee of such Indemnified Party).
The General Partner may extend the indemnification called for by Section 3.12(a)
to non-employee agents of the Partnership, the General Partner or its
Affiliates.
ARTICLE IV - CAPITAL CONTRIBUTIONS; DISTRIBUTIONS;
CAPITAL ACCOUNTS AND ALLOCATIONS
SECTION 4.1 CAPITAL CONTRIBUTIONS.
(a) Simultaneously with the effectiveness of this Agreement,
the General Partner is contributing to the Partnership certain of its assets,
properties, rights, powers and privileges and the Partners agree that such
Capital Contribution has a value of $169,468.00. Except as may be agreed to in
connection with the issuance of additional Partnership Points, as specifically
set forth herein, and as may be required under applicable law, the Partners
shall not be required to make any further contributions to the Partnership. No
Partner shall make any contribution to the Partnership without the prior consent
of the General Partner.
(b) No Partner shall have the right to withdraw any part of
the capital it (or its predecessors in interest) contributed to the Partnership
until the termination, dissolution and winding up of all the Partnership, except
as distributions pursuant to this Article IV may represent returns of capital,
in whole or in part. No Partner shall be entitled to receive any interest on any
Capital Contribution made by it (or its predecessors in interest) to the
Partnership.
SECTION 4.2 CAPITAL ACCOUNTS; ALLOCATIONS.
(a) Capital Accounts. There shall be established for each
Partner a Capital Account (a "Capital Account") which, in the case of the
General Partner, shall be in the amount set forth in Section 4.1(a) above, and
in the case of each other Partner, shall initially be equal to the Capital
Contribution of such Partner as set forth on Schedule A hereto.
(b) Adjustments to Capital Accounts. The Capital Account of
each Partner shall be adjusted in the following manner. Each Capital Account
shall be increased by such Partner's allocable share of income and gain, if any,
of the Partnership (as well as the Capital Contributions made by a Partner after
the Effective Date) and shall be decreased by such Partner's allocable share of
deductions and losses, if any, of the Partnership and by the amount
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of all distributions made to such Partner. The amount of any distribution of
assets other than cash shall be deemed to be the Fair Market Value of such
assets (net of any liabilities encumbering such property that the distributee
Partner is considered to assume or take subject to). Capital Accounts shall also
be adjusted upon the issuance of additional Partnership Interests as set forth
in Section 5.6(c) and upon the redemption of Partnership Interests.
(c) Allocation of Income and Loss. Subject to Sections
4.2(d) and 4.2(e) and Sections 4.4 and 4.5 hereof, all items of Partnership
income, deduction, gain and loss shall be allocated among the Partners' Capital
Accounts at the end of every month as follows: *** [The remainder of this
subsection has been omitted pursuant to the confidential treatment request
referenced on the cover page hereto. The omitted portion has been filed
separately with the Commission.] ***
(d) *** [This subsection has been omitted pursuant to the
confidential treatment request referenced on the cover page hereto. The omitted
portion has been filed separately with the Commission.] ***
(e) Interim Closings. In the event that during any calendar
month (or any fiscal year) there is any change of Partners or Partnership Points
(whether as a result of the admission of an Additional Limited Partner, the
redemption by the Partnership of all (or any portion of) any Limited Partner's
Partnership Points, a transfer of any Partnership Points or otherwise), the
following shall apply: (i) such transfer shall be deemed to have occurred as of
the close of business on the last day of the month in which such change
occurred, (ii) the books of account of the Partnership shall be closed effective
as of the close of business on the effective date of any such change as set
forth in clause (i) and such fiscal year shall thereupon be divided into two or
more portions, (iii) each item of income gain, loss, deduction shall be
determined (on the closing of the books basis) for the portion of such fiscal
year ending with the date on which the books of account of the Partnership are
so closed, and (iv) each such item for such portion of such fiscal year shall be
allocated (pursuant to the provisions of Section 4.2(c) hereof) to those persons
who were Partners during such portion of such fiscal year in accordance with
their respective Partnership Points during such period.
SECTION 4.3 DISTRIBUTIONS.
********** [This section (approximately 1 1/3 pages) has been
omitted pursuant to the confidential treatment request referred to on the cover
page hereto. The omitted portions have been filed separately with the
Commission.] ************
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SECTION 4.4 DISTRIBUTIONS UPON LIQUIDATION; ESTABLISHMENT OF A
RESERVE UPON LIQUIDATION. Upon the liquidation of the Partnership, after payment
(or the making of reasonable provision for the payment) of all liabilities of
the Partnership owing to creditors, the General Partner (or liquidator) shall
set up such reserves as it deems reasonably necessary for any contingent,
conditional or unmatured liabilities or other obligations of the Partnership.
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Such reserves may be paid over by the General Partner (or liquidator) to a bank
(or other third party), to be held in escrow for the purpose of paying any such
contingent, conditional or unmatured liabilities or other obligations. At the
expiration of such period(s) as the General Partner (or liquidator) may deem
advisable, such reserves, if any (and any other assets available for
distribution), or a portion thereof, shall be distributed to the Partners in
accordance with their respective Capital Accounts. If any assets of the
Partnership are to be distributed in kind in connection with such liquidation,
such assets shall be distributed on the basis of their Fair Market Value net of
any liabilities encumbering such assets and, to the greatest extent possible,
shall be distributed pro-rata in accordance with the total amounts to be
distributed to each Partner. Immediately prior to the effectiveness of any such
distribution-in-kind, each item of gain and loss that would have been recognized
by the Partnership had the property being distributed been sold at Fair Market
Value shall be determined and allocated to those persons who were Partners
immediately prior to the effectiveness of such distribution in accordance with
Section 4.2(d).
SECTION 4.5 PROCEEDS FROM THE SALE OF SECURITIES; INSURANCE
PROCEEDS; CERTAIN SPECIAL ALLOCATIONS.
(a) Capital Contributions made by any Partner after the
Effective Date, and other proceeds from the issuance of securities by the
Partnership may, in the sole discretion of the General Partner, be used for the
benefit of the Partnership (including, without limitation, the repurchase or
redemption of Partnership Interests), or, may be distributed by the Partnership,
in which case, any such proceeds shall be allocated and distributed among the
Partners in accordance with their respective Partnership Points immediately
prior to the date of such contribution; it being understood that in the case the
proceeds are a note receivable, any such distribution shall occur upon receipt
by the Partnership of any cash in respect thereof.
(b) In the event of the death of an Employee Stockholder
covered by key-man life insurance, the proceeds of such policy shall first be
used by the Partnership to fund (to the extent thereof) the Repurchase of
Partnership Interests from the Employee Stockholder or Limited Partner through
which such Employee Stockholder held his or her interest in the Partnership in
accordance with Section 3.9 hereof and, if the proceeds exceed the amounts so
required to effect such Repurchase, then the amount of such excess proceeds may,
in the sole discretion of the General Partner, be used for the benefit of the
Partnership, or, may be distributed by the Partnership, in which case, any such
proceeds shall be allocated and distributed among the Partners in accordance
with their respective Partnership Points immediately following the Repurchase of
the Partnership Interests from such Limited Partner.
(c) Items of Tax Depreciation (as such term is defined
below) on account of the property of the Partnership on the Effective Date,
shall be specially allocated among the Partners in accordance with the positive
balances in their Capital Accounts on the Effective Date. All items of Tax
Depreciation on account of property purchased out of Free Cash Flow shall be
allocated among the Partners in accordance with their respective numbers of
Partnership Points.
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(d) The items of income, deduction, gain and loss allocable
pursuant to this Partnership Agreement shall generally be determined in
accordance with the Partnership's books of account; provided, however, that in
lieu of the depreciation, amortization, and other cost recovery deductions taken
into account in keeping the Partnership's books of account, there shall be taken
into account "Tax Depreciation" as defined below. "Tax Depreciation" means, for
any allocation period, an amount equal to the depreciation, amortization, and
other cost recovery deductions allowable for Federal income tax purposes with
respect to an asset or other capitalized amount for such allocation period
(regardless of whether such depreciation, amortization, or other cost recovery
deductions arise from the common tax basis of Partnership property or the tax
basis of Partnership property attributable to a particular Partner because of a
Code Section 754 election or otherwise); provided, however, that if the book
value of an asset differs from its adjusted tax basis at the beginning of such
allocation period, Tax Depreciation for that asset shall be an amount that bears
the same ratio to such beginning book value as the Federal income tax
depreciation, amortization, or other cost recovery deduction for that asset for
such allocation period bears to such beginning adjusted tax basis; provided,
further, however, that if the adjusted tax basis of an asset at the beginning of
such allocation period is zero, Tax Depreciation for that asset shall be
determined with reference to the appropriate Federal income tax recovery period.
SECTION 4.6 FEDERAL TAX ALLOCATIONS. The General Partner shall
allocate the ordinary income and losses and capital gains and losses of the
Partnership as determined for U.S. Federal income tax purposes (and each item of
income, gain, loss, deduction or credit entering into the computation thereof),
as the case may be, among the Partners for tax purposes in a manner that, to the
greatest extent possible (i) reflects the economic arrangement of the Partners
under this Agreement (determined after taking into account the allocation
provisions of Sections 4.2, 4.4 and 4.5 hereof, and the distributions provisions
of Sections 4.3, 4.4 and 4.5 hereof) and (ii) is consistent with the principles
of Sections 704(b) and 704(c) of the Code. Pursuant to the foregoing, the
General Partner shall allocate items of income, deduction, gain and loss for tax
purposes in the same manner as, and in proportion to, the book allocations of
corresponding items made pursuant to this Partnership Agreement, except (i) as
provided below with respect to allocations required under the principles of Code
Section 704(c), and (ii) as required by Code Section 704(b) and the Treasury
Regulations thereunder ("Required Allocations"). Any Required Allocations shall
be taken into account in computing other and subsequent tax allocations so that
the amount of tax items allocated to each Partner, to the greatest extent
possible, shall be equal to the amount of tax items that would have been
allocated to each Partner in the absence of such Required Allocations. The
Partners understand and agree that, with respect to any item of property (other
than cash) contributed (or deemed to be contributed for U.S. federal income tax
purposes) by a Partner to the capital of the Partnership, the initial tax basis
of such property in the hands of the Partnership will be the same as the tax
basis of such property in the hands of such Partner at the time so contributed.
The Partners further understand and agree that the taxable income and taxable
loss of the Partnership is to be computed for Federal income tax purposes by
reference to the initial tax basis to the Partnership of any assets and
properties contributed by the Partners (and not by reference to the fair market
value of such assets and properties at the time contributed). The Partners also
understand that, pursuant to Section 704(c) of the Code, all taxable items of
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income, gain, loss and deduction with respect to such assets and properties
shall be allocated among the Partners for Federal income tax purposes so as to
take account of any difference between the initial tax basis of such assets and
properties to the Partnership and their fair market values at the time
contributed, using any method authorized by the Income Tax Regulations under
Section 704(c) and selected by the General Partner in its sole discretion,
subject to its fiduciary duties to the Partners as a whole. For purposes of
maintaining the Capital Accounts of the Partners, items of income, gain, loss
and deduction relating to any asset or property contributed to the Partnership
that are required to be allocated for tax purposes pursuant to Section 704(c) of
the Code shall not be reflected in the Capital Accounts of the Partners.
ARTICLE V - TRANSFER OF PARTNERSHIP INTERESTS OTHER THAN
BY THE GENERAL PARTNER, ADMISSION OF ADDITIONAL
PARTNERS, REDEMPTION AND WITHDRAWAL
SECTION 5.1 ASSIGNABILITY OF INTERESTS. No interest of a Limited
Partner in the Partnership may be sold, assigned, transferred, pledged,
hypothecated, gifted, exchanged, optioned or encumbered (each, a "Transfer"),
nor may any interest in any Limited Partner be Transferred, and no Transfer
shall be binding upon the Partnership or any Limited Partner unless it is
expressly permitted by this Article V and the General Partner receives an
executed copy of such assignment, which shall be in form and substance
reasonably satisfactory to the General Partner. The assignee of such interest in
the Partnership may become a substitute Limited Partner only upon the terms and
conditions set forth in Section 5.2. No Limited Partner's interest in the
Partnership or, in the case of a Limited Partner which is not an individual, the
direct and indirect interests of a beneficial owner of such Limited Partner, may
be Transferred except:
(a) to the General Partner;
(b) to AMG pursuant to the provisions of Section 3.9, 7.1 or
7.3 hereof or pursuant to the provisions of such other agreement as may be
entered into by the Partnership in connection with the issuance of Partnership
Points;
(c) upon the death of such beneficial owner, their interests
in the Partnership or in the Limited Partner may be Transferred by will or the
laws of descent and distribution;
(d) a Limited Partner (and its beneficial owners) may
Transfer interests in the Partnership or in such Limited Partner to members of
his or her Immediate Family (or trusts for their benefit and of which the
beneficial owner is the settlor and/or trustee, provided that any such trust
does not require or permit distribution of such interests); and
(e) another Limited Partner, with the prior written consent
of the General Partner, which consent may be granted or withheld by the General
Partner in its sole discretion (provided, however, unless William J. Nutt is the
President and Chief Executive Officer of
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AMG, Limited Partners may, with a Majority Vote, transfer an aggregate of up to
1.5 Partnership Points without the consent of, but with at least fifteen (15)
days prior written notice to, the General Partner (which transfer or transfers
may take place on one or more dates and subject to such terms and conditions as
may be set by a Majority Vote, subject to a maximum number of 1.5 Partnership
Points for all such transfers on all such occasions taken together); and
(f) the stockholders of such Limited Partner, with the prior
written approval of the General Partner and subject to such Limited Partner and
such stockholders making such representations and warranties regarding the
ownership of such Limited Partner and such stockholder as the General Partner
may deem necessary or appropriate.
; provided, that in the case of (c), (d) or (f) above, (i) the transferee enters
into an agreement with the Partnership agreeing to be bound by the provisions
hereof (and the transferee enters into (A) if such transferee is not already a
party to a Non Solicitation Agreement, the relevant Non Solicitation Agreement,
and (B) if the transferee is (or has an equityholder which is) an employee of
First Quadrant Limited, the Revenue Agreement) as a Limited Partner (to the
extent such Person then would hold any interest in the Partnership), and (ii)
whether or not the transferee enters into such an agreement, such Partnership
Interests, and interests in such Limited Partner, shall thereafter remain
subject to this Agreement (and, if applicable, the relevant Non Solicitation
Agreement) to the same extent they would be if held by such Limited Partner or
beneficial owner, as applicable.
For all purposes of this Partnership Agreement, any Transfers of
Partnership Interests shall be deemed to occur as of the close of business on
the last day of the calendar month in which any such Transfer would otherwise
have occurred.
SECTION 5.2 SUBSTITUTE LIMITED PARTNERS. No transferee of interests
of a Limited Partner shall become a Partner except in accordance with this
Section 5.2. The General Partner may, with a Majority Vote of the Limited
Partners, admit as a substitute Limited Partner any Person that acquires a
Partnership Interest by Transfer from another Limited Partner in accordance with
the provisions of Section 5.1. The admission of an assignee as a substitute
Limited Partner shall in all events be conditioned upon the execution of an
instrument satisfactory to the General Partner whereby such assignee becomes a
party to this Agreement as a Limited Partner. Upon the admission of a substitute
Limited Partner, the General Partner shall make the appropriate revisions to
Schedule A hereto. Notwithstanding the foregoing, upon a Transfer of Partnership
Interests to AMG in compliance with the provisions of Section 5.1(b) above, AMG
shall be admitted to the Partnership as a Limited Partner with respect to the
Partnership Interests so transferred, without the necessity for a Majority Vote.
SECTION 5.3 ADDITIONAL REQUIREMENTS. As additional conditions to the
validity of (x) any Transfer of a Limited Partner's interest in the Partnership
(or, in the case of a Limited Partner which is not an individual, the interests
of the direct and indirect beneficial owners of such Limited Partner) or (y) the
issuance of additional Partnership Interests (pursuant to
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Section 5.6 below), such Transfer or issuance shall not: (i) violate the
registration provisions of the Securities Act or the securities laws of any
applicable jurisdiction, (ii) cause the Partnership to become subject to
regulation as an "investment company" under the Investment Company Act, and the
rules and regulations of the SEC thereunder, including by resulting in there
being one hundred (100) or more beneficial holders of interests in the
Partnership, (iii) result in the termination of any contract to which the
Partnership is a party and which individually or in the aggregate are material
(it being understood and agreed that any contract pursuant to which the
Partnership provides Investment Management Services is material), or (iv) result
in the treatment of the Partnership as an association taxable as a corporation
or as a "publicly traded limited partnership" for Federal income tax purposes.
The General Partner may require reasonable evidence as to the
foregoing, including, without limitation, a favorable opinion of counsel, which
expense shall be borne by the parties to such transaction (and, to the extent
the Partnership is such a party, shall be paid from Operating Cash Flow).
As an additional condition to the validity of (x) any Transfer of a
Limited Partner's interest in the Partnership (or, in the case of a Limited
Partner which is not an individual, the interests of the direct and indirect
beneficial owners of such Limited Partner) or (y) the issuance of additional
Partnership Interests (pursuant to Section 5.6 below), an equal interest in the
U.S. Partnership must be so transferred or issued to the transferee or recipient
by the transferor or issuer.
To the fullest extent permitted by law, any Transfer that violates
the conditions of this Section 5.3 shall be null and void ab initio.
SECTION 5.4 ALLOCATION OF DISTRIBUTIONS BETWEEN ASSIGNOR AND
ASSIGNEE; SUCCESSOR TO CAPITAL ACCOUNTS. Upon the Transfer of a Partnership
Interest pursuant to this Article V, distributions pursuant to Article IV shall
be made to the Person owning the Partnership Interest at the date of
distribution, unless the assignor and assignee otherwise agree and so direct the
General Partner in a written statement signed by both. In connection with a
Transfer by a Partner of Partnership Points, the assignee shall succeed to a
pro-rata (based on the percentage of such Person's Partnership Interests
transferred) portion of the assignor's Capital Account, unless the assignor and
assignee otherwise agree and so direct the General Partner in a written
statement signed by both and consented to by the General Partner.
SECTION 5.5 REDEMPTIONS AND WITHDRAWALS. No Limited Partner shall
have the right to redeem its interest in the Partnership, in whole or in part,
or to withdraw from the Partnership, except (a) upon receipt of a Majority Vote
and with the consent of the General Partner, (b) as is expressly provided for in
Section 3.9 hereof, or (c) as is expressly provided for in Section 7.1 and 7.3
hereof. Upon the redemption or withdrawal, in whole or in part, by a Limited
Partner, the General Partner shall make the appropriate revisions to Schedule A
hereto.
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SECTION 5.6 ISSUANCE OF ADDITIONAL PARTNERSHIP INTERESTS.
(a) Additional Limited Partners (the "Additional Limited
Partners" and each an "Additional Limited Partner") may be admitted to the
Partnership and such Additional Limited Partners may be issued Partnership
Points, upon receipt of a Majority Vote and the consent of the General Partner
and upon such terms and conditions as may be established by the General Partner
with a Majority Vote (including, without limitation, upon such Additional
Limited Partner's execution of an instrument satisfactory to the General Partner
whereby such Person becomes a party to this Agreement as a Limited Partner);
provided, however, that upon a transfer pursuant to Section 6.1(ii) hereof, the
General Partner may admit the transferee as an Additional Limited Partner
without a Majority Vote.
(b) Existing Limited Partners may be issued additional
Partnership Points (or other Partnership Interests) by the Partnership with the
consent of, and upon such terms and conditions as may be established by, the
General Partner with a Majority Vote (without including the Limited Partner to
be issued additional Partnership Points). Except as provided in the last
sentence of the definition of "Incentive Reserve" or "Executive Retention
Reserve," the General Partner may only be issued additional Partnership Points
(or other Partnership Interests) upon the receipt of a Majority Vote.
(c) Each time additional Partnership Interests are issued
(including, without limitation, additional Partnership Points), the Capital
Accounts of all the Partners shall be adjusted as follows: (i) the General
Partner shall determine the proceeds which would be realized if the Partnership
sold all its assets at such time for a price equal to the Fair Market Value of
such assets, and (ii) the General Partner shall allocate amounts equal to the
gain or loss which would have been realized upon such a sale to the Capital
Accounts of all the Partners immediately prior to such issuance in accordance
with Section 4.2(d) hereof.
(d) In connection with the issuance of additional
Partnership Interests, such issuances, except as set forth herein and in the
Options, are not subject to the preemptive rights of any Person.
(e) Upon the issuance of additional Partnership Interests,
the General Partner shall make the appropriate revisions to Schedule A hereto.
SECTION 5.7 REPRESENTATION OF PARTNERS. The General Partner and each
Limited Partner (including each Additional Limited Partner) hereby represents
and warrants to the Partnership and each other Partner, and acknowledges, that
(a) it has such knowledge and experience in financial and business matters that
it is capable of evaluating the merits and risks of an investment in the
Partnership and making an informed investment decision with respect thereto, (b)
it is able to bear the economic and financial risk of an investment in the
Partnership for an indefinite period of time, (c) it is acquiring an interest in
the Partnership for investment only and not with a view to, or for resale in
connection with, any distribution to the public or public offering thereof, (d)
the equity interests in the Partnership have not been registered under the
securities laws of any jurisdiction and cannot be disposed of unless they are
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subsequently registered and/or qualified under applicable securities laws and
the provisions of this Agreement have been complied with, and (e) the execution,
delivery and performance of this Agreement by such Partner do not require it to
obtain any consent or approval that has not been obtained and do not contravene
or result in a default under any provision of any existing law or regulation
applicable to it, any provision of its charter, by-laws or other governing
documents or any agreement or instrument to which it is a party or by which it
is bound.
ARTICLE VI - TRANSFER OF PARTNERSHIP INTEREST BY THE
GENERAL PARTNER; REDEMPTION, REMOVAL
AND WITHDRAWAL
SECTION 6.1 ASSIGNABILITY OF INTEREST. Without a Majority Vote,
neither the General Partner's interest in the Partnership nor the stock of the
General Partner may be sold or transferred; provided, however, (i) it is
understood and agreed that, in connection with the operation of the business of
AMG (including, without limitation, the financing of direct or indirect
investments in additional investment management companies), the General
Partner's interest in the Partnership and the stock of the General Partner may
be pledged or encumbered pursuant to a bona fide pledge or encumbrance and under
such circumstances, lien holders shall have and be able to exercise the rights
of secured creditors with respect to such interest, (ii) the General Partner may
sell some (but not all or substantially all) of its Partnership Interests to a
person or entity who is not a Partner but who is an Officer of the Partnership
or who becomes an Officer in connection with such issuance, or an entity wholly
owned by any such person, and (iii) the General Partner may sell some (but not
all or substantially all) of its Partnership Interests to existing Limited
Partners. Notwithstanding anything else set forth herein, the General Partner
may, with a Majority Vote, sell all its interests in the Partnership in a single
transaction or a series of related transactions, and, in any such case, each of
the Limited Partners of the Partnership shall be required to sell, in the same
transaction or transactions, all their interest in the Partnership; provided,
that the price to be received by all the Partners shall be allocated among the
Partners as follows: (a) an amount equal to the sum of the positive balances, if
any, in positive Capital Accounts shall be allocated among the Partners having
such Capital Accounts in proportion to such positive balances, and (b) the
excess, if any, shall be allocated among all Partners in accordance with their
respective number of Partnership Points at the time of such sale.
SECTION 6.2 RESIGNATION, REDEMPTION, AND WITHDRAWAL. To the fullest
extent permitted by law, except as set forth in the last sentence of Section
6.1, without a prior Majority Vote, the General Partner shall not have the right
to resign or withdraw from the Partnership. Without a prior Majority Vote, the
General Partner shall have no right to have all or any portion of its interest
in the Partnership redeemed. Any resigned, withdrawn or removed General Partner
shall retain its interest in the capital of the Partnership and its other
economic rights under this Agreement.
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ARTICLE VII - PUT/CALL OF PARTNERSHIP INTERESTS;
REGISTRATION RIGHTS
SECTION 7.1 MANDATORY PUTS.
(a) Each Limited Partner may, subject to the terms and
conditions set forth in this Section 7.1, cause AMG to purchase portions of the
Partnership Interests held by such Limited Partner in the Partnership (a "Put").
(b) Each Limited Partner other than Lovell, Inc. may, subject
to the terms and conditions set forth in this Partnership Agreement, cause AMG
to purchase up to twelve and one-half percent (12.5%) of the Initial Partnership
Points held by such Limited Partner, on the last business day in March (each, a
"Purchase Date") on any five (5) separate occasions (but only up to an aggregate
of fifty percent (50%) of such Limited Partner's Initial Partnership Points)
starting with the last business day in March, 2001 and ending with the last
business day in March, 2011. Notwithstanding any other provisions set forth
herein, each Limited Partner may only exercise its rights under this Section
7.1(b) if the Limited Partner simultaneously causes AMG to purchase an equal
number of U.S. Partnership Points in the U.S. Partnership pursuant to the
provisions of Section 7.1(b) of the U.S. Partnership Agreement.
(c) Lovell, Inc. may, subject to the terms and conditions set
forth in this Partnership Agreement, cause AMG to purchase up to twenty percent
(20%) of the Initial Partnership Points held by Lovell, Inc., on each Purchase
Date starting with the first Purchase Date in March, 2001. Notwithstanding any
other provision set forth herein, Lovell, Inc. may only exercise its rights
under this Section 7.1(c) if Lovell, Inc. simultaneously causes AMG to purchase
an equal number of U.S. Partnership Points in the U.S. Partnership pursuant to
the provisions of Section 7.1(c) of the U.S. Partnership Agreement.
(d) Each Limited Partner may, subject to the terms and
conditions set forth in this Partnership Agreement, cause AMG to purchase a
number of Partnership Points as is equal to up to twelve and one-half percent
(12.5%) of the positive difference, if any, between (i) the Partnership Points
issued to such Limited Partner pursuant to the Incentive Program or upon the
exercise of any options issued pursuant thereto (each such issuance or issuance
upon the exercise of an option, an "Option Exercise") and (ii) any Partnership
Points purchased from such Limited Partner pursuant to a GP Call under Section
7.3 hereof on any five (5) separate Purchase Dates (but only up to an aggregate
of a number of Partnership Points as is equal to fifty percent (50%) of the
positive difference, if any, between (x) the Partnership Points issued in such
Option Exercise and (y) any Partnership Points purchased from such Limited
Partner pursuant to a GP Call under Section 7.3 hereof) starting on the first
Purchase Date which is at least five (5) years following the date of such Option
Exercise and ending on the first Purchase Date which is at least fifteen (15)
years following the date of such Option Exercise. Notwithstanding any other
provisions set forth herein, each Limited Partner may only exercise its rights
under this Section 7.1(d) if the Limited Partner simultaneously causes AMG to
purchase an equal number of Partnership Points in the Partnership pursuant to
the
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provisions of this Section 7.1(d) and U.S. Partnership Points in the U.S.
Partnership pursuant to the provisions of Section 7.1(d) of the U.S. Partnership
Agreement.
(e) If a Limited Partner desires to exercise its rights
under Section 7.1(b), 7.1(c) or 7.1(d) above, it and its Employee Stockholder
shall give AMG, each other Employee Stockholder, the General Partner and the
Partnership irrevocable written notice (a "Put Notice") on or prior to the
preceding November 30 (the "Notice Deadline") stating that it is electing to
exercise such rights and the number of Partnership Points (the "Put Partnership
Points") to be sold in the Put and whether or to what extent such Put is a Put
of Initial Partnership Points (including, without limitation, a Put by Lovell,
Inc. pursuant to Section 7.1(c) above) (the "Initial Put Partnership Points") or
Partnership Points issued pursuant to an Option Exercise (together, the "Option
Put Partnership Points"). Puts in any given calendar year for which Put Notices
are received before the Notice Deadline for that calendar year shall be done as
follows: AMG shall purchase from each Limited Partner that number of Put
Partnership Points as is equal to the sum of (i) the number of Initial Put
Partnership Points designated as such in the Put Notice, up to the maximum
number permitted by Section 7.1(b) or Section 7.1(c) above with respect to that
year and the aggregate number of Initial Partnership Points that may be Put by
the Limited Partner, and (ii) the number of Option Put Partnership Points
designated as such in the Put Notice, up to the maximum number permitted by
Section 7.1(d) above with respect to the Option Exercise and that year and the
aggregate number of Partnership Points that may be Put by the Limited Partner
with respect to the Option Exercise; provided, however, that in no event shall
the number of Partnership Points which AMG is required to purchase on any
Purchase Date pursuant to Puts under this Section 7.1 exceed Two and Four-Tenths
(2.4) Partnership Points; and, provided further, that if the number of
Partnership Points for which Put Notices are received before the Notice Deadline
for that calendar year exceeds two and four tenths (2.4) Partnership Points,
then AMG shall purchase an aggregate of Two and Four-Tenths (2.4) Partnership
Points among all Limited Partners as follows: AMG shall purchase from each
Limited Partner that number of Partnership Points as is equal to (A) Two and
Four-Tenths (2.4) Partnership Points multiplied by (B) a fraction, the numerator
of which is the number of Partnership Points set forth in such Limited Partner's
Put Notice (up to the maximum number of Partnership Points permitted by Sections
7.1(b), 7.1(c) and 7.1(d) above with respect to that Purchase Date and the
aggregate number of Initial Put Partnership Points and Option Put Partnership
Points which may be Put by that Limited Partner on that Purchase Date) and the
denominator of which is the number of Partnership Points set forth in all the
Put Notices (with respect to each such Put Notice, up to the maximum number of
Partnership Points permitted by Sections 7.1(b), 7.1(c) and 7.1(d) above with
respect to that Purchase Date) (provided, that in the case of the purchase of a
number of Partnership Points that is less than the number of Partnership Points
set forth in a Limited Partner's Put Notice, such Limited Partner may allocate
the Partnership Points to be purchased among the Initial Put Partnership Points
and Option Put Partnership Points set forth in its Put Notice).
(f) The purchase price for a Put (the "Put Price") shall be
an amount equal to (i)
******************************************************************************
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******************************************************************************
**************************************************************************** The
Put Price shall be paid by AMG (or, if AMG shall have assigned its obligation to
the Partnership pursuant to paragraph (g) below, the Partnership in such
proportions as may be determined by AMG with a Majority Vote) on the relevant
Purchase Date by certified checks to such Limited Partner, in each case, against
delivery of such documents or instruments of transfer as may reasonably be
requested by AMG or the Partnership, as applicable; provided, however, that in
the case of a Put by Lovell, Inc. under this Section 7.1, if after giving effect
to the Put, Lovell, Inc. would hold less than one and five-tenths (1.5)
Partnership Points, then the Put Price may, in AMG's sole discretion, be paid
with a promissory note in the form attached hereto as Exhibit C, the principal
of which promissory note would be paid in four (4) installments, the first
installment would be paid on the Purchase Date, and the second, third and fourth
installments would be paid twelve (12) months, twenty-four (24) months and
thirty-six (36) months, respectively, after such Purchase Date.
(g) No purchase by AMG pursuant to this Section 7.1 (or,
upon assignment of any of AMG's obligations to the Partnership pursuant to this
paragraph (g) hereof, redemption by the Partnership) shall occur if it would
result in AMG owning, directly or indirectly, in excess of eighty percent (80%)
of the Partnership Points outstanding after giving effect to any such saleor
redemption. If some, but not all, of the Partnership Points which Employee
Stockholders have requested be purchased can be so purchased without AMG's
ownership, directly or indirectly, exceeding eighty percent (80%) of the
outstanding Partnership Points, then AMG shall purchase, or shall assign its
obligations to the Partnership, and the Partnership shall redeem, Partnership
Points from the Limited Partners having Put Partnership Interests in proportion
to the Partnership Points then held by such Limited Partners up to the maximum
extent that would not cause AMG to own, directly or indirectly, in excess of
eighty percent (80%) of the outstanding Partnership Points (in each case,
subject to the maximum amount set forth in Section 7.1(b), 7.1(c) and 7.1(d)
hereof).
(h) AMG may, only with a Majority Vote, assign any or all of
its rights and obligations to purchase Partnership Points under this Section
7.1, in one or more instances, to the General Partner or the Partnership;
provided, however, that if AMG (with a Majority Vote) assigns any or all its
rights and obligations to purchase Partnership Points under this Section 7.1 to
the General Partner or the Partnership, then AMG shall assign the identical and
proportional rights and obligations to purchase U.S. Partnership Points under
Section 7.1 of the U.S. Partnership Agreement to the General Partner (in the
case where rights or obligations to purchase Partnership Points were assigned to
the General Partner) or the U.S. Partnership (in the case where rights or
obligations to purchase Partnership Points were assigned to the Partnership).
SECTION 7.2 ELECTION RIGHTS OF LIMITED PARTNERS TO RECEIVE AMG
STOCK.
(a) If AMG does not assign to the Partnership or the General
Partner the right or obligation pursuant to Section 7.1(h) above to purchase
Partnership Interests from a
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Limited Partner, and AMG has, at that time, completed a registration of shares
of its common stock for sale under the Securities Act (other than a registration
on Form S-8 (or its then equivalent form) or a registration affected solely to
implement an employee benefit plan, a transaction under Rule 145 or to which any
other similar rule of the SEC under the Securities Act is applicable or
registration on a form not available for registering securities for sale to the
public) (a "Public Offering"), then such Limited Partner may elect to cause AMG
to pay up to one-half of the Put Price (as such term is defined in Section
7.1(f) above) for the relevant Put in shares of AMG's Common Stock, $.01 par
value per share (the "AMG Stock").
(b) An election under this Section 7.2 must be made by the
Limited Partner at least sixty (60) days prior to the relevant Purchase Date, by
giving written notice to the Partnership and AMG of such election, which
election, once made, shall be irrevocable without the prior written consent of
AMG.
(c) The number of shares of AMG Stock to be issued upon
exercise of the Put shall be determined in accordance with the following
formula:
Number of Shares of AMG Stock = OS x F
---
1-F
where OS is the number of issued and outstanding shares of AMG Stock
immediately prior to the closing of the Put, and F is a fraction, the numerator
of which is the Put Price of a Put pursuant to Section 7.1(f) above, multiplied
by .75, and the denominator of which is an amount equal to the sum of (A)
********** of AMG's earnings before interest, amortization and taxes for the
twenty-four (24) month period ending on the last day of the calendar year prior
to the date of the closing of such Put (determined in accordance with generally
accepted accounting principles, consistently applied) plus (B) the Put Price of
a Put.
(d) If AMG completes a Public Offering, AMG shall, as soon
as reasonably practicable, provide notice thereof to each Employee Stockholder.
SECTION 7.3 GENERAL PARTNER CALL OPTION.
(a) The General Partner may, subject to the terms and
conditions set forth in this Section 7.3, purchase up to eight and twenty-four
one-hundredths (8.24) Partnership Points from the Limited Partners (the "GP
Call").
(b) The General Partner shall exercise its rights under this
Section 7.3 if ten (10) Partnership Points have been made available to the
Incentive Reserve (as such term is defined in the Incentive Program and not as
such term is defined herein) pursuant to Section 3(f) of the Incentive Program;
provided, however, that the General Partner may give the GP Call Notice (as such
term is hereinafter defined) prior to the date such a determination is made.
Simultaneously with the General Partner's exercise of its rights under this
Section 7.3, the General Partner shall exercise its rights under Section 7.3(b)
of the U.S. Partnership Agreement.
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(c) If the General Partner exercises its rights under this
Section 7.3, it shall give written notice (the "GP Call Notice") to the Chief
Executive Officer and each Limited Partner stating its exercise of such rights.
Within Five (5) days after delivery of the Call Notice, the General Partner
shall allocate the GP Call among the Limited Partners in its sole discretion and
shall so indicate the allocation in a writing delivered to the Chief Executive
Officer and the Limited Partners; and, provided further, that any allocation by
the General Partner shall only be effective if an equivalent allocation is made
pursuant to Section 7.3(c) of the U.S. Partnership Agreement. The closing of a
GP Call shall take place on a date which is fifteen (15) days after the date of
the GP Call Notice.
(d) The Purchase Price for a GP Call shall be an amount
equal to (i) Four Hundred Twenty-Eight One Thousands (.428) of First Quadrant
Limited's cumulative Revenues (as such term is defined in the Revenue Agreement)
for the period beginning on the Effective Date and ending on December 31, 2000
for each Partnership Point for which the General Partner exercises its rights
under this Section 7.3 (subject in any event, to any equitable adjustments which
the General Partner may deem necessary or appropriate (in its sole discretion)
if there is any change in the portion of Revenues which are allocated to the
Partnership under the Revenue Agreement or the allocation or distribution of
Free Cash Flow under this Agreement), minus (ii) the taxes incurred (calculated
as set forth in this clause) by the General Partner in respect of such
distributions, calculated on the assumption that such distributions are not less
than one half of the highest marginal federal, state and foreign tax rates
applicable to the General Partner are not more than the highest marginal
federal, state and foreign tax rates applicable to the General Partner (with the
taxes incurred within such range to be determined by the General Partner in its
sole discretion), plus (iii) an amount equal to each cash distribution described
in clause (i) above, net of any taxes attributable thereto (calculated as
described in clause (ii) above) multiplied by the Prime Rate established by
Chemical Bank (or any successor thereto) from time to time, as in effect on the
date of each such cash distribution.
SECTION 7.4 AMG CALL OPTION.
(a) AMG may, subject to the terms and conditions set forth
in this Section 7.4, purchase portions of the Partnership Interests held by the
Limited Partners in the Partnership (each a "Call"). Notwithstanding anything
else set forth herein to the contrary, the consent of the Chief Executive
Officer shall be required prior to any Call other than a Call of Partnership
Points held by the Chief Executive Officer or the Limited Partner of which the
Chief Executive Officer is the Employee Stockholder.
(b) AMG may purchase up to five percent (5%) of the Initial
Partnership Points of any of the Limited Partners on the last business day in
March (each a "Call Date") of each calendar year (but only up to an aggregate
of twenty-five percent (25%) of the Initial Partnership Points issued to such
Limited Partner) starting with the last business day in March of the calendar
year 2002. Notwithstanding any other provision set forth herein, AMG may only
exercise its rights under this Section 7.3(b) if it purchases an equal number
of
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Initial Partnership Points in the Partnership and Initial U.S. Partnership
Points in the U.S. Partnership.
(c) AMG may purchase a number of Partnership Points as is
equal to up to five percent (5%) of the positive difference, if any, between
(i) the Partnership Points issued in an Option Exercise and (ii) any
Partnership Points purchased from such Limited Partner pursuant to a GP Call
under Section 7.3 hereof, on a Call Date (but only up to an aggregate of a
number of Partnership Points as is equal to twenty-five percent (25%) of the
positive difference, if any, between (x) the Partnership Points issued in such
Option Exercise and (y) any Partnership Points purchased from such Limited
Partner pursuant to a GP Call under Section 7.3 hereof) starting with the first
Call Date which is at least six (6) years following the date of such Option
Exercise. Notwithstanding any other provision set forth herein, AMG may only
exercise its rights under this Section 7.4(c) if it purchases an equal number
of Partnership Points in the Partnership and U.S. Partnership Points in the
U.S. Partnership.
(d) If AMG desires to exercise its rights under Section
7.4(b) or (c) above, it shall give irrevocable written notice (a "Call Notice")
on or prior to the preceding November 30, to each Limited Partner, First
Quadrant, and the Partnership, stating its election to exercise such rights, the
Limited Partner(s) from whom it intends to purchase Partnership Points, and the
number of Partnership Points to be purchased in the Call (the "Call Partnership
Points"). The number of Partnership Points purchased from a given Limited
Partner must be equal to the number of U.S. Partnership Points being purchased
at the same time from such Limited Partner.
(e) The purchase price for Call Partnership Points purchased
from a Limited Partner in a Call (each a "Call Price") shall be an amount equal
to (i) ***********************************************************************
******************************************************************************
The Call Price shall be paid by AMG (or, if AMG shall have assigned its rights
to the Partnership pursuant to paragraph (f) below, the Partnership in such
proportions as may be determined by AMG with a Majority Vote) on the relevant
Call Date by certified checks, against delivery of such documents or
instruments of transfer as may reasonably be requested by AMG and the
Partnership, as applicable.
(f) AMG may, with a Majority Vote, assign any or all of its
rights and obligations to purchase Partnership Points under this Section 7.4, in
one or more instances, to the General Partner or the Partnership; provided,
however, that if AMG (with a Majority Vote) assigns any or all its rights and
obligations to purchase Partnership Points under this
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Section 7.3 to the General Partner or the Partnership, then AMG shall assign the
identical and proportional rights and obligations to purchase U.S. Partnership
Points under this Section 7.3 of the U.S. Partnership Agreement to First
Quadrant (in the case where rights or obligations to purchase Partnership Points
were assigned to First Quadrant) or the U.S. Partnership (in the case where
rights or obligations to purchase Partnership Points were assigned to the
Partnership).
ARTICLE VIII - DISSOLUTION AND TERMINATION.
SECTION 8.1 EVENTS OF DISSOLUTION.
(a) The Partnership shall be dissolved and its affairs wound
up:
(i) on a date designated in writing by the
General Partner;
(ii) upon the occurrence of an event of
withdrawal (as defined in the Partnership
Act) with respect to the General Partner;
(iii) upon the sale or other disposition of all
(or a substantial portion of) the
Partnership's assets;
(iv) upon the effective date of the resignation
or withdrawal of the General Partner
pursuant to Section 6.2 hereof;
(v) upon a Repurchase Closing Date;
(vi) in any event, at midnight on December 31,
2095 unless the Partnership's term is
extended pursuant to Section 2.5 hereof; or
(vii) upon the entry of a decree of judicial
dissolution under Section 17-802 of the
Partnership Act.
(b) Dissolution of the Partnership shall be effective at the
close of business on the day on which the event occurs giving rise to the
dissolution, whereupon the Partnership shall be wound up and liquidated in an
orderly manner, as soon as reasonably practicable, but the Partnership shall not
terminate until the assets of the Partnership shall have been distributed as
provided herein. Notwithstanding the dissolution of the Partnership, prior to
the termination of the Partnership, as aforesaid, the business of the
Partnership and the affairs of the Partners, as such, shall continue to be
governed by this Agreement. The General Partner or, if there be none, a
liquidator approved by a Majority Vote, shall liquidate the assets of the
Partnership and apply and distribute the proceeds thereof as contemplated by
Section 4.4 hereof.
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(c) Upon an event described in Section 8.1(a)(ii) or
8.1(a)(v) that would otherwise result in a dissolution of the Partnership, the
Partnership shall not be dissolved if, with thirty (30) days after the event
described in either of such Sections, the holders of more than fifty percent
(50%) of the Partnership Points then outstanding (including the General Partner
and including as outstanding Partnership Points held by the General Partner any
Partnership Points in the Executive Retention Reserve or Incentive Reserve) (or
such greater percentage in interest as may be required under applicable law) in
writing agree to continue the business of the Partnership and to the selection,
effective as of the date of such event, of a successor general partner (which,
to the extent permitted by applicable law, may be the General Partner). In such
event, the Partnership shall continue until dissolved in accordance with this
Section 8.
(d) Within one hundred and eighty (180) days following an
event described in Section 8.1(a)(v) that results in the dissolution of the
Partnership, the General Partner and the holders of more than fifty percent
(50%) of the Partnership Points then outstanding (including the General Partner)
(or such greater percentage of holders of Partnership Interests as may then be
required under applicable law) may elect in writing to reconstitute and continue
the business of the Partnership by forming a new limited partnership on the same
terms and provisions as are set forth in this Agreement. If such an election is
timely made, all the Limited Partners of the Partnership shall continue as
limited partners of the reconstituted partnership and the General Partner of the
Partnership shall continue as general partner of the reconstituted partnership.
Upon any such election by the holders of more than fifty percent (50%) of the
Partnership Points then outstanding (or such greater percentage of holders of
Partnership Interests as may then be required under applicable law), all holders
of Partnership Interests shall be bound thereby and shall be deemed to have
approved thereof. Upon any such election by the holders of more than fifty
percent (50%) of the Partnership Points then outstanding (or such greater
percentage of holders of Partnership Interests as may then be required under
applicable law), all necessary steps shall be taken to cancel this Agreement and
the Certificate of Limited Partnership of the Partnership and to enter into a
new partnership agreement (which is identical to this Agreement) and certificate
of limited partnership of the reconstituted partnership, and the General Partner
may for this purpose and all purposes stated in such agreement or certificate,
exercise the power of attorney granted pursuant to Section 8.1(e) below.
(e) Each Limited Partner and each Employee Stockholder and
each other Person who accepts Partnership Interests constitutes and appoints
each of the General Partner (and any successor thereof by merger, transfer,
election or otherwise), and each of the General Partner's authorized officers
and attorneys-in-fact, with full power of substitution, as its, his or her true
and lawful agents and attorneys-in-fact, with full power and authority in its,
his or her name, place and stead to: execute, swear to, acknowledge, deliver,
file and record in the appropriate public offices all certificates and other
instruments including, at the option of the General Partner, this Agreement and
the Certificate of Limited Partnership and all amendments and restatements
thereof or any of the foregoing relating to the continuation of the Partnership
as contemplated by paragraph (c) above or the reconstituted partnership, as
contemplated by paragraph (d) above, that the General Partner deems appropriate
or necessary to exercise any
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powers of the General Partner or to carry out the purposes of this Agreement and
to form, qualify, or continue the existence or qualification of the Partnership
or the reconstituted partnership, as contemplated by paragraph (c) or paragraph
(d) above, as a limited partnership in the State of Delaware and under the
Delaware Act and in all jurisdictions in which the Partnership may or may wish
to conduct business or own property.
The foregoing power of attorney is hereby declared to be irrevocable
and a power coupled with an interest, and it shall survive, and shall not be
affected by, the subsequent death, incompetence, dissolution, disability,
incapacity, bankruptcy or termination of any grantor and the transfer of all or
any portion of his Partnership Interest and shall extend to such Person's heirs,
successors and assigns. Each Person who accepts Partnership Interests is deemed
to consent to be bound by any representations made by the General Partner or the
authorized officers and attorneys-in-fact thereof, acting in good faith pursuant
to such power of attorney. Each Person who accepts Partnership Interests is
deemed to consent to and waive any and all defenses that may be available to
contest, negate or disaffirm any action of the General Partner or the authorized
officers and attorneys-in-fact thereof, taken in good faith under such power of
attorney. Each Limited Partner shall execute and deliver to the General Partner
within fifteen (15) days after receipt of the General Partner's request
therefor, such further designations, powers of attorney and other instruments as
the General Partner deems necessary to effectuate this Section 8.1(e).
ARTICLE IX - RECORDS AND REPORTS
SECTION 9.1 BOOKS AND RECORDS. The Officers of the Partnership and
the General Partner shall cause the Partnership to keep complete and accurate
books of account with respect to the operations of the Partnership, prepared in
accordance with generally accepted accounting principles, using the accrual
method of accounting, consistently applied. Such books shall reflect that the
interests in the Partnership have not been registered under the Securities Act,
and that the interests may not be sold or transferred without registration under
the Securities Act or exemption therefrom and without compliance with Article V
or Article VI of this Agreement. Such books shall be maintained at the principal
office of the Partnership in Pasadena, California or at such other place as the
General Partner shall determine.
SECTION 9.2 ACCOUNTING. The Partnership's books of account shall be
kept on the accrual method of accounting, or on such other method of accounting
as the General Partner may from time to time determine, with the advice of the
Independent Public Accountants, and shall be closed and balanced at the end of
each Partnership fiscal year. The taxable year of the Partnership shall be the
twelve months ending December 31 or such other taxable year as the General
Partner may designate, with the written advice of the Independent Public
Accountants.
SECTION 9.3 FINANCIAL REPORTS. The Partnership shall furnish to the
General Partner and AMG each of the following:
40
<PAGE> 45
(a) Within twenty-five (25) days after the end of each month
and each fiscal quarter, an unaudited financial report of Partnership, which
report shall be prepared in accordance with generally accepted accounting
principles using the accrual method of accounting, consistently applied (except
that the financial report may (i) be subject to normal year-end audit
adjustments which are neither individually nor in the aggregate material and
(ii) not contain all notes thereto which may be required in accordance with
generally accepted accounting principles) and shall be certified by the most
senior financial officer of the Partnership to have been so prepared, and which
shall include the following:
(i) Statements of operations, changes in partners'
capital and cash flows for such month or quarter, together
with a cumulative income statement from the first day of the
then-current fiscal year to the last day of such month or
quarter;
(ii) a balance sheet as of the last day of such month
or quarter; and
(iii) with respect to the quarterly financial report,
a detailed computation of Partnership Share and Free Cash Flow
for such quarter.
(b) Within sixty (60) days after the end of each fiscal year
of the Partnership, audited financial statements of the Partnership, which shall
include statements of operations, changes in partners' capital and cash flows
for such year and a balance sheet as of the last day thereof, each prepared in
accordance with generally accepted accounting principles, using the accrual
method of accounting, consistently applied, certified by Independent Public
Accountants satisfactory to the General Partner.
(c) As promptly as is reasonably possible following request
by the General Partner from time to time, such operations and/or performance
data as may be requested, in each case certified by the most senior financial
officer of the Partnership if such a certification is requested by the General
Partner.
(d) Any other financial or other information available to
the Officers as the General Partner shall have reasonably requested on a timely
basis.
SECTION 9.4 [RESERVED].
SECTION 9.5 TAX MATTERS.
(a) The General Partner shall cause to be prepared and filed
on or before the due date (or any extension thereof) Federal, state, local and
foreign tax or information returns required to be filed by the Partnership. The
General Partner, to the extent that Partnership
41
<PAGE> 46
funds are available, shall cause the Partnership to pay any taxes payable by the
Partnership; provided that the General Partner shall not be required to cause
the Partnership to pay any tax so long as the General Partner or the Partnership
is in good faith and by appropriate legal proceedings contesting the validity,
applicability or amount thereof and such contest does not materially endanger
any right or interest of the Partnership and adequate reserves therefor have
been set aside by the Partnership.
(b) The General Partner shall be the tax matters partner for
the Partnership pursuant to Sections 6221 through 6233 of the Code.
ARTICLE X - MISCELLANEOUS.
SECTION 10.1 NOTICES. All notices, requests, elections, consents or
demands permitted or required to be made under this Agreement shall be in
writing, signed by the Partner or Partners giving such notice, request,
election, consent or demand and shall be delivered personally or by confirmed
facsimile, or sent by registered or certified mail, or by commercial courier to
the other Partners, at their addresses set forth on the signature pages hereof
or on Schedule A hereto, or at such other addresses as may be supplied by
written notice given in conformity with the terms of this Section 10.1. The date
of any such personal or facsimile delivery or the date of delivery by an
overnight courier or the date five (5) days after the date of mailing by
registered or certified mail, as the case may be, shall be the date of such
notice.
SECTION 10.2 SUCCESSORS AND ASSIGNS. Subject to the restrictions on
transfer set forth herein, this Agreement shall be binding upon and shall inure
to the benefit of the Partners, their respective successors,
successors-in-title, heirs and assigns, and each and every
successors-in-interest to any Partners, whether such successor acquires such
interest by way of gift, purchase, foreclosure or by any other method, and each
shall hold such interest subject to all of the terms and provisions of this
Agreement.
SECTION 10.3 AMENDMENTS. No amendments may be made to this Agreement
without the prior written consent of (i) the General Partner and (ii) a Majority
Vote of the Limited Partners and, with respect to Section 3.9 hereof, AMG;
provided, however, that the General Partner shall make such amendments and
additions to Schedule A hereto as are required by the provisions hereof; and,
provided further, that the General Partner may amend this Agreement to correct
any printing, stenographic or clerical errors or omissions. Except as otherwise
provided for herein, no amendment may be made to this Agreement which materially
and adversely affects a Limited Partner in a manner different from all the other
Limited Partners, without the prior written consent of the Limited Partner which
would be so affected.
SECTION 10.4 NO PARTITION. No Partner nor any successors-in-interest
to any Partner, shall have the right while this Agreement remains in effect to
have the property of the Partnership partitioned, or to file a complaint or
institute any proceeding at law or in equity to have the property of the
Partnership partitioned, and each Partner, on behalf of himself, his
42
<PAGE> 47
successors, representatives, heirs and assigns, hereby waives any such right. It
is the intent of the Partners that during the term of this Agreement, the rights
of the Partners and their successors-in-interest, as among themselves, shall be
governed by the terms of this Agreement, and that the right of any Partner or
successors-in-interest to assign, transfer, sell or otherwise dispose of his
interest in the Partnership shall be subject to the limitations and restrictions
of this Agreement.
SECTION 10.5 NO WAIVER. The failure of any Partner to insist upon
strict performance of a covenant hereunder or of any obligation hereunder,
irrespective of the length of time for which such failure continues, shall not
be a waiver of such Partner's right to demand strict compliance in the future.
No consent or waiver, express or implied, to or of any breach or default in the
performance of any obligation hereunder, shall constitute a consent or waiver to
or of any other breach or default in the performance of the same or any other
obligation hereunder.
SECTION 10.6 DISPUTE RESOLUTION. All disputes arising in connection
with this Agreement shall be resolved by binding arbitration in accordance with
the applicable rules of the American Arbitration Association. The arbitration
shall be held in Delaware before a single arbitrator selected in accordance with
Section 12 of the American Arbitration Association Commercial Arbitration Rules
who shall have substantial business experience in the investment advisory
industry, and shall otherwise be conducted in accordance with the American
Arbitration Association Commercial Arbitration Rules.
SECTION 10.7 PRIOR AGREEMENTS SUPERSEDED. This Agreement, (including
without limitation, the schedules and exhibits hereto), supersedes the prior
understandings and agreements among the parties with respect to the subject
matter hereof.
SECTION 10.8 CAPTIONS. Titles or captions of Articles or Sections
contained in this Agreement are inserted as a matter of convenience and for
reference, and in no way define, limit, extend or describe the scope of this
Agreement or the intent of any provision hereof.
SECTION 10.9 COUNTERPARTS. This Agreement may be executed in a
number of counterparts, all of which together shall for all purposes constitute
one Agreement, binding on all the Partners notwithstanding that all Partners
have not signed the same counterpart.
SECTION 10.10 APPLICABLE LAW; JURISDICTION. This Agreement and the
rights and obligations of the parties hereunder shall be governed by and
interpreted, construed and enforced in accordance with the laws of the State of
Delaware, without applying the choice of law provisions thereof.
SECTION 10.11 SINGULAR AND PLURAL. All terms herein using the
singular shall include the plural; all terms using the plural shall include the
singular; in each case, the term shall be as appropriate to the context of each
sentence.
43
<PAGE> 48
SECTION 10.12 CREDITORS. None of the provisions of this Agreement
shall be for the benefit of or enforceable by any creditor of (i) any Partner,
(ii) any Employee Stockholder or (iii) the Partnership, other than a Partner who
is also a creditor of the Partnership.
[INTENTIONALLY LEFT BLANK]
44
<PAGE> 49
IN WITNESS WHEREOF the General Partner and the Limited Partners have
executed and delivered this Limited Partnership Agreement as of the day and year
first above written.
GENERAL PARTNER
Name and Signature Address
FIRST QUADRANT CORP. 800 East Colorado Blvd.
Suite 900
Pasadena, CA 91101
By:/s/ William J. Nutt
-------------------------
William J. Nutt
President
LIMITED PARTNERS
Name and Signature Address
R.D. ARNOTT CORPORATION 800 East Colorado Blvd.
Suite 900
Pasadena, CA 91101
By:/s/ Robert D. Arnott
-------------------------
Robert D. Arnott
President
CULONBOIS CORPORATION 800 East Colorado Blvd.
Suite 900
Pasadena, CA 91101
By:/s/ Curtis J. Ketterer
-------------------------
Curtis J. Ketterer
President
LUCK MONSTER CORPORATION 800 East Colorado Blvd.
Suite 900
Pasadena, CA 91101
By:/s/ Christopher G. Luck
-------------------------
Christopher G. Luck
President
<PAGE> 50
AYPWIP CORPORATION 800 East Colorado Blvd.
Suite 900
Pasadena, CA 91101
By:/s/ David J. Leinweber
--------------------------
David J. Leinweber
President
R.M. DARNELL CORPORATION 800 East Colorado Blvd.
Suite 900
Pasadena, CA 91101
By:/s/ R. Max Darnell
--------------------------
R. Max Darnell
President
T.S. MECKEL RUHESTANDS 56 Ledgeways
CORPORATION Wellesley, MA 02181
By:/s/ Timothy S. Meckel
--------------------------
Timothy S. Meckel
President
LOVELL, INC. P.O. Box 561
Featherbed Lane
Mt. Vernon, NJ 07976
By:/s/ Robert M. Lovell, Jr.
--------------------------
Robert M. Lovell, Jr.
President
WILLIAM A.R. GOODSALL 17 Old Park Lane
London W1Y 3LG
United Kingdom
/s/ William A.R. Goodsall
- -----------------------------
ROBERT H. BROWN 17 Old Park Lane
London W1Y 3LG
United Kingdom
/s/ Robert H. Brown
- -----------------------------
<PAGE> 51
ACKNOWLEDGMENT
For good and valuable consideration, the receipt of which is hereby
acknowledged, each of the undersigned hereby acknowledges the provisions of this
Agreement, agrees that he constitutes an Employee Stockholder hereunder and
agrees to fulfill all of the rights and duties of an Employee Stockholder
hereunder.
/s/ Robert D. Arnott
- -------------------------------
Robert D. Arnott
/s/ Curtis J. Ketterer
- -------------------------------
Curtis J. Ketterer
/s/ Christopher G. Luck
- -------------------------------
Christopher G. Luck
/s/ David J. Leinweber
- -------------------------------
David J. Leinweber
/s/ R. Max Darnell
- -------------------------------
R. Max Darnell
/s/ Timothy S. Meckel
- -------------------------------
Timothy S. Meckel
/s/ Robert M. Lovell, Jr.
- -------------------------------
Robert M. Lovell, Jr.
The undersigned is executing this Agreement solely to acknowledge
and agree to be bound by the provisions of Section 3.9, the relevant provisions
of Article VII, and Section 10.6 hereof.
AFFILIATED MANAGERS GROUP, INC. Address
Two International Place
By:/s/ William J. Nutt 23rd Floor
--------------------------------- Boston, MA 02110
Name: William J. Nutt
Title: President and
Chief Executive Officer
<PAGE> 1
EXHIBIT 10.8
PORTIONS OF THIS DOCUMENT HAVE BEEN OMITTED PURSUANT TO A
CONFIDENTIAL TREATMENT REQUEST FILED WITH THE COMMISSION. ASTERISKS (*) IDENTIFY
WHERE SUCH CONFIDENTIAL INFORMATION HAS BEEN OMITTED. THE OMITTED PORTIONS HAVE
BEEN FILED SEPARATELY WITH THE COMMISSION.
SKYLINE ASSET MANAGEMENT, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT
AUGUST 31, 1995
<PAGE> 2
SKYLINE ASSET MANAGEMENT, L.P.
AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
TABLE OF CONTENTS
<TABLE>
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<S> <C>
ARTICLE I - DEFINITIONS.............................................................................1
Section 1.1 Definitions......................................................................1
ARTICLE II - ORGANIZATION AND GENERAL PROVISIONS....................................................8
Section 2.1 Continuation of Partnership......................................................8
Section 2.2 Name of the Partnership..........................................................8
Section 2.3 Purposes of the Partnership......................................................9
Section 2.4 Place of Business; Registered Agent..............................................9
Section 2.5 Duration of the Partnership......................................................9
Section 2.6 Title to Property................................................................9
Section 2.7 Liability of Partners; No Deficit Restoration Obligation........................10
Section 2.8 Exculpation of Liability........................................................10
Section 2.9 Indemnification.................................................................10
Section 2.10 Fiscal Year.....................................................................11
ARTICLE III - MANAGEMENT OF THE PARTNERSHIP........................................................11
Section 3.1 Management in General...........................................................11
Section 3.2 Officers of the Partnership and Mandatory Retirement............................12
Section 3.3 Operation of the Business of the Partnership....................................13
Section 3.4 Compensation and Expenses of the Partner........................................15
Section 3.5 Other Business of the General Partner and its Affiliates........................15
Section 3.6 Non Solicitation and Non Disclosure by Limited Partners and Employee
Stockholders....................................................................15
Section 3.7 Remedies Upon Breach............................................................17
Section 3.8 Repurchase Upon Termination of Employment.......................................17
Section 3.9 Puts............................................................................20
Section 3.10 Exchange Rights of Limited Partners of the Partnership..........................22
Section 3.11 No Employment Obligation........................................................22
Section 3.12 Miscellaneous...................................................................22
ARTICLE IV - REGISTRATION RIGHTS...................................................................23
Section 4.1. Piggy-back Registrations........................................................23
Section 4.2. Registrable Securities..........................................................23
Section 4.3. Further Obligations of AMG......................................................23
Section 4.4. Registration Expenses...........................................................24
Section 4.5. Indemnification; Contribution...................................................24
Section 4.6. Limitations.....................................................................25
Section 4.7. Limitation of Registration Rights...............................................26
</TABLE>
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<PAGE> 3
<TABLE>
<CAPTION>
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<S> <C>
ARTICLE V - CAPITAL CONTRIBUTIONS; DISTRIBUTIONS CAPITAL ACCOUNTS AND ALLO............................27
Section 5.1 Capital Contributions..............................................................27
Section 5.2 Capital Accounts; Allocations......................................................27
Section 5.3 Distributions......................................................................29
Section 5.4 Distributions Upon Liquidation; Establishment of a Reserve Upon
Liquidation........................................................................31
Section 5.5 Proceeds from the Sale of Securities; Insurance Proceeds; Certain Special
Allocations........................................................................31
Section 5.6 Federal Tax Allocations............................................................32
ARTICLE VI - TRANSFER OF PARTNERSHIP INTERESTS BY
LIMITED PARTNERS, ADMISSION OF ADDITIONAL PARTNERS,
REDEMPTION AND WITHDRAWAL........................................................................32
Section 6.1 Assignability of Interests.........................................................32
Section 6.2 Substitute Limited Partners........................................................34
Section 6.3 Allocation of Distributions Between Assignor and Assignee..........................34
Section 6.4 Redemptions and Withdrawals........................................................34
Section 6.5 Issuance of Additional Limited Partnership Interests; No Preemptive Rights.........35
Section 6.6 Representation of Partners.........................................................36
ARTICLE VII - TRANSFER OF PARTNERSHIP INTEREST BY GENERAL
PARTNER; REDEMPTION, REMOVAL AND WITHDRAWAL......................................................36
Section 7.1 Assignability of Interest..........................................................36
Section 7.2 Resignation, Redemption, and Withdrawal............................................37
ARTICLE VIII - DISSOLUTION AND TERMINATION............................................................37
Section 8.1 Events of Dissolution..............................................................37
ARTICLE IX - RECORDS AND REPORTS......................................................................38
Section 9.1 Books and Records..................................................................38
Section 9.2 Accounting.........................................................................38
Section 9.3 Financial Reports..................................................................39
Section 9.4 Budget Meetings....................................................................40
Section 9.5 Tax Matters........................................................................40
ARTICLE X - MISCELLANEOUS.............................................................................41
Section 10.1 Notices............................................................................41
Section 10.2 Successors and Assigns.............................................................41
Section 10.3 Amendments.........................................................................41
</TABLE>
(ii)
<PAGE> 4
<TABLE>
<S> <C>
Section 10.4 No Partition.......................................................................41
Section 10.5 No Waiver..........................................................................41
Section 10.6 Prior Agreements Superseded........................................................42
Section 10.7 Captions...........................................................................42
Section 10.8 Counterparts.......................................................................42
Section 10.9 Applicable Law.....................................................................42
Section 10.10 Singular and Plural................................................................42
Section 10.11 Creditors..........................................................................42
SCHEDULES AND EXHIBITS
Exhibit A Partners and Partnership Points
Exhibit B Form of Non Solicitation Agreement
Schedule 5.1(a) Assets contributed by Mesirow Asset Management, Inc.
</TABLE>
(iii)
<PAGE> 5
SKYLINE ASSET MANAGEMENT, L.P.
AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT
This Amended and Restated Limited Partnership Agreement (the
"Agreement") is made and entered into as of ___________, 1995 (the "Effective
Date"), by and among Affiliated Managers Group, Inc., a Delaware corporation
("AMG"), as general partner, and the limited partners named on Exhibit A hereto.
AMG and any Person who succeeds AMG as general partner of the partnership is
sometimes referred to herein as the "General Partner." The General Partner and
the Limited Partners are sometimes herein referred to collectively as the
"Partners" and individually as a "Partner."
This Agreement amends and completely restates that certain Limited
Partnership Agreement of Skyline Asset Management, L.P. entered into as of June
6, 1995 by and among the Initial Limited Partners and Mesirow Asset Management,
Inc.
FOR GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency of
which is hereby acknowledged, and in consideration of the mutual agreements
hereinafter set forth, including, but not limited to, their capital
contributions, the parties hereby agree as follows:
ARTICLE I - DEFINITIONS.
SECTION 1.1 DEFINITIONS. For purposes of this Agreement:
"Additional Limited Partner" shall have the meaning specified in
Section 6.5.
"Advisers Act" shall mean the Investment Advisers Act of 1940, as it
may be amended from time to time, and any successor to such Act.
"Affiliate" shall mean, with respect to any person or entity (herein
the "first party"), any other person or entity that directly or indirectly
controls, or is controlled by, or is under common control with, such first
party. The term "control" as used herein (including the terms "controlled by"
and "under common control with") means the possession, directly or indirectly,
of the power to (a) vote twenty-five percent (25%) or more of the outstanding
voting securities of such person or entity or (b) otherwise direct the
management or policies of such person or entity by contract or otherwise.
Notwithstanding the foregoing, no Limited Partner or Employee Stockholder shall
be an Affiliate of the Partnership for purposes of this Agreement.
"Agreement" shall mean this Amended and Restated Limited Partnership
Agreement, as it may from time to time be amended, supplemented or restated.
"AMG Stock" shall have the meaning specified in Section 3.10(a).
"Annual Put Limit" shall have the meaning specified in Section
3.9(b)(A).
<PAGE> 6
"Asset Transfers" shall have the meaning specified in the
Partnership Interest Purchase Agreement.
"Average Free Cash Flow" shall mean fifty percent (50%) of the
Partnership's Free Cash Flow (net of Free Cash Flow Expenditures) for the
twenty-four (24) month period ending on a date specified as the ending date for
the calculation of Average Free Cash Flow; provided, however, that if any
portion of such twenty-four (24) month period would precede the effective date
of the Asset Transfers, then "Average Free Cash Flow" shall mean fifty percent
(50%) of (a) the Partnership's Free Cash Flow for the period from the effective
date of the Asset Transfers to the last day of such twenty-four (24) month
period, plus (b) ********** percent (**%) of the revenues of the Institutional
Business from investment management and advisory fees (determined on an accrual
basis in accordance with generally accepted accounting principles, consistently
applied) from the start of such twenty-four (24) month period to the effective
date of the Asset Transfers.
"Bankruptcy Event" shall have the meaning specified in Section 3.8
hereof.
"Capital Account" shall mean the capital account maintained by the
Partnership with respect to each Partner in accordance with the capital
accounting rules described in Section 5.2 hereof.
"Capital Contribution" shall mean, as to each Partner, the amount of
money and/or the agreed fair market value of any property (net of any
liabilities encumbering such property that the Partnership is considered to
assume or take subject to) contributed to the capital of the Partnership by such
Partner.
"Carry-Over Put Limit" shall have the meaning specified in Section
3.9(b)(B) hereof.
"CEO" shall have the meaning specified in Section 3.2(a) hereof.
"Certificate of Limited Partnership"shall mean the certificate of
limited partnership for the Partnership required under the Partnership Act, as
such Certificate may be amended or restated from time to time.
"Code" or "Internal Revenue Code" shall mean the United States
Internal Revenue Code of 1986, as from time to time amended, and any successor
thereto, together with all regulations promulgated thereunder.
"Effective Date" shall have the meaning specified in the preamble of
this Agreement.
"Employee Stockholder" shall mean that certain Officer and/or
employee of the Partnership who is the owner of the issued and outstanding
capital stock of a Limited Partner, and listed as such on Exhibit A hereto;
provided, however, that if a Limited Partner is a natural person, the term
Employee Stockholder shall refer to such natural person.
2
<PAGE> 7
"Exercise Period" shall mean, with respect to any fiscal year, the
period of thirty (30) calendar days following the last day on which the
Partnership distributes to its Partners (promptly after receipt thereof from the
Independent Public Accountants) the audited financial statements of the
Partnership for such fiscal year; provided however that if AMG has completed a
Registration and is subject to the reporting requirements of either Section 13
or Section 15(d) of the Exchange Act of 1934, as amended, the period shall
instead be the period of thirty (30) calendar days following the date on which
the audited financial statements of AMG for such fiscal year are filed with the
Securities and Exchange Commission pursuant to such reporting requirements.
"Fair Market Value" shall mean the fair market value as reasonably
determined in good faith by the Board of Directors of the General Partner.
"For Cause" shall mean, with respect to the termination of an
Employee Stockholder, any of the following:
(a) the Employee Stockholder either has committed an act of
embezzlement or misappropriation against the Partnership or has (i) been
convicted by a court of competent jurisdiction, (ii) pleaded nolo contendere or
(iii) entered into a settlement with, or consented to the issuance of an order
to be issued by, any Governmental Authority, which settlement or order involves
any penalty, fine, admission of guilt or liability or other sanction, and
which, in the case of (i), (ii) or (iii), occurs in connection with any
proceeding involving (A) a violation of federal or state securities laws or (B)
a theft or other crime involving dishonesty;
(b) the Employee Stockholder has persistently and willfully neglected
his duties or has failed to spend sufficient amounts of his working time,
energy and skills so as to perform diligently and faithfully his
responsibilities and duties to the Partnership, after the Partnership has given
the Employee Stockholder written notice specifying such conduct by the Employee
Stockholder and giving the Employee Stockholder a reasonable period of time (not
less than thirty (30) days), to conform his conduct to such duties; or
(c) The Employee Stockholder has engaged in Prohibited Competition
Activity or violated or breached any material provision of his Non-Solicitation
Agreement or engaged in any of the activities prohibited by Section 3.6 hereof,
other than an isolated, insubstantial and inadvertent action which the Employee
Stockholder does not take in bad faith and does remedy promptly (and, in any
event, in not more than thirty (30) days) after receipt of notice of such
action given by the Partnership.
"Free Cash Flow" shall mean, for any period, ********** percent
(**%) of the Revenues From Operations of the Partnership for such period,
provided that if the compensation arrangements with respect to Skyline Fund, a
registered investment company for which the Partnership serves as investment
adviser are changed to reduce the expenses of the Fund borne by the Partnership,
then the percentage of Revenues from Operations that constitutes Free Cash Flow
shall be increased so that after such became expenses, the net result for the
Parties is unchanged.
"Free Cash Flow Expenditures" shall have the meaning specified in
Section 3.3(c).
"General Partner" shall have the meaning specified in the preamble
of this Agreement.
"Good Reason" with respect to any Employee Stockholder shall mean
any action by the General Partner that results in a breach by the Partnership or
the General Partner (x) of Section 2.4(c)(i) (change in principal office of the
Partnership), Section 2.9 (indemnification) or Section 7.1(a)(iv) (certain
transfers to Affiliates of the General Partner), (y) of the obligation to obtain
a Majority Vote under any of the following Sections: 2.3(c), 2.7(c), 3.1(a)
(only with respect to the last full sentence thereof), 5.3(b), 6.5(a), 6.5(b),
6.5(d), 7.1(a), 7.1(c), 7.2, 8.1(a)(i) or 10.3, or (z) of the obligation under
either of the last two sentences of Section 10.3 to obtain the consent of the
Limited Partner controlled by such Employee Stockholder; provided, however, that
if (a) such breach is not the result of bad faith of the General Partner, (b)
the General Partner in good faith investigates and, to the extent necessary to
satisfy the provisions of clause (c) of this definition, remedies such breach
reasonably promptly after receipt of notice of such breach given by such
Employee Stockholder, and (c) either (i) such breach (after the effects of any
remedy in accordance with the foregoing clause (b)) does not have a material
adverse effect on the Employee Stockholder or the Partnership, or (ii) a
Majority Vote (or, if applicable, consent of such Limited
3
<PAGE> 8
Partner) is obtained where such breach resulted from the failure to obtain such
vote or consent, then such breach shall not constitute Good Reason hereunder.
"Governmental Authority" shall mean any foreign, federal, state or
local court, governmental authority, agency or regulatory body.
"Holders" shall have the meaning specified in Section 4.1.
"Immediate Family" shall mean the spouse, parents, grandparents,
children and siblings of an individual.
"Independent Public Accountants" shall mean any independent
certified public accountant satisfactory to the General Partner and retained by
the Partnership.
"Initial Limited Partners" shall mean those Persons who are Limited
Partners on the Effective Date.
"Institutional Business" shall have the meaning specified in Section
2.6 of the Partnership Interest Purchase Agreement.
"Investment Company Act" shall mean the Investment Company Act of
1940, as it may be amended from time to time, and any successor to such Act.
"Investment Management Services" shall mean any services which
involve (a) the management, for a fee or other remuneration, of an investment
account or fund (or portions thereof or a group of investment accounts or
funds), or (b) the giving of advice, for a fee or other remuneration, with
respect to the investment and/or reinvestment of assets or funds (or any group
of assets or funds).
"IRS" shall mean the Internal Revenue Service of the United States
Department of the Treasury.
"Limited Partner" shall mean any Person who is or becomes a Limited
Partner pursuant to the terms hereof.
"Majority Vote" shall mean the affirmative approval by vote or
written consent of Limited Partners holding a majority of the outstanding Vested
Partnership Points then held by all Limited Partners (other than the General
Partner and its Affiliates).
"Mandatory Retirement" shall mean, with respect to an Employee
Stockholder, when that Employee Stockholder reaches age sixty-five (65);
provided, however, that with the consent of the General Partner and a Majority
Vote, Mandatory Retirement may be extended up to age sixty-eight (68) with
respect to any particular Employee Stockholder.
"NASD" shall have the meaning specified in Section 4.4.
4
<PAGE> 9
"Non Solicitation Agreement" shall mean a Non Solicitation/Non
Disclosure Agreement in form of Exhibit B hereto or in such other form and
substance as is satisfactory to the General Partner.
"Operating Cash Flow" shall mean, for any period, an amount equal to
the difference between Revenues From Operations of the Partnership for such
period and Free Cash Flow for such period.
"Partners" shall mean the General Partner and the Limited Partners,
unless otherwise indicated.
"Partnership" shall mean the partnership organized under the
Predecessor Agreement and continued under this Agreement, as the same may be
amended and/or restated from time to time.
"Partnership Act" shall mean the Delaware Revised Uniform Limited
Partnership Act (6 Del. C. Section 17-101 et seq.), as it may be amended from
time to time, and any successor to such Act.
"Partnership Interests" shall mean the interests (including Capital
Accounts and Partnership Points) of all the Partners in the Partnership.
"Partnership Interest Purchase Agreement" shall mean that certain
Partnership Interest Purchase Agreement dated as of June 6, 1995, by and among
the General Partner, the Partnership, Mesirow Asset Management, Inc., Mesirow
Financial Holdings, Inc., certain managers of Mesirow Asset Management, Inc. and
certain manager-owned corporations, as the same has been amended from time to
time prior to the date hereof.
"Partnership Points" shall mean as of any date, with respect to a
Partner, the aggregate number of Partnership Points (representing the right to
receive certain distributions after the Effective Date) of such Partner
(including both Vested Partnership Points and unvested Partnership Points) as
set forth on Exhibit A hereto, as amended from time to time in accordance with
its terms and the terms hereof, and as in effect on such date.
"Percentage Exchanged" shall have the meaning specified in Section
3.10(a).
"Permanent Incapacity" shall mean, with respect to an Employee
Stockholder, (a) the inability of the Employee Stockholder, by reason of injury,
illness or other similar cause, to have performed his duties and
responsibilities, for a continuous period of one hundred eighty (180) days (as
determined by a licensed physician agreed upon for the purpose by the General
Partner and such Employee Stockholder or his representative, or failing
selection of such physician within ten (10) days of a written request thereof by
either party to the other, then designated by an independent representative of
the American Medical Association) or (b) the incompetence, metal incapacity or
insanity of such Person (as determined by a licensed physician agreed upon for
the purpose by the General Partner and such Employee Stockholder or his
representative, or failing selection of such physician within ten (10) days of a
written request thereof by either party to the other, then designated by an
independent representative of the American Medical Association).
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If an Employee Stockholder's employment with the Partnership is terminated
because of the Permanent Incapacity of such Employee Stockholder, the date of
such termination shall be deemed to be the later of (x) the date such Permanent
Incapacity is finally determined, or (y) the date such Employee Stockholder's
employment with the Partnership is terminated.
"Person" shall mean any individual, partnership (general or
limited), corporation, limited liability company, limited liability partnership,
association, trust, joint venture, unincorporated organization, and any
government, governmental department or agency or political subdivision thereof.
"Predecessor Agreement" shall mean that certain Limited Partnership
Agreement of Skyline Asset Management, L.P. entered into on June 6, 1995 by and
among the Initial Limited Partners and Mesirow Asset Management, Inc., pursuant
to which this Partnership was formed, which partnership agreement is being
amended and restated by this Agreement.
"Prohibited Competitive Activity" shall mean any of the following
activities:
(a) directly or indirectly, whether as owner, part owner,
shareholder, partner, director, officer, trustee, employee, agent or consultant
for or on behalf of any Person, firm, corporation or other entity other than the
Partnership or an Affiliate of the Partnership, (i) providing Investment
Management Services with respect to any funds or investments with respect to
which the Partnership is performing Investment Management Services, or (ii)
soliciting any person or entity for the purpose of causing any funds or
investments with respect to which the Partnership provides Investment Management
Services to be withdrawn from such management; or
(b) directly or indirectly, whether as owner, part owner,
shareholder, partner, director, officer, trustee, employee, agent or consultant
for or on behalf of any Person, firm, corporation or other entity other than the
Partnership or an Affiliate of the Partnership, performing any Investment
Management Services.
"Purchase Date" shall have the meaning specified in Section 3.9(d).
"Put" shall have the meaning specified in Section 3.9(a).
"Put Price" shall have the meaning specified in Section 3.9(e).
"Registrable Securities" shall have the meaning specified in Section
4.2.
"Registration" shall have the meaning specified in Section 3.10(a).
"Registration Expenses" shall have the meaning specified in Section
4.4.
"Repurchase" shall mean a purchase or repurchase of Partnership
Interests made pursuant to Section 3.8(a).
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"Repurchase Closing Date" shall mean the date upon which payment is
made with respect to a Repurchase, or if payment is made in more than one
installment, the date upon which the first such installment is paid.
"Repurchased Partner" shall have the meaning specified in Section
3.8(a).
"Repurchase Price" shall have the meaning specified in Section
3.8(c).
"Retirement" shall mean, with respect to an Employee Stockholder,
the permanent cessation of such Employee Stockholder's active employment
performing Investment Management Services, after the earlier of (a) the date
such Employee Stockholder shall reach fifty-five (55) years of age, and (b) the
date such Employee Stockholder shall have been continuously employed, counting
both employment with the Partnership and prior employment by Mesirow Asset
Management, Inc., an Illinois corporation, for a period of twenty (20) years;
provided, however, that such retirement shall in no event be before the twelfth
anniversary of the Effective Date.
"Revenues From Operations" shall mean, for any period, the gross
revenues of the Partnership (except as set forth herein), determined on an
accrual basis in accordance with generally accepted accounting principles
consistently applied; provided, however, that Revenues From Operations shall be
determined without regard to (a) revenues from the sale, exchange or other
disposition of all, or a substantial portion of, the assets of the Partnership,
(b) revenues from the issuance by the Partnership of additional Partnership
Points, other Partnership Interests or other securities, and (c) payments
received pursuant to any insurance policies.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act " shall mean the Securities Act of 1933, as it may
be amended from time to time, and any successor to such Act.
"Selling Partner" shall have the meaning specified in Section
3.9(a).
"Suspension Period" shall have the meaning specified in Section
4.6(c).
"Transfer" shall have the meaning specified in Section 6.1.
"Treasury Regulations" shall mean the income tax regulations
promulgated under the Code, as such regulations may be amended from time to time
(including corresponding provisions of succeeding regulations).
"Vested Partnership Points" shall mean, at any time and with respect
to any Partner, the number of Partnership Points held by such Partner which have
vested at such time, as determined in accordance with the provisions of the
Agreement, including Exhibit A hereto, or which were fully vested when issued.
The number of Vested Partnership Points held by each Partner and the vesting
schedule with respect to any Partnership Points which are not vested, shall be
indicated
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on Exhibit A hereto, which Exhibit shall be updated by the General Partner as
additional Partnership Points are issued and/or vest from time to time in
accordance with the Agreement, including without limitation Exhibit A hereto.
In addition to the foregoing, other capitalized terms used in this
Agreement shall have the meaning ascribed thereto in the text of this Agreement.
ARTICLE II - ORGANIZATION AND GENERAL PROVISIONS.
SECTION 2.1 CONTINUATION OF PARTNERSHIP. The parties hereby continue
the partnership formed under the Predecessor Agreement, under and pursuant to
the Partnership Act and the terms of this Agreement. The rights, duties,
liabilities and obligations of the Partners, and the administration and
termination of this Partnership, shall be governed by the Partnership Act,
except as otherwise provided in this Agreement. The General Partner shall cause
the Partnership to comply with all requirements of the Partnership Act and to
qualify to do business as a limited partnership in any jurisdiction where the
General Partner shall deem it necessary, appropriate or desirable.
SECTION 2.2 NAME OF THE PARTNERSHIP. The name of the Partnership
shall be "Skyline Asset Management, L.P." or such other name as the General
Partner may from time to time determine. The General Partner shall cause to be
filed on behalf of the Partnership such partnership or assumed or fictitious
name certificates as the General Partner shall deem necessary, appropriate or
desirable.
SECTION 2.3 PURPOSES OF THE PARTNERSHIP. The Partnership was
organized and is continued for the following purposes:
(a) to engage in the business of providing Investment
Management Services and any and all activities reasonably related thereto;
(b) to make and perform all contracts and engage in all
activities and transactions and to do any and all things necessary or advisable
to carry out the foregoing purposes; and
(c) to engage in any other act or activity which is lawful
for partnerships organized under the Partnership Act and which is approved by
the General Partner and by a Majority Vote.
SECTION 2.4 PLACE OF BUSINESS; REGISTERED AGENT.
(a) The principal place of business of the Partnership shall
be 311 South Wacker Drive, Suite 4500, Chicago, Illinois 60606.
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(b) The Partnership's resident agent for service of process
in Delaware is c/o The Corporation Trust Company, Corporation Trust Center, 1209
Orange Street, Wilmington, New Castle County, Delaware 19801, and its registered
office in Delaware shall be in care of such resident agent.
(c) The General Partner may, at any time and from time to
time: (i) change the location of the Partnership's principal place of business
and establish such additional place or places of business of the Partnership as
it may determine, provided that if the principal place of business is to be
located outside of Chicago, Illinois, then such action may not be taken without
a Majority Vote, (ii) change the Partnership's registered office in Delaware,
and (iii) change the Partnership's resident agent for service of process in
Delaware; provided, however, that the General Partner shall promptly after any
such change give each Limited Partner notice of such change.
SECTION 2.5 DURATION OF THE PARTNERSHIP. The Partnership term shall
continue until December 31, 2095, unless extended or terminated earlier in
accordance with the provisions hereof. The Partnership's term may be extended by
the General Partner at any time and from time to time.
SECTION 2.6 TITLE TO PROPERTY. All property owned by the
Partnership, whether real or personal, tangible or intangible, shall be deemed
to be owned by the Partnership as an entity, and no Partner, individually, shall
have any ownership of such property.
SECTION 2.7 LIABILITY OF PARTNERS; NO DEFICIT RESTORATION
OBLIGATION.
(a) The General Partner shall have such liability for the
repayment, satisfaction and discharge of the debts, liabilities and obligations
of the Partnership as is provided by the Partnership Act for the general partner
of a limited partnership.
(b) A Limited Partner which receives the return of any part
of its Capital Contribution shall be liable to the Partnership for the amount of
its Capital Contribution so returned to the extent, and only to the extent,
provided by the Partnership Act. No Limited Partner shall otherwise be liable to
the Partnership, another Partner or any third party for the repayment,
satisfaction, or discharge of the Partnership's debts, liabilities, and
obligations or otherwise have any obligation to contribute money or any other
asset to or in respect of the Partnership, other than payment of such Limited
Partner's Capital Contribution and as otherwise specifically provided in this
Agreement.
(c) No Limited Partner with a deficit balance in its Capital
Account shall have any obligation to restore such deficit (or make any
contribution to the capital of the Partnership, or otherwise pay any amount,
with respect to such deficit), and such deficit shall not be considered as a
debt of such Limited Partner to the Partnership or to any other Partner for any
purpose whatsoever; provided, however, that such Limited Partner will be
required to eliminate such deficit to the extent that all or any part of any
such deficit is attributable to the allocation to such
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Limited Partner of any extraordinary cost or expense incurred by the Partnership
(as determined by the General Partner) with the concurrence of a Majority Vote.
SECTION 2.8 EXCULPATION OF LIABILITY. Neither the General Partner
nor any Limited Partner nor their respective agents or officers shall be liable
to the Partnership or the Partners except for material breaches of this
Agreement, gross negligence, willful malfeasance, fraud, and actions not taken
in good faith in the reasonable belief that such Person is acting in the best
interests of the Partnership.
SECTION 2.9 INDEMNIFICATION.
(a) The Partnership shall indemnify the Partners and their
agents and officers and agents and Officers of the Partnership, including any
such agents or officers who serve at the request of the Partnership as either
directors, officers or trustees of another organization in which the Partnership
has any interest as a security holder, creditor or otherwise (each an
"Indemnified Person") against all liabilities, losses and expenses, including,
but not limited to, amounts paid in satisfaction of judgments, in compromise
settlements, and fines, penalties and counsel fees, reasonably incurred in
connection with the defense or disposition of any action, suit or other
proceeding, whether civil or criminal, before any court or administrative or
legislative body, in which such Indemnified Person may be or may have been
involved as a party or otherwise or with which it or they may be or may have
been threatened, while in office or thereafter by reason of being or having been
such Indemnified Person or acting on behalf of the Partnership, including,
without limitation, acting as a partner or shareholder of another organization
in which the Partnership has any interest, or serving or having served at the
request of the Partnership as such director, officer or trustee; provided,
however, that indemnification shall not be paid hereunder with respect to any
matter as to which such Indemnified Person shall have been finally adjudicated
in any such action, suit or other proceeding, or otherwise by a court of
competent jurisdiction, to have committed an action of gross negligence, willful
malfeasance, or fraud in the conduct of its or their office or actions not taken
in good faith in the reasonable belief that such Indemnified Person is acting in
the best interests of the Partnership.
(b) Expenses, including reasonable fees and disbursements of
counsel, so incurred by the Indemnified Person shall be paid by the Partnership
in advance of the final disposition of any such action, suit or proceeding on
the condition that the amounts so paid shall be repaid to the Partnership if it
is ultimately determined that indemnification of such expenses is not authorized
hereunder. The Partnership may, if it deems appropriate, require any person for
whom such expenses are paid in advance of final disposition to deliver adequate
security to the Partnership for his obligation to repay such indemnification.
(c) The right of indemnification hereby provided shall not
be exclusive of or affect any other rights to which the Indemnified Person may
be entitled. Nothing contained in this Section 2.9 shall limit any lawful rights
to indemnification existing independently of this Section. The right of
indemnification provided by this Section 2.9 shall not be construed to increase
the liability of the Limited Partners as set forth in Section 2.7.
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(d) The provisions of this Section 2.9 are intended for the
benefit of and shall be enforceable by the respective Indemnified Persons.
SECTION 2.10 FISCAL YEAR. The fiscal year of the Partnership shall
be the twelve-month period ending on December 31 unless otherwise determined by
the General Partner.
ARTICLE III - MANAGEMENT OF THE PARTNERSHIP.
SECTION 3.1 MANAGEMENT IN GENERAL
(a) The management and control of the business of the
Partnership shall be vested in the General Partner. Except to the extent
otherwise provided in Section 3.3 hereof (recognizing expressly that the General
Partner has delegated only specific responsibilities pursuant to Sections
3.3(a), 3.3(b) and 3.3(c) hereof, and acknowledging that the General Partner
will have all such rights, duties, obligations and liabilities under Delaware
law as derive from being the general partner of a Delaware limited partnership,
and under the provisions of this Agreement), the General Partner, acting alone
with no other approval or authorization of the Partners (except to the extent
that any specific provision of this Agreement requires a Majority Vote), shall
have the power and authority, in the name of and on behalf of the Partnership,
to perform all acts and do all things which, in its sole discretion, it deems
necessary or desirable to conduct the business of the Partnership, including,
without limitation, (i) to enter into, execute, amend, supplement, acknowledge
and deliver any and all contracts, agreements, leases or other instruments for
the operation of the Partnership's business; and (ii) in general to do all
things and execute all documents necessary or appropriate to conduct the
business of the Partnership as set forth in Section 2.3 hereof, or to protect
and preserve the Partnership's assets. Notwithstanding any other provision of
law or of this Agreement, the General Partner shall not, without a Majority
Vote, cause the Partnership to:
(i) sell, lease, exchange, transfer or otherwise
dispose of all or substantially all of the Partnership's
assets in a single transaction or series of related
transactions;
(ii) pledge all or substantially all of the
Partnership's assets (provided, however, that nothing herein
shall limit the General Partner's right to pledge or otherwise
encumber any Partnership Interests it holds);
(iii) guarantee the debts or obligations of any other
entity;
(iv) directly or indirectly, merge, consolidate or
engage in any similar reorganization;
(v) amend or modify or repeal any provision of the
Certificate of Limited Partnership;
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(vi) purchase, lease, exchange or otherwise acquire
assets (including securities), directly or indirectly, in a
single transaction or series of released transactions having a
value in excess of $100,000;
(vii) incur indebtedness for borrowed money in excess
of $250,000; or
(viii) enter into any transaction with a Partner or
any Affiliate of a Partner.
(b) The Limited Partners, as such, shall not participate in
the control of the business of the Partnership within the meaning of Section
17-303(a) of the Partnership Act. Notwithstanding the foregoing, a Limited
Partner may consult with and advise the General Partner with respect to any
matter, including the business of the Partnership, and do all other acts
contemplated by Section 17-303(b) of the Partnership Act. An Employee
Stockholder may serve as an employee of the Partnership, and, as an employee may
be given the generic name "Officer."
SECTION 3.2 OFFICERS OF THE PARTNERSHIP AND MANDATORY RETIREMENT.
(a) The Officers of the Partnership shall consist of a
President/Chief Executive Officer (the "CEO"), who may be appointed and removed
only by the General Partner, and such other subordinate officers as the General
Partner and the CEO, acting jointly, may determine are necessary or appropriate.
William M. Dutton is hereby appointed as the CEO of the Partnership.
(b) No employee or Officer of the Partnership shall be held
personally liable, by virtue of his status as an employee or Officer, for any
losses, debts or obligations of the Partnership.
(c) When an Employee Stockholder reaches Mandatory
Retirement, his employment by the Partnership shall terminate.
SECTION 3.3 OPERATION OF THE BUSINESS OF THE PARTNERSHIP.
(a) The General Partner hereby delegates to the Officers of
the Partnership authority to manage the day-to-day operations and activities of
the Partnership with respect to the provision of Investment Management Services
and the general administration of the Partnership, including the power, in the
name and on behalf of the Partnership, to:
(i) determine the use of the Operating Cash Flow as
set forth in Section 3.3(c) below;
(ii) execute such documents and do such acts as are
necessary to register or qualify the Partnership or any fund
for which it provides Investment Management Services, or the
offering of interests in such a fund, under applicable Federal
and state securities laws;
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(iii) open, maintain and close bank accounts and draw
checks or other orders for the payment of monies;
(iv) enter into contracts and other agreements with
respect to the provision of Investment Management Services and
execute other instruments, documents or reports on behalf of
the Partnership in connection therewith;
(v) execute, or cause the execution of, transactions
in, and hold and exercise all rights, powers and privileges
with respect to, securities and other instruments on behalf of
clients of the Partnership; and
(vi) act for and on behalf of the Partnership in all
matters incidental to the foregoing;
provided, however, that without the prior written consent of the General Partner
(which consent expressly references this Section of this Agreement), the
Officers shall not cause the Partnership (x) to incur expenses or obligations
(including, without limitation, salaries and bonuses) that exceed its ability to
pay or provide for them out of its Operating Cash Flow on a current basis or (y)
to enter into any contract or agreement which, at the time entered into, can
reasonably be foreseen (including taking into account current, long-term,
contingent and all other obligations of the Partnership at such time) to render
it impossible for the Partnership, in any future period, to operate in the
ordinary course, consistent with past practice, with its aggregate expenses
funded entirely out of Operating Cash Flow.
(b) Subject to the limitations set forth in the proviso set
forth in the last clause of Section 3.3(a) above, in addition to general
authority as an Officer as described in Section 3.3(a) above and the authority
with respect to Operating Cash Flow as described in Section 3.3(c) below, the
CEO shall have the specific authority necessary to:
(i) make all decisions relating to the hiring and
termination of any employees (including Officers) or personnel
of, and consultants to, the Partnership;
(ii) make all decisions regarding the determination
and negotiation of the compensation and benefits arrangements
of all consultants, employees, Officers and personnel
(including the CEO) of the Partnership, including the
determination as to (A) base salary and bonuses of such
consultants, employees, Officers and personnel (including the
CEO), and (B) the terms of employee benefit plans or similar
arrangements to be established or maintained by the
Partnership, provided that in making all decisions, the CEO
will give fair and reasonable consideration to such
individual's responsibilities and position with the
Partnership as well as his or her overall contribution to the
business and financial results of the Partnership;
(iii) make all decisions relating to the overall
portfolio management and marketing strategy relating to the
investment advisory and investment management business and
activities of the Partnership; and
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(iv) arrange for the audit of the Partnership and
distribution of reports with respect thereto and of financial
statements to the Partners.
(c) The Operating Cash Flow of the Partnership for any
period shall be used by the Partnership to provide for and pay its business
expenses and expenditures as determined by the CEO of the Partnership. In
furtherance and not in limitation of the foregoing, it is expressly agreed that
the Operating Cash Flow of the Partnership for any period shall be used as
determined by the CEO of the Partnership in his sole discretion to provide for
compensation and benefits to employees of the Partnership, including the
Officers of the Partnership. Free Cash Flow may be used to provide for and pay
the business expenses and expenditures of the Partnership to the extent
specified in Section 3.3(d) with respect to key-man insurance and in Section
9.5(c) with respect to unincorporated business taxes and otherwise as agreed to
in writing by the General Partner and the Limited Partners by a Majority Vote
(any such use being referred to herein as a "Free Cash Flow Expenditure").
(d) The Partnership will maintain, in full force and effect,
such insurance as is customarily maintained by companies of similar size in the
same or similar business (including, without limitation, errors and omissions
liability insurance), the premiums on which will be paid out of Operating Cash
Flow. The Partnership will also maintain such key-man life insurance policies on
each Employee Stockholder as the General Partner may deem necessary or
desirable, from time to time. The Partnership will receive the proceeds of these
key-man policies, and the Partners agree with each other and the Partnership
that the Partnership will pay the premiums on any such key-man policies out of
Free Cash Flow.
SECTION 3.4 COMPENSATION AND EXPENSES OF THE PARTNERS. Stockholders,
officers, directors, partners and agents of Partners (including, without
limitation, any Employee Stockholder) may serve as employees and/or Officers of
the Partnership and be compensated therefor as determined pursuant to Section
3.3(c). The Partnership shall pay and/or reimburse the General Partner out of
Operating Cash Flow for all reasonable expenses incurred by the General Partner
in connection with the operation of the Partnership; provided, however, that the
General Partner's regular overhead expenses shall not be reimbursed by the
Partnership.
SECTION 3.5 OTHER BUSINESS OF THE GENERAL PARTNER AND ITS
AFFILIATES. The General Partner and its Affiliates may engage, independently or
with others, in other business ventures of every nature and description,
including the acquisition, creation, financing, trading in, and operation and
disposition of interests in investment managers and other businesses that may be
competitive with the Partnership's business. Neither the Partnership nor any of
the Limited Partners shall have any right in or to any other such ventures by
virtue of this Agreement or the Partnership created hereby, nor shall any such
activity be deemed wrongful or improper by the General Partner or such
Affiliates. The General Partner shall not be obligated to present any
opportunity to the Partnership even if such opportunity is of such a character
which, if presented to the Partnership, would be suitable for the Partnership.
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SECTION 3.6 NON SOLICITATION AND NON DISCLOSURE BY LIMITED PARTNERS
AND EMPLOYEE STOCKHOLDERS.
(a) As a condition to the admission of each Limited Partner
to the Partnership, each such Limited Partner and each Employee Stockholder
thereof has executed and delivered a Non Solicitation Agreement. In furtherance
of the purposes thereof, each Limited Partner and each Employee Stockholder
agrees, for the benefit of the Partnership and each other Partner, to observe
the provisions of this Section 3.6. This provisions of this Section 3.6 shall
not be deemed to limit any of the rights of the Partnership under the applicable
Non Solicitation Agreement. The provisions of this Section 3.6 shall not prevent
any Employee Stockholder from (i) making passive investments in a competitive
enterprise the shares of which are publicly traded provided his holdings
therein, together with any holdings of his Affiliates and his Immediate Family,
do not exceed five percent (5%) of the outstanding shares or comparable
interests in such entity, or (ii) providing Investment Management Services to
members of his Immediate Family.
(b) Each Limited Partner and each Employee Stockholder
agrees, for the benefit of the Partnership and each other Partner, not to engage
in any Prohibited Competitive Activity while employed by the Partnership or any
of its Affiliates.
(c) In furtherance and not in limitation of the provisions
of Section 3.6(b), each Limited Partner and each Employee Stockholder agrees,
for the benefit of the Partnership and each other Partner, that such Limited
Partner or Employee Stockholder shall not, without the express written consent
of the General Partner, during the period beginning on the date such Limited
Partner becomes a Limited Partner, and until the date which is two (2) years
after the termination of such Employee Stockholder's employment with the
Partnership and its Affiliates (or, such shorter period as may be determined
pursuant to Section 3.6(e)): (A) engage in any Prohibited Competitive Activity
of the type described in clause (a) of the definition thereof (provided that,
except as described in clause (B) hereof, during such period the Employee
Stockholder may engage in activity of the type described in clause (b) of the
definition of Prohibited Competitive Activity); (B) with respect to any person
or entity that is a client of the Partnership (for this purpose, any clients of
the Partnership at the date of termination of the Employee Stockholder's
employment or at any time during the six (6) months immediately preceding the
date of termination shall be deemed a "client of the Partnership") or any person
or entity with whom the Partnership was actively attempting to develop an
investment advisory or investment management relationship at any time during the
six (6) months immediately preceding the date of termination, engage in any
Prohibited Competitive Activity of the type described in clause (b) of the
definition thereof; or (C) solicit or induce any employee or former employee of
the Partnership or any of its Affiliates to terminate his relationship
therewith, or hire any such employee who was employed by the Partnership or its
Affiliates at any time during the six (6) months immediately preceding the
termination of the Employee Stockholder's employment.
(d) Each Limited Partner and each Employee Stockholder
agrees that any and all presently existing investment advisory business of the
Partnership and its Affiliates and the Institutional Business and all business
developed by the Partnership and its Affiliates, or any other employee of the
Partnership, including without limitation, all investment advisory contracts,
fees,
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commissions, compensation records, client lists, agreements, and any other
incident of any business developed by the Partnership or earned or carried on by
the Employee Stockholder for the Partnership shall be the exclusive property of
the Partnership or such Affiliate as applicable, for its or their sole use, and
(where applicable) shall be payable directly to the Partnership or such
Affiliate and all trade names, trademarks and service marks under which the
Partnership does business, and any combinations or variations thereof and all
related logos, are and shall be the exclusive property of the Partnership. Each
Limited Partner and each Employee Stockholder acknowledges that, in the course
of performing services hereunder and otherwise, the Employee Stockholder has
had, and will from time to time have, access to confidential records, data,
client lists, trade secrets and similar confidential information owned or used
in the course of business by the Partnership or its Affiliates. Each Limited
Partner and each Employee Stockholder agrees always to keep secret and not ever
publish, divulge, furnish, use or make accessible to anyone (otherwise than (i)
in the regular business of the Partnership or any Affiliate thereof at the
Partnership's request or (ii) upon notice to the Partnership, as otherwise
required under applicable securities laws in the opinion of counsel to the
Partnership (which counsel shall be experienced in securities laws) or pursuant
to a deposition, interrogatory, subpoena, civil investigation demand or similar
process) any knowledge or information of a confidential or proprietary nature
with respect to any trade secrets, proprietary plans, clients, client
requirements, service providers, business operations or techniques of the
Partnership or any Affiliate thereof. At the termination of the Employee
Stockholder's services to the Partnership, all data, memoranda, client lists,
notes, programs and other papers, items and tangible media, and reproductions
thereof relating to the foregoing matters in the possession or control of the
Employer Stockholder (or any Limited Partner in which he holds an interest)
shall be returned to the Partnership and remain in its possession (except where
the return of such items shall be unreasonable or impractical in relation to the
importance or confidentiality of such items).
(e) In the event that an Employee Stockholder and the
General Partner are in good faith disputing whether the termination of the
Employee Stockholder by the Partnership, with the consent of the General
Partner, is For Cause, then the term of the obligation of the applicable Limited
Partner and such Employee Stockholder under Section 3.6(c) shall be reduced so
that such term expires on the date that is the earliest of (i) one year after
such termination, (ii) the date on which a court of competent jurisdiction has
rendered a final determination that such termination is not For Cause hereunder,
or (iii) a date mutually agreed upon by the Employee Stockholder and the General
Partner.
(f) Unless Section 3.6(e) is applicable, in the event that
the employment of an Employee Stockholder with the Partnership is terminated by
the Partnership, with the consent of the General Partner, for no reason or for
any reason other than For Cause, then such Employee Stockholder and the Limited
Partner controlled by such Employee Stockholder shall have no obligation
pursuant to Section 3.6(c) after such termination.
SECTION 3.7 REMEDIES UPON BREACH. Each Limited Partner and each
Employee Stockholder agrees that any breach of the provisions of Section 3.6 or
of the Non Solicitation Agreement by such Limited Partner or Employee
Stockholder could cause irreparable damage to the Partnership and the other
Partners. The Partnership and any of the Partners shall have the
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right to an injunction or other equitable relief (in addition to other legal
remedies) to prevent any violation of a Limited Partner's or Employee
Stockholder's obligations hereunder or thereunder.
SECTION 3.8 REPURCHASE UPON TERMINATION OF EMPLOYMENT.
(a) (i) In the event that the employment by the Partnership
of any Employee Stockholder terminates for any reason, the General Partner shall
purchase all the Vested Partnership Interests held by the Limited Partner of
which such employee was the Employee Stockholder pursuant to the terms of this
Section 3.8 and (ii) in the event that a Limited Partner has filed a petition
under the United States Bankruptcy Code, or sixty (60) days after the filing by
another person against such Limited Partner of a petition under the United
States Bankruptcy Code which petition is not dismissed, or if such Limited
Partner has ceased to carry on a business because of a voluntary liquidation
(such date of filing, sixtieth day or effective date of liquidation, the
"Bankruptcy Event"), the General Partner shall purchase all the Vested
Partnership Interests held by such Limited Partner pursuant to the terms of this
Section 3.8 (a Limited Partner under either (i) or (ii), the "Repurchased
Partner"); provided, however, that if the termination of the Employee
Stockholder pursuant to (i) above occurs because of the death of such Employee
Stockholder, the Partnership shall first apply the proceeds of any key-man life
insurance policies maintained by the Partnership on the life of such Employee
Stockholder to effect such Repurchase and the General Partner shall purchase any
remaining portion of such Partnership Interest. If a Repurchased Partner holds
any Partnership Points that, upon either (x) the termination of employment with
the Partnership of the Employee Stockholder that controls such Repurchased
Partner or (y) a Bankruptcy Event, have not become Vested Partnership Points
hereunder, then such unvested Partnership Points shall terminate, with no
further liability or obligation of the Partnership with respect thereto
(provided however that certain terminated Partnership Points may be reissued in
accordance with the provisions of Exhibit A and, to the extent applicable,
Section 6.5(e)).
(b) Payment with respect to a Repurchase shall be made in
cash in a single installment on a date specified by the General Partner not more
than ninety (90) days after the termination of employment of the relevant
Employee Stockholder or the Bankruptcy Event, as applicable; provided, however,
that (i) if such Employee Stockholder's employment with the Partnership is
terminated because of the death of such Employee Stockholder, then, at the
election of the General Partner, the Repurchase Closing Date may be a later date
that is as soon as reasonably practicable after the Partnership has received the
proceeds of any key-man life insurance policy maintained by the Partnership on
the life of such Employee Stockholder, and (ii) if an Employee Stockholder's
employment with the Partnership is terminated because of such Employee
Stockholder's Permanent Incapacity, then the Repurchase Price shall be paid in
three (3) equal installments as follows: (A) the first such installment shall be
paid on the later of the date such Employee Stockholder's Permanent Incapacity
is finally determined or the date such Employee Stockholder's employment with
the Partnership is terminated, (B) the second installment shall be paid one (1)
calendar year after such date, and (C) the third installment shall be paid two
(2) calendar years after such date.
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(c) The purchase price for the Repurchase (the "Repurchase
Price") shall be calculated as of the date of termination of the Employee
Stockholder's employment with the Partnership in accordance with the following
provisions:
(i) If the Employee Stockholder's employment with the
Partnership is terminated because of the death, Permanent Incapacity or
Retirement of such Employee Stockholder, or if such Employee
Stockholder is terminated by the Partnership other than For Cause or if
the Employee Stockholder terminates his employment with the Partnership
for Good Reason, then the Repurchase Price shall be the sum of (A)
***********************************************************************
***********************************************************************
***********************************************************************
In the event that any Limited Partner has received payment of the
Repurchase Price in connection with the Permanent Incapacity of its
Employee Stockholder and such Employee Stockholder resumes his active
employment performing Investment Management Services at a subsequent
date, then such Limited Partner and its Employee Stockholder, jointly
and severally, shall be liable for the return of an amount equal to the
difference between the Repurchase Price actually paid and the amount
that would have been paid in accordance with paragraph (iv) below.
(ii) If the Employee Stockholder is terminated For Cause, then
the Repurchase Price shall be the lesser of (A) the aggregate balance
of the Capital Account of the Limited Partner of which such employee
was the Employee Stockholder on the date of termination of the Employee
Stockholder's employment with the Partnership For Cause or (B) the
amount determined pursuant to paragraph (iv) below.
(iii) If the Limited Partner has experienced a Bankruptcy
Event, then the Repurchase Price shall be the lesser of (A) the
aggregate balance of such Limited Partner's Capital Account on the date
of the Bankruptcy Event or (B) the amount determined pursuant to
paragraph (iv) below.
(iv) In all other cases (including, without limitation, the
resignation of an Employee Stockholder other than for Good Reason), the
Repurchase Price shall be the sum of (A) ****************[The
remainder of this subsection has been omitted pursuant to the
confidential treatment request referred to on the cover page hereto.
The omitted portions have been filed separately with the Commission.]
***************
(d) The rights of the General Partner, the Partnership and
their assigns hereunder are in addition to and shall not affect any other rights
which the General Partner, the Partnership or their assigns may have to
repurchase Partnership Interests (including, without limitation, pursuant to any
Vesting Agreement).
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<PAGE> 23
(e) As of the Repurchase Closing Date, the Limited Partner
shall cease to hold any Partnership Interests, shall no longer have any rights
with respect to the Partnership Interests previously held, and such Limited
Partner shall be deemed to have withdrawn from the Partnership and shall cease
to be a Partner of the Partnership and shall no longer have any rights
hereunder.
(f) The General Partner may, with a Majority Vote, assign
any or all the General Partner's rights and obligations under this Section 3.8,
in one or more instances, to the Partnership; provided, however, that no
approval of Limited Partners shall be needed in connection with a Repurchase
using the proceeds of a key-man life insurance policy in accordance with Section
3.8(a).
(g) Each Partner hereby agrees for the benefit of each other
Partner and the Partnership that when the Employee Stockholder of such Partner,
if any, reaches Mandatory Retirement the General Partner shall purchase all
Partnership Interests held by the Limited Partner of which such employee was the
Employee Stockholder, pursuant to the provisions of this Section 3.8 as if such
Employee Stockholder had elected Retirement regardless of whether such Employee
Stockholder's employment is actually terminated.
SECTION 3.9 PUTS.
(a) Each Initial Limited Partner (a "Selling Partner") may,
subject to the terms and conditions set forth in this Section 3.9, cause the
General Partner to purchase portions of the vested Partnership Interests held by
such Limited Partner (each, a "Put").
(b) On any five (5) separate annual occasions starting with
the Exercise Period for the fiscal year ending December 31, 2000 and continuing
in each subsequent annual Exercise Period, through and including the Exercise
Period for the fiscal year ending December 31, 2009, each Selling Partner may
cause the General Partner to purchase, and the General Partner agrees to buy,
all or any portion of the Partnership Interests then held by such Selling
Partner that are Vested Partnership Points as of December 31 of the fiscal year
preceding the applicable Exercise Period; provided, however, that the amount
subject to repurchase upon the first such occasion shall not exceed the sum of
(A) one-fith (1/5) of the aggregate Vested Partnership Points held by such
Selling Partner (and a proportionate share of such Partner's Capital Account)
on the Effective Date plus the aggregate Vested Partnership Points (and a
proportionate share of such Partner's Capital Account) issued to such Limited
Partner after the Effective Date pursuant to Section 6.5(e) (the "Annual Put
Limit") plus (B) three-twentieths (3/20) of the aggregate Vested Partnership
Points held by such Selling Partner (and a proportionate share of such
Partner's Capital Account) on the Effective Date plus the aggregate Vested
Partnership Points (and a proportionate share of such Partner's Capital
Account) issued to such Limited Partner after the Effective Date pursuant to
Section 6.5(e) (the "Carry-Over Put Limit"). If the Selling Partner makes a Put
of less than the total Carry-Over Put Limit that he is permitted to Put on any
occasion, then the remainder of that Carry-Over Put Limit may be carried
forward and Put at any subsequent occasion under this Section 3.9(b) or under
Section 3.9(c), provided that the amount subject to repurchase on any Put after
the first Put shall not exceed the sum of (X) the Annual Put
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<PAGE> 24
Limit, plus (Y) any portion of the Carry-Over Put Limit that has not previously
been Put by such Partner.
(c) On any five (5) separate annual occasions starting
with the Exercise Period for the fiscal year ending December 31, 2010 and
continuing in each subsequent annual Exercise Period, through and including the
Exercise Period for the fiscal year ending December 31, 2020, each Selling
Partner may cause the General Partner to purchase and the General Partner
agrees to buy, all or any portion of the Partnership Interests then held by
such Selling Partner (and a proportionate share of such Partner's Capital
Account) that are Vested Partnership Points as of December 31 of the fiscal
year preceding the applicable Exercise Period; provided, however, that the
amount subject to repurchase upon any such occasion shall not exceed the
greater of (i) the Annual Put Limit or (ii) one-fith (1/5) of the Partnership
Points held by such Selling Partner (and a proportionate share of such
Partner's Capital Account) on December 31, 2010 plus the aggregate Vested
Partnership Points (and a proportionate share of such Partner's Capital
Account) issued to such Limited Partner after the Effective Date pursuant to
Section 6.5(e).
(d) If a Selling Partner elects to cause the General Partner
to purchase Partnership Interests pursuant to paragraph (b) or (c) above, during
the Exercise Period such Selling Partner and its Employee Stockholder shall
provide the Partnership and the General Partner with a written notice to the
effect that it is electing to exercise the Put and stating the number of
Partnership Points included in the Partnership Interest to be sold in the Put.
Each Put shall close on the first business day which is at least sixty (60) days
after the receipt of the Partnership's audited financial statements for the
applicable fiscal year or such earlier closing date as is agreed to in writing
by the General Partner (each, a "Purchase Date").
(e) The purchase price for a Put (the "Put Price") shall be
(i) **************************************************************************
******************************************************************************
******************************************************************************
The Put Price shall be paid by the General Partner on the Purchase Date by
certified check to the Selling Partner, against delivery of such documents or
instruments of transfer as may reasonably be requested by the General Partner.
(f) The General Partner may, with a Majority Vote, assign
any or all the General Partner's rights and obligations under this Section 3.9,
in one or more instances, to the Partnership.
(g) As of any Purchase Date, the Limited Partner shall cease
to hold the Partnership Interests to be purchased on the Purchase Date pursuant
to the Put and shall no longer have any rights with respect to such Partnership
Interests previously held.
(h) In the event that any Additional Limited Partner is
admitted to the Partnership under the circumstances contemplated by Section
6.5(e), each such Additional Limited Partner may be granted the right, by the
CEO in his sole discretion, to Put his vested Partnership Interests subject to
the terms and conditions set forth in this Section 3.9; provided, however, that
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<PAGE> 25
(i) the five separate annual occasions on which such Additional Limited
Partner may cause Partnership Interests to be purchased in accordance with
Section 3.9(b) shall start with the Exercise Period for the fiscal year (ending
December 31) during which occurs the fifth anniversary of the admission of such
Limited Partner to the Partnership and shall continue in each subsequent annual
Exercise Period through (and including) the Exercise Period for the fiscal year
(ending December 31) during which occurs the fourteenth anniversary of the
admission of such Limited Partner to the Partnership; and (ii) the five
separate annual occasions on which such Additional Limited Partner may cause
Partnership Interests to be purchased in accordance with Section 3.9(c) shall
start with the Exercise Period for the fiscal year (ending December 31) during
which occurs the fifteenth anniversary of the admission of such Limited Partner
to the Partnership and shall continue in each subsequent annual Exercise Period
through (and including) the Exercise Period for the fiscal year (ending
December 31) during which occurs the twenty-fifth anniversary of the admission
of such Limited Partner to the Partnership.
SECTION 3.10 EXCHANGE RIGHTS OF LIMITED PARTNERS OF THE PARTNERSHIP.
(a) If (i) AMG, as General Partner, has the obligation to
purchase Partnership Interests pursuant to Section 3.9 from a Selling Partner
which is an Initial Limited Partner, and (ii) AMG has completed a registration
of shares of its common stock ("AMG Stock") for sale under the Securities Act
(other than a registration on Form S-8 (or its then equivalent form) or a
registration effected solely to implement an employee benefit plan or
registration on a form not available for registering securities for sale to the
public) (a "Registration"), then such Selling Partner may elect to cause AMG to
pay up to one-half of the Put Price in shares of AMG Stock. The percentage of
the Put Price paid in shares of AMG Stock is referred to as the "Percentage
Exchanged."
(b) An election under this Section 3.10 must be made by the
Selling Partner in the written notice contemplated by Section 3.9(d), which
election, once made, shall be irrevocable without the prior written consent of
AMG.
(c) The number of shares of AMG Stock which may be exchanged
shall be equal to the number of shares of AMG Stock that represents a percentage
interest in AMG's earnings (after giving effect to such issuance or exchange)
before depreciation, amortization and taxes that is equal to (i) the Put Price,
multiplied by the product of (A) the Percentage Exchanged times (B) seventy-five
one-hundredths (.75), divided by (ii) an amount equal to the sum of (A)
********** times AMG's earnings before depreciation, amortization and taxes for
the twenty-four (24) month period ending on the last day of the most recently
completed fiscal year (determined in accordance with generally accepted
accounting principles, consistently applied) plus (B) the product of the Put
Price times the Percentage Exchanged.
(d) If AMG completes a Registration, AMG shall, as soon as
reasonably practicable, provide notice thereof to each Limited Partner.
SECTION 3.11 NO EMPLOYMENT OBLIGATION. Each Limited Partner and each
Employee Stockholder acknowledges that neither this Agreement nor the provisions
of the Non Solicitation
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<PAGE> 26
Agreement create an obligation on the part of the Partnership to continue the
employment of an Employee Stockholder with the Partnership.
SECTION 3.12 MISCELLANEOUS. Each Limited Partner and each Employee
Stockholder agrees that the enforcement of the provisions of Sections 3.6, 3.7,
3.8 and 3.11, and the provisions of the Non Solicitation Agreements is necessary
to ensure the protection and continuity of the business of the Partnership for
the benefit of each of the Partners. Each Limited Partner and each Employee
Stockholder agrees that, due to the proprietary nature of the Company's
business, the restrictions set forth in Section 3.6 hereof and in the Non
Solicitation Agreements are reasonable as to duration and scope. Each Limited
Partner and each Employee Stockholder acknowledges that the obligations and
rights under this Article III shall survive the termination of the employment of
an Employee Stockholder with the Partnership and/or the withdrawal or removal of
a Limited Partner from the Partnership, regardless of the manner of such
termination in accordance with the provisions hereof and of the relevant Non
Solicitation Agreement.
ARTICLE IV - REGISTRATION RIGHTS.
SECTION 4.1. PIGGY-BACK REGISTRATIONS. If at any time or times
following the completion of its initial public offering, AMG shall determine to
complete a Registration (which, as defined in Section 3.10(a), excludes a
registration on Form S-8 (or its then equivalent form) or a registration
effected solely to implement an employee benefit plan or registration on a form
not available for registering securities for sale to the public) other than on
Form S-4 (or its then equivalent form) and other than with respect to securities
to be issued solely in connection with any acquisition of any securities or
assets of any entity or business, then AMG will promptly (and in no event less
than twelve (12) days prior to the filing of a registration statement with the
SEC with respect to such Registration) give written notice thereof to the
Selling Partners which are holders of Registrable Securities (as hereinafter
defined) then outstanding (the "Holders"), and, subject to the terms and
conditions of this Article IV, will use all commercially reasonable efforts to
effect the Registration under the Securities Act of all Registrable Securities
which the Holders request in a writing delivered to AMG within ten (10) days
after the notice given by AMG. AMG shall have the right to postpone or withdraw
any Registration without any obligation to any Holder.
SECTION 4.2. REGISTRABLE SECURITIES. For the purposes of this
Article IV, the term "Registrable Securities" shall mean any AMG Stock held by a
Selling Partner which was acquired by such Selling Partner pursuant to the terms
of Section 3.10(a), and any equity securities issued or issuable with respect to
such AMG Stock by way of a stock dividend or stock split or in connection with a
combination of shares.
SECTION 4.3. FURTHER OBLIGATIONS OF AMG. Whenever under the
preceding sections of this Article IV AMG is required hereunder to register
Registrable Securities, AMG agrees that it shall also do the following:
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<PAGE> 27
(a) use all commercially reasonable efforts to prepare
diligently for filing with the SEC a registration statement and such
amendments and supplements to such registration statement and the
prospectus used in connection therewith as may be necessary for the
duration of such Registration;
(b) use all commercially reasonable efforts to maintain
the effectiveness of any registration statement pursuant to which
any of the Registrable Securities are being sold on a delayed or
continuous basis under Rule 415 (or any successor or similar rule)
under the Securities Act (other than a registration statement in
connection with an underwritten offering) until the earlier of (i)
the completion of the distribution of all Registrable Securities
offered pursuant thereto or (ii) ninety (90) days after the
effective date of such registration statement, provided that if a
Suspension Period has occurred during the pendency of a
Registration, AMG shall in good faith use reasonable efforts to
extend the effectiveness of such Registration so that there are
ninety (90) days during which such Registration is effective and a
Suspension Period is not in effect.
(c) furnish to each selling Holder such copies of each
preliminary and final prospectus and such other documents as such
Holder may reasonably request to facilitate the public offering of
its Registrable Securities in accordance with customary practices;
and
(d) use all commercially reasonable efforts to register
or qualify its Registrable Securities covered by said registration
statement under the securities or "blue-sky" laws of such
jurisdictions as any selling Holder may reasonably request, provided
that AMG shall not be required to register in any jurisdiction which
requires it to qualify to do business (unless it is otherwise so
qualified) or subject itself to general service of process (unless
it is otherwise so subject).
SECTION 4.4. REGISTRATION EXPENSES. Reasonable expenses incident to
AMG's performance of or compliance with this Article IV, including SEC and
securities exchange or National Association of Securities Dealers, Inc. ("NASD")
registration and filing fees, fees and expenses of compliance with securities or
blue sky laws, printing expenses, fees and disbursements of counsel for AMG and
its independent certified public accountants incurred in connection with each
registration hereunder (but not including any fees or disbursements of counsel
for the Holders, or any underwriting fees, discounts or commissions attributable
to the sale of Registrable Securities) (all such included expenses being herein
called "Registration Expenses") will be borne by AMG.
SECTION 4.5. INDEMNIFICATION; CONTRIBUTION.
(a) Indemnification. Incident to any registration statement
referred to in this Article IV, and subject to applicable law, AMG will
indemnify each underwriter, each Holder of Registrable Securities so registered,
and each person controlling any of them ("Controlling Person") against all
claims, losses, damages and liabilities, including legal and other expenses
reasonably incurred in investigating or defending against the same, arising out
of any untrue
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<PAGE> 28
statement of a material fact contained therein, or any omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, or arising out of any violation by AMG of the
Securities Act, any other federal securities laws, any state securities or
"blue-sky" laws or any rule or regulation thereunder in connection with such
registration, except insofar as the same may have been caused by an untrue
statement or omission based upon information furnished in writing to AMG by or
on behalf of such underwriter, Holder or Controlling Person expressly for use
therein, and with respect to such untrue statement or omission in the
information furnished in writing to AMG by or on behalf of such underwriter,
Holder or Controlling Person, such underwriter, Holder or Controlling Person so
providing such information to AMG (or on whose behalf such information was so
provided) will indemnify AMG, its directors and officers, and the other
underwriters, Holders and Controlling Persons against any losses, claims,
damages, expenses or liabilities to which any of them may become subject to the
same extent.
(b) Contribution. If the indemnification provided for in
this Section 4.5 from the indemnifying party is unavailable to an indemnified
party hereunder in respect of any losses, claims, damages, liabilities or
expenses referred to therein, then the indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims, damages,
liabilities or expenses in such proportion as is appropriate to reflect the
relative fault of the indemnifying party and indemnified parties in connection
with the actions which resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations. The relative
fault of such indemnifying party and indemnified parties shall be determined by
reference to, among other things, whether any action in question, including any
untrue or alleged untrue statement of a material fact, has been made by, or
relates to information supplied by, such indemnifying party or indemnified
parties, and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such action. The amount paid or payable by a
party as a result of the losses, claims, damages, liabilities and expenses
referred to above shall be deemed to include any reasonable legal or other fees
or expenses reasonably incurred by such party in connection with any
investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 4.5(b) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 4.5(b), no Holder shall be
required to contribute any amount in excess of the amount by which the total
price at which the Registrable Securities of such Holder were offered to the
public exceeds the amount of any damages which such Holder has otherwise been
required to pay by reason of such untrue statement or omission. No Person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation.
If indemnification is available under this Section 4.5, the
indemnifying parties shall indemnify each indemnified party to the full extent
provided in Sections 4.5(a) without regard to
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<PAGE> 29
the relative fault of said indemnifying party or indemnified party or any other
equitable consideration provided for in this Section 4.5(b).
SECTION 4.6. LIMITATIONS. Notwithstanding anything herein to the
contrary, the parties agree as follows:
(a) In the event that in connection with an underwritten
public offering, the managing underwriter(s) shall in good faith
impose a limitation on the number of securities which may be
included in such Registration for marketing purposes, AMG shall not
be required to register Registrable Securities in excess of such
limitation, provided that the reduction in the number of securities
included in such Registration to comply with such limitation is
imposed pro rata (based on the relative number of securities sought
to be included in such Registration) with respect to all securities
the holders of which have a contractual, incidental right
("piggy-back right") to include such securities in the Registration
and as to which registration has been requested pursuant to such
right (it being understood that such limitation may be imposed as to
all securities the holders of which have a piggy-back right prior to
the imposition of any limitation on securities the holders of which
have a right to cause the Company to effect a Registration ("demand
right")).
(b) If requested in writing by the managing
underwriter(s), if any, of any underwritten public offering of AMG
Stock, each Limited Partner and Employee Stockholder agrees not to
offer, sell, contract to sell or otherwise dispose of any shares of
AMG Stock except as part of such underwritten public offering within
thirty (30) days before or one hundred and eighty (180) days after
the effective date of the registration statement filed with respect
to said offering.
(c) Following the effectiveness of a Registration
(including, without limitation a Registration for sale on a delayed
or continuous basis under Rule 415 under the Securities Act), each
Limited Partner and Employee Stockholder agrees not to effect any
sales of AMG Stock after they have received notice from the Company
to suspend sales as a result of the commencement any Suspension
Period (as defined below). Each Limited Partner and Employee
Stockholder may recommence effecting sales of AMG Stock following
further notice to such effect from the Company, which notice shall
be given by the Company not later than five (5) business days after
the conclusion of any such Suspension Period. For purposes hereof, a
"Suspension Period" shall mean the pendency or occurrence of an
event that would make it impractical or inadvisable (i) to cause a
registration statement to remain in effect or (ii) to permit the
sale of AMG Stock by Limited Partners or Management Employees of the
Partnership and by limited partners and employee stockholders of
other partnerships of which AMG is the general partner generally
(without prejudice to any particular Limited Partner or Management
Employee), and shall include, without limitation, pending
negotiations relating to, or consummation of, a transaction or the
pendency or occurrence of any other event that would require
additional disclosure of material information by AMG in a
registration statement, as to which AMG has a bona fide business
purpose for preserving confidentiality or which renders the AMG
unable to comply with applicable legal requirements.
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<PAGE> 30
SECTION 4.7. LIMITATION OF REGISTRATION RIGHTS. Notwithstanding the
foregoing, AMG shall not be required to effect a Registration of Registrable
Securities under this Article IV if, in the opinion of counsel for AMG, which
counsel and opinion shall be reasonably acceptable to the Holders of a majority
of the Registrable Securities, such Holders of Registrable Securities may then
sell all Registrable Securities proposed to be sold without registration under
the Securities Act.
ARTICLE V - CAPITAL CONTRIBUTIONS; DISTRIBUTIONS
CAPITAL ACCOUNTS AND ALLOCATIONS
SECTION 5.1 CAPITAL CONTRIBUTIONS.
(a) Prior to the effectiveness of this Agreement, Mesirow
Asset Management, Inc., an Illinois corporation, contributed to the Partnership
certain of its assets, as set forth on Schedule 5.1(a). Schedule 5.1(a) also
sets forth (i) the tax basis of Mesirow Asset Management, Inc. in each such
asset, (ii) the tax basis of the Partnership in each asset held as of the
Effective Date, and (iii) the amount which each of the Partners acknowledge and
agree is the fair market value of each such asset. Except as may be agreed to in
connection with the issuance of additional Partnership Points, as specifically
set forth herein, and as may be required under applicable law, the Partners
shall not be required to make any further contributions to the Partnership.
(b) No Partner shall have the right to withdraw any part of
the capital it contributed to the Partnership until the termination, dissolution
and winding up of the Partnership, except as distributions pursuant to this
Article V may represent returns of capital, in whole or in part. No Partner
shall be entitled to receive any interest on any Capital Contribution to the
Partnership.
SECTION 5.2 CAPITAL ACCOUNTS; ALLOCATIONS.
(a) Establishment of Capital Accounts. There shall be
established for each Partner a Capital Account which initially shall be in an
amount equal to the Fair Market Value of the Capital Contribution of such
Partner.
(b) Adjustments to Capital Accounts. The Capital Account of
each Partner shall be adjusted in the following manner. Each Capital Account
shall be increased by such Partner's allocable share of income and gain of the
Partnership and shall be decreased by such Partner's allocable share of losses,
if any, of the Partnership and by the amount of all distributions made to such
Partner. The amount of any distribution of assets other than cash shall be
deemed to be the Fair Market Value of such assets. Capital Accounts shall also
be adjusted upon the issuance of additional Partnership Interests as set forth
in Section 6.5(c).
(c) Allocation of Income and Gain. Subject to Section 5.2(e)
and Sections 5.4 and 5.5 hereof, all items of Partnership income and gain shall
be allocated among the Partners' Capital Accounts at the end of every month as
follows:
****************[The remainder of this subsection and the
following 3 subsections (approximately 1 2/3 pages in the aggregate) have been
omitted pursuant to the confidential treatment request referred to on the cover
page hereto. The omitted portions have been filed separately with the
Commission.]***************
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<PAGE> 31
(g) Dispute Resolution. Any dispute or disagreement among the
Partners with respect to determination of Capital Account balances or otherwise
with respect to the manner or method of accounting by the Partnership may be
submitted by any Partner to, and resolved by, the Independent Public
Accountants, whose determinations as so made shall be conclusive and binding
upon the Partners.
(h) Interim Closing. In the event that during any calendar month (or
any fiscal year) there is any change of Partners or Partnership Points (whether
as a result of the admission of an Additional Limited Partner, the redemption by
the Partnership of any Partnership Points, a transfer of any Partnership Points
or otherwise, but not as a result of vesting in accordance with the provisions
of Exhibit A of Partnership Points issued upon execution of the agreement or in
accordance with Section 6.5(e), the following shall apply: (i) the books of
account of the Partnership shall be closed effective as of the close of business
on the date of any such change and such month (or fiscal year) shall thereupon
be divided into two or more portions, (ii) each item of income, gain, loss and
deduction shall be determined (on the closing of the books basis) for the
portion of such month (or fiscal year) ending with the date on which the books
of account of the Partnership are so closed, and (iii) each such item for such
portion of such month (or fiscal year)
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shall be allocated to those persons who were Partners during such portion of
such month (or fiscal year) in accordance with the provisions of Section 5.2(c)
hereof.
SECTION 5.3 DISTRIBUTIONS.
****************[This section (approximately 1 page) has been omitted
pursuant to the confidential treatment request referred to on the cover page
hereto. The omitted portions have been filed separately with the
Commission.]***************
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SECTION 5.4 DISTRIBUTIONS UPON LIQUIDATION; ESTABLISHMENT OF A RESERVE
UPON LIQUIDATION.
(a) Upon the liquidation of the Partnership, after payment of all
liabilities of the Partnership owing to creditors, the General Partner shall set
up such reserves as it deems reasonably necessary for any future liabilities or
obligations of the Partnership including, without limitation, any specified or
unspecified contingent liabilities. Such reserves may be paid over by the
General Partner to a bank (or other third party), to be held in escrow for the
purpose of paying any such future liabilities or obligations. At the expiration
of such period(s) as the General Partner may deem advisable in its sole
discretion, any remaining reserves and any other assets available for
distribution (or a portion thereof specified by the General Partner) shall be
distributed to the Partners in accordance with Section 5.3(c) hereof.
(b) The General Partner may elect to make any distributions pursuant
to this Section 5.4 through in-kind distributions of Partnership property. The
decisions of the General Partner with respect to in-kind payments, including
decisions with respect to selection and apportionment, shall be conclusive and
binding upon all Partners; provided, however, that all in-kind distributions of
Partnership property shall be made on the basis of the Fair Market Value of such
property, net of any liabilities encumbering such property. Immediately prior to
the effectiveness of any such distribution in-kind, each item of gain and loss
that would have been recognized by the Partnership had the property being
distributed been sold at Fair Market Value shall be determined and allocated to
those persons who were Partners immediately prior to the effectiveness of such
distribution in accordance with Sections 5.2(e) and 5.2(f) hereof.
SECTION 5.5 PROCEEDS FROM THE SALE OF SECURITIES; INSURANCE PROCEEDS;
CERTAIN SPECIAL ALLOCATIONS.
(a) Capital Contributions made by any Partner after the date hereof,
and other proceeds from the issuance of securities by the Partnership may, in
the sole discretion of the General Partner, be used for the benefit of the
Partnership (including, without limitation, the repurchase or redemption of
Partnership Interests), or may be distributed by the Partnership, in which case,
any such proceeds shall be allocated and distributed among the Partners in
accordance with their respective Vested Partnership Points immediately prior to
the date of such contribution.
(b) In the event of the death of an Employee Stockholder covered by
key-man life insurance, the proceeds of such policy shall first be used by the
Partnership to Repurchase the Partnership Interests from the Limited Partner
through which such Employee Stockholder held his interest in the Partnership in
accordance with Section 3.8 hereof. If the proceeds of any such
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insurance exceed the amounts so required to effect such redemption, then such
excess proceeds may, in the sole discretion of the General Partner, be used for
the benefit of the Partnership (including, without limitation, the repurchase or
redemption of Partnership Interests held by other Limited Partners), or may be
distributed by the Partnership, in which case, any such proceeds shall be
allocated and distributed among the Partners in accordance with their respective
Vested Partnership Points immediately following the Repurchase of the
Partnership Interests from such Limited Partner.
SECTION 5.6 FEDERAL TAX ALLOCATIONS. The General Partner shall, in its
sole discretion, allocate the ordinary income and losses and capital gains and
losses of the Partnership as determined for U.S. Federal income tax purposes
(and each item of income, gain, loss, deduction or credit entering into the
computation thereof), as the case may be, among the Partners for tax purposes in
a manner that, to the greatest extent possible (i) reflects the economic
arrangement of the Partners under this Agreement (determined after taking into
account the allocation provisions of Section 5.2 hereof and the distributions
provisions of Section 5.3 and 5.4 hereof) and (ii) is consistent with the
principles of Sections 704(b) and 704(c) of the Code. The Partners understand
and agree that, with respect to any item of property (other than cash)
contributed by a Partner to the capital of the Partnership, the initial tax
basis of such property in the hands of the Partnership will be the same as the
tax basis of such property in the hands of such Partner at the time so
contributed. The Partners further understand and agree that the taxable income
and taxable loss of the Partnership is to be computed for Federal income tax
purposes by reference to the initial tax basis to the Partnership of any assets
and properties contributed by the Partners (and not by reference to the fair
market value of such assets and properties at the time contributed). The
Partners also understand that, pursuant to Section 704(c) of the Code, all
taxable items of income, gain, loss and deduction with respect to such assets
and properties shall be allocated among the Partners for Federal income tax
purposes so as to take account of any difference between the initial tax basis
of such assets and properties to the Partnership and their fair market values at
the time contributed, using any method authorized by the Federal regulations
under Section 704(c) of the Internal Revenue Code, and selected by the General
Partner in its sole discretion. For purposes of maintaining the Capital Accounts
of the Partners, items of income, gain, loss and deduction relating to any asset
or property contributed to the Partnership that are required to be allocated
pursuant to Section 704(c) of the Code shall not be reflected in the Capital
Accounts of the Partners. Without limiting the generality of the foregoing, all
deductions with respect to the amortization or depreciation of property
contributed to the Partnership by a Partner shall be allocated to the
contributing Partner for U.S. Federal income tax purposes.
ARTICLE VI - TRANSFER OF PARTNERSHIP INTERESTS BY
LIMITED PARTNERS, ADMISSION OF ADDITIONAL PARTNERS,
REDEMPTION AND WITHDRAWAL
SECTION 6.1 ASSIGNABILITY OF INTERESTS.
(a) Except with the written consent of the General Partner, which
the General Partner may withhold in its sole discretion, or in accordance with
Section 6.1(b) or 6.1(c), no
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Limited Partner shall sell, assign, transfer, pledge, hypothecate, gift,
exchange, option or encumber, or otherwise dispose of (any such disposition
being referred to herein as a "Transfer"), or offer to Transfer, all or any
portion of such Partner's Partnership Interest or in the case of a Limited
Partner that is not an individual, any direct or indirect beneficial ownership
in such Limited Partner (whether voluntarily or involuntarily) to any Person
other than the General Partner or the Partnership.
(b) In the event that any Employee Stockholder or Limited Partner,
as applicable, shall die or shall be declared incompetent or insane or shall be
adjudicated a bankrupt, the legal representative of such Employee Stockholder or
Limited Partner shall, upon written notice to the General Partner of the
occurrence of any such event, become an assignee of such Employee Stockholder's
interest in the Limited Partner or of such Limited Partner's Partnership
Interests, subject to all of the terms of this Agreement as then in effect,
provided that (i) such legal representative shall not be permitted to exercise
any rights as a Partner or become a Substitute Limited Partner unless and until
such representative is admitted as a Substitute Limited Partner in accordance
with the provisions of Section 6.2 and (ii) the provisions of Section 3.8 shall
be applied to effect a Repurchase either of the Partnership Interest so
Transferred or of the Partnership Interest held by the Limited Partner the
beneficial interests in which have been so Transferred.
(c) A Limited Partner may, upon prior written notice to the General
Partner, transfer a portion (but not all) of its Partnership Interest to its
Employee Stockholder or to one or more trusts of which its Employee Stockholder
is the sole trustee, with sole power and authority to direct the disposition of,
and voting with respect to, the assets thereof, and of which the sole
beneficiaries are such Employee Stockholder and/or his lineal descendants,
provided that such Transfer shall satisfy the conditions set forth in Section
6.2(b), and provided, further, that the recipient of such Transfer, if a trust,
shall agree not to permit the Transfer of interests therein or the addition of
beneficiaries thereto without prior written notice to the General Partner and
satisfaction of the conditions set forth in Section 6.2(b).
(d) Any Transfer by any Limited Partner of any interest in the
Partnership or a Limited Partner thereof in contravention of this Agreement
shall be void ab initio and ineffectual and shall not bind or be recognized by
the General Partner, the Partnership or any other party. No purported assignee
pursuant to such a Transfer shall have any right to any profits, losses or
distributions of the Partnership.
(e) Any Limited Partner who shall Transfer all of such Limited
Partner's Partnership Interest shall cease to be a Partner of the Partnership
and shall no longer have any rights or privileges of a Partner except that,
unless and until the recipient of the Transfer of such Limited Partner is
admitted as a Substitute Limited Partner in accordance with the provisions of
Section 6.2, said transferring Limited Partner shall retain the statutory rights
and obligations of a transferring partner under applicable law.
(f) Any Person who acquires in any manner whatsoever any Partnership
Interest, irrespective of whether such Person has accepted and adopted in
writing the terms and
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provisions of this Agreement, shall be deemed by the acceptance of the benefits
of the acquisition thereof to have agreed to be subject to and bound by all the
terms and conditions of this Agreement that any predecessor in such Partnership
Interest of such Person was subject to or by which such predecessor was bound to
the same extent as such predecessor was bound as if there had been no such
Transfer.
SECTION 6.2 SUBSTITUTE LIMITED PARTNERS.
(a) No recipient of a Transfer of limited partner interests in the
Partnership shall become a Limited Partner except in accordance with this
Section 6.2. The General Partner may, with a Majority Vote, admit as a
Substitute Limited Partner any Person that acquires a Partnership Interest by
Transfer from another Limited Partner in accordance with the provisions of
Section 6.1.
(b) As additional conditions to the validity of any Transfer of a
Limited Partner's interest in the Partnership (or, in the case of a Limited
Partner which is not an individual, the interests of the direct and indirect
beneficial owners of such Limited Partner), regardless of whether the recipient
of a Transfer becomes a Limited Partner, such Transfer shall not: (i) violate
the registration provisions of the Securities Act or the securities laws of any
applicable jurisdiction, (ii) cause the Partnership to become subject to
regulation as an "investment company" under the Investment Company Act, and the
rules and regulations of the Securities and Exchange Commission thereunder or to
fail to satisfy an exemption from registration thereunder, including by causing
there to be more than one hundred (100) beneficial owners of interest in the
Partnership as determined in accordance with Section 3(c)(1) of the Investment
Company Act, (iii) result in the termination of any contract(s) to which the
Partnership is a party and which individually or in the aggregate are material
(it being understood and agreed that any contract pursuant to which the
Partnership provides investment management or advisory services is material), or
(iv) result in the treatment of the Partnership as an association taxable as a
corporation or as a "publicly traded limited partnership" for Federal income tax
purposes. The General Partner may require reasonable evidence as to the
foregoing, including, without limitation, a favorable opinion of counsel.
(c) Upon the admission of a substitute Limited Partner, the General
Partner shall make the appropriate revisions to Exhibit A hereto.
SECTION 6.3 ALLOCATION OF DISTRIBUTIONS BETWEEN ASSIGNOR AND ASSIGNEE.
Upon the assignment of a Partnership Interest pursuant to this Article VI,
distributions pursuant to Article V shall be made to the Person owning the
Partnership Interest at the date of distribution, unless the assignor and
assignee otherwise agree and so direct the General Partner in a written
statement signed by both.
SECTION 6.4 REDEMPTIONS AND WITHDRAWALS. Except as expressly provided in
Article III, no Limited Partner shall have the right to redeem its interest in
the Partnership, in whole or in part, or to withdraw from the Partnership,
except upon receipt of a Majority Vote and with the
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consent of the General Partner. Upon the redemption or withdrawal, in whole or
in part, by a Limited Partner, the General Partner shall make the appropriate
revisions to Exhibit A hereto.
SECTION 6.5 ISSUANCE OF ADDITIONAL LIMITED PARTNERSHIP INTERESTS; NO
PREEMPTIVE RIGHTS.
(a) Additional Limited Partners (the "Additional Partners" and each
an "Additional Partner") may be admitted to the Partnership and be issued
Partnership Interests under the circumstances contemplated by Section 6.2,
Section 6.5(d) and Sections 6.5(e). Under other circumstances, Additional
Limited Partners may be admitted to the Partnership and such Additional Partners
may be issued Partnership Interests, upon receipt of a Majority Vote and the
consent of the General Partner and upon such terms and conditions as may be
established by the General Partner in its sole discretion. As a condition to
admission to the Partnership, each Additional Limited Partner (and any Employee
Stockholder thereof) shall first execute and deliver (i) an instrument
satisfactory to the General Partner whereby such Additional Limited Partner
becomes a party to this Agreement as a Limited Partner and (ii) a Non
Solicitation Agreement. Upon the admission of any Additional Limited Partner,
the General Partner shall make the appropriate revisions to Exhibit A hereto.
(b) Existing Limited Partners may be issued additional Partnership
Interests by the Partnership either (i) upon receipt of a Majority Vote (without
including the Limited Partner to be issued additional Partnership Points) with
the consent of, and upon such terms and conditions as may be established by, the
General Partner in its sole discretion or (ii) in accordance with Section 6.5(d)
or Section 6.5(e).
(c) Each time additional Partnership Interests are issued (other
than in accordance with Section 6.5(e)), prior to such issuance, the Capital
Accounts of all the Partners shall be adjusted as follows: (i) the General
Partner shall determine the proceeds which would be realized if the Partnership
sold all its assets at such time for a price equal to the Fair Market Value, and
(ii) the General Partner shall allocate amounts equal to the gain or loss which
would have been realized upon such a sale to the Capital Accounts of all the
Partners in accordance with Sections 5.2(e) and (f) hereof; provided, however,
that the vesting of previously granted Partnership Points shall not constitute
the issuance of additional Partnership Interests for purposes of this Section
6.5(c). Capital Accounts for Partners receiving additional Partnership Interests
shall be increased by, and Capital Accounts for new Partners shall be
established in, an amount equal to the fair market value (as determined by the
General Partner) of such Partner's contributions to the capital of the
Partnership, if any, in consideration of the issuance of such Partnership
Interests.
(d) The General Partner, with a Majority Vote, shall have the right
to cause the Partnership to issue or sell (i) additional interests in the
Partnership (including other classes or series of interests having different
rights), (ii) obligations, evidences of indebtedness or other securities
convertible or exchangeable into interests in the Partnership and (iii)
warrants, options or other rights to purchase or otherwise acquire interests in
the Partnership; provided, however, that no Majority Vote shall be required for
(i) the issuance of Partnership Points pursuant to
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Section 6.5(e) hereof and (ii) the issuance of interests in the Partnership
pursuant to (A) obligations, evidences of indebtedness or other securities
convertible or exchangeable into interests in the Partnership previously issued
in accordance with this Section 6.5(d) or (B) warrants, options or other rights
to purchase or otherwise acquire interests in the Partnership previously issued
in accordance with this Section 6.5(d). No Partner shall have any pre-emptive
rights in any of the foregoing.
(e) Existing Limited Partners may be issued additional Partnership
Points and Additional Limited Partners may be admitted to the Partnership and
issued Partnership Points by the CEO acting on behalf of the Partnership in his
sole discretion subject only to the provisions set forth on Exhibit A and to the
following conditions: (i) the maximum number of Partnership Points issuable
pursuant to this Section 6.5(e) is nine (9) (provided that if any of such nine
(9) Partnership Points terminate unvested, they may be reissued in accordance
with the provisions of this Section 6.5(e) and Exhibit A); (ii) Partnership
Points shall not be issued or vested in an initial increment of less than
one-half of one Partnership Point; and (iii) without the consent of the General
Partner, no Partnership Points may be issued pursuant to this Section 6.5(e) to
the CEO, any member of the Immediate Family of the CEO or any Affiliate of the
CEO or his Immediate Family.
SECTION 6.6 REPRESENTATION OF PARTNERS. Each Partner (including each
Additional Partner) hereby represents and warrants to the Partnership and each
other Partner, and acknowledges, that (a) it has such knowledge and experience
in financial and business matters that it is capable of evaluating the merits
and risks of an investment in the Partnership and making an informed investment
decision with respect thereto, (b) it is able to bear the economic and financial
risk of an investment in the Partnership for an indefinite period of time, (c)
it is acquiring an interest in the Partnership for investment only and not with
a view to, or for resale in connection with, any distribution to the public or
public offering thereof, (d) the equity interests in the Partnership have not
been registered under the securities laws of any jurisdiction and cannot be
disposed of unless they are subsequently registered and/or qualified under
applicable securities laws and the provisions of this Agreement have been
complied with, and (e) the execution, delivery and performance of this Agreement
do not require it to obtain any consent or approval that has not been obtained
and do not contravene or result in a default under any provision of any existing
law or regulation applicable to it, any provision of its charter, by-laws or
other governing documents or any agreement or instrument to which it is a party
or by which it is bound.
ARTICLE VII - TRANSFER OF PARTNERSHIP INTEREST BY GENERAL
PARTNER; REDEMPTION, REMOVAL AND WITHDRAWAL
SECTION 7.1 ASSIGNABILITY OF INTEREST.
(a) Without a Majority Vote, the General Partner's interest in the
Partnership may not be Transferred; provided, however, that subject to the
provision of Section 7.1(b), (i) the General Partner's interest in the
Partnership may be pledged or encumbered in connection with the operation of the
business of AMG (including, without limitation, the financing of the
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acquisition of additional investment management companies) and that under such
circumstances, lien holders shall have the rights of secured creditors with
respect to such interest; (ii) the General Partner may Transfer a portion of its
Partnership Interest to a person or entity which is not a Partner but which is
either an officer or employee of the Partnership or which becomes an officer or
employee in connection with such issuance, or an entity wholly owned by any such
person; (iii) the General Partner may Transfer a portion of its Partnership
Interest to existing Limited Partners; and (iv) the General Partner may Transfer
all but not less than all of its Partnership Interest in a single transaction or
series of related transactions to a Person or Persons that are Affiliates of the
General Partner, provided that such Person or Persons shall have net worth that
is sufficient to enable it to satisfy the obligations of the General Partner
hereunder.
(b) As a condition to certain Transfers described in Section 7.1(a),
(i) upon any Transfer contemplated by the foregoing clauses (ii) and (iii), the
Partnership Interest subject to the Transfer shall be a limited partnership
interest in the hands of the transferee and the transferee shall have the rights
and obligations of a Limited Partner hereunder; and (ii) each Person who
acquires a Partnership Interest as a result of a Transfer pursuant to Section
7.1(a)(iv) shall execute a counterpart of this Agreement and agree to be bound
as the General Partner hereunder and the General Partner shall thereupon be
permitted to withdraw from the Partnership.
(c) Notwithstanding anything else set forth herein, the General
Partner may, with a Majority Vote, sell all of its interests and all other
interests in the Partnership in a single transaction or a series of related
transactions, and, in any such case, each of the Limited Partners of the
Partnership may be required to sell, in the same transaction or transactions,
all of their interests in the Partnership, provided, that if the Limited
Partners are required to sell their interests pursuant to this Section 7.1(c),
each Limited Partner shall be entitled to receive the value of its Partnership
Interests determined by multiplying the amount to be paid for the interests of
all of the Partners by the fraction the numerator of which is the number of
Vested Partnership Points held by such Limited Partner and the denominator of
which is the aggregate number of Vested Partnership Points outstanding.
SECTION 7.2 RESIGNATION, REDEMPTION, AND WITHDRAWAL. Except as described
in Section 7.1(a)(iv), without a Majority Vote, the General Partner shall not
have the right (a) to resign or withdraw from the Partnership or (b) to have all
or any portion of its interest in the Partnership redeemed. Any resigned,
withdrawn or removed General Partner shall, unless otherwise agreed with its
successor, retain its interest in the capital of the Partnership and its other
economic rights under this Agreement.
ARTICLE VIII - DISSOLUTION AND TERMINATION.
SECTION 8.1 EVENTS OF DISSOLUTION.
(a) The Partnership shall only be dissolved:
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(i) on a date designated in writing by the General
Partner and approved by Majority Vote;
(ii) upon bankruptcy of, or the occurrence of an event
of withdrawal (as defined in the Partnership Act) with respect to,
the General Partner;
(iii) upon the sale or other disposition of all (or a
substantial portion of) the Partnership's assets;
(iv) upon the effective date of the resignation or
withdrawal of the General Partner pursuant to Section 7.2 hereof;
(v) upon the entry of a decree of judicial dissolution
under Section 17-802 of the Partnership Act; or
(vi) in any event, at midnight on December 31, 2095
unless the Partnership's term is extended pursuant to Section 2.5
hereof.
(b) Dissolution of the Partnership shall be effective at the close
of business on the day on which the event occurs giving rise to the dissolution,
whereupon the Partnership shall be liquidated in an orderly manner, as soon as
reasonably practicable, but the Partnership shall not terminate until the assets
of the Partnership shall have been distributed as provided herein.
Notwithstanding the dissolution of the Partnership, prior to the termination of
the Partnership, as aforesaid, the business of the Partnership and the affairs
of the Partners, as such, shall continue to be governed by this Agreement. The
General Partner shall liquidate the assets of the Partnership and apply and
distribute the proceeds thereof in accordance with Section 5.4 hereof. If the
General Partner is unwilling or unable to carry out the duties contemplated by
this Article VIII, another Person shall be designated to perform such duties by
a Majority Vote. Under such circumstances references to the General Partner in
Section 5.4 and in this Article VIII shall be deemed to refer to the Person so
designated.
ARTICLE IX - RECORDS AND REPORTS
SECTION 9.1 BOOKS AND RECORDS. The General Partner (or, at the direction
of the General Partner, the Officers of the Partnership) shall keep complete and
accurate books of account with respect to the operations of the Partnership,
prepared in accordance with generally accepted accounting principles using the
accrual method of accounting, consistently applied. Such books shall reflect
that the interests in the Partnership have not been registered under the
Securities Act, and that the interests may not be sold or transferred without
registration under the Securities Act or exemption therefrom and without
compliance with Article VI or Article VII of this Agreement. Such books shall be
maintained at the principal office of the Partnership, or at such other place as
the General Partner shall determine with the approval of a Majority Vote. All
Partners, and their duly authorized representatives, shall at all reasonable
times have access to such books.
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SECTION 9.2 ACCOUNTING. The Partnership's books of account shall be kept
on the accrual method of accounting, or on such other method of accounting as
the General Partner may from time to time determine, with the advice of the
Independent Public Accountants, and shall be closed and balanced at the end of
each Partnership fiscal year. The taxable year of the Partnership shall be the
twelve months ending December 31 or such other taxable year as the General
Partner may designate, with the written advice of the Independent Public
Accountants.
SECTION 9.3 FINANCIAL REPORTS. The Partnership shall furnish to each
Partner each of the following, which shall be prepared and distributed or caused
to be prepared and distributed by the Officers of the Partnership:
(a) Within twenty-five (25) days after the end of each month and
each fiscal quarter, an unaudited financial report of Partnership, which report
shall be prepared in accordance with generally accepted accounting principles
using the accrual method of accounting, consistently applied (except that the
financial report may (i) be subject to normal year-end audit adjustments which
are neither individually nor in the aggregate material and (ii) not contain all
notes thereto which may be required in accordance with generally accepted
accounting principles) and shall be certified by the Partnership's chief
executive officer or the most senior financial officer of the Partnership
involved in the preparation of such report, and which shall include the
following:
(i) statements of operations, changes in Partners'
capital and cash flows for such month or quarter, together with a
cumulative income statement from the first day of the then-current
fiscal year to the last day of such month or quarter;
(ii) a balance sheet as of the last day of such month or
quarter; and
(iii) with respect to each quarterly financial report, a
detailed computation of Free Cash Flow for such quarter.
(b) Within sixty (60) days after the end of each fiscal year of the
Partnership, audited financial statements of the Partnership, which shall
include statements of operations, changes in partners' capital and cash flows
for such year and a balance sheet as of the last day thereof, each prepared in
accordance with generally accepted accounting principles using the accrual
method of accounting, consistently applied, certified by Independent Public
Accountants.
(c) Within twenty-five (25) days after the end of each calendar
quarter, the Partnership's operating budget for each of the next four (4) fiscal
quarters, in such form and containing such estimates as may be required by the
General Partner from time to time, certified by the most senior financial
officer of the Partnership.
(d) Copies of all financial statements, reports, notices, press
releases and other documents released to the public.
(e) Any other financial or other information available to the
Officers as the General Partner shall have reasonably requested on a timely
basis.
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SECTION 9.4 BUDGET MEETINGS.
(a) The Partnership shall hold regular quarterly budget meetings
within ten (10) days after the distribution of each operating budget required by
Section 9.3(c) hereof. Each budget meeting shall be attended (either in person
or by telephone) by the Partnership's chief executive officer, most senior
financial officer, such representative or representatives of the General Partner
as the General Partner may designate from time to time, and such other persons
as the General Partner or the Partnership's chief executive officer may deem
necessary or appropriate. The Partnership and the CEO shall give each such
Person notice of the time and place of each budget meeting at least five (5)
days prior to the occurrence thereof. The Partnership will reimburse the
reasonable travel expenses of any representative of the General Partner who
attends each budget meeting.
(b) At each budget meeting, the most senior financial officer of the
Partnership shall make a presentation, comparing the budget for the most
recently completed calendar quarter which was presented at the previous budget
meeting with the Partnership's results for the most recently completed calendar
quarter and explaining the preparation of the most recently distributed budgets
pursuant to Section 9.3(a) hereof. Each of the attendees (whether in person or
by telephone) at such meeting shall have the right to submit proposals and
suggestions regarding the operations of the Partnership, and the attendees at
the meeting shall discuss and consider such proposals and suggestions.
SECTION 9.5 TAX MATTERS.
(a) The General Partner shall cause to be prepared and filed on or
before the due date (or any extension thereof) Federal, state and local tax or
information returns required to be filed by the Partnership. The General
Partner, to the extent that Partnership funds are available, shall cause the
Partnership to pay any taxes payable by the Partnership (it being understood
that the expenses of preparation and filing of such tax returns, and the amounts
of such taxes, are to be treated as operating expenses of the Partnership);
provided that the General Partner shall not be required to cause the Partnership
to pay any tax so long as the General Partner or the Partnership is in good
faith and by appropriate legal proceedings contesting the validity,
applicability or amount thereof and such contest does not materially endanger
any right or interest of the Partnership and adequate reserves therefor have
been set aside by the Partnership.
(b) The General Partner shall be the tax matters partner for the
Partnership pursuant to Sections 6221 through 6233 of the Code.
(c) The Partnership will pay out of its Free Cash Flow the amounts
of any unincorporated business tax attributable to the Partnership.
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ARTICLE X - MISCELLANEOUS.
SECTION 10.1 NOTICES. All notices, requests, elections, consents or
demands permitted or required to be made under this Agreement shall be in
writing, signed by the Partner or Partners giving such notice, request,
election, consent or demand and shall be delivered personally, or sent by
registered or certified mail, or by overnight courier to the other Partners, at
their addresses set forth on the signature pages hereof or on Exhibit A hereto,
or at such other addresses as may be supplied by written notice given in
conformity with the terms of this Section 10.1. The date of any such personal
delivery or the date of delivery by an overnight courier or of the registered or
certified mail, as the case may be, shall be the date of such notice.
SECTION 10.2 SUCCESSORS AND ASSIGNS. Subject to the restrictions on
transfer set forth herein, this Agreement shall be binding upon and shall inure
to the benefit of the Partners, their respective successors,
successors-in-title, heirs and assigns, and each and every
successors-in-interest to any Partners, whether such successor acquires such
interest by way of gift, purchase, foreclosure or by any other method, and each
shall hold such interest subject to all of the terms and provisions of this
Agreement.
SECTION 10.3 AMENDMENTS. No amendments may be made to this Agreement
without the written consent of (a) the General Partner and (b) a Majority Vote
of the Limited Partners; provided, however, that the General Partner shall make
such amendments and additions to Exhibit A hereto as are required by the
provisions hereof; and, provided further, that the General Partner may amend
this Agreement to correct any printing, stenographic or clerical errors or
omissions. Except as otherwise provided for herein, no amendment may be made to
this Agreement which materially and adversely affects a Limited Partner in a
manner different from all the other Limited Partners, without the written
consent of the Limited Partner which would be so affected. Notwithstanding
anything contained herein to the contrary, no amendment may be made to reduce
the Partnership Points of any Partner without the written consent of such
Partner.
SECTION 10.4 NO PARTITION. No Partner nor any successors-in-interest to
any Partner, shall have the right while this Agreement remains in effect to have
the property of the Partnership partitioned, or to file a complaint or institute
any proceeding at law or in equity to have the property of the Partnership
partitioned, and each Partner, on behalf of himself, his successors,
representatives, heirs and assigns, hereby waives any such right. It is the
intent of the Partners that during the term of this Agreement, the rights of the
Partners and their successors-in-interest, as among themselves, shall be
governed by the terms of this Agreement, and that the right of any Partner or
successors-in-interest to Transfer his Partnership Interest shall be subject to
the limitations and restrictions of this Agreement.
SECTION 10.5 NO WAIVER. The failure of any Partner to insist upon strict
performance of a covenant hereunder or of any obligation hereunder, irrespective
of the length of time for which such failure continues, shall not be a waiver of
such Partner's right to demand strict compliance in the future. No consent or
waiver, express or implied, to or of any breach or default in the performance of
any obligation hereunder, shall constitute a consent or waiver to or of any
other breach or default in the performance of the same or any other obligation
hereunder.
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SECTION 10.6 PRIOR AGREEMENTS SUPERSEDED. This Agreement, (including
without limitation, the schedules and exhibits hereto), supersedes the
Predecessor Agreement and all other prior understandings and agreements among
the parties with respect to the subject matter hereof.
SECTION 10.7 CAPTIONS. Titles or captions of Articles or Sections
contained in this Agreement are inserted as a matter of convenience and for
reference, and in no way define, limit, extend or describe the scope of this
Agreement or the intent of any provision hereof.
SECTION 10.8 COUNTERPARTS. This Agreement may be executed in a number of
counterparts, all of which together shall for all purposes constitute one
Agreement, binding on all the Partners notwithstanding that all Partners have
not signed the same counterpart.
SECTION 10.9 APPLICABLE LAW. This Agreement and the rights and obligations
of the parties hereunder shall be governed by and interpreted, construed and
enforced in accordance with the laws of the State of Delaware, without applying
the choice of law provisions thereof.
SECTION 10.10 SINGULAR AND PLURAL. All terms herein using the singular
shall include the plural; all terms using the plural shall include the singular;
in each case, the term shall be as appropriate to the context of each sentence.
SECTION 10.11 CREDITORS. None of the provisions of this Agreement shall be
for the benefit of or enforceable by any creditor of (a) any Partner, (b) any
Employee Stockholder or (c) the Partnership, other than a Partner who is also a
creditor of the Partnership.
[Intentionally Left Blank]
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IN WITNESS WHEREOF the General Partner and the Limited Partners have
executed and delivered this Limited Partnership Agreement as of the day and year
first above written.
GENERAL PARTNER
Name and Signature Address
AFFILIATED MANAGERS GROUP, INC. Affiliated Managers Group, Inc.
One International Place
Boston, Massachusetts 02110
By:/s/ Sean M. Healey
-------------------------------
Name: Sean M. Healey
Title: Executive Vice President
LIMITED PARTNERS
Name and Signature Address
WMD CORP. 311 South Wacker Drive, Suite 4500
Chicago, IL 60606
By:/s/ William M. Dutton
-------------------------------
William M. Dutton, President
KSK CORP. 311 South Wacker Drive, Suite 4500
Chicago, IL 60606
By:/s/ Kenneth S. Kailin
-------------------------------
Kenneth S. Kailin, President
GXL CORP. 311 South Wacker Drive, Suite 4500
Chicago, IL 60606
By:/s/ Geoffrey P. Lutz
-------------------------------
Geoffrey P. Lutz, President
MXM CORP. 311 South Wacker Drive, Suite 4500
Chicago, IL 60606
By:/s/ Michael Maloney
-------------------------------
Michael Maloney, President
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ACKNOWLEDGMENT
For good and valuable consideration, the receipt of which is hereby
acknowledged, each of the undersigned hereby acknowledges the provisions of this
Agreement, agrees that he constitutes an Employee Stockholder hereunder and
agrees to fulfill all of the rights and duties of an Employee Stockholder
hereunder.
Name and Signature Employee Stockholder of:
/s/ William M. Dutton WMD Corp.
- ----------------------------------
William M. Dutton
/s/ Kenneth S. Kailin KSK Corp.
- ----------------------------------
Kenneth S. Kailin
/s/ Geoffrey P. Lutz GXL Corp.
- ----------------------------------
Geoffrey P. Lutz
/s/ Michael Maloney MXM Corp.
- ----------------------------------
Michael Maloney
43
