<PAGE>
As filed with the Securities and Exchange Commission on September 9, 1999
Registration No. 333-78367
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
AMENDMENT NO. 3
TO FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
BlackRock, Inc.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Delaware 6211 51-0380803
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
345 Park Avenue
New York, NY 10154
(212) 754-5560
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
Robert P. Connolly
Managing Director and General Counsel
BlackRock, Inc.
345 Park Avenue
New York, NY 10154
(212) 754-5560
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
---------------
Copies to:
<TABLE>
<S> <C> <C>
Matthew J. Mallow Gary S. Schpero Steven Kaplan
Skadden, Arps, Slate, Simpson Thacher & Bartlett Arnold & Porter
Meagher & Flom LLP 425 Lexington Avenue 555 Twelfth Street, N.W.
919 Third Avenue New York, New York 10017 Washington, D.C. 20004
New York, New York 10022 (212) 455-2000 (202) 942-5000
(212) 735-3000
</TABLE>
---------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If any of the Securities being registered on this Form are being offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 (the "Securities Act"), check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to 462(b) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [_]
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
EXPLANATORY NOTE
This registration statement contains two forms of prospectus: one to be
used in connection with an offering in the United States and Canada (the "U.S.
Prospectus") and one to be used in a concurrent international offering (the
"International Prospectus"). The International Prospectus will be identical to
the U.S. Prospectus in all respects except for the front cover page, pages 81,
82, 83 and 84, and the back cover page. The form of the U.S. Prospectus is
included herein and is followed by the front cover page, pages 81, 82, 83, 84
and 85, and the back cover page to be used in the International Prospectus.
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell these securities and it is not soliciting an offer to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to Completion
Preliminary Prospectus dated September 9, 1999
PROSPECTUS
9,000,000 Shares of Class A Common Stock
-----------
The U.S. underwriters are offering shares in the United States and
Canada and the international managers are offering shares outside the
United States and Canada.
We expect the public offering price to be between $14.00 and $17.00 per
share. Currently, no public market exists for the shares. The class A common
stock has been approved for listing on the New York Stock Exchange under the
symbol "BLK."
Following the offerings, we will have two classes of authorized common
stock--class A common stock, offered through this prospectus, and class B
common stock, % of which will be owned by a subsidiary of PNC Bank Corp. The
rights of holders of class A common stock and class B common stock are
identical, except with respect to voting. Each share of class A common stock
will have one vote and each share of class B common stock will have five votes
on all matters submitted to a vote of our stockholders. As a result, following
the offerings, PNC will own % of the combined voting power of all classes of
BlackRock stock and will control all matters affecting BlackRock stockholders.
Investing in the class A common stock involves risks which are described in
the "Risk Factors" section beginning on page 9 of this prospectus.
-----------
<TABLE>
<CAPTION>
Per Share Total
--------- -----
<S> <C> <C>
Public offering price................................. $ $
Underwriting discount................................. $ $
Proceeds, before expenses, to BlackRock............... $ $
</TABLE>
The U.S. underwriters may also purchase up to an additional shares of
class A common stock at the public offering price, less the underwriting
discount, within 30 days from the date of this prospectus to cover over-
allotments. The international managers may similarly purchase up to an
aggregate of an additional shares of class A common stock.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
The shares of class A common stock will be ready for delivery in New York,
New York on or about , 1999.
-----------
Merrill Lynch & Co.
Goldman, Sachs & Co.
Lehman Brothers
Prudential Securities
Salomon Smith Barney
-----------
The date of this prospectus is , 1999.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary......................................................... 1
Risk Factors............................................................... 9
Note Regarding Forward-Looking Statements.................................. 16
Use of Proceeds............................................................ 16
Dividend Policy............................................................ 16
Dilution................................................................... 17
Capitalization............................................................. 18
Selected Financial Data.................................................... 19
Management's Discussion and Analysis of Financial
Condition and Results of Operations....................................... 23
Business................................................................... 33
Management................................................................. 48
Executive Compensation..................................................... 52
Ownership of the Common Stock.............................................. 59
Certain Relationships and Related Transactions............................. 60
Description of Capital Stock............................................... 67
Shares Eligible for Future Sale............................................ 79
Underwriting............................................................... 81
Material United States Federal Income and Estate Tax Considerations
for Non-U.S. Holders of Class A Common Stock.............................. 85
Legal Matters.............................................................. 87
Experts.................................................................... 87
Where You Can Find More Information........................................ 87
Index to Consolidated Financial Statements................................. F-1
</TABLE>
<PAGE>
PROSPECTUS SUMMARY
You should read the entire prospectus carefully, especially the risks of
investing in our common stock discussed under "Risk Factors."
BlackRock
Overview. BlackRock is one of the 30 largest investment management firms
in the United States with $142 billion of assets under management at June 30,
1999. In 1998, PNC Bank Corp. (NYSE: PNC), one of the largest diversified
financial services companies in the United States, created BlackRock to
consolidate most of its asset management business into one entity. This process
began in 1995 when PNC acquired BlackRock Financial Management L.P., then a $25
billion fixed income manager. By year-end 1996, the BFM management team had
assumed responsibility for overseeing PNC's mutual fund marketing and liquidity
management efforts. The equity divisions were added in 1998, when a substantial
portion of PNC's asset management businesses were consolidated under the
BlackRock brand name. At that time, the BFM management team integrated
activities across investment product lines and established committees to
oversee each product line on a day-to-day basis.
Our Products and Services. We offer a variety of investment products to
institutional and individual investors in the U.S. and internationally. At June
30, 1999, fixed income products represented 56%, money market or liquidity
products represented 31%, equity products represented 11% and alternative
investment products represented 2% of total assets under management. We manage
these assets in approximately 400 separate accounts and 70 mutual funds on
behalf of more than 3,000 institutions and 150,000 individual investors. We
also offer a variety of risk management services to large institutional fixed
income investors. Through these risk management services, we use software,
which we have developed over many years, to provide comprehensive risk analysis
and advice with respect to more than $500 billion of assets managed by our
clients.
Our Asset Growth. Over the past five and a half years, our assets under
management have increased by more than $89 billion, a 25% compound annual
growth rate. Separate accounts, which are offered primarily to institutional
investors, grew by $65 billion, a 41% compound annual growth rate, and mutual
funds, which are offered primarily under the BlackRock Funds and Provident
Institutional Funds brand names, grew by $24 billion, a 12% compound annual
growth rate. Most of this growth has been in fixed income and liquidity
products in which assets under management have increased by $56 billion and $21
billion, respectively. Importantly, we achieved this growth largely by
attracting new clients and additional funds from existing clients, despite the
fact that investors have been shifting money out of bonds and into stocks to
take advantage of the sustained bull market in equities during the past decade.
Our Investment Performance and Client Service. We believe that our
success in increasing fixed income and liquidity assets under management is
principally due to our investment returns which have consistently met or
exceeded our clients' targets while assuming equal or lower levels of risk than
performance benchmarks, and to our comprehensive client service. We achieve our
investment results by using an investment process that combines the expertise
of our investment professionals and the scope of our risk management software.
Our senior professionals work closely with clients, consultants and
distributors to better understand their needs and to market our products and
provide client service. Products and services are tailored to meet differing
return objectives and risk tolerances, as well as regulatory, tax, accounting
and credit constraints. Our computer capabilities also play an important role
in client service by permitting efficient report customization and delivery
over the Internet.
1
<PAGE>
Our Strategies. We began 1999, our first full year as an integrated
business, better prepared to pursue opportunities across our products and
markets. We plan to continue to increase assets under management by pursuing
our current business strategy, which consists of the following key elements:
. Retaining and attracting talented professionals. The quality and
depth of our professional staff is critical to our business, and
the market for management, investment, technology and marketing
personnel is intensely competitive. As a result, we strongly
emphasize recruiting, training and long-term career development.
The experience and stability of our management team is one of our
greatest strengths. To promote stability, 39 managing directors
acquired 18% of BlackRock's equity and signed 5-year employment
contracts during 1998. After the offerings, these managing
directors will own % of the equity in BlackRock, and % of the
combined voting power of all classes of BlackRock stock. We also
granted long-term deferred compensation to key professionals. We
expect to expand employee ownership over time, both to retain and
motivate key personnel and to attract additional high caliber
professionals committed to building our long-term value.
. Continuing to build our fixed income and liquidity
presence. Although we have realized considerable growth in fixed
income and liquidity assets, the market for these products is
highly fragmented and no single firm accounts for substantial
market share. Accordingly, there is a substantial opportunity for
continued growth in these businesses. We plan to capitalize on
these opportunities through continued direct calling on pension
plan sponsors, insurance companies, corporations, industry
consultants and financial intermediaries.
. Expanding our equity business. After assuming responsibility for
PNC's equity products in 1998, we took steps to enhance our
capabilities and build capacity for future growth, including
upgrading computers, adding trading and operations resources and
expanding risk management reporting. We will continue to pursue
distribution opportunities for mutual funds, which currently
comprise the majority of our equity assets under management. In
addition, we will pursue both cross-selling and direct calling
efforts among institutional investors, particularly as we establish
longer term investment performance track records.
. Diversifying our products and clients. We will continue to
diversify our products in order to better serve our existing
clients and attract new ones. These efforts may include selective
development of new products that build upon or expand our existing
capabilities, including additional alternative investment products.
We will also seek additional distribution outlets for our mutual
funds, pursue relatively untapped segments of the institutional
investor universe and seek to enhance the distribution of our
products in international markets.
. Marketing our risk management services. We have developed
sophisticated risk management software that supports our risk
assessment and investment decision-making and automates our trade
processing and compliance functions. We recently began offering
risk management services separately from our asset management
services and intend to gradually expand our marketing efforts in
this area.
. Improving our operating efficiency and pursuing strategic
opportunities. By integrating our business across investment
product lines, we expect to have opportunities to realize continued
improvement in our operating margins. We will also seek to use our
technology strengths to achieve greater automation and improve
management reporting to support future growth. Finally, we believe
that as one of relatively few publicly-traded investment
2
<PAGE>
management firms, we will be better able to participate in future
industry consolidation. We will pursue acquisition and joint
venture opportunities that we believe can enhance stockholder value
by making our operations more efficient, expanding our product
capabilities and strengthening our distribution capabilities.
Headquarters. Our principal executive offices are located at 345 Park
Avenue, New York, New York 10154, and our telephone number is (212) 754-5560.
3
<PAGE>
The Offerings
The following information assumes that the underwriters and managers do
not exercise the options granted by BlackRock to purchase additional shares in
the offerings.
<TABLE>
<S> <C>
Class A common stock offered:
U.S. offering......................................... shares
International offering................................ shares
Total............................................... 9,000,000 shares
Common stock outstanding after the offerings, including
shares reserved for issuance under our employee benefit
plans:
Class A common stock.................................. 9,000,000 shares(/1/)
Class B common stock.................................. 54,982,635 shares(/2/)
Total............................................... 63,982,635 shares
</TABLE>
Use of proceeds............. We estimate that the net proceeds to be
received by BlackRock from these
offerings will be approximately $
million. We intend to use these net
proceeds to repay outstanding
indebtedness under our $175 million
revolving line of credit with PNC Bank.
At June 30, 1999, the outstanding
balance on this line of credit,
including accrued interest, was $125
million. The remaining net proceeds
will be used for working capital and
other general corporate purposes.
Dividend policy............. BlackRock intends to retain earnings to
finance the development and growth of
its business, including possible
investments, and does not anticipate
paying cash dividends in the
foreseeable future.
Voting rights............... The rights of holders of class A common
stock and class B common stock are
identical, except that holders of class
B common stock will have five votes per
share, while holders of class A common
stock will have one vote per share.
Risk factors................ See "Risk Factors" and the other
information included in this prospectus
for a discussion of factors you should
carefully consider before deciding to
invest in shares of the class A common
stock.
NYSE symbol................. "BLK"
- --------
(1) Does not include options to purchase shares of class A common stock,
all of which are unvested, at the initial offering price pursuant to the
adoption of the BlackRock Inc. 1999 Stock Award and Incentive Plan and the
conversion of $ of deferred compensation awards into shares of
restricted class A common stock, all of which are unvested, at the initial
offering price. See "Executive Compensation."
(2) Reflects June 30, 1999 diluted shares outstanding, adjusted for an
estimated reclassification to be completed upon consummation of the
offerings of each share of common stock into 275 shares of our class B
common stock.
4
<PAGE>
SUMMARY FINANCIAL DATA
The consolidated financial statements of BlackRock reflect the "carved
out" historical operating results of the asset management businesses of PNC
which were consolidated under BlackRock in 1998 as if the combined operations
had been a separate entity prior to the formation of BlackRock. The summary
financial data presented below has been derived in part from, and should be
read in conjunction with, the consolidated financial statements of BlackRock
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this prospectus. The consolidated financial
data includes the results of operations of BFM since its acquisition by PNC on
February 28, 1995. Had BFM's results of operations been included for the year
ended December 31, 1994 and the two months ended February 28, 1995, revenues
would have increased by $55.1 million and $12.1 million, respectively. BFM's
income before income taxes for these periods would not be comparable to post
acquisition results due to the financing costs and goodwill amortization
expense arising out of the acquisition and which have only been incurred in
periods since the acquisition.
The balance sheet data at June 30, 1998 and 1999, and the income statement
data for the six month periods then ended, have been derived from BlackRock's
unaudited financial statements which, in the opinion of BlackRock, reflect all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the financial position and results of operations of
BlackRock for those periods. The income statement data for interim periods is
not necessarily indicative of results for subsequent periods or a full year.
<TABLE>
<CAPTION>
Six Months
Year Ended December 31, Ended June 30,
---------------------------------------------- ----------------
1994 1995 1996 1997 1998 1998 1999
------- -------- -------- -------- -------- ------- -------
(unaudited) (unaudited)
($ in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Income statement data
Revenue
Investment advisory and administration
fees:
Mutual funds......................... $26,995 $ 61,877 $ 87,189 $117,977 $162,487 $67,403 $99,637
Separate accounts.................... 7,638 24,458 43,069 62,985 101,352 42,376 71,569
BlackRock Asset Investors (BAI) (1).. -- 5,933 6,061 13,867 61,199 15,761 (2,054)
------- -------- -------- -------- -------- ------- -------
Total advisory and administration
fees.................................. 34,633 92,268 136,319 194,829 325,038 125,540 169,152
Other income........................... 1,411 5,814 10,159 10,644 14,444 5,713 10,941
------- -------- -------- -------- -------- ------- -------
Total revenue.......................... 36,044 98,082 146,478 205,473 339,482 131,253 180,093
Operating expenses
Employee compensation and benefits... 7,073 33,698 53,703 73,217 109,741 50,845 65,964
BAI incentive compensation (1)....... -- 3,070 3,525 9,688 44,806 10,332 (1,494)
Fund administration and servicing
costs--affiliates................... 10,475 12,412 19,611 27,278 52,972 15,656 36,334
General and administration........... 10,510 17,719 24,500 29,764 38,696 16,634 23,836
Amortization of goodwill............. -- 8,002 9,603 9,653 9,653 4,826 4,826
Mutual fund offering costs........... -- -- -- -- 4,252 -- --
------- -------- -------- -------- -------- ------- -------
Total operating expenses............... 28,058 74,901 110,942 149,600 260,120 98,293 129,466
------- -------- -------- -------- -------- ------- -------
Operating income....................... 7,986 23,181 35,536 55,873 79,362 32,960 50,627
Non-operating income (expense)
Interest and dividend income......... 331 943 1,877 3,117 1,995 1,066 1,293
Interest expense..................... -- (14,253) (19,975) (20,249) (13,347) (7,582) (7,121)
------- -------- -------- -------- -------- ------- -------
331 (13,310) (18,098) (17,132) (11,352) (6,516) (5,828)
------- -------- -------- -------- -------- ------- -------
Income before income taxes............. 8,317 9,871 17,438 38,741 68,010 26,444 44,799
Income taxes......................... 2,753 4,785 8,475 16,655 32,395 12,596 18,813
------- -------- -------- -------- -------- ------- -------
Net income............................. $ 5,564 $ 5,086 $ 8,963 $ 22,086 $ 35,615 $13,848 $25,986
======= ======== ======== ======== ======== ======= =======
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
Six months
Year ended ended
Dec. 31, June 30,
1998 1999
---------- ----------
<S> <C> <C>
Unaudited pro forma data
Historical income before income taxes.................... $ 68,010 $ 44,799
Pro forma interest adjustment for debt repayment......... 9,658 5,000
Pro forma income taxes................................... 37,514 21,231
---------- ----------
Pro forma net income..................................... $ 40,154 $ 28,568
========== ==========
Unaudited pro forma net income per share (2)
Basic.................................................. .75 .52
Diluted................................................ .75 .52
Unaudited pro forma weighted average shares outstanding
Basic.................................................. 53,507,051 54,807,482
Diluted................................................ 53,682,203 54,982,635
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
At December 31, At June 30,
------------------------------------------- -----------------
1994 1995 1996 1997 1998 1998 1999
------- -------- -------- -------- -------- -------- --------
(unaudited) (unaudited)
($ in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance sheet data
Goodwill.................................................... $ -- $232,100 $223,216 $213,563 $203,910 $208,737 $199,084
Total assets................................................ 15,039 293,270 332,719 335,507 440,784 314,947 403,252
Long-term debt.............................................. -- 149,754 234,255 206,432 178,200 146,761 125,000
Total liabilities........................................... 3,904 270,481 300,047 290,544 334,593 232,516 271,174
Stockholders' equity........................................ 11,135 22,789 32,672 44,963 106,191 82,431 132,078
<CAPTION>
At December 31, At June 30,
------------------------------------------- -----------------
1994 1995 1996 1997 1998 1998 1999
------- -------- -------- -------- -------- -------- --------
(unaudited)
($ in millions)
<S> <C> <C> <C> <C> <C> <C> <C>
Other financial data (3)
Assets under management
Separate accounts:
Fixed income*............................................. $13,848 $ 23,345 $ 28,958 $ 39,261 $ 52,869 $ 46,664 $ 68,286
Liquidity................................................. 3,269 5,556 7,430 10,019 13,826 12,738 12,362
Equity.................................................... 540 700 1,204 1,763 2,417 2,095 2,353
------- -------- -------- -------- -------- -------- --------
Subtotal.................................................. 17,657 29,601 37,592 51,043 69,112 61,497 83,001
Mutual funds:
Fixed income.............................................. 10,021 11,969 12,546 13,714 13,888 14,172 13,617
Liquidity................................................. 20,398 21,183 23,933 29,827 35,555 28,958 31,921
Equity.................................................... 4,615 6,306 8,643 10,829 12,087 12,055 13,262
------- -------- -------- -------- -------- -------- --------
Subtotal.................................................. 35,034 39,458 45,122 54,370 61,530 55,185 58,800
------- -------- -------- -------- -------- -------- --------
Total....................................................... $52,691 $ 69,059 $ 82,714 $105,413 $130,642 $116,682 $141,801
======= ======== ======== ======== ======== ======== ========
<CAPTION>
For Six Months
For the Year Ended December 31, Ended June 30,
------------------------------------------- -----------------
1994 1995 1996 1997 1998 1998 1999
------- -------- -------- -------- -------- -------- --------
(unaudited)
($ in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
EBITDA
Net income.................................................. $ 5,564 $ 5,086 $ 8,963 $ 22,086 $ 35,615 $ 13,848 $ 25,986
Depreciation expense........................................ 292 1,531 2,097 2,498 3,199 1,391 4,629
Amortization of goodwill.................................... -- 8,002 9,603 9,653 9,653 4,826 4,826
------- -------- -------- -------- -------- -------- --------
EBITDA as adjusted (4)...................................... $ 5,856 $ 14,619 $ 20,663 $ 34,237 $ 48,467 $ 20,065 $ 35,441
======= ======== ======== ======== ======== ======== ========
Interest expense............................................ -- 14,253 19,975 20,249 13,347 7,582 7,121
Income taxes................................................ 2,753 4,785 8,475 16,655 32,395 12,596 18,813
------- -------- -------- -------- -------- -------- --------
EBITDA (5).................................................. $ 8,609 $ 33,657 $ 49,113 $ 71,141 $ 94,209 $ 40,243 $ 61,375
- --------------------------------------------------
======= ======== ======== ======== ======== ======== ========
</TABLE>
- -------
* including alternative investment products.
(1) Pursuant to a plan of liquidation to be completed by the fourth quarter of
1999, the assets of BAI are being sold and its business operations
terminated. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--General."
(footnotes continued on next page)
7
<PAGE>
(footnotes continued from previous page)
(2) The unaudited pro forma data and the pro forma net income per share give
effect to an estimated reclassification to be completed upon consummation
of the offerings of each share of our common stock into 275 shares class B
of our common stock prior to the offerings and to the offerings, including
the repayment of debt and decrease in interest expense and the increase in
income tax expense, as if the reclassification and the offerings had been
effected as of January 1, 1998. The unaudited pro forma data and the pro
forma net income per share do not purport to represent the results of
operations or the financial position of BlackRock which actually would have
occurred had the offerings been consummated on January 1, 1998, or project
the results of operations or the financial position of BlackRock for any
future date or period.
(3) For comparative purposes, "assets under management" at December 31, 1994
includes BFM.
(4) "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 repay debt obligations or
make new investments. EBITDA, as adjusted, as calculated by us may not be
consistent with the computation 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 as
an alternative to net income as a measure of operating performance or to
cash flows from operating activities as a measure of liquidity.
(5) "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 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. EBITDA has increased every year since 1994,
primarily due to new business growth which resulted in annual increases to
operating income.
8
<PAGE>
RISK FACTORS
As a BlackRock stockholder, you will be subject to risks affecting our
business, risks relating to our relationship with PNC and risks relating to the
ownership of our stock. You should carefully consider the following factors as
well as other information contained in this prospectus before deciding to
invest in shares of the class A common stock.
Risk factors affecting our business
Decline in the securities markets could lead to a decline in our revenues
Our investment management revenues are comprised of fees based on a
percentage of the value of assets under management and performance fees
expressed as a percentage of the returns realized on assets under management. A
decline in the prices of stocks or bonds could cause our revenues to decline
by:
. causing the value of our assets under management to decrease,
which would result in lower investment management fees;
. causing the returns realized on our assets under management to
decrease, which would result in lower performance fees; and
. causing our clients to withdraw funds in favor of investments in
markets that they perceive to offer greater opportunity and that
we do not serve, which would result in lower investment management
fees.
Poor investment performance could lead to loss of our clients and a decline in
our revenues
We believe that investment performance is one of the most important
factors for the growth of our assets under management. Poor investment
performance could impair our revenues and growth because:
. existing clients might withdraw funds in favor of better
performing products, which would result in lower investment
management fees;
. our ability to attract funds from existing and new clients might
diminish; and
. we might earn little or no performance fees.
Our sources of revenues are subject to termination on short notice
Our revenues will decrease if our investment management contracts are
terminated or if clients withdraw funds that we manage on their behalf. Any of
the following could cause our revenues to decline:
. clients can, without penalty, terminate our investment management
contracts and can withdraw their funds generally with little or no
advance notice;
. the boards of registered investment companies that we advise could
choose to terminate or not renew our investment management
contracts, which they must consider annually; and
. fund shareholders can withdraw assets with no advance notice.
We may not be able to replace revenues from the funds we manage that have fixed
terms
We manage a variety of mutual funds that were designed with maturity
dates ranging from October 1999 to December 2010. At maturity, all remaining
assets will be distributed to investors in these
9
<PAGE>
funds and our investment advisory agreements will terminate. There is no
assurance that clients will reinvest these assets in our other products or, if
they do, that such reinvestments will be in products that provide us with equal
revenues. Funds maturing in the next three years include:
. BAI, which has adopted a plan of liquidation that we expect will
be completed by the fourth quarter of 1999, represented $159
million of our assets under management at June 30, 1999, and
contributed $16.4 million of operating income in 1998 and an
operating loss of $0.6 million for the six months ended June 30,
1999; and
. three closed-end taxable bond funds maturing on or prior to
December 31, 2001, which collectively represented $2.5 billion of
our assets under management at June 30, 1999 and contributed
$10.6 million of revenues during 1998 and $5.3 million during the
first six months of 1999.
Loss of significant separate accounts would decrease our revenues
We had approximately 400 separate accounts at June 30, 1999, of which the
10 largest (excluding alternative investment products) generated approximately
5.7% of our total revenues during 1998 and 7.1% during the six months ended
June 30, 1999. Loss of any of these accounts would reduce our revenues. We
have, from time to time, lost separate accounts because of corporate mergers
and restructuring, and in the future we could lose accounts under these or
other circumstances, such as adverse market conditions or poor performance.
Competitive fee pressures could reduce our revenues and our profit margins
The investment management business is highly competitive and has
relatively low barriers to entry. To the extent that we are forced to compete
on the basis of price, we may not be able to maintain our current fee
structure. Fee reductions on existing or future new business could cause our
revenues and profit margins to decline.
Performance fees may increase earnings volatility, which could decrease our
stock price
A portion of our revenues are derived from performance fees on some
investment and risk management advisory assignments. In most cases, performance
fees are based on investment returns, although in some cases they are based on
achieving specific service standards. Generally, we are entitled to performance
fees only if the returns on the related portfolios exceed agreed-upon periodic
or cumulative return targets. If we do not exceed these targets, we will not
generate performance fees for that period and we may not earn performance fees
in future periods if the targets are based on cumulative returns. Performance
fees will vary from period to period in relation to volatility in investment
returns, causing our earnings to be more volatile than if we did not manage
assets on a performance fee basis. The volatility in our earnings may decrease
our stock price. Performance fees, excluding BAI, represented 6.2% of our total
revenue in 1998 and 7.5% of total revenue for the six months ended June 30,
1999.
Many of our competitors have greater resources than we do and could use these
resources to increase their business at our expense
Many firms offer similar and additional investment management products
and services to the same clients that we target. In addition, many of our
competitors have or may in the future develop greater financial and other
resources, more extensive distribution capabilities, more effective advertising
and marketing strategies and broader name recognition. Our competitors may be
able to use these resources and capabilities to place us at a competitive
disadvantage in retaining assets under management and achieving increased
market penetration.
Our corporate or acquisition strategies may decrease our earnings and harm our
competitive position
We employ a variety of strategies intended to enhance our earnings and to
improve our profit margins. In the future, these strategies may include
acquisitions of other investment management businesses. We may
10
<PAGE>
not be able to find suitable businesses to acquire at acceptable prices and we
may not be able to successfully integrate or realize the intended benefits from
these acquisitions. In general, our strategies may not be effective and failure
to successfully develop and implement our strategies may decrease our earnings
and harm our competitive position in the investment management industry.
Failure to develop effective business continuity plans could disrupt operations
and cause financial losses which could decrease our stock price
We are dependent to a substantial degree on the availability of our
office facilities and the proper functioning of our computer and
telecommunications systems. A disaster, such as water damage, an explosion or a
prolonged loss of electrical power, could materially interrupt our business
operations and cause material financial loss, regulatory actions, reputational
harm or legal liability, which, in turn, could cause a decline in our stock
price.
We currently estimate that the total cost of developing and implementing
our business continuity plans will not have a material impact on our results of
operations, liquidity or capital resources. We cannot provide any assurance,
however, that our business continuity plans will be effective or that our
estimates regarding the timing and cost of completing the plans will be
accurate.
Failure to achieve Year 2000 readiness could disrupt operations and cause
financial losses which could decrease our stock price
We are substantially dependent on the proper functioning of our computer
systems. In addition, we interact with a variety of third parties in the normal
course of business. A failure of our systems or any of those third parties'
systems to be Year 2000 ready could disrupt our operations and cause material
financial losses, which, in turn, could cause a decline in our stock price. The
primary problem is that many existing computer systems and microprocessors with
date functions use only two digits to identify a year in the date field, with
the assumption that the first two digits of the year are always "19." Computers
that are not Year 2000 ready may treat the year 2000 as the year 1900 and may
fail to treat the year 2000 as a leap year. Systems that calculate, compare or
sort using the incorrect date may malfunction, which could have the following
effects on our business:
. in the case of our systems, incomplete or inaccurate recording or
accounting of trades or inaccurate calculation of security
valuations and risk parameters;
. in the case of third-party data providers, the receipt of
inaccurate or out-of-date information that would impair our
ability to perform critical data functions, including pricing
portfolio assets or evaluating our risk exposures;
. in the case of customers, trading counterparties and financial
intermediaries such as exchanges and clearing agents, disruption
of funding flows, failed trade settlements or an inability to
trade in certain markets;
. in the case of custodian banks, fund administrators and transfer
agents, disruption of critical administrative, valuation and
record-keeping services for our mutual fund, separate account and
risk management clients;
. in the case of vendors, disruption of telecommunications and
electrical power and other services upon which we depend; and
. in the case of the issuers of securities in which we invest,
adverse impact on their operations and financial condition which
could decrease the value and liquidity of their securities, which
could cause the value of the assets we manage and our investment
management fees to decline.
Disruption or suspension of activity in the world's financial markets is
also possible. In addition, many market participants may reduce their market
activities temporarily as they assess the effectiveness of their Year 2000
readiness efforts during a "phase-in" period beginning in late 1999. This
reduction could decrease liquidity in the securities markets and inhibit our
ability to manage our client portfolios.
11
<PAGE>
We currently estimate that the total cost of implementing our Year 2000
program will not have a material impact on our results of operations, liquidity
or capital resources. We cannot provide any assurance, however, that our Year
2000 program will be effective or that our estimates about the timing and cost
of completing our Year 2000 program will be accurate or that third parties on
which we are dependent will be Year 2000 ready.
Failure to comply with client guidelines could result in damage awards against
us and loss of assets under management, both of which could cause earnings or
stock price to decline
When clients retain us to manage assets on their behalf, they specify
guidelines that we are required to observe in the management of their
portfolios. A failure to comply with these guidelines could result in losses
that the client could seek to recover from us and the client withdrawing its
assets from our management, both of which could cause our earnings or stock
price to decline.
Failure to comply with government regulations could result in fines or
temporary or permanent prohibitions on our activities, which could cause our
earnings or stock price to decline
Our business is subject to extensive regulation in the United States and
certain of our activities are subject to the laws of non-U.S. jurisdictions and
non-U.S. regulatory agencies or bodies. Violation of applicable laws or
regulations could result in fines, temporary or permanent prohibition on our
engagement in certain activities, suspensions of our personnel or revocation of
their licenses, suspension or termination of our investment adviser or broker-
dealer registrations, or other sanctions, which could cause our earnings or
stock price to decline.
Subsidiaries of ours are registered with the Securities and Exchange
Commission under the Investment Advisers Act, and BlackRock's mutual funds are
registered with the SEC under the Investment Company Act. The Investment
Advisers Act imposes numerous obligations on registered investment advisers
including record-keeping, operating and marketing requirements, disclosure
obligations and prohibitions on fraudulent activities. The Investment Company
Act imposes similar obligations, as well as additional detailed operational
requirements, on investment advisers to registered investment companies. The
failure of one of our subsidiaries to comply with the Investment Advisers Act
or the Investment Company Act could lead the SEC to institute proceedings and
impose sanctions for violations of either of these acts ranging from censure to
termination of an investment adviser's registration to prohibition to serve as
advisers to SEC-registered funds, any of which could cause our earnings or
stock price to decline.
Failure to comply with ERISA regulations could result in penalties against us
and cause our earnings or stock price to decline
Our asset management subsidiaries are subject to the Employee Retirement
Income Security Act of 1974, and to regulations promulgated thereunder, insofar
as they act as a "fiduciary" under ERISA with respect to benefit plan clients.
ERISA and applicable provisions of the Internal Revenue Code impose duties on
persons who are fiduciaries under ERISA, prohibit specified transactions
involving ERISA plan clients and provide monetary penalties for violations of
these prohibitions. The failure of any of our subsidiaries to comply with these
requirements could result in significant penalties against us which could
reduce our earnings or cause our stock price to decline.
Risks relating to our relationship with PNC
We will be controlled by PNC as long as it controls a majority of the
outstanding voting power of our common stock, and our other stockholders will
be unable to affect the outcome of stockholder voting during such time
Immediately after completion of these offerings, four of our six
directors will be directors and/or executive officers of PNC and PNC indirectly
will own approximately % of our outstanding shares of class B common stock,
representing % of the combined voting power of all classes of voting stock of
BlackRock. As long as PNC owns a majority of the voting power of our common
stock, PNC will be able to
12
<PAGE>
elect our entire board of directors and to remove any director, with or without
cause, and generally to determine the outcome of all corporate actions
requiring stockholder approval. Additionally, our bylaws provide that, subject
to applicable law and exchange policy, prior to the date on which PNC or
another person beneficially owns less than a majority of the voting power of
BlackRock common stock, a majority of all directors on the committees of our
board of directors will be designated by PNC or such other person. As a result,
subject to the power of executive management to manage the day-to-day
operations of BlackRock, PNC will be in a position to continue to control all
matters affecting BlackRock, including:
. the composition of our board of directors and, through it, any
determination with respect to the direction and policies of
BlackRock, including the appointment and removal of officers;
. any determination with respect to mergers or other business
combinations involving BlackRock;
. the acquisition or disposition of assets by BlackRock;
. future issuances of common stock or other securities of BlackRock;
. the incurrence of debt by BlackRock;
. amendments, waivers and modifications to our agreements, including
those with PNC;
. the payment of dividends on our common stock; and
. determinations with respect to the treatment of items in our tax
returns which are consolidated or combined with PNC's tax returns.
Concentration of PNC managed assets in BlackRock Funds could result in loss of
revenue if the PNC managed assets are withdrawn by PNC
Approximately 80% ($19.9 billion at June 30, 1999) of the assets in the
BlackRock Funds are assets of PNC clients and are invested in the BlackRock
Funds on a discretionary basis by PNC. PNC may withdraw these assets at any
time and we may not be able to replace them. In addition, we may not be
successful in increasing sales through PNC channels and PNC may determine not
to continue marketing the BlackRock Funds or our other products.
Banking regulation of PNC and BlackRock limits our activities and the types of
businesses in which we may engage
Because PNC is a bank holding company and BlackRock is a subsidiary of
PNC and PNC Bank, one of its national bank subsidiaries, we are subject to bank
regulations which limit our activities and the types of businesses in which we
may engage. These limitations might impair our ability to compete for assets
under management and grow our assets. As a subsidiary of a national bank,
BlackRock may not conduct new activities, establish a subsidiary, or acquire
the stock or assets of another company unless it first obtains written
regulatory approval, which is available only for activities that are legally
permissible for a national bank or a subsidiary of a national bank and
consistent with prudent banking principles and regulatory policy or, for non-
U.S. activities or investments, that are usual in connection with the
transaction of the business of banking or other financial operations outside of
the United States. Banking regulations may cause us to be at a competitive
disadvantage because most of our competitors are not subject to these
limitations. BlackRock is subject to the supervision, regulation, and
examination of the Office of the Comptroller of the Currency. As a PNC Bank
subsidiary, BlackRock is subject to the broad enforcement authority of the OCC,
including the OCC's power to prohibit BlackRock from engaging in any activity
that, in the OCC's opinion, constitutes an unsafe or unsound practice in
conducting its business. The OCC may also impose substantial fines and other
penalties for violations of banking regulations applicable to BlackRock. Some
of our subsidiaries that engage in activities outside the United States are
subject to regulation and supervision by the Board of Governors of the Federal
Reserve System. In addition, your shares will not be insured by the Federal
Deposit Insurance Corporation or guaranteed by any bank.
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<PAGE>
We could lose existing management and investment contracts if there is a change
in control of PNC or BlackRock
Upon a change in control of PNC or BlackRock, PNC, BlackRock or any
successor may be required to offer to purchase all our capital stock held by
BlackRock's employee stockholders and by public stockholders. Upon a change in
control of PNC or BlackRock, our existing management may leave and new
management could be appointed. In addition, in the event of such a change in
control of PNC or BlackRock, the boards of registered investment companies and
our other clients might have to reapprove our investment management contracts.
The termination of any contracts would reduce our revenues.
Holders may not participate in PNC's disposal of its common stock which could
decrease our stock price
After the offerings, PNC will beneficially own approximately % of
BlackRock's outstanding class B common stock, representing % of the combined
voting power of all classes of voting stock of BlackRock. At any time following
the expiration of the 180 day lock-up period in connection with the offerings,
PNC could decide to sell or otherwise dispose of all or a portion of its class
B common stock, subject to rights of first refusal and tag along rights
provided to our employee stockholders in a stockholders agreement. If PNC were
to dispose of all its class B common stock, members of our management team and
other employee stockholders could choose to sell all of their shares of common
stock in such a transaction.
Because it owns a controlling voting interest of BlackRock, PNC may
realize a premium over the prevailing market price in selling its class B
common stock. Holders of class A common stock may not be allowed to participate
in a transfer by PNC of its controlling interest and may not realize any
premium with respect to their shares of class A common stock. PNC will have the
right to require BlackRock to register the common stock held by PNC for sale in
public offerings. BlackRock's other existing stockholders also have
registration rights and may therefore participate in a public or private sale
of shares by PNC.
Four of our directors are also directors or executive officers of PNC. Our
directors and officers may own PNC stock and, as a result, will have conflicts
of interest on issues involving both BlackRock and PNC
Four members of our board of directors are executive officers of PNC.
Three of these PNC officers are also directors of PNC. Those directors who are
also directors or executive officers of PNC will have obligations to both
companies and will have conflicts of interest with respect to matters
potentially or actually involving or affecting us, such as acquisitions,
financings and other corporate opportunities that may be suitable both for us
and for PNC.
Many of our directors and our executive officers own significant amounts
of PNC stock and employee stock options on PNC stock because of their
relationships with PNC. Such ownership could create, or appear to create,
potential conflicts of interest when directors and officers are faced with
decisions that could have different implications for BlackRock and PNC.
BlackRock's certificate of incorporation contains provisions addressing the
respective rights and duties of BlackRock, PNC and their respective officers
and directors. These provisions do not alter the fiduciary duty of loyalty of
our directors under applicable Delaware law.
Conflicts of interest with PNC due to our ongoing business relationship may
arise
Conflicts of interest may arise between BlackRock and PNC in a number of
areas relating to our past, ongoing and future relationships, including:
. the nature, quality and pricing of services rendered to us by PNC
and to PNC by us;
. competitive business activities;
. sales or distributions by PNC of all or a portion of its ownership
interest in BlackRock;
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<PAGE>
. PNC's ability to control the management and affairs of BlackRock;
or
. other intercompany relationships.
We may not be able to resolve any conflict of interest with PNC or, if a
conflict of interest is resolved, we may not receive as favorable a resolution
as we might have received if we were dealing with an unaffiliated third party.
Risk factors relating to our class A common stock
Disparate voting rights may decrease our stock price
The holders of class A common stock and class B common stock have
identical rights, except that:
. holders of class A common stock will have one vote per share on
all matters to be voted on by stockholders in general;
. holders of class B common stock will have five votes per share on
all matters to be voted on by stockholders in general; and
. holders of class A common stock are not eligible to vote on
matters relating exclusively to class B common stock, and vice
versa.
The difference in voting rights and our ability to issue additional
class B common stock could depress the value of the class A common stock.
Shares available for future sale or distribution, when sold or distributed,
may decrease our stock price
Immediately after the offerings, we will have outstanding
shares of class A common stock and shares of class B common stock.
Subject to the restrictions described under "Description of Capital Stock--
Common Stock--Stockholders Agreement," "Shares Eligible for Future Sale" and
the lock-up agreements described under "Underwriting," PNC and our existing
stockholders could from time to time and for any reason sell any or all of the
shares of class B common stock owned by them.
We cannot predict the effect, if any, that future sales or distributions
of class B common stock by PNC and our existing stockholders will have on the
market price of the class A common stock. Sales or distributions of
substantial amounts of class A common stock or class B common stock, or the
perception that such sales or distributions could occur, may cause the market
price for the class A common stock to decline.
Anti-takeover provisions may render changes of control more difficult and may
decrease our stock price
For so long as PNC owns a majority of the voting power of our
outstanding common stock, any merger or business combination involving
BlackRock would require the prior approval of PNC. In the event that PNC were
to control less than a majority of the voting power of our outstanding common
stock, provisions in our corporate documents may have the effect of rendering
more difficult or discouraging an acquisition of BlackRock or changes in
control of BlackRock deemed undesirable by the board of directors. These
obstacles to the acquisition of BlackRock by a third party could adversely
affect the price of our common stock and include the fact that our certificate
of incorporation and bylaws divide the board into three classes of directors,
each of which serves staggered three-year terms. Because this makes it more
difficult for stockholders to change the composition of the board, the
classification of the board may discourage a third party from trying to gain
control of BlackRock. This obstacle, and others discussed under "Description
of Capital Stock," could depress the value of our common stock.
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<PAGE>
NOTE REGARDING FORWARD-LOOKING STATEMENTS
We make statements about our future results in this prospectus that may
constitute "forward-looking statements." These statements are based on our
current expectations and the current economic environment. We caution you that
these statements are not guarantees of future performance. They involve a
number of risks and uncertainties that are difficult to predict. Our actual
results could differ materially from those expressed or implied in the forward-
looking statements. Important factors, including those described under "Risk
Factors" and elsewhere in this prospectus, could cause our actual results to
differ materially from those in the forward-looking statements.
----------------
This prospectus contains information you should consider when making your
investment decision. You should rely only on the information contained in this
prospectus. We have not, and the underwriters have not, authorized any other
person to provide you with different information. If anyone provides you with
different or inconsistent information, you should not rely on it. We are not,
and the underwriters are not, making an offer to sell these securities in any
jurisdiction where such offer or sale is not permitted. You should assume that
the information appearing in this prospectus is accurate at the date on the
front cover of this prospectus only. Our business, financial condition, results
of operations and prospects may have changed since that date.
----------------
USE OF PROCEEDS
We estimate that the net proceeds to be received by BlackRock from these
offerings, not including the proceeds received from the over-allotment options,
will be approximately $ million. We intend to use these net proceeds to repay
outstanding indebtedness under our $175 million revolving line of credit with
PNC Bank. At June 30, 1999, the outstanding balance of this facility, including
accrued interest, was $125 million. The remaining net proceeds will be used for
working capital and other general corporate purposes. The revolving line of
credit bears interest at PNC Bank's prime rate, which was 7.75% at June 30,
1999. See "Capitalization" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources."
DIVIDEND POLICY
We intend to retain future earnings, if any, for the development of our
business and therefore do not anticipate that our board of directors will
declare or pay any dividends on the class A common stock and class B common
stock in the foreseeable future. The declaration and payment of dividends by
BlackRock are subject to the discretion of our board of directors. BlackRock is
a holding company and, as such, our ability to pay dividends is subject to the
ability of our subsidiaries to provide cash to us. The board of directors will
determine future dividend policy based on our results of operations, financial
conditions, capital requirements and other circumstances. In addition, because
we are a consolidated subsidiary of PNC Bank, federal banking restrictions on
payments of dividends by PNC Bank may apply to us. See "Business--Regulation."
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DILUTION
Our pro forma net tangible book value at June 30, 1999 was $72.494
million, or $1.13 per share of class A and class B 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 the sale of
the 9,000,000 shares of class A common stock offered by BlackRock in these
offerings at an assumed public offering price of $15.50 per share. The pro
forma net tangible book value per share was calculated without deduction of the
estimated underwriting discount and estimated offering expenses, and without
any provision for the application of the estimated net proceeds. Our pro forma
net tangible book value at June 30, 1999 would have been $(67.006) million, or
$(1.22) per share without giving effect to the offerings. These offerings will
cause an immediate decrease in the pro forma net tangible book value of $14.37
per share to new investors in our class A common stock and an immediate
increase in pro forma net tangible book value of $2.35 per share of our common
stock held by our existing stockholders.
<TABLE>
<S> <C> <C>
Public offering price per share(1).......................... $15.50
Pro forma net tangible book value per share before these
offerings.................................................. $(1.22)
Increase per share attributable to new investors............ 2.35
------
Pro forma net tangible book value per share after these
offerings.................................................. 1.13
------
Dilution per share to new investors(2)(3)................... $14.37
======
</TABLE>
- --------
(1) Assumed public offering price before deduction of underwriting discount
and estimated expenses of these offerings to be paid by BlackRock.
(2) Dilution is determined by subtracting the pro forma net tangible book
value per share of our common stock after these offerings from the assumed
public offering price paid by purchasers in these offerings for a share of
our class A common stock.
(3) Assumes no exercise of outstanding employee stock options. As of the date
of this prospectus, there are options outstanding, all of which are
unvested, to purchase shares of class A common stock at the
initial offering price. See "Executive Compensation." If any of these
options are exercised, there will be further dilution to purchasers of
class A common stock in these offerings.
Assuming the underwriters' over-allotment options are exercised in full,
the pro forma net tangible book value at June 30, 1999 would have been $93.419
million, or $1.43 per share of class A and class B common stock. The immediate
increase in pro forma net tangible book value of shares owned by existing
stockholders would be $2.65 per share, and the immediate dilution to purchasers
of shares of class A common stock in these offerings would be $14.07 per share.
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<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of BlackRock at June
30, 1999 on an actual basis and on an as-adjusted basis. The as-adjusted basis
reflects the application of the estimated net proceeds from the offerings to
repay outstanding amounts under our revolving credit line with PNC Bank from
the sale by BlackRock of 9,000,000 shares of class A common stock offered
hereby at an initial public offering price of $15.50 per share after deducting
the underwriter's discount and estimated offering expenses, and assuming that
the over-allotment options are not exercised. The remaining net proceeds will
be used for working capital and other general corporate purposes. This table
should be read in conjunction with the consolidated financial statements and
related notes and other financial and operating data contained elsewhere in our
prospectus and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" beginning on page 23 of this prospectus.
<TABLE>
<CAPTION>
June 30, 1999
------------------
As
Actual Adjusted
-------- --------
($ in thousands)
<S> <C> <C>
Debt
7.5% unsecured note due February 2000.................... $ 28,200 $ 28,200
Revolving line of credit with PNC Bank................... 125,000 --
-------- --------
Total debt................................................. 153,200 28,200
Stockholders' equity
Class A common stock, $0.01 par value per share;
shares authorized; 9,000,000 shares issued and
outstanding............................................. -- 90
Class B common stock, $0.01 par value per share;
shares authorized; 54,982,635 shares issued and
outstanding............................................. -- 550
Additional paid-in capital............................... 53,105 179,965
Retained earnings........................................ 79,272 79,272
Unrealized gain (loss) on investments, net............... (99) (99)
Treasury stock, at cost, 56,900 shares................... (200) (200)
-------- --------
Total stockholders' equity................................. 132,078 259,578
-------- --------
Total capitalization....................................... $285,278 $287,778
======== ========
</TABLE>
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SELECTED FINANCIAL DATA
The consolidated financial statements of BlackRock reflect the "carved
out" historical operating results of the asset management businesses of PNC
which were consolidated under BlackRock in 1998 as if the combined operations
had been a separate entity prior to the formation of BlackRock. The selected
financial data presented below has been derived in part from, and should be
read in conjunction with, the consolidated financial statements of BlackRock
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this prospectus. The consolidated financial
data includes the results of operations of BFM since its acquisition by PNC on
February 28, 1995. Had BFM's results of operations been included for the year
ended December 31, 1994 and the two months ended February 28, 1995, revenues
would have increased by $55.1 million and $12.1 million, respectively. BFM's
income before income taxes for these periods would not be comparable to post
acquisition results due to the financing costs and goodwill amortization
expense arising out of the acquisition and which have only been incurred in
periods since the acquisition.
The balance sheet data at June 30, 1998 and 1999, and the income
statement data for the six month periods then ended, have been derived from
BlackRock's unaudited financial statements which, in the opinion of BlackRock,
reflect all adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of the financial position and results of
operations of BlackRock for those periods. The income statement data for
interim periods is not necessarily indicative of results for subsequent periods
or a full year.
<TABLE>
<CAPTION>
Six Months
Year Ended December 31, Ended June 30,
---------------------------------------------- ----------------
1994 1995 1996 1997 1998 1998 1999
------- -------- -------- -------- -------- ------- -------
(unaudited) (unaudited)
($ in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Income statement data
Revenue
Investment advisory and administration
fees:
Mutual funds......................... $26,995 $ 61,877 $ 87,189 $117,977 $162,487 $67,403 $99,637
Separate accounts.................... 7,638 24,458 43,069 62,985 101,352 42,376 71,569
BlackRock Asset Investors (BAI) (1).. -- 5,933 6,061 13,867 61,199 15,761 (2,054)
------- -------- -------- -------- -------- ------- -------
Total advisory and administration
fees.................................. 34,633 92,268 136,319 194,829 325,038 125,540 169,152
Other income........................... 1,411 5,814 10,159 10,644 14,444 5,713 10,941
------- -------- -------- -------- -------- ------- -------
Total revenue.......................... 36,044 98,082 146,478 205,473 339,482 131,253 180,093
Operating expenses
Employee compensation and benefits... 7,073 33,698 53,703 73,217 109,741 50,845 65,964
BAI incentive compensation (1)....... -- 3,070 3,525 9,688 44,806 10,332 (1,494)
Fund administration and servicing
costs--affiliates................... 10,475 12,412 19,611 27,278 52,972 15,656 36,334
General and administration........... 10,510 17,719 24,500 29,764 38,696 16,634 23,836
Amortization of goodwill............. -- 8,002 9,603 9,653 9,653 4,826 4,826
Mutual fund offering costs........... -- -- -- -- 4,252 -- --
------- -------- -------- -------- -------- ------- -------
Total operating expenses............... 28,058 74,901 110,942 149,600 260,120 98,293 129,466
------- -------- -------- -------- -------- ------- -------
Operating income....................... 7,986 23,181 35,536 55,873 79,362 32,960 50,627
Non-operating income (expense)
Interest and dividend income......... 331 943 1,877 3,117 1,995 1,066 1,293
Interest expense..................... -- (14,253) (19,975) (20,249) (13,347) (7,582) (7,121)
------- -------- -------- -------- -------- ------- -------
331 (13,310) (18,098) (17,132) (11,352) (6,516) (5,828)
------- -------- -------- -------- -------- ------- -------
Income before income taxes............. 8,317 9,871 17,438 38,741 68,010 26,444 44,799
Income taxes......................... 2,753 4,785 8,475 16,655 32,395 12,596 18,813
------- -------- -------- -------- -------- ------- -------
Net income............................. $ 5,564 $ 5,086 $ 8,963 $ 22,086 $ 35,615 $13,848 $25,986
======= ======== ======== ======== ======== ======= =======
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
Six months
Year ended ended
Dec. 31, June 30,
1998 1999
----------- -----------
<S> <C> <C>
Unaudited pro forma data
Historical income before income taxes................. $ 68,010 $ 44,799
Pro forma interest adjustment for debt repayment...... 9,658 5,000
Pro forma income taxes................................ 37,514 21,231
----------- -----------
Pro forma net income.................................. $ 40,154 $ 28,568
=========== ===========
Unaudited pro forma net income per share (2)
Basic............................................... .75 .52
Diluted............................................. .75 .52
Unaudited pro forma weighted average shares
outstanding
Basic............................................... 53,507,051 54,807,482
Diluted............................................. 53,682,203 54,982,635
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
At December 31, At June 30,
------------------------------------------- -----------------
1994 1995 1996 1997 1998 1998 1999
------- -------- -------- -------- -------- -------- --------
(unaudited) (unaudited)
($ in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance sheet data
Goodwill................ $ -- $232,100 $223,216 $213,563 $203,910 $208,737 $199,084
Total assets............ 15,039 293,270 332,719 335,507 440,784 314,947 403,252
Long-term debt.......... -- 149,754 234,255 206,432 178,200 146,761 125,000
Total liabilities....... 3,904 270,481 300,047 290,544 334,593 232,516 271,174
Stockholders' equity.... 11,135 22,789 32,672 44,963 106,191 82,431 132,078
<CAPTION>
At December 31, At June 30,
------------------------------------------- -----------------
1994 1995 1996 1997 1998 1998 1999
------- -------- -------- -------- -------- -------- --------
(unaudited)
($ in millions)
<S> <C> <C> <C> <C> <C> <C> <C>
Other financial data (3)
Assets under management
Separate accounts:
Fixed income*......... $13,848 $ 23,345 $ 28,958 $ 39,261 $ 52,869 $ 46,664 $ 68,286
Liquidity............. 3,269 5,556 7,430 10,019 13,826 12,738 12,362
Equity................ 540 700 1,204 1,763 2,417 2,095 2,353
------- -------- -------- -------- -------- -------- --------
Subtotal.............. 17,657 29,601 37,592 51,043 69,112 61,497 83,001
Mutual funds:
Fixed income.......... 10,021 11,969 12,546 13,714 13,888 14,172 13,617
Liquidity............. 20,398 21,183 23,933 29,827 35,555 28,958 31,921
Equity................ 4,615 6,306 8,643 10,829 12,087 12,055 13,262
------- -------- -------- -------- -------- -------- --------
Subtotal.............. 35,034 39,458 45,122 54,370 61,530 55,185 58,800
------- -------- -------- -------- -------- -------- --------
Total................... $52,691 $ 69,059 $ 82,714 $105,413 $130,642 $116,682 $141,801
======= ======== ======== ======== ======== ======== ========
<CAPTION>
For Six Months
For the Year Ended December 31, Ended June 30,
------------------------------------------- -----------------
1994 1995 1996 1997 1998 1998 1999
------- -------- -------- -------- -------- -------- --------
(unaudited)
($ in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
EBITDA
Net income.............. $ 5,564 $ 5,086 $ 8,963 $ 22,086 $ 35,615 $ 13,848 $ 25,986
Depreciation expense.... 292 1,531 2,097 2,498 3,199 1,391 4,629
Amortization of
goodwill............... -- 8,002 9,603 9,653 9,653 4,826 4,826
------- -------- -------- -------- -------- -------- --------
EBITDA as adjusted (4).. $ 5,856 $ 14,619 $ 20,663 $ 34,237 $ 48,467 $ 20,065 $ 35,441
======= ======== ======== ======== ======== ======== ========
Interest expense........ -- 14,253 19,975 20,249 13,347 7,582 7,121
Income taxes............ 2,753 4,785 8,475 16,655 32,395 12,596 18,813
------- -------- -------- -------- -------- -------- --------
EBITDA (5).............. $ 8,609 $ 33,657 $ 49,113 $ 71,141 $ 94,209 $ 40,243 $ 61,375
======= ======== ======== ======== ======== ======== ========
</TABLE>
- --------
* including alternative investment products.
(1) Pursuant to a plan of liquidation to be completed by the fourth quarter of
1999, the assets of BAI are being sold and its business operations
terminated. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--General."
(footnotes continued on next page)
21
<PAGE>
(footnotes continued from previous page)
(2) The unaudited pro forma data and the pro forma net income per share give
effect to an estimated reclassification to be completed upon consummation
of the offerings of each share of our common stock into 275 shares of our
class B common stock and to the offerings, including the repayment of debt
and decrease in interest expense and the increase in income tax expense, as
if the reclassification and the offerings had been effected as of January
1, 1998. The unaudited pro forma data and the pro forma net income per
share do not purport to represent the results of operations or the
financial position of BlackRock which actually would have occurred had the
offerings been consummated on January 1, 1998, or project the results of
operations or the financial position of BlackRock for any future date or
period.
(3) For comparative purposes, "assets under management" at December 31, 1994
includes BFM.
(4) "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 repay debt obligations or
make new investments. EBITDA, as adjusted, as calculated by us may not be
consistent with the computation 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 as
an alternative to net income as a measure of operating performance or to
cash flows from operating activities as a measure of liquidity.
(5) "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 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. EBITDA has increased every year since 1994,
primarily due to new business growth which resulted in annual increases to
operating income.
22
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
BlackRock was formed in 1998 as a result of PNC's decision to
substantially consolidate its asset management businesses under the BlackRock
brand name and management team. Prior to this consolidation, PNC provided the
fixed income, liquidity and equity advisory services now under BlackRock
through various legal entities utilizing separate brand names. Through PNC Bank
and other PNC affiliates, PNC continues to provide asset management services as
part of its personal trust activities and otherwise to individual and
institutional clients.
The consolidated financial statements of BlackRock reflect the "carved
out" historical operating results of the asset management businesses of PNC
which were consolidated under BlackRock in 1998 as if the combined operations
had been a separate entity prior to the formation of BlackRock.
General
BlackRock derives a substantial portion of its revenues from investment
advisory and administration fees, which are recognized as the services are
performed. Such fees are primarily based on predetermined percentages of the
market value of assets under management and are affected by changes in assets
under management, including market appreciation or depreciation and net
subscriptions or redemptions. Net subscriptions or redemptions represent the
sum of new client assets, additional fundings from existing clients,
withdrawals of assets from and termination of client accounts and purchases and
redemptions of mutual fund shares.
The following table presents the component changes in BlackRock's assets
under management for the years ended December 31, 1996, 1997 and 1998, and for
the six months ended June 30, 1999. The $3.8 billion in net mutual fund
redemptions for the six months ended June 30, 1999 was almost entirely due to
$3.7 billion in net redemptions in our institutional money market fund family,
Provident Institutional Funds. These funds experience high levels of
subscriptions and redemptions on a daily basis which can result in volatile
period-to-period changes in assets under management.
<TABLE>
<CAPTION>
For the
Six Months
For the Year Ended ended June
December 31, 30,
--------------------------- ----------
1996 1997 1998 1999
------- -------- -------- ----------
($ in millions)
<S> <C> <C> <C> <C>
Separate Accounts
Beginning assets under management..... $29,601 $ 37,592 $ 51,043 $ 69,112
Net subscriptions..................... 6,616 11,301 15,166 15,505
Market appreciation (depreciation).... 1,375 2,150 2,903 (1,616)
------- -------- -------- --------
Ending assets under management........ 37,592 51,043 69,112 83,001
Mutual Funds
Beginning assets under management..... 39,458 45,122 54,370 61,530
Net subscriptions (redemptions)....... 4,551 7,221 5,674 (3,844)
Market appreciation................... 1,113 2,027 1,486 1,114
------- -------- -------- --------
Ending assets under management........ 45,122 54,370 61,530 58,800
------- -------- -------- --------
Total Assets Under Management ("AUM").. 82,714 105,413 130,642 141,801
======= ======== ======== ========
Net subscriptions..................... $11,167 $ 18,522 $ 20,840 $ 11,661
% of Change in AUM from net
subscriptions........................ 81.8% 81.6% 82.6% 104.5%
</TABLE>
Investment advisory agreements for certain separate accounts and
BlackRock's alternative products provide for performance fees in addition to
fees based on assets under management. Performance fees are earned when
investment performance exceeds a contractual threshold and, accordingly, may
increase the volatility of BlackRock's revenues and earnings. Other income
primarily reflects fees earned on risk management advisory engagements. See
"Business--Risk Management Products."
23
<PAGE>
BAI, one of our alternative investment products, was created in 1994 in
response to the opportunity we perceived in commercial real estate debt arising
from the dislocation of traditional lenders that had occurred and the resulting
lack of capital in the sector. We believed that BAI would capture equity-like
returns as an early market participant able to invest in these types of assets.
As the commercial real estate markets recovered and capital market
participation in commercial mortgage securities expanded, further opportunities
to generate equity-like returns diminished. As a result, BAI's Board of
Trustees and shareholders decided to adopt management's recommendation to
liquidate the fund. For the years ended December 31, 1996, 1997 and 1998, BAI
generated operating income (advisory and performance fees, net of expenses) of
$2.5 million, $4.2 million and $16.4 million, respectively. As a result of the
liquidation, which involved the sale of BAI's assets, BlackRock has realized an
operating loss of $0.6 million for the six months ended June 30, 1999. We do
not believe that the liquidation of the remaining assets and distributions to
shareholders will have a material impact on future operations. We expect the
liquidation of BAI will be completed by the fourth quarter of 1999.
Operating expenses primarily consist of employee compensation and benefit
expense, BAI incentive compensation expense, fund administration and servicing
expense, general and administrative expense and goodwill amortization. Employee
compensation and benefit expense reflects salaries, deferred and incentive
compensation, and related benefit costs. BAI incentive compensation expense
reflects compensation payable in accordance with various agreements to
investment advisory and other employees of BlackRock. Fund administration and
servicing expenses reflect payments made to PNC affiliated entities (see
"Certain Relationships and Related Transactions" and Note 7 of "Notes to
BlackRock's Consolidated Financial Statements") associated with the
administration and servicing of BlackRock's mutual funds. Goodwill at December
31, 1998 was $203.9 million with annual amortization expense of approximately
$9.7 million. Substantially all of the goodwill resulted from PNC's acquisition
of BFM on February 28, 1995.
Operating Results for Six Months Ended June 30, 1999 as Compared to Six Months
Ended June 30, 1998
Assets Under Management
Assets under management rose $25.1 billion, or 21.5%, to $141.8 billion
at June 30, 1999, as compared to $116.7 billion at June 30, 1998. The increase
was largely driven by a 35.0% growth in separate account assets, primarily
reflecting new fixed income advisory business. Net subscriptions totaled $24.4
billion, or 97.2% of the $25.1 billion increase in assets under management,
with the remaining $0.7 billion (2.8%) reflecting market appreciation.
<TABLE>
<CAPTION>
For the Six
Months Ended June
30, Period-to-Period
----------------- ------------------
1998 1999 $ Change % Change
-------- -------- -------- --------
($ in millions) ($ in millions)
<S> <C> <C> <C> <C>
Separate Accounts
Fixed income*.......................... $ 46,664 $ 68,286 $21,622 46.3%
Liquidity.............................. 12,738 12,362 (376) (3.0)%
Equity................................. 2,095 2,353 258 12.3%
-------- -------- -------
Subtotal............................... 61,497 83,001 21,504 35.0%
-------- -------- -------
Mutual Funds
Fixed income........................... 14,172 13,617 (555) (3.9)%
Liquidity.............................. 28,958 31,921 2,963 10.2%
Equity................................. 12,055 13,262 1,207 10.0%
-------- -------- -------
Subtotal............................... 55,185 58,800 3,615 6.6%
-------- -------- -------
Total.................................... $116,682 $141,801 $25,119 21.5%
======== ======== =======
</TABLE>
- --------
* including alternative investment products.
24
<PAGE>
Revenues
Investment advisory and administration fees increased $43.6 million, from
$125.5 million for the six months ended June 30, 1998 to $169.1 million for the
six months ended June 30, 1999. The growth in investment advisory and
administration fees was due to increases in assets under management for
separate accounts and mutual funds and was partially offset by reductions in
BAI-related performance fees as a result of the planned liquidation of the fund
by the fourth quarter of 1999.
<TABLE>
<CAPTION>
For the Six
Months Ended June
30, Period-to-Period
----------------- ------------------
1998 1999 $ Change % Change
-------- -------- -------- --------
($ in thousands) ($ in thousands)
<S> <C> <C> <C> <C>
Investment advisory and
administration fees:
Mutual funds...................... $ 67,403 $ 99,637 $32,234 47.8%
Separate accounts................. 42,376 71,569 29,193 68.9%
BAI............................... 15,761 (2,054) (17,815) (113.0)%
-------- -------- -------
Total investment advisory and
administration fees................ 125,540 169,152 43,612 34.7%
Other income........................ 5,713 10,941 5,228 91.5%
-------- -------- -------
Total revenue..................... $131,253 $180,093 $48,840 37.2%
======== ======== =======
Mutual fund advisory and administration fees increased $32.2 million for
the six months ended June 30, 1999 due to a $3.6 billion increase in mutual
fund assets under management and the May 1998 conversion of $8.2 billion of PNC
common trust funds into the BlackRock Funds, which earn higher advisory fees.
Separate account advisory fees rose $29.2 million largely as a result of a
$21.5 billion increase in separate account assets under management as well as
increased performance fees earned on BlackRock's domestic and off-shore fixed
income hedge funds. BAI advisory fees decreased $17.8 million due to the
discontinuance of any further business activity other than asset sales
associated with the fund's liquidation. Other income increased $5.2 million
primarily from new risk management advisory engagements and includes a $1.0
million increase for additional services provided to PNC. See "Certain
Relationships and Related Transactions--Transactions with PNC and Its
Subsidiaries."
Expenses
Operating expenses increased by $31.2 million, from $98.3 million for the
six months ended June 30, 1998 to $129.5 million for the six months ended June
30, 1999. The change was primarily the result of increases in employee
compensation and benefits, fund administration and servicing costs-affiliates
due to higher levels of PNC client assets under management in the BlackRock
Funds and general and administration expenses. The increases were partially
offset by lower incentive compensation in 1999 related to the liquidation of
BAI.
<CAPTION>
For the Six
Months Ended June
30, Period-to-Period
----------------- ------------------
1998 1999 $ Change % Change
-------- -------- -------- --------
($ in thousands) ($ in thousands)
<S> <C> <C> <C> <C>
Employee compensation and benefits.. $ 50,845 $ 65,964 $15,119 29.7%
BAI incentive compensation.......... 10,332 (1,494) (11,826) (114.5)%
Fund administration and servicing
costs-affiliates................... 15,656 36,334 20,678 132.1%
Amortization of goodwill............ 4,826 4,826 -- 0.0%
General and administration.......... 16,634 23,836 7,202 43.3%
-------- -------- -------
Total Operating Expenses.......... $ 98,293 $129,466 $31,173 31.7%
======== ======== =======
</TABLE>
25
<PAGE>
Employee compensation and benefits rose $15.1 million due to additional
expenses of $3.7 million related to salary and benefits and $11.4 million for
incentive compensation based primarily on operating profit growth. Salary and
benefit cost increases were the result of a 20.7% increase in full-time
employees to support business growth and enhancements to the company's 401(k)
plan which were partially offset by the adoption of SOP 98-1 (Accounting for
the Cost of Computer Software Developed or Obtained for Internal Use). BAI
incentive compensation decreased by $11.8 million due to the discontinuance of
any further business activity other than asset sales associated with the fund's
liquidation. Fund administration and servicing costs-affiliates increased $20.7
million primarily due to the May 1998 conversion of $8.2 billion of PNC common
trust funds into the BlackRock Funds, on which BlackRock pays higher service
fees. General and administration expenses increased $7.2 million primarily
attributable to additional expenditures of $1.6 million related to occupancy
and office services, $1.9 million related to marketing and promotional costs
and $2.1 million related to systems and communications. These increases
resulted from the substantial business growth experienced during the period as
well as management's decision to adjust the depreciable life on equipment from
five years to three years, which increased depreciation expense by $1.6
million.
Operating Income and Net Income
Operating income was $50.6 million for the six months ended June 30,
1999, representing a $17.7 million or 53.6% increase from the same period in
1998. Net interest expense decreased $0.7 million or 10.6% to $5.8 million for
the six months ended June 30, 1999 as compared to $6.5 million for the six
months ended June 30, 1998, due to the repayment of debt. Income tax expense
was $18.8 million and $12.6 million for the six months ended June 30, 1999 and
1998, respectively, representing effective tax rates of 42.0% and 47.6%. The
difference in the effective tax rates resulted from various permanent
differences and variations caused by state and local income tax accruals
pursuant to the PNC tax sharing policy which BlackRock is subject to prior to
the Tax Disaffiliation Agreement taking effect. Net income totaled $26.0
million for the six months ended June 30, 1999 as compared to $13.8 million for
the six months ended June 30, 1998, an increase of 87.7%.
Operating Results for 1998 as Compared to 1997
Assets Under Management
Assets under management rose $25.2 billion in 1998, propelled by a 35.4%
growth in separate account assets, primarily reflecting new fixed income
advisory business. Net subscriptions totaled $20.8 billion, or 83% of the $25.2
billion increase in assets under management, with the remaining $4.4 billion
(17%) reflecting market appreciation.
<TABLE>
<CAPTION>
At December 31, Year-to-Year
----------------- -----------------
1997 1998 $ Change % Change
-------- -------- -------- --------
($ in millions) ($ in millions)
<S> <C> <C> <C> <C>
Separate Accounts
Fixed income*.......................... $ 39,261 $ 52,869 $13,608 34.7%
Liquidity.............................. 10,019 13,826 3,807 38.0%
Equity................................. 1,763 2,417 654 37.1%
-------- -------- -------
Subtotal............................... 51,043 69,112 18,069 35.4%
-------- -------- -------
Mutual Funds
Fixed income........................... 13,714 13,888 174 1.3%
Liquidity.............................. 29,827 35,555 5,728 19.2%
Equity................................. 10,829 12,087 1,258 11.6%
-------- -------- -------
Subtotal............................... 54,370 61,530 7,160 13.2%
-------- -------- -------
Total.................................... $105,413 $130,642 $25,229 23.9%
======== ======== =======
</TABLE>
- --------
* including alternative investment products.
26
<PAGE>
Revenues
Investment advisory and administration fees increased $130.2 million,
from $194.8 million in 1997 to $325.0 million in 1998. The growth in investment
advisory and administration fees for 1998 was due to increases in assets under
management for separate accounts and mutual funds as well as an increase in
BAI- related performance fees.
<TABLE>
<CAPTION>
Year Ended December 31, Year-to-Year
----------------------- -------------------------
1997 1998 $ Change % Change
----------- ----------- ---------------- --------
($ in thousands) ($ in thousands)
<S> <C> <C> <C> <C>
Investment advisory and
administration fees:
Mutual funds............ $ 117,977 $ 162,487 $ 44,510 37.7%
Separate accounts....... 62,985 101,352 38,367 60.9%
BAI..................... 13,867 61,199 47,332 341.3%
----------- ----------- --------
Total investment advisory
and administration
fees.................... 194,829 325,038 130,209 66.8%
Other income............. 10,644 14,444 3,800 35.7%
----------- ----------- --------
Total revenue........... $ 205,473 $ 339,482 $134,009 65.2%
=========== =========== ========
</TABLE>
Mutual funds advisory and administration fees increased $44.5 million due
to a $7.2 billion increase in mutual fund assets under management and the May
1998 conversion of $8.2 billion of PNC common trust funds into the BlackRock
Funds which earn higher advisory fees. Separate account advisory fees rose
$38.4 million largely as a result of an $18.1 billion increase in separate
account assets under management as well as increased performance fees earned on
BlackRock's domestic and off-shore fixed income hedge funds. BAI advisory fees
increased $47.3 million primarily due to increased performance fees based on
the market value of fund assets to be liquidated and projected fund returns.
Other income increased $3.8 million primarily from new risk management advisory
engagements.
Expenses
Operating expenses increased by $110.5 million, from $149.6 million in
1997 to $260.1 million in 1998. The change was primarily the result of
increases in employee compensation and benefits, incentive compensation related
to the liquidation of BAI, and fund administration and servicing costs due to
higher levels of PNC client assets under management in the BlackRock Funds.
<TABLE>
<CAPTION>
Year Ended December 31, Year-to-Year
----------------------- -------------------------
1997 1998 $ Change % Change
----------- ----------- ---------------- --------
($ in thousands) ($ in thousands)
<S> <C> <C> <C> <C>
Employee compensation and
benefits................... $ 73,217 $ 109,741 $ 36,524 49.9%
BAI incentive compensation.. 9,688 44,806 35,118 362.5%
Fund administration and
servicing costs-
affiliates................. 27,278 52,972 25,694 94.2%
Amortization of goodwill.... 9,653 9,653 -- 0.0%
General and administration.. 29,764 38,696 8,932 30.0%
Mutual fund offering costs.. -- 4,252 4,252 NA
----------- ----------- --------
Total operating expenses.... $ 149,600 $ 260,120 $110,520 73.9%
=========== =========== ========
</TABLE>
Employee compensation and benefits rose $36.5 million due to additional
expenses of $16.1 million related to salary and benefits, $16.0 million for
incentive compensation based primarily on operating profit growth and $4.4
million associated with the establishment of a deferred compensation program to
retain key executives and employees. Salary and benefit cost increases largely
resulted from a 25% rise in full time employees to support business growth and
enhance infrastructure. BAI incentive compensation increased $35.1 million
based on the substantial increase in BAI performance fee revenues. Fund
administration and
27
<PAGE>
servicing costs-affiliates increased $25.7 million primarily due to the May
1998 conversion of $8.2 billion of PNC common trust funds into the BlackRock
Funds on which BlackRock pays higher service fees. General and administration
expenses increased $8.9 million, primarily attributable to additional
expenditures of $1.8 million related to occupancy and office services, $1.8
million related to marketing and promotion and $1.3 million related to systems
and communications. These increases resulted from the substantial business
growth experienced in 1998 as well as from BlackRock's formation, which
required significant staff increases and included sizable new investments in
technology and leased premises as compared to the prior year. BlackRock also
launched a new high yield mutual fund in December 1998, which resulted in the
immediate recognition of $4.3 million of expense for broker-related sales
commissions.
Operating Income and Net Income
Operating income was $79.4 million for 1998, representing a $23.5 million
or 42.0% increase from the prior year. Net interest expense decreased to $11.4
million for 1998 as compared to $17.1 million for 1997, a 33.7% decrease due to
the continuing reduction of debt. Income tax expense was $32.4 million and
$16.7 million for 1998 and 1997, respectively, representing effective tax rates
of 47.6% and 43.0%. The increase in the effective tax rate from the prior year
is attributable to increased state and local taxes. Net income totaled $35.6
million for 1998 as compared to $22.1 million for 1997, an increase of 61.3%.
Operating Results for 1997 as Compared to 1996
Assets Under Management
Total assets under management increased by 27.4% in 1997, reflecting
strong growth in both separate account and mutual fund assets under management.
Separate account assets under management rose $13.5 billion due to continued
strong growth in new fixed income clients while mutual fund assets under
management increased $9.2 billion, primarily due to $7.2 billion in net
subscriptions.
<TABLE>
<CAPTION>
At December 31, Year-to-Year
---------------- ------------------------
1996 1997 $ Change % Change
------- -------- --------------- --------
($ in millions) ($ in millions)
<S> <C> <C> <C> <C>
Separate Accounts
Fixed income*.................... $28,958 $ 39,261 $10,303 35.6%
Liquidity........................ 7,430 10,019 2,589 34.8%
Equity........................... 1,204 1,763 559 46.4%
------- -------- -------
Subtotal......................... 37,592 51,043 13,451 35.8%
------- -------- -------
Mutual Funds
Fixed income..................... 12,546 13,714 1,168 9.3%
Liquidity........................ 23,933 29,827 5,894 24.6%
Equity........................... 8,643 10,829 2,186 25.3%
------- -------- -------
Subtotal......................... 45,122 54,370 9,248 20.5%
------- -------- -------
Total.............................. $82,714 $105,413 $22,699 27.4%
======= ======== =======
</TABLE>
- --------
* including alternative investment products.
Revenues
Investment advisory and administration fees totaled $194.8 million in
1997, which represented a $58.5 million or 42.9% increase from 1996. The
increase in investment advisory and administration fees was primarily
attributable to a $22.7 billion rise in mutual fund and separate account assets
under management.
28
<PAGE>
Mutual fund advisory and administration fees for 1997 of $118.0 million
increased $30.8 million from 1996 or 35.3% as mutual fund assets under
management increased $9.2 billion or 20.5%. Separate account advisory fees were
$63.0 million in 1997, an increase of $19.9 million or 46.2% reflecting a $13.5
billion or 35.8% increase in separate account assets under management. BAI
advisory fees increased $7.8 million to $13.9 million in 1997, primarily as a
result of higher performance fees. Other income increased by $0.5 million to
$10.6 million in 1997.
Expenses
Operating expenses increased $38.7 million or 34.8% from $110.9 million
in 1996 to $149.6 million in 1997. The increase was primarily due to
significant business growth, which resulted in higher employee compensation and
benefit costs and increased marketing expenses.
Employee compensation and benefits of $73.2 million were up $19.5 million
or 36.3% compared with 1996. The increase was attributable to additional
expenses of $8.0 million related to salary and benefits and $11.5 million for
incentive compensation based on operating profit growth. Salary and benefit
cost increases were largely due to higher staffing levels to support new
business growth together with normal merit pay raises and escalations in
benefit costs. BAI incentive compensation of $9.7 million was up $6.2 million
from the prior year. The rise was largely attributable to the rise in earned
performance fees. Fund administration and servicing costs were $27.3 million in
1997, an increase of $7.7 million or 39.1% from the prior year. The increase
was attributable to increases in PNC private banking client assets in the
BlackRock Funds as well as higher assets under management in the Provident
Institutional Funds on which BlackRock pays administration fees to a PNC mutual
fund processing subsidiary. General and administration expenses were $29.8
million in 1997, a $5.3 million or 21.5% increase over 1996. The increase was
primarily attributable to a $4.1 million rise in marketing and promotional
costs associated with increased mutual fund and institutional separate account
sales.
Operating Income and Net Income
Operating income was $55.9 million for 1997, representing a $20.3 million
increase or 57.2% from the prior year. Net interest expense declined to $17.1
million in 1997 from $18.1 million in 1996. Income tax expense was $16.7
million and $8.5 million for 1997 and 1996, respectively, representing
effective tax rates of 43.0% and 48.6%. Net income totaled $22.1 million for
1997 as compared to $9.0 million for 1996, an increase of 146.4%.
Liquidity and Capital Resources
BlackRock's business is not capital intensive. BlackRock has historically
met its working capital requirements through cash generated by its operating
activities and borrowings with PNC Bank under a $175 million revolving credit
facility. Cash provided by operating activities totaled $17.9 million, $47.2
million and $53.7 million for the years ended December 31, 1996, 1997 and 1998
respectively, and $15.6 million for the first six months of 1999. BlackRock
expects that such cash flows will continue to serve as the principal source of
working capital for the near future.
Net cash flow used in investing activities was $3.7 million, $3.0 million
and $5.0 million for the years ended December 31, 1996, 1997 and 1998
respectively, and $9.0 million for the first six months of 1999. Capital
expenditures for computer hardware, furniture and equipment and leasehold
improvements were $4.2 million, $2.2 million and $8.4 million for the years
ended December 31, 1996, 1997 and 1998 respectively, and $9.1 million for the
first six months of 1999.
Total capital at December 31, 1998, was $303.2 million and was comprised
of $106.2 million of stockholders' equity and $197.0 million of debt. Debt at
December 31, 1998 included $150.0 million outstanding on a $175.0 million
revolving credit facility with PNC Bank due December 31, 2002, and a $47.0
million unsecured note due through February 28, 2000 with B.P. Partners, L.P.,
an entity comprised of former partners of BFM who received deferred notes as
part of the purchase price for BFM. The $197.0 million in
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outstanding debt as of December 31, 1998 represents amounts remaining from
PNC's $240.0 million acquisition of BFM on February 28, 1995, which was
recorded on BFM's books. The revolving credit facility with PNC Bank, dated
February 28, 1996, as amended, bears interest at PNC Bank's "prime rate" and is
not terminable by the bank except in the event of a default. The unsecured note
bears interest at a fixed rate of 7.5% and is unconditionally guaranteed by
PNC. BlackRock repaid $18.8 million on February 28, 1999, and $28.2 million is
due on February 28, 2000. Total capital at June 30, 1999 was $285.3 million and
was comprised of $132.1 million of stockholders' equity and $153.2 million of
debt. Debt at June 30, 1999 included $125.0 million outstanding on the $175.0
million revolving credit facility with PNC Bank due December 31, 2002, and
$28.2 million on the unsecured note due February 28, 2000 with B. P. Partners,
L.P.
BlackRock intends that the net proceeds from the offerings will be used
to repay a portion of the outstanding indebtedness under our $175 million
revolving credit facility with PNC Bank.
Net cash flow used in financing activities was $4.4 million and $40.4
million for 1998 and 1997, respectively, and $43.8 million for the six months
ended June 30, 1999, while such activities provided approximately $20.8 million
of cash flow in 1996. During 1998, BlackRock received $34.2 million in net
proceeds from the sale of restricted stock to employees. On the March 31, 1998
formation date, $12.3 million in dividends were paid to PNC in order to
establish an appropriate exchange ratio for PNC and employee ownership
interests based on the fair market value of the combined businesses. Debt
payments totaled $28.2 million and $30.6 million for 1998 and 1997,
respectively, and $43.8 million for the six months ended June 30, 1999, with
outstanding debt increasing in 1996 by approximately $19.9 million.
Recent Accounting Developments
In 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133 ("Accounting for
Derivative Instruments and Hedging Activities"). SFAS No. 133 establishes
standards for recognizing and establishing fair value for derivative financial
instruments. SFAS No. 133, as amended by SFAS No. 137, "Accounting for
Derivative Instruments and Hedging Activities--Deferral of the Effective Date
of FASB Statement No. 133," is required to be adopted for fiscal years
beginning after June 15, 2000. BlackRock does not expect implementation to have
any significant effect on BlackRock's reported financial position or results of
operations.
Seasonality
BlackRock does not believe its operations are subject to significant
seasonal fluctuations.
Interest Rates
The value of assets under management is affected by changes in interest
rates. Since BlackRock derives the majority of its revenues from investment
advisory fees based on assets under management, BlackRock's revenues may be
adversely affected by changing interest rates. In a period of rapidly rising
interest rates, BlackRock's assets under management would likely be negatively
affected by reduced asset values and increased redemptions. See "Risk Factors--
Risk factors affecting our business--Decline in the securities markets could
lead to a decline in our revenues."
Inflation
The majority of BlackRock's revenues are based on the value of assets
under management. There is no predictable relationship between the rate of
inflation and the value of assets under management by BlackRock, except as
inflation may affect interest rates. BlackRock does not believe inflation will
significantly affect its compensation costs as they are substantially variable
in nature. However, the rate of inflation may affect BlackRock expenses such as
information technology and occupancy costs. To the extent inflation results in
rising interest rates and has other effects upon the securities markets, it may
adversely affect BlackRock's results of operations by reducing BlackRock's
assets under management, revenues or otherwise. See "Risk Factors--Risk factors
affecting our business--Decline in the securities markets could lead to a
decline in our revenues."
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Year 2000 Readiness
BlackRock has been working since 1997 to prepare its computer systems to
meet the Year 2000 challenge. This process involves reviewing, modifying and
replacing existing software, hardware and other equipment, as necessary, and
communicating with counterparties, external service providers and customers
regarding their responses to Year 2000 issues.
As of December 31, 1998, substantially all of BlackRock's internally
developed software had been tested and remediated where necessary. We had
substantially completed an organization-wide assessment of Year 2000 issues
relating to our critical system equipment as well as an assessment of the Year
2000 preparedness of our identified critical service providers.
The Year 2000 issue may have an adverse impact on the operations and
financial condition of the issuers of the securities in which the firm invests.
Before purchasing securities, BlackRock considers the Year 2000 readiness of
issuers. The depth of the review depends on the issuers' industry. BlackRock
will continue to review and assess the Year 2000 preparedness of issuers
throughout 1999.
During the third quarter of 1999, BlackRock plans to conduct tests of its
networking and telecommunications systems in an attempt to verify vendor
representations of Year 2000 readiness. We currently estimate that the total
cost of implementing our Year 2000 programs will not have a material impact on
our results of operations, liquidity or capital resources. No significant
expenditures have been made to replace existing systems solely for Year 2000
readiness reasons. The costs and timetable in which BlackRock plans to complete
its Year 2000 readiness activities are based on management's best estimates,
which were derived using numerous assumptions of future events including the
continued availability of certain resources, third party preparedness and other
factors. We have incurred approximately $800,000 in Year 2000 readiness
expenses through June 30, 1999 and we expect to spend an additional $200,000 to
fully implement our program. BlackRock can make no guarantee that these
estimates will prove correct, and actual results could differ from such plans.
BlackRock has reviewed and strengthened its business continuity plans to
address Year 2000 implications. We have written business continuity plans in
place for each of our four offices, including recovery strategies for data,
communications and personnel, designed to achieve the goal of resuming critical
business functions at an alternate site within 24 hours of an emergency. We
update and test these plans at least once a year to reflect changes in our
business and our systems. We also have written contingency plans for all of our
critical business systems at each office site which outline alternative
business procedures in the event of minor disruptions.
We are working with our critical service providers to provide alternate
service to our disaster recovery sites. We expect to have backup communications
lines in place, where appropriate, by December 31, 1999.
BlackRock's Year 2000 readiness efforts and contingency plans are also
subject to oversight and regulation by the SEC, the OCC, the Federal Reserve
and other regulatory bodies. As a registered investment adviser, we were
required to file a disclosure document with the SEC regarding our preparation
for Year 2000 complications. We have also responded to specific inquiries from,
and provided information to, the SEC, the OCC and the Federal Reserve regarding
the potential adverse implications to our business from Year 2000 consequences
and our plans for addressing them.
It is not possible to predict with certainty all of the adverse effects
that could result from a failure of BlackRock or of third parties to become
fully Year 2000 ready or whether such effects could have a material adverse
impact on BlackRock. However, if BlackRock were to fail to correct internal
Year 2000 problems or if BlackRock's contingency plans fail to mitigate any
such problems, or if one or more third parties is unable, due
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<PAGE>
to Year 2000 issues, to provide services required by BlackRock, a disruption of
operations resulting in increased operating costs, loss of revenues and other
adverse effects could occur. A disruption of operations might include a
temporary inability to process transactions and delays in providing services.
In addition, to the extent that the issuers of securities are weakened due to
Year 2000 issues, the value and liquidity of client portfolios could be
adversely affected. Disruption or suspension of activity in the world's
financial markets is also possible as a result of Year 2000 issues. See "Risk
Factors--Risk factors affecting our business--Failure to achieve Year 2000
readiness could disrupt operations and cause financial losses which could
decrease our stock price."
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BUSINESS
We differentiate ourselves from our competitors through our investment
process, the risk management software we have developed, the quality of our
client service and the stability of our management team. Together, these have
helped us deliver investment returns that have consistently met or exceeded our
clients' targets while assuming equal or lower levels of risk than performance
benchmarks. They also have enabled our experienced professionals to serve the
varying needs of our clients with customized products and services. We believe
that these factors, as well as the quality and depth of our employees, have
been critical to achieving growth in assets under management and will continue
to be of primary importance to our future success. We also believe that these
offerings will enhance stockholder value by furthering our ability to attract
and retain talented professionals, permitting strategic investments in our
existing business and improving our ability to participate in future industry
consolidation.
Assets Under Management
<TABLE>
<CAPTION>
At December 31, At June 30, Compound
----------------------------------------- ----------- Annual
1994 1995 1996 1997 1998 1999 Growth Rate
------- ------- ------- -------- -------- ----------- -----------
($ in millions)
<S> <C> <C> <C> <C> <C> <C> <C>
Separate Accounts
Fixed income*......... $13,848 $23,345 $28,958 $ 39,261 $ 52,869 $ 68,286 43%
Liquidity............. 3,269 5,556 7,430 10,019 13,826 12,362 34%
Equity................ 540 700 1,204 1,763 2,417 2,353 39%
------- ------- ------- -------- -------- --------
Subtotal.............. 17,657 29,601 37,592 51,043 69,112 83,001 41%
<CAPTION>
Mutual Funds
<S> <C> <C> <C> <C> <C> <C> <C>
Fixed income.......... 10,021 11,969 12,546 13,714 13,888 13,617 7%
Liquidity............. 20,398 21,183 23,933 29,827 35,555 31,921 10%
Equity................ 4,615 6,306 8,643 10,829 12,087 13,262 26%
------- ------- ------- -------- -------- --------
Subtotal.............. 35,034 39,458 45,122 54,370 61,530 58,800 12%
------- ------- ------- -------- -------- --------
Total................. $52,691 $69,059 $82,714 $105,413 $130,642 $141,801 25%
======= ======= ======= ======== ======== ========
</TABLE>
- --------
* including alternative investment products.
Background
In 1995, PNC acquired BFM, then a $25 billion fixed income manager, to
complement existing capabilities in liquidity and equities. Since the
acquisition, all of BFM's senior management team have remained with the firm.
During the same period fixed income assets have nearly tripled. As highlighted
below, the BFM management team has assumed increasing responsibility for a
substantial portion of PNC's other asset management activities over time.
. Mutual Funds. PNC has been actively involved in the mutual funds
management business for over 40 years, having offered its first
common trust fund in 1956. In January 1996, the BFM management
team merged several of PNC's mutual fund families and assumed
responsibility for related marketing and product management
efforts. We have continually worked to enhance service to PNC and
its customers, which represent the funds' largest investor base.
In addition, we sought to build on the relationships developed
through BFM's mutual fund business by targeting distribution
through broker-dealers and other intermediaries. Assets have grown
by more than $11 billion, or 85%, since BFM's management team
assumed responsibility for the fund family, which we renamed
BlackRock Funds in 1998. We have also established more than 200
broker agreements and as of June 30, 1999, BlackRock Funds ranked
as the 14th largest wholesale fund family in the United States.
. Liquidity. PNC entered the liquidity management business in 1973
with the introduction of TempFund, the first institutional money
market fund. At year-end 1996, BFM's management
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team was charged with overseeing PNC's liquidity management
business. We restructured sales and marketing to enhance our
ability to grow our institutional money market fund family,
Provident Institutional Funds, and to build a separate account
business in this product area. We also transitioned PNC's
liquidity portfolios to BlackRock's fixed income system to enhance
capacity and operating efficiency. Liquidity assets have increased
by $13 billion, or more than 40%, since BFM assumed responsibility
for the business.
. Equities. PNC's involvement in equity funds extends back to 1958
when it introduced the PNC Common Stock Fund, a common trust fund
that was merged into the BlackRock Funds Select Equity Portfolio
in 1998. The BFM management team assumed responsibility for a
substantial portion of PNC's equity investment management
businesses in the first quarter of 1998. Our initial efforts have
focused on maintaining continuity with our equity professionals
and on building the foundation for future growth by making
critical infrastructure investments, pursuing selected
enhancements to our investment process and integrating equity
expertise with our marketing and client service capabilities.
We believe that the PNC/BFM affiliation has been and will continue to be
successful in large measure because of our shared commitment to attracting and
retaining talented professionals, developing and delivering highly
sophisticated investment management services and systems and finding ways to
jointly pursue distribution of our products.
Asset Management Products
Today, we offer a wide variety of fixed income, liquidity, equity and
alternative investment products. Revenue from these products consists of
advisory fees typically structured as a percentage of assets managed and, in
some instances, a performance fee expressed as a percentage of returns
realized in excess of agreed-upon targets.
. Fixed Income. At June 30, 1999, fixed income assets under
management, excluding alternative investment products, were $80
billion. Since 1994, fixed income assets have grown by 31% on a
compound annual basis despite the fact that investors have been
shifting money out of bonds and into stocks to participate in the
equity bull market of the past decade.
Over time we have introduced new fixed income products to better
meet investor needs. Our product development efforts emphasize
meeting client needs by using existing capabilities and by adding
professional expertise that can be fully integrated with our
existing operations. The two capabilities we introduced in 1998,
BlackRock's Equity PLUS product and high yield bond management,
exemplify our deliberate approach to product line expansion.
Specifically, BlackRock's Equity PLUS product utilizes existing
fixed income and derivatives expertise to meet client demand for
new ways to participate in the equity markets, while development
of our high yield capability was deferred until we identified high
caliber professionals who would become integrated members of our
portfolio management team and complement existing fixed income
capabilities. Our fixed income products, excluding alternative
products, can be broadly grouped into three categories, as
described below.
Fixed Income Products*
<TABLE>
<CAPTION>
At December 31, At June 30,
--------------------------------------- -----------
1994 1995 1996 1997 1998 1999
------- ------- ------- ------- ------- -----------
($ in millions)
<S> <C> <C> <C> <C> <C> <C>
Core........................ $ 5,061 $ 9,817 $14,175 $21,050 $28,310 $32,936
Sector specialty............ 7,143 11,044 11,136 12,771 16,838 19,214
Targeted duration........... 11,665 14,352 15,790 18,665 19,673 27,656
------- ------- ------- ------- ------- -------
Total....................... $23,869 $35,213 $41,101 $52,486 $64,821 $79,806
======= ======= ======= ======= ======= =======
</TABLE>
- --------
* excluding alternative investment products.
34
<PAGE>
Core. Core products represented 41% of our fixed income assets
at June 30, 1999, and have increased at a compound annual growth
rate of 52% since 1994. All of these accounts seek to achieve
superior returns while assuming equal or lower levels of risk
than the Lehman Brothers Aggregate Index or other broad market
indices. Traditional core accounts invest in all asset classes
represented in the index while maintaining portfolio duration
close to that of the securities in the index. Enhanced index
core accounts more tightly constrain portfolio risk parameters
relative to the benchmark, while core plus accounts are
permitted to invest in assets not included in the index, such as
high yield and non-dollar debt.
Sector specialty. Sector specialty accounts represented 24% of
our fixed income assets at June 30, 1999, and have grown at a
25% compound annual rate since 1994. This product line includes
all accounts that seek to outperform a subset of the broad fixed
income market. Examples include mortgage, corporate, U.S.
Treasury and high yield mandates. The investment objective is
typically total return based, although clients may specify
income, tax or other constraints to be observed in the
management of their portfolios.
Targeted duration. Targeted duration products represented 35% of
our fixed income assets at June 30, 1999, and have experienced
compound annual growth in excess of 21% since 1994. These
accounts are designed to achieve returns in excess of the
duration of specified liabilities or of indices consisting of
U.S. Treasury securities or other obligations maturing within
defined time parameters. These products are often used by
investors seeking to earn a spread relative to their financing
costs or to fund other liabilities.
. Liquidity. At June 30, 1999, liquidity assets under management
were $44 billion. Products are designed to meet the needs of
domestic corporations and their foreign subsidiaries, municipal
treasurers, banks, bank trust departments and other
intermediaries. We seek to achieve attractive yields, subject to
stringent safety and liquidity guidelines, which are implemented
by a dedicated team of portfolio managers who are based in
Wilmington, Delaware and are supported by our fixed income credit
analyst team as well as our risk management systems. In general,
clients use our liquidity products to invest money that they
expect to need in the short-term. As a result, our money market
portfolios experience a high level of subscriptions and
redemptions on a daily basis, and liquidity assets under
management can be quite volatile. For example, at June 30, 1999,
liquidity assets were more than $5 billion less than at year-end
1998, although they were nearly $3 billion higher than they were
at June 30, 1998. As highlighted below, we offer three basic types
of liquidity products.
Liquidity Products
<TABLE>
<CAPTION>
At December 31, At June 30,
--------------------------------------- -----------
1994 1995 1996 1997 1998 1999
------- ------- ------- ------- ------- -----------
($ in millions)
<S> <C> <C> <C> <C> <C> <C>
Prime....................... $12,874 $13,187 $16,103 $23,279 $32,479 $28,082
Government.................. 7,518 8,954 10,211 11,384 12,677 12,254
Tax-exempt.................. 3,275 4,598 5,049 5,183 4,225 3,947
------- ------- ------- ------- ------- -------
Total....................... $23,667 $26,739 $31,363 $39,846 $49,381 $44,283
======= ======= ======= ======= ======= =======
</TABLE>
Prime. Prime products are designed to utilize a wide variety of
liquidity instruments to achieve enhanced money market returns.
These portfolios invest in "prime" or short-term corporate and
bank debt, as well as U.S. Treasury and agency obligations.
Customized versions include our offshore liquidity funds, which
are subject to investment constraints based on tax
considerations, and separate accounts that permit broader
investment flexibility than money market funds.
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<PAGE>
Government. Government products are designed to meet the needs
of investors who cannot assume credit risk of any kind or
otherwise prefer highly conservative products for their
liquidity investments. These products include all portfolios
that invest solely in U.S. Treasuries, agency securities and/or
obligations backed by U.S. Treasuries or agencies.
Tax-exempt. Tax-exempt products are designed for investors
seeking to optimize after-tax returns. These products include
national funds investing in securities that are exempt from
federal taxation, as well as state-specific funds that invest
solely in securities exempt from both federal and state
taxation.
. Equity. Our equity business represents the smallest of our primary
products lines, with assets under management of approximately $16
billion at June 30, 1999. Over 80% of these assets are in mutual
funds, all of which emphasize long-term capital appreciation and
strict adherence to investment discipline and market
capitalization guidelines. We have expanded our capacity in this
business and we intend to pursue separate accounts for
institutional investors, particularly as longer term investment
performance track records are established. Strategies are
developed and implemented by dedicated portfolio managers and
research analysts based in Philadelphia, Pennsylvania, and
Edinburgh, Scotland. Our equity products can be classified as
discussed below.
Equity Products
<TABLE>
<CAPTION>
At December 31, At June 30,
------------------------------------ -----------
1994 1995 1996 1997 1998 1999
------ ------ ------ ------- ------- -----------
($ in millions)
<S> <C> <C> <C> <C> <C> <C>
U.S. growth.................... $ 841 $1,576 $2,676 $ 3,542 $ 4,447 $ 4,881
U.S. value..................... 1,729 2,185 2,990 3,989 4,144 4,110
International.................. 846 1,056 1,676 1,926 2,084 1,984
Other.......................... 1,739 2,189 2,505 3,135 3,829 4,640
------ ------ ------ ------- ------- -------
Total.......................... $5,155 $7,006 $9,847 $12,592 $14,504 $15,615
====== ====== ====== ======= ======= =======
</TABLE>
U.S. growth. U.S. growth equity products seek to achieve returns
by investing in companies that are expected to realize
significant earnings growth and price appreciation. Products are
differentiated by the market capitalization of the companies in
which they invest, and include large-, mid-, small- and micro-
cap portfolios.
U.S. value. U.S. value equity products seek to achieve returns
versus market indices by investing in companies that are
undervalued relative to industry peers and/or historical trading
ratios. These products also vary according to the size of the
market capitalization of the underlying stocks in the portfolio,
and include large-, mid- and small-cap portfolios.
International. International equity products are designed to
deliver returns by investing in a variety of foreign stock
markets. These products are typically differentiated by
geographic markets and include Europe, Pacific Basin and
emerging market portfolios, as well as Europe, Australia and Far
East (EAFE) combined portfolios.
Other. Other equity products that we offer include balanced
funds, which invest in both equities and fixed income
securities, as well as index and enhanced index funds.
. Alternative Investment Products. At June 30, 1999, we managed $2.1
billion in alternative investment products. We have created these
products to take advantage of unique market opportunities or to
meet specific client interests. These products usually involve a
higher level of investment risk and offer the potential for
significantly greater absolute returns than our traditional
investment products. We generally structure these products as
commingled investment vehicles and limit the amount of capital we
will accept from investors. To date, we have created four
alternative investment products.
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<PAGE>
Alternative Investment Products
<TABLE>
<CAPTION>
At December 31, At June 30,
---------------------------- -----------
<S> <C> <C> <C> <C> <C> <C>
1994 1995 1996 1997 1998 1999
------ ---- ---- ---- ------ ------
($ in millions)
BAI.................................... $ -- $101 $359 $243 $ 173 $ 159
Obsidian............................... -- -- 44 246 582 760
Anthracite............................. -- -- -- -- 181 178
Magnetite.............................. -- -- -- -- 1,000 1,000
------ ---- ---- ---- ------ ------
Total.................................. $ -- $101 $403 $489 $1,936 $2,097
====== ==== ==== ==== ====== ======
</TABLE>
BlackRock Asset Investors. BAI was created in 1994 to target
opportunities in the rapidly changing real estate financing
markets. We structured BAI as a mutual fund to address unique
regulatory restrictions applicable to our pension clients. BAI
is currently in liquidation, which we expect to complete by the
fourth quarter of 1999. We expect to realize returns
substantially in excess of our original targets.
Obsidian Funds. The Obsidian Funds, our domestic and offshore
fixed income hedge funds, were introduced in 1996 in direct
response to client interest. These products implement the
strategies of our fixed income portfolio management team on a
more leveraged or more concentrated basis.
Anthracite Capital. Anthracite Capital Inc. (NYSE: AHR) was
offered in early 1998 to focus on continuing investment
opportunities in the real estate debt markets. Anthracite is a
mortgage REIT that brings together our capital markets expertise
with PNC's commercial mortgage loan origination and servicing
capabilities. We aggressively restructured Anthracite's
asset/liability structure last fall to strengthen its balance
sheet. We continue to seek ways to enhance Anthracite's
performance.
Magnetite Asset Investors. Late last year, we created Magnetite
Asset Investors, LLC to pursue investment opportunities in the
high yield market. Specifically, Magnetite invests in a variety
of high yield securities using our disciplined investment
process and the sub-advisory services of Kelso & Co., a
leveraged buyout firm, to enhance Magnetite's access to certain
types of high yield investments. Magnetite was privately offered
to institutional and high net worth investors, from whom we
raised debt and equity capital of $1 billion.
Investment Process
Our investment process emphasizes a highly disciplined team approach,
rather than depending upon a few "star" managers, use of our extensive
proprietary risk management software, and intensive credit and fundamental
research. Multiple checks and balances are incorporated in the process,
including automated compliance monitoring. The formal components of our
investment process include new account meetings prior to funding, daily
portfolio management meetings, weekly investment strategy group meetings and
monthly account review meetings. Other groups that support the investment
process, such as the credit committee and product specialist teams, also meet
regularly. All of these efforts are designed to help us achieve our clients'
objectives, while adhering to their investment guidelines and regulatory
requirements and conducting our operations efficiently.
. Investment Strategy. Our fixed income strategies seek to achieve
consistent returns in excess of client benchmarks with equal or
lower levels of risk. Our liquidity strategies concentrate on
enhancing yield, subject to safety and liquidity guidelines.
Although interest rates are a critical factor in determining bond
values, we do not emphasize strategies that involve speculating on
the level or direction of interest rates. Instead, we seek to add
value relative to client benchmarks principally by choosing the
types of bonds and the individual securities in which to invest.
The judgment of our portfolio managers, as well as quantitative
37
<PAGE>
and credit research, are fundamental to our investment process.
Broad strategies are set by our investment strategy group, which
considers macroeconomic and market conditions, as well as credit
and liquidity trends, to determine appropriate portfolio
positioning. The investment strategy group's conclusions are
implemented across all portfolios by product specialists, subject
to each client's investment guidelines.
Similarly, our equity strategies seek to achieve returns in excess
of market indices. We seek to add value through a disciplined
stock selection process that uses inputs from proprietary
quantitative analysis, fundamental research provided by our equity
analysts and market flow information supplied by our equity
traders. Strategies are developed by portfolio management teams
dedicated to each of our equity specialties.
. Risk Management. We look at investment risk across all of our
products in an asset/liability management framework. We believe
that in order to achieve long-term investment performance
consistent with clients' expectations, we must have a
comprehensive understanding of the investment risks taken, or
proposed to be taken, in each portfolio relative to the
corresponding liability, as well as those risks inherent in the
increasingly complex global capital markets. Our risk analyses are
customized as necessary to address unique regulatory, accounting
and tax considerations applicable to individual client portfolios.
We produce risk management reports daily and provide on-line
access to analyses that our portfolio managers use to evaluate and
monitor risks and refine investment strategy.
Credit and fundamental research are also critical components of
our investment process. Fixed income analysts evaluate industry
conditions, the creditworthiness of individual issuers and the
features of individual securities in order to recommend relative
industry weightings, establish our approved credit list and
provide ongoing surveillance throughout the holding period. Equity
analysts review company filings and research reports and visit
companies to assess numerous factors, including the quality of a
company's management team, its cash flows, the diversity of its
products and customers, its balance sheet strength and financial
condition, and both the company's and the industry's stage in the
business life cycle.
. Compliance. Our proprietary risk management system, used in our
fixed income and liquidity businesses, provides a high degree of
automation in trade processing and compliance. Trades are entered
electronically by our portfolio managers. Compliance criteria are
built into our system to provide efficient checks and balances.
Our system is designed to prevent execution of non-compliant
trades and to alert portfolio compliance personnel, who consult
investment guidelines and regulations, as well as portfolio and
account managers, to determine further action. Compliant trades
are forwarded to operations and administration personnel and to
clients' custodians, who work together to process each trade from
confirmation through settlement. Similar, though more manual,
processes are applied in our equity business and opportunities
will be pursued to achieve greater automation in these activities
over time.
. Interdisciplinary Account Teams. All account team members,
including marketing and client service, portfolio and risk
management, administration, operations and compliance personnel,
attend formal monthly account review meetings. These meetings are
organized by product type, so that deviations in performance among
accounts with comparable objectives and guidelines can be quickly
identified. In addition, investment performance, guideline
changes, and custody and trade operations issues are reviewed for
each account. To facilitate ongoing communication and senior
management oversight, up-to-date guidelines, portfolio holdings,
risk analyses and credit research are published on our intranet.
. Investment Performance. Separate account returns are aggregated
into composites in accordance with industry standards and reported
to pension consultants, who track and report performance (as
measured by gross returns) relative to market indices and manager
universes. Similarly, independent third parties, such as Lipper
Inc. and others, maintain mutual fund data and report performance
relative to indices and peers.
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. Fixed income performance is illustrated below for our core fixed
income product, which represents over 40% of our total fixed
income assets under management. Specifically, over the past 7
years we have consistently achieved higher returns and lower risk
than both the Lehman Brothers Aggregate Index, the most
frequently used benchmark, and a group of 51 managers reporting
core composite returns to Frank Russell Company.
. Liquidity performance is illustrated below for our TempFund,
which represents more than 50% of the assets managed in our
Provident Institutional Funds. Specifically, over the past 10
years, we have delivered higher yields and lower risk than the
universe of first tier, institutions-only money market funds as
reported by IBC Financial.
[LOGO--Composite and TempFund]
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. Equity performance is illustrated with the Lipper quartile
rankings of the BlackRock Funds equity portfolios, which represent
more than 80% of our equity assets under management. For the 1-
year period ended June 30, 1999, six of our equity funds ranked in
the first quartile.
BlackRock Funds Portfolios
Lipper Quartile Ranking* as of June 30, 1999
<TABLE>
<CAPTION>
1-Year 3-Year 5-Year
------ ------ ------
<S> <C> <C> <C>
U.S. growth
Large-cap growth......................................... 1 1 1
Mid-cap growth........................................... 1 NA NA
Small-cap growth......................................... 1 3 1
Micro-cap................................................ 1 NA NA
U.S. value
Large-cap value.......................................... 3 2 2
Mid-cap value............................................ 4 NA NA
Small-cap value.......................................... 4 2 3
International
International equity..................................... 2 3 3
International small cap.................................. 3 NA NA
International emerging markets........................... 3 4 4
Other
Index equity............................................. 2 2 3
Select equity............................................ 1 1 1
Balanced................................................. 1 1 1
</TABLE>
- --------
* The Lipper rankings and percentiles are from Lipper Inc. Lipper is a mutual
fund performance monitor. Lipper rankings are based on total returns with
dividends and distributions reinvested and do not reflect sales charges.
Funds with returns among the top 25% of a peer group of portfolios with
comparable objectives are in the first quartile, 25% to 50% are in the
second quartile and 50% to 75% are in the third quartile. Funds with returns
among the bottom 25% of returns are in the fourth quartile.
Distribution
Our investment products are offered to individual and institutional
investors worldwide through separate accounts and a variety of mutual funds.
Senior professionals work closely with our clients, consultants and
distributors to better understand investor needs. We tailor our products and
services to meet differing return objectives and risk tolerances, as well as
regulatory, tax, accounting and credit constraints. We use our technology
capabilities to develop products, to enhance client service by customizing
reports and, in the case of institutional clients, to deliver them efficiently
over the Internet.
. Separate Accounts. We have increased separate account assets under
management from $18 billion at year-end 1994 to $83 billion at
June 30, 1999, which represents compound annual growth of 41%.
Asset growth reflects additional assets from existing clients and
new client assignments. We distribute separate accounts and
alternative investment products principally through the direct
marketing efforts of our account management group, which included
36 professionals as of June 30, 1999. These employees focus
primarily on three client bases: tax-exempt, taxable and
international institutions. Alternative investment products are
used to expand investment options offered to existing clients and
to gain access to relatively untapped segments of the investor
universe.
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Separate Account Clients
<TABLE>
<CAPTION>
At December 31, At June 30,
--------------------------------------- -----------
1994 1995 1996 1997 1998 1999
------- ------- ------- ------- ------- -----------
($ in millions)
<S> <C> <C> <C> <C> <C> <C>
Tax-exempt.................. $ 4,444 $ 7,502 $12,068 $18,856 $25,181 $30,897
Taxable..................... 12,382 20,679 24,356 28,571 37,592 43,089
International............... 831 1,420 1,168 3,616 6,339 9,015
------- ------- ------- ------- ------- -------
Total....................... $17,657 $29,601 $37,592 $51,043 $69,112 $83,001
======= ======= ======= ======= ======= =======
</TABLE>
Tax-exempt. Our tax-exempt clients consist primarily of defined
benefit and defined contribution pension plans. As of June 30,
1999, 133 pension plans maintained $29 billion in separate
accounts with us. During 1998, assets managed for tax-exempt
investors increased by over $6 billion, or 34%. Our growth in
pension assets last year resulted in our being ranked as the
10th fastest growing pension asset manager across all products
and the 7th fastest growing among active domestic fixed income
advisers. Although the market for investment management services
in this channel remains highly fragmented, industry data
suggests that tax-exempt investors are increasingly
consolidating their manager universes, resulting in above
average growth for the largest and best performing managers. We
have been benefiting from this trend and we believe that we can
further develop this distribution channel with direct calling
and cross-selling efforts, as well as by introducing new
products and capabilities over time that enable us to meet the
needs of a broader universe of tax-exempt investors.
Taxable. Our taxable clients include insurance companies,
corporations, banks, third party mutual fund sponsors and other
financial services companies. As of June 30, 1999, we managed
$43 billion in assets for taxable clients. During 1998, separate
account assets managed for taxable clients increased by over $9
billion, or 32%. We are one of the largest independent managers
of insurance company assets with more than $28 billion under
management as of June 30, 1999. We offer a comprehensive range
of services to our insurance clients, many of which seek to
outsource some or all of their investment functions and retain
us to manage multiple portfolios, to serve as a manager of
managers and to deliver consolidated risk management reports
through password-protected sites on the World Wide Web.
Liquidity, short term and other portfolios are managed for a
variety of other taxable investors seeking to maximize income
relative to their funding costs. In addition, BlackRock manages
mutual funds for third party sponsors who wish to obtain
investment management services, while retaining marketing and
distribution consistent with their internal branding strategies.
International. Our international clients include mutual fund
sponsors, insurance companies, banks, corporations and
supranationals located in 16 countries. We have been active in
these markets since BFM was formed and, as of June 30, 1999, we
managed over $9.0 billion of assets on behalf of international
clients. Products include separate accounts and offshore funds
for both institutional and retail investors. In 1998, we raised
more than $1 billion of new assets in Japan through three
investment trusts created with Nomura Asset Management Co., Ltd.
(NAM), the largest money manager in Japan. Since year-end, we
have entered into a formal relationship with NAM by establishing
Nomura BlackRock Asset Management Co., Ltd., a joint venture
that will initially focus on offering BlackRock's fixed income
products in the Japanese institutional and investment trust
markets. To further promote our international business, we will
consider establishing additional strategic affiliations and
foreign business development offices in the future.
. Mutual Funds. We have increased mutual fund assets under
management from $35 billion at year-end 1994 to $59 billion at
June 30, 1999, which represents compound annual growth
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of more than 12%. Approximately $47 billion, or nearly 80%, of our
mutual fund assets are managed in our two open-end fund families,
BlackRock Funds and Provident Institutional Funds. We also manage
21 publicly-traded closed-end funds and several short-term
investment funds ("STIFs"). Our funds group is responsible for
wholesaling to PNC, third party broker-dealers and other
intermediaries. The funds group also conducts direct calling
efforts for our institutional funds and develops and implements
marketing, product management, branding and media relations
strategies designed to enhance client service and distribution
across all channels.
Mutual Fund Assets
<TABLE>
<CAPTION>
At December 31, At June 30,
--------------------------------------- -----------
1994 1995 1996 1997 1998 1999
------- ------- ------- ------- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
($ in millions)
BlackRock Funds........... $10,038 $13,670 $17,846 $22,129 $24,231 $25,255
Provident Institutional
Funds.................... 16,421 15,496 16,230 20,278 25,368 21,578
Closed-end funds.......... 7,080 7,953 7,881 8,114 7,756 7,507
STIFs..................... 1,495 2,339 3,165 3,849 4,175 4,460
------- ------- ------- ------- ------- -------
Total..................... $35,034 $39,458 $45,122 $54,370 $61,530 $58,800
======= ======= ======= ======= ======= =======
</TABLE>
BlackRock Funds. The BlackRock Funds family consists of 36
portfolios, including 13 equity, 15 fixed income and eight
liquidity funds. In May 1998, PNC converted $8.2 billion of PNC
common trust funds into the BlackRock Funds. For comparative
purposes in the table above, assets in the BlackRock Funds have
been restated to include the PNC common trust fund assets as if
such assets were part of the BlackRock Funds. Prior to 1996,
assets were gathered almost exclusively through PNC channels and
by acquisition. In addition to working closely with the PNC
channels, we have pursued marketing opportunities with third
party intermediaries by building a staff of 26 wholesalers and
securing more than 200 broker agreements. Through these efforts,
we have established BlackRock Funds as the 14th largest
wholesale fund family in the United States. We intend to
continue to pursue distribution within both PNC and wholesale
channels. We also plan to pursue opportunities with fund
supermarkets, financial planners and other distributors to
expand market penetration in the future.
Provident Institutional Funds. Provident Institutional Funds is
our institutional money market fund family and consists of 11
prime, government and tax-exempt funds. As mentioned earlier,
money market assets are subject to substantial volatility. We
market these funds through the direct calling efforts of a
dedicated sales force consisting of 12 regional salespeople. A
limited number of additional professionals are responsible for
wholesaling Provident Institutional Funds through the PNC
channels. In addition, we develop and deliver software,
including cash sweep and Web-based order entry capabilities,
that enhance clients' ability to efficiently invest in Provident
Institutional Funds. Our marketing strategies have focused on
diversifying our client base in light of consolidation and
internalization trends in the banking industry. We will continue
to closely observe industry trends and develop marketing
strategies to further diversify our client base.
Closed-end funds. Closed-end funds represent approximately 13%
of our mutual fund assets, with $8 billion managed at June 30,
1999 in 21 funds listed on the New York or American stock
exchanges. All of these funds are fixed income products,
including 13 target term trusts, a product that we introduced to
the industry in 1988. When the BlackRock 1998 Term Trust matured
at the end of last year at $10.02 per share, we became the first
and only term trust manager to meet or exceed the fund's
targeted
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terminal value. Unlike open-end funds, closed-end funds are
generally underwritten and sold exclusively through broker-
dealers. Although we maintain very close relationships with
brokerage firms, access to distribution is highly competitive
and increasingly expensive. In 1998, we raised $95 million in
the BlackRock High Yield Trust (NYSE: BHY), our first public
closed-end fund offering since 1993. We will continue to create
and offer closed-end funds as market opportunities permit.
STIFs. Short-term investment funds are also offered to
institutional clients through PNC. At June 30, 1999, we managed
over $4 billion of assets in several STIFs, which are structured
as open-end commingled investment trusts, rather than as
registered mutual funds.
Risk Management Products
Since the formation of BFM in 1988, we have made substantial investments
in developing sophisticated, risk management and analytic software. Today, the
risk management staff represents more than 25% of our total employees.
Professionals include quantitative and credit analysts, financial model and
software developers, and management information systems and technology
personnel. These professionals support our investment process, client service
efforts, computing environment and the growing number of clients who separately
purchase our risk management services.
Our investment technology has evolved over the years into a comprehensive
information processing capability fully integrated with sophisticated analytics
that support risk assessment and investment decision-making. We believe that
our combination of integrated front-to-back office automation and professional
expertise resulted in an increasing number of requests for our technology
products by large institutional clients. As a result, in 1995, we began
offering high value-added risk management systems and advisory services
separate from our asset management products. As of June 30, 1999, we provided
these services to 13 clients, including three relationships that we added in
the first six months of 1999. In total, we provide analyses with respect to
more than $500 billion of assets managed by these clients.
. Analytics Service Bureau. We offer daily, weekly or monthly
production of risk management reports to a variety of clients,
including insurance companies, banks and pension plans. Portfolio
transactions executed by the client's investment staff or other
asset managers on the client's behalf are transmitted to us. Asset
and liability positions are modeled and risk parameters are
measured for each position, for the corresponding portfolio and/or
for the balance sheet as a whole. We then generate risk management
reports and provide them through password-protected sites on the
Internet or through dedicated lines to the client's in-house
systems. Service bureau contracts are typically multi-year
arrangements in which we are paid a set-up fee at the outset and
an ongoing service fee based on the number of positions processed.
. Advisory Services. We also offer a range of advisory services in
conjunction with risk management reporting to enhance clients'
development of a variety of asset/liability management strategies.
Over time, these services have included asset disposition,
portfolio restructuring and hedging advice provided to service
bureau clients, broker-dealers, REITs and mortgage banks. Our
senior risk management professionals provide a highly customized
consulting service, working closely with clients to evaluate their
risk positions relative to their liabilities, market conditions
and regulatory, accounting and tax considerations. Hedging and
other risk management strategies are jointly developed for
implementation by the client or, at the client's direction, by us.
Assignments can be project-oriented or ongoing in nature, and
contracts provide fixed advisory fees and, occasionally,
performance fees based on the client's determination of overall
value-added.
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<PAGE>
. Trading Systems Services. In 1998, we entered into our first
contract to provide trading system outsourcing. BlackRock's system
was chosen following a search by a large institutional client that
included well-established industry competitors, evidencing our
strong capabilities in investment technology. A long lead-time was
necessary to complete hardware upgrades, further software
development and user documentation. The multi-year contract
provides set-up fees, annual service fees and consulting fees for
client-specified customization. Revenues, particularly in the
early years, will be substantially reinvested in order to satisfy
our obligations under the contract and to build our ability to
provide this service more efficiently in the future. We have
chosen to limit marketing of this product until this first
installation has been made and tested, but potential clients
include banks, insurance companies, brokerage firms and other
substantial fixed income investors.
We view these risk management activities as a start-up technology service
venture. By first establishing an analytics service bureau and providing risk
management advisory services, we have been able to attract or expand
relationships with a variety of sophisticated institutional investors, many of
which are leaders in their industries. At the same time, we are building the
capability to provide trading system outsourcing or to license our trading
system to others, which should provide substantially greater scale in the risk
management business over time.
Facilities
BlackRock's principal executive offices are located at 345 Park Avenue,
New York, New York 10154, where it occupies approximately 65,000 square feet of
space under various leases expiring through 2005. BlackRock also has office
space at 1600 Market Street, Philadelphia, Pennsylvania 19103 and 400 Bellevue
Parkway, Wilmington, Delaware 19805 where it occupies a total of approximately
46,500 square feet of space under a lease arrangement with PNC. See "Certain
Relationships and Related Transactions" and Note 7 of "Notes to BlackRock's
Consolidated Financial Statements."
Competition
BlackRock competes with investment management firms, mutual fund
complexes, insurance companies, banks, brokerage firms and other financial
institutions that offer products that are similar to, or alternatives to, those
offered by BlackRock. In order to grow our business, BlackRock must be able to
compete effectively for assets under management. Key competitive factors
include investment performance track records, investment style and discipline,
quality of client service and brand name recognition. We have historically
competed principally on the basis of our long-term investment performance track
record, our investment process, our risk management and analytic capabilities
and our approach to client service. Over the past five years, we have succeeded
in growing aggregate assets under management, and we believe that we will
continue to be able to do so by maintaining strong investment performance and
client service, building longer-term track records in our equity products, and
developing new products and new distribution capabilities. Many of our
competitors, however, have greater financial or marketing resources and better
brand name recognition than BlackRock. These factors and others identified
elsewhere in this prospectus may place BlackRock at a competitive disadvantage,
and there can be no assurance that our strategies and efforts to maintain our
existing assets and attract new business will be successful.
Employees
At June 30, 1999, BlackRock had 551 full-time employees, including 95
professionals in the portfolio management group, 154 professionals in risk
management and analytics, 108 professionals in the separate account and funds
marketing and client service areas and 90 professionals in administrative and
support departments.
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Legal Proceedings
On or about August 27, 1999, a plaintiff alleging herself to be a
shareholder of the BlackRock New York Term Trust filed a purported class action
lawsuit in the United States District Court for the Southern District of New
York against BFM, certain of its officers and directors, and certain of the
municipal term trusts managed by BFM, Laprade v. BlackRock Financial
Management, Inc. et al., The complaint asserts causes of action under Section
206 of the Investment Advisers Act of 1940, Sections 20(a), 36(b) and 48(a) of
the Investment Company Act of 1940, and for breach of fiduciary duty and breach
of contract, by alleging that BFM and the other defendants violated both
statutory and common law in connection with the proposed mergers of the
defendant municipal term trusts into certain municipal perpetual funds also
managed by BFM because, among other things, BFM's merger of these term trusts
with other mutual funds managed by BFM allegedly may prevent the return of the
original investments of investors in the term trusts and because defendants
allegedly failed to consider other options that might result in greater returns
to these investors. The complaint seeks, among other things, certification of a
class on behalf common shareholders of the defendant municipal term trusts, an
unspecified amount of damages plus interest and costs and expenses, including
reasonable attorneys' fees, and equitable and injunctive relief.
Although the lawsuit is in its preliminary stages and, accordingly, the
ultimate outcome cannot be predicted at this time, BlackRock presently believes
that this lawsuit will not have a material adverse effect on BlackRock's
consolidated financial position or results of operations.
From time to time, we may be a defendant in various other lawsuits
incidental to our business. We do not believe the outcome of any current
litigation will have a material adverse effect on BlackRock's financial
condition or results of operations.
Regulation
Virtually all aspects of BlackRock's business are subject to various
federal and state laws and regulations. These laws and regulations are
primarily intended to protect investment advisory clients, stockholders of
registered investment companies, PNC's bank subsidiaries and bank customers of
PNC Bank. Under these laws and regulations, agencies that regulate investment
advisers and bank subsidiaries such as BlackRock and its subsidiaries have
broad administrative powers, including the power to limit, restrict or prohibit
it from carrying on business if it fails to comply with such laws and
regulations. Possible sanctions for significant compliance failures include the
suspension of individual employees, limitations on engaging in certain lines of
business for specified periods of time, revocation of investment adviser and
other registrations, censures and fines.
BlackRock's subsidiaries are subject to regulation, primarily at the
federal level, by the SEC, the Department of Labor, the OCC, the Federal
Reserve, the Commodity Futures Trading Commission and other regulatory bodies.
The Investment Advisers Act imposes numerous obligations on registered
investment advisers, including record keeping requirements, operational
requirements, marketing requirements, disclosure obligations and prohibitions
on fraudulent activities. The Investment Company Act imposes similar
obligations, as well as detailed operational requirements, on investment
advisers to registered investment companies and other managed accounts. The SEC
is authorized to institute proceedings and impose sanctions for violations of
the Investment Advisers Act and the Investment Company Act, ranging from fine
and censure to termination of an investment adviser's registration.
BlackRock derives a substantial majority of its revenues from investment
advisory services through its investment management agreements. Under the
Investment Advisers Act, BlackRock's investment management agreements may not
be assigned without the client's consent. Under the Investment Company Act,
advisory agreements with registered investment companies terminate
automatically upon assignment. The term
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"assignment" is broadly defined and may include direct assignments as well as
assignments that may be deemed to occur upon the transfer, directly or
indirectly, of a controlling interest in BlackRock or any of its parent
companies. The offerings will not constitute an assignment for these purposes.
Accordingly, BlackRock does not intend to seek client consents or approvals of
new investment advisory agreements in connection with these transactions.
BlackRock's subsidiaries are subject to ERISA and to regulations
promulgated thereunder, insofar as they act as a "fiduciary" under ERISA with
respect to benefit plan clients. ERISA and applicable provisions of the
Internal Revenue Code impose certain duties on persons who are fiduciaries
under ERISA, prohibit certain transactions involving ERISA plan clients and
provide monetary penalties for violations of these prohibitions. One of
BlackRock's subsidiaries is registered as a commodity pool operator and
commodity trading adviser with the CFTC and the National Futures Association.
The CFTC and NFA administer a comparable regulatory system covering futures
contracts and various other financial instruments in which BlackRock clients
may invest. Another subsidiary is registered with the SEC as a broker-dealer
and is a member of the National Association of Securities Dealers. Although
this entity's NASD membership agreement limits its permitted activities to the
sale of investment company securities and annuities and certain private
placement and financial consulting activities, it is subject to the customer
dealing, reporting and other requirements of the NASD as well as the net
capital and other requirements of the SEC.
PNC is a bank holding company regulated by the Federal Reserve under the
Bank Holding Company Act. PNC Bank, the indirect parent of BlackRock, is a
national bank subsidiary of PNC. As the subsidiary of PNC Bank, a national
bank, BlackRock is subject to most banking laws, regulations, and orders that
are applicable to PNC Bank, and therefore to the supervision, regulation, and
examination of the OCC. The OCC and the FDIC also have broad enforcement
authority over PNC Bank and its subsidiaries, including the power to prohibit
PNC or any subsidiary from engaging in any activity that, in the OCC's opinion,
constitutes an unsafe or unsound practice in conducting its business, to
terminate deposit insurance, to appoint the FDIC as conservator or receiver of
PNC Bank if any of a number of conditions are met, and to impose substantial
fines and other penalties. Supervision and regulation of PNC and its
subsidiaries is intended primarily for the protection of depositors, the
deposit insurance funds of the FDIC, and the banking system as a whole, not for
the protection of stockholders or creditors of national banks or their
subsidiaries. The Federal Reserve has regulatory and supervisory authority with
respect to PNC's non-U.S. activities and investments as well as with respect to
its non-bank subsidiaries; the OCC, the FDIC, and the Office of Thrift
Supervision have regulatory and supervisory authority with respect to PNC's
bank and thrift subsidiaries and subsidiaries of such banks and thrifts.
Because BlackRock is a consolidated subsidiary of PNC Bank, federal
restrictions on payments of dividends by PNC Bank might be applied to
BlackRock. Under federal law, OCC approval is needed before PNC Bank may pay
dividends in any year in which the total of all dividends paid would exceed the
total of PNC Bank's net profits for that year combined with its retained net
profits from the prior two years. PNC Bank also may not pay dividends exceeding
its capital surplus.
As a subsidiary of a national bank, BlackRock may not conduct new
activities, establish a subsidiary, or acquire the stock or assets of another
company unless it first obtains the written approval of the OCC and, with
respect to most non-U.S. activities or investments, the Federal Reserve. The
OCC will only approve activities and investments that are legally permissible
for a national bank, and consistent with prudent banking principles and
regulatory policy. The Federal Reserve will approve only those activities that
are usual in connection with the transaction of the business of banking or
other financial operations outside of the United States. BlackRock is not
permitted to act as a distributor of any fund, the shares of which are offered
more often than four times a year or to control any open-end fund or any
closed-end fund that invests in assets of a type or quantity not permitted to
be held by a bank holding company. Investment management firms with which
BlackRock competes commonly invest in investment companies and private
investment funds to which they provide services. BlackRock may invest in
investment companies and private investment funds to which it provides
advisory, administrative or other services, to the extent consistent with
applicable law and regulatory interpretations, including applicable banking
laws. BlackRock's current domestic and overseas activities are permissible for
a national bank.
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Under federal law, PNC Bank and its subsidiaries, including BlackRock,
generally may not engage in transactions with PNC or its non-bank subsidiaries,
except on terms and under circumstances that are substantially the same as
those prevailing for comparable transactions involving nonaffiliated companies,
or, in the absence of comparable transactions, that in good faith would be
offered to or would apply to nonaffiliated companies. In addition, certain
transactions, including loans and other extensions of credit, guarantees,
investments, and asset purchases between PNC Bank and its subsidiaries,
including BlackRock, on the one hand, and PNC and its nonbank subsidiaries on
the other hand, are limited to 10% of PNC Bank's capital and loan loss reserve
allowance for transactions with a single company and to 20% of PNC Bank's
capital and loan loss reserve allowance for aggregate transactions with PNC and
all of its nonbank subsidiaries and other affiliates. In certain circumstances,
federal regulatory authorities may impose more restrictive limitations. Such
extensions of credit, with limited exceptions, must be fully collateralized.
The FDIC could be appointed as conservator or receiver of PNC Bank if the
bank were to become insolvent or if other conditions or events were to occur.
As conservator or receiver, the FDIC could exercise all rights of PNC Bank as
stockholder of BlackRock. The FDIC would also have the authority to repudiate
contracts by PNC Bank, including servicing or other contracts with BlackRock,
at any time within 180 days of its appointment as conservator or receiver, and
would be obligated to pay BlackRock only "actual direct compensatory damages,"
not including damages for lost profits or opportunity, as of the date of
conservatorship or receivership as a result of such repudiation. The FDIC could
also disregard, without paying damages, any contract that tended to diminish or
defeat the FDIC's interest in any PNC Bank asset if the contract were not:
. in writing;
. executed by PNC Bank and BlackRock contemporaneously with the
acquisition of the asset by PNC Bank;
. approved by the board of directors of PNC Bank or its loan
committee with the approval reflected in the minutes of the board
or committee; and
. continuously, from the time of its execution, an official record
of PNC Bank.
In addition, the FDIC could obtain a stay of up to 90 days of any
judicial action or proceeding involving PNC Bank, and could require BlackRock
to exhaust its remedies under FDIC claims procedures before pursuing any
available judicial remedy.
PNC's bank and thrift subsidiaries are subject to "cross-guarantee"
provisions under federal law that provide if one of these banks or thrifts
fails or requires FDIC assistance, the FDIC may assess a "commonly controlled"
bank or thrift, such as PNC Bank, for the estimated losses suffered by the
FDIC. The FDIC's claim is superior to the claims of affiliates, such as
BlackRock, and of stockholders of the banks. At December 31, 1998, all of PNC's
bank and thrift subsidiaries exceeded the required ratios for classification as
"well capitalized" under statutory and regulatory standards.
BlackRock's international operations are subject to the laws of non-U.S.
jurisdictions and non-U.S. regulatory agencies or bodies. As BlackRock expands
its international business its internal operations may become subject to
requirements in numerous jurisdictions regarding reporting of beneficial
ownership positions in securities issued by companies whose securities are
publicly traded in those countries. BlackRock's subsidiaries are subject to
periodic examination by these regulatory agencies. BlackRock's international
subsidiaries have developed comprehensive compliance systems in order to
satisfy applicable regulatory requirements. The failure of BlackRock's internal
operations to comply with the applicable regulatory frameworks could have a
material adverse effect on BlackRock.
PNC currently holds its ownership interest in BlackRock through a
subsidiary of PNC Bank. As such, BlackRock currently is not subject to
regulation under the nonbanking provisions of the Bank Holding Company Act. If
PNC were to hold its ownership interest in BlackRock at the holding company
level as a nonbank subsidiary, BlackRock would no longer be subject to OCC
supervision and regulation, but would instead become subject to Federal Reserve
supervision and regulation as a nonbank subsidiary of a bank holding company.
47
<PAGE>
MANAGEMENT
Directors and Executive Officers of BlackRock
The following table sets forth certain information concerning the
directors and executive officers of BlackRock. Our board currently has six
members. Four of our directors, Thomas H. O'Brien, James E. Rohr, Walter E.
Gregg, Jr., and Helen P. Pudlin are currently executive officers and/or
directors of PNC and various PNC subsidiaries. We expect to add four board
members in the several months following the offerings, all of whom will be
independent. The ages listed below are as of January 1, 1999.
Our board will be divided into three classes (I, II, and III) serving
staggered terms. After an initial transition period following the offerings,
directors in each class will be elected to serve for three-year terms and will
serve until their successors are elected and qualified. Each year, the
directors of one class will stand for election as their terms of office expire.
We expect that after the offerings:
. will be designated class I directors, with terms expiring in 2000,
. will be designated class II directors, with terms expiring in
2001, and
. will be designated class III directors, with terms expiring in
2002.
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Laurence D. Fink........ 46 Director, Chairman and Chief Executive Officer
Ralph L. Schlosstein.... 47 Director and President
Thomas H. O'Brien....... 61 Director
James E. Rohr........... 50 Director
Walter E. Gregg, Jr..... 57 Director
Helen P. Pudlin......... 49 Director
Robert S. Kapito........ 41 Vice Chairman
Paul L. Audet........... 45 Managing Director and Chief Financial Officer
Robert P. Connolly...... 44 Managing Director and General Counsel
</TABLE>
Laurence D. Fink, director, chairman and chief executive officer of
BlackRock, is chairman of the management committee and co-chair of the
investment strategy group. He is also chairman of the board of BlackRock's
family of closed-end mutual funds, a director of BlackRock's offshore funds and
alternative investment vehicles, and chairman of the board of Nomura BlackRock
Asset Management Co., Ltd. Mr. Fink serves on the asset liability committee of
PNC Bank. Prior to founding BFM in 1988, Mr. Fink was a managing director and
member of the management committee of The First Boston Corporation.
Ralph L. Schlosstein, director and president of BlackRock, is a member of
the management committee and the investment strategy group. Mr. Schlosstein is
president and a director of BlackRock's family of closed-end mutual funds and a
director and officer of BlackRock's alternative investment vehicles. Prior to
founding BFM in 1988, Mr. Schlosstein was a managing director of Lehman
Brothers Inc. Mr. Schlosstein is a director of Pulte Corporation.
Thomas H. O'Brien, director, is chairman and chief executive officer of
PNC and PNC Bank and a member of PNC's Office of the Chairman. Mr. O'Brien was
appointed to the board of directors and elected vice chairman of PNC in 1983,
president and chief executive officer in 1985, and chairman in June 1988. Prior
to his election as president and chief executive officer in 1985, he was
chairman and chief executive officer of Pittsburgh National Bank (predecessor
of PNC Bank). He joined Pittsburgh National Bank in 1962, was elected vice
president in 1967, senior vice president in 1973, executive vice president in
1980, vice chairman of PNC Bank in 1983, and chairman of PNC Bank in 1993. Mr.
O'Brien is a director of Bell Atlantic Corp., US Airways Inc., and Hilb, Rogal
& Hamilton Co.
48
<PAGE>
James E. Rohr, director, is president and chief operating officer of PNC
and PNC Bank and a member of PNC's Office of the Chairman. Mr. Rohr joined PNC
through its Management Development Program in 1972. In 1990, Mr. Rohr was
elected chairman and chief executive officer of Pittsburgh National Bank. He
was elected a vice chairman of PNC in 1989, named a director in 1990, elected
president in 1992 and named chief operating officer in 1998. Mr. Rohr is a
director of Allegheny Teledyne Incorporated and Equitable Resources, Inc.
Walter E. Gregg, Jr., director, is vice chairman of PNC and a member of
PNC's Office of the Chairman. He also is a director of PFPC Worldwide, PNC's
mutual fund servicing arm. Mr. Gregg joined Pittsburgh National Bank in 1974 as
resident attorney. He was elected senior vice president, treasurer and chief
counsel-regulatory reporting/acquisitions in 1983, executive vice president-
finance and administration for PNC in 1989, senior executive vice president in
1997, a director in 1998 and vice chairman in 1999.
Helen P. Pudlin, director, is senior vice president and general counsel
of PNC and PNC Bank. Ms. Pudlin joined PNC in 1989 as general counsel of
Provident National Bank (predecessor of PNC Bank) from the law firm of Ballard,
Spahr, Andrews & Ingersoll in Philadelphia, where she was a partner. She was
elected senior vice president and deputy general counsel for PNC in 1992,
became a managing general counsel in 1993, was named senior vice president and
general counsel of PNC later in 1993, and became senior vice president and
general counsel of PNC Bank in 1998.
Robert S. Kapito, vice chairman, is head of the portfolio management
group, co-head of the equity operating committee, a member of the investment
strategy group and a member of the management committee. Mr. Kapito serves as a
vice president of BlackRock's family of closed-end mutual funds and of the
Smith Barney Adjustable Rate Government Income Fund. Prior to founding BFM in
1988, Mr. Kapito was a vice president in the mortgage products group at The
First Boston Corporation.
Paul L. Audet, managing director, is chief financial officer and a member
of the management committee and co-head of the infrastructure operating
committee. Prior to joining BlackRock in 1998, Mr. Audet was a senior vice
president at PNC, responsible for mergers and acquisitions and for finance at
PNC Asset Management Group, Inc. He joined PNC in 1991 as chief financial
officer of PNC's eastern operations, which included Provident National Bank in
Philadelphia and PFPC Worldwide in Wilmington, Delaware.
Robert P. Connolly, managing director, is general counsel of BlackRock
and a member of the management committee. Mr. Connolly is responsible for all
legal affairs of BlackRock. Prior to joining PNC Asset Management Group, Inc.
in 1997, Mr. Connolly was managing director and general counsel of New England
Funds, L.P. beginning in April 1995. From March 1993 through April 1995, Mr.
Connolly was managing director and general counsel of Kroll Associates, Inc.,
and prior to March 1993, he was managing director and general counsel of
Equitable Capital Management Corporation.
Committees of the Board of Directors
BlackRock has established an executive committee, a compensation
committee, an investment committee and a nominating committee. An audit
committee will be established after the offerings. As additional persons join
our board in connection with and following the offerings, we expect that
membership on some of these committees will be modified and that we will
appoint other members to some of these committees. Our by-laws provide that, so
long as PNC owns a majority of the voting power of our outstanding common
stock, the majority of the members of each committee will be directors who are
also directors and/or officers of PNC to the extent permitted by applicable law
or stock exchange policy.
49
<PAGE>
The executive committee will be authorized to exercise, between meetings
of our board, all of the powers and authority of the board in the direction and
management of BlackRock, except as prohibited by applicable law and except to
the extent another committee has been accorded authority over the matter. The
audit committee will recommend the annual appointment of BlackRock's auditors,
with whom the audit committee will review the scope of audit and non-audit
assignments and related fees, accounting principles used by BlackRock in
financial reporting, internal auditing procedures and the adequacy of
BlackRock's risk management, compliance and internal control procedures. The
compensation committee will administer BlackRock's stock award and incentive
plans and will establish the compensation for BlackRock's executive officers.
The investment committee will review and make recommendations to the board of
directors regarding investments by BlackRock, including investments in our
alternative investment products. The nominating committee will review the
qualifications of potential candidates for the board of directors, report its
findings to the board of directors and propose nominations for board
memberships for approval by the board of directors and submission to the
stockholders of BlackRock for elections. Our board may alter the duties of
these committees and may establish other committees from time to time to
facilitate the management of the business and affairs of BlackRock.
Compensation of Directors
Directors who are also employees of BlackRock or PNC will receive no
compensation for serving as directors or committee members. Non-employee
directors will receive total compensation of $50,000 per year, and may elect to
receive common stock in lieu of all or a portion of this compensation. See
"Executive Compensation--Non-employee Directors Stock Compensation Plan."
Key Employees
The following table sets forth certain information concerning key
employees of BlackRock. The ages listed below are as of January 1, 1999.
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Keith T. Anderson................................. 39 Managing Director
Rosemarie F. Bruno................................ 39 Managing Director
Daniel B. Eagan................................... 36 Managing Director
Hugh R. Frater.................................... 43 Managing Director
Henry Gabbay...................................... 51 Managing Director
Bennett W. Golub.................................. 41 Managing Director
Charles S. Hallac................................. 34 Managing Director
Barbara G. Novick................................. 38 Managing Director
Karen H. Sabath................................... 33 Managing Director
Susan L. Wagner................................... 37 Managing Director
William J. Wykle.................................. 61 Managing Director
</TABLE>
Keith T. Anderson, managing director, is chief investment officer, fixed
income and co-chair of the investment strategy group, as well as co-head of the
fixed income operating committee and a member of BlackRock's management
committee. Mr. Anderson also serves as a vice president of BlackRock's family
of closed-end mutual funds. Prior to founding BFM in 1988, Mr. Anderson was a
vice president in fixed income research at The First Boston Corporation.
Rosemarie F. Bruno, managing director, is director of human resources and
a member of the management committee. Ms. Bruno is responsible for the firm's
human resources strategy, programs and policies. Prior to joining BlackRock in
1998, Ms. Bruno was the New York Metro Region Human Resources Director for
Kwasha HR Solutions of PricewaterhouseCoopers.
50
<PAGE>
Daniel B. Eagan, managing director, is a senior portfolio manager,
equities, a member of the equity operating committee and a member of the
management committee. His primary responsibility is as lead manager for large-
cap value and enhanced core equity portfolios. He is also the co-manager for
small-cap value products. Before joining PNC Asset Management Group in 1994,
Mr. Eagan was a senior research consultant for William M. Mercer Asset
Planning, Inc.
Hugh R. Frater, managing director, is president and director of
Anthracite Capital, Inc., head of the real estate operating committee and a
member of the management committee. Anthracite Capital, Inc. is a REIT that was
created by BlackRock in 1998. Prior to forming the REIT, Mr. Frater co-headed
BlackRock's account management group. Before joining BFM in 1988, Mr. Frater
was a vice president in investment banking at Lehman Brothers Inc.
Henry Gabbay, Ph.D., managing director, is the head of the fund
administration and operations group and is a member of the management
committee. Dr. Gabbay also serves as treasurer for BlackRock's family of
closed-end mutual funds. Prior to joining BFM in 1989, Dr. Gabbay was a vice
president in the finance department at The First Boston Corporation.
Bennett W. Golub, Ph.D., managing director, is co-head of the risk
management and analytics group, a member of the investment strategy group and
the credit committee, and a member of the management committee. Prior to
founding BFM in 1988, Dr. Golub was a vice president at The First Boston
Corporation.
Charles S. Hallac, managing director, is co-head of the risk management
and analytics group, a member of the investment strategy group and a member of
the management committee. Prior to joining BFM in 1988, Mr. Hallac was an
associate in the mortgage products group at The First Boston Corporation.
Barbara G. Novick, managing director, is head of the account management
group, co-head of the fixed income and equity operating committees and a member
of the management committee. Prior to founding BFM in 1988, Ms Novick was a
vice president in the mortgage products group at The First Boston Corporation.
Karen H. Sabath, managing director, is head of the funds group and the
funds operating committee and a member of BlackRock's management committee. Ms.
Sabath also serves as the secretary for BlackRock's family of closed-end mutual
funds. Prior to joining BFM in 1988, Ms. Sabath was an associate in the
mortgage products group at The First Boston Corporation.
Susan L. Wagner, managing director, is head of the strategy and product
development group, co-head of the infrastructure operating committee and a
member of the management committee. Ms. Wagner serves as a director of
BlackRock's offshore funds and an officer of BlackRock's alternative investment
vehicles. Prior to founding BFM in 1988, Ms. Wagner was a vice president in the
mortgage and savings institutions group at Lehman Brothers Inc.
William J. Wykle, managing director, is a senior portfolio manager,
equities, a member of the equity operating committee and a member of the
management committee. His primary responsibility is lead manager on the mid-
small- and micro-cap growth products, for which he oversees the investment
management and research process. Before joining PNC Asset Management Group in
1986, Mr. Wykle was a senior vice president and chief investment officer at One
Valley Bancorp of West Virginia.
51
<PAGE>
EXECUTIVE COMPENSATION
Summary of Compensation
The following summary compensation table sets forth information
concerning compensation earned in the fiscal year ended December 31, 1998, by
BlackRock's chief executive officer and its other four most highly compensated
executive officers (the "named executive officers").
Summary Compensation Table--1998
<TABLE>
<CAPTION>
Annual Compensation
--------------------------------------
Other
Name and Annual All Other
Principal Position Salary Bonus Compensation Compensation
------------------ -------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
Laurence D. Fink......... $300,000 $5,641,855 $ -- $281,217(1)
Chairman and Chief
Executive Officer
Ralph L. Schlosstein..... $225,000 $3,435,163 $ -- $178,276(2)
President
Robert S. Kapito......... $150,000 $4,586,736 $ -- $163,068(3)
Vice Chairman
Paul L. Audet............ $257,692(4) $ 300,000(5) $1,260(6) $ 43,285(7)
Chief Financial Officer
Robert P. Connolly....... $250,000(8) $ 210,000 $ -- $ 40,338(9)
General Counsel
</TABLE>
- --------
(1) Includes $9,600 matching contribution to Incentive Savings Plan, $8,400
contributions to the non-qualified plan, $263,217 for value of discount to
fair market value of purchased stock.
(2) Includes $9,600 matching contribution to Incentive Savings Plan, $3,900
contributions to the non-qualified plan, $164,776 for value of discount to
fair market value of purchased stock.
(3) Includes $9,000 matching contributions to Incentive Savings Plan, $154,068
for value of discount to fair market value of purchased stock.
(4) $40,000 as BlackRock Executive.
(5) $200,000 as BlackRock Executive.
(6) Reimbursement from PNC for certain tax liabilities (club membership).
(7) $6,913 KEEP premium paid by PNC Bank Corp and $36,372 for relocation.
(8) $182,692 as BlackRock Executive.
(9) Includes $5,192 matching contribution to Incentive Savings Plan, $22,812
for relocation and $12,334 for value of discount to fair market value of
purchased stock.
PNC Stock Options
The following table sets forth information concerning the grant of PNC
stock options to each of BlackRock's named executive officers during the last
fiscal year.
PNC Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Individual Grants
------------------------------------------------
% of Total
Number of Options Grant
Securities Granted to Date
Underlying PNC Employees Exercise Present
Options in Fiscal or Base Expiration Value
Name Granted(1) Year Price ($/SH) Date ($)(2)
---- ---------- ------------- ------------ ---------- --------
<S> <C> <C> <C> <C> <C>
Laurence D. Fink..... 35,000 1.00% $57.8125 5/28/08 $335,000
Ralph L.
Schlosstein......... 25,000 0.72% $57.8125 5/28/08 $239,500
Robert S. Kapito..... 10,000 0.29% $57.8125 5/28/08 $ 95,800
Paul L. Audet........ 15,000 0.43% $54.7188 2/19/08 $134,400
Robert P. Connolly... 7,400 0.21% $54.7188 2/19/08 $ 66,304
</TABLE>
- --------
(1) The options granted to Messrs. Fink, Schlosstein and Kapito have a grant
date of May 28, 1998, and became exercisable on May 28, 1999. The options
granted to Messrs. Audet and Connolly have a grant date of February 19,
1998, and became exercisable on February 19, 1999.
52
<PAGE>
(2) The chart below shows, by option grant date, the assumptions used to
determine the grant date present value per option. BlackRock or PNC Bank in
no way intends to provide any predictions or assurances with respect to
option or common stock values, as some of the underlying assumptions are
highly subjective.
<TABLE>
<CAPTION>
Annualized Dollar
Risk Free Estimated Value
Grant Market Exercise Rate of Useful Dividend Of
Date Price Price Volatility Return Life Yield@ Option
----- ------ -------- ---------- ---------- --------- -------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
2/19/98 $54.72 $54.72 0.198 5.57% 6 Years 4.40% $8.96
5/28/98 $57.81 $57.81 0.199 5.65% 6 Years 4.40% $9.58
</TABLE>
Exercise of PNC Options
The following table sets forth information concerning the exercise of PNC
stock options during the last fiscal year by each of BlackRock's named
executive officers and the fiscal year-end value of unexercised options.
Aggregated Option Exercises in Last Fiscal Year, and Fiscal Year-End Option
Values
<TABLE>
<CAPTION>
Number of Securities
Shares Underlying Value of Unexercised
Acquired on Value Unexercised Options In-the-Money Options
Exercise Realized at FY-End at FY-End
----------- -------- ------------------------- -------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Laurence D. Fink........ -- $ -- 40,000 35,000 $956,250 $ --
Ralph L. Schlosstein.... 30,000 $499,376 -- 25,000 $ -- $ --
Robert S. Kapito ....... -- $ -- 9,400 10,000 $ 96,937 $ --
Paul L. Audet........... -- $ -- 12,700 15,000 $130,968 $ --
Robert P. Connolly...... -- $ -- -- 7,400 $ -- $ --
</TABLE>
PNC Defined Benefit or Actuarial Plan
Mr. Audet and Mr. Connolly are the only BlackRock executive officers who
participate in PNC's pension plan. Mr. Audet and Mr. Connolly would receive
estimated total annual benefits (including those payable by supplemental non-
qualified pension plans) upon retirement at age 65 equal to $320,939 and
$96,772, respectively. The benefits have been projected assuming that (a) Mr.
Audet's and Mr. Connolly's salary remain constant and (b) the 30-year U.S.
Treasury Bond rate until retirement is 7.0%.
Employment Agreements
BlackRock has entered into employment agreements and stock arrangements
with the named executive officers that are designed to retain their services
through compensation and equity arrangements.
BlackRock intends to enter into new employment agreements with the named
executive officers which will become effective when the offerings are
completed. The named executive officers are generally referred to as
"executives." These employment agreements will provide for compensation for
each executive in the form of an annual base salary and an annual bonus in an
amount determined by BlackRock and will provide that BlackRock's management
committee will manage the day-to-day operations of BlackRock. Generally, these
agreements will expire on December 31, 2002.
The employment agreements will provide that the employment of an
executive will terminate upon the death or disability of the executive, and may
be terminated by BlackRock for cause or good reason or by the
53
<PAGE>
executive by reason of a deficient opportunity (as defined below). Other than
Mr. Fink's employment agreement, the employment agreements will provide that
the determination as to whether an executive's termination of employment is for
cause or good reason can only be made by BlackRock's chief executive officer
and a majority of the members of its management committee, other than that
executive. Mr. Fink's employment will provide that such a determination may
only be made by BlackRock's board of directors.
The employment agreements will also provide that, following a change in
control of BlackRock (as defined below under "Certain Relationships and Related
Transactions--IPO Agreement--Change in Control of BlackRock") or a change in
control of PNC (as defined below under "Certain Relationships and Related
Transactions --IPO Agreement--Change in Control of PNC"), an executive will be
entitled to a severance payment equal to either one times or two times the
executive's total compensation upon the termination of the executive's
employment by BlackRock without cause or good reason or by the executive by
reason of a deficient opportunity, subject to the executive's compliance with
the surviving provisions of the employment agreement.
The employment agreements will also provide that, in the event that
BlackRock's management committee ceases to manage the day-to-day operations of
BlackRock without its consent, the restrictions on transferring of BlackRock
shares described under "Description of Capital Stock--Stockholders Agreement"
will lapse on the earlier of (i) the date or dates such restrictions would
otherwise have lapsed or (ii) the first anniversary of the date on which
BlackRock's chief executive officer and its management committee ceased
managing the day-to-day operations of BlackRock.
The employment agreements will also contain various restrictive covenants
applicable to the executive during his employment and upon the termination of
the executive's employment, including provisions relating to non-disparagement,
non-solicitation of clients, non-hiring of employees and non-disclosure of
confidential information and, for some executives, non-competition.
For purposes of some of the employment agreements, "deficient
opportunity" occurs if (i) the executive does not have duties, authority and
reporting responsibilities in BlackRock which are substantially equivalent to
or greater than those as of the beginning of his or her term of employment,
unless otherwise mutually agreed upon, (ii) the executive's principal work
location is relocated beyond a specified geographic area, unless otherwise
mutually agreed upon or at the direction of the chief executive officer or
(iii) there occurs a change in control of BlackRock or a change in control of
PNC and, at the direction of the entity causing such change in control and
without the consent of the chief executive officer, the sum of (1) the
aggregate annual salary and bonus earned by the executive with respect to the
fiscal year in which the change in control occurs or with respect to either of
the two succeeding fiscal years and (2) the value of other incentive awards
granted to the executive in the applicable fiscal year, is less than the sum of
(x) the average annual salary and bonus paid to or earned by the executive with
respect to the two fiscal years immediately preceding the year in which such
change in control occurs and (y) the average value of other incentive awards
granted to the executive in the two fiscal years immediately preceding the year
in which such change in control occurs, unless the reason that the sum of (1)
and (2) is less than the sum of (x) and (y) is because of the adverse financial
performance of BlackRock during the applicable fiscal year.
For other employment agreements, "deficient opportunity" (as described
above) only occurs following a change in control of BlackRock or a change in
control of PNC.
BlackRock, Inc. 1999 Stock Award and Incentive Plan
Prior to the completion of the offerings, the board of directors of
BlackRock will adopt and the stockholders will approve the BlackRock, Inc. 1999
Stock Award and Incentive Plan (the "Award Plan"). A maximum of shares
of common stock has been reserved for issuance under the Award Plan. The number
of shares authorized is generally subject to equitable adjustment upon the
occurrence of any stock dividend or other distribution, recapitalization, stock
split, reverse split, reorganization, merger, consolidation, spin-off,
combination, repurchase or share exchange, or other similar corporate
transaction or event.
54
<PAGE>
Pursuant to the Award Plan, BlackRock may grant awards which may consist
of:
. stock options, including incentive stock options and nonqualified
stock options;
. stock appreciation rights, either in connection with stock options
granted under the Award Plan or independently of options;
. restricted stock;
. restricted stock units; and/or
. dividend equivalents and other stock or cash-based awards.
The Award Plan will be administered by the compensation committee
established by the board of directors, and the compensation committee will make
awards in a manner that satisfies Rule 16b-3 under the Exchange Act. The
compensation committee shall have full authority, subject to the provisions of
the Award Plan, to, among other things, determine the persons to whom awards
will be granted, determine the terms and conditions (including any applicable
performance criteria) of the awards, and prescribe, amend and rescind rules and
regulations relating to the Award Plan.
Grants of awards may be made under the Award Plan to selected employees
and independent contractors of BlackRock and its present or future affiliates,
at the discretion of the compensation committee.
Stock options and appreciation rights
Stock options may be either "incentive stock options," as such term is
defined in Section 422 of the Internal Revenue Code, or nonqualified stock
options. The exercise price of a nonqualified stock option may be above, at or
below the fair market value per share of common stock on the date of grant; the
exercise price of an incentive stock option may not be less than the fair
market value per share of common stock on the date of grant. The exercise price
may be paid in cash or by the surrender or withholding of common stock.
Stock appreciation rights may be granted alone or together with stock
options. A stock appreciation right is a right to be paid an amount equal to
the excess of the fair market value of a share of common stock on the date the
stock appreciation right is exercised over either the fair market value of a
share of common stock on the date of grant (in case of a free standing stock
appreciation right) or the exercise price of the related stock option (in case
of a tandem stock appreciation right). Payment can be made in cash, common
stock or both, as specified in the award agreement or as determined by the
compensation committee.
No person may be granted stock options or stock appreciation rights under
the Award Plan in any calendar year representing an aggregate of more than
shares of common stock. Stock options and stock appreciation rights
will be exercisable at such times and upon such conditions as the compensation
committee may determine, as reflected in the applicable award agreement. The
exercise period shall be determined by the compensation committee except that,
in the case of an incentive stock option, the exercise period shall not exceed
ten years from the date of grant of the incentive stock option.
Except to the extent that the applicable award agreement provides
otherwise, in the event of the termination of employment of an employee or
termination of the independent contractor relationship, the right to exercise
stock options and stock appreciation rights held by such employee or
independent contractor will cease.
55
<PAGE>
Restricted stock and restricted stock units
A restricted stock award is an award of common stock and a restricted
stock unit award is an award of the right to receive cash or common stock at a
future date. In each case, the award is subject to restrictions on
transferability and such other restrictions, if any, as the compensation
committee may impose at the date of grant. The restrictions may lapse
separately or in combination at such times, under such circumstances,
including, without limitation, a specified period of employment or the
satisfaction of pre-established performance goals, in such installments, or
otherwise, as the compensation committee may determine. Except to the extent
restricted under the award agreement relating to the restricted stock, a
participant granted restricted stock will have all of the rights of a
stockholder, including, without limitation, the right to vote and the right to
receive dividends on the restricted stock.
Upon termination of employment or termination of the independent
contractor relationship during the applicable restriction period, shares of
restricted stock, restricted stock units and accrued but unpaid dividends or
dividend equivalents that are subject to restrictions will be forfeited unless
the compensation committee provides otherwise. The compensation committee can
determine that restrictions or forfeiture conditions relating to restricted
stock or restricted stock units will be waived in whole or in part in the event
of terminations resulting from specified causes. The compensation committee may
in other cases waive in whole or in part the forfeiture of restricted stock.
No person may be granted restricted stock or restricted stock units under
the Award Plan in any calendar year representing an aggregate of more than
shares of common stock.
Other awards
The compensation committee may grant to a participant the right to
receive cash or common stock, in each case equal in value to dividends paid
with respect to a specified number of shares of common stock. Dividend
equivalents may be awarded on a free-standing basis or in connection with
another award, and may be paid currently or on a deferred basis. The
compensation committee is also authorized to grant common stock as a bonus or
to grant other cash awards.
Transferability
Except as otherwise determined by the compensation committee, awards
granted under the Award Plan may be transferred only by will or by the laws of
descent and distribution.
Amendment and termination
The Award Plan may be altered, amended, suspended, or terminated by the
board of directors or the compensation committee, in whole or in part, except
that no amendment that requires stockholder approval in order for the Award
Plan to continue to comply with state law, stock exchange requirements or other
applicable law will be effective unless the amendment has received the required
stockholder approval. In addition, no amendment may be made which adversely
affects any of the rights of any award holder previously granted an award,
without the holder's consent.
56
<PAGE>
Outstanding awards
On , 1999, BlackRock granted the following stock options to
the following named executive officers:
<TABLE>
<CAPTION>
Individual Grants
------------------------------------------------
Number of % of Total Grant
Securities Options Date
Underlying Granted to Exercise Present
Options Employees in or Base Expiration Value
Name Granted Fiscal Year Price ($/SH) Date ($)
---- ---------- ------------- ------------ ---------- --------
<S> <C> <C> <C> <C> <C>
Laurence D. Fink..... % $ $
Ralph L.
Schlosstein.........
Robert S. Kapito.....
Paul L. Audet........
Robert P. Connolly...
</TABLE>
BlackRock, Inc. 1999 Annual Incentive Performance Plan
Prior to the completion of the offerings, the board of directors of
BlackRock will adopt and the stockholders will approve the BlackRock, Inc. 1999
Annual Incentive Performance Plan ("Annual Incentive Plan").
The purpose of the Annual Incentive Plan is to encourage behavior by
Annual Incentive Plan participants that create superior financial performance
and strengthen the commonality of interests between the participants and
stockholders in creating superior stockholder value.
The Annual Incentive Plan will be administered by the compensation
committee.
The Annual Incentive Plan provides that any employee who is selected by
the compensation committee is eligible to participate in the Annual Incentive
Plan. Payment of awards to participants are permitted if, and only to the
extent that, performance goals established by the compensation committee are
met for the applicable performance period. The performance goals may relate to
the performance of BlackRock, a business unit, product line, territory or any
combination thereof. Performance goals may also include such objective or
subjective performance goals as the compensation committee may, from time to
time, establish. Performance goals may include a threshold level of performance
below which no award payment will be made and levels of performance at which
specified percentages of the target award will be paid, and may also include a
maximum level of performance above which no additional award will be paid. The
performance measure or measures and the performance goals established by the
compensation committee may be different for different performance periods and
different goals may be applicable to different divisions or other operational
segments.
A participant's award with respect to a performance period will be paid
in cash, but only if the participant is employed by BlackRock on the last day
of the applicable performance period. If a participant is terminated by
BlackRock for cause prior to the date on which the payment of awards is made,
the participant will forfeit all claims to unpaid amounts earned or otherwise
due under the Annual Incentive Plan.
The board or the compensation committee may from time to time amend,
suspend or discontinue the Annual Incentive Plan. No amendment, however, shall
affect adversely any of the rights of any participant under any award following
the end of the applicable performance period.
Since benefits under the Incentive Bonus Plan will be determined by the
compensation committee and performance goal criteria may vary from performance
period to performance period and from participant to participant, benefits to
be paid under the Incentive Bonus Plan are not determinable at this time.
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Non-employee Directors Stock Compensation Plan
Prior to the completion of the offerings, the board of directors of
BlackRock will adopt and the stockholders will approve the Non employee
Directors Stock Compensation Plan. The purpose of the director plan is to
encourage members of the board of directors who are not also employees of
BlackRock or any of its subsidiaries and who receive fees for their services to
acquire additional stock ownership interests in BlackRock. The following is a
description of the material terms of the director plan, and as such is
qualified in its entirety by the actual terms of the director plan.
Only outside directors are eligible to participate in the director plan.
The director plan will be administered by the compensation committee. The board
of directors may at any time alter, amend, suspend or terminate the director
plan.
Each outside director may elect that a specified percentage of his or her
future compensation as a director be paid in shares of common stock rather than
in cash. Shares of common stock issuable to an outside director under the
director plan will be transferred to the outside director as soon as
practicable following the end of each calendar quarter.
The total number of shares of common stock to be transferred on each such
date will be determined by dividing:
(a)the product of (1) the percentage of compensation elected by
the outside directors and (2) the outside director's compensation
payable for services rendered in the calendar quarter with respect to
which such transfer is being made; by
(b)the fair market value (as defined in the director plan) of a
share of class A common stock on the last day of such calendar quarter.
Cash will be paid in lieu of any fractional shares of class A common
stock.
Because awards under the director plan depend on elections by outside
directors, and no elections have been made, the awards to be made in 1999 have
not been determined.
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OWNERSHIP OF THE COMMON STOCK
The following table sets forth certain information with respect to the
beneficial ownership of the common stock as of June 30, 1999; by:
. Each person who is known by us to own beneficially more than 5% of
the outstanding shares of common stock;
. Each of our directors;
. Our executive officers named in the "Summary Compensation Table"
on page 52 of this prospectus; and
. All of our directors and executive officers as a group.
Except as otherwise noted, the beneficial owners named in the table have
sole voting and investment power with respect to all shares of common stock
shown as beneficially owned by them.
<TABLE>
<CAPTION>
Beneficial Ownership Prior to Beneficial Ownership After
Offerings Offerings
------------------------------------ --------------------------------
Percent of Percent of Percent of Percent of
class A class B class A class B
common stock common stock common stock common stock
Number outstanding outstanding Number outstanding outstanding
---------- ------------ ------------ ------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
PNC Asset Management
Inc.
One PNC Plaza
249 Fifth Avenue
Pittsburgh, PA 15222... 44,935,000 0.00% 81.73%
Laurence D. Fink........ 1,867,189 0.00% 3.40%
Ralph L. Schlosstein.... 1,168,899 0.00% 2.13%
Robert S. Kapito........ 1,092,978 0.00% 1.99%
Thomas H. O'Brien....... -- 0.00% 0.00%
James E. Rohr........... -- 0.00% 0.00%
Walter E. Gregg, Jr..... -- 0.00% 0.00%
Helen P. Pudlin......... -- 0.00% 0.00%
Paul L. Audet........... 165,000 0.00% 0.30%
Robert P. Connolly...... 28,468 0.00% 0.05%
All directors and
executive officers as a
group (9 persons)...... 4,322,534 0.00% 7.86%
</TABLE>
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Background
BFM was acquired by PNC on February 28, 1995 for total consideration of
$240 million. PNC accounted for the acquisition by contributing $10 million of
equity capital and utilized "push down" accounting to record approximately $230
million of debt and approximately $240 million of goodwill on the books of BFM.
Outstanding debt included a $94 million unsecured note payable to certain
partners of BFM through February 2000 with the balance ultimately representing
amounts borrowed from PNC Bank under a $175 million revolving credit facility.
Equity Offering to Employees of BFM
In July 1997, PNC retained an independent investment bank to assist in
the valuation of PNC's investment management business, including a fair market
valuation of BFM in connection with a proposed sale of equity to employees.
PNC's objectives were to establish a long-term retention program for key
employees and to more closely align PNC and employee interests in generating
stockholder value growth. On January 31, 1998, PNC sold 30,000 shares of BFM
restricted stock with a fair value of $999.36 per share to key employees at a
purchase price of $966.00 per share. PNC retained 70,000 shares or a 70%
ownership interest in BFM. BFM received $29.0 million in proceeds from the sale
and recorded compensation expense of $1.0 million reflecting the purchase price
discount from fair value.
In connection with these offerings, BFM, PNC and certain employees of BFM
entered into a stockholders agreement. The stockholders agreement restricts
transfer of BFM employee shares until restrictions are ratably removed on
December 31, 2000, 2001 and 2002, as applicable, or earlier in certain
situations. The stockholders agreement, among other things, also requires
holders of restricted stock who voluntarily terminate their employment with BFM
to sell their shares back to BFM at the lower of cost or fair market value and
provides a right of first refusal in the favor of PNC and BFM employee
stockholders before any sale of BFM stock to a third party. See "Description of
Capital Stock--Common Stock--Stockholders Agreement" for a more complete
description of these terms.
Formation Transactions
On March 31, 1998, PNC contributed BFM and certain of its other
investment management subsidiaries into a new holding company. The contribution
was recorded at historical book value as a combination of entities under common
control. On the formation date, BFM's employee stockholders and PNC exchanged
their shares in BFM for an equal number of shares in BlackRock with PNC
receiving $12.3 million in cash dividends and an additional 94,000 shares of
stock representing the value of PNC's other contributed investment management
businesses. As part of the formation, BlackRock also offered to sell an
additional 5,507 shares of restricted stock with a market value of $1,085.15
per share to key employees of PNC's other contributed businesses at a per share
price of $966.00. These stock transactions were completed in May 1998 with all
employee stockholders, including BFM employees, required to execute a new
stockholders agreement with BlackRock and PNC containing the same provisions
previously outlined in the sale of stock to employees of BFM. Proceeds from the
second sale of stock were $5.3 million with BlackRock recording an additional
$0.7 million in compensation expense. At December 31, 1998, there were five
forward sale agreements to purchase restricted stock outstanding with certain
key employees. These agreements totaled 637 additional shares at an initial
price per share of $966.00 plus an imputed annual financing charge of 12%. Each
of the shares of BlackRock stock owned by PNC and BlackRock employees at the
completion of the offering will be reclassified into 275 shares of class B
common stock.
Transactions with PNC and Its Subsidiaries
After completion of the offerings, PNC will beneficially own
approximately % of the combined voting power and % of the equity of
BlackRock's outstanding common stock (approximately % of the voting power and
%, of the equity, if the underwriters over-allotment options are exercised in
full).
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BlackRock provides risk management advisory services to PNC's corporate
and line of business asset/liability management committees ("ALCO") for which
it received an annual fee of $3.0 million for 1996, 1997 and 1998 and $2.5
million for the six months ended June 30, 1999. Effective June 1, 1998,
BlackRock entered into an agreement with PNC's private banking group to provide
model portfolio and investment research services for $4.4 million per year.
Total fees earned in 1998 were $2.6 million and total fees earned through June
30, 1999 were $2.2 million.
BlackRock acts as the investment adviser for certain commingled funds or
separate accounts which are either sponsored by PNC affiliated entities or are
PNC clients. In most instances, these advisory and administration services are
provided in accordance with formal advisory agreements. BlackRock is generally
compensated on the basis of fees calculated as a percentage of the market value
of the assets under management. Investment advisory and administration fees
associated with PNC affiliated entities for the years ended December 31, 1996,
1997 and 1998 amounted to $10.3 million, $13.1 million and $11.0 million,
respectively. The decrease in 1998 was attributable to the May 1998 conversion
of $8.2 billion in PNC commingled common trust fund assets into the BlackRock
Funds.
At June 30, 1999, clients of PNC affiliated entities maintained
approximately $19.9 billion of investments in the BlackRock Funds, which
represents approximately 80% of the assets in the BlackRock Funds. For the year
ended December 31, 1998, BlackRock earned approximately $69 million in
investment advisory and administrative fees on PNC client investments in the
BlackRock Funds and for the six months ended June 30, 1999 earned approximately
$50.0 million. As a result of the formation and the common trust fund
conversion, BlackRock and PNC entered into a memorandum of understanding in
1998 establishing the services to be provided and fees to be paid to PNC
affiliated entities associated with maintaining their client investments in the
BlackRock Funds. BlackRock also pays co-administration fees to a PNC mutual
fund servicing affiliate for administrative services provided to the Provident
Institutional Funds. Costs for these services are based on a percentage of the
market value of assets under management. Fund administration and servicing
costs-affiliates for the years ended December 31, 1996, 1997 and 1998 were
$19.6 million, $27.3 million and $53.0 million, respectively, and were $36.3
million for the six months ended June 30, 1999. The increase in expense for
1998 and the six months ended June 30, 1999, was largely due to the May 1998
common trust fund conversion.
Pursuant to an administrative services agreement, PNC provides BlackRock
with certain management and administrative services. The services include
legal, audit, employee benefit, payroll and information services. As
consideration for these services, BlackRock pays PNC a monthly fee based on
actual usage of the services or on defined formulas which, in management's
view, result in reasonable charges. Total expense for these services was $6.9
million, $3.0 million and $3.3 million for the years ended December 31, 1996,
1997 and 1998 respectively, and was $2.0 million for the six months ended June
30, 1999.
Pursuant to a master lease agreement with an affiliate of PNC, BlackRock
currently leases approximately 22,500 square feet of office space at 400
Bellevue Parkway, Wilmington, Delaware 19805 and 24,000 square feet of office
space at 1600 Market Street, Philadelphia, Pennsylvania 19103. The lease is
subject to annual renewal and calls for annual lease payments of approximately
$1.4 million. BlackRock believes that the price and other terms under the lease
are at least as favorable as prices and terms being offered generally in the
same marketplaces by unrelated parties for comparable space.
Debt of $153 million at June 30, 1999 included $125 million outstanding
on a $175 million revolving line of credit facility with PNC Bank and a $28
million unsecured note due February 28, 2000 with B.P. Partners, L.P.
BlackRock's outstanding debt largely reflects amounts remaining from PNC's
acquisition of BFM on February 28, 1995. B.P. Partners, L.P. is a limited
partnership comprised of former partners of BFM who received notes as part of
the purchase price for BFM. The revolving credit facility dated February 28,
1996, as amended, bears interest at PNC Bank's prime rate and is not terminable
by the bank except in the event of a default. The unsecured note bears interest
at a fixed rate of 7.5% and is unconditionally guaranteed
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by PNC. BlackRock repaid $18.8 million on February 28, 1999 and $28.2 million
is due on February 28, 2000. Interest expense paid by BlackRock for the years
ended December 31, 1996, 1997 and 1998 was $20.0 million, $20.2 million and
$13.3 million, respectively, and was $7.1 million for the six months ended June
30, 1999. BlackRock intends that net proceeds from the offerings will be used
to repay a portion of the outstanding indebtedness under the revolving credit
facility with PNC Bank.
Tax Sharing Policy and Tax Disaffiliation Agreement
BlackRock will participate in the PNC and PNC Asset Management, Inc. tax
sharing policies through the completion of the offerings. The PNC tax sharing
policy provides, among other things, that the consolidated federal income tax
liability for all 80% or more owned subsidiaries of PNC included in the PNC
consolidated federal income tax return will generally be allocated to each
subsidiary based on their separately calculated liability. Because BlackRock
and its subsidiaries were not eligible to join PNC's consolidated federal
income tax return after March 31, 1998, the provisions of such policy related
to federal income taxes were not applicable to BlackRock for federal income tax
periods beginning after that date. BlackRock has, however, participated in the
PNC Asset Management, Inc. tax sharing policy, the provisions of which are
generally identical to those of the PNC tax sharing policy, with respect to PNC
Asset Management, Inc. consolidated federal income tax returns for taxable
periods beginning after March 31, 1998. BlackRock will be subject to the state
and municipal provisions of the PNC tax sharing policy through the completion
of the offerings. The PNC tax sharing policy generally provides that state and
municipal income tax liabilities are determined as if each PNC subsidiary has
filed a separate return. In the event that a state or municipality imposes
income and/or franchise taxes on two or more individual PNC subsidiaries, on a
consolidated, combined or unitary basis, the income tax liability is allocated
to those subsidiaries whose business operations generated the liability.
Prior to the completion of the offerings, PNC and BlackRock will enter
into a tax disaffiliation agreement (the "Tax Disaffiliation Agreement") that
will set forth each party's rights and obligations with respect to income tax
payments and refunds for taxable periods before and after the completion of the
offerings and will also address related matters such as the filing of tax
returns and the conduct of audits or other proceedings involving claims made by
taxing authorities.
As described above, prior to the completion of the offerings, BlackRock
and its subsidiaries will be included in consolidated, combined and unitary
income and franchise tax returns with PNC and/or certain of its subsidiaries,
including PNC Asset Management, Inc. Under the Tax Disaffiliation Agreement,
PNC or PNC Asset Management, Inc. will be responsible for preparing and filing
all of such consolidated, combined and unitary income tax returns. In addition,
BlackRock will generally agree to indemnify PNC and PNC Asset Management, Inc.
for income taxes relating to the taxable period, or portion thereof, beginning
before the completion of the offerings to the extent such income taxes are
attributable to BlackRock. BlackRock's share of the income tax liability with
respect to federal consolidated income tax returns including PNC and/or PNC
Asset Management, Inc. generally will be based upon the tax liability that
would have been incurred by BlackRock and its subsidiaries if such group had
filed its own federal consolidated income tax return and with respect to state
or municipal combined or unitary income or franchise tax returns including PNC
and/or certain of its subsidiaries will generally be based upon an allocation
to BlackRock of a percentage of the total tax liability based upon BlackRock's
level of activity in such state or municipality. PNC and PNC Asset Management,
Inc. will agree to indemnify BlackRock for all other income and franchise taxes
relating to the taxable period, or portion thereof, ending on or before the
completion of the offerings. PNC and PNC Asset Management, Inc. also will have
exclusive control over any audits or other proceedings involving claims made by
taxing authorities with respect to such consolidated, combined or unitary tax
returns, notwithstanding that such audits or proceedings may result in a
liability to BlackRock under the Tax Disaffiliation Agreement. PNC is obligated
to consult with BlackRock and take the best interests of all parties into
account in the conduct of such audits or proceedings.
Upon completion of the offerings, BlackRock will begin filing its own
separate consolidated federal income tax return for taxable periods beginning
after the date of the offerings. BlackRock will file separate
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state and municipal income and franchise tax returns or may be included in
state and municipal income and franchise tax returns with one or more PNC
subsidiaries on a combined or unitary basis. If BlackRock is included in a
group's combined or unitary state or municipal income tax filing with other PNC
subsidiaries, BlackRock's share of the group's liability will generally be
based upon an allocation to BlackRock of a percentage of the total tax
liability based upon BlackRock's level of activity in such state or
municipality.
IPO Agreement
General
We have entered into an Initial Public Offering Agreement with PNC and
PNC Asset Management, Inc. which governs our respective rights and duties with
respect to the offerings, and sets forth covenants we and PNC have agreed to
for various periods following the offerings.
Subsequent issuances of common stock and additional purchases of common stock
by PNC
The IPO Agreement provides that at any time following the offerings until
the date on which PNC or another person (a "PNC transferee") beneficially owns
less than a majority of the voting power of our capital stock (the "Trigger
Date"), we will not, without PNC's prior written consent, issue any shares of
capital stock or any rights, warrants or options to acquire our capital stock.
The IPO Agreement further provides that until the Trigger Date, if we issue
common stock, PNC will be entitled, but not required, to purchase from
BlackRock a number of shares of common stock when it is issued so that PNC
would continue to maintain the same proportionate economic and voting rights
after the issuance as it had before the issuance of common stock. If we issue
common stock for cash, PNC must pay the same per share price to purchase
additional shares. In all other cases, the price that PNC must pay to purchase
the additional shares of capital stock shall be the fair value of the class of
capital stock and, with respect to class A common stock and class B common
stock, shall be equal to the average of the closing prices of the class A
common stock reported on the NYSE for the ten trading days prior to the
completion of the issuance giving rise to PNC's additional purchase right.
Change in control of PNC or BlackRock
The IPO Agreement provides that if there is a change in control of PNC or
BlackRock at any time following the offerings until the Trigger Date, PNC or
its successor must offer to purchase all of our outstanding common stock not
held by PNC or its successor (i.e., stock held by public stockholders and
employee stockholders) at a "fair value" if, within 12 months following the
anniversary of the effective date of change in control of PNC or BlackRock, a
committee consisting of all of our independent directors immediately prior to
such a change in control determines that the fundamental economics and
prospects of our business will be materially and adversely affected as a result
of the change in control of PNC or BlackRock.
The "fair value" of our capital stock would be determined through good
faith negotiation by a special committee of our board of directors and PNC or
its successor. However, if we were unable to agree on a fair value, then the
fair value would be determined by two nationally recognized investment banking
or business appraisal firms--one selected by PNC or its successor and one
selected by the special committee. If these two firms were unable to agree on
the fair value of our capital stock, they would jointly select a third
nationally recognized investment banking or business appraisal firm which would
resolve any disputes between the two original firms and conclusively determine
the fair value of our capital stock. Fair value of our common stock will be
determined by reference to, among other factors, the trading value of our
common stock prior to the announcement of the change in control of PNC or
BlackRock.
A "change in control of PNC" will be deemed to occur if, whether by an
actual or threatened proxy contest, including a consent solicitation, or any
merger, reorganization, consolidation or similar transaction, persons who are
directors of PNC immediately prior to the proxy contest or execution of the
agreement
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pursuant to which the transaction is consummated cease to constitute a majority
of the board of directors of PNC or any successor entity immediately following
the proxy contest or the consummation of the transaction. In making the
determination as to whether a majority of the board of directors consists of
persons who served as directors prior to the proxy contest or other
transaction, any director whose initial assumption of office was in connection
with a prior actual or threatened proxy contest will not be deemed to be a
prior director regardless of when the individual took office.
A "change in control of BlackRock" will be deemed to have occurred if (i)
due to a transfer of voting stock, a person other than PNC or its affiliates
holds a majority of the voting power of the voting stock of BlackRock or (ii)
whether by virtue of an actual or threatened proxy contest (including a consent
solicitation) or any merger, reorganization, consolidation or similar
transaction, persons who are directors of BlackRock immediately prior to such
proxy contest or the execution of the agreement pursuant to which such
transaction is consummated (other than a director whose initial assumption of
office was in connection with a prior actual or threatened proxy contest) cease
to constitute a majority of the board of directors of BlackRock or any
successor entity immediately following such proxy contest or the consummation
of such transaction.
Other BlackRock Covenants
After the offerings, PNC will continue to own a significant portion of
our outstanding voting stock. As a result, PNC will continue to include us as a
"subsidiary" for various financial reporting, accounting and other purposes.
Accordingly, we have agreed to certain covenants in the IPO Agreement. Certain
of these covenants are described below:
Financial information. We have agreed that, for so long as PNC is
required to consolidate our results of operations and financial position or
account for its investment in BlackRock using the equity method of accounting
or for such longer time as may be required by applicable banking laws as a
result of PNC's investment in BlackRock, and subject to appropriate
confidentiality provisions to protect the confidentiality commitments we have
made to our customers, we will:
. provide PNC full access to our books and records, including
budgets and financial projections;
. present our financial information in a manner consistent with
PNC's accounting policies and procedures; and
. cooperate fully with PNC in connection with public disclosures and
regulatory reporting.
We have generally agreed to indemnify PNC and its affiliates against all
liabilities arising out of any incorrect, inaccurate or incomplete financial
and other information we provide to PNC pursuant to the terms of the IPO
Agreement.
Other covenants. Until the Trigger Date, we have agreed that:
. we will not, without PNC's prior written consent, which it may
withhold in its sole and absolute discretion, take any action
which limits PNC's ability to freely sell, pledge or otherwise
dispose of shares of our capital stock or limits the legal rights
of or denies any benefit to PNC as a BlackRock stockholder in a
manner not applicable to BlackRock stockholders generally; and
. to the extent that PNC is a party to, or enters into, any
agreements that provide that certain actions of PNC's subsidiaries
may result in PNC being in breach or default under such
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agreements, and we have been advised of the existence of such
agreements, we will not take any actions that may result in PNC
being in breach or default under any such agreement. PNC will not,
however, enter into any agreements that would materially restrict
BlackRock's business as currently conducted.
Expenses
In general, unless otherwise provided for in the IPO Agreement or any
other agreement, we and PNC will pay our respective costs and expenses
incurred in connection with the offerings.
PNC transferees
Any PNC transferee will be bound by the IPO Agreement and have the
rights and obligations of PNC under the IPO Agreement.
Registration Rights Agreement
PNC and our employees who hold shares of class B common stock cannot
freely sell such shares without registration under the Securities Act.
Accordingly, we have entered into a Registration Rights Agreement with PNC
Asset Management, Inc. and our employee stockholders to provide them with
registration rights relating to shares of our class A common stock into which
their shares of class B common stock are convertible. No shares may be sold
under the Registration Rights Agreement until the expiration of the 180-day
lock-up period. See "Shares Eligible for Future Sale."
Shares covered. The Registration Rights Agreement covers the shares of
our common stock that are held by PNC and our employee stockholders or that
PNC or our employee stockholders may acquire in the future.
Demand Registrations. PNC or employee stockholders holding a majority
interest of the class B common stock held by all employee stockholders may
request registration under the Securities Act of all or any portion of our
shares covered by the Registration Rights Agreement.
. Terms of each offering. PNC or the employee stockholders will
designate the terms of each offering effected pursuant to a Demand
Registration, which may take any form, including an underwritten
public offering or a shelf registration;
. Timing of demand registration. We are not required to undertake a
Demand Registration within 90 days of the effective date of a
previous Demand Registration. Also, we have the right to postpone the
filing or effectiveness of any Demand Registration for up to 90 days
if in our reasonable judgment such registration would interfere with
any existing proposal or plans by our company to engage in certain
material transactions, provided, however, that we may exercise this
right only for a total of 90 days in any 12-month period.
Piggyback registrations. The Registration Rights Agreement also provides
for certain "piggyback" registration rights for PNC and our employee
stockholders. Whenever we propose to register any of our securities under the
Securities Act for ourselves or others, subject to certain customary
exceptions, we must provide prompt notice to PNC and our employee stockholders
and use our reasonable best efforts to include in such registration all shares
of our stock which PNC or our employee stockholders request to be included.
Registration procedures and expenses. The Registration Rights Agreement
sets forth customary registration procedures, including a covenant by us to
use our reasonable best efforts to make available our senior management for
road show presentations. All registration expenses incurred in connection with
the Registration Rights Agreement, including all filing fees, fees and
expenses of compliance with securities and/or
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blue sky laws, financial printing expenses, fees and disbursements of
custodians, transfer agents, exchange agents and/or information agents, and
fees and disbursements of counsel for our company and all independent certified
public accountants, underwriters, excluding discounts and commissions, and
other persons retained by us will be paid by us.
Indemnification. The Registration Rights Agreement contains customary
indemnification and contribution provisions by us for the benefit of PNC, our
employee stockholders and any underwriters and by PNC and our employee
stockholders for the benefit of us and any underwriters with respect to
information provided by PNC or our employee stockholders.
Transfer. PNC and our employee stockholders may transfer shares covered
by the Registration Rights Agreement and the holders of such transferred shares
will be entitled to the benefits of the Registration Rights Agreement, provided
that each such transferee agrees to be bound by the terms of the Registration
Rights Agreement. Such transferees will be entitled to the rights available to
PNC or our employee stockholders described above. Any successor entities to our
company will be bound by the terms of the Registration Rights Agreement.
Duration. The registration rights under the Registration Rights Agreement
will remain in effect with respect to any shares of our common stock until:
. such shares have been sold pursuant to an effective registration
statement under the Securities Act;
. such shares have been sold to the public pursuant to Rule 144
under the Securities Act, or any successor provision;
. such shares have been otherwise transferred to a person who is not
PNC or an employee stockholder; and
. such shares have ceased to be outstanding.
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DESCRIPTION OF CAPITAL STOCK
Our authorized equity capital consists of shares of class A
common stock, $.01 par value per share, shares of class B common
stock, $.01 par value per share, (the class A common stock and class B common
stock, together, the "common stock"), and shares of preferred stock,
$.01 par value per share. No preferred stock is outstanding as of the date of
this prospectus. Of the class A common stock authorized, 9,000,000 shares are
being offered in the offerings (10,350,000 shares if the underwriters' over-
allotment options are exercised in full). class A common shares have
been reserved for issuance pursuant to certain of our employee benefit plans.
See "Management -- Executive Compensation." Of the shares of class B
common stock authorized, will be outstanding and held by PNC (or its
affiliates) and certain employee stockholders. The following summary
description of our capital stock is qualified by reference to our certificate
of incorporation and bylaws, copies of which are filed as exhibits to the
registration statement, and to Delaware corporate law.
Common Stock
Voting rights
The holders of class A common stock and class B common stock generally
have identical rights. The one exception is that, on all matters to be voted on
by stockholders, holders of class A common stock are entitled to one vote per
share, whereas holders of class B common stock are entitled to five votes per
share. Holders of shares of class A common stock and class B common stock are
not entitled to cumulate their votes in the election of directors. Generally,
all matters to be voted on by stockholders must be approved by a majority (or,
in the case of election of directors, by a plurality) of the votes entitled to
be cast by all shares of class A common stock and class B common stock present
in person or represented by proxy, voting together as a single class, subject
to any voting rights granted to holders of any outstanding preferred stock.
Except as otherwise provided by law or in our certificate of
incorporation or bylaws, and subject to any voting rights granted to holders of
any outstanding preferred stock, amendments to our certificate of incorporation
generally must be approved by a majority of the combined voting power of all
class A common stock and class B common stock voting together as a single
class. Amendments to our certificate of incorporation that would alter or
change the powers, preferences, or special rights of the class A common stock
or the class B common stock so as to affect them adversely also must be
approved by a majority of the votes entitled to be cast by the holders of the
shares adversely affected by the amendment, voting as a separate class. Holders
of class A common stock are not eligible to vote on any change in the powers,
preferences, or special rights of the class B common stock that would not
adversely affect the rights of the class A common stock (and vice versa). For
the foregoing purposes, any provisions for the voluntary, mandatory or other
conversion of class B common stock into or for class A common stock on a one-
for-one basis are deemed not to adversely affect the rights of the class A
common stock. Any amendment to our certificate of incorporation to increase the
authorized shares of any class or classes of capital stock will be deemed not
to affect adversely the powers, preferences, or special rights of the class A
common stock or class B common stock.
Dividends
Holders of class A common stock and class B common stock will receive an
equal amount per share in any dividend declared by the board of directors.
Dividends to any holders of common stock are subject to any preferential rights
of any outstanding preferred stock. In addition, because BlackRock is a
consolidated subsidiary of PNC Bank, federal restrictions on payment of
dividends by PNC Bank may apply to BlackRock. See "Business --Regulation."
Dividends consisting of shares of class A common stock and class B common stock
may be paid only as follows:
. shares of class A common stock may be paid only to holders of
class A common stock and shares of class B common stock may be
paid only to holders of class B common stock; and
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. shares will be paid proportionally with respect to each
outstanding share of class A common stock and class B common
stock.
We may not reclassify, subdivide or combine the shares of either class of
common stock without at the same time proportionally reclassifying, subdividing
or combining shares of the other class.
Conversion
Subject to the transfer and other restrictions in the Amended
Stockholders Agreement, holders of class B common stock may, at their option,
convert their shares of class B common stock into shares of class A common
stock at anytime. Each share of class B common stock is convertible into one
share of class A common stock. Any unrestricted shares of class B common stock
held by employee stockholders will automatically convert into shares of class A
common stock upon the termination of their employment with BlackRock.
Other rights
In the event of any reorganization or consolidation of BlackRock with one
or more corporations or a merger of BlackRock with another corporation in which
shares of common stock are converted into or exchangeable for shares of stock,
other securities or property, including cash, all holders of common stock,
regardless of class, will be entitled to receive the same kind and amount of
shares of stock and other securities and property, including cash, unless
otherwise approved by a majority of the votes entitled to be cast by the
holders of each class of common stock, voting separately as a class.
On liquidation, dissolution, or winding up of BlackRock, after payment in
full of any amounts required to be paid to holders of preferred stock, all
holders of common stock, regardless of class, are entitled to share ratably in
any assets available for distribution to holders of shares of common stock. No
shares of common stock are subject to redemption or have preemptive rights to
purchase additional shares of common stock, except as provided under the terms
of the IPO Agreement and the Amended Stockholders Agreement. Under the IPO
Agreement, PNC has the right, at its option, any time we issue additional
shares of common stock, to purchase a sufficient number of shares of common
stock so that PNC maintains its proportionate economic and voting rights after
the issuance as it had before the issuance of common stock. See "Certain
Relationships and Related Transactions--IPO Agreement--Subsequent issuances of
common stock and additional purchases of common stock by PNC." Upon
consummation of the offerings, all the outstanding shares of class A common
stock and class B common stock will be validly issued, fully paid, and
nonassessable.
Stockholders Agreement
BlackRock, PNC Asset Management, Inc., the indirect, wholly owned
subsidiary of PNC that holds PNC's shares of class B common stock, and certain
employees of BlackRock, or its affiliates, who will hold shares of class B
common stock, have been parties to a stockholders agreement since April 30,
1998. These parties will enter into an Amended Stockholders Agreement which
will become effective when the offerings are completed.
For so long as PNC owns voting stock representing at least 25% of the
voting power of the capital stock of BlackRock, subject to applicable law, (i)
the employee stockholders agree to vote their shares for the election of the
four director candidates nominated by PNC and (ii) PNC agrees to vote its
shares of Class B common stock for the two director candidates nominated by the
BlackRock management committee. From and after the time PNC owns voting stock
representing less than 25% but more than 10% of the voting power of BlackRock,
subject to applicable law, (x) the employee stockholders agree to vote their
PNC shares for the election of two director candidates nominated by PNC and (y)
PNC agrees to vote its shares of class B common stock for two directors
candidates nominated by the BlackRock management committee.
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Under the terms of the Amended Stockholders Agreement, one-third of the
class B shares held by the employee stockholders may not be transferred,
except for estate planning purposes, until December 31, 2000; one third until
December 31, 2001; and one third until December 31, 2002 with respect to
shares issued prior to September 1999 and one third on each of the third,
fourth and fifth anniversary dates of the closing of the offerings with
respect to shares issued in September 1999. If a holder of class B common
stock attempts to transfer restricted shares of class B common stock in a
transfer that is not permitted under, or would violate, the Amended
Stockholders Agreement, then that transfer will not be registered by
BlackRock.
The Amended Stockholders Agreement will provide that any restrictions on
shares held by an employee stockholder or permitted transferee will
immediately lapse upon the termination of the employee's employment by
BlackRock without cause or good reason, or upon termination of the employee's
employment by reason of a deficient opportunity (as defined above under
"Management--Employment Agreements") or as a result of death or disability.
Immediately following the termination of an employee stockholder's employment,
all shares of unrestricted class B common stock then held by that employee
will convert into shares of class A common stock unless they are repurchased
by BlackRock or class B stockholders.
The Amended Stockholders Agreement will provide that upon a termination
of an employee's employment by BlackRock for cause or good reason or by the
employee for any reason other than a deficient opportunity, BlackRock must
purchase all remaining restricted shares then held by the employee or valid
transferee of the employee at the lower of:
. the market value of the shares, which will be equal to the market
value of shares of class A common stock, or
. the cost at which the shares were originally acquired by the
employee.
The Amended Stockholders Agreement will provide that any proposed
transfer of class B common stock will be subject to a right of first refusal
and, in certain circumstances, rights to participate in the proposed transfer
by the other holders of class B common stock as follows:
. The right of first refusal means that before a holder of class B
common stock can sell any of its shares of class B common stock to
a third party, it must first offer the shares on the same
terms as offered to the third party to the other holders of class
B common stock for purchase in proportion to their respective
ownership interests. Any shares which are not claimed under the
right of first refusal within 30 days may then be sold to the
third party at a price that is at least as high as was originally
proposed.
. The rights to participate in the proposed transfer apply if a
holder of class B common stock proposes to transfer to a third
party shares constituting more than 5% of the then outstanding
class B common stock. In that event, any other holder of class B
common stock who does not exercise the right to purchase the
shares pursuant to the right of first refusal described above may
instead require the transferring stockholder to include a portion
of the holder's unrestricted shares in the block of shares being
sold to the third party.
The right of first refusal and rights to participate in the proposed
transfer are not applicable to transfers of shares of class B common stock
among PNC affiliates, to transfers of shares by an employee stockholder to the
estate, personal representative or certain family members of employee
stockholders, or to certain entities which hold an economic interest for the
benefit of any such persons or to BlackRock and to the transfer of shares
registered in accordance with the terms of the Registration Rights Agreement.
Any PNC transferee will be bound by the Amended Stockholders Agreement and
have the rights and obligations of PNC under the Amended Stockholders
Agreement.
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If PNC or its affiliates or, following a change in control of PNC or
BlackRock, any successor offers to purchase or purchases all outstanding shares
of class A common stock or class B common stock or purchases sufficient shares
of class A common stock to cause such stock to be delisted, it must also offer
to purchase all outstanding shares of class B common stock or other capital
stock held by employee stockholders at fair value, which, with respect to both
class A common stock and class B common stock, shall be the highest price paid
for class A common stock or class B common stock as applicable, and to offer to
cancel all BlackRock stock options held by each employee stockholder, if any,
for a cash payment in an amount based upon the excess of the price offered to
other stockholders over the exercise price of such stock options.
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Preferred Stock
At the date of this prospectus, no shares of preferred stock are
outstanding. The board of directors may authorize the issuance of preferred
stock in one or more classes or series and may determine, with respect to any
class or series, the designations, powers, preferences, and rights of the class
or series, and its qualifications, limitations, and restrictions, including,
without limitation:
. the designation of the class or series;
. the number of shares of the class or series, which number the
board of directors may later increase or decrease, unless
otherwise provided in the designations for the class or series;
however, the number of shares cannot be decreased below the number
of shares of the class or series then outstanding;
. whether dividends, if any, will be cumulative or noncumulative and
the dividend rate of the series; the conditions upon which and the
dates at which dividends, if any, will be payable, and the
relation that those dividends, if any, will bear to the dividends
payable on any other class or classes of stock;
. the redemption rights and price or prices, if any, for shares of
the class or series;
. the terms and amounts of any sinking fund provided for the
purchase or redemption of shares of the class or series;
. the amounts payable on shares of the class or series and the
preferences, if any, of shares of the class or series in the event
of any voluntary or involuntary liquidation, dissolution, or
winding up of BlackRock;
. whether the shares of the class or series will be convertible into
shares of any other class or series, or any other security, of
BlackRock or any other corporation; if the shares will be
convertible, the specification of the other class or series or the
other security, the conversion price or prices or rate or rates,
any applicable adjustments, the date or dates at which the shares
will be convertible and all other terms and conditions upon which
the conversion may be made;
. restrictions, if any, on the issuance of shares of the same class
or series or of any other class or series of BlackRock capital
stock; and
. the voting rights, if any, of the holders of shares of the class
or series.
We believe that the ability of the board of directors to issue one or
more classes or series of preferred stock will provide us with flexibility in
structuring possible future financings and acquisitions and in meeting other
corporate needs that might arise. The authorized shares of preferred stock will
be available for issuance without further action by our stockholders, unless
action is required by applicable law or by the rules of any stock exchange on
which our securities may be listed or traded. The NYSE, on which BlackRock
expects to list the class A common stock, currently requires stockholder
approval as a prerequisite to listing shares in several instances, including
where the present or potential issuance of shares could result in an increase
of at least 20% in the number of shares of common stock outstanding or in the
amount of voting securities outstanding.
Although the board of directors has no current intention of doing so, it
could issue a class or series of preferred stock that could, depending on the
terms of the class or series, impede the completion of a merger, tender offer,
or other takeover attempt. The board of directors will make any determination
to issue shares based on its judgment as to the best interests of BlackRock and
our stockholders. In making its determination, the board of directors could
issue preferred stock having terms that could discourage a potential acquirer
from making an acquisition attempt that may change the composition of the board
of directors, without first negotiating with the board of directors. The
transactions that might be discouraged could include a tender offer or other
transaction that some, or a majority, of our stockholders might believe to be
in their best interests or in which stockholders might receive a premium for
their stock over the then current market price of the stock.
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Delaware Business Combination Statute
Our amended and restated certificate of incorporation provides that
Section 203 of the Delaware General Corporation Law, which restricts certain
business combinations between a corporation and certain interested stockholders
of that corporation, is not applicable to us. However, our amended and restated
certificate of incorporation contains provisions that as of and following the
Trigger Date will restrict transactions between us and interested stockholders
in the same manner such transactions would be restricted if we were subject to
Section 203. See "Certificate of Incorporation and Bylaw Provisions-- Business
combination transaction restrictions."
Certificate of Incorporation and Bylaw Provisions
The summary set forth below describes material provisions of the
certificate of incorporation and bylaws. The summary is qualified in its
entirety by reference to the provisions of the certificate of incorporation and
bylaws, copies of which were filed as exhibits to the registration statement of
which this prospectus forms a part.
Certain of the provisions of the certificate of incorporation or the
bylaws discussed below may, following the Trigger Date, either alone or in
combination with the provisions of the Delaware General Corporation Law
discussed above, make more difficult or discourage a tender offer, proxy
contest or other takeover attempt that is opposed by the board of directors but
that a stockholder might consider to be in such stockholder's best interest.
Those provisions include restrictions on the rights of stockholders to remove
or elect directors and prohibitions against stockholders calling a special
meeting of stockholders. Prior to the Trigger Date, these provisions either
will not apply or will have little practical significance in terms of
discouraging takeover attempts because such attempts cannot succeed without the
consent of PNC or a PNC transferee so long as PNC or a PNC transferee owns more
than 50% of our voting power. In addition, the certificate of incorporation
contains provisions relating to the allocation of certain corporate
opportunities and resolution of certain conflicts of interest.
Staggered board
The certificate of incorporation and the bylaws divide the board of
directors into three classes of directors, each class constituting
approximately one-third of the total number of directors. One class will be
originally elected for a term expiring at the annual meeting of stockholders to
be held in 2000, another will be originally elected for a term expiring at the
annual meeting of stockholders to be held in 2001 and another will be
originally elected for a term expiring at the annual meeting of stockholders to
be held in 2002. Each director is to hold office until his or her successor is
duly elected and qualified. Commencing with the 2000 annual meeting of
stockholders, directors elected to succeed directors whose terms then expire
will be elected for a term of office to expire at the third succeeding annual
meeting of stockholders after their election, with each director to hold office
until such person's successor is duly elected and qualified.
The classification of the board of directors will make it more difficult
for stockholders to change the composition of the board of directors because
only a minority of the directors can be elected at once. The classification
provisions could also discourage a third party from accumulating BlackRock's
stock or attempting to obtain control of BlackRock, even though such an attempt
might be beneficial to BlackRock and some, or a majority, of its stockholders.
Accordingly, under certain circumstances stockholders could be deprived of
opportunities to sell their shares of common stock at a higher price than might
otherwise be available.
Number and composition of directors; filling vacancies; removal
The certificate of incorporation and bylaws provide that the board of
directors will consist of a number of directors as may be fixed from time to
time pursuant to a resolution adopted by directors constituting, prior
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to the Trigger Date, at least 80% of the directors on the board of directors,
and as of and following the Trigger Date, a majority of the board of directors.
The bylaws provide that unless the board of directors otherwise determines, any
vacancies on the board of directors will be filled by the affirmative vote of
80% of the remaining directors, prior to the Trigger Date, or as of or
following the Trigger Date, by a majority of the directors then in office, or
by a sole remaining director or by the stockholders if such vacancies resulted
from the action of the stockholders. These provisions would be subject to any
rights of holders of preferred stock to elect directors under specified
circumstances. Accordingly, absent an amendment to the certificate of
incorporation or the bylaws, the board of directors could prevent any
stockholder from enlarging the board of directors and filling the new
directorships with such stockholder's own nominees.
The certificate of incorporation and the bylaws provide that as of and
following the Trigger Date, a director may be removed only for cause and only
upon the affirmative vote of holders of at least 80% of the voting power of the
then outstanding shares of common stock entitled to vote generally in the
election of directors, voting together as a single class. Prior to the Trigger
Date, directors may be removed, with or without cause, with the affirmative
vote of the holders of at least a majority of the voting power of the then
outstanding voting stock, voting together as a single class. Prior to the
Trigger Date, PNC or a PNC transferee will always have the power to remove any
director, subject to its obligations under the Amended Stockholders Agreement.
See "--Stockholders Agreement."
The bylaws also provide that, prior to the Trigger Date, to the extent
permitted by applicable law:
. a majority of all of the directors on the committees of the board
of directors will be directors designated by PNC or its
affiliates, and
. at least one director on each committee of the board of directors
will be a director designated by our management committee.
Quorum; certain board voting requirements
The bylaws provide that a quorum for the transaction of business by the
board of directors at a meeting will only be constituted if a majority of the
board of the directors, and, until the Trigger Date, including the chairman of
the board of directors and two directors designated by PNC, are present at the
meeting; provided, that the board of directors will be entitled to take any
action at any meeting if a quorum is otherwise present if the meeting is a
regularly scheduled meeting or, if the meeting is not a regularly scheduled
meeting, after having been sent required notice of the meeting, either two of
the directors designated by PNC or the chairman of the board are absent from
the meeting and, the absent PNC designated directors or chairman of the board
will have failed to communicate in writing to the secretary of BlackRock good
reason for such absence in advance of the relevant meeting. The bylaws also
provide that, except as otherwise provided by applicable law, certain bylaw
amendments including but not limited to those relating to: changes in the size
and composition of the board of directors, mergers, acquisitions and certain
other significant transactions, issuance of additional stock, incurrence of
indebtedness, engaging in new types of business activities, proposed changes in
auditors and dividend declarations and matters which may materially affect the
economic interests of PNC, may only be acted upon or put into effect by the
affirmative vote of 80% of the board of directors. Based on the expected
composition of the board of directors following the offerings, an affirmative
vote of 80% of the board of directors would require the affirmative vote of at
least two directors who are designated to be directors by PNC.
Certain business activities
The bylaws provide that so long as PNC or any of PNC's subsidiaries
directly or indirectly owns at least 10% of the capital stock or 5% of any
"class" of "voting securities" (as those terms are defined for purposes of the
Federal Reserve Board's Regulation Y) of BlackRock BlackRock or any successor
entity to it
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may not, without PNC's consent, directly or indirectly own any asset or engage
in any activity if to do so would cause BlackRock or any of its subsidiaries or
the PNC entity that owns capital stock of BlackRock or any successor to such
PNC entity, to be in violation of any applicable federal banking law or any
rule, regulation, policy or order of any federal banking regulator with
jurisdiction over BlackRock or the PNC entity. The bylaws further provide that
BlackRock will, and will cause its subsidiaries to, take any necessary action
to ensure compliance with the foregoing provision, including, without
limitation, obtaining any required approval from, or filing any required notice
or application with, any applicable federal banking agency. The bylaws also
provide that if PNC owns less than 10% of the capital stock and less than 5% of
any class of voting securities of BlackRock, BlackRock or a successor will
provide PNC with written notice before engaging in new activities or investing
in assets not permitted by applicable banking laws, in order to allow PNC
sufficient time after such notice to restructure PNC's investment so as to free
BlackRock from the applicable activities restrictions. References to PNC in
this provision include references to any successor company to PNC.
No stockholder action by written consent
The certificate of incorporation and bylaws provide that, subject to the
rights of any holders of preferred stock to elect additional directors under
specified circumstances,
. effective as of the Trigger Date, stockholder action can be taken
only at an annual or special meeting of stockholders and
stockholder action may not be taken by written consent in lieu of
a meeting; and
. prior to the Trigger Date, any stockholder action can be taken by
written consent in lieu of an annual or special meeting of
stockholders as permitted by law.
Advance notice procedures
The bylaws provide for an advance notice procedure for the nomination,
other than by or at the direction of the board of directors or by a Controlling
Stockholder prior to the Trigger Dates, of candidates for election as
directors, as well as for other stockholder proposals to be considered at
annual meetings of stockholders. In general, notice of intent to nominate a
director or raise matters at meetings will have to be received in writing by
BlackRock not less than 120 nor more than 150 days prior to the anniversary of
the mailing date of proxy materials for the previous year's annual meeting of
stockholders. The notice must contain certain information concerning the person
to be nominated or the matters to be brought before the meeting and concerning
the stockholder submitting the proposal.
Special meetings
The certificate of incorporation and bylaws provide that special meetings
of stockholders can be called only by BlackRock's chairman or president or a
majority of the board of directors. Prior to the Trigger Date, special meetings
can also be called at the request of PNC. Effective as of the Trigger Date, the
power of any stockholder to call a special meeting is specifically denied. This
provision is subject to the rights of holders of any series of preferred stock
to elect additional directors under specified circumstances. The business
permitted to be conducted at any special meeting of stockholders is limited to
the business brought before the meeting pursuant to the notice of meeting.
The provisions of the bylaws permitting special meetings to be called
only by BlackRock's chairman or president or at the request of a majority of
the board of directors may have the effect, after the Trigger Date, of delaying
consideration of a stockholder proposal until the next annual meeting.
Moreover, a stockholder could not force stockholder consideration of a proposal
over the opposition of BlackRock's chairman or president or a majority of the
board of directors by calling a special meeting of stockholders prior to the
time they believe stockholder consideration to be appropriate.
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Business combination transaction restrictions
As of and following the Trigger Date, we will be subject to restrictions
on certain business combinations between us and an interested stockholder set
forth in our certificate of incorporation. These restrictions are intended to
be equivalent to the restrictions on business combinations with interested
stockholders imposed by Section 203 of the Delaware General Corporation Law.
BlackRock has elected not to be subject to Section 203 of the Delaware General
Corporation Law. The following discussion is a summary of these restrictions in
our certificate of incorporation. An "interested stockholder" is a person,
other than BlackRock, PNC, PNC's successor, or any majority-owned subsidiary of
BlackRock or PNC, that:
. owns 15% or more of the outstanding voting stock of BlackRock;
. is an affiliate or associate of BlackRock and was the owner of 15%
or more of the outstanding voting stock of BlackRock at any time
within the three year period immediately prior to the date on
which the determination of whether that person is an interested
stockholder is made; or
. an affiliate or associate of the persons described in the second
bullet point of this sentence.
The restrictions do not apply if:
. prior to an interested stockholder becoming an interested
stockholder, the board of directors approved either the business
combination or the transaction that resulted in the stockholder
becoming an interested stockholder;
. upon consummation of the transaction that resulted in any person
becoming an interested stockholder, the interested stockholder
owned at least 85% of our voting equity outstanding at the time
the transaction commenced (excluding shares owned by certain
employee equity ownership plans and persons who are both our
directors and officers); or
. at or subsequent to the time an interested stockholder becomes an
interested stockholder, the business combination is both approved
by the board of directors and authorized at an annual or special
meeting of our stockholders, not by written consent, by the
affirmative vote of at least 66 2/3% of the outstanding voting
equity not owned by the interested stockholder.
Under certain circumstances, these provisions will make it more difficult
for a person who would be an "interested stockholder" as of and following the
Trigger Date to effect various business combinations with us for a three-year
period. It is anticipated that these provisions may encourage companies
interested in acquiring us to negotiate in advance with the board of directors,
since the stockholder approval requirement would be avoided if a majority of
the directors then in office approves, prior to the date on which a stockholder
becomes an interested stockholder, either the business combination or the
transaction that results in the stockholder becoming an interested stockholder.
These restrictions on business combination transactions with interested
stockholders will not be applicable prior to the Trigger Date. Therefore, these
restrictions will not be applicable to any proposed business combination
transactions between us and PNC or any PNC transferee.
Liability of directors; indemnification
BlackRock's certificate of incorporation provides that, to the fullest
extent permitted by the Delaware General Corporation Law, no director of
BlackRock will be liable to BlackRock or its stockholders for monetary damages
for the breach of his or her fiduciary duty as a director. Under the Delaware
General Corporation Law, this provision does not eliminate or limit the
liability of any director if a judgment or other final adjudication establishes
that his or her acts or omissions constituted a breach of his or her duty of
loyalty
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to BlackRock or its stockholders or were in bad faith or involved intentional
misconduct or a knowing violation of law or that he or she personally gained a
material profit or other advantage to which he was not legally entitled or that
his acts violated Section 174 of the Delaware General Corporation Law.
As a result of this provision, BlackRock and its stockholders may be
unable to obtain monetary damages from a director for breach of his duty of
care. Although stockholders may continue to seek injunctive or other equitable
relief for an alleged breach of fiduciary duty by a director, stockholders may
not have any effective remedy against the challenged conduct if equitable
remedies are unavailable.
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to BlackRock or its stockholders or were in bad faith or involved intentional
misconduct or a knowing violation of law or that he or she personally gained a
material profit or other advantage to which he was not legally entitled or that
his acts violated Section 174 of the Delaware General Corporation Law.
As a result of this provision, BlackRock and its stockholders may be
unable to obtain monetary damages from a director for breach of his duty of
care. Although stockholders may continue to seek injunctive or other equitable
relief for an alleged breach of fiduciary duty by a director, stockholders may
not have any effective remedy against the challenged conduct if equitable
remedies are unavailable.
The bylaws provide that BlackRock will indemnify, to the maximum extent
not prohibited by Delaware law, any person who was or is a party to any
threatened, pending, or completed action, suit or proceeding because he or she
is or was a director or officer of BlackRock, or is or was serving at the
request of BlackRock as a director or officer of another corporation,
partnership or other enterprise. The bylaws provide that indemnification will
be from and against expenses, judgments, fines and amounts paid in settlement
by the director or officer.
Overview of corporate opportunity and conflict of interest policies
Our certificate of incorporation sets forth provisions which regulate and
define the conduct of certain business and affairs of BlackRock relating to
corporate opportunities and conflicts of interest. These provisions serve to
address the respective rights and duties of BlackRock, PNC and certain of their
respective directors, and officers in anticipation that:
. directors, officers, and/or employees of PNC may serve as
directors of BlackRock;
. PNC engages in, is expected to continue to engage in, and in the
future may engage in lines of business that are the same as,
similar or related to, overlap or compete with the lines of
business of BlackRock; and
. PNC and BlackRock will engage in material business transactions
including, without limitation, pursuant to the agreements
described under "Certain Relationships and Related Transactions."
BlackRock may, from time to time, enter into and perform agreements with
PNC to engage in any transaction, and to agree to compete or not to compete
with each other, including to allocate, or to cause their respective directors,
officers and employees to allocate, corporate opportunities between themselves.
BlackRock may also enter into such agreements with its own or PNC's directors,
officers or employees, or with other entities in which these persons have a
financial interest.
The termination of the provisions of our certificate of incorporation
with regard to such transactions or corporate opportunities will not terminate
the effect of those provisions with respect to any agreement between BlackRock
or an affiliate and PNC that was entered into before that time or any
transaction entered into in the performance of such agreement, whether entered
into before or after that time, or any transaction entered into between
BlackRock and PNC for the allocation of any opportunity between them before
that time. These provisions do not alter the fiduciary duty of loyalty of our
directors under applicable Delaware law. Subject to applicable Delaware law, by
becoming a stockholder in BlackRock, you will be deemed to have notice of and
have consented to these provisions of our certificate of incorporation. These
provisions may be amended only with the affirmative vote of the holders of at
least 80% of the voting power of all shares of voting stock then outstanding,
voting together as a single class.
Amendment
In general, prior to the Trigger Date, our certificate of incorporation
may be altered or repealed and new provisions thereof adopted by the
affirmative vote of the holders of a majority of the outstanding voting stock
and by the affirmative vote of a majority of the board of directors. Similarly,
our bylaws may be altered or repealed and new provisions thereof adopted by the
affirmative vote of the holders of a majority of the
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outstanding voting stock or by the affirmative vote of a majority of the board
of directors, except that prior to the Trigger Date, the board of directors
will only be able to effect such an amendment through the affirmative vote of
at least 80% of the members of the board of directors. As of and following the
Trigger Date, certain provisions of our certificate of incorporation and
bylaws, including those relating to stockholder action by written consent, the
calling of special stockholder meetings, other stockholder actions and
proposals and certain matters related to our board of directors, may be amended
only by the affirmative vote of holders of at least 80% of the voting stock.
Listing
The class A common stock has been approved for listing on the NYSE under
the symbol "BLK."
Transfer Agent and Registrar
The transfer agent and registrar for the class A common stock is
.
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SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the offerings, we will have outstanding shares
of class A common stock and shares of class B common stock. All of the
shares of class A common stock to be sold in the offerings will be freely
tradable without restrictions or further registration under the Securities Act,
except that shares purchased by one of our affiliates will be subject to the
resale limitations of Rule 144. The shares of class A and class B
common stock owned by PNC and our other existing stockholders may not be sold
in the absence of registration under the Securities Act other than pursuant to
Rule 144 under the Securities Act or another exemption from registration under
the Securities Act.
In general, under Rule 144:
. a person (or persons whose shares are required to be aggregated)
who has beneficially owned shares of common stock as to which at
least one year has elapsed since such shares were sold by us or by
an affiliate in a transaction or chain of transactions not
involving a public offering ("restricted securities"); or
. an affiliate who holds shares of common stock that are not
restricted securities
may sell, within any three-month period, a number of shares that does not
exceed the greater of 1% of our common stock then outstanding or the average
weekly trading volume in the common stock during the four calendar weeks
preceding the date on which notice of the sale required under Rule 144 was
filed. Sales under Rule 144 are also subject to certain provisions relating to
the manner and notice of sale and availability of current public information
about us.
Affiliates must comply with the requirements of Rule 144, including the
one-year holding period requirement, to sell shares of common stock that are
restricted securities. Furthermore, if a period of at least two years has
elapsed from the date restricted securities were acquired from us or an
affiliate, a holder of restricted securities who is not an affiliate at the
time of the sale and has not been an affiliate at any time during the three
months prior to the sale would be entitled to sell the shares without regard to
the volume limitation and other conditions described above.
The shares of common stock authorized for issuance pursuant to options
that may be granted under the Award Plan may be either authorized but unissued
shares or treasury shares obtained by us through market or private purchases.
See "Executive Compensation--BlackRock, Inc. 1999 Stock Award and Incentive
Plan." We intend to register under the Securities Act the shares of common
stock issuable upon the exercise of options granted pursuant to the Award Plan.
Prior to the offerings, there has been no public market for the common
stock. Although we can make no prediction as to the effect, if any, that sales
of shares of common stock by PNC and our other existing stockholders would have
on the market price prevailing from time to time, sales of substantial amounts
of common stock or the availability of the shares for sale could adversely
affect prevailing market prices.
All of our executive officers, directors and stockholders have entered
into contractual "lock-up" agreements, providing that subject to certain
limited exceptions they will not during the period of 180 days from the date of
this prospectus, without the prior written consent of Merrill Lynch, Pierce,
Fenner & Smith Incorporated, directly or indirectly:
. offer, pledge, sell, contract to sell, sell any option or contract
to purchase, purchase any option or contract to sell, grant any
option, right or warrant for the sale of or otherwise transfer or
dispose of, any common stock or any securities convertible into or
exercisable or exchangeable for common stock, whether now earned
or subsequently acquired or to which
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<PAGE>
officers, directors and stockholders have or later acquire the
power of disposition, or file any registration statement under the
Securities Act with respect to any of the foregoing; or
. enter into any swap or any other agreement or any transaction that
transfers, in whole or in part, directly or indirectly, the
economic consequence of ownership of the common stock in each
case, whether the swap or transaction is settled by delivery of
common stock or other securities, in cash or otherwise.
As a result of contractual restrictions, notwithstanding possible
earlier eligibility for sale under the provisions of Rule 144 promulgated
under the Securities Act, which are summarized above, shares subject to lock-
up agreements will not be saleable until the agreements expire.
We have agreed subject to certain limited exceptions not to, during the
period of 180 days from the date of this prospectus, without the prior written
consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated, directly or
indirectly:
. offer, pledge, sell, contract to sell, sell any option or contract
to purchase, purchase any option or contract to sell, grant any
option, right or warrant to purchase or otherwise transfer or
dispose of, any common stock or any securities convertible into or
exercisable or exchangeable for common stock or file any
registration statement under the Securities Act with respect to
any of the foregoing; or
. enter into any swap or any other agreement or any transaction that
transfers, in whole or in part, directly or indirectly, the
economic consequence of ownership of the common stock;
in each case, whether the swap or transaction is settled by delivery of common
stock or other securities, in cash or otherwise. However, we may:
. grant stock options or stock awards under our existing benefit and
compensation plans as referred to in the prospectus;
. issue shares of class A common stock upon the exercise of options,
warrants or rights or the conversion of currently outstanding
securities as referred to in the prospectus; and
. issue, offer and sell shares of class A common stock or securities
convertible, exercisable or exchangeable into shares of class A
common stock in transactions not involving a public offering, as
long as each recipient of the securities agrees in writing to be
bound by the restrictions in this paragraph.
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UNDERWRITING
General
We intend to offer our common stock in the United States and Canada
through a number of U.S. underwriters as well as through international
managers. Merrill Lynch, Pierce, Fenner & Smith Incorporated , Goldman, Sachs &
Co., Lehman Brothers Inc., Prudential Securities Incorporated and Salomon Smith
Barney Inc. are acting as U.S. Representatives of each of the U.S. underwriters
named below. Subject to the terms and conditions described in a U.S. purchase
agreement among BlackRock and the U.S. underwriters, and concurrently with the
sale of shares of class A common stock to the international managers, we
have agreed to sell to the U.S. underwriters, and each of the U.S. underwriters
severally and not jointly has agreed to purchase from BlackRock, the number of
shares of class A common stock listed opposite its name below.
<TABLE>
<CAPTION>
Number of
U.S. Underwriters Shares
----------------- ---------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated..........................................
Goldman, Sachs & Co. ..........................................
Lehman Brothers Inc. ..........................................
Prudential Securities Incorporated.............................
Salomon Smith Barney Inc. .....................................
------
Total.................................................
======
</TABLE>
We have has also entered into an international purchase agreement with
international managers outside the United States and Canada for whom Merrill
Lynch International is acting as lead manager. Subject to the terms and
conditions described in the international purchase agreement, and concurrently
with the sale of shares of class A common stock to the U.S. underwriters
pursuant to the U.S. purchase agreement, we have agreed to sell to the
international managers, and the international managers severally have agreed to
purchase from us, an aggregate of shares of class A common stock. The
initial public offering price per share and the total underwriting discount per
share of class A common stock are identical under the U.S. purchase agreement
and the international purchase agreement.
In the U.S. purchase agreement and the international purchase agreement,
the U.S. underwriters and the international managers have agreed, subject to
the terms and conditions in those agreements, to purchase all of the shares of
class A common stock being sold under the terms of those agreements if any of
the shares of class A common stock are purchased. In the event of a default by
an underwriter, the U.S. purchase agreement and the international purchase
agreement provide that the purchase commitments of the nondefaulting
underwriters may be increased or the purchase agreements may be terminated. The
closings with respect to the sale of shares of class A common stock to be
purchased by the U.S. underwriters and the international managers are
conditioned on one another.
We have agreed to indemnify the U.S. underwriters and the international
managers against liabilities under the securities laws arising out of or based
upon untrue statements of material facts or material omissions contained in the
registration statement or the prospectus. We have also agreed to contribute to
payments that the U.S. underwriters and the international managers may be
required to make in respect of those liabilities.
Commitments and Discounts
The U.S. representatives have advised us that the U.S. underwriters
propose initially to offer the shares of class A common stock to the public at
the initial public offering price listed on the cover page of this prospectus,
and to dealers at such price less a concession not in excess of $ per share
of class A common stock. The U.S. underwriters may allow, and such dealers may
reallow, a discount not in excess of $ per share of class A common stock to
other dealers. After the initial public offerings, the public offering price,
concession and discount may be changed.
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The following table shows the per share and total public offering price,
underwriting discount to be paid by us to the U.S. underwriters and the
international managers and the proceeds before expenses to us. This information
is presented assuming either no exercise or full exercise by the U.S.
underwriters and the international managers of their over-allotment options.
<TABLE>
<CAPTION>
Without With
Per Share Option Option
--------- ------- -------
<S> <C> <C> <C>
Public offering price........................... $ $ $
Underwriting discount........................... $ $ $
Proceeds, before expenses, to BlackRock......... $ $ $
</TABLE>
The expenses of the offerings are estimated as follows: SEC registration
fee, $51,791; NASD fee, $19,100; listing fee, $115,000; accounting fees and
expenses, $750,000; legal fees and expenses, $400,000; printing and engraving
fees and expenses, $375,000; transfer agent's fees, $25,000; blue sky fees and
expenses, including counsel fees, $10,000; and miscellaneous expenses, $22,989.
The total expenses, not including the underwriting discount, are estimated at
$1,768,880 and are payable by us.
Intersyndicate Agreement
The U.S. underwriters and the international managers have entered into an
intersyndicate agreement that provides for the coordination of their
activities. Under the terms of the intersyndicate agreement, the U.S.
underwriters and the international managers are permitted to sell shares of our
class A common stock to each other for purposes of resale at the initial public
offering price, less an amount not greater than the selling concession. Under
the terms of the intersyndicate agreement, the U.S. underwriters and any dealer
to whom they sell shares of our class A common stock will not offer to sell or
sell shares of our class A common stock to persons who are non-U.S. or non-
Canadian persons or to persons they believe intend to resell to persons who are
non-U.S. or non-Canadian persons, except in the case of transactions under the
terms of the intersyndicate agreement. Similarly, the international managers
and any dealer to whom they sell shares of our class A common stock will not
offer to sell or sell shares of our class A common stock to U.S. persons or to
Canadian persons or to persons they believe intend to resell to U.S. or
Canadian persons, except in the case of transactions pursuant to the
intersyndicate agreement.
Over-allotment Option
We have granted an option to the U.S. underwriters, exercisable for 30
days after the date of this prospectus, to purchase up to additional shares
of class A common stock at the public offering price listed on the cover page
of this prospectus, less the underwriting discount. The U.S. underwriters may
exercise this option solely to cover over-allotments, if any, made on the sale
of the class A common stock. To the extent that the U.S. underwriters exercise
this option, each U.S. underwriter will be obligated, subject to customary
conditions, to purchase a number of additional shares of our class A common
stock proportionate to such U.S. underwriter's initial amount reflected in the
above table.
We have also granted an option to the international managers, exercisable
for 30 days after the date of this prospectus, to purchase up to additional
shares of class A common stock to cover over-allotments, if any, on terms
similar to those granted to the U.S. underwriters.
Reserved Shares
At our request, the underwriters have reserved for sale, at the initial
public offering price, up to of the shares of the class A common stock
offered by this prospectus for sale to some directors, officers and of the
employees of BlackRock and PNC. The number of shares of our class A common
stock available for sale to the general public will be reduced to the extent
those persons purchase the reserved shares. Any reserved
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<PAGE>
shares which are not orally confirmed for purchase within one day of the
pricing of the offerings will be offered by the underwriters to the general
public on the same basis as the other shares offered by this prospectus.
No Sales of Similar Securities
BlackRock and its executive officers and directors and all existing
stockholders will agree prior to the offering, not to sell or transfer any of
their shares of class B common stock for 180 days after the date of the
prospectus unless they first obtain the written consent of Merrill Lynch. In
particular, BlackRock and all of these persons have agreed that they will not
directly or indirectly:
. offer, pledge, sell or contract to sell any of the class B common
stock,
. sell any option or contract to purchase the class B common stock,
. purchase any option or contract to sell the class B common stock,
. grant any option, right or warrant for the sale of the class B common
stock,
. request or demand that BlackRock file a registration statement
related to the class B common stock, or
. enter into any agreement or transaction that transfers all or any
part of the ownership of the class B common stock.
This lockup provision applies to class B common stock as well as any
securities which are convertible into or exchangeable or exercisable for class
B common stock. The provision applies to class B common stock currently held as
well as class B common stock acquired in the future.
However, a stockholder may without the consent of Merrill Lynch transfer
the shares of common stock to trusts or similar entities for estate planning
purposes or to affiliates as defined in Rule 144 as long as any transferee
agrees in writing to be bound by the terms of the lockup agreement. See "Shares
Eligible for Future Sale."
New York Stock Exchange Listed
The class A common stock has been approved for listing on the New York
Stock Exchange under the symbol "BLK." In order to meet the requirements for
listing of the class A common stock on that exchange, the U.S. underwriters and
the international managers have undertaken to sell lots of 100 or more shares
to a minimum of 2,000 beneficial owners.
Initial Public Offering Price
Prior to the offerings, there has been no public market for the class A
common stock. The initial public offering price will be determined through
negotiations between BlackRock and the representatives. The factors considered
in determining the initial public offering price, in addition to prevailing
market conditions, are
. price-earnings ratios of publicly traded companies that the
representatives believe to be comparable to BlackRock,
. financial information of BlackRock,
. the history of, and the prospects for, BlackRock and the industry in
which it competes, or
. an assessment of its management, its past and present operations, the
prospects for, and timing of, future revenue of BlackRock, and the
present state of its development.
An active trading market may not develop for the class A common stock and
the class A common stock may not trade in the public market subsequent to the
offerings at or above the initial public offering price.
The underwriters do not expect sales of the class A common stock to any
accounts over which they exercise discretionary authority to exceed 5% of the
number of shares being offered in these offerings.
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NASD Regulations
Because we may be deemed to be an affiliate of PNC subsidiaries that are
member firms of the NASD, the offerings will be conducted in accordance with
Conduct Rule 2720 of the National Association of Securities Dealers, Inc. This
rule requires that the public offering price of an equity security be no higher
than the price recommended by a qualified independent underwriter which has
participated in the preparation of the registration statement and performed its
usual standard of due diligence. Merrill Lynch has agreed to act as qualified
independent underwriter with respect to the offerings. The public offering
price of the class A common stock will be no higher than that recommended by
Merrill Lynch.
The underwriters will not confirm sales of the class A common stock to
any account over which they exercise discretionary authority without the prior
written specific approval of the customer.
Price Stabilization, Short Positions and Penalty Bids
Until the distribution of our class A common stock is completed, SEC
rules may limit the ability of the underwriters and certain selling group
members to bid for and purchase our class A common stock. As an exception to
these rules, the U.S. representatives are permitted to engage in transactions
that stabilize the price of our class A common stock. Such transactions consist
of bids or purchases for the purpose of pegging, fixing or maintaining the
price of our class A common stock.
If the underwriters create a short position in the class A common stock
in connection with the offerings, i.e., if they sell more shares of our class A
common stock than are listed on the cover page of this prospectus, the U.S.
representatives may reduce that short position by purchasing our class A common
stock in the open market. The U.S. representatives may also elect to reduce any
short position by exercising all or part of the over-allotment options
described above.
The U.S. representatives may also impose a penalty bid on underwriters
and selling group members. This means that if the U.S. representatives purchase
shares of our class A common stock in the open market to reduce the
underwriters' short position or to stabilize the price of our class A common
stock, they may reclaim the amount of the selling concession from the
underwriters and selling group members who sold those shares.
In general, purchases of a security for the purpose of stabilization or
to reduce a short position could cause the price of the security to be higher
than it might be in the absence of such purchases. The imposition of a penalty
bid might also have an effect on the price of the our A common stock to the
extent that it discourages resale of our class A common stock.
Neither BlackRock nor any of the underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of our class A common stock. In addition,
neither BlackRock nor any of the underwriters makes any representation that the
U.S. representatives or the lead manager will engage in such transactions or
that such transactions, once commenced, will not be discontinued without
notice.
Other Relationships
Certain of the underwriters and their affiliates engage in transactions
with, and perform services for, BlackRock, PNC and their affiliates in the
ordinary course of business and have engaged, and may in the future engage, in
commercial banking and investment banking transactions with BlackRock for which
they receive customary compensation. Merrill Lynch, Prudential Securities and
its affiliated parties and Salomon Smith Barney distribute BlackRock Funds and
provide stockholder services in connection with those funds in the ordinary
course of business, for which they receive customary compensation.
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MATERIAL UNITED STATES FEDERAL INCOME AND ESTATE TAX CONSIDERATIONS FOR NON-
U.S. HOLDERS OF CLASS A COMMON STOCK
The following is a general summary of the material United States federal
income and estate tax consequences of the purchase, ownership, and sale or
other taxable disposition of the class A common stock by any person or entity
(a "non-U.S. Holder") other than:
. a citizen or resident of the United States;
. a partnership, corporation or other entity created or organized
in or under the laws of the United States or of any political
subdivision thereof;
. a trust, if a court within the United States is able to
exercise primary supervision over the administration of the
trust and one or more United States persons have the authority
to control all substantial decisions of the trust or the trust
has a valid election in effect under applicable U.S. Treasury
regulations to be treated as a U.S. Person; or
. an estate, the income of which is includible in gross income
for United States federal income tax purposes regardless of its
source.
This summary does not address all tax considerations that may be relevant to
non-U.S. Holders in light of their particular circumstances or to certain non-
U.S. Holders that may be subject to special treatment under United States
federal income or estate tax laws. This summary is based upon the Internal
Revenue Code, existing, temporary and proposed regulations promulgated
thereunder and administrative and judicial decisions, all of which are subject
to change, possibly with retroactive effect. In addition, this summary does not
address the effect of any state, local or foreign tax laws. Each prospective
purchaser of class A common stock should consult its tax advisor with respect
to the tax consequences of purchasing, owning and disposing of the class A
common stock.
Dividends
Dividends paid to a non-U.S. Holder of class A common stock generally
will be subject to a withholding of United States federal income tax at a 30
percent rate or such lower rate as may be specified by an applicable income tax
treaty unless:
. the dividend is effectively connected with the conduct of a
trade or business of the non-U.S. Holder within the United
States; or
. if a tax treaty applies, it is attributable to a United States
permanent establishment of the non-U.S. Holder,
in which cases the dividend will be taxed at ordinary federal income tax rates.
If the non-U.S. Holder is a corporation, such effectively connected income may
also be subject to an additional "branch profits tax."A non-U.S. Holder may be
required to satisfy certain certification requirements in order to claim treaty
benefits or otherwise claim a reduction of, or exemption from, the withholding
described above.
Sale or Other Disposition of Class A Common Stock
A non-U.S. Holder generally will not be subject to United States federal
income tax in respect of any gain recognized on the sale or other taxable
disposition of class A common stock unless:
. the gain is effectively connected with the conduct of a trade
or business of the non-U.S. Holder within the United States;
. in the case of a non-U.S. Holder who is an individual and holds
the class A common stock as a capital asset, the holder is
present in the United States for 183 or more days in the
taxable year of the sale or other taxable disposition and
certain other tests are met;
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. the non-U.S. Holder is subject to tax pursuant to the
provisions of United States federal income tax law applicable
to certain United States expatriates; or
. BlackRock is or has been during certain periods preceding the
sale or other taxable disposition a United States real property
holding corporation ("USRPHC") for United States federal income
tax purposes and certain other requirements are met. BlackRock
currently believes that it is not a USRPHC and anticipates that
it will not become a USRPHC.
Estate Tax
Class A common stock owned or treated as owned by an individual non-U.S.
Holder at the time of death will be includible in the individual's gross estate
for United States federal estate tax purposes, unless an applicable treaty
provides otherwise, and may be subject to United States federal estate tax.
Backup Withholding and Information Reporting
Dividends. United States backup withholding tax generally will not apply
to dividends paid on the class A common stock that are subject to the 30
percent or reduced treaty rate of United States withholding tax previously
discussed. BlackRock must report annually to the Internal Revenue Service and
to each non-U.S. Holder the amount of dividends paid to, and the tax withheld
with respect to, such holder, regardless of whether any tax was withheld. This
information may also be made available to the tax authorities in the non-U.S.
Holder's country of residence.
Sale or Other Disposition of Common Stock. Upon the sale or other taxable
disposition of class A common stock by a non-U.S. Holder to or through a United
States office of a broker, the broker must backup withhold at a rate of 31
percent and report the sale to the Internal Revenue Service, unless the holder
certifies its non-U.S. Holder status under penalties of perjury or otherwise
establishes an exemption. Upon the sale or other taxable disposition of class A
common stock by a non-U.S. Holder to or through the foreign office of a United
States broker, or a foreign broker with a certain relationship to the United
States, the broker must report the sale to the Internal Revenue Service (but
not backup withhold) unless the broker has documentary evidence in its files
that the seller is a non-U.S. Holder and certain other conditions are met or
the holder otherwise establishes an exemption.
Backup withholding is not an additional tax. Amounts withheld under the
backup withholding rules generally are allowable as a refund or credit against
a non-U.S. Holder's United States federal income tax liability, if any,
provided that the required information is furnished to the Internal Revenue
Service on a timely basis.
The U.S. Treasury Department has issued regulations generally effective
for payments made after December 31, 2000 that will affect the procedures to be
followed by a non-U.S. Holder in establishing such holder's status as a non-
U.S. Holder for purposes of the withholding, backup withholding and information
reporting rules described herein. In general, such regulations do not
significantly alter the substantive withholding and information reporting
requirements, but unify current certification procedures and forms and clarify
reliance standards. Prospective investors should consult their tax advisors
concerning the effect of such regulations on an investment in the class A
common stock.
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LEGAL MATTERS
Legal matters with respect to the validity of the shares of the class A
common stock offered hereby will be passed upon for us by Skadden, Arps, Slate,
Meagher & Flom LLP, New York, New York. Legal matters relating to the class A
common stock will be passed upon for the underwriters by Simpson Thacher &
Bartlett, New York, New York. Simpson Thacher & Bartlett has from time to time
in the past and may in the future provide services to BlackRock and its
affiliates for which it has or will receive customary compensation.
EXPERTS
The consolidated financial statements of BlackRock at December 31, 1997
and 1998, and for each of the three years in the period ended December 31, 1998
appearing in this prospectus and registration statement have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report thereon
appearing elsewhere herein, and are included in reliance upon such report given
upon the authority of such firm as experts in accounting and auditing. Ernst &
Young LLP also serve as PNC's independent auditors.
WHERE YOU CAN FIND MORE INFORMATION
After the offerings, we will be subject to the reporting requirements of
the Securities Exchange Act of 1934 and as a result we will file reports, proxy
statements and other information with the SEC. Our SEC filings will be
available over the internet at the SEC's web site at http://www.sec.gov. You
may also read, without charge, or copy, at prescribed rates, any document we
file at the SEC's public reference rooms in Washington, D.C., New York, New
York and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for more
information on the public reference rooms and their copy charges. You may also
inspect our SEC reports and other information at The New York Stock Exchange,
20 Broad Street, New York, New York 10005.
We have filed a registration statement on Form S-1 with the SEC covering
the class A common stock. For further information on us and the class A common
stock, you should refer to our registration statement and its exhibits. This
prospectus summarizes material provisions of contracts and other documents to
which we refer you. Since the prospectus may not contain all the information
that you may find important, you should review the full text of these
documents. We have included copies of these documents as exhibits to our
registration statement.
We intend to furnish to our stockholders annual reports containing
audited consolidated financial statements and quarterly reports for the first
three quarters of each fiscal year containing unaudited interim financial
information.
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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Contents
<TABLE>
<S> <C>
Report of Independent Auditors.............................................. F-2
Consolidated Statements of Financial Condition.............................. F-3
Consolidated Statements of Income........................................... F-4
Consolidated Statements of Changes in Stockholders' Equity.................. F-6
Consolidated Statements of Cash Flows....................................... F-7
Notes to Consolidated Financial Statements.................................. F-8
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
BlackRock, Inc.
We have audited the accompanying consolidated statements of financial
condition of BlackRock, Inc. as of December 31, 1997 and 1998, and the
consolidated statements of income, changes in stockholders' equity and cash
flows for each of the three years in the period ended December 31, 1998. These
financial statements are the responsibility of BlackRock's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of BlackRock, Inc. at December 31, 1997 and 1998, and the consolidated results
of its operations and its cash flows for each of the three years in the period
ended December 31, 1998, in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
New York, New York
February 26, 1999
F-2
<PAGE>
BLACKROCK, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollar amounts in thousands, except share data)
<TABLE>
<CAPTION>
December 31, June 30,
------------------- -----------
1997 1998 1999
--------- --------- -----------
(unaudited)
<S> <C> <C> <C>
Assets
Cash and cash equivalents..................... $ 69,085 $ 113,450 $ 76,262
Accounts receivable
Advisory and administration fees............ 28,632 47,611 47,565
BlackRock Asset Investors (BAI)............. 7,214 58,599 54,447
Investments (cost: $5,891 in 1997, $2,349 in
1998 and $2,329 in 1999)..................... 5,915 2,515 2,306
Property and equipment, net................... 7,037 12,252 16,737
Goodwill (less accumulated amortization of
$27,309 in 1997, $36,962 in 1998 and $41,788
in 1999)..................................... 213,563 203,910 199,084
Receivable from affiliate..................... 1,868 446 1,427
Other assets.................................. 2,193 2,001 5,424
--------- --------- --------
Total assets.................................. $ 335,507 $ 440,784 $403,252
========= ========= ========
Liabilities and stockholders' equity
Note and loan payable to affiliates........... 225,232 197,000 153,200
Accrued compensation
Employees................................... 40,424 65,523 49,116
BAI incentive compensation.................. 8,308 44,806 41,349
Accounts payable and accrued liabilities
Affiliate................................... 7,926 16,478 19,079
Other....................................... 5,053 7,627 7,522
Accrued interest payable to affiliates........ 1,658 1,175 705
Other liabilities............................. 1,943 1,984 203
--------- --------- --------
Total liabilities............................. 290,544 334,593 271,174
--------- --------- --------
Stockholders' equity
Common stock, no par value, 400,000 shares
authorized; 164,000, 199,300 and 199,300
shares outstanding, respectively........... -- -- --
Additional paid--in capital................. 15,091 53,105 53,105
Retained earnings........................... 29,872 53,286 79,272
Unrealized loss on investments, net......... -- -- (99)
Treasury stock, at cost, 207 shares........... -- (200) (200)
--------- --------- --------
Total stockholders' equity.................... 44,963 106,191 132,078
--------- --------- --------
Total liabilities and stockholders' equity.... $ 335,507 $ 440,784 $403,252
========= ========= ========
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
BLACKROCK, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Dollar amounts in thousands, except share data)
<TABLE>
<CAPTION>
Six months ended
Year Ended December 31, June 30,
---------------------------- ------------------
1996 1997 1998 1998 1999
-------- -------- -------- -------- --------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Revenue
Investment advisory and
administration fees
Mutual funds.............. $ 87,189 $117,977 $162,487 $ 67,403 $ 99,637
Separate accounts......... 43,069 62,985 101,352 42,376 71,569
BAI....................... 6,061 13,867 61,199 15,761 (2,054)
Other income
Affiliate................. 3,000 3,000 3,000 1,500 2,500
Other..................... 7,159 7,644 11,444 4,213 8,441
-------- -------- -------- -------- --------
Total revenues.............. 146,478 205,473 339,482 131,253 180,093
-------- -------- -------- -------- --------
Expenses
Employee compensation and
benefits................... 53,703 73,217 109,741 50,845 65,964
BAI incentive compensation.. 3,525 9,688 44,806 10,332 (1,494)
Fund administration and
servicing costs--
affiliates................. 19,611 27,278 52,972 15,656 36,334
General and administration
Affiliate................. 7,559 3,900 4,666 2,338 2,745
Other..................... 16,941 25,864 34,030 14,296 21,091
Amortization of goodwill.... 9,603 9,653 9,653 4,826 4,826
Closed-end fund offering
costs...................... -- -- 4,252 -- --
-------- -------- -------- -------- --------
Total expenses.............. 110,942 149,600 260,120 98,293 129,466
-------- -------- -------- -------- --------
Operating income............ 35,536 55,873 79,362 32,960 50,627
Non-operating income
(expense)
Interest and dividend
income..................... 1,877 3,117 1,995 1,066 1,293
Interest expense--
affiliates................. (19,975) (20,249) (13,347) (7,582) (7,121)
-------- -------- -------- -------- --------
(18,098) (17,132) (11,352) (6,516) (5,828)
-------- -------- -------- -------- --------
Income before income taxes.. 17,438 38,741 68,010 26,444 44,799
Income taxes................ 8,475 16,655 32,395 12,596 18,813
-------- -------- -------- -------- --------
Net income.................. $ 8,963 $ 22,086 $ 35,615 $ 13,848 $ 25,986
======== ======== ======== ======== ========
Earnings per share
Basic..................... $ 183.04 $ 130.39
======== ========
Diluted................... $ 182.44 $ 129.97
======== ========
Weighted average shares
outstanding
Basic..................... 194,578 199,300
======== ========
Diluted................... 195,215 199,937
======== ========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
BLACKROCK, INC.
CONSOLIDATED STATEMENTS OF INCOME (Continued)
(Dollar amounts in thousands, except share data)
<TABLE>
<CAPTION>
Year ended Six months ended
December 31, 1998 June 30, 1999
----------------- ----------------
<S> <C> <C>
Unaudited pro forma data
Income before income taxes, as reported.. $ 68,010 $ 44,799
Pro forma interest adjustment for debt
repayment............................... 9,658 5,000
Pro forma income taxes................... 37,514 21,231
----------- -----------
Pro forma net income..................... $ 40,154 $ 28,568
=========== ===========
Unaudited pro forma net income per share
Basic.................................... .75 .52
Diluted.................................. .75 .52
Unaudited pro forma weighted average shares
outstanding
Basic.................................... 53,507,051 54,807,482
Diluted.................................. 53,682,203 54,982,635
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
BLACKROCK, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Years ended December 31, 1996, 1997 and 1998 and six months ended June 30, 1999
(unaudited)
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
Additional Unrealized Total
Paid-In Retained Loss on Treasury Stockholders'
Capital Earnings Securities Stock Equity
---------- -------- ---------- -------- -------------
<S> <C> <C> <C> <C> <C>
December 31, 1995....... $15,091 $ 7,698 $ -- $ -- $ 22,789
Net Income............ -- 8,963 -- -- 8,963
Forgiveness of
intercompany
allocations.......... -- 920 -- -- 920
------- -------- ----- ----- --------
December 31, 1996....... 15,091 17,581 -- -- 32,672
Net income............ -- 22,086 -- -- 22,086
Dividend of
intercompany
allocations.......... -- (9,795) -- -- (9,795)
------- -------- ----- ----- --------
December 31, 1997....... 15,091 29,872 -- -- 44,963
Net income............ -- 35,615 -- -- 35,615
Dividends to PNC...... -- (12,300) -- -- (12,300)
Issuance of restricted
stock................ 35,951 -- -- -- 35,951
Purchase of treasury
stock................ -- -- -- (200) (200)
Forgiveness of
intercompany
allocations.......... -- 99 -- -- 99
Capital contribution
from PNC............. 2,063 -- -- -- 2,063
------- -------- ----- ----- --------
December 31, 1998....... 53,105 53,286 -- (200) 106,191
Net income
(unaudited).......... -- 25,986 -- -- 25,986
Unrealized loss on
investments
(unaudited).......... -- -- (99) -- (99)
------- -------- ----- ----- --------
June 30, 1999
(unaudited)............ $53,105 $ 79,272 $ (99) $(200) $132,078
======= ======== ===== ===== ========
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
BLACKROCK, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
Six months
Year ended December 31, ended June 30,
--------------------------- ------------------
1996 1997 1998 1998 1999
------- -------- -------- -------- --------
(unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities
Net income................... $ 8,963 $ 22,086 $ 35,615 $ 13,848 $ 25,986
Adjustments to reconcile net
income to net cash provided
from (used in) operating
activities:
Depreciation and
amortization.............. 11,700 12,151 12,852 6,217 9,455
Discount on issuance of
restricted stock.......... -- -- 1,737 1,737 --
Changes in operating assets
and liabilities:
Decrease (increase) in
accounts receivable..... (9,204) (7,484) (70,364) (19,598) 4,198
Decrease (increase) in
receivable from
affiliate............... (1,487) (325) 1,422 1,844 (981)
Decrease (increase) in
other assets............ (1,019) (358) 192 (583) (3,423)
Increase (decrease) in
accrued compensation.... 10,424 16,723 61,597 (7,322) (19,864)
Increase in accounts
payable and accrued
liabilities............. 2,282 6,516 11,126 8,891 2,496
(Decrease) in accrued
interest payable to
affiliates.............. (3,419) (536) (483) (291) (470)
Increase (decrease) in
other liabilities....... (317) (1,578) 41 365 (1,781)
------- -------- -------- -------- --------
Cash provided from operating
activities.................. 17,923 47,195 53,735 5,108 15,616
------- -------- -------- -------- --------
Cash flows from investing
activities
Purchases of property and
equipment................... (4,155) (2,165) (8,414) (2,300) (9,114)
(Purchase)/sale of
investments................. 474 (790) 3,400 2,053 110
------- -------- -------- -------- --------
Cash used by investing
activities.................. (3,681) (2,955) (5,014) (247) (9,004)
------- -------- -------- -------- --------
Cash flows from financing
activities
Net borrowings
from/(repayment of) note and
loan payable to affiliates.. 19,876 (30,627) (28,232) (59,671) (43,800)
Issuance of restricted
stock....................... -- -- 34,214 34,214 --
Capital contribution from
PNC......................... -- -- 2,063 2,063 --
Purchase of treasury stock... -- -- (200) (200) --
Forgiveness of intercompany
allocations................. 920 -- 99 -- --
Dividend of intercompany
allocations................. -- (9,795) -- (1,894) --
Dividends to PNC............. -- -- (12,300) (12,300) --
------- -------- -------- -------- --------
Cash provided by (used in)
financing activities........ 20,796 (40,422) (4,356) (37,788) (43,800)
------- -------- -------- -------- --------
Net increase (decrease) in
cash and cash equivalents... 35,038 3,818 44,365 (32,927) (37,188)
Cash and cash equivalents,
beginning of period......... 30,229 65,267 69,085 69,085 113,450
------- -------- -------- -------- --------
Cash and cash equivalents,
end of period............... $65,267 $ 69,085 $113,450 $ 36,158 $ 76,262
======= ======== ======== ======== ========
Supplemental disclosures
Cash paid for interest....... $28,239 $ 20,780 $ 13,683 $ 6,891 $ 7,591
======= ======== ======== ======== ========
Cash paid for income taxes... $ 2,759 $ 4,730 $ 25,983 $ 7,906 $ 16,889
======= ======== ======== ======== ========
</TABLE>
See notes to consolidated financial statements.
F-7
<PAGE>
BLACKROCK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1996, 1997 and 1998
(Dollar amounts in thousands)
1. Significant Accounting Policies
Organization and Basis of Presentation
BlackRock, Inc. ("BlackRock" or "Company") is majority owned by PNC Bank
Corp. ("PNC") through its wholly-owned subsidiary PNC Bank, N.A. The
consolidated financial statements of BlackRock include the assets, liabilities
and earnings of its wholly-owned subsidiaries BlackRock Advisors Inc. ("BA"),
BlackRock Institutional Management Corporation ("BIMC"), Provident Advisors,
Inc. ("PAI"), BlackRock Financial Management, Inc. ("BFM") and BlackRock
International, Ltd. ("BI") and their subsidiaries. BlackRock and its
consolidated subsidiaries provide diversified investment management services to
institutional clients, including certain subsidiaries and affiliates of PNC,
and to retail investors through various investment vehicles. The institutional
investment management business primarily consists of the active management of
fixed income and equity client accounts and the management of the Provident
Institutional Funds, a money market mutual fund family serving the
institutional market. The individual investor services business primarily
consists of the management of the Company's sponsored open and closed-end
mutual funds. BA, BIMC, BFM and BI are registered investment advisers under the
Investment Advisers Act of 1940 while PAI is a registered broker-dealer.
The consolidated financial statements of BlackRock reflect the "carved
out" historical financial position, results of operations, cash flows and
changes in stockholders' equity of the asset management businesses of PNC which
were consolidated under BlackRock in 1998 as if the combined operations had
been a separate entity prior to the formation of BlackRock. The consolidated
statement of operations has been adjusted to reflect an allocation of certain
expenses, primarily relating to office rent and overhead charges for various
administrative functions provided by PNC. The allocations were required to
reflect all costs of doing business and have been based on various methods
which management believes results in reasonable allocations of such costs. The
intercompany allocations and other adjustments related to the carve out which
were not paid or received by BlackRock are reflected in BlackRock's
consolidated statements of changes in stockholders' equity as dividend or
forgiveness of intercompany allocations.
The consolidated financial statements reflect the results of operations
of BlackRock Financial Management, LP and BFM Advisory LP, which were acquired
by PNC on February 28, 1995. Total consideration for the acquisition was $240
million, of which $71 million was paid in cash at closing with the remaining
$169 million comprising unsecured debt, ultimately payable to the BFM partners
and recorded on the books of BFM. Goodwill recognized at acquisition
approximated $240 million.
Significant intercompany accounts and transactions between the
consolidated entities have been eliminated.
The unaudited interim consolidated financial statements of BlackRock
included herein have been prepared in accordance with generally accepted
accounting principles for interim financial information and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, the unaudited interim
consolidated financial statements reflect all adjustments, which are of a
normal recurring nature, necessary for a fair presentation of financial
position, results of operations and cash flows of BlackRock for the interim
periods presented and are not necessarily indicative of a full year's results.
In preparing the unaudited interim consolidated financial statements,
management is required to make estimates and assumptions that affect the
amounts reported in the financial statements. Actual results could differ from
those estimates.
F-8
<PAGE>
BLACKROCK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
1. Significant Accounting Policies (continued)
Formation Transactions
BlackRock was formed in 1998 as a result of PNC's decision to consolidate
a substantial portion of its investment management businesses under a common
management and brand (BlackRock). Prior to the formation, on January 31, 1998,
PNC sold, pursuant to a private placement under the Securities Act of 1933, as
amended (the "Securities Act"), 30,000 shares of restricted BFM stock to
certain key employees and PNC retained 70,000 shares. The purchase price for
the stock was based on an independent valuation of BFM, with the shares subject
to significant vesting and transfer restrictions.
On March 31, 1998, PNC contributed BFM and certain other investment
management subsidiaries into a new holding company, BlackRock. BFM's employee
stockholders exchanged their stock in BFM for an equal number of restricted
shares in BlackRock while PNC received 70,000 shares of BlackRock for its
ownership interest in BFM and an additional 94,000 shares representing the fair
value based on an independent valuation of PNC's other contributed investment
management businesses.
In May 1998, BlackRock sold an additional 5,507 shares of restricted
stock pursuant to a private placement under the Securities Act to key employees
of the contributed businesses. BlackRock also executed forward sales of 637
shares of Company restricted stock to key employees. During the year, one
employee stockholder terminated his employment and sold 207 shares back to
BlackRock at cost.
At December 31, 1998, there were 199,300 common shares of BlackRock
outstanding including 164,000 (82.3%) owned by PNC and 35,300 (17.7%) owned by
employees. Total proceeds from employee purchases of restricted stock amounted
to $34,214. These shares were issued at a discount to fair market value of
$1,737, which was recorded as compensation expense.
Use of Estimates
The preparation of the consolidated financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the consolidated financial statements and the reported amounts of revenues and
expenses during the reporting periods. Actual results could differ from those
estimates.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash and short-term, highly liquid
investments with original maturities of three months or less. Cash and cash
equivalents are held at major financial institutions and in money market mutual
funds, to which BlackRock is exposed to market and credit risk.
Investments
Investments consist principally of shares of registered investment
companies and are stated at quoted market values. The resulting unrealized
gains and losses are included in the consolidated statements of income.
F-9
<PAGE>
BLACKROCK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
1. Significant Accounting Policies (continued)
Revenue Recognition
Investment advisory and administration fees are recognized as the
services are performed. Such fees are primarily based on predetermined
percentages of the market values of the assets under management. Investment
advisory and administration fees are shown net of fees waived pursuant to
expense limitations.
BlackRock also receives performance fees or an incentive allocation from
selected institutional and private placement portfolios based on the returns
for each portfolio taking into consideration realized and unrealized gains and
losses. These performance fees generally are subject to payment only upon
attaining specified return thresholds and may contain other restrictions.
Administration and Servicing Costs
BlackRock incurs certain administration and servicing costs, which are
expensed as incurred, related to mutual funds advised by BlackRock. Such costs
are paid to affiliated companies.
Property and Equipment
Property and equipment is recorded at cost less accumulated depreciation.
Depreciation generally is provided on the straight-line method over an
estimated useful life of five years. Leasehold improvements are amortized using
the straight-line method over their estimated useful lives or lease terms,
whichever is shorter.
Goodwill
Goodwill is amortized by the straight-line method over 25 years.
BlackRock assesses the recoverability of goodwill based on the estimated future
nondiscounted cash flows over the remaining amortization period.
Earnings Per Share
BlackRock has adopted Financial Accounting Standards ("SFAS") No. 128,
"Earnings Per Share." Basic earnings per common share is calculated by dividing
net income applicable to common stockholders by the weighted average number of
shares of common stock outstanding. Diluted earnings per share is computed
using the treasury stock method. Diluted earnings per common share assumes full
dilution and is computed by dividing net income by the total of the weighted
average number of shares of common stock outstanding and common stock
equivalents.
Business Segments
BlackRock has not presented business segment data in accordance with SFAS
No. 131, "Disclosure about Segments of an Enterprise and Related Information,"
because it operates predominantly in one business segment, the investment
advisory and asset management business.
Recent Accounting Pronouncements
Comprehensive Income
BlackRock has adopted SFAS No. 130, "Reporting Comprehensive Income,"
which requires companies to report all changes in equity during a period,
except those resulting from investments by owners and distributions to owners.
BlackRock has not presented a consolidated statement of comprehensive income
because the amount of "other comprehensive income" is immaterial.
F-10
<PAGE>
BLACKROCK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Recent Accounting Pronouncements (continued)
Software Costs
BlackRock intends to adopt, effective January 1, 1999, Statement of
Position ("SOP") 98-1, "Accounting for the Costs of Computer Software Developed
or Obtained for Internal Use." SOP 98-1 requires the capitalization of certain
costs incurred in connection with developing or obtaining software for internal
use. Qualifying software costs will be capitalized and amortized over the
estimated useful life of the software. Software costs currently are expensed as
incurred. Restatement of prior year financial statements is not permitted. The
adoption of SOP 98-1 is not expected to have a material impact on BlackRock's
results of operations or financial position.
Derivative Instruments and Hedging Activities
BlackRock intends to adopt, SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS 133 requires BlackRock to recognize
all financial derivatives, including hedges, at fair value, and all changes in
fair value or cash flow of both the hedge and the hedged item in earnings in
the same period. SFAS 133, as amended by SFAS 137, "Accounting for Derivative
Instruments and Hedging Activities--Deferral of the Effective Date of FASB
Statement No. 133," is required to be adopted for fiscal years beginning after
June 15, 2000.
BlackRock did not enter into any derivative instruments or hedging
activities for the periods covered under the financial statements. The adoption
of SFAS 133 is not expected to have a material impact on BlackRock's results of
operations or financial position.
Disclosure of Fair Value
SFAS No. 107, "Disclosure about Fair Value of Financial Instruments,"
requires disclosure of estimated fair values of certain on- and off-balance
sheet financial instruments. The methods and assumptions are set forth below:
. Cash and cash equivalents, receivables, accounts payable and
accrued liabilities approximate fair value due to the short
maturities.
. The fair value of investments is based on quoted market price.
. The fair value of the unsecured note is based on current rates
offered to BlackRock for debt with a similar remaining maturity
(see Note 3). The revolving line of credit is stated at fair value
as its interest rate is at prime.
2. Property and Equipment
Property and equipment consists of the following:
<TABLE>
<CAPTION>
December 31,
---------------
1997 1998
------- -------
<S> <C> <C>
Office and computer equipment............................. $ 9,392 $13,472
Furniture and fixtures.................................... 4,660 5,792
Leasehold improvements.................................... 2,462 5,207
------- -------
16,514 24,471
Less accumulated depreciation............................. 9,477 12,219
------- -------
Property and equipment, net............................... $ 7,037 $12,252
======= =======
</TABLE>
Depreciation expense amounted to $2,097, $2,498 and $3,199 for the years
ended December 31, 1996, 1997 and 1998, respectively.
F-11
<PAGE>
BLACKROCK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
3.Note and Loan Payable to Affiliates
BlackRock had the following note and line of credit outstanding:
<TABLE>
<CAPTION>
December 31,
-----------------
1997 1998
-------- --------
<S> <C> <C>
7.5% unsecured note, with interest payable semiannually,
through February 2000.................................. $ 65,800 $ 47,000
Revolving line of credit with PNC Bank, with interest at
prime rate (7.75% at December 31, 1998), maximum
outstanding principal of $175,000 due December 2002.... 159,432 150,000
-------- --------
$225,232 $197,000
======== ========
</TABLE>
The 7.5% unsecured note is unconditionally guaranteed by PNC and is
ultimately payable to certain employees of BlackRock resulting from PNC's
acquisition of BFM on February 28, 1995.
At December 31, 1998, future principal maturities of debt are as follows:
<TABLE>
<S> <C>
1999.............................................................. $ 18,800
2000.............................................................. 28,200
2001.............................................................. --
2002.............................................................. 150,000
--------
$197,000
========
</TABLE>
At December 31, 1998, the fair value of BlackRock's 7.5% unsecured note
due through February 2000, estimated based on the current rates offered to
BlackRock for debt with a similar remaining maturity, was approximately
$47,700. The revolving line of credit with PNC is carried at cost which
approximates fair value.
4.Commitments
BlackRock leases its primary office space under agreements which expire
in 2011. Future minimum commitments under these operating leases, net of rental
reimbursements of $959 through 2002 from a sublease arrangement, are as
follows:
<TABLE>
<S> <C>
1999............................................................... $ 4,225
2000............................................................... 3,790
2001............................................................... 3,714
2002............................................................... 1,831
2003............................................................... 1,459
Thereafter......................................................... 3,547
-------
$18,566
=======
</TABLE>
Under the lease agreement, BlackRock is responsible for certain
escalation payments. Equipment and occupancy expense amounted to $6,160, $7,253
and $10,060 for the years ended December 31, 1996, 1997 and 1998, respectively.
F-12
<PAGE>
BLACKROCK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
5. Employee Benefit Plans
BlackRock's employees participate in PNC's Incentive Savings Plan
("ISP"). Under the ISP, employee contributions of up to 6% of eligible
compensation, subject to Internal Revenue Code limitations, are matched by
BlackRock. ISP expenses for BlackRock were $837, $1,019 and $1,210 for the
years ended December 31, 1996, 1997 and 1998, respectively. Contributions to
the plans are matched primarily by shares of PNC's common stock funded by PNC's
Employee Stock Ownership Plan.
PNC provides certain health care and life insurance benefits for retired
employees. Expenses for post-retirement benefits allocated to BlackRock by PNC
were $114, $105 and $217 for the fiscal years ended December 31, 1996, 1997 and
1998, respectively. At December 31, 1997 and 1998, accrued post-retirement
benefits included in the consolidated statements of financial condition totaled
$311 and $528, respectively. No separate financial obligation data for
BlackRock is available with respect to such plan. BlackRock currently does not
have any retired employees and as such did not make any benefit payments for
retirees in 1997 and 1998.
6. Deferred Compensation Plan
Effective January 1, 1998, BlackRock established the Long-Term
Compensation Plan (the "Plan") to provide a competitive long-term incentive for
key officers and employees. The Plan provides for payment of $18.5 million
divided equally in three separate awards. The awards vest in 2001, 2002 and
2003, respectively, and are recorded to expense on a straight-line method over
the respective vesting periods. Compensation expense for 1998 was $6,321.
7. Related Party Transactions
BlackRock and its consolidated subsidiaries provide investment advisory
and administration services to BlackRock's open-end and closed-end funds, the
Provident Institutional Funds and other commingled funds. Substantially all of
these services are provided under contracts that set forth the services to be
provided and the fees to be charged. Contracts for the Registered Investment
Companies are subject to annual review and approval by each of the funds'
boards of directors or trustees and, in certain circumstances, by the
stockholders.
Revenues for services provided to these mutual funds are as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------
1996 1997 1998
------- -------- --------
<S> <C> <C> <C>
Investment advisory and administration fees--
mutual funds:
BlackRock open-end funds.................... $29,752 $ 44,009 $ 86,225
BlackRock closed-end funds.................. 34,960 36,050 36,521
Provident Institutional Funds............... 13,039 26,266 32,202
Commingled funds............................ 9,438 11,652 7,539
------- -------- --------
$87,189 $117,977 $162,487
======= ======== ========
</TABLE>
During May 1998, approximately $8.2 billion in assets of the PNC common
trust commingled funds were converted to the BlackRock open-end funds. For the
years ended December 31, 1996 and 1997, BlackRock earned fees of $6,443 and
$7,150, respectively, related to these funds. During the first four months of
1998, $3,142 of fees were earned prior to the conversion.
F-13
<PAGE>
BLACKROCK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
7. Related Party Transactions (continued)
BlackRock provides investment advisory and administration services to
certain PNC subsidiaries for a fee, based on assets under management. In
addition, BlackRock provides risk management and, beginning in 1998, model
portfolio services to PNC. Revenues for such services are as follows:
<TABLE>
<CAPTION>
Year Ended December
31,
--------------------
1996 1997 1998
------ ------ ------
<S> <C> <C> <C>
Revenues:
Investment advisory and administration fees:
Separate accounts................................ $ 901 $1,496 $3,468
Model portfolio services......................... -- -- 2,567
Other income--risk management...................... 3,000 3,000 3,000
</TABLE>
BlackRock has entered into various memoranda of understanding and co-
administration agreements with affiliates of PNC pursuant to which BlackRock
pays administration fees for the Provident Institutional Funds and certain
other commingled funds based on total fund assets and service fees based on
assets under management for PNC's private banking clients invested in the
BlackRock open-end funds.
BlackRock also incurred interest expense to related parties in connection
with the 7.5% unsecured note and the revolving line of credit with PNC Bank.
PNC also provides general and administration services to BlackRock. Charges for
such services were based on actual usage or on defined formulas which, in
management's view, resulted in reasonable allocations. Aggregate expenses
included in the consolidated financial statements for transactions with PNC
subsidiaries are as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1996 1997 1998
------- ------- -------
<S> <C> <C> <C>
Expenses:
Fund administration and servicing costs--
affiliates.................................... $19,611 $27,278 $52,972
General and administration..................... 7,559 3,900 4,666
Interest expense--affiliates................... 19,975 20,249 13,347
</TABLE>
Additionally, an indirect wholly-owned subsidiary of PNC acts as a
financial intermediary associated with the sale of back-end loaded shares of
certain BlackRock open-end funds. This entity finances broker sales commissions
and receives all associated sales charges.
8. BlackRock Asset Investors
BFM is an investment advisor to BlackRock Asset Advisors ("BAI"), a
closed-end investment company. BAI's principal business is to acquire, work
out, pool and repackage performing and distressed commercial, multifamily, and
single family mortgage loans as commercial or residential mortgage-backed
securities for sale in the capital markets through independent underwriters and
broker-dealers.
The Board of Trustees ("Trustees") of BAI approved a plan of liquidation
on September 18, 1997 which was adopted by its stockholders on October 6, 1997.
The plan term runs two years from the stockholder approval date. The plan
requires the trustees to oversee the liquidation. Any remaining assets and
liabilities may be deposited in a voting trust at any time before the end of
the plan term.
F-14
<PAGE>
BLACKROCK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
8. BlackRock Asset Investors (continued)
BFM recorded management fees for BAI in 1996, 1997 and 1998 of $6,061,
$6,067 and $3,291, respectively. BFM earned performance fees based on a
stipulated percentage of the excess profits after BAI stockholders had received
a minimum return on invested capital. Based on the market value of BAI's
underlying assets, overall investor returns and anticipated asset liquidation
schedules BlackRock recorded performance fees of $0, $7,800 and $57,908 in
1996, 1997 and 1998, respectively.
In accordance with various contractual arrangements including the 1994
acquisition agreement between PNC and BFM, $3,525, $9,688 and $44,806 of BAI
revenue was allocated to incentive compensation for the years ended December
31, 1996, 1997, and 1998, respectively.
9. Net Capital Requirements
As a registered broker-dealer, PAI is subject to the Uniform Net Capital
requirements under the Securities Exchange Act of 1934, which requires
maintenance of certain minimum net capital levels. At December 31, 1998, PAI
net capital was $3,290 in excess of regulatory requirements.
10. Closed-End Fund Offering Costs
In accordance with SOP 98-5, "Reporting on the Costs of Start-Up
Activities," BlackRock has expensed the offering costs it incurred in
connection with an initial offering of a closed-end fund.
11. Income Taxes
BlackRock accounts for income taxes under the liability method prescribed
by SFAS No. 109, "Accounting for Income Taxes." Deferred tax assets and
liabilities are recognized for the future tax consequences attributable to the
differences between the financial statement carrying amount of existing assets
and liabilities and their respective tax bases.
On a historical basis, the operating results of BlackRock have been
primarily included in the consolidated U.S. Federal income tax returns of PNC
or its subsidiaries. For state and local income tax purposes, BlackRock has
been included in the consolidated and unitary tax returns with PNC and its
subsidiaries, and has filed separate returns. BlackRock's tax provision has
been determined pursuant to the PNC tax sharing agreement.
The provision (benefit) for income taxes consists of the following:
<TABLE>
<CAPTION>
Year Ended December
31,
----------------------
1996 1997 1998
------ ------- -------
<S> <C> <C> <C>
Current:
Federal........................................... $4,434 $11,872 $16,408
State & local..................................... 2,578 3,011 8,746
------ ------- -------
Total current....................................... 7,012 14,883 25,154
Deferred:
Federal........................................... 957 1,159 4,422
State & local..................................... 506 613 2,819
------ ------- -------
Total deferred...................................... 1,463 1,772 7,241
------ ------- -------
Total............................................... $8,475 $16,655 $32,395
====== ======= =======
</TABLE>
F-15
<PAGE>
BLACKROCK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
11. Income Taxes (continued)
The reconciliation between the federal statutory income tax rate and
BlackRock's effective income tax rate consists of the following:
<TABLE>
<CAPTION>
Year Ended
December 31,
-----------------
1996 1997 1998
----- ----- -----
<S> <C> <C> <C>
Statutory Federal income tax rate........................ 35.0% 35.0% 35.0%
Increase resulting from:
State and local income taxes........................... 11.6% 6.1% 11.1%
Other.................................................. 2.0% 1.9% 1.5%
----- ----- -----
Total effective income tax rate.......................... 48.6% 43.0% 47.6%
===== ===== =====
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of deferred tax assets and liabilities, which are shown net in
accounts payable and accrued liabilities--Affiliate in the consolidated
statement of financial condition, consisted of the following:
<TABLE>
<CAPTION>
December 31,
--------------
1997 1998
------ -------
<S> <C> <C>
Deferred tax assets:
Compensation and benefits................................ $2,355 $31,388
Other.................................................... 2,316 3,606
------ -------
Gross deferred tax asset................................. $4,671 $34,994
====== =======
Deferred tax liabilities:
Deferred revenue......................................... $ -- $33,980
Goodwill................................................. 9,704 13,129
Other.................................................... 4 163
------ -------
Gross deferred tax liability............................. $9,708 $47,272
------ -------
Net deferred tax liability................................. $5,037 $12,278
====== =======
</TABLE>
12. Subsequent Events (Unaudited)
Stock Award and Incentive Plan
BlackRock intends to adopt a stock award and incentive plan, and a
deferred compensation plan (the "Plan") prior to or concurrent with the initial
public offerings ("Offering").
Pro Forma Information
The unaudited pro forma amounts included in the accompanying pro forma
consolidated statement of income for the year ended December 31, 1998 and the
six months ended June 30, 1999 reflect the use of Offering proceeds to repay
outstanding debt as of January 1, 1998, and the corresponding reduction in
interest expense and tax benefit thereon. The unaudited pro forma consolidated
statement of income does not give effect to the Plan because its terms have not
been finalized.
F-16
<PAGE>
BLACKROCK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
12. Subsequent Events (Unaudited) (continued)
BlackRock intends to file a separate consolidated federal income tax
return after the offerings. BlackRock has not determined whether it will
continue to file combined and/or unitary state and local income tax returns
with PNC and its subsidiaries. BlackRock's income tax provision for the six
months ended June 30, 1999 is computed pursuant to the tax sharing agreement
with PNC. This agreement provides that the federal income tax provision is
based on each subsidiary's separately calculated liability and that the
combined and/or unitary state and local income tax provision is allocated to
those subsidiaries whose business operations generate the liability.
F-17
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Through and including (the 25th day after the date of this
prospectus), all dealers effecting transactions in these securities, whether or
not participating in these offerings, may be required to deliver a prospectus.
This is in addition to the dealers' obligation to deliver a prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
9,000,000 Shares of Class A Common Stock
----------------
PROSPECTUS
----------------
Merrill Lynch & Co.
Goldman, Sachs & Co.
Lehman Brothers
Prudential Securities
Salomon Smith Barney
, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell these securities and it is not soliciting an offer to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
[International--Alternate Cover Page]
Subject to Completion
Preliminary Prospectus dated September 9, 1999
PROSPECTUS
9,000,000 Shares of Class A Common Stock
----------
The international managers will offer shares outside the United States
and Canada and the U.S. underwriters will offer shares in the United
States and Canada.
We expect the public offering price to be between $14.00 and $17.00 per
share. Currently, no public market exists for the shares. The class A common
stock has been approved for listing on The New York Stock Exchange under the
symbol "BLK."
Following the offering, we will have two classes of authorized common
stock--class A common stock, offered through this prospectus, and class B
common stock, % of which will be owned by a subsidiary of PNC Bank Corp. The
rights of holders of class A common stock and class B common stock are
identical, except with respect to voting. Each share of class A common stock
will have one vote and each share of class B common stock will have five votes
on all matters submitted to a vote of our stockholders. As a result, following
the offerings, PNC will own % of the combined voting power of all classes of
BlackRock stock and will control all matters affecting BlackRock stockholders.
Investing in the class A common stock involves risks which are described in
the "Risk Factors" section beginning on page 9 of this prospectus.
----------
<TABLE>
<CAPTION>
Per Share Total
--------- -----
<S> <C> <C>
Public Offering Price................................. $ $
Underwriting Discount................................. $ $
Proceeds, before expenses, to BlackRock............... $ $
</TABLE>
The international managers may also purchase up to an additional
shares of class A common stock at the public offering price, less the
underwriting discount, within 30 days from the date of this prospectus to cover
over-allotments. The U.S. underwriters may similarly purchase up to an
aggregate of an additional shares of class A common stock.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
The shares of class A common stock will be ready for delivery in New York,
New York on or about , 1999.
----------
Merrill Lynch International
Goldman Sachs International
Lehman Brothers International
Prudential-Bache Securities
Salomon Smith Barney International
----------
The date of this prospectus is , 1999.
<PAGE>
[International-Alternate Page]
UNDERWRITING
General
We intend to offer shares of our class A common stock outside the United
States and Canada through a number of international managers and in the United
States and Canada through a number of U.S. underwriters. Merrill Lynch
International, Goldman Sachs International, Lehman Brothers International
(Europe), Prudential-Bache Securities (U.K.) Inc. and Salomon Brothers
International Limited are acting as lead managers for each of the international
managers named below. Subject to the terms and conditions set forth in an
international purchase agreement among BlackRock and the international
managers, and concurrently with the sale of shares of class A common stock
to the U.S. underwriters, we have has agreed to sell to the international
managers, and each of the international managers severally and not jointly has
agreed to purchase from BlackRock, the number of shares of class A common stock
listed opposite its name below.
<TABLE>
<CAPTION>
Number
of
International Manager Shares
--------------------- ------
<S> <C>
Merrill Lynch International........................................
Goldman Sachs International........................................
Lehman Brothers International (Europe).............................
Prudential-Bache Securities (U.K.) Inc. ...........................
Salomon Brothers International Limited.............................
-----
Total.........................................................
=====
</TABLE>
We have also entered into a U.S. purchase agreement with underwriters in
the United States and Canada for whom Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Goldman, Sachs & Co., Lehman Brothers Inc., Prudential Securities
Incorporated and Salomon Smith Barney Inc. are acting as U.S. representatives.
Subject to the terms and conditions described in the U.S. purchase agreement,
and concurrently with the sale of shares of class A common stock to the
international managers pursuant to the international purchase agreement, we
have agreed to sell to the U.S. underwriters, and the U.S. underwriters
severally have agreed to purchase from us, an aggregate of shares of class A
common stock. The initial public offering price per share and the total
underwriting discount per share of class A common stock are identical under the
international purchase agreement and the U.S. purchase agreement.
In the international purchase agreement and the U.S. purchase agreement,
the international managers and the U.S. underwriters have agreed, subject to
the terms and conditions set forth in those agreements to purchase all of the
shares of class A common stock being sold under the terms of those agreement if
any of the shares of class A common stock are purchased. In the event of a
default by an underwriter, the U.S. purchase agreement and the international
purchase agreement provide that the purchase commitments of the nondefaulting
underwriters may be increased or the purchase agreements may be terminated. The
closings with respect to the sale of shares of class A common stock to be
purchased by the international managers and the U.S. underwriters are
conditioned on one another.
We have agreed to indemnify the international managers and the U.S.
underwriters against liabilities under the securities laws arising out of or
based upon untrue statements of material facts or material omissions contained
in the registration statement or the prospectus. We have also agreed to
contribute to payments that the U.S. underwriters and the international
managers may be required to make in respect of those liabilities.
81
<PAGE>
[International-Alternate Page]
Commitments and Discounts
The lead managers have advised us that the international managers propose
initially to offer the shares of class A common stock to the public at the
initial public offering price listed on the cover page of this prospectus, and
to dealers at such price less a concession not in excess of $ per share of
class A common stock. The international managers may allow, and such dealers
may reallow, a discount not in excess of $ per share of class A common stock
to other dealers. After the initial public offerings, the public offering
price, concession and discount may be changed.
The following table shows the per share and total public offering price,
underwriting discount to be paid by us to the international managers and the
U.S. underwriters and the proceeds before expenses to us. This information is
presented assuming either no exercise or full exercise by the international
managers and the U.S. underwriters of their over-allotment options.
<TABLE>
<CAPTION>
Without With
Per Share Option Option
--------- ------- ------
<S> <C> <C> <C>
Public offering price............................ $ $ $
Underwriting discount............................ $ $ $
Proceeds, before expenses, to BlackRock.......... $ $ $
</TABLE>
The expenses of the offerings are estimated as follows: SEC registration
fee, $51,791; NASD fee, $19,100; listing fee, $115,000; accounting fees and
expenses, $750,000; legal fees and expenses, $400,000; printing and engraving
fees and expenses, $375,000; transfer agent's fees, $25,000; blue sky fees and
expenses, including counsel fees, $10,000; and miscellaneous expenses, $22,989.
The total expenses, not including the underwriting discount, are estimated at
$1,768,880 and are payable by us.
Intersyndicate Agreement
The international managers and the U.S. underwriters have entered into an
intersyndicate agreement that provides for the coordination of their
activities. Under the terms of the intersyndicate agreement, the international
managers and the U.S. underwriters are permitted to sell shares of our class A
common stock to each other for purposes of resale at the initial public
offering price, less an amount not greater than the selling concession. Under
the terms of the intersyndicate agreement, the U.S. underwriters and any dealer
to whom they sell shares of our class A common stock will not offer to sell or
sell shares of our class A common stock to persons who are non-U.S. or non-
Canadian persons or to persons they believe intend to resell to persons who are
non-U.S. or non-Canadian persons, except in the case of transactions under the
terms of the intersyndicate agreement. Similarly, the international managers
and any dealer to whom they sell shares of our class A common stock will not
offer to sell or sell shares of our class A common stock to U.S. persons or to
Canadian persons or to persons they believe intend to resell to U.S. or
Canadian persons, except in the case of transactions pursuant to the
intersyndicate agreement.
Over-allotment Option
We have granted an option to the international managers, exercisable for
30 days after the date of this prospectus, to purchase up to additional
shares of class A common stock at the public offering price listed on the cover
page of this prospectus, less the underwriting discount. The international
managers may exercise this option solely to cover over-allotments, if any, made
on the sale of the class A common stock. To the extent that the international
managers exercise this option, each international manager will be obligated,
subject to customary conditions, to purchase a number of additional shares of
our class A common stock proportionate to such international manager's initial
amount reflected in the above table.
82
<PAGE>
[International-Alternate Page]
We have also granted an option to the U.S. underwriters, exercisable for
30 days after the date of this prospectus, to purchase up to additional
shares of class A common stock to cover over-allotments, if any, on terms
similar to those granted to the international managers.
Reserved Shares
At our request, the underwriters have reserved for sale, at the initial
public offering price, up to of the shares of the class A common stock
offered by this prospectus for sale to some of our directors, officers and
employees of BlackRock and PNC. The number of shares of our class A common
stock available for sale to the general public will be reduced to the extent
that those persons purchase the reserved shares. Any reserved shares which are
not orally confirmed for purchase within one day of the pricing of the
offerings will be offered by the underwriters to the general public on the same
basis as the other shares offered by this prospectus.
No Sales of Similar Securities
BlackRock and its executive officers and directors and all existing
shareholders will agree prior to the offering not to sell or transfer any of
their shares of class B common stock for 180 days after the date of the
prospectus unless they first obtain the written consent of Merrill Lynch. In
particular, BlackRock and all of these individuals have agreed that they will
not directly or indirectly
. offer, pledge, sell or contract to sell any of the class B common
stock
. sell any option or contract to purchase the class B common stock
. purchase any option or contract to sell the class B common stock
. request or demand that BlackRock file a registration statement
related to the class B common stock, or
. enter into any agreement or transaction that transfers all or any
part of the ownership of the class B common stock.
This lockup provision applies to class B common stock as well as any
securities which are convertible into or exchangeable or exercisable for class
B common stock. The provision applies to class B common stock currently held as
well as class B common stock acquired in the future.
However, a shareholder may without the consent of Merrill Lynch transfer
the common stock to trusts or similar entities for estate planning purposes or
to affiliates as defined in Rule 144 as long as any transferee agrees in
writing to be bound by the terms of the lockup agreement. See "Shares Eligible
for Future Sale."
New York Stock Exchange Listed
The class A common stock has been approved for listing on the New York
Stock Exchange under the symbol "BLK." In order to meet the requirements for
listing of the class A common stock on that exchange, the U.S. underwriters and
the international managers have undertaken to sell lots of 100 or more shares
to a minimum of 2,000 beneficial owners.
Initial Public Offering Price
Prior to the offerings, there has been no public market for the class A
common stock of BlackRock. The initial public offering price will be determined
through negotiations between BlackRock and the representatives. The factors
considered in determining the initial public offering price, in addition to
prevailing market conditions, are
. price-earnings ratios of publicly traded companies that the
representatives believe to be comparable to BlackRock,
83
<PAGE>
[International--Alternate Page]
. financial information of BlackRock,
. the history of, and the prospects for, BlackRock and the industry in
which it competes, and
. an assessment of its management, its past and present operations, the
prospects for, and timing of, future revenue of BlackRock, and the
present state of its development.
An active trading market may not develop for the class A common stock and
the class A common stock may not trade in the public market subsequent to the
offerings at or above the initial public offering price.
The underwriters do not expect sales of the class A common stock to any
accounts over which they exercise discretionary authority to exceed 5% of the
number of shares being offered in these offerings.
NASD Regulations
Because we may be deemed to be an affiliate of PNC subsidiaries that are
member firms of the NASD, the offerings will be conducted in accordance with
Conduct Rule 2720 of the National Association of Securities Dealers, Inc.,
which requires that the public offering price of an equity security be no
higher than the price recommended by a qualified independent underwriter which
has participated in the preparation of the registration statement and performed
its usual standard of due diligence. Merrill Lynch has agreed to act as
qualified independent underwriter with respect to the offerings. The public
offering price of the class A common stock will be no higher than that
recommended by Merrill Lynch.
The underwriters will not confirm sales of the class A common stock to
any account over which they exercise discretionary authority without the prior
written specific approval of the customer.
Price Stabilization, Short Positions and Penalty Bids
Until the distribution of our class A common stock is completed, SEC
rules may limit the ability of the underwriters and certain selling group
members to bid for and purchase our class A common stock. As an exception to
these rules, the U.S. representatives are permitted to engage in transactions
that stabilize the price of our class A common stock. Such transactions consist
of bids or purchases for the purpose of pegging, fixing or maintaining the
price of our class A common stock.
If the underwriters create a short position in the class A common stock
in connection with the offerings, i.e., if they sell more shares of our class A
common stock than are listed on the cover page of this prospectus, the U.S.
representatives may reduce that short position by purchasing our class A common
stock in the open market. The U.S. representatives may also elect to reduce any
short position by exercising all or part of the over-allotment options
described above.
The U.S. representatives may also impose a penalty bid on underwriters
and selling group members. This means that if the U.S. representatives purchase
shares of class A common stock in the open market to reduce the underwriters'
short position or to stabilize the price of our class A common stock, they may
reclaim the amount of the selling concession from the underwriters and selling
group members who sold those shares.
In general, purchases of a security for the purpose of stabilization or
to reduce a short position could cause the price of the security to be higher
than it might be in the absence of such purchases. The imposition of a penalty
bid might also have an effect on the price of our class A common stock to the
extent that it discourages resale of our class A common stock.
Neither BlackRock nor any of the underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of our class A common stock. In addition,
neither BlackRock nor any of the underwriters makes any representation that the
U.S. representatives or the lead manager will engage in such transactions or
that such transactions, once commenced, will not be discontinued without
notice.
84
<PAGE>
[International--Alternate Page]
UK Selling Restrictions
Each international manager has agreed that:
.it has not offered or sold and, prior to the expiration of the period
of six months from the closing date, will not offer or sell any
shares of class A common stock to persons in the United Kingdom,
except to persons whose ordinary activities involve them in
acquiring, holding, managing or disposing of investments (as
principal or agent) for the purposes of their businesses or otherwise
in circumstances which do not constitute an offer to the public in
the United Kingdom within the meaning of the Public Offers of
Securities Regulations 1995;
.it has complied and will comply with all applicable provisions of the
Financial Services Act 1986 with respect to anything done by it in
relation to the class A common stock in, from or otherwise involving
the United Kingdom; and
.it has only issued or passed on and will only issue or pass on in the
United Kingdom any document received by it in connection with the
issuance of class A common stock to a person who is of a kind
described in Article 11(3) of the Financial Services Act 1986
(Investment Advertisements) (Exemptions) Order 1996 as amended by the
Financial Services Act 1986 (Investment Advertisements) (Exemptions)
Order 1997 or is a person to whom such document may otherwise
lawfully be issued or passed on.
No Public Offering Outside the United States
No action has been or will be taken in any jurisdiction (except in the
United States) that would permit a public offering of the shares of class A
common stock, or the possession, circulation or distribution of this prospectus
or any other material relating to BlackRock or shares of our class A common
stock in any jurisdiction where action for that purpose is required.
Accordingly, the shares of our class A common stock may not be offered or sold,
directly or indirectly, and neither this prospectus nor any other offering
material or advertisements in connection with the shares of class A common
stock may be distributed or published, in or from any country or jurisdiction
except in compliance with any applicable rules and regulations of any such
country or jurisdiction.
Purchasers of the shares offered by this prospectus may be required to
pay stamp taxes and other charges in accordance with the laws and practices of
the country of purchase in addition to the offering price described on the
cover page of this prospectus.
Other Relationships
Certain of the underwriters and their affiliates engage in transactions
with, and perform services for, BlackRock, PNC and their affiliates in the
ordinary course of business and have engaged, and may in the future engage, in
commercial banking and investment banking transactions with BlackRock, for
which they receive customary compensation. Merrill Lynch, Prudential Securities
and its affiliated parties and Salomon Smith Barney distribute BlackRock Funds
and provide stockholder services in connection with those funds in the ordinary
course of business, for which they receive customary compensation.
85
<PAGE>
[International--Alternate Back Cover]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Through and including (the 25th day after the date of this
prospectus), all dealers effecting transactions in these securities, whether or
not participating in this offering, may be required to deliver a prospectus.
This is in addition to the dealers' obligation to deliver a prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
9,000,000 Shares of Class A Common Stock
----------------
PROSPECTUS
----------------
Merrill Lynch International
Goldman Sachs International
Lehman Brothers International
Prudential-Bache Securities
Salomon Smith Barney International
, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
Item 13. Other Expenses of Issuance and Distribution
The following table indicates the estimated expenses to be incurred in
connection with the Offerings, all of which will be paid by BlackRock.
<TABLE>
<S> <C>
SEC registration fee.......................................... $ 51,791
NASD fee...................................................... 19,100
Listing fee................................................... 115,000
Accounting fee and expenses................................... 750,000
Legal fees and expenses....................................... 400,000
Printing and engraving........................................ 375,000
Transfer Agent's fees......................................... 25,000
Blue Sky fees and expenses (including counsel fees)........... 10,000
Miscellaneous expenses........................................ 22,989
----------
Total....................................................... $1,768,880
==========
</TABLE>
- --------
* To be supplied by amendment
Item 14. Indemnification of Directors and Officers
Article SEVENTH of BlackRock's certificate of incorporation provides that
no director of BlackRock shall be personally liable to BlackRock or its
stockholders for monetary damages for breach of fiduciary duty to the fullest
extent permitted by law.
In addition, Article VI of BlackRock's bylaws provides that if the
Delaware General Corporation Law is amended to authorize the further
elimination or limitation of the liability of directors, then the liability of
a director of BlackRock shall be eliminated or limited to the fullest extent
permitted by the Delaware General Corporation Law, as so amended. In addition,
the bylaws provide for indemnification by BlackRock of its directors and
officers under certain circumstances against expenses (including attorneys'
fees, judgments, fines and amounts paid in settlement) incurred in connection
with the defense or settlement of any threatened, pending or completed legal
proceeding in which any such person is involved by reason of the fact that such
person is or was a director or officer of BlackRock.
The form of underwriting agreement to be filed as Exhibit 1.1 will
contain agreements between BlackRock, PNC and BlackRock's management and
directors and the underwriters and their controlling persons providing for
indemnification against civil liabilities, including liabilities under the
Securities Act, or for contribution to payments which any of them may be
required to make in respect thereof.
Item 15. Recent Sales of Unregistered Securities.
On January 31, 1998, PNC Bank Corp. ("PNC") sold, pursuant to a private
placement under Section 4(2) of the Securities Act, 30,000 shares of restricted
BlackRock Financial Management, Inc. ("BFM") stock to certain key employees and
PNC retained 70,000 shares. The purchase price for the stock was based on an
independent valuation of BFM, with the shares subject to significant vesting
and transfer restrictions.
On March 31, 1998, PNC contributed BFM and certain other investment
management subsidiaries into a new holding company, BlackRock. BFM's employee
stockholders exchanged their stock in BFM for an equal number of restricted
shares of BlackRock common stock while PNC received 70,000 shares of BlackRock
common stock for its ownership interest in BFM and an additional 94,000 shares
representing the fair value based on an independent valuation of PNC's other
contributed investment management businesses. The issuance of the BlackRock
common stock was made pursuant to a private placement under Section 4(2) of the
Securities Act.
II-1
<PAGE>
In May 1998, BlackRock sold an additional 5,507 shares of restricted
common stock pursuant to a private placement under Section 4(2) of the
Securities Act to key employees of the contributed businesses. In May 1998,
BlackRock also executed forward sales of 637 shares of BlackRock restricted
common stock to key employees. Total proceeds from employee purchases of
restricted stock amounted to $34,214,000. These shares were issued at a
discount to fair market value of $1,737,000 which was recorded as compensation
expense. During 1998 and 1999, several employee stockholders terminated their
employment and sold 776 shares back to BlackRock at cost.
In September, 1999, prior to the completion of the Offerings, BlackRock
intends to sell to 8 key employees the 776 shares of restricted BlackRock
common stock repurchased from former employees during 1998 and 1999, and
currently held in treasury, pursuant to a private placement under Section 4(2)
of the Securities Act. All of these employees are managing directors of
BlackRock and, except for one, all already own shares of BlackRock common
stock. They are all accredited investors as defined in Regulation D under the
Securities Act. Total proceeds from these sales are expected to amount to
$749,616. These shares will be issued at a discount to fair market value of
$ , which will be recorded as compensation expense.
Upon completion of the Offerings, all the shares of BlackRock common
stock described above will be automatically converted into shares of class B
common stock of BlackRock.
Item 16. Exhibits
(a)Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
------- ----------------------
<C> <S>
1.1 --Form of Underwriting Agreement.
3.1 --Form of Amended and Restated Certificate of Incorporation of the
Registrant.
3.2 --Form of Amended and Restated Bylaws of the Registrant.
4.1 --Specimen of Common Stock Certificate (per class).*
4.2 --Amended Stockholders Agreement.
5.1 --Form of Opinion of Skadden, Arps, Slate Meagher & Flom LLP,
regarding legality of securities being registered.
10.1 --Form of Tax Disaffiliation Agreement among BlackRock Inc., PNC Asset
Management, Inc. and PNC Bank Corp.
10.2 --1999 Stock Award and Incentive Plan.
10.3 --1999 Annual Incentive Performance Plan.
10.4 --Non employee Directors Stock Compensation Plan.
10.5 --Form of Employment Agreement.
10.6 --Form of Initial Public Offering Agreement among the Registrant, PNC
Bank Corp. and PNC Asset Management, Inc.
10.7 --Form of Registration Rights Agreement among the Registrant, PNC
Asset Management, Inc. and certain holders of class B common stock of
the Registrant.
10.8 --Form of Services Agreement between the Registrant and PNC Bank Corp.
21.1 --List of subsidiaries of the Registrant.**
23.1 --Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in
Exhibit 5.1).
23.2 --Consent of Ernst & Young LLP.
24.1 --Powers of Attorney.**
27.1 --Financial Data Schedule.
</TABLE>
- --------
* To be filed by amendment.
** Previously filed.
II-2
<PAGE>
(b)Financial Statement Schedules
We did not include financial statement schedules with this item because
they are not required, not applicable or the information is included in the
financial statements or notes to the financial statements that are part of the
prospectus.
Item 17. Undertakings
(a) The undersigned registrant hereby undertakes to provide the
underwriter at the closing specified in the underwriting agreements,
certificates in such denominations and registered in such names as required by
the underwriter to permit prompt delivery to each purchaser.
(b) 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 Act and
will be governed by the final adjudication of such issue.
(c) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it
meets all the requirements for filing on Form S-1 and has duly caused this
amendment to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of New York, New York on
the 9th day of September, 1999.
BLACKROCK, INC.
/s/ Laurence D. Fink
By: _________________________________
Laurence D. Fink
Chairman of the Board of
Directors and Chief Executive
Officer
II-4
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
amendment to the Registration Statement has been signed by the following
persons in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Laurence D. Fink Chairman of the Board of September 9, 1999
____________________________________ Directors and Chief
Laurence D. Fink Executive Officer (Principal
Executive Officer)
/s/ Paul L. Audet Managing Director, Chief September 9, 1999
____________________________________ Financial Officer (Principal
Paul L. Audet Financial and Accounting
Officer)
/s/ Ralph L. Schlosstein Director and President September 9, 1999
____________________________________
Ralph L. Schlosstein
* Director September 9, 1999
____________________________________
Thomas H. O'Brien
* Director September 9, 1999
____________________________________
James E. Rohr
* Director September 9, 1999
____________________________________
Walter E. Gregg, Jr.
* Director September 9, 1999
____________________________________
Helen P. Pudlin
</TABLE>
* Robert P. Connolly, pursuant to Powers of Attorney (executed by each of the
officers and directors indicated above and filed as part of the registrant's
Registration Statement, on May 13, 1999, Reg. No. 333-78367), by signing his
name hereto does hereby sign and execute this Amendment No. 3 to Form S-1
Registration Statement Under the Securities Act of 1933 on behalf of each
director.
/s/ Robert P. Connolly
-------------------------------------
Robert P. Connolly
II-5
<PAGE>
EXHIBIT 1.1
================================================================================
BLACKROCK, INC.
(a Delaware corporation)
__ Shares of Class A Common Stock
U.S. PURCHASE AGREEMENT
-----------------------
Dated: __, 1999
================================================================================
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1. Representations and Warranties........................................... 4
(a) Representations and Warranties by the Company............................ 4
(i) Compliance with Registration Requirements..................... 4
(ii) Independent Accountants....................................... 5
(iii) Financial Statements.......................................... 5
(iv) No Material Adverse Change in Business........................ 5
(v) Good Standing of the Company.................................. 5
(vi) Good Standing of Subsidiaries................................. 5
(vii) Capitalization................................................ 6
(viii) Authorization of Agreement.................................... 6
(ix) Authorization and Description of Securities................... 6
(x) Absence of Defaults and Conflicts............................. 7
(xi) Absence of Labor Dispute...................................... 7
(xii) Absence of Proceedings........................................ 7
(xiii) Accuracy of Exhibits.......................................... 8
(xiv) Possession of Intellectual Property........................... 8
(xv) Absence of Further Requirements............................... 8
(xvi) Possession of Licenses and Permits............................ 8
(xvii) Title to Property............................................. 8
(xviii) Investment Company Act........................................ 9
(xix) Registration Rights........................................... 9
(xx) Investment Advisors Act....................................... 9
(xxi) Broker-Dealer Registration.................................... 9
(xxii) Transfer Agent................................................ 10
(xxiii) Compliance with Law........................................... 10
(xxiv) Funds......................................................... 10
(xxv) Advisory and Other Agreements................................. 10
(xxvi) Assignment.................................................... 10
(xxvii) Year 2000..................................................... 11
(b) Officer's Certificates................................................... 11
SECTION 2. Sale and Delivery to U.S. Underwriters; Closing.......................... 11
(a) Initial Securities....................................................... 11
(b) Option Securities........................................................ 11
(c) Payment.................................................................. 12
(d) Denominations; Registration.............................................. 12
SECTION 3. Covenants of the Company................................................. 13
(a) Compliance with Securities Regulations and Commission Requests........... 13
(b) Filing of Amendments..................................................... 13
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
(c) Delivery of Registration Statements........................... 13
(d) Delivery of Prospectuses...................................... 13
(e) Continued Compliance with Securities Laws..................... 14
(f) Blue Sky Qualifications....................................... 14
(g) Rule 158...................................................... 14
(h) Use of Proceeds............................................... 14
(i) Listing....................................................... 15
(j) Restriction on Sale of Securities............................. 15
(k) Reporting Requirements........................................ 15
(l) Compliance with NASD Rules.................................... 15
SECTION 4. Payment of Expenses........................................... 15
(a) Expenses...................................................... 15
(b) Termination of Agreement...................................... 16
SECTION 5. Conditions of U.S. Underwriters' Obligations.................. 16
(a) Effectiveness of Registration Statement....................... 16
(b) Opinion of Counsel for Company................................ 17
(c) Opinion of Counsel for U.S. Underwriters...................... 17
(d) Officers' Certificate......................................... 17
(e) Accountant's Comfort Letter................................... 17
(f) Bring-down Comfort Letter..................................... 17
(g) Approval of Listing........................................... 17
(h) No Objection.................................................. 18
(i) Lock-up Agreements............................................ 18
(j) Purchase of Initial International Securities.................. 18
(k) Conditions to Purchase of U.S. Option Securities.............. 18
(i) Officers' Certificate.............................. 18
(ii) Opinion of Counsel for Company..................... 18
(iii) Opinion of Counsel for U.S. Underwriters........... 18
(iv) Bring-down Comfort Letter.......................... 18
(l) Additional Documents.......................................... 18
(m) Termination of Agreement...................................... 19
SECTION 6. Indemnification............................................... 19
(a) Indemnification of U.S. Underwriters.......................... 19
(b) Indemnification of Company, Directors and Officers............ 20
(c) Actions against Parties; Notification......................... 21
(d) Settlement without Consent if Failure to Reimburse............ 21
(e) Indemnification for Reserved Securities....................... 22
SECTION 7. Contribution.................................................. 22
SECTION 8. Representations, Warranties and Agreements to Survive Delivery 23
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 9. Termination of Agreement...................................... 23
(a) Termination; General.......................................... 23
(b) Liabilities................................................... 24
SECTION 10. Default by One or More of the U.S. Underwriters................ 24
SECTION 11. Notices........................................................ 25
SECTION 12. Parties........................................................ 25
SECTION 13. GOVERNING LAW AND TIME......................................... 25
SECTION 14. Effect of Headings............................................. 25
SCHEDULES
SCHEDULE A - LIST OF UNDERWRITERS................................. SCH A-1
SCHEDULE B - PRICING INFORMATION.................................. SCH B-1
SCHEDULE C - LIST OF PERSONS SUBJECT TO LOCK-UP................... SCH C-1
EXHIBITS
EXHIBIT A - FORM OF OPINION OF COMPANY'S COUNSEL.................. Exhibit A-1
EXHIBIT B - FORM OF LOCK-UP LETTER................................ Exhibit B-1
</TABLE>
iii
<PAGE>
BLACKROCK, INC.
(a Delaware corporation)
___ Shares of Class A Common Stock
(Par Value $.01 Per Share)
U.S. PURCHASE AGREEMENT
-----------------------
___, 1999
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Goldman, Sachs & Co.
Lehman Brothers Inc.
Prudential Securities Incorporated
Salomon Smith Barney Inc.
as U.S. Representatives of the several U.S. Underwriters
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, New York 10281-1209
Ladies and Gentlemen:
BlackRock, Inc., a Delaware corporation (the "Company"), confirms its
agreement with Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch") and each of the other U.S. Underwriters named in
Schedule A hereto (collectively, the "U.S. Underwriters", which term shall also
include any underwriter substituted as hereinafter provided in Section 10
hereof), for whom Merrill Lynch, Goldman, Sachs & Co., Lehman Brothers Inc.,
Prudential Securities Incorporated and Salomon Smith Barney Inc. are acting as
Representatives (in such capacity, the "U.S. Representatives"), with respect to
the issue and sale by the Company and the purchase by the U.S. Underwriters,
acting severally and not jointly, of the respective numbers of shares of Class A
Common Stock, par value $.01 per share, of the Company (the "Class A Common
Stock") set forth in said Schedule A, and with respect to the grant by the
Company to the U.S. Underwriters, acting severally and not jointly, of the
option described in Section 2(b) hereof to purchase all or any part of ____
additional shares of Class A Common Stock to cover over-allotments, if any. The
aforesaid ___ shares of Class A Common Stock (the "Initial U.S. Securities") to
be purchased by the U.S. Underwriters and all or any part of the ___ shares of
Class A
<PAGE>
Common Stock subject to the option described in Section 2(b) hereof (the
"U.S. Option Securities") are hereinafter called, collectively, the "U.S.
Securities". The Class A Common Stock and the Class B Common Stock, par value
$.01 per share, of the Company (the "Class B Common Stock") are hereinafter
referred to as the "Common Stock".
It is understood that the Company is concurrently entering into an
agreement dated the date hereof (the "International Purchase Agreement")
providing for the offering by the Company of an aggregate of ____ shares of
Class A Common Stock (the "Initial International Securities") through
arrangements with certain underwriters outside the United States and Canada (the
"International Managers") for which Merrill Lynch International, Goldman Sachs
International, Lehman Brothers International (Europe), Prudential-Bache
Securities (U.K.) Inc. and Salomon Brothers International Limited are acting as
lead managers (the "Lead Managers") and the grant by the Company to the
International Managers, acting severally and not jointly, of an option to
purchase all or any part of the International Managers' pro rata portion of up
to ____ additional shares of Class A Common Stock solely to cover
overallotments, if any (the "International Option Securities" and, together with
the U.S. Option Securities, the "Option Securities"). The Initial International
Securities and the International Option Securities are hereinafter called the
"International Securities". It is understood that the Company is not obligated
to sell and the U.S. Underwriters are not obligated to purchase, any Initial
U.S. Securities unless all of the Initial International Securities are
contemporaneously purchased by the International Managers.
The U.S. Underwriters and the International Managers are hereinafter
collectively called the "Underwriters", the Initial U.S. Securities and the
Initial International Securities are hereinafter collectively called the
"Initial Securities", and the U.S. Securities, and the International Securities
are hereinafter collectively called the "Securities".
The U.S. Underwriters and the International Managers will concurrently
enter into an Intersyndicate Agreement of even date herewith (the
"Intersyndicate Agreement") providing for the coordination of certain
transactions among the Underwriters.
The Company understands that the U.S. Underwriters propose to make a public
offering of the U.S. Securities as soon as the U.S. Representatives deem
advisable after this Agreement has been executed and delivered.
The Company and the U.S. Underwriters agree that up to ____ shares of the
Initial U.S. Securities to be purchased by the U.S. Underwriters and that up to
____ shares of the Initial International Securities to be purchased by the
International Managers (collectively, the "Reserved Securities") shall be
reserved for sale by the Underwriters to certain eligible employees and persons
having business relationships with the Company, as part of the distribution of
the Securities by the Underwriters, subject to the terms of this Agreement, the
applicable rules, regulations and interpretations of the National Association of
Securities Dealers, Inc. (the "NASD") and all other applicable laws, rules and
regulations. To the extent that such Reserved Securities are not orally
confirmed for purchase by such eligible employees and persons having business
relationships with the Company by the end of the first business day after the
date of this Agreement, such Reserved Securities may be offered to the public as
part of the public offering contemplated hereby.
2
<PAGE>
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-1 (No. 333-78367) covering the
registration of the Securities under the Securities Act of 1933, as amended (the
"1933 Act"), including the related preliminary prospectus or prospectuses.
Promptly after execution and delivery of this Agreement, the Company will either
(i) prepare and file a prospectus in accordance with the provisions of Rule 430A
("Rule 430A") of the rules and regulations of the Commission under the 1933 Act
(the "1933 Act Regulations") and paragraph (b) of Rule 424 ("Rule 424(b)") of
the 1933 Act Regulations or (ii) if the Company has elected to rely upon Rule
434 ("Rule 434") of the 1933 Act Regulations, prepare and file a term sheet (a
"Term Sheet") in accordance with the provisions of Rule 434 and Rule 424(b).
Two forms of prospectus are to be used in connection with the offering and sale
of the Securities: one relating to the U.S. Securities (the "Form of U.S.
Prospectus") and one relating to the International Securities (the "Form of
International Prospectus"). The Form of International Prospectus is identical
to the Form of U.S. Prospectus, except for the front cover and back cover pages
and the information under the caption "Underwriting" and the inclusion in the
Form of International Prospectus of a section under the caption "Certain United
States Tax Considerations for Non-United States Holders." The information
included in any such prospectus or in any such Term Sheet, as the case may be,
that was omitted from such registration statement at the time it became
effective but that is deemed to be part of such registration statement at the
time it became effective (a) pursuant to paragraph (b) of Rule 430A is referred
to as "Rule 430A Information" or (b) pursuant to paragraph (d) of Rule 434 is
referred to as "Rule 434 Information." Each Form of U.S. Prospectus and Form of
International Prospectus used before such registration statement became
effective, and any prospectus that omitted, as applicable, the Rule 430A
Information or the Rule 434 Information, that was used after such effectiveness
and prior to the execution and delivery of this Agreement, is herein called a
"preliminary prospectus." Such registration statement, including the exhibits
thereto and schedules thereto at the time it became effective and including the
Rule 430A Information and the Rule 434 Information, as applicable, is herein
called the "Registration Statement." Any registration statement filed pursuant
to Rule 462(b) of the 1933 Act Regulations is herein referred to as the "Rule
462(b) Registration Statement," and after such filing the term "Registration
Statement" shall include the Rule 462(b) Registration Statement. The final Form
of U.S. Prospectus and the final Form of International Prospectus in the forms
first furnished to the Underwriters for use in connection with the offering of
the Securities are herein called the "U.S. Prospectus" and the "International
Prospectus," respectively, and collectively, the "Prospectuses." If Rule 434 is
relied on, the terms "U.S. Prospectus" and "International Prospectus" shall
refer to the preliminary U.S. Prospectus dated ____ 1999 and preliminary
International Prospectus dated ____ 1999, respectively, each together with the
applicable Term Sheet and all references in this Agreement to the date of such
Prospectuses shall mean the date of the applicable Term Sheet. For purposes of
this Agreement, all references to the Registration Statement, any preliminary
prospectus, the U.S. Prospectus, the International Prospectus or any Term Sheet
or any amendment or supplement to any of the foregoing shall be deemed to
include the copy filed with the Commission pursuant to its Electronic Data
Gathering, Analysis and Retrieval system ("EDGAR").
3
<PAGE>
SECTION 1. Representations and Warranties.
------------------------------
(a) Representations and Warranties by the Company. The Company
represents and warrants to each U.S. Underwriter as of the date hereof, as of
the Closing Time referred to in Section 2(c) hereof, and as of each Date of
Delivery (if any) referred to in Section 2(b) hereof and agrees with each U.S.
Underwriter, as follows:
(i) Compliance with Registration Requirements. The Company is
-----------------------------------------
eligible to use Form S-1 under the 1933 Act. Each of the Registration Statement
and any Rule 462(b) Registration Statement has become effective under the 1933
Act and no stop order suspending the effectiveness of the Registration Statement
or any Rule 462(b) Registration Statement has been issued under the 1933 Act and
no proceedings for that purpose have been instituted or are pending or, to the
knowledge of the Company, are contemplated by the Commission, and any request on
the part of the Commission for additional information has been complied with.
At the respective times the Registration Statement, the Rule 462(b)
Registration Statement and any post-effective amendments thereto became
effective and at the Closing Time (and, if any Option Securities are purchased,
at the Date of Delivery), the Registration Statement, the Rule 462(b)
Registration Statement and any amendments and supplements thereto complied and
will comply in all material respects with the requirements of the 1933 Act and
the 1933 Act Regulations and did not and will 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 not misleading and the Prospectuses,
any preliminary prospectuses and any supplement thereto or prospectus wrapper
prepared in connection therewith, at their respective times of issuance and at
the Closing Time, complied and will comply in all material respects with any
applicable laws or regulations of foreign jurisdictions in which the
Prospectuses and such preliminary prospectuses, as amended or supplemented, if
applicable, are distributed in connection with the offer and sale of Reserved
Securities. Neither of the Prospectuses nor any amendments or supplements
thereto (including any prospectus wrapper), at the time the Prospectuses or any
amendments or supplements thereto were issued and at the Closing Time (and, if
any Option Securities are purchased, at the Date of Delivery), included or will
include an untrue statement of a material fact or omitted or will omit to state
a material fact necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading. If Rule 434 is
used, the Company will comply with the requirements of Rule 434 and the
Prospectuses shall not be "materially different", as such term is used in Rule
434, from the prospectuses included in the Registration Statement at the time it
became effective. The representations and warranties in this subsection shall
not apply to statements in or omissions from the Registration Statement or the
U.S. Prospectus made in reliance upon and in conformity with information
furnished to the Company in writing by any U.S. Underwriter through the U.S.
Representatives expressly for use in the Registration Statement or the U.S.
Prospectus.
Each preliminary prospectus and the Prospectuses filed as part of the
Registration Statement as originally filed or as part of any amendment thereto,
or filed pursuant to Rule 424 under the 1933 Act, complied when so filed in all
material respects with the 1933 Act Regulations and each
4
<PAGE>
preliminary prospectus and the Prospectuses delivered to the Underwriters for
use in connection with this offering was identical to the electronically
transmitted copies thereof filed with the Commission pursuant to EDGAR, except
to the extent permitted by Regulation S-T.
(ii) Independent Accountants. The accountants who certified the
-----------------------
financial statements and supporting schedules included in the Registration
Statement are independent public accountants as required by the 1933 Act and the
1933 Act Regulations.
(iii) Financial Statements. The financial statements included in the
--------------------
Registration Statement and the Prospectuses, together with the related schedules
and notes, present fairly in all material respects the financial position of the
Company and its consolidated subsidiaries at the dates indicated and the
statement of operations, stockholders' equity and cash flows of the Company and
its consolidated subsidiaries for the periods specified; said financial
statements have been prepared in conformity with generally accepted accounting
principles ("GAAP") applied on a consistent basis throughout the periods
involved, except as disclosed therein. The supporting schedules included in the
Registration Statement present fairly in accordance with GAAP the information
required to be stated therein in all material respects. The selected financial
data and the summary financial information included in the Prospectuses present
fairly in all material respects the information shown therein and have been
compiled on a basis consistent with that of the audited financial statements
included in the Registration Statement.
(iv) No Material Adverse Change in Business. Since the respective
--------------------------------------
dates as of which information is given in the Registration Statement and the
Prospectuses, except as otherwise stated therein, (A) there has been no material
adverse change in the condition, financial or otherwise, or in the earnings,
business affairs or business prospects of the Company and its subsidiaries
considered as one enterprise, whether or not arising in the ordinary course of
business (a "Material Adverse Effect"), (B) there have been no transactions
entered into by the Company or any of its subsidiaries, other than those in the
ordinary course of business, which are material with respect to the Company and
its subsidiaries considered as one enterprise, and (C) there has been no
dividend or distribution of any kind declared, paid or made by the Company on
any class of its capital stock.
(v) Good Standing of the Company. The Company has been duly
----------------------------
organized and is validly existing as a corporation in good standing under the
laws of the State of Delaware and has corporate power and authority to own,
lease and operate its properties and to conduct its business as described in the
Prospectuses and to enter into and perform its obligations under this Agreement;
and the Company is duly qualified as a foreign corporation to transact business
and is in good standing in each other jurisdiction in which such qualification
is required, whether by reason of the ownership or leasing of property or the
conduct of business, except where the failure to so qualify or to be in good
standing would not result in a Material Adverse Effect.
(vi) Good Standing of Subsidiaries. Each subsidiary of the Company
-----------------------------
listed on Exhibit 21.1 to the Registration Statement (each a "Subsidiary" and,
collectively, the "Subsidiaries") has been duly organized, and is validly
existing as a corporation or partnership, as the case may be, in good standing
under the laws of the jurisdiction of its incorporation or organization, as the
case may be, has requisite power and authority to own, lease and operate its
properties and to conduct its
5
<PAGE>
business as described in the Prospectuses and is duly qualified as a foreign
corporation or partnership, as the case may be, to transact business and is in
good standing in each jurisdiction in which such qualification is required,
whether by reason of the ownership or leasing of property or the conduct of
business, except where the failure to so qualify or to be in good standing would
not result in a Material Adverse Effect; except as otherwise disclosed in the
Registration Statement, all of the issued and outstanding capital stock of each
such Subsidiary has been duly authorized and validly issued, is fully paid and
non-assessable and is owned by the Company, directly or through subsidiaries,
free and clear of any security interest, mortgage, pledge, lien, encumbrance,
claim or equity; none of the outstanding shares of capital stock of any
Subsidiary was issued in violation of the preemptive or similar rights arising
by operation of law, or under the charter, by-laws or other organizational
documents of the Company or any Subsidiary or under any agreement to which the
Company or any Subsidiary is a party. The only subsidiaries of the Company are
(a) the subsidiaries listed on Exhibit 21 to the Registration Statement and (b)
certain other subsidiaries which, considered in the aggregate as a single
Subsidiary, do not constitute a "significant subsidiary" as defined in Rule 1-02
of Regulation S-X.
(vii) Capitalization. The authorized, issued and outstanding capital
--------------
stock of the Company is as set forth in the Prospectuses in the column entitled
"Actual" under the caption "Capitalization" (except for subsequent issuances, if
any, pursuant to this Agreement pursuant to reservations, agreements or employee
benefit plans referred to in the Prospectus or pursuant to the exercise of
convertible securities or options referred to in the Prospectus). The shares of
issued and outstanding capital stock of the Company have been duly authorized
and validly issued and are fully paid and non-assessable; none of the
outstanding shares of capital stock of the Company was issued in violation of
the preemptive or other similar rights arising by operation of law, or under the
organizational documents or by-laws of the Company or any Subsidiary or under
any agreement to which the Company or any Subsidiary is a party.
(viii) Authorization of Agreement. This Agreement and the
--------------------------
International Purchase Agreement have been duly authorized, executed and
delivered by the Company.
(ix) Authorization and Description of Securities. The Securities to
-------------------------------------------
be purchased by the U.S. Underwriters and the International Managers from the
Company have been duly authorized for issuance and sale to the U.S. Underwriters
pursuant to this Agreement and the International Managers pursuant to the
International Purchase Agreement, respectively, and, when issued and delivered
by the Company pursuant to this Agreement and the International Purchase
Agreement, respectively, against payment of the consideration set forth herein
and the International Purchase Agreement, respectively, will be validly issued,
fully paid and non-assessable; the Common Stock conforms to all statements
relating thereto contained in the Prospectuses and such description conforms to
the rights set forth in the instruments defining the same; no holder of the
Securities will be subject to personal liability by reason of being such a
holder; and the issuance of the Securities is not subject to the preemptive or
other similar rights arising by operation of law, under the certificate of
incorporation or by-laws of the Company, under any agreement to which the
Company or any of its subsidiaries is a party, or otherwise.
6
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(x) Absence of Defaults and Conflicts. Neither the Company nor any
---------------------------------
of its subsidiaries is in violation of its charter, by-laws or other
organizational documents or in default in the performance or observance of any
obligation, agreement, covenant or condition contained in any bond, deed, note
or any contract, indenture, mortgage, deed of trust, loan or credit agreement,
lease or other agreement or instrument to which the Company or any of its
subsidiaries is a party or by which it or any of them may be bound, or to which
any of the property or assets of the Company or any subsidiary is subject
(collectively, "Agreements and Instruments") except for such defaults that would
not result in a Material Adverse Effect; and the execution, delivery and
performance of this Agreement and the International Purchase Agreement and the
consummation of the transactions contemplated in this Agreement, the
International Purchase Agreement and in the Registration Statement (including
the issuance and sale of the Securities and the use of the proceeds from the
sale of the Securities as described in the Prospectuses under the caption "Use
of Proceeds") and compliance by the Company with its obligations under this
Agreement and the International Purchase Agreement have been duly authorized by
all necessary corporate action on the part of the Company and do not and will
not, whether with or without the giving of notice or passage of time or both,
conflict with or constitute a breach of, or default or Repayment Event (as
defined below) under, or result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company or any
subsidiary pursuant to, the Agreements and Instruments (except for such
conflicts, breaches or defaults or liens, charges or encumbrances that would not
result in a Material Adverse Effect), nor will such action result in any
violation of the provisions of the charter or by-laws of the Company or any
subsidiary or any applicable law, statute, rule, regulation, judgment, order,
writ or decree of any government, government instrumentality or court, domestic
or foreign, having jurisdiction over the Company or any subsidiary or any of
their assets, properties or operations. As used herein, a "Repayment Event"
means any event or condition which gives the holder of any note, debenture or
other evidence of indebtedness (or any person acting on such holder's behalf)
the right to require the repurchase, redemption or repayment of all or a portion
of such indebtedness by the Company or any subsidiary.
(xi) Absence of Labor Dispute. No labor dispute or problem exists
------------------------
with the employees of the Company or any subsidiary or, to the knowledge of the
Company, is imminent, which may reasonably be expected to result in a Material
Adverse Effect.
(xii) Absence of Proceedings. There is no action, suit, proceeding,
----------------------
inquiry or investigation before or brought by any court or governmental agency
or body, domestic or foreign, now pending, or, to the knowledge of the Company,
threatened, against or affecting the Company or any of its subsidiaries, which
is required to be disclosed in the Registration Statement (other than as
disclosed therein), or which might reasonably be expected to result in a
Material Adverse Effect, or which might reasonably be expected to materially and
adversely affect the properties or assets thereof or the consummation of the
transactions contemplated in this Agreement and the International Purchase
Agreement or the performance by the Company of its obligations hereunder or
thereunder; the aggregate of all pending legal or governmental proceedings to
which the Company or any subsidiary of the Company is a party or of which any of
their respective properties or assets is the subject which are not described in
the Registration Statement, including ordinary routine litigation incidental to
the business, could not reasonably be expected to result in a Material Adverse
Effect.
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(xiii) Accuracy of Exhibits. There are no contracts or documents
--------------------
which are required to be described in the Registration Statement, the
Prospectuses or to be filed as exhibits thereto which have not been so described
and filed as required.
(xiv) Possession of Intellectual Property. The Company and its
-----------------------------------
subsidiaries own or possess, or can acquire on reasonable terms, adequate
patents, patent rights, licenses, inventions, copyrights, know-how (including
trade secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures), trademarks, service marks,
trade names or other intellectual property (collectively, "Intellectual
Property") necessary to carry on the business now operated by them, and neither
the Company nor any of its subsidiaries has received any notice or is otherwise
aware of any infringement of or conflict with asserted rights of others with
respect to any Intellectual Property or of any facts or circumstances which
would render any Intellectual Property invalid or inadequate to protect the
interest of the Company or any of its subsidiaries therein, and which
infringement or conflict (if the subject of any unfavorable decision, ruling or
finding) or invalidity or inadequacy, singly or in the aggregate, would result
in a Material Adverse Effect.
(xv) Absence of Further Requirements. No filing with, or
-------------------------------
authorization, approval, consent, license, order, registration, qualification or
decree of, any court or governmental authority or agency is necessary or
required for the performance by the Company of its obligations hereunder, in
connection with the offering, issuance or sale of the Securities under this
Agreement and the International Purchase Agreement or the consummation of the
transactions contemplated by this Agreement and the International Purchase
Agreement, except (i) such as have been already obtained or as may be required
under the 1933 Act or the 1933 Act Regulations and foreign or state securities
or blue sky laws and filing to list the Securities on the New York Stock
Exchange or registering of the Securities under the Securities Exchange Act of
1934, as amended (the "1934 Act"), which in each case, will be effective on or
prior to the Closing Date and (ii) such as have been obtained under the laws and
regulations of jurisdictions outside the United States in which the Reserved
Securities are offered.
(xvi) Possession of Licenses and Permits. The Company and its
----------------------------------
subsidiaries possess such permits, licenses, approvals, consents and other
authorizations (collectively, "Governmental Licenses") issued by the appropriate
federal, state, local or foreign regulatory agencies or bodies necessary to
conduct the business now operated by them; the Company and its subsidiaries are
in compliance with the terms and conditions of all such Governmental Licenses,
except where the failure so to comply would not, singly or in the aggregate,
have a Material Adverse Effect; all of the Governmental Licenses are valid and
in full force and effect, except when the invalidity of such Governmental
Licenses or the failure of such Governmental Licenses to be in full force and
effect would not have a Material Adverse Effect; and neither the Company nor any
of its subsidiaries has received any notice of proceedings relating to the
revocation or modification of any such Governmental Licenses which, singly or in
the aggregate, if the subject of an unfavorable decision, ruling or finding,
would result in a Material Adverse Effect.
(xvii) Title to Property. The Company and its subsidiaries have good
-----------------
and marketable title to all real property owned by the Company and its
subsidiaries and good title to all other properties owned by them, in each case,
free and clear of all mortgages, pledges, liens, security
8
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interests, claims, restrictions or encumbrances of any kind except such as (a)
are described in the Prospectuses or (b) do not, singly or in the aggregate,
materially affect the value of such property and do not interfere with the use
made and proposed to be made of such property by the Company or any of its
subsidiaries; and all of the leases and subleases material to the business of
the Company and its subsidiaries, considered as one enterprise, and under which
the Company or any of its subsidiaries holds properties described in the
Prospectuses, are in full force and effect, and neither the Company nor any
subsidiary has any notice of any material claim of any sort that has been
asserted by anyone adverse to the rights of the Company or any subsidiary under
any of the leases or subleases mentioned above, or affecting or questioning the
rights of the Company or such subsidiary to the continued possession of the
leased or subleased premises under any such lease or sublease.
(xviii) Investment Company Act. The Company is not, and upon the
----------------------
issuance and sale of the Securities as herein contemplated and the application
of the net proceeds therefrom as described in the Prospectuses will not 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
"1940 Act").
(xix) Registration Rights. There are no persons with registration
-------------------
rights or other similar rights to have any securities registered pursuant to the
Registration Statement or otherwise registered by the Company under the 1933
Act, except as disclosed in the Prospectus.
(xx) Investment Advisors Act. Each of BlackRock Advisors, Inc.
-----------------------
("BlackRock Advisors"), BlackRock Institutional Management Corporation
("BlackRock Institutional"), BlackRock Financial Management, Inc. ("BlackRock
Financial"), BlackRock (Japan), Inc. ("BlackRock Japan") and BlackRock
International Ltd. ("BlackRock International", together with BlackRock Advisors,
BlackRock Institutional, BlackRock Financial and BlackRock Japan, the
"Investment Adviser Subsidiaries") is duly registered as an investment adviser
under the Investment Advisers Act of 1940, as amended (the "Advisers Act") and
none of the Investment Adviser Subsidiaries is prohibited by any provision of
the Advisers Act or the 1940 Act, or the respective rules and regulations
thereunder, from acting as an investment adviser. The Investment Adviser
Subsidiaries are the only direct or indirect subsidiaries of the Company
required to be registered as investment advisers under the Advisers Act. Each
of the Investment Adviser Subsidiaries is duly registered, licensed or qualified
as an investment adviser in each jurisdiction where the conduct of its business
requires such registration and is in compliance with all federal, state and
foreign laws requiring any such registration, licensing or qualification or is
subject to no material liability or disability by reason of the failure to be so
registered, licensed or qualified in any such jurisdiction or to be in such
compliance. None of the Company or its other direct or indirect subsidiaries
is 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 or is not
subject to material liability or disability by reason of the failure to be so
registered, licensed or qualified.
(xxi) Broker-Dealer Registration. Provident Advisers, Inc.
---------------------------
("Provident Advisers") is duly registered, licensed or qualified as a broker-
dealer under the Exchange Act, and under the securities laws of each
jurisdiction where the conduct of its business requires such registration and
9
<PAGE>
is in compliance with all federal, state and foreign laws requiring such
registration, licensing or qualification or is subject to no material liability
or disability by reason of the failure to be so registered, licensed or
qualified in any such jurisdiction or to be in such compliance. Provident
Advisers is a member in good standing of NASD. None of the Company's other
direct or indirect subsidiaries is required to be registered, licensed or
qualified as a broker-dealer under the laws requiring any such registration,
licensing or qualification in any jurisdiction in which it conducts business or
is subject to any material liability or disability by reason of the failure to
be so registered, licensed or qualified.
(xxii) Transfer Agent. None of the Company or its direct or indirect
--------------
subsidiaries is required to be registered, licensed or qualified as a transfer
agent under the federal or state laws requiring any such registration, licensing
or qualification in any state in which it conducts business or is subject to any
material liability or disability by reason of the failure to be so registered,
licensed or qualified.
(xxiii) Compliance with Law. Each of the Investment Adviser Subsidiaries
--------------------
and Provident Advisers is and has been in compliance with, and each such entity
has received no notice of any violation of, (A) all laws, regulations,
ordinances and rules (including those of any non-governmental self-regulatory
agencies) applicable to it or its operations relating to investment advisory or
broker-dealer activities, as the case may be, and (B) all other laws,
regulations, ordinances and rules applicable to it and its operations, except,
in either case, where any failure to comply with any such law, regulation,
ordinance or rule would not have, individually or in the aggregate, a Material
Adverse Effect.
(xxiv) Funds. Each entity for which the Investment Adviser Subsidiaries
------
acts as investment adviser and, to the best knowledge of the Investment Adviser
Subsidiaries, each entity for which the Investment Adviser Subsidiaries acts as
sub-adviser and, in each case, which is required to be registered with the
Commission as an investment company under the 1940 Act (a "Fund") is, and upon
consummation of the transactions contemplated herein will be, duly registered
with the Commission as an investment company under the 1940 Act and to the best
knowledge of the Company, each Fund has been operated in compliance in all
material respects with the 1940 Act and the rules and regulations thereunder and
to the best knowledge of the Company, there are no facts with respect to any
such Fund that are likely to have a Material Adverse Effect. To the best
knowledge of the Company, each Fund's registration statement complies in all
material respects with the provisions of the Securities Act, the 1940 Act and
the rules and regulations thereunder and does not contain any untrue statement
of material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein not misleading.
(xxv) Advisory and Other Agreements. Each agreement between the Company,
-----------------------------
any Investment Adviser Subsidiary, or any other subsidiary of the Company on the
one hand and any Fund or private client on the other is a legal and valid
obligation of the parties thereto, and none of the Company, any Investment
Adviser Subsidiary or any other subsidiary of the Company is in breach or
violation of or in default under any such agreement which would individually or
in the aggregate have a Material Adverse Effect.
(xxvi) Assignment. The offering contemplated by this Agreement and the
----------
International Purchase Agreement will not constitute an "assignment" as defined
in the 1940 Act and the Advisers
10
<PAGE>
Act of any of the investment advisory contracts to which the Company or any of
its Subsidiaries is a party.
(xxvii) Year 2000. The Company does not anticipate incurring significant
---------
operating expenses or costs to ensure that all Company software that contains or
calls on a calendar function that is indexed to a computer processing unit
clock, provides specific dates or calculates spans of dates, is able to record,
store, process and provide true and accurate dates and calculations for dates
and spans of dates including and following January 1, 2000, except as disclosed
in the Prospectus.
(b) Officer's Certificates. Any certificate signed by any officer of
the Company or any of its subsidiaries delivered to the U.S. Representatives,
the Lead Managers, the U.S. Underwriters, the International Managers, or to
counsel thereof shall be deemed a representation and warranty by the Company to
each U.S. Representative, Lead Manager, U.S. Underwriter and International
Manager as to the matters covered thereby.
SECTION 2. Sale and Delivery to U.S. Underwriters; Closing.
-----------------------------------------------
(a) Initial Securities. On the basis of the representations and
warranties herein contained and subject to the terms and conditions herein set
forth, the Company agrees to sell to each U.S. Underwriter, severally and not
jointly, and each U.S. Underwriter, severally and not jointly, agrees to
purchase from the Company, at the price per share set forth in Schedule B, the
number of Initial U.S. Securities set forth in Schedule A opposite the name of
such U.S. Underwriter, plus any additional number of Initial U.S. Securities
which such Underwriter may become obligated to purchase pursuant to the
provisions of Section 10 hereof.
(b) Option Securities. In addition, on the basis of the
representations and warranties herein contained and subject to the terms and
conditions herein set forth, the Company hereby grants an option to the U.S.
Underwriters, severally and not jointly, to purchase up to an additional ____
shares of Class A Common Stock at the price per share set forth in Schedule B,
less an amount per share equal to any dividends or distributions declared by the
Company and payable on the Initial U.S. Securities but not payable on the U.S.
Option Securities. The option hereby granted will expire 30 days after the date
hereof and may be exercised in whole or in part from time to time only for the
purpose of covering over-allotments which may be made in connection with the
offering and distribution of the Initial U.S. Securities upon notice by the U.S.
Representatives to the Company setting forth the number of U.S. Option
Securities as to which the several U.S. Underwriters are then exercising the
option and the time and date of payment and delivery for such U.S. Option
Securities. Any such time and date of delivery for the U.S. Option Securities (a
"Date of Delivery") shall be determined by the U.S. Representatives, but shall
not be later than seven full business days after the exercise of said option,
nor in any event prior to the Closing Time, as hereinafter defined. If the
option is exercised as to all or any portion of the U.S. Option Securities, each
of the U.S. Underwriters, acting severally and not jointly, will purchase that
proportion of the total number of U.S. Option Securities then being purchased
which the number of Initial U.S. Securities set forth in Schedule A opposite the
name of such U.S. Underwriter bears to the total number of Initial U.S.
Securities, subject in each case to such adjustments as the U.S. Representatives
in their discretion shall make to eliminate any sales or purchases of fractional
shares.
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(c) Payment. Payment of the purchase price for, and delivery of
certificates for, the Initial Securities shall be made at the offices of Simpson
Thacher & Bartlett, counsel for the Underwriters, at 425 Lexington Avenue, New
York, New York 10017, or at such other place as shall be agreed upon by the U.S.
Representatives and the Company, at 9:00 A.M. (Eastern time) on the third
(fourth, if the pricing occurs after 4:30 P.M. (Eastern time) on any given day)
business day after the date hereof (unless postponed in accordance with the
provisions of Section 10), or such other time not later than ten business days
after such date as shall be agreed upon by the U.S. Representatives and the
Company (such time and date of payment and delivery being herein called "Closing
Time").
In addition, in the event that any or all of the U.S. Option Securities are
purchased by the U.S. Underwriters, payment of the purchase price for, and
delivery of certificates for, such U.S. Option Securities shall be made at
Simpson Thacher & Bartlett, counsel for the Underwriters, at 425 Lexington
Avenue, New York, New York 10017, or at such other place as shall be agreed upon
by the U.S. Representatives and the Company, on each Date of Delivery as
specified in the notice from the U.S. Representatives to the Company.
Payment shall be made to the Company by wire transfer of immediately
available funds to a bank account designated by the Company, against delivery to
the U.S. Representatives for the respective accounts of the U.S. Underwriters of
certificates for the U.S. Securities to be purchased by them. It is understood
that each U.S. Underwriter has authorized the U.S. Representatives, for its
account, to accept delivery of, receipt for, and make payment of the purchase
price for, the Initial U.S. Securities and the U.S. Option Securities, if any,
which it has agreed to purchase. Merrill Lynch, individually and not as
representative of the U.S. Underwriters, may (but shall not be obligated to)
make payment of the purchase price for the Initial U.S. Securities or the U.S.
Option Securities, if any, to be purchased by any U.S. Underwriter whose funds
have not been received by the Closing Time or the relevant Date of Delivery, as
the case may be, but such payment shall not relieve such U.S. Underwriter from
its obligations hereunder.
(d) Denominations; Registration. Certificates for the Initial U.S.
Securities and the U.S. Option Securities, if any, shall be in such
denominations and registered in such names as the U.S. Representatives may
request in writing at least one full business day before the Closing Time or the
relevant Date of Delivery, as the case may be. The certificates for the Initial
U.S. Securities and the U.S. Option Securities, if any, will be made available
for examination and packaging by the U.S. Representatives in The City of New
York not later than 10:00 A.M. (Eastern time) on the business day prior to the
Closing Time or the relevant Date of Delivery, as the case may be.
Appointment of Qualified Independent Underwriter. The company hereby
confirms its engagement of Merrill Lynch as, and Merrill Lynch hereby confirms
its agreement with the Company to render services as, a "qualified independent
underwriter" within the meaning of Rule 2720 of the Conduct Rules of the
National Association of Securities Dealers, Inc. with respect to the offering
and sale of the U.S. Securities. Merrill Lynch, solely in its capacity as
qualified independent underwriter and not otherwise, is referred to herein as
the "Independent Underwriter".
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SECTION 3. Covenants of the Company. The Company covenants with each U.S.
------------------------
Underwriter as follows:
(a) Compliance with Securities Regulations and Commission Requests. The
Company, subject to Section 3(b), will comply with the requirements of Rule 430A
or Rule 434, as applicable, and will notify the U.S. Representatives
immediately, and confirm the notice in writing, (i) when any post-effective
amendment to the Registration Statement shall become effective, or any
supplement to the Prospectuses or any amended Prospectus shall have been filed,
(ii) of the receipt of any comments from the Commission, (iii) of any request by
the Commission for any amendment to the Registration Statement or any amendment
or supplement to the Prospectuses or for additional information, and (iv) of the
issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement or of any order preventing or suspending the use of any
preliminary prospectus, or of the suspension of the qualification of the
Securities for offering or sale in any jurisdiction, or of the initiation or
threatening of any proceedings for any of such purposes. The Company will
promptly effect the filings necessary pursuant to Rule 424(b) and will take such
steps as it deems necessary to ascertain promptly whether the form of prospectus
transmitted for filing under Rule 424(b) was received for filing by the
Commission and, in the event that it was not, it will promptly file such
prospectus. The Company will make every reasonable effort to prevent the
issuance of any stop order and, if any stop order is issued, to obtain the
lifting thereof at the earliest possible moment.
(b) Filing of Amendments. The Company will give the U.S. Representatives
notice of its intention to file or prepare any amendment to the Registration
Statement (including any filing under Rule 462(b)), any Term Sheet or any
amendment, supplement or revision to either the prospectus included in the
Registration Statement at the time it became effective or to the Prospectuses,
will furnish the U.S. Representatives with copies of any such documents a
reasonable amount of time prior to such proposed filing or use, as the case may
be, and will not file or use any such document to which the U.S. Representatives
or counsel for the U.S. Underwriters shall reasonably object.
(c) Delivery of Registration Statements. The Company has furnished or will
deliver to the U.S. Representatives and counsel for the U.S. Underwriters,
without charge, signed copies of the Registration Statement as originally filed
and of each amendment thereto (including exhibits filed therewith or
incorporated by reference therein) and signed copies of all consents and
certificates of experts, and will also deliver to the U.S. Representatives,
without charge, a conformed copy of the Registration Statement as originally
filed and of each amendment thereto (without exhibits) for each of the U.S.
Underwriters. The copies of the Registration Statement and each amendment
thereto furnished to the U.S. Underwriters will be identical to the
electronically transmitted copies thereof filed with the Commission pursuant to
EDGAR, except to the extent permitted by Regulation S-T.
(d) Delivery of Prospectuses. The Company has delivered to each U.S.
Underwriter, without charge, as many copies of each preliminary prospectus as
such U.S. Underwriter reasonably requested, and the Company hereby consents to
the use of such copies for purposes permitted by the 1933 Act. The Company will
furnish to each U.S. Underwriter, without charge, during the period when the
U.S. Prospectus is required to be delivered under the 1933 Act or the 1934 Act,
such
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number of copies of the U.S. Prospectus (as amended or supplemented) as such
U.S. Underwriter may reasonably request. The U.S. Prospectus and any amendments
or supplements thereto furnished to the U.S. Underwriters will be identical to
the electronically transmitted copies thereof filed with the Commission pursuant
to EDGAR, except to the extent permitted by Regulation S-T.
(e) Continued Compliance with Securities Laws. The Company will comply
with the 1933 Act and the 1933 Act Regulations and the 1934 Act and the rules
and regulations promulgated thereunder (the "1934 Act Regulations") so as to
permit the completion of the distribution of the Securities as contemplated in
this Agreement, the International Purchase Agreement and in the Prospectuses.
If at any time when a prospectus is required by the 1933 Act to be delivered in
connection with sales of the Securities, any event shall occur or condition
shall exist as a result of which it is necessary, in the opinion of counsel for
the U.S. Underwriters or for the Company, to amend the Registration Statement or
amend or supplement any Prospectus in order that the Prospectuses will not
include any untrue statements of a material fact or omit to state a material
fact necessary in order to make the statements therein not misleading in the
light of the circumstances existing at the time it is delivered to a purchaser,
or if it shall be necessary, in the opinion of such counsel, at any such time to
amend the Registration Statement or amend or supplement any Prospectus in order
to comply with the requirements of the 1933 Act or the 1933 Act Regulations, the
Company will promptly prepare and file with the Commission, subject to Section
3(b), such amendment or supplement as may be necessary to correct such statement
or omission or to make the Registration Statement or the Prospectuses comply
with such requirements, and the Company will furnish to the U.S. Underwriters
such number of copies of such amendment or supplement as the U.S. Underwriters
may reasonably request.
(f) Blue Sky Qualifications. The Company will use its best efforts, in
cooperation with the U.S. Underwriters, to qualify the Securities for offering
and sale under the applicable securities laws of such states and other
jurisdictions (domestic or foreign) as the U.S. Representatives may designate
and to maintain such qualifications in effect for a period of not less than one
year from the later of the effective date of the Registration Statement and any
Rule 462(b) Registration Statement; provided, however, that the Company shall
not be obligated to file any general consent to service of process or to qualify
as a foreign corporation or as a dealer in securities in any jurisdiction in
which it is not so qualified or to subject itself to taxation in respect of
doing business in any jurisdiction in which it is not otherwise so subject. In
each jurisdiction in which the Securities have been so qualified, the Company
will file such statements and reports as may be required by the laws of such
jurisdiction to continue such qualification in effect for a period of not less
than one year from the effective date of the Registration Statement and any Rule
462(b) Registration Statement.
(g) Rule 158. The Company will timely file such reports pursuant to the
1934 Act as are necessary in order to make generally available to its
securityholders as soon as practicable an earnings statement for the purposes
of, and to provide the benefits contemplated by, the last paragraph of Section
11(a) of the 1933 Act.
(h) Use of Proceeds. The Company will use the net proceeds received by it
from the sale of the Securities in the manner specified in the Prospectuses
under "Use of Proceeds".
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(i) Listing. The Company will use its best efforts to effect the listing
of the Class A Common Stock (including the Securities) on the New York Stock
Exchange.
(j) Restriction on Sale of Securities. During a period of 180 days from
the date of the Prospectuses, the Company will not, without the prior written
consent of the U.S. Representatives, (i) directly or indirectly, offer, pledge,
sell, contract to sell, sell any option or contract to purchase, purchase any
option or contract to sell, grant any option, right or warrant to purchase or
otherwise transfer or dispose of any share of Class B Common Stock or any
securities convertible into or exercisable or exchangeable for Class B Common
Stock or file any registration statement under the 1933 Act with respect to any
of the foregoing or (ii) enter into any swap or any other agreement or any
transaction that transfers, in whole or in part, directly or indirectly, the
economic consequence of ownership of the Class B Common Stock, whether any such
swap or transaction described in clause (i) or (ii) above is to be settled by
delivery of Class B Common Stock or such other securities, in cash or otherwise.
The foregoing sentence shall not apply to (A) the Securities to be sold
hereunder or under the International Purchase Agreement, (B) any shares of Class
B Common Stock issued by the Company upon the exercise of an option or warrant
or the conversion of a security outstanding on the date hereof and referred to
in the Prospectuses, (C) any shares of Class B Common Stock issued or options to
purchase Class B Common Stock granted pursuant to existing employee benefit
plans of the Company referred to in the Prospectuses, (D) any shares of Class B
Common Stock issued pursuant to any non-employee director stock plan or dividend
reinvestment plan, (E) any shares of Class A Common Stock or (F) U.S. Securities
convertible, exercisable or exchangeable for shares of Class B Common Stock
issued, offered or sold in consideration for (1) the acquisition of stock or
assets of other companies or (2) the services of newly hired employees of the
Company; provided, however, that each recipient of the securities agrees in
writing to be bound by the restrictions set forth in this paragraph.
(k) Reporting Requirements. The Company, during the period when the
Prospectuses are required to be delivered under the 1933 Act or the 1934 Act,
will file all documents required to be filed with the Commission pursuant to the
1934 Act within the time periods required by the 1934 Act and the 1934 Act
Regulations.
(l) Compliance with NASD Rules. The Company hereby agrees that it will
ensure that the Reserved Securities will be restricted as required by NASD or
the NASD rules from sale, transfer, assignment, pledge or hypothecation for a
period of three months following the date of this Agreement. The Underwriters
will notify the Company as to which persons will need to be so restricted. At
the request of the Underwriters, the Company will direct the transfer agent to
place a stop transfer restriction upon such securities for such period of time.
Should the Company release, or seek to release, from such restrictions any of
the Reserved Securities, the Company agrees to reimburse the Underwriters for
any reasonable expenses (including, without limitation, legal expenses) they
incur in connection with such release.
SECTION 4. Payment of Expenses.
-------------------
(a) Expenses. The Company will pay all expenses incident to the
performance of its obligations under this Agreement, including (i) the
preparation, printing and filing of the Registration
15
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Statement (including financial statements and exhibits) as originally filed and
of each amendment thereto, (ii) the preparation, printing and delivery to the
Underwriters of this Agreement, any agreement among Underwriters and such other
documents as may be required in connection with the offering, purchase, sale,
issuance or delivery of the Securities, (iii) the preparation, issuance and
delivery of the certificates for the Securities to the Underwriters, including
any stock or other transfer taxes and any stamp or other duties payable upon the
sale, issuance or delivery of the Securities to the Underwriters and the
transfer of the Securities between the U.S. Underwriters and the International
Managers, (iv) the fees and disbursements of the Company's counsel, accountants
and other advisors, (v) the qualification of the Securities under securities
laws in accordance with the provisions of Section 3(f) hereof, including filing
fees and the reasonable fees and disbursements of counsel for the Underwriters
in connection therewith and in connection with the preparation of the Blue Sky
Survey and any supplement thereto, (vi) the printing and delivery to the
Underwriters of copies of each preliminary prospectus, any Term Sheets and of
the Prospectuses and any amendments or supplements thereto, (vii) the
preparation, printing and delivery to the Underwriters of copies of the Blue Sky
Survey and any supplement thereto, (viii) the fees and expenses of any transfer
agent or registrar for the Securities, (ix) the filing fees incident to, and the
reasonable fees and disbursements of counsel to the Underwriters in connection
with, the review by NASD of the terms of the sale of the Securities, (x) the
fees and expenses incurred in connection with the listing of the Class A Common
Stock (including the Securities) on the New York Stock Exchange, (xi) all costs
and expenses of the Underwriters, including the fees and disbursements of
counsel for the Underwriters, in connection with matters related to the Reserved
Securities which are designated by the Company for sale to employees and others
having a business relationship with the Company and (xii) the fees and expenses
of the Independent Underwriter.
(b) Termination of Agreement. If this Agreement is terminated by the U.S.
Representatives in accordance with the provisions of Section 5 or Section
9(a)(i) hereof, the Company shall reimburse the U.S. Underwriters for all of
their out-of-pocket expenses, including the reasonable fees and disbursements of
counsel for the U.S. Underwriters.
SECTION 5. Conditions of U.S. Underwriters' Obligations. The obligations
--------------------------------------------
of the several U.S. Underwriters hereunder are subject to the accuracy of the
representations and warranties of the Company contained in Section 1 hereof or
in certificates of any officer of the Company or any subsidiary of the Company
delivered pursuant to the provisions hereof, to the performance by the Company
of its covenants and other obligations hereunder, and to the following further
conditions:
(a) Effectiveness of Registration Statement. The Registration Statement,
including any Rule 462(b) Registration Statement, has become effective and at
Closing Time no stop order suspending the effectiveness of the Registration
Statement shall have been issued under the 1933 Act or proceedings therefor
initiated or threatened by the Commission, and any request on the part of the
Commission for additional information shall have been complied with to the
reasonable satisfaction of counsel to the U.S. Underwriters. A prospectus
containing the Rule 430A Information shall have been filed with the Commission
in accordance with Rule 424(b) (or a post-effective amendment providing such
information shall have been filed and declared effective in accordance with the
requirements of Rule 430A) or, if the Company has elected to rely upon Rule 434,
a Term Sheet shall have been filed with the Commission in accordance with Rule
424(b).
16
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(b) Opinion of Counsel for Company. At Closing Time, the U.S.
Representatives shall have received the favorable opinion, dated as of Closing
Time, of Skadden, Arps, Slate, Meagher & Flom LLP, counsel for the Company, in
form and substance satisfactory to counsel for the U.S. Underwriters, together
with signed or reproduced copies of such letter for each of the other U.S.
Underwriters to the effect set forth in Exhibit A hereto and to such further
effect as counsel to the U.S. Underwriters may reasonably request.
(c) Opinion of Counsel for U.S. Underwriters. At Closing Time, the U.S.
Representatives shall have received an opinion, dated as of Closing Time, of
Simpson Thacher & Bartlett, counsel for the U.S. Underwriters, together with
signed or reproduced copies of such letter for each of the other U.S.
Underwriters, in form and substance reasonably satisfactory to the U.S.
Underwriters.
(d) Officers' Certificate. At Closing Time, there shall not have been,
since the date hereof or since the respective dates as of which information is
given in the Prospectuses, any material adverse change in the condition,
financial or otherwise, or in the earnings, business affairs or business
prospects of the Company and its subsidiaries considered as one enterprise,
whether or not arising in the ordinary course of business, and the U.S.
Representatives shall have received a certificate of the President or a Vice
President of the Company and of the chief financial or chief accounting officer
of the Company, dated as of Closing Time, to the effect that (i) there has been
no such material adverse change, (ii) the representations and warranties in
Section 1(a) hereof are true and correct with the same force and effect as
though expressly made at and as of Closing Time, (iii) the Company has complied
with all agreements and satisfied all conditions on its part to be performed or
satisfied at or prior to Closing Time, and (iv) no stop order suspending the
effectiveness of the Registration Statement has been issued and no proceedings
for that purpose have been instituted or are pending or are contemplated by the
Commission.
(e) Accountant's Comfort Letter. At the time of the execution of this
Agreement, the U.S. Representatives shall have received from Ernst & Young LLP a
letter dated such date, in form and substance satisfactory to the U.S.
Representatives, together with signed or reproduced copies of such letter for
each of the other U.S. Underwriters containing statements and information of the
type ordinarily included in accountants' "comfort letters" to underwriters with
respect to the financial statements and certain financial information contained
in the Registration Statement and the Prospectuses.
(f) Bring-down Comfort Letter. At Closing Time, the U.S. Representatives
shall have received from Ernst & Young LLP a letter, dated as of Closing Time,
to the effect that they reaffirm the statements made in the letter furnished
pursuant to subsection (e) of this Section, except that the specified date
referred to shall be a date not more than three business days prior to Closing
Time.
(g) Approval of Listing. At Closing Time, the Class A Common Stock
(including the Securities) shall have been listed or approved for listing on the
New York Stock Exchange, subject only to official notice of issuance.
17
<PAGE>
(h) No Objection. The NASD has confirmed that it has not raised any
objection with respect to the fairness and reasonableness of the underwriting
terms and arrangements.
(i) Lock-up Agreements. At the date of this Agreement, the U.S.
Representatives shall have received an agreement substantially in the form of
Exhibit B hereto signed by the persons or entities listed on Schedule C hereto.
(j) Purchase of Initial International Securities. Contemporaneously with
the purchase by the U.S. Underwriters of the Initial U.S. Securities under this
Agreement, the International Managers shall have purchased the Initial
International Securities under the International Purchase Agreement.
(k) Conditions to Purchase of U.S. Option Securities. In the event that
the U.S. Underwriters exercise their option provided in Section 2(b) hereof to
purchase all or any portion of the U.S. Option Securities, the representations
and warranties of the Company contained herein and the statements in any
certificates furnished by the Company or any subsidiary of the Company hereunder
shall be true and correct as of each Date of Delivery and, at the relevant Date
of Delivery, the U.S. Representatives shall have received:
(i) Officers' Certificate. A certificate, dated such Date of
---------------------
Delivery, of the President or a Vice President of the Company and of the chief
financial or chief accounting officer of the Company confirming that the
certificate delivered at the Closing Time pursuant to Section 5(d) hereof
remains true and correct as of such Date of Delivery.
(ii) Opinion of Counsel for Company. The favorable opinion of
------------------------------
Skadden, Arps, Slate, Meagher & Flom LLP, counsel for the Company, in form and
substance satisfactory to counsel for the U.S. Underwriters, dated such Date of
Delivery, relating to the U.S. Option Securities to be purchased on such Date of
Delivery and otherwise to the same effect as the opinion required by Section
5(b) hereof.
(iii) Opinion of Counsel for U.S. Underwriters. The favorable
----------------------------------------
opinion of Simpson Thacher & Bartlett, counsel for the U.S. Underwriters, dated
such Date of Delivery, relating to the U.S. Option Securities to be purchased on
such Date of Delivery and otherwise to the same effect as the opinion required
by Section 5(c) hereof.
(iv) Bring-down Comfort Letter. A letter from Ernst & Young LLP, in
-------------------------
form and substance satisfactory to the U.S. Representatives and dated such Date
of Delivery, substantially in the same form and substance as the letter
furnished to the U.S. Representatives pursuant to Section 5(f) hereof, except
that the "specified date" in the letter furnished pursuant to this paragraph
shall be a date not more than five days prior to such Date of Delivery.
(l) Additional Documents. At Closing Time and at each Date of Delivery,
counsel for the U.S. Underwriters shall have been furnished with such documents
and opinions as they may require for the purpose of enabling them to pass upon
the issuance and sale of the Securities as herein contemplated, or in order to
evidence the accuracy of any of the representations or warranties, or the
18
<PAGE>
fulfillment of any of the conditions, herein contained; and all proceedings
taken by the Company in connection with the issuance and sale of the Securities
as herein contemplated shall be satisfactory in form and substance to the U.S.
Representatives and counsel for the U.S. Underwriters.
(m) Termination of Agreement. If any condition specified in this Section
shall not have been fulfilled when and as required to be fulfilled, this
Agreement, or, in the case of any condition to the purchase of U.S. Option
Securities on a Date of Delivery which is after the Closing Time, the
obligations of the several U.S. Underwriters to purchase the relevant Option
Securities, may be terminated by the U.S. Representatives by notice to the
Company at any time at or prior to Closing Time or such Date of Delivery, as the
case may be, and such termination shall be without liability of any party to
any other party except as provided in Section 4 and except that Sections 1, 6, 7
and 8 shall survive any such termination and remain in full force and effect.
SECTION 6. Indemnification.
---------------
(a) Indemnification of U.S. Underwriters. (1) The Company agrees to
indemnify and hold harmless each U.S. Underwriter and each person, if any, who
controls any U.S. Underwriter within the meaning of Section 15 of the 1933 Act
or Section 20 of the 1934 Act as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement (or any
amendment thereto), including the Rule 430A Information and the Rule 434
Information, if applicable, or the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to make the statements
therein not misleading or arising out of any untrue statement or alleged untrue
statement of a material fact included in any preliminary prospectus or the
Prospectuses (or any amendment or supplement thereto), or the omission or
alleged omission therefrom of a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of (A) the violation of any applicable laws
or regulations of foreign jurisdictions where Reserved Securities have been
offered and (B) any untrue statement or alleged untrue statement of a material
fact included in the supplement or prospectus wrapper material distributed in M
in connection with the reservation and sale of the Reserved Securities to
[directors, officers and employees of] the Company or the omission or alleged
omission therefrom of a material fact necessary to make the statements therein,
when considered in conjunction with the Prospectuses or preliminary
prospectuses, not misleading;
(iii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim whatsoever
based upon any such untrue statement or omission, or any such alleged untrue
statement or omission or in connection with any violation of the nature referred
to in Section 6(a)(1)(ii)(A) hereof; provided that (subject to Section 6(d)
below) any such settlement is effected with the written consent of the Company;
and
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(iv) against any and all expense whatsoever, as incurred (including
the fees and disbursements of counsel chosen by Merrill Lynch), reasonably
incurred in investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission or in connection with
any violation of the nature referred to in Section 6(a)(1)(ii)(A) hereof, to the
extent that any such expense is not paid under (i), (ii) or (iii) above;
provided, however, that this indemnity agreement shall not apply to any loss,
- -------- -------
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by any
U.S. Underwriter through the U.S. Representatives expressly for use in the
Registration Statement (or any amendment thereto), including the Rule 430A
Information and the Rule 434 Information, if applicable, or any preliminary
prospectus or the U.S. Prospectus (or any amendment or supplement thereto).
(1) In addition to and without limitation of the Company's obligation
to indemnify Merrill Lynch as an Underwriter, the Company also agrees to
indemnify and hold harmless the Underwriter and each person, if any, who
controls the Independent Underwriter within the meaning of Section 15 of the
1933 Act or Section 20 of the 1934 Act, from and against any and all loss,
liability, claim, damage and expense whatsoever, as incurred, incurred as a
result of the Independent Underwriter's participation as a "qualified
independent underwriter" within the meaning of Rule 2720 of the Conduct Rules of
the National Association of Securities Dealers, Inc. in connection with the
offering of the U.S. Securities.
(2) Insofar as this indemnity agreement may permit indemnification for
liabilities under the 1933 Act of any person who is a partner of a U.S.
Underwriter or who controls and underwriter within the meaning of Section 15 of
the 1933 Act or Section 20 of the 1934 Act and who, at the date of this
Agreement, is a director or officer of the Company or controls the Company
within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act,
such indemnity agreement is subject to the undertaking of the Company in the
Registration Statement under Item 13 relating to "Disclosure of Commission
Position on Indemnification for Securities Act Liabilities" or to "Undertakings"
thereof.
(b) Indemnification of Company, Directors and Officers. Each U.S.
Underwriter severally agrees to indemnify and hold harmless the Company, its
directors, each of its officers who signed the Registration Statement, and each
person, if any, who controls the Company within the meaning of Section 15 of the
1933 Act or Section 20 of the 1934 Act against any and all loss, liability,
claim, damage and expense described in the indemnity contained in subsection (a)
(1) of this Section, as incurred, but only with respect to untrue statements or
omissions, or alleged untrue statements or omissions, made in the Registration
Statement (or any amendment thereto), including the Rule 430A Information and
the Rule 434 Information, if applicable, or any preliminary U.S. prospectus or
the U.S. Prospectus (or any amendment or supplement thereto) in reliance upon
and in conformity with written information furnished to the Company by such U.S.
Underwriter through
20
<PAGE>
Merrill Lynch expressly for use in the Registration Statement (or any amendment
thereto) or such preliminary prospectus or the U.S. Prospectus (or any amendment
or supplement thereto).
(c) Actions against Parties; Notification. Each indemnified party shall
give notice as promptly as reasonably practicable to each indemnifying party of
any action commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party shall not relieve such
indemnifying party from any liability hereunder to the extent it is not
materially prejudiced as a result thereof and in any event shall not relieve it
from any liability which it may have otherwise than on account of this indemnity
agreement. In the case of parties indemnified pursuant to Section 6(a)(1)
above, counsel to the indemnified parties shall be selected by Merrill Lynch,
and, in the case of parties indemnified pursuant to Section 6(b) above, counsel
to the indemnified parties shall be selected by the Company. An indemnifying
party may participate at its own expense in the defense of any such action;
provided, however, that counsel to the indemnifying party shall not (except with
the consent of the indemnified party) also be counsel to the indemnified party.
In no event shall the indemnifying parties be liable for fees and expenses of
more than one counsel (in addition to any local counsel) separate from their own
counsel for all indemnified parties in connection with any one action or
separate but similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances; provided, that, if indemnity is
sought pursuant to Section 6(a)(2), then, in addition to the fees and expenses
of such counsel for the indemnified parties, the indemnifying party shall be
liable for the reasonable fees and expenses of not more than one counsel (in
addition to any local counsel) separate from its own counsel and that of the
other indemnified parties for the Independent Underwriter in its capacity as a
"qualified" independent underwriter" and all persons, if any who control the
Independent Underwriter within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act in connection with any one action or separate but
similar or related actions in the same jurisdiction arising our of the same
general allegations or circumstances if, in the reasonable judgment of the
Independent Underwriter and the other indemnified parties. Any such separate
counsel for the Independent Underwriter and such control persons of the
Independent Underwriter shall be designated in writing by the Independent
Underwriter. No indemnifying party shall, without the prior written consent of
the indemnified parties, settle or compromise or consent to the entry of any
judgment with respect to any litigation, or any investigation or proceeding by
any governmental agency or body, commenced or threatened, or any claim
whatsoever in respect of which indemnification or contribution could be sought
under this Section 6 or Section 7 hereof (whether or not the indemnified parties
are actual or potential parties thereto), unless such settlement, compromise or
consent (i) includes an unconditional release of each indemnified party from all
liability arising out of such litigation, investigation, proceeding 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.
(d) Settlement without Consent if Failure to Reimburse. If at any time an
indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, such indemnifying party
agrees that it shall be liable for any settlement of the nature contemplated by
Section 6(a)(1)(ii) and 6(a)(1)(iii) effected without its written consent if (i)
such settlement is entered into more than 45 days after receipt by such
indemnifying party of the aforesaid request, (ii) such indemnifying party shall
have received notice of the terms of such
21
<PAGE>
settlement at least 30 days prior to such settlement being entered into and
(iii) such indemnifying party shall not have reimbursed such indemnified party
in accordance with such request prior to the date of such settlement.
(e) Indemnification for Reserved Securities. In connection with the offer
and sale of the Reserved Securities, the Company agrees, promptly upon a
request, in writing to indemnify and hold harmless the Underwriters from and
against any and all losses, liabilities, claims, damages and expenses incurred
by them as a result of the failure of [any directors, officers or employees of
the Company] to pay for and accept delivery of Reserved Securities which, by the
end of the first business day following the date of this Agreement, were subject
to a properly confirmed agreement to purchase.
SECTION 7. Contribution. If the indemnification provided for in Section 6
------------
hereof is for any reason unavailable to or insufficient to hold harmless an
indemnified party in respect of any losses, liabilities, claims, damages or
expenses referred to therein, then each indemnifying party shall contribute to
the aggregate amount of such losses, liabilities, claims, damages and expenses
incurred by such indemnified party, as incurred, (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company on the one
hand and the U.S. Underwriters on the other hand from the offering of the
Securities pursuant to this Agreement or (ii) if the allocation provided by
clause (i) is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Company on the one hand and of the U.S.
Underwriters on the other hand in connection with the statements or omissions,
or in connection with any violation of the nature referred to in Section
6(a)(1)(ii)(A) hereof, which resulted in such losses, liabilities, claims,
damages or expenses, as well as any other relevant equitable considerations.
The relative benefits received by the Company on the one hand and the U.S.
Underwriters on the other hand in connection with the offering of the U.S.
Securities pursuant to this Agreement shall be deemed to be in the same
respective proportions as the total net proceeds from the offering of the U.S.
Securities pursuant to this Agreement (before deducting expenses) received by
the Company and the total underwriting discount received by the U.S.
Underwriters, in each case as set forth on the cover of the U.S. Prospectus, or,
if Rule 434 is used, the corresponding location on the Term Sheet, bear to the
aggregate initial public offering price of the U.S. Securities as set forth on
such cover.
The relative fault of the Company on the one hand and the U.S. Underwriters
on the other hand shall be determined by reference to, among other things,
whether any such untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact relates to information
supplied by the Company or by the U.S. Underwriters and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission or any violation of the nature referred to in Section
6(a)(1)(ii)(A) hereof.
The Company and the U.S. Underwriters agree that Merrill Lynch will not
receive any additional benefits hereunder for serving as the Independent
Underwriter in connection with the offering and sale of U.S. Securities.
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<PAGE>
The Company and the U.S. Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 7 were determined by pro rata
allocation (even if the U.S. 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 Section 7. The aggregate
amount of losses, liabilities, claims, damages and expenses incurred by an
indemnified party and referred to above in this Section 7 shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue or alleged untrue
statement or omission or alleged omission.
Notwithstanding the provisions of this Section 7, no U.S. Underwriter shall
be required to contribute any amount in excess of the amount by which the total
price at which the U.S. Securities underwritten by it and distributed to the
public were offered to the public exceeds the amount of any damages which such
U.S. Underwriter has otherwise been required to pay by reason of any 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 1933 Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 7, each person, if any, who controls a U.S.
Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act shall have the same rights to contribution as such U.S.
Underwriter, and each director of the Company, each officer of the Company who
signed the Registration Statement, and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act or Section 20 of the
1934 Act shall have the same rights to contribution as the Company. The U.S.
Underwriters' respective obligations to contribute pursuant to this Section 7
are several in proportion to the number of Initial U.S. Securities set forth
opposite their respective names in Schedule A hereto and not joint.
SECTION 8. Representations, Warranties and Agreements to Survive Delivery.
--------------------------------------------------------------
All representations, warranties and agreements contained in this Agreement or in
certificates of officers of the Company or any of its subsidiaries submitted
pursuant hereto, shall remain operative and in full force and effect, regardless
of any investigation made by or on behalf of any U.S. Underwriter or controlling
person, or by or on behalf of the Company, and shall survive delivery of the
U.S. Securities to the U.S. Underwriters.
SECTION 9. Termination of Agreement.
------------------------
(a) Termination; General. The U.S. Representatives may terminate this
Agreement, by notice to the Company, at any time at or prior to Closing Time (i)
if there has been, since the time of execution of this Agreement or since the
respective dates as of which information is given in the Prospectus, any
material adverse change in the condition, financial or otherwise, or in the
earnings, business affairs or business prospects of the Company and its
subsidiaries considered as one enterprise, whether or not arising in the
ordinary course of business, or (ii) if there has occurred any
23
<PAGE>
material adverse change in the financial markets in the United States or the
international financial markets, any outbreak of hostilities or escalation
thereof or other calamity or crisis or any change or development involving a
prospective change in national or international political, financial or economic
conditions, in each case the effect of which is such as to make it, in the
judgment of the U.S. Representatives, impracticable to market the Securities or
to enforce contracts for the sale of the Securities, or (iii) if trading in any
securities of the Company has been suspended or materially limited by the
Commission or the New York Stock Exchange, or if trading generally on the
American Stock Exchange or the New York Stock Exchange or in the NASDAQ National
Market has been suspended or materially limited, or minimum or maximum prices
for trading have been fixed, or maximum ranges for prices have been required, by
any of said exchanges or by such system or by order of the Commission, the NASD
or any other governmental authority, or (iv) if a banking moratorium has been
declared by either Federal or New York authorities.
(b) Liabilities. If this Agreement is terminated pursuant to this Section,
such termination shall be without liability of any party to any other party
except as provided in Section 4 hereof, and provided further that Sections 1, 6,
7 and 8 shall survive such termination and remain in full force and effect.
SECTION 10. Default by One or More of the U.S. Underwriters. If one or
-----------------------------------------------
more of the U.S. Underwriters shall fail at Closing Time or a Date of Delivery
to purchase the U.S. Securities which it or they are obligated to purchase under
this Agreement (the "Defaulted Securities"), the U.S. Representatives shall have
the right, within 24 hours thereafter, to make arrangements for one or more of
the non-defaulting U.S. Underwriters, or any other underwriters, to purchase
all, but not less than all, of the Defaulted Securities in such amounts as may
be agreed upon and upon the terms herein set forth; if, however, the U.S.
Representatives shall not have completed such arrangements within such 24-hour
period, then:
(a) if the number of Defaulted Securities does not exceed 10% of the
number of U.S. Securities to be purchased on such date, each of the non-
defaulting U.S. Underwriters shall be obligated, severally and not jointly, to
purchase the full amount thereof in the proportions that their respective
underwriting obligations hereunder bear to the underwriting obligations of all
non-defaulting U.S. Underwriters, or
(b) if the number of Defaulted Securities exceeds 10% of the number of
U.S. Securities to be purchased on such date, this Agreement or, with respect to
any Date of Delivery which occurs after the Closing Time, the obligation of the
U.S. Underwriters to purchase and of the Company to sell the U.S. Option
Securities to be purchased and sold on such Date of Delivery shall terminate
without liability on the part of any non-defaulting U.S. Underwriter.
No action taken pursuant to this Section shall relieve any defaulting U.S.
Underwriter from liability in respect of its default.
In the event of any such default which does not result in a termination of
this Agreement or, in the case of a Date of Delivery which is after the Closing
Time, which does not result in a termination of the obligation of the U.S.
Underwriters to purchase and the Company to sell the
24
<PAGE>
relevant U.S. Option Securities, as the case may be, either the U.S.
Representatives or the Company shall have the right to postpone Closing Time or
the relevant Date of Delivery, as the case may be, for a period not exceeding
seven days in order to effect any required changes in the Registration Statement
or Prospectuses or in any other documents or arrangements. As used herein, the
term "U.S. Underwriter" includes any person substituted for a U.S. Underwriter
under this Section 10.
SECTION 11. Notices. All notices and other communications hereunder shall
-------
be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the U.S.
Underwriters shall be directed to the U.S. Representatives at North Tower, World
Financial Center, New York, New York 10281-1201, attention of ___; and notices
to the Company shall be directed to it at 345 Park Avenue, 29/th/ Floor, New
York, New York 10154, attention of ___.
SECTION 12. Parties. This Agreement shall each inure to the benefit of
-------
and be binding upon the U.S. Underwriters and the Company and their respective
successors. Nothing expressed or mentioned in this Agreement is intended or
shall be construed to give any person, firm or corporation, other than the U.S.
Underwriters and the Company and their respective successors and the controlling
persons and officers and directors referred to in Sections 6 and 7 and their
heirs and legal representatives, any legal or equitable right, remedy or claim
under or in respect of this Agreement or any provision herein contained. This
Agreement and all conditions and provisions hereof are intended to be for the
sole and exclusive benefit of the U.S. Underwriters and the Company and their
respective successors, and said controlling persons and officers and directors
and their heirs and legal representatives, and for the benefit of no other
person, firm or corporation. No purchaser of Securities from any U.S.
Underwriter shall be deemed to be a successor by reason merely of such purchase.
SECTION 13. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE GOVERNED BY
----------------------
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. SPECIFIED
TIMES OF DAY REFER TO NEW YORK CITY TIME.
SECTION 14. Effect of Headings. The Article and Section headings herein
------------------
and the Table of Contents are for convenience only and shall not affect the
construction hereof.
25
<PAGE>
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to the Company a counterpart hereof, whereupon this
instrument, along with all counterparts, will become a binding agreement between
the U.S. Underwriters and the Company in accordance with its terms.
Very truly yours,
BLACKROCK, INC.
By: _________________________________________
Title:
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
GOLDMAN, SACHS & CO.
LEHMAN BROTHERS INC.
PRUDENTIAL SECURITIES INCORPORATED
SALOMON SMITH BARNEY INC.
By: MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED
By __________________________________________
Authorized Signatory
For itself and the Other U.S. Representatives and on behalf of the other
U.S. Underwriters named in Schedule A hereto.
26
<PAGE>
SCHEDULE A
Number of
Initial U.S.
Name of U.S. Underwriter Securities
- ------------------------ ------------
Merrill Lynch, Pierce, Fenner & Smith
Incorporated......................................
Goldman, Sachs & Co.................................
Lehman Brothers Inc.................................
Prudential Securities Incorporated..................
Salomon Smith Barney Inc............................
---------
Total............................................... [_]
=========
Sch A-1
<PAGE>
SCHEDULE B
BLACKROCK, INC.
_ Shares of Class A Common Stock
(Par Value $.01 Per Share)
1. The initial public offering price per share for the Securities,
determined as provided in said Section 2, shall be $_.
2. The purchase price per share for the U.S. Securities to be paid by the
several U.S. Underwriters shall be $_, being an amount equal to the initial
public offering price set forth above less $_ per share; provided that the
purchase price per share for any U.S. Option Securities purchased upon the
exercise of the over-allotment option described in Section 2(b) shall be reduced
by an amount per share equal to any dividends or distributions declared by the
Company and payable on the Initial U.S. Securities but not payable on the U.S.
Option Securities.
Sch B-1
<PAGE>
SCHEDULE C
The following persons shall execute agreements in the form of Exhibit B
hereto:
Sch C-1
<PAGE>
EXHIBIT A
FORM OF OPINION OF SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
TO BE DELIVERED PURSUANT TO
SECTION 5(b)
(i) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware.
(ii) The Company has corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the
Prospectuses and to enter into and perform its obligations under the U.S.
Purchase Agreement and the International Purchase Agreement.
(iii) The Company is duly qualified as a foreign corporation to transact
business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure so to qualify or
to be in good standing would not result in a Material Adverse Effect.
(iv) The authorized, issued and outstanding capital stock of the Company
is as set forth in the Prospectuses in the column entitled "Actual" under the
caption "Capitalization" (except for subsequent issuances, if any, pursuant to
the U.S. Purchase Agreement and the International Purchase Agreement; the shares
of issued and outstanding capital stock have been duly authorized and validly
issued and are fully paid and non-assessable; and none of the outstanding shares
of capital stock of the Company was issued in violation of the preemptive or
other similar rights of any shareholder of the Company arising by operation of
law or under the certificate of incorporation or by-laws of the Company or under
any agreement to which the Company or any of its subsidiaries is a party.
(v) The Securities to be purchased by the U.S. Underwriters and the
International Managers from the Company have been duly authorized for issuance
and sale to the Underwriters pursuant to the U.S. Purchase Agreement and the
International Purchase Agreement, respectively, and, when issued and delivered
by the Company pursuant to the U.S. Purchase Agreement and the International
Purchase Agreement, respectively, against payment of the consideration set forth
in the U.S. Purchase Agreement and the International Purchase Agreement, will be
validly issued and fully paid and non-assessable and no holder of the Securities
is or will be subject to personal liability by reason of being such a holder.
(vi) The issuance of the Securities is not subject to the preemptive or
other similar rights of any shareholder of the Company arising by operation of
law or under the certificate of incorporation or by-laws of the Company or under
any agreement to which the Company or any of its subsidiaries is a party.
(vii) Each Subsidiary has been duly organized and is validly existing as a
corporation or partnership, as the case may be, in good standing under the laws
of the jurisdiction of its organization, has requisite power and authority to
own, lease and operate its properties and to conduct its business as described
in the Prospectuses and is duly qualified as a foreign corporation
Exhibit A-1
<PAGE>
to transact business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure so to qualify or
to be in good standing would not result in a Material Adverse Effect; except as
otherwise disclosed in the Registration Statement, all of the issued and
outstanding capital stock of each Subsidiary has been duly authorized and
validly issued, is fully paid and non-assessable and, to the best of our
knowledge, is owned by the Company, directly or through subsidiaries, free and
clear of any security interest, mortgage, pledge, lien, encumbrance, claim or
equity; none of the outstanding shares of capital stock of any Subsidiary was
issued in violation of the preemptive or similar rights of any securityholder of
such Subsidiary.
(viii) The U.S. Purchase Agreement and the International Purchase Agreement
have been duly authorized, executed and delivered by the Company.
(ix) The Registration Statement, including any Rule 462(b) Registration
Statement, has been declared effective under the 1933 Act; any required filing
of the Prospectuses pursuant to Rule 424(b) has been made in the manner and
within the time period required by Rule 424(b); and, to the best of our
knowledge, no stop order suspending the effectiveness of the Registration
Statement or any Rule 462(b) Registration Statement has been issued under the
1933 Act and no proceedings for that purpose have been instituted or are pending
or threatened by the Commission.
(x) The Registration Statement, including any Rule 462(b) Registration
Statement, the Rule 430A Information and the Rule 434 Information, as
applicable, the Prospectuses and each amendment or supplement to the
Registration Statement and the Prospectuses as of their respective effective or
issue dates (other than the financial statements and supporting schedules
included therein or omitted therefrom, as to which we need express no opinion)
complied as to form in all material respects with the requirements of the 1933
Act and the 1933 Act Regulations.
(xi) If Rule 434 has been relied upon, the Prospectuses were not
"materially different," as such term is used in Rule 434, from the prospectuses
included in the Registration Statement at the time it became effective.
(xii) The form of certificate used to evidence the Class A Common Stock
complies in all material respects with all applicable statutory requirements,
with any applicable requirements of the charter and by-laws of the Company and
the requirements of the New York Stock Exchange.
(xiii) To the best of our knowledge, there is not pending or threatened
any action, suit, proceeding, inquiry or investigation, to which the Company or
any subsidiary is a party, or to which the property of the Company or any
subsidiary is subject, before or brought by any court or governmental agency or
body, domestic or foreign, which might reasonably be expected to result in a
Material Adverse Effect, or which might reasonably be expected to materially and
adversely affect the properties or assets thereof or the consummation of the
transactions contemplated in the U.S. Purchase Agreement and International
Purchase Agreement or the performance by the Company of its obligations
thereunder.
Exhibit A-2
<PAGE>
(xiv) The information in the Prospectuses under "Description of Capital
Stock--Common Stock", "Business--Regulatory Matters", "Business--Litigation" and
"Certain Federal Income Tax Considerations" and in the Registration Statement
under Item 14, to the extent that it constitutes matters of law, summaries of
legal matters, the Company's charter and bylaws or legal proceedings, or legal
conclusions, has been reviewed by us and is correct in all material respects and
the opinion of such firm set forth under "Certain Federal Income Tax
Considerations" is confirmed.
(xv) To the best of our knowledge, there are no statutes or regulations
that are required to be described in the Prospectuses that are not described as
required.
(xvi) All descriptions in the Prospectuses of contracts and other
documents to which the Company or its subsidiaries are a party are accurate in
all material respects; to the best of our knowledge, there are no franchises,
contracts, indentures, mortgages, loan agreements, notes, leases or other
instruments required to be described or referred to in the Registration
Statement or to be filed as exhibits thereto other than those described or
referred to therein or filed or incorporated by reference as exhibits thereto,
and the descriptions thereof or references thereto are correct in all material
respects.
(xvii) To the best of our knowledge, neither the Company nor any
subsidiary is in violation of its charter or by-laws and no default by the
Company or any subsidiary exists in the due performance or observance of any
material obligation, agreement, covenant or condition contained in any contract,
indenture, mortgage, loan agreement, note, lease or other agreement or
instrument that is described or referred to in the Registration Statement or the
Prospectuses or filed or incorporated by reference as an exhibit to the
Registration Statement.
(xviii) No filing with, or authorization, approval, consent, license,
order, registration, qualification or decree of, any court or governmental
authority or agency, domestic or foreign (other than under the 1933 Act and the
1933 Act Regulations, which have been obtained, or as may be required under the
securities or blue sky laws of the various states, as to which we need express
no opinion) is necessary or required in connection with the due authorization,
execution and delivery of the U.S. Purchase Agreement and the International
Purchase Agreement or for the offering, issuance, sale or delivery of the
Securities.
(xix) The execution, delivery and performance of the U.S. Purchase
Agreement and the International Purchase Agreement and the consummation of the
transactions contemplated in the U.S. Purchase Agreement, the International
Purchase Agreement and in the Registration Statement (including the issuance and
sale of the Securities, and the use of the proceeds from the sale of the
Securities as described in the Prospectuses under the caption "Use Of Proceeds")
and compliance by the Company with its obligations under the U.S. Purchase
Agreement and the International Purchase Agreement do not and will not, whether
with or without the giving of notice or lapse of time or both, conflict with or
constitute a breach of, or default or Repayment Event (as defined in Section
1(a)(x) of the Purchase Agreements) under or result in the creation or
imposition of any lien, charge or encumbrance upon any property or assets of the
Company or any Subsidiary pursuant to any contract, indenture, mortgage, deed of
trust, loan or credit agreement, note, lease or any other agreement or
instrument, known to us, to which the Company or any Subsidiary is a party or by
Exhibit A-3
<PAGE>
which it or any of them may be bound, or to which any of the property or assets
of the Company or any subsidiary is subject (except for such conflicts, breaches
or defaults or liens, charges or encumbrances that would not have a Material
Adverse Effect), nor will such action result in any violation of the provisions
of the charter or by-laws of the Company or any Subsidiary, or any applicable
law, statute, rule, regulation, judgment, order, writ or decree, known to us, of
any government, government instrumentality or court, domestic or foreign, having
jurisdiction over the Company or any Subsidiary or any of their respective
properties, assets or operations.
(xx) To the best of our knowledge, there are no persons with
registration rights or other similar rights to have any securities registered
pursuant to the Registration Statement or otherwise registered by the Company
under the 1933 Act.
(xxi) The Company is not an "investment company" or an entity
"controlled" by an "investment company," as such terms are defined in the 1940
Act.
(xxii) Provident Advisors is duly registered, licensed or qualified as a
broker-dealer under the Exchange Act and in each jurisdiction where the conduct
of its business requires such registration and is in compliance in all material
respects with all laws requiring any such registration, licensing or
qualification in all jurisdictions in which such registration, licensing or
qualification is required. None of the Company or its other direct or indirect
subsidiaries (other than Provident Advisors) is required to be registered,
licensed or qualified as a broker-dealer under the Exchange Act or the laws
requiring any such registration, licensing or qualification in any jurisdiction
in which it conducts business. To the best knowledge of counsel, each of the
Company, and Provident Advisors is in compliance with all laws, regulations,
ordinances and rules (including those of any non-governmental self-regulatory
agencies) applicable to it or its operations relating to broker-dealer
activities except where any failure by the Company or any subsidiary to comply
with any such law, regulation, ordinance or rule would not have, individually,
or in the aggregate, a Material Adverse Effect.
(xxiii) Each Investment Adviser Subsidiary is duly registered as an
investment adviser under the Advisers Act. No other subsidiary of the Company is
an "investment adviser" within the meaning of the Advisers Act and the rules and
regulations of the Commission promulgated thereunder. Each of the Investment
Advisor Subsidiaries is duly registered, licensed or qualified as an investment
adviser in each jurisdiction where the conduct of its business requires such
registration and is in compliance in all material respects with all laws
requiring such registration, licensing or qualification in all jurisdictions in
which such registration, licensing or qualification is required. None of the
Company or its direct or indirect subsidiaries other than the Investment Advisor
Subsidiaries is required to be registered, licensed or qualified as an
investment adviser under the laws of any jurisdiction in which it conducts
business. To the best knowledge of counsel, each of the Company and the
Investment Adviser Subsidiaries is in compliance with all laws, regulations,
ordinances and rules (including those of any non-governmental self-regulatory
agencies) applicable to it or its operations relating to investment advisory
activities except where any failure by the Company or any subsidiary to comply
with any such law, regulation, ordinance or rule would not have, individually,
or in the aggregate, a Material Adverse Effect.
Exhibit A-4
<PAGE>
(xxiv) The Offering will not constitute an "assignment" as defined in the
1940 Act and the Advisers Act of any of the investment advisory contracts to
which the Investment Advisor Subsidiaries are parties.
Nothing has come to our attention that would lead us to believe that the
Registration Statement or any amendment thereto, including the Rule 430A
Information and Rule 434 Information (if applicable), (except for financial
statements and schedules and other financial data included therein or omitted
therefrom, as to which we need make no statement), at the time such Registration
Statement or any such amendment became effective, contained an untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading or that the
Prospectuses or any amendment or supplement thereto (except for financial
statements and schedules and other financial data included therein or omitted
therefrom, as to which we need make no statement), at the time the Prospectuses
were issued, at the time any such amended or supplemented prospectus was issued
or at the Closing Time, included or includes an untrue statement of a material
fact or omitted or omits to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
In rendering such opinion, such counsel may rely, as to matters of fact
(but not as to legal conclusions), to the extent they deem proper, on
certificates of responsible officers of the Company and public officials. Such
opinion shall not state that it is to be governed or qualified by, or that it is
otherwise subject to, any treatise, written policy or other document relating to
legal opinions, including, without limitation, the Legal Opinion Accord of the
ABA Section of Business Law (1991).
Exhibit A-5
<PAGE>
Exhibit B
__, 1999
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith Incorporated,
Goldman, Sachs & Co.
Lehman Brothers Inc.
Prudential Securities Incorporated
Salomon Smith Barney Inc.
as U.S. Representatives of the several
U.S. Underwriters to be named in the
within-mentioned U.S. Purchase Agreement
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
North Tower
World Financial Center
New York, New York 10281-1209
Re: Proposed Initial Public Offering by BlackRock, Inc.
---------------------------------------------------
Dear Ladies and Gentlemen:
The undersigned, a stockholder [and an officer and/or director] of
BlackRock, Inc., a Delaware corporation (the "Company"), understands that
Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated
("Merrill Lynch"), Goldman, Sachs & Co., Lehman Brothers Inc., Prudential
Securities Incorporated and Salomon Smith Barney Inc. propose to enter into a
U.S. Purchase Agreement (the "U.S. Purchase Agreement") with the Company
providing for the public offering of shares (the "Securities") of the Company's
Class A Common Stock (the "Securities"), par value $.01 per share (the "Class A
Common Stock"). The Class A Common Stock and the Class B Common Stock, par value
$.01 per share (the "Class B Common Stock"), of the Company are hereinafter
referred to as the "Common Stock." In recognition of the benefit that such an
offering will confer upon undersigned as a stockholder [and an officer and/or
director] of the Company, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the undersigned agrees
with each U.S. Underwriter and International Manager to be named in the U.S.
Purchase Agreement and the International Purchase Agreement (the "Purchase
Agreements") that, during a period of 180 days from the date of the Purchase
Agreements, the undersigned will not, without the prior written consent of
Merrill Lynch, directly or indirectly, (i) offer, pledge, sell, contract to
sell, sell any option or contract to purchase, purchase any option or contract
to sell, grant any option, right or warrant for the sale of, or otherwise
dispose of or transfer any shares of the Company's Class B Common Stock or any
securities convertible into or exchangeable or exercisable for Class B Common
Stock, whether now owned or hereafter acquired by the undersigned or with
respect to which the undersigned has or hereafter acquires the power of
disposition, or file any registration statement under the Securities Act of
1933, as amended, with
Exhibit B-1
<PAGE>
respect to any of the foregoing or (ii) enter into any swap or any other
agreement or any transaction that transfers, in whole or in part, directly or
indirectly, the economic consequence of ownership of the Common Stock, whether
any such swap or transaction is to be settled by delivery of Common Stock or
other securities, in cash or otherwise.
Very truly yours,
Signature:________________________________
Print Name:_______________________________
Exhibit B-2
<PAGE>
EXHIBIT 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
BLACKROCK, INC.
BlackRock, Inc., a Delaware corporation (hereinafter the
"Corporation") hereby certifies as follows:
1. The name of the corporation is BlackRock, Inc. The original
certificate of incorporation of the Corporation (the "Original Certificate of
Incorporation") was filed with the Secretary of State of the State of Delaware
on March 27, 1998.
2. This Amended and Restated Certificate of Incorporation (the
"Certificate of Incorporation") amends and restates in its entirety the
Corporation's Original Certificate of Incorporation and has been duly adopted in
accordance with Sections 242 and 245 of the General Corporation Law of the State
of Delaware (the "DGCL") and by written consent of the stockholders of the
Corporation and duly executed and acknowledged by the officers of the
Corporation in accordance with Section 103 of the DGCL.
3. Upon the filing (the "Effective Time") of this Certificate of
Incorporation pursuant to the DGCL, each share of the Corporation's common
stock, no par value per share, issued and outstanding immediately prior to the
Effective Time (the "Old Common Stock") shall be reclassified as and changed
into _____ validly issued, fully paid, and non-assessable shares of Class B
Common Stock (the "Class B Common Stock") authorized by paragraph (C) of Article
FOURTH of the Certificate of Incorporation (totaling _______ shares of Class B
Common Stock), without any action by the holder thereof (the
"Reclassification"). Each Certificate that theretofore represented a share or
shares of Old Common Stock shall thereafter represent that number of shares of
Class B Common Stock into which the share or shares of Old Common Stock
represented by such certificates shall have been reclassified.
<PAGE>
4. The Original Certificate of Incorporation of the Corporation is
hereby amended and restated to read in its entirety as follows:
FIRST: The name of the corporation is BlackRock, Inc.
SECOND: The address of the Corporation's registered office in the
State of Delaware is Corporation Trust Center, 1209 Orange Street, City of
Wilmington, County of New Castle, State of Delaware, and the name of its
registered agent at such address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful
act or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware (the "DGCL").
FOURTH: A. Authorized Shares. The Corporation shall be authorized
to issue __________ shares of stock, of which (i) __________ shares shall be
shares of Class A Common Stock, par value $0.01 per share (the "Class A Common
Stock") and __________ shall be shares of Class B Common Stock, par value $0.01
per share (the "Class B Common Stock") (the Class A Common Stock and the Class B
Common Stock being collectively referred to herein as the "Common Stock") and
(ii) __________ shares shall be shares of Preferred Stock, par value $0.01 per
share (the "Preferred Stock").
B. Preferred Stock. The Preferred Stock may be issued
from time to time in one or more classes or series. The Board of Directors is
hereby authorized to provide for the issuance of shares of Preferred Stock in
one or more classes or series and, by filing a certificate pursuant to the DGCL
(hereinafter referred to as a "Preferred Stock Designation"), to establish from
time to time the number of shares to be included in each such class or series,
and to fix the designations, voting powers (if any), privileges, preferences and
relative, participating, optional or other special rights of the shares of each
such class or series and the qualifications, limitations and restrictions
thereon. The authority of the Board of Directors with respect to each class or
series shall include, but not be limited to, determination of the following:
(1) the designation of the class or series, which may be by
distinguishing number, letter or title;
2
<PAGE>
(2) the number of shares of the class or series, which
number the Board of Directors may thereafter (except where otherwise provided in
the Preferred Stock Designation) increase or decrease (but not below the number
of shares thereof then outstanding) in the manner permitted by law;
(3) the rate of any dividends (or method of determining the
dividends) payable to the holders of the shares of such class or series, any
conditions upon which such dividends shall be paid and the date or dates or the
method for determining the date or dates upon which such dividends shall be
payable;
(4) whether dividends, if any, shall be cumulative or
noncumulative and, in the case of shares of any class or series having
cumulative dividend rights, the date or dates or method of determining the date
or dates from which dividends on the shares of such class or series shall
cumulate;
(5) if the shares of such class or series may be redeemed
by the Corporation, the price or prices (or method of determining such price or
prices) at which, the form of payment of such price or prices (which may be
cash, property or rights, including securities of the Corporation or of another
corporation or other entity) for which, the period or periods within which and
the other terms and conditions upon which the shares of such class or series may
be redeemed, in whole or in part, at the option of the Corporation or at the
option of the holder or holders thereof or upon the happening of a specified
event or events, if any, including the obligation, if any, of the Corporation to
purchase or redeem shares of such class or series pursuant to a sinking fund or
otherwise;
(6) the amount payable out of the assets of the Corporation
to the holders of shares of the class or series in the event of any voluntary or
involuntary liquidation, dissolution or winding up of the affairs of the
Corporation;
(7) provisions, if any, for the conversion or exchange of
the shares of such class or series, at any time or times, at the option of the
holder or holders thereof or at the option of the Corporation or upon the
happening of a specified event or events, into shares of any other class or
classes or any other series of the same class of capital stock of the
Corporation or into any other security of the Corporation, or into the stock or
other securities of any other corporation or other entity, and the price or
prices or rate or rates of conversion or exchange
3
<PAGE>
and any adjustments applicable thereto, and all other terms and conditions upon
which such conversion or exchange may be made;
(8) restrictions on the issuance of shares of the same
class or series or of any other class or series of capital stock of the
Corporation, if any; and
(9) the voting rights and powers, if any, of the holders of
shares of the class or series.
C. Common Stock. The following is a statement of the relative
powers, preferences and participating, optional or other special rights, and the
qualifications, limitations and restrictions of the Class A Common Stock and
Class B Common Stock of the Corporation:
(1) Except as otherwise set forth below in this Article
FOURTH, the relative powers, preferences and participating, optional or other
special rights, and the qualifications, limitations or restrictions of the Class
A Common Stock and Class B Common Stock shall be identical in all respects.
(2) Subject to the rights of the holders of Preferred
Stock, and subject to any other provisions of this Certificate of Incorporation,
holders of Class A Common Stock and Class B Common Stock shall be entitled to
receive such dividends and other distributions in cash, stock of any corporation
(other than Common Stock of the Corporation) or property of the Corporation as
may be declared thereon by the Board of Directors from time to time out of
assets or funds of the Corporation legally available therefor and shall share
equally on a per share basis in all such dividends and other distributions. In
the case of dividends or other distributions payable in Common Stock, including
distributions pursuant to stock splits or divisions of Common Stock of the
Corporation, only shares of Class A Common Stock shall be paid or distributed
with respect to Class A Common Stock and only shares of Class B Common Stock
shall be paid or distributed with respect to Class B Common Stock. The number of
shares of Class A Common Stock and Class B Common Stock so distributed on each
share shall be equal in number. Neither the shares of Class A Common Stock nor
the shares of Class B Common Stock may be reclassified, subdivided or combined
unless such reclassification, subdivision or combination occurs simultaneously
and in the same proportion for each class.
4
<PAGE>
(3) (a) At every meeting of the stockholders of the
Corporation, every holder of Class A Common Stock shall be entitled to one vote
in person or by proxy for each share of Class A Common Stock standing in his,
her or its name on the transfer books of the Corporation, and every holder of
Class B Common Stock shall be entitled to five votes in person or by proxy for
each share of Class B Common Stock standing in his, her or its name on the
transfer books of the Corporation, in connection with the election of directors
and all other matters submitted to a vote of stockholders. Except as may be
otherwise required by law or by this Certificate of Incorporation, the holders
of Class A Common Stock and Class B Common Stock shall vote together as a single
class and their votes shall be counted and totaled together, subject to any
voting rights which may be granted to holders of Preferred Stock, on all matters
submitted to a vote of stockholders of the Corporation. Notwithstanding any
other provision of this Certificate of Incorporation to the contrary, holders of
Class A Common Stock shall not be eligible to vote on any alteration or change
in the powers, preferences or special rights of the Class B Common Stock that
would not adversely affect the rights of the Class A Common Stock and holders of
Class B Common Stock shall not be eligible to vote on any alteration or change
in the powers, preferences or special rights of the Class A Common Stock that
would not adversely affect the rights of the holders of the Class B Common
Stock; provided that, for the foregoing purposes, any provision for the
voluntary, mandatory or other conversion or exchange of the Class B Common Stock
into or for Class A Common Stock on a one for one basis shall be deemed not to
adversely affect the rights of the Class A Common Stock.
(b) Except as otherwise provided by law, and subject
to any rights of the holders of Preferred Stock, the provisions of this
Certificate of Incorporation shall not be modified, revised, altered or amended,
repealed or rescinded in whole or in part, without the approval of a majority of
the votes entitled to be cast by the holders of the Class A Common Stock and the
Class B Common Stock, voting together as a single class (except as otherwise
provided in paragraph (C)(3)(a) above); provided, however, that with respect to
any proposed amendment of this Certificate of Incorporation which would alter or
change the powers, preferences or special rights of the shares of Class A Common
Stock or Class B Common Stock so as to affect them adversely, the approval of a
majority of the votes entitled to be cast by the holders of the shares affected
by the proposed amendment, voting separately as a class, shall be obtained in
addition to the approval of a majority of the votes entitled to be cast by the
holders of the Class A Common Stock and the Class B Common Stock voting together
as a single class as hereinbefore provided. To the fullest extent permitted by
law, any increase in the authorized
5
<PAGE>
number of shares of any class or classes of stock of the Corporation or
creation, authorization or issuance of any securities convertible into, or
warrants, options or similar rights to purchase, acquire or receive, shares of
any such class or classes of stock shall be deemed not to affect adversely the
powers, preferences or special rights of the shares of Class A Common Stock or
Class B Common Stock.
(c) Every reference in this Certificate of
Incorporation to a majority or other proportion of shares, or a majority or
other proportion of the votes of shares, of Voting Stock, Common Stock, Class A
Common Stock or Class B Common Stock shall refer to such majority or other
proportion of the votes to which such shares of Voting Stock, Common Stock,
Class A Common Stock or Class B Common Stock are entitled.
(d) At any meeting of stockholders, the presence in
person or by proxy of the holders of shares entitled to cast a majority of all
the votes which could be cast at such meeting by the holders of all of the
outstanding shares of stock of the Corporation entitled to vote on every matter
that is to be voted on at such meeting shall constitute a quorum.
(4) In the event of any dissolution, liquidation or winding
up of the affairs of the Corporation, whether voluntary or involuntary, after
payment in full of the amounts required to be paid to the holders of Preferred
Stock, the remaining assets and funds of the Corporation shall be distributed
pro rata to the holders of Common Stock, and the holders of Class A Common Stock
and the holders of Class B Common Stock will be entitled to receive the same
amount per share in respect thereof. For purposes of this paragraph (C)(4), the
voluntary sale, conveyance, lease, exchange or transfer (for cash, shares of
stock, securities or other consideration) of all or substantially all of the
assets of the Corporation or a consolidation or merger of the Corporation with
one or more other corporations (whether or not the Corporation is the
corporation surviving such consolidation or merger) shall not be deemed to be a
liquidation, dissolution or winding up, voluntary or involuntary.
(5) Except as shall otherwise be approved by a majority of
the votes entitled to be cast by the holders of each class of Common Stock
voting separately as a class, in case of any reorganization or any consolidation
of the Corporation with one or more other corporations or a merger of the
Corporation with another corporation in which shares of Class A Common Stock or
Class B Common Stock are converted into (or entitled to receive with respect
thereto) shares
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of stock and/or other securities or property (including cash), each holder of a
share of Class A Common Stock shall be entitled to receive with respect to such
share the same kind and amount of shares of stock and other securities and
property (including cash) receivable upon such reorganization, consolidation or
merger by a holder of a share of Class B Common Stock and each holder of a share
of Class B Common Stock shall be entitled to receive with respect to such share
the same kind and amount of shares of stock and other securities and property
(including cash) receivable upon such reorganization, consolidation or merger by
a holder of a share of Class A Common Stock. In the event that the holders of
Class A Common Stock (or of Class B Common Stock) are granted rights to elect to
receive one of two or more alternative forms of consideration, the foregoing
provision shall be deemed satisfied if holders of Class A Common Stock and
holders of Class B Common Stock are granted substantially identical election
rights.
(6) (a) Except as provided in and subject to the
provisions of the Stockholders Agreement, dated , 1999, among the
Corporation, PNC Asset Management, Inc., certain employees of the Corporation
and its Affiliates and Permitted Transferees (as defined therein) thereof, as
such agreement may be amended from time to time (the "Stockholders Agreement"),
each share of Class B Common Stock shall be convertible, at the option of its
record holder, into one validly issued, fully paid and non-assessable share of
Class A Common Stock at any time. At the time of a conversion, the record holder
of shares of Class B Common Stock shall deliver to the principal office of the
Corporation or any transfer agent for shares of the Class A Common Stock (i) the
certificate or certificates representing the shares of Class B Common Stock to
be converted, duly endorsed in blank or accompanied by proper instruments of
transfer and (ii) written notice to the Corporation specifying the number of
shares of Class B Common Stock to be converted into shares of Class A Common
Stock and stating the name or names (with addresses) and denominations in which
the certificate or certificates representing the shares of Class A Common Stock
issuable upon such conversion are to be issued and including instructions for
the delivery thereof. Conversion shall be deemed to have been effected at the
time when delivery is made to the Corporation of both such written notice and
the certificate or certificates representing the shares of Class B Common Stock
to be converted or such later time as may be specified in such written notice,
and as of such time each person named in such written notice as the person to
whom a certificate representing shares of Class A Common Stock is to be issued
shall be deemed to be the holder of record of the number of shares of Class A
Common Stock to be evidenced by that certificate. Delivery of such certificates
and such written notice shall obligate the Corporation to issue such shares of
Class A Common Stock,
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and thereupon the Corporation or its transfer agent shall promptly issue and
deliver at such stated address to such record holder of shares of Class A Common
Stock a certificate or certificates representing the number of shares of Class A
Common Stock to which such record holder is entitled by reason of such
conversion, and shall cause such shares of Class A Common Stock to be registered
in the name of such record holder.
(b) Upon any conversion of shares of Class B Common
Stock into shares of Class A Common Stock pursuant to the provisions of this
paragraph, any dividend for which the record date or payment date shall be
subsequent to such conversion and/or which may have been declared on the shares
of Class B Common Stock so converted, shall be deemed to have been declared, and
shall be payable, with respect to the shares of Class A Common Stock into or for
which such shares of Class B Common Stock shall have been so converted, and any
such dividend which shall have been declared on such shares payable in shares of
Class B Common Stock shall be deemed to have been declared, and shall be
payable, in shares of Class A Common Stock.
(c) The Corporation shall at all times reserve and
keep available, out of its authorized but unissued Common Stock, such number of
shares of Class A Common Stock as would become issuable upon the conversion of
all shares of Class B Common Stock then outstanding. The Corporation covenants
that all of the shares of Class A Common Stock so issuable shall, when so
issued, be duly and validly issued, fully paid and non-assessable and free from
liens and charges. The Corporation shall take all action as may be necessary to
ensure that all such shares of Class A Common Stock may be so issued without
violation of any applicable law or regulation, or of any requirements of any
national securities exchange upon which the shares of Class A Common Stock are
or may be listed, or of any inter-dealer quotation system of a registered
national securities association upon which the shares of Class A Common Stock
are or may be listed.
(d) The Corporation will not be required to pay any
documentary, stamp or similar issue or transfer taxes payable in respect of the
issue or delivery of shares of Class A Common Stock on the conversion of shares
of Class B Common Stock, and no such issue or delivery shall be made unless and
until the person effecting such transfer has paid to the Corporation the amount
of any such tax or has established, to the satisfaction of the Corporation, that
such tax has been paid.
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(7) For so long as the Stockholders Agreement shall remain
in effect, the Corporation shall recognize the restrictions on transfer
contained therein with respect to the parties thereto; provided that in
connection with any transfer or conversion of any stock of the Corporation
pursuant to or as permitted by the Stockholders Agreement, or in connection with
the making of any determination referred to therein:
(a) the Corporation shall be under no obligation to
make any investigation of facts unless an officer, employee or agent of the
Corporation responsible for making such transfer or determination or issuing
Class A Common Stock pursuant to such conversion has substantial reason to
believe, or unless the Board of Directors (or a committee of the Board of
Directors designated for the purpose) determines that there is substantial
reason to believe, that any affidavit or other document is incomplete or
incorrect in a material respect or that an investigation would disclose facts
upon which any determination should be made, in either of which events the
Corporation shall make or cause to be made such investigation as it may deem
necessary or desirable in the circumstances and have a reasonable time to
complete such investigation; and
(b) neither the Corporation nor any director, officer,
employee or agent of the Corporation shall be liable in any manner for any
action taken or omitted in good faith.
(8) No stockholder shall be entitled to exercise any right
of cumulative voting.
FIFTH: A. Stockholder Meetings.
(1) Meetings of stockholders may be held within
or without the State of Delaware, as the Bylaws may provide. An annual meeting
of the stockholders of the Corporation for the election of directors and for the
transaction of such other business as may come before the meeting shall be held
at such time and place as shall be determined in accordance with the Bylaws.
Elections of directors need not be by written ballot unless otherwise provided
in the Bylaws.
(2) Except as otherwise required by law and
subject to the rights of the holders of any class or series of stock having a
preference over the Common Stock as to dividends or distributions upon
liquidation, special
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meetings of stockholders of the Corporation of any class or series for any
purpose or purposes may be called only by:
(a) the Chairman of the Board of Directors;
(b) the President of the Corporation;
(c) a majority of the Board of Directors; or
(d) a Controlling Stockholder, provided that
as of and following the Trigger Date, the power of any stockholder to call
a special meeting is specifically denied.
B. Written Consent.
(1) Except as provided in paragraph (2) below and
except as may be otherwise provided in a resolution or resolutions providing for
any class or series of stock other than Common Stock with respect to action by
written consent by holders of such class or series of stock, any action required
or permitted to be taken at any annual or special meeting of the stockholders
may be effected by written consent of such stockholders pursuant to Section 228
of the DGCL.
(2) As of and following the Trigger Date, any
action required or permitted to be taken by the stockholders of the Corporation
must be effected at a duly called annual or special meeting of such stockholders
and may not be effected by any consent in writing by any such stockholders.
SIXTH: A. Powers of the Board of Directors. The
business and affairs of the Corporation shall be managed by or under the
direction of the Board of Directors, which shall be constituted as provided in
this Article and as provided by law.
B. Number of Directors. The Board of Directors
shall initially consist of six directors, which number of directors may be
increased or decreased from time to time pursuant to a resolution adopted by:
(1) prior to the Trigger Date, the affirmative vote of at least eighty percent
(80%) of the entire Board of Directors; or (2) as of and following the Trigger
Date, the affirmative vote of a majority of the entire Board of Directors.
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C. Classes, Election and Term. The Board of
Directors shall be divided into three classes, designated Class I, Class II and
Class III. Each class shall consist, as nearly as may be possible, of one-third
of the total number of directors constituting the entire Board of Directors.
Class I directors shall be elected initially for a one-year term, Class II
directors initially for a two-year term and Class III directors initially for a
three-year term. At each succeeding annual meeting of stockholders beginning in
2000, successors to the class of directors whose term expires at that annual
meeting shall be elected for a three-year term. If the number of directors is
changed, any increase or decrease shall be apportioned among the classes so as
to maintain the number of directors in each class as nearly equal as possible,
but in no case shall a decrease in the number of directors shorten the term of
any incumbent director. A director shall hold office until the annual meeting of
the year in which his term expires and until his successor shall be elected and
shall qualify, subject, however, to prior death, resignation or removal from
office.
D. Removal of Directors.
(1) Prior to the Trigger Date, except as may be
provided in a resolution or resolutions providing for any class or series of
Preferred Stock with respect to any directors elected by the holders of such
class or series, any director, or the entire Board of Directors, may be removed
from office at any time, with or without cause, by the affirmative vote of the
holders of at least a majority of the votes entitled to be cast by the Voting
Stock.
(2) As of and following the Trigger Date, except
as may be provided in a resolution or resolutions providing for any class or
series of Preferred Stock with respect to any directors elected by the holders
of such class or series, any director, or the entire Board of Directors, may be
removed from office at any time, only for cause (as defined by the Corporation's
Bylaws), by the affirmative vote of the holders of at least eighty percent (80%)
of the votes entitled to be cast by the Voting Stock.
E. Meetings of the Board of Directors. Meetings
of the Board of Directors may be held within or without the State of Delaware,
as the Bylaws may provide.
SEVENTH: A director of the Corporation shall, to the
maximum extent permitted by the laws of the State of Delaware, as now or
hereafter in effect,
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have no personal liability to the Corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director.
The Corporation shall indemnify its directors and officers to the
fullest extent authorized or permitted by law, as now or hereafter in effect,
and such right to indemnification shall continue as to a person who has ceased
to be a director or officer of the Corporation and shall inure to the benefit of
his or her heirs, executors and personal and legal representatives; provided,
however, that, except for proceedings to enforce rights to indemnification, the
Corporation shall not be obligated to indemnify any director or officer (or his
or her heirs, executors or personal or legal representatives) in connection with
a proceeding (or part thereof) initiated by such person unless such proceeding
(or part thereof) was authorized or consented to by the Board of Directors. The
right to indemnification conferred by this Article SEVENTH shall include the
right to be paid by the Corporation the expenses incurred in defending or
otherwise participating in any proceeding in advance of its final disposition.
The Corporation may, to the extent authorized from time to
time by the Board of Directors, provide rights to indemnification and to the
advancement of expenses to employees and agents of the Corporation similar to
those conferred in this Article SEVENTH to directors and officers of the
Corporation.
The rights to indemnification and to the advance of expenses
conferred in this Article SEVENTH shall not be exclusive of any other right
which any person may have or hereafter acquire under this Certificate of
Incorporation, the Bylaws of the Corporation, any statute, agreement, vote of
stockholders or disinterested directors or otherwise.
Any repeal or modification of this Article SEVENTH by the
stockholders of the Corporation shall not adversely affect any rights to
indemnification and to the advancement of expenses or other protection of a
director, officer, employee or agent of the Corporation existing at the time of
such repeal or modification with respect to any acts or omissions occurring
prior to such repeal or modification.
EIGHTH: The Corporation shall not be subject to Section 203 of
the DGCL.
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NINTH: A. Business Combinations. As of and following the
Trigger Date, the Corporation shall not engage in any Business Combination with
any Interested Stockholder for a period of three years following the time that
such stockholder became an Interested Stockholder, unless:
(1) prior to such time the Board of Directors of the
Corporation approved either the Business Combination or the transaction which
resulted in the stockholder becoming an Interested Stockholder, or
(2) upon consummation of the transaction which
resulted in the stockholder becoming an Interested Stockholder, the Interested
Stockholder owned at least 85% of the Voting Stock outstanding at the time the
transaction commenced, excluding for purposes of determining the number of
shares outstanding those shares owned (i) by persons who are directors and also
officers and (ii) employee stock plans in which employee participants do not
have the right to determine confidentially whether shares held subject to the
plan will be tendered in a tender or exchange offer, or
(3) at or subsequent to such time the Business
Combination is approved by the Board of Directors and authorized at an annual or
special meeting of stockholders, and not by written consent, by the affirmative
vote of at least 66-2/3% of the outstanding Voting Stock which is not owned by
the Interested Stockholder.
B. Exceptions. The restrictions contained in this
Article NINTH shall not apply if:
(1) The Corporation does not have a class of Voting
Stock that is (i) listed on a national exchange, (ii) authorized for quotation
on the NASDAQ Stock Market or (iii) held of record by more than 2,000
stockholders, unless any of the foregoing results from action taken, directly or
indirectly, by an Interested Stockholder or from a transaction in which a person
becomes an Interested Stockholder;
(2) A stockholder becomes an Interested Stockholder
inadvertently and (i) as soon as practicable divests itself of ownership of
sufficient shares so that the stockholder ceases to be an Interested Stockholder
and (ii) would not, at any time within the 3-year period immediately prior to a
Business
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Combination between the Corporation and such stockholder, have been an
Interested Stockholder but for the inadvertent acquisition of ownership; or
(3) The Business Combination is proposed prior to the
consummation or abandonment of and subsequent to the earlier of the public
announcement or the notice required hereunder of a proposed transaction which
(i) constitutes one of the transactions described in the second sentence of this
paragraph; (ii) is with or by a person who either was not an Interested
Stockholder during the previous three years or who became an Interested
Stockholder with the approval of the Corporation's Board of Directors or during
the period described in paragraph (2) of this subsection B; and (iii) is
approved or not opposed by a majority of the members of the Board of Directors
then in office (but not less than 1) who were directors prior to any person
becoming an Interested Stockholder during the previous three years or were
recommended for election or elected to succeed such directors by a majority of
such directors. The proposed transactions referred to in the preceding sentence
are limited to (x) a merger or consolidation of the corporation (except for a
merger in respect of which, pursuant to Section 251(f) of the DGCL, no vote of
the stockholders of the Corporation is required); (y) a sale, lease, exchange,
mortgage, pledge, transfer or other disposition (in one transaction or a series
of transactions), whether as part of a dissolution or otherwise, of assets of
the Corporation or of any direct or indirect majority-owned subsidiary of the
Corporation (other than to any direct or indirect wholly-owned subsidiary of the
Corporation) having an aggregate market value equal to fifty percent (50%) or
more of either the aggregate market value of all of the assets of the
Corporation determined on a consolidated basis or the aggregate market value of
all the outstanding stock of the Corporation; or (z) a proposed tender or
exchange offer for fifty percent (50%) or more of the Voting Stock. The
Corporation shall give not less than twenty (20) days notice to all Interested
Stockholders prior to the consummation of any of the transactions described in
clauses (x) or (y) of the second sentence of this paragraph.
C. Definitions. As used in this Article NINTH only,
the term:
(1) "affiliate" means a person that directly or
indirectly through one or more intermediaries, controls, or is controlled by, or
is under common control with, another person.
(2) "associate," when used to indicate a relationship
with any person, means (i) any corporation, partnership, unincorporated
associa-
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tion or other entity of which such person is a director, officer or partner or
is, directly or indirectly, the owner of twenty percent (20%) or more of any
class of voting stock, (ii) any trust or other estate in which such person has
at least a twenty percent (20%) beneficial interest or as to which such person
serves as trustee or in a similar fiduciary capacity, and (iii) any relative or
spouse of such person, or any relative of such spouse, who has the same
residence as such person.
(3) "Business Combination," when used in reference to
the Corporation and any Interested Stockholder of the Corporation, means:
(i) any merger or consolidation of the
Corporation or any direct or indirect majority-owned subsidiary of the
Corporation with (A) the Interested Stockholder or (B) with any other
corporation, partnership, unincorporated association or other entity if the
merger or consolidation is caused by the Interested Stockholder and as a
result of such merger or consolidation, paragraph (A) of this Article is
not applicable to the surviving entity;
(ii) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition (in one transaction or a series of
transactions), except proportionately as a stockholder of the Corporation,
to or with the Interested Stockholder, whether as part of a dissolution or
otherwise, of assets of the Corporation or of any direct or indirect
majority-owned subsidiary of the Corporation which assets have an aggregate
market value equal to ten percent (10%) or more of either the aggregate
market value of all the assets of the Corporation determined on a
consolidated basis or the aggregate market value of all the outstanding
stock of the Corporation;
(iii) any transaction which results in the
issuance or transfer by the Corporation or by any direct or indirect
majority-owned subsidiary of the Corporation of any stock of the
Corporation or of such subsidiary to the Interested Stockholder, except (a)
pursuant to the exercise, exchange or conversion of securities exercisable
for, exchangeable for or convertible into stock of the Corporation or any
such subsidiary which securities were outstanding prior to the time that
the Interested Stockholder became such, (b) pursuant to a merger under
Section 251(g) of the DGCL; (c) pursuant to a dividend or distribution paid
or made, or the exercise, exchange or conversion of securities exercisable
for, exchangeable for or convertible
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into stock of the Corporation or any such subsidiary which security is
distributed, pro rata to all holders of a class or series of stock of the
Corporation subsequent to the time the Interested Stockholder became such,
(d) pursuant to an exchange offer by the Corporation to purchase stock made
on the terms to all holders of said stock or (e) any issuance or transfer
of stock by the Corporation, provided however, that in no case under (c)-
(e) above shall there be an increase in the Interested Stockholder's
proportionate share of the stock of any class or series of the Corporation
or of the Voting Stock;
(iv) any transaction involving the Corporation or
any direct or indirect majority-owned subsidiary of the Corporation which
has the effect, directly or indirectly, of increasing the proportionate
share of the stock of any class or series, or securities convertible into
the stock of any class or series, of the Corporation or of any such
subsidiary which is owned by the Interested Stockholder, except as a result
of immaterial changes due to fractional share adjustments or as a result of
any purchase or redemption of any shares of stock not caused, directly or
indirectly, by the Interested Stockholder; or
(v) any receipt by the Interested Stockholder of
the benefit, directly or indirectly (except proportionately as a
stockholder of the Corporation) of any loans, advances, guarantees,
pledges, or other financial benefits (other than those expressly permitted
in subparagraphs (i)-(iv) above) provided by or through the Corporation or
any direct or indirect majority-owned subsidiary.
(4) "control," including the terms "controlling,"
"controlled by" and "under common control with," means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of a person, whether through the ownership of voting stock, by
contract or otherwise. A person who is the owner of twenty percent (20%) or
more of the outstanding voting stock of any corporation, partnership,
unincorporated association or other entity shall be presumed to have control of
such entity, in the absence of proof by a preponderance of the evidence to the
contrary. Notwithstanding the foregoing, a presumption of control shall not
apply where such person holds voting stock, in good faith and not for the
purpose of circumventing this Article, as an agent, bank, broker, nominee,
custodian or trustee for one or more owners who do not individually or as a
group have control of such entity.
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(5) "Interested Stockholder" means any person (other
than the Corporation or PNC Bank Corp. or any successor thereof (PNC) and any
direct or indirect majority-owned subsidiary of the Corporation or PNC) that (i)
is the owner of fifteen percent (15%) or more of the Voting Stock or (ii) is an
affiliate or associate of the Corporation and was the owner of fifteen percent
(15%) or more of the outstanding Voting Stock at any time within the 3-year
period immediately prior to the date on which it is sought to be determined
whether such person is an Interested Stockholder; and the affiliates and
associates of such person; provided, however, that the term "Interested
Stockholder" shall not include any person whose ownership of shares in excess of
the fifteen percent (15%) limitation set forth herein is the result of action
taken solely by the Corporation provided that such person shall be an Interested
Stockholder if thereafter such person acquires additional shares of Voting
Stock, except as a result of further action of the Corporation not caused,
directly or indirectly, by such person. For the purpose of determining whether a
person is an Interested Stockholder, the Voting Stock deemed to be outstanding
shall include stock deemed to be owned by the person through application of
subparagraph (6) of this paragraph (B) but shall not include any other unissued
stock of the Corporation which may be issuable pursuant to any agreement,
arrangement or understanding, or upon exercise of conversion rights, warrants or
options, or otherwise.
(6) "owner" including the terms "own" and "owned" when
used with respect to any stock means a person that individually or with or
through any of its affiliates or associates:
(i) beneficially owns such stock, directly or
indirectly; or
(ii) has (a) the right to acquire such stock
(whether such right is exercisable immediately or only after the passage of
time) pursuant to any agreement, arrangement or understanding, or upon the
exercise of conversion rights, exchange rights, warrants or options, or
otherwise; provided, however, that a person shall not be deemed the owner
of stock tendered pursuant to a tender or exchange offer made by such
person or any of such person's affiliates or associates until such tendered
stock is accepted for purchase or exchange; or (b) the right to vote such
stock pursuant to any agreement, arrangement or understanding; provided,
however, that a person shall not be deemed the owner of any stock because
of such person's right to vote such stock if the agreement, arrangement or
understanding to vote such stock arises solely from a revocable proxy or
consent given in
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response to a proxy or consent solicitation made to ten (10) or more
persons; or
(iii) has any agreement, arrangement or understanding for the
purpose of acquiring, holding, voting (except voting pursuant to a
revocable proxy or consent as described in item (b) of clause (ii) of this
subparagraph), or disposing of such stock with any other person that
beneficially owns, or whose affiliates or associates beneficially own,
directly or indirectly, such stock.
TENTH: A. Certain Acknowledgments. The provisions of this Article
TENTH shall regulate and define the conduct of certain of the business and
affairs of the Corporation in relation to any Controlling Stockholder and
Affiliated Companies (as defined below in this Article TENTH) thereof, in
recognition and anticipation that:
(1) the Original Controlling Stockholder or another Controlling
Stockholder will remain a significant stockholder of the Corporation;
(2) the directors, officers and/or employees of a Controlling
Stockholder or of Affiliated Companies thereof may serve as directors
and/or officers of the Corporation;
(3) the Controlling Stockholder and the Affiliated Companies
thereof engage, are expected to continue to engage and may in the future
engage in the same, similar or related lines of business as those in which
the Corporation, directly or indirectly, may engage and/or other business
activities that overlap with or compete with those in which the
Corporation, directly or indirectly, may engage;
(4) that the Corporation and Affiliated Companies thereof will or
may engage in material business transactions with the Controlling
Stockholder and Affiliated Companies thereof; and
(5) as a consequence of the foregoing, it is in the best
interests of the Corporation that the respective rights and duties of the
Corporation, the Controlling Stockholder and the Affiliated Companies of
each, and the duties of any directors or officers of the Corporation who
are also directors, officers
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or employees of the Controlling Stockholder or Affiliated Companies thereof, be
determined and delineated in respect of any agreements, arrangements or
transactions between, or opportunities that may be suitable for both, the
Corporation and Affiliated Companies thereof, on the one hand, and the
Controlling Stockholder and Affiliated Companies thereof, on the other hand.
Any person or entity purchasing or otherwise acquiring any interest in
shares of capital stock of the Corporation shall be deemed to have notice of and
consented to the provisions of this Article TENTH.
The provisions of this Article TENTH are in addition to, and not in
limitation of, the provisions of the DGCL and the other provisions of this
Certificate of Incorporation. Any agreement, arrangement, transaction or
business relationship which does not comply with the procedures set forth in
this Article TENTH shall not by reason thereof be deemed void or voidable or
result in any breach of any fiduciary duty or duty of loyalty or failure to act
in good faith or in the best interests of the Corporation or derivation of any
improper personal benefit, but shall be governed by the provisions of this
Certificate of Incorporation, the Bylaws, the DGCL and other applicable law.
B. Certain Agreements, arrangements and Transactions Permitted;
Certain Fiduciary Duties of Certain Stockholders, Directors and Officers. The
Corporation may from time to time enter into and perform, and cause or permit
any Affiliated Company of the Corporation to enter into and perform, one or more
agreements (or modifications or supplements to pre-existing agreements),
arrangements or transactions with the Controlling Stockholder or Affiliated
Companies thereof pursuant to which the Corporation or an Affiliated Company
thereof, on the one hand, and the Controlling Stockholder or an Affiliated
Company thereof, on the other hand, agree to or do engage in transactions of any
kind or nature with each other or with Affiliated Companies thereof and/or agree
to or do compete, or refrain from competing or limit or restrict their
competition, with each other, including allocating and to causing their
respective directors, officers and employees (including any who are directors,
officers or employees of both) to allocate opportunities between or to refer
opportunities to each other. No such agreement, arrangement or transaction shall
be considered void or voidable solely (i) due to the nature of the parties
thereto or due to the existence of circumstances as described in paragraph (A)
of this Article TENTH or (ii) because any one or more of the officers or
directors of the Corporation who are also directors or officers of the
Controlling Stockholder or any Affiliated Companies thereof are present at or
participate in the meeting of
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the Board of Directors or committee thereof which authorizes the agreement,
arrangement or transaction, or solely because his or their votes are counted for
such purpose. No such agreement, arrangement or transaction or the performance
thereof by the Corporation or the Controlling Stockholder on any Affiliated
Company thereof shall be considered (i) contrary to any fiduciary duty or duty
of loyalty that the Controlling Stockholder or any Affiliated Company thereof
may owe to the Corporation or any Affiliated Company thereof or to any
stockholder or other owner of an equity interest in the Corporation by reason of
the Controlling Stockholder or any Affiliated Company thereof being a
Controlling Stockholder or any Affiliated Company thereof being a Controlling
Stockholder of the Corporation or participating in control of the Corporation or
any Affiliated Company thereof or (ii) contrary to any fiduciary duty or duty of
loyalty of any director or officer of the Corporation who is also a director,
officer or employee of the Controlling Stockholder or any Affiliated Company
thereof to the Corporation or such Affiliated Company or any stockholder or
other owner of an equity interest thereof. In addition, with respect to any such
agreement, arrangement or transaction, the directors and officers of the
Corporation who are also directors and officers of the Controlling Stockholder
or any Affiliated Company thereof, the Controlling Stockholder or any Affiliated
Company thereof (i) shall have fully satisfied their fiduciary duties to the
Corporation and the stockholders, (ii) shall be deemed to have acted in good
faith and in a manner such persons reasonably believe to be in and not opposed
to the best interests of the Corporation and (iii) shall be deemed not to have
breached their duties of loyalty to the Corporation and its stockholders and not
to have derived an improper personal benefit therefrom, if any of the following
conditions shall have been satisfied:
(1) such agreement, arrangement or transaction shall have been entered
into before any shares of Common Stock of the Corporation were offered for sale
to the public and continued in effect in respect of any such transaction or
opportunity after such time; or
(2) such agreement, arrangement or transaction shall have been
approved (a) by the Board of Directors by the affirmative vote of a majority of
the directors (even though less than a quorum) who are not Interested Persons
(as defined below in this Article TENTH) in respect of such agreement,
arrangement or transaction or (b) by a committee of the Board of Directors
constituted solely of directors who are not Interested Persons in respect of
such agreement, arrangement or transaction by the affirmative vote of a majority
of the members of such committee or (c) by one or more officers or employees of
the Corporation (including officers or employees of the Corporation acting as
directors, officers, trustees, partners or members of, or in any similar
capacity on behalf of, any Affiliated Company of the Corporation) who in each
case is not an Interested Person in respect of such agreement, arrangement or
transaction and to whom the authority to approve such agreement, arrangement or
transaction has been delegated either by the Board of Directors by the same
affirmative vote required by paragraph (B)(2)(a) of this Article TENTH for
approval of such agreement, arrangement or transaction by the Board of Directors
or by a committee of the Board of Directors constituted as provided by and
acting by the same affirmative vote as required by para-
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graph (B)(2)(b) of this Article TENTH for approval of such agreement by such
committee or, in the case of an employee, to whom such authority has been
delegated by an officer to whom authority to approve such agreement, arrangement
or transaction has been so delegated; provided, however, that, before approval
of such agreement, arrangement or transaction, the material facts of the
relationship between the Corporation or such Affiliated Company thereof, on the
one hand, and the Controlling Stockholder or such Affiliated Company thereof, on
the other hand, and the material terms and facts as to such agreement were
disclosed to or were known by the members of the Board of Directors or of such
committee or the officer or officers or employee or employees who acted on
approval of such agreement, arrangement or transaction as the case may be; or
(3) such agreement, arrangement or transaction was fair to
the Corporation as of the time it was entered into by the Corporation; or
(4) such agreement, arrangement or transaction was approved
by the affirmative vote of the holders of a majority of the shares of capital
stock of the Corporation entitled to vote thereon and who do vote thereon,
exclusive of the Controlling Stockholder and any Affiliated Company thereof and
any Interested Person in respect of such agreement, arrangement or transaction;
or
(5) in the case of any such arrangement agreement, or
transaction that did not satisfy the requirements of clause (1), (2), (3) or (4)
of this paragraph (B), such agreement, arrangement or transaction shall have
been approved or ratified by (a) the Board of Directors of the Corporation by
the affirmative vote of a majority of the directors (even though less than a
quorum) who are not Interested Persons in respect of such agreement, arrangement
or transaction or (b) by a committee of the Board of Directors constituted
solely of directors who are not Interested Persons in respect of such agreement,
arrangement or transaction by the affirmative vote of a majority of the members
of such committee or (c) by one or more officers or employees of the Corporation
(including officers or employees of the Corporation acting as directors,
officers, trustees, partners or members of, or in any similar capacity on behalf
of, any Affiliated Company of the Corporation) who in each case is not an
Interested Person in respect of such agreement, arrangement or transaction and
to whom the authority to approve such agreement, arrangement or transaction has
been delegated either by the Board of Directors by the same affirmative vote
required by paragraph (B)(5)(a) of this Article TENTH for approval of such
agreement, arrangement or transaction by the Board of Directors or a committee
of the Board of Directors constituted as provided by and acting by the same
affirmative vote as required by paragraph (B)(5)(b) of this Article TENTH for
approval of such agreement, arrangement or transaction by such committee or, in
the case of an employee, to whom such authority has been delegated by an officer
to whom
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authority to approve such agreement, arrangement or transaction has been so
delegated; provided, however, that, before such approval or ratification, the
material facts of the relationship between the Corporation or such Affiliated
Company thereof, on the one hand, and the Controlling Stockholder or such
agreement, arrangement or Affiliated Company thereof, on the other hand, and the
material facts as to such agreement, arrangement or transaction were disclosed
to or were known by the members of the Board of Directors or of such committee
or the officer or officers or employee or employees who acted on approval or
ratification of such agreement, arrangement or transaction, as the case may be;
or
(6) in case of any such agreement, arrangement or
transaction that did not satisfy the requirements of clause (1), (2), (3) or (4)
of this paragraph (B), such agreement, arrangement or transaction was approved
or ratified by the affirmative vote of the holders of a majority of the shares
of capital stock of the Corporation entitled to vote thereon and who do vote
thereon, exclusive of the Controlling Stockholder and any Affiliated Company
thereof and any Interested Person in respect of such arrangement or transaction.
Neither the Controlling Stockholder nor any Affiliated Company thereof, as
a stockholder of the Corporation or participant in control of the Corporation,
shall have or be under any fiduciary duty or duty of loyalty to refrain from
entering into any agreement or participating in any arrangement or transaction
that meets the requirements of any of clauses (1), (2), (3), (4), (5) or (6) of
this paragraph (B) and no director, officer or employee of the Corporation who
is also a director, officer or employee of the Controlling Stockholder or any
Affiliated Company thereof shall have or be under any fiduciary duty or duty of
loyalty to the Corporation to refrain from acting on behalf of the Corporation
or any Affiliated Company thereof in respect of any such agreement, arrangement
or transaction or performing any such agreement, arrangement or transaction in
accordance with its terms. The failure of any agreement, arrangement or
transaction between the Corporation or an Affiliated Company thereof, on the one
hand, and the Controlling Stockholder or an Affiliated Company thereof, on the
other hand, to satisfy the requirements of this Article TENTH shall not, by
itself, cause such agreement, arrangement or transaction to constitute any
breach of any fiduciary duty or duty of loyalty to the Corporation or to any
Affiliated Company thereof, or to any stockholder or other owner of an equity
interest therein, by the Controlling Stockholder or such Affiliated Company
thereof or by any director or officer of the Corporation, the Controlling
Stockholder or any of their respective Affiliated Companies.
Directors of the Corporation who are also
directors, officers or employees of the Controlling Stockholder or an Affiliated
Company may be counted in determining the presence of a quorum at a meeting of
the Board of
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Directors or of a committee which authorizes the agreement, arrangement or
transaction. Voting Stock owned by the Controlling Stockholder and any
Affiliated Companies may be counted in determining the presence of a quorum at a
meeting of stockholders which authorizes the agreement, arrangement or
transaction.
The Corporation may from time to time enter into and perform, and cause
or permit any Affiliated Company of the Corporation to enter into and perform
one or more agreements (or modifications or supplements of pre-existing
agreements), arrangements or transactions with one or more officers or directors
of the Corporation. With respect to any such agreement, arrangement or
transaction, any director or officer of the Corporation party thereto (i) shall
have fully satisfied his or her fiduciary duties to the Corporation and the
stockholders, (ii) shall be deemed to have acted in good faith and in a manner
such persons reasonably believe to be in and not opposed to the best interests
of the Corporation and (iii) shall be deemed not to have breached his or her
duties of loyalty to the Corporation and its stockholders and not to have
derived an improper personal benefit therefrom, if any of the conditions
specified in clauses (1), (2), (3), (4), (5) or (6) of this paragraph B,
have been satisfied with respect to such agreement, arrangement or transaction.
For purposes of this Article TENTH, any agreement,
arrangement or transaction with any corporation, partnership, joint venture,
association or other entity in which the Corporation owns (directly or
indirectly) fifty percent or more of the outstanding voting stock, voting power,
partnership interests or similar ownership interests, or with any officer or
director thereof, shall be deemed to be an agreement, arrangement or transaction
with the Corporation.
C. Corporate Opportunities.
(1) The Controlling Stockholder and its Affiliated
Companies shall have no fiduciary duty, duty of loyalty or other duty not to (i)
engage in the same or similar activities or lines of business as the
Corporation, (ii) do business with any client or customer of the Corporation or
(iii) employ or otherwise engage any officer or employee of the Corporation, and
none of the Controlling Stockholder nor its Affiliated Companies nor any officer
or director thereof shall be liable to the Corporation or its stockholders for
breach of any fiduciary duty or duty of loyalty by reason of any such activities
of the Controlling Stockholder or any Affiliated Company thereof or of such
person's participation therein. In the event that the Controlling Stockholder or
any Affiliated Company thereof acquires knowledge of a potential transaction or
matter which may be a corporate opportunity for both the Controlling Stockholder
or any Affiliated Company thereof and the Corporation, neither the Controlling
Stockholder nor its Affiliated Companies nor any officer or director thereof
(even if such officer or director is also an officer or director of the
Corporation) shall have any duty to communicate or present such corporate
opportunity to the Corporation and shall not be liable to the Corporation or its
stockholders for breach of any fiduciary duty or duty of loyalty by reason of
the fact that the Controlling Stockholder or any Affiliated Company thereof
pursues or acquires such corporate opportunity for itself or the Controlling
Shareholder or any of its Affiliated Companies or any officer or director
thereof (even if such officer or director is also an officer or director of the
Corporation) directs such corporate opportunity to another person or does not
present such corporate opportunity to the Corporation.
(2) For the purposes of this Article TENTH, "corporate
opportunities" shall include, but not be limited to, business opportunities
which the Corporation is financially able to undertake, which are, from their
nature, in the line of the Corporation's business, are of practical advantage to
it and are ones in which
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the Corporation has an interest or a reasonable expectancy, and in which, by
embracing the opportunities, the self-interest of the Controlling Stockholder or
any Affiliated Company or its officers or directors, will be brought into
conflict with that of the Corporation.
(3) If any agreement, arrangement or transaction
between the Corporation and the Controlling Shareholder and any Affiliated
Company involves a corporate opportunity and is approved in accordance with the
procedures set forth in paragraph (B) of this Article TENTH, the officers and
directors of the Corporation, the Controlling Shareholder and any Affiliated
Company and their officers and directors shall (even if such officers and
directors are also officers and directors of the Corporation) also for the
purposes of this Article TENTH and the other provisions of this Certificate of
Incorporation and the provisions of the By-laws (a) have fully satisfied and
fulfilled their fiduciary duties to the Corporation and its stockholders, (b) be
deemed to have acted in good faith and in a manner such persons reasonably
believe to be in and not opposed to the best interests of the Corporation and
(c) be deemed not to have breached their duties of loyalty to the Corporation
and its stockholders and not to have derived an improper personal benefit
therefrom. Any such agreement, arrangement or transaction involving a corporate
opportunity not so approved shall not by reason thereof result in any such
breach of any fiduciary duty or duty of loyalty or failure to act in good faith
or in the best interests of the Corporation or derivation of any improper
personal benefit, but shall be governed by the other provisions of this Article
TENTH, this Certificate of Incorporation, the Bylaws, the DGCL and other
applicable law.
D. Modification. No alteration, amendment or
repeal of any provision of this Article TENTH shall terminate the effect of such
provisions or eliminate or reduce the effect of this Article TENTH in respect of
any matter occurring, or any cause of action, suit or claim that, but for this
Article TENTH, would accrue or arise, prior to such alteration, amendment,
repeal or adoption.
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E. Certain Definitions. For purposes of this Article
TENTH, the following definitions shall apply:
(1) "Affiliated Company" shall mean in respect of the
Controlling Stockholder any company which controls, is controlled by or is
under common control with the Controlling Stockholder (other than the
Corporation and any company that is controlled by the Corporation) and in
respect of the Corporation shall mean any company controlled by the Corporation.
(2) "Interested Person" in respect of an agreement,
arrangement or transaction referred to in paragraph (B) of Article TENTH shall
mean any director, officer or employee of the Controlling Stockholder or an
Affiliated Company thereof and any person who has a financial interest that is
material to such person in the Controlling Stockholder or such Affiliated
Company or otherwise has a personal financial interest that is material to such
person in such agreement, arrangement or transaction; provided, however, that no
such financial interest shall be considered material by reason of a person's
ownership of securities of the Controlling Stockholder or an Affiliated Company
thereof.
ELEVENTH: The books of the Corporation may be kept (subject
to any provision contained in the DGCL or other applicable statutes) outside the
State of Delaware at such place or places as may be designated from time to time
by the Board of Directors or in the Bylaws of the Corporation.
TWELFTH: Whenever a compromise or arrangement is proposed
between the Corporation and its creditors or any class of them and/or between
the Corporation and its stockholders or any class of them, any court of
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equitable jurisdiction within the State of Delaware may, in a summary way, on
the application of the Corporation or of any creditor or stockholder thereof or
on the application of any receiver or receivers appointed for the Corporation
under the provisions of Section 291 of the DGCL or on the application of
trustees in dissolution or of any receiver or receivers appointed for the
Corporation under the provisions of Section 279 of the DGCL, order a meeting of
the creditors or class of creditors, and/or of the stockholders or class of
stockholders of the Corporation, as the case may be, to be summoned in such
manner as said court directs. If a majority in number representing three-fourths
in value of the creditors or class of creditors, and/or of the stockholders or
class of stockholders of the Corporation, as the case may be, agree to any
compromise or arrangement and to any reorganization of the Corporation as a
consequence of such compromise or arrangement, the said compromise or
arrangement and the said reorganization shall, if sanctioned by the court to
which the said application has been made, be binding on all the creditors or
class of creditors, and/or on all the stockholders or class of stockholders, of
the Corporation, as the case may be, and also on the Corporation.
THIRTEENTH:
A. General Right to Amend Bylaws. Except as otherwise set forth
below in paragraph (B) of this Article, the Bylaws of the Corporation may be
adopted, consistent with law and the provisions of this Certificate of
Incorporation (including any Preferred Stock Designation), and once adopted, any
Bylaw may be altered or repealed by: (1) the affirmative vote of at least a
majority of the members of the Board of Directors then in office; provided,
however, that prior to the Trigger Date, the affirmative vote of at least eighty
percent (80%) of the entire Board of Directors shall be required to amend,
alter, change, adopt or repeal any provision of the Bylaws or to adopt any new
Bylaw; or (2) the affirmative vote of at least a majority of the voting power of
the Voting Stock.
B. Certain Bylaw Amendments. As of and following the Trigger
Date, any proposed amendment, alteration, change, adoption or repeal of, or the
adoption of any Bylaw inconsistent with, any of Sections 2.3, 2.9, 2.10 or 2.12
of Article II or Sections 3.2 or 3.4 of Article III or Article VIII of the
Bylaws shall require the affirmative vote of the holders of at least eighty
percent (80%) of the voting power of all Voting Stock then outstanding.
FOURTEENTH:
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A. General Right to Amend Certificate of Incorporation.
(1) The Corporation hereby reserves the right at any time
and from time to time to amend, alter, change or repeal any provision contained
in this Certificate of Incorporation, and to add thereto any other provision
authorized by the laws of the state of Delaware at the time in force, and except
as may otherwise be explicitly provided by any provision of this Certificate of
Incorporation, all rights, preferences and privileges of whatsoever nature
conferred upon stockholders, directors or officers of the Corporation or any
other person whomsoever by and pursuant to this Certificate of Incorporation in
its present form, or as hereafter amended, are granted subject to the right
reserved in this paragraph (A)(1).
(2) Subject to the provisions of paragraph (B) below and
the rights of the holders of Preferred Stock, the provisions of this Certificate
of Incorporation may only be altered, amended or repealed, and any inconsistent
provision adopted, with such action (if any) of the Board of Directors as is
provided by law, and in addition to any other vote of stockholders (if any)
required by law, and notwithstanding that a lower vote (or a no vote) of
stockholders otherwise would be required by the approval of at least a majority
of the voting power of Voting Stock; provided, however, that as of and following
the Trigger Date, any proposed amendment, alteration, change, adoption or repeal
of, or the adoption of any provision inconsistent with, any of paragraph
(C)(3)(a) of Article FOURTH, paragraph (A)(2) of Article FIFTH, paragraph (B) of
Article FIFTH, paragraph (C) of Article SIXTH, paragraph (E) of Article SIXTH,
Article EIGHTH, Article NINTH, Article TENTH and Article THIRTEENTH shall
require the approval by affirmative vote of the holders of at least eighty
percent (80%) of the voting power of all Voting Stock.
B. Amendment of this Article. The affirmative vote of the
holders of at least eighty percent (80%) of the voting power of all Voting Stock
shall be required to alter, amend or repeal, or to adopt any provision
inconsistent with, this Article FOURTEENTH.
FIFTEENTH: The Corporation shall have perpetual existence.
SIXTEENTH: For purposes of this Certificate of Incorporation, the
following definitions shall apply:
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(1) "Beneficial Owner" shall have the meaning given to such
term in Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as
amended;
(2) "Controlling Stockholder" shall mean a holder or
beneficial owner, in the aggregate, of at least a majority of the Voting Stock;
(3) "Original Controlling Stockholder" shall mean PNC Asset
Management, Inc.;
(4) each reference to a "person" shall be deemed to include
not only a natural person, but also a corporation, partnership, joint venture,
association or legal entity of any kind; each reference to a "natural person"
(or to a "record holder" of shares, if a natural person) shall be deemed to
include, in his, her or its representative capacity, a guardian, committee,
executor, administrator or other legal representative of such natural person or
record holder;
(5) "Subsidiary" shall mean, as to any person or entity, a
corporation, part ownership, joint venture, association or other entity in which
such person or entity beneficially owns (directly or indirectly) fifty percent
(50%) or more of the Voting Stock or outstanding voting power, partnership
interests or similar voting interests;
(6) "Trigger Date" shall mean the first date following the
date upon which a Controlling Stockholder ceases to be the holder or beneficial
owner of a majority of the voting power of the Voting Stock; and
(7) "Voting Stock" shall mean the then outstanding shares
of capital stock of the Corporation entitled to vote generally on the election
of directors and shall exclude any class or series of capital stock of the
Corporation only entitled to vote in the event of dividend arrearages or any
default under any provision of such series thereon, whether or not at the time
of determination there are any such dividend arrearages or defaults.
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IN WITNESS WHEREOF, this Certificate of Incorporation which restates,
integrates and amends the provisions of the Original Certificate of
Incorporation of the Corporation, and which has been duly adopted in accordance
with Sections 242 and 245 of the Delaware General Corporation Law, has been
executed by an authorized officer of the Corporation this ____ day of
___________, 1999.
BLACKROCK, INC.
By:______________________
[Name]
[Title]
By:_______________________
[Name]
[Title]
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EXHIBIT 3.2
AMENDED AND RESTATED
BYLAWS OF
BLACKROCK, INC.
A Delaware Corporation
ARTICLE I
Offices
Section 1.1 Registered Office. The registered office of BlackRock, Inc.
-----------------
(hereinafter called the "Corporation") within the State of Delaware shall be at
Corporation Trust Center, 1209 Orange Street, City of Wilmington, County of New
Castle, State of Delaware 19801, and the name of the registered agent of the
Corporation at such address shall be The Corporation Trust Company.
Section 1.2 Other Offices. The Corporation may also have offices at such
-------------
other places, both within and without the State of Delaware, as the Board of
Directors from time to time shall determine or the business of the Corporation
may require.
Section 1.3 Books and Records. The books and records of the Corporation
-----------------
may be kept outside the State of Delaware at such place or places as may from
time to time be designated by the Board of Directors or officers.
Section 1.4 Certain Definitions. Except where otherwise explicitly
-------------------
provided, all references herein to the "Certificate of Incorporation" shall mean
the certificate of incorporation of the Corporation as from time to time amended
or restated and in effect including any certificates of designation (each a
"Preferred Stock Designation") filed under section 151(g) (or any successor
provision) of the General Corporation Law of the State of Delaware, as amended
and in effect from time to time (the "DGCL"), starting with the Amended and
Restated Certificate of Incorporation dated ___________ ___, 1999 in effect on
the date these Bylaws become effective. In the event of any amendment of these
Bylaws that does not involve a complete restatement thereof, any reference
herein to "the Bylaws" or "these Bylaws" or "herein" or "hereof" or a like
reference shall refer to these Bylaws as so amended.
ARTICLE II
Meetings of Stockholders
Section 2.1 Place of Meetings. All meetings of the stockholders shall be
-----------------
held at any such place, either within or without the State of Delaware, as shall
be designated from time to time by the Board of Directors and stated in the
notice of meeting or in a duly executed waiver thereof.
<PAGE>
Section 2.2 Annual Meeting. The annual meeting of the stockholders for the
--------------
election of directors and for the transaction of such other business as may come
before the meeting shall be held at such time and place as shall be determined
by the Board of Directors and stated in the notice of the meeting. Only such
business may be conducted as has been brought before an annual meeting of
stockholders by, or at the direction of, the Board of Directors, or by a
stockholder who has given timely written notice to the Secretary of the
Corporation of such stockholder's intention to bring such business before the
meeting pursuant to Section 2.10 of these Bylaws.
Section 2.3 Special Meetings. Except as otherwise provided by law or by
----------------
the Certificate of Incorporation of the Corporation and subject to the rights of
the holders of Preferred Stock (as defined in the Certificate of Incorporation),
special meetings of the stockholders for any purpose or purposes may be called
only by a majority of the Board of Directors in accordance with these Bylaws,
the Chairman of the Board of Directors, the President of the Corporation or a
committee of the Board of Directors whose powers and authority include the power
to call such meetings; provided that, prior to the Trigger Date (as defined in
the Certificate of Incorporation), the Secretary shall call a special meeting of
stockholders promptly upon written request by the Controlling Stockholder (as
defined in the Certificate of Incorporation). As of and following the Trigger
Date, the power of any stockholder to call a special meeting is specifically
denied. The only business which may be conducted at a special meeting, other
than procedural matters and matters relating to the conduct of the meeting,
shall be the matter or matters described in the notice of such meeting.
Section 2.4 Adjournments. Any meeting of the stockholders may be adjourned
------------
from time to time to reconvene at the same or some other place, and notice need
not be given of any such adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken. At the adjourned
meeting, the Corporation may transact any business which might have been
transacted at the original meeting. If the adjournment is for more than thirty
days, or if after the adjournment a new record date is fixed for the adjourned
meeting, notice of the adjourned meeting shall be given to each stockholder of
record entitled to vote at the meeting.
Section 2.5 Notice of Meetings. Notice of meetings of stockholders shall
------------------
be given by the Corporation as required by applicable law not less than ten days
nor more than sixty days before such meeting (unless a different time is
specified by law) to every stockholder entitled by law to notice of such
meeting. Notice of any such meeting need not be given to any stockholder who
shall, either before or after the meeting, submit a signed waiver of notice or
who shall attend such meeting, except when he shall attend for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened.
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Section 2.6 List of Stockholders. A complete list of the stockholders
--------------------
entitled to vote at any meeting of stockholders, arranged in alphabetical order,
and showing the address of each stockholder and the number of shares of each
class of capital stock of the Corporation registered in the name of each
stockholder, shall be prepared by the Secretary and shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, either at a place within the city where the meeting is
to be held, which place shall be specified in the notice of the meeting, or, if
not so specified, at the place where the meeting is to be held, for at least ten
days before the meeting and at the place of the meeting during the whole time of
the meeting. The stock ledger of the Corporation shall be the only evidence as
to who are the stockholders entitled to examine the stock ledger and the list
required by this Section 2.6 or to vote in person or by proxy at any meeting of
stockholders.
Section 2.7 Quorum. Unless otherwise required by law or the Certificate of
------
Incorporation, a majority in voting power of the outstanding shares of the
Corporation entitled to vote on the matters at issue, present in person or
represented by proxy, shall constitute a quorum. If, however, such quorum shall
not be present or represented at any meeting of the stockholders, the
stockholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time, in the manner
provided in Section 2.4, until a quorum shall be present or represented. A
quorum, once established, shall not be broken by the subsequent withdrawal of
enough votes to leave less than a quorum. At any such adjourned meeting at which
there is a quorum, any business may be transacted that might have been
transacted at the meeting originally called.
Section 2.8 Conduct of Meetings. The Board of Directors of the Corporation
-------------------
may adopt by resolution such rules and regulations for the conduct of the
meeting of the stockholders as it shall deem appropriate. At every meeting of
stockholders, the Chairman of the Board of Directors, or in his absence or
inability to act, the President, or, in his absence or inability to act, the
person whom the Vice Chairman shall appoint, shall act as chairman of, and
preside at, the meeting. The Secretary or, in his absence or inability to act,
the person whom the chairman of the meeting shall appoint secretary of the
meeting, shall act as secretary of the meeting and keep the minutes thereof.
Except to the extent inconsistent with such rules and regulations as adopted by
the Board of Directors, the chairman of any meeting of the stockholders shall
have the right and authority to prescribe such rules, regulations and procedures
and to do all such acts as, in the judgment of such chairman, are appropriate
for the proper conduct of the meeting. Such rules, regulations or procedures,
whether adopted by the Board of Directors or prescribed by the chairman of the
meeting, may include, without limitation, the following: (a) the establishment
of an agenda or order of business for the meeting; (b) the determination of when
the polls shall open and close for any given matter to be voted on at the
meeting; (c) rules and procedures for maintaining order at the meeting and the
safety of those present; (d) limitations on attendance at or participation in
the meeting to stockholders of record of the corporation, their duly authorized
and constituted proxies or such other persons as the chairman of the meeting
shall determine; (e) restrictions on entry to the meeting after the time fixed
for the commencement thereof; and (f) limitations on the time allotted to
questions or comments by participants.
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Section 2.9 Nomination of Directors.
-----------------------
(a) Only persons who are nominated in accordance with the
procedures in this Section 2.9 shall be eligible for election as directors of
the Corporation, subject to the rights of the holders of Preferred Stock.
Nominations of persons for election to the Board of Directors may be made at any
annual meeting of stockholders (i) by or at the direction of the Board of
Directors (or any duly authorized committee thereof) or (ii) by any stockholder
of the Corporation (A) who is a stockholder of record on the date of the giving
of the notice provided for in this Section 2.9 and on the record date for the
determination of stockholders entitled to vote at such annual meeting and (B)
who complies with the notice procedures set forth in this Section 2.9.
(b) In addition to any other applicable requirements, for a
nomination to be made by a stockholder (other than by a Controlling Stockholder
prior to the Trigger Date), such stockholder must have given timely notice
thereof in proper written form to the Secretary of the Corporation.
(c) To be timely, a stockholder's notice to the Secretary must be
delivered to or mailed and received at the principal executive offices of the
Corporation not less than one hundred twenty (120) days nor more than one
hundred and fifty (150) days prior to the anniversary of the mailing date of the
Corporation's proxy materials for the immediately preceding annual meeting of
stockholders; provided, however, that in the event that the annual meeting is
called for a date that is not within thirty (30) days before or after the
anniversary date of such meeting, notice by the stockholder in order to be
timely must be so received not later than the close of business on the tenth
(10th) day following the day on which notice of the date of the annual meeting
was mailed to stockholders or public disclosure of the date of the annual
meeting was made, whichever first occurs.
(d) To be in proper written form, a stockholder's notice to the
Secretary must set forth: (i) as to each person whom the stockholder proposes to
nominate for election as a director (A) the name, age, business address and
residence address of such person, (B) the principal occupation or employment of
such person, (C) the class or series and number of shares of capital stock of
the Corporation which are owned beneficially or of record by such person that
would be required to be disclosed in a proxy statement or other filings required
to be made in connection with solicitations of proxies for election of directors
pursuant to Section 14 of the Securities Exchange Act of 1934, as amended
("Exchange Act") and the rules and regulations promulgated thereunder; and (ii)
as to the stockholder giving the notice (A) the name and record address of such
stockholder, (B) the class or series and number of shares of capital stock of
the Corporation which are owned beneficially or of record by such stockholder,
(C) a description of all arrangements or understandings between such stockholder
and each proposed nominee and any other person or persons (including their
names) pursuant to which the nomination(s) are to be made by such stockholder,
(D) a representation that such stockholder intends to appear in person or by
proxy at the annual meeting to nominate the persons named in its notice and (E)
any
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other information relating to such stockholder that would be required to be
disclosed in a proxy statement or other filings required to be made in
connection with solicitations of proxies for election of directors pursuant to
Section 14 of the Exchange Act and the rules and regulations promulgated
thereunder. Such notice must be accompanied by a written consent of each
proposed nominee to being named as a nominee and to serve as a director if
elected.
(e) If the chairman of the annual meeting determines that a
nomination was not made in accordance with the foregoing procedures, the
chairman shall declare to the meeting that the nomination was defective and such
defective nomination shall be disregarded.
(f) Notwithstanding anything to the contrary set forth herein,
prior to the Trigger Date, nominations by a Controlling Stockholder shall not be
subject to the notice procedures of this Section 2.9.
Section 2.10 Business at Annual Meetings.
---------------------------
(a) No business may be transacted at an annual meeting of
stockholders, other than business that is either (i) specified in the notice of
meeting (or any supplement thereto) given by or at the direction of the Board of
Directors (or any duly authorized committee thereof), (ii) otherwise properly
brought before the annual meeting by or at the direction of the Board of
Directors (or any duly authorized committee thereof) or by the Controlling
Stockholder prior to the Trigger Date or (iii) otherwise properly brought before
the annual meeting by any stockholder of the Corporation (A) who is a
stockholder of record on the date of the giving of the notice provided for in
this Section 2.10 and on the record date for the determination of stockholders
entitled to vote at such annual meeting and (B) who complies with the notice
procedures set forth in this Section 2.10.
(b) In addition to any other applicable requirements, for business
to be properly brought before an annual meeting by a stockholder (other than by
a Controlling Stockholder prior to the Trigger Date), such stockholder must have
given timely notice thereof in proper written form to the Secretary of the
Corporation.
(c) To be timely, a stockholder's notice to the Secretary must be
delivered to or mailed and received at the principal executive offices of the
Corporation not less than one hundred and twenty (120) days nor more than one
hundred and fifty (150) days prior to the anniversary of the mailing date of the
Corporation's proxy materials for the immediately preceding annual meeting of
stockholders; provided, however that in the event that the annual meeting is
called for a date that is not within thirty (30) days before or after the
anniversary date of such meeting, notice by the stockholder in order to be
timely must be so received not later than the close of business on the tenth
(10th) day following the day on which notice of the date of the annual meeting
was mailed to stockholders or public disclosure of the date of the annual
meeting was made, whichever first occurs.
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(d) To be in proper written form, a stockholder's notice to the
Secretary must set forth as to each matter such stockholder proposes to bring
before the annual meeting (i) a brief description of the business desired to be
brought before the annual meeting and the reasons for conducting such business
at the annual meeting, (ii) the name and record address of such stockholder,
(iii) the class or series and number of shares of capital stock of the
Corporation which are owned beneficially or of record by such stockholder, (iv)
a description of all arrangements or understandings between such stockholder and
any other person or persons (including their names) in connection with the
proposal of such business by such stockholder and any material interest of such
stockholder in such business and (v) a representation that such stockholder
intends to appear in person or by proxy at the annual meeting to bring such
business before the meeting.
(e) Once business has been properly brought before the annual
meeting in accordance with such procedures, nothing in this Section 2.10 shall
be deemed to preclude discussion by any stockholder of any such business. If the
chairman of an annual meeting determines that business was not properly brought
before the annual meeting in accordance with the foregoing procedures, the
Chairman shall declare to the meeting that the business was not properly brought
before the meeting and such business shall not be transacted.
(f) Notwithstanding anything to the contrary set forth herein,
prior to the Trigger Date, business brought before an annual meeting by a
Controlling Stockholder shall not be subject to the notice procedures of this
Section 2.10.
Section 2.11 Voting. Unless otherwise required by law, the Certificate of
------
Incorporation or these Bylaws, any question brought before any meeting of
stockholders, other than the election of directors, shall be decided by the vote
of the holders of a majority of the votes of shares of capital stock represented
and entitled to vote thereat, voting as a single class. Every reference in these
Bylaws to a majority or other proportion of shares, or a majority or other
proportion of the votes of shares, of capital stock shall refer to such majority
or other proportion of the votes to which such shares of capital stock are
entitled as provided in the Certificate of Incorporation. Votes of stockholders
entitled to vote at a meeting of stockholders may be cast in person or by proxy
but no proxy shall be voted on or after three years from its date, unless such
proxy provides for a longer period. The Board of Directors, in its discretion,
or the chairman of the meeting of stockholders, in such chairman's discretion,
may require that any votes cast at such meeting shall be cast by written ballot.
Abstentions shall not be considered to be votes cast.
Section 2.12 No Stockholder Action by Written Consent. As of and following
----------------------------------------
the Trigger Date, except as otherwise provided pursuant to provisions of the
Certificate of Incorporation fixing the powers, privileges or rights of any
series of preferred stock in respect of action by written consent of the holders
of such series of preferred stock, any action required or permitted to be taken
by the stockholders of the Corporation must be effected at a duly called annual
or special meeting of such stockholders and may not be effected by any consent
in writing by such
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stockholders. Prior to the Trigger Date, action of the stockholders of any class
or classes of capital stock, or series thereof, may be taken by written consent
as permitted by law.
ARTICLE III
Board of Directors
Section 3.1 General Powers. The business and affairs of the Corporation
--------------
shall be managed by or under the direction of the Board of Directors. In
addition to the powers and authorities expressly conferred upon them by these
Bylaws, the Board of Directors may exercise all such powers of the Corporation
and do all such lawful acts and things as are not by statute or by the
Certificate of Incorporation or by these Bylaws required to be exercised or done
by the stockholders.
Section 3.2 Number, Qualifications, Election and Term of Office.
---------------------------------------------------
(a) The Board of Directors shall consist initially of six (6)
directors. Subject to the rights of the holders of Preferred Stock, the number
of directors on the Board of Directors may be increased or decreased from time
to time exclusively pursuant to a resolution adopted by: (i) prior to the
Trigger Date, the affirmative vote of at least eighty percent (80%) of the
entire Board of Directors; or (ii) as of and following the Trigger Date, the
affirmative vote of a majority of the entire Board of Directors. No reduction in
the number of directors shall have the effect of shortening the term of any
director in office at the time such reduction becomes effective.
(b) The retirement age of and other restrictions and
qualifications for directors constituting the Board of Directors shall be as
authorized from time to time by the affirmative vote of eighty percent (80%) of
the members of the Board of Directors then in office. Members of the Board of
Directors need not be residents of the State of Delaware and need not be
stockholders of the Corporation.
(c) The directors shall be divided into three classes, Class I,
Class II and Class III, as provided in the Certificate of Incorporation, and
shall hold office in accordance with the provisions as set forth therein.
Section 3.3 Vacancies. Unless otherwise required by law or by the
---------
Certificate of Incorporation, vacancies arising through death, resignation,
removal, an increase in the number of directors or otherwise may be filled
(x)(i) prior to the Trigger Date, by the affirmative vote of at least eighty
percent (80%) of the entire Board of Directors and (ii) as of and following the
Trigger Date, by a majority of the directors then in office, even though less
than a quorum, or by a sole remaining director, or (y) by the stockholders if
such vacancy resulted from the action of stockholders (in which event such
vacancy may not be filled by the directors or a majority thereof), and in any
event the directors so chosen shall hold office until the next election for such
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class and until their successors are duly elected and qualified, or until their
earlier death, resignation or removal.
Section 3.4 Removal. Any director or the entire Board of Directors may be
-------
removed, with or without cause, by the affirmative vote of shares representing a
majority of the votes entitled to be cast by the Voting Stock; provided, however
that from and after the Trigger Date, a director may only be removed for cause,
such removal to be by the affirmative vote of the shares representing eighty
percent (80%) of the votes entitled to be cast by the Voting Stock. "Cause" for
removal of a director shall be deemed to exist only if: (i) the director whose
removal is proposed has been convicted, or when a director is granted immunity
to testify when another has been convicted, of a felony by a court of competent
jurisdiction and such conviction is no longer subject to direct appeal; (ii)
such director has been found by the affirmative vote of a majority of the
Directors then in office at any regular or special meeting of the Board of
Directors called for that purpose, or by a court of competent jurisdiction, to
have been guilty of willful misconduct in the performance of his duties to the
Corporation in a matter of substantial importance to the Corporation; (iii) such
director has been adjudicated by a court of competent jurisdiction to be
mentally incompetent, which mental incompetency directly affects his ability as
a director of the Corporation; or (iv) the entry of any order against such
director by any governmental body having regulatory authority with respect to
the Corporation's business. Notwithstanding the foregoing, whenever holders of
outstanding shares of one or more series of Preferred Stock are entitled to
elect directors of the Corporation pursuant to the provisions applicable in the
case of arrearages in the payment of dividends or other defaults contained in
the resolution or resolutions of the Board of Directors providing for the
establishment of any such series, any such director of the Corporation so
elected may be removed in accordance with the provisions of such resolution or
resolutions. "Voting Stock" shall mean the shares of the then outstanding
capital stock entitled to vote generally on the election of directors and shall
exclude any class or series of capital stock only entitled to vote in the event
of dividend arrearages thereon or other defaults thereunder, whether or not at
the time of the determination there are any such dividend arrearages or
defaults.
Section 3.5 Place of Meetings. Meetings of the Board of Directors shall be
-----------------
held at such place or places, within or without the State of Delaware, as the
Board of Directors may from time to time determine or as shall be specified in
the notice of any such meeting. Each regular meeting of the Board of Directors
shall be held at the location specified in the notice with respect to such
meeting or, if no such notice is provided or no location is specified therein,
at the principal executive offices of the Corporation.
Section 3.6 Regular Meetings. Regular meetings of the Board of Directors
----------------
shall be held at such time and place as the Board of Directors may fix. Notice
of regular meetings of the Board of Directors need not be given except as
otherwise required by applicable law or these Bylaws.
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Section 3.7 Special Meetings. Special meetings of the Board of Directors
----------------
may be called by the Chairman of the Board of Directors or at the request of
twenty percent (20%) of the directors. The person or persons authorized to call
a special meeting of the Board of Directors may fix the place, date and time of
the meeting. Upon request by the person or persons authorized to call such
meetings, the Secretary of the Corporation shall give any requisite notice for
the meeting.
Section 3.8 Notice of Meetings. Notice of each special meeting of the
------------------
Board of Directors (and of each regular meeting for which notice shall be
required) shall be given by the Secretary as hereinafter provided in this
Section 3.8, in which notice shall be stated the date, time and place of the
meeting. Notice of a special meeting shall state the general purpose of the
meeting, but other routine business may be conducted at a special meeting
without such matter being stated in the notice. Notice of each meeting shall be
given to each director either by mail not less than forty-eight (48) hours
before the date of such meeting, by telephone or telegram on twenty-four (24)
hours' notice, or on such shorter notice as the person or persons calling such
meeting may deem necessary or appropriate under the circumstances. Notice of any
meeting need not be given to any director who shall, either before or after the
meeting, submit a signed waiver of notice or who shall attend such meeting,
except when he shall attend for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened.
Section 3.9 Quorum.
------
(a) Except as otherwise provided by law, the Certificate of
Incorporation and Sections 3.3 and 3.9(b) of these Bylaws, at all meetings of
the Board of Directors, a majority of the entire Board of Directors shall
constitute a quorum for the transaction of business and the act of a majority of
the directors present at any meeting at which there is a quorum shall be the act
of the Board of Directors. In the absence of a quorum at any meeting of the
Board of Directors, a majority of the directors present thereat may adjourn such
meeting from time to time to another time and place. Notice of the time and
place of any such adjourned meeting shall be given to all of the directors
unless such time and place were announced at the meeting at which the
adjournment was taken, in which case such notice shall only be given to the
directors who were not present thereat. At any adjourned meeting at which a
quorum is present, any business may be transacted which might have been
transacted at the meeting as originally called.
(b) Until the Trigger Date, at least two directors designated by
the Controlling Stockholder pursuant to the Amended and Restated Stockholders
Agreement, dated as of [ ], 1999, by and among the Corporation, PNC Asset
Management, Inc., certain employees of the Corporation and permitted transferees
under such agreement, as such agreement may be amended from time to time (the
"Stockholders Agreement"), and the Chairman of the Board of Directors must be
present at any meeting of the Board of Directors in order to establish a quorum
to conduct business; provided, however, that the Board of Directors will be
entitled to take any action at any meeting if a quorum is otherwise present if
(i) the meeting is a regularly scheduled
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meeting of the Board of Directors or (ii) the meeting is not a regularly
scheduled meeting and, after having been sent notice of such meeting, either two
of the directors designated by the Controlling Stockholder and/or the Chairman
of the Board of Directors, as the case may be, are not present at such meeting,
and the directors designated by the Controlling Stockholder who are absent or
the Chairman of the Board of Directors shall, in either the case of either (i)
or (ii), have failed to communicate in writing to the Secretary good reason for
such absence in advance of the relevant meeting.
Section 3.10 Board Approval Requirements in Certain Circumstances. Prior
----------------------------------------------------
to the Trigger Date, any act of the Board of Directors shall require the
affirmative vote of not less than eighty percent (80%) of the entire Board of
Directors if it relates to or involves one or more of the following matters:
(a) the size and composition of the Board of Directors and Board
committees or changes thereto, including but not limited to matters involving
Sections 3.2, 3.3, 3.4 and 3.16 of these Bylaws;
(b) any merger, acquisition, consolidation, divestiture or
acquisition of material assets, or any other similar transaction involving the
Corporation;
(c) the issuance of capital stock, sales of treasury stock,
grants of options, warrants or other rights to acquire capital stock (other than
issuances or grants pursuant to stock option, bonus and other benefit plans of
the Corporation approved by the affirmative vote of not less than 80% of the
Board of Directors);
(d) the incurrence of indebtedness by or on behalf of the
Corporation other than in the ordinary course of business;
(e) any business activity to be engaged in by or on behalf of the
Corporation of a type that is not currently conducted by or on behalf of the
Corporation;
(f) any change in the outside auditors of the Corporation;
(g) the declaration of any dividend by the Corporation;
(h) the amendment, alteration, modification or repeal of these
Bylaws or the Certificate of Incorporation; or
(i) any other matter materially affecting the economic interests
of a Controlling Stockholder.
Section 3.11 Organization. At each meeting of the Board of Directors, the
------------
Chairman of the Board of Directors or, in his absence, the Vice Chairman or
another director chosen by a majority of the directors present, shall act as
chairman of the meeting and preside thereat. The
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Secretary or, in his absence, any person appointed by the chairman, shall act as
secretary of the meeting and keep the minutes thereof.
Section 3.12 Resignations. Any director of the Corporation may resign at
------------
any time by giving written notice of his resignation to the Chairman of the
Board of Directors, the President or the Secretary. Any such resignation shall
take effect at the time specified therein or, if the time when it shall become
effective shall not be specified therein, immediately upon its receipt. Unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective.
Section 3.13 Compensation. Directors shall receive such compensation,
------------
including fees and reimbursement of expenses, for their services as the Board of
Directors may determine from time to time. No such payment shall preclude any
director from serving the Corporation in any other capacity and receiving
compensation therefor.
Section 3.14 Action by Written Consent. Unless otherwise provided by the
-------------------------
Certificate of Incorporation or these Bylaws, any action required or permitted
to be taken at any meeting of the Board of Directors or any committee thereof
may be taken without a meeting if all members of the Board of Directors or of
such committee, as the case may be, consent thereto in writing, and the writing
or writings are filed with the minutes of the proceedings of the Board of
Directors or such committee, as the case may be.
Section 3.15 Telephonic Meeting. Unless otherwise provided by the
------------------
Certificate of Incorporation, any one or more members of the Board of Directors
or any committee thereof may participate in a meeting of the Board of Directors
or such committee by means of a conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation by such means shall constitute presence in person
at a meeting.
Section 3.16 Board Committees.
----------------
(a) The Board of Directors may by resolution designate one or
more committees (in addition to the mandatory Standing Committees as set forth
in Section 3.16(e) below) consisting of one or more directors of the Corporation
which, to the extent authorized in any resolution of the Board of Directors or
these Bylaws and permissible under the DGCL and the Certificate of
Incorporation, shall have and may exercise any or all the powers and authority
of the Board of Directors in the management of the business and affairs of the
Corporation; provided, however, that prior to the Trigger Date, a majority of
directors on each such committee (including each Standing Committee) shall be
directors that were designated as directors by the Controlling Stockholder, and
at least one director on each such committee (including each Standing Committee)
shall be a director that was designated as a director by the Management
Committee of the Corporation (as defined in the Stockholders Agreement), in each
instance as permitted by applicable law or stock exchange policy.
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(b) Subject to Section 3.16(a), with respect to all committees
designated in accordance with this Section 3.16, the Board of Directors may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of any such committee.
With respect to all Board committees designated in accordance with this Section
3.16, in the absence or disqualification of a member of a committee, and in the
absence of a designation by the Board of Directors of an alternate member to
replace the absent or disqualified member, the member or members thereof present
at any meeting and not disqualified from voting, whether or not such member or
members constitute a quorum, may unanimously appoint another member of the Board
of Directors to act at the meeting in the place of any absent or disqualified
member. Any committee may authorize the seal of the Corporation to be affixed to
all papers which may require it.
(c) A majority of the members of any committee may determine such
committee's procedures for the conduct of business and may fix the time and
place of its meetings, unless the Board of Directors shall by resolution
otherwise provide. Notice of such meetings shall be given to each member of the
committee in the same manner as provided for meetings of the Board of Directors
by these Bylaws. Each committee shall keep written minutes of its proceedings
and shall report such proceedings to the Board of Directors when required.
Except as otherwise provided by resolution of the Board of Directors or of such
committee, a quorum for the transaction of business by a committee at a meeting
thereof shall be a majority of the members and the affirmative vote of a
majority of the members present at a meeting at which a quorum is present shall
be the act of the committee.
(d) Nothing herein shall be deemed to prevent the Board of Directors
from appointing one or more committees consisting in whole or in part of one or
more officers, employees or persons who are not directors of the Corporation to
conduct any part of the business or affairs of the Corporation; provided,
however, that no such committee shall have or may exercise any authority of the
Board of Directors.
(e) Standing Committees.
The standing committees which, subject to Section 3.16(a), shall be
appointed from time to time by the Board of Directors shall be: the Executive
Committee, the Audit Committee, the Nominating Committee, the Compensation
Committee and the Investment Committee.
(i) Executive Committee.
-------------------
The Executive Committee shall consist of the Chairman and Chief
Executive Officer and such other directors, who shall from time to time be
appointed by the Board of Directors. The Executive Committee shall have and
exercise in the intervals between the
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meetings of the Board of Directors all the powers of the Board of Directors,
except as prohibited by applicable law. All acts done and powers conferred by
the Executive Committee from time to time shall be deemed to be, and may be
certified as being, done and conferred under authority of the Board of
Directors.
(ii) Audit Committee.
---------------
The Board of Directors shall appoint annually the Audit Committee
consisting of not less than three directors, none of whom shall be an officer of
the Corporation. The Audit Committee will recommend the annual appointment of
the Corporation's auditors, with whom the Audit Committee will, among other
things, review the scope of audit and non-audit assignments and related fees,
accounting principles used by the Corporation in financial reporting, internal
auditing procedures and the adequacy of the Corporation's risk management,
compliance and internal control procedures.
(iii) Nominating Committee.
--------------------
The Board of Directors shall appoint annually the members of the
Nominating Committee, consisting of not less than three directors. The
Nominating Committee will review the qualifications of potential candidates for
the Board of Directors, report its findings to the Board of Directors and
propose nominations for board memberships for approval by the Board of Directors
and, if appropriate, submission to the stockholders of the Corporation for
approval.
(iv) Compensation Committee.
----------------------
The Board of Directors shall appoint annually the members of the
Compensation Committee, consisting of not less than three directors. The
Compensation Committee will administer the Corporation's 1999 Stock Award and
Incentive Plan, Key Executive Long-Term Incentive Bonus Plan and other such
compensation plans as the Board of Directors may determine from time to time,
and will establish the compensation for the Corporation's executive officers.
The Compensation Committee may by resolution designate a subcommittee to
administer the Corporation's compensation plans.
(v) Investment Committee.
--------------------
The Board of Directors shall appoint annually the members of the
Investment Committee consisting of not less than three directors. The Investment
Committee shall have and may exercise any or all of the powers and authority of
the Board of Directors to the extent authorized in a resolution of the Board of
Directors and permissible under the DGCL, these Bylaws and the Certificate of
Incorporation. The Investment Committee shall have the responsibility to review
and make recommendations to the Board of Directors regarding investments by the
Company, including investments by the Company in alternative products sponsored
by the Company.
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ARTICLE IV
Officers
Section 4.1 Designation. The officers of the Corporation shall be elected
-----------
by the Board of Directors and shall include a Chief Executive Officer,
President, Chief Financial Officer, Treasurer and Secretary. The Board of
Directors of the Corporation, in its discretion, may also elect a Chairman of
the Board of Directors (who must be a director), one or more Vice Chairmen (who
need not be a director) and one or more Managing Directors, Directors, Vice
Presidents, Assistant Treasurers, Assistant Secretaries and other officers.
Section 4.2 Election and Tenure. Officers and assistant officers of the
-------------------
Corporation may, but need not, also be members of the Board of Directors or
stockholders of the Corporation. At its first meeting after each annual meeting
of the stockholders, the Board of Directors shall elect the officers or provide
for the appointment thereof. Unless otherwise provided by the Certificate of
Incorporation, the term of each officer elected by the Board of Directors shall
be until the first meeting of the Board of Directors following the next annual
meeting of stockholders and until his successor is elected and qualified or
until his earlier death, resignation or removal in the manner specified in this
Section 4.2. Any officer elected or appointed by the Board of Directors may be
removed by the Board of Directors at any time with or without cause by the
majority vote of the members of the Board of Directors then in office. Any
officer or assistant officer appointed by another officer may be removed from
office with or without cause by such officer. The removal of an officer shall be
without prejudice to his contract rights, if any. The election or appointment of
an officer shall not of itself create contract rights. Any officer of the
Corporation may resign at any time by giving written notice of his resignation
to the Chairman of the Board of Directors, the President or the Secretary. Any
such resignation shall take effect at the time specified therein or, if the time
when it shall become effective shall not be specified therein, immediately upon
its receipt. Unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective. Should any vacancy
occur among the officers, the position shall be filled for the unexpired portion
of the term by appointment made by the Board of Directors or, in the case of
offices held by officers who may be appointed by other officers, by any officer
authorized to appoint such officer. Any individual may be elected to, and may
hold, more than one office of the Corporation.
Section 4.3 Duties. Except as set forth in Section 4.5, the powers and
------
duties of the several officers shall be as provided from time to time by
resolution or other directive of the Board of Directors. In the absence of such
provisions, the respective officers shall have the powers and shall discharge
the duties customarily and usually held and performed by like officers of
corporations similar in organization and business purposes to the Corporation.
Section 4.4 Compensation. Officers may be paid such reasonable
------------
compensation as the Board of Directors may from time to time authorize and
direct. The Board of Directors may delegate its authority to determine
compensation to a committee.
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Section 4.5 Responsibilities of the Senior Officers.
---------------------------------------
(a) Chief Executive Officer
Subject to the direction of the Board of Directors, the Chief
Executive Officer shall have the general supervision of the policies, business
and operations of the Corporation, and of the other officers, agents and
employees of the Corporation and, except as otherwise provided in these Bylaws
or by the Board of Directors, shall have all the other powers and duties as are
usually incident to the Chief Executive Officer of a corporation. In the absence
of the Chief Executive Officer, his rights and duties shall be performed by such
other officer or officers as shall be designated by the Board of Directors. To
the extent not specifically appointed to a Committee, the Chief Executive
Officer of the Corporation shall be ex officio a member of all Committees except
the Audit Committee, the Nominating Committee and the Compensation Committee.
(b) Chairman, President and Vice Chairmen
The Chairman, the President and one or more Vice Chairmen, if not
designated as the Chief Executive Officer, shall have such duties and powers as
may be assigned to them from time to time by the Board of Directors or, in the
case of the President and the Vice Chairmen, the Chief Executive Officer in the
absence of any assignment by the Board of Directors.
(c) Chief Financial Officer
Except as otherwise provided in these Bylaws or by the Board of
Directors, the Chief Financial Officer shall have all the other powers and
duties as are usually incident to the Chief Financial Officer of a corporation.
In the absence of the Chief Financial Officer, his rights and duties shall be
performed by such other officer or officers as shall be designated by the Board
of Directors.
(d) Managing Directors, Directors and Vice Presidents
The Managing Directors, Directors, Executive Vice Presidents, Senior
Vice Presidents and the Vice Presidents, if such are elected, shall have the
duties and powers as may from time to time be assigned to them by the Board of
Directors or by the Chief Executive Officer in the absence of any assignment by
the Board of Directors. Any reference in these Bylaws to a Vice President will
apply equally to an Executive Vice President or a Senior Vice President unless
the context requires otherwise.
(e) Treasurer
The Treasurer shall be responsible for the corporate funds and
securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the
15
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Corporation and shall deposit all moneys and other valuable effects in the name
and to the credit of the Corporation in such depositories as may be designated
by the Board of Directors or the Chief Executive Officer and shall perform such
other duties as may be assigned to him from time to time by the Board of
Directors, Chief Financial Officer or the Chief Executive Officer in the absence
of any assignment by the Board of Directors.
(f) Secretary
The Secretary shall: attend the meetings of the stockholders, of the
Board of Directors and any committees thereof, and shall keep minutes thereof in
suitable minute books; have charge of the corporate records, papers and the
corporate seal; have charge of the stock and transfer records of the Corporation
and shall keep a record of all stockholders and give notices of all meetings of
stockholders, special meetings of the Board of Directors and of its Committees;
and have such other duties as may be assigned to him from time to time by the
Board of Directors or the Chief Executive Officer in the absence of any
assignment by the Board of Directors.
(g) Controller
The Controller, if a Controller is elected, shall cause to be kept
proper records of the transactions of the Corporation; shall be responsible for
the preparation of financial and tax reports required of the Corporation; and
shall perform such other duties as may be assigned to him from time to time by
the Board of Directors, the Chief Financial Officer or the Chief Executive
Officer in the absence of any assignment by the Board of Directors.
(h) Assistant Officers
Each assistant officer as shall be elected shall assist in the
performance of the duties of the officer to whom he is assistant and shall
perform such duties in the absence of the officer. He shall perform such
additional duties as may be assigned to him from time to time by the Board of
Directors, or in the absence of any assignment by the Board of Directors, the
Chief Executive Officer or the officer to whom he is assistant.
ARTICLE V
Stock Certificates and Their Transfer
Section 5.1 Uncertificated and Certificated Shares; Form of Certificates.
------------------------------------------------------------
Effective at such time as the President or any Vice President or the Treasurer
of the Corporation designates in writing to the Corporate Secretary and any
transfer agents of the Corporation with respect to any class of stock of the
Corporation, the shares of such class shall be uncertificated shares, provided
that the foregoing shall not apply to shares represented by a certificate until
such certificate is surrendered to the Corporation and provided further that
upon request every holder
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of uncertificated shares shall be entitled, to the extent provided in Section
158 of the DGCL, to have a certificate signed in the name of the Corporation (i)
by the President or a Vice President and (ii) by the Treasurer or an Assistant
Treasurer, or the Secretary or an Assistant Secretary, of the Corporation,
certifying the number of shares owned by such stockholder in the Corporation.
Section 5.2 Record Owners. A record of the name and address of the holder
-------------
of each certificate, the number of shares represented thereby and the date of
issue thereof shall be made on the Corporation's books. The Corporation shall be
entitled to recognize the exclusive right of a person registered on its records
as the owner of shares of stock to receive dividends and to vote as such owner,
shall be entitled to hold liable for calls and assessments a person registered
on its records as the owner of shares of stock, and shall not be bound to
recognize any equitable or other claim to or interest in such share or shares of
stock on the part of any other person, whether or not it shall have express or
other notice thereof, except as otherwise provided by the laws of the State of
Delaware.
Section 5.3 Transfers of Stock. Stock of the Corporation shall be
------------------
transferable in the manner prescribed by law and in these Bylaws. Transfers of
stock shall be made on the books of the Corporation only by the person named as
the holder thereof on the stock records of the Corporation, by such person's
attorney lawfully constituted in writing, and in the case of shares represented
by a certificate upon the surrender of the certificate therefor, which shall be
cancelled before a new certificate shall be issued. No transfer of stock shall
be valid as against the Corporation for any purpose until it shall have been
entered in the stock records of the Corporation by an entry showing from and to
whom transferred. To the extent designated by the President or any Vice
President or the Treasurer of the Corporation, the Corporation may recognize the
transfer of fractional uncertificated shares, but shall not otherwise be
required to recognize the transfer of fractional shares.
Section 5.4 Transfer Agents and Registrars. The Board of Directors may
------------------------------
appoint, or authorize any officer or officers to appoint, one or more transfer
agents and one or more registrars. If any certificate is countersigned (a) by a
transfer agent other than the Corporation or its employee, or (b) by a registrar
other than the Corporation or its employee, any signature on the certificate may
be a facsimile. In case any officer, transfer agent or registrar who has signed
or whose facsimile signature has been placed upon a certificate shall have
ceased to be such officer, transfer agent or registrar before such certificate
is issued, it may be issued by the Corporation with the same effect as if such
person were such officer, transfer agent or registrar at the date of issue.
Section 5.5 Regulations. The Board of Directors may make such additional
-----------
rules and regulations, not inconsistent with these Bylaws, as it may deem
expedient concerning the issue, transfer and registration of certificates for
shares of stock of the Corporation.
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Section 5.6 Fixing the Record Date.
----------------------
(a) In order that the Corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, the Board of Directors may fix a record date, which record
date shall not precede the date upon which the resolution fixing the record date
is adopted by the Board of Directors, and which record date shall not be more
than sixty (60) nor less than ten (10) days before the date of such meeting. If
no record date is fixed by the Board of Directors, the record date for
determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the day
on which notice is given, or, if notice is waived, at the close of business on
the day next preceding the day on which the meeting is held. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
(b) In order that the Corporation may determine the stockholders
entitled to consent to corporate action in writing without a meeting, the Board
of Directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the Board of
Directors, and which record date shall not be more than ten (10) days after the
date upon which the resolution fixing the record date is adopted by the Board of
Directors. If no record date has been fixed by the Board of Directors, the
record date for determining stockholders entitled to consent to corporate action
in writing without a meeting, when no prior action by the Board of Directors is
required by law, shall be the first date on which a signed written consent
setting forth the action taken or proposed to be taken is delivered to the
Corporation by delivery to its registered office in the State of Delaware, its
principal place of business, or an officer or agent of the Corporation having
custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to the Corporation's registered office shall be by hand
or by certified or registered mail, return receipt requested. If no record date
has been fixed by the Board of Directors and prior action by the Board of
Directors is required by law, the record date for determining stockholders
entitled to consent to corporate action in writing without a meeting shall be at
the close of business on the day on which the Board of Directors adopts the
resolutions taking such prior action.
(c) In order that the Corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or allotment
of any rights or the stockholders entitled to exercise any rights in respect of
any change, conversion or exchange of stock, or for the purpose of any other
lawful action, the Board of Directors may fix a record date, which record date
shall not precede the date upon which the resolution fixing the record date is
adopted, and which record date shall be not more than sixty (60) days prior to
such action. If no record date is fixed, the record date for determining
stockholders for any such purpose shall be at the close of business on the day
on which the Board of Directors adopts the resolution relating thereto.
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Section 5.7 Lost Certificates. The Board of Directors may direct a new
-----------------
certificate to be issued in place of any certificate theretofore issued by the
Corporation alleged to have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen or destroyed. When authorizing such issue of a new certificate, the
Board of Directors may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
certificate, or the owner's legal representative, to advertise the same in such
manner as the Board of Directors shall require and/or to give the Corporation a
bond in such sum as it may direct as indemnity against any claim that may be
made against the Corporation with respect to the certificate alleged to have
been lost, stolen or destroyed or the issuance of such new certificate.
ARTICLE VI
Indemnification and Insurance
Section 5.8 Right to Indemnification. Each person who was or is made a
------------------------
party or is threatened to be made a party to or is involved in any action, suit
or proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she, or a person
of whom he or she is the legal representative, is or was a director or officer,
of the Corporation or is or was serving at the request of the Corporation as a
director or officer of another company, partnership, joint venture, trust or
other enterprise, including service with respect to employee benefit plans,
whether the basis of such proceeding is alleged action in an official capacity
as a director or officer or in any other capacity while serving as a director or
officer shall be indemnified and held harmless by the Corporation to the fullest
extent authorized by the DGCL, as the same exists or may hereafter be amended
(but, in the case of any such amendment, only to the extent that such amendment
permits the Corporation to provide broader indemnification rights than said law
permitted the Corporation to provide prior to such amendment), against all
expense, liability and loss (including attorneys' fees, judgments, fines, ERISA
excise taxes or penalties and amounts paid or to be paid in settlement) incurred
or suffered by such person in connection therewith and such director or officer
and shall inure to the benefit of his or her heirs, executors and
administrators; provided, however, that, except as provided in Section 6.2
hereof, the Corporation shall indemnify any such person seeking indemnification
in connection with a proceeding (or part thereof) initiated by such person only
if such proceeding (or part thereof) was authorized by the Board of Directors of
the Corporation. The right to indemnification conferred in this Section 6.1
shall be a contract right and shall include the right to be paid by the
Corporation the expenses incurred in defending any such proceeding in advance of
its final disposition; provided, however, that, if the DGCL requires, the
payment of such expenses incurred by a director or officer in his or her
capacity as a director or officer (and not in any other capacity in which
service was or is rendered by such person while a director or officer,
including, without limitation, service to an employee benefit plan) in advance
of the final disposition of a proceeding, shall be made only upon delivery to
the Corporation of an undertaking, by or on behalf of such director or officer,
to repay all amounts so advanced if it shall ultimately be determined that such
director or officer is not entitled to be indemnified under this
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Section 6.1 or otherwise. The Corporation may, by action of its Board of
Directors, provide indemnification to employees and agents of the Corporation
with the same scope and effect as the foregoing indemnification of directors and
officers.
Section 6.2 Right of Claimant to Bring Suit. If a claim under Section 6.1
-------------------------------
is not paid in full by the Corporation within thirty (30) days after a written
claim has been received by the Corporation, the claimant may at any time
thereafter bring suit against the Corporation to recover the unpaid amount of
the claim and, if successful in whole or in part, the claimant shall be entitled
to be paid also the expense of prosecuting such claim. It shall be a defense to
any such action (other than an action brought to enforce a claim for expenses
incurred in defending any proceeding in advance of its final disposition where
the required undertaking, if any is required, has been tendered to the
Corporation) that the claimant has not met the standards of conduct which make
it permissible under the DGCL for the Corporation to indemnify the claimant for
the amount claimed, but the burden of proving such defense shall be on the
Corporation. Neither the failure of the Corporation (including its Board of
Directors, independent legal counsel or its stockholders) to have made a
determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in the DGCL, nor an actual
determination by the Corporation (including its Board of Directors, independent
legal counsel or its stockholders) that the claimant has not met such
applicable standard of conduct, shall be a defense to the action or create a
presumption that the claimant has not met the applicable standard of conduct.
Section 6.3 Non-Exclusivity of Rights. The right to indemnification and
-------------------------
the payment of expenses incurred in defending a proceeding in advance of its
final disposition conferred in this Article VI shall not be exclusive of any
other right which any person may have or hereafter acquire under any statute,
provision of the Certificate of Incorporation, Bylaws, agreement, vote of
stockholders or disinterested directors or otherwise.
Section 6.4 Insurance. The Corporation may maintain insurance, at its
---------
expense, to protect itself and any director, officer, employee or agent of the
Corporation or another corporation, partnership, joint venture, trust or other
enterprise against any such expense, liability or loss, whether or not the
Corporation would have the power to indemnify such person against such expense,
liability or loss under the DGCL.
ARTICLE VII
General Provisions
Section 7.1 Seal. The seal of the Corporation shall be in such form as
----
shall be approved by the Board of Directors. The seal may be used by causing it
or a facsimile thereof to be impressed or affixed or reproduced or otherwise, as
may be prescribed by law or custom or by the Board of Directors.
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Section 7.2 Fiscal Year. The fiscal year of the Corporation shall begin on
-----------
January 1 and end on December 31 of each year.
Section 7.3 Checks, Notes, Drafts, Etc. All checks, notes, drafts or other
--------------------------
orders for the payment of money of the Corporation shall be signed, endorsed or
accepted in the name of the Corporation by such officer, officers, person or
persons as from time to time may be designated by the Board of Directors or by
an officer or officers authorized by the Board of Directors to make such
designation.
Section 7.4 Voting of Stock in Other Corporations. Unless otherwise
-------------------------------------
provided by resolution of the Board of Directors, the Chief Executive Officer,
from time to time, may (or may appoint one or more attorneys or agents to) cast
the votes that the Corporation may be entitled to cast as a stockholder or
otherwise in any other corporation, any of whose shares or securities may be
held by the Corporation, at meetings of the holders of the shares or other
securities of such other corporation, or consent in writing to any action by any
such other corporation. In the event one or more attorneys or agents are
appointed, the Chief Executive Officer may instruct the person or persons so
appointed as to the manner of casting such votes or giving such consent. The
Chief Executive Officer may, or may instruct the attorneys or agents appointed
to, execute or cause to be executed in the name and on behalf of the Corporation
and under its seal or otherwise, such written proxies, consents, waivers or
other instruments as may be necessary or proper in the circumstances relating to
securities owned by the Corporation.
Section 7.5 Dividends. Subject to the provisions of the DGCL and the
---------
Certificate of Incorporation, dividends upon the shares of capital stock of the
Corporation may be declared by the Board of Directors at any regular or special
meeting in accordance with the voting requirements set forth in Section 3.10 if
applicable. Dividends may be paid in cash, in property or in shares of stock of
the Corporation, unless otherwise provided by the DGCL or the Certificate of
Incorporation.
Section 7.6 Certain Prohibited Business Activities. So long as PNC Bank
--------------------------------------
Corp. ("PNC") (or any successor company thereof) owns, directly or indirectly,
at least ten percent (10%) of the capital stock or five percent (5%) of any
"class" of "voting securities" (as those terms are defined for purposes of the
Federal Reserve Board's Regulation Y or any successor regulation thereto) of the
Corporation, the Corporation or any successor entity to the Corporation shall be
prohibited, without PNC's (or any successor company thereof) consent, from
directly or indirectly owning any asset or engaging in any activity if to do so
would cause the Corporation or any subsidiary thereof or PNC (or any successor
company thereof) or any direct or indirect bank or nonbank subsidiary of PNC (or
any successor company thereof) (a "PNC Entity") that owns capital stock of the
Corporation to be in violation of any applicable federal banking law or any
rule, regulation, policy or order of any federal banking regulator with
jurisdiction over the Corporation or a PNC Entity. The Corporation will, and
will cause its subsidiaries to, take any necessary action to ensure compliance
with this Section 7.6, including, without limitation, obtaining any required
approval from, or filing any required notice or application with, any applicable
federal banking agency. In the event that PNC (or any successor company thereof)
owns less than
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10% of the capital stock and less than 5% of any class of voting securities of
the Corporation, the Corporation or such successor shall provide PNC (or any
successor company thereof) with written notice before engaging in new activities
or investing in assets not permissible under the banking laws in order to allow
PNC sufficient time as is reasonably required after such notice to restructure
PNC's (or any successor company thereof) investment in the Corporation
(including, without limitation, time to obtain regulatory approval prior to
moving PNC's (or any successor company thereof) investment to a non-bank
subsidiary of PNC (or any successor company thereof) and shall cooperate with
PNC (or any successor company thereof) as necessary to restructure PNC's (or any
successor company thereof) investment so as to remove the Corporation and its
subsidiaries from the activities and investment restrictions of applicable
banking laws.
ARTICLE VIII
Amendments
Section 8.1 By the Board of Directors. Except as otherwise provided in
-------------------------
Section 8.2 below and subject to Section 3.10, these Bylaws may be amended,
altered, changed, adopted and repealed or new bylaws adopted by the affirmative
vote of at least a majority of the members of the Board of Directors then in
office at any regular or special meeting; provided, however, that prior to the
Trigger Date, the affirmative vote of at least eighty percent (80%) of the
entire Board of Directors shall be required to amend, alter, change, adopt or
repeal any provision of these Bylaws or to adopt any new bylaw.
Section 8.2 By the Stockholders. Prior to the Trigger Date, these Bylaws
-------------------
may be amended, altered, changed, adopted and repealed or new bylaws adopted by
the affirmative vote of at least a majority of the voting power of the capital
stock of the Corporation issued, outstanding and entitled to vote thereon;
provided, however, that as of and following the Trigger Date, any proposed
amendment, alteration, change, adoption or repeal of, or the adoption of any
bylaw inconsistent with any of Sections 2.3, 2.9, 2.10, or 2.12 of Article II or
Sections 3.2 and 3.4 of Article III or this Article VIII of these Bylaws shall
require the affirmative vote of the holders of at least eighty percent (80%) of
the voting power of all of the then outstanding capital stock of the Corporation
entitled to vote thereon voting as a single class.
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EXHIBIT 4.2
AMENDED AND RESTATED
STOCKHOLDERS AGREEMENT
By and Among
BLACKROCK, INC.
PNC ASSET MANAGEMENT, INC.
and
CERTAIN EMPLOYEES OF BLACKROCK, INC.
AND ITS AFFILIATES
________ __, 1999
<PAGE>
AMENDED AND RESTATED STOCKHOLDERS AGREEMENT
-------------------------------------------
This AMENDED AND RESTATED STOCKHOLDERS AGREEMENT (this "Agreement") is made
and entered into as of _______ __, 1999, by and among BLACKROCK, INC., a
Delaware corporation ("BlackRock"), PNC ASSET MANAGEMENT, INC., a Delaware
corporation ("PAM"), and the parties identified on the signature pages hereto as
Employee Stockholders (as defined herein) or their Permitted Transferees (as
defined herein).
BACKGROUND
----------
BlackRock Financial Management, Inc. ("BFM"), a predecessor in interest to
BlackRock, PAM, and certain Employee Stockholders (as defined below) were
parties to a Shareholders Agreement, dated January 31, 1998 ("BFM Stockholders
Agreement"), with respect to the shares of common stock of BFM (the "BFM Common
Stock") outstanding immediately prior to the date thereof.
In the Exchange Agreement, dated March 31, 1998 (the "Exchange Agreement"),
PAM and the Employee Stockholders exchanged their shares of BFM Common Stock for
shares of common stock, no par value, of BlackRock ("Old BlackRock Common
Stock") on a one share for one share basis.
The BFM Stockholders Agreement was terminated in its entirety with the
execution of a new stockholders agreement by and among BlackRock, PAM and
certain Employee Stockholders, dated as of April 30, 1998 ("1998 Stockholders
Agreement"). As of such date, BlackRock issued additional shares of Old
BlackRock Common Stock to certain Employee Stockholders, and the holders of such
additional Old BlackRock Common Stock as well as the other holders of Old
BlackRock Common Stock outstanding immediately prior to the date thereof became
subject to the terms and conditions of the 1998 Stockholders Agreement.
BlackRock intends to offer common stock for sale to the public in a
domestic offering and an international offering (together, the "Offerings").
Immediately prior to the completion of the Offerings, BlackRock will adopt an
Amended and Restated Certificate of Incorporation (the "Certificate of
Incorporation") which, among other things, will provide for the recapitalization
of BlackRock by creating two classes of common stock. In the recapitalization,
each outstanding share of Old BlackRock
1
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Common Stock will be changed and reclassified into 275 shares of Class B Common
Stock, par value $0.01 per share ("Class B Common Stock"). PAM and the Employee
Stockholders will be the sole holders of Class B Common Stock. A second class of
common stock, Class A Common Stock, par value $0.01 per share ("Class A Common
Stock" and, together with the Class B Common Stock, "Common Stock"), will be
sold to the public in the Offerings. The Class A Common Stock and the Class B
Common Stock will be identical in all respects, except that each share of Class
B Common Stock is entitled to five votes while each share of Class A Common
Stock will be entitled to one vote.
The parties to the 1998 Stockholders Agreement agree that certain changes
to the 1998 Stockholders Agreement will be necessary and desirable and in the
best interests of BlackRock, PAM and the Employee Stockholders if the Offerings
are completed, and, therefore, the parties desire to enter into this Agreement
which on the Effective Date will amend and restate the 1998 Stockholders
Agreement.
TERMS
-----
NOW, THEREFORE, in consideration of the foregoing and the covenants set
forth herein, the parties hereto agree as follows:
ARTICLE 1.
DEFINITIONS
For purposes of this Agreement, in addition to terms defined elsewhere
herein, the following terms when used herein shall have the following meanings:
1.1 "1940 Act" means the Investment Company Act of 1940, as amended, and
the rules and regulations of the Securities and Exchange Commission (the
"Commission") promulgated thereunder, as now or hereafter in effect.
1.2 "Affiliate" of, or any person or entity "affiliated" with, the person
or entity specified shall mean any corporation, partnership, joint venture,
association, organization or other person or entity that directly, or indirectly
through one or more intermediaries, controls or is controlled by, or is under
common control with, the person or entity specified.
2
<PAGE>
1.3 "BlackRock Board" shall mean the Board of Directors of BlackRock.
1.4 "BlackRock Employee Shares" means any shares of Class B Common Stock
owned by any Employee Stockholder or acquired from an Employee Stockholder by a
Permitted Transferee.
1.5 "BlackRock Management Committee" means a committee consisting of the
Chief Executive Officer and President of BlackRock and not less than five (5)
Managing Directors of BlackRock or its subsidiaries who are designated from time
to time by the Chief Executive Officer and President of BlackRock to serve on
this committee.
1.6 "Change of Control of PNC" shall be deemed to occur if, whether by
virtue of an actual or threatened proxy contest (including a consent
solicitation) or any merger, reorganization, consolidation or similar
transaction Persons who are directors of PNC immediately prior to such proxy
contest or the execution of the agreement pursuant to which such transaction is
consummated (other than a director whose initial assumption of office was in
connection with a prior actual or threatened proxy contest) cease to constitute
a majority of the Board of Directors of PNC or any successor entity immediately
following such proxy contest or the consummation of such transaction.
1.7 "Change of Control of BlackRock" shall be deemed to occur if (i) due
to a transfer of Voting Stock, a person other than PNC or its Affiliates holds a
majority of the voting power of the Voting Stock; or (ii) whether by virtue of
an actual or threatened proxy contest (including a consent solicitation) or any
merger, reorganization, consolidation or similar transaction, Persons who are
directors of BlackRock immediately prior to such proxy contest or the execution
of the agreement pursuant to which such transaction is consummated (other than a
director whose initial assumption of office was in connection with a prior
actual or threatened proxy contest) cease to constitute a majority of the Board
of Directors of BlackRock or any successor entity immediately following such
proxy contest or the consummation of such transaction.
3
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1.8 "Cause" shall have the meaning ascribed to it in each Employee
Stockholder's employment agreement with BlackRock or its Affiliates, if any.
1.9 "Deficient Opportunity" shall have the meaning ascribed to it in each
Employee Stockholder's employment agreement with BlackRock or its Affiliates, if
any.
1.10 "Disability" shall mean an Employee Stockholder's physical or mental
incapacity constituting disability in accordance with Employer's long-term
disability policy which in any event does or is reasonably expected to continue
for at least six (6) months.
1.11 "Effective Date" shall mean the effective date of this Agreement as
provided in Section 6.1 hereof.
1.12 "Employee Stockholders" means all holders of Class B Common Stock who
are employees of BlackRock or any of its Affiliates and who are parties to this
Agreement.
1.13 "Employer" shall mean, with respect to any Employee Stockholder,
BlackRock or any Affiliate thereof that employs such Employee Stockholder.
1.14 "Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the Commission promulgated thereunder, as now
or hereafter in effect.
1.15 "Good Reason" shall have the meaning ascribed to it in each Employee
Stockholder's employment agreement with BlackRock or its Affiliates, if any.
1.16 "Insolvency" of any party hereto means that (i) the party or its
parent entity, if applicable, commences a voluntary case under the Federal
bankruptcy laws or any other applicable Federal or state bankruptcy, insolvency
or similar law, or consents to the entry of an order for relief in an
involuntary case under any such law or to the appointment of a receiver,
liquidator, assignee, custodian, trustee, sequestrator (or other similar
official) of the party or its parent entity, if applicable, or of any
substantial part of its property, or makes an assignment for the benefit of its
creditors, or admits in writing its inability to pay its debts as they become
due or (ii) a decree or order for relief in respect of the party or its parent
entity, if applicable, is entered by a court having jurisdiction in an
involuntary case under the Federal bankruptcy laws or any other applicable
Federal or state bankruptcy, insolvency or
4
<PAGE>
similar law, or appointing a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or other similar official) of the party or its parent entity, if
applicable, or of any substantial part of its property, or, if applicable,
ordering the winding up or liquidation of its affairs, and any such decree or
order shall be unstayed and in effect for a period of 90 days and on account of
any such event the party or its parent entity, if applicable, shall, if
applicable, liquidate, dissolve or wind up.
1.17 "Market Value" shall mean, with respect to each share of Class B
Common Stock and Class A Common Stock, the average closing price per share of
Class A Common Stock on the New York Stock Exchange (as reported by The Wall
Street Journal or other authoritative source) for the ten (10) trading days
immediately preceding the date of determination.
1.18 "PNC" shall mean PNC Bank Corp., a Pennsylvania corporation.
1.19 "Registration Rights Agreement" shall mean the Registration Rights
Agreement, dated the date hereof, by and among BlackRock, PAM and the Employee
Stockholders.
1.20 "Securities Act" shall mean the Securities Act of 1933, as amended,
and the rules and regulations of the Commission promulgated thereunder, as now
or hereafter in effect.
1.21 "Transfer" shall mean any actual or proposed disposition of all or a
portion of an interest (legal or equitable) by any means, direct or indirect,
absolute or conditional, voluntary or involuntary, including, but not limited
to, by sale, assignment, put, transfer, pledge, hypothecation, mortgage or other
encumbrance, court order, operation of law, distribution, settlement, exchange,
waiver, abandonment, gift, alienation, bequest or disposal. Notwithstanding the
foregoing, the term Transfer shall not include any pledge of BlackRock Employee
Shares to a financial institution in connection with any financing of the
purchase of BlackRock Employee Shares by an Employee Stockholder, or, in the
event of any default of any Employee Stockholder in connection with such
financing, any foreclosure by such financial institution on such BlackRock
Employee Shares, provided that such financial institution agrees to be subject
to and bound by the terms of this Agreement.
1.22 "Trigger Date" shall mean the first date following the date upon which
PAM or any PAM Affiliate or a Controlling Stockholder (as defined in
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<PAGE>
BlackRock's Certificate of Incorporation) ceases to be the holder or beneficial
owner of a majority of the voting power of the Voting Stock.
1.23 "Voting Stock" shall mean the then outstanding shares of capital stock
of BlackRock entitled to vote generally on the election of directors and shall
exclude any class or series of capital stock of BlackRock only entitled to vote
in the event of dividend arrearages or any default under any provision of such
series thereon whether or not at the time of determination there are any such
dividend arrearages or defaults.
ARTICLE 2.
GOVERNANCE AND OPERATION OF BLACKROCK
2.1 Rights of BlackRock Employee Shares. Except for the restrictions on
-----------------------------------
transfer imposed by this Agreement and any other agreements between the holders
of the BlackRock Employee Shares and BlackRock or any Affiliate thereof and/or
PAM, each BlackRock Employee Share shall have the same rights and privileges,
including voting rights, as the other shares of Class B Common Stock.
2.2 BlackRock Board of Directors.
----------------------------
(a) Following the Effective Date and for so long as PAM and its
Affiliates own in the aggregate Voting Stock representing at least twenty-five
percent (25%) of the voting power of the Voting Stock, subject to applicable
law, (i) the Employee Stockholders agree to vote their Employee Shares for the
election of the four (4) director candidates nominated by PAM or its Affiliates
and (ii) PAM agrees to vote its shares of Class B Common Stock for the two (2)
director candidates nominated by the BlackRock Management Committee. From and
after the time PAM and its Affiliates own in the aggregate Voting Stock
representing less than twenty-five percent (25%) but more than ten percent (10%)
of the voting power of the Voting Stock, subject to applicable law, (x) the
Employee Stockholders agree to vote their Employee Shares for the election of
two (2) director candidates nominated by PAM or its Affiliate and (y) PAM agrees
to vote its shares of Class B Common Stock for two (2) director candidates
nominated by the BlackRock Management Committee.
(b) Following the Effective Date, subject to applicable law, the
Employee Stockholders and PAM agree not to take any action to amend the
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Amended and Restated Certificate of Incorporation (the "Certificate of
Incorporation") or the Bylaws of BlackRock in effect on the Effective Date in a
manner that would be inconsistent with the provisions of this Agreement, as
amended from time to time, and will vote their shares of Voting Stock against
any such proposed amendment.
(c) From and after such time as a person or entity other than PNC or
its Affiliate (the "Subsequent Principal Stockholder") owns capital stock of
BlackRock representing fifty percent (50%) or more of the voting power of the
Voting Stock, PAM's rights under this Section 2.2 shall be transferred and
assigned to the Subsequent Principal Stockholder.
ARTICLE 3.
TRANSFER RESTRICTIONS ON BLACKROCK EMPLOYEE SHARES;
PERMITTED TRANSFERS OF BLACKROCK EMPLOYEE SHARES
3.1 Transfer Restrictions on BlackRock Employee Shares. Except as
--------------------------------------------------
expressly set forth in this Agreement, the BlackRock Employee Shares may not be
transferred, and any purported Transfer in violation of this provision shall be
null and void; provided that the restrictions on Transfer set forth in this
Section 3.1 will lapse with respect to one third of the BlackRock Employee
Shares held by each Employee Stockholder or Permitted Transferee on each of
December 31, 2000, December 31, 2001 and December 31, 2002 with respect to
shares issued prior to September 1999, or on each of September [ ],
September [ ] and September [ ] with respect to shares
issued in September 1999 (or such other dates as may be applicable to subsequent
issuances of Class B Common Stock), unless this restriction on Transfer is
earlier removed or accelerated in accordance with the provisions of this
Agreement or in accordance with the provisions of the Employee Stockholder's
employment agreement with BlackRock or its Affiliates. BlackRock Employee Shares
which are subject to this restriction on Transfer are sometimes referred to
herein as "Restricted BlackRock Employee Shares"; BlackRock Employee Shares on
which this restriction on Transfer has lapsed are sometimes referred to herein
as "Unrestricted BlackRock Employee Shares."
3.2 Lapse of Transfer Restrictions on Restricted BlackRock Employee
---------------------------------------------------------------
Shares. The restrictions on Transfer set forth in Section 3.1 hereof will lapse
- ------
immediately with respect to all Restricted BlackRock Employee Shares held by an
Employee Stockholder or any Permitted Transferee thereof and such shares shall
7
<PAGE>
become Unrestricted BlackRock Employee Shares in the event of the termination of
an Employee Stockholder's employment:
(i) by reason of death or Disability;
(ii) by Employer without Cause or Good Reason; or
(iii) if applicable, by such Employee Stockholder by reason of a
Deficient Opportunity.
For purposes of this Section 3.2, if BlackRock or an affiliate thereof
proposes to terminate the Employee Stockholder's employment for Cause or Good
Reason, as determined by BlackRock's chief executive officer and a majority of
the members of Management Committee (or, with respect to the individual who is
the chief executive officer on the date hereof, as determined by a majority of
the members of BlackRock's Board), BlackRock's chief executive officer (or, with
respect to the individual who is the chief executive officer on the date hereof,
BlackRock's Board) shall immediately notify the Employee Stockholder of such
fact in writing, specifying the action or conduct which resulted in such
determination (the date on which such notice is given being hereinafter referred
to as the "Notice Date"). Within 30 days, the Employee Stockholder shall have
the right to cure such action or conduct or to submit the determination of Cause
or Good Reason, as the case may be, to binding arbitration in accordance with
the Rules of the American Arbitration Association then in force. The award in
any such arbitration proceedings shall be nonappealable except as provided in
applicable arbitration statutes. If: (i) within 30 days, the Employee
Stockholder fails to cure such action or conduct to the satisfaction of
BlackRock's chief executive officer and a majority of the members of Management
Committee (or, with respect to the individual who is the chief executive officer
on the date hereof, to the satisfaction of BlackRock's Board) and fails to seek
arbitration of such determination of Cause or Good Reason, the termination shall
be treated as a termination for Cause or Good Reason as of such thirtieth day;
or (ii) the determination of Cause or Good Reason is upheld in arbitration, the
termination shall be treated as a termination for Cause or Good Reason as of the
date of such determination; or (iii) the determination of Cause or Good Reason
is overturned in arbitration, the termination shall be treated as a termination
without Cause or Good Reason as of the date of such determination.
3.3 Permitted Transfers of BlackRock Employee Shares.
------------------------------------------------
(a) Notwithstanding anything in Section 3.1 hereof to the contrary,
unless Article 4 is applicable to a proposed Transfer and is complied with,
Employee Stockholders shall be entitled to Transfer Restricted BlackRock
Employee Shares and Unrestricted BlackRock Employee Shares to a Permitted
Transferee; provided that (i) the Permitted Transferee executes a counterpart
copy of this Agreement and agrees to be bound by its terms and conditions and
(ii) the Permitted Transferee executes an irrevocable proxy in favor of the
transferring Employee Stockholder (or PAM or another Employee Stockholder in the
case of a Permitted Transferee that is an estate or personal representative)
entitling the proxyholder to exercise all voting rights with respect to the
transferred BlackRock Employee Shares.
(b) For purposes of this Agreement, "Permitted Transferee" means with
respect to any Employee Stockholder (i) BlackRock and its Affiliates, (ii) the
estate or personal representative of the Employee Stockholder (iii) any spouse,
child, grandchild or parent of the Employee Stockholder or (iv) any trust,
corporation, partnership, limited liability company or other entity if
substantially all of the economic interests in such entity are held by or for
the benefit of the Employee Stockholder and/or persons specified in clauses (ii)
or (iii) at all times while such entity holds any BlackRock Employee Shares.
(c) If any person who was a Permitted Transferee at the time an
Employee Stockholder transferred BlackRock Employee Shares to such person ceases
to be a Permitted Transferee for any reason, such person must Transfer any
BlackRock Employee Shares held by such person back to the applicable Employee
Stockholder or another Permitted Transferee designated by such Employee
Stockholder. If an Employee Stockholder Transfers BlackRock Employee Shares to
a Permitted Transferee and such Employee Stockholder ceases to be employed by
8
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BlackRock, this Agreement shall apply to all BlackRock Employee Shares held by
such Permitted Transferee that were Transferred by such Employee Stockholder and
such BlackRock Employee Shares shall be treated for all purposes as if held by
such Employee Stockholder at the time he or she ceased to be employed by
BlackRock.
(d) Notwithstanding anything to the contrary set forth herein, any
Employee Stockholder may pledge such Unrestricted BlackRock Employee Shares to a
pledgee pursuant to a bona fide pledge of such shares as collateral security for
any indebtedness or other obligation of any person; provided that, even if such
shares are registered in the name of the pledgee or its nominee (which
registration is hereby expressly permitted and shall not be considered a
Transfer hereunder), such shares shall remain subject to the provisions of this
subparagraph 3.3(d). In the event that such pledged shares of Class B Common
Stock (the "Pledged Stock") are foreclosed upon, each share of such Pledged
Stock shall be deemed, without further act on the part of the holder thereof or
BlackRock, to be converted into one share of Class A Common Stock, and stock
certificates formerly representing each such share of Class B Common Stock shall
thereupon and thereafter be deemed to represent such number of shares of Class A
Common Stock as equals the number of shares of Class A Common Stock into which
such shares of Class B Common Stock are converted effective upon the earlier of
(i) if the pledgor is contesting the foreclosure on such shares of Pledged
Stock, 30 days after the date on which the foreclosure on such Pledged Stock
becomes final and non-appealable or (ii) if the pledgor is not contesting the
foreclosure on such shares of Pledged Stock, 30 days after the date on which
such Pledged Stock is foreclosed upon; provided that the Pledged Stock shall not
be automatically converted as provided herein as a result of such foreclosure
if, prior to expiration of such 30-day period, the Pledged Stock shall be
transferred by the pledgee or the purchaser in such foreclosure to another
Employee Stockholder or one or more Permitted Transferees of an Employee
Stockholder.
(e) Notwithstanding anything to the contrary herein, BlackRock will
not register the Transfer of any shares of Class B Common Stock unless the
transferee and the transferor of such Class B Common Stock have furnished such
affidavits and other proof as BlackRock may reasonably request to establish that
such proposed transferee is a Permitted Transferee. Any purported Transfer
which is not permitted hereunder shall be null and void and shall not be
registered in the books and records of BlackRock.
3.4 BlackRock Board Approval Required for Certain Transfers of Class B
------------------------------------------------------------------
Common Stock.
- ------------
9
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(a) Notwithstanding any provision of this Agreement to the contrary,
no Transfer of any BlackRock Employee Shares may be made by any Employee
Stockholder or Permitted Transferee without the prior written consent of the
BlackRock Board if (i) as a result of such Transfer, BlackRock would be required
to register any class of its securities under the Securities Act, except if
BlackRock is required to register Class A Common Stock under the terms of the
Registration Rights Agreement or (ii) if such Transfer would constitute an
assignment of the advisory agreements of BlackRock or any investment advisory
subsidiary of BlackRock for purposes of the 1940 Act or the Investment Advisers
Act of 1940, as amended ("Advisers Act"). Any Transfer of BlackRock Employee
Shares consented to by the BlackRock Board that constitutes an assignment for
purposes of the 1940 Act shall only be consummated after entering into and
obtaining appropriate covenants to assure compliance with Section 15(f) of the
1940 Act.
(b) In connection with a Transfer of Class B Common Stock (or Class A
Common Stock into which such Class B Common Stock has been converted) by PAM or
an Affiliate thereof (i) PAM or its Affiliate shall (A) use its best efforts and
take all actions necessary or appropriate to cooperate with BlackRock in
complying with any requirements of the 1940 Act and the Advisers Act applicable
to such Transfer; and (B) require, as a condition of the closing of any such
Transfer, compliance with the second sentence of Section 3.4(a); and (ii)
BlackRock shall use its best efforts and take all actions necessary or
appropriate to cooperate with PAM or its Affiliate and with the transferee in
complying with any requirements of the 1940 Act, the Advisers Act and Section
3.4(a) applicable to such Transfer.
(c) Any purported Transfer which would result in a violation of
Section 3.4(a) hereof shall be null and void.
3.5 Restricted BlackRock Employee Shares Not Convertible Into Class A
-----------------------------------------------------------------
Common Stock. No shares of Class B Common Stock may be converted into shares of
- ------------
Class A Common Stock so long as such shares of Class B Common Stock are
Restricted BlackRock Employee Shares.
ARTICLE 4.
STOCKHOLDERS' RIGHT OF FIRST REFUSAL ON
DISPOSITIONS OF BLACKROCK CLASS B COMMON STOCK
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4.1 Transfers of Class B Common Stock to Third Parties. Subject to
--------------------------------------------------
compliance with the provisions of Article 4 of this Agreement, PAM may Transfer,
in whole or in part, its shares of Class B Common Stock, and any Employee
Stockholder or Permitted Transferee may transfer, in whole or in part,
Unrestricted BlackRock Employee Shares beneficially owned by the Employee
Stockholder or a Permitted Transferee, to any third party at any time after the
Effective Date.
4.2 Offer Notice Regarding the BlackRock Common Stock. Except as
-------------------------------------------------
otherwise provided in Section 4.9 hereof, if at any time after the Effective
Date any stockholder wishes to Transfer all or any part of the unrestricted
shares of Class B Common Stock held by such stockholder (a "Transferring
Stockholder") to another party to this Agreement or to a third party in a
private sale, pursuant to an effective registration statement under the
Securities Act or otherwise, other than Transfers permitted by Section 3.3 of
this Agreement which are not subject to this Article 4, the Transferring
Stockholder shall give written notice (the "Offer Notice") of the proposed
transaction to BlackRock and to the other parties to this Agreement (i)
identifying the Proposed Transferee, (ii) setting forth the proposed terms of
such Transfer, which shall be limited to transactions involving cash, cash
equivalents or marketable securities against delivery of the Class B Common
Stock, (iii) stating the Transfer Percentage (as defined herein) and (iv)
stating (A) whether more than 5% of the outstanding Class B Common Stock will be
transferred and (B) whether the Transfer will constitute an assignment under the
1940 Act. The giving by the Transferring Stockholder of an Offer Notice shall be
deemed to be an offer to Transfer the Class B Common Stock subject to the Offer
Notice to the other stockholders who are parties to this Agreement (to each such
stockholder in proportion to his or her ownership of the total number of
outstanding shares of Class B Common Stock, not counting the shares subject to
the Offer Notice for this purpose) for a purchase price equal to the value
proposed to be paid by the Proposed Transferee.
4.3 Response to Offer Notice. Within thirty (30) days of receipt of such
------------------------
Offer Notice, each stockholder who receives the Offer Notice must notify the
Transferring Stockholder whether such stockholder will exercise his, her or its
right to purchase the Class B Common Stock subject to the Offer Notice. Any
eligible stockholder that does not respond to the Offer Notice within the
allotted thirty (30) day period shall not have any right to purchase shares of
Class B Common Stock subject to the Offer Notice. Each stockholder who receives
the Offer Notice may indicate in his, her or its response to the Offer Notice a
number of shares of Class B Common Stock that such stockholder is prepared to
purchase in addition to any shares of Class
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<PAGE>
B Common Stock which are allocated to such stockholder based on such
stockholder's proportionate ownership of BlackRock. Any shares of Class B Common
Stock which are subject to the Offer Notice which are not claimed by any
stockholder entitled to claim such shares shall be allocated to those
stockholders who indicate in their response to the Offer Notice that they are
prepared to purchase remaining shares of Class B Common Stock in addition to the
shares which are allocated to them based on the proportionate ownership
criteria. If the stockholders who express an interest in purchasing remaining or
additional shares of Class B Common Stock indicate an interest in more shares
than are available from the remaining shares being offered by the Transferring
Stockholder, such remaining shares shall be allocated among the stockholders
expressing an interest in purchasing additional shares in proportion to such
stockholders' relative ownership percentages of Class B Common Stock.
4.4 Settlement for Purchases by Stockholders. Settlement for Class B
----------------------------------------
Common Stock to be purchased by stockholders pursuant to this Article 4 shall be
thirty (30) calendar days after the expiration of the thirty (30) day period
provided for in Section 4.3 hereof or such other date as may be agreed to by the
relevant parties. At such settlement, (i) the stockholders who have elected to
purchase Class B Common Stock pursuant to this Article 4 shall deliver the
consideration for such shares to the Transferring Stockholder and (ii) the
Transferring Stockholder shall deliver properly endorsed certificates
representing such Class B Common Stock to the appropriate other stockholders.
4.5 Right to Transfer to Proposed Transferee. Subject to Section 4.6 of
----------------------------------------
this Agreement, to the extent eligible stockholders of BlackRock do not exercise
their purchase rights pursuant to this Article 4, the Transferring Stockholder
may, within three months from the date of the Offer Notice, if no eligible
stockholders exercise their purchase right, or the date of settlement pursuant
to Section 4.4 hereof, if some eligible stockholders exercise their purchase
right, Transfer all or a portion of the shares of Common Stock which were
subject to the Offer Notice and not purchased by other eligible stockholders of
BlackRock pursuant to this Article 4, to the Proposed Transferee identified in
the Offer Notice at a purchase price equal to or greater than the purchase price
specified by the Transferring Stockholder in the Offer Notice. If the
Transferring Stockholder does not Transfer the Common Stock in the three-month
period provided for in this Section 4.5, a Transfer by the Transferring
Stockholder after such period shall again be subject to the provisions of this
Article 4 or, if applicable, Article 3.
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4.6 Tag Along Rights.
----------------
(a) If a Transferring Stockholder proposes to Transfer more than five
percent 5% of the outstanding Voting Stock pursuant to Section 4.2 hereof, each
BlackRock stockholder that is a party to this Agreement that elects to not
exercise the purchase right pursuant to Section 4.3 hereof shall be entitled to
exercise tag along rights as set forth in this Section 4.6 by written notice (a
"Tag Along Notice") to the Transferring Stockholder not later than 30 days
following receipt of the related Offer Notice. The tag along rights provided in
this Article 4 shall not apply to any transfer of shares of Class A Common
Stock. The Tag Along Notice shall specify the number of shares of Class B Common
Stock that such stockholder shall request to Transfer pursuant to this Section
4.6, the maximum number of which shall be determined in accordance with the
provisions set forth below:
(i) If the proposed Transfer shall not constitute an assignment
under the 1940 Act, each such BlackRock stockholder shall be entitled to require
Transfer a maximum number of such BlackRock stockholder's shares of Class B
Common Stock equal to the product of (A) the ratio of the number of shares of
Class B Common Stock proposed to be transferred by the Transferring Stockholder
to the total number of shares of Class B Common Stock held by such Transferring
Stockholder (the "Transfer Percentage") and (B) the total number of
unrestricted shares of Class B Common Stock held by such BlackRock stockholder.
(ii) If the proposed Transfer shall constitute an assignment
under the 1940 Act, (A) the restriction on Transfer set forth in Section 3.1
hereof will lapse immediately with respect to that number of Restricted
BlackRock Employee Shares held by each Employee Stockholder or any Permitted
Transferee thereof equal to (x) the product of the Transfer Percentage and the
total number of shares of Class B Common Stock held by such Employee Stockholder
or Permitted Transferee thereof, minus (y) the total number of Unrestricted
BlackRock Employee Shares held by such Employee Stockholder or any Permitted
Transferee thereof (provided that if such number shall be negative such number
shall be deemed to be zero) and (B) each such BlackRock stockholder shall be
entitled to require Transfer of a maximum number of such BlackRock stockholder's
shares of Class B Common Stock equal to the product of the Transfer Percentage
and the total number of shares of Class B Common Stock held by such BlackRock
stockholder.
(iii) Notwithstanding the provisions of clauses (i) and (ii)
above, if the Proposed Transferee advises the Transferring Stockholder that it
will not purchase the total number of shares offered in the aggregate by the
Transferring
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Stockholder and the other BlackRock stockholders pursuant to this Section 4.6,
then the number of shares that may be Transferred by the Transferring
Stockholder and by each stockholder that has delivered to the Transferring
Stockholder a Tag Along Notice pursuant to this Section 4.6 shall be reduced
ratably on the basis of the number of shares that each such stockholder,
including the Transferring Stockholder, has requested to be included in such
Transfer.
(b) At least ten (10) business days prior to the consummation of a
Transfer by the Transferring Stockholder described in the Offer Notice, the
Transferring Stockholder shall provide written notice (a "Consummation Notice")
to the BlackRock stockholders entitled to exercise tag along rights pursuant to
this Section 4.6 stating (i) the number of shares of Class B Common Stock that
each such stockholder will be entitled to Transfer pursuant to this Section 4.6
and (ii) the date the Transfer will be consummated. At least five (5) business
days prior to the date of the consummation of the Transfer by the Transferring
Stockholder to the Proposed Transferee identified in the Offer Notice, each
stockholder exercising rights pursuant to this Section 4.6 shall deliver to the
Transferring Stockholder for Transfer to the Proposed Transferee one or more
certificates, properly endorsed for Transfer, which represent the number of
shares of Class B Common Stock the stockholder is entitled to sell as provided
in the Consummation Notice. The certificate(s) delivered to the Transferring
Stockholder shall be Transferred to the transferee as part of the consummation
of the Transfer of Class B Common Stock pursuant to the terms and conditions
specified in the Offer Notice and the Consummation Notice.
4.7 Representations of Selling Stockholders. In connection with the
---------------------------------------
Transfer contemplated by Section 4.6 hereof or any Transfer among stockholders
permitted by this Agreement, any selling stockholder shall be required to make
customary representations and warranties regarding the Class B Common Stock that
it proposes to Transfer, including, but not limited to, such stockholder's
ownership of and authority to Transfer such Class B Common Stock, the absence of
any liens or other encumbrances on such Class B Common Stock, and the compliance
of such Transfer with the federal and state securities laws and all other
applicable laws and regulations.
4.8 Insolvency of a Party. The Insolvency of any party hereto shall be
---------------------
deemed to be an offer to sell the Class B Common Stock owned by such party and
its Affiliates and Permitted Transferees (other than a financial institution
referenced in the second sentence of Section 1.17 hereof) to the other
stockholders of BlackRock who are parties hereto in accordance with the terms
and procedures set forth in this
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<PAGE>
Article 4, except that (i) the price per share of Class B Common Stock offered
in such event shall be equal to the Market Value of each share of Class B Common
Stock determined as of the date on which notice of such offer is made in
accordance with the provisions of this Article 4 and (ii) Section 4.6 hereof
shall not apply. If a court or other governmental authority permits a transfer
of Class B Common Stock to a party other than stockholders of BlackRock in
connection with a bankruptcy or other insolvency proceeding notwithstanding the
preceding sentence, such third party shall be subject to and bound by the terms
of this Agreement and shall be required to offer to sell the Class B Common
Stock acquired by such third party to the other stockholders of BlackRock who
are parties to this Agreement in accordance with the first sentence of this
Section 4.8. Each share of Class B Common Stock that is offered for sale
pursuant to this Section 4.8 and is not purchased by the stockholders of
BlackRock who are parties to this Agreement pursuant to this Article 4 shall be
deemed to be offered for sale to BlackRock at a purchase price equal to the
price at which such share was offered to such stockholders of BlackRock and, if
not repurchased by BlackRock within a reasonable time, automatically convert
into one share of Class A Common Stock.
4.9 Transfers to Affiliates. Notwithstanding any other term of this
-----------------------
Agreement to the contrary, PAM may Transfer, in one or more transactions, all or
a portion of the Class B Common Stock held by it to any of its Affiliates and
subsequent Transfers of Class B Common Stock may be made among Affiliates of PNC
(other than BlackRock), provided that (i) any transferee shall agree in writing
prior to such Transfer to be bound by the terms of this Agreement and (ii) any
such Transfer must comply with Section 3.4 hereof. Any Transfer made pursuant to
this Section 4.9 shall not be subject to the other provisions of Article 4 of
this Agreement.
If, at any time, any person that received Class B Common Stock from
PAM or its Affiliates ceases to be an Affiliate of PNC for any reason, such
person must Transfer any shares of Class B Common Stock held by it back to PNC
or another Affiliate of PNC designated by PNC. In addition, if PAM shall cease
to be an Affiliate of PNC while PAM holds any Class B Common Stock, PAM must
Transfer any shares of Class B Common Stock held by it to PNC or an Affiliate of
PNC designated by PNC. Notwithstanding the foregoing provisions of this Section
4.9, PNC may transfer its interest in PAM or another Affiliate of PNC that holds
PNC's direct or indirect interest in shares of Class B Common Stock to a person
that is not an Affiliate of PNC and such transfers shall be deemed a transfer of
Class B Common Stock subject to the terms of this Article 4.
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4.10 Notwithstanding any provisions of this Article 4, each share of Class
B Common Stock that is Transferred by will or operation of law as a result of
the death of an Employee Stockholder or his or her Permitted Transferee shall,
if not Transferred to a Permitted Transferee, automatically convert into one
share of Class A Common Stock.
4.11 In the event that, following a Change of Control of PNC or a Change
of Control of BlackRock, any successor entity to either PNC or BlackRock,
respectively, (i) offers to purchase all or substantially all outstanding shares
of Class A Common Stock or Class B Common Stock or (ii) purchases sufficient
shares of Class A Common Stock to cause such stock to be delisted from the
national securities exchange on which such stock is then listed, PNC or
BlackRock, as applicable, shall require such successor entity to offer to
purchase all Class B Common Stock owned by each Employee Stockholder at the
highest price paid to other stockholders for such Class A Common Stock or Class
B Common Stock, as applicable, in purchases or offers to purchase resulting from
transactions described in clauses (i) or (ii) above, and to offer to cancel all
BlackRock stock options held by each Employee Stockholder, if any, for a cash
payment in an amount based upon the excess of the price offered to other
stockholders over the exercise price of such stock options.
ARTICLE 5.
REPURCHASES OF RESTRICTED BLACKROCK EMPLOYEE SHARES
BY BLACKROCK; MANDATORY CONVERSION OF CLASS B COMMON
STOCK
5.1 Repurchases of Restricted BlackRock Employee Shares Upon Termination
--------------------------------------------------------------------
of Employment. Any Restricted BlackRock Employee Shares held by an Employee
- -------------
Stockholder or a Permitted Transferee of such Employee Stockholder as of the
date of the termination of such Employee Stockholder's employment by Employer,
the restrictions on which have not lapsed as a result of such termination of
employment in accordance with Section 3.2 hereof, shall be offered for sale to
BlackRock and BlackRock shall purchase such shares. The purchase price to be
paid by BlackRock for such Restricted BlackRock Employee Shares shall be the
lower of (i) the Market Value determined as of a date three (3) business days
prior to the date on which such repurchase is consummated pursuant to Section
5.2 hereof or (ii) the consideration paid by the Employee Stockholder for
Restricted BlackRock Employee Shares or the shares of BFM Common Stock that were
exchanged for such Restricted
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BlackRock Employee Shares pursuant to the Exchange Agreement, as the case may
be.
5.2 Settlement for Restricted BlackRock Employee Shares. The purchase by
---------------------------------------------------
BlackRock of Restricted BlackRock Employee Shares pursuant to this Article 5
shall be consummated at a closing which shall take place on a date specified by
BlackRock, which date shall not be later than sixty (60) calendar days following
the effective date of the termination occurrence of the event which requires
BlackRock to purchase Restricted BlackRock Employee Shares.
5.3 Treatment of Unrestricted BlackRock Employee Shares Upon Termination
--------------------------------------------------------------------
of Employment. Subject to Sections 5.1 and 5.2 above, upon the termination of
- -------------
any Employee Stockholder's employment with Employer each share of such Employee
Stockholder's Class B Common Stock shall be converted into one share of Class A
Common Stock. Each Employee Stockholder hereby agrees to comply with the
procedures set forth herein and take any other action required in order to
convert such shares of Class B Common Stock into Class A Common Stock.
ARTICLE 6.
EFFECTIVE DATE; TERMINATION; ADDITIONAL PARTIES
6.1 Effective Date. All rights and obligations set forth in this
--------------
Agreement shall take effect upon the filing of the Certificate of Incorporation
of BlackRock with the Delaware Secretary of State. On the Effective Date, the
1998 Stockholders Agreement shall terminate without any consideration paid
thereunder, and from and after the Effective Date, the 1998 Stockholders
Agreement shall be void and of no force and effect.
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6.2 Termination.
-----------
(a) With respect to any holder of Class B Common Stock, all rights
and obligations set forth in this Agreement, to the extent not previously
terminated, shall terminate at such time as such holder shall cease to own any
shares of Class B Common Stock.
(b) With respect to PAM, all rights and obligations of PAM set forth
in this Agreement, to the extent not previously terminated, shall terminate at
such time as PAM or any Affiliate shall cease to own any shares of Class B
Common Stock.
(c) This Agreement shall terminate automatically if all outstanding
shares Class B Common Stock represents less than five percent (5%) of the voting
power of the outstanding Voting Stock of BlackRock at such time and there are no
remaining Restricted BlackRock Employee Shares.
(d) This Agreement may be terminated at any time upon the mutual
agreement of PAM and the holders of a majority in interest of the BlackRock
Employee Shares.
6.3 Additional Parties. Any person which proposes to acquire any Class B
------------------
Common Stock or any interest therein shall be required as a condition precedent
to such transaction to become a party to this Agreement by executing this
Agreement or a counterpart hereof. Any such additional party shall be subject to
and bound by the terms and conditions of this Agreement. Any employee of
BlackRock or any Affiliate thereof that becomes a party to this Agreement after
the date hereof shall be deemed an "Employee Stockholder" for purposes of this
Agreement. BlackRock shall promptly notify each existing party to this Agreement
of the addition of each new party hereto and such notice shall include the
requisite information for providing notice to such new party pursuant to Section
7.1 hereof
ARTICLE 7.
MISCELLANEOUS
7.1 Notices. All notices, demands and requests required or permitted to
-------
be given under the provisions of this Agreement shall be: (i) in writing, (ii)
sent by telecopy (with receipt personally confirmed by telephone), delivered by
personal
18
<PAGE>
delivery, or sent by commercial delivery service or certified mail, return
receipt requested, (iii) deemed to have been given on the date telecopied with
receipt confirmed, the date of personal delivery or the date set forth in the
records of the delivery service or on the return receipt and (iv) addressed as
follows:
If to BlackRock: BlackRock, Inc.
---------------
345 Park Avenue
New York, New York 10154
Attention: Laurence D. Fink
Telecopy: 212-754-8760
Telephone: 212-754-5546
with a copy (which shall
not constitute notice) to: Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Attention: Matthew J. Mallow
Telecopy: 212-735-2000
Telephone: 212-735-3930
If to PAM: PNC Asset Management, Inc.
---------
c/o PNC Bank Corp.
One PNC Plaza
Pittsburgh, Pennsylvania 15222
Attention: Helen P. Pudlin
Telecopy: 412-768-2875
Telephone: 412-762-7987
with a copy (which shall
not constitute notice) to: Arnold & Porter
555 Twelfth Street, N.W.
Washington, D.C. 20004-1202
Attention: Steven Kaplan
Telecopy: 202-942-5999
Telephone: 202-942-5998
If to an Employee
Stockholder or
Permitted
19
<PAGE>
Transferee: The address set forth on the stock
- ----------
transfer records of BlackRock
or to any such other or additional persons and addresses as the parties may from
time to time designate in writing delivered in accordance with this Section 7.1.
All notices, requests, demands and other communications hereunder shall be
deemed delivered when received by all persons entitled to their receipt.
7.2 Assignability; Binding Effect. This Agreement shall not be assignable
-----------------------------
by any of the parties hereto except as expressly permitted by this Agreement or
in connection with the Transfer of a party's Class B Common Stock in accordance
with the terms of this Agreement. This Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective successors, heirs,
executors, administrators and permitted assigns.
7.3 Governing Law and Dispute Resolution.
------------------------------------
(a) This Agreement and all actions contemplated hereby shall be
construed and enforced in accordance with, and the rights of the parties shall
be governed by, the laws of the State of Delaware applicable to contracts made
and to be performed entirely within the State of Delaware and without giving
effect to its choice or conflict of laws, rules or principles.
(b) If a dispute should arise with respect to the terms of this
Agreement, the parties shall have thirty (30) days from the date written notice
of the dispute is given by one party to another party to resolve the matter
through informal negotiation. If the matter is not resolved within those thirty
(30) days, and if any party wishes to pursue the dispute, the dispute shall be
submitted to binding arbitration under the Commercial Rules of the American
Arbitration Association. Arbitration may be initiated by any party making a
written demand for arbitration to the other party within a reasonable time from
the date the claim, dispute or controversy arose. The party making such demand
shall designate a competent and disinterested arbitrator in such written demand.
Within thirty (30) days of such demand, the other party shall designate a
competent and disinterested arbitrator and shall give written notice of such
designation to the party making the initial demand for arbitration. Within
thirty (30) days after such notices have been given, the two arbitrators so
designated shall select a third competent and disinterested arbitrator and give
notice of such selection to both parties. If the two arbitrators designated by
the parties are unable to agree on a third arbitrator within (30) days, then
upon request of either
20
<PAGE>
party such third arbitrator shall be randomly selected from a list of available
arbitrators as provided by the American Arbitration Association. In no event may
the arbitration be initiated more than one year after the date one party gave
written notice to the other party. Any arbitration proceeding pursuant to this
Section 7.3(b) shall be conducted in the City of New York. The arbitrators shall
have no authority to award any punitive or exemplary damages and may interpret
or construe, but shall not vary or ignore, the terms of this Agreement and shall
be bound to follow controlling law. Each party shall pay its chosen arbitrator,
and shall bear equally the expenses of the third arbitrator and all other
expenses of arbitration are to be borne by the party incurring them. Any
arbitration award made pursuant to this Section 7.3(b) shall be nonappealable
except as provided in applicable arbitration statutes.
(c) Notwithstanding Section 7.3(b) hereof, in connection with any
dispute under this Agreement the parties to this Agreement shall be entitled to
seek injunctive relief (but not damages) in any court of equity having
jurisdiction over the relevant parties.
7.4 Counterparts. This Agreement may be executed simultaneously in one or
------------
more counterparts and may be executed by facsimile. Each such counterpart shall
be deemed to be an original instrument, but all such counterparts together shall
constitute but one agreement.
7.5 Entire Agreement. This Agreement, the Initial Public Offering
----------------
Agreement dated the date hereof between PNC, PAM and BlackRock, the Registration
Rights Agreement, and any employment agreements between BlackRock and any
Employee Stockholders constitute the entire agreement among the parties hereto
with respect to the transactions contemplated hereby and thereby and, except as
provided herein, supersede all previous oral and written and all contemporaneous
oral negotiations, commitments, writings and understandings with respect to such
transactions.
7.6 Amendments and Waivers.
----------------------
(a) This Agreement may be amended only by the written agreement of
PAM, BlackRock and the director(s) of BlackRock nominated by the BlackRock
Management Committee; provided, however, that if any proposed amendment to this
Agreement would materially and adversely affect any holders of BlackRock
Employee Shares, the amendment must also be approved by a majority in interest
of those holders of BlackRock Employee Shares.
21
<PAGE>
(b) No delay or omission on the part of any party hereto in enforcing
any of the obligations of any other party hereto shall operate as a waiver of
such obligation or operate to constrain the rights of any other party hereunder
to enforce such obligation. No waiver of any one right shall operate as a
waiver of any subsequent right.
7.7 Headings. The headings contained in this Agreement are for reference
--------
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
7.8 Severability. It is the intent and understanding of each party hereto
------------
that if, in any action or proceeding before any court or agency legally
empowered to enforce this Agreement or arbitrator, any term, restriction,
covenant or promise is found to be unreasonable and for that reason
unenforceable, then such term, restriction, covenant or promise shall not
thereby be terminated but that it shall be deemed modified to the minimal extent
necessary to make it enforceable by such court or agency and, if it cannot be so
modified, that it shall be deemed amended to delete therefrom such provision or
portion adjudicated to be invalid or unenforceable, such modification or
amendment in any event to apply only with respect to the operation of this
Agreement in the particular jurisdiction in which such adjudication is made.
7.9 Legend. All certificates representing the Class B Common Stock
------
covered by this Agreement shall bear on their face the following legend, or one
substantially similar thereto:
The shares represented by this certificate have not been registered under
either the Securities Act of 1933 (the "Act") or applicable state or
foreign securities laws (the "Other Acts") and shall not be sold or
otherwise disposed of by the holder hereof except upon registration of such
sale or disposition in accordance with the securities registration
requirements of the Act or any applicable Other Acts, or pursuant to an
exemption from such registration requirements. In addition, the shares
represented by this certificate may be transferred only in compliance with
the provisions of the Stockholders Agreement dated as of ____________ ___,
1999 (a copy of which is available for inspection at the executive offices
of BlackRock, Inc. ("BlackRock") at 345 Park Avenue, New York, New York
10154 and will be provided to a registered holder of securities of
BlackRock upon request) and no person who receives such shares in
connection with a transfer which does not meet the
22
<PAGE>
qualifications prescribed by the Stockholders Agreement is entitled to own
or to be registered as the record holder of such shares.
7.10 Further Agreements. Each of the parties hereto agrees to execute all
------------------
such further instruments and documents and to take all such further action as
any other party may reasonably require in order to effectuate the terms and
purposes of this Agreement.
7.11 Financial Information. BlackRock shall make available to each holder
---------------------
of Class B Common Stock all financial statements, reports and other information
made available to holders of Class A Common Stock.
23
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement or
have caused this Agreement to be executed by their duly authorized officers, as
appropriate, as of the date first above written.
BLACKROCK, INC.
By:________________________________
Name:______________________________
Title:_____________________________
PNC ASSET MANAGEMENT, INC.
By:________________________________
Name:______________________________
Title:_____________________________
<PAGE>
_____________________________
LAURENCE FINK
_____________________________
RALPH SCHLOSSTEIN
_____________________________
ROBERT KAPITO
_____________________________
SCOTT AMERO
_____________________________
GORDON ANDERSON
_____________________________
KEITH ANDERSON
_____________________________
PAUL AUDET
<PAGE>
_____________________________
THOMAS BAIN
_____________________________
NIGEL BARRY
_____________________________
THOMAS CALLAN
_____________________________
LAURENCE CAROLAN
_____________________________
YOUNG CHIN
_____________________________
ROBERT CONNOLLY
<PAGE>
_____________________________
ANDREW DAMM
_____________________________
DANIEL EAGAN
_____________________________
HUGH FRATER
_____________________________
HENRY GABBAY
_____________________________
BENNETT GOLUB
_____________________________
ANDREW GORDON
_____________________________
CHARLES HALLAC
<PAGE>
_____________________________
[RICHARD HARMON]
_____________________________
MICHAEL HUEBSCH
_____________________________
KEVIN KLINGERT
_____________________________
JAMES KONG
_____________________________
RICHARD KUSHEL
_____________________________
PHILIP MATTHEWS
<PAGE>
_____________________________
WILLIAM McVAIL
_____________________________
JOHN MORAN
_____________________________
THOMAS NEVIN
_____________________________
BARBARA NOVICK
_____________________________
KAREN SABATH
_____________________________
DENNIS SCHANEY
_____________________________
JOEL SHAIMAN
<PAGE>
_____________________________
RAJIV SOBTI
_____________________________
CHRISTIAN STADLINGER
_____________________________
PETER TAIT
_____________________________
DOUGLAS WAGGONER
_____________________________
SUSAN WAGNER
_____________________________
ADAM WIZON
<PAGE>
_____________________________
WILLIAM WYKLE
<PAGE>
EXHIBIT 5.1
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
September __, 1999
BlackRock, Inc.
345 Park Avenue
New York, NY 10154
Re: BlackRock, Inc.
Registration Statement on Form S-1
----------------------------------
Ladies and Gentlemen:
We have acted as special counsel to BlackRock, Inc., a Delaware
corporation (the "Company"), in relation to the initial public offering by the
Company of up to 10,350,000 shares (including 1,350,000 shares subject to an
over-allotment option) (the "Shares") of the Company's class A common stock, par
value $0.01 per share (the "Common Stock").
This opinion is being furnished in accordance with the requirements of
Item 601(b)(5) of Regulation S-K under the Securities Act of 1933, as amended
(the "Act").
In connection with this opinion, we have examined originals or copies,
certified or otherwise identified to our satisfaction, of (i) the Registration
Statement on Form S-1 (File No. 333-78367) as filed with the Securities and
Exchange Commission (the "Commission") on May 13, 1999 under the Act; (ii)
Amendment No. 1 to the Registration Statement as filed with the Commission on
August 19, 1999; (iii) Amendment No. 2 to the Registration Statement as filed
with the Commission on August 26, 1999; (iv) Amendment No. 3 to the Registration
Statement as filed with the Commission on [ ] (such Registration
Statement, as so amended, being hereinafter referred to as the "Registration
State-
<PAGE>
BlackRock, Inc.
September __, 1999
Page 2
ment"); (v) the form of Underwriting Agreement (the "Underwriting Agreement")
proposed to be entered into by and among the Company, as issuer, and Merrill
Lynch, Pierce, Fenner & Smith Incorporated, Goldman, Sachs & Co., Lehman
Brothers Inc., Prudential Securities Incorporated and Salomon Smith Barney,
Inc., as representatives of the several U.S. underwriters named therein (the
"U.S. Underwriters"), and Merrill Lynch International, Goldman Sachs
International, Lehman Brothers International, Prudential-Bache Securities and
Salomon Smith Barney International, as the several international underwriters
(the "International Underwriters" and together with the U.S. Underwriters, the
"Underwriters") to be filed as an exhibit to the Registration Statement; (vi) a
specimen certificate representing the Common Stock; (vii) the form of Amended
and Restated Certificate of Incorporation of the Company, filed as an exhibit to
the Registration Statement (the "Restated Certificate of Incorporation"); (viii)
the Bylaws of the Company, filed as an exhibit to the Registration Statement;
(ix) certain resolutions of the Board of Directors of the Company, dated May
10, 1999; (x) certain resolutions of the Board of Directors of the Company,
dated [ ], and the Action by Written Consent of the shareholders of the
Company, dated [ ], relating to the Restated Certificate of Incorporation;
and (xi) drafts of certain resolutions (the "Draft Resolutions") of the Pricing
Committee of the Board of Directors of the Company (the "Pricing Committee"),
relating to the issuance and sale of the Shares and related matters. We also
have examined originals or copies, certified or otherwise identified to our
satisfaction, of such records of the Company and such agreements, certificates
of public officials, certificates of officers or other representatives of the
Company and others, and such other documents, certificates and records as we
have deemed necessary or appropriate as a basis for the opinions set forth
herein.
In our examination, we have assumed the legal capacity of all natural
persons, the genuineness of all signatures, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified, conformed or photostatic copies and the
authenticity of the originals of such latter documents. In making our
examination of executed documents, we have assumed that the parties thereto,
other than the Company, had the power, corporate or other, to enter into and
perform all obligations thereunder and have also assumed the due authorization
by all requisite action, corporate or other, and execution and delivery by such
parties of such documents and the validity and binding effect thereof on such
parties. As to any facts material to the opinions expressed herein which we have
not independently established or verified,
<PAGE>
BlackRock, Inc.
September __, 1999
Page 3
we have relied upon statements and representations of officers and other
representatives of the Company and others.
Members of our firm are admitted to the bar in the State of New York
and we do not express any opinion as to the laws of any jurisdiction other than
the General Corporation Law of the State of Delaware, and we do not express any
opinion as to the effect of any other laws on the opinion stated herein.
Based upon and subject to the foregoing, we are of the opinion that
when (i) the Registration Statement becomes effective under the Act; (ii) the
Restated Certificate of Incorporation has been filed with the Secretary of State
of the State of Delaware; (iii) the Draft Resolutions have been adopted by the
Pricing Committee; (iv) the price at which the Shares are to be sold to the
Underwriters pursuant to the Underwriting Agreement and other matters relating
to the issuance and sale of the Shares have been approved by the Pricing
Committee in accordance with the Draft Resolutions; (v) the Underwriting
Agreement has been duly executed and delivered; and (vi) certificates
representing the Shares in the form of the specimen certificate examined by us
have been manually signed by an authorized officer of the transfer agent and
registrar for the Common Stock and registered by such transfer agent and
registrar, and have been delivered to and paid for by the Underwriters at a
price per share not less than the per share par value of the Common Stock as
contemplated by the Underwriting Agreement, the issuance and sale of the Shares
will have been duly authorized, and the Shares will be validly issued, fully
paid and nonassessable.
We hereby consent to the filing of this opinion with the Commission as
Exhibit 5.1 to the Registration Statement. We also consent to the reference to
us under the caption "Legal Matters" in the Registration Statement. In giving
this consent, we do not thereby admit that we are included in the category of
persons whose consent is required under Section 7 of the Act or the rules and
regulations of the Commission.
Very truly yours,
<PAGE>
EXHIBIT 10.1
8/24/99 DRAFT
TAX DISAFFILIATION AGREEMENT
AMONG
BLACKROCK, INC.
PNC ASSET MANAGEMENT, INC.
AND
PNC BANK CORP.
DATED AS OF ______ __, 1999
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
<S> <C>
ARTICLE I DEFINITIONS 4
1.01. Certain Defined Terms. 4
ARTICLE II PREPARATION AND FILING OF TAX RETURNS 6
2.01. Consolidated Returns. 6
2.02. Combined Returns. 6
2.03. Separate Returns. 6
2.04. Carrybacks and Carryovers - PNC Asset Management Group Consolidated Tax
Returns. 7
2.05. Carrybacks and Carryovers - PNC Group Consolidated Tax Returns. 7
2.06. Carrybacks and Carryovers - Combined Returns. 8
2.07. Ownership Change. 8
ARTICLE III TAX PAYMENTS - PNC ASSET MANAGEMENT GROUP 8
3.01. General Rule. 8
3.02. Subsequent Adjustments. 9
3.03. Hypothetical Federal Tax Liability. 9
ARTICLE IV TAX PAYMENTS - COMBINED RETURNS 10
4.01. General Rule. 10
4.02. Subsequent Adjustments. 10
4.03. Hypothetical Combined Tax Liability. 11
ARTICLE V TAX PAYMENTS - PNC GROUP 11
5.01. Adjustments. 11
ARTICLE VI TAX AUDITS AND ADMINISTRATIVE MATTERS 11
6.01. Tax Audits and Controversies. 11
6.02. Retention of Books and Records. 12
6.03. Cooperation Regarding Return Filing, Examinations, and Controversies. 12
6.04. Interest on Late Payments. 13
6.05. Character and Effect of Payments. 13
ARTICLE VII GENERAL PROVISIONS 13
7.01. Complete Agreement; Construction. 13
7.02. Survival of Agreements. 13
7.03. Governing Law. 13
7.04. Notices. 13
7.05. Amendments. 14
7.06. Successors and Assigns. 14
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
7.07. No Third-Party Beneficiaries. 14
7.08. Headings. 14
7.09. Severability. 14
7.10. Counterparts. 15
</TABLE>
ii
<PAGE>
TAX DISAFFILIATION AGREEMENT, dated as of AUGUST _, 1999 (this
"Agreement"), among BlackRock, Inc., a Delaware corporation ("BlackRock"), on
---------
behalf of itself and its subsidiaries, PNC Asset Management, Inc., a Delaware
corporation ("PNC Asset Management"), and PNC Bank Corp., a Pennsylvania
corporation ("PNC").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, PNC owns 100% of the stock of PNC Bancorp, Inc. ("PNC Bancorp"),
PNC Bank, N.A. ("PNC Bank") is a first-tier wholly owned subsidiary of PNC
Bancorp, PNC Bank owns 100% of the stock of PNC Investment Holdings,
Inc. ("PNC Investment Holdings") and a 50% membership interest in PNC Investment
Holdings, LLC, a Delaware limited liability company treated as a partnership for
federal income tax purposes, PNC Investment Holdings owns the other 50%
interest in PNC Investment Holdings, LLC and PNC Investment Holdings, LLC owns
100% of PNC Asset Management;
WHEREAS, PNC Asset Management owns 82.29% of the common, and only
outstanding stock of BlackRock;
WHEREAS, the Board of Directors of BlackRock has determined that it would
be in the best interest of BlackRock to effect a public offering (the "IPO")
of BlackRock;
WHEREAS, PNC is the common parent of a consolidated group (the "PNC
Group"), within the meaning of Section 1.1502-1(h) of the United States Treasury
Regulations, which included BlackRock and certain of its subsidiaries for
periods including March 1, 1995 until March 31, 1998;
WHEREAS, PNC Asset Management is the common parent of a consolidated group
(the "PNC Asset Management Group"), within the meaning of Section 1.1502-1(h) of
the United States Treasury Regulations, which includes BlackRock and its
subsidiaries beginning April 1, 1998;
WHEREAS, BlackRock Financial Management, Inc.("BFM"), filed a separate
federal income tax return for the period February 1, 1998 to March 31, 1998;
WHEREAS, BlackRock and certain of its subsidiaries have been or will be
included in various state or local combined or unitary income or franchise tax
filings with certain PNC subsidiaries in various periods through December 31,
1999;
WHEREAS, after the IPO, it is anticipated that BlackRock will cease to be a
member of the PNC Asset Management Group;
WHEREAS, after the IPO, it is anticipated that BlackRock will be the common
parent of a consolidated group (the "BlackRock Group") within the meaning of
Section 1.1502-1(h) of the United States Treasury Regulations;
WHEREAS, BlackRock, PNC Asset Management and PNC have determined that it
is appropriate and desirable to set forth agreement with respect to income,
franchise or similar taxes due for periods both before and after the IPO and
with respect to certain liabilities that may be asserted in respect of the tax
of BlackRock and its subsidiaries;
1
<PAGE>
WHEREAS, BlackRock entered into an agreement with PNC on August, _________,
1999 with respect to the provision of tax services by PNC for BlackRock (the
"Services Agreement").
NOW, THEREFORE, in consideration of the promises and the mutual agreements
and covenants hereinafter set forth, BlackRock, PNC Asset Management and PNC
hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01 Certain Defined Terms. As used in this Agreement, the
---------------------
following terms shall have the following meanings:
"Agreement" has the meaning specified in the preamble to this Agreement.
---------
"Apportionment Factor" means payroll, receipts, property, deposits or any
--------------------
other factor used by a governmental authority to determine an Apportionment
Percentage and computed with the numerator being the payroll, receipts,
property, deposits or other appropriate measure attributable to a given state
and locality and the denominator being such amount attributable everywhere.
"Apportionment Percentage" means the average, determined under the
------------------------
applicable statutory provisions, of the Apportionment Factors which
Apportionment Percentage is used generally to apportion total taxable income to
the various states and localities.
"BFM" has the meaning specified in the preamble to this Agreement
---
"BlackRock" has the meaning specified in the preamble to this Agreement.
---------
"BlackRock Group" has the meaning specified in the preamble to this
---------------
Agreement.
"Code" means the United States Internal Revenue Code of 1986, as amended,
----
and any successor thereto.
"Combined Return" means, as the context requires, a consolidated, combined
---------------
or unitary foreign, state or local income or franchise tax return to the extent
such return includes BlackRock and/or one or more of its subsidiaries.
"Consolidated Return" means, as the context requires, the consolidated
-------------------
United States federal income tax return for the BlackRock Group, PNC Group or
the PNC Asset Management Group.
"Final Determination" means, with respect to any issue or item for any
-------------------
taxable period: (i) a decision by a court of competent jurisdiction, but only
after such decision has become final and unappealable; (ii) the expiration of
the time for filing a claim for refund or, if a refund claim has been timely
filed, the time for instituting a suit in respect of such refund claim, provided
that no further adjustment to the items of income, gain, loss, deduction or
credit for such period may thereafter be made; (iii) the execution by or on
behalf of the relevant taxpayer and the IRS of a closing agreement under Section
7121 of the Code or comparable agreements under the laws of other jurisdictions;
(iv) the acceptance by the IRS or its counsel of a tender pursuant to an offer
in compromise under Section 7122 of the Code, or comparable agreements under the
laws of other jurisdictions; (v) the execution of a Form 870 or Form 870AD and
the subsequent payment of the tax deficiency
2
<PAGE>
or the receipt of the refund reflected therein; or (vi) any other final and
irrevocable determination of the tax liability of a party to this Agreement for
any taxable period.
"Hypothetical Apportionment Factor" means the Apportionment Factor computed
---------------------------------
using BlackRock and/or its relevant subsidiaries' payroll, receipts, property,
deposits or other appropriate measure divided by the entire payroll, receipts,
property, deposits or other appropriate measure as reported on a Combined
Return.
"Hypothetical Combined Apportionment Percentage" means an Apportionment
----------------------------------------------
Percentage computed using Hypothetical Apportionment Factors.
"Hypothetical Combined Income" means the total taxable income shown on a
----------------------------
Combined Return multiplied by the Hypothetical Combined Apportionment
Percentage.
"Hypothetical Combined Tax Liability" has the meaning set forth in Section
-----------------------------------
4.03.
"Hypothetical Combined Tax Return" means the hypothetical estimated or
--------------------------------
final income tax returns or income tax calculation of the BlackRock Group's
relevant subsidiaries showing the Hypothetical Combined Tax Liability.
"Hypothetical Federal Tax Liability" has the meaning set forth in Section
----------------------------------
3.03.
"Hypothetical Federal Tax Return" means the hypothetical estimated or final
-------------------------------
income tax returns of the BlackRock Group showing the Hypothetical Federal Tax
Liability.
"IPO" has the meaning specified in the preamble to this Agreement
---
"IPO Date" means the date of the closing of the IPO. For all purposes of
--------
this Agreement, the IPO shall be deemed effective as of the close of business on
the IPO Date.
"IRS" means the United States Internal Revenue Service.
---
"PNC" has the meaning specified in the preamble to this Agreement
---
"PNC Asset Management" has the meaning specified in the preamble to this
--------------------
Agreement.
"PNC Asset Management Group" has the meaning specified in the preamble to
--------------------------
this Agreement.
"PNC Bank" has the meaning specified in the preamble to this Agreement.
--------
"PNC Group" has the meaning specified in the preamble to this Agreement.
---------
"Separate Return" means the separate foreign, federal, state, or local
---------------
income or franchise tax return for BlackRock or its subsidiaries for any period
during which it is not part of a Consolidated Return or a Combined Return.
"Services Agreement" has the meaning specified in the preamble to this
------------------
Agreement.
"Tax Adjustment" means any adjustments made by the IRS or other
---------------
governmental authority with respect to any income or franchise tax return.
3
<PAGE>
"Tax Documents" has the meaning specified in Section 5.02.
-------------
ARTICLE II
PREPARATION AND FILING OF TAX RETURNS
SECTION 2.01. Consolidated Returns (a) PNC shall prepare or shall cause to
--------------------
be prepared all Consolidated Returns for the PNC Group that are required to be
filed for calendar year 1998, and later taxable years on a timely basis. PNC
will file the Consolidated Returns and will pay to the IRS the consolidated
United States federal income tax liabilities reported on these returns (or as a
result of any subsequent adjustments thereto) on a timely basis.
(b) PNC Asset Management shall prepare or shall cause to be prepared all
Consolidated Returns for the PNC Asset Management Group that are required to be
filed for any tax period on a timely basis. PNC Asset Management will file the
Consolidated Returns and will pay to the IRS the consolidated United States
federal income tax liabilities reported on these returns (or as a result of any
subsequent adjustments thereto) on a timely basis.
(c) BlackRock shall prepare or shall cause to be prepared all Consolidated
Returns for the BlackRock Group that are required to be filed for all taxable
years beginning after the IPO Date. BlackRock will file the Consolidated
Returns and will pay to the IRS the consolidated United States federal income
tax liabilities reported on these returns (or as a result of any subsequent
adjustments thereto) on a timely basis.
SECTION 2.02. Combined Returns. (a) PNC shall prepare or shall cause to be
----------------
prepared all Combined Returns, for all taxable years, which include a subsidiary
which is not BlackRock or a BlackRock subsidiary. PNC will timely file such
Combined Returns and will timely pay to the appropriate foreign, state, or local
tax authority the combined tax liabilities reported on these returns (or as a
result of any subsequent adjustments thereto).
(b) PNC shall prepare or cause to be prepared all Combined Returns, for
all taxable years, beginning before the IPO Date, which include BlackRock or its
subsidiaries. PNC will timely file such Combined Returns and will timely pay to
the appropriate foreign, state, or local tax authority the combined tax
liabilities reported on these returns (or as a result of any subsequent
adjustments thereto).
(c) BlackRock shall prepare or shall cause to be prepared all Combined
Returns, for all taxable years beginning after the IPO Date, which include
BlackRock or its subsidiaries and which do not include a PNC subsidiary that is
not BlackRock or its subsidiaries. BlackRock will timely file such Combined
Returns and will timely pay to the appropriate foreign, state or local tax
authority the combined tax liabilities reported on these returns (or as a result
of any subsequent adjustments thereto).
SECTION 2.03. Separate Returns. BlackRock shall prepare, or shall cause to
----------------
be prepared, and file all Separate Returns required to be filed after the IPO
Date. Subject to the provisions of this Agreement and the Services Agreement,
all decisions relating to the preparation and filing of Separate Returns and
Combined Returns which do not include PNC or a PNC subsidiary (excepting a
BlackRock subsidiary) and any audit or other review of such Separate Returns
shall be made in the sole discretion of BlackRock.
4
<PAGE>
SECTION 2.04. Carrybacks and Carryovers - PNC Asset Management Group
------------------------------------------------------
Consolidated Returns. (a) For purposes of preparing Separate Returns for taxable
- --------------------
periods beginning after the IPO Date, loss or credit carryovers of the PNC Asset
Management Group shall be allocated between PNC Asset Management and BlackRock
(and its subsidiaries) in accordance with the principles of Section 1.1502-21 of
the United States Treasury Regulations, or successor provisions, based on their
relative contributions toward generating the carryovers while they were included
in PNC Asset Management Group's Consolidated Returns. Such allocation shall be
calculated by PNC Asset Management, but BlackRock shall have the right to review
and approve any such allocation and the parties agree to consult in good faith
with respect to any issues arising as a result of the review of any such
allocation.
(b) PNC Asset Management shall prepare all refund claims with respect to a
loss or credit carryback from a PNC Asset Management Group Consolidated Return
with respect to any taxable year beginning on or before the IPO Date to an
earlier PNC Asset Management Group Consolidated Return. PNC Asset Management
will file the refund claim prepared pursuant to this Section 2.03(b). To the
extent any refund is received by PNC Asset Management with respect to any such
loss or credit carryback, PNC Asset Management shall pay to BlackRock within
thirty (30) days of receipt of such refund any portion of such refund that is
owed to BlackRock.
(c) Upon a request of BlackRock, PNC Asset Management shall file the
refund claim requested with respect to a loss or credit carryback from a
Separate Return of BlackRock (or successor corporation) to an earlier PNC Asset
Management Group Consolidated Return and will promptly transmit to the
requesting party any refund received by PNC Bank Asset Management, which is
attributable to such refund claim.
(d) If PNC Asset Management pays BlackRock any amount under Section
2.04(b) or (c), BlackRock hereby agrees to indemnify PNC Asset Management for
any subsequent increase in income or franchise tax liability of PNC Asset
Management arising out of a Final Determination which results in a subsequent
reduction of the amount of such carryback arising from a Tax Adjustment,
including any deficiency interest, penalties or additions to tax payable with
respect thereto.
SECTION 2.05. Carrybacks and Carryovers - PNC Group Consolidated Returns.
----------------------------------------------------------
(a) For purposes of preparing Separate Returns for taxable periods beginning
after the IPO Date, loss or credit carryovers of the PNC Group shall be
allocated between PNC (and its subsidiaries) and BlackRock (and its
subsidiaries) in accordance with the principles of Section 1.1502-21 of the
United States Treasury Regulations, or successor provisions, based on their
relative contributions toward generating the carryovers while they were included
in the PNC Group's Consolidated Returns. Such allocation shall be calculated by
PNC, but BlackRock shall have the right to review and approve any such
allocation and the parties agree to consult in good faith with respect to any
issues arising as a result of the review of any such allocation.
(b) PNC shall prepare all refund claims with respect to a loss or credit
carryback from a PNC Group Consolidated Return to an earlier PNC Group
Consolidated Return. To the extent any refund is received by the PNC Group with
respect to any such loss or credit carryback, the PNC Group shall pay to
BlackRock within thirty (30) days of receipt of such refund any portion of such
refund that is owed to BlackRock.
(c) Upon a request of BlackRock, the PNC Group shall prepare and file the
refund claim requested with respect to a loss or credit carryback from a
Separate Return of BlackRock (or successor corporation) or BlackRock Group
Consolidated Return to an earlier PNC Group Consolidated Return and will
promptly transmit to the requesting party any refund received by PNC which is
attributable to such refund claim.
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(d) If PNC pays BlackRock any amount under Section 2.05(b) or (c),
BlackRock hereby agrees to indemnify PNC for any subsequent increase in income
or franchise tax liability arising out of Final Determination which results in a
subsequent reduction of the amount of such carryback arising from a Tax
Adjustment, including any deficiency interest, penalties or additions to tax
payable with respect thereto.
SECTION 2.06. Carrybacks and Carryovers - Combined Returns. (a) PNC shall
--------------------------------------------
prepare or shall cause to be prepared all refund claims with respect to a loss
or credit carryback from any tax return to a Combined Return which includes a
subsidiary which was not BlackRock or a BlackRock subsidiary. To the extent any
refund is received by PNC (or any of its subsidiaries, excluding BlackRock or a
BlackRock subsidiary) with respect to any such loss or credit carryback, PNC
shall pay or shall cause to be paid to BlackRock within thirty (30) days of
receipt of such refund any portion of such refund that is owed to BlackRock.
(b) Upon a request of BlackRock, PNC shall prepare and file, or shall
cause to be filed, the refund claim requested with respect to a loss or credit
carryback from a Separate state, local or Combined Return of BlackRock (or
successor corporation) or any of its subsidiaries to an earlier Combined Return
of which BlackRock or any of its subsidiaries was a part with PNC or any of its
subsidiaries (which was not BlackRock or a BlackRock subsidiary) and will
promptly transmit to the requesting party a refund received by PNC (or any of
its subsidiaries) which is attributable to such refund claim.
(c) If PNC or any of its subsidiaries pays BlackRock any amount under
Section 2.06(a) or (b), BlackRock hereby agrees to indemnify PNC and its
subsidiaries for any subsequent increase in income or franchise tax liability
arising out of a Final Determination which results in subsequent reduction of
the amount of such carryback arising from a Tax Adjustment, including any
deficiency interest, penalties or additions to tax payable with respect thereto.
SECTION 2.07. Ownership Change. If either PNC Asset Management or PNC
----------------
undergoes an ownership change (within the meaning of Section 382(g) of the Code)
either before or after the IPO, PNC Asset Management or PNC, as the case may be,
agrees to make (or refrain from making) any election or allocation (or take or
not take any action) that is reasonably requested by BlackRock. A request of
BlackRock will be considered reasonable if such requested election, allocation
or action would allow BlackRock to use any net operating loss carryover (or
other tax attribute) in an efficient manner taking into account BlackRock's
projections of taxable income in the future.
ARTICLE III
TAX PAYMENTS - PNC ASSET MANAGEMENT GROUP
SECTION 3.01. General Rule. (a) BlackRock shall pay to PNC Asset
------------
Management the amount of any Hypothetical Federal Tax Liability for the tax year
ended December 31, 1998 and later tax years with respect to any PNC Asset
Management Group Consolidated Return. BlackRock shall pay any such amount to
PNC Asset Management, not later than the time or times such amount (or any
portion thereof) would be due to the IRS or other governmental authority if
BlackRock and its subsidiaries filed a separate Consolidated Return.
(b) Where BlackRock and its subsidiaries are members of the PNC Asset
Management Group's Consolidated Return, BlackRock shall prepare or shall cause
to be prepared Hypothetical Federal Tax Returns for the tax year ended December
31, 1998, and later tax years at least three (3) days before the time any
6
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payment of estimated or final annual income tax of BlackRock (or its
subsidiaries) is due to the IRS. PNC Asset Management Corp. shall have the right
to review and approve any such Hypothetical Federal Tax Return and the parties
agree to consult in good faith with respect to any issues arising as a result of
the review of any such Hypothetical Federal Tax Return by BlackRock.
SECTION 3.02. Subsequent Adjustments. (a) If any Tax Adjustments
----------------------
(including the filing of an amended return or refund claim to reflect any such
adjustments) are made with respect to any PNC Asset Management Group
Consolidated Return then to the extent that such adjustments:
(i) increase BlackRock's Hypothetical Federal Tax Liability, BlackRock
shall pay such amount to PNC Asset Management , or
(ii) decrease BlackRock's Hypothetical Federal Tax Liability, PNC Asset
Management shall pay such amount to BlackRock.
If BlackRock or PNC Asset Management shall have any liability as a result
of this Section 3.02, the amount thereof shall be paid within thirty (30) days
following the date on which a Final Determination has occurred; provided,
however, that to the extent PNC Asset Management receives any refund from the
IRS or other governmental authority, PNC Asset Management shall pay any amount
owed to BlackRock within thirty (30) days of receipt of the refund.
(b) PNC Asset Management agrees to indemnify and hold harmless BlackRock
against and from any liability for income tax and related interest, penalties
and additions to tax in excess of BlackRock's Hypothetical Federal Tax
Liability. BlackRock agrees to indemnify and hold PNC Asset Management harmless
against and from any liability for income or franchise tax and related interest,
penalties and additions to tax with respect to BlackRock's Hypothetical Federal
Tax Liability.
SECTION 3.03. Hypothetical Federal Tax Liability. The Hypothetical Federal
----------------------------------
Tax Liability of BlackRock for a taxable year shall be computed as follows:
(i) Such computation shall be made as though BlackRock had filed a
Consolidated Tax Return for the hypothetical group consisting of itself and its
subsidiaries (the "BlackRock Group").
(ii) Such computation shall be made solely by reference to items of
income, gain, deduction, loss and credit in the current and prior taxable years
of the BlackRock Group, notwithstanding that any such item may require a
different treatment or limitation in the Consolidated Return.
(iii) Items of income, gain, loss or deduction arising from a transaction
described in Section 1.1552-1(a)(2)(ii) of the Treasury Regulations, or
successor provision, shall be taken into account by the BlackRock Group, in the
same manner and in the same taxable years as such items are actually taken into
account on the Consolidated Return.
(iv) Carryovers and carrybacks of losses, credits or similar items shall
be computed using any of such items that would be available, but subject to the
same limitations that would exist, if the BlackRock Group had filed a
consolidated, combined or unitary tax return for each year since the
organization of BlackRock, notwithstanding that there is no actual carryover or
carryback or there is a larger or smaller carryover or carryback as a result of
filing a Consolidated Return or a Combined Return.
7
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(v) The treatment of any item affecting the computation of the
Hypothetical Federal Tax Liability shall be (A) in accordance with Federal
income tax law, (B) consistent with the treatment, if any, of such item in
BlackRock's similar calculations for any prior tax period unless the
inconsistency is one that would not require IRS approval or unless PNC Asset
Management has obtained such approval and (C) such as to minimize the actual
and estimated Hypothetical Federal Tax Liability and the amount of taxes payable
by BlackRock hereunder. BlackRock shall have the right to make any and all
elections permitted by law with respect to the treatment of items of income,
deduction or credit for it and its subsidiaries.
(vi) Such computations shall take into account any related deficiency
interest, penalties and additions to tax.
ARTICLE IV
TAX PAYMENTS - COMBINED RETURNS
SECTION 4.01. General Rule. (a) BlackRock shall pay to PNC, or to a PNC
------------
subsidiary if appropriate, the amount of BlackRock's Hypothetical Combined Tax
Liability with respect to any Combined Return which includes a PNC subsidiary
which is not BlackRock or a BlackRock subsidiary. BlackRock shall pay any such
amount to PNC or a PNC subsidiary not later than the time or times such amount
(or any portion thereof) would be due to a governmental authority if BlackRock
or its subsidiaries filed a separate return.
(b) PNC shall prepare, or shall cause to be prepared, Hypothetical
Combined Tax Returns which include a PNC subsidiary which is not BlackRock or a
BlackRock subsidiary, for all tax years at least three (3) days before the time
any payment of estimated or final annual income tax of BlackRock (or its
subsidiaries) is due to a governmental authority. BlackRock shall have the
right to review any such Hypothetical Combined Tax Return and the parties agree
to consult in good faith with respect to any issues arising as a result of the
review of any such Hypothetical Combined Tax Return by BlackRock.
SECTION 4.02. Subsequent Adjustments. (a) If any Tax Adjustments
----------------------
(including the filing of an amended return or refund claim to reflect any such
adjustments) are made with respect to any Combined Return then to the extent
that such adjustments, as a result of a Final Determination:
(i) increase BlackRock's Hypothetical Combined Tax Liability, BlackRock
shall pay such amount to PNC or a PNC subsidiary, or
(ii) decrease BlackRock's Hypothetical Combined Tax Liability, PNC or a PNC
subsidiary shall pay such amount to BlackRock.
If BlackRock, PNC or a PNC subsidiary shall have any liability as a result of
this Section 4.02, the amount thereof shall be paid within thirty (30) days
following the date on which a Final Determination has occurred; provided,
however, that to the extent PNC or a PNC subsidiary receives any refund from a
governmental authority, PNC or a PNC subsidiary shall pay any amount owed to
BlackRock within thirty (30) days of receipt of the refund.
(b) PNC agrees to indemnify and hold harmless BlackRock against and from
any liability for income or franchise tax and related interest, penalties and
additions to tax in excess of BlackRock's Hypothetical Combined Tax Liability.
BlackRock agrees to indemnify and hold PNC and its subsidiaries harmless against
and from any liability for income or franchise tax and related interest,
penalties and additions to tax with respect to BlackRock's Hypothetical Combined
Tax Liability.
8
<PAGE>
SECTION 4.03. Hypothetical Combined Tax Liability. The Hypothetical
-----------------------------------
Combined Tax Liability of BlackRock for a taxable year shall be computed by
multiplying the applicable statutory tax rate by the Hypothetical Combined
Income.
ARTICLE V
TAX PAYMENTS - PNC GROUP
SECTION 5.01. Adjustments. (a) If any Tax Adjustments (including the
-----------
filing of an amended return or refund claim to reflect any such adjustments) are
made with respect to any PNC Group Consolidated Return then to the extent that
such adjustments:
(i) increase BlackRock's federal tax liability, BlackRock shall pay such
amount to PNC, or
(ii) decrease BlackRock's federal tax liability, PNC shall pay such
amount to BlackRock.
(b) For purposes of Section 5.01(a) BlackRock's federal tax liability
shall be determined in the same manner and using the same principles as were
used when the PNC Group Consolidated Return was originally filed; that is to
say, each member of the Consolidated Return's liability was computed as if it
had filed a separate return except where its separate items of deduction, loss,
or credit could not be utilized on the Consolidated Return.
(c) PNC agrees to indemnify and hold harmless BlackRock against and from
any liability for income tax, arising as a result of BlackRock's inclusion in a
PNC Group Consolidated Return, in excess of the amounts determined in accordance
with Sections 5.01(a) and 5.01(b), including any obligation arising under
Treasury Regulation Sec. 1.1502-6. BlackRock agrees to indemnify and hold
harmless PNC against and from amounts determined in accordance with Sections
5.01(a) and 5.01(b).
ARTICLE VI
TAX AUDITS AND ADMINISTRATIVE MATTERS
SECTION 6.01. Tax Audits and Controversies. (a) Except as otherwise
----------------------------
provided in this Section 6.0l, PNC Asset Management shall have the exclusive
authority and obligation to represent each member of the PNC Asset Management
Group before the IRS or before any court with respect to any matter affecting
the income tax liability with respect to any Consolidated Return of the PNC
Asset Management Group. PNC Asset Management shall consult with BlackRock with
regard to any such administrative or judicial proceeding and any proposed
compromise or settlement thereof and take the best interests of all parties into
account. Such representation shall include, but shall not be limited to
exclusive control over (i) any response to any examination by a governmental
authority of any tax returns, and (ii) any contest through a Final Determination
of any issue included in any tax return but not limited to (A) whether and in
what forum to conduct such contest and (B) whether and on what basis to settle
such contest.
(b) Except as otherwise provided in this Section 6.0l, PNC shall have the
exclusive authority and obligation to represent each member of the PNC Group
before the IRS or before any
9
<PAGE>
court with respect to any matter affecting the income tax liability with respect
to any Consolidated Return of the PNC Group. PNC shall consult with BlackRock
with regard to any such administrative or judicial proceeding and any proposed
compromise or settlement thereof and take the best interests of all parties into
account. Such representation shall include, but shall not be limited to,
exclusive control over (i) any response to any examination by a governmental
authority of any tax returns and (ii) any contest through a Final Determination
of any issue included in any tax return but not limited to (A) whether and in
what forum to conduct such contest and (B) whether and on what basis to settle
such contest.
(c) PNC shall have the exclusive authority and obligation to represent
each member of a Combined Return before any governmental authority or before any
Court with respect to any matter affecting the income or franchise tax liability
with respect to any Combined Return which includes PNC or any of its
subsidiaries which is not BlackRock or a BlackRock subsidiary. PNC shall consult
BlackRock with regard to any such administrative or judicial proceedings and any
proposed compromise or settlement thereof and take the best interests of all
parties into account. Such cooperation shall include, but not be limited to,
making available, during normal business hours, and within thirty (30) days
after any request therefor, all books, records and information, and the
assistance of all officers and employees, necessary or useful in connection with
any tax inquiry, audit, examination, investigation, dispute, litigation or any
other matter.
(d) PNC Asset Management and PNC, respectively, shall give timely notice
to BlackRock of any inquiry, the assertion of any claim or the commencement of
any suit, action or proceeding of which it first is made aware by any
governmental authority. Each party shall give the other party or parties such
information with respect thereto as such other party or parties may reasonably
request.
SECTION 6.02. Retention of Books and Records. BlackRock, PNC Asset
------------------------------
Management and PNC agree to retain all Consolidated Returns and Combined
Returns, related schedules and workpapers, and all records and other documents
relating thereto (collectively, the "Tax Documents") existing on the date hereof
-------------
or later created, until the expiration of the statute of limitations (including
extensions) of the taxable years to which such returns and other documents
relate. No Tax Documents shall be destroyed or otherwise disposed of by
BlackRock, PNC Asset Management or PNC (or any affiliate) until the party (or
parties) intending to make such disposition has given the other parties at least
thirty (30) days advance notice thereof, whereupon the party receiving such
notice shall have the right, at its own expense, to take possession of such Tax
Documents.
SECTION 6.03. Cooperation Regarding Return Filing, Examinations, and
------------------------------------------------------
Controversies. Each member of the BlackRock Group, PNC Asset Management Group
- -------------
or PNC Group, respectively, shall fully cooperate with other members and their
representatives, in a prompt and timely manner, in connection with the
preparation and filing of any inquiry, audit, examination, investigation,
dispute or litigation involving any Consolidated Return or Combined Return.
Such cooperation shall include, but not be limited to, making available, during
normal business hours, and within thirty (30) days after any request therefor,
all books, records and information, and the assistance of all officers and
employees, necessary or useful in connection with any tax inquiry, audit,
examination, investigation, dispute, litigation or any other matter.
BlackRock agrees on behalf of itself and each member of BlackRock Group,
respectively, to execute and deliver to PNC Asset Management when so requested
by PNC Asset Management, any power of attorney required to allow PNC Asset
Management and its counsel to represent the PNC Asset Management Group in any
controversy which PNC Asset Management shall have the right to control pursuant
to the terms of Section 6.01.
10
<PAGE>
BlackRock agrees on behalf of itself and each member of BlackRock Group,
respectively, to execute and deliver to PNC when so requested by PNC any power
of attorney required to allow PNC and its counsel to represent the PNC Group,
PNC, or any of its subsidiaries which is not BlackRock or a BlackRock subsidiary
in any controversy which PNC shall have the right to control pursuant to the
terms of Section 6.01.
SECTION 6.04. Interest on Late Payments. Any amount payable under this
-------------------------
Agreement shall (if not paid within ten (10) business days after the due date
specified in this Agreement) bear interest from such due date until the date
paid, at the most recently published interest rate charged by the IRS on income
tax deficiencies of large corporations, as provided by Section 6621(c) of the
Code.
SECTION 6.05. Character and Effect of Payments. All amounts paid pursuant
--------------------------------
to this Agreement by one party to another party with respect to income or
franchise taxes (other than interest payable under Section 6.04 above) shall be
treated by such parties as intercompany settlements of liabilities for income
tax and other tax purposes.
ARTICLE VII
GENERAL PROVISIONS
SECTION 7.01. Complete Agreement; Construction. This Agreement shall
--------------------------------
constitute the entire agreement between the parties with respect to the subject
matter hereof and shall supersede all previous agreements and undertakings, both
written and oral, with respect to such subject matter. Notwithstanding any other
provisions in this Agreement to the contrary, in the event and to the extent
that there shall be a conflict between the provisions of this Agreement and any
other agreement, the provisions of this Agreement shall control. This Agreement
supersedes any tax sharing, tax indemnity or similar agreement that may have
previously existed between any members of the PNC Asset Management Group. This
Agreement supersedes any tax sharing, tax indemnity or similar agreement that
may have previously existed between any members of the PNC Group with respect to
BlackRock and its subsidiaries.
SECTION 7.02. Survival of Agreements. Except as otherwise contemplated by
----------------------
this Agreement, all covenants and agreements of the parties contained in this
Agreement shall survive the IPO Date.
SECTION 7.03. Governing Law. This Agreement shall be governed by, and
-------------
construed in accordance with, the laws of the Commonwealth of Pennsylvania,
without regard to the principles of conflicts of laws thereof.
SECTION 7.04. Notices. All notices, requests, claims, demands and other
-------
communications hereunder shall be in writing and shall be given or made (and
shall be deemed to have been duly given or made upon receipt) by delivery in
person, by courier service, by cable, by telecopy, by telegram, by telex or by
registered or certified mail (postage prepaid, return receipt requested) to the
respective parties at the following addresses (or at such other address for a
party as shall be specified in a notice given in accordance with this Section
7.04):
(a) If to PNC Asset Management:
c/o PNC Bank Corp.
Director of Taxes
11
<PAGE>
Corporate Tax Department
249 Fifth Avenue
Pittsburgh, Pennsylvania 15222-2707
(b) If to PNC Bank Corp.:
Director of Taxes
Corporate Tax Department
249 Fifth Avenue
Pittsburgh, Pennsylvania 15222-2707
(c) If to BlackRock:
Managing Director and Chief Financial Officer
BlackRock, Inc.
345 Park Avenue
New York, New York 10154
SECTION 7.05. Amendments. This Agreement may not be modified or amended
----------
except by an agreement in writing signed by the parties.
SECTION 7.06. Successors and Assigns. This Agreement and all of the
----------------------
provisions hereof shall be binding upon and inure to the benefit of the parties
and their respective successors and permitted assigns.
SECTION 7.07. No Third-Party Beneficiaries. This Agreement shall be
----------------------------
binding upon and inure solely to the benefit of the parties hereto and their
permitted assigns and nothing herein, express or implied, is intended to or
shall confer upon any other Person, any legal or equitable right, benefit or
remedy of any nature whatsoever.
SECTION 7.08. Headings. The descriptive headings contained in this
--------
Agreement are for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
SECTION 7.09. Severability. If any term or other provision of this
------------
Agreement is invalid, illegal or incapable of being enforced by any Law or
public policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner in
order that the transactions contemplated hereby are consummated as originally
contemplated to the greatest extent possible.
12
<PAGE>
SECTION 7.10. Counterparts. This Agreement may be executed in one or more
------------
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
13
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as of the date first written above by their respective officers thereunto duly
authorized.
BLACKROCK, INC.
By ______________________________
Name:
Title:
PNC ASSET MANAGEMENT, INC.
By ______________________________
Name:
Title:
PNC BANK CORP.
By ______________________________
Name:
Title:
14
<PAGE>
EXHIBIT 10.2
BLACKROCK, INC.
1999 STOCK AWARD AND INCENTIVE PLAN
1. Purpose; Types of Awards; Construction.
--------------------------------------
The purposes of the 1999 Stock Award and Incentive Plan of BlackRock,
Inc. (the "Plan"), are to afford an incentive to selected employees and
independent contractors of BlackRock, Inc. (the "Company") or any Affiliate that
now exists or hereafter is organized or acquired, to continue as employees or
independent contractors, as the case may be, to increase their efforts on behalf
of the Company and to promote the success of the Company's business. Pursuant
to the Plan, there may be granted stock options (including "incentive stock
options" and "nonqualified stock options"), stock appreciation rights,
restricted stock, restricted stock units, dividend equivalents and other long-
term stock- or cash-based Awards.
2. Definitions.
-----------
(a) "Affiliate" shall have the meaning set forth in Rule 12b-2
promulgated under Section 12 of the Exchange Act.
(b) "Award" means any Option, SAR, Restricted Stock, Restricted
Stock Unit, Dividend Equivalent or Other Stock-Based Award or Other Cash-Based
Award granted under the Plan.
(c) "Award Agreement" means any written agreement, contract, or
other instrument or document evidencing an Award.
(d) "Board" means the Board of Directors of the Company.
(e) "Cash-Based Award" means an Award that is not denominated or
valued by reference to Stock, including an Award that is subject to the
attainment of Performance Goals or otherwise as permitted under the Plan.
(f) "Code" means the Internal Revenue Code of 1986, as amended
from time to time.
(g) "Committee" means the committee established by the Board to
administer the Plan, the composition of which shall at all times satisfy the
provisions of Rule 16b-3.
<PAGE>
(h) "Company" means BlackRock, Inc., a corporation organized
under the laws of the State of Delaware, or any successor corporation.
(i) "Dividend Equivalent" means a right, granted to a Grantee
under Section 6(b)(v), to receive cash, Stock, or other property equal in value
to dividends paid with respect to a specified number of shares of Stock.
Dividend Equivalents may be awarded on a free-standing basis or in connection
with another Award, and may be paid currently or on a deferred basis.
(j) "Effective Date" means the effective date of the Initial
Public Offering, provided that the Plan had been approved by the stockholders of
the Company prior to the Initial Public Offering.
(k) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended from time to time.
(l) "Fair Market Value" means, with respect to Stock or other
property, the fair market value of such Stock or other property determined by
such methods or procedures as shall be established from time to time by the
Committee. Unless otherwise determined by the Committee in good faith, the per
share Fair Market Value of Stock as of a particular date shall mean (i) the
closing sales price per share of Stock on the national securities exchange on
which the Stock is principally traded, for the last preceding date on which
there was a sale of such Stock on such exchange, or (ii) if the shares of Stock
are then traded in an over-the-counter market, the average of the closing bid
and asked prices for the shares of Stock in such over-the-counter market for the
last preceding date on which there was a sale of such Stock in such market, or
(iii) if the shares of Stock are not then listed on a national securities
exchange or traded in an over-the-counter market, such value as the Committee,
in its sole discretion, shall determine.
(m) "Grantee" means a person who has been granted an Award under
the Plan.
(n) "ISO" means any Option intended to be and designated as an
incentive stock option within the meaning of Section 422 of the Code.
(o) "Initial Public Offering" shall mean the initial public
offering of shares of Stock of the Company.
2
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(p) "NQSO" means any Option that is designated as a nonqualified
stock option.
(q) "Option" means a right, granted to a Grantee under Section
6(b)(i), to purchase shares of Stock. An Option may be either an ISO or an
NQSO; provided that ISOs may be granted only to employees of the Company or any
--------
Subsidiary or the Company's Parent.
(r) "Other Stock-Based Award" means an Award that is
denominated or valued in whole or in part by reference to Stock, including, but
not limited to (1) restricted or unrestricted Stock awarded subject to the
attainment of Performance Goals or otherwise as permitted under the Plan, and
(2) a right granted to a Grantee to acquire Stock from the Company for cash.
(s) "Parent" means any corporation in an unbroken chain of
corporations ending with the Company, if each of the corporations other than the
Company owns stock possessing 50% or more of the total combined voting power of
all classes of stock of one of the other corporations in such chain.
(t) "Participant" means an individual eligible to receive Awards
under the Plan.
(u) "Performance Goals" means performance goals based on one or
more of the following criteria: (i) before-tax income or after-tax income, (ii)
operating profit, (iii) return on equity, assets, capital or investment, (iv)
earnings or book value per share, (v) sales or revenues, (vi) operating
expenses, (vii) Stock price appreciation and (viii) implementation or completion
of critical projects or processes. Where applicable, the Performance Goals may
be expressed in terms of attaining a specified level of the particular criteria
or the attainment of a percentage increase or decrease in the particular
criteria, and may be applied to the Company or one or all of the Affiliates of
the Company, or a division or strategic business unit of the Company, or may be
applied to the performance of the Company relative to a market index, a group of
other companies or a combination thereof, all as determined by the Committee.
The Performance Goals may include a threshold level of performance below which
no payment will be made (or no vesting will occur), levels of performance at
which specified payments will be made (or specified vesting will occur), and a
maximum level of performance above which no additional payment will be made (or
at which full vesting will occur). To the extent possible, each of the
foregoing Performance Goals shall be determined in accordance with generally
accepted accounting principles and shall be subject to certification by the
Committee; provided that the Committee shall have the authority to make
--------
equitable
3
<PAGE>
adjustments to the Performance Goals in recognition of unusual or non-recurring
events affecting the Company or any Subsidiary or other Affiliate or the
financial statements of the Company or any Subsidiary or other Affiliate, in
response to changes in applicable laws or regulations, or to account for items
of gain, loss or expense determined to be extraordinary or unusual in nature or
infrequent in occurrence or related to the disposal of a segment of a business
or related to a change in accounting principles.
(v) "Plan" means this BlackRock, Inc., 1999 Stock Award and
Incentive Plan, as amended from time to time.
(w) "Plan Year" means the fiscal year of the Company.
(x) "Restricted Stock" means an Award of shares of Stock to a
Grantee under Section 6(b)(iii) that may be subject to certain transferability
and other restrictions and to a risk of forfeiture (including by reason of not
satisfying certain Performance Goals).
(y) "Restricted Stock Unit" means a right granted to a Grantee
under Section 6(b)(iv) to receive Stock or cash at the end of a specified
deferral period, which right may be conditioned on the satisfaction of certain
requirements (including the satisfaction of certain Performance Goals).
(z) "Rule 16b-3" means Rule 16b-3, as from time to time in
effect promulgated by the Securities and Exchange Commission under Section 16 of
the Exchange Act, including any successor to such Rule.
(aa) "Stock" means shares of the [class A and/or class B] common
stock, par value $0.01 per share, of the Company.
(bb) "SAR" or "Stock Appreciation Right" means the right, granted
to a Grantee under Section 6(b)(ii), to be paid an amount measured by the
appreciation in the Fair Market Value of Stock from the date of grant to the
date of exercise of the right, with payment to be made in cash, Stock, or
property as specified in the Award or determined by the Committee.
(cc) "Subsidiary" means any corporation in an unbroken chain of
corporations beginning with the Company if, at the time of granting of an Award,
each of the corporations (other than the last corporation in the unbroken chain)
owns stock possessing 50% or more of the total combined voting power of all
classes of stock in one of the other corporations in the chain.
4
<PAGE>
3. Administration.
--------------
The Plan shall be administered by the Committee. The Committee shall
have the authority in its discretion, subject to and not inconsistent with the
express provisions of the Plan, to administer the Plan and to exercise all the
powers and authorities either specifically granted to it under the Plan or
necessary or advisable in the administration of the Plan, including, without
limitation, the authority to grant Awards; to determine the persons to whom and
the time or times at which Awards shall be granted; to determine the type and
number of Awards to be granted, the number of shares of Stock to which an Award
may relate and the terms, conditions, restrictions and Performance Goals
relating to any Award; to determine Performance Goals; to determine whether, to
what extent, and under what circumstances an Award may be settled, cancelled,
forfeited, exchanged, or surrendered; to make adjustments in the terms and
conditions (including Performance Goals) applicable to Awards; to designate
Affiliates; to construe and interpret the Plan and any Award; to prescribe,
amend and rescind rules and regulations relating to the Plan; to determine the
terms and provisions of the Award Agreements (which need not be identical for
each Grantee); and to make all other determinations deemed necessary or
advisable for the administration of the Plan.
The Committee may appoint a chairperson and a secretary and may make
such rules and regulations for the conduct of its business as it shall deem
advisable, and shall keep minutes of its meetings. All determinations of the
Committee shall be made by a majority of its members either present in person or
participating by conference telephone at a meeting or by written consent. The
Committee may delegate to one or more of its members or to one or more agents
such administrative duties as it may deem advisable, and the Committee or any
person to whom it has delegated duties as aforesaid may employ one or more
persons to render advice with respect to any responsibility the Committee or
such person may have under the Plan. All decisions, determinations and
interpretations of the Committee shall be final and binding on all persons,
including the Company, and any Affiliate or Grantee (or any person claiming any
rights under the Plan from or through any Grantee) and any stockholder.
No member of the Board or Committee shall be liable for any action
taken or determination made in good faith with respect to the Plan or any Award
granted hereunder.
4. Eligibility.
-----------
Except as provided below, all Awards may be granted to selected
employees and independent contractors of the Company or of any of its
Affiliates. In determin-
5
<PAGE>
ing the persons to whom Awards shall be granted and the type of Award (including
the number of shares to be covered by such Award), the Committee shall take into
account such factors as the Committee shall deem relevant in connection with
accomplishing the purposes of the Plan.
ISOs shall be granted only to employees (including officers and
directors who are also employees) of the Company, its Parent or any of its
Subsidiaries. No ISO shall be granted to any employee of the Company, its
Parent or any of its Subsidiaries if such employee owns, immediately prior to
the grant of the ISO, stock representing more than 10% of the voting power or
more than 10% of the value of all classes of stock of the Company or a Parent or
a Subsidiary, unless the purchase price for the stock under such ISO shall be at
least 110% of its Fair Market Value at the time such ISO is granted and the ISO,
by its terms, shall not be exercisable more than five years from the date it is
granted. In determining the stock ownership under this paragraph, the
provisions of Section 424(d) of the Code shall be controlling.
5. Stock Subject to the Plan.
-------------------------
The maximum number of shares of Stock reserved for the grant or
settlement of Awards under the Plan shall be [ ], subject to
adjustment as provided herein. No more than [ ] shares of Stock may
be covered by stock-based awards (including Options, SARs, Restricted Stock and
Restricted Stock Units) made to a single individual during any Plan Year, which
number shall be subject to adjustment as provided herein. Shares issued
hereunder may, in whole or in part, be authorized but unissued shares or shares
that shall have been or may be reacquired by the Company in the open market, in
private transactions or otherwise. If any shares subject to an Award are
forfeited, cancelled, exchanged or surrendered or if an Award otherwise
terminates or expires without a distribution of shares to the Grantee, the
shares of stock with respect to such Award shall, to the extent of any such
forfeiture, cancellation, exchange, surrender, termination or expiration, again
be available for Awards under the Plan.
In the event that the Committee shall determine that any dividend or
other distribution (whether in the form of cash, Stock, or other property),
recapitalization, Stock split, reverse split, reorganization, merger,
consolidation, spin-off, combination, repurchase, or share exchange, or other
similar corporate transaction or event, affects the Stock such that an
adjustment is appropriate in order to prevent dilution or enlargement of the
rights of Grantees under the Plan, then the Committee shall make such equitable
changes or adjustments as it deems necessary or appropriate to any or all of (i)
the number and kind of shares of Stock or other property (including cash) that
may thereafter be issued in connection with Awards, (ii) the number and kind of
shares of Stock or other property
6
<PAGE>
(including cash) issued or issuable in respect of outstanding Awards, (iii) the
exercise price, grant price, or purchase price relating to any Award; provided
--------
that, with respect to ISOs, such adjustment shall be made in accordance with
Section 424(h) of the Code, (iv) the Performance Goals and (v) the individual
limitations applicable to Awards.
6. Terms of Awards.
---------------
(a) General Terms of Awards. The term of each Award shall be for
-----------------------
such period as may be determined by the Committee. Subject to the terms of the
Plan and any applicable Award Agreement, payments to be made by the Company or
Affiliate upon the grant, maturation, or exercise of an Award may be made in
such forms as the Committee shall determine at the date of grant or thereafter,
including, without limitation, cash, Stock, or other property, and may be made
in a single payment or transfer, in installments, or on a deferred basis. The
Committee may make rules relating to installment or deferred payments with
respect to Awards, including the rate of interest to be credited with respect to
such payments. In addition to the foregoing, the Committee may impose on any
Award or the exercise thereof, at the date of grant or thereafter, such
additional terms and conditions, not inconsistent with the provisions of the
Plan, as the Committee shall determine.
(b) Specific Terms of Awards. The Committee is authorized to
------------------------
grant to Participants the following Awards, as deemed by the Committee to be
consistent with the purposes of the Plan. The Committee shall determine the
terms and conditions of such Awards at the date of grant or thereafter.
(i) Options. The Committee is authorized to grant Options to
-------
Participants on the following terms and conditions:
(A) Type of Award. The Award Agreement evidencing the grant
-------------
of an Option under the Plan shall designate the Option as an ISO or an
NQSO.
(B) Exercise Price. The exercise price per share of Stock
--------------
purchasable under an Option shall be determined by the Committee; provided
--------
that, such exercise price of an ISO shall be not less than the Fair Market
Value of a share of Stock on the date of grant of such ISO. The exercise
price for Stock subject to an Option may be paid in cash or by an exchange
of Stock previously owned by the Grantee, or a combination of both, in an
amount having a combined value equal to such exercise price. An Award
Agreement may provide that a Grantee may elect to pay all or a
7
<PAGE>
portion of the aggregate exercise price by having shares of Stock with a
Fair Market Value on the date of exercise equal to the aggregate exercise
price withheld by the Company or sold by a broker-dealer.
(C) Term and Exercisability of Options. Options shall be
----------------------------------
exercisable over the exercise period (which shall not exceed ten years from
the date of grant), at such times and upon such conditions as the Committee
may determine, as reflected in the Award Agreement; provided that, the
--------
Committee shall have the authority to accelerate the exercisability of any
outstanding Option at such time and under such circumstances as it, in its
sole discretion, deems appropriate. An Option may be exercised to the
extent of any or all full shares of Stock as to which the Option has become
exercisable, by giving written notice of such exercise to the Committee or
its designated agent.
(D) Termination of Employment, etc. An Option may not be
------------------------------
exercised unless the Grantee is then in the employ of, or maintains a
independent contractor relationship with, the Company or an Affiliate (or a
company or a parent or subsidiary company of such company issuing or
assuming the Option in a transaction to which Section 424(a) of the Code
applies), and unless the Grantee has remained continuously so employed, or
continuously maintained such relationship, since the date of grant of the
Option; provided that, the Award Agreement may contain provisions extending
--------
the exercisability of Options, in the event of specified terminations, to
a date not later than the expiration date of such Option.
(E) Other Provisions. Options may be subject to such other
----------------
conditions including, but not limited to, restrictions on transferability
of the shares acquired upon exercise of such Options, as the Committee may
prescribe in its discretion or as may be required by applicable law.
(ii) SARs. The Committee is authorized to grant SARs to Participants
----
on the following terms and conditions:
(A) In General. Unless the Committee determines other
----------
wise, an SAR (1) granted in tandem with an NQSO may be granted at the time
of grant of the related NQSO or at any time thereafter or (2) granted in
tandem with an ISO may only be granted at the time of grant of the related
ISO. An SAR granted in tandem with an Option shall be exercisable only to
the extent the underlying Option is exercisable.
8
<PAGE>
(B) Settlement of SARs. An SAR shall confer on the Grantee
------------------
a right to receive an amount in cash or shares of Stock (at the sole
discretion of the Committee) with respect to each share subject thereto,
upon exercise thereof, equal to the excess of (1) the Fair Market Value of
one share of Stock on the date of exercise over (2) the grant price of the
SAR (which in the case of an SAR granted in tandem with an Option shall be
equal to the exercise price of the underlying Option, and which in the case
of any other SAR shall be such price as the Committee may determine).
(iii) Restricted Stock. The Committee is authorized to grant
----------------
Restricted Stock to Participants on the following terms and conditions:
(A) Issuance and Restrictions. Restricted Stock shall be
-------------------------
subject to such restrictions on transferability and other restrictions, if
any, as the Committee may impose at the date of grant or thereafter, which
restrictions may lapse separately or in combination at such times, under
such circumstances, in such installments, or otherwise, as the Committee
may determine. The Committee may place restrictions on Restricted Stock
that shall lapse, in whole or in part, upon the attainment of Performance
Goals. Except to the extent restricted under the Award Agreement relating
to the Restricted Stock, a Grantee granted Restricted Stock shall have all
of the rights of a stockholder including, without limitation, the right to
vote Restricted Stock and the right to receive dividends thereon.
(B) Forfeiture. Upon termination of employment with or
----------
service to the Company or Affiliate, or upon termination of the independent
contractor relationship, as the case may be, during the applicable
restriction period, Restricted Stock and any accrued but unpaid dividends
or Dividend Equivalents that are at that time subject to restrictions shall
be forfeited; provided that, the Committee may provide, by rule or
--------
regulation or in any Award Agreement, or may determine in any individual
case, that restrictions or forfeiture conditions relating to Restricted
Stock will be waived in whole or in part in the event of terminations
resulting from specified causes, and the Committee may in other cases waive
in whole or in part the forfeiture of Restricted Stock.
(C) Certificates for Stock. Restricted Stock granted under
----------------------
the Plan may be evidenced in such manner as the Committee shall determine.
If certificates representing Restricted Stock are registered in the
9
<PAGE>
name of the Grantee, such certificates shall bear an appropriate legend
referring to the terms, conditions, and restrictions applicable to such
Restricted Stock, and the Company shall retain physical possession of the
certificate.
(D) Dividends. Dividends paid on Restricted Stock shall be
---------
either paid at the dividend payment date, or deferred for payment to such
date as determined by the Committee, in cash or in shares of unrestricted
Stock having a Fair Market Value equal to the amount of such dividends.
Stock distributed in connection with a stock split or stock dividend, and
other property distributed as a dividend, shall be subject to restrictions
and a risk of forfeiture to the same extent as the Restricted Stock with
respect to which such Stock or other property has been distributed.
(iv) Restricted Stock Units. The Committee is authorized to
----------------------
grant Restricted Stock Units to Participants, subject to the following
terms and conditions:
(A) Award and Restrictions. Delivery of Stock or cash, as
----------------------
determined by the Committee, will occur upon expiration of the deferral
period specified for Restricted Stock Units by the Committee or, if
permitted by the Committee, upon expiration of such deferral period as may
have been elected by the Grantee. The Committee may condition the vesting
and/or payment of Restricted Stock Units, in whole or in part, upon the
attainment of Performance Goals.
(B) Forfeiture. Upon termination of employment or
----------
termination of the independent contractor relationship during the
applicable deferral period or portion thereof to which forfeiture
conditions apply, or upon failure to satisfy any other conditions precedent
to the delivery of Stock or cash to which such Restricted Stock Units
relate, all Restricted Stock Units that are then subject to deferral or
restriction shall be for feited; provided that, the Committee may provide,
--------
by rule or regulation or in any Award Agreement, or may determine in any
individual case, that restrictions or forfeiture conditions relating to
Restricted Stock Units will be waived in whole or in part in the event of
termination resulting from specified causes, and the Committee may in other
cases waive in whole or in part the forfeiture of Restricted Stock Units.
10
<PAGE>
(v) Dividend Equivalents. The Committee is authorized to grant
--------------------
Dividend Equivalents to Participants. The Committee may provide, at the
date of grant or thereafter, that Dividend Equivalents shall be paid or
distributed when accrued or shall be deemed to have been reinvested in
additional Stock, or other investment vehicles as the Committee may
specify, provided that Dividend Equivalents (other than freestanding
--------
Dividend Equivalents) shall be subject to all conditions and restrictions
of the underlying Awards to which they relate.
(vi) Other Stock- or Cash-Based Awards. The Committee is
---------------------------------
authorized to grant Awards to Participants in the form of Other Stock-Based
Awards or Cash-Based Awards, as deemed by the Committee to be consistent
with the purposes of the Plan. Awards granted pursuant to this paragraph
may be granted with value and payment contingent upon the attainment of
certain Performance Goals, so long as such goals relate to periods of
performance in excess of one calendar year. The Committee shall determine
the terms and conditions of such Awards at the date of grant or thereafter.
The maximum payment that any Grantee may receive pursuant to an Award
granted under this paragraph in respect of any performance period shall be
[$ ]. Payments earned hereunder may be decreased or increased in
the sole discretion of the Committee based on such factors as it deems
appropriate.
7. General Provisions.
------------------
(a) Nontransferability. Unless otherwise provided in an Award
------------------
Agreement, Awards shall not be transferable by a Grantee except by will or the
laws of descent and distribution and shall be exercisable during the lifetime of
a Grantee only by such Grantee or his guardian or legal representative.
(b) No Right to Continued Employment. Nothing in the Plan or in
--------------------------------
any Award granted under the Plan or in any Award Agreement or other agreement
entered into pursuant hereto shall confer upon any Grantee or Participant the
right to continue in the employ of or to continue as an independent contractor
of the Company or any Affiliate or to be entitled to any remuneration or
benefits not set forth in the Plan or such Award Agreement or other agreement or
to interfere with or limit in any way the right of the Company or any such
Affiliate to terminate such Grantee's employment or independent contractor
relationship.
(c) Withholding and Other Taxes. The Company or any applicable
---------------------------
Affiliate is authorized to withhold from any Award granted, any payment relating
to an Award under the Plan (including from a distribution of Stock) or any other
payment to
11
<PAGE>
a Grantee, amounts of withholding and other taxes due in connection with any
transac tion involving an Award, and to take such other action as the Committee
may deem advisable to enable the Company and Grantees to satisfy obligations for
the payment of withholding taxes and other tax obligations relating to any
Award. This authority shall include authority to withhold or receive Stock or
other property and to make cash payments in respect thereof in satisfaction of a
Grantee's tax obligations.
(d) Amendment and Termination. The Board may at any time and
-------------------------
from time to time alter, amend, suspend, or terminate the Plan in whole or in
part. Notwithstanding the foregoing, no amendment shall affect adversely any of
the rights of any Grantee, without such Grantee's consent, under any Award
theretofore granted under the Plan and any amendment shall be approved by
shareholders, unless otherwise determined by the Board, if necessary to comply
with state law, stock listing requirements or other applicable law. Unless
earlier terminated by the Board pursuant to the provisions of the Plan, the Plan
shall terminate on the tenth anniversary of its Effective Date. No Awards shall
be granted under the Plan after such termination date.
(e) No Rights to Awards; No Stockholder Rights. No Grantee or
------------------------------------------
Participant shall have any claim to be granted any Award under the Plan, and
there is no obligation for uniformity of treatment of Grantees. Except as
provided specifically herein, a Grantee or a transferee of an Award shall have
no rights as a stockholder with respect to any shares covered by the Award until
the date of the issuance of a stock certificate to him for such shares.
(f) Unfunded Status of Awards. The Plan is intended to
-------------------------
constitute an "unfunded" plan for incentive and deferred compensation. With
respect to any payments not yet made to a Grantee pursuant to an Award, nothing
contained in the Plan or any Award shall give any such Grantee any rights that
are greater than those of a general creditor of the Company.
(g) No Fractional Shares. No fractional shares of Stock shall be
--------------------
issued or delivered pursuant to the Plan or any Award. The Committee shall
determine whether cash, other Awards, or other property shall be issued or paid
in lieu of such fractional shares or whether such fractional shares or any
rights thereto shall be forfeited or otherwise eliminated.
(h) Regulations and Other Approvals.
-------------------------------
(i) The obligation of the Company to sell or deliver
Stock with respect to any Award granted under the Plan shall be subject to all
applicable laws,
12
<PAGE>
rules and regulations, including all applicable federal and state securities
laws, and the obtaining of all such approvals by governmental agencies as may be
deemed necessary or appropriate by the Committee.
(ii) Each Award is subject to the requirement that, if at
any time the Committee determines, in its absolute discretion, that the listing,
registration or qualification of Stock issuable pursuant to the Plan is required
by any securities exchange or under any state or federal law, or the consent or
approval of any governmental regulatory body is necessary or desirable as a
condition of, or in connection with, the grant of an Award or the issuance of
Stock, no such Award shall be granted or payment made or Stock issued, in whole
or in part, unless listing, registration, qualification, consent or approval has
been effected or obtained free of any conditions not acceptable to the
Committee.
(iii) In the event that the disposition of Common Stock
acquired pursuant to the Plan is not covered by a then current registration
statement under the Securities Act of 1933, as amended (the "Securities Act"),
and is not otherwise exempt from such registration, such Stock shall be
restricted against transfer to the extent required by the Securities Act or
regulations thereunder, and the Committee may require a Grantee receiving Stock
pursuant to the Plan, as a condition precedent to receipt of such Stock, to
represent to the Company in writing that the Stock acquired by such Grantee is
acquired for investment only and not with a view to distribution.
(i) Governing Law. The Plan and all determinations made and
-------------
actions taken pursuant hereto shall be governed by the laws of the State of
Delaware without giving effect to the conflict of laws principles thereof.
13
<PAGE>
EXHIBIT 10.3
BLACKROCK, INC.
1999 ANNUAL INCENTIVE PERFORMANCE PLAN
1. Purpose.
-------
The purpose of the BlackRock, Inc., 1999 Annual Incentive Performance
Plan is to reinforce corporate, organizational and business-development goals;
to promote the achievement of year-to-year and long-range financial and other
business objectives; and to reward the performance of individual officers and
other employees in fulfilling their personal responsibilities for long-range
achievements.
2. Definitions.
-----------
The following terms, as used herein, shall have the following
meanings:
(a) "Award" shall mean an annual incentive compensation award, granted
pursuant to the Plan, which is contingent upon the attainment of Performance
Goals with respect to a Performance Period.
(b) "Award Agreement" shall mean any written agreement, contract, or
other instrument or document between the Company and a Participant evidencing an
Award.
(c) "Board" shall mean the Board of Directors of the Company.
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(e) "Committee" shall mean the Compensation Committee of the Board.
(f) "Company" shall mean BlackRock, Inc., a Delaware corporation, and
its subsidiaries.
(g) "Participant" shall mean an officer or other employee of the
Company who is, pursuant to Section 4 of the Plan, selected to participate
herein.
(h) "Performance Goals" means performance goals based on one or more
of the following criteria: (i) before-tax income or after-tax income, (ii)
operating profit, (iii) return on equity, assets, capital or investment, (iv)
earnings or book value per share, (v) sales or revenues, (vi) operating
expenses, (vii) stock price appreciation and
<PAGE>
(viii) implementation or completion of critical projects or processes. Where
applicable, the Performance Goals may be expressed in terms of attaining a
specified level of the particular criteria or the attainment of a percentage
increase or decrease in the particular criteria, and may be applied to one or
more of the Company, a subsidiary or affiliate, or a division or strategic
business unit of the Company, or may be applied to the performance of the
Company relative to a market index, a group of other companies or a combination
thereof, all as determined by the Committee. The Performance Goals may include a
threshold level of performance below which no payment will be made (or no
vesting will occur), levels of performance at which specified payments will be
made (or specified vesting will occur), and a maximum level of performance above
which no additional payment will be made (or at which full vesting will occur).
To the extent possible, each of the foregoing Performance Goals shall be
determined in accordance with generally accepted accounting principles and shall
be subject to certification by the Committee; provided that the Committee shall
--------
have the authority to make equitable adjustments to the Performance Goals in
recognition of unusual or non-recurring events affecting the Company or any
subsidiary or affiliate or the financial statements of the Company or any
subsidiary or affiliate, in response to changes in applicable laws or
regulations, or to account for items of gain, loss or expense determined to be
extraordinary or unusual in nature or infrequent in occurrence or related to the
disposal of a segment of a business or related to a change in accounting
principles.
(i) "Performance Period" shall mean the Company's fiscal year.
(j) "Plan" shall mean this BlackRock, Inc., 1999 Annual Incentive
Performance Plan.
3. Administration.
--------------
The Plan shall be administered by the Committee. The Committee shall
have the authority in its sole discretion, subject to and not inconsistent with
the express provisions of the Plan, to administer the Plan and to exercise all
the powers and authorities either specifically granted to it under the Plan or
necessary or advisable in the administration of the Plan, including, without
limitation, the authority to grant Awards; to determine the persons to whom and
the time or times at which Awards shall be granted; to determine the terms,
conditions, restrictions and performance criteria, including Performance Goals,
relating to any Award; to determine whether, to what extent, and under what
circumstances an Award may be settled, cancelled, forfeited, or surrendered; to
make adjustments in the Performance Goals in recognition of unusual or non-
recurring events affecting the Company or the financial statements of the
Company, or in response to changes in applicable laws, regulations, or
accounting principles, or for any other
2
<PAGE>
reason; to construe and interpret the Plan and any Award; to prescribe, amend
and rescind rules and regulations relating to the Plan; to determine the terms
and provisions of Award Agreements; and to make all other determinations deemed
necessary or advisable for the administration of the Plan.
The Committee may appoint a chairperson and a secretary and may make
such rules and regulations for the conduct of its business as it shall deem
advisable, and shall keep minutes of its meetings. All determinations of the
Committee shall be made by a majority of its members either present in person or
participating by conference telephone at a meeting or by written consent. The
Committee may delegate to one or more of its members or to one or more agents
such administrative duties as it may deem advisable, and the Committee or any
person to whom it has delegated duties as aforesaid may employ one or more
persons to render advice with respect to any responsibility the Committee or
such person may have under the Plan. All decisions, determinations and
interpretations of the Committee shall be final and binding on all persons,
including the Company, the Participant (or any person claiming any rights under
the Plan from or through any Participant) and any shareholder.
No member of the Board or the Committee shall be liable for any action
taken or determination made in good faith with respect to the Plan or any Award
granted hereunder.
4. Eligibility.
-----------
Awards may be granted to officers and other employees of the Company
in the sole discretion of the Committee. In determining the persons to whom
Awards shall be granted and the Performance Goals relating to each Award, the
Committee shall take into account such factors as the Committee shall deem
relevant in connection with accomplishing the purposes of the Plan.
5. Terms of Awards.
---------------
Awards granted pursuant to the Plan shall be evidenced by an Award
Agreement in such form as the Committee shall from time to time approve and the
terms and conditions of such Awards shall be set forth therein. The Committee
shall specify with respect to a Performance Period the Performance Goals
applicable to each Award. Performance Goals may include a level of performance
below which no payment shall be made and levels of performance at which
specified percentages of the Award shall be paid. Award levels for any
Performance Period may be expressed as a dollar amount or as a percentage of the
Participant's annual base salary. Unless otherwise determined by
3
<PAGE>
the Committee, all payments in respect of Awards granted under this Plan shall
be made, in cash, within a reasonable period after the end of the Performance
Period.
6. General Provisions.
------------------
(a) Compliance with Legal Requirements. The Plan and the granting and
----------------------------------
payment of Awards, and the other obligations of the Company under the Plan and
any Award Agreement or other agreement shall be subject to all applicable
federal and state laws, rules and regulations, and to such approvals by any
regulatory or governmental agency as may be required.
(b) Nontransferability. Awards shall not be transferable by a
------------------
Participant except by will or the laws of descent and distribution.
(c) No Right To Continued Employment. Nothing in the Plan or in any
--------------------------------
Award granted or any Award Agreement or other agreement entered into pursuant
hereto shall confer upon any Participant the right to continue in the employ of
the Company or to be entitled to any remuneration or benefits not set forth in
the Plan or such Award Agreement or other agreement or to interfere with or
limit in any way the right of the Company to terminate such Participant's
employment.
(d) Withholding Taxes. Where a Participant or other person is
-----------------
entitled to receive a cash payment pursuant to an Award hereunder, the Company
shall have the right to require the Participant or such other person to pay to
the Company the amount of any taxes that the Company may be required to withhold
before delivery to such Participant or other person of such payment.
(e) Amendment, Termination and Duration of the Plan. The Board or
-----------------------------------------------
the Committee may at any time and from time to time alter, amend, suspend, or
terminate the Plan in whole or in part. Notwithstanding the foregoing, no
amendment shall affect adversely any of the rights of any Participant, without
such Participant's consent, under any Award theretofore granted under the Plan.
(f) Participant Rights. No Participant shall have any claim to be
------------------
granted any Award under the Plan, and there is no obligation for uniformity of
treatment for Participants.
(g) Unfunded Status of Awards. The Plan is intended to constitute an
-------------------------
"unfunded" plan for incentive and deferred compensation. With respect to any
payments not yet made to a Participant pursuant to an Award, nothing contained
in the Plan or any
4
<PAGE>
Award shall give any such Participant any rights that are greater than those of
a general creditor of the Company.
(h) Governing Law. The Plan and all determinations made and actions
-------------
taken pursuant hereto shall be governed by the laws of the State of Delaware
without giving effect to the conflict of laws principles thereof.
(i) Effective Date. The Plan shall take effect upon the effective
--------------
date of the initial public offering of the shares of class A common stock, par
value $0.01 per share, of the Company, provided that the Plan has been approved
by the stockholders of the Company prior to the initial public offering.
(j) Beneficiary. A Participant may file with the Committee a
-----------
written designation of a beneficiary on such form as may be prescribed by the
Committee and may, from time to time, amend or revoke such designation. If no
designated beneficiary survives the Participant, the executor or administrator
of the Participant's estate shall be deemed to be the grantee's beneficiary.
5
<PAGE>
EXHIBIT 10.4
BLACKROCK, INC.
NONEMPLOYEE DIRECTORS
STOCK COMPENSATION PLAN
1. Purpose. The BlackRock, Inc. Nonemployee Directors Stock Compensation Plan
-------
is intended to encourage members of the board of directors of BlackRock, Inc., a
Delaware corporation, who are not also employees of the Company or any of its
subsidiaries and who receive fees for their services to acquire additional
stock ownership interests in the Company.
2. Definitions.
-----------
(a) "Accounting Date" means the first day of each calendar quarter.
(b) "Board" means the Board of Directors of the Company.
(c) "Committee" means the Compensation Committee of the Board.
(d) "Common Stock" means the class A common stock, par value $0.01 per
share, of the Company.
(e) "Company" means BlackRock, Inc., a Delaware corporation.
(f) "Compensation" means the aggregate amount payable in cash to a Director
for such Director's services on the Board, including any amounts payable with
respect to service on or serving as Chairman of a committee of the Board or for
attendance at Board or committee meetings.
(g) "Director" means a member of the Board who is not also an employee of
the Company or any of its subsidiaries and who receives fees for his or her
services on the Board.
(h) "Effective Date" means the effective date of the Initial Public
Offering, provided that the Plan had been approved by the stockholders of the
Company prior to the Initial Public Offering.
(i) "Fair Market Value" means, with respect to Common Stock, the fair
market value of such Common Stock determined by such methods or procedures as
shall be established from time to time by the Committee. Unless otherwise
determined by the Committee in good faith, the per share Fair Market Value of
Common Stock as of a
<PAGE>
particular date shall mean (i) the closing sales price per share of Common Stock
on the national securities exchange on which the Common Stock is principally
traded, for the last preceding date on which there was a sale of such Common
Stock on such exchange, or (ii) if the shares of Common Stock are then traded in
an over-the-counter market, the average of the closing bid and asked prices for
the shares of Common Stock in such over-the-counter market for the last
preceding date on which there was a sale of such Common Stock in such market, or
(iii) if the shares of Common Stock are not then listed on a national securities
exchange or traded in an over-the-counter market, such value as the Committee,
in its sole discretion, shall determine.
(j) "Initial Public Offering" shall mean the initial public offering of
shares of Common Stock of the Company.
(k) "Plan" means this BlackRock, Inc., Nonemployee Directors Stock
Compensation Plan.
3. Administration of the Plan. The Plan shall be administered by the
--------------------------
Committee. The Committee shall adopt such rules as it may deem appropriate in
order to carry out the purpose of the Plan. All questions of interpretation,
administration, and application of the Plan shall be determined by the
Committee, except that the Committee may authorize any one or more of its
members, or any officer of the Company, to execute and deliver documents on
behalf of the Committee. The determination by the Committee shall be final and
binding in all matters relating to the Plan.
4. Common Stock Reserved for the Plan. The number of shares of Common Stock
----------------------------------
authorized for issuance under the Plan is ________, subject to adjustment
pursuant to Section 6 hereof. Shares of Common Stock delivered hereunder may be
either authorized but unissued shares or previously issued shares reacquired
and held by the Company.
5. Terms and Conditions of Grants.
------------------------------
(a) Elections. Each Director may elect that a specified percentage of his
---------
or her future Compensation be paid in shares of Common Stock and such shares of
Common Stock shall be received in lieu of the payment of cash in respect of the
specified percentage of future Compensation. The shares of Common Stock shall be
transferred in accordance with Section 5(b) hereof. An election hereunder shall
be in the form of a document executed and filed with the Secretary of the
Company and shall remain in effect until the effectiveness of any modification
or revocation of such election.
2
<PAGE>
(b) Transfer of Shares. Shares of Common Stock issuable to a Director under
------------------
Section 5(a) hereof shall be transferred to such Director as soon as practicable
following the end of each calendar quarter, including (i) partial calendar
quarters for those individuals who become Directors during a calendar quarter
and (ii) the partial calendar quarter ending December 31, 1999. The total number
of shares of Common Stock to be so transferred on each such date shall be
determined by dividing (x) the product of (1) the percentage specified by the
Director pursuant to Section 5(a) hereof and (2) the Director's Compensation
payable for services rendered in the calendar quarter (or partial calendar
quarter, if applicable) with respect to which such transfer is being made, by
(y) the Fair Market Value of a share of Common Stock on the last trading day of
such calendar quarter. The Company shall deliver a stock certificate
representing the number of whole such shares acquired plus cash in lieu of any
fractional shares.
6. Effect of Certain Changes in Capitalization. In the event of any dividend
-------------------------------------------
or other distribution (whether in the form of cash, Common Stock, or other
property), recapitalization, stock split, reverse split, reorganization, merger,
consolidation, spin-off, combination, repurchase, or share exchange, or other
similar corporate transaction or event, the maximum number or class of shares
available under the Plan, and the number or class of shares of Common Stock to
be delivered hereunder shall be proportionately adjusted to reflect any such
transaction.
7. Term of Plan. This Plan shall become effective as of the Effective Date,
------------
provided that the Plan shall have been approved by the stockholders of the
Company. This Plan shall remain in effect until all authorized shares have been
issued, unless sooner terminated by the Board.
8. Amendment; Termination. The Board may at any time and from time to time
----------------------
alter, amend, suspend, or terminate the Plan in whole or in part.
9. Rights of Directors. Nothing contained in the Plan or with respect to any
-------------------
grant shall interfere with or limit in any way the right of the stockholders of
the Company to remove any Director from the Board, nor confer upon any Director
any right to continue in the service of the Company as a director.
10. General Restrictions.
--------------------
(a) Investment Representations. The Company may require any Director to
--------------------------
whom Common Stock is issued, as a condition of receiving such Common Stock, to
give written assurances in substance and form satisfactory to the Company and
its counsel to the effect that such person is acquiring the Common Stock for his
own account for
3
<PAGE>
investment and not with any present intention of selling or otherwise
distributing the same, and to such other effects as the Company deems necessary
or appropriate in order to comply with Federal and applicable state securities
laws.
(b) Compliance with Securities Laws. Each issuance shall be subject to the
-------------------------------
requirement that, if at any time counsel to the Company shall determine that the
listing, registration or qualification of the shares upon any securities
exchange or under any state or Federal law, or the consent or approval of any
governmental or regulatory body, is necessary as a condition of, or in
connection with, the issuance of shares hereunder, such issuance may not be
accepted or exercised in whole or in part unless such listing, registration,
qualification, consent or approval shall have been effected or obtained on
conditions acceptable to the Committee. Nothing herein shall be deemed to
require the Company to apply for or to obtain such listing, registration or
qualification.
(c) Nontransferability. Awards under this Plan shall not be transferable
------------------
by a Director other than by the laws of descent and distribution.
11. Governing Law. This Plan and all rights hereunder shall be construed in
-------------
accordance with and governed by the laws of the State of Delaware.
12. Headings. The headings of sections and subsections herein are included
--------
solely for convenience of reference and shall not affect the meaning of any of
the provisions of the Plan.
4
<PAGE>
Exhibit 10.5
FORM OF
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is effective as of the
close of the initial public offering of the shares of Class A Common Stock of
BlackRock, Inc. ("BlackRock"), between ________ ("Executive"), PNC Bank Corp.
("PNC"), a Pennsylvania corporation, and BlackRock, a Delaware corporation.
WHEREAS, the Executive, BlackRock and PNC are parties to an
Employment Agreement (the "Prior Agreement") dated December 31, 1997;
WHEREAS, the business of BlackRock involves the provision of
investment management and advisory services to individuals, institutions,
corporations, fiduciaries and other domestic and international customers, and
that business depends in part upon BlackRock's processes, techniques, formulae,
know-how, specifications and other data and upon its ability to establish its
position in the market for its new products and other developments before other
companies are able to enter that market;
WHEREAS, the Executive's services are unique, extraordinary and
essential to the business of BlackRock and BlackRock wishes to induce the
Executive to remain in the employ of BlackRock or an affiliate thereof; and
WHEREAS, in connection with the initial public offering of shares of
Class A Common Stock of BlackRock, BlackRock and the Executive wish to enter
into this Agreement, which shall replace and supersede the Prior Agreement;
WHEREAS, the foregoing recitals are hereby incorporated by reference
into this Agreement;
NOW THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound hereby, it is agreed as follows:
1. Definitions.
(a) "Acquisition Agreement" shall mean the Acquisition Agreement
---------------------
dated as of February 28, 1995, by and between BlackRock Financial Management
L.P., BFM Advisory L.P., BFM Management Partners L.P., Blackstone Group Holdings
L.P., Blackstone Financial Holdings L.P. and PNC Bank, National Association.
<PAGE>
(b) "Cause" shall mean the occurrence or existence of any of the
-----
following with respect to the Executive: (i) a material breach by the Executive
of any written policies of BlackRock or an affiliate thereof required by law or
established to maintain compliance with applicable law; (ii) any act of fraud,
misappropriation, dishonesty, embezzlement or similar conduct by the Executive
against BlackRock or an affiliate thereof or any client of BlackRock or an
affiliate thereof; or (iii) conviction (including a plea of nolo contendere) of
---- ----------
the Executive for the commission of a felony that could, in BlackRock's
reasonable judgment, impair the Executive's ability to perform his duties
hereunder or adversely affect BlackRock's or any of its affiliates' businesses
or reputation; or (iv) entry of any order against the Executive by any
governmental body having regulatory authority with respect to BlackRock's
business, which order relates to or arises out of the Executive's employment
relationship with BlackRock. A determination of Cause may be made only by
BlackRock's CEO and a majority of the members of the BlackRock Management
Committee (excluding the Executive, if applicable).
(c) "Change of Control of BlackRock" shall be deemed to occur if (i)
------------------------------
due to a transfer of Voting Stock, a person other than PNC or its Affiliates
holds a majority of the voting power of the Voting Stock; the voting power of
the Voting Stock of or (ii) whether by virtue of an actual or threatened proxy
contest (including a consent solicitation) or any merger, reorganization,
consolidation or similar transaction, Persons who are directors of BlackRock
immediately prior to such proxy contest or the execution of the agreement
pursuant to which such transaction is consummated (other than a director whose
initial assumption of office was in connection with a prior actual or threatened
proxy contest) cease to constitute a majority of the Board of Directors of
BlackRock or any successor entity immediately following such proxy contest or
the consummation of such transaction.
(d) "Change of Control of PNC" shall be deemed to occur if, whether
------------------------
by virtue of an actual or threatened proxy contest (including a consent
solicitation) or any merger, reorganization, consolidation or similar
transaction Persons who are directors of PNC immediately prior to such proxy
contest or the execution of the agreement pursuant to which such transaction is
consummated (other than a director whose initial assumption of office was in
connection with a prior actual or threatened proxy contest) cease to constitute
a majority of the Board of Directors of PNC or any successor entity immediately
following such proxy contest or the consummation of such transaction.
(e) "Class A Common Stock" shall mean the shares of Class A Common
--------------------
Stock, par value $0.01 per share, of BlackRock.
2
<PAGE>
(f) "Class B Common Stock" shall mean the shares of Class B Common
--------------------
Stock, par value $0.01 per share, of BlackRock.
(g) "Compensation" shall mean the aggregate base salary and annual
------------
bonus paid to or earned by the Executive in respect of the fiscal year ending
immediately prior to the year in which the termination of the Executive's
employment occurred.
(h) "Competitive Activity" shall mean any participation in,
--------------------
employment by, ownership of any equity interest exceeding 1% in, or promotion or
organization of, any person, partnership, corporation, firm, association or
other business organization, entity or enterprise that is engaged in a business
that is substantially similar to some or all of the businesses of BlackRock as
of the date of termination of the Executive's employment with BlackRock or an
affiliate thereof, whether the Executive is acting as agent, consultant,
employee, officer, director, investor, partner, shareholder, proprietor or in
any other individual or representative capacity therein.
(i) "Deficient Opportunity" shall exist if, during the Term, (i) the
---------------------
Executive does not have duties, authority and reporting responsibilities in
BlackRock or an affiliate thereof which are substantially equivalent to or
greater than those at BlackRock or an affiliate thereof as of the commencement
of the Term, unless otherwise mutually agreed upon, or (ii) the Executive's
principal work location has been relocated to any place other than the New York
City metropolitan area, unless otherwise mutually agreed upon, or (iii)
following a Change of Control of BlackRock or a Change of Control of PNC and by
or at the direction of the entity effecting such Change of Control and without
the consent of the individual who is chief executive officer of BlackRock as of
the date hereof, the sum of (1) the aggregate annual salary and bonus paid to or
earned by the Executive with respect to the fiscal year in which such Change of
Control occurs or with respect to either of the two succeeding fiscal years and
(2) the value of other incentive awards granted to the Executive in the
applicable fiscal year (such sum, the "Compensation Amount"), is less than the
sum of (x) the average annual salary and bonus paid to or earned by the
Executive with respect to the two fiscal years immediately preceding the year in
which such Change of Control occurs and (y) the average value of other incentive
awards granted to the Executive in the two fiscal years immediately preceding
the year in which such Change of Control occurs (such sum, the "Average
Historical Compensation"); provided, however, that the failure of the
-------- -------
Executive's Compensation Amount to equal or exceed the Executive's Average
Historical Compensation shall not constitute a Deficient Opportunity if such
failure is solely due to adverse financial performance of BlackRock during the
applicable fiscal year.
3
<PAGE>
(j) "Disability" shall mean the Executive's physical or mental
----------
incapacity constituting disability in accordance with BlackRock's long-term
disability policy which in any event does or is reasonably expected to continue
for at least 6 months.
(k) "Fiscal Year" shall mean the twelve-month period ending on
-----------
December 31 of each year or such other date as may be determined by BlackRock's
Board of Directors.
(l) "Good Reason" shall mean failure of the Executive to
-----------
substantially perform any material assigned duties (other than by reason of
death, Disability or Deficient Opportunity). A determination of Good Reason may
be made only by BlackRock's chief executive officer (the "CEO") and a majority
of the members of the BlackRock Management Committee (excluding the Executive,
if applicable).
(m) "Management Committee" shall mean that committee consisting of
--------------------
BlackRock's CEO, President and not less than five Managing Directors designated
from time to time by BlackRock's CEO and President to serve on such committee.
(n) "1940 Act" shall mean the Investment Company Act of 1940, as
--------
amended, and the rules and regulations of the Securities and Exchange Commission
promulgated thereunder.
(o) "Person" shall mean any individual, partnership, limited
------
partnership, corporation, trust, estate, association, limited liability company,
private foundation or other entity.
(p) "Shareholders Agreement" shall mean the Amended and Restated
----------------------
Shareholders Agreement by and among BlackRock, PNC Asset Management, Inc., and
Certain Employees of BlackRock and its Affiliates.
(q) "Voting Stock" shall mean the then outstanding shares of capital
------------
stock of BlackRock entitled to vote generally on the election of directors and
shall exclude any class or series of capital stock of BlackRock only entitled to
vote in the event of dividend arrearages or any default under any provision of
such series thereon whether or not at the time of determination there are any
such dividend arrearages or defaults.
4
<PAGE>
2. Termination of Prior Agreement; Term of Agreement.
--------------------------------------------------
(a) Termination of Prior Agreement. Effective as of the date hereof,
------------------------------
the Prior Agreement shall terminate without any consideration paid thereunder,
and from and after the date hereof, the Prior Agreement shall be void and of no
force and effect.
(b) Effective Date and Term. The Executive's employment period under
-----------------------
this Agreement shall commence as of the date hereof and shall continue in effect
through December 31, 2002, unless earlier terminated in accordance with the
terms of this Agreement (such period of employment, the "Term").
3. Employment. BlackRock agrees to employ or cause an affiliate to
----------
employ the Executive, and the Executive agrees to be employed by BlackRock or
such affiliate, during the Term on the terms and conditions set forth herein.
Except as otherwise provided herein, the Executive's employment shall be subject
to the employment policies of BlackRock in effect from time to time.
4. Position and Duties. During the Term, except as may otherwise be
-------------------
mutually agreed upon by BlackRock and the Executive, the Executive shall serve
BlackRock or an affiliate thereof in a position with duties, authority and
reporting responsibilities substantially equivalent to those that the Executive
has at BlackRock as of the date hereof. The Executive shall devote substantially
all of his or her working time and efforts to the business and affairs of
BlackRock and its affiliates.
5. Compensation and Related Matters. During the Term, the Executive
--------------------------------
shall be paid a base salary of not less than $________ per year, and an annual
bonus in an amount determined in the sole discretion of BlackRock. During the
Term, the Executive shall also be eligible to participate in certain employee
benefit plans offered by BlackRock. All amounts payable to the Executive
pursuant to this Agreement shall be paid subject to such reporting and
withholding requirements, if any, as may be imposed by applicable law and
BlackRock policy.
6. Termination of Employment.
-------------------------
(a) Termination Upon Death or Disability. Notwithstanding anything
------------------------------------
to the contrary herein, this Agreement shall terminate upon the death or
Disability of the Executive.
(b) Termination by Reason of a Deficient Opportunity. In the event
------------------------------------------------
of a Deficient Opportunity, the Executive may terminate his or her employment
hereunder
5
<PAGE>
upon 60 days' notice (or, in the event of a Deficient Opportunity that occurs
following a Change in Control of BlackRock or a Change in Control of PNC, 180
days' notice) from the Executive to BlackRock or such shorter notice period as
may be mutually agreed upon by the Executive and BlackRock (provided that any
such notice is given within 30 days after the occurrence of such Deficient
Opportunity).
(c) Other Termination. The Executive's employment by BlackRock or an
-----------------
affiliate thereof may be terminated (i) by the Board of Directors of BlackRock
or (ii) by the Executive (other than by reason of a Deficient Opportunity) upon
60 days' notice to BlackRock or, in each case, upon such shorter notice period
as may be mutually agreed upon by the Executive and the Board of Directors of
BlackRock. A termination of the Executive's employment by the Board of Directors
of BlackRock pursuant to clause (i) of this Section 6(c) shall be deemed to have
been made without Cause or Good Reason, unless such termination is determined to
have been made for Cause or Good Reason in accordance with Section 10(b) hereof.
7. Effect of Termination of Employment.
-----------------------------------
(a) Certain Terminations. Upon a termination of the Executive's
--------------------
employment that occurs following a Change in Control of BlackRock or a Change in
Control of PNC and during the Term (i) by BlackRock without Cause or Good Reason
or (ii) by the Executive by reason of a Deficient Opportunity, the Company shall
pay to the Executive, as soon as practicable following such termination of
employment, a lump sum cash payment equal to two times the Executive's
Compensation. Severance payments payable hereunder shall be in lieu of, and not
in addition to, cash severance payments payable under any other severance plan,
policy or program of BlackRock or PNC.
(b) Other Terminations. In the event of a termination (i) by the
------------------
Executive other than by reason of a Deficient Opportunity or (ii) by BlackRock
for Cause or Good Reason, the restricted shares of Class B Common Stock then
held by the Executive shall be offered for sale to BlackRock and BlackRock shall
purchase such shares, in accordance with Article 5 of the Shareholders
Agreement.
8. Executive's Covenants and Acknowledgments. In order to induce
-----------------------------------------
BlackRock to enter into this Agreement, Executive hereby covenants and
acknowledges to BlackRock as follows:
(a) Non-Competition. During the Term and for a period of nine months
---------------
thereafter (the "Non-Compete Term"), unless the Executive's employment with
BlackRock or an affiliate thereof shall have been terminated (i) by BlackRock
without
6
<PAGE>
Cause or Good Reason (determined pursuant to Section 10(b) hereof), (ii) by
reason of the Executive's death or Disability or (iii) by the Executive by
reason of a Deficient Opportunity, the Executive shall not, without the prior
written consent of BlackRock, engage in any Competitive Activity anywhere in the
world. The parties hereto have further expressed their intention with respect to
the determination of Competitive Activity in Exhibit A, attached hereto.
Notwithstanding anything to the contrary contained in this Agreement (other than
pursuant to Section 10(a) hereof), the Non-Compete Term shall not extend beyond
December 31, 2002.
(b) Non-Solicitation. During the Term and for one year thereafter
----------------
(the "Non-Solicitation Term"), Executive shall not directly or indirectly,
either for his or her own benefit or purpose or for the benefit or purpose of
any other Person, solicit, call on, actively interfere with BlackRock's or any
affiliates' relationship with, or attempt to divert or entice away, any Person
who the Executive should reasonably know: (i) is an investment management or
advisory client of BlackRock or an affiliate thereof as of the date of
termination of the Executive's employment with BlackRock or an affiliate
thereof, or (ii) was an investment management or advisory client of BlackRock or
an affiliate thereof at any time during the twelve months preceding such date,
or (iii) was, as of such date, considering retention of BlackRock or an
affiliate thereof to provide investment management or advisory services.
Notwithstanding anything to the contrary contained in this Agreement (other than
pursuant to Section 10(a) hereof), the Non-Solicitation Term shall not extend
beyond December 31, 2003.
(c) No-Hire. During the Term and for one year thereafter (the
-------
"No-Hire Term"), Executive shall not directly or indirectly, either for his or
her own benefit or purpose or for the benefit or purpose of any other Person,
employ or offer to employ, call on, actively interfere with BlackRock's or any
affiliates' relationship with, or attempt to divert or entice away, any employee
of BlackRock or an affiliate thereof. Notwithstanding anything to the contrary
contained in this Agreement (other than pursuant to Section 10(a) hereof), the
No-Hire Term shall not extend beyond December 31, 2003.
(d) Non-Disclosure. During the Term and at all times thereafter,
--------------
Executive shall not, without the prior written consent of BlackRock, disclose or
use in any way, except as required in the course of such Executive's employment
with BlackRock or an affiliate thereof, any confidential business or technical
information or trade secret acquired in the course of such employment, whether
or not conceived of or prepared by him, which is related to any service or
business of BlackRock or any affiliate thereof, all of which are the exclusive
and valuable property of BlackRock and its affiliates, other than information
which is generally known in the industry in which such business is transacted or
acquired from public sources; provided, however, that this
7
<PAGE>
provision shall not preclude the Executive from the disclosure or use of
information required to be disclosed by applicable law, rules or regulations or
by court, governmental or regulatory agency order or decree.
(e) Non-Disparagement. During the Term and at all times thereafter,
-----------------
Executive shall refrain from any disparagement, direct or indirect, in whatever
form, including, without limitation, innuendo, humor, satire or otherwise, of
BlackRock, its affiliates, or any of their employees, agents, officers,
directors or shareholders, provided, however, that this provision shall not
apply to any conduct by the Executive which is isolated and non-continuous in
nature and which has not been undertaken in bad faith.
(f) Tangible Items. All files, records, documents, manuals, books,
--------------
forms, reports, memoranda, studies, data, calculations, recordings,
correspondence and all copies, abstracts and summaries of the foregoing and all
physical items related to the business of BlackRock and its affiliates, other
than merely personal items, whether of a public nature or not, and whether
prepared by the Executive or not, are and shall remain the exclusive property of
BlackRock and its affiliates and shall not be removed from their premises,
except as required in the course of employment by BlackRock or an affiliate
thereof, without the prior written consent of BlackRock, and the same shall be
promptly returned by the Executive on the termination of the Executive's
employment with BlackRock or an affiliate thereof or at any time prior thereto
upon the request of BlackRock.
(g) Cancellation of Previous Awards. Executive hereby acknowledges
-------------------------------
and represents that Executive does not hold any equity-based awards with respect
to BlackRock common stock or the right to acquire any equity in BlackRock
pursuant to any equity award or plan, program or policy of BlackRock or PNC,
other than the equity-based awards with respect to BlackRock common stock held
by or granted to the Executive (i) in connection with his or her entering into
this Agreement and the Shareholders Agreement or (ii) by reason of his or her
participation in the Stock Plan, the Employee Stock Purchase Plan or the Long
Term Deferred Compensation Plan (collectively, the "Equity Plans"). Executive
further acknowledges and agrees that the equity-based awards with respect to
BlackRock common stock held by or granted to the Executive (i) in connection
with his or her entering into this Agreement and the Shareholders Agreement or
(ii) by reason of his or her participation in the Equity Plans shall supersede
and replace any and all previous equity-based awards with respect to BlackRock
common stock held by or granted to Executive.
9. BlackRock's and PNC's Covenants. In order to induce the
-------------------------------
Executive to enter into this Agreement, BlackRock and PNC hereby covenant to the
Executive that,
8
<PAGE>
unless otherwise determined by BlackRock's CEO and a majority of the members of
BlackRock's Management Committee, as provided in Section 5.6(b) of the
Acquisition Agreement, the Management Committee of BlackRock will continue to
manage the day-to-day operations of BlackRock.
10. Remedies.
--------
(a) The Executive acknowledges that the restrictions and agreements
contained in this Agreement, including without limitation the periods of time
and the unlimited geographic area, in view of the compensation and bonus
payments payable to the Executive hereunder, the purchase price payable under
the Acquisition Agreement, the international geographic scope and nature of the
business in which BlackRock and its affiliates are or will be engaged, the
Executive's knowledge and prospective knowledge of BlackRock's and its
affiliates' clients, are reasonable and necessary to protect the legitimate
interests of BlackRock, and that any violation of this Agreement will cause
substantial and irreparable injury to BlackRock that would not be quantifiable
and for which no adequate remedy would exist at law and agrees that injunctive
relief, in addition to all other remedies, shall be available therefor. The
period covered by any such injunction may extend beyond the periods described in
Section 8 hereof to the extent necessary to provide BlackRock the full benefit
of length of time intended to be benefitted by those provisions notwithstanding
any period of violation thereof by the Executive.
(b) If BlackRock or an affiliate thereof proposes to terminate the
Executive's employment for Cause or Good Reason, as determined by BlackRock's
CEO and a majority of the members of Management Committee, or to allege a
violation by the Executive of any provision of Section 8 hereof, BlackRock's CEO
shall immediately notify the Executive of such fact in writing, specifying the
action or conduct which resulted in such determination (the date on which such
notice is given being hereinafter referred to as the "Notice Date"). Within 30
days, the Executive shall have the right to cure such action or conduct or to
submit the determination of Cause or Good Reason, as the case may be, to binding
arbitration in accordance with the Rules of the American Arbitration Association
then in force. The award in any such arbitration proceedings shall be
nonappealable except as provided in applicable arbitration statutes. If the
Notice Date occurs prior to February 28, 2000, pending such cure or the results
of such arbitration proceedings, all payments on the 7.5% PNC Notes due February
28, 2000 (the "Notes"), allocable to the Executive shall accrue, but shall not
be paid. If: (i) within 30 days, the Executive fails to cure such action or
conduct to the satisfaction of BlackRock's CEO and a majority of the members of
Management Committee and fails to seek arbitration of such determination of
Cause or Good Reason, the termination shall be treated as a termination for
Cause or Good Reason as of such thirtieth day and, if the Notice Date
9
<PAGE>
occurs prior to February 28, 2000, the Executive shall forfeit the right to
receive payment of interest and principal on any outstanding Notes; or (ii) the
determination of Cause or Good Reason is upheld in arbitration, the termination
shall be treated as a termination for Cause or Good Reason as of the date of
such determination and, if the Notice Date occurs prior to February 28, 2000,
the Executive shall forfeit the right to receive payment of interest and
principal on any outstanding Notes; or (iii) the determination of Cause or Good
Reason is overturned in arbitration, the termination shall be treated as a
termination without Cause or Good Reason as of the date of such determination
and, if the Notice Date occurs prior to February 28, 2000, the Executive shall
not forfeit the right to receive payment of interest and principal on any
outstanding Notes and any accrued but unpaid payments on the Notes shall be made
if then due and owing. Nothing herein shall prevent BlackRock from terminating
the Executive's employment in accordance with Section 6(c) hereof and treating
such termination as a termination without Cause or Good Reason.
(c) Breach of Section 9.
-------------------
(i) Notwithstanding anything to the contrary contained in the
Shareholders Agreement, in the event of a breach of Section 9 hereof (as
determined in accordance with Section 10(c)(ii) below), the restrictions
on the shares of Class B Common Stock shall lapse on the earlier of the
date the restrictions would otherwise have lapsed in accordance with the
Shareholders Agreement and the date that is the first anniversary of the
date that Section 9 hereof shall have been deemed to be breached. If the
arbitration described in Section 10(c)(ii) below results in the
determination that Section 9 hereof has not been breached, then the
restrictions on the shares of Class B Common Stock shall remain in place
and shall lapse in accordance with the terms of the Shareholders
Agreement. The remedy provided by this Section 10(c)(i) shall be
Executive's sole remedy for any breach of Section 9 hereof.
(ii) If BlackRock's CEO and a majority of the members of the
Management Committee seek to have a determination that Section 9 hereof
has been breached, then BlackRock's CEO and a majority of the members of
the Management Committee shall immediately notify the Board of Directors
of BlackRock of such fact in writing and shall submit the determination of
such breach to a committee (the "Independent Director Committee")
comprising those individuals who constituted the "outside directors" of
the Board of Directors of BlackRock immediately prior to the alleged
breach of Section 9. The determination by the Independent Director
Committee shall be binding on all parties. The members of the Independent
Director Committee shall be reimbursed for all reasonable expenses
incurred in connection with such Independent Director Committee (e.g.,
----
travel expenses, retention of counsel, etc.) .
10
<PAGE>
(d) If BlackRock shall not have exercised any of its rights provided
for in Sections 10(a) or 10(b) hereof with respect to a violation by the
Executive of any provision of Section 8 hereof, PNC shall be able to obtain an
injunction against such violation and shall be able to exercise all other rights
and remedies provided to BlackRock under Sections 10(a) and 10(b) hereof.
11. Severability. It is the intent and understanding of each party
------------
hereto that if, in any action before any court or agency legally empowered to
enforce this Agreement, any term, restriction, covenant, or promise is found to
be unreasonable and for that reason unenforceable, then such term, restriction,
covenant, or promise shall not thereby be terminated but that it shall be deemed
modified to the minimal extent necessary to make it enforceable by such court or
agency and, if it cannot be so modified, that it shall be deemed amended to
delete therefrom such provision or portion adjudicated to be invalid or
unenforceable, such modification or amendment in any event to apply only with
respect to the operation of this Agreement in the particular jurisdiction in
which such adjudication is made.
12. Consent to Jurisdiction. Except as set forth in Section 10(b)
-----------------------
hereof, each party hereby irrevocably submits to the exclusive jurisdiction of
the courts of the State of New York and of any United States federal courts
sitting in the State of New York in any action or proceeding arising out of or
relating to this Agreement, and irrevocably agrees that all claims in respect
of such action or proceeding may be heard and determined in any such New York or
United States federal court. Each of the parties further agrees that service of
any process, summons, notice or document by registered mail to such party's
address set forth below shall be effective service of process for any action,
suit or proceeding brought against such party in any such court. Each party
irrevocably and unconditionally waives any objection to the laying of venue of
any action, suit or proceeding arising out of this Agreement in such courts and
further irrevocably and unconditionally waives and agrees not to plead or claim
in any such court that any such action, suit or proceeding brought in any such
court has been brought in final judgment in any such action or proceeding shall
be conclusive and may be enforced in another jurisdiction by suit on the
judgment or in any other manner provided by law.
13. Notice. For the purposes of this Agreement, notices, demands and all
------
other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when delivered to the Executive at:
11
<PAGE>
------------------------------
------------------------------
------------------------------
or to BlackRock at its principal executive offices to the attention of its CEO,
or such other address as the parties may from time to time designate by written
notice as herein provided.
14. Miscellaneous.
-------------
(a) No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in writing
signed by the Executive, PNC and BlackRock. No waiver by any party hereto at any
time of any breach by any other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. No agreements or representations,
oral or otherwise, expressed or implied, with respect to the subject matter
hereof have been made by the parties which are not set forth expressly or
referred to in this Agreement.
(b) The validity, interpretation, construction and performance of
this Agreement shall be governed by the laws of the State of New York relating
to contracts made and to be performed entirely therein.
(c) Nothing contained herein shall be deemed to limit or restrict
the powers and duties conferred or imposed upon the Board of Directors of
BlackRock by applicable law.
15. Representation and Warranty. The Executive represents and warrants
---------------------------
to BlackRock and PNC that the Executive has read this Agreement, has consulted
with his or her own advisers regarding the terms of this Agreement, and is fully
aware of its content and of its legal effect, and that this is the Executive's
legally valid and binding obligation.
16. Headings. The headings of the paragraphs herein are for convenience
--------
only and shall have no significance in the interpretation of this Agreement.
17. Successors. This Agreement shall be binding upon and inure to the
----------
benefit of the parties hereto and their heirs, personal representatives and
successors.
12
<PAGE>
18. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed to be an original and both of which
together will constitute one and the same instrument.
19. Survival. Section 8, Section 10(a) and Section 12 hereof shall
--------
survive the termination of this Agreement, in accordance with the terms of such
Sections.
13
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first written above.
BlackRock, Inc.
By:
---------------------------------
Name:
Title:
PNC Bank Corp.
By:
---------------------------------
Name:
Title:
Executive
------------------------------------
Name:
14
<PAGE>
Exhibit A
---------
This exhibit sets forth BlackRock's intentions regarding the "non-compete"
provisions contained in Section 8(a) of your employment agreement, which would
preclude your associating, during the Non-Compete Term, with an enterprise that
is engaged in a business that is substantially similar to BlackRock's business
without BlackRock's prior written consent.
In determining whether to grant such consent, BlackRock will take into
consideration not only the nature of the competitive activity engaged in by the
prospective employer, but also the nature of the position that you would occupy
with it. It is not BlackRock's intention to preclude you from undertaking
employment under circumstances where your employment is in activities that are
not themselves substantially similar to BlackRock's business and that otherwise
do not present a competitive concern. In a particular case, therefore, BlackRock
might condition its consent on the receipt of appropriate assurances from you or
your prospective employer.
Notwithstanding the foregoing, it is impossible to foresee at this time all of
the circumstances that might arise. BlackRock reserves all of its rights under
the employment agreement until specific circumstances are presented for its
consideration.
15
<PAGE>
EXHIBIT 10.6
INITIAL PUBLIC OFFERING AGREEMENT
DATED AS OF _________ __, 1999
BY AND AMONG
PNC BANK CORP.,
PNC ASSET MANAGEMENT, INC.
AND
BLACKROCK, INC.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
1. DEFINITIONS.......................................................................... 2
2. THE INITIAL PUBLIC OFFERING.......................................................... 6
2.1 The Initial Public Offering................................................ 6
---------------------------
2.2 Expenses................................................................... 7
--------
3. COVENANTS............................................................................ 7
3.1 Financial and Other Information............................................ 7
-------------------------------
3.2 Additional Purchases of BlackRock Common Stock by PNC...................... 10
-----------------------------------------------------
3.3 Change in Control of PNC or Change in Control of BlackRock................. 11
----------------------------------------------------------
3.4 Prohibited BlackRock Business Activities; New Business Activities.......... 13
-----------------------------------------------------------------
3.5 Other Covenants............................................................ 14
---------------
4. INDEMNIFICATION...................................................................... 15
4.1 Indemnification by BlackRock............................................... 15
----------------------------
4.2 Indemnification by PNC..................................................... 15
----------------------
4.3 Other Liabilities.......................................................... 16
-----------------
4.4 Effect of Insurance Upon Indemnification................................... 16
----------------------------------------
4.5 Procedure for Indemnification Involving Third-Party Claims................. 16
----------------------------------------------------------
4.6 Procedure for Indemnification Not Involving Third-Party Claims............. 17
--------------------------------------------------------------
4.7 Exclusive Remedies......................................................... 17
------------------
5. CONFIDENTIALITY...................................................................... 18
6. MISCELLANEOUS........................................................................ 18
6.1 Dispute Resolution......................................................... 18
------------------
6.2 Complete Agreement......................................................... 18
------------------
6.3 Authority.................................................................. 18
---------
6.4 Governing Law.............................................................. 18
-------------
6.5 Consent to Exclusive Jurisdiction.......................................... 19
---------------------------------
6.6 Notices.................................................................... 19
-------
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
6.7 Amendment and Modification........................... 20
--------------------------
6.8 Binding Effect; Assignment........................... 20
--------------------------
6.9 Third Party Beneficiaries............................ 21
-------------------------
6.10 Counterparts......................................... 21
------------
6.11 Waiver............................................... 21
------
6.12 Severability......................................... 21
------------
6.13 Specific Performance................................. 22
--------------------
6.14 Remedies............................................. 22
--------
6.15 Performance.......................................... 22
-----------
6.16 References; Construction............................. 22
------------------------
</TABLE>
ii
<PAGE>
INITIAL PUBLIC OFFERING AGREEMENT
This INITIAL PUBLIC OFFERING AGREEMENT (the "Agreement") is made and
entered into as of _________ __, 1999, by and among PNC Bank Corp., a
Pennsylvania corporation ("PNC"), PNC Asset Management, Inc., a Delaware
corporation and an indirect wholly owned subsidiary of PNC ("PAM"), and
BlackRock, Inc., a Delaware corporation and a majority owned subsidiary of PAM
("BlackRock"). Certain capitalized terms used herein are defined in Section 1 of
this Agreement.
RECITALS
WHEREAS, the Board of Directors of BlackRock has determined that it is in
the best interests of BlackRock and its stockholders for a portion of the common
stock of BlackRock to be sold to the public in the Initial Public Offering;
WHEREAS, PAM currently owns _____% of the issued and outstanding BlackRock
common stock and certain employees of BlackRock and BlackRock Affiliates
collectively own ____% of the outstanding BlackRock common stock;
WHEREAS, BlackRock has previously filed the IPO Registration Statement with
the SEC but it has not yet become effective;
WHEREAS, the parties currently contemplate that, reasonably promptly
following the execution of this Agreement, BlackRock shall consummate the
Initial Public Offering;
WHEREAS, immediately following the consummation of the Initial Public
Offering, PAM shall own approximately _____% of the outstanding shares of
BlackRock Class B Common Stock; and
WHEREAS, the parties intend in this Agreement to set forth the principal
terms of certain continuing relationships between the parties;
<PAGE>
NOW, THEREFORE, in consideration of the promises, representations,
warranties, covenants and agreements herein contained, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound hereby, the parties hereby agree
as follows:
1. DEFINITIONS.
"Additional PNC Stock Purchase" has the meaning set forth in Section
3.2(a).
"Affiliate" means a BlackRock Affiliate or a PNC Affiliate, as the case may
be.
"Agreement" has the meaning set forth in the Preamble.
"Arbitrating Investment Bank" has the meaning set forth in Section 3.3(b).
"Audit Committee" has the meaning ascribed to it in Section 3.1(h).
"Audit Committee Charter" has the meaning ascribed to it in Section 3.1(h).
"BlackRock" has the meaning set forth in the Preamble.
"BlackRock Affiliate" means a Person that, directly or indirectly through
one or more intermediaries, is controlled by, or is under common control with,
BlackRock, except for PNC or any PNC Affiliate.
"BlackRock Auditors" means Ernst & Young, LLP or any other independent
certified public accountants appointed from time to time by BlackRock's Board of
Directors.
"BlackRock Business" means any business or operations of BlackRock or any
BlackRock Affiliates.
"BlackRock Capital Securities" has the meaning set forth in Section 3.2(a).
"BlackRock Capital Stock" means all classes or series of capital stock of
BlackRock.
"BlackRock Class A Common Stock" means the Class A Common Stock, par value
$0.01 per share, of BlackRock.
2
<PAGE>
"BlackRock Class B Common Stock" means the Class B Common Stock, par value
$0.01 per share, of BlackRock.
"BlackRock Common Stock" means collectively the BlackRock Class A Common
Stock and the BlackRock Class B Common Stock.
"BlackRock Special Committee" has the meaning set forth in Section 3.3(b).
"BlackRock Transfer Agent" means _____________________, in its capacity as
the transfer agent and registrar for the BlackRock Common Stock.
"Business" means the BlackRock Business or the PNC Business, as the case
may be.
"Business Day" means any day other than a Saturday, a Sunday or a day on
which banking institutions located in the State of New York or the Commonwealth
of Pennsylvania are authorized or obligated by law or executive order to close.
"Change in Control of BlackRock" has the meaning set forth in Section
3.4(d).
"Change in Control of PNC" has the meaning set forth in Section 3.4(c).
"Claim" has the meaning set forth in Section 4.6.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, together with the rules and regulations promulgated thereunder.
"control," including the terms "controlling," "controlled by" and "under
common control with," means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.
"Controlling Stockholder" means a holder or beneficial owner of at least a
majority of the voting power of the Voting Stock of BlackRock.
"Dispute Notice" means written notice of any dispute between PNC or PAM and
BlackRock arising out of or relating to this Agreement, which shall set forth,
in reasonable detail, the nature of the dispute.
3
<PAGE>
"Exchange Act" means the Securities Exchange Act of 1934, as amended, now
or hereafter in effect, together with the rules and regulations promulgated
thereunder.
"Fair Value" has the meaning set forth in Section 3.3(b).
"GAAP" means generally accepted accounting principles, now or hereafter in
effect.
"Indemnifiable Losses" means all Losses suffered by an Indemnitee.
"Indemnifying Party" means a Person that is obligated to provide
indemnification under this Agreement.
"Indemnitee" means a Person that is entitled to seek indemnification under
this Agreement.
"Indemnity Payment" means an amount that an Indemnifying Party is required
to pay to an Indemnitee under this Agreement.
"Initial Investment Banks" has the meaning set forth in Section 3.3(b).
"Initial Public Offering" means the initial public offering by BlackRock of
shares of BlackRock Class A Common Stock as contemplated by the IPO Registration
Statement.
"Insurance Proceeds" means the payment received by an insured from an
insurance carrier or paid by an insurance carrier on behalf of the insured, net
of any applicable premium adjustment and tax effect.
"IPO Registration Statement" means the Registration Statement on Form S-1,
Registration No. 333-78367, of BlackRock, as may be supplemented and amended
from time to time.
"Losses" means all actual losses, liabilities, claims, obligations,
demands, judgments, damages, dues, penalties, assessments, fines (civil or
criminal), costs, liens, expenses, forfeitures, settlements, fees, reasonable
attorneys' fees and court costs, of any nature or kind
4
<PAGE>
whether or not such Losses would properly be reflected on a balance sheet, and
"Loss" means any one of these.
"New Securities" has the meaning set forth in Section 3.2(b).
"Notice" means any notice, request, claim, demand or other communication
under this Agreement.
"PAM" has the meaning set forth in the Preamble.
"Person" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization or a governmental entity or any
department, agency or political subdivision thereof.
"PNC" has the meaning set forth in the Preamble.
"PNC Affiliate" means a Person that, directly or indirectly through one or
more intermediaries, is controlled by, or is under common control with, PNC,
except for BlackRock or any BlackRock Affiliate.
"PNC Business" means any business or operations of PNC or any PNC
Affiliates other than the BlackRock Business.
"Registration Rights Agreement" means the Registration Rights Agreement to
be entered into among BlackRock, PNC, PAM and the other stockholders party
thereto concurrently with the execution and delivery of this Agreement.
"Regulation S-K" means Regulation S-K of the General Rules and Regulations
promulgated by the SEC, as now or hereafter in effect.
"Regulation S-X" means Regulation S-X of the General Rules and Regulations
promulgated by the SEC, as now or hereafter in effect.
"Request" has the meaning set forth in Section 4.6.
"SEC" means the United States Securities and Exchange Commission or any
successor agency.
5
<PAGE>
"Securities Act" means the Securities Act of 1933, as amended, now or
hereafter in effect, together with the rules and regulations promulgated
thereunder.
"Service Agent" means (i) for PNC,__________________________ ; (ii) for
PAM, The Corporation Trust Company, with offices on the date hereof at 1209
Orange Street, Wilmington, County of New Castle, Delaware 19801; and (iii) for
BlackRock, The Corporation Trust Company, with offices on the date hereof at
1209 Orange Street, Wilmington, County of New Castle, Delaware 19801.
"Stock Issuance" has the meaning set forth in Section 3.2(a).
"Subsidiary" means with respect to any specified Person, any corporation or
other legal entity of which such Person or any of its Subsidiaries owns,
directly or indirectly, more than 50% of the stock or other equity interest
entitled to vote with respect to the election of members to the board of
directors or similar governing body; provided, however, that for the purposes of
this Agreement, neither BlackRock nor any of the Subsidiaries of BlackRock shall
be deemed to be Subsidiaries of PNC or of any of the Subsidiaries of PNC.
"Tax Disaffiliation Agreement" means the Tax Disaffiliation Agreement to be
entered into among PNC, PAM and BlackRock concurrently with the execution of
this Agreement.
"Third-Party Claim" means any claim, suit, arbitration, inquiry, proceeding
or investigation by or before any court, governmental or other regulatory or
administrative agency or commission or any arbitration tribunal asserted by a
Person other than PNC, PAM or any PNC Affiliate or BlackRock or any BlackRock
Affiliate which gives rise to a right of indemnification hereunder.
"Trigger Date" shall mean the first date following the date upon which PAM
or any PAM Affiliate or a Controlling Stockholder (as defined in BlackRock's
Certificate of Incorporation) ceases to be the holder or beneficial owner of a
majority of the voting power of the Voting Stock.
"Underwriting Agreements" means the underwriting agreements to be entered
into by BlackRock with the underwriters (domestic and international) relating to
the Initial Public Offering.
"Voting Stock" means with respect to any Person, all classes and series of
the capital stock of such Person entitled to vote generally in the election of
directors.
6
<PAGE>
2. THE INITIAL PUBLIC OFFERING.
2.1 The Initial Public Offering. BlackRock, PNC and PAM shall consult
---------------------------
with, and cooperate in all respects with, each other in connection with the
pricing of the BlackRock Class A Common Stock to be offered in the Initial
Public Offering and BlackRock shall, at PAM's direction, promptly take any and
all actions necessary or desirable to consummate the Initial Public Offering as
contemplated by the IPO Registration Statement.
2.2 Expenses. Except as otherwise provided in this Agreement or any other
--------
agreement between the parties relating to the Initial Public Offering, all costs
and expenses of either party hereto in connection with the Initial Public
Offering shall be paid by the party that incurs such costs and expenses.
3. COVENANTS.
3.1 Financial and Other Information.
-------------------------------
(a) Access to BlackRock's Books and Records.
---------------------------------------
(i) For each fiscal year that BlackRock or any of its
subsidiaries are included in the results of operations of the
consolidated financial statements of PNC or PAM, BlackRock shall
provide access to its books, records, personnel, systems and other
requested information to PNC, its designated representatives and
regulatory authorities with jurisdiction over it, as necessary, upon
reasonable notice. If this provision conflicts with the terms of the
Tax Disaffiliation Agreement, the Tax Disaffiliation Agreement shall
control.
(ii) From the date that PNC's interest in BlackRock is reported
on the financial statements of PNC under the equity method of
accounting, BlackRock and its subsidiaries shall make available to
PNC information reasonably requested by PNC to permit it to account
for its results of operations and investment in BlackRock on the
equity method of accounting, work in good faith with PNC to
7
<PAGE>
facilitate the reporting of their investment in BlackRock on the
equity method of accounting and provide information to PNC as
required under the Tax Disaffiliation Agreement. If this provision
conflicts with the terms of the Tax Disaffiliation Agreement, the Tax
Disaffiliation Agreement shall control.
(b) Reporting Monthly Financial Data.
--------------------------------
(i) BlackRock shall promptly communicate its monthly earnings and
detailed supporting information to PNC, and submit an electronic
general ledger transmission to PNC within a time period mutually
agreed upon by PNC and BlackRock. In determining the time period
referenced above, PNC and BlackRock shall agree upon a time period
that (i) provides BlackRock's management enough time to review and
approve such statement of revenues and general ledger and (ii) results
in PNC reporting its consolidated earnings by a date following the end
of each month reasonably acceptable to PNC.
(ii) BlackRock shall provide the financial and operating data
within a reasonable time after such data is requested by PNC.
(c) BlackRock shall from time to time negotiate in good faith with
other PNC affiliates to enter into and maintain definitive agreements with
respect to: (i) inter-company revenue arrangements; and (ii) services that will
be provided by PNC staff and operating functions, provided that such agreements
shall provide that (x) inter-affiliate payments shall be settled in cash on a
monthly or more frequent basis in accordance with agreements between BlackRock
and PNC; and (y) BlackRock shall reimburse PNC for all payments made by PNC on
behalf of BlackRock. PNC shall provide adequate documentation to support
billings under such agreements and shall provide BlackRock a reasonable period
to review and challenge such billings prior to the time that payments with
respect to such billings are due.
(d) PNC and BlackRock shall maintain the Tax Disaffiliation Agreement
or a substantially similar agreement as provided by the terms of such Tax
Disaffiliation Agreement.
8
<PAGE>
(e) BlackRock will adhere to PNC's corporate financial accounting
policies and procedures as appropriate for BlackRock's business. BlackRock will
consult with PNC Corporate Accounting Policy relative to transactions/
circumstances involving interpretation of accounting rules. PNC's
recommendations will be followed unless BlackRock and PNC mutually agree that it
is not necessary due to materiality or other factors mutually agreed upon by
BlackRock and PNC. BlackRock will adhere to all other PNC accounting and
financial operating policies and procedures unless both PNC and BlackRock
mutually agree that is it not necessary based upon materiality or based upon the
nature of their operations.
(f) Regulatory Reporting and Public Disclosure.
------------------------------------------
(i) Upon the request of PNC, BlackRock shall provide
to PNC or its designated representative information for use by PNC in
its public disclosures and filings with regulatory bodies including,
but not limited to, press releases, shareholder reports, presentations
to analysts or investors, surveys, periodic reports filed with the
SEC, trust asset reports, OCC reports, Federal Deposit Insurance
Corporation reports and Federal Reserve reports within the reasonable
time periods requested by PNC. Upon the request of PNC,
BlackRock shall provide information to PNC or its designated
representative or to regulatory authorities with jurisdiction over PNC
or its affiliates with respect to Regulation Y and Sections 23a and
23b monitoring and reporting and other applicable regulatory
requirements.
(ii) BlackRock shall provide PNC copies of the periodic
reports it files with the SEC and other public disclosures far enough
in advance to provide PNC the reasonable opportunity to review such
reports and such disclosures before such reports are filed with the
SEC or such disclosures are publicly released. BlackRock shall
incorporate comments and recommendations made by PNC into such
reports or other disclosures.
(iii) PNC and BlackRock shall work in good faith to coordinate
the timing of their SEC filings and public disclosures to optimize the
benefit to both entities.
(g) Upon the request of PNC, BlackRock shall provide to
PNC or its designated representative annual budgets, earnings forecasts, long-
9
<PAGE>
range business and financial plans or other similar information for use by PNC
in the level of detail and within the time periods reasonably requested by PNC.
(h) For so long as any class of BlackRock's equity securities are
registered under the Securities Act, BlackRock shall maintain an Audit Committee
of its Board of Directors (the "Audit Committee"), that will operate under a
charter (the "Audit Committee Charter") approved by BlackRock's Board of
Directors. The Audit Committee Charter shall provide, among other things, that
the Audit Committee shall be responsible for recommending nominees to be the
BlackRock Auditors to the Board of Directors. The Audit Committee shall make
available to PNC or its designated representatives copies of the Audit
Committee's minutes, correspondence with the BlackRock Auditors, including
all letters of representations and summaries of audit differences, and other
information regarding any audit or internal control matters. Upon reasonable
notice from PNC, BlackRock shall use its reasonable efforts to make available
to PNC or its designated representatives members of the Audit Committee or
representatives of the BlackRock Auditors.
(i) PNC and BlackRock shall mutually agree upon any recommendation to
the Audit Committee of a candidate to be the BlackRock Auditors.
3.2 Additional Purchases of BlackRock Common Stock by PNC.
(a) From and after the consummation of the Initial Public Offering and
until the Trigger Date, at any time that BlackRock issues (each a "Stock
Issuance") (i) additional shares of BlackRock Common Stock, (ii) any shares of
any other class or series of BlackRock Capital Stock authorized after the
date hereof or (iii) any right, options or warrants to purchase any shares of
any class or series of BlackRock Capital Stock (collectively, the "BlackRock
Capital Securities") to any Person or Persons other than PNC or a PNC Affiliate,
PNC shall have the right to purchase (in each instance, an "Additional PNC Stock
Purchase") a number of additional BlackRock Capital Securities such that
following the Stock Issuance PNC will own shares and/or other securities
representing the same percentage of (x) the voting power of the Voting Stock of
BlackRock and (y) economic interest of all outstanding BlackRock Capital
Securities, in each case as it owned immediately prior to such Stock Issuance.
If the purchaser or purchasers of BlackRock Capital Securities in a Stock
Issuance pays cash in consideration for such securities, PNC shall pay an equal
per security amount of cash consideration in the Additional PNC Stock Purchase
following such Stock Issuance. In all other cases, the price that PNC must pay
to purchase the additional shares of capital stock shall be the fair value of
the class of capital stock and, with respect to class A common stock and class B
common stock, shall be equal to the average of the closing prices of the class A
common stock reported on the NYSE for the ten trading days prior to the
completion of the issuance giving rise to PNC's additional purchase right.
10
<PAGE>
(b) PNC's preemptive right under this Section 3.2 is assignable by
PNC to any subsidiary of PNC or to any transferee of Voting Stock held by PNC
that, after such transfer, is directly or indirectly the beneficial owner of at
least 50% of the voting power of the Voting Stock. Once transferred, PNC no
longer has any rights under this Section.
(c) BlackRock acknowledges and agrees that legal remedies for breach
of this Section 3.2 will be inadequate, that PNC will be irreparably injured by
any such breach and that this Section 3.2 may be enforced by, and that PNC shall
be entitled to obtain, one or more injunctions or other equitable relief to
ensure enforcement of this Section 3.2.
3.3 Change in Control of PNC or Change in Control of BlackRock.
----------------------------------------------------------
(a) If, following the Initial Public Offering and prior to the
Trigger Date, there is a Change in Control of PNC or a Change in Control of
BlackRock, PNC or a successor Controlling Stockholder, as the case may be,
agrees to offer to purchase all of the outstanding capital stock of BlackRock
not owned by PNC or the successor Controlling Stockholder, as the case may be,
for a "Fair Value" (as determined below), if within 12 months following the
anniversary of the effective date the Change in Control, majority of the
independent directors serving on the day prior to the effective date of the
Change in Control (the "Independent Directors Committee") determines that the
fundamental economics and prospects of the business of BlackRock have been
materially and adversely affected as a result of such Change in Control.
(b) The "Fair Value" of BlackRock capital stock will be determined
through good faith negotiations between PNC or its successor, as the case may
be, and a special committee of the BlackRock Board of Directors, which shall not
include any director of BlackRock who was nominated by PNC or any PNC Affiliate,
their respective successors, if any, or any successor Controlling Stockholder,
as the case may be (the "BlackRock Special Committee"). If PNC or its
11
<PAGE>
successor, as the case may be, and the BlackRock Special Committee are unable to
agree on Fair Value after reasonable efforts, each of PNC or its successor, as
the case may be, and the BlackRock Special Committee shall select a nationally
recognized investment banking or business appraisal firm (together, the "Initial
Investment Banks") which shall determine the Fair Value. If the Initial
Investment Banks are unable to agree on the Fair Value within 30 days of their
selection, they shall jointly select a third nationally recognized investment
banking or business appraisal firm (the "Arbitrating Investment Bank") within 10
days following the expiration of such 30-day period. Within 30 days following
its selection, the Arbitrating Investment Bank shall determine the Fair Value;
provided, that the Fair Value determined by the Arbitrating Investment Bank may
not be outside the range for the Fair Value determined by the Initial Investment
Banks. The fees and expenses of the Initial Investment Banks and the Arbitrating
Investment Bank (if applicable) shall be borne one-half by PNC or its successor,
as the case may be, and one-half by BlackRock. Fair Value shall be determined by
reference to, among other factors, the trading value of the Class A Common Stock
prior to any public announcement of the Change in Control; provided, however,
that actions taken by the acquiror in connection with such Change in Control,
including, without limitation, a substantial change in management of BlackRock,
which have had an adverse impact on the trading value of the Class A Common
Stock shall be excluded from any determination of Fair Value.
(c) A "Change in Control of PNC" shall be deemed to occur if, whether
------------------------
by virtue of an actual or threatened proxy contest (including a consent
solicitation) or any merger, reorganization, consolidation or similar
transaction Persons who are directors of PNC immediately prior to such proxy
contest or the execution of the agreement pursuant to which such transaction is
consummated (other than a director whose initial assumption of office was in
connection with a prior actual or threatened proxy contest) cease to constitute
a majority of the Board of Directors of PNC or any successor entity immediately
following such proxy contest or the consummation of such transaction.
(d) "Change in Control of BlackRock" shall be deemed to occur if (i)
------------------------------
due to a transfer of Voting Stock, a person other than PNC or its Affiliates
holds a majority of the voting power of the Voting Stock; or (ii)
12
<PAGE>
whether by virtue of an actual or threatened proxy contest (including a consent
solicitation) or any merger, reorganization, consolidation or similar
transaction, Persons who are directors of BlackRock immediately prior to such
proxy contest or the execution of the agreement pursuant to which such
transaction is consummated (other than a director whose initial assumption of
office was in connection with a prior actual or threatened proxy contest) cease
to constitute a majority of the Board of Directors of BlackRock or any successor
entity immediately following such proxy contest or the consummation of such
transaction.
(e) BlackRock shall pay (i) the fees and expenses of any financial
advisors, legal counsel or other advisors deemed necessary or advisable by the
Independent Directors Committee in connection with determining the impact of the
Change in Control on the business of BlackRock pursuant to this Section 3.3; and
(ii) all reasonable expenses of the Independent Directors Committee and
BlackRock Special Committee incidental to the determination of the Fair Value
including, but not limited to, expenses of and reasonable compensation for the
members of the Independent Directors Committee and the BlackRock Special
Committee. Members of the Independent Directors Committee and the BlackRock
Special Committee shall be entitled to the benefit of indemnification from
BlackRock, including, but not limited to, the indemnification provided by
BlackRock's Certificate of Incorporation and Bylaws, and BlackRock shall
maintain directors and officers insurance for such members at least as favorable
as in that which was in effect on the day prior to the effective date of the
applicable Change in Control and any additional directors and officers insurance
reasonably requested and available at a reasonable cost by the Independent
Directors Committee and BlackRock Special Committee in connection with their
services to be rendered under this Section 3.3.
3.4 Prohibited BlackRock Business Activities; New Business Activities.
-----------------------------------------------------------------
(a) So long as PNC owns, directly or indirectly, at least ten percent
(10%) of the capital stock or five percent (5%) of any "class" of "voting
securities" (as those terms are defined for purposes of the Federal Reserve
Board's Regulation Y or any successor regulation thereto) of BlackRock,
BlackRock or any successor entity to BlackRock shall be prohibited, without
PNC's consent, from directly or indirectly owning any asset or engaging in any
activity if to do so would cause BlackRock or its Subsidiaries or PNC (or any
successor company thereof) or any direct or indirect bank or nonbank subsidiary
of PNC (or any successor company thereof) (a "PNC Entity") that owns capital
stock of BlackRock to be in violation of
13
<PAGE>
any applicable federal banking law or any rule, regulation, policy or order of
any federal banking regulator with jurisdiction over BlackRock or a PNC Entity.
BlackRock will, and will cause its Subsidiaries to, take any necessary action to
ensure compliance with this Section 3.4, including, without limitation,
obtaining any required approval from, or filing any required notice or
application with, any applicable federal banking agency.
(b) In the event that PNC owns less than 10% of the capital stock and
less than 5% of any class of voting securities of BlackRock or a successor,
BlackRock or such successor shall provide PNC with written notice before
engaging in new activities or investing in assets not permissible under the
banking laws in order to allow PNC sufficient time as is reasonably required
after such notice to restructure PNC's investment (including, without
limitation, time to obtain regulatory approval prior to moving PNC's investment
to a non-bank subsidiary of PNC) and shall cooperate with PNC as necessary to
restructure PNC's investment so as to remove BlackRock and its subsidiaries from
the activities and investment restrictions of applicable banking laws.
(c) At any time PNC (or any successor company thereof) or any direct
or indirect Subsidiary of PNC (or any successor company thereof) directly or
indirectly owns less than twenty-five percent (25%) of the voting power of the
Voting Stock of BlackRock, if BlackRock advises PNC (or any successor company
thereof) that the regulatory restrictions imposed on BlackRock by reason of the
regulatory status of PNC (or any successor company thereof) is having a
significant adverse affect on the BlackRock Business, PNC shall, and shall cause
its Subsidiaries to, cooperate in good faith with BlackRock to identify those
steps, if any, that may be taken to reduce the impact of the relevant regulatory
restrictions on BlackRock, it being understood PNC shall not be required to
take any particular action.
3.5 Other Covenants. BlackRock hereby covenants and agrees that until
---------------
the Trigger Date:
(a) BlackRock shall not, without the prior written consent of PNC
(which it may withhold in its sole and absolute discretion), take, or cause to
be taken, directly or indirectly, any action, including making or failing to
make any election under the law of any state, which has the effect, directly or
indirectly, of restricting or limiting the ability of PNC to freely sell,
transfer, assign, pledge or otherwise dispose of shares of any class or series
of BlackRock capital stock or would restrict or limit the rights of any
transferee of PNC as a holder of any class or series of BlackRock capital stock.
Without limiting the generality of the foregoing, BlackRock shall not, without
the prior written consent of PNC (which it may withhold in its sole and
14
<PAGE>
absolute discretion), take any action, or take any action to recommend to its
stockholders any action, which would, among other things, limit the legal rights
of, or deny any benefit to, PNC or a PNC Affiliate as a BlackRock stockholder in
a manner not applicable to BlackRock stockholders generally.
(b) BlackRock shall not, without the prior written consent of PNC
(which it may withhold in its sole and absolute discretion), issue any shares of
BlackRock Capital Stock or any rights, warrants or options to acquire BlackRock
Capital Stock (including, without limitation, securities convertible or
exchangeable for BlackRock Capital Stock), except for issuances pursuant to
employee benefit plans approved by the Board of Directors of BlackRock.
(c) To the extent that PNC is a party to any contracts or agreements
that provide that certain actions of PNC's Subsidiaries may result in PNC being
in breach of or in default under such contracts or agreements, then if BlackRock
would be deemed a Subsidiary of PNC for purposes of such contract or agreement
and PNC advises BlackRock of the existence, and has furnished BlackRock with
copies, of such contracts or agreements (or the relevant portions thereof),
BlackRock shall not take any actions that reasonably could result in PNC being
in breach of or in default under any such contract or agreement. Prior to the
execution of this Agreement, PNC shall have delivered to BlackRock the contracts
and agreements (or relevant portions thereof) applicable to this covenant as of
the date hereof. The parties acknowledge and agree that, after the date hereof,
PNC may in good faith (and not solely with the intention of imposing
restrictions on BlackRock pursuant to this covenant) enter into additional
contracts or agreements under which BlackRock would be deemed a Subsidiary of
PNC that restrict activities of PNC's subsidiaries. PNC shall furnish BlackRock
with copies of such contracts or agreements (or relevant portions thereof).
BlackRock agrees to keep confidential and not to disclose any information
provided to it by PNC or its Affiliates pursuant to this Section 3.5(c), to the
extent such information is not already public. Notwithstanding the foregoing,
PNC shall not enter into any agreements that would materially restrict
BlackRock's business as currently conducted.
4. INDEMNIFICATION.
4.1 Indemnification by BlackRock. Subject to Section 4.3, BlackRock shall
----------------------------
indemnify, defend and hold harmless PNC, all PNC Affiliates and each of their
respective directors, officers and employees (in their capacities as such), from
and against:
15
<PAGE>
(a) all Indemnifiable Losses relating to, arising out of or due to,
directly or indirectly, any breach by BlackRock or any BlackRock Affiliate of
any of the provisions of this Agreement; and
(b) all Indemnifiable Losses relating to, arising out of or due to,
directly or indirectly, any incorrect, inaccurate or incomplete financial and
other information provided by BlackRock or any BlackRock Affiliate to PNC
pursuant to Section 3.1 of this Agreement.
4.2 Indemnification by PNC. Subject to Section 4.3, PNC shall indemnify,
----------------------
defend, and hold harmless BlackRock, all BlackRock Affiliates, and each of their
respective directors, officers and employees (in their capacities as such), from
and against all Indemnifiable Losses relating to, arising out of or due to,
directly or indirectly, any breach by PNC or any PNC Affiliate of any of the
provisions of this Agreement.
4.3 Other Liabilities.
-----------------
(a) This Section 4 shall not be applicable to any Tax-Related Losses
(as defined in the Tax Disaffiliation Agreement), which shall be governed by the
Tax Disaffiliation Agreement.
(b) This Section 4 shall not be applicable to any Losses relating to,
arising out of or due to any breach of the provisions of any other contract,
agreement or understanding between PNC or any PNC Affiliate and BlackRock or any
BlackRock Affiliate, which Losses shall be governed by the terms of such
contract, agreement or understanding.
4.4 Effect of Insurance Upon Indemnification. The amount which an
----------------------------------------
Indemnifying Party is required to pay to any Indemnitee pursuant to this Section
4 shall be reduced (including retroactively) by any Insurance Proceeds and other
amounts actually recovered by such Indemnitee in reduction of the related Loss,
it being understood and agreed that each of BlackRock and PNC shall use
commercially reasonable efforts to collect any such proceeds or other amounts to
which it or any of its Affiliates is entitled, without regard to whether it is
the Indemnifying Party hereunder. No Indemnitee shall be required, however, to
collect any such proceeds or other amounts prior to being entitled to
indemnification from an Indemnifying Party hereunder. If an Indemnitee receives
an Indemnity Payment in respect of a Loss and subsequently receives Insurance
Proceeds or other amounts
16
<PAGE>
in respect of such Loss, then such Indemnitee shall pay to such Indemnifying
Party an amount equal to the difference between (a) the sum of the amount of
such Indemnity Payment and the amount of such Insurance Proceeds or other
amounts actually received and (b) the amount of such Loss, in each case adjusted
(at such time as appropriate adjustment can be determined) to reflect any
premium adjustment attributable to such claim.
4.5 Procedure for Indemnification Involving Third-Party Claims.
----------------------------------------------------------
(a) An Indemnitee shall promptly notify the Indemnifying Party in
writing of the existence of any facts known to the Indemnitee giving rise to an
Indemnifiable Loss covered by this Section 4 and, in the case of any claim or
litigation giving rise to any such obligation, the Indemnitee shall notify the
Indemnifying Party of the commencement thereof (but the Indemnifying Party's
obligations under this Section 4 shall not be conditioned upon receipt of such
notice). If so requested by the Indemnitee, the Indemnifying Party shall
forthwith undertake the defense thereof at its own expense. The Indemnifying
Party shall be entitled to participate in and, to the extent it wishes, to
control the defense thereof at its own expense, but such defense shall be
conducted by counsel of good standing and reasonably satisfactory to the
Indemnitee. The Indemnitee shall not settle any proceeding without the written
consent of the Indemnifying Party, which shall not be unreasonably withheld.
The Indemnifying Party shall not consent to the entry of a judgment or enter
into any settlement without the consent of the Indemnitee if such judgment or
settlement would result in injunctive or other equitable relief being imposed on
the Indemnitee.
(b) In the event that the Indemnifying Party shall be obligated to
indemnify an Indemnitee pursuant to this Section 4, the Indemnifying Party
shall, upon payment of such indemnity in full, be subrogated to all rights of
the Indemnitee with respect to the claims to which such indemnification relates.
(c) The remedies provided in this Section 4 shall be cumulative and
shall not preclude assertion by an Indemnitee of any other rights or the seeking
of any other remedies against any Indemnifying Party.
4.6 Procedure for Indemnification Not Involving Third-Party Claims. If
--------------------------------------------------------------
any Indemnitee desires to assert against an Indemnifying Party any claim for
indemnification under this Section 4 other than a Third-Party Claim (a "Claim"),
the Indemnitee shall deliver to the Indemnifying Party notice of its demand for
17
<PAGE>
satisfaction of such Claim (a "Request"), specifying in reasonable detail the
amount of such Claim and the basis for asserting such Claim. Within 30 days
after the Indemnifying Party has been given a Request, the Indemnifying Party
shall either (i) satisfy the Claim requested to be satisfied in such Request by
delivering to the Indemnitee payment by wire transfer or a certified or bank
cashier's check payable to the Indemnified Party in immediately available funds
in an amount equal to the amount of such Claim, or (ii) notify the Indemnitee
that the Indemnifying Party contests such Claim by delivering to the Indemnitee
a Dispute Notice, stating that the Indemnifying Party objects to such Claim and
specifying in reasonable detail the basis for contesting such Claim. Any dispute
described in clause (ii) of this Section 4.6 shall be subject to the provisions
of Section 5.
4.7 Exclusive Remedies. Except for the right to pursue equitable
------------------
remedies, the remedies provided in this Section 4 shall be deemed the sole and
exclusive remedies of the parties with respect to the subject matters of the
indemnification provisions of this Section 4.
5. CONFIDENTIALITY
Subject to any contrary requirement of law and the right of each party to
enforce its rights hereunder in any legal action, each party shall keep strictly
confidential, and shall cause its employees and agents to keep strictly
confidential, any information which it or any of its agents or employees may
acquire pursuant to, or in the course of performing its obligations under, any
provision of this Agreement; provided, however, that such obligation to maintain
--------- --------
confidentiality shall not apply to information that at the time of disclosure
was in the public domain not as a result of acts or omissions by the receiving
party.
6. MISCELLANEOUS.
6.1 Dispute Resolution. PNC or PAM and BlackRock shall attempt in good
------------------
faith to resolve any dispute between the parties arising out of or relating to
this Agreement promptly through negotiations of the parties prior to seeking any
other legal or equitable remedy.
6.2 Complete Agreement. Except as otherwise set forth in this Agreement,
------------------
this Agreement and the exhibits hereto shall constitute the entire agreement
between the parties hereto with respect to the subject matter hereof and
18
<PAGE>
shall supersede all prior agreements and understandings, whether written or
oral, between the parties with respect to such subject matter.
6.3 Authority. Each of the parties hereto represents to the other that
---------
(a) it has the corporate power and authority to execute, deliver and perform
each of this Agreement and the Registration Rights Agreement, (b) the execution,
delivery and performance of each of this Agreement and the Registration Rights
Agreement by it has been duly authorized by all necessary corporate action, (c)
it has duly and validly executed and delivered each of this Agreement and the
Registration Rights Agreement and (d) each of this Agreement and the
Registration Rights Agreement is a legal, valid and binding obligation,
enforceable against it in accordance with its terms subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally and general equity principles.
6.4 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of Delaware (other than the laws regarding
conflicts of laws) as to all matters, including matters of validity,
construction, effect, performance and remedies.
6.5 Consent to Exclusive Jurisdiction. Any action, suit or proceeding
---------------------------------
arising out of any claim that the parties cannot settle through good faith
negotiations shall be litigated exclusively in the state courts of Delaware.
Each of the parties hereto hereby irrevocably and unconditionally (a) submits to
the jurisdiction of the state courts of Delaware for any such action, suit or
proceeding, (b) agrees not to commence any such action, suit or proceeding
except in the state courts of Delaware, (c) waives, and agrees not to plead or
to make, any objection to the venue of any such action, suit or proceeding in
the state courts of Delaware, (d) waives, and agrees not to plead or to make,
any claim that any such action, suit or proceeding brought in the state courts
of Delaware has been brought in an improper or otherwise inconvenient forum, (e)
waives, and agrees not to plead or to make, any claim that the state courts of
Delaware lack personal jurisdiction over it and (f) waives its right to remove
any such action, suit or proceeding to the federal courts except when such
courts are vested with sole and exclusive jurisdiction by statute. PNC, PAM and
BlackRock shall cooperate with each other in connection with any such action,
suit or proceeding to obtain reliable assurances that confidential treatment
will be accorded any information that either party shall reasonably deem to be
confidential or proprietary. Each of the parties hereto irrevocably designates
and appoints its respective Service Agent as its agent to receive service of
process in any such action, suit or proceeding. Each of the parties hereto
further covenants and
19
<PAGE>
agrees that, until the expiration of all applicable statutes of limitations
relating to potential claims under this Agreement, each such party shall
maintain a duly appointed agent for the service of summonses and other legal
process in the State of [Delaware], and shall promptly notify the other party
hereto of any change in the name or address of its Service Agent and the name
and address of any replacement for its Service Agent, if such agent is no longer
the Service Agent named herein. This Section 6.5 is meant to comply with 6 Del.
C. Section 2708. Notwithstanding anything contained in this Section 6.5, all
claims for indemnification under Section 6 shall be governed by the provisions
thereof.
6.6 Notices. All Notices shall be in writing and shall be deemed given
-------
upon (a) a transmitter's confirmation of a receipt of a facsimile transmission
(but only if followed by confirmed delivery of a standard overnight courier the
following Business Day or if delivered by hand the following Business Day) or
(b) confirmed delivery of a standard overnight courier or delivered by hand, to
the parties at the following addresses:
if to PNC or PAM to:
PNC Bank Corp.
One PNC Plaza
Pittsburgh, Pennsylvania 15222
Attention: General Counsel
Telecopy No.: (412) 762-2875
with a copy to:
Arnold & Porter
555 Twelfth Street, N.W.
Washington, D.C. 20004-1202
Attention: Steven Kaplan
Telecopy No.: (202) 942-5999
if to BlackRock, to:
BlackRock, Inc.
345 Park Avenue
New York, New York 10154
Attention: Laurence D. Fink
Telecopy No.: (212) 754-8760
20
<PAGE>
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Attention: Matthew J. Mallow
Telecopy No.: (212) 735-2000
or to such other address as either party hereto may have furnished to the other
party by a Notice in writing in accordance with this Section 6.6.
6.7 Amendment and Modification. This Agreement may not be amended or
--------------------------
modified in any respect except by a written agreement signed by both of the
parties hereto.
6.8 Binding Effect; Assignment. This Agreement and all of the provisions
--------------------------
hereof shall be binding upon the parties hereto and inure to the benefit of the
parties hereto and their respective successors and permitted assigns. PAM may
assign its rights, interests and obligations hereunder to PNC, any PNC
Affiliate, a Controlling Stockholder (as such term is defined in BlackRock's
Amended and Restated Certificate of Incorporation) or an Affiliate of such
Controlling Stockholder. PNC may assign its rights, interests and obligations
hereunder to a Controlling Stockholder. Except as otherwise specifically
provided for in this Section 6.8, neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any party hereto
without the prior written consent of the other parties, which consent shall
not be unreasonably withheld or delayed.
6.9 Third Party Beneficiaries. The Indemnitees and their respective
-------------------------
successors shall be third party beneficiaries of the indemnification provisions
of Section 4, as applicable, and shall be entitled to enforce those provisions
and in connection with such enforcement shall be subject to Section 6.5, in each
such case as fully and to the same extent as if they were parties to this
Agreement. Except as provided in the previous sentence, nothing in this
Agreement, express or implied, is intended to or shall confer upon any Person
any legal or equitable right, benefit or remedy of any nature whatsoever under
or by reason of this Agreement, and no Person (other than as provided in the
previous sentence) shall be deemed a third party beneficiary under or by reason
of this Agreement.
6.10 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. This Agreement may be
executed by facsimile signature.
21
<PAGE>
6.11 Waiver. The observance of any term of this Agreement may be waived
------
(either generally or in a particular instance and either retroactively or
prospectively) by the party entitled to enforce such term, but such waiver shall
be effective only if it is in writing signed by the party against which such
waiver is to be asserted. Unless otherwise expressly provided in this Agreement,
no delay or omission on the part of any party in exercising any right or
privilege under this Agreement shall operate as a waiver thereof, nor shall any
waiver on the part of any party of any right or privilege under this Agreement
operate as a waiver of any other right or privilege under this Agreement nor
shall any single or partial exercise of any right or privilege preclude any
other or further exercise thereof or the exercise of any other right or
privilege under this Agreement. No failure by either party to take any action or
assert any right or privilege hereunder shall be deemed to be a waiver of such
right or privilege in the event of the continuation or repetition of the
circumstances giving rise to such right unless expressly waived in writing by
the party against whom the existence of such waiver is asserted.
6.12 Severability. Any provision of this Agreement which is prohibited or
------------
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof. Any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
6.13 Specific Performance. Each of PNC, PAM and BlackRock acknowledges
--------------------
and agrees that under certain circumstances the breach by PAM, PNC or any of its
Affiliates or BlackRock or any of its Affiliates of a term or provision of this
Agreement will materially and irreparably harm the other party, that money
damages will accordingly not be an adequate remedy for such breach and that the
non-defaulting party, in its sole discretion and in addition to its rights under
this Agreement and any other remedies it may have at law or in equity, may apply
to any court of law or equity of competent jurisdiction (without posting any
bond or deposit) for specific performance and/or other injunctive relief in
order to enforce or prevent any breach of the provisions of this Agreement.
6.14 Remedies. Each of PNC, PAM and BlackRock shall be entitled to enforce
--------
its rights under this Agreement, specifically to recover actual damages and
costs (including reasonable attorneys' fees) caused by any breach of any
provision of this Agreement and to exercise all other rights existing in its
favor.
22
<PAGE>
6.15 Performance. Each of the parties hereto shall use all commercially
-----------
reasonable efforts to cause to be performed all actions, agreements and
obligations set forth herein to be performed by any Subsidiary or Affiliate of
such party.
6.16 References; Construction. The table of contents and the section and
------------------------
other headings and subheadings contained in this Agreement and the exhibits
hereto are solely for the purpose of reference, are not part of the agreement of
the parties hereto and shall not in any way affect the meaning or
interpretation of this Agreement or any exhibit hereto. All references to days
or months shall be deemed references to calendar days or months. Unless the
context otherwise requires, any reference to a "Section" or an "Exhibit" shall
be deemed to refer to a section of this Agreement or an exhibit to this
Agreement, as applicable. The words "hereof," "herein" and "hereunder" and words
of similar import referring to this Agreement refer to this Agreement as a whole
and not to any particular provision of this Agreement. Whenever the words
"include," "includes" or "including" are used in this Agreement, unless
otherwise specifically provided, they shall be deemed to be followed by the
words "without limitation." This Agreement shall be construed without regard to
any presumption or rule requiring construction or interpretation against the
party drafting or causing the document to be drafted.
23
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the date and year first written above.
PNC BANK CORP.
By:___________________________________
Name:_________________________________
Title:________________________________
PNC ASSET MANAGEMENT, INC.
By:___________________________________
Name:_________________________________
Title:________________________________
BLACKROCK, INC.
By:___________________________________
Name:_________________________________
Title:________________________________
24
<PAGE>
EXHIBIT 10.7
================================================================================
REGISTRATION RIGHTS AGREEMENT
by and among
BLACKROCK, INC.,
PNC ASSET MANAGEMENT, INC.
and
The Persons and Entities Listed on
the Signature Pages Hereof
____________________________
Dated as of , 1999
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Section 1. Definitions................................ 1
Section 2. Registration Under the Securities Act...... 4
Section 3. Restrictions on Public Sale by the Company. 11
Section 4. Registration Procedures.................... 11
Section 5. Indemnification; Contribution.............. 17
Section 6. Miscellaneous.............................. 21
</TABLE>
i
<PAGE>
REGISTRATION RIGHTS AGREEMENT (the "Agreement") dated as of
---------
, 1999, by and between BLACKROCK, INC., a company organized under the laws of
the State of Delaware (the "Company"), PNC Asset Management, Inc., a company
-------
organized under the laws of the State of Delaware ("PNC"), the Persons
---
listed on the signature pages hereof (such Persons herein referred to
collectively as the "Employee Stockholders" and individually as an "Employee
--------------------- --------
Stockholder," and together with PNC herein referred to collectively as the
- -----------
"Holders" and individually as a "Holder").
- -------- ------
WHEREAS the Company intends to make an initial public offering
("Initial Public Offering") of its Class A Common Stock, par value $0.01 per
share, ("Class A Common Stock");
--------------------
WHEREAS the parties desire to set forth the rights of PNC and the
Employee Stockholders and the obligations of the Company with respect to the
registration of Registrable Securities (as defined herein) pursuant to the
Securities Act (as defined herein);
NOW THEREFORE, in consideration of the promises and the
representations, warranties and agreements contained herein, and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, and intending to be legally bound hereby, the parties hereto agree
as follows:
Section 1. Definitions.
As used in this Agreement, the following terms shall have the
following meanings:
"Affiliate" shall have the meaning set forth in Rule 12b-2 promulgated
---------
under the Exchange Act.
"Class A Common Stock" has the meaning set forth in the preamble.
--------------------
"Class B Common Stock" shall mean the shares of class B common stock,
--------------------
par value $0.01 per share, of the Company.
"Company" shall have the meaning set forth in the preamble and shall
-------
also include the Company's successors.
<PAGE>
"Employee Stockholder(s)" shall have the meaning set forth in the
-----------------------
preamble.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended from time to time.
"Holder" and "Holders" shall have the meanings set forth in the
------ -------
preamble.
"Incidental Registration" shall mean a registration required to be
-----------------------
effected by the Company pursuant to Section 2(b).
"Incidental Registration Statement" shall mean a registration
---------------------------------
statement of the Company, as provided in Section 2(b), which covers any of the
Registrable Securities on an appropriate form in accordance with the Securities
Act and all amendments and supplements to such registration statement, including
post-effective amendments, in each case including the Prospectus contained
therein, all exhibits thereto and all material incorporated by reference
therein.
"Initial Public Offering" shall have the meaning set forth in the
-----------------------
preamble.
"Lock-up Period" means the 180-day period commencing on the effective
--------------
date of the registration statement for the Initial Public Offering.
"Majority Holders" shall mean Employee Stockholders representing a
----------------
majority of the Registrable Securities covered by a Registration Statement.
"NASD" shall mean the National Association of Securities Dealers, Inc.
----
"Person" shall mean any individual, limited or general partnership,
------
limited liability company, corporation, trust, joint venture, association, joint
stock company or unincorporated organization.
"Prospectus" shall mean the prospectus included in a Registration
----------
Statement, including any preliminary Prospectus, and any such Prospectus as
amended or supplemented by any prospectus supplement with respect to the terms
of the offering of any portion of the Registrable Securities and by all other
amendments
2
<PAGE>
and supplements to such Prospectus, including post-effective amendments, and in
each case all material incorporated by reference therein.
"Registrable Securities" shall mean collectively, (i) the shares of
----------------------
Class A Common Stock into which shares of Class B Common Stock as of the date
hereof (which, in the case of the Employee Stockholders, are not subject to
resale restrictions under any employment agreement with the Company) are
convertible pursuant to the Company's certificate of incorporation (the
"Shares"), (ii) any stock or other securities into which or for which the Shares
may hereafter be changed, converted or exchanged, (iii) any other securities
issued or distributed in respect of the Shares by way of stock dividend or stock
split or in connection with a combination of shares, recapitalization,
reorganization, merger, consolidation or otherwise and (iv) any other securities
into which or for which shares of any other successor securities are received in
respect of any of the foregoing (i) through (iii); provided that in the event
that any Registrable Securities (as defined without giving effect to this
proviso) are being registered pursuant hereto, the Holder may include in such
registration (subject to the limitations of this Agreement otherwise applicable
to the inclusion of Registrable Securities) any shares of Class A Common Stock
or securities acquired in respect thereof thereafter acquired by such Holder,
which shall also be deemed to be "Shares," and accordingly Registrable
Securities, for purposes of such registration. Registrable Securities will
cease to be Registrable Securities when (i) a Registration Statement covering
such Registrable Securities has been declared effective under the Securities Act
and they have been disposed of pursuant to such effective Registration
Statement, (ii) such Registrable Securities are distributed to the public
pursuant to Rule 144 (or any similar provision then in force) under the
Securities Act or otherwise transferred in a manner that results in the
transferred security being delivered not being subject to transfer restrictions
under the Securities Act, (iii) such Registrable Securities shall have been
otherwise transferred to a person who is not a Holder, or (iv) such Registrable
Securities shall have ceased to be outstanding.
"Registration Expenses" shall mean (i) all registration, listing,
---------------------
qualification and filing fees (including NASD filing fees), (ii) fees and
disbursements of counsel for the Company, (iii) accounting fees incident
to any such registration, (iv) blue sky fees and expenses (including counsel
fees in connection with the preparation of a Blue Sky Memorandum and legal
investment survey and NASD filings), (v) all expenses of any Persons in
preparing or assisting in preparing, printing, distributing, mailing and
delivering any Registration Statement, any Prospectus, any underwriting
agreements, transmit-
3
<PAGE>
tal letters, securities sales agreements, securities certificates and other
documents relating to the performance of and compliance with this Agreement,
(vi) the expenses incurred in connection with making road show presentations and
holding meetings with potential investors to facilitate the distribution, (vii)
underwriter fees, excluding discounts and commissions, and sale of Registrable
Securities which are customarily borne by the issuer and (v) all internal
expenses of the Company (including all salaries and expenses of officers and
employees performing legal or accounting duties); provided, however,
Registration Expenses shall not include any Selling Expenses.
"Registration Statement" shall mean any registration statement of the
----------------------
Company which covers any Registrable Securities and all amendments and
supplements to any such Registration Statement, including post-effective
amendments, in each case including the Prospectus contained therein, all
exhibits thereto and all material incorporated by reference therein.
"Related Securities" shall mean any securities of the Company similar
------------------
or identical to any of the Registrable Securities including, without limitation,
Class A Common Stock, Class B Common Stock and all options, warrants, rights and
other securities convertible into, or exchangeable or exercisable for Class A
Common Stock or Class B Common Stock (other than any of the foregoing to be
offered or sold to officers, directors or employees as compensation).
"Required Registration" shall mean a registration required to be
---------------------
effected pursuant to Section 2(a).
"Required Registration Statement" shall mean a Registration Statement
-------------------------------
which covers the Registrable Securities requested to be included therein
pursuant to the provisions of Section 2(a) on an appropriate form (in accordance
with Section 4(a) hereof) pursuant to the Securities Act, and which form shall
be available for the sale of the Registrable Securities in accordance with the
intended method or methods of distribution thereof, and all amendments and
supplements to such Registration Statement, including post-effective amendments,
in each case including the Prospectus contained therein, all exhibits thereto
and all material incorporated by reference therein.
"SEC" shall mean the Securities and Exchange Commission.
---
4
<PAGE>
"Selling Expenses" shall mean underwriting discounts, selling
----------------
commissions and stock transfer taxes applicable to the shares registered by the
Holders.
"Securities Act" shall mean the Securities Act of 1933, as amended
--------------
from time to time.
"Underwriter" shall have the meaning set forth in Section 5(a).
-----------
"Underwritten Offering" shall mean a sale of securities of the Company
---------------------
to an Underwriter or Underwriters for reoffering to the public.
Section 2. Registration Under the Securities Act.
(a) Required Registration
---------------------
(i) Right to Require Registration. At any time following the Lock-up
-----------------------------
Period (subject to extension in accordance with the penultimate paragraph of
this Section 2(a)(i)), each of PNC and Employee Stockholders representing a
majority of the aggregate number of outstanding shares of Class B Common Stock
beneficially owned by Employee Stockholders shall have the right to request in
writing (a "Request") (which Request shall specify the Registrable Securities
-------
intended to be disposed of by such Holders and the intended method of
distribution thereof) that the Company register such Holders' Registrable
Securities by filing with the SEC a Required Registration Statement. Upon the
receipt of such a Request, the Company will, by the tenth (10th) business day
thereafter, give written notice of such requested registration to all Holders of
Registrable Securities, and, not later than the 60th calendar day after the
receipt of such a Request by the Company, the Company will cause to be filed
with the SEC a Required Registration Statement covering the Registrable
Securities which the Company has been so requested to register in such Request
and all other Registrable Securities which the Company has been requested to
register by Holders thereof by written request given to the Company within ten
(10) business days after the giving of such written notice by the Company. The
Required Registration Statement will provide for the registration under the
Securities Act of the Registrable Securities which the Company has been so
requested to register by all such Holders, subject to the limitations of this
Section, to the extent necessary to permit the disposition of such Registrable
Securities in accordance with the intended methods of distribution thereof
specified in such Request or further
5
<PAGE>
requests, and the Company shall use its reasonable best efforts to have such
Required Registration Statement declared effective by the SEC as soon as
practicable thereafter (but in no event later than the 180th calendar day after
the receipt of such a Request) and to keep such Required Registration Statement
continuously effective for a period of at least 60 calendar days (or, in the
case of an Underwritten Offering, such period as the Underwriters shall
reasonably require) following the date on which such Required Registration
Statement is declared effective (or such shorter period which will terminate
when all of the Registrable Securities covered by such Required Registration
Statement have been sold pursuant thereto), including, if necessary, by filing
with the SEC a post-effective amendment or a supplement to the Required
Registration Statement or the related Prospectus or any document incorporated
therein by reference or by filing any other required document or otherwise
supplementing or amending the Required Registration Statement, if required by
the rules, regulations or instructions applicable to the registration form used
by the Company for such Required Registration Statement or by the Securities
Act, the Exchange Act, any state securities or blue sky laws or any rules and
regulations thereunder.
The Company shall not be required to effect, pursuant to this Section
2(a) more than three registrations in the aggregate requested by PNC and three
registrations in the aggregate requested by the Employee Stockholders. A Request
which does not result in an effective registration under the Securities Act
shall not be counted in determining whether these registrations have occurred.
A Request may be withdrawn prior to the filing of the Required
Registration Statement by the Holder(s) which made such Request (a "Withdrawn
---------
Request") and a Required Registration Statement may be withdrawn prior to the
- -------
effectiveness thereof by the Holders of a majority of the Registrable Securities
included therein (a "Withdrawn Required Registration"), but, in either such
-------------------------------
event, such withdrawal shall not be treated as a Required Registration which
shall have been effected pursuant to the immediately preceding paragraph.
The Holders shall not, without the Company's consent, be entitled to
deliver a Request for a Required Registration if less than 90 calendar days have
elapsed since (A) the effective date of a prior Required Registration Statement
or (B) in the case of a Required Registration which is effected other than by
means of an Underwritten Offering, the sale by Holders of their Registrable
Securities pursuant thereto or the Required Registration Statement ceasing to be
effective under the Securities Act or (C) the date of withdrawal of a Withdrawn
Required Registration.
6
<PAGE>
Notwithstanding the foregoing, the Company may delay the filing or the
effectiveness of any Required Registration Statement for a period not to exceed
90 days (a "Blackout Period") if the Board of Directors of the Company, in
---------------
its reasonable judgment, determines that such registration would interfere with
any pending material financing, acquisition, corporate reorganization or any
other material corporate development involving the Company or any of its
subsidiaries or would require premature disclosure thereof; provided, however,
that the aggregate number of days included in all Blackout Periods during any
consecutive 12 months shall not exceed 90 days.
The registration rights granted pursuant to the provisions of this
Section 2(a) shall be in addition to the registration rights granted pursuant to
the other provisions of this Section 2.
(ii) Priority in Required Registrations. If a Required Registration
----------------------------------
involves an Underwritten Offering, and the sole Underwriter or the lead managing
Underwriter, as the case may be, of such Underwritten Offering shall advise the
Company in writing on or before the date five (5) days prior to the date then
scheduled for such offering that, in its opinion, the amount of Registrable
Securities requested to be included in such Required Registration exceeds the
amount which can be sold in such offering without adversely affecting the
success of the distribution of the Registrable Securities being offered, the
Company will include in such Required Registration only the amount of
Registrable Securities that the Company is so advised can be sold in such
offering; provided, however, that the Company shall be required to include in
such Required Registration: first, all Registrable Securities requested to be
included in the Required Registration by Holders requesting registration (not
including, for purposes of this proviso, the shares covered in the proviso
clause of the definition of Registrable Securities) and, to the extent not all
such Registrable Securities can be included in such Required Registration, the
number of Registrable Securities to be included shall be allocated pro rata on
the basis of the number of shares of Class B Common Stock beneficially owned at
that time by all the Holders requesting to participate in the Required
Registration or on such other basis as shall be agreed among such Holders;
second, if all Registrable Securities requested to be included in the Required
Registration by the Holders requesting registration can be so included, all
Registrable Securities requested to be included in
7
<PAGE>
the Required Registration by any other Holders and, to the extent not all such
Registrable Securities can be included in such Required Registration, the number
of Registrable Securities to be included shall be allocated pro rata on the
basis of the number of shares of Class B Common Stock beneficially owned at that
time by all such other Holders requesting to participate in the Required
Registration or on such other basis as shall be agreed among such other Holders;
and third, if all Registrable Securities requested to be included in the
Required Registration by all such Holders can be so included, all other
securities requesting, in accordance with any registration rights which are
granted in compliance with Section 6(a), to be included in such Required
Registration which are of the same class as the Registrable Securities and, to
the extent not all such securities can be included in such Required
Registration, the number of securities to be included shall be allocated pro
rata among the holders thereof requesting inclusion in such Required
Registration on the basis of the number of securities requested to be included
by all such holders.
(b) Incidental Registration.
-----------------------
(i) Right to Include Registrable Securities. If at any time the
---------------------------------------
Company proposes to register any Related Securities under the Securities Act
(other than (A) any registration of public sales or distributions solely by and
for the account of the Company of securities issued (x) pursuant to any employee
benefit or similar plan, including employee stock and stock option plus, or any
dividend reinvestment plan or (y) in any acquisition by the Company, (B)
pursuant to Section 2(a) hereof or (C) for the Initial Public Offering), either
in connection with a primary offering for cash for the account of the Company or
a secondary offering or a combination thereof, the Company will, each time it
intends to effect such a registration, give written notice to all Holders of
Registrable Securities at least ten (10) business days prior to the initial
filing of a Registration Statement with the SEC pertaining thereto, informing
such Holders of its intent to file such Registration Statement and of the
Holders' rights to request the registration of the Registrable Securities held
by the Holders under this Section 2(b) (the "Company Notice"). Upon the written
--------------
request of any Holder made within 7 business days after any such Company Notice
is given (which request shall specify the Registrable Securities intended to be
disposed of by such Holder and, unless the applicable registration is intended
to effect a primary offering of class A common shares for cash for the account
of the Company, the intended method of distribution thereof), the Company will
use its reasonable best efforts to effect the registration under the Securities
Act of all Registrable Securities which the Company has been so requested to
register by such Holders to the extent required to permit the disposition (in
accordance with the intended methods of
8
<PAGE>
distribution thereof or, in the case of a registration which is intended to
effect a primary offering for cash for the account of the Company, in accordance
with the Company's intended method of distribution) of the Registrable
Securities so requested to be registered, including, if necessary, by filing
with the SEC a post-effective amendment or a supplement to the Incidental
Registration Statement or the related Prospectus or any document incorporated
therein by reference or by filing any other required document or otherwise
supplementing or amending the Incidental Registration Statement, if required by
the rules, regulations or instructions applicable to the registration form used
by the Company for such Incidental Registration Statement by the Securities Act,
any state securities or blue sky laws, or any rules and regulations thereunder;
provided, however, that if, at any time after giving written notice of its
intention to register any securities and prior to the effective date of the
Incidental Registration Statement filed in connection with such registration,
the Company shall determine for any reason not to register or to delay
registration of such securities, the Company may, at its election, give written
notice of such determination to each Holder of Registrable Securities and,
thereupon, (A) in the case of a determination not to register, the Company shall
be relieved of its obligation to register any Registrable Securities in
connection with such registration (but not from its obligation to pay the
Registration Expenses incurred in connection therewith) and (B) in the case of
a determination to delay such registration, the Company shall be permitted to
delay registration of any Registrable Securities requested to be included in
such Incidental Registration Statement for the same period as the delay in
registering such other securities.
The registration rights granted pursuant to the provisions of this
Section 2(b) shall be in addition to the registration rights granted pursuant to
the other provisions of this Section 2.
(ii) Priority in Incidental Registrations. If a registration pursuant
------------------------------------
to this Section 2(b) involves an Underwritten Offering of the securities so
being registered, whether or not for sale for the account of the Company, and
the sole Underwriter or the lead managing Underwriter, as the case may be, of
such Underwritten Offering shall advise the Company in writing (with a copy to
each Holder of Registrable Securities requesting registration) on or before the
date five (5) days prior to the date then scheduled for such offering that, in
its opinion, the amount of securities (including Registrable Securities)
requested to be included in such registration exceeds the amount which can be
sold in (or during the time of) such offering without adversely affecting the
success of the distribution of the securities being offered, then the Company
will include in such registration first, all the securities
9
<PAGE>
entitled to be sold pursuant to such Registration Statement without reference to
the incidental registration rights of any holder (including Holders), and
second, the amount of other securities (including Registrable Securities)
requested to be included in such registration that the Company is so advised can
be sold in (or during the time of) such offering, allocated, if necessary, pro
rata among the holders (including the Holders) thereof requesting such
registration on the basis of the number of the securities (including Registrable
Securities) beneficially owned at the time by the holders (including Holders)
requesting inclusion of their securities; provided, however, that in the event
the Company determines, by virtue of this paragraph, not to include in any such
registration all of the Registrable Securities of any Holder requested to be
included in such registration, such Holder may, upon written notice to the
Company given within 3 days of the time such Holder first is notified of such
matter, reduce the amount of Registrable Securities it desires to have included
in such registration, whereupon only the Registrable Securities, if any, it
desires to have included will be so included and the Holders not so reducing
shall be entitled to a corresponding increase in the amount of Registrable
Securities to be included in such registration.
(c) Expenses. The Company agrees to pay all Registration Expenses in
--------
connection with (i) each of the three (3) registrations requested pursuant to
Section 2(a) (subject to Section 2(a)(i)) and (ii) each registration as to which
Holders request inclusion of Registrable Securities pursuant to Section 2(b).
All Selling Expenses relating to securities registered on behalf of Holders
shall be borne by the Holders of shares included in such registration, other
selling stockholders and the Company pro rata on the basis of the number of
shares of Common Stock so registered, except that the Company need not
contribute to fees and disbursements of counsel for the Holders and other
selling stockholders.
(d) Effective Registration Statement; Suspension. Subject to the
--------------------------------------------
third paragraph of Section 2(a)(i), a Registration Statement pursuant to Section
2(a) will not be deemed to have become effective (and the related registration
will not be deemed to have been effected) unless it has been declared effective
by the SEC prior to a request by the Holders of a majority of the Registrable
Securities included in such registration that such Registration Statement be
withdrawn; provided, however, that if, after it has been declared effective, the
offering of any Registrable Securities pursuant to such Registration Statement
is interfered with by any stop order, injunction or other order or requirement
of the SEC or any other governmental agency or court, such Registration
Statement will be deemed not to have become effective and
10
<PAGE>
the related registration will not be deemed to have been effected pursuant to
this Agreement.
Any period during which the Company fails to keep any Required
Registration Statement effective and usable for resale of Registrable Securities
shall be referred to as a "Suspension Period." A Suspension Period shall (a)
-----------------
commence on and include the earlier of the date that (i) the Company gives
notice or (ii) a Holder is advised by counsel or the SEC, in either case, that
a Required Registration Statement is no longer effective or usable for resale of
Registrable Securities and (b) end on and including the date when each Holder of
Registrable Securities covered by such Required Registration Statement either
receives copies of the supplemented or amended Prospectus contemplated by
Section 4(j) or is advised in writing by the Company (having a reasonable basis
to so advise) that the use of the Prospectus may be resumed. In the event of one
or more Suspension Periods, the applicable time period referenced in the first
paragraph of Section 2(a)(i)) shall be extended by the number of days included
in each Suspension Period, and, in the event any Suspension Period occurs sooner
than 30 days after the end of the previous Suspension Period or 30 days after
the initial effectiveness of any Required Registration Statement, none of the
days between such Suspension Periods (as the case may be) or prior to such
Suspension Period shall be included in computing such applicable time period.
(e) Selection of Underwriters. At any time or from time to time, the
-------------------------
Holders of at least 25% of the Registrable Securities covered by a Required
Registration Statement may elect to have such Registrable Securities sold in an
Underwritten Offering and may select the investment banker or investment bankers
and manager or managers that will serve as lead and co-managing Underwriters
with respect to the offering of such Registrable Securities, subject to the
consent of the Company which shall not be unreasonably withheld. No Holder may
participate in any Underwritten Offering hereunder unless such Holder (a) agrees
to sell such Holder's securities on the basis provided in any underwriting
arrangements and (b) completes and executes all questionnaires, powers of
attorney, custody agreements, indemnities, underwriting agreements and other
documents required under the terms of such Underwritten Offering.
Section 3. Restrictions on Public Sale by the Company.
If requested by the sole Underwriter or lead managing Underwriter(s)
in any Underwritten Offering, the Company agrees not to effect any public sale
or
11
<PAGE>
distribution (other than, in the case of the Company, public sales or
distributions solely by and for the account of the Company of securities issued
pursuant to any employee benefit or similar plan, including employee stock and
stock option plans, or any dividend reinvestment plan) of any securities during
the period commencing on the date the Company receives a Request from any Holder
and continuing until 180 days after the commencement of an Underwritten Offering
(or for such shorter period as the sole or lead managing Underwriter shall
request) unless earlier terminated by the sole Underwriter or lead managing
Underwriter(s) in such Underwritten Offering.
Section 4. Registration Procedures.
In connection with the obligations of the Company pursuant to Section
2, the Company shall use its best efforts to effect or cause to be effected the
registration of the Registrable Securities under the Securities Act to permit
the sale of such Registrable Securities by the Holders in accordance with their
intended method of distribution, and the Company shall:
(a) (i) prepare and file a Registration Statement with the SEC which
(x) shall be on Form S-3 (or any successor to such form), if available, and
otherwise on Form S-1, (y) shall be available for the sale or exchange of the
Registrable Securities in accordance with the intended method or methods of
distribution by the selling Holders thereof and (z) shall comply as to form
with the requirements of the applicable form and include all financial
statements required by the SEC to be filed therewith and all other information
reasonably requested by the lead managing Underwriter or sole Underwriter, if
applicable, to be included therein, (ii) use its reasonable best efforts to
cause such Registration Statement to become effective and remain effective in
accordance with Section 2, (iii) use its reasonable best efforts not to take any
action that would cause a Registration Statement to contain a material
misstatement or omission or to be not effective and usable for resale of
Registrable Securities during the period that such Registration Statement is
required to be effective and usable and (iv) cause each Registration Statement
and the related Prospectus and any amendment or supplement thereto, as of the
effective date of such Registration Statement, amendment or supplement (x) to
comply in all material respects with any requirements of the Securities Act and
the rules and regulations of the SEC and (y) not to contain any untrue statement
of a material fact required to be stated therein or necessary to make the
statements therein not misleading;
12
<PAGE>
(b) subject to paragraph (j) of this Section 4, prepare and file with
the SEC such amendments and post-effective amendments to each such Registration
Statement, as may be necessary to keep such Registration Statement effective for
the applicable period; cause each such Prospectus to be supplemented by any
required prospectus supplement, and as so supplemented to be filed pursuant to
Rule 424 under the Securities Act; and comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by each
Registration Statement during the applicable period in accordance with the
intended method or methods of distribution by the selling Holders thereof, as
set forth in such registration statement;
(c) furnish to each Holder of Registrable Securities and to each
Underwriter of an Underwritten Offering of Registrable Securities, if any,
without charge, as many copies of each Prospectus, including each preliminary
Prospectus, and any amendment or supplement thereto and such other documents as
such Holder or Underwriter may reasonably request in order to facilitate the
public sale or other disposition of the Registrable Securities; the Company
hereby consents to the use of the Prospectus, including each preliminary
Prospectus, by each Holder of Registrable Securities and each Underwriter of an
Underwritten Offering of Registrable Securities covered by the Prospectus or the
preliminary Prospectus (and Holders hereby agreeing not to make a broad public
dissemination of a form of preliminary Prospectus which is designed to be a
"quiet filing" without the Company's consent, such consent to not be withheld
unreasonably);
(d) (i) use its reasonable best efforts to register or qualify the
Registrable Securities, no later than the time the applicable Registration
Statement is declared effective by the SEC, under all applicable state
securities or "blue sky" laws of such jurisdictions as each Underwriter, if any,
or any Holder of Registrable Securities covered by a Registration Statement,
shall reasonably request; (ii) use its reasonable best efforts to keep each such
registration or qualification effective during the period such Registration
Statement is required to be kept effective; and (iii) do any and all other acts
and things which may be reasonably necessary or advisable to enable each such
Underwriter, if any, and Holder to consummate the disposition in each such
jurisdiction of such Registrable Securities owned by such Underwriter or Holder;
provided, however, that the Company shall not be obligated to qualify as a
foreign corporation or as a dealer in securities in any jurisdiction in which it
is not so qualified or to consent to be subject to general service of process
(other than service of process in connection with such registration or
qualification or any sale of Registrable Securities in connection therewith) in
any such jurisdiction;
13
<PAGE>
(e) notify each Holder of Registrable Securities promptly, and, if
requested by such Holder, confirm such advice in writing, (i) when a
Registration Statement has become effective and when any post-effective
amendments and supplements thereto become effective, (ii) of the issuance by the
SEC or any state securities authority of any stop order, injunction or other
order or requirement suspending the effectiveness of a Registration Statement or
the initiation of any proceedings for that purpose, (iii) if, between the
effective date of a Registration Statement and the closing of any sale of
securities covered thereby pursuant to any agreement to which the Company is a
party, the representations and warranties of the Company contained in such
agreement cease to be true and correct in all material respects or if the
Company receives any notification with respect to the suspension of the
qualification of the Registrable Securities for sale in any jurisdiction or the
initiation of any proceeding for such purpose and (iv) of the happening of any
event during the period a Registration Statement is effective as a result of
which such Registration Statement or the related Prospectus contains any untrue
statement of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not misleading;
(f) furnish counsel for each such Underwriter, if any, and for the
Holders of Registrable Securities copies of any request by the SEC or any state
securities authority for amendments or supplements to a Registration Statement
and Prospectus or for additional information;
(g) use its reasonable best efforts to obtain the withdrawal of any
order suspending the effectiveness of a Registration Statement at the earliest
possible time;
(h) upon request, furnish to the sole Underwriter or lead managing
Underwriter of an Underwritten Offering of Registrable Securities, if any,
without charge, at least one signed copy of each Registration Statement and any
post-effective amendment thereto, including financial statements and schedules,
all documents incorporated therein by reference and all exhibits; and furnish to
each Holder of Registrable Securities, without charge, at least one conformed
copy of each Registration Statement and any post-effective amendment thereto
(without documents incorporated therein by reference or exhibits thereto, unless
requested);
(i) cooperate with the selling Holders of Registrable Securities and
the sole Underwriter or lead managing Underwriter of an Underwritten Offering of
Registrable Securities, if any, to facilitate the timely preparation and
delivery of
14
<PAGE>
certificates representing Registrable Securities to be sold and not bearing any
restrictive legends; and enable such Registrable Securities to be in such
denominations (consistent with the provisions of the governing documents
thereof) and registered in such names as the selling Holders or the sole
Underwriter or lead managing Underwriter of an Underwritten Offering of
Registrable Securities, if any, may reasonably request at least three business
days prior to any sale of Registrable Securities;
(j) upon the occurrence of any event contemplated by paragraph
(e)(iv) of this Section, use its reasonable best efforts to prepare a supplement
or post-effective amendment to a Registration Statement or the related
Prospectus, or any document incorporated therein by reference, or file any other
required document so that, as thereafter delivered to the purchasers of the
Registrable Securities, such Prospectus will not contain any untrue statement of
a material fact, or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading;
(k) enter into customary agreements (including, in the case of an
Underwritten Offering, underwriting agreements in customary form, and including
provisions with respect to indemnification and contribution in customary form
and consistent with the provisions relating to indemnification and contribution
contained herein) and take all other customary and appropriate actions in order
to expedite or facilitate the disposition of such Registrable Securities and in
connection therewith:
(1) make such representations and warranties to the Holders
of such Registrable Securities and the Underwriters, if any, in
form, substance and scope as are customarily made by issuers to
underwriters in similar underwritten offerings;
(2) obtain opinions of counsel to the Company and updates
thereof (which counsel and opinions (in form, scope and
substance) shall be reasonably satisfactory to the lead managing
Underwriter, if any, and PNC or the Majority Holders, as
applicable) addressed to each selling Holder and the
Underwriters, if any, covering the matters customarily covered in
opinions requested in sales of securities or underwritten
offerings and such other matters as may be reasonably requested
by such Holders and Underwriters;
15
<PAGE>
(3) obtain comfort letters and updates thereof from the
Company's independent certified public accountants addressed to
the selling Holders of Registrable Securities, if permissible,
and the Underwriters, if any, which letters shall be customary in
form and shall cover matters of the type customarily covered in
comfort letters to underwriters in connection with primary
underwritten offerings;
(4) to the extent requested and customary for the relevant
transaction, enter into a securities sales agreement with the
Holders and such representative of the selling Holders as PNC or
the Majority Holders, as applicable, select, relating to the
Registration and providing for, among other things, the
appointment of such representative as agent for the selling
Holders for the purpose of soliciting purchases of Registrable
Securities, which agreement shall be customary in form, substance
and scope and shall contain customary representations, warranties
and covenants; and
(5) deliver such customary documents and certificates as
may be reasonably requested by PNC or the Majority Holders, as
applicable, or by the managing Underwriters, if any.
The above shall be done (i) at the effectiveness of such Registration Statement
(and each post-effective amendment thereto) in connection with any registration
required hereunder, and (ii) at each closing under any underwriting or similar
agreement, as and to the extent required thereunder;
(l) make available for inspection by representatives of the Holders
of the Registrable Securities and any Underwriters participating in any
disposition pursuant to a Registration Statement and any counsel or accountant
retained by such Holders or Underwriters, all relevant financial and other
records, pertinent corporate documents and properties of the Company and cause
the respective officers, directors and employees of the Company to supply all
information reasonably requested by any such representative, Underwriter,
counsel or accountant in connection with a Registration Statement;
(m) (i) within a reasonable time prior to the filing of any
Registration Statement, any Prospectus, any amendment to a Registration
Statement or amendment or supplement to a Prospectus, provide copies of such
document to the Holders of Registrable Securities and to counsel to such Holders
and to the Under-
16
<PAGE>
writer or Underwriters of an Underwritten Offering of Registrable Securities, if
any; fairly consider such reasonable changes in any such document prior to or
after the filing thereof as the counsel to the Holders or the Underwriter or the
Underwriters may request and not file any such document in a form to which PNC
or the Majority Holders, as applicable, or any Underwriter shall reasonably
object; and make such of the representatives of the Company as shall be
reasonably requested by the Holders of Registrable Securities being registered
or any Underwriter available for discussion of such document;
(ii) within a reasonable time prior to the filing of any
document which is to be incorporated by reference into a Registration Statement
or a Prospectus, provide copies of such document to counsel for the Holders;
fairly consider such reasonable changes in such document prior to or after the
filing thereof as counsel for such Holders or such Underwriter shall request;
and make such of the representatives of the Company as shall be reasonably
requested by such counsel available for discussion of such document;
(n) cause all Registrable Securities to be listed on the New York
Stock Exchange and any securities exchange on which securities of the same class
issued by the Company are then so qualified or listed if so requested by PNC or
the Majority, as applicable, or if so requested by the Underwriter or
Underwriters of an Underwritten Offering of Registrable Securities, if any;
(o) otherwise use its reasonable best efforts to comply with all
applicable rules and regulations of the SEC, including making available to its
security holders an earnings statement covering at least 12 months which shall
satisfy the provisions of Section 11(a) of the Securities Act and Rule 158
thereunder;
(p) cooperate and assist in any filings required to be made with the
NASD and in the performance of any due diligence investigation by any
Underwriter in an Underwritten Offering; and
(q) use its reasonable best efforts to facilitate the distribution
and sale of any Registrable Securities to be offered pursuant to this Agreement,
including without limitation by making road show presentations, holding meetings
with potential investors and taking such other actions as shall be requested by
PNC or the Majority Holders, as applicable, or the lead managing Underwriter of
an Underwritten Offering.
17
<PAGE>
Each selling Holder of Registrable Securities as to which any
registration is being effected pursuant to this Agreement agrees, as a condition
to the registration obligations with respect to such Holder provided herein, to
furnish to the Company such information regarding such Holder required to be
included in the Registration Statement, the ownership of Registrable Securities
by such Holder and the proposed distribution by such Holder of such Registrable
Securities as the Company may from time to time reasonably request in writing.
Each Holder agrees that, upon receipt of any notice from the Company
of the happening of any event of the kind described in paragraph (e)(iv) of this
Section, such Holder will forthwith discontinue disposition of Registrable
Securities pursuant to the affected Registration Statement until such Holder's
receipt of the copies of the supplemented or amended Prospectus, contemplated by
paragraph (j) of this Section, and, if so directed by the Company, such Holder
will deliver to the Company (at the expense of the Company), all copies in its
possession, other than permanent file copies then in such Holder's possession,
of the Prospectus covering such Registrable Securities which was current at the
time of receipt of such notice.
Section 5. Indemnification; Contribution.
(a) Indemnification by the Company. The Company agrees to indemnify
------------------------------
and hold harmless each Person who participates as an underwriter (any such
Person being an "Underwriter"), each Holder and their respective partners,
directors, officers and employees and each Person, if any, who controls any
Holder or Underwriter within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act as follows:
(i) against any and all losses, liabilities, claims, damages,
judgments and reasonable expenses whatsoever, as incurred, arising out of any
untrue statement or alleged untrue statement of a material fact contained in any
Registration Statement pursuant to which Registrable Securities were registered
under the Securities Act, including all documents incorporated therein by
reference, or the omission or alleged omission therefrom of a material fact
required to be stated therein or necessary to make the statements therein not
misleading or arising out of any untrue statement or alleged untrue statement of
a material fact contained in any Prospectus, including all documents
incorporated therein by reference, or the omission or alleged omission therefrom
of a material fact necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading;
18
<PAGE>
(ii) against any and all losses, liabilities, claims, damages,
judgments and reasonable expenses whatsoever, as incurred, to the extent of the
aggregate amount paid in settlement of any litigation, investigation or
proceeding by any governmental agency or body, commenced or threatened, or of
any other claim whatsoever based upon any such untrue statement or omission, or
any such alleged untrue statement or omission, if such settlement is effected
with the written consent of the Company; and
(iii) against any and all reasonable expense whatsoever, as incurred
(including fees and disbursements of counsel), incurred in investigating,
preparing or defending against any litigation, investigation or proceeding by
any governmental agency or body, commenced or threatened, in each case whether
or not such Person is a party, or any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue statement or omission,
to the extent that any such expense is not paid under subparagraph (j) or (ii)
above;
provided, however, that this indemnity agreement does not apply to any Holder or
Underwriter with respect to any loss, liability, claim, damage, judgment or
expense to the extent arising out of any untrue statement or alleged untrue
statement of a material fact contained in any Prospectus, or the omission or
alleged omission therefrom of a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, in any such case made in reliance upon and in conformity with
written information furnished to the Company by such Holder or Underwriter
expressly for use in a Registration Statement (or any amendment thereto) or any
Prospectus (or any amendment or supplement thereto); and provided further, in
the case of an offering that is not an Underwritten Offering, the Company will
not be liable to any Holder of Registrable Securities under the indemnity
agreement in this Section 5(a) for any such loss, claim, damage, liability (or
action or proceeding in respect thereof) or expense that arises out of such
Holder's failure to send or give a copy of the final Prospectus (as its may then
be amended or supplemented) to the Person asserting an untrue statement or
alleged untrue statement or omission or alleged omission at or prior to the
written confirmation of the sale of the Registrable Securities to such Person if
such statement or omission was corrected in such final Prospectus (as it may
then be amended or supplemented) and the Company has previously furnished copies
thereof in accordance with this Agreement.
19
<PAGE>
(b) Indemnification by Holders. (i) Each selling Holder severally
--------------------------
agrees to indemnify and hold harmless the Company, each Underwriter and the
other selling Holders, and each of their respective partners, directors,
officers and employees (including each officer of the Company who signed the
Registration Statement), and each Person, if any, who controls the Company, any
Underwriter or any other selling Holder within the meaning of Section 15 of the
Securities Act, against any and all losses, liabilities, claims, damages,
judgments and expenses described in the indemnity contained in paragraph (a) of
this Section (provided that any settlement of the type described therein is
effected with the written consent of such selling Holder), as incurred, but only
with respect to untrue statements or alleged untrue statements of a material
fact contained in any Prospectus or the omissions or alleged omissions therefrom
of a material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, in any such case made
in reliance upon and in conformity with written information furnished to the
Company by such selling Holder expressly for use in such Registration Statement
(or any amendment thereto) or such Prospectus (or any amendment or supplement
thereto).
(c) Conduct of Indemnification Proceedings. Each indemnified party or
--------------------------------------
parties shall give reasonably prompt notice to each indemnifying party or
parties of any action or proceeding commenced against it in respect of which
indemnity may be sought hereunder, but which it or they may have under this
indemnity agreement, except to the extent that the indemnifying party is
materially prejudiced by such failure to give notice. If the indemnifying party
or parties so elects within a reasonable time after receipt of such notice, the
indemnifying party or parties may assume the defense of such action or
proceeding at such indemnifying party's or parties' expense with counsel chosen
by the indemnifying party or parties and approved by the indemnified party
defendant in such action or proceeding, which approval shall not be unreasonably
withheld; provided, however, that, if such indemnified party or parties
determines in good faith that a conflict of interest exists and that therefore
it is advisable for such indemnified party or parties to be represented by
separate counsel or that, upon advice of counsel, there may be legal defenses
available to it or them which are different from or in addition to those
available to the indemnifying party, then the indemnifying party or parties
shall not be entitled to assume such defense and the indemnified party or
parties shall be entitled to separate counsel (limited in each jurisdiction to
one counsel for all Underwriters and another counsel for all other indemnified
parties under this Agreement) at the indemnifying party's or parties' expense.
If an indemnifying party or parties is not so entitled to assume the defense of
such action or does not assume
20
<PAGE>
such defense, after having received the notice referred to in the first sentence
of this paragraph, the indemnifying party or parties will pay the reasonable
fees and expenses of counsel for the indemnified party or parties (limited in
each jurisdiction to one counsel for all Underwriters and another counsel for
all other indemnified parties under this Agreement). No indemnifying party or
parties will be liable for any settlement effected without the written consent
of such indemnifying party or parties, which consent shall not be unreasonably
withheld. If an indemnifying party is entitled to assume, and assumes, the
defense of such action or proceeding in accordance with this paragraph, such
indemnifying party or parties shall not, except as otherwise provided in this
subsection (c), be liable for any fees and expenses of counsel for the
indemnified parties incurred thereafter in connection with such action or
proceeding.
(d) Contribution. (i) In order to provide for just and equitable
------------
contribution in circumstances in which the indemnity agreement provided for in
this Section is for any reason held to be unenforceable by the indemnified
parties although applicable in accordance with its terms in respect of any
losses, liabilities, claims, damages, judgments and expenses suffered by an
indemnified party referred to therein, each applicable indemnifying party, in
lieu of indemnifying such indemnified party, shall contribute to the amount paid
or payable by such indemnified party as a result of such losses, liabilities,
claims, damages, judgments and expenses in such proportion as is appropriate to
reflect the relative fault of the Company on the one hand and of the liable
selling Holders (including, in each case, that of their respective officers,
directors, employees and agents) on the other, in connection with the statements
or omissions which resulted in such losses, liabilities, claims, damages,
judgments or expenses, as well as any other relevant equitable considerations.
The relative fault of the Company on the one hand and of the liable selling
Holders (including, in each case, that of their respective officers, directors,
employees and agents) on the other, shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Company, on the one hand, or by or on behalf of the
selling Holders, on the other, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission. The amount paid or payable by a party as a result of the losses,
liabilities, claims, damages, judgments and expenses referred to above shall be
deemed to include, subject to the limitations set forth in paragraph (c) of this
Section, any legal or other fees or expenses reasonably incurred by such party
in connection with investigating or defending any action or claim.
21
<PAGE>
(ii) The Company and each Holder of Registrable Securities agree that
it would not be just and equitable if contribution pursuant to this paragraph
(d) were determined by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred to in sub-
paragraph (i) above. Notwithstanding the provisions of this paragraph (d), in
the case of distributions to the public, an indemnifying Holder shall not be
required to contribute any amount in excess of the amount by which (A) the total
price at which the Registrable Securities sold by such indemnifying Holder and
distributed to the public were offered to the public exceeds (B) the amount of
any damages which such indemnifying Holder has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission. No Person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation.
(iii) For purposes of this Section, each Person, if any, who controls
a Holder or an Underwriter within the meaning of Section 15 of the Securities
Act (and their respective partners, directors, officers and employees) shall
have the same rights to contribution as such Holder or Underwriter; and each
director of the Company, each officer of the Company who signed the Registration
Statement and each Person, if any, who controls the Company within the meaning
of Section 15 of the Securities Act, shall have the same rights to contribution
as the Company.
Section 6. Miscellaneous.
(a) No Inconsistent Agreements. The Company will not on or after the
--------------------------
date of this Agreement enter into any agreement which conflicts with the
provisions of this Agreement or which grants registration or similar rights
inconsistent with the rights herein.
(b) Amendments and Waivers. The provisions of this Agreement,
----------------------
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given unless the Company has obtained the written consent of PNC and
Employee Stockholders representing a majority of the aggregate number of
outstanding shares of Class B Common Stock beneficially owned by Employee
Stockholders and, if any such amendment, modification, supplement, waiver or
consent would adversely affect the rights of any Holder hereunder, the written
consent of each Holder which is affected shall be obtained; provided, however,
that nothing herein shall prohibit any
22
<PAGE>
amendment, modification, supplement, waiver or consent the effect of which is
limited only to those Holders who have agreed to such amendment, modification,
supplement, waiver or consent.
(c) Notices. All notices and other communications provided for or
-------
permitted hereunder shall be made in writing by hand delivery, telex,
telecopier or any courier guaranteeing overnight delivery (i) if to a Holder,
at the most current address given by such Holder to the Company by means of a
notice given in accordance with the provisions of this paragraph (c), which
address initially is, with respect to each Holder as of the date hereof, the
address set forth next to such Holder's name on the signature page hereof and
with respect to each Holder who becomes after the date hereof, the address of
such Holder in the stock or warrant records of the Company or (ii) if to the
Company, at 345 Park Avenue, New York, NY 10154, telecopier number (212) 409-
3744, Attention: General Counsel, and thereafter at such other address, notice
of which is given in accordance with the provisions of this paragraph (c), with
a copy to Skadden, Arps, Slate, Meagher & Flom, LLP, 919 Third Avenue, New York,
New York 10022, Attention: Matthew J. Mallow, telecopier number (212) 735-2000.
Notwithstanding the foregoing, the Company shall not be obligated to provide any
notice to any Holder which is not a party to this Agreement except with respect
to a Required or Incidental Registration Statement which has been filed and
pursuant to which such Holder is identified as a selling stockholder.
All such notices and communications shall be deemed to have been duly
given at the time delivered by hand, if personally delivered; when answered
back, if telexed; when receipt is acknowledged, if telecopied; and on the next
business day, if timely delivered to a courier guaranteeing overnight delivery.
(d) Successors and Assigns. This Agreement shall inure to the benefit
----------------------
of and be binding upon the successors, assigns and transferees of each of the
parties without the need for an express assignment. If any successor, assignee
or transferee of any Holder shall acquire Registrable Securities in any manner,
whether by operation of law or otherwise, such Registrable Securities shall be
held subject to all of the terms of this Agreement, and by taking and holding
such Registrable Securities such Person shall conclusively be deemed to have
agreed to be bound by and to perform all of the terms and provisions of this
Agreement and to receive the benefits hereof. Notwithstanding the foregoing,
nothing in this Section 6 is intended to enlarge the class of Persons which are
Holders, as defined in the preamble of this Agreement, and thus entitled to the
rights granted hereunder. For purposes of this
23
<PAGE>
Agreement, "successor" for any entity other than a natural person shall mean a
successor to such entity as a result of such entity's merger, consolidation,
liquidation, dissolution, sale of substantially all of its assets or similar
transaction.
(e) Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which, when so executed and delivered, shall be deemed to
be an original, but all of which counterparts, taken together, shall constitute
one and the same instrument.
(f) Descriptive Headings, Etc. The headings in this Agreement are for
-------------------------
convenience of reference only and shall not limit or otherwise affect the
meaning of terms contained herein. Unless the context of this Agreement
otherwise requires: (1) words of gender shall be deemed to include each other
gender; (2) words using the singular or plural number shall also include the
plural or singular number, respectively; (3) the words "hereof," "herein" and
"hereunder" and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement, and Article, Section and paragraph references are to the Articles,
Sections and paragraphs to this Agreement unless otherwise specified; (4) the
word "including" and words of similar import when used in this Agreement shall
mean "including, without limitation," unless otherwise specified; (5) "or" is
not exclusive; and (6) provisions apply to successive events and transactions.
(g) Severability. In the event that any one or more of the
------------
provisions, paragraphs, words, clauses, phrases or sentences contained herein,
or the application thereof in any circumstances, is held invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision, paragraph, word, clause, phrase or
sentence in every other respect and of the other remaining provisions,
paragraphs, words, clauses, phrases or sentences hereof shall not be in any way
impaired, it being intended that all rights, powers and privileges of the
parties hereto shall be enforceable to the fullest extent permitted by law.
(h) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
-------------
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO
THE CONFLICTS OF LAW PRINCIPLES THEREOF).
24
<PAGE>
(i) Specific Performance. The parties hereto acknowledge that there
--------------------
would be no adequate remedy at law if any party fails to perform in any material
respect any of its obligations hereunder, and accordingly agree that each party,
in addition to any other remedy to which it may be entitled at law or in equity,
shall be entitled to compel specific performance of the obligations of any other
party under this Agreement in accordance with the terms and conditions of this
Agreement in any court of the United States or any State thereof having
jurisdiction.
(j) Entire Agreement. This Agreement is intended by the parties as a
----------------
final expression of their agreement and is intended to be a complete and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein. This Agreement supersedes all
prior agreements and understandings between the Company, on the one hand, and
the other parties to this Agreement, on the other, with respect to such subject
matter.
* * *
25
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first written above.
BLACKROCK, INC.
By:___________________________
Name:
Title:
PNC ASSET MANAGEMENT, INC.
By:___________________________
Name:
Title:
Address:
- -------
PNC Asset Management, Inc.
c/o PNC Bank Corp.
One PNC Plaza
Pittsburgh, Pennsylvania 15222
Attention: General Counsel
Telecopy: 412-768-2875
Telephone: 412-762-7987
<PAGE>
[EMPLOYEE STOCKHOLDERS]
_________________________
Name:
Address:
- -------
_______________________________
_______________________________
_______________________________
_______________________________
Telephone Number:
- ----------------
_______________________________
Telecopier Number:
- -----------------
_______________________________
<PAGE>
EXHIBIT 10.8
SERVICES AGREEMENT
------------------
THIS SERVICES AGREEMENT ("Agreement") is made as of ________, 1999 by and
between PNC Bank Corp. ("Service Provider") and BlackRock, Inc. ("BlackRock").
BACKGROUND
----------
Service Provider currently provides to BlackRock certain services.
BlackRock has requested that Service Provider continue such services, and
Service Provider has agreed to provide such services, on the terms and
conditions set forth in this Agreement and the Schedules hereto, which are
incorporated herein by reference.
TERMS
-----
In consideration of the terms and conditions of this Agreement and intending to
be legally bound, Service Provider and BlackRock agree as follows:
1. Provision of Services. During the term of this Agreement, Service Provider
---------------------
shall provide to BlackRock the services (the "Services") set forth on
the Schedules hereto on the terms and conditions set forth in this
Agreement.
2. Service Charges and Other Terms. The charges for the Services, and certain
-------------------------------
other terms related to the Services, are set forth on the Schedules hereto.
3. Cooperation. Each party shall observe the normal security and other
-----------
operational procedures in place at the other party's offices.
4. Audits and Regulators. In connection with the Services, in recognition of
---------------------
the fact that both parties are subject to audits and to regulation and
examination by governmental authorities, each party shall cooperate fully
in all audits and regulatory examinations of the other party as may be
reasonably requested by such other party.
5. Provision of Corporate Records. In connection with the Services, subject
------------------------------
to applicable law and privileges, upon the prior and reasonable request by
a party for specific and identified
1
<PAGE>
agreements, documents, books, records or files, relating to or affecting
such party, the other party shall arrange, as soon as reasonably
practicable following the receipt of such request, for the provision of
appropriate copies of such records (or the originals thereof if the party
making the request has a compelling need for such originals) in the
possession of such other party, but only to the extent such items are not
already in the possession of the requesting party.
6. Access to Information. In connection with the Services, subject to
---------------------
applicable law and privileges, each of Service Provider and BlackRock
shall afford to the other and its authorized accountants, counsel and other
designated representatives reasonable access, upon reasonable prior notice
during normal business hours, subject to appropriate restrictions for
classified, privileged or confidential information, to the personnel,
properties, books and records of such party insofar as such access is
reasonably required by the other party.
7. Reimbursement; Other Matters. Except to the extent otherwise contemplated
----------------------------
by any of the Schedules hereto, a party providing records or access to
information to the other shall be entitled to receive from the recipient,
upon the presentation of invoices therefor, payments for such amounts,
relating to supplies, disbursements and other out-of-pocket expenses, as
may be reasonably incurred in providing such records or access to
information.
8. Representations and Warranties; Standards of Care. Service Provider
-------------------------------------------------
represents and warrants that the Services will be provided (a) by competent
personnel and (b) on substantially the same basis as provided to Service
Provider's other recipients or for Service Provider's own use.
9. Indemnification. Each of the Parties hereto (each an "Indemnifying
----------------
Party") shall indemnify, defend, save and hold harmless the other party
hereto, its direct and indirect subsidiaries, and each party's and its
subsidiaries' officers, directors, employees and agents (collectively, the
"Indemnified Parties") from and against any and all damages incurred or
sustained by the Indemnified Parties to the extent they arise out of any
(i) breach by the Indemnifying Party of any of its covenants, agreements or
obligations contained in this Agreement or (ii) the Indemnifying Party's
negligence, willful misconduct or reckless disregard of its duties
hereunder.
For purposes of this section, "damages" shall mean all actions, costs,
damages, disbursements, obligations, penalties, liabilities, taxes, losses,
charges, expenses, assessments, judgments, settlements or deficiencies of
any nature whatsoever, whether foreseeable or unforeseeable (including,
without limitation, any interest, penalties, reasonable investigation,
legal, accounting and other costs and expenses incurred in the
investigation, collection, prosecution and defense of any action, suit,
proceeding or claim and amounts paid in settlement) that may be imposed or
otherwise incurred or suffered by an Indemnified Party; provided, however,
that damages shall exclude, and Service Provider shall not have liability
to the Indemnified Parties under this Agreement for, consequential,
special, exemplary or punitive damages.
2
<PAGE>
10. Confidentiality. The following categories of information shall be
---------------
considered as confidential ("Confidential Information") under this
Agreement: (a) all information, files and data relating to customers of
Service Provider and BlackRock and their subsidiaries; (b) all business
plans, studies, forecasts, analyses and similar projections relating to
Service Provider and BlackRock and their subsidiaries; and (c) all
other information specifically labeled in writing as "confidential."
Confidential Information shall not include information that (x) enters the
public domain other than by any unauthorized disclosure hereunder, (y) was
known by a party prior to its disclosure by the other party hereunder, or
(z) rightfully comes into the possession of a party from a third party
under no obligation of confidence. Service Provider and BlackRock shall
keep the Confidential Information in confidence and shall safeguard it with
at least the same degree of diligence as it protects its own similar
confidential information. Neither party shall, without the prior written
consent of the other party, disclose the Confidential Information to anyone
other than, on a need-to-know basis only, its employees, auditors, agents
under a contractual duty of confidence with respect to the Confidential
Information, governmental regulatory or examination authorities, or as
otherwise required by applicable law. To the extent that a party hereto is
compelled by judicial or administrative process to disclose such
information under circumstances in which any evidentiary privilege may be
available, such party agrees to assert such privilege in good faith prior
to making such disclosure. Each of the parties hereto agrees to immediately
consult with the other party in connection with any such judicial or
administrative process, including, without limitation, in determining
whether any privilege is available, and further agrees to allow each such
relevant party and its counsel to participate in any hearing or other
proceeding (including, without limitation, any appeal of an initial order
to disclose) in respect of such disclosure and assertion of privilege. Each
party agrees that a breach of these confidentiality requirements could be
damaging, that any remedy at law is inadequate, that damages would be
difficult to calculate and that injunctive relief against further
disclosure is appropriate.
11. Disaster Backup. Service Provider shall provide, where applicable, backup
---------------
or disaster recovery capability for the Services provided hereunder, or for
any data, files or the documents or material furnished by BlackRock to
Service Provider hereunder.
12. Year 2000 Readiness. Service Provider (a) has reviewed its departments,
-------------------
divisions, groups, business and operations, (b) has developed or is
developing a program to remediate or replace computer applications and
systems, and (c) has developed a testing plan to test the remediation or
replacement of computer application and systems, in each case, to address
on a timely basis the risk that certain computer applications and systems
used by Service Provider may be unable to recognize and perform properly
date sensitive functions involving dates prior to and after December 31,
1999, including dates such as February 29, 2000 (the "Year 2000
Challenge"). To the best of Service Provider's knowledge and belief, the
reasonably foreseeable consequences of the Year 2000 Challenge will not
adversely effect Service Provider's ability to perform its duties and
obligations under this Agreement.
13. Term; Termination. Unless otherwise agreed in writing by the parties, the
-----------------
term of this Agreement shall commence on the date first set forth above and
terminate, with respect to
3
<PAGE>
each of the Services, on the date set forth on the Schedules hereto.
14. Upon Nonrenewal or Termination. Upon nonrenewal or termination of this
-------------------------------
Agreement with respect to any Services set forth on the Schedules hereto
for any reason and subject to applicable law (including, but not limited
to, recordkeeping requirements of BlackRock and its subsidiaries), each
party, at the request of the other party, shall promptly either return to
the other party all applicable Confidential Information of the other party
then in its possession or certify in writing that all such Confidential
Information has been destroyed. As to all other records, files, documents
or other material belonging to one party which are in the possession of the
other party at termination, the party holding such material shall return it
to the other party at its request; provided the party requesting such
return shall reimburse the returning party the reasonable out-of-pocket
expenses, if any, incurred in implementing such return. In the alternative,
the parties may agree upon the disposition of such material.
15. Notices. Any notices permitted or required by this Agreement shall, unless
-------
otherwise agreed, be in writing and shall be deemed effective when
received. Effective notices may be given and delivered by mail, by
courier service or by facsimile transmission. Notices shall be addressed as
follows:
if to BlackRock:
BlackRock, Inc.
345 Park Avenue
New York, NY 10154
Attn: General Counsel
Facsimile: (212) 409-3744
if to Service Provider:
PNC Bank Corp
One PNC Plaza
249 5/th/ Avenue
Pittsburgh, PA 15222
Attn: General Counsel
Facsimile: (412) 768-2875
or to such other address as either party may by notice hereunder advise the
other as its new address for receipt of notices.
16. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
4
<PAGE>
17. No Waiver. No term or provision hereof shall be deemed waived and no
---------
breach excused, unless such waiver or consent shall be in writing and
signed by the party claimed to have waived or consented. Any consent by
either party to, or waiver of, a breach by the other, whether express or
implied, shall not constitute a consent to, waiver of, or excuse of any
other different or subsequent breach.
18. Assignment. Service Provider may assign its rights and delegate its duties
----------
hereunder to any affiliate, provided that (a) Service Provider gives
BlackRock thirty (30) days' prior written notice and (b) Service Provider
and such delegate (or assignee) promptly provide such information as
BlackRock may request, and respond to such questions as BlackRock may
ask, relative to the delegation (or assignment), including (without
limitation) the capabilities of the delegate (or assignee), to the
reasonable satisfaction of BlackRock.
19. Captions. The captions in this Agreement are provided for convenience of
--------
reference only and in no way define or delimit any of the provisions hereof
or otherwise affect their construction or effect.
20. Governing Law. This Agreement shall be deemed to be a contract made in
-------------
Delaware and governed by Delaware law, without regard to principles of
conflicts of laws.
21. Partial Invalidity. If any provision of this Agreement shall be held or
------------------
made invalid by a court decision, statute, rule or otherwise, the remainder
of this Agreement shall not be affected thereby; provided, however, that if
such provision constitutes the essence of this Agreement then this
Agreement shall be deemed terminated without such termination constituting
a breach hereof.
22. Parties in Interest. This Agreement shall be binding upon and inure to the
-------------------
benefit of the parties hereto and their successors and assigns. This
Agreement is not for the benefit of any other person or entity, and there
shall be no third party beneficiaries hereof.
5
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement by their duly
authorized officers with the intent of being legally bound hereby.
BlackRock, Inc.
By:______________________________
Title:___________________________
PNC Bank Corp.
By:______________________________
Title:___________________________
6
<PAGE>
SCHEDULE FOR INTERNAL AUDIT AND COMPLIANCE SERVICES
Services:
BlackRock will obtain assistance from the Service Provider's internal audit
group and Ernst & Young to develop and implement an internal audit plan and
program. BlackRock will also utilize compliance staff designated by Service
Provider for, and Service Provider agrees to provide, compliance and support
work relating to (i) bank and bank holding company regulatory matters and (ii)
PNC's Code of Ethics. With respect to all other compliance matters,
BlackRock will have access to Service Provider's compliance and support
staff to the extent reasonably requested by BlackRock.
Service Charges:
BlackRock will pay incremental third party expenses and a pro-rata share of
Service Provider expense as agreed by the parties on an annual basis for all
internal audit and compliance services provided by Service Provider and Ernst &
Young to BlackRock pursuant to this Agreement.
Term and Termination:
From the Closing Date to the first anniversary of the Closing Date, and
thereafter from year to year, terminable by either party on sixty days notice
prior to the end of each calendar year.
7
<PAGE>
SCHEDULE FOR HUMAN RESOURCES SERVICES
Services:
The Service Provider will process BlackRock's payroll on a bi-weekly basis. In
connection with payroll processing, the Service Provider will produce direct
deposit payments or checks (depending on employee's preference) for all of
BlackRock's employees. The Service Provider will file all federal, state, and
local withholding taxes as well as all other payroll related filings. Employees
of the Service Provider will respond to all payroll related inquiries by taxing
and other authorities. The Service Provider will, on an annual basis, prepare
and mail each employee a Form W-2.
The Service Provider administers certain health, welfare, disability, retirement
and other employee benefit programs (including COBRA administration) which
currently include all of BlackRock's employees. The Service Provider benefit
plans will continue to include BlackRock employees. BlackRock employees will
have access to all information and services provided by the Service Provider to
non-BlackRock employees.
Service Charges:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Cost per Unit
Service Type Unit of Measure Of Measure
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Employee Relations Headcount at month end $ 16.49
- ----------------------------------------------------------------------------------------------------------
Payroll Headcount at month end $ 11.08
- ----------------------------------------------------------------------------------------------------------
Benefits Planning & Technology Headcount at month end $ 11.58
- ----------------------------------------------------------------------------------------------------------
Human Resources Call Center Headcount at month end $ 2.53
- ----------------------------------------------------------------------------------------------------------
Corporate Compensation Headcount at month end $ 2.48
- ----------------------------------------------------------------------------------------------------------
Corporate Employment Headcount at month end $ 8.18
- ----------------------------------------------------------------------------------------------------------
Benefits Administration Full time equivalent employees (FTE's) $ 7.94
- ----------------------------------------------------------------------------------------------------------
PNC 101 New hires $ 359.89
- ----------------------------------------------------------------------------------------------------------
Employment Staffing New hires $3227.70
- ----------------------------------------------------------------------------------------------------------
</TABLE>
Term and Termination:
From the Closing Date to the first anniversary of the Closing Date, and
thereafter from year to year, terminable by either party on sixty days' notice
prior to the end of each calendar year. In the event of termination, all fourth
quarter payroll tax filings and calendar filings will be completed by the
Service Provider.
8
<PAGE>
SCHEDULE FOR LEGAL SERVICES
Services:
Service provider will provide to BlackRock from time to time such legal support
services reasonably requested by BlackRock.
Service Charges:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Type of Attorney Hourly Rate
- -------------------------------------------------------------------------------
<S> <C>
Senior Attorneys $175.00
- -------------------------------------------------------------------------------
Attorneys $128.82
- -------------------------------------------------------------------------------
Paralegals $ 60.00
- -------------------------------------------------------------------------------
</TABLE>
Term and Termination:
From the Closing Date to the first anniversary of the Closing Date, and
thereafter from year to year, terminable by either party on sixty days' notice
prior to the end of each calendar year.
9
<PAGE>
SCHEDULE FOR TECHNOLOGY AND NETWORK SERVICES
Services:
BlackRock will utilize certain technology resources of the Service Provider in
its business operations. The Service Provider's hardware and software will
include, but is not limited to, main frame computers, data and voice
communications hardware and software, telephone lines and equipment and local
and wide area networking services.
Service Charges:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Cost per Unit
Service Type Unit of Measure of Measure
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
MIS
- -------------------------------------------------------------------------------------------------------
MIS Hours Per MIS hour $ 54.00
- -------------------------------------------------------------------------------------------------------
Advanced Technology Prorated based on above MIS hours $ 8.50
billed
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
Computer Usage
- -------------------------------------------------------------------------------------------------------
Mainframe CPU (Batch; TSO) Per CPU second $ 0.056
- -------------------------------------------------------------------------------------------------------
Mainframe CICS CPU Per CICS CPU second $ 0.083
- -------------------------------------------------------------------------------------------------------
Production Batch Jobs Per scheduled job $ 0.49
- -------------------------------------------------------------------------------------------------------
Mainframe DASD Storage Per megabytes of storage $ 0.004
- -------------------------------------------------------------------------------------------------------
Mainframe Tape Storage Per megabytes of storage $ 0.03
- -------------------------------------------------------------------------------------------------------
Midrange Tape Per megabytes of storage $ 0.05
- -------------------------------------------------------------------------------------------------------
Database Support Hours Per hour $ 57.89
- -------------------------------------------------------------------------------------------------------
Transmission Support Hours Per hour $ 47.81
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
Network Services
- -------------------------------------------------------------------------------------------------------
Voice Communications Per phone line per month $ 8.27
- -------------------------------------------------------------------------------------------------------
Voice Mail Per mailbox per month $ 7.82
- -------------------------------------------------------------------------------------------------------
Audio Bridge Per port usage $ 3.85
- -------------------------------------------------------------------------------------------------------
Data Network Access and Usage Location and headcount Various
- -------------------------------------------------------------------------------------------------------
Network Consulting Per hour $ 59.48
- -------------------------------------------------------------------------------------------------------
Technology Support Per hour $ 47.71
- -------------------------------------------------------------------------------------------------------
Network Installation and Charge Per hour $ 31.05
- -------------------------------------------------------------------------------------------------------
Application Server Connectivity Per server port connection $248.86
- -------------------------------------------------------------------------------------------------------
External Connection NW Access Per external connections $552.25
- -------------------------------------------------------------------------------------------------------
Internet/Intranet Web Hosting Per web site Various
- -------------------------------------------------------------------------------------------------------
Remote LAN Access Per RLA logon ID's $ 5.02
- -------------------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE>
<TABLE>
<S> <C> <C>
- -------------------------------------------------------------------------------------------------------
Mainframe Dialup - Rlink Access Per Rlink logon ID's $ 10.63
- -------------------------------------------------------------------------------------------------------
</TABLE>
Term and Termination:
From the Closing Date to the first anniversary of the Closing Date, and
thereafter from year to year, terminable on sixty days' notice prior to the end
of each calendar year.
11
<PAGE>
SCHEDULE FOR PUBLIC RELATIONS SERVICES
Services:
Service Provider will provide to BlackRock employees corporate internal
communications made to employees of PNC Bank Corp. and its affiliates, including
but not limited to PNC Bank News Online, PNC Bank News Summary, PNC Bank Insight
and PNC Bank Today video. Service Provider will review press releases to be
issued by BlackRock.
Also, Service Provider will provide other public relations services, such as
communications plans, media relations projects, executive coaching and
counseling and event support, upon request of BlackRock.
Service Charge:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Cost per Unit
Service Type Unit of Measure of Measure
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Internal Communications Full time equivalent employees per month $7.03
- ------------------------------------------------------------------------------------------------
Press Release Hourly charge of Service Provider To be determined
- ------------------------------------------------------------------------------------------------
Other Public Relations Hourly charge of Service Provider plus To be determined
Third Party charge
- ------------------------------------------------------------------------------------------------
</TABLE>
Term and Termination:
From the Closing Date to the first anniversary of the Closing Date, and
thereafter from year to year, terminable on sixty days' notice prior to the end
of each calendar year.
12
<PAGE>
SCHEDULE FOR GENERAL ACCOUNTING AND TAX SERVICES
Services:
General accounting, accounts payable, cost accounting, management accounting,
financial accounting, asset and liability risk management, financial analysis,
communications and corporate dues and memberships. Preparation of all federal
and state tax filings, tax planning and research and agent/representation in
any matters related to BlackRock's tax filing subject to examination by the
Internal Revenue Service or similar state agencies.
Service Charges:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
Cost per Unit
Service Type Unit of Measure of Measure
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
General Accounting General ledger account $ 1.87
- --------------------------------------------------------------------------------------------------
Reconcilement Oversight General ledger account $ 0.26
- --------------------------------------------------------------------------------------------------
Financial Accounting System General ledger account $ 0.71
- --------------------------------------------------------------------------------------------------
Funds Control Average float per $000 $ 0.06
- --------------------------------------------------------------------------------------------------
Accounts Payable Accounts payable transaction $ 3.96
- --------------------------------------------------------------------------------------------------
Sales and Use Tax Accounts payable transaction $ 0.34
- --------------------------------------------------------------------------------------------------
Finance Technology Hourly rate for finance/technology $75.00
staff
- --------------------------------------------------------------------------------------------------
Management Accounting System Internal management reporting record $ 0.14
- --------------------------------------------------------------------------------------------------
Financial Analysis Full time employees $ 0.67
- --------------------------------------------------------------------------------------------------
Asset and Liability Management 50% on net assets per thousand 30 basis points
dollars per month
50% on available funds per thousand 30 basis points
dollars per month
- --------------------------------------------------------------------------------------------------
</TABLE>
Term and Termination:
From the Closing Date to the first anniversary of the Closing Date, and
thereafter from year to year, terminable by either party on sixty days' notice
prior to the end of each year.
13
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference of our firm under the caption "Experts" and
to the use of our report on the Consolidated Financial Statements of BlackRock,
Inc. and subsidiaries dated February 26, 1999, in this Registration Statement
on Form S-1 (No. 333-78367) and the related Prospectus of BlackRock, Inc. to be
filed on or about August 26, 1999.
/s/ Ernst & Young LLP
New York, New York
August 26, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 76,262
<SECURITIES> 2,306
<RECEIVABLES> 103,439
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 16,737
<DEPRECIATION> 18,177
<TOTAL-ASSETS> 403,252
<CURRENT-LIABILITIES> 0
<BONDS> 153,200
0
0
<COMMON> 53,105
<OTHER-SE> 78,973
<TOTAL-LIABILITY-AND-EQUITY> 403,252
<SALES> 180,093
<TOTAL-REVENUES> 180,093
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 129,466
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,121
<INCOME-PRETAX> 44,799
<INCOME-TAX> 18,813
<INCOME-CONTINUING> 25,986
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 25,986
<EPS-BASIC> 130.39
<EPS-DILUTED> 129.97
</TABLE>
