<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 24, 1999
REGISTRATION STATEMENT NO. 333-71561
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
-------------------
AFFILIATED MANAGERS GROUP, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 04-3218510
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) 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:
<TABLE>
<S> <C>
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.
-------------------
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>
SUBJECT TO COMPLETION. DATED FEBRUARY 24, 1999.
The information in this preliminary prospectus is not complete and may be
changed. These securities may not be sold until the registration statement filed
with the Securities and Exchange Commission is effective. This preliminary
prospectus is not an offer to sell nor does it seek an offer to buy these
securities in any state where the offer or sale is not permitted.
<PAGE>
6,232,920 Shares
<TABLE>
<S> <C>
[LOGO] AFFILIATED MANAGERS GROUP, INC.
</TABLE>
Common Stock
-------------
Affiliated Managers Group, Inc. is offering 4,000,000 shares of the shares
to be sold in the offering. The selling stockholders identified in this
prospectus are offering an additional 2,232,920 shares. See "Selling
Stockholders". AMG will not receive any of the proceeds from the sale of shares
by the selling stockholders.
AMG's Common Stock is traded on the New York Stock Exchange under the symbol
"AMG". The last reported sale price of the Common Stock on February 23, 1999 was
$27.8125 per share.
SEE "RISK FACTORS" ON PAGE 11 TO READ ABOUT SEVERAL FACTORS YOU SHOULD
CONSIDER BEFORE BUYING SHARES OF THE COMMON STOCK.
------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY BODY
HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR
ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
------------------
<TABLE>
<CAPTION>
Per Share Total
----------- -----------
<S> <C> <C>
Initial public offering price.............................. $ $
Underwriting discount...................................... $ $
Proceeds, before expenses, to AMG.......................... $ $
Proceeds, before expenses, to the selling stockholders..... $ $
</TABLE>
The underwriters may, under certain circumstances, purchase up to an
additional 934,938 shares from AMG at the initial public offering price less the
underwriting discount.
------------------
The underwriters expect to deliver the shares against payment in New York,
New York on , 1999.
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
MORGAN STANLEY DEAN WITTER
SCHRODER & CO. INC.
------------------
Prospectus dated , 1999.
<PAGE>
ASSETS UNDER MANAGEMENT
[Graphical depiction of growth in assets under management from June 30, 1994
to December 31, 1998; vertical axis of assets under management (in billions)
ranging from $0 to $65 billion; horizontal axis is chronology of June 1994
through December 1998; graph includes indication of approximate date the Company
completed each of its thirteen investments; line graph begins at approximately
$1 billion in June 1994 and rises to approximately $62 billion in December
1998.]
EBITDA CONTRIBUTION
PRO FORMA NINE MONTHS ENDED SEPTEMBER 30, 1998
We hold interests in thirteen investment management firms, which we refer to
as our "affiliates". We use the term "EBITDA Contribution" to refer to the
portion of an affiliate's revenues that is allocated to AMG, after amounts
retained by the affiliate for compensation and day-to-day operating and overhead
expenses, but before the interest, tax, depreciation and amortization expenses
of the affiliate. EBITDA Contribution does not include holding company expenses.
The following pie charts show the percentage of total EBITDA Contribution
allocated to AMG by its affiliates, broken down by client type, asset class and
geographic area. The global investments referenced in the Geography pie chart
below consist of accounts invested primarily in non-U.S. marketable securities.
[Pie chart display of EBITDA Contribution pro forma nine months ended
September 30, 1998 by client type, asset class and geography; first pie chart
depicting EBITDA Contribution by client type showing institutional, mutual
funds, high net worth and other client types representing 48%, 28%, 18% and 6%
of EBITDA Contribution, respectively; second pie chart depicting asset class
EBITDA Contribution with equities, other and fixed income at 89%, 6% and 5%,
respectively; third pie chart depicting EBITDA Contribution by geography with
domestic investments and global investments representing 71% and 29%,
respectively.]
We determined these percentages by multiplying each affiliate's EBITDA
Contribution for the period by the percentage of its period-end assets under
management in the relevant category. The sum of the EBITDA Contribution by
category for all affiliates constitutes the EBITDA Contribution to AMG in that
category for the period. We believe that EBITDA Contribution may be useful to
investors as an indicator of each affiliate's contribution to AMG's ability to
service debt, to make new investments and to meet working capital requirements.
EBITDA Contribution is not a measure of financial performance under generally
accepted accounting principles and should not be considered an alternative to
net income as a measure of operating performance or to cash flows from operating
activities as a measure of liquidity. EBITDA Contribution, as calculated by us,
may not be consistent with comparable computations by other companies.
2
<PAGE>
PROSPECTUS SUMMARY
YOU SHOULD READ THE FOLLOWING SUMMARY TOGETHER WITH THE MORE DETAILED
INFORMATION AND CONSOLIDATED FINANCIAL STATEMENTS AND THE NOTES TO THOSE
STATEMENTS APPEARING ELSEWHERE IN THIS PROSPECTUS OR IN THE OTHER PUBLICLY
AVAILABLE DOCUMENTS THAT WE HAVE FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION AND HAVE "INCORPORATED BY REFERENCE" IN THIS PROSPECTUS BY REFERRING
TO THEM IN THE "WHERE YOU CAN FIND MORE INFORMATION" SECTION.
AMG
BACKGROUND
We are an asset management holding company which buys and holds majority
interests in mid-sized investment management firms. We seek to grow by investing
in additional firms, as well as through the internal growth of the firms in
which we have already invested. With the completion of our most recent
investments--in Davis Hamilton Jackson & Associates and Rorer Asset
Management--we have invested in 13 investment management firms that managed
$62.1 billion in assets at December 31, 1998.
We were founded in 1993 to address the challenges facing the founders and
principal owners of many mid-sized investment management firms in shifting
ownership and control to the next generation of management. We generally define
"mid-sized" as firms with $500 million to $10 billion in assets under
management. We believed that many of the owners of these firms would be
interested in a new and better way to handle these ownership and management
succession issues. Before AMG, succession planning alternatives for these firms
were typically limited to:
- the sale of the owners' interests to their employees, generally at prices
below fair market value, or
- the sale of 100% of the firm's equity, which often failed to provide
adequate incentives for succeeding management to grow the firm.
OUR TRANSACTION STRUCTURE
We have developed an innovative transaction structure which we believe is a
superior succession planning alternative for growing, mid-sized investment
management firms. In our structure, we purchase a majority interest and
management of these firms holds the remaining interest. We believe that this
structure appeals to these firms because it:
- allows their owners to sell a portion of their interest, while ongoing
management, including junior management, holds a significant ownership
interest and has the opportunity to sell that interest to us in the
future,
- provides management with autonomy over the day-to-day operations of their
firm, and
- allows management to retain a fixed portion of their revenues to pay their
operating expenses (including salaries and bonuses), and permits
management to decide how to spend these revenues.
We believe that our structure distinguishes us from other buyers of
investment management firms. Other buyers generally seek to own 100% of their
target firms and, in many cases, seek to control the day-to-day management of
such firms. We believe that our structure is particularly appealing to managers
of firms who anticipate strong future growth, because it gives them the
opportunity to profit from the growth of their retained ownership interest.
OUR GROWTH STRATEGY
We have achieved substantial growth in assets under management, EBITDA and
net income by making new investments in mid-sized investment management firms as
well as through the internal growth of our affiliates. Since our initial public
offering in November 1997, we have made three new investments adding
approximately $13.5 billion, or 29% to our assets under management, based on our
pro forma assets under management at December 31, 1998.
3
<PAGE>
In our view, we have many opportunities to continue our growth. Our primary
strategies for achieving this growth are:
- growing our existing affiliates, and
- investing in additional mid-sized investment management firms.
The table below presents information that we believe illustrates our growth
from 1997 to 1998. We have included our unaudited financial and operating
results for the year ended December 31, 1998, which we announced on January 27,
1999, in the table below and in the "Recent Developments" section of this
prospectus.
<TABLE>
<CAPTION>
INCREASE
------------------------
YEAR ENDED DECEMBER 31, HISTORICAL PRO FORMA
----------------------------------- 1998 OVER 1998 OVER
PRO FORMA PRO FORMA PRO FORMA
AS ADJUSTED HISTORICAL PRO FORMA AS ADJUSTED AS ADJUSTED
1997(1) 1998 1998(2) 1997 1997
----------- ----------- --------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Assets under management (in millions)......... $ 45,673 $ 57,731 $ 62,131 26% 36%
EBITDA(3) (in thousands)...................... 45,010 76,312 89,278 70 98
Net income (in thousands)..................... 8,761 25,551 28,254 192 222
Net income per share--diluted................. $ 0.49 $ 1.33 $ 1.45 171% 196%
</TABLE>
--------------------------------
(1) The pro forma as adjusted data give effect to all investments made as of
December 31, 1997 as if such investments occurred on January 1, 1997.
(2) The pro forma data give effect to all investments made as of December 31,
1998 and the Rorer investment completed on January 6, 1999 as if such
investments occurred on January 1, 1998.
(3) "EBITDA" represents earnings before interest expense, income taxes,
depreciation, amortization and extraordinary items. EBITDA is not a
measure of financial performance under generally accepted accounting
principles, as discussed in more detail in note 2 to the "Summary
Historical Financial Data" below.
INTERNAL GROWTH. Our affiliates' assets under management increased 13%
during 1998 on a pro forma basis from $54.9 billion at December 31, 1997 to
$62.1 billion at December 31, 1998. Over the same period Tweedy, Browne, our
largest affiliate based on EBITDA Contribution, grew its assets under management
by 24%, from $5.3 billion to $6.6 billion. We discuss the meaning of the term
"EBITDA Contribution" on the inside of the front cover page of this prospectus.
We continue to believe that our affiliates are well positioned for future
internal growth. Our affiliates manage assets across a diverse range of
investment styles, asset classes and client types, with significant
participation in fast-growing segments such as equities, global investments and
mutual funds. For the nine months ended September 30, 1998 pro forma,
investments in equity securities represented 89% of EBITDA Contribution, while
global investments represented 29% of EBITDA Contribution. For the same period,
mutual fund assets represented 28% of EBITDA Contribution. Other asset classes,
including fixed income, represented 11% of EBITDA Contribution; domestic
investments represented 71% of EBITDA Contribution; and institutional, high net
worth and other client types represented 72% of EBITDA Contribution for the same
period.
4
<PAGE>
OUR AFFILIATES
The table below lists our affiliates, including their assets under
management at December 31, 1998 and Rorer which became an affiliate on January
6, 1999. We own majority interests in each of our affiliates other than
Paradigm.
<TABLE>
<CAPTION>
ASSETS UNDER
MANAGEMENT
AT DECEMBER 31,
PRINCIPAL DATE OF 1998
AFFILIATE LOCATION(S) INVESTMENT ----------------
- --------------------------------------------- --------------------------- ------------------- (IN MILLIONS)
<S> <C> <C> <C>
Burridge..................................... Chicago; Seattle December 1996 $ 1,594
Davis Hamilton Jackson....................... Houston December 1998 3,468
Essex........................................ Boston March 1998 5,558
First Quadrant............................... Pasadena, CA; London March 1996 26,615
GeoCapital................................... New York September 1997 2,543
Gofen and Glossberg.......................... Chicago May 1997 4,280
Hartwell..................................... New York May 1994 362
Paradigm..................................... New York May 1995 2,898
Renaissance.................................. Cincinnati November 1995 1,390
Rorer........................................ Philadelphia January 1999 4,400
Skyline...................................... Chicago August 1995 1,161
Systematic................................... Teaneck, NJ May 1995 1,221
Tweedy, Browne............................... New York; London October 1997 6,641
--------
Total.................................. $ 62,131
</TABLE>
The assets under management of First Quadrant include directly managed
assets of $10.5 billion and $16.1 billion of assets indirectly managed using
"overlay" strategies, which are strategies that use futures, options or other
derivative securities for the purpose of enhancing the returns on an underlying
portfolio of assets. Overlay strategies generate advisory fees which are
generally at the lower end of the range of those generated by First Quadrant's
directly managed portfolios.
NEW INVESTMENTS. Since March 1, 1998, we completed three new investments:
Essex, Davis Hamilton Jackson, and Rorer. With the addition of the three new
affiliates, we increased our concentration of investments in equity securities
which generally earn higher fees and have historically experienced higher growth
in assets under management. These three completed investments added $34.1
million in EBITDA to our existing operations on a pro forma basis for the twelve
months ended December 31, 1998.
On January 29, 1999, we entered into a definitive agreement to purchase The
Managers Funds, L.P., subject to customary closing conditions. Managers had $1.8
billion in assets under management at December 31, 1998, in a family of 10
mutual funds. Managers selects subadvisers for each of its mutual fund products
from a universe of over a thousand investment managers. We describe this
transaction below in the "Recent Developments" section of this prospectus.
We continue to seek opportunities to make new investments. We estimate that
there are approximately 1,300 mid-sized firms in the United States, Canada and
the United Kingdom. We believe that many of the founders of these firms are
approaching retirement age and will begin to plan for succession at their firms.
We also see opportunities to invest in firms which are currently wholly-owned by
larger companies which are looking to exit the business.
We believe that we are well positioned to take advantage of these investment
opportunities because our management team has substantial industry experience
and expertise in structuring and negotiating transactions, as well as a highly
organized process for identifying and contacting investment prospects. We
identify and develop relationships with promising potential affiliates based on
a thorough understanding of the universe of mid-sized investment management
5
<PAGE>
firms. We try to increase awareness of our approach to investing by actively
participating in conferences and seminars related to succession planning for
investment management firms. We also maintain a program of visits, telephone
calls and other contacts in order to develop relationships with prospective
affiliates. We have identified over 750 companies in our target universe. In the
past three years, our management team has visited over 440 firms.
Our offices are located at Two International Place, 23rd Floor, Boston,
Massachusetts 02110. Our telephone number is (617) 747-3300.
THE OFFERING
The following information assumes that the underwriters do not exercise the
option granted by AMG to purchase additional shares in the offering. See
"Underwriting".
<TABLE>
<S> <C>
Shares offered by AMG........................ 4,000,000
Shares offered by the selling stockholders... 2,232,920
Total shares offered....................... 6,232,920
Shares to be outstanding after the 23,282,559
offering(1)................................
NYSE symbol.................................. "AMG"
Use of proceeds.............................. To reduce existing indebtedness. See "Use of
Proceeds".
</TABLE>
- ------------------------
(1) Excludes 1,171,750 shares of Common Stock reserved for issuance upon the
exercise of outstanding stock options under our stock option plans.
------------------------------
Except as otherwise indicated in this prospectus, all references in this
prospectus to our outstanding Common Stock include our Common Stock, our Class B
Non-Voting Common Stock and our Series C Non-Voting Convertible Stock. We are
not offering any shares of our Class B Non-Voting Common Stock or our Series C
Non-Voting Convertible Stock in this offering.
6
<PAGE>
SUMMARY PRO FORMA FINANCIAL DATA
(IN THOUSANDS, EXCEPT AS INDICATED AND SHARE AND PER SHARE DATA)
The unaudited pro forma consolidated financial data below reflect our
investments in Essex, Davis Hamilton Jackson and Rorer and the related
financings as if they had occurred on January 1, 1998. The summary pro forma
financial data do not necessarily reflect the same results as might have
occurred had the transactions reflected actually taken place at the beginning of
the period specified. We do not intend the summary pro forma financial data to
be a projection of future results. You should read the summary pro forma
financial data below together with our consolidated financial statements and the
notes to such statements, and the other financial information included or
incorporated by reference in this prospectus.
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA AS ADJUSTED
NINE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 1998 SEPTEMBER 30, 1998(1)
-------------------- ----------------------
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues............................................................ $ 189,692 $ 189,692
Operating expenses:
Depreciation and amortization..................................... 18,155 18,155
Other operating expenses.......................................... 99,321 99,321
-------------------- ----------------------
Operating income.............................................. 72,216 72,216
Investment and other income......................................... (1,593) (1,593)
Interest expense.................................................... 13,645 7,935
Minority interest................................................... 29,227 29,227
-------------------- ----------------------
Income before income taxes.......................................... 30,937 36,647
Income taxes...................................................... 12,994 15,392
-------------------- ----------------------
Net income.......................................................... $ 17,943 $ 21,255
-------------------- ----------------------
-------------------- ----------------------
Net income per share--diluted....................................... $ 0.92 $ 0.90
-------------------- ----------------------
-------------------- ----------------------
Average shares outstanding--diluted................................. 19,553,540 23,553,540
OTHER FINANCIAL DATA:
Assets under management (at period end, in millions)................ $ 56,657 $ 56,657
EBITDA(2)........................................................... 62,737 62,737
EBITDA as adjusted(3)............................................... 36,098 39,410
Historical cash flow from operating activities...................... 35,650 35,650
Historical cash flow used in investing activities................... (67,845) (67,845)
Historical cash flow from financing activities...................... 39,261 39,261
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA
PRO FORMA AS ADJUSTED
SEPTEMBER 30, 1998 SEPTEMBER 30, 1998(1)
-------------------- ----------------------
<S> <C> <C>
BALANCE SHEET DATA:
Current assets...................................................... $ 74,603 $ 74,603
Acquired client relationships, net.................................. 189,210 189,210
Goodwill, net....................................................... 364,759 364,759
Total assets........................................................ 647,269 647,269
Current liabilities................................................. 22,868 22,868
Senior debt......................................................... 287,300 176,800
Total liabilities................................................... 320,582 210,082
Minority interest................................................... 21,264 21,264
Stockholders' equity................................................ 305,423 415,923
</TABLE>
- ------------------------
(1) The pro forma as adjusted data give effect to our sale of 4,000,000 shares
of Common Stock in this offering and the application of the estimated net
proceeds to AMG from this offering. See "Use of Proceeds" and
"Capitalization".
(2) See note (2) to the Summary Historical Financial Data below.
(3) See note (3) to the Summary Historical Financial Data below.
8
<PAGE>
SUMMARY HISTORICAL FINANCIAL DATA
(IN THOUSANDS, EXCEPT AS INDICATED AND SHARE AND PER SHARE DATA)
We have derived the summary historical consolidated financial data below
with respect to our statement of operations data for the three years ended
December 31, 1997 and with respect to our balance sheet data as of December 31,
1997 from our audited consolidated financial statements which are incorporated
by reference in this prospectus. The summary historical financial data set forth
below for the nine month periods ended September 30, 1997 and 1998 and as of
September 30, 1997 and 1998 are unaudited and include all adjustments,
consisting only of normal, recurring adjustments, in the opinion of our
management necessary for a fair presentation of the financial information for
such periods. The results of operations for the nine months ended September 30,
1998 may not be an accurate indication of our results for the full year. All but
one of our affiliates are majority-owned subsidiaries (we own less than a 50%
interest in Paradigm). The portion of each of our affiliate's operating results
and net assets that are owned by minority owners of each affiliate is reflected
as a reduction of net income and stockholders' equity, respectively, and called
minority interest. You should read the summary data below together with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our consolidated financial statements and the notes to those
statements incorporated by reference in this prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------- ---------------------
1995 1996 1997 1997 1998
--------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues............................. $ 14,182 $ 50,384 $ 95,287 $ 53,280 $ 158,201
Operating expenses:
Depreciation and amortization...... 4,307 8,985 8,558 4,180 14,725
Other operating expenses........... 8,585 34,228 64,168 40,128 83,201
--------- --------- --------- --------- ----------
Operating income..................... 1,290 7,171 22,561 8,972 60,275
Investment and other income.......... (265) (337) (1,174) (814) (1,341)
Interest expense..................... 1,244 2,747 8,479 2,707 10,567
Minority interest.................... 2,541 5,969 12,249 6,025 23,981
--------- --------- --------- --------- ----------
Income (loss) before income taxes and
extraordinary item................. (2,230) (1,208) 3,007 1,054 27,068
Income taxes......................... 706 181 1,364 221 10,827
--------- --------- --------- --------- ----------
Income (loss) before extraordinary
item............................... (2,936) (1,389) 1,643 833 16,241
Extraordinary item(1)................ -- (983) (10,011) -- --
--------- --------- --------- --------- ----------
Net income (loss).................... $ (2,936) $ (2,372) $ (8,368) $ 833 $ 16,241
--------- --------- --------- --------- ----------
--------- --------- --------- --------- ----------
Income (loss) per share--diluted:
Income (loss) before extraordinary
item............................. $ (2.95) $ (3.22) $ 0.20 $ 0.12 $ 0.85
Extraordinary item, net............ -- (2.27) (1.22) -- --
--------- --------- --------- --------- ----------
Net income (loss).................. $ (2.95) $ (5.49) $ (1.02) $ 0.12 $ 0.85
--------- --------- --------- --------- ----------
--------- --------- --------- --------- ----------
Average shares outstanding--diluted 996,144 431,908 8,235,529 6,850,761 19,146,658
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------- ---------------------
1995 1996 1997 1997 1998
--------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
OTHER FINANCIAL DATA:
Assets under management (at period
end, in millions).................. $ 4,615 $ 19,051 $ 45,673 $ 37,993 $ 50,054
EBITDA(2)............................ 3,321 10,524 20,044 7,941 52,361
EBITDA as adjusted(3)................ 1,371 7,596 10,201 5,013 30,967
Cash flow from operating
activities......................... 1,292 6,185 16,205 6,749 35,650
Cash flow used in investing
activities......................... (37,781) (29,210) (327,275) (27,007) (67,845)
Cash flow from financing
activities......................... 46,414 15,650 327,112 24,032 39,261
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30,
DECEMBER 31, -----------------------
1997 1997 1998
--------------- ---------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Current assets..................................... $ 52,058 $ 33,331 $ 68,793
Acquired client relationships, net................. 142,875 44,917 163,225
Goodwill, net...................................... 249,698 53,545 310,430
Total assets....................................... 456,990 142,400 557,780
Current liabilities................................ 18,815 17,251 20,379
Senior debt........................................ 159,500 63,300 200,300
Total liabilities.................................. 180,771 84,800 231,093
Minority interest.................................. 16,479 8,775 21,264
Preferred stock.................................... -- 53,577 --
Stockholders' equity............................... 259,740 48,825 305,423
</TABLE>
- ------------------------
(1) For each of 1996 and 1997 the extraordinary item represents costs that we
wrote off due to the early extinguishment of debt.
(2) "EBITDA" represents earnings before interest expense, income taxes,
depreciation, amortization and extraordinary items. We believe EBITDA may be
useful to investors as an indicator of our ability to service debt, to make
new investments and to meet working capital requirements. EBITDA, as
calculated by us, may not be consistent with computations of EBITDA by other
companies. EBITDA is not a measure of financial performance under generally
accepted accounting principles and you should not consider it an alternative
to net income as a measure of operating performance or to cash flows from
operating activities as a measure of liquidity.
(3) "EBITDA as adjusted" represents earnings after interest expense and income
taxes but before depreciation and amortization and extraordinary items. We
believe that this measure may be useful to investors as another indicator of
funds available to us, which may be used to make new investments, repay debt
obligations, repurchase shares of our Common Stock or pay dividends on our
Common Stock. EBITDA as adjusted, as calculated by us, may not be consistent
with computations of EBITDA as adjusted by other companies. EBITDA as
adjusted is not a measure of financial performance under generally accepted
accounting principles and you should not consider it an alternative to net
income as a measure of operating performance or to cash flows from operating
activities as a measure of liquidity.
10
<PAGE>
RISK FACTORS
BEFORE PURCHASING SHARES, YOU SHOULD CAREFULLY CONSIDER THE RISK FACTORS
DESCRIBED BELOW. IF ANY OF THE FOLLOWING RISKS ACTUALLY OCCURS, IT COULD
MATERIALLY ADVERSELY AFFECT OUR BUSINESS, FINANCIAL CONDITION, AND RESULTS OF
OPERATIONS. THE RISKS AND UNCERTAINTIES DESCRIBED BELOW ARE NOT THE ONLY ONES WE
ARE FACING. WE MAY HAVE OTHER RISKS AND UNCERTAINTIES OF WHICH WE ARE NOT YET
AWARE OR WHICH WE CURRENTLY BELIEVE ARE IMMATERIAL THAT MAY ALSO IMPAIR OUR
BUSINESS OPERATIONS. IN LIGHT OF THESE RISKS AND UNCERTAINTIES, THE TRADING
PRICE OF OUR COMMON STOCK COULD DECLINE AND YOU MAY LOSE ALL OR PART OF THE
MONEY YOU PAID TO BUY OUR COMMON STOCK.
SOME OF THE STATEMENTS MADE IN THIS "RISK FACTORS" SECTION AND IN OTHER
SECTIONS OF THIS PROSPECTUS, OR IN DOCUMENTS THAT WE HAVE INCORPORATED BY
REFERENCE IN THIS PROSPECTUS, ARE "FORWARD-LOOKING STATEMENTS" WITHIN THE
MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. THESE
STATEMENTS INCLUDE, AMONG OTHER THINGS, DESCRIPTIONS OF OUR PLANS AND OBJECTIVES
FOR OUR BUSINESS AND OUR FINANCIAL PERFORMANCE, AND THE ASSUMPTIONS THAT
UNDERLIE THESE PLANS AND OBJECTIVES AND OTHER FORWARD-LOOKING STATEMENTS
INCLUDED IN THIS PROSPECTUS. THEY ALSO INCLUDE STATEMENTS RELATING TO
ACQUISITIONS (INCLUDING PRO FORMA FINANCIAL INFORMATION) AND OTHER BUSINESS
DEVELOPMENT ACTIVITIES, FUTURE CAPITAL EXPENDITURES, FINANCING SOURCES AND
AVAILABILITY AND THE EFFECTS OF REGULATION AND COMPETITION. WE BASE THESE
STATEMENTS ON OUR CURRENT EXPECTATIONS, BUT MANY FACTORS AND UNCERTAINTIES,
INCLUDING CHANGES IN THE SECURITIES OR FINANCIAL MARKETS OR IN GENERAL ECONOMIC
CONDITIONS, THE AVAILABILITY OF EQUITY AND DEBT FINANCING, COMPETITION FOR
ACQUISITIONS OF INTERESTS IN INVESTMENT MANAGEMENT FIRMS, THE FAILURE OF CLOSING
CONDITIONS FOR PENDING INVESTMENTS TO OCCUR AND THE OTHER FACTORS DESCRIBED IN
THIS SECTION COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE
DESCRIBED IN THE FORWARD-LOOKING STATEMENTS. WE CAUTION YOU NOT TO PLACE UNDUE
RELIANCE ON ANY FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE
MADE.
OUR GROWTH STRATEGY AND INVESTMENTS
MAY NOT BE SUCCESSFUL
Our growth strategy includes acquiring ownership interests in mid-sized
investment management firms. To date, we have invested in 13 such firms, which
we refer to as our "affiliates". We intend to continue this investment program
in the future, assuming that we can find suitable firms to invest in and that we
can negotiate agreements on acceptable terms. We cannot be certain that we will
be successful in finding or investing in such firms or that they will have
favorable operating results.
WE HAD NET LOSSES IN 1994-97,
OUR FIRST FOUR YEARS OF OPERATION
We have been in operation for five years and had net losses in the first
four years. To date, our growth has come mostly from making new investments.
However, the performance of our existing affiliates is becoming increasingly
important to our growth. We may not be successful in making new investments and
the firms we invest in may fail to carry out their growth or management
succession plans. As we continue to execute our business strategy, we may
experience net losses in the future, which could have an adverse effect on our
financial condition and prospects.
FUTURE FINANCINGS COULD ADVERSELY
AFFECT US AND OUR STOCKHOLDERS
A large part of the purchase price we pay for the firms in which we invest
usually consists of cash. We believe that our existing cash resources and cash
flow from operations will be sufficient to meet our working capital needs for
normal operations for the foreseeable future. However, we expect that these
sources of capital will not be sufficient to fund anticipated investments in
firms. Therefore, we will need to raise capital by making additional long-term
or short-term borrowings or by selling more shares, either publicly or
privately, in order to complete further investments. This could increase our
interest expense, decrease our net income or dilute the interests of our
existing shareholders. Moreover, we may not be able to obtain
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financing for future investments on acceptable terms, if at all.
OUR USE OF DEBT TO FINANCE ACQUISITIONS COULD ADVERSELY AFFECT US
We plan to use all of the estimated $110.5 million that we will receive from
this offering to repay part of our borrowings. We will then have $148.0 million
of debt and $182.0 million available to borrow under our credit facility. We can
use borrowings under our credit facility for future investments and for our
working capital needs only if we continue to meet the financial tests under the
terms of the credit facility. We may also borrow an additional $70 million under
our credit facility with the consent of our lenders. We anticipate that we will
borrow more in the future when we invest in investment management firms. This
will subject us to the risks normally associated with debt financing.
Our credit facility contains provisions for the benefit of our lenders which
could operate in ways that restrict the manner in which we can conduct our
business or may have an adverse impact on your interests as a stockholder. For
example:
- Our borrowings under the credit facility are collateralized by pledges of
all of our interests in our affiliates (including all interests indirectly
held through wholly-owned subsidiaries).
- Our credit facility contains, and future debt instruments may contain,
restrictive covenants that could limit our ability to obtain additional
debt financing and could adversely affect our ability to make future
investments in investment management firms.
- Our credit facility prohibits us from paying dividends and other
distributions to our stockholders and restricts us, our affiliates and any
other subsidiaries we may have from incurring indebtedness, incurring
liens, disposing of assets and engaging in extraordinary transactions. We
are also required to comply with the credit facility's financial covenants
on an ongoing basis.
- We cannot borrow under our credit facility unless we comply with its
requirements.
Because indebtedness under our credit facility bears interest at variable
rates, interest rate increases will increase our interest expense, which could
adversely affect our cash flow and ability to meet our debt service obligations.
Although we have entered into interest rate "hedging" contracts designed to
offset a portion of our exposure to interest rate fluctuations above specified
levels, we cannot be certain that this strategy will be effective. If prevailing
interest rates drop below levels set in our hedging contracts, we may have to
pay higher interest rates under the hedging contracts than would otherwise apply
under the actual indebtedness.
WRITE-OFFS OF INTANGIBLE ASSETS
COULD ADVERSELY AFFECT US
At September 30, 1998, our total assets were $557.8 million, of which $473.7
million were intangible assets consisting of acquired client relationships and
goodwill. We cannot be certain that we will ever realize the value of such
intangible assets. We are amortizing (writing off) these intangible assets on a
straight-line basis over periods ranging from 9 to 28 years in the case of
acquired client relationships and 15 to 35 years in the case of goodwill. Pro
forma for all investments in our affiliates to date, amortization of intangible
assets, including goodwill, would have resulted in a charge to operations of
$21.3 million for the year ended December 31, 1997 and $16.0 million for the
nine months ended September 30, 1998.
We evaluate each investment and establish appropriate amortization periods
based on a number of factors including:
- the firm's historical and potential future operating performance and
attrition among clients,
- the stability and longevity of existing client relationships,
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- the firm's recent, as well as long-term, investment performance,
- the characteristics of the firm's products and investment styles,
- the stability and depth of the firm's management team, and
- the firm's history and perceived franchise or brand value.
After making each investment, we reevaluate these and other factors on a
regular basis to determine if the related intangible assets continue to be
realizable and if the amortization period continues to be appropriate. In 1995
and 1996, our reevaluations resulted in the write-off of approximately $2.5
million and $4.6 million of unamortized goodwill, respectively.
We do not consider the net unamortized balance of the intangible assets of
any of our investments to be impaired as of September 30, 1998. However, any
such future determination requiring the write-off of a significant portion of
unamortized intangible assets could adversely affect our results of operations
and financial position. In addition, we intend to invest in additional
investment management firms in the future. While these firms may contribute
additional revenue to AMG, they will also result in the recognition of
additional intangible assets which will cause further increases in amortization
expense.
CHANGES IN ACCOUNTING FOR GOODWILL AMORTIZATION MAY HAVE A MATERIAL ADVERSE
AFFECT ON US
The Financial Accounting Standards Board (FASB) is currently considering a
new approach for all companies that would require all purchased goodwill to be
amortized on a straight-line basis over its useful life, not to exceed 20 years.
The FASB is also considering an approach in which the useful life of goodwill
would be presumed to be 10 years or less, unless sufficient evidence supports a
longer life, not to exceed 20 years. It is unclear whether the FASB's new
approach would apply only to newly purchased goodwill or whether it would apply
to both previously recorded and newly purchased goodwill. The FASB is expected
to issue a statement on this issue in the second quarter of 1999.
We currently amortize goodwill purchased in our 13 investments on a straight
line basis ranging from 15 to 35 years. Any changes in GAAP accounting rules
that reduce the period over which we may amortize goodwill may have an adverse
effect on our acquisition strategy and our financial results. A shorter goodwill
amortization period would increase annual amortization expense and reduce our
net income over the amortization period.
WE AND OUR AFFILIATES RELY ON KEY MANAGEMENT PERSONNEL AND CANNOT GUARANTEE
THEIR CONTINUED SERVICE
We depend on the efforts of William J. Nutt, our President and Chief
Executive Officer, Sean M. Healey, our Executive Vice President, and our other
officers. Messrs. Nutt and Healey, in particular, play an important role in
identifying suitable investment opportunities for us and in structuring and
negotiating the terms of our investments in investment management firms. Messrs.
Nutt and Healey do not have employment agreements with us, although each of them
has a significant equity interest in AMG (including options subject to vesting
provisions).
In addition, Tweedy, Browne, our largest affiliate based on revenue, depends
heavily on the services of Christopher H. Browne, William H. Browne and John D.
Spears. These individuals have managed Tweedy, Browne for over 20 years and are
primarily responsible for all of that firm's investment decisions. Although each
of these individuals has entered into an employment agreement with Tweedy,
Browne providing for continued employment until October 2007, these employment
agreements are not a guarantee that these individuals will remain with Tweedy,
Browne until that date.
Our loss of key management personnel or our inability to attract, retain and
motivate sufficient numbers of qualified management personnel may adversely
affect our business. The market for investment managers is extremely competitive
and is increasingly
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characterized by frequent movement by investment managers among different firms.
In addition, because individual investment managers at our affiliates often
maintain a strong, personal relationship with their clients based on the
clients' trust in individual managers, the loss of a key investment manager at
an affiliate could jeopardize the affiliate's relationships with its clients and
lead to the loss of client accounts. Losing client accounts in these
circumstances could have a material adverse effect on the results of operations
and financial condition of AMG and its affiliates. Although we use a combination
of economic incentives, vesting provisions, and, in some instances,
non-solicitation agreements and employment agreements in an attempt to retain
key management personnel, we cannot guarantee that key managers will remain with
us.
POOR ECONOMIC AND MARKET CONDITIONS
MAY ADVERSELY AFFECT US
Because our affiliates offer a broad range of investment management services
and utilize a number of distribution channels, changing conditions in the
financial and securities markets directly affect our performance.
The financial markets and the investment management industry in general have
experienced both record performance and record growth in recent years. For
example, between January 1, 1995 and December 31, 1998, the S&P 500 Index
appreciated at a compound annual rate of approximately 30.5% and the aggregate
assets under management of mutual and pension funds grew at a compound annual
rate of 20.7% during 1995-1997, according to the Federal Reserve Board and the
Investment Company Institute. Domestic and foreign economic conditions and
general trends in business and finance, among other factors, affect the
financial markets and businesses operating in the securities industry. We cannot
guarantee that broader market performance will be favorable in the future. Any
decline in the financial markets or a lack of sustained growth may result in a
corresponding decline in our affiliates' performance and may cause our
affiliates to experience declining assets under management and/or fees, which
would reduce cash flow distributable to AMG.
POOR PERFORMANCE BY OUR LARGEST
AFFILIATE MAY ADVERSELY AFFECT US
Our investment in Tweedy, Browne represents our single largest investment to
date, with a purchase price of $300 million. Tweedy, Browne's revenues
represented 31.3% of our pro forma revenues for the first nine months of 1998.
Poor financial performance by Tweedy, Browne would have an adverse effect on our
consolidated results of operations and financial condition.
OUR AFFILIATES' INVESTMENT MANAGEMENT CONTRACTS ARE SUBJECT TO TERMINATION
ON SHORT NOTICE
Our affiliates derive almost all of their revenues from investment
management contracts. These contracts are typically terminable without penalty
upon 60 days' notice in the case of mutual fund clients or upon 30 days' notice
in the case of individual and institutional clients. As a result, our
affiliates' clients may withdraw funds from accounts managed by the affiliates
at their election. In addition, these contracts generally provide for payment
based on the market value of assets under management, although a portion also
provide for payment based on investment performance. Because most of these
contracts provide for payments based on market values of securities,
fluctuations in securities prices will directly affect our consolidated results
of operations and financial condition. Changes in our clients' investment
patterns will also affect the total assets under management. Moreover, some of
our affiliates' fees are higher than those of other investment managers for
similar types of investment services. The ability of each of our affiliates to
maintain its fee levels in a competitive environment depends on its ability to
provide clients with investment returns and services which are satisfactory to
its clients. We cannot be certain that our affiliates will be able to retain
their existing clients or to attract new clients at their current fee levels.
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THE FAILURE TO RECEIVE REGULAR
DISTRIBUTIONS FROM OUR AFFILIATES WOULD
ADVERSELY AFFECT US
Because we are a holding company, we receive all of our cash from
distributions made to us by our affiliates. All of our affiliates have entered
into agreements with us pursuant to which they have agreed to pay to us a
specified percentage of their gross revenues on a quarterly basis. In our
agreements with our affiliates, the distributions made to us by our affiliates
represent only a portion of our affiliates' gross revenues. Our affiliates use
the portion of their revenues not required to be distributed to us to pay their
operating expenses and distributions to their management teams. The payment of
distributions to us by our affiliates may be subject to the claims of our
affiliates' creditors and to limitations applicable to our affiliates under
state laws governing corporations, partnerships and limited liability companies,
state and federal regulatory requirements for the securities industry and
bankruptcy and insolvency laws. As a result, we cannot guarantee that our
affiliates will always make these distributions. See "Business--Our Structure
and Relationship with Affiliates-- Revenue Sharing Arrangements".
OUR PURCHASE OBLIGATIONS MAY
ADVERSELY AFFECT US
When we made our original investments in our affiliates, we agreed to
purchase the additional ownership interests in each affiliate from the owners of
these interests on pre-negotiated terms which are subject to several conditions
and limitations. Consequently, we may have to purchase some of these interests
from time to time for cash (which we may have to borrow) or in exchange for
newly issued shares of our Common Stock. These purchases may result in us having
more interest expense and less net income or in our existing stockholders
experiencing a dilution of their ownership in AMG. In addition, these purchases
may result in us owning larger portions of our affiliates, which may have an
adverse effect on our cash flow and liquidity. See "Business--Our Structure and
Relationship with Affiliates--Our Purchase of Additional Interests in Our
Existing Affiliates".
OUR ABILITY TO ALTER THE MANAGEMENT PRACTICES AND POLICIES OF OUR AFFILIATES
IS LIMITED
Although our agreements with our affiliates give us the authority to control
some types of business activities undertaken by them and we have voting rights
with respect to significant decisions, our affiliates manage and control their
own day-to-day operations, including all investment management policies and fee
levels, product development, client relationships, compensation programs and
compliance activities. As a result, we may not become aware, for example, of one
of our affiliates' non-compliance with a regulatory requirement as quickly as if
we were involved in the day-to-day business of the affiliate or we may not
become aware of the non-compliance at all. In situations such as the preceding
example, our financial condition and results of operations may be adversely
affected by problems stemming from the day-to-day operations of our affiliates.
See "--Our Affiliates' Businesses Are Highly Regulated". In addition, because
our affiliates conduct their own marketing and client relations, they may from
time to time compete with each other for clients. See "Business--Our Structure
and Relationship with Affiliates".
WE MAY BE RESPONSIBLE FOR LIABILITIES INCURRED BY OUR AFFILIATES
Some of our existing affiliates are partnerships of which we are the general
partner. Consequently, to the extent any of these affiliates incurs liabilities
or expenses which exceed its ability to pay for them, we are liable for their
payment. In addition, we may be held liable in some circumstances as a control
person for acts of our affiliates or their employees. AMG and each of its
affiliates maintain errors and omissions and general liability insurance in
amounts which we believe to be adequate to cover any potential liabilities. We
cannot be certain, however, that we will not have claims which exceed the limits
of our available insurance coverage, that our insurers
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will remain solvent and will meet their obligations to provide coverage, or that
insurance coverage will continue to be available to us with sufficient limits or
at a reasonable cost. A judgment against us or any of our affiliates in excess
of our available coverage could have a material adverse effect on us.
OUR INDUSTRY AND OUR AFFILIATES'
INDUSTRY ARE HIGHLY COMPETITIVE
We are an asset management holding company which invests in mid-sized
investment management firms. The market for partial or total acquisitions of
interests in investment management firms is highly competitive. We have several
competitors which are also set up as holding companies and invest in or buy
investment management firms. In addition, many other public and private
companies, including commercial and investment banks, insurance companies and
investment management firms, most of which have longer operating histories and
significantly greater resources than us, invest in or buy investment management
firms. Moreover, some of our principal stockholders also invest in or buy
investment management firms and may compete with us as we pursue additional
investments. We cannot guarantee that we will be able to compete effectively
with such competitors, that new competitors will not enter the market or that
such competition will not make it more difficult or impracticable for us to make
new investments in investment management firms.
The investment management business is also highly competitive. Our
affiliates compete with a broad range of investment managers, including public
and private investment advisers as well as firms associated with securities
broker-dealers, banks, insurance companies and other entities. From time to
time, our affiliates may also compete with each other for clients. Many of our
affiliates' competitors have greater resources than do we and our affiliates. In
addition to competing directly for clients, competition may reduce the fees that
our affiliates can obtain for their services. We believe that each of our
affiliate's ability to compete effectively with other firms is dependent upon
the affiliate's products, level of investment performance and client service, as
well as the marketing and distribution of its investment products. We cannot be
certain that our affiliates will be able to achieve favorable investment
performance and retain their existing clients.
OUR INTERNATIONAL OPERATIONS INVOLVE RISKS WHICH MAY ADVERSELY AFFECT US
Some of our affiliates operate or advise clients outside of the United
States. Furthermore, in the future we may invest in other investment management
firms which operate or advise clients outside of the United States and our
existing affiliates may expand their non-U.S. operations. Our affiliates take
risks inherent in doing business internationally, such as changes in applicable
laws and regulatory requirements, difficulties in staffing and managing foreign
operations, longer payment cycles, difficulties in collecting
investment advisory fees receivable, political instability, fluctuations in
currency exchange rates, expatriation controls and potential adverse tax
consequences. We cannot be certain that one or more of these risks will not have
an adverse effect on our affiliates, including investment management firms in
which we may invest in the future, and, consequently, on our consolidated
business, financial condition and results of operations.
OUR AFFILIATES' BUSINESSES ARE
HIGHLY REGULATED
Our affiliates' businesses are highly regulated, primarily by U.S. federal
authorities and to a lesser extent by other authorities including non-U.S.
authorities. The failure of our affiliates to comply with laws or regulations
could result in fines, suspensions of individual employees or other sanctions,
including revocation of an affiliate's registration as an investment adviser,
commodity trading advisor or broker/dealer. Each of our affiliates (other than
First Quadrant Limited) is registered as an investment adviser with the
Securities and Exchange Commission under the Investment Advisers Act of 1940, as
amended (the
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"Investment Advisers Act"), and is subject to the provisions of the Investment
Advisers Act and related regulations. The Investment Advisers Act requires
registered investment advisers to comply with numerous obligations, including
record keeping requirements, operational procedures and disclosure obligations.
Each of our affiliates (other than First Quadrant Limited) is also subject to
regulation under the securities laws and fiduciary laws of several states.
Moreover, some of our affiliates, including Tweedy, Browne, act as advisers or
subadvisers to mutual funds which are registered with the Securities and
Exchange Commission pursuant to the Investment Company Act of 1940, as amended
(the "1940 Act"). As an adviser or subadviser to a registered investment
company, each of these affiliates must comply with the requirements of the 1940
Act and related regulations.
Our affiliates are also subject to the Employee Retirement Income Security
Act of 1974 ("ERISA"), and related regulations, to the extent they are
"fiduciaries" under ERISA with respect to some of their clients. ERISA and
related provisions of the Internal Revenue Code of 1986, as amended, impose
duties on persons who are fiduciaries under ERISA, and prohibit some
transactions involving the assets of each ERISA plan which is a client of an
affiliate, as well as some transactions by the fiduciaries (and several other
related parties) to such plans. Two of our affiliates, First Quadrant and
Renaissance, are also registered with the Commodity Futures Trading Commission
as Commodity Trading Advisors and are members of the National Futures
Association. Finally, Tweedy, Browne is registered under the Exchange Act as a
broker/dealer and, therefore, is subject to extensive regulation relating to
sales methods, trading practices, the use and safekeeping of customers' funds
and securities, capital structure, record keeping and the conduct of directors,
officers and employees.
Furthermore, the Investment Advisers Act and the 1940 Act provide that each
investment management contract under which our affiliates manage assets for
other parties either terminates automatically if assigned, or must state that it
is not assignable without consent. In general, the term "assignment" includes
not only direct assignments, but also indirect assignments which may be deemed
to occur upon the direct or indirect transfer of a "controlling block" of the
voting securities of one of our affiliates. The 1940 Act provides that all
investment contracts with mutual fund clients may be terminated by such clients,
without penalty, upon no later than 60 days' notice.
Several of our affiliates are also subject to the laws of non-U.S.
jurisdictions and non-U.S. regulatory agencies. For example, First Quadrant
Limited, located in London, is a member of the Investment Management Regulatory
Organisation of the United Kingdom, and some of our other affiliates are
investment advisers to funds which are organized under non-U.S. jurisdictions,
including Luxembourg (where the funds are regulated by the Institute Monetaire
Luxembourgeois) and Bermuda (where the funds are regulated by the Bermuda
Monetary Authority).
AMG itself does not engage in the business of providing investment advice
and, therefore, is not registered as an investment adviser under federal or
state law.
THERE IS A RISK THAT WE WILL NOT BE PREPARED FOR THE IMPACT OF THE YEAR 2000
AND, THEREFORE, WE ARE PROVIDING THE FOLLOWING YEAR 2000 READINESS DISCLOSURE
The "Year 2000" poses a concern to our business as a result of the fact that
computer applications have historically used the last two digits, rather than
all four digits, to store year data. If left unmodified, these applications
would misinterpret the Year 2000 for the year 1900 and would in many cases be
unable to function properly in the Year 2000 and beyond.
AMG'S READINESS. In anticipation of this problem, we have identified all of
the significant computers, software applications and related equipment used at
our holding company that need to be modified, upgraded
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or replaced to minimize the possibility of a material disruption to our business
based on the advent of the Year 2000. We anticipate completing our Year 2000
preparations at the holding company by the end of the second quarter of 1999. We
estimate our total cost will be less than $800,000 for the four year period
ending on December 31, 1999. We cannot be certain that we will not encounter
unforeseen delays or costs in completing our preparations.
OUR AFFILIATES' READINESS. We have also established a time line with each
of our affiliates to complete its Year 2000 preparations and have received
estimates from each of them of the costs required to complete their
preparations. As part of our general preparedness program, each of our
affiliates has assigned responsibility for preparing for the Year 2000 to a
member of its senior management in order to ensure that both proprietary and
third party vendor systems will be ready for the Year 2000. All of our
affiliates have completed their assessment and plans are in place for the
renovation or replacement of all non-compatible systems. We anticipate that the
affiliates will complete the renovation or replacement of all non-compatible
systems and the subsequent testing of all systems in the first half of 1999.
Most of our affiliates pay for the costs of their Year 2000 preparations out of
their operating allocation, which is the portion of their revenues that is
allocated to pay their operating expenses and is not available for distribution
to the owners of the affiliates. As a result, these costs will only reduce an
affiliate's distributions to AMG based on AMG's ownership interest in the
affiliate if the affiliate's operation expenses exceed its operating allocation
and the portion of revenues allocated to the management owners.
We have based our evaluation of our ability to prepare for the Year 2000
upon a number of assumptions regarding future events, including third party
modification plans and the availability of needed resources. We cannot guarantee
that these estimates will be achieved, and actual results may differ materially
from our estimates. Specific factors which might cause such material differences
with respect to the Year 2000 issue include, but are not limited to, the failure
of our affiliates to achieve represented or stated levels of Year 2000
compliance, the availability and cost of personnel trained in this area and the
ability to locate and correct all relevant computer codes and similar
uncertainties.
BECAUSE OUR BUSINESS COULD BE ADVERSELY AFFECTED IF OUR OUTSIDE SERVICE
PROVIDERS ARE NOT PREPARED FOR THE YEAR 2000, WE ARE PROVIDING THE FOLLOWING
ADDITIONAL YEAR 2000 READINESS DISCLOSURE.
Outside service providers perform several processes which are critical to
our affiliates' business operations, including transfer agency and custody
functions. Our affiliates have surveyed these parties and are monitoring their
progress. However, our affiliates have limited control, if any, over the actions
of these outside parties and in some instances have no alternative vendors. If
the affiliates or their outside service providers fail to resolve their Year
2000 issues, we anticipate that our affiliates' operations could experience
material disruptions caused by the inability to process trades and access client
and investment research data files and, accordingly, our business would be
adversely affected.
OUR CHARTER AND BY-LAWS AND DELAWARE
LAW MAY IMPEDE TRANSACTIONS
FAVORABLE TO OUR STOCKHOLDERS
Several provisions of our Amended and Restated Certificate of Incorporation,
our Amended and Restated By-laws and Delaware law may, together or separately,
prevent a transaction which is beneficial to our stockholders from occurring.
These provisions may discourage potential purchasers from presenting acquisition
proposals, delay or prevent potential purchasers from acquiring a controlling
interest in us, block the removal of incumbent directors or limit the price that
potential purchasers might be willing to pay in the future for shares of our
Common Stock. These provisions include the issuance, without further stockholder
approval, of preferred stock with rights and privileges which could be senior to
the Common Stock. We are also subject to Section 203 of the Delaware General
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Corporation Law which, subject to a few exceptions, prohibits a Delaware
corporation from engaging in any of a broad range of business combinations with
any "interested stockholder" for a period of three years following the date that
such stockholder became an interested stockholder.
WE DO NOT PLAN TO PAY DIVIDENDS TO
OUR STOCKHOLDERS
We have never declared or paid a cash dividend on our Common Stock. We
intend to retain earnings to repay debt and to finance the growth and
development of our business and do not anticipate paying cash dividends on our
Common Stock in the foreseeable future. Any declaration of cash dividends in the
future will depend, among other things, upon our results of operations,
financial condition and capital requirements as well as general business
conditions. Our credit facility also contains restrictions which prohibit us
from making dividend payments to our stockholders. See "Dividend Policy".
MARKET CONDITIONS MAY REDUCE THE
TRADING PRICE OF OUR COMMON STOCK
The market price of our Common Stock has historically experienced and may
continue to experience high volatility. Our quarterly operating results, changes
in general conditions in the economy or the financial markets and other
developments affecting us or our competitors could cause the market price of our
Common Stock to fluctuate substantially. In addition, in recent years, the stock
market has experienced significant price and volume fluctuations. This
volatility has affected the market prices of securities issued by many companies
for reasons unrelated to their operating performance and may adversely affect
the price of our Common Stock.
SHARES ELIGIBLE FOR FUTURE SALE
If our stockholders sell substantial amounts of our Common Stock (including
shares issued upon the exercise of outstanding options) in the public market
following this offering, the market price of our Common Stock could fall. Such
sales may also make it more difficult for us to sell equity or equity-related
securities in the public market in the future at a time and at a price that we
deem appropriate. Upon completion of this offering, we will have 23,282,559
shares of our Common Stock outstanding (based on the number of shares
outstanding as of December 31, 1998 and assuming no exercise of outstanding
stock options after that date). Of these shares, 18,368,289 shares are freely
tradable without restriction under the Securities Act of 1933 (the "Securities
Act"). Also, 3,122,703 shares are currently eligible for sale in the public
market subject to compliance with the volume and other limitations of Rule 144
under the Securities Act, and 1,791,567 shares will become eligible for sale at
various times after the date of this prospectus under Rule 144.
The selling stockholders and all our directors and officers have agreed not
to sell a total of 3,318,496 of these shares for periods of 60 to 90 days after
the completion of this offering without the consent of the underwriters. In
addition, AMG has also agreed not to sell shares for a period of 90 days after
the completion of this offering without the consent of the underwriters.
In addition, we have registered for resale the 2,175,000 shares of our
Common Stock reserved for issuance under our stock plans. As of December 31,
1998, options to purchase 1,171,750 shares of our Common Stock were outstanding
and will be eligible for sale in the public market from time to time subject to
vesting and, in the case of some stock options, the expiration of lock-up
agreements. The possible sale of a significant number of the shares may cause
the price of our Common Stock to fall.
In addition, the holders of approximately 2,987,583 shares of our Common
Stock have the right in some circumstances to require us to register their
shares under the Securities Act for resale to the public, the holders of
approximately 5,370,856 shares have the right to include their shares in any
registration statement filed by us and some of the
19
<PAGE>
managers of our affiliates have the right under some circumstances to exchange
portions of their interests in our affiliates for shares of our Common Stock.
See "Business--Our Structure and Relationship with Affiliates--Our Purchase of
Additional Interests in Our Existing Affiliates". Some of these managers also
have the right to include these shares in a registration statement filed by us
under the Securities Act. By exercising their registration rights and causing a
large number of shares to be sold in the public market, these holders may cause
the price of our Common Stock to fall. In addition, any demand to include these
shares in our registration statements could have an adverse effect on our
ability to raise needed capital.
20
<PAGE>
USE OF PROCEEDS
The net proceeds to AMG from the sale of 4,000,000 shares of Common Stock
offered by AMG are estimated to be $110.5 million ($136.6 million if the
underwriters' over-allotment option is exercised in full) at an assumed public
offering price of $29.25 per share and after deducting the estimated
underwriting discount and estimated offering expenses payable by AMG. We will
not receive any proceeds from the sale of shares of Common Stock by the selling
stockholders. See "Selling Stockholders". We intend to use the proceeds from
this offering to reduce outstanding indebtedness under our credit facility. Our
outstanding indebtedness under our credit facility bears interest at variable
rates based on the prime rate or LIBOR and matures in December 2002. This
interest rate was 5.7% at January 29, 1999.
DIVIDEND POLICY
We have never declared or paid a cash dividend on our Common Stock. We currently
intend to retain earnings to finance the growth and development of our business,
including possible investments, and do not anticipate paying cash dividends for
the foreseeable future. Any payment of cash dividends in the future will depend
upon our financial condition, capital requirements and earnings, as well as
other factors our Board of Directors may deem relevant. Our ability to pay
dividends on our Common Stock is dependent on the receipt of distributions from
our affiliates. In addition, our credit facility prohibits us from making
dividend payments to our stockholders.
21
<PAGE>
CAPITALIZATION
The following table sets forth our capitalization at September 30, 1998: (i)
on an actual basis; (ii) on a pro forma basis to reflect our recent investments
in Davis Hamilton Jackson and Rorer and related financings; and (iii) on the pro
forma basis described for those investments, as adjusted to reflect the
conversion of 555,555 shares of our Class B Common Stock into Common Stock in
connection with this Offering and our use of the estimated net proceeds from
this offering as described under "Use of Proceeds".
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL PRO FORMA AS ADJUSTED
----------- ----------- ------------
<S> <C> <C> <C>
(IN THOUSANDS)
Senior debt, current portion.............................................. $ -- $ -- $ --
Senior debt, long-term portion............................................ 200,300 287,300 176,800
Subordinated debt......................................................... 800 800 800
----------- ----------- ------------
Total debt.......................................................... 201,100 288,100 177,600
Stockholders' equity:
Series C Non-Voting Convertible Stock, $.01 par value; 1,750,942 shares
authorized, issued and outstanding historical, pro forma and pro forma
as adjusted........................................................... 30,992 30,992 30,992
Common Stock, $.01 par value; 40,000,000 shares authorized; 15,707,417
shares issued and outstanding historical and pro forma; and 20,262,972
shares issued and outstanding pro forma as adjusted(1)................ 157 157 203
Class B Common Stock, $.01 par value, non-voting; 3,000,000 shares
authorized; 1,886,800 shares issued and outstanding historical, pro
forma; and 1,331,245 shares issued and outstanding pro forma as
adjusted.............................................................. 19 19 13
Additional paid-in capital on Common Stock.............................. 273,415 273,415 383,875
Accumulated other comprehensive income.................................. 15 15 15
Retained earnings....................................................... 2,359 2,359 2,359
Less treasury shares.................................................... (1,534) (1,534) (1,534)
----------- ----------- ------------
Total stockholders' equity.......................................... 305,423 305,423 415,923
----------- ----------- ------------
Total capitalization................................................ $ 506,523 $ 593,523 $ 593,523
----------- ----------- ------------
----------- ----------- ------------
</TABLE>
- ------------------------
(1) Excludes (i) 92,500 shares of Common Stock reserved for issuance under
options outstanding under our 1995 stock plan, of which 53,959 shares were
issuable at September 30, 1998 upon the exercise of outstanding stock
options at $9.10 per share, and (ii) 898,500 shares of Common Stock reserved
for issuance under options outstanding under our 1997 stock plan, of which
32,500 shares were issuable at September 30, 1998 upon the exercise of
outstanding stock options at a weighted average exercise price of $34.25 per
share. Includes 62,600 shares repurchased after September 30, 1998.
22
<PAGE>
DILUTION
Our pro forma net tangible book value (deficit) at September 30, 1998 was
$(248.6) million, or $(14.16) per share of Common Stock. Pro forma net tangible
book value per share represents the amount of our total tangible assets less
total liabilities, each on a pro forma basis to reflect our recent investments
in Davis Hamilton Jackson and Rorer and related financings, divided by the
number of shares of Common Stock outstanding. After giving effect to the sale of
the 4,000,000 shares of Common Stock offered by AMG in this offering at an
assumed public offering price of $29.25 per share (before deducting the
estimated underwriting discount and estimated offering expenses), and the
application of the estimated net proceeds, our pro forma net tangible book value
(deficit) at September 30, 1998 would have been $(138.1) million, or $(6.40) per
share. This represents an immediate decrease in the pro forma net tangible book
value (deficit) of $7.76 per share to new investors in our Common Stock in this
offering.
<TABLE>
<S> <C> <C>
Assumed public offering price per share(1)............................... $ 29.25
Pro forma net tangible book value (deficit) per share before this
offering........................................................... $ (14.16)
Increase per share attributable to new investors..................... 7.76
Pro forma net tangible book value (deficit) per share after this
offering............................................................... (6.40)
---------
Dilution per share to new investors(2)(3)................................ $ 35.65
---------
---------
</TABLE>
- ------------------------
(1) Assumed public offering price before deduction of underwriting discount and
estimated expenses of this offering to be paid by AMG.
(2) Dilution is determined by subtracting the pro forma net tangible book value
(deficit) per share of our Common Stock after this offering from the assumed
public offering price paid by purchasers in this offering for a share of our
Common Stock.
(3) Assumes no exercise of outstanding stock options. As of the date of this
prospectus, there are options (including both vested and unvested options)
outstanding to purchase 1,171,750 shares of Common Stock at a weighted
average exercise price of $26.34. See the notes to our consolidated
financial statements incorporated by reference. If any of these options were
exercised, there would be further dilution to purchasers of Common Stock in
this offering.
Assuming the underwriters' over-allotment options are exercised in full, the
pro forma net tangible book value (deficit) at September 30, 1998 would be
$(112.0) million, or $(4.98) per share of Common Stock, the immediate increase
in pro forma net tangible book value of shares owned by existing stockholders
would be $9.18 per share, and the immediate dilution to purchasers of shares of
Common Stock in this offering would be $34.23 per share.
23
<PAGE>
RECENT DEVELOPMENTS
PLANNED ACQUISITION OF THE MANAGERS
FUNDS, L.P.
On January 29, 1999, we entered into a definitive agreement to acquire
substantially all of the partnership interests in The Managers Funds, L.P.,
which serves as the adviser to a family of ten equity and fixed income no-load
mutual funds. These mutual funds had a total of $1.8 billion in assets at
December 31, 1998. This transaction is subject to customary closing conditions.
Managers employs an innovative business model whereby it selects subadvisers
for its mutual fund products from a universe of over a thousand investment
managers. The funds are distributed to retail and institutional clients directly
and through intermediaries including independent investment advisers, 401(k)
plan sponsors and alliances, broker-dealers, major fund marketplaces and bank
trust departments. We believe that the acquisition of Managers will provide some
of our affiliates that have traditionally focused on institutional clients with
an opportunity to reach new clients through Managers' diverse mutual fund
distribution channels.
Except as otherwise specifically indicated in this prospectus, none of the
financial or other information contained in this prospectus reflects our planned
acquisition of Managers.
FOURTH QUARTER AND FULL YEAR 1998 RESULTS
On January 27, 1999, we reported our financial and operating results for the
fourth quarter and year ended December 31, 1998.
Our net income for the fourth quarter was $9.3 million, or $0.48 per share
on a diluted basis, on revenues of $80.3 million. Our EBITDA for the fourth
quarter was $24.0 million. These results compare to net income before
extraordinary item for the fourth quarter 1997 of $0.8 million, or $0.07 per
share on a diluted basis, on revenues of $42.0 million, and EBITDA before
extraordinary item of $12.1 million. The revenues, EBITDA and net income for the
fourth quarter 1998 include substantial performance fees which, due to their
dependence on investment results, may not recur to the same magnitude in 1999
and future years.
For the year ended December 31, 1998, our net income was $25.6 million, or
$1.33 per share on a diluted basis, on revenues of $238.5 million, while our
EBITDA for the year ended December 31, 1998 was $76.3 million. For the year
ended December 31, 1997, our net income before extraordinary items was $1.6
million, or $0.20 per share on a diluted basis, on revenues of $95.3 million.
Our EBITDA for the year ended December 31, 1997 was $20.0 million.
On a pro forma basis (giving effect to the investments in Essex, completed
on March 20, 1998, Davis Hamilton Jackson, completed on December 31, 1998, and
Rorer, completed on January 6, 1999, as if each occurred on January 1, 1998),
net income for the year ended December 31, 1998 was $28.3 million, or $1.45 per
share. Our EBITDA on the same pro forma basis for the year ended December 31,
1998 was $89.3 million.
Pro forma for the investment in Rorer, assets under management at December
31, 1998 were $62.1 billion. Assets under management by Tweedy, Browne, our
largest affiliate based on EBITDA Contribution, rose to $6.6 billion, a 24.3%
increase for the year. Aggregate net client cash flows were positive for the
year at $160 million, although those for the fourth quarter were negative $1.5
billion due to a decline in assets indirectly managed using "overlay"
strategies. Overlay assets declined by $1.6 billion in the fourth quarter and
for the year. Overlay assets generally carry lower fees than directly managed
assets. Excluding the effect of these overlay assets, aggregate directly managed
assets of our affiliates increased by $170 million in the fourth quarter and
$1.7 billion for the year.
24
<PAGE>
AFFILIATED MANAGERS GROUP, INC.
SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED PRO FORMA
DECEMBER 31, THREE MONTHS ENDED
---------------------------- DECEMBER 31,
1997 1998 1998 (1)
------------- ------------- ---------------------
<S> <C> <C> <C>
(UNAUDITED)
STATEMENT OF INCOME DATA:
Revenues............................................ $ 42,007 $ 80,293 $ 88,635
Other operating expenses............................ 24,040 42,390 46,853
Depreciation and amortization....................... 4,378 5,398 6,230
------------- ------------- -----------
Operating income.................................... 13,589 32,505 35,552
Investment and other income......................... (360) (910) (992)
Interest expense.................................... 5,772 3,036 4,045
Income before minority interest, income taxes and
extraordinary item................................ 8,177 30,379 32,499
Minority interest................................... (6,224) (14,862) (16,232)
------------- ------------- -----------
Income before income taxes and extraordinary item... 1,953 15,517 16,267
Income tax expense.................................. 1,143 6,207 6,832
------------- ------------- -----------
Income before extraordinary item.................... 810 9,310 9,435
Extraordinary item.................................. (10,011) -- --
------------- ------------- -----------
Net income (loss)................................... $ (9,201) $ 9,310 $ 9,435
------------- ------------- -----------
------------- ------------- -----------
Average shares outstanding--diluted................. 12,344,678 19,360,481 19,358,753
Income before extraordinary item per
share--diluted.................................... $ 0.07 $ 0.48 $ 0.49
OTHER FINANCIAL DATA:
EBITDA (2).......................................... $ 12,103 $ 23,951 $ 26,542
EBITDA as adjusted (3).............................. 5,188 14,708 15,665
EBITDA as adjusted per share (under same method used
to calculate diluted earnings per share).......... $ 0.42 $ 0.76 $ 0.81
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1998 1998
-------------- -------------- --------------
<S> <C> <C> <C>
(UNAUDITED)
BALANCE SHEET DATA:
Senior debt......................................... $ 159,500 $ 212,500 $ 277,500
Subordinated debt................................... 800 800 800
Stockholders' equity................................ 259,740 313,655 313,655
</TABLE>
25
<PAGE>
AFFILIATED MANAGERS GROUP, INC.
SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
YEAR ENDED DECEMBER 31, YEAR ENDED
-------------------------- DECEMBER 31,
1997 1998 1998 (1)
----------- ------------- --------------
<S> <C> <C> <C>
(UNAUDITED)
STATEMENT OF INCOME DATA:
Revenues........................................................... $ 95,287 $ 238,494 $ 278,327
Other operating expenses........................................... 64,168 125,590 146,175
Depreciation and amortization...................................... 8,558 20,124 24,386
----------- ------------- --------------
Operating income................................................... 22,561 92,780 107,766
Investment and other income........................................ (1,174) (2,251) (2,585)
Interest expense................................................... 8,479 13,603 16,179
Income before minority interest, income taxes and extraordinary
item............................................................. 15,256 81,428 94,172
Minority interest.................................................. (12,249) (38,843) (45,459)
----------- ------------- --------------
Income before income taxes and extraordinary item.................. 3,007 42,585 48,713
Income tax expense................................................. 1,364 17,034 20,459
----------- ------------- --------------
Income before extraordinary item................................... 1,643 25,551 28,254
Extraordinary item................................................. (10,011) -- --
----------- ------------- --------------
Net income (loss).................................................. $ (8,368) $ 25,551 $ 28,254
----------- ------------- --------------
----------- ------------- --------------
Average shares outstanding--diluted................................ 8,235,529 19,222,831 19,479,900
Income before extraordinary item per share--diluted................ $ 0.20 $ 1.33 $ 1.45
OTHER FINANCIAL DATA:
EBITDA (2)......................................................... $ 20,044 $ 76,312 $ 89,278
EBITDA as adjusted (3)............................................. 10,201 45,675 52,640
EBITDA as adjusted per share (under same method used to calculate
diluted earnings per share)...................................... $ 1.24 $ 2.38 $ 2.70
</TABLE>
26
<PAGE>
AFFILIATED MANAGERS GROUP, INC.
SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT AS INDICATED)
<TABLE>
<CAPTION>
PRO FORMA
THREE MONTHS THREE MONTHS PRO FORMA
ENDED YEAR ENDED ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1998 1998 (1) 1998 (1)
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
(UNAUDITED)
SUPPLEMENTAL REPORTED AND PRO FORMA INFORMATION:
Assets under management (at period end, in millions):
Tweedy, Browne...................................... $ 6,641 $ 6,641 $ 6,641 $ 6,641
Other Affiliates (4)................................ 51,090 51,090 55,490 55,490
-------------- -------------- -------------- --------------
Total........................................... $ 57,731 $ 57,731 $ 62,131 $ 62,131
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
Revenues:
Tweedy, Browne...................................... $ 18,937 $ 78,243 $ 18,937 $ 78,243
Other Affiliates.................................... 61,356 160,251 69,698 200,084
-------------- -------------- -------------- --------------
Total........................................... $ 80,293 $ 238,494 $ 88,635 $ 278,327
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
Owners' Allocation (5):
Tweedy, Browne...................................... $ 13,072 $ 54,097 $ 13,072 $ 54,097
Other Affiliates.................................... 28,902 69,785 32,818 88,936
-------------- -------------- -------------- --------------
Total........................................... $ 41,974 $ 123,882 $ 45,890 $ 143,033
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
EBITDA Contribution (6):
Tweedy, Browne...................................... $ 9,392 $ 39,284 $ 9,392 $ 39,284
Other Affiliates.................................... 17,027 44,676 19,618 57,642
-------------- -------------- -------------- --------------
Total........................................... $ 26,419 $ 83,960 $ 29,010 $ 96,926
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
RECONCILIATION OF EBITDA CONTRIBUTION TO EBITDA:
Total EBITDA Contribution (as above)................ $ 26,419 $ 83,960 $ 29,010 $ 96,926
Less, holding company expenses...................... (2,468) (7,648) (2,468) (7,648)
-------------- -------------- -------------- --------------
EBITDA(2)........................................... $ 23,951 $ 76,312 $ 26,542 $ 89,278
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
</TABLE>
- ------------------------
(1) The pro forma financial data give effect to the investments in Essex, Davis
Hamilton Jackson, and Rorer and financing transactions which occurred during
1998 and 1999 as if each of such transactions occurred as of January 1,
1998.
(2) EBITDA represents earnings before interest expense, income taxes,
depreciation and amortization and extraordinary items.
(3) EBITDA as adjusted represents earnings after interest expense and income
taxes but before depreciation and amortization and extraordinary items.
(4) Assets under management for the three months December 31, 1998 and year
ended December 31, 1998 reflect assets for Davis Hamilton Jackson. Revenues,
Owners' Allocation and EBITDA Contribution for the same periods do not
reflect the investment in Davis Hamilton Jackson due to its closing date of
December 31, 1998.
(5) Owners' Allocation represents the portion of an affiliate's revenues which
is allocated to the owners of that affiliate, including AMG, generally in
proportion to their ownership interests, pursuant to the revenue sharing
agreement with such affiliate.
(6) EBITDA Contribution represents the portion of an affiliate's revenues that
is allocated to AMG after amounts retained by the affiliate for compensation
and day-to-day operating and overhead expenses, but before the interest,
income taxes, depreciation and amortization expenses of the affiliate.
27
<PAGE>
BUSINESS
OVERVIEW
We acquire equity interests in mid-sized investment management firms and
currently derive all of our revenues from those firms. We refer to the firms in
which we have invested as our "affiliates". We hold investments in 13 affiliates
that managed $62.1 billion in assets at December 31, 1998.
We were founded in 1993 to address the succession and ownership transition
issues facing the founders and principal owners of many mid-sized investment
management firms. We did this because we believed that many of them wanted a new
alternative for shifting ownership to the next generation of management. We
developed an innovative transaction structure to serve as a superior succession
planning alternative for these firms.
The key component of our transaction structure is our purchase of majority
interests in these firms. Within this structure, we allow ongoing managers to
keep a significant ownership interest in their firms which they may sell to us
in the future, we give management autonomy over the day-to-day operations of
their firm, and we allow management to decide how to spend a fixed portion of
their revenues on salaries, bonuses and other operating expenses.
We implement our structure through a revenue sharing arrangement with each
of our affiliates. This arrangement allocates a specified percentage of
revenues, typically 50-70%, for use by the affiliate's management in paying the
salaries, bonuses and other operating expenses of the affiliate and the
remaining portion of revenues, typically 30-50%, to the owners of that
affiliate, including AMG, generally in proportion to their ownership of the
affiliate. We believe that our structure is particularly appealing to managers
of firms which anticipate strong future growth, because it gives them the
opportunity to profit from an affiliate's growth through this revenue sharing
arrangement.
The table below depicts the pro forma change in our assets under management
(assuming all 13 of our affiliates were included for the entire periods
presented).
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
--------------------
1997 1998
--------- ---------
<S> <C> <C>
(IN MILLIONS)
Assets under management--beginning......................................................... $ 35,324 $ 54,961
Net new sales.............................................................................. 12,339 2,001
Market appreciation........................................................................ 7,298 5,169
--------- ---------
Assets under management--ending............................................................ $ 54,961 $ 62,131
--------- ---------
--------- ---------
</TABLE>
We generally seek to acquire interests in investment management firms with
$500 million to $10 billion of assets under management. The growth in the
investment management industry has resulted in a significant increase in the
number of firms in this size range. We have identified approximately 1,300 of
these firms in the United States, Canada and the United Kingdom. We believe
that, in the coming years, a substantial number of investment opportunities will
arise as founders of these firms approach retirement age and begin to plan for
succession. We also anticipate significant additional investment opportunities
in firms that are currently wholly-owned by larger entities. We believe that we
can take advantage of these investment opportunities because our management team
has substantial industry experience and expertise in structuring and negotiating
transactions, as well as a highly organized process for identifying and
contacting investment prospects.
28
<PAGE>
HOLDING COMPANY OPERATIONS
Our management performs two primary functions:
- implementing our strategy of growth through acquisitions of interests in
prospective affiliates; and
- supporting, enhancing, and monitoring the activities of our existing
affiliates.
ACQUISITION OF INTERESTS IN PROSPECTIVE AFFILIATES
The acquisition of interests in new affiliates is a primary element of our
growth strategy. Our management takes responsibility for each step in this
process, including identification and contact of potential affiliates, and the
valuation, structuring and negotiation of transactions. In general, we try to
initiate our discussions with potential affiliates on an exclusive basis. We do
not actively seek to participate in competitive auction processes or employ
investment bankers or finders. However, AMG and its transaction structure have
been competitive in cases where investment bankers have been involved. Of our 13
affiliates, five were represented by investment bankers while the remaining
eight were transactions initiated by our management.
Our management identifies and develops relationships with promising
potential affiliates based on a thorough understanding of the universe of
mid-sized investment management firms derived from our proprietary database made
up of data from third party vendors, public and industry sources and our own
research. We use this database to screen and prioritize investment prospects. We
also use the database to monitor the level and frequency of interaction with
potential affiliates. This database and our related contact management system
help us to identify promising potential affiliates and to develop and maintain
relationships with these firms.
We try to increase awareness of our approach to investing by actively
participating in conferences and seminars related to succession planning for
investment management firms. These activities lead to a substantial number of
unsolicited calls to AMG by firms considering succession planning issues. In
addition, our management maintains an active calling program in order to develop
relationships with prospective affiliates. In the past three years, our
management has visited over 440 firms. We believe that we have established
ongoing relationships with a substantial number of firms which will be
considering succession planning alternatives in the future.
Once discussions with a target firm lead to transaction negotiations, our
management team performs all of the functions related to the valuation,
structuring and negotiation of the transaction. Our management team includes
professionals with substantial experience in mergers and acquisitions of
investment management firms.
Upon the negotiation and execution of definitive agreements, the target firm
contacts its clients to notify them and seek their consent to the transaction
(which constitutes an assignment of the firm's investment advisory contracts),
as required by the Investment Advisers Act. If the firm has mutual fund clients,
the firm seeks new contracts with those funds, as required by the 1940 Act. The
new contracts must be approved by the funds' shareholders through a proxy
process.
AFFILIATE SUPPORT
In addition to seeking new investments, we seek to support and enhance the
growth and operations of our affiliates. We believe that the management of each
affiliate is in the best position to assess its firm's needs and opportunities,
and that the autonomy and culture of each affiliate should be preserved.
However, when requested by the management of an affiliate, we provide strategic,
marketing and operational assistance. We believe that our affiliates find these
support services attractive because the services otherwise may not be as
accessible or as affordable to mid-sized investment management firms.
In addition to the diverse industry experience and knowledge of our senior
management, we maintain relationships with
29
<PAGE>
many consultants whose specific expertise enhances our ability to offer a wide
range of assistance. Our initiatives to support our affiliates have included:
- new product development,
- marketing material development,
- institutional sales assistance,
- recruiting,
- compensation evaluation,
- regulatory compliance audits, and
- client satisfaction surveys.
We also work to obtain discounts on some of the products and services that
our affiliates need, such as:
- sales training seminars,
- public relations services,
- insurance, and
- retirement benefits.
One way that we seek to enhance the growth of our affiliates is by helping
them acquire smaller investment management firms or teams which are not suitable
as stand-alone investments by AMG. Mid-sized firms may have difficulty finding
and capitalizing on these opportunities on their own. As an example, in July
1998, we structured and financed the acquisition of Sound Capital Partners by
The Burridge Group LLC, one of our affiliates.
OUR STRUCTURE AND RELATIONSHIP WITH AFFILIATES
As part of our investment structure, each of our affiliates is organized as
a separate and largely autonomous limited liability company or partnership. Each
affiliate operates under its own organizational document, a limited liability
company agreement or partnership agreement. The organizational document includes
provisions regarding the use of the affiliate's revenues and the management of
the affiliate. The organizational document also generally gives management
owners the ability to realize the value of their retained equity interests in
the future. While the organizational document of each affiliate is agreed upon
at the time of our investment, from time to time we agree to amendments to
accommodate our business needs or those of our affiliates.
OPERATIONAL AUTONOMY OF AFFILIATES
We develop the management provisions in each organizational document jointly
with the affiliate's senior management at the time we make our investment. Each
organizational document has provisions that differ from the others. However, all
of them give the affiliate's management team the power and authority to carry on
the day-to-day operations and management of the affiliate, including matters
relating to:
- personnel,
- investment management,
- policies and fee structures,
- product development,
- client relationships, and
- employee compensation programs.
However, we retain the authority to prevent some specified types of actions
which we believe could adversely affect cash distributions to AMG. For example,
none of the affiliates may incur material indebtedness without our consent. AMG
itself does not engage in the business of providing investment advice and,
therefore, is not registered as an investment adviser.
REVENUE SHARING ARRANGEMENTS
When we make an investment in an affiliate, we negotiate a revenue sharing
arrangement with that affiliate, which we place in its organizational document.
The revenue sharing arrangement allocates a percentage of revenues (typically
50-70%) for use by management of that affiliate in paying operating expenses of
the affiliate, including salaries and bonuses. We call this the "Operating
Allocation". We determine the percentage of revenues designated as Operating
Allocation for each affiliate in consultation with the managers of the affiliate
30
<PAGE>
at the time of our investment based on the affiliate's historical and projected
operating margins. The organizational document of each affiliate allocates the
remaining portion of the affiliate's revenues (typically 30-50%) to the owners
of that affiliate (including AMG), generally in proportion to their ownership of
the affiliate. We call this the "Owners' Allocation" because it is the portion
of revenues which the affiliate's management is prohibited from spending on
operating expenses without the prior consent of AMG. Each affiliate distributes
its Owners' Allocation to its management owners and AMG in proportion to their
ownership interests in that affiliate.
Before agreeing to these allocations, we examine the revenue and expense
base of the firm. We only agree to a division of revenues if we believe that the
Operating Allocation will cover all operating expenses of the affiliate,
including in cases involving an increase in expenses, or a decrease in revenues
without a corresponding decrease in operating expenses.
While our management has significant experience in the asset management
industry, we cannot be certain that we will successfully anticipate changes in
the revenue and expense base of any firm. Therefore, we cannot be certain that
the agreed-upon Operating Allocation will be large enough to pay for all
operating expenses, including salaries and bonuses of the affiliate.
One of the purposes of our revenue sharing arrangements is to provide
ongoing incentives for the managers of the affiliates by allowing them:
- to participate in their firm's growth, through their compensation from the
Operating Allocation,
- to receive a portion of the Owners' Allocation based on their ownership
interest in the affiliate, and
- to control operating expenses, thereby increasing the portion of the
Operating Allocation which is available for growth initiatives and bonuses
for management of the affiliate.
The managers of each affiliate, therefore, have an incentive to both increase
revenues (thereby increasing the Operating Allocation) and to control expenses
(thereby increasing the excess Operating Allocation).
The revenue sharing arrangements allow AMG to participate in the revenue
growth of each affiliate, because AMG receives a portion of the additional
revenue as its share of the Owners' Allocation. However, we participate in that
growth to a lesser extent than the managers of the affiliate, because we do not
share in the growth of the Operating Allocation.
Under the organizational documents of the affiliates, the allocations and
distributions of cash to AMG generally take priority over the allocations and
distributions to the management owners of the affiliates. This further protects
AMG if there are any expenses in excess of the Operating Allocation of an
affiliate. Thus, if an affiliate's expenses exceed its Operating Allocation, the
excess expenses first reduce the portion of the Owners' Allocation allocated to
the affiliate's management owners, until that portion is eliminated, and then
reduce the portion allocated to AMG.
31
<PAGE>
This diagram illustrates the typical
allocation of our affiliates' revenues.
[Diagram demonstrating the flow of revenues from an affiliate to AMG, to
management owners of the affiliate, and to pay operating expenses of the
affiliate.]
[Diagram begins on the left side of the page with a square with "Affiliate"
written inside; an arrow moves from left to right, beginning on the right side
of the square, and connects to a rectangle entitled "Revenue Sharing
Agreement".]
[Two arrows originate from the right side of the "Revenue Sharing Agreement"
rectangle; one arrow begins at the top right corner and moves diagonally upwards
to the right to an oval shape with "Operating Allocation" written inside; the
bottom arrow moves diagonally downwards to the right from the lower right corner
of the rectangle and connects to an oval shape with "Owners' Allocation" written
inside.]
[Two arrows originate from the right side of the oval titled "Operating
Allocation"; one arrow moves diagonally upwards and to the right and connects
with another oval shape entitled "Salary and Bonuses to Employees; Other
Operating Expenses"; the second arrow, with the words "Excess Operating
Allocation" written on the arrow, moves diagonally downwards and to the right to
a rectangle entitled "Affiliate Management Equity Holders".]
[The "Owners' Allocation" oval has two arrows originating on the right side;
one arrow, with the words "Owners' Allocation" written on it, moves diagonally
upwards and to the right and connects to the rectangle called "Affiliate
Management Equity Holders" described above; the second arrow, with the words
"Owners' Allocation" written on it, moves diagonally downwards and to the right
and connects to a pennant-shaped symbol with "AMG" written inside.]
OUR PURCHASE OF ADDITIONAL INTERESTS IN OUR EXISTING AFFILIATES
Under our transaction structure, the management team at each affiliate
retains an ownership interest in their own firm. We consider this a key way that
we provide management with incentives to grow their firms. In order to provide
as much incentive as we can, we include in the organizational documents of each
affiliate (other than Paradigm) "put" rights for its management owners. The put
rights require us periodically to buy part of the management owners' interests
in the affiliate, for cash, shares of our Common Stock or a combination of both.
In this way, the management owners can realize a portion of the equity value
that they create in their firm. In addition, the organizational documents of
some of our affiliates provide us with "call" rights that let us require the
management owners to sell portions of their interests in the affiliate to AMG.
Finally, the organizational documents of each affiliate include provisions
obligating each such owner to sell his or her remaining interests at a point in
the future, generally after the termination of his or her employment with the
affiliate. Underlying all of these provisions is our basic philosophy that
management owners of each affiliate should maintain an ownership level in that
affiliate within a range that offers them sufficient incentives to grow and
improve their business to create equity value for themselves.
PUT RIGHTS. The put rights are designed to let the management owners
convert portions of their retained ownership interest into cash, shares of our
Common Stock or a combination of both prior to their retirement. In addition, as
an alternative to simply purchasing all of a management owner's interest in the
affiliate following the termination of his or her employment, the put rights
enable us to purchase additional interests in the affiliates at a more gradual
rate. We believe that a more gradual purchase of interests in affiliates will
make it easier for us to keep our ownership of each affiliate within a desired
range. We can do this by transferring purchased interests in the affiliate to
more junior members of its management.
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<PAGE>
In most cases, the put rights do not become exercisable for a period of
several years from the date of our investment in an affiliate. Once exercisable,
the put rights generally are limited in the aggregate to a percentage of the
management owner's ownership interests. The most common formulation among all
the affiliates is that a management owner's put rights:
- do not commence for five years from the date of AMG's investment (or, if
later, the date he or she purchased his or her interest in the affiliate),
- are limited, in the aggregate, to fifty percent of the interests he or she
held in the affiliate, and
- are limited, in any twelve-month period, to ten percent of the greatest
interest he or she held in the affiliate. In addition, the organizational
documents of the affiliates generally contain a limitation on the maximum
total amount that management of any affiliate may require AMG to purchase
pursuant to their put rights in any given twelve-month period.
The purchase price under the put rights is generally based on a multiple of
the affiliate's Owners' Allocation at the time the right is exercised, with the
multiple generally having been determined at the time we made our initial
investment.
CALL RIGHTS. The call rights are designed to assure AMG and the management
members of some of our affiliates that we can facilitate some transition within
the senior management team after an agreed-upon period of time. The call rights
vary in each specific instance, but in all cases the timing, mechanism and price
are agreed upon when we make our investment. The price is payable in cash or in
shares of our Common Stock.
BUY-OUT RIGHTS. The organizational documents of each affiliate provide that
the management owners will realize the remaining equity value they have created
generally following the termination of their employment with the affiliate. In
general, upon a management owner's retirement after an agreed-upon number of
years, or upon his or her earlier death, permanent incapacity or termination
without cause (but with AMG's consent), that management owner is required to
sell to AMG (and AMG is required to purchase from the management owner) his or
her remaining interests. The purchase price in these cases is payable either in
cash, shares of our Common Stock or a combination of both. The purchase price is
generally based on the same formulas that apply to put rights. In general, if a
management owner quits early or is terminated for cause, his or her interests
will be purchased by AMG for cash at a substantial discount to the price that he
or she would otherwise be paid. Also, if a management owner quits or is
terminated for cause within the first several years following our investment
(or, if later, the date the management owner purchased his or her interest in
the affiliate), the management owner generally receives nothing for his or her
retained interest.
If an affiliate collects any key-man life insurance or lump-sum disability
insurance proceeds upon the death or permanent incapacity of a management owner,
the affiliate must use that money to purchase his or her interests. A purchase
by an affiliate would have the effect of ratably increasing the ownership
percentage of AMG and each of the remaining management owners. By contrast, the
purchase of interests by AMG only increases AMG's ownership percentage. The
organizational documents of most of the affiliates provide for the purchase of
such insurance, to the extent requested by AMG. The premium costs are subtracted
from the Owners' Allocation of the affiliate, so all of the affiliate's owners
(including AMG and management) bear this cost.
OUR AFFILIATES
In general, our affiliates derive revenues by charging fees to their clients
that are typically based on the market value of assets under management. In some
instances, however, the affiliates may derive revenues from fees based on
investment performance.
33
<PAGE>
BURRIDGE
Burridge, founded in 1986, is a Chicago and Seattle-based firm which
specializes in the management of mid-capitalization and large-capitalization
growth equity portfolios. Burridge's clients include corporate, Taft-Hartley and
public pension plans, as well as foundations, endowments and individuals.
Burridge has two distinct investment teams, a Chicago-based team which manages
its mid-capitalization portfolios, and a Seattle-based team which manages its
large-capitalization portfolios. Burridge's management team is led by President
and Chief Executive Officer, John H. Streur, Jr.
DAVIS HAMILTON JACKSON
Davis Hamilton Jackson is a Houston-based investment adviser which manages
equity securities employing a disciplined growth approach and fixed income
instruments. Founded in 1988, the firm is led by its co-founders Robert C. Davis
and Jack R. Hamilton, along with a management group of other investment and
client service professionals, who serve a diversified client base including
pension and profit sharing plans for public and private entities, corporations
and Taft-Hartley accounts, as well as trusts, high net worth individuals and a
sub-advised mutual fund.
ESSEX
Essex is a Boston-based investment adviser specializing in investing in
growth equities and fixed income securities employing a fundamental
research-driven approach. Founded in 1976, Essex is led by its founder, Chairman
and Chief Investment Officer, Joseph C. McNay, along with a management group led
by Stephen D. Cutler, President, and Stephen R. Clark, Executive Vice President.
Essex provides investment advisory services to defined benefit plans,
endowments, foundations, partnerships and private individuals and acts as a
subadviser to a mutual fund.
FIRST QUADRANT
First Quadrant specializes in asset allocation and style management on a
global basis. First Quadrant, L.P. is headed by Robert D. Arnott, its Chief
Executive Officer, a recognized leader in the field of quantitative investing,
and its sister company, First Quadrant Limited, is led by William A. R.
Goodsall. First Quadrant employs a highly disciplined quantitative methodology
to guide its investment strategy. First Quadrant seeks to add value by assessing
relative valuations across major segments of the portfolio: among asset classes,
across global markets, among equity styles and in currency allocation. First
Quadrant, L.P. has offices in Pasadena, California and Boston, while First
Quadrant Limited is based in London. First Quadrant also maintains joint
ventures with firms in Toronto, Tokyo and Paris.
GEOCAPITAL
Founded in 1979, GeoCapital invests in domestic growth and special situation
small-capitalization equities on behalf of corporations, retirement programs,
foundations, high net worth individuals and private partnerships. Based in New
York, the firm is led by its Chairman and Chief Investment Officer, Irwin
Lieber, and its President, Barry K. Fingerhut.
GOFEN AND GLOSSBERG
Gofen and Glossberg is one of the oldest and most respected investment
counseling firms in the United States. Founded in 1932, the firm has a long
history of managing assets for prominent individuals, families, retirement
plans, foundations and endowments. Based in Chicago, the firm is led by its
President, William H. Gofen, and its Executive Vice President, Joseph B.
Glossberg.
HARTWELL
Founded in 1961, Hartwell is a New York-based growth stock manager, whose
clients include high net worth individuals, an offshore hedge fund and several
large private
34
<PAGE>
foundations. The management team at Hartwell is led by William C. Miller, IV.
PARADIGM
Paradigm is a New York-based leader in equity style management. Paradigm's
investment process typically begins by identifying several portfolio management
styles from a set of active managers with risk and return characteristics of the
chosen styles. The process then takes their portfolios and, using a proprietary
model, arrives at a smaller portfolio of stocks with risk and return
characteristics that match the larger group. Paradigm is led by James E.
Francis, President and Chief Executive Officer. Paradigm has a diversified
client list of public and private pension fund clients. AMG holds a minority
ownership interest in Paradigm.
RENAISSANCE
Based in Cincinnati, Ohio, Renaissance provides quantitatively-based
investment management strategies to a variety of institutional and individual
clients. The firm is led by Managing Directors Michael A. Schroer, Donald W.
Kennedy and Paul A. Radomski.
RORER
Rorer is a value-oriented equity and fixed income manager based in
Philadelphia which offers four types of investment management accounts: large
cap equity, mid-cap equity, balanced and fixed income. Founded in 1978, Rorer is
led by its founder Edward C. Rorer, Chairman and Chief Investment Officer, and a
committee including James G. Hesser, President, and Clifford B. Storms, Jr.,
Director of Research.
SKYLINE
Skyline is a Chicago-based firm which specializes in small-capitalization
and mid-capitalization value equities. Skyline manages assets for institutional
clients, as well as three no-load mutual funds, SKYLINE SPECIAL EQUITIES,
SKYLINE SMALL-CAP VALUE PLUS and SKYLINE SMALL-CAP CONTRARIAN. The firm is led
by its President, William Dutton, who was named Morningstar Portfolio Manager of
the Year in 1992.
SYSTEMATIC
Located in Teaneck, New Jersey, Systematic manages assets on behalf of a
variety of corporations, jointly-trusteed and public pension funds as well as
for high net worth individuals, principally through wrap programs. Systematic is
led by its Chief Investment Officer Gyanendra (Joe) Joshi. Systematic offers
three products: core value equity, small-capitalization value equity and free
cash flow value equity.
TWEEDY, BROWNE
Tweedy, Browne is recognized as a leading practitioner of the value-oriented
investment approach first advocated by Benjamin Graham. Tweedy, Browne manages
domestic, international and global equity portfolios for institutions,
individuals, partnerships and mutual funds. The firm, which is the successor to
Tweedy & Co., a brokerage firm founded in 1920, is led by Christopher H. Browne,
William H. Browne and John D. Spears. Based in New York, the firm also maintains
a research office in London.
35
<PAGE>
SELLING STOCKHOLDERS
The following table sets forth the number of shares of our Common Stock
beneficially owned by each selling stockholder as of December 31, 1998, the
number of shares which each selling stockholder will sell in this offering and
the number of shares which each selling stockholder will beneficially own upon
completion of this offering. The selling stockholders have furnished to us the
information set forth below and this information is accurate to the best of our
knowledge.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO OFFERING (2) AFTER OFFERING(2)
------------------------ SHARES TO ------------------------
NAME(1) SHARES PERCENT BE SOLD SHARES PERCENT
----------- ----------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Chase Equity Associates, L.P.(3)...................... 1,666,650 8.6% 555,555 1,111,095 4.8%
BankAmerica Corporation(4)............................ 1,305,160 6.8 200,000 1,105,160 4.7
TA Associates Group(5)................................ 858,821 4.5 858,821 -- --
William J. Nutt(6).................................... 600,741 3.1 50,000 550,741 2.4
Hartford Accident and Indemnity Company............... 373,150 1.9 200,000 173,150 *
Irwin Lieber(7)....................................... 265,972 1.4 26,600 239,372 1.0
Sean M. Healey(8)..................................... 255,431 1.3 40,000 215,431 *
Chestnut Group(9)..................................... 225,444 1.2 225,444 -- --
Barry K. Fingerhut(10)................................ 185,661 * 20,000 165,661 *
Levon Chertavian, Jr.(11)............................. 101,722 * 7,500 94,222 *
Nathaniel Dalton(12).................................. 78,708 * 20,000 58,708 *
Seth W. Brennan(13)................................... 40,528 * 10,000 30,528 *
Jeffrey S. Murphy(14)................................. 24,761 * 8,400 16,361 *
Jonathan Lieber(15)................................... 17,476 * 3,000 14,476 *
Seth Lieber(16)....................................... 17,476 * 4,000 13,476 *
Andrew Fingerhut...................................... 15,582 * 2,000 13,582 *
Dana Lieber........................................... 15,582 * 1,600 13,982 *
After the offering, our executive officers and directors will hold 1,977,802 shares (including shares subject to vested
and unvested options).
</TABLE>
- ------------------------
* Less than 1%
(1) The address of Chase Equity Associates, L.P. is 380 Madison Avenue, 12(th)
Floor, New York, New York 10017. The address of the TA Associates Group is
c/o TA Associates, Inc., High Street Tower, Suite 2500, 125 High Street,
Boston, Massachusetts 02110-2720. The address of BankAmerica Corporation is
100 North Tryon Street, Charlotte, North Carolina 28255. The address of
Hartford Accident and Indemnity Company is c/o The Hartford Investment
Management Company, 55 Farmington Avenue, Hartford, Connecticut 06105. The
address of the Chestnut Group is c/o MVP Ventures, 288 Littleton Road, Suite
25, Westford, MA 01886. The address of Messrs. I. Lieber, B. Fingerhut, J.
Lieber, A. Fingerhut and S. Lieber and Ms. Lieber is c/o GeoCapital, LLC,
767 Fifth Avenue, 45th Floor, New York, New York 10153-4590. The address of
all other listed stockholders is c/o Affiliated Managers Group, Inc., Two
International Place, 23rd Floor, Boston, Massachusetts 02110.
(2) In computing the number of shares of voting Common Stock beneficially owned
by a person, shares of voting Common Stock subject to options and warrants
held by that person that are currently exercisable or that become
exercisable within 60 days of December 31, 1998 and shares of voting Common
Stock issuable upon conversion of currently convertible securities or
securities that could become convertible held by that person are deemed
outstanding. For
36
<PAGE>
purposes of computing the percentage of outstanding shares of voting Common
Stock beneficially owned by such person, the shares subject to options or
warrants or underlying convertible securities that are currently exercisable
or convertible or that become exercisable or convertible within 60 days of
December 31, 1998 are deemed to be outstanding for such person but are not
deemed to be outstanding for purposes of computing the ownership percentage
of any other person. As of December 31, 1998, a total of 19,282,559 shares
of Common Stock were deemed to be outstanding.
(3) The 1,666,650 shares beneficially owned by Chase Equity Associates, L.P. are
shares of non-voting Class B Common Stock, convertible under some
circumstances into voting Common Stock.
(4) The 1,305,160 shares beneficially owned by BankAmerica Corporation include
(i) 750,000 shares of Common Stock and 220,150 shares of non-voting Class B
Common Stock beneficially owned by NationsBanc Investment Corporation; (ii)
235,800 shares beneficially owned by NationsBank, N.A., of which 206,400
shares are held by Trade Street Investment Associates, Inc., of which
122,700 shares are under the discretionary authority of NationsBanc
Advisors, Inc.; (iii) 90,400 shares beneficially owned by Bank of America
National Trust and Savings Association; and (iv) 8,810 shares held by
BankAmerica Capital Corporation. BankAmerica Corporation is a bank holding
company and the direct or indirect parent of NationsBanc Investment
Corporation, Bank of America National Trust and Savings Association,
BankAmerica Capital Corporation and NB Holdings Corporation. NB Holdings
Corporation is a holding company and the direct parent of NationsBanc
Investment Corporation and NationsBank, N.A. NationsBank, N.A. is a national
bank and the direct parent of Trade Street Investment Associates, Inc. and
NationsBanc Advisors, Inc.
(5) Includes (i) 446,941 shares owned by Advent Atlantic and Pacific II L.P.,
(ii) 161,152 shares owned by Advent Industrial II L.P., (iii) 217,372 shares
owned by Advent New York L.P., (iv) 24,338 shares owned by TA Associates VII
L.P., (v) 4,509 shares owned by TA Associates, Inc., and (vi) 4,509 shares
owned by TA Associates Service Corporation. The foregoing partnerships and
corporations are part of an affiliated group of investment partnerships and
other entities referred to, collectively, as the TA Associates Group. The
general partner of each of Advent Industrial II L.P. and Advent New York
L.P. is TA Associates VI L.P. The general partner of Advent Atlantic and
Pacific II L.P. is TA Associates AAP II Partners L.P. The general partner of
each of TA Associates VII L.P., TA Associates VI L.P. and TA Associates AAP
II Partners L.P. is TA Associates, Inc. TA Associates, Inc. is also the sole
stockholder of TA Associates Service Corporation. In such capacity, TA
Associates, Inc. exercises sole voting and investment power with respect to
all the shares of Common Stock held of record by the named partnerships or
corporations; individually no stockholder, director or officer of TA
Associates, Inc. is deemed to have or share such voting or investment power.
(6) Includes 5,823 shares of restricted Common Stock which will vest in March
1999 and 58,181 shares of Common Stock subject to options exercisable within
60 days. Excludes (i) 229,319 shares subject to unvested options and (ii)
89,139 shares held by irrevocable trusts for the benefit of members of Mr.
Nutt's immediate family of which Mr. Nutt is not a trustee, of which shares
Mr. Nutt disclaims beneficial ownership. Mr. Nutt is our President and Chief
Executive Officer and the Chairman of our Board of Directors.
(7) Mr. Lieber is the Chairman and Chief Investment Officer of GeoCapital, an
affiliate of AMG.
(8) Includes (i) 8,750 shares of restricted Common Stock which will vest in
March 1999, and (ii) 55,431 shares of Common Stock subject to options
exercisable within 60 days. Excludes 214,569 shares subject to unvested
options. Mr. Healey is our Executive Vice President.
37
<PAGE>
(9) Includes 169,051 shares held by Chestnut III Limited Partnership and 56,393
shares held by Chestnut Capital International III Limited Partnership.
Messrs. Jonathan J. Fleming, Michael F. Schiavo, Peter A. Schober and John
G. Turner are the general partners of Chestnut III Management Limited
Partnership ("CMLP") and MVP Capital Limited Partnerhsip ("MVP"). CMLP has
voting and investment power to act for Chestnut III Limited Partnership. MVP
has voting and investment power to act for Chestnut Capital International
III Limited Partnership.
(10) Mr. Fingerhut is the President of GeoCapital, an affiliate of AMG.
(11) Includes (i) 6,250 shares of restricted Common Stock which will vest in
March 1999, and (ii) 19,222 shares of Common Stock subject to options
exercisable within 60 days. Excludes 63,278 shares subject to unvested
options. Mr. Chertavian is our Senior Vice President, Affiliate Support.
(12) Includes (i) 12,500 shares of restricted Common Stock which will vest in
May 1999, and (ii) 30,708 shares of Common Stock subject to options
exercisable within 60 days. Excludes 107,292 shares subject to unvested
options. Mr. Dalton is our Senior Vice President, General Counsel and
Secretary.
(13) Includes (i) 4,375 shares of restricted Common Stock which will vest in
March 1999, and (ii) 24,028 shares of Common Stock subject to options
exercisable within 60 days. Excludes 80,972 shares subject to unvested
options. Mr. Brennan is a Vice President of AMG.
(14) Includes (i) 2,500 shares of restricted Common Stock which will vest in
March 1999, and (ii) 13,861 shares of Common Stock subject to options
exercisable within 60 days. Excludes 54,139 shares subject to unvested
options. Mr. Murphy is a Vice President of AMG.
(15) Mr. Lieber is a portfolio manager with GeoCapital, an affiliate of AMG.
(16) Mr. Lieber is a portfolio manager with GeoCapital, an affiliate of AMG.
38
<PAGE>
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement we filed with the
Securities and Exchange Commission ("SEC") to register the shares offered in
this offering. It does not repeat important information that you can find in our
registration statement or in the reports and other documents that we file with
the SEC. For further information about us and our Common Stock, you should read
the registration statement and the exhibits to the registration statement.
Statements contained in this prospectus concerning documents we have filed with
the SEC as exhibits to the registration statement or otherwise are not
necessarily complete and, in each instance, you should refer to the actual filed
document.
We have not authorized anyone to provide you any information different from
that contained in this prospectus. The Common Stock may be offered for sale only
in jurisdictions where offers and sales are permitted. The information contained
in this prospectus is accurate only as of the date of this prospectus,
regardless of the time of delivery of this prospectus or of any sale of the
Common Stock.
In this prospectus, the terms or words "AMG," "we," "us," and "our" refer to
Affiliated Managers Group, Inc.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information electronically with the SEC. You may read and copy any document we
file at the SEC's public reference rooms at 450 Fifth Street, Mail Stop 1-2,
N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference rooms. Our SEC filings are also available
from the New York Stock Exchange and at the SEC's website at http://www.sec.gov.
The SEC allows us to "incorporate by reference" the information we file with
them. This means that we can disclose important information to you by referring
you to those documents. The information incorporated by reference is an
important part of this prospectus and information that we file later with the
SEC will automatically update and supersede this information. We incorporate by
reference the documents listed below, and any future filings made by us with the
SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of
1934, as amended:
- Registration Statement on Form 8-A filed on October 7, 1997,
- Annual Report on Form 10-K for the fiscal year ended December 31, 1997,
- Quarterly Report on Form 10-Q for the quarter ended March 31, 1998,
- Current Report on Form 8-K event date March 20, 1998,
- Amendment No. 1 to Current Report on Form 8-K/A event date March 20, 1998,
- Quarterly Report on Form 10-Q for the quarter ended June 30, 1998,
- Quarterly Report on Form 10-Q for the quarter ended September 30, 1998,
- Current Report on Form 8-K event date January 6, 1999,
- Current Report on Form 8-K event date February 1, 1999, and
- Current Report on Form 8-K event date February 1, 1999.
You may request a copy of these filings, at no cost, by writing or
telephoning us at Two International Place, 23(rd) Floor, Boston, MA 02110,
telephone (617) 747-3300, attention: Investor Relations.
39
<PAGE>
VALIDITY OF SECURITIES
The validity of the shares of Common Stock offered hereby will be passed
upon for AMG by Goodwin, Procter & Hoar LLP, Boston, Massachusetts, and for the
underwriters by Sullivan & Cromwell, New York, New York. Partners (or, in the
case of partners which are professional corporations, the sole stockholders of
such corporations) of Goodwin, Procter & Hoar LLP own at least 43,392 shares of
our Common Stock.
EXPERTS
The following financial statements have been incorporated by reference in
this prospectus in reliance on the reports of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of that firm as experts in
accounting and auditing:
- the consolidated balance sheets of AMG as of December 31, 1996 and 1997
and the related consolidated statements of operations, changes in
stockholders' equity and cash flows for each of the three years in the
period ended December 31, 1997;
- the balance sheets of Essex Investment Management Company, Inc. as of
November 30, 1995, 1996 and 1997 and related statements of operations,
stockholders' equity and cash flows for each of the three years in the
period ended November 30, 1997;
- the statement of financial condition of GeoCapital Corporation as of
September 30, 1997 and the related statements of operations, changes in
stockholders' equity and cash flows for the year ended September 30, 1997;
- the statements of financial condition of Tweedy, Browne Company L.P. as of
October 8, 1997 and the related statements of operations, changes in
partners' capital and cash flows for the period January 1, 1997 through
October 8, 1997; and
- the statement of financial condition of Gofen and Glossberg, Inc. as of
May 6, 1997 and the related statements of operations, changes in
shareholders' equity and cash flows for the period January 1, 1997 through
May 6, 1997.
40
<PAGE>
UNDERWRITING
AMG, the selling stockholders and the underwriters for the offering (the
"Underwriters") named below have entered into an underwriting agreement with
respect to the shares being offered. Subject to certain conditions, each
Underwriter has severally agreed to purchase the number of shares indicated in
the following table. Goldman, Sachs & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Morgan Stanley & Co. Incorporated and Schroder & Co. Inc. are the
representatives of the Underwriters.
<TABLE>
<CAPTION>
Underwriters Number of Shares
- --------------------------------------------------------------------------- -----------------
<S> <C>
Goldman, Sachs & Co........................................................
Merrill Lynch, Pierce, Fenner & Smith Incorporated.........................
Morgan Stanley & Co. Incorporated..........................................
Schroder & Co. Inc.........................................................
-----------------
Total................................................................ 6,232,920
-----------------
-----------------
</TABLE>
------------------------
If the Underwriters sell more shares than the total number set forth in the
table above, the Underwriters have an option to buy up to an additional 934,938
shares from AMG to cover such sales. They may exercise that option for 30 days.
If any shares are purchased pursuant to this option, the Underwriters will
severally purchase shares in approximately the same proportion set forth in the
table above.
The following tables show the per share and total underwriting discounts and
commissions to be paid to the underwriters by AMG and the selling stockholders.
Such amounts are shown assuming both no exercise and full exercise of the
Underwriters' option to purchase 934,938 additional shares.
Paid by AMG
<TABLE>
<CAPTION>
Full
No Exercise Exercise
------------ ------------
<S> <C> <C>
Per Share................ $ $
Total.................... $ $
</TABLE>
Paid by the Selling Stockholders
<TABLE>
<CAPTION>
Full
No Exercise Exercise
----------- ------------
<S> <C> <C>
Per Share................. $ $
Total..................... $ $
</TABLE>
U-1
<PAGE>
Shares sold by the Underwriters to the public will initially be offered at
the initial public offering price set forth on the cover of this prospectus. Any
shares sold by the Underwriters to securities dealers may be sold at a discount
of up to $ per share from the initial public offering price. Any such
securities dealers may resell any shares purchased from the Underwriters to
other brokers or dealers at a discount of up to $ per share from the
initial public offering price. If all the shares are not sold at the initial
offering price, the representatives of the Underwriters may change the offering
price and the other selling terms.
AMG, all of its directors and officers and the selling stockholders have
agreed with the Underwriters not to dispose of or hedge any of their Common
Stock or securities convertible into or exchangeable for shares of Common Stock
during the periods from the date of this prospectus continuing, in the case of
AMG, through the date 90 days after the date of this prospectus, and in the case
of the directors officers and selling stockholders, through the date either 60
or 90 days after the date of this prospectus, in each case except with the prior
written consent of the representatives of the Underwriters. This agreement does
not apply to any existing employee benefit plans. See "Risk Factors--Shares
Eligible for Future Sale" for a discussion of certain transfer restrictions.
In connection with this offering, the Underwriters may purchase and sell
shares of Common Stock in the open market. These transactions may include short
sales, stabilizing transactions and purchases to cover positions created by
short sales. Short sales involve the sale by the Underwriters of a greater
number of shares than they are required to purchase in this offering.
Stabilizing transactions consist of certain bids or purchases made for the
purpose of preventing or retarding a decline in the market price of the Common
Stock while this offering is in progress.
The Underwriters also may impose a penalty bid. This occurs when a
particular Underwriter repays to the Underwriters a portion of the underwriting
discount received by it because the representatives have repurchased shares sold
by or for the account of such Underwriter in stabilizing or short-covering
transactions.
These activities by the Underwriters may stabilize, maintain or otherwise
affect the market price of the Common Stock. As a result, the price of the
Common Stock may be higher than the price that otherwise might exist in the open
market. If these activities are commenced, they may be discontinued by the
Underwriters at any time. These transactions may be effected on the NYSE, in the
over-the-counter market or otherwise.
The Underwriters and their affiliates have in the past provided, and may in
the future from time to time provide, investment banking services and general
financing and banking to AMG or one or more of the affiliates, for which they
may receive customary fees. Among other things, Goldman, Sachs & Co. acted as
financial advisor to, and received a customary fee from, the partners of Tweedy,
Browne in connection with AMG's investment in Tweedy, Browne in 1997.
Because affiliates of the Underwriters will receive in the aggregate more
than 10% of the net proceeds of the offering, the offering is being made
pursuant to Rule 2710(e)(8) of the Conduct Rules of the National Association of
Securities Dealers, Inc. In particular, The Chase Manhattan Bank, an affiliate
of Chase Securities, Inc., one of the Underwriters, is administrative agent and
a lender under AMG's credit facility and will receive a portion of the amounts
repaid under that facility with the net proceeds to AMG from the shares sold by
it. See "Use of Proceeds". Chase Securities Inc. is also an affiliate of Chase
Equity Associates, L.P., one of the selling stockholders. See "Selling
Stockholders".
AMG and the selling stockholders estimate that their shares of the total
expenses of this offering, excluding underwriting discounts and commissions,
will be approximately $ and $ , respectively.
AMG and the selling stockholders have agreed to indemnify the several
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933.
U-2
<PAGE>
- ---------------------------------------------
---------------------------------------------
- ---------------------------------------------
---------------------------------------------
No dealer, salesperson or other person is authorized to give any information
or to represent anything not contained in this prospectus. You must not rely on
any unauthorized information or representations. This prospectus is an offer to
sell only the shares offered hereby, but only under the circumstances and in the
jurisdictions where it is lawful to do so. The information contained in this
prospectus is current only as of its date.
--------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
-----
<S> <C>
Prospectus Summary..................... 3
Risk Factors........................... 11
Use of Proceeds........................ 21
Dividend Policy........................ 21
Capitalization......................... 22
Dilution............................... 23
Recent Developments.................... 24
Business............................... 28
Selling Stockholders................... 36
About This Prospectus.................. 39
Where You Can Find More Information.... 39
Validity of Securities................. 40
Experts................................ 40
Underwriting........................... U-1
</TABLE>
6,232,920 Shares
AFFILIATED
MANAGERS GROUP, INC.
Common Stock
---------------
[LOGO]
---------------
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
MORGAN STANLEY DEAN WITTER
SCHRODER & CO. INC.
Representatives of the Underwriters
- ---------------------------------------------
---------------------------------------------
- ---------------------------------------------
---------------------------------------------
<PAGE>
PART II: INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCES AND DISTRIBUTION (1)
Expenses of the Registrant in connection with the issuance and distribution
of the securities being registered, other than the underwriting discount and
commissions, are estimated as follows:
<TABLE>
<S> <C>
SEC Registration Fee........................................... $ 63,000
NASD and NYSE Fees............................................. 23,000
Printing Expenses.............................................. 133,000
Legal Fees and Expenses........................................ 220,000
Accounting Fees and Expenses................................... 345,000
Expenses of Qualification Under State Securities Laws.......... 11,000
Transfer Agent's Fees.......................................... 75,000
Miscellaneous Costs............................................ 72,000
----------
Total.................................................... $ 942,000
</TABLE>
- ------------------------
(1) The amounts set forth above, except for the SEC, NASD and NYSE Fees, are in
each case estimated.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Registrant's Amended and Restated Certificate of Incorporation and
Amended and Restated By-laws include provisions to (i) eliminate the personal
liability of its directors for monetary damages resulting from breaches of their
fiduciary duty to the extent permitted by Section 102 (b) (7) of the General
Corporation Law of Delaware (the "Delaware Law") and (ii) authorize the
Registrant to indemnify its directors and officers to the fullest extent
permitted by Section 145 of the Delaware law, including circumstances in which
indemnification is otherwise discretionary. Pursuant to Section 145 of the
Delaware Law, a corporation generally has the power to indemnify its present and
former directors, officers, employees and agents against expenses incurred by
them in connection with any suit to which they are, or are threatened to be
made, a party by reason of their serving in such positions so long as they acted
in good faith and in a manner they reasonably believed to be in, or not opposed
to, the best interests of a corporation, and with respect to any criminal
action, they had no reasonable cause to believe their conduct was unlawful. The
Registrant believes that these provisions do not eliminate liability for breach
of the director's duty of loyalty to the Registrant or its stockholders, or for
omissions not in good faith or involving transactions from which the director
derived an improper personal benefit or for any willful or negligent payment of
any unlawful dividend or any unlawful stock purchase agreement or redemption.
The Registrant has purchased an insurance policy covering the officers and
directors of the Registrant with respect to some liabilities arising under the
Securities Act or otherwise.
ITEM 16. EXHIBITS
<TABLE>
<C> <S>
1.1 Form of Underwriting Agreement
3.1 Form of Amended and Restated Certificate of Incorporation (incorporated by reference
to Exhibit 3.1 to Amendment No. 4 to the Registration Statement on Form S-1 of the
Registrant (File No. 333-34679))
+3.2 Certificate of Designations, Preferences and Rights of a Series of Stock
3.3 Form of Amended and Restated By-Laws (incorporated by reference to Exhibit 3.2 to
Amendment No. 4 to the Registration Statement on Form S-1 of the Registrant (File
No. 333-34679))
</TABLE>
II-1
<PAGE>
<TABLE>
<C> <S>
4.1 Specimen Certificate of Common Stock (incorporated by reference to Exhibit 4.1 to
the Registration Statement on Form S-1 of the Registrant (File No. 333-34679))
5.1 Opinion of Goodwin Procter & Hoar LLP, with respect to the legality of the shares
being registered
23.1 Consent of PricewaterhouseCoopers LLP, independent accountants of AMG
23.2 Consent of PricewaterhouseCoopers LLP, independent accountants of Essex Investment
Management Company, Inc.
23.3 Consent of PricewaterhouseCoopers LLP, independent accountants of GeoCapital
Corporation
23.4 Consent of PricewaterhouseCoopers LLP, independent accountants of Tweedy, Browne
Company L.P.
23.5 Consent of PricewaterhouseCoopers LLP, independent accountants of Gofen & Glossberg,
Inc.
23.6 Consent of Goodwin Procter & Hoar LLP (included in Exhibit 5.1)
+24.1 Powers of Attorney (included on signature page)
</TABLE>
- ------------------------
+ Previously filed.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial BONA FIDE offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit, or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act of 1933 and will be governed by the
final adjudication of such issue.
The undersigned Registrant undertakes that: (1) for purposes of determining
any liability under the Securities Act of 1933, the information omitted from the
form of prospectus as filed as part of this Registration Statement in reliance
upon Rule 430A and contained in the form of prospectus filed by the Registrant
pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act of 1933
shall be deemed to be part of the Registration Statement as of the time it was
declared effective, and (2) for the purpose of determining any liability under
the Securities Act of 1933, each post-effective amendment that contains a form
prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial BONA FIDE offering thereof.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Boston, Commonwealth of Massachusetts, on this 24th
day of February, 1999.
AFFILIATED MANAGERS GROUP, INC.
By: /s/ NATHANIEL DALTON
------------------------------------------
Nathaniel Dalton
Senior Vice President
and General Counsel
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.
<TABLE>
<CAPTION>
NAME TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
Chairman of the Board of
* Directors, President and
- ------------------------------ Chief Executive Officer February 24, 1999
William J. Nutt (Principal Executive
Officer)
Chief Financial Officer
* and Treasurer (Principal
- ------------------------------ Financial and Accounting February 24, 1999
Darrell W. Crate Officer)
*
- ------------------------------ Director February 24, 1999
Richard E. Floor
*
- ------------------------------ Director February 24, 1999
P. Andrews McLane
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
NAME TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
*
- ------------------------------ Director February 24, 1999
John M. B. O'Connor
*
- ------------------------------ Director February 24, 1999
W. W. Walker, Jr.
*
- ------------------------------ Director February 24, 1999
William F. Weld
</TABLE>
<TABLE>
<S> <C> <C>
/s/ NATHANIEL DALTON
----------------------------------------
Nathaniel Dalton
*By: Attorney-in-Fact
</TABLE>
II-4
<PAGE>
Exhibit 1.1
AFFILIATED MANAGERS GROUP, INC.
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
FORM OF
UNDERWRITING AGREEMENT
, 1999
Goldman, Sachs & Co.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated,
Morgan Stanley & Co. Incorporated,
Schroder & Co. Inc.,
As representatives of the several Underwriters
named in Schedule I hereto,
c/o Goldman, Sachs & Co.,
85 Broad Street,
New York, New York 10004.
Ladies and Gentlemen:
Affiliated Managers Group, Inc., a Delaware corporation (the "Company"),
proposes, subject to the terms and conditions stated herein, to issue and sell
to the Underwriters named in Schedule I hereto (the "Underwriters") an aggregate
of 4,000,000 shares and, at the election of the Underwriters, up to 934,938
additional shares of Common Stock, par value $.01 per share ("Stock"), of the
Company and the stockholders of the Company named in Schedule II hereto (the
"Selling Stockholders") propose, subject to the terms and conditions stated
herein, to sell to the Underwriters an aggregate of 2,232,920 shares of Stock.
The aggregate of 6,232,920 shares to be sold by the Company and the Selling
Stockholders is herein called the "Firm Shares" and the aggregate of 934,938
additional shares to be sold by the Company is herein called the "Optional
Shares". The Firm Shares and the Optional Shares that the Underwriters elect to
purchase pursuant to Section 2 hereof are herein collectively called the
"Shares" .
As used in this Agreement, the term "subsidiaries" of any person shall mean
each entity, whether in corporate, partnership or other form, that is
controlled, directly or indirectly, by such person or in which such person,
directly or indirectly, holds at least a 30% equity interest, including, in the
case of subsidiaries of the Company, each of the investment advisory and other
entities (together with their respective subsidiaries) listed on Annex A hereto.
1. (a) The Company represents and warrants to, and agrees with, each of the
Underwriters that:
(i) A registration statement on Form S-3 (File No. 333-71561) (the "Initial
Registration Statement") in respect of the Shares has been filed with the
Securities and Exchange Commission (the "Commission"); the Initial Registration
Statement and any post-effective amendment thereto, each in the form heretofore
delivered to you, and, excluding exhibits thereto but including all documents
incorporated by reference in the prospectus contained therein, to you for each
of the other Underwriters, have been declared effective by the Commission in
such form; other than a registration statement, if any, increasing the size of
the offering (a "Rule 462(b) Registration Statement"), filed pursuant to Rule
462(b) under the Securities Act of 1933, as amended (the "Act"), which became
effective upon filing, no other document with respect to the Initial
Registration Statement or document incorporated by reference therein has
heretofore been filed with the
1
<PAGE>
Commission; and no stop order suspending the effectiveness of the Initial
Registration Statement, any post-effective amendment thereto or the Rule 462(b)
Registration Statement, if any, has been issued and no proceeding for that
purpose has been initiated or threatened by the Commission (any preliminary
prospectus included in the Initial Registration Statement or filed with the
Commission pursuant to Rule 424(a) of the rules and regulations of the
Commission under the Act is hereinafter called a "Preliminary Prospectus"; the
various parts of the Initial Registration Statement and the Rule 462(b)
Registration Statement, if any, including all exhibits thereto and including (i)
the information contained in the form of final prospectus filed with the
Commission pursuant to Rule 424(b) under the Act in accordance with Section 5(a)
hereof and deemed by virtue of Rule 430A under the Act to be part of the Initial
Registration Statement at the time it was declared effective and (ii) the
documents incorporated by reference in the prospectus contained in the Initial
Registration Statement at the time such part of the Initial Registration
Statement became effective, each as amended at the time such part of the Initial
Registration Statement became effective or such part of the Rule 462(b)
Registration Statement, if any, became or hereafter becomes effective, are
hereinafter collectively called the "Registration Statement"; such final
prospectus, in the form first filed pursuant to Rule 424(b) under the Act, is
hereinafter called the "Prospectus"; any reference herein to any Preliminary
Prospectus or the Prospectus shall be deemed to refer to and include the
documents incorporated by reference therein pursuant to Item 12 of Form S-3
under the Act, as of the date of such Preliminary Prospectus or Prospectus, as
the case may be; any reference to any amendment or supplement to any Preliminary
Prospectus or the Prospectus shall be deemed to refer to and include any
documents filed after the date of such Preliminary Prospectus or Prospectus, as
the case may be, under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and incorporated by reference in such Preliminary Prospectus or
Prospectus, as the case may be; and any reference to any amendment to the
Registration Statement shall be deemed to refer to and include any annual report
of the Company filed pursuant to Section 13(a) or 15(d) of the Exchange Act
after the effective date of the Initial Registration Statement that is
incorporated by reference in the Registration Statement;
(ii) No order preventing or suspending the use of any Preliminary Prospectus
has been issued by the Commission, and each Preliminary Prospectus, at the time
of filing thereof, conformed in all material respects to the requirements of the
Act and the rules and regulations of the Commission thereunder, and 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
the light of the circumstances under which they were made, not misleading;
PROVIDED, HOWEVER, that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity with information
furnished in writing to the Company by an Underwriter through Goldman, Sachs &
Co. expressly for use therein or by a Selling Stockholder expressly for use in
the preparation of the answers therein to Item 7 of Form S-3;
(iii) The documents incorporated by reference in the Prospectus, when they
became or become effective or were or are filed with the Commission, as the case
may be, conformed in all material respects to the requirements of the Act or the
Exchange Act, as applicable, and the rules and regulations of the Commission
thereunder;
(iv) The Registration Statement conforms, and the Prospectus and any further
amendments or supplements to the Registration Statement or the Prospectus will
conform, in all material respects to the requirements of the Act and the rules
and regulations of the Commission thereunder and do not and will not, as of the
applicable effective date as to the Registration Statement and any amendment
thereto, and as of the applicable filing date as to the Prospectus and any
amendment or supplement thereto, 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 not misleading; PROVIDED, HOWEVER, that this
representation and warranty shall not apply to any statements or omissions made
in reliance upon and in conformity with information furnished in writing to the
2
<PAGE>
Company by an Underwriter through Goldman, Sachs & Co. expressly for use therein
or by a Selling Stockholder expressly for use in the preparation of the answers
therein to Item 7 of Form S-3;
(v) The Company and its subsidiaries, taken as a whole, have not sustained
since the date of the latest audited financial statements included or
incorporated by reference in the Prospectus any material loss or interference
with its business from fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any labor dispute or court or governmental action,
order or decree, in each case affecting its properties, assets or operations,
otherwise than as set forth or contemplated in the Prospectus; and, since the
respective dates as of which information is given in the Registration Statement
and the Prospectus, otherwise than as set forth or contemplated in the
Prospectus, there has not been any change in the capital stock (other than
changes resulting from the exercise of stock options or warrants or conversion
of preferred stock after September 30, 1998 and prior to the Time of Delivery)
of the Company or any increase in the long-term debt of the Company on a
consolidated basis or any material adverse change, or any development involving
a prospective material adverse change, in or affecting the business affairs,
management, financial position, stockholders' equity or results of operations of
the Company and its subsidiaries, taken as a whole;
(vi) Neither the Company nor any of its subsidiaries owns any real property;
the Company and its subsidiaries have good title to all personal property owned
by them and material to their respective businesses, in each case free and clear
of all liens, encumbrances and defects except such as are described in the
Prospectus or such as do not materially affect the value of the property of the
Company or subsidiary, as applicable, and do not interfere with the use made and
proposed to be made of such property by the Company and its subsidiaries; and
any real property and buildings held under lease by the Company and its
subsidiaries are held by them under valid, subsisting and enforceable leases
with such exceptions as are not material and do not interfere with the use made
and proposed to be made of such property and buildings by the Company and its
subsidiaries;
(vii) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of Delaware, with power and
authority (corporate and other) to own its properties and conduct its business
as described in the Prospectus, and has been duly qualified as a foreign
corporation to do business and is in good standing as a foreign corporation in
each jurisdiction in which it owns or leases properties or conducts any business
so as to require such qualification, with such exceptions individually or in the
aggregate as would not have a material adverse effect on the business affairs,
management, financial position, stockholders' equity or results of operation of
the Company and its subsidiaries, taken as a whole (a "Material Adverse
Effect"); and each subsidiary of the Company has been duly organized or formed
and is validly existing as a corporation, limited partnership, limited liability
company or general partnership, as the case may be, under the laws of its
jurisdiction of organization and each such subsidiary that is a corporation,
limited partnership or limited liability company is in good standing under the
laws of its jurisdiction of organization;
(viii) The Company has an authorized capitalization as set forth in the
Prospectus; upon consummation of the transactions contemplated by this
Agreement, the Company will have the authorized capitalization as set forth in
the Prospectus; all of the issued shares of capital stock of the Company have
been duly and validly authorized and issued, are fully paid and non-assessable
and conform to the description of the Stock contained in the Prospectus; and all
of the issued shares of capital stock of each subsidiary of the Company which is
a corporation have been duly authorized and validly issued, and are fully paid
and non-assessable, and (except for directors' qualifying shares and as
described generally in the Registration Statement or documents incorporated by
reference therein) are owned directly or indirectly by the Company, free and
clear of all liens, encumbrances, equities or claims, in each case with such
exceptions, individually or in
3
<PAGE>
the aggregate, as would not have a Material Adverse Effect. The partnership
interests, membership interests and shares of beneficial interest of each
subsidiary of the Company which is a partnership, limited liability company or
Massachusetts business trust, in each case, as set forth on Annex B hereto have
been validly issued in accordance with applicable law and the partnership
agreement, limited liability agreement or declaration of trust, as applicable,
of such subsidiary, and (except as described generally in the Registration
Statement and the documents incorporated by reference therein) are owned
directly or indirectly by the Company, free and clear of all liens,
encumbrances, equities or claims, except, in the case of each subsidiary of the
Company, for liens, encumbrances, equities or claims which individually or in
the aggregate would not be material to the Company's ownership of such
subsidiary or to the Company's exercise of its rights with respect to such
subsidiary;
(ix) The Shares to be issued and sold by the Company to the Underwriters
hereunder will be newly issued, have been duly and validly authorized and, when
issued and delivered against payment therefor as provided herein, will be duly
and validly issued and fully paid and non-assessable and will conform to the
description of the Stock contained in the Prospectus;
(x) The issue and sale of the Shares to be sold by the Company hereunder,
the sale of the Shares to be sold by the Selling Stockholders hereunder and the
compliance by the Company with all of the provisions of this Agreement and the
consummation of the transactions herein contemplated will not conflict with or
result in a breach or violation of any of the terms or provisions of, constitute
a default or termination under, or require any consent (except such consents as
will have been obtained at or prior to the time of such issue and sale) under or
with respect to, any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which the Company or any of its subsidiaries is a
party or by which the Company or any of its subsidiaries is bound or to which
any of the property or assets of the Company or any of its subsidiaries is
subject, with such exceptions individually or in the aggregate as would not have
a Material Adverse Effect or a material adverse effect on such compliance or
consummation, nor will such action result in any violation of the provisions of
the Certificate of Incorporation or By-laws of the Company in effect as of the
time immediately preceding the relevant Time of Delivery or any statute or any
order, rule or regulation of any court or governmental agency or body having
jurisdiction over the Company or any of its subsidiaries or any of their
properties, with such exceptions individually or in the aggregate as would not
have a Material Adverse Effect or a material adverse effect on such compliance
or consummation; and no consent, approval, authorization, order, registration or
qualification of or with any such court or governmental agency or body is
required for the issue and sale of the Shares or the consummation by the Company
of the transactions contemplated by this Agreement, except the registration
under the Act and the Exchange Act of the Shares, such consents, approvals,
authorizations, registrations or qualifications as may be required under state
securities or Blue Sky laws in connection with the purchase and distribution of
the Shares by the Underwriters and the clearance of the public offering of the
Shares by the Underwriters with the National Association of Securities Dealers,
Inc. (the "NASD");
(xi) Neither the Company nor any of its subsidiaries is (A) in violation of
its Certificate of Incorporation or By-laws or other constituting or
organizational instrument as in effect on the date hereof, with such exceptions,
solely with respect to subsidiaries of the Company which are partnerships,
limited partnerships or limited liability companies, which, individually or in
the aggregate would not have a Material Adverse Effect or a material adverse
effect on the validity, performance or consummation of the transactions
contemplated by this Agreement, the Power of Attorney (as defined below) or the
Custody Agreement (as defined below) or (B) in default in the performance or
observance of any material obligation, agreement, covenant or condition
contained in any indenture, mortgage, deed of trust, loan agreement, lease or
other agreement or instrument to which it is a party or by which it or any of
its properties may be bound;
4
<PAGE>
(xii) The statements set forth in the Company's registration statement on
Form 8-A under the Exchange Act (filed with the Commission on October 7, 1997)
which incorporate by reference the statements set forth in the Company's
registration statement on Form S-1 under the Act (File No. 333-34679) under the
caption "Description of Capital Stock", together with the statements set forth
in the Company's current report on Form 8-K under the Exchange Act (filed with
the Commission on February 1, 1999) under the caption "Series C Stock", in each
case insofar as they purport to constitute a summary of the terms of the Stock,
are accurate, complete and fair;
(xiii) Other than as set forth in the Prospectus, there are no legal or
governmental proceedings pending to which the Company or any of its subsidiaries
is a party or of which any property of the Company or any of its subsidiaries is
the subject which, if determined adversely to the Company or any of its
subsidiaries, would be reasonably likely individually or in the aggregate, to
have a Material Adverse Effect; and, to the best of the Company's knowledge, no
such proceedings are threatened or contemplated by governmental authorities or
threatened by others;
(xiv) To the extent such registration is required, each of the Company's
subsidiaries has been duly registered as an investment adviser under the
Investment Advisers Act of 1940, as amended (the "Advisers Act"), and each such
registration is in full force and effect; the Company is not required to
register as an "investment adviser" within the Advisers Act and the rules and
regulations of the Commission promulgated thereunder; and neither the Company
nor any of its subsidiaries is and, after giving effect to the offering and sale
of the Shares, neither will be, an "investment company" or an entity
"controlled" by an "investment company", as such terms are defined in the
Investment Company Act of 1940, as amended (the "Investment Company Act");
(xv) Each of the Company's subsidiaries is duly registered, licensed or
qualified as an investment adviser under state and local laws and is in
compliance with all such laws requiring any such registration, licensing or
qualification, in each case with such exceptions, individually or in the
aggregate, as would not have a Material Adverse Effect; the Company is not
required to be registered, licensed or qualified as an investment adviser under
the laws requiring any such registration, licensing or qualification in any
jurisdiction in which it or its subsidiaries conduct business.
(xvi) The Company is not party to any investment advisory agreement or
distribution agreement and is not serving or acting as an investment adviser to
any person; each of the investment advisory agreements and distribution
agreements to which any of the Company's subsidiaries is a party is a legal and
valid obligation of such subsidiary and, to the extent subject thereto, complies
with the applicable requirements of the Advisers Act, the Investment Company Act
and the rules and regulations of the Commission thereunder, and no such
agreement that was either in effect on September 30, 1998 or entered into by a
subsidiary since September 30, 1998 has been terminated or expired, except where
the failure to so comply or any such termination or expiration would not,
individually or in the aggregate, have a Material Adverse Effect; none of such
subsidiaries is in breach or violation of or in default under any such agreement
with such exceptions individually or in the aggregate as would not have a
Material Adverse Effect; and no subsidiary of the Company is serving or acting
as an investment adviser to any person except pursuant to an agreement to which
such subsidiary is a party and which is in full force and effect, other than any
agreements the non-existence of which would not, individually or in the
aggregate, have a Material Adverse Effect;
(xvii) Neither the Company nor any of its affiliates does business with the
government of Cuba or with any person or affiliate located in Cuba within the
meaning of Section 517.075, Florida Statutes; (xviii) Each of
PricewaterhouseCoopers LLP and Potter, Littlewood & Petty P.C., who have
certified certain financial statements of the Company is an independent public
accountant as required by the Act and the rules and regulations of the
Commission thereunder; and
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(xix) The Company has initiated a review of its operations and that of its
subsidiaries and any third parties with which the Company or any of its
subsidiaries has a material relationship to evaluate the extent to which the
business or operations of the Company or any of its subsidiaries will be
affected by the Year 2000 Problem. Although such a review has not been
completed, as a result of the review that has been conducted to the date hereof,
other than as described in the Prospectus, the Company currently has no reason
to believe and currently does not believe that the Year 2000 Problem will have a
Material Adverse Effect or result in any material loss or interference with the
Company's business or operations. The "Year 2000 Problem" as used herein means
any significant risk that computer hardware or software used in the receipt,
transmission, processing, manipulation, storage, retrieval, retransmission or
other utilization of data or in the operation of mechanical or electrical
systems of any kind will not, in the case of dates or time periods occurring
after December 31, 1999, function at least as effectively as in the case of
dates or time periods occurring prior to January 1, 2000.
(b) Each of the Selling Stockholders severally represents and warrants to,
and agrees with, each of the Underwriters and the Company that:
(i) All material consents, approvals, authorizations and orders necessary
for the execution and delivery by such Selling Stockholder of this Agreement,
the Power of Attorney and the Custody Agreement hereinafter referred to, and for
the sale and delivery of the Shares to be sold by such Selling Stockholder
hereunder have been obtained; and such Selling Stockholder has full right, power
and authority to enter into this Agreement, the Power of Attorney and the
Custody Agreement and to sell, assign, transfer and deliver the Shares to be
sold by such Selling Stockholder hereunder;
(ii) The sale of the Shares to be sold by such Selling Stockholder hereunder
and the compliance by such Selling Stockholder with all of the provisions of
this Agreement, the Power of Attorney and the Custody Agreement and the
consummation of the transactions herein contemplated will not conflict with or
result in a breach or violation of any of the terms or provisions of, or
constitute a default under, any statute, indenture, mortgage, deed of trust,
loan agreement or other agreement or instrument to which such Selling
Stockholder is a party or by which such Selling Stockholder is bound, or to
which any of the property or assets of such Selling Stockholder is subject, nor
will such action result in any violation of the provisions of the Certificate of
Incorporation or By-laws of such Selling Stockholder if such Selling Stockholder
is a corporation, the Partnership Agreement of such Selling Stockholder if such
Selling Stockholder is a partnership or any statute or any order, rule or
regulation of any court or governmental agency or body having jurisdiction over
such Selling Stockholder or the property of such Selling Stockholder, with such
exceptions individually or in the aggregate as would not have a material adverse
effect on the business affairs, management, financial position, stockholders'
equity or results of operation of such Selling Stockholder and its subsidiaries,
taken as a whole, or a material adverse effect on the validity, performance or
consummation of the transactions contemplated by this Agreement, the Power of
Attorney (as defined below) or the Custody Agreement (as defined below);
(iii) Such Selling Stockholder has, and immediately prior to the First Time
of Delivery (as defined in Section 4 hereof) such Selling Stockholder will have,
good and valid title to the Shares to be sold by such Selling Stockholder
hereunder, free and clear of all liens, encumbrances, equities or claims; and,
upon delivery of such Shares and payment therefor pursuant hereto, good and
valid title to such Shares, free and clear of all liens, encumbrances, equities
or claims, will pass to the several Underwriters; provided, that each such
Underwriter has purchased such Shares in good faith and without notice of any
such lien, encumbrance, equity or claim or any other adverse claim within the
meaning of the Uniform Commercial Code as adopted in the State of New York (the
"Code");
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(iv) During the period beginning from the date hereof and continuing to and
including, with respect to the Selling Stockholders listed on Schedule III-A
hereto, the date 90 days, and with respect to the Selling Stockholders listed on
Schedule III-B hereto, the date 60 days, after the date of the Prospectus, not
to offer, sell, contract to sell or otherwise dispose of, except as provided
hereunder, any Stock or securities of the Company that are substantially similar
to the Stock, or which are convertible into or exchangeable for, or that
represent the right to receive, Stock or any such substantially similar
securities (other than pursuant to employee stock option plans existing on, or
upon the conversion or exchange of convertible or exchangeable securities
outstanding as of, the date of this Agreement), without your prior written
consent;
(v) Such Selling Stockholder has not taken and will not take, directly or
indirectly, any action which is designed to or which has constituted or which
might reasonably be expected to cause or result in stabilization or manipulation
of the price of any security of the Company to facilitate the sale or resale of
the Shares except for the arrangements described in subsection (b)(iv) above;
(vi) To the extent that any statements or omissions made in the Registration
Statement, any Preliminary Prospectus, the Prospectus or any amendment or
supplement thereto are made in reliance upon and in conformity with written
information furnished to the Company by such Selling Stockholder expressly for
use therein, such Preliminary Prospectus and the Registration Statement did, and
the Prospectus and any further amendments or supplements to the Registration
Statement and the Prospectus, when they become effective or are filed with the
Commission, as the case may be, will conform in all material respects to the
requirements of the Act and the rules and regulations of the Commission
thereunder 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 not misleading;
(vii) In order to document the Underwriters' compliance with the reporting
and withholding provisions of the Tax Equity and Fiscal Responsibility Act of
1982 with respect to the transactions herein contemplated, such Selling
Stockholder will deliver to you prior to or at the First Time of Delivery (as
hereinafter defined) a properly completed and executed United States Treasury
Department Form W-9 (or other applicable form or statement specified by Treasury
Department regulations in lieu thereof);
(viii) Certificates in negotiable form representing all of the Shares to be
sold by such Selling Stockholder hereunder have been placed in custody under a
Custody Agreement, in the form heretofore furnished to you (the "Custody
Agreement"), duly executed and delivered by such Selling Stockholder to ,
as custodian (the "Custodian"), and such Selling Stockholder has duly executed
and delivered a Power of Attorney, in the form heretofore furnished to you (the
"Power of Attorney"), appointing the persons indicated in Schedule II hereto,
and each of them, as such Selling Stockholder's attorneys-in-fact (the
"Attorneys-in-Fact") with authority to execute and deliver this Agreement on
behalf of such Selling Stockholder, to determine the purchase price to be paid
by the Underwriters to the Selling Stockholders as provided in Section 2 hereof,
to authorize the delivery of the Shares to be sold by such Selling Stockholder
hereunder and otherwise to act on behalf of such Selling Stockholder in
connection with the transactions contemplated by this Agreement and the Custody
Agreement; and
(ix) The Shares represented by the certificates held in custody for such
Selling Stockholder under the Custody Agreement are subject to the interests of
the Underwriters hereunder; the arrangements made by such Selling Stockholder
for such custody, and the appointment by such Selling Stockholder of the
Attorneys-in-Fact by the Power of Attorney, are to that extent irrevocable; the
obligations of the Selling Stockholders hereunder shall not be terminated by
operation of law, whether by the death or incapacity of any individual Selling
Stockholder or, in the case of an estate or trust, by the death or incapacity of
any executor or trustee or the termination of such estate or trust, or in the
case of a partnership or corporation, by the dissolution of such partnership or
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corporation, or by the occurrence of any other event; if any individual Selling
Stockholder or any such executor or trustee should die or become incapacitated,
or if any such estate or trust should be terminated, or if any such partnership
or corporation should be dissolved, or if any other such event should occur,
before the delivery of the Shares hereunder, certificates representing the
Shares shall be delivered by or on behalf of the Selling Stockholders in
accordance with the terms and conditions of this Agreement and of the Custody
Agreement; and actions taken by the Attorneys-in-Fact pursuant to the Powers of
Attorney shall be as valid as if such death, incapacity, termination,
dissolution or other event had not occurred, regardless of whether or not the
Custodian, the Attorneys-in-Fact, or any of them, shall have received notice of
such death, incapacity, termination, dissolution or other event.
2. Subject to the terms and conditions herein set forth, (a) the Company and
each of the Selling Stockholders agree, severally and not jointly, to sell to
each of the Underwriters, and each of the Underwriters agrees, severally and not
jointly, to purchase from the Company and each of the Selling Stockholders, at a
purchase price per share of $ , the number of Firm Shares (to be
adjusted by you so as to eliminate fractional shares) determined by multiplying
the aggregate number of Firm Shares to be sold by the Company and each of the
Selling Stockholders as set forth opposite their respective names in Schedule II
hereto by a fraction, the numerator of which is the aggregate number of Firm
Shares to be purchased by such Underwriter as set forth opposite the name of
such Underwriter in Schedule I hereto and the denominator of which is the
aggregate number of Firm Shares to be purchased by all of the Underwriters from
the Company and all of the Selling Stockholders hereunder and (b) in the event
and to the extent that the Underwriters shall exercise the election to purchase
Optional Shares as provided below, the Company agrees to sell to each of the
Underwriters, and each of the Underwriters agrees, severally and not jointly, to
purchase from the Company, at the purchase price per share set forth in clause
(a) of this Section 2, that portion of the number of Optional Shares as to which
such election shall have been exercised (to be adjusted by you so as to
eliminate fractional shares) determined by multiplying such number of Optional
Shares by a fraction, the numerator of which is the maximum number of Optional
Shares which such Underwriter is entitled to purchase as set forth opposite the
name of such Underwriter in Schedule I hereto and the denominator of which is
the maximum number of Optional Shares that all of the Underwriters are entitled
to purchase hereunder.
The Company hereby grants to the Underwriters the right to purchase at their
election up to 934,938 Optional Shares, at the purchase price per share set
forth in the paragraph above, for the sole purpose of covering overallotments in
the sale of the Firm Shares. Any such election to purchase Optional Shares may
be exercised only by written notice from you to the Company, given within a
period of 30 calendar days after the date of this Agreement and setting forth
the aggregate number of Optional Shares to be purchased and the date on which
such Optional Shares are to be delivered, as determined by you but in no event
earlier than the First Time of Delivery (as defined in Section 4 hereof) or,
unless you and the Company otherwise agree in writing, earlier than two or later
than ten business days after the date of such notice.
3. Upon the authorization by you of the release of the Firm Shares, the
several Underwriters propose to offer the Firm Shares for sale upon the terms
and conditions set forth in the Prospectus.
4. (a) The Shares to be purchased by each Underwriter hereunder, in
definitive form, and in such authorized denominations and registered in such
names as Goldman, Sachs & Co. may request upon at least forty-eight hours' prior
notice to the Company and the Selling Stockholders shall be delivered by or on
behalf of the Company and the Selling Stockholders (in the case of Firm Shares
sold by them) to Goldman, Sachs & Co., through the facilities of The Depository
Trust Company for the account of such Underwriter, against payment by or on
behalf of such Underwriter of the purchase price therefor by wire transfer of
Federal (same-day) funds to the account specified by the Company and the
Custodian (in the case of Firm Shares sold by the Selling Stockholders), as
their interests may appear, to Goldman, Sachs & Co. at least forty-eight hours
in advance. The
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Company will cause the certificates representing the Shares to be made available
for checking and packaging at least twenty-four hours prior to the Time of
Delivery (as defined below) with respect thereto at the office of DTC or its
designated custodian Goldman, Sachs & Co., 85 Broad Street, New York, New York
10004 (the "Designated Office"). The time and date of such delivery and payment
shall be, with respect to the Firm Shares, 9:30 a.m., New York time, on ,
1999 or such other time and date as Goldman, Sachs & Co., the Company and the
Selling Stockholders may agree upon in writing, and, with respect to the
Optional Shares, 9:30 a.m., New York time, on the date specified by Goldman,
Sachs & Co. in the written notice given by Goldman, Sachs & Co. of the
Underwriters' election to purchase such Optional Shares, or such other time and
date as Goldman, Sachs & Co. and the Company may agree upon in writing. Such
time and date for delivery of the Firm Shares is herein called the "First Time
of Delivery", such time and date for delivery of the Optional Shares, if not the
First Time of Delivery, is herein called the "Second Time of Delivery", and each
such time and date for delivery is herein called a "Time of Delivery".
(b) The documents to be delivered at each Time of Delivery by or on behalf
of the parties hereto pursuant to Section 7 hereof, including the cross receipt
for the Shares and any additional documents requested by the Underwriters
pursuant to Section 7(l) hereof, will be delivered at the offices of Sullivan &
Cromwell, 125 Broad Street, New York, New York 10004 (the "Closing Location"),
and the Shares will be delivered at the Designated Office, all at each Time of
Delivery. A meeting will be held at the Closing Location at 2:00 p.m., New York
City time, on the New York Business Day next preceding such Time of Delivery, at
which meeting the final drafts of the documents to be delivered pursuant to the
preceding sentence will be available for review by the parties hereto. For the
purposes of this Section 4, "New York Business Day" shall mean each Monday,
Tuesday, Wednesday, Thursday and Friday which is not a day on which banking
institutions in New York are generally authorized or obligated by law or
executive order to close.
5. The Company agrees with each of the Underwriters:
(a) To prepare the Prospectus in a form approved by you and to file such
Prospectus pursuant to Rule 424(b) under the Act not later than the Commission's
close of business on the second business day following the execution and
delivery of this Agreement, or, if applicable, such earlier time as may be
required by Rule 430A(a)(3) under the Act; to make no further amendment or any
supplement to the Registration Statement or Prospectus prior to the last Time of
Delivery which shall be disapproved by you promptly after reasonable notice
thereof; to advise you, promptly after it receives notice thereof, of the time
when any amendment to the Registration Statement has been filed or becomes
effective or any supplement to the Prospectus or any amended Prospectus has been
filed and to furnish you with copies thereof; to file promptly all reports and
any definitive proxy or information statements required to be filed by the
Company with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act subsequent to the date of the Prospectus and for so long as the
delivery of a prospectus is required in connection with the offering or sale of
the Shares; to advise you, promptly after it receives notice thereof, of the
issuance by the Commission of any stop order or of any order preventing or
suspending the use of any Preliminary Prospectus or prospectus, of the
suspension of the qualification of the Shares for offering or sale in any
jurisdiction, of the initiation or threatening of any proceeding for any such
purpose, or of any request by the Commission for the amending or supplementing
of the Registration Statement or Prospectus or for additional information; and,
in the event of the issuance of any stop order or of any order preventing or
suspending the use of any Preliminary Prospectus or prospectus or suspending any
such qualification, promptly to use its commercially reasonable best efforts to
obtain the withdrawal of such order;
(b) Promptly from time to time to take such action as you may reasonably
request to qualify the Shares for offering and sale under the securities laws of
such jurisdictions as you may request and to comply with such laws so as to
permit the continuance of sales and dealings therein in such jurisdictions for
as long as may be necessary to complete the distribution of the Shares, provided
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that in connection therewith the Company shall not be required to qualify as a
foreign corporation or to file a general consent to service of process in any
jurisdiction;
(c) Prior to 10:00 a.m., New York City time, on the New York Business Day
next succeeding the date of this Agreement and from time to time, to furnish the
Underwriters with copies of the Prospectus in New York City in such quantities
as you may reasonably request, and, if the delivery of a prospectus is required
at any time prior to the expiration of nine months after the time of issue of
the Prospectus in connection with the offering or sale of the Shares and if at
such time any event shall have occurred as a result of which the Prospectus as
then amended or supplemented would include an untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were made
when such Prospectus is delivered, not misleading, or, if for any other reason
it shall be necessary during such period to amend or supplement the Prospectus
or to file under the Exchange Act any document incorporated by reference in the
Prospectus in order to comply with the Act or the Exchange Act, to notify you
and upon your request to file such document and to prepare and furnish without
charge to each Underwriter and to any dealer in securities as many copies as you
may from time to time reasonably request of an amended Prospectus or a
supplement to the Prospectus which will correct such statement or omission or
effect such compliance, and in case any Underwriter or dealer is required to
deliver a prospectus in connection with sales of any of the Shares at any time
nine months or more after the time of issue of the Prospectus, upon your request
but at the expense of such Underwriter or dealer, to prepare and deliver to such
Underwriter or dealer as many copies as you may request of an amended or
supplemented Prospectus complying with Section 10(a)(3) of the Act;
(d) To make generally available to its securityholders as soon as
practicable, but in any event not later than eighteen months after the effective
date of the Registration Statement (as defined in Rule 158(c) under the Act), an
earnings statement of the Company and its subsidiaries (which need not be
audited) complying with Section 11(a) of the Act and the rules and regulations
thereunder (including, at the option of the Company, Rule 158);
(e) During the period beginning from the date hereof and continuing to and
including the date 90 days after the date of the Prospectus, not to offer, sell,
contract to sell or otherwise dispose of, except as provided hereunder, any
Stock or securities of the Company that are substantially similar to the Stock,
or which are convertible into or exchangeable or exercisable for, or that
represent the right to receive, Stock or any such substantially similar
securities (other than pursuant to employee stock option or stock purchase plans
existing on, or upon the conversion or exchange of convertible or exchangeable
securities, or the exercise of warrants, outstanding as of, the date of this
Agreement, and other than shares of Stock or such other securities issued as
consideration in investments or acquisitions made by the Company or any of its
subsidiaries, provided that such securities are made subject to the same 90-day
restriction), without your prior written consent;
(f) To furnish to its stockholders as soon as practicable after the end of
each fiscal year an annual report (including a balance sheet and statements of
income, stockholders' equity and cash flows of the Company and its consolidated
subsidiaries certified by independent public accountants) and, as soon as
practicable after the end of each of the first three quarters of each fiscal
year (beginning with the fiscal quarter ending after the effective date of the
Registration Statement), consolidated summary financial information of the
Company and its subsidiaries for such quarter in reasonable detail;
(g) During a period of five years from the effective date of the
Registration Statement, to furnish to you copies of all reports or other
communications (financial or other) furnished to stockholders, and to deliver to
you (i) as soon as they are available, copies of any reports and financial
statements furnished to or filed with the Commission or any national securities
exchange on which any class of securities of the Company is listed; and (ii)
such additional information concerning the
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business and financial condition of the Company as you may from time to time
reasonably request (such financial statements to be on a consolidated basis to
the extent the accounts of the Company and its subsidiaries are consolidated in
reports furnished to its stockholders generally or to the Commission);
(h) To use the net proceeds received by it from the sale of the Shares
pursuant to this Agreement in the manner specified in the Prospectus under the
caption "Use of Proceeds";
(i) To use its commercially reasonable best efforts to list, subject to
notice of issuance, the Shares on the New York Stock Exchange (the "Exchange");
and
(j) If the Company elects to rely upon Rule 462(b), the Company shall file a
Rule 462(b) Registration Statement with the Commission in compliance with Rule
462(b) by 10:00 P.M., Washington, D.C. time, on the date of this Agreement, and
the Company shall at the time of filing either pay to the Commission the filing
fee for the Rule 462(b) Registration Statement or give irrevocable instructions
for the payment of such fee pursuant to Rule 111(b) under the Act.
6. (a) The Company covenants and agrees with the several Underwriters that
it will pay or cause to be paid the following: (i) the fees, disbursements and
expenses of the Company's counsel and accountants in connection with the
registration of the Shares under the Act and all other expenses in connection
with the preparation, printing and filing of the Registration Statement, any
Preliminary Prospectus and the Prospectus and amendments and supplements thereto
and the mailing and delivering of copies thereof to the Underwriters and
dealers; (ii) the cost of printing or producing any Agreement among
Underwriters, this Agreement, the Blue Sky Memorandum, closing documents
(including any compilations thereof) and any other documents printed or produced
by or on behalf of the Company in connection with the offering, purchase, sale
and delivery of the Shares; (iii) all expenses in connection with the
qualification of the Shares for offering and sale under state securities laws as
provided in Section 5(b) hereof, including the fees and disbursements of counsel
for the Underwriters in connection with such qualification and in connection
with the Blue Sky survey; (iv) all fees and expenses in connection with listing
the Shares on the Exchange; (v) the filing fees incident to, and the fees and
disbursements of counsel for the Underwriters in connection with, securing any
required review by the NASD of the terms of the sale of the Shares; (vi) the
cost of preparing stock certificates; (vii) the cost and charges of any transfer
agent or registrar; and (viii) all other costs and expenses incident to the
performance of its obligations hereunder which are not otherwise specifically
provided for in this Section; and (b) the Company and each of the Selling
Stockholders, jointly and severally, covenant and agree with one another and
with the several Underwriters that each such Selling Stockholder will pay or
cause to be paid all costs and expenses incident to the performance of such
Selling Stockholder's obligations hereunder which are not otherwise specifically
provided for in this Section, including (i) any fees and expenses of counsel for
such Selling Stockholder, (ii) such Selling Stockholder's pro rata share of the
fees and expenses of the Attorneys-in-Fact and the Custodian and (iii) all
expenses and taxes incident to the sale and delivery of the Shares to be sold by
such Selling Stockholder to the Underwriters hereunder, in each case unless the
Company actually pays such costs and expenses on behalf of such Selling
Stockholder. In connection with Clause (b) (iii) of the preceding sentence,
Goldman, Sachs & Co. agrees to pay New York State stock transfer tax, and each
Selling Stockholder agrees to reimburse Goldman, Sachs & Co. for associated
carrying costs if such tax payment is not rebated on the day of payment and for
any portion of such tax payment not rebated. It is understood, however, that the
Company shall bear, and the Selling Stockholders shall not be required to pay or
to reimburse the Company for, the cost of any other matters not directly
relating to the sale and purchase of the Shares pursuant to this Agreement, and
that, except as provided in this Section, and Sections 8 and 11 hereof, the
Underwriters will pay all of their own costs and expenses, including the fees of
their counsel, stock transfer taxes on resale of any of the Shares by them, and
any advertising expenses connected with any offers they may make.
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7. The obligations of the Underwriters hereunder, as to the Shares to be
delivered at each Time of Delivery, shall be subject, in their discretion, to
the condition that all representations and warranties and other statements of
the Company and of the Selling Stockholders herein are, at and as of such Time
of Delivery, true and correct, the condition that the Company and the Selling
Stockholders shall have performed, in all material respects, all of its and
their obligations hereunder theretofore to be performed, and the following
additional conditions:
(a) The Prospectus shall have been filed with the Commission pursuant to
Rule 424(b) within the applicable time period prescribed for such filing by the
rules and regulations under the Act and in accordance with Section 5(a) hereof;
no stop order suspending the effectiveness of the Registration Statement or any
part thereof shall have been issued and no proceeding for that purpose shall
have been initiated or threatened by the Commission; and all requests for
additional information on the part of the Commission shall have been complied
with to your reasonable satisfaction; and if the Company has elected to rely
upon Rule 462(b), the Rule 462(b) Registration Statement shall have become
effective by 10:00 P.M., Washington, D.C. time, on the date of this Agreement;
(b) Sullivan & Cromwell, counsel for the Underwriters, shall have furnished
to you such opinion or opinions, dated such Time of Delivery, with respect to
the incorporation and good standing of the Company, the Shares being delivered
at such Time of Delivery, this Agreement, the Registration Statement and the
Prospectus as well as such other related matters as you may reasonably request,
and such counsel shall have received such papers and information as they may
reasonably request to enable them to pass upon such matters;
(c) Goodwin, Procter & Hoar LLP, counsel for the Company, shall have
furnished to you their written opinion and letter in substantially the form of
Annex II-A and II-B hereto;
(d) The respective counsel for each of the Selling Stockholders, as
indicated in Schedule II hereto, each shall have furnished to you their written
opinion with respect to each of the Selling Stockholders for whom they are
acting as counsel, dated such Time of Delivery, in form and substance
satisfactory to you, to the effect that:
(i) A Power of Attorney and a Custody Agreement have been duly executed
and delivered by such Selling Stockholder and constitute valid and legally
binding agreements of such Selling Stockholder, enforceable against such
Selling Stockholder in accordance with their respective terms, subject, as
to enforcement, to applicable bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and other laws of general applicability affecting
creditors' rights and to general equity principles;
(ii) This Agreement has been duly executed and delivered by or on behalf
of such Selling Stockholder; and the sale of the Shares to be sold by such
Selling Stockholder hereunder and the compliance by such Selling Stockholder
with all of the provisions of this Agreement, the Power of Attorney and the
Custody Agreement and the consummation of the transactions herein and
therein contemplated will not conflict with or result in a breach or
violation of any terms or provisions of, or constitute a default under, any
statute, indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument known to such counsel to which such Selling
Stockholder is a party or by which such Selling Stockholder is bound, or, to
such counsel's knowledge, to which any of the property or assets of such
Selling Stockholder is subject, nor, to such counsel's knowledge, will such
action result in any violation of the provisions of the Certificate of
Incorporation or By-laws of such Selling Stockholder if such Selling
Stockholder is a corporation, the Partnership Agreement of such Selling
Stockholder if such Selling Stockholder is a partnership or any order, rule
or regulation known to such counsel of any court or governmental agency or
body having jurisdiction over such Selling Stockholder or the property of
such Selling Stockholder, with such exceptions individually or in
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the aggregate as would not have a material adverse effect on the business
affairs, management, financial position, stockholders' equity or results of
operation of such Selling Stockholder and its subsidiaries, taken as a
whole, or a material adverse effect on the validity, performance or
consummation of the transactions contemplated by this Agreement, the Power
of Attorney or the Custody Agreement;
(iii) No material consent, approval, authorization or order of any court
or governmental agency or body is required for the consummation of the
transactions contemplated by this Agreement in connection with the Shares to
be sold by such Selling Stockholder hereunder except such as have been
obtained under the Act and such as may be required under state securities or
Blue Sky laws in connection with the purchase and distribution of such
Shares by the Underwriters;
(iv) To the knowledge of such counsel, immediately prior to the First
Time of Delivery such Selling Stockholder had good and valid title to the
Shares to be sold at the First Time of Delivery by such Selling Stockholder
under this Agreement, free and clear of all liens, encumbrances, equities or
claims, and full right, power and authority to sell, assign, transfer and
deliver the Shares to be sold by such Selling Stockholder hereunder; and
(v) Good and valid title to such Shares, free and clear of all liens,
encumbrances, equities or claims, has been transferred to each of the
several Underwriters who have purchased such Shares in good faith and
without notice of any such lien, encumbrance, equity or claim or any other
adverse claim within the meaning of the Code.
In rendering such opinion, such counsel may state that they express no
opinion as to the laws of any jurisdiction outside the United States and in
rendering the opinion in subparagraph (iv) such counsel may rely upon a
certificate of such Selling Stockholder in respect of matters of fact as to
ownership of, and liens, encumbrances, equities or claims on the Shares sold by
such Selling Stockholder, provided that such counsel shall state that they
believe that both you and they are justified in relying upon such certificate.
Such counsel may also state that it has made no special inquiry or investigation
in respect of opinions that are rendered to the knowledge of such counsel;
(e) On the date of the Prospectus at a time prior to the execution of this
Agreement, at 9:30 a.m., New York City time, on the effective date of any
post-effective amendment to the Registration Statement filed subsequent to the
date of this Agreement and also at each Time of Delivery, each of
PricewaterhouseCoopers LLP and Potter, Littlewood & Petty P.C. shall have
furnished to you a letter or letters, dated the respective dates of delivery
thereof, in form and substance reasonably satisfactory to you, to the effect set
forth in Annex I-1 and II-1 hereto, respectively (the executed copy of the
letter delivered prior to the execution of this Agreement is attached as Annex
I(a) -1 and II(a)-1 hereto, respectively and, in the case of
PricewaterhouseCoopers LLP only, a draft of the form of letter to be delivered
on the effective date of any post-effective amendment to the Registration
Statement and, in the case of PricewaterhouseCoopers LLP only, as of each Time
of Delivery is attached as Annex I(b) hereto);
(f)(i) Neither the Company nor any of its subsidiaries shall have sustained
since the date of the latest audited financial statements included or
incorporated by reference in the Prospectus any loss or interference with its
business from fire, explosion, flood or other calamity, whether or not covered
by insurance, or from any labor dispute or court or governmental action, order
or decree, in each case affecting its properties, assets or operations,
otherwise than as set forth or contemplated in the Prospectus, and (ii) since
the respective dates as of which information is given in the Prospectus there
shall not have been any change in the capital stock (other than changes
resulting from the exercise of stock options or warrants or conversion of
preferred stock after September 30, 1998 and prior to the Time of Delivery) or
any increase in the long-term debt of the Company or any of its subsidiaries or
any change, or any development involving a prospective change, in or
13
<PAGE>
affecting the business affairs, management, financial position, stockholders'
equity or results of operations of the Company and its subsidiaries, taken as a
whole, otherwise than as set forth or contemplated in the Prospectus, the effect
of which, in any such case described in Clause (i) or (ii), is in the judgment
of the Representatives so material and adverse as to make it impracticable or
inadvisable to proceed with the public offering or the delivery of the Shares
being delivered at such Time of Delivery on the terms and in the manner
contemplated in the Prospectus;
(g) On or after the date hereof (i) no downgrading shall have occurred in
the rating accorded the Company's debt securities or preferred stock by any
"nationally recognized statistical rating organization", as that term is defined
by the Commission for purposes of Rule 436(g)(2) under the Act, and (ii) no such
organization shall have publicly announced that it has under surveillance or
review, with possible negative implications, its rating of any of the Company's
debt securities or preferred stock;
(h) On or after the date hereof there shall not have occurred any of the
following: (i) a suspension or material limitation in trading in securities
generally on the New York Stock Exchange or NASDAQ; (ii) a suspension or
material limitation in trading in the Company's securities on the New York Stock
Exchange; (iii) a general moratorium on commercial banking activities declared
by either Federal or New York State authorities; or (iv) the outbreak or
escalation of hostilities involving the United States or the declaration by the
United States of a national emergency or war, if the effect of any such event
specified in this Clause (iv) in the judgment of the Representatives makes it
impracticable or inadvisable to proceed with the public offering or the delivery
of the Shares being delivered at such Time of Delivery on the terms and in the
manner contemplated in the Prospectus;
(i) The Shares to be sold by the Company and the Selling Stockholders at
such Time of Delivery shall have been duly listed, subject to notice of
issuance, on the Exchange;
(j) The Company has obtained and delivered to the Underwriters executed
copies of an agreement from all of the stockholders, directors and officers
listed in Schedules III-A, III-B and III-C hereto, respectively, substantially
to the effect set forth in Subsection 1(b)(iv) hereof in form and substance
satisfactory to you;
(k) The Company shall have complied with the provisions of Section 5(c)
hereof with respect to the furnishing of prospectuses on the New York Business
Day next succeeding the date of this Agreement; and
(l) The Company and the Selling Stockholders shall have furnished or caused
to be furnished to you at such Time of Delivery certificates of officers of the
Company and of the Selling Stockholders, respectively, satisfactory to you as to
the accuracy of the representations and warranties of the Company and of the
Selling Stockholders, respectively, herein at and as of such Time of Delivery,
as to the performance by the Company and the Selling Stockholders of all of
their respective obligations hereunder to be performed at or prior to such Time
of Delivery, and as to such other matters as you may reasonably request, and the
Company shall have furnished or caused to be furnished certificates as to the
matters set forth in subsections (a) and (f) of this Section and as to such
other matters as you may reasonably request.
8. (a) The Company will indemnify and hold harmless each Underwriter against
any losses, claims, damages or liabilities, joint or several, to which such
Underwriter may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, the Registration
Statement or the Prospectus, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse each Underwriter for
14
<PAGE>
any legal or other expenses reasonably incurred by such Underwriter in
connection with investigating or defending any such action or claim as such
expenses are incurred; PROVIDED, HOWEVER, that the Company shall not be liable
in any such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in any Preliminary Prospectus, the
Registration Statement or the Prospectus or any such amendment or supplement in
reliance upon and in conformity with written information furnished to the
Company by any Underwriter through Goldman, Sachs & Co. expressly for use
therein.
(b) Each of the Selling Stockholders severally and not jointly will
indemnify and hold harmless each Underwriter against any losses, claims, damages
or liabilities, joint or several, to which such Underwriter may become subject,
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus, the Registration Statement or the Prospectus, or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in each case
to the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission was made in any Preliminary
Prospectus, the Registration Statement or the Prospectus or any such amendment
or supplement in reliance upon and in conformity with written information
furnished to the Company by such Selling Stockholder expressly for use therein;
and will reimburse each Underwriter for any legal or other expenses reasonably
incurred by such Underwriter in connection with investigating or defending any
such action or claim as such expenses are incurred; PROVIDED, HOWEVER, that such
Selling Stockholder shall not be liable in any such case to the extent that any
such loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
any Preliminary Prospectus, the Registration Statement or the Prospectus or any
such amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by any Underwriter through Goldman, Sachs &
Co. expressly for use therein; provided, further, that the liability of a
Selling Stockholder pursuant to this subsection (b) shall not exceed the product
of the number of Shares sold by such Selling Stockholder and the initial public
offering price of the Shares as set forth in the Prospectus.
(c) Each Underwriter will indemnify and hold harmless the Company and each
Selling Stockholder against any losses, claims, damages or liabilities to which
the Company or such Selling Stockholder may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was made in any Preliminary Prospectus, the Registration
Statement or the Prospectus or any such amendment or supplement in reliance upon
and in conformity with written information furnished to the Company by such
Underwriter through Goldman, Sachs & Co. expressly for use therein; and will
reimburse the Company and each Selling Stockholder for any legal or other
expenses reasonably incurred by the Company or such Selling Stockholder in
connection with investigating or defending any such action or claim as such
expenses are incurred.
(d) Promptly after receipt by an indemnified party under subsection (a), (b)
or (c) above of notice of the commencement of any action, such indemnified party
shall, if a claim in respect
15
<PAGE>
thereof is to be made against an indemnifying party under such subsection,
notify the indemnifying party in writing of the commencement thereof; but the
omission so to notify the indemnifying party shall not relieve it from any
liability which it may have to any indemnified party otherwise than under such
subsection. In case any such action shall be brought against any indemnified
party and it shall notify the indemnifying party of the commencement thereof,
the indemnifying party shall be entitled to participate therein and, to the
extent that it shall wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel satisfactory to such
indemnified party (who shall not, except with the consent of the indemnified
party, be counsel to the indemnifying party), and, after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party shall not be liable to such indemnified
party under such subsection for any legal expenses of other counsel or any other
expenses, in each case subsequently incurred by such indemnified party, in
connection with the defense thereof other than reasonable costs of
investigation. No indemnifying party shall, without the written consent of the
indemnified party, effect the settlement or compromise of, or consent to the
entry of any judgment with respect to, any pending or threatened action or claim
in respect of which indemnification or contribution may be sought hereunder
(whether or not the indemnified party is an actual or potential party to such
action or claim) unless such settlement, compromise or judgment (i) includes an
unconditional release of the indemnified party from all liability arising out of
such action or claim and (ii) does not include a statement as to or an admission
of fault, culpability or a failure to act, by or on behalf of any indemnified
party.
(e) If the indemnification provided for in this Section 8 is unavailable to
or insufficient to hold harmless an indemnified party under subsection (a), (b)
or (c) above in respect of any losses, claims, damages or liabilities (or
actions in respect thereof) referred to therein, then each indemnifying party
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages or liabilities (or actions in respect
thereof) in such proportion as is appropriate to reflect the relative benefits
received by the Company and the Selling Stockholders on the one hand and the
Underwriters on the other from the offering of the Shares. If, however, the
allocation provided by the immediately preceding sentence is not permitted by
applicable law or if the indemnified party failed to give the notice required
under subsection (d) above, then each indemnifying party shall contribute to
such amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company and the Selling Stockholders on the one hand and the
Underwriters on the other in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities (or actions in respect
thereof), as well as any other relevant equitable considerations. The relative
benefits received by the Company and the Selling Stockholders on the one hand
and the Underwriters on the other shall be deemed to be in the same proportion
as the total net proceeds from the offering of the Shares purchased under this
Agreement (before deducting expenses) received by the Company and the Selling
Stockholders bear to the total underwriting discounts and commissions received
by the Underwriters with respect to the Shares purchased under this Agreement,
in each case as set forth in the table on the cover page of the Prospectus. The
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
Company or the Selling Stockholders on the one hand or the Underwriters on the
other and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Company, each
of the Selling Stockholders and the Underwriters agree that it would not be just
and equitable if contributions pursuant to this subsection (e) were determined
by PRO RATA allocation (even if the Underwriters were treated as one entity for
such purpose) or by any other method of allocation which does not take account
of the equitable considerations referred to above in this subsection (e). The
amount paid or payable by an indemnified party as a result of the
16
<PAGE>
losses, claims, damages or liabilities (or actions in respect thereof) referred
to above in this subsection (e) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this subsection (e), (i) no Underwriter shall be required to
contribute any amount in excess of the amount by which the total price at which
the Shares underwritten by it and distributed to the public were offered to the
public exceeds the amount of any damages which such Underwriter has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission, and (ii) no Selling Stockholder shall be required
to contribute any amount in excess of the amount by which the product of the
number of Shares sold by such Selling Stockholder and the initial public
offering price of the Shares as set forth in the Prospectus exceeds the amount
of any damages, which such Selling Stockholder has otherwise been required to
pay by reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Underwriters'
obligations in this subsection (e) to contribute are several in proportion to
their respective underwriting obligations and not joint.
(f) The obligations of the Company and the Selling Stockholders under this
Section 8 shall be in addition to any liability which the Company and the
respective Selling Stockholders may otherwise have and shall extend, upon the
same terms and conditions, to each person, if any, who controls any Underwriter
within the meaning of the Act; and the obligations of the Underwriters under
this Section 8 shall be in addition to any liability which the respective
Underwriters may otherwise have and shall extend, upon the same terms and
conditions, to each officer and director of the Company or any Selling
Stockholder and to each person, if any, who controls the Company or any Selling
Stockholder within the meaning of the Act.
9. (a) If any Underwriter shall default in its obligation to purchase the
Shares which it has agreed to purchase hereunder at a Time of Delivery, you may
in your discretion arrange for you or another party or other parties to purchase
such Shares on the terms contained herein. If within thirty-six hours after such
default by any Underwriter you do not arrange for the purchase of such Shares,
then the Company and the Selling Stockholders shall be entitled to a further
period of thirty-six hours within which to procure another party or other
parties satisfactory to you to purchase such Shares on such terms. In the event
that, within the respective prescribed periods, you notify the Company and the
Selling Stockholders that you have so arranged for the purchase of such Shares,
or the Company and the Selling Stockholders notify you that they have so
arranged for the purchase of such Shares, you or the Company and the Selling
Stockholders shall have the right to postpone such Time of Delivery for a period
of not more than seven days, in order to effect whatever changes may thereby be
made necessary in the Registration Statement or the Prospectus, or in any other
documents or arrangements, and the Company agrees to file promptly any
amendments to the Registration Statement or the Prospectus which in your opinion
may thereby be made necessary. The term "Underwriter" as used in this Agreement
shall include any person substituted under this Section with like effect as if
such person had originally been a party to this Agreement with respect to such
Shares.
(b) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company and
the Selling Stockholders as provided in subsection (a) above, the aggregate
number of such Shares which remains unpurchased does not exceed one-eleventh of
the aggregate number of all the Shares to be purchased at such Time of Delivery,
then the Company and the Selling Stockholders shall have the right to require
each non-defaulting Underwriter to purchase the number of shares which such
Underwriter agreed to purchase hereunder at such Time of Delivery and, in
addition, to require each non-defaulting Underwriter to purchase its pro rata
share (based on the number of Shares which such Underwriter
17
<PAGE>
agreed to purchase hereunder) of the Shares of such defaulting Underwriter or
Underwriters for which such arrangements have not been made; but nothing herein
shall relieve a defaulting Underwriter from liability for its default.
(c) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company and
the Selling Stockholders as provided in subsection (a) above, the aggregate
number of such Shares which remains unpurchased exceeds one-eleventh of the
aggregate number of all the Shares to be purchased at such Time of Delivery, or
if the Company and the Selling Stockholders shall not exercise the right
described in subsection (b) above to require non-defaulting Underwriters to
purchase Shares of a defaulting Underwriter or Underwriters, then this Agreement
(or, with respect to the Second Time of Delivery, the obligations of the
Underwriters to purchase and of the Company to sell the Optional Shares) shall
thereupon terminate, without liability on the part of any non-defaulting
Underwriter or the Company or the Selling Stockholders, except for the expenses
to be borne by the Company and the Selling Stockholders and the Underwriters as
provided in Section 6 hereof and the indemnity and contribution agreements in
Section 8 hereof; but nothing herein shall relieve a defaulting Underwriter from
liability for its default.
10. The respective indemnities, agreements, representations, warranties and
other statements of the Company, the Selling Stockholders and the several
Underwriters, as set forth in this Agreement or made by or on behalf of them,
respectively, pursuant to this Agreement, shall remain in full force and effect,
regardless of any investigation (or any statement as to the results thereof)
made by or on behalf of any Underwriter or any controlling person of any
Underwriter, or the Company, or any of the Selling Stockholders, or any officer
or director or controlling person of the Company, or any controlling person of
any Selling Stockholder, and shall survive delivery of and payment for the
Shares.
11. If this Agreement shall be terminated pursuant to Section 9 hereof,
neither the Company nor the Selling Stockholders shall then be under any
liability to any Underwriter except as provided in Sections 6 and 8 hereof; but,
if for any other reason, any Shares are not delivered by or on behalf of the
Company and the Selling Stockholders as provided herein, the Company and each of
the Selling Stockholders pro rata (based on the number of Shares to be sold by
the Company and such Selling Stockholder hereunder) will reimburse the
Underwriters through you for all out-of-pocket expenses approved in writing by
you, including fees and disbursements of counsel, reasonably incurred by the
Underwriters in making preparations for the purchase, sale and delivery of the
Shares not so delivered, but the Company and the Selling Stockholders shall then
be under no further liability to any Underwriter in respect of the Shares not so
delivered except as provided in Sections 6 and 8 hereof.
12. In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Underwriter made or
given by you jointly or by Goldman, Sachs & Co. on behalf of you as the
representatives and in all dealings with any Selling Stockholder hereunder, you
and the Company shall be entitled to act and rely upon any statement, request,
notice or agreement on behalf of such Selling Stockholder made or given by any
or all of the Attorneys-in-Fact for such Selling Stockholder.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to you as the representatives in care of Goldman, Sachs &
Co., 32 Old Slip, 9th Floor, New York, New York 10004, Attention: Registration
Department; if to any Selling Stockholder shall be delivered or sent by mail,
telex or facsimile transmission to counsel for such Selling Stockholder at its
address set forth in Schedule II hereto; and if to the Company shall be
delivered or sent by mail to the address
18
<PAGE>
of the Company set forth in the Registration Statement, Attention: Secretary;
provided, however, that any notice to an Underwriter pursuant to Section 8(d)
hereof shall be delivered or sent by mail, telex or facsimile transmission to
such Underwriter at its address set forth in its Underwriters' Questionnaire, or
telex constituting such Questionnaire, which address will be supplied to the
Company or the Selling Stockholders by you upon request. Any such statements,
requests, notices or agreements shall take effect upon receipt thereof.
13. This Agreement shall be binding upon, and inure solely to the benefit
of, the Underwriters, the Company and the Selling Stockholders and, to the
extent provided in Sections 8 and 10 hereof, the officers and directors of the
Company and each person who controls the Company, any Selling Stockholder or any
Underwriter, and their respective heirs, executors, administrators, successors
and assigns, and no other person shall acquire or have any right under or by
virtue of this Agreement. No purchaser of any of the Shares from any Underwriter
shall be deemed a successor or assign by reason merely of such purchase.
14. Time shall be of the essence of this Agreement. As used herein, the term
"business day" shall mean any day when the Commission's office in Washington,
D.C. is open for business.
15. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK.
16. This Agreement may be executed by any one or more of the parties hereto
in any number of counterparts, each of which shall be deemed to be an original,
but all such counterparts shall together constitute one and the same instrument.
19
<PAGE>
If the foregoing is in accordance with your understanding, please sign and
return to us counterparts hereof, and upon the acceptance hereof by you,
on behalf of each of the Underwriters, this letter and such acceptance hereof
shall constitute a binding agreement among each of the Underwriters, the Company
and each of the Selling Stockholders. It is understood that your acceptance of
this letter on behalf of each of the Underwriters is pursuant to the authority
set forth in a form of Agreement among Underwriters, the form of which shall be
submitted to the Company and the Selling Stockholders for examination upon
request, but without warranty on your part as to the authority of the signers
thereof.
Any person executing and delivering this Agreement as Attorney-in-Fact for a
Selling Stockholder represents by so doing that he has been duly appointed as
Attorney-in-Fact by such Selling Stockholder pursuant to a validly existing and
binding Power of Attorney which authorizes such Attorney-in-Fact to take such
action.
Very truly yours,
Affiliated Managers Group, Inc.
By:
--------------------------------------
Name:
Title:
[NAMES OF SELLING STOCKHOLDERS]
By:
--------------------------------------
Name:
Title:
As Attorney-in-Fact acting on behalf
of each of the Selling Stockholders
named in Schedule II to this
Agreement.
Accepted as of the date hereof:
Goldman, Sachs & Co.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Morgan Stanley & Co. Incorporated
Schroder & Co. Inc.
By: Goldman, Sachs & Co.
- ----------------------------------------
(Goldman, Sachs & Co.)
20
<PAGE>
ON BEHALF OF EACH OF THE UNDERWRITERS
SCHEDULE I
<TABLE>
<CAPTION>
NUMBER OF OPTIONAL
TOTAL NUMBER SHARES TO BE
OF PURCHASED IF
FIRM SHARES MAXIMUM OPTION
UNDERWRITER PURCHASED EXERCISED
- ----------------------------------------------------------------------------- --------------------- ---------------------------
<S> <C> <C>
Total........................................................................
- -
</TABLE>
21
<PAGE>
SCHEDULE II
<TABLE>
<CAPTION>
NUMBER OF OPTIONAL
SHARES TO BE
TOTAL NUMBER OF SOLD IF
FIRM SHARES MAXIMUM OPTION
TO BE SOLD EXERCISED
---------------- -------------------
<S> <C> <C>
The Company...............................................................
The Selling Stockholder(s):
[NAME OF SELLING STOCKHOLDER](a)........................................
[NAME OF SELLING STOCKHOLDER](b)........................................
[NAME OF SELLING STOCKHOLDER](c)........................................
[NAME OF SELLING STOCKHOLDER](d)........................................
[NAME OF SELLING STOCKHOLDER](e)........................................
Total
</TABLE>
- ------------------------
(a) This Selling Stockholder is represented by [NAME AND ADDRESS OF COUNSEL] and
has appointed [NAMES OF ATTORNEYS-IN-FACT (NOT LESS THAN TWO)], and each of
them, as the Attorneys-in-Fact for such Selling Stockholder.
(b) This Selling Stockholder is represented by [NAME AND ADDRESS OF COUNSEL] and
has appointed [NAMES OF ATTORNEYS-IN-FACT (NOT LESS THAN TWO)], and each of
them, as the Attorneys-in-Fact for such Selling Stockholder.
(c) This Selling Stockholder is represented by [NAME AND ADDRESS OF COUNSEL] and
has appointed [NAMES OF ATTORNEYS-IN-FACT (NOT LESS THAN TWO)], and each of
them, as the Attorneys-in-Fact for such Selling Stockholder.
(d) This Selling Stockholder is represented by [NAME AND ADDRESS OF COUNSEL] and
has appointed [NAMES OF ATTORNEYS-IN-FACT (NOT LESS THAN TWO)] , and each of
them, as the Attorneys-in-Fact for such Selling Stockholder.
(e) This Selling Stockholder is represented by [NAME AND ADDRESS OF COUNSEL] and
has appointed [NAMES OF ATTORNEYS-IN-FACT (NOT LESS THAN TWO)], and each of
them, as the Attorneys-in-Fact for such Selling Stockholder.
22
<PAGE>
SCHEDULE III-A*
- ------------------------
* List officers and directors of the Company who are Selling Stockholders.
23
<PAGE>
SCHEDULE III-B*
- ------------------------
* List Selling Stockholders who are not officers or directors of the Company.
24
<PAGE>
SCHEDULE III-C*
- ------------------------
* List officers and directors of the Company who are not Selling Stockholders.
25
<PAGE>
ANNEX I-1
Pursuant to Section 7(e) of the Underwriting Agreement,
PricewaterhouseCoopers LLP shall furnish letters to the Underwriters to the
effect that:
(i) They are independent certified public accountants with respect to
the Company and its subsidiaries within the meaning of the Act and the
applicable published rules and regulations thereunder;
(ii) In their opinion, the financial statements and any supplementary
financial information and schedules (and, if applicable, financial forecasts
and/or pro forma financial information) examined by them and included or
incorporated by reference in the Prospectus or the Registration Statement
comply as to form in all material respects with the applicable accounting
requirements of the Act or the Exchange Act, as applicable, and the related
published rules and regulations thereunder; and, if applicable, they have
made a review in accordance with standards established by the American
Institute of Certified Public Accountants of the unaudited consolidated
interim financial statements, selected financial data, pro forma financial
information, financial forecasts and/or condensed financial statements
derived from audited financial statements of the Company for the periods
specified in such letter, as indicated in their reports thereon, copies of
which have been furnished to the representatives of the Underwriters (the
"Representatives");
(iii) They have made a review in accordance with standards established
by the American Institute of Certified Public Accountants of the unaudited
condensed consolidated statements of income, consolidated balance sheets and
consolidated statements of cash flows included in the Prospectus and/or
included in the Company's Quarterly Reports on Form 10-Q incorporated by
reference into the Prospectus as indicated in their reports thereon copies
of which have been separately furnished to the Representatives and on the
basis of specified procedures including inquiries of officials of the
Company who have responsibility for financial and accounting matters
regarding whether the unaudited condensed consolidated financial statements
referred to in paragraph (vi)(A)(i) below comply as to form in all material
respects with the applicable accounting requirements of the Act and the
Exchange Act and the related published rules and regulations, nothing came
to their attention that cause them to believe that the unaudited condensed
consolidated financial statements do not comply as to form in all material
respects with the applicable accounting requirements of the Act and the
Exchange Act and the related published rules and regulations;
(iv) The unaudited selected financial information with respect to the
consolidated results of operations and financial position of the Company for
the five most recent fiscal years included in the Prospectus and included or
incorporated by reference in Item 6 of the Company's Annual Report on Form
10-K for the most recent fiscal year agrees with the corresponding amounts
(after restatement where applicable) in the audited consolidated financial
statements for such five fiscal years which were included or incorporated by
reference in the Company's Annual Reports on Form 10-K for such fiscal
years;
(v) They have compared the information in the Prospectus under selected
captions with the disclosure requirements of Regulation S-K and on the basis
of limited procedures specified in such letter nothing came to their
attention as a result of the foregoing procedures that caused them to
believe that this information does not conform in all material respects with
the disclosure requirements of Items 301, 302, 402 and 503(d), respectively,
of Regulation S-K;
(vi) On the basis of limited procedures, not constituting an examination
in accordance with generally accepted auditing standards, consisting of a
reading of the unaudited financial statements and other information referred
to below, a reading of the latest available interim
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financial statements of the Company and its subsidiaries, inspection of the
minute books of the Company and its subsidiaries since the date of the
latest audited financial statements included or incorporated by reference in
the Prospectus, inquiries of officials of the Company and its subsidiaries
responsible for financial and accounting matters and such other inquiries
and procedures as may be specified in such letter, nothing came to their
attention that caused them to believe that:
(A) (i) the unaudited consolidated statements of income, consolidated
balance sheets and consolidated statements of cash flows included in the
Prospectus and/or included or incorporated by reference in the Company's
Quarterly Reports on Form 10-Q incorporated by reference in the
Prospectus do not comply as to form in all material respects with the
applicable accounting requirements of the Exchange Act as it applies to
Form 10-Q and the related published rules and regulations, or (ii) any
material modifications should be made to the unaudited condensed
consolidated statements of income, consolidated balance sheets and
consolidated statements of cash flows included in the Prospectus or
included in the Company's Quarterly Reports on Form 10-Q incorporated by
reference in the Prospectus for them to be in conformity with generally
accepted accounting principles;
(B) any other unaudited income statement data and balance sheet items
included in the Prospectus do not agree with the corresponding items in
the unaudited consolidated financial statements from which such data and
items were derived, and any such unaudited data and items were not
determined on a basis substantially consistent with the basis for the
corresponding amounts in the audited consolidated financial statements
included or incorporated by reference in the Company's Annual Report on
Form 10-K for the most recent fiscal year;
(C) the unaudited financial statements which were not included in the
Prospectus but from which were derived any unaudited condensed financial
statements referred to in Clause (A) and any unaudited income statement
data and balance sheet items included in the Prospectus and referred to
in Clause (B) were not determined on a basis substantially consistent
with the basis for the audited consolidated financial statements included
or incorporated by reference in the Company's Annual Report on Form 10-K
for the most recent fiscal year;
(D) any unaudited pro forma consolidated condensed financial statements
included or incorporated by reference in the Prospectus do not comply as
to form in all material respects with the applicable accounting
requirements of the Act and the published rules and regulations
thereunder or the pro forma adjustments have not been properly applied to
the historical amounts in the compilation of those statements;
(E) as of a specified date not more than five days prior to the date of
such letter, there have been any changes in the consolidated capital
stock (other than issuances of capital stock upon exercise of options and
stock appreciation rights, upon earn-outs of performance shares and upon
conversions of convertible securities, in each case which were
outstanding on the date of the latest balance sheet included or
incorporated by reference in the Prospectus) or any increase in the
consolidated long-term debt of the Company and its subsidiaries, or any
decreases in consolidated net current assets or stockholders' equity or
other items specified by the Representatives, or any increases in any
items specified by the Representatives, in each case as compared with
amounts shown in the latest balance sheet included or incorporated by
reference in the Prospectus, except in each case for changes, increases
or decreases which the Prospectus discloses have occurred or may occur or
which are described in such letter; and
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(F) for the period from the date of the latest financial statements
included or incorporated by reference in the Prospectus to the specified
date referred to in Clause (E) there were any decreases in consolidated
net revenues or operating profit or the total or per share amounts of
consolidated net income or other items specified by the Representatives,
or any increases in any items specified by the Representatives, in each
case as compared with the comparable period of the preceding year and
with any other period of corresponding length specified by the
Representatives, except in each case for decreases or increases which the
Prospectus discloses have occurred or may occur or which are described in
such letter; and
(vii) In addition to the examination referred to in their report(s)
included or incorporated by reference in the Prospectus and the limited
procedures, inspection of minute books, inquiries and other procedures
referred to in paragraphs (iii) and (vi) above, they have carried out
certain specified procedures, not constituting an examination in accordance
with generally accepted auditing standards, with respect to certain amounts,
percentages and financial information specified by the Representatives which
are derived from the general accounting records of the Company and its
subsidiaries, which appear in the Prospectus (excluding documents
incorporated by reference), or in Part II of, or in exhibits and schedules
to, the Registration Statement specified by the Representatives or in
documents incorporated by reference in the Prospectus specified by the
Representatives, and have compared certain of such amounts, percentages and
financial information with the accounting records of the Company and its
subsidiaries and have found them to be in agreement.
3
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ANNEX I-2
4
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EXHIBIT 5.1
February 24, 1999
Affiliated Managers Group, Inc.
Two International Place, 23rd Floor
Boston, Massachusetts 02110
Ladies and Gentlemen:
This opinion is furnished in connection with the filing by Affiliated
Managers Group, Inc., a Delaware corporation (the "Company"), with the
Securities and Exchange Commission under the Securities Act of 1933 of a
Registration Statement on Form S-3 (the "Registration Statement") relating to
7,167,858 shares of common stock, par value $.01 per share (the "Common Stock"),
of the Company (the "Registered Shares"). Of the 7,167,858 Registered Shares,
4,000,000 are to be sold by the Company (the "Primary Shares"), 2,232,920 are to
be sold by certain stockholders of the Company (the "Selling Stockholders") (the
"Selling Stockholder Shares") and 934,938 may be sold by the Company pursuant to
the over-allotment option to the Underwriters (as defined below) (together with
the Primary Shares, the "Company Shares"). All of the Registered Shares are to
be sold to the several underwriters (the "Underwriters") for whom Goldman, Sachs
& Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Morgan Stanley & Co.
Incorporated and Schroder & Co. Inc. are acting as representatives pursuant to
an underwriting agreement to be entered into between the Company, the Selling
Stockholders and the Underwriters (the "Underwriting Agreement").
In connection with rendering this opinion, we have examined the form of the
proposed Underwriting Agreement being filed as an exhibit to the Registration
Statement; the Amended and Restated Certificate of Incorporation and Amended and
Restated By-laws of the Company, each as amended to date; such records of the
corporate proceedings of the Company as we deemed material; and such other
certificates, receipts, records and documents as we considered necessary for the
purposes of this opinion. In our examination, we have assumed the genuineness of
all signatures, the legal capacity of natural persons, the authenticity of all
documents submitted to us as certified, photostatic or facsimile copies, the
authenticity of the originals of such copies and the authenticity of telephonic
confirmations of public officials and others. As to facts material to our
opinion, we have relied upon certificates or telephonic confirmations of public
officials and certificates, documents, statements and other information of the
Company or representatives or officers thereof.
We express no opinion concerning the laws of any jurisdictions other than
the laws of the United States of America and The Commonwealth of Massachusetts
and the Delaware General Corporation Law (the "DGCL").
Based upon the foregoing, we are of the opinion that (A) when the
Underwriting Agreement is completed (including the insertion therein of pricing
terms) and executed by the Company and the Underwriters, and the Company Shares
are sold to the Underwriters and paid for pursuant to the terms of the
Underwriting Agreement, the Company Shares will be duly authorized, validly
issued, fully paid and nonassessable, and (B) the Selling Stockholder Shares are
duly authorized, validly issued, fully paid and non-assessable by the Company
under the DGCL.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us with respect to this opinion
under the heading "Validity of Securities" in the Prospectus which is a part of
such Registration Statement.
Very truly yours,
/s/ GOODWIN, PROCTER & HOAR LLP
Goodwin, Procter & Hoar LLP
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Amendment No. 2 to the
Registration Statement on Form S-3 (File No. 333-71561) of our report dated
February 10, 1998, except for Note 16 for which the date is March 20, 1998, on
our audits of the consolidated financial statements and financial statement
schedule of Affiliated Managers Group, Inc. We also consent to the reference to
our firm under the caption "Experts."
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 24, 1999
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Amendment No. 2 to the
Registration Statement on Form S-3 (File No. 333-71561) of our report dated
April 24, 1998, on our audit of the financial statements of Essex Investment
Management Company, Inc. We also consent to the reference to our firm under the
caption "Experts."
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 24, 1999
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Amendment No. 2 to the
Registration Statement on Form S-3 (File No. 333-71561) of our report dated
April 22, 1998, on our audit of the financial statements of GeoCapital
Corporation. We also consent to the reference to our firm under the caption
"Experts."
PricewaterhouseCoopers LLP
New York, New York
February 24, 1999
<PAGE>
EXHIBIT 23.4
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Amendment No. 2 to the
Registration Statement on Form S-3 (File No. 333-71561) of our report dated
April 22, 1998, on our audit of the financial statements of Tweedy, Browne
Company L.P. We also consent to the reference to our firm under the caption
"Experts."
PricewaterhouseCoopers LLP
New York, New York
February 24, 1999
<PAGE>
EXHIBIT 23.5
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Amendment No. 2 to the
Registration Statement on Form S-3 (File No. 333-71561) of our report dated May
29, 1998, on our audit of the financial statements of Gofen and Glossberg, Inc.
We also consent to the reference to our firm under the caption "Experts."
PricewaterhouseCoopers LLP
Chicago, Illinois
February 24, 1999
