<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 19, 1998
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
NEUBERGER BERMAN INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 6282 06-1523639
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
605 THIRD AVENUE
NEW YORK, NY 10158
TEL: (212) 476-9000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
C. CARL RANDOLPH, ESQ.
GENERAL COUNSEL
NEUBERGER BERMAN INC.
605 THIRD AVENUE
NEW YORK, NY 10158
TEL: (212) 476-9000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C>
RALPH ARDITI, ESQ. RICHARD R. HOWE, ESQ.
GEORGE E.B. MAGUIRE, ESQ. SULLIVAN & CROMWELL
DEBEVOISE & PLIMPTON 125 BROAD STREET
875 THIRD AVE. NEW YORK, NY 10004-2498
NEW YORK, NY 10022 TEL: (212) 558-4000
TEL: (212) 909-6000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable on or after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
- ------------------
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
- ------------------
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration 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. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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TITLE OF EACH CLASS OF PROPOSED MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE(1)(2) REGISTRATION FEE
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<S> <C> <C>
Common Stock, par value $.01 per share........ $250,000,000 $73,750.00
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</TABLE>
(1) A portion of the shares to be registered represents shares that are to be
offered outside the United States but that may be resold from time to time
in the United States. Such shares are not being registered for the purpose
of sales outside the United States.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o) under the Securities Act of 1933, as amended.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE> 2
THE INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION AND AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED AUGUST 19, 1998
SHARES
[NEUBERGER BERMAN LOGO]
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
------------------
Of the shares of Common Stock offered, shares are
being offered hereby in the United States and shares are being
offered in a concurrent international offering outside the United States. The
initial public offering price and the aggregate underwriting discount per share
will be identical for both offerings. See "Underwriting".
Of the shares of Common Stock offered, shares are
being sold by the Company and shares are being sold by the Selling
Stockholders. See "Selling Stockholders". The Company will not receive any of
the proceeds from the sale of shares being sold by the Selling Stockholders.
Upon consummation of the offerings, the Management Stockholders will
beneficially own shares having approximately % of the voting power of the
Company's outstanding Common Stock. See "Stockholders Agreement" and "Selling
Stockholders".
Prior to this offering, there has been no public market for the Common
Stock of the Company. It is currently estimated that the initial public offering
price will be between $ and $ . For factors to be considered
in determining the initial public offering price, see "Underwriting".
SEE "RISK FACTORS" BEGINNING ON PAGE 15 FOR CERTAIN CONSIDERATIONS RELEVANT
TO AN INVESTMENT IN THE COMMON STOCK.
Application will be made to list the Common Stock on the New York Stock
Exchange under the symbol "NEU".
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------
<TABLE>
<CAPTION>
INITIAL PUBLIC PROCEEDS TO
OFFERING UNDERWRITING PROCEEDS TO SELLING
PRICE DISCOUNT(1) COMPANY(2) STOCKHOLDERS
-------------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Per Share............... $ $ $ $
Total(3)................ $ $ $ $
</TABLE>
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(1) The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933.
(2) Before deducting estimated expenses of $ payable by the Company.
(3) The Company and the Selling Stockholders have granted the U.S. Underwriters
an option for 30 days to purchase up to an additional shares at
the initial public offering price per share, less the underwriting discount,
solely to cover over-allotments. Additionally, the Company and the Selling
Stockholders have granted the International Underwriters a similar option
with respect to an additional shares as part of the concurrent
international offering. If such options are exercised in full, the total
initial public offering price, underwriting discount, proceeds to the
Company and proceeds to the Selling Stockholders will be $ ,
$ , $ and $ , respectively. See
"Underwriting".
------------------
The shares offered hereby are offered severally by the U.S. Underwriters,
as specified herein, subject to receipt and acceptance by them and subject to
their right to reject any order in whole or in part. It is expected that the
shares will be ready for delivery in New York, New York, on or about
, 1998, against payment therefor in immediately available funds.
GOLDMAN, SACHS & CO.
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The date of this Prospectus is , 1998.
<PAGE> 3
[The Neuberger Berman logo is at the top of the page.]
A Premier Money Manager Since 1939
$59 Billion in Assets Under Management at June 30, 1998
[Beneath this text appear two pie charts presenting the following data:]
DIVERSE CLIENT BASE
High Net Worth 30%
Mutual Funds 40%
Institutional 27%
Wrap Fee 3%
CONCENTRATION IN EQUITY ACCOUNTS
Value, Growth and International Equity 79%
Fixed Income and Money Market 21%
Increasing Assets Under Management in Three Growth Markets
[Beneath this text appear three bar graphs presenting the following data:]
HIGH NET WORTH ASSETS
Date AUM ($bn)
---- ---------
12/94 7.3
12/95 9.5
12/96 12.1
12/97 15.6
6/98 17.8
MUTUAL FUND ASSETS
Date AUM ($bn)
---- ---------
12/94 7.2
12/95 11.7
12/96 15.1
12/97 20.7
6/98 23.7
DEFINED CONTRIBUTION PLAN ASSETS (a)
Date AUM ($bn)
---- ---------
12/94 1.1
12/95 2.4
12/96 4.5
12/97 5.6
6/98 6.3
[Beneath this bar graph appears a footnote which reads:]
(a) Includes only assets in mutual funds. Assets also included in mutual fund
data (above).
[PHOTO DESCRIPTIONS]
------------------------------------------------------------------------
CERTAIN PERSONS PARTICIPATING IN THE OFFERINGS MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN SUCH
SECURITIES AND THE IMPOSITION OF A PENALTY BID, IN CONNECTION WITH THE
OFFERINGS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING".
2
<PAGE> 4
AVAILABLE INFORMATION
Neuberger Berman Inc. has filed with the Securities and Exchange Commission
(the "SEC") a registration statement on Form S-1 (together with all amendments,
exhibits and schedules thereto, the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
common stock, par value $.01 per share, of the Company (the "Common Stock")
offered hereby. This Prospectus does not contain all the information set forth
in the Registration Statement, certain parts of which are omitted in accordance
with the rules and regulations of the SEC. For further information with respect
to the Company and the Common Stock offered hereby, reference is made to the
Registration Statement. Statements made in this Prospectus concerning the
content of any document are not necessarily complete, although the material
terms thereof are described in this Prospectus, and, in each instance, reference
is made to the copy of the document included as an exhibit to the Registration
Statement. Each such statement is qualified in its entirety by this reference.
The Registration Statement may be inspected, without charge, at the Public
Reference Section of the SEC at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the regional offices of the SEC located at
7 World Trade Center, Suite 1300, New York, New York 10048 and 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies of all or any portion of the
Registration Statement may be obtained from the Public Reference Section of the
SEC upon payment of prescribed fees. The SEC also maintains a worldwide web site
at http://www.sec.gov which contains reports, proxy and information statements
and other information regarding registrants that file electronically with the
SEC.
The Company will be subject to the periodic reporting and other
informational requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and in accordance therewith will file with the SEC
reports, proxy statements and other information. Such materials may be inspected
and copied at the offices of the SEC in the manner described above and will also
be available at the offices of the New York Stock Exchange (the "NYSE"), 20
Broad Street, New York, New York 10005.
The Company intends to furnish its stockholders annual reports containing
audited financial statements and quarterly reports containing unaudited interim
financial information for the first three quarters of each fiscal year.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this Prospectus may constitute "forward-looking
statements" within the meaning of the United States Private Securities
Litigation Reform Act of 1995. These statements are based on the beliefs and
assumptions of the Company's management and on information available to
management at the time such statements were made. Forward-looking statements
include information concerning possible or assumed future results of the
Company's operations, earnings, industry conditions, demand and pricing for the
Company's products and other aspects of its business under "Prospectus Summary",
"Risk Factors", "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business" and statements that are preceded by,
followed by, or include the words "believes", "expects", "anticipates",
"intends", "plans", "estimates" or similar expressions.
Forward-looking statements are not guarantees of performance. They involve
risks, uncertainties and assumptions. Although the Company makes such statements
based on assumptions which it believes to be reasonable, there can be no
assurance that actual results will not differ materially from the Company's
expectations. Many of the factors that will determine these results are beyond
the Company's ability to control or predict. The Company does not intend to
review or revise any particular forward-looking statements referenced in this
Prospectus in light of future events. Prospective purchasers of the Common Stock
are cautioned not to put undue reliance on any forward-looking statements.
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The Company hereby identifies the factors noted under "Risk Factors" and
the following important factors, among others, which could cause its results to
differ from any results which might be projected, forecast or estimated by the
Company in any such forward-looking statements: (1) variations in demand for its
investment products; (2) significant changes in net cash flows into or out of
the Company's business; (3) significant fluctuations in the performance of debt
and equity markets in the U.S. or worldwide; (4) enactment of adverse state or
federal legislation or changes in government policy or regulation (including
accounting standards) affecting the Company's operations; (5) adverse results in
litigation; and (6) the effect of changes in economic conditions or interest
rates on a U.S. or international basis.
------------------------
The executive office of the Company is located at 605 Third Avenue, New
York, New York 10158, and the telephone number is (212) 476-9000. The Company's
principal operating subsidiaries, Neuberger & Berman, LLC, a Delaware limited
liability company ("NB LLC"), and Neuberger & Berman Management Incorporated, a
New York corporation ("NBMI"), maintain Internet home pages at www.nb.com and
www.nbfunds.com, respectively. Information contained in such home pages shall
not be deemed a part of this Prospectus.
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<PAGE> 6
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial data, including
the Combined Financial Statements and Notes thereto and pro forma financial
information, included elsewhere in this Prospectus. Unless otherwise indicated,
all information contained in this Prospectus (i) gives effect to the Exchange
(as defined herein) and (ii) assumes no exercise of the Underwriters'
over-allotment options. In addition, unless the context otherwise requires, the
"Company" or "Neuberger Berman" refers (a) prior to the Exchange, to the
combined businesses of NB LLC, its subsidiaries and NBMI, and (b) after the
Exchange, to Neuberger Berman Inc., a Delaware corporation, and its
subsidiaries, including NB LLC and NBMI. See "The Exchange and the Subordinated
Note Transaction". Prior to the Offerings, the Company was wholly owned by the
members of NB LLC and the shareholders of NBMI who received most of their
compensation as a share of the Company's net income, substantially all of which
was distributed to them as capital distributions and dividends. Accordingly, the
Company's historical combined financial statements do not fairly reflect the
compensation received by its owners for their services as such. In addition,
Federal income taxes have not been provided against the net income of the
Company because, prior to the Exchange, the Company's owners were liable for
such taxes. See the Pro Forma Combined Financial Statements (Unaudited) and
Notes thereto included elsewhere in this Prospectus.
THE COMPANY
Neuberger Berman is an independent investment advisory firm founded in
1939. The Company has established a nationally recognized brand name for its
demonstrated commitment to investment performance and client service. It is a
prominent provider of investment advisory services to the high net worth, mutual
fund and institutional segments of the investment management industry.
Approximately 80% of the Company's assets under management are held in equity
accounts. Over the past three years, the Company has expanded and strengthened
its distribution channels to capitalize on its brand name and position itself
for continued growth. Since December 31, 1993, assets under management grew at a
compound annual rate of 16.8% to $59.1 billion at June 30, 1998. Net income
before principal compensation increased to $298.7 million for 1997 from $149.9
million for 1993, representing a compound annual growth rate of 18.8%, and to
$170.3 million for the six months ended June 26, 1998 as compared to $138.3
million for the six months ended June 27, 1997, an increase of 23.1%.
The Company's High Net Worth Business, with $17.8 billion in assets under
management at June 30, 1998, provides investment advisory services to high net
worth individuals and smaller institutions. This business is marked by long-term
client loyalty, sometimes spanning several generations. The Company's investment
professionals work directly with high net worth clients and can tailor
individual portfolios specifically to address clients' investment goals, income
requirements, capital preservation needs, tax posture and social considerations.
Through two trust company subsidiaries, the Company provides estate planning,
fiduciary and other services to wealthy individuals, families and estates,
qualified and nonqualified employee benefit plans and charities. The Company has
built a 55 person national combined sales and marketing force for the High Net
Worth Business that operates in New York and eight regional offices, with 13
sales professionals and six regional offices added in the last three years. The
Company intends to continue to expand its national marketing efforts, adding
personnel and regional offices. The Company believes that, by virtue of its
established brand name, skilled professionals and national marketing and
servicing capabilities, it is well positioned to expand its presence in this
market.
The Company's Mutual Fund and Institutional Business, with $41.3 billion in
assets under management at June 30, 1998, provides investment management
services to mutual funds and institutional clients, offering its diverse client
base a broad choice of investment products and styles. As of June 30, 1998, the
Company provided investment management, distribution and administrative
5
<PAGE> 7
services to a proprietary family of 35 mutual funds (the "Neuberger Berman
Funds") and subadvisory services to seven mutual funds sponsored by third
parties. Since December 31, 1993, mutual fund assets under management grew at a
compound annual rate of 33.3% to $23.7 billion at June 30, 1998. The Company was
at the forefront of participating in networks for making mutual fund shares
available through intermediaries and now participates in over 100 strategic
alliances with mutual fund "supermarkets", third party administrators for
defined contribution plans (such as 401(k) and 403(b) plans), broker-dealers,
banks and other institutions.
The Company believes that further opportunities for growth in its mutual
funds business are available through these and other alliances. The Company also
manages approximately 510 accounts for diverse institutional advisory clients
such as corporate and public employee pension funds, endowments, foundations,
and other domestic and foreign institutions. The Company provides investment
advice to approximately 5,300 accounts through eight wrap fee programs sponsored
by third party brokerage firms and banks.
The Company's portfolio management services are generally provided by
groups of professionals, with portfolio managers averaging over 26 years of
professional experience and 15 years service with the Company. The Company has
been known for its value-oriented equity investment philosophy, with an emphasis
on investing in companies trading in the lower range of price-to-earnings and
price-to-cash flow ratios. The Company is committed to offering a broad range of
investment products and services in a wide variety of investment styles and
market capitalization ranges. Its investment disciplines also include
growth-oriented equity (investing in companies whose earnings and cash flow are
growing faster than the average company and the economy overall), international
equity, balanced, fixed income and money market. All of the Company's investment
professionals are supported by a centralized proprietary research department.
The Company generates additional income through its Other Businesses that
market certain related services developed for its investment management
business, including trust company services, brokerage services and research.
Through NB LLC, a registered broker-dealer and member of the New York Stock
Exchange, the Company executes transactions for its clients and third parties,
provides prime brokerage services, principally for small- to mid-sized
investment managers, and clears transactions on a fully disclosed basis for
other broker-dealers.
The Company has experienced significant growth in recent years in assets
under management, net revenues after interest expense and net income before
principal compensation, as shown in the following table:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
------------------- ----------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
-------- -------- -------- -------- -------- -------- --------
( IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS UNDER MANAGEMENT
High Net Worth Business.... $ 17,806 $ 13,912 $ 15,553 $ 12,050 $ 9,491 $ 7,349 $ 7,971
Mutual Fund and
Institutional Business
Mutual funds............. 23,717 18,130 20,744 15,122 11,674 7,184 6,499
Institutional clients.... 15,927 16,904 15,667 15,800 15,891 12,949 13,456
Wrap fee accounts........ 1,639 1,492 1,547 1,388 1,268 1,167 1,477
Total............... $ 59,089 $ 50,438 $ 53,511 $ 44,360 $ 38,324 $ 28,649 $ 29,403
</TABLE>
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<TABLE>
<CAPTION>
SIX MONTHS ENDED
------------------- YEAR ENDED DECEMBER 31,
JUNE 26, JUNE 27, ----------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
NET REVENUES AFTER INTEREST
EXPENSE
High Net Worth Business.... $116,789 $ 93,797 $198,306 $161,844 $134,904 $120,811 $118,004
Mutual Fund and
Institutional Business
Mutual funds............. 89,925 64,725 145,268 104,619 74,473 51,622 43,589
Institutional clients.... 39,561 35,964 78,272 73,835 67,334 61,535 59,268
Wrap fee accounts........ 4,297 3,509 7,311 6,902 6,452 7,067 6,461
Other Businesses........... 35,475 35,636 72,892 69,567 57,623 41,431 48,644
Total............... $286,047 $233,631 $502,049 $416,767 $340,786 $282,466 $275,966
NET INCOME BEFORE PRINCIPAL
COMPENSATION(1)
High Net Worth Business.... $ 80,294 $ 64,262 $135,707 $104,557 $ 86,184 $ 76,422 $ 76,893
Mutual Fund and
Institutional Business... 74,837 57,981 127,730 95,708 77,274 62,199 54,350
Other Businesses........... 15,141 16,048 35,228 28,861 22,634 12,354 18,633
Total............... $170,272 $138,291 $298,665 $229,126 $186,092 $150,975 $149,876
</TABLE>
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(1) Substantially all net income was distributed to principals as capital
distributions and dividends. Certain principals were also paid through
compensation expense. See Note 7 to the Combined Financial Statements
included elsewhere in this Prospectus.
BUSINESS STRATEGY
The Company's business strategy is to continue to provide premier
investment management services to a growing number of clients, to offer an
expanding array of investment products and to increase its presence in a number
of distribution channels. In addition, the Company believes that a broad base of
employee stock ownership following the Offerings will strengthen the alignment
of interests across its business segments and enhance the Company's ability to
produce steadily improving financial results for its stockholders.
MAINTAIN ASSET MANAGEMENT AS CORE BUSINESS. Since its founding almost 60
years ago, the Company's core business has been asset management. Concentrating
its professional and financial resources on providing high quality investment
products and client service, the Company has established a respected reputation
among its clients and in the investment community. The Company believes that its
continuing commitment to its core asset management business, together with its
continued independence during a period of consolidation in the financial
services industry, is attractive to potential clients and has also contributed
to its ability to attract and retain highly qualified investment professionals.
PROMOTE BRAND NAME. Over the last three years, the Company has engaged in
the active promotion of the Neuberger Berman name through television and print
advertising and direct mail campaigns. The Company intends to increase these
promotional activities beginning in the second half of 1998 to further enhance
its national brand identity. The Company also believes that listing the
Company's Common Stock on the New York Stock Exchange will enhance its national
stature.
CENTRALIZE MARKETING ACTIVITIES. The Company has recently reorganized its
asset management operations to better coordinate its marketing efforts. The
Company believes that the ongoing expansion of its national sales effort in the
High Net Worth Business will enhance its growth potential by better managing and
coordinating the individual initiatives which were pursued by investment
professionals in this segment. In the Mutual Fund and Institutional Business,
sales and distribution efforts are being integrated and combined under common
leadership. This recognizes
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<PAGE> 9
that the growth of defined contribution plans, among other things, has created
an environment in which mutual funds and separately managed accounts are viewed
as alternatives for a common client base, rather than as investment vehicles
designed for different clients.
INCREASE PENETRATION IN HIGH NET WORTH MARKET. The market for providing
investment advisory services to high net worth individuals is a growing market
that is generally fragmented, regionalized and underpenetrated by independent
managers that focus primarily on personalized asset management. Based on
industry data, the Company believes that the number of households with over $1
million in investable assets will grow from approximately 2.5 million in 1996 to
over 15.0 million by 2010. The Company believes that it is well positioned to
capitalize on the growth opportunities in this market by virtue of its ability
to combine national operations and brand name recognition with an emphasis on
client service and personalized asset management. The Company intends to
increase its high net worth sales force from 23 sales professionals at June 30,
1998 to about 60, and to expand its regional offices from eight locations
throughout the U.S. at June 30, 1998 to 15, by 2001. In addition, the Company
believes that its ability to provide an integrated approach to comprehensive
wealth management and administration services through its trust company
subsidiaries represents a competitive advantage. The Company is organizing an
additional trust company to service the active Florida trust services market.
EXPAND MUTUAL FUND ALLIANCES AND DISTRIBUTION CAPABILITIES. The Company
has realized significant growth in its mutual funds from the addition of
multiple channels through which mutual fund shares are made available to
investors. In addition to alliances with mutual fund supermarkets, the Company
believes that opportunities for growth are available through the following:
- DEFINED CONTRIBUTION PLAN ADMINISTRATORS. The Company seeks to expand
its relationships with administrators that provide investment vehicles,
principally mutual funds, offered to participants in defined contribution
plans. Since year end 1993, the Company's assets under management in
mutual funds from defined contribution plans grew from $0.8 billion to
$6.3 billion at June 30, 1998 and, as of June 30, 1998, the Company had
strategic alliances with 51 administrators of defined contribution plans.
- PROVIDERS OF VARIABLE INSURANCE PRODUCTS. The Company also seeks to
expand its relationships with insurance companies that offer variable
annuity and variable life insurance products that invest in the Neuberger
Berman Funds. The Company believes that significant opportunities exist
to expand its services as subadviser to mutual funds that provide
investment options for variable insurance products. Since year end 1993,
assets under management in funds that provide investments options for
variable insurance products grew at a compound annual rate of 36.3% to
$3.5 billion at June 30, 1998 and, as of June 30, 1998, the Company had
relationships with 32 insurance companies.
- LOAD FUNDS. The Company plans to introduce a family of load funds. Based
on contacts with market participants, the Company believes that the
addition of load funds would be well received by financial advisers and
other intermediaries.
- INTERNET DISTRIBUTION. Through NBMI's Internet site, mutual fund
investors can access their account information, and Neuberger Berman Fund
prospectuses and applications are available. The Company expects to offer
investors the ability to purchase mutual fund shares directly through the
Internet in the near future.
BUILD WRAP FEE PROGRAM PARTICIPATION. Prior to 1996, the Company's
participation in wrap fee programs was limited primarily to providing fixed
income and balanced products in programs with Merrill Lynch and other sponsors.
In 1997, the Company added Morgan Stanley Dean Witter (a registered service mark
of Morgan Stanley Dean Witter & Co.) to its existing relationships and in 1998,
joined the fiduciary services wrap program of Salomon Smith Barney. As a result,
the Company now has relationships with three of the largest sponsors of wrap fee
programs and has begun to offer through these wrap fee programs a range of
equity products, including mid-cap and
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large-cap value and growth products. The Company believes that these
developments offer significant growth opportunities through increased
participation in wrap fee programs.
ENHANCE DIVERSE PRODUCT AND SERVICE OFFERINGS. The Company believes that
its ability to offer a broad range of investment products and services in a wide
variety of investment styles enhances its opportunities for attracting new
clients and cross-selling its products and services to existing clients. In
addition to its value-oriented domestic equity products, the Company currently
offers growth-oriented equity, international equity, balanced, fixed income and
money market products. The Company seeks to complement these existing product
offerings through internal development or acquisition of new investment
capabilities.
ATTRACT AND RETAIN EXPERIENCED PROFESSIONALS. The ability to attract and
retain highly experienced investment and other professionals with a long-term
commitment to the Company and its clients has been, and will continue to be, a
significant factor in its long-term growth. The Company has historically
experienced little turnover among its professional employees, and believes that
investment professionals are attracted to investment advisory firms like the
Company that have remained independent during a period of consolidation in the
financial services industry. In addition, the Company believes that, following
the Offerings, the ability to offer its employees shares of or options to
purchase its publicly-traded Common Stock will be a significant incentive in
attracting and retaining employees. In connection with the Offerings, the
Company will adopt employee incentive plans under which approximately 15% of the
Company's fully diluted Common Stock will be available for ongoing option and
restricted stock programs for the Company's existing and future employees. In
addition, the Company believes that the share transfer restrictions and
noncompetition provisions contained in the Stockholders Agreement (as defined
herein), as well as the Company's competitive compensation and benefit
arrangements, will encourage employee retention. See "Management -- Executive
Compensation" and "Stockholders Agreement".
ALIGN INTERESTS OF EMPLOYEES AND PUBLIC STOCKHOLDERS. Following the
Offerings, equity ownership will be distributed broadly within the Company. The
Company believes that this will be an important and efficient means of unifying
incentives within the Company and aligning the interests of employees and the
public stockholders and that the ongoing share transfer restrictions contained
in the Stockholders Agreement will maintain this commonality of interests in the
future. In addition, as of June 30, 1998, principals and employees of the
Company and their families had over $200 million invested in the Neuberger
Berman Funds on a voluntary basis.
CAPITALIZE ON ACQUISITION OPPORTUNITIES. The Company evaluates acquisition
opportunities as they arise for their possible contribution to the Company's
strategic objectives, including adding new product and service offerings,
investment capabilities or distribution channels. Following the Offerings, the
availability of publicly-traded Common Stock could facilitate acquisitions by
the Company and give it access to an expanded range of opportunities.
9
<PAGE> 11
THE OFFERINGS
The offering hereby of shares of Common Stock initially
being offered in the United States (the "U.S. Offering") and the offering of
shares of Common Stock initially being offered in a concurrent
international offering outside the United States (the "International Offering")
are collectively referred to as the "Offerings". The closing of each of the
Offerings is conditioned upon the closing of the other Offering.
Common Stock offered:
The Company................. shares
The Selling Stockholders.... shares
Total.................... shares
Common Stock to be outstanding
after the Offerings (1):.... shares
Proposed NYSE Symbol:......... "NEU"
Use of Proceeds............... The net proceeds from the Offerings received by
the Company, estimated to be $ , will
be used for general corporate purposes
including the possible repayment of the
Subordinated Note (as defined herein). In
addition, the Company reviews acquisition
opportunities as they arise and, although it is
not currently planning a transaction, it may
use proceeds from the Offerings partially to
fund suitable acquisitions. The Company will
not receive any proceeds from the sale of
shares by the Selling Stockholders. See "Use of
Proceeds" and "The Exchange and the
Subordinated Note Transaction".
- ---------------
(1) Does not include shares of Common Stock expected to be
outstanding at, or shortly after, the time of the Offerings after giving
effect to expected employee stock awards and contributions of shares by the
Company to the Defined Contribution Stock Plan (as defined herein) and
expected contributions of shares by the Management Stockholders to the
Company. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Subsequent Events". In addition, shares of
Common Stock will be reserved for issuance under the LTIP (as defined
herein) and shares of Common Stock will be reserved for issuance under the
Directors Plan (as defined herein). See "Management -- Compensation of
Directors -- Directors Stock Incentive Plan", "-- Executive Compensation --
Long-Term Incentive Plan" and "-- Defined Contribution Stock Incentive
Plan".
RISK FACTORS
Prospective purchasers of the Common Stock should carefully consider the
factors set forth under "Risk Factors" starting on page 15 as well as the other
information set forth in this Prospectus.
10
<PAGE> 12
SUMMARY HISTORICAL COMBINED FINANCIAL DATA
The following tables present summary historical combined financial
information for the Company (including NB LLC, its subsidiaries and NBMI) for
each of the years in the five-year period ended December 31, 1997 and for the
six-month periods ended June 26, 1998 and June 27, 1997. The financial statement
information for each of the years in the three-year period ended December 31,
1997 and for the six-month periods ended June 26, 1998 and June 27, 1997 has
been derived from the Combined Financial Statements and Notes thereto, which for
each year in such three-year period have been audited by Arthur Andersen LLP,
independent public accountants. The financial statement information for each of
the years in the two-year period ended December 31, 1994 has been derived from
audited combined financial statements of the Company, including the notes
thereto, which are not presented herein. The data presented below should be read
in conjunction with the Combined Financial Statements and Notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this Prospectus. The results for the six-month
period ended June 26, 1998 are not necessarily indicative of the results to be
expected for the full fiscal year.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
------------------- YEAR ENDED DECEMBER 31,
JUNE 26, JUNE 27, ----------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
-------- -------- ---- ---- ---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Investment advisory and
administrative fees...... $194,697 $147,918 $327,191 $260,775 $207,888 $176,479 $158,366
Commissions................ 67,845 62,082 124,911 109,621 96,400 83,231 86,589
Interest................... 79,672 75,743 153,954 143,928 119,713 79,712 63,619
Other...................... 9,928 9,829 20,523 22,241 20,073 9,496 19,777
Gross revenues............. 352,142 295,572 626,579 536,565 444,074 348,918 328,351
Interest expense........... 66,095 61,941 124,530 119,798 103,288 66,452 52,385
Net revenues after interest
expense.................. 286,047 233,631 502,049 416,767 340,786 282,466 275,966
Operating expenses:
Employee compensation and
benefits................. 64,474 50,893 112,840 106,431 87,816 76,461 73,009
Other...................... 51,301 44,447 90,544 81,210 66,878 55,030 53,081
Total operating
expenses.......... 115,775 95,340 203,384 187,641 154,694 131,491 126,090
Net income before
principal
compensation(1)... $170,272 $138,291 $298,665 $229,126 $186,092 $150,975 $149,876
</TABLE>
- ---------------
(1) Substantially all net income was distributed to principals as capital
distributions and dividends. Certain principals were also paid through
compensation expense. See Note 7 to the Combined Financial Statements
included elsewhere in this Prospectus.
11
<PAGE> 13
<TABLE>
<CAPTION>
DECEMBER 31,
JUNE 26, --------------------------------------------------------------
1998 1997 1996 1995 1994 1993
-------- ---- ---- ---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets................. $2,775,069 $2,410,203 $2,446,811 $2,019,476 $1,542,931 $1,951,672
Assets related to broker-
dealer activities........ 2,667,329 2,239,997 2,327,794 1,892,521 1,457,215 1,871,681
Total liabilities............ $2,615,903 $2,251,172 $2,288,811 $1,981,707 $1,505,180 $1,913,643
Liabilities related to
broker-dealer
activities............... 2,518,314 2,138,656 2,210,097 1,895,920 1,448,244 1,855,502
Total principals' capital and
stockholders' equity....... $ 159,166 $ 159,031 $ 158,000 $ 37,769 $ 37,751 $ 38,029
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
----------------- -----------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ---- ----
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA:
Total assets under management........ $59,089 $50,438 $53,511 $44,360 $38,324 $28,649 $29,403
</TABLE>
12
<PAGE> 14
SUMMARY PRO FORMA COMBINED FINANCIAL DATA (UNAUDITED)
The following table presents summary pro forma combined financial
information for the Company (including NB LLC, its subsidiaries and NBMI) as of
and for the six-month period ended June 26, 1998, and for the year ended
December 31, 1997. For purposes of the summary pro forma combined balance sheet
data, the Exchange and the Subordinated Note Transaction (as defined herein) are
assumed to have occurred on June 26, 1998. See "The Exchange and the
Subordinated Note Transaction". For purposes of the summary pro forma combined
income statement data, the Exchange and the Subordinated Note Transaction are
assumed to have occurred on January 1, 1997 and the Subordinated Note is assumed
to remain outstanding through June 26, 1998. The summary pro forma combined
financial information is based on the historical combined financial information
of the Company which has been derived from the Combined Financial Statements and
Notes thereto included elsewhere in this Prospectus.
The summary pro forma combined financial information is not necessarily
indicative of the results that would have been achieved had the Exchange and the
Subordinated Note Transaction occurred and the Subordinated Note been
outstanding as of the dates indicated or that may be achieved in the future. The
summary pro forma combined financial information should be read together with
the Pro Forma Combined Financial Statements (Unaudited) and Notes thereto,
"Capitalization" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED
ENDED JUNE 26, 1998 DECEMBER 31, 1997
------------------- -----------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Investment advisory and administrative fees.......... $ 194,697 $327,191
Commissions.......................................... 67,845 124,911
Interest............................................. 79,672 153,954
Other................................................ 9,928 20,523
Gross revenues....................................... 352,142 626,579
Interest expense(1).................................. 67,783 127,905
Net revenues after interest expense.................. 284,359 498,674
Operating expenses:
Employee compensation and benefits(2)................ 106,924 192,755
Other................................................ 46,495 84,287
Total operating expenses..................... 153,419 277,042
Income before provision for income taxes..... 130,940 221,632
Provision for income taxes(3)........................ 58,923 99,734
Net income................................... $ 72,017 $121,898
Basic weighted average shares outstanding.............. 96,000 96,000
Basic earnings per share............................... $ .75 $ 1.27
</TABLE>
13
<PAGE> 15
<TABLE>
<CAPTION>
JUNE 26, 1998
-------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Total assets........................................... $2,775,069
Total liabilities(4)................................... $2,665,903
Stockholders' equity(4)................................ $ 109,166
</TABLE>
- ---------------
(1) Includes interest on the $50,000,000 Subordinated Note due one year and a
day after issuance, unless extended. Interest will be payable quarterly at a
rate of 6.75% per annum. See "The Exchange and the Subordinated Note
Transaction".
(2) Employee compensation and benefits of $64,474,000 and $112,840,000 for the
six months ended June 26, 1998 and the year ended December 31, 1997,
respectively, are adjusted to include $42,450,000 and $79,915,000,
respectively, of compensation and benefits in respect of principals.
(3) New York City unincorporated business tax and state and local taxes are
reversed, and an effective tax rate of 45.0% is applied to income before
income tax expense to record Federal, state and local income taxes.
(4) Adjusted to reflect the issuance of the $50,000,000 Subordinated Note. See
"The Exchange and the Subordinated Note Transaction".
14
<PAGE> 16
RISK FACTORS
Prospective investors should carefully consider, in addition to the other
information contained in this Prospectus, the following factors before
purchasing the Common Stock offered hereby.
CHANGES IN MARKET CONDITIONS; RETENTION OF ASSETS UNDER MANAGEMENT
The Company derives substantial revenues from investment management
contracts with its clients. Under these contracts, the investment management fee
paid to the Company is typically based on the market value of assets under
management. Accordingly, fluctuations in the prices of securities may have a
material effect on the Company's consolidated revenues and profitability. The
increases in aggregate assets under management, revenues and net income of the
Company from 1993 through 1997 resulted in part from rising prices of
securities. Other factors being constant, decreasing securities prices would
have the opposite effect.
The Company's investment management and administrative contracts are
generally terminable at will or upon 30 to 60 days' notice and mutual fund
investors may redeem their investments in the funds at any time without prior
notice. Institutional and individual clients, and firms with which the Company
has strategic alliances, may terminate their relationship with the Company,
reduce the aggregate amount of assets under management, or shift their funds to
other types of accounts with different rate structures for any of a number of
reasons, including investment performance, changes in prevailing interest rates
and financial market performance. In a declining stock market the pace of mutual
fund redemptions could accelerate. Poor performance relative to other investment
management firms tends to result in decreased purchases in fund shares,
increased redemptions of fund shares, and the loss of institutional or
individual accounts or strategic alliances, with corresponding decreases in
revenues to the Company, and could, therefore, have a material adverse effect on
the Company.
DEPENDENCE ON KEY PERSONNEL
Retaining key personnel is extremely important to the Company's ability to
attract and retain clients and mutual fund shareholder accounts. In particular,
the Company is dependent on its highly skilled investment management, research,
client service, fiduciary and sales professionals. The market for such
professionals is very competitive and has grown more so in recent periods as the
investment management industry has experienced substantial growth. The Company's
policy has been to provide its professionals with compensation and benefits that
the Company believes to be competitive with other leading investment management
firms. The Company intends to continue this policy following the Offerings and
believes that the policy, together with the substantial share ownership of
Common Stock by employees and the share transfer restrictions and noncompetition
provisions contained in the Stockholders Agreement, will encourage employee
retention. See "Stockholders Agreement". Furthermore, the Company believes that
its general practice of having a group of investment professionals service each
client account helps promote client retention even if a portfolio manager
departs. While the Company has historically experienced little turnover among
its professional employees, there can be no assurance that the Company will
continue to be successful in retaining its key personnel or in attracting highly
qualified professionals. The loss of key personnel could have a material adverse
effect on the Company.
COMPETITION
The investment management business is highly competitive, with competition
based on a variety of factors including the range of products offered, brand
recognition, investment performance, business reputation, the continuity of
client relationships and of assets under management, quality of service provided
to clients, the level of fees charged for services, the level of commissions and
other compensation paid, financial strength and distribution support offered to
financial intermediaries and other distribution participants.
15
<PAGE> 17
The Company competes in all aspects of its business with a large number of
investment management firms, commercial banks, investment banks, broker-dealers,
insurance companies and other financial institutions. A number of these
institutions have greater capital and other resources, and offer more
comprehensive lines of products and services, than the Company. The recent trend
toward consolidation within the investment management industry and the
securities industry in general has served to increase the size and strength of a
number of the Company's competitors. Additionally, there are relatively few
barriers to entry by new investment management firms, and the successful efforts
of new entrants into the Company's various lines of business, including major
banks, insurance companies and other financial institutions, have also resulted
in increased competition. Competitors of the Company are also seeking to expand
market share in the products and services offered or to be offered in the future
by the Company.
The Company's ability to market its mutual funds is highly dependent on
access to the client base of national and regional securities firms, banks,
insurance companies, defined contribution plan administrators and other
intermediaries which generally offer competing internally and externally managed
investment products. Although the Company has historically been successful in
gaining access to these channels, there can be no assurance that it will
continue to be able to do so. The inability to have such access could have a
material adverse effect on the Company's business. See
"Business -- Competition".
REGULATION
As with all investment management companies and broker-dealers, the Company
and its mutual fund business are heavily regulated. Noncompliance with
applicable statutes or regulations could result in sanctions including the
revocation of licenses to operate certain businesses, the suspension or
expulsion from a particular jurisdiction or market of the Company's business
organizations or their key personnel, the imposition of fines and censures or
reputational loss. It is also possible that laws or regulations governing the
Company's operations, particular investment products or the Company's clients,
could be amended or interpreted in a manner that is adverse to the Company or
its business. To the extent that existing or future laws or regulations
affecting the sale of the Company's products and services or the Company's
investment strategies cause or contribute to reduced sales of the Company's
products or impair the investment performance of the Company's products, the
Company's aggregate assets under management and its revenues might be adversely
affected. See "Business -- Regulation".
RISK OF SYSTEMS FAILURE
The Company's business is highly dependent on communications and
information systems and those of its key service vendors. Any failure or
interruption of such systems could have a material adverse effect on the
Company's operating results. Although the Company has back-up systems in place,
there can be no assurance that any such systems failure or interruption, whether
caused by a fire, other natural disaster, power or telecommunications failure,
act of God, act of war or otherwise will not occur, or that back-up procedures
and capabilities in the event of any such failure or interruption will be
adequate.
YEAR 2000 COMPUTER ISSUES
Many computer systems in use today were designed and developed using two
digits, rather than four, to specify the year. As a result, such systems will
recognize the year 2000 as "00". This could cause many computer applications to
fail completely or to create erroneous results unless corrective measures are
taken. The Company has developed a plan to identify and respond to the year 2000
issue, and expects its critical systems to be compliant in 1999. The Company is
seeking to obtain assurances from its key service vendors that they will be
compliant. The failure of the Company or one of its key vendors to achieve year
2000 compliance in a timely fashion could
16
<PAGE> 18
materially adversely affect the Company's business and operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Year 2000 Computer Issues".
GENERAL SECURITIES BROKERAGE BUSINESS RISKS
The securities brokerage business is, by its nature, subject to numerous
and substantial risks, particularly in volatile or illiquid markets, and in
markets influenced by sustained periods of low or negative economic growth,
including the risk of losses resulting from the ownership of securities,
trading, principal activities, counterparty failure to meet commitments, client
fraud, employee errors, misconduct and fraud (including unauthorized
transactions by traders), failures in connection with the processing of
securities transactions and litigation. The Company's trading activities for its
own account are limited. Therefore, the principal risks are those relating to
counterparty failure and unauthorized trading. The Company has risk management
procedures and internal controls to address these risks but there can be no
assurance that these procedures and controls will prevent losses from occurring.
CONSTRAINTS IMPOSED BY NET CAPITAL REQUIREMENTS
As NB LLC and NBMI are registered broker-dealers and as NB LLC is a member
of the NYSE, NB LLC and NBMI, the Company's principal subsidiaries, are subject
to the net capital rules of the SEC, the NYSE and the National Association of
Securities Dealers, Inc. (the "NASD"). These rules, which specify minimum net
capital requirements for registered broker-dealers and NYSE and NASD members,
are designed to assure that broker-dealers maintain adequate regulatory capital
in relation to the size of their client related debit balances. These
requirements have the effect of requiring that a portion of a broker-dealer's
assets be kept in cash or readily marketable investments. Compliance by NB LLC
and NBMI with the net capital requirements could limit the growth of operations
that require intensive use of capital and could restrict the ability of the
Company to withdraw capital, even in circumstances where NB LLC and NBMI have
more than the minimum amount of required capital, which, in turn, could limit
the ability of the Company to pay dividends. Because NB LLC's regulatory capital
has historically exceeded the net capital requirements and because NBMI is a
limited-purpose broker-dealer engaged in the distribution of the Neuberger
Berman funds, the Company does not anticipate any such restrictions to adversely
affect its operations. However, there can be no assurance that the operations of
the Company will not in the future be restricted by the net capital
requirements.
EFFECTIVE CONTROL BY CERTAIN STOCKHOLDERS
After giving effect to the sale of the shares of Common Stock sold in the
Offerings, the former members of NB LLC and shareholders of NBMI and certain
family limited partnerships and trusts formed by them (together, the "Management
Stockholders") will beneficially own in the aggregate % of the outstanding
Common Stock. The Management Stockholders and the Company have entered into a
Stockholders Agreement (the "Stockholders Agreement") providing that (i) before
every stockholders' meeting, the Management Stockholders and certain employees
of the Company who acquire Common Stock after the Offerings will take a separate
preliminary vote on all the issues that will be presented at the stockholders'
meeting and (ii) all shares held by such stockholders must then be voted as a
block in accordance with the majority of shares voted in such preliminary vote.
As a result, such stockholders will control the Company's Board of Directors,
and, therefore, the business, policies and affairs of the Company including
certain corporate transactions that require stockholder approval, such as
mergers and sales of the Company's assets. See "Stockholders Agreement". The
control exerted by such stockholders and the transfer restrictions in the
Stockholders Agreement could preclude any unsolicited acquisition of the Company
and, consequently, adversely affect the market price of the Common Stock.
17
<PAGE> 19
ANTI-TAKEOVER PROVISIONS
Under the Company's Certificate of Incorporation (the "Certificate of
Incorporation"), the Board of Directors has the authority, without action by the
Company's stockholders, to fix certain terms and issue shares of Preferred
Stock, par value $.01 per share (the "Preferred Stock"). Actions of the Board of
Directors pursuant to this authority may have the effect of delaying, deterring,
or preventing a change in control of the Company. Other provisions in the
Certificate of Incorporation and in the By-Laws of the Company (the "By-Laws")
impose procedural and other requirements that may be deemed to have
anti-takeover effects. These provisions include the inability of the
stockholders to take any action without a meeting or to call special meetings of
stockholders, certain advance notice procedures for nominating candidates for
election as directors and for submitting proposals for consideration at
stockholders' meetings, and limitations on the ability to remove directors.
Further, stockholders can amend the By-Laws and certain provisions of the
Certificate of Incorporation only with a two-thirds majority vote. With certain
exceptions, Section 203 of the Delaware General Corporation Law (the "DGCL")
imposes certain restrictions on mergers and other business combinations between
the Company and any holder of 15% or more of the voting stock of the Company.
Furthermore, pursuant to the Stockholders Agreement, the Management
Stockholders, who will beneficially own % of the outstanding shares, must
vote their shares of Common Stock, together with certain employees who acquire
Common Stock after the Offerings, as a block, permitting Management Stockholders
holding a majority of the shares held by all such stockholders to elect the
Board of Directors of the Company and to control the outcome of any stockholder
votes regarding any material corporate transaction such as a merger. See
"Stockholders Agreement" and "Description of Capital Stock -- Anti-Takeover
Effect of the Certificate of Incorporation and By-Laws".
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offerings, shares of Common Stock will be
issued and outstanding. Of these shares, ( %) will be owned beneficially by
the Management Stockholders. Sales of substantial amounts of Common Stock by the
Management Stockholders may materially adversely affect the market price of the
Common Stock prevailing from time to time. The Management Stockholders have
entered into a Stockholders Agreement which generally provides that shares of
Common Stock cannot be sold for two years after the Offerings and which also
places restrictions on the subsequent disposition of such shares. The
restrictions on the disposition of shares contained in the Stockholders
Agreement can be waived by the Board of Directors of the Company or its designee
without notice to or consent of the Company's stockholders. After the expiration
of a 180 day "lock-up" period to which all of the Management Stockholders will
be subject pursuant to the Underwriting Agreements, such holders will in general
be entitled to dispose of their shares, subject to Rule 144 under the Securities
Act and the Stockholders Agreement. See "Stockholders Agreement", "Shares
Eligible for Future Sale" and "Underwriting".
NO PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to the Offerings, there has been no public market for the Common
Stock. Although the Company will make an application for listing the Common
Stock on the New York Stock Exchange, no assurance can be given that an active
trading market will be created or sustained. The initial public offering price
will be determined by negotiations among the Company, the Selling Stockholders
and representatives of the Underwriters based on several factors and will not
necessarily reflect the market price of the Common Stock following the
Offerings. Due to the absence of any prior public market for the shares of
Common Stock, there can be no assurance that the initial public offering price
will correspond to the price at which the shares of Common Stock will trade in
the public market subsequent to the Offerings. See "Underwriting".
The market price for shares of the Common Stock may be volatile and may
fluctuate based upon a number of factors including, but not limited to, the
Company's operating performance, news
18
<PAGE> 20
announcements or changes in general economic and market conditions. In addition,
the stock market in recent years has experienced extreme price and volume
fluctuations that often have been unrelated or disproportionate to the operating
performance of companies. These fluctuations may materially adversely affect the
market price of the Common Stock.
DILUTION
Purchasers of Common Stock in the Offerings will experience immediate and
substantial dilution in the net tangible book value of their Common Stock. At an
assumed initial public offering price of $ per share (the midpoint of the
initial public offering price range set forth on the cover of this Prospectus),
purchasers of shares in the Offerings will experience dilution in net tangible
book value of $ per share. See "Dilution".
Management Stockholders have indicated their intention to contribute to the
Company at, or shortly after, the time of the Offerings shares of
Common Stock to mitigate the dilutive effect of share issuances by the Company
under its anticipated employee stock incentive plans. However, the Management
Stockholders are under no legal obligation to make such contributions and there
can be no assurance that any such contribution will be made. See "Management's
Discussion and Analysis of Financial Conditions and Results of
Operations -- Subsequent Events".
USE OF PROCEEDS
The net proceeds from the Offerings received by the Company, assuming an
initial public offering price of $ per share (the midpoint of the initial
public offering price range set forth on the cover of this Prospectus) and after
deducting estimated underwriting discounts and other expenses payable by the
Company, are estimated to be $ and will be used for general corporate
purposes including the possible repayment of the Subordinated Note. See "The
Exchange and the Subordinated Note Transaction". In addition, the Company
reviews acquisition opportunities as they arise and, although it is not
currently planning a transaction, it may use proceeds from the Offerings
partially to fund suitable acquisitions. The Company will not receive any
proceeds from the sale of shares by the Selling Stockholders. The Company has
agreed to assume the costs of the Offerings (other than the underwriting
discount in respect of shares sold by the Selling Stockholders) and to pay
certain fees and expenses in connection with the sale of shares by the Selling
Stockholders.
DIVIDEND POLICY
The Company's Board of Directors intends to declare quarterly cash
dividends on the Common Stock. The Company expects that the first quarterly
dividend payment will be $.075 per share (an annual amount of $.30) which is
expected to be declared and paid in the fourth quarter of 1998. The declaration
and payment of dividends by the Company are subject to the discretion of its
Board of Directors. Any determination as to the payment of dividends, including
the level of dividends, will depend on, among other things, general economic and
business conditions, the strategic plans of the Company, the Company's financial
results and condition, contractual, legal and regulatory restrictions on the
payment of dividends by the Company or its subsidiaries, and such other factors
as the Board of Directors of the Company may consider to be relevant. The
Company is a holding company, and, as such, its ability to pay dividends is
subject to the ability of the subsidiaries of the Company to provide cash to the
Company. See "Management's Discussion and Analysis of Financial Condition and
Results of Operation -- Capital Resources and Liquidity".
19
<PAGE> 21
CAPITALIZATION
The following table sets forth the combined capitalization of the Company
(including NB LLC, its subsidiaries and NBMI) as of June 26, 1998 (1) on an
actual basis and (2) as adjusted to give effect to (a) the Exchange and the
Subordinated Note Transaction and (b) the Offerings and the application of the
net proceeds therefrom received by the Company. This table should be read in
conjunction with the Combined Financial Statements and Notes thereto, the pro
forma financial information and "Management's Discussion and Analysis of
Financial Condition and Results of Operation" included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
JUNE 26, 1998
---------------------------------------------
PRO FORMA AFTER
EXCHANGE AND
SUBORDINATED
NOTE PRO FORMA AFTER
ACTUAL TRANSACTION THE OFFERINGS(1)
-------- --------------- ----------------
(UNAUDITED, IN THOUSANDS EXCEPT SHARE DATA)
<S> <C> <C> <C>
Subordinated Note.................................. $ -- $ 50,000 $50,000
Principals' Capital and Stockholders' Equity:
Principals' Capital of NB LLC.................... 150,000
Common Stock, par value $.01 per share, of NBMI;
34,484 shares authorized; 12,668 shares issued
and outstanding...............................
Common Stock, par value $.01 per share, of
Neuberger Berman Inc.; 250,000,000 shares
authorized; 100,000,000 issued and
outstanding, pro forma after the
Offerings(2).................................. 960
Preferred Stock, par value $.01 per share, of
Neuberger Berman Inc.; 5,000,000 shares
authorized; none issued and outstanding.......
Paid-in capital.................................. 2,877 101,917
Retained earnings................................ 6,289 6,289 6,289
-------- -------- -------
Total principals' capital and
stockholders' equity................... 159,166 109,166
-------- -------- -------
Total capitalization..................... $159,166 $159,166 $
======== ======== =======
</TABLE>
- ---------------
(1) Assumes an initial public offering price of $ per share (the midpoint of
the initial public offering price range set forth on the cover of this
Prospectus).
(2) Does not include shares of Common Stock expected to be
outstanding at, or shortly after, the time of the Offerings after giving
effect to expected employee stock awards and contributions of shares by the
Company to the Defined Contribution Stock Plan and expected contributions of
shares by the Management Stockholders to the Company. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Subsequent Events". In addition, shares of Common Stock will
be reserved for issuance under the LTIP and shares of Common
Stock will be reserved for issuance under the Directors Plan. See
"Management -- Compensation of Directors -- Directors Stock Incentive Plan",
"-- Executive Compensation -- Long-Term Incentive Plan" and "-- Defined
Contribution Stock Incentive Plan".
20
<PAGE> 22
DILUTION
The pro forma net tangible book value of the Company as of ,
1998, after giving effect to the Exchange and the Subordinated Note Transaction,
was approximately $ or approximately $ per share of Common Stock.
Pro forma net tangible book value per share represents the amount of the
Company's total combined tangible assets less total combined liabilities,
divided by the number of shares of Common Stock outstanding prior to the sale of
the shares offered in the Offerings. After giving effect to the sale by the
Company of shares of Common Stock in the Offerings at an assumed
initial public offering price of $ per share (the midpoint of the initial
public offering price range set forth on the cover of this Prospectus) and after
deducting estimated underwriting discounts and commissions and offering expenses
payable by the Company of $ , the pro forma net tangible book value of
the Company as of , 1998 would have been approximately
$ , or approximately $ per share of Common Stock. This represents
an immediate increase in pro forma net tangible book value of $ per share of
Common Stock to existing stockholders and an immediate dilution in net tangible
book value of $ per share of Common Stock to purchasers of Common Stock in
the Offerings (the "New Stockholders") at the assumed initial public offering
price. The following table illustrates this dilution on a per share basis:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $
Pro forma net tangible book value per share before giving
effect to the Offerings................................ $
Increase in net tangible book value per share attributable
to the Offerings....................................... --
Pro forma net tangible book value per share after the
Offerings................................................. --
Net tangible book value dilution per share to New
Stockholders(1)........................................... $
</TABLE>
- ---------------
(1) Dilution is determined by subtracting pro forma net tangible value per
share, after giving effect to the Exchange and the Subordinated Note
Transaction, and after giving effect to the receipt of the net proceeds of
the Offerings and the application of such proceeds as described in "Use of
Proceeds", from the assumed initial public offering price.
The following table summarizes, on a pro forma basis at the assumed initial
public offering price, as of , 1998, the difference between the
number of shares of Common Stock purchased, the total consideration paid and the
average price per share paid by the existing stockholders and by the New
Stockholders.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------------- ------------------------ AVERAGE
NUMBER AMOUNT PRICE PER
(IN THOUSANDS) PERCENT (IN MILLIONS) PERCENT SHARE
-------------- ------- ------------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders............ % $ % $
New Stockholders.................
-------- --- ---- ----
Total.................. 100% $ 100%
======== === ==== ====
</TABLE>
21
<PAGE> 23
SELECTED HISTORICAL COMBINED FINANCIAL DATA
The following tables present selected historical combined financial
information for the Company (including NB LLC, its subsidiaries and NBMI) for
each of the years in the five-year period ended December 31, 1997 and for the
six-month periods ended June 26, 1998 and June 27, 1997. The financial statement
information for each of the years in the three-year period ended December 31,
1997 and for the six-month periods ended June 26, 1998 and June 27, 1997, has
been derived from the Combined Financial Statements and Notes thereto, which for
each year in such three-year period have been audited by Arthur Andersen LLP,
independent public accountants. The financial statement information for each of
the years in the two-year period ended December 31, 1994 has been derived from
audited combined financial statements of the Company, including the notes
thereto, which are not presented herein. The data presented below should be read
in conjunction with the Combined Financial Statements and Notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this Prospectus. The results for the six-month
period ended June 26, 1998 are not necessarily indicative of the results for the
full fiscal year.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
------------------- YEAR ENDED DECEMBER 31,
JUNE 26, JUNE 27, ----------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
-------- -------- ---- ---- ---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Investment advisory and
administrative fees...... $194,697 $147,918 $327,191 $260,775 $207,888 $176,479 $158,366
Commissions................ 67,845 62,082 124,911 109,621 96,400 83,231 86,589
Interest................... 79,672 75,743 153,954 143,928 119,713 79,712 63,619
Other...................... 9,928 9,829 20,523 22,241 20,073 9,496 19,777
Gross revenues............. 352,142 295,572 626,579 536,565 444,074 348,918 328,351
Interest expense........... 66,095 61,941 124,530 119,798 103,288 66,452 52,385
Net revenues after interest
expense.................. 286,047 233,631 502,049 416,767 340,786 282,466 275,966
Operating expenses:
Employee compensation and
benefits................. 64,474 50,893 112,840 106,431 87,816 76,461 73,009
Advertising and
promotion................ 7,963 6,918 14,722 12,732 7,763 6,113 5,999
Information technology..... 7,674 6,404 13,503 12,906 12,013 10,084 8,673
Rent and occupancy......... 5,375 4,808 9,761 9,189 8,613 8,252 7,246
Other...................... 30,289 26,317 52,558 46,383 38,489 30,581 31,163
Total operating
expenses.......... 115,775 95,340 203,384 187,641 154,694 131,491 126,090
Net income before
principal
compensation(1)... 170,272 138,291 298,665 229,126 186,092 150,975 149,876
Principal compensation..... 19,925 14,491 33,685 27,045 18,973 12,347 10,170
Net income.......... $150,347 $123,800 $264,980 $202,081 $167,119 $138,628 $139,706
</TABLE>
- ---------------
(1) Substantially all net income was distributed to principals as capital
distributions and dividends. Certain principals were also paid through
compensation expense. See Note 7 to the Combined Financial Statements
included elsewhere in this Prospectus.
22
<PAGE> 24
<TABLE>
<CAPTION>
DECEMBER 31,
JUNE 26, --------------------------------------------------------------
1998 1997 1996 1995 1994 1993
-------- ---- ---- ---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets................. $2,775,069 $2,410,203 $2,446,811 $2,019,476 $1,542,931 $1,951,672
Assets related to broker-
dealer activities(1)....... 2,667,329 2,239,997 2,327,794 1,892,521 1,457,215 1,871,681
Total liabilities............ $2,615,903 $2,251,172 $2,288,811 $1,981,707 $1,505,180 $1,913,643
Liabilities related to
broker-dealer
activities(2).............. 2,518,314 2,138,656 2,210,097 1,895,920 1,448,244 1,855,502
Total principals' capital and
stockholders' equity....... $ 159,166 $ 159,031 $ 158,000 $ 37,769 $ 37,751 $ 38,029
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
----------------- -----------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ---- ----
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA:
Total assets under management.. $59,089 $50,438 $53,511 $44,360 $38,324 $28,649 $29,403
</TABLE>
- ---------------
(1) Includes cash and securities segregated for the exclusive benefits of
clients, cash and securities deposited with clearing organizations,
securities purchased under agreements to resell, receivable from brokers,
dealers and clearing organizations, receivable from clients, securities
owned (at market value) and exchange memberships.
(2) Includes bank loans, securities sold under agreements to repurchase, payable
to brokers, dealers and clearing organizations, payable to clients,
securities sold but not yet purchased (at market value) and, for the years
1993 to 1995, subordinated debt.
23
<PAGE> 25
PRO FORMA COMBINED FINANCIAL DATA (UNAUDITED)
The following section presents pro forma combined financial information for
the Company (including NB LLC, its subsidiaries and NBMI) as of and for the
six-month period ended June 26, 1998 and for the year ended December 31, 1997.
For purposes of the pro forma combined balance sheet data, the Exchange and the
Subordinated Note Transaction are assumed to have occurred on June 26, 1998. See
"The Exchange and the Subordinated Note Transaction". For purposes of the pro
forma combined statement of income data, the Exchange and the Subordinated Note
Transaction are assumed to have occurred on January 1, 1997 and the Subordinated
Note is assumed to remain outstanding through June 26, 1998. The pro forma
combined financial information is based on the historical combined financial
information of the Company which has been derived from the Combined Financial
Statements and Notes thereto included elsewhere in this Prospectus.
The pro forma combined financial information is not necessarily indicative
of the results that would have been achieved had the Exchange and the
Subordinated Note Transaction occurred and the Subordinated Note been
outstanding as of the dates indicated or that may be achieved in the future. The
pro forma combined financial information should be read together with the Pro
Forma Combined Financial Statements (Unaudited) and Notes thereto,
"Capitalization" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED
ENDED JUNE 26, 1998 DECEMBER 31, 1997
------------------- -----------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Investment advisory and administrative fees.......... $ 194,697 $327,191
Commissions.......................................... 67,845 124,911
Interest............................................. 79,672 153,954
Other................................................ 9,928 20,523
Gross revenues....................................... 352,142 626,579
Interest expense(1).................................. 67,783 127,905
Net revenues after interest expense.................. 284,359 498,674
Operating expenses:
Employee compensation and benefits(2)................ 106,924 192,755
Advertising and promotion............................ 7,963 14,722
Information technology............................... 7,674 13,503
Rent and occupancy................................... 5,375 9,761
Other................................................ 25,483 46,301
Total operating expenses..................... 153,419 277,042
Income before provision for income taxes............. 130,940 221,632
Provision for income taxes(3)........................ 58,923 99,734
Net income........................................ $ 72,017 $121,898
Weighted average shares outstanding.................... 96,000 96,000
Basic earnings per share............................... $ .75 $ 1.27
</TABLE>
24
<PAGE> 26
<TABLE>
<CAPTION>
JUNE 26, 1998
-------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Total assets........................................... $2,775,069
Total liabilities(4)................................... $2,665,903
Stockholders' equity(4)................................ $ 109,166
</TABLE>
- ---------------
(1) Includes interest on the $50,000,000 Subordinated Note due one year and a
day after issuance, unless extended. Interest will be payable quarterly at a
rate of 6.75% per annum. See "The Exchange and the Subordinated Note
Transaction".
(2) Employee compensation and benefits of $64,474,000 and $112,840,000 for the
six months ended June 26, 1998 and the year ended December 31, 1997,
respectively, are adjusted to include $42,450,000 and $79,915,000,
respectively, of compensation and benefits in respect of principals.
(3) New York City unincorporated business tax and state and local taxes are
reversed, and an effective tax rate of 45.0% is applied to income before
income tax expense to record Federal, state and local income taxes.
(4) Adjusted to reflect the issuance of the $50,000,000 Subordinated Note. See
"The Exchange and the Subordinated Note Transaction".
25
<PAGE> 27
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This discussion and analysis should be read in conjunction with the
Company's Combined Financial Statements and Notes thereto, the pro forma
financial information and the other financial information included elsewhere in
this Prospectus.
GENERAL
The Company is an independent investment advisory firm serving the high net
worth, mutual fund and institutional segments of the investment management
industry. The Company is organized in three operating segments: (1) the High Net
Worth Business, (2) the Mutual Fund and Institutional Business and (3) the Other
Businesses, which include trust company services, securities lending activities,
prime brokerage services and proprietary research.
The Company derives its revenues primarily from fees for investment
advisory and administrative services provided to high net worth, mutual fund,
institutional and wrap fee accounts. Investment advisory and administrative fees
are generally based on the total market value and composition of assets under
management and, accordingly, fluctuations in financial markets and client
contributions and withdrawals have a direct effect on revenues and net income.
Fees vary with the type of assets managed, with higher fees earned on actively
managed equity accounts and lower fees earned on fixed income and cash
management accounts.
As a broker-dealer, the Company earns commission revenue by executing
securities transactions for its high net worth, mutual fund and institutional
clients as well as for third parties in prime brokerage and institutional sales
transactions. The majority of the Company's commissions are earned from
transactions for high net worth clients. Commission revenue may fluctuate from
time to time based on general market conditions.
The Company also generates additional income by managing cash balances
available to the Company as a result of its broker-dealer activities. The three
principal areas from which net interest income is generated are treasury
management (managing overnight cash balances), securities lending activities and
client cash and margin balances, primarily for prime brokerage and high net
worth clients. The Company evaluates these activities by focusing on net
interest income. Net interest income fluctuates based on general market
conditions, prevailing interest rates and the amount of client cash and margin
balances.
The Company's largest operating expense is employee compensation and
benefits, the largest components of which are compensation for portfolio
managers (which is influenced by performance and assets under management) and
for sales personnel (which is based on commissions and fees). Historically,
aggregate levels of employee compensation and benefits were directly affected
from one year to the next by the promotion of one or more employees to
principal, at which time such employees' compensation from the Company ceased
and they generally received distributions of net income directly from capital.
Following the Offerings, the distinction between employees and principals in
this respect will cease. Other significant expenses include advertising and
promotion, information technology and rent and occupancy. Federal income taxes
have not been provided against the net income of the Company because, prior to
the Exchange, principals were individually liable for such taxes.
Revenues of the Company are recorded in the operating segments in which
they are earned. Operating expenses include direct expenses, such as employee
compensation and benefits, travel and entertainment and third-party research
materials, which are charged to the operating segments in which they are
incurred. Operating expenses also include indirect expenses, such as general and
administrative, proprietary research and execution and clearance expenses, which
are allocated to each segment based upon various methodologies determined by
management.
26
<PAGE> 28
RESULTS OF OPERATIONS
The following is a summary of revenue and expense data by operating
segment:
<TABLE>
<CAPTION>
MUTUAL FUND AND
HIGH NET WORTH INSTITUTIONAL OTHER
BUSINESS BUSINESS BUSINESSES TOTALS
-------------- --------------- ---------- ------
(AUM IN MILLIONS, FINANCIAL INFORMATION IN THOUSANDS)
<S> <C> <C> <C> <C>
JUNE 30, 1998
Assets under management............. $ 17,806 $ 41,283 $ -- $ 59,089
SIX MONTHS ENDED JUNE 26, 1998
Net revenues after interest
expense........................... $116,789 $133,783 $35,475 $286,047
Operating expenses.................. 36,495 58,946 20,334 115,775
Net income before principal
compensation...................... $ 80,294 $ 74,837 $15,141 $170,272
JUNE 30, 1997
Assets under management............. $ 13,912 $ 36,526 $ -- $ 50,438
SIX MONTHS ENDED JUNE 27, 1997
Net revenues after interest
expense........................... $ 93,797 $104,198 $35,636 $233,631
Operating expenses.................. 29,535 46,217 19,588 95,340
Net income before principal
compensation...................... $ 64,262 $ 57,981 $16,048 $138,291
AS OF OR FOR THE YEAR ENDED:
DECEMBER 31, 1997
Assets under management............. $ 15,553 $ 37,958 $ -- $ 53,511
Net revenues after interest
expense........................... $198,306 $230,851 $72,892 $502,049
Operating expenses.................. 62,599 103,121 37,664 203,384
Net income before principal
compensation...................... $135,707 $127,730 $35,228 $298,665
DECEMBER 31, 1996
Assets under management............. $ 12,050 $ 32,310 $ -- $ 44,360
Net revenues after interest
expense........................... $161,844 $185,356 $69,567 $416,767
Operating expenses.................. 57,287 89,648 40,706 187,641
Net income before principal
compensation...................... $104,557 $ 95,708 $28,861 $229,126
DECEMBER 31, 1995
Assets under management............. $ 9,491 $ 28,833 $ -- $ 38,324
Net revenues after interest
expense........................... $134,904 $148,259 $57,623 $340,786
Operating expenses.................. 48,720 70,985 34,989 154,694
Net income before principal
compensation...................... $ 86,184 $ 77,274 $22,634 $186,092
</TABLE>
SIX MONTHS ENDED JUNE 26, 1998 COMPARED TO THE SIX MONTHS ENDED JUNE 27,
1997
ASSETS UNDER MANAGEMENT. The general market appreciation in the United
States, combined with a higher asset base, produced record operating results for
the Company during the six months ended June 26, 1998. Assets under management
were $59.1 billion at June 30, 1998 as compared to $50.4 billion at June 30,
1997. During the six months ended June 30, 1998, assets under management
increased by $5.6 billion, of which $4.6 billion was attributable to market
appreciation and $1.0 billion resulted from net new business.
OPERATING RESULTS. Revenues increased by $52.4 million, or 22.4%, to
$286.0 million for the six months ended June 26, 1998 from $233.6 million for
the six months ended June 27, 1997, largely resulting from an increase of $46.7
million in investment advisory and administrative fees due primarily to higher
levels of assets under management. The remaining revenue growth was due to an
increase of $5.7 million in commissions to $67.8 million for the six months
ended June 26, 1998 from $62.1 million for the six months ended June 27, 1997.
27
<PAGE> 29
Operating expenses increased by $20.5 million, or 21.4%, to $115.8 million
for the six months ended June 26, 1998 from $95.3 million for the six months
ended June 27, 1997. Employee Compensation and Benefits contributed $13.6
million of the increase, growing to $64.5 million for the six months ended June
26, 1998 from $50.9 million for the six months ended June 27, 1997, as a result
of generally higher compensation and increased staff levels associated with the
expansion of the Company's national marketing force in its High Net Worth
Business and Mutual Fund and Institutional Business. Information Technology
increased by $1.3 million to $7.7 million for the six months ended June 26, 1998
from $6.4 million for the six months ended June 27, 1997, largely related to
expenditures to enhance the Company's client accounting system. Advertising and
Promotion increased by $1.1 million to $8.0 million for the six months ended
June 26, 1998 from $6.9 million for the six months ended June 27, 1997, due to
the active promotion of the Neuberger Berman name through television and print
advertising and direct mail campaigns.
Net income before principal compensation increased by $32.0 million, or
23.1%, to $170.3 million for the six months ended June 26, 1998 from $138.3
million for the six months ended June 27, 1997.
HIGH NET WORTH BUSINESS. Assets under management in the High Net Worth
Business were $17.8 billion at June 30, 1998 as compared to $13.9 billion at
June 30, 1997. During the six months ended June 30, 1998, assets under
management increased by $2.3 billion. Revenues increased by $23.0 million, or
24.5%, to $116.8 million for the six months ended June 26, 1998 from $93.8
million for the six months ended June 27, 1997. Operating expenses increased by
$7.0 million, or 23.6%, to $36.5 million from $29.5 million over the same
periods, with Employee Compensation and Benefits representing $4.5 million of
the increase as a result of increased portfolio manager compensation and
increased marketing compensation related to the hiring of additional salespeople
and sales commission payments related to new account growth. Net income before
principal compensation increased by $16.0 million, or 24.9%, to $80.3 million
for the six months ended June 26, 1998 from $64.3 million for the six months
ended June 27, 1997.
MUTUAL FUND AND INSTITUTIONAL BUSINESS. Assets under management were $41.3
billion at June 30, 1998 as compared to $36.5 billion at June 30, 1997. During
the six months ended June 30, 1998, mutual fund assets under management
increased by $3.0 billion and institutional assets under management increased
$0.3 billion. The increase in mutual fund assets under management was in part
attributable to $1.0 billion in net new business, the largest component of which
was new assets from insurance companies that offer variable annuity and variable
life insurance products. Revenues increased $29.6 million to $133.8 million, or
28.4%, for the six months ended June 26, 1998 from $104.2 million at six months
ended June 27, 1997. Operating expenses increased by $12.7 million, or 27.5%, to
$58.9 million for the six months ended June 26, 1998 from $46.2 million for the
six months ended June 27, 1997. Net income before principal compensation
increased by $16.8 million, or 29.1%, to $74.8 million for the six months ended
June 26, 1998 from $58.0 million for the six months ended June 27, 1997.
OTHER BUSINESSES. Revenues were $35.5 million for the six months ended
June 26, 1998 as compared to $35.6 million for the six months ended June 27,
1997. Operating expenses were $20.3 million for the six months ended June 26,
1998, up $0.7 million from $19.6 million for the six months ended June 27, 1997.
As a result, net income before principal compensation decreased $0.9 million
from $16.0 million to $15.1 million between the two periods.
1997 COMPARED TO 1996
ASSETS UNDER MANAGEMENT. Assets under management increased by $9.1
billion, or 20.6%, to $53.5 billion at December 31, 1997 from $44.4 billion at
December 31, 1996. The changes in assets under management reflected $9.4 billion
from market appreciation, $2.5 billion in net new business from high net worth
and mutual fund clients, and the loss of $2.8 billion in assets under management
from institutional clients, primarily from the loss of two accounts.
28
<PAGE> 30
OPERATING RESULTS. Revenues increased by $85.2 million, or 20.5%, to
$502.0 million for the year ended December 31, 1997 from $416.8 million for the
year ended December 31, 1996. Investment Advisory and Administrative Fees were
the largest contributor to this growth, increasing $66.4 million to $327.2
million for the year ended December 31, 1997 from $260.8 million for the year
ended December 31, 1996. Commission revenues increased by $15.3 million to
$124.9 million for the year ended December 31, 1997 from $109.6 million for the
year ended December 31, 1996, $10.3 million of the increase being attributable
to high net worth clients. Net interest income increased by $5.3 million to
$29.4 million for the year ended December 31, 1997 from $24.1 million for the
year ended December 31, 1996. This resulted from an increase in net interest
earned on client margin debit balances and more favorable borrowing rates.
Total operating expenses increased by $15.8 million, or 8.4%, to $203.4
million for the year ended December 31, 1997 from $187.6 million for the year
ended December 31, 1996. Employee Compensation and Benefits increased by $6.4
million to $112.8 million for the year ended December 31, 1997 from $106.4
million for the year ended December 31, 1996, partially due to increased staff
levels and performance related compensation in the High Net Worth Business and
the Mutual Funds and Institutional Business marketing groups.
Net income before principal compensation increased by $69.6 million, or
30.3%, to $298.7 million for the year ended December 31, 1997 from $229.1
million for the year ended December 31, 1996.
HIGH NET WORTH BUSINESS. Assets under management increased by $3.5
billion, or 29.1%, to $15.6 billion at December 31, 1997 from $12.1 billion at
December 31, 1996. Revenues increased by $36.5 million, or 22.5%, to $198.3
million for the year ended December 31, 1997 from $161.8 million for the year
ended December 31, 1996. Operating expenses increased by $5.3 million, or 9.3%,
to $62.6 million for the year ended December 31, 1997 from $57.3 million for the
year ended December 31, 1996. Net income before principal compensation increased
by $31.1 million, or 29.8%, to $135.7 million for the year ended December 31,
1997 from $104.6 million for the year ended December 31, 1996.
MUTUAL FUND AND INSTITUTIONAL BUSINESS. Assets under management increased
by $5.7 billion, or 17.5%, to $38.0 billion at December 31, 1997 from $32.3
billion at December 31, 1996. Mutual fund assets increased by $5.6 billion, or
37.2%, consisting in part of net new business of $2.4 billion, largely related
to new and existing defined contribution plans. Assets under management for
institutional clients remained flat, reflecting market gains offset by the loss
of $2.8 billion in assets under management primarily from two accounts, a $1.7
billion fixed income cash management account and a $0.4 billion equity account.
Revenues increased by $45.5 million, or 24.5%, to $230.9 million for the year
ended December 31, 1997 from $185.4 million for the year ended December 31,
1996. Operating expenses increased by $13.5 million, or 15.0%, to $103.1 million
for the year ended December 31, 1997 from $89.6 million for the year ended
December 31, 1996. Net income before principal compensation increased by $32.0
million, or 33.5%, to $127.7 million for the year ended December 31, 1997 from
$95.7 million for the year ended December 31, 1996.
OTHER BUSINESSES. Revenues increased by $3.3 million to $72.9 million for
the year ended December 31, 1997 from $69.6 million for the year ended December
31, 1996. Operating expenses decreased by $3.0 million to $37.7 million for the
year ended December 31, 1997 from $40.7 million for the year ended December 31,
1996, a decrease of 7.5%. As a result, net income before principal compensation
increased by $6.3 million, or 22.1%, to $35.2 million for the year ended
December 31, 1997 from $28.9 million for the year ended December 31, 1996.
1996 COMPARED TO 1995
ASSETS UNDER MANAGEMENT. Assets under management increased by $6.1
billion, or 15.7%, to $44.4 billion at December 31, 1996 from $38.3 billion at
December 31, 1995. The changes in assets under management reflected $5.9 billion
from market appreciation and $1.8 billion in net new
29
<PAGE> 31
business from high net worth and mutual fund clients, offset by a loss of $1.6
billion in assets under management from institutional clients.
OPERATING RESULTS. Revenues increased by $76.0 million, or 22.3%, to
$416.8 million for the year ended December 31, 1996 from $340.8 million for the
year ended December 31, 1995. Investment Advisory and Administrative Fees
contributed the largest portion of the increase, growing by $52.9 million to
$260.8 million for the year ended December 31, 1996 from $207.9 million for the
year ended December 31, 1995, reflecting the growth in assets under management.
Commission revenues increased by $13.2 million to $109.6 million for the year
ended December 31, 1996 from $96.4 million for the year ended December 31, 1995.
Net interest income increased by $7.7 million to $24.1 million for the year
ended December 31, 1996 from $16.4 million for the year ended December 31, 1995,
primarily due to increased securities lending activities partially offset by a
decrease in net client interest income.
Total operating expenses increased by $32.9 million, or 21.3%, to $187.6
million for the year ended December 31, 1996 from $154.7 million for the year
ended December 31, 1995. Employee Compensation and Benefits represented the
largest increase, growing by $18.6 million to $106.4 million for the year ended
December 31, 1996 from $87.8 million for the year ended December 31, 1995,
primarily due to increased salaries and bonuses across all business segments.
Net income before principal compensation increased by $43.0 million, or
23.1%, to $229.1 million for the year ended December 31, 1996 from $186.1
million for the year ended December 31, 1995.
HIGH NET WORTH BUSINESS. Assets under management increased by $2.6
billion, or 27.0%, to $12.1 billion at December 31, 1996 from $9.5 billion at
December 31, 1995. Revenues increased by $26.9 million to $161.8 million for the
year ended December 31, 1996 from $134.9 million for the year ended December 31,
1995, primarily as a result of the increased assets under management. Operating
expenses increased by $8.6 million, or 17.6%, to $57.3 million for the year
ended December 31, 1996 from $48.7 million for the year ended December 31, 1995.
Net income before principal compensation increased by $18.4 million, or 21.3%,
to $104.6 million for the year ended December 31, 1996 from $86.2 million for
the year ended December 31, 1995.
MUTUAL FUND AND INSTITUTIONAL BUSINESS. Assets under management increased
by $3.5 billion, or 12.1%, to $32.3 billion at December 31, 1996 from $28.8
billion at December 31, 1995. Mutual fund assets increased by $3.4 billion, or
29.5%, derived in part from net new business of $1.6 billion, largely from
defined contribution plans. Assets under management for institutional clients
remained flat. Revenues increased by $37.1 million, or 25.0%, to $185.4 million
for the year ended December 31, 1996 from $148.3 million for the year ended
December 31, 1995. Operating expenses increased by $18.6 million, or 26.3%, to
$89.6 million for the year ended December 31, 1996 from $71.0 million for the
year ended December 31, 1995, resulting from increases in salaries and bonuses,
Advertising and Promotion and Fund Administration expenses. Net income before
principal compensation increased by $18.4 million, or 23.9%, to $95.7 million
for the year ended December 31, 1996 from $77.3 million for the year ended
December 31, 1995.
OTHER BUSINESSES. Revenues increased by $12.0 million, or 20.7%, to $69.6
million for the year ended December 31, 1996 from $57.6 million for the year
ended December 31, 1995. Operating expenses increased by $5.7 million, or 16.3%,
to $40.7 million for the year ended December 31, 1996 from $35.0 million for the
year ended December 31, 1995. Net income before principal compensation increased
by $6.3 million, or 27.5%, to $28.9 million for the year ended December 31, 1996
from $22.6 million for the year ended December 31, 1995.
CAPITAL RESOURCES AND LIQUIDITY
The Company's investment advisory activities do not require it to maintain
significant capital balances. However, as a result of its broker-dealer
activities, the Company's balance sheet includes
30
<PAGE> 32
substantially higher levels of assets and liabilities than is typical for an
investment adviser of the Company's size.
The Company's financial condition is highly liquid with most of its assets
readily convertible to cash. Receivables from and payables to brokers, dealers
and clearing organizations represent either current open transactions that
usually settle within a few days or the activity of securities lending that is
collateralized and normally can be closed out within a few days. Receivables
from and payables to clients of the Company arise in the normal course of
business in connection with cash and margin securities transactions. Client
receivables are secured by securities held as collateral. The Company has
committed lines of credit totalling $150 million, of which $125 million was
available at June 30, 1998.
The Company continually monitors and evaluates the adequacy of its capital.
The Company has consistently maintained net capital in excess of the regulatory
requirements prescribed by the SEC and other regulatory authorities. The Company
believes that its cash flow from operations and existing committed and
uncommitted lines of credit, as well as the net proceeds of the Offerings to be
received by the Company, will be sufficient to meet its debt and other
obligations as they come due and anticipated capital requirements.
INFLATION
The Company's assets are largely liquid in nature and therefore not
significantly affected by inflation. Large investments in fixed assets are not
required because the nature of the Company's business is as a service provider.
However, the rate of inflation may affect Company expenses, such as employee
compensation, information technology and occupancy costs which may not be
readily recoverable in the prices of services offered by the Company. To the
extent inflation results in rising interest rates and has other effects upon the
securities markets, it may adversely affect the Company's financial position and
results of operations.
SUBSEQUENT EVENTS
Immediately prior to the Offerings, NB LLC and NBMI intend to distribute to
their members and shareholders, respectively, any net income not previously
distributed.
At, or shortly after, the time of the Offerings, the Company expects to
issue shares of Common Stock, part of which will be awarded to
certain employees at no cost and will be fully vested upon award, and part of
which will be contributed to the Defined Contribution Stock Plan. See
"Management -- Executive Compensation -- Defined Contribution Stock Incentive
Plan". The Company expects to record a one-time charge in the fourth quarter of
1998 resulting in an expected loss in the quarter related to the issuance of
these shares and other compensation-related expenses. The pre-tax amount of such
charge will be equal to the market value of the Common Stock at the time of such
contribution and awards plus the amount of such other costs.
The Management Stockholders have indicated their intention to contribute to
the Company, at, or shortly after, the time of the Offerings, shares
of Common Stock for no consideration as a means of mitigating the dilutive
effects of share issuances by the Company under its employee stock incentive
plans, including the issuances described above. However, the Management
Stockholders are under no legal obligation to make such contribution and there
can be no assurance that such contribution will be made.
YEAR 2000 COMPUTER ISSUES
Many computer systems in use today were designed and developed using two
digits, rather than four, to specify the year. As a result, such systems will
recognize the year 2000 as "00". This could cause many computer applications to
fail completely or to create erroneous results unless corrective measures are
taken. The Company utilizes software and related computer technologies
31
<PAGE> 33
essential to its operations that will be affected by this year 2000 issue. In
recognition of the year 2000 issue, the Company has adopted policies setting
forth the steps to be taken in response. As a matter of policy, the Company has
since 1997 evaluated all newly acquired hardware and software products for year
2000 compliance. The Company is in the process of modifying, upgrading or
replacing its computer software applications and systems and seeks to be
compliant by 1999. The Company has retained an outside consultant to address the
year 2000 issue, and the Company's internal task forces are reviewing all
hardware and software products used by the Company to establish priority levels
for year 2000 compliance testing. The Company will perform several tests of its
systems throughout 1998 and 1999, including participation in industry-wide
testing. As of June 30, 1998, the Company had spent $2.8 million associated with
these actions and, based on management's identification of the requirements for
both plan implementation and overall project management, future expense is not
expected to exceed $1.8 million, of which $0.2 million has been incurred through
August 15, 1998. In addition, the Company relies on a number of financial and
other institutions whose failure to be year 2000 compliant could adversely
affect the Company. The Company is seeking assurances from key service vendors
that they will be year 2000 compliant. The Company is in the process of
developing contingency plans in the event that the Company or any of its key
service vendors is not compliant.
32
<PAGE> 34
BUSINESS
OVERVIEW
Neuberger Berman is an independent investment advisory firm founded in
1939. The Company has established a nationally recognized brand name for its
demonstrated commitment to investment performance and client service. It is a
prominent provider of investment advisory services to the high net worth, mutual
fund and institutional segments of the investment management industry.
Approximately 80% of the Company's assets under management are held in equity
accounts. Over the past three years, the Company has expanded and strengthened
its distribution channels to capitalize on its brand name and position itself
for continued growth. Since December 31, 1993, assets under management grew at a
compound annual rate of 16.8% to $59.1 billion at June 30, 1998. Net income
before principal compensation increased to $298.7 million for 1997 from $149.9
million for 1993, representing a compound annual growth rate of 18.8%, and to
$170.3 million for the six months ended June 26, 1998 as compared to $138.3
million for the six months ended June 27, 1997, an increase of 23.1%.
The Company's High Net Worth Business, with $17.8 billion in assets under
management at June 30, 1998, provides investment advisory services to high net
worth individuals and smaller institutions. This business is marked by long-term
client loyalty, sometimes spanning several generations. The Company's investment
professionals work directly with high net worth clients and can tailor
individual portfolios specifically to address clients' investment goals, income
requirements, capital preservation needs, tax posture and social considerations.
Through two trust company subsidiaries, the Company provides estate planning,
fiduciary and other services to wealthy individuals, families and estates,
qualified and nonqualified employee benefit plans and charities. The Company has
built a 55 person national combined sales and marketing force for the High Net
Worth Business that operates in New York and eight regional offices, with 13
sales professionals and six regional offices added in the last three years. The
Company intends to continue to expand its national marketing efforts, adding
personnel and regional offices. The Company believes that, by virtue of its
established brand name, skilled professionals and national marketing and
servicing capabilities, it is well positioned to expand its presence in this
market.
The Company's Mutual Fund and Institutional Business, with $41.3 billion in
assets under management at June 30, 1998, provides investment management
services to mutual funds and institutional clients, offering its diverse client
base a broad choice of investment products and styles. As of June 30, 1998, the
Company provided investment management, distribution and administrative services
to a proprietary family of 35 mutual funds and subadvisory services to seven
mutual funds sponsored by third parties. Since December 31, 1993, mutual fund
assets under management grew at a compound annual rate of 33.3% to $23.7 billion
at June 30, 1998. The Company was at the forefront of participating in networks
for making mutual fund shares available through intermediaries and now
participates in over 100 strategic alliances with mutual fund "supermarkets",
third party administrators for defined contribution plans (such as 401(k) and
403(b) plans), broker-dealers, banks and other institutions. The Company
believes that further opportunities for growth in its mutual funds business are
available through these and other alliances. The Company also manages
approximately 510 accounts for diverse institutional advisory clients such as
corporate and public employee pension funds, endowments, foundations, and other
domestic and foreign institutions. The Company provides investment advice to
approximately 5,300 accounts through eight wrap fee programs sponsored by third
party brokerage firms and banks.
The Company's portfolio management services are generally provided by
groups of professionals, with portfolio managers averaging over 26 years of
professional experience and 15 years service with the Company. The Company has
been known for its value-oriented equity investment philosophy, with an emphasis
on investing in companies trading in the lower range of price-to-earnings and
price-to-cash flow ratios. The Company is committed to offering a broad range of
investment products and services in a wide variety of investment styles and
market capitalization
33
<PAGE> 35
ranges. Its investment disciplines also include growth-oriented equity
(investing in companies whose earnings and cash flow are growing faster than the
average company and the economy overall), international equity, balanced, fixed
income and money market. All of the Company's investment professionals are
supported by a centralized proprietary research department.
The Company generates additional income through its Other Businesses that
market certain related services developed for its investment management
business, including trust company services, brokerage services and research.
Through NB LLC, a registered broker-dealer and member of the New York Stock
Exchange, the Company executes transactions for its clients and third parties,
provides prime brokerage services, principally for small- to mid-sized
investment managers, and clears transactions on a fully disclosed basis for
other broker-dealers.
The Company has experienced significant growth in recent years in assets
under management, net revenues after interest expense and net income before
principal compensation, as shown on the following table:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
----------------- -----------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ---- ----
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS UNDER MANAGEMENT
High Net Worth Business............ $17,806 $13,912 $15,553 $12,050 $ 9,491 $ 7,349 $ 7,971
Mutual Fund and Institutional
Business
Mutual funds..................... 23,717 18,130 20,744 15,122 11,674 7,184 6,499
Institutional clients............ 15,927 16,904 15,667 15,800 15,891 12,949 13,456
Wrap fee accounts................ 1,639 1,492 1,547 1,388 1,268 1,167 1,477
Total....................... $59,089 $50,438 $53,511 $44,360 $38,324 $28,649 $29,403
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
------------------- YEAR ENDED DECEMBER 31,
JUNE 26, JUNE 27, ----------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
-------- -------- ---- ---- ---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
NET REVENUES AFTER INTEREST
EXPENSE
High Net Worth Business.... $116,789 $ 93,797 $198,306 $161,844 $134,904 $120,811 $118,004
Mutual Fund and
Institutional Business
Mutual funds............. 89,925 64,725 145,268 104,619 74,473 51,622 43,589
Institutional clients.... 39,561 35,964 78,272 73,835 67,334 61,535 59,268
Wrap fee accounts........ 4,297 3,509 7,311 6,902 6,452 7,067 6,461
Other Businesses........... 35,475 35,636 72,892 69,567 57,623 41,431 48,644
Total............... $286,047 $233,631 $502,049 $416,767 $340,786 $282,466 $275,966
NET INCOME BEFORE PRINCIPAL
COMPENSATION(1)
High Net Worth Business.... $ 80,294 $ 64,262 $135,707 $104,557 $ 86,184 $ 76,422 $ 76,893
Mutual Fund and
Institutional Business... 74,837 57,981 127,730 95,708 77,274 62,199 54,350
Other Businesses........... 15,141 16,048 35,228 28,861 22,634 12,354 18,633
Total............... $170,272 $138,291 $298,665 $229,126 $186,092 $150,975 $149,876
</TABLE>
- ---------------
(1) Substantially all net income was distributed to principals as capital
distributions and dividends. Certain principals were also paid through
compensation expense. See Note 7 to the Combined Financial Statements
included elsewhere in this Prospectus.
34
<PAGE> 36
BUSINESS STRATEGY
The Company's business strategy is to continue to provide premier
investment management services to a growing number of clients, to offer an
expanding array of investment products and to increase its presence in a number
of distribution channels. In addition, the Company believes that a broad base of
employee stock ownership following the Offerings will strengthen the alignment
of interests across its business segments and enhance the Company's ability to
produce steadily improving financial results for its stockholders.
MAINTAIN ASSET MANAGEMENT AS CORE BUSINESS. Since its founding almost 60
years ago, the Company's core business has been asset management. Concentrating
its professional and financial resources on providing high quality investment
products and client service, the Company has established a respected reputation
among its clients and in the investment community. The Company believes that its
continuing commitment to its core asset management business, together with its
continued independence during a period of consolidation in the financial
services industry, is attractive to potential clients and has also contributed
to its ability to attract and retain highly qualified investment professionals.
PROMOTE BRAND NAME. Over the last three years, the Company has engaged in
the active promotion of the Neuberger Berman name through television and print
advertising and direct mail campaigns. The Company intends to increase these
promotional activities beginning in the second half of 1998 to further enhance
its national brand identity. The Company also believes that listing the
Company's Common Stock on the New York Stock Exchange will enhance its national
stature.
CENTRALIZE MARKETING ACTIVITIES. The Company has recently reorganized its
asset management operations to better coordinate its marketing efforts. The
Company believes that the ongoing expansion of its national sales effort in the
High Net Worth Business will enhance its growth potential by better managing and
coordinating the individual initiatives which were pursued by investment
professionals in this segment. In the Mutual Fund and Institutional Business,
sales and distribution efforts are being integrated and combined under common
leadership. This recognizes that the growth of defined contribution plans, among
other things, has created an environment in which mutual funds and separately
managed accounts are viewed as alternatives for a common client base, rather
than as investment vehicles designed for different clients.
INCREASE PENETRATION IN HIGH NET WORTH MARKET. The market for providing
investment advisory services to high net worth individuals is a growing market
that is generally fragmented, regionalized and underpenetrated by independent
managers that focus primarily on personalized asset management. Based on
industry data, the Company believes that the number of households with over $1
million in investable assets will grow from approximately 2.5 million in 1996 to
over 15.0 million by 2010. The Company believes that it is well positioned to
capitalize on the growth opportunities in this market by virtue of its ability
to combine national operations and brand name recognition with an emphasis on
client service and personalized asset management. The Company intends to
increase its high net worth sales force from 23 sales professionals at June 30,
1998 to about 60, and to expand its regional offices from eight locations
throughout the U.S. at June 30, 1998 to 15, by 2001. In addition, the Company
believes that its ability to provide an integrated approach to comprehensive
wealth management and administration services through its trust company
subsidiaries represents a competitive advantage. The Company is organizing an
additional trust company to service the active Florida trust services market.
EXPAND MUTUAL FUND ALLIANCES AND DISTRIBUTION CAPABILITIES. The Company
has realized significant growth in its mutual funds from the addition of
multiple channels through which mutual fund shares are made available to
investors. In addition to alliances with mutual fund supermarkets, the Company
believes that opportunities for growth are available through the following:
- DEFINED CONTRIBUTION PLAN ADMINISTRATORS. The Company seeks to expand
its relationships with administrators that provide investment vehicles,
principally mutual funds, offered to
35
<PAGE> 37
participants in defined contribution plans. Since year end 1993, the
Company's assets under management in mutual funds from defined
contribution plans grew from $0.8 billion to $6.3 billion at June 30,
1998 and, as of June 30, 1998, the Company had strategic alliances with
51 administrators of defined contribution plans.
- PROVIDERS OF VARIABLE INSURANCE PRODUCTS. The Company also seeks to
expand its relationships with insurance companies that offer variable
annuity and variable life insurance products that invest in the Neuberger
Berman Funds. The Company believes that significant opportunities exist
to expand its services as subadviser to mutual funds that provide
investment options for variable insurance products. Since year end 1993,
assets under management in funds that provide investments options for
variable insurance products grew at a compound annual rate of 36.3% to
$3.5 billion at June 30, 1998 and, as of June 30, 1998, the Company had
relationships with 32 insurance companies.
- LOAD FUNDS. The Company plans to introduce a family of load funds. Based
on contacts with market participants, the Company believes that the
addition of load funds would be well received by financial advisers and
other intermediaries.
- INTERNET DISTRIBUTION. Through NBMI's Internet site, mutual fund
investors can access their account information, and Neuberger Berman Fund
prospectuses and applications are available. The Company expects to offer
investors the ability to purchase mutual fund shares directly through the
Internet in the near future.
BUILD WRAP FEE PROGRAM PARTICIPATION. Prior to 1996, the Company's
participation in wrap fee programs was limited primarily to providing fixed
income and balanced products in programs with Merrill Lynch and other sponsors.
In 1997, the Company added Morgan Stanley Dean Witter (a registered trademark of
Morgan Stanley Dean Witter & Co.) to its existing relationships and in 1998,
joined the fiduciary services wrap program of Salomon Smith Barney. As a result,
the Company now has relationships with three of the largest sponsors of wrap fee
programs and has begun to offer through these wrap fee programs a range of
equity products, including mid-cap and large-cap value and growth products. The
Company believes that these developments offer significant growth opportunities
through increased participation in wrap fee programs.
ENHANCE DIVERSE PRODUCT AND SERVICE OFFERINGS. The Company believes that
its ability to offer a broad range of investment products and services in a wide
variety of investment styles enhances its opportunities for attracting new
clients and cross-selling its products and services to existing clients. In
addition to its value-oriented domestic equity products, the Company currently
offers growth-oriented equity, international equity, balanced, fixed income and
money market products. The Company seeks to complement these existing product
offerings through the internal development or acquisition of new investment
capabilities.
ATTRACT AND RETAIN EXPERIENCED PROFESSIONALS. The ability to attract and
retain highly experienced investment and other professionals with a long-term
commitment to the Company and its clients has been, and will continue to be, a
significant factor in its long-term growth. The Company has historically
experienced little turnover among its professional employees, and believes that
investment professionals are attracted to investment advisory firms like the
Company that have remained independent during a period of consolidation in the
financial services industry. In addition, the Company believes that, following
the Offerings, the ability to offer its employees shares of or options to
purchase its publicly-traded Common Stock will be a significant incentive in
attracting and retaining employees. In connection with the Offerings, the
Company will adopt employee incentive plans under which approximately 15% of the
Company's fully diluted Common Stock will be available for ongoing option and
restricted stock programs for the Company's existing and future employees. In
addition, the Company believes that the share transfer restrictions and
noncompetition provisions contained in the Stockholders Agreement, as well as
the Company's competitive compensation and benefit arrangements, will encourage
employee retention. See "Management -- Executive Compensation" and "Stockholders
Agreement".
36
<PAGE> 38
ALIGN INTERESTS OF EMPLOYEES AND PUBLIC STOCKHOLDERS. Following the
Offerings, equity ownership will be distributed broadly within the Company. The
Company believes that this will be an important and efficient means of unifying
incentives within the Company and aligning the interests of employees and the
public stockholders and that the ongoing share transfer restrictions contained
in the Stockholders Agreement will maintain this commonality of interests in the
future. In addition, as of June 30, 1998, principals and employees of the
Company and their families had over $200 million invested in the Neuberger
Berman Funds on a voluntary basis.
CAPITALIZE ON ACQUISITION OPPORTUNITIES. The Company evaluates acquisition
opportunities as they arise for their possible contribution to the Company's
strategic objectives, including adding new product and service offerings,
investment capabilities or distribution channels. Following the Offerings, the
availability of publicly-traded Common Stock could facilitate acquisitions by
the Company and give it access to an expanded range of opportunities.
BUSINESS SEGMENTS
The Company's business segments consist of the High Net Worth Business, the
Mutual Fund and Institutional Business and the Other Businesses. This
organizational structure was adopted in 1998 as the Company sought to better
coordinate and integrate its various operations.
HIGH NET WORTH BUSINESS
The Company was founded by Roy R. Neuberger in 1939 as an investment firm
for wealthy individuals, and the High Net Worth Business remains one of the
Company's principal businesses. The Company provides asset management services
to individuals and smaller institutions that generally have at least $500,000 to
invest. Based on industry data, the Company believes that the number of
households with over $1 million in investable assets will grow from
approximately 2.5 million in 1996 to over 15.0 million in 2010. As of June 30,
1998, the High Net Worth Business managed $17.8 billion in assets in
approximately 11,000 individual accounts, including assets managed for clients
of the Company's trust company subsidiaries. For the year ended December 31,
1997, the High Net Worth Business produced $198.3 million in net revenues after
interest expense, representing 39.5% of the Company's total net revenues after
interest expense. The High Net Worth Business assets under management grew at a
compound annual rate of 19.6% between December 31, 1993 and June 30, 1998.
The following table shows for the High Net Worth Business assets under
management, number of accounts and net revenues after interest expense:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
----------------- --------------------------------------------
1998 1997 1997 1996 1995 1994 1993
------- ------- ------- ------- ------ ------ ------
(AUM IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Assets under management................. $17,806 $13,912 $15,553 $12,050 $9,491 $7,349 $7,971
Number of accounts...................... 11,091 10,017 10,446 9,555 8,865 8,278 7,921
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
------------------- YEAR ENDED DECEMBER 31,
JUNE 26, JUNE 27, ----------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
NET REVENUES AFTER INTEREST
EXPENSE
Investment advisory fees.... $ 72,533 $52,613 $116,795 $ 91,423 $ 72,711 $ 67,005 $ 61,855
Commissions................. 43,077 39,817 78,465 68,209 60,555 52,203 54,535
Net interest................ 1,139 1,365 3,049 2,211 1,630 1,579 1,613
Other revenues.............. 40 2 (3) 1 8 24 1
Total................ $116,789 $93,797 $198,306 $161,844 $134,904 $120,811 $118,004
</TABLE>
37
<PAGE> 39
The Company believes that its dedication to serving the needs of individual
clients distinguishes it from many of its competitors. Through close individual
contact with high net worth clients, the Company's portfolio managers can tailor
individual portfolios specifically to address clients' investment goals, current
income requirements, capital preservation needs, tax posture and social
considerations. In addition to standard SIPC insurance coverage, supplemental
coverage of up to $100 million per client is provided for all clients whose
accounts are carried by the Company. The Company believes that it has excellent
relationships with its high net worth clients; many clients' families have
entrusted multiple generations of wealth to the Company's management.
Traditionally, the High Net Worth Business generated new business through
referrals from existing clients and marketing efforts by individual portfolio
managers. In 1986, the Company formed a national sales force to complement its
traditional marketing efforts. This dedicated marketing group currently consists
of 23 sales professionals working in New York and regional offices in Atlanta,
Boston, Chicago, Dallas, Los Angeles, Miami, San Francisco and West Palm Beach.
The Company believes that channeling marketing and client services through its
dedicated marketing group has increased productivity while allowing portfolio
managers more time to focus on managing the accounts of existing clients. The
Company intends to continue to expand this sales force and the number of
regional offices. The Company believes that the promotion of the Company's brand
name will enable the High Net Worth Business to continue to experience
substantial growth.
The Company's trust company subsidiaries enable the Company to provide an
integrated approach to wealth management, including estate, income, financial
and retirement planning, trust administration, fiduciary and other services. The
Company believes these services enhance its ability to retain and manage
clients' assets for multiple succeeding generations and attract new clients.
In general, each high net worth client enters into a standardized written
investment management agreement authorizing the Company to act as investment
adviser for the client for a fee calculated as a percentage of assets under
management. The agreement is terminable at any time by either party and may not
be assigned by the Company without the consent of the client. Almost all listed
equity trades on behalf of high net worth clients are executed by the Company as
broker, generating commission revenue.
MUTUAL FUND AND INSTITUTIONAL BUSINESS
The Mutual Fund and Institutional Business provides advisory services to
mutual funds, institutional clients and wrap fee programs. The Mutual Fund and
Institutional Business offers a wide range of investment products including
large-cap, mid-cap and small-cap equity products, incorporating value-oriented
or growth-oriented investment philosophies, as well as international and
socially responsive investing. The Company also offers balanced, fixed income
and money market products through this business segment.
The following table shows for the Mutual Fund and Institutional Business
assets under management and net revenues after interest expense:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
------------------ ---------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ---- ----
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS UNDER MANAGEMENT
Mutual funds........................ $23,717 $18,130 $20,744 $15,122 $11,674 $ 7,184 $ 6,499
Institutional accounts.............. 15,927 16,904 15,667 15,800 15,891 12,949 13,456
Wrap fee accounts................... 1,639 1,492 1,547 1,388 1,268 1,167 1,477
Total......................... $41,283 $36,526 $37,958 $32,310 $28,833 $21,300 $21,432
</TABLE>
38
<PAGE> 40
<TABLE>
<CAPTION>
SIX MONTHS ENDED
-------------------- YEAR ENDED DECEMBER 31,
JUNE 26, JUNE 27, --------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
-------- -------- ---- ---- ---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
NET REVENUES AFTER
INTEREST EXPENSE
Investment advisory
and
administrative
fees............. $122,152 $ 95,296 $210,375 $169,325 $135,178 $109,481 $ 96,427
Commissions........ 11,018 8,442 19,205 15,260 12,354 10,388 12,421
Net interest....... 5 6 17 29 46 41 85
Other revenues..... 608 454 1,254 742 681 314 385
Total....... $133,783 $104,198 $230,851 $185,356 $148,259 $120,224 $109,318
</TABLE>
MUTUAL FUND MANAGEMENT. In 1950, the Company organized one of the first no
load mutual funds in the United States. As of June 30, 1998, the Company managed
$23.7 billion in mutual fund assets invested in 35 Neuberger Berman Funds based
on 21 separate investment portfolios that span the entire range of the firm's
investment strategies, as well as two mutual funds sponsored by third parties,
which are subadvised by NBMI. The assets under management in the Neuberger
Berman Funds and the subadvised funds grew at a compound annual rate of 33.3%
between December 31, 1993 and June 30, 1998.
The following table shows assets under management for the Neuberger Berman
Funds and the funds sponsored by third parties, which are subadvised by NBMI, as
well as sales of fund shares (net of redemptions) and number of fund
shareholders for the Neuberger Berman Funds:
<TABLE>
<CAPTION>
AS OF OR FOR THE
SIX MONTHS ENDED AS OF OR FOR
JUNE 30, THE YEAR ENDED DECEMBER 31,
---------------------- ------------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ---- ----
(AUM IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS UNDER
MANAGEMENT
Equity funds....... $ 21,418 $ 16,230 $ 18,807 $ 13,232 $ 9,772 $ 5,471 $ 4,749
Balanced funds..... 180 183 162 173 203 179 161
Fixed income
funds............ 665 663 639 669 813 803 915
Money market
funds............ 1,454 1,054 1,136 1,048 886 731 674
Total........ $ 23,717 $ 18,130 $ 20,744 $ 15,122 $ 11,674 $ 7,184 $ 6,499
NET NEW SALES OF FUND
SHARES............. $1,031,324 $981,127 $2,419,057 $1,589,509 $2,186,759 $699,422 $1,133,431
NUMBER OF FUND
SHAREHOLDERS....... 645,721 539,561 609,282 500,398 432,460 356,975 325,633
</TABLE>
Neuberger Berman Fund shares are made available to investors through
multiple channels.
- DIRECT AND INTERNET SALES. Neuberger Berman Funds have traditionally
been sold directly to shareholders, without a sales load. Fund shares are
marketed through television and print advertising and through direct mail
solicitations principally to existing shareholders. Through the Company's
Internet site, mutual fund investors can access their account information
and interactive investor education features. Neuberger Berman Fund
prospectuses and applications are currently available through the
Internet and the Company expects to offer investors the ability to
purchase mutual fund shares directly through the Internet in the near
future.
- MUTUAL FUND SUPERMARKETS. The Company was at the forefront of
participating in networks for making mutual fund shares available through
mutual fund supermarkets. Neuberger Berman Fund shares are currently made
available through 11 such services as of June 30, 1998. These services,
generally offered by discount brokers, offer investors the opportunity to
invest in a broad range of mutual funds through a single brokerage
account. As of June 30,
39
<PAGE> 41
1998, shares representing 18.1% of Neuberger Berman Fund assets under management
were held through mutual fund supermarket accounts.
- DEFINED CONTRIBUTION PLANS. As of June 30, 1998, the Company had
strategic alliances with 51 administrators of defined contribution plans
(such as 401(k), 403(b) and nonqualified deferred compensation plans) in
which the Company provides investment advisory services and the
administrators provide record keeping and plan participant services. The
Neuberger Berman Funds have experienced significant growth through these
alliances in recent years without capital investment by the Company for
the development and maintenance of such services. The Company's defined
contribution plan assets under management in mutual funds grew at a
compound annual rate of 57.7% between December 31, 1993 and June 30,
1998.
- VARIABLE INSURANCE PRODUCTS. As of June 30, 1998, the Company had also
developed relationships with 32 insurance companies that offer variable
annuity and variable life insurance products that may be invested, at the
direction of policy holders, in Neuberger Berman Funds. As of June 30,
1998, $3.5 billion was invested in funds that provide investment options
for variable insurance products, including two insurance company-
sponsored mutual funds for which NBMI serves as subadviser. The Company
believes that significant opportunities exist to expand its subadvisory
services to other such mutual funds.
- OTHER INTERMEDIARIES. As of June 30, 1998, Neuberger Berman Fund shares
were also sold through 27 broker-dealers, 17 banks and nine other
institutions.
The Company pays certain intermediaries for distribution assistance and the
Company and the Neuberger Berman Funds pay certain intermediaries for
shareholder and administrative services. While the specific terms of agreements
with such intermediaries vary, they provide, in general, for payments calculated
on the basis of the amount of mutual fund assets held in the account of an
intermediary or its clients, may be terminated by either party upon notice to
the other and may not be assigned without the consent of the other party.
The Neuberger Berman Funds are organized in a "master-feeder" structure in
which, as of June 30, 1998, shares of 35 "feeder" funds, invested in 21 "master"
funds, were sold to investors. Through this structure, one or more feeder funds
invest all of their assets in a master fund, which, in turn, invests in a single
portfolio of securities. Each feeder fund may enter into separate contractual
arrangements for the particular distribution, administration or other services
that may be appropriate for different investors. This permits the Company to
make available through multiple feeder funds a single investment portfolio to
different investors. The Company believes that the recent growth of the
Neuberger Berman Funds may be attributed in part to the flexibility and
efficiency of the master-feeder structure.
In addition to investment advisory fees, the Company also generates income
from administrative and service fees for accounting services, general
administration of mutual funds (such as coordinating board meetings, compliance
programs and prospectus and semi-annual report production) and shareholder
services. Also, approximately 50% of the commissions paid by the Neuberger
Berman Funds are paid to the Company for executing listed equity trades as
broker pursuant to Rule 17e-1 under the Investment Company Act of 1940, as
amended (the "Investment Company Act").
The board of trustees of each master fund, including a majority of the
trustees who are not "interested persons" of the fund or the Company within the
meaning of the Investment Company Act, and its shareholders must approve each
management agreement to allow the Company to provide investment advisory
services to the portfolio. These services are provided for a fee calculated as a
percentage of assets under management. These agreements provide for an initial
two-year term and thereafter must be approved annually by the master fund's
board of trustees and
40
<PAGE> 42
a majority vote of the non-interested trustees. They may be terminated without
penalty by either party upon 60 days' prior written notice and terminate
automatically in the event of an assignment by the Company.
INSTITUTIONAL ACCOUNTS. The Company manages both domestic and
international equity, balanced, fixed income and cash management separate
account portfolios for U.S. institutional clients, including defined benefit and
defined contribution plans for corporations and municipalities, Taft-Hartley
plans, insurance companies, endowments and foundations, and hospital and health
care organizations. Institutional accounts also include five mutual funds
sponsored by third parties, which are subadvised by NB LLC. Investment
portfolios are tailored to the specific objective and risk tolerance levels of
each client.
The following table shows for the Company's institutional accounts assets
under management and number of accounts:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
----------------- -----------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ---- ----
(AUM IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS UNDER MANAGEMENT(1)
Equity............................. $ 9,228 $ 9,063 $ 9,403 $ 8,212 $ 7,512 $ 5,904 $ 6,052
Fixed income....................... 5,654 6,781 5,311 5,509 5,955 4,206 4,673
Cash management.................... 1,045 1,060 953 2,079 2,424 2,839 2,731
Total....................... $15,927 $16,904 $15,667 $15,800 $15,891 $12,949 $13,456
Number of accounts................... 510 487 498 471 486 459 436
</TABLE>
- ---------------
(1) Balanced accounts are reflected in their equity and fixed income components.
The Company believes that its strategy of diversifying its product line has
positioned it for future growth in accounts and assets under management. A
significant portion of the Company's institutional accounts is attributable to
relationships with pension consulting firms. Pension consultants typically
evaluate investment advisers based on their classification of investment styles
which generally include various methods of equity investing and market
capitalization ranges. There is generally a lead time between the development of
a particular investment style and its acceptance and subsequent recommendations
by consultants. Since certain of the Company's equity products, including growth
equity, have been introduced to consultants only within the past two years, or,
in some cases, more recently, the Company believes that sales of these products
may increase as they become recognized and accepted by consultants. Since
January 1, 1997, the Company added accounts from institutional investors that
were advised by a total of 17 pension consulting firms. The institutional
separate account sales group also pursues an intensive direct calling effort
focused on plan sponsors. The Company believes that this effort, together with
the consultant effort, will attain additional separate account asset growth.
The Company's marketing efforts to institutional investors have
traditionally been pursued independently of its sales activities related to the
Neuberger Berman Funds. Because institutional investors, particularly defined
contribution plans, are now an important source of sales by mutual funds, the
Company is coordinating previously separate marketing activities for
institutional and mutual fund investors under common leadership. In addition,
the Company has separated its institutional account marketing from its client
service responsibilities. The Company believes that this separation of
individual responsibility will enhance its abilities both to increase the
marketing of an expanded product line and to better service its clients.
The Company's trust company subsidiaries enable it to provide a pooled
investment product which may be attractive to certain clients. In addition,
these subsidiaries provide corporate retirement plan trustee services including
investment of assets, transmittal of trust information to record keepers and
plan sponsors, and distribution of funds. Services are also provided to non-
profit organizations for 403(b) and other retirement plans.
41
<PAGE> 43
The Company's institutional accounts are managed pursuant to written
investment management agreements between each client and the Company. While the
specific terms of such agreements may vary, they are generally terminable either
at will or upon 30 to 60 days' prior notice. The agreements may not be assigned
without the consent of the client. Under the agreements, the Company is
compensated on the basis of fees calculated as a percentage of assets under
management. In general, the investment management agreements authorize the
Company to effect securities transactions for the advisory client. Approximately
45% of the commissions paid by institutional clients are paid to the Company for
executing listed equity trades as broker.
WRAP FEE ACCOUNTS. The Company acts as investment adviser to approximately
5,300 accounts through eight wrap fee programs sponsored by third party banks
and brokerage firms. Wrap fee programs, designed to meet the needs of
individuals and smaller institutions, offer comprehensive investment management
services under a single fee structure covering all charges, including investment
management, brokerage, custody, record keeping and reporting. Prior to 1996, the
Company's participation in wrap fee programs was limited primarily to providing
fixed income and balanced products in programs with Merrill Lynch and other
sponsors. In 1997, the Company added Morgan Stanley Dean Witter (a registered
service mark of Morgan Stanley Dean Witter & Co.) to its existing relationships
and in 1998, joined the fiduciary services wrap program of Salomon Smith Barney.
As a result, the Company now has relationships with three of the largest
sponsors of wrap fee programs and has begun to offer through these wrap fee
programs a range of equity products, including mid-cap and large-cap value and
growth products. The Company believes that these developments offer the
opportunity for significant growth through increased participation in wrap fee
programs. The Company maintains a regional sales and service force organized
specifically for these programs.
The following table shows for the Company's wrap fee accounts assets under
management and number of accounts:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
---------------- ----------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ---- ----
(AUM IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS UNDER MANAGEMENT
Equity......................... $ 371 $ 195 $ 255 $ 126 $ 36 $ 9 $ 2
Balanced....................... 747 748 775 725 688 623 798
Fixed income................... 521 549 517 537 544 535 677
Total................... $1,639 $1,492 $1,547 $1,388 $1,268 $1,167 $1,477
Number of accounts............... 5,268 4,680 4,842 4,685 4,511 4,918 6,338
</TABLE>
OTHER BUSINESSES
The Company generates additional income by marketing to third parties
certain related services developed for the investment management business,
including trust company services, brokerage services and research.
TRUST COMPANIES. Through its subsidiaries Neuberger & Berman Trust
Company, a New York trust company, and Neuberger & Berman Trust Company of
Delaware, a Delaware limited purpose trust company, the Company also provides an
integrated approach to wealth management through estate, income, financial and
retirement planning, trust administration, fiduciary and other services to
clients. Trust company clients include wealthy individuals, wealthy families and
estates, qualified and nonqualified employee benefit plans and charities.
The trust companies' business complements the individualized investment
management services provided by the Company and was established with the goal of
enhancing the Company's client service, attract new clients and retain current
and new individual clients through multiple generations. This business is
focused on providing customized client service and account design to assist the
Company's clients with both personal and business wealth management matters.
42
<PAGE> 44
The Company intends to continue investing in this business over time as
client needs warrant and to that end is organizing a Florida trust company to
provide the Company with a local presence in the active Florida trust services
market.
BROKER-DEALER ACTIVITIES. The Company conducts a number of activities in
its capacity as a registered broker-dealer. Principally, the Company provides
brokerage services for its high net worth clients and, to a lesser extent, the
Neuberger Berman Funds and institutional clients. The Company provides its
clients and other institutional investors with access to the research generated
by its proprietary research department. If these institutional investors elect
to purchase or sell securities based on this research, such trades are usually
placed with the Company.
As prime broker, the Company provides brokerage and custody services for
investment partnerships and other professional investors, who may direct the
Company to place specific transactions with designated third-party brokers. The
Company provides "one stop shopping" services to clients through a central desk
capable of performing all prime brokerage functions, from trading to account
administration. Prime brokerage services are marketed to a network of investment
professionals and firms developed through market contacts. In addition, the
Company clears its own brokerage transactions and has developed a clearing
business to capitalize on its excess clearing capacity. As of June 30, 1998, the
Company served as clearing broker to 14 introducing brokers.
The Company also engages in securities lending, manages available cash
balances, acts as a market maker and underwrites securities. The Company has
engaged in short-term securities lending transactions for over 40 years. Such
transactions consist primarily of borrowing securities to meet short-sale
obligations of the Company's prime brokerage clients. The Company also generates
additional income by managing cash available to the Company as a result of its
broker-dealer activities. The Company acts as market maker for approximately 220
securities traded on the over-the-counter market, buying or selling such
securities as principal. The Company does not engage in such transactions with
its advisory clients. However, the Company believes that its presence as market
maker provides it with additional insight as to market conditions, which may
improve the Company's execution of transactions for its advisory clients. From
time to time, the Company participates in public offerings of securities by
purchasing for its own account a portion of new securities being offered and
then reselling such securities to institutional investors and other brokerage
clients. The Company does not participate in such offerings for its advisory
clients.
The following table shows for the Company's Other Businesses net revenues
after interest expense:
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED
-------------------- FOR THE YEAR ENDED DECEMBER 31,
JUNE 28, JUNE 27, ---------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
-------- -------- ---- ---- ---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
NET REVENUES AFTER
INTEREST EXPENSE
Commissions............ $13,750 $13,823 $27,241 $26,152 $23,491 $20,640 $19,633
Net interest........... 12,433 12,431 26,358 21,890 14,749 11,640 9,536
Clearance fees......... 4,886 4,356 8,332 8,152 7,893 5,925 6,845
Other revenues......... 4,406 5,026 10,961 13,373 11,490 3,226 12,630
Total........... $35,475 $35,636 $72,892 $69,567 $57,623 $41,431 $48,644
</TABLE>
INVESTMENT PROCESS AND RESEARCH DEPARTMENT
The Company's portfolio management is provided by groups of investment
professionals that offer a wide variety of investment styles. All of the
Company's investment professionals are supported by a centralized proprietary
research department. Organized by industry, the Company's
43
<PAGE> 45
analysts are responsible for understanding developments within the companies
they follow, meeting with senior management, developing earnings estimates and
providing complete fundamental analysis. The Company's research staff also
provides the business risk assessment and cash flow models that underpin the
Company's credit analysis. The Company research analysts average 11 years of
experience and four years with the Company.
In addition to this centralized proprietary research department, dedicated
research analysts within many groups of investment professionals focus on
securities that are particularly relevant to such groups' investments. Moreover,
many portfolio managers were former analysts (including former heads of research
at the Company and elsewhere), and continue to generate their own research,
which is shared with other portfolio managers. The Company's analysts and
portfolio managers hold meetings with managements of companies on a regular
basis (including, in the preceding twelve months, more than 900 meetings in the
Company's offices) to discuss their plans and to review their results.
COMPETITION
The investment management business is intensely competitive, based on a
variety of factors including the range of products offered, brand recognition,
investment performance, business reputation, the continuity of client
relationships and of assets under management, quality of service provided to
clients, the level of fees charged for services, the level of commissions and
other compensation paid, financial strength and distribution support offered to
financial intermediaries and other distribution participants.
The Company and its business units compete in every market segment in which
they operate with a large number of investment management firms, commercial
banks, investment banks, broker-dealers, insurance companies and other financial
institutions. A number of these institutions have greater capital and other
resources, and offer more comprehensive lines of products and services, than the
Company. The recent trend toward consolidation within the investment management
industry has served to increase the strength of a number of the Company's
competitors. Additionally, there are relatively few barriers to entry by new
investment management firms, and the successful efforts of new entrants into the
Company's various lines of business, including major banks, insurance companies
and other financial institutions, have also resulted in increased competition.
Additionally, the financial intermediaries who make available certain of the
Company's products also make available numerous competing products, including
products sponsored by the firms that employ such financial intermediaries.
The Company expects that other industry participants will from time to time
seek to recruit Company investment professionals and other employees away from
the Company. The loss of key professionals could have a material adverse affect
on the Company.
At the end of 1997, there were approximately 6,800 registered open-end
investment companies, of varying sizes and investment policies, whose shares are
currently being offered to the public both on a load and no-load basis. In
addition to competition from other mutual fund managers and investment advisers,
the Company and the mutual fund industry compete with investment alternatives
offered by insurance companies, commercial banks, broker-dealers and other
financial institutions. Competition for sales of mutual fund shares is
influenced by various factors, including investment performance in terms of
attaining the stated objectives of the particular funds and in terms of fund
yields and total returns; advertising and sales promotional efforts; and type
and quality of services.
REGULATION
The Company's business and the securities industry in general are subject
to extensive regulation in the United States at both the federal and state
level, as well as by self-regulatory organizations ("SROs"). The securities and
commodities industry is one of the nation's most
44
<PAGE> 46
extensively regulated industries. The SEC is responsible for carrying out the
federal securities laws and serves as a supervisory body for all investment
advisers to mutual funds, as well as for national securities exchanges and
associations. The regulation of broker-dealers has to a large extent been
delegated by the federal securities laws to SROs. These SROs include all the
national securities and commodities exchanges and the NASD. Subject to approval
by the SEC and the Commodity Futures Trading Commission (the "CFTC"), the SROs
adopt rules that govern the industry and conduct periodic examinations of the
operations of certain subsidiaries of the Company. In addition, these
subsidiaries are subject to regulation under the laws of the 50 states, the
District of Columbia, Puerto Rico and certain foreign countries in which they
are registered to conduct securities, investment banking, insurance or
commodities business.
Both NB LLC and NBMI are registered as investment advisers with the SEC. As
registered advisers, each is subject to the requirements of the Investment
Advisers Act of 1940, as amended (the "Advisers Act"), and the SEC's regulations
thereunder. Such requirements relate to, among other things, record-keeping and
reporting requirements, disclosure requirements, limitations on agency cross and
principal transactions between an adviser and advisory clients, as well as
general anti-fraud prohibitions. Moreover, both NB LLC and NBMI and the mutual
funds managed by NBMI are subject to the Investment Company Act and the SEC's
regulations thereunder. The Investment Company Act regulates the relationship
between a mutual fund and its investment adviser and prohibits or severely
restricts principal transactions and joint transactions.
NB LLC is registered with the CFTC as a commodity pool operator, commodity
trading advisor and futures commission merchant. NB LLC's commodity futures and
options activities are also regulated by the National Futures Association. NB
LLC limits its futures and options activities to those permitted by the CFTC to
be provided with reduced disclosure and other requirements to certain eligible
clients.
Broker-dealers are subject to regulations which cover all aspects of the
securities business, including sales practices, market making and trading among
broker-dealers, use and safekeeping of clients' funds and securities, capital
structure of securities firms, record-keeping and the conduct of directors,
officers and employees. Violation of applicable regulations can result in the
revocation of broker-dealer licenses, the imposition of censures or fines and
the suspension or expulsion of a firm, its officers or employees.
As registered broker-dealers, NB LLC and NBMI are each subject to certain
net capital requirements under the Exchange Act; NB LLC is also a member of the
NYSE. The net capital requirements, which specify minimum net capital
requirements for registered broker-dealers, are designed to measure the
financial soundness and liquidity of broker-dealers. NB LLC and NBMI are also
subject to "Risk Assessment Rules" imposed by the SEC which require, among other
things, that certain broker-dealers maintain and preserve certain information,
describe risk management policies and procedures and report on the financial
condition of certain affiliates whose financial and securities activities are
reasonably likely to have material impact on the financial and operational
condition of the broker-dealers.
The Company's trust company subsidiaries are supervised by relevant state
banking authorities, which regulate such matters as policies and procedures
relating to conflicts of interest, account administration and overall governance
and supervisory procedures. Neuberger & Berman Trust Company, a non-depository
trust company chartered under the New York Banking Law, is subject to oversight
by the New York State Banking Department. Neuberger & Berman Trust Company of
Delaware, a non-depository limited purpose trust company chartered under the
Delaware Banking Code, is subject to oversight by the State Bank Commissioner of
the State of Delaware.
In addition to being regulated in the United States, the Company's business
is subject to regulation by various foreign governments and regulatory bodies.
NB LLC is registered with and subject to regulation by the Ontario Securities
Commission, the Alberta Securities Commission and the British Columbia
Securities Commission. Foreign regulations govern all aspects of the invest-
45
<PAGE> 47
ment business, including regulatory capital, sales and trading practices, use
and safekeeping of client funds and securities, record-keeping, margin practices
and procedures, registration standards, reporting and disclosure. To the extent
that the Company or its subsidiaries determine to engage in securities
activities in other jurisdictions, such additional regulations may apply.
Additional legislation and regulations, including those relating to the
activities of investment advisers and broker-dealers, changes in rules
promulgated by the SEC or other U.S. or foreign regulatory authorities and SROs
or changes in the interpretation or enforcement of existing laws and rules may
adversely affect the manner of operation and profitability of the Company. The
Company's businesses may be materially affected not only by regulations
applicable to it as an investment adviser or broker-dealer, but also by
regulations of general application.
LEGAL MATTERS
In the normal course of business, the Company is subject to various legal
proceedings. However, in management's opinion, there are no legal proceedings
pending against the Company or any of its subsidiaries that would have a
material adverse effect on the financial position, results of operation or
liquidity of the Company.
INTELLECTUAL PROPERTY
The Company regards the Neuberger Berman name as material to its business
and has made applications for trademark registrations of the name "Neuberger
Berman". The Company currently holds trademark registrations of the name
"Neuberger & Berman" and trademark registrations relating to the Neuberger
Berman Funds. The Company licenses accounting software from Signature Financial
Group, Inc. for the administration of the Neuberger Berman master-feeder funds.
The license may not be assigned to a party not affiliated with the Company and
may be terminated upon 120 days' notice.
OFFICES
The executive office of the Company is located in leased office space at
605 Third Avenue, New York, New York. The Company also has leased premises at 55
Water Street and at 600 Third Avenue, New York, New York. A growth equity
portfolio management group operates alongside marketing personnel in office
space leased in Boston, Massachusetts. The Company or its subsidiaries have also
leased premises for regional marketing offices in Atlanta, Georgia; Chicago,
Illinois; Los Angeles and San Francisco, California; Dallas, Texas; Columbia,
Maryland; and Miami and West Palm Beach, Florida. NB Trust Delaware leases
office space in Wilmington, Delaware. The Company does not own any real
property. The Company considers these arrangements to be adequate for its
present needs.
EMPLOYEES
As of June 30, 1998, the Company and its subsidiaries collectively employed
approximately 1,025 people. Employees of the Company and its subsidiaries are
not subject to any collective bargaining agreement. Management believes that the
Company and its subsidiaries have good relations with their respective
employees.
46
<PAGE> 48
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company are:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Lawrence Zicklin........................... 62 Chief Executive Officer and Chairman of the
Board of Directors
Richard A. Cantor.......................... 65 President, Chief Operating Officer and
Director
Jeffrey B. Lane............................ 56 Executive Vice President, Chief
Administrative Officer and Director
Vincent T. Cavallo......................... 62 Senior Vice President and Chief Financial
Officer
C. Carl Randolph........................... 60 Senior Vice President, General Counsel and
Secretary
Stanley Egener............................. 64 Director
Michael M. Kassen.......................... 45 Director
Marvin C. Schwartz......................... 57 Director
Heidi S. Steiger........................... 45 Director
Dietrich Weismann.......................... 59 Director
</TABLE>
All directors are elected annually to serve until the Company's next
meeting of stockholders and thereafter until their successors are elected.
Officers are elected by and serve at the discretion of the Board of Directors
(the "Board"). Set forth below is certain biographical information for the
executive officers and directors of the Company.
LAWRENCE ZICKLIN is Chief Executive Officer and Chairman of the Board of
Directors of the Company. Mr. Zicklin is the Managing Principal of NB LLC and
has been a Director of NBMI since December 1974. He joined the Company in April
1969.
RICHARD A. CANTOR is President, Chief Operating Officer and a Director of
the Company. Mr. Cantor is the Executive Principal of NB LLC and has been a
Director of NBMI since March 1988 and its Chairman since August 1991. He joined
the Company in October 1973.
JEFFREY B. LANE is Executive Vice President, Chief Administrative Officer,
a Director of the Company and head of the Other Businesses. Mr. Lane joined the
Company in July 1998. He was previously employed by Primerica Corp. (now known
as Travelers Group) from February 1990 until July 1998, where he served in
several capacities, including President of Primerica Holdings from February 1990
to February 1991, Vice Chairman of Smith Barney (a subsidiary of Primerica) from
February 1991 through December 1995, and Vice Chairman of Travelers Group from
January 1996 to July 1998.
VINCENT T. CAVALLO is Senior Vice President and Chief Financial Officer of
the Company. Mr. Cavallo has been Chief Financial Officer of NB LLC since June
1976. He joined the Company in January 1968.
C. CARL RANDOLPH is Senior Vice President, General Counsel and Secretary of
the Company. Mr. Randolph has served as General Counsel of NB LLC since joining
the Company in July 1971.
STANLEY EGENER is a Director of the Company and the co-head of the Mutual
Fund and Institutional Business. Mr. Egener has served as a Director of NBMI
since February 1980 and has been its President and Chief Executive Officer since
October 1982. He joined the Company in August 1975.
47
<PAGE> 49
MICHAEL M. KASSEN is a Director of the Company, a senior portfolio manager
and the co-head of the Mutual Fund and Institutional Business. Mr. Kassen has
served as a Vice President of NBMI since June 1990. Mr. Kassen has been a
Director of NBMI since April 1996. He joined the Company in June 1990.
MARVIN C. SCHWARTZ is a Director of the Company, a senior portfolio manager
and the co-head of the High Net Worth Business. Mr. Schwartz was a Director of
NBMI from December 1990 to April 1996. He joined the Company in January 1961.
HEIDI S. STEIGER is a Director of the Company, the co-head of the High Net
Worth Business and director of sales and marketing. Ms. Steiger joined the
Company in January 1986.
DIETRICH WEISMANN is a Director of the Company and a senior portfolio
manager. Mr. Weismann joined the Company in April 1968.
COMMITTEES OF THE BOARD
The Board has two standing committees: an Audit Committee and a
Compensation Committee.
The Audit Committee consists of Messrs. , ,
and , with Mr. serving as Chairman.
It is responsible for recommending the firm to be appointed as independent
accountants to audit the Company's financial statements and to perform services
related to the audit; reviewing the scope and results of the audit with the
independent accountants; reviewing with the management and the independent
accountants the Company's year-end operating results; considering the adequacy
of the internal accounting and control procedures of the Company; reviewing the
non-audit services to be performed by the independent accountants, if any, and
considering the effect of such performance on the accountants' independence.
The Compensation Committee consists of Messrs. ,
, , and , with Mr.
serving as Chairman. It is responsible for review and
recommendation regarding compensation arrangements for the Chief Executive
Officer and the four other most highly compensated executive officers. A
subcommittee of the Compensation Committee, comprised solely of "outside
directors" (as such term is used in Section 162(m) of the Internal Revenue Code
of 1986, as amended (the "Code")) who are also "Non-Employee Directors" (as such
term is defined in Rule 16b-3 of the Exchange Act) has exclusive authority to
approve any awards of stock or options to directors of the Company (other than
Non-Employee Directors) or other individuals who are "officers" of the Company
for purposes of Section 16 of the Exchange Act under the Company's Long-Term
Incentive Plan (described below) and to administer elements of the Company's
1998 Annual Performance Incentive Plan (also described below) covered by Section
162(m) of the Code. The subcommittee also is responsible for determining whether
the performance goals under the Annual Plan (as defined herein) have been met.
In the remainder of this Prospectus, references to the Compensation Committee
shall be deemed to be references to the subcommittee in all cases where Section
162(m) of the Code or Section 16 of the Exchange Act would require that action
be taken by the subcommittee rather than the full Compensation Committee.
COMPENSATION OF DIRECTORS
Directors who are not officers or employees of the Company ("Non-Employee
Directors") will receive an annual retainer fee of $25,000, payable in equal
monthly installments, a fee of $1,000 for each meeting of the Board attended and
a fee of $800 for any committee meeting attended. Directors who are officers or
employees of the Company will not receive any additional compensation for
serving as a director. The Company will also reimburse all directors for
reasonable and necessary expenses they incur in performing their duties as
directors.
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DIRECTORS STOCK INCENTIVE PLAN
It is anticipated that, prior to the consummation of the Offerings, the
Board of Directors will adopt, effective on the consummation of the Offerings,
the 1998 Neuberger Berman Directors Stock Incentive Plan (the "Directors Plan").
The Directors Plan will provide that each Non-Employee Director who is in
office on the first business day after each annual meeting of the Board will
receive an annual award of options to purchase $75,000 of shares of Common Stock
(based on the fair market value per share of Common Stock on the grant date).
The Directors Plan will also provide for pro rata awards for a partial year of
service in the case of a Non-Employee Director who is initially named to the
Board less than six months after the preceding annual meeting. The options will
have an exercise price equal to the fair market value of the Common Stock on the
grant date.
Options will generally vest pro rata over a four-year period, as long as
the Non-Employee Director remains in office. If a Non-Employee Director ceases
to be a director because of death or disability before all options are vested,
the Non-Employee Director's options will vest in full immediately upon death or
disability. In addition, each option will vest in full upon a "Change in
Control" of the Company (as defined below under "Long-Term Incentive Plan").
Each option will expire on the earlier of (i) the date the Non-Employee Director
ceases to be a director for any reason other than for death, disability or
retirement, (ii) three years from the date the Non-Employee Director ceases to
be a director because of death, disability or retirement or (iii) the tenth
anniversary of the grant date.
The Directors Plan will also provide for a one-time award of $50,000 of
restricted stock to a new Non-Employee Director upon his or her initial election
to the Board. This grant will be made on the business day immediately following
the annual meeting at or after which the new director is elected to the Board
and the number of shares so awarded will be determined based on the fair market
value of the Common Stock on the grant date, except that in the case of a
Non-Employee Director who is serving at the time of the consummation of the
Offerings, the award will be made on the date of the consummation of the
Offerings and the number of shares will be determined based on the initial
public offering price. The shares of restricted stock will vest in the same
manner as the annual option awards described above.
Under the Directors Plan, a Non-Employee Director will be permitted to
elect, on or before December 31 of any calendar year ending on or before the
expiration of the term of the Directors Plan, to defer receipt of all or any
part of any annual retainer fee or meeting fee payable in respect of the
calendar year following the year in which such election is made. The fee
deferred will be deemed invested in a stock account and shall be deemed to be
invested in a number of notional shares of Common Stock (the "Units") equal to
the quotient of (i) the fee so deferred divided by (ii) the fair market value
per share of Common Stock on the date a fee would have been payable. Dividends
(if any) will be deemed reinvested in additional Units on the related dividend
payment date. In the event of any change in the number or kind of outstanding
shares of Common Stock by reason of any recapitalization, reorganization,
merger, consolidation, stock split or any similar change affecting the Common
Stock (other than a stock dividend), the Board will make an appropriate
adjustment in the number of Units credited to the stock account.
Each Non-Employee Director will also elect whether (i) the aggregate
amounts credited to his or her account will be distributed wholly in cash, in
the greatest number of whole shares of Common Stock (with any fractional
interest payable in cash) or a combination of cash and whole shares, (ii) such
distribution will commence immediately following the date he or she ceases to be
a director or on the first business day of any calendar year following the
calendar year in which he or she ceases to be a director and (iii) such
distribution will be in one lump-sum payment or in such number of annual
installments (not to exceed ten) as he or she may designate. Each Non-Employee
Director may also elect to receive a distribution of all or any portion of the
amounts credited to his or her accounts as of a date which is at least one full
year after the date of such election, but any
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<PAGE> 51
director who so elects will cease to be eligible to make any additional
deferrals for the two immediately following calendar years.
A maximum of 250,000 shares may be issued under the Directors Plan, subject
to appropriate adjustments in the event of the certain corporate transactions,
including, but not limited to reorganizations, stock dividends and stock splits.
The Directors Plan will be administered, and may be amended by, the Board.
DIRECTOR STOCK OWNERSHIP GUIDELINES
The Company believes that the interests of its Non-Employee Directors
should be aligned with the interests of the Company's stockholders. To this end,
the Company may adopt stock ownership guidelines applicable to its Non-Employee
Directors that will require Directors to make a investment in the Company's
Common Stock.
EXECUTIVE COMPENSATION
Prior to the Exchange, the employees of the Company, including the Named
Executives (as defined herein), were employees and/or principals of NBMI or NB
LLC, and those individuals who were principals, including (with the exception of
Mr. Lane) the Named Executives, were shareholders and members of NBMI and NB LLC
and received most of their compensation as a share of the Company's net income
through capital distributions and dividends. In connection with the Exchange and
the Offerings, the Company undertook a study of the compensation programs and
practices that the Company should have as a public company. The Company used the
services of independent compensation consultants who provided the Company with
independent analyses, viewpoints and guidance with respect to prevailing
compensation levels and practices of other comparable public firms.
Based upon this study, the Company sought to establish a compensation
system for its executive officers and other key employees that would:
- provide for total compensation that is comparable to the Company's
competitors, to enable the Company to recruit and retain talented
individuals who have been, and will be in the future, critical to
Company's long-term growth and profitability;
- enhance the growth and profitability of the Company as a whole and
motivate and reward individual performance by providing compensation that
includes a significant variable element that takes into account, as
appropriate, overall success of the Company and achievement of the
Company's strategic objectives, individual performance and team or
business unit results; and
- include a significant equity component of total compensation in order to
further align the interests of executive officers and other key employees
with those of the Company's stockholders.
The Company also took into account projected ratios of compensation to net
revenues and certain other available data relating to comparable firms. In
addition, the Company sought to design its compensation programs to maximize
contributions to firm-wide and business unit results and individual performance.
In general, compensation for executive officers and other key employees of
the Company will consist of base salary, annual bonus awards (a portion of which
may be payable in restricted stock) and long-term incentive awards of options or
restricted stock that may be made from time to time under the Company's
Long-Term Incentive Plan (described below). Because a portion of each annual
bonus for designated individuals will be paid in restricted stock, the Company
believes that annual bonus awards will provide significant short-term and
long-term incentive value that will be directly linked to the enhancement of
stockholder value.
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ANNUAL PERFORMANCE INCENTIVE PLAN
Prior to the consummation of the Offerings, the Board will adopt, effective
upon the consummation of the Offerings, the Neuberger Berman 1998 Annual
Performance Incentive Plan (the "Annual Plan"), pursuant to which executive
officers and key employees of the Company and its subsidiaries will be eligible
to receive annual incentive bonuses. The Annual Plan will be administered by the
Compensation Committee. The Annual Plan will be effective for 1998 and each of
calendar years 1999, 2000 and 2001, unless extended or earlier terminated by the
Board. Non-Employee Directors will not be eligible for awards under the Annual
Performance Incentive Plan.
Each year the Company will establish target incentive bonuses for
participants in the Annual Plan. Bonuses will be payable under the Annual Plan
for a year if the Company meets the performance criteria for such year selected
for a participant or group of participants by the Compensation Committee from
among the following: (i) earnings per share growth; (ii) revenue growth; (iii)
growth in assets under management; (iv) increase in net income; (v) return on
equity; (vi) controlling expenses and/or (vii) relative performance versus a
peer group of companies. The actual bonus payable to a participant, which may
equal, exceed or be less than the target bonus, will be determined based on
whether the applicable performance targets are met, exceeded or not met, and may
be decreased or increased based on individual performance and contributions, or
such other factors as the Compensation Committee may deem appropriate.
In addition, notwithstanding the foregoing, the Compensation Committee will
have the right, in its discretion, to pay to any participant an annual bonus
based on individual performance or any other criteria that the Committee deems
appropriate and, in connection with the hiring of any person or otherwise, the
Compensation Committee may provide for a minimum bonus amount in any calendar
year, regardless of whether performance objectives are attained.
Any such bonuses will be payable as soon as practicable after the
Compensation Committee certifies that the applicable performance criteria have
been obtained, or, in the case of bonuses that are not tied to such performance
criteria, at such time as the Compensation Committee determines (unless the
participant has elected to defer receipt of such bonus, see "-- Deferred
Compensation Plan").
A portion of a participant's annual incentive bonus may be payable in
restricted stock or options awarded under the LTIP (described below). In
general, from 15% to 25% of a participant's annual incentive bonus over a
specified threshold will be payable in restricted stock, depending on the amount
of such participant's annual bonus. Any such shares of restricted stock will
generally vest over four years, and may be awarded at a discount from fair
market value at the time of such award in order to reflect the impact of the
restrictions on the value of such stock and the risk of forfeiture related to
such vesting. Dividends will be payable on unvested shares of restricted stock.
Because the Annual Plan will be in existence before the completion of the
Offerings, the $1,000,000 deductibility limit of Section 162(m) of the Code
generally will not apply to payments under the Annual Plan until the first
meeting of the Company's stockholders at which directors will be elected after
the close of the third calendar year following the calendar year in which the
Offerings occur. The Board or the Compensation Committee may at any time amend,
suspend, discontinue or terminate the Annual Plan; provided, however, that no
such action will be effective without approval by the stockholders of the
Company to the extent necessary to continue to qualify the amounts payable under
the Annual Plan as deductible under Section 162(m) of the Code.
DEFERRED COMPENSATION PLAN
Prior to the consummation of the Offerings, the Board will adopt, effective
upon the consummation of the Offerings, the Neuberger Berman Deferred
Compensation Plan (the "Deferred Compensation Plan"). The Deferred Compensation
Plan will permit participants in the Annual Plan to elect to defer receipt of
all or any part of their annual incentive bonus under the Annual Plan or a
portion of
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their salary. Amounts so deferred will, at the election of the participant, be
credited to either (i) a stock account deemed to be invested in Units as
described above under "Management -- Compensation of Directors -- Directors
Stock Compensation Plan" equal to the quotient of the amount so deferred divided
by the fair market value of the Common Stock on the date bonus would have been
payable or (ii) one or more phantom investment funds, which will be credited (or
debited) based on the return of a similar amount deemed invested in one or more
of the mutual funds managed by the Company (each, an "Account"). Participants in
the Deferred Compensation Plan will be eligible to change the designation of the
Accounts in which such deferred amounts are deemed to be invested.
A participant in the Deferred Compensation Plan will file a written
election with respect to the timing and manner of distribution of the aggregate
amount, if any, credited to his or her Account at any time. A participant may
elect to receive a distribution from his or her Account in a single lump-sum
payment, or in such number of annual installments (not to exceed ten) as he or
she may designate. Subject to such limitations as the Compensation Committee may
impose, a participant may also elect to receive all or a portion of the
aggregate amount credited to his or her Account as of the first day of any
calendar year while he or she is an employee. If a distribution election is not
made or if such election does not apply to the entire balance in such Account,
the balance in the participant's Account will be distributed in a single
lump-sum payment as soon as administratively possible after the first business
day of the calendar year immediately following the year of separation from
employment. In the case of any distribution being made in annual installments,
each installment after the first installment will be paid as soon as
administratively possible after the first business day of each calendar year
following the year in which such first installment is paid until the entire
amount subject to such installment distribution election has been paid. If a
participant dies before payment of all amounts credited to the participant's
Account has been completed, the total unpaid balance then credited to his or her
Account will be paid to his or her designated beneficiaries or estate in a
single lump-sum payment as of the first business day of the first calendar month
commencing after the date of the participant's death, or as soon thereafter as
administratively possible.
LONG-TERM INCENTIVE PLAN
Prior to the consummation of the Offerings, the Board of Directors will
adopt and the stockholders of the Company will approve, effective upon the
consummation of the Offerings, the 1998 Neuberger Berman Long-Term Incentive
Plan (the "LTIP"). The LTIP provides for the grant of any or all of the
following types of awards: (1) stock options, including incentive stock options;
(2) restricted stock and restricted units; (3) incentive stock and incentive
units; and (4) deferred stock units (each, an "Award").
In order to minimize the dilutive effect of equity awards under the LTIP,
to the extent the Company has available cash the Company may repurchase shares
of Common Stock on the open market from time to time.
LTIP awards may be granted to key employees, including executive officers
of the Company, its subsidiaries and affiliates, but may not be granted to any
director who is not also an employee of the Company, its subsidiaries or
affiliates. The number of employees participating in the LTIP will vary from
year to year. Initially, shares of Common Stock will be authorized to be issued
under the LTIP.
If shares subject to an option under the LTIP cease to be subject to such
option, or if shares awarded under the LTIP are forfeited or if an award
otherwise terminates without a payment being made to the participant in the form
of Common Stock, such shares will again be available for future award under the
LTIP. In the event of certain changes in the Company's capital structure
affecting the Common Stock, the Compensation Committee may make appropriate
adjustments in the number of shares that may be awarded and in the number of
shares covered by options and other
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awards then outstanding under the LTIP, and, where applicable, the exercise
price of outstanding awards under the LTIP. The LTIP will be administered by the
Compensation Committee.
STOCK OPTIONS. The Compensation Committee may grant options to purchase
shares of Common Stock that are either "qualified," which includes those awards
that satisfy the requirements of Section 422 of the Code for incentive stock
options, or "nonqualified," which includes those awards that are not intended to
satisfy the requirements of Section 422 of the Code. Under the terms of the
LTIP, the exercise price of the options will, unless the Compensation Committee
determines otherwise, not be less than such Common Stock's fair market value at
the time of grant. The exercise price of the option is payable in cash or its
equivalent or, as permitted by the Compensation Committee, by exchanging shares
of Common Stock owned by the participant, or by a combination of the foregoing.
The options will generally have a term of ten years, unless the
Compensation Committee specifies a shorter term, and, unless the Compensation
Committee otherwise determines, will become exercisable in four equal annual
installments commencing on the first anniversary of the date of grant. If an
option holder ceases employment with the Company as a result of the holder's (i)
death, (ii) disability, (iii) early retirement with the consent of the
Compensation Committee or (iv) normal retirement, the holder (or his or her
beneficiary or legal representative) may exercise any option, regardless of
whether then exercisable, for a period of one year (or such greater or lesser
period as determined by the Compensation Committee at or after grant), but in no
event after the date the option otherwise expires. If an option holder's
employment is terminated for any other reason, all of his or her options will
immediately terminate, regardless of whether then exercisable (unless determined
otherwise by the Compensation Committee). The Compensation Committee may provide
that a participant who delivers shares of Common Stock to exercise an option
when the market value of the Common Stock exceeds the exercise price of the
option will be automatically granted new options for the number of shares
delivered to exercise the option ("reload options"). Reload options will be
subject to the same terms and conditions as the related option except that the
exercise price will be the fair market value on the date the reload option is
granted and such reload options will not be exercisable for six months.
RESTRICTED STOCK AND RESTRICTED UNITS. The LTIP authorizes the
Compensation Committee to grant Awards in the form of restricted stock and
restricted units. For purposes of the LTIP, restricted stock is an Award of
Common Stock and a restricted unit is a contractual right to receive Common
Stock (or cash based on fair market value of Common Stock). Such awards will be
subject to such terms and conditions, if any, as the Compensation Committee
deems appropriate. Unless otherwise determined by the Compensation Committee,
participants will be entitled to receive either currently or at a future date,
dividends or other distributions paid with respect to restricted stock and, if
and to the extent determined by the Compensation Committee, either will be
credited with or receive, currently an amount equal to dividends paid with
respect to the corresponding number of shares covered by restricted units.
Restricted stock and restricted units become vested and nonforfeitable and the
restricted period will lapse pro rata on each of the first four anniversaries of
the date of grant unless the Compensation Committee determines otherwise. If a
participant's employment terminates because of death, disability, early
retirement (with the Compensation Committee's consent) or normal retirement,
during the period in which the transfer of shares is restricted, the restricted
stock or restricted units will become vested and nonforfeitable as to that
percentage of the shares based upon the days worked as a percentage of total
days in the restricted period (or such greater percentage as the Compensation
Committee may determine). Unless nonforfeitable on the date of termination or
otherwise determined by the Compensation Committee, a restricted stock or
restricted unit award will be forfeited on termination of employment.
INCENTIVE STOCK AND INCENTIVE UNITS. The LTIP allows for the grant of
Awards in the form of incentive stock and incentive units. For purposes of the
LTIP, incentive stock is an Award of Common Stock and an incentive unit is a
contractual right to receive Common Stock (or cash based on fair market value of
Common Stock). Such awards will be contingent upon the attainment, in
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whole or in part, of certain performance objectives over a period to be
determined by the Compensation Committee. With regard to a particular
performance period, the Compensation Committee will have the discretion, subject
to the LTIP's terms, to determine the terms and conditions of such Awards,
including the performance objectives to be achieved during such period and the
determination of whether and to what degree such objectives have been attained.
Unless otherwise determined by the Compensation Committee, participants will be
entitled to receive, either currently or at a future date, all dividends and
other distributions paid with respect to the incentive stock and, if and to the
extent determined by the Compensation Committee, either to be credited with or
receive currently an amount equal to dividends paid with respect to the
corresponding number of shares covered by the incentive units. If a
participant's employment terminates because of death, disability, early
retirement (with the Compensation Committee's consent) or normal retirement
during the measurement period, an Award of incentive stock or incentive units
will become vested and nonforfeitable as to that percentage of the award that
would have been earned based on the attainment of performance objectives for the
days worked as a percentage of total days in the performance period (or such
greater percentage as the Compensation Committee may determine). Unless the
Compensation Committee determines otherwise, any incentive stock or incentive
unit award will be forfeited on termination.
DEFERRED STOCK. An Award of deferred stock confers upon a participant the
right to receive shares of Common Stock at the end of a specified deferral
period. On such date or dates established by the Compensation Committee and
subject to such terms and conditions as determined by the Compensation
Committee, a participant may be permitted to defer receipt of all or a portion
of his or her annual salary and/or annual incentive bonus ("Deferred Annual
Amount") and receive the equivalent amount in elective Units based on the fair
market value of Common Stock on the date of grant. To the extent determined by
the Compensation Committee, a participant may also receive supplemental stock
units for a percentage of the Deferred Annual Amount. Deferred stock units carry
no voting rights until the shares have been issued. The Compensation Committee
will determine whether any dividend equivalents attributable to deferred units
are to be paid currently or credited to the participant's account and deemed
reinvested in deferred stock units. Deferred stock units and dividend
equivalents with respect thereto are fully vested at all times. Unless the
Compensation Committee provides otherwise, supplemental stock units and dividend
equivalents with respect thereto will become fully vested on the fourth
anniversary of the date the corresponding deferred amount would have been paid
and free standing stock units and dividend equivalents with respect thereto will
become fully vested on the third anniversary of the corresponding Common Stock
in lieu of cash Award.
If there is a "Change in Control", all Awards that are not then vested will
become vested and any restrictions or limitations will lapse. For these
purposes, a "Change in Control" shall mean the occurrence of any of the
following events: (1) the members of the Board at the beginning of any
consecutive twenty-four calendar month period (the "Incumbent Directors") cease
for any reason other than death to constitute at least a majority of the Board,
provided that any director whose election, or nomination for election by the
Company's stockholders, was approved by a vote of at least a majority of the
members of the Board then still in office who were members of the Board at the
beginning of such twenty-four calendar month period, other than as a result of a
proxy contest, or any agreement arising out of an actual or threatened proxy
contest, will be treated as an Incumbent Director; or (2) any "person",
including a "group" (as such terms are used in Sections 13(d) and 14(d)(2) of
the Act), but excluding the Company, any subsidiary of the Company or any
employee benefit plan of the Company or any subsidiary of the Company is or
becomes the "beneficial owner" (as defined in Rule 13(d)(3) under the Act),
directly or indirectly, of securities of the Company representing 20% or more of
the combined voting power of the Company's then outstanding securities; or (3)
the stockholders of the Company approve a definitive agreement (A) for the
merger or other business combination of the Company with or into another
corporation, a majority of the directors of which were not directors of the
Company immediately prior to the merger and in which the stockholders of the
Company immediately prior to
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the effective date of such merger own a percentage of the voting power in such
corporation that is less than one-half of the percentage of the voting power
they owned in the Company immediately prior to such transaction or (B) for the
sale or other disposition of all or substantially all of the assets of the
Company to any other entity; provided, in each case, that such transaction has
been consummated; or (4) the purchase of Common Stock pursuant to any tender or
exchange offer made by any "person", including a "group" (as such terms are used
in Sections 13(d) and 14(d)(2) of the Act), other than the Company, any
subsidiary of the Company, or an employee benefit plan of the Company or any
subsidiary of the Company, for 20% or more of the Stock of the Company.
Notwithstanding the foregoing, a "Change in Control" will not be deemed to occur
in the event the Company files for bankruptcy, liquidation or reorganization
under the United States Bankruptcy Code.
The Board or the Compensation Committee may amend, suspend or terminate the
LTIP.
DEFINED CONTRIBUTION STOCK INCENTIVE PLAN
Prior to the consummation of the Offerings, the Board of Directors will
adopt, effective upon the consummation of the Offerings, the Neuberger Berman
Employee Defined Contribution Stock Incentive Plan (the "Defined Contribution
Stock Plan"). The Defined Contribution Stock Plan is not qualified under section
401(a) of the Code.
The designation of participants in the Defined Contribution Stock Plan, the
amount of any Company contributions to the Defined Contribution Stock Plan and
the amount allocated to any individual participant in the Defined Contribution
Stock Plan will be determined by the Compensation Committee. Contributions to
the Defined Contribution Stock Plan are irrevocable, and cannot revert to the
Company. At the time of, or shortly after, the completion of the Offerings, the
Company anticipates that it will contribute approximately shares of
Common Stock to the Defined Contribution Stock Plan, which will be allocated
among approximately of the Company's employees (other than the Named
Executives, who, it is currently intended, will not be participants in the
Defined Contribution Stock Plan).
In general, the allocation of Company contributions to the Defined
Contribution Stock Plan will occur at the time of, or shortly following, the
time the Company makes any contribution to the Defined Contribution Stock Plan.
Amounts allocated to participants will generally vest in equal installments on
each of the first four anniversaries of the allocation date. Unless the
Compensation Committee determines otherwise, a participant will forfeit any
unvested allocation if he or she terminates employment for any reason prior to
vesting. Any forfeitures will be reallocated to other participants in the
Defined Contribution Stock Plan by the Compensation Committee.
A participant in the Defined Contribution Stock Plan will be entitled to
receive an immediate distribution of any vested allocation. In addition,
participants will be entitled to receive any dividends paid on or with respect
to any vested or unvested shares that he or she has been allocated under the
Defined Contribution Stock Plan.
OTHER BENEFIT PLANS AND ARRANGEMENTS
The Company maintains defined contribution plans consisting of an employee
profit-sharing plan and a money purchase pension plan covering all full-time
employees (as defined in the applicable plan) who have completed one year of
continuous service. Contributions to the plans, which at the discretion of the
Company, are determined annually but do not exceed the amount permitted under
the Code as a deductible expense.
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ANTICIPATED GRANTS FOR 1998
Except as described below under "-- Jeffrey B. Lane Letter Agreement", the
Company does not anticipate that it will make any awards under the LTIP or
allocations under the Defined Contribution Stock Plan to any of the Named
Executives.
In connection with the consummation of the Offerings, the Company
anticipates that it will grant in the aggregate approximately fully
vested shares of Common Stock and options to acquire approximately
shares of Common Stock to employees of the Company under the LTIP.
ANTICIPATED COMPENSATION IN 1999
Neuberger Berman Inc. was formed in August 1998, and has had no business
operations or employees. Prior to the Exchange, the Chief Executive Officer and
three of Neuberger Berman Inc.'s other four Named Executives were members and
shareholders of NB LLC and NBMI and received most of their compensation as a
share of the Company's net income through capital distributions and dividends.
After the Exchange, Neuberger Berman Inc.'s executive officers will, in general,
receive compensation consisting of base salary, annual bonus awards and
long-term incentive awards of options or restricted stock. Accordingly, amounts
received as distributions by such officers prior to the Exchange cannot
meaningfully be compared to the salary based compensation that will be in effect
after the Exchange. See "Management -- Executive Compensation" and the Pro Forma
Combined Financial Statements and Notes thereto.
The following table sets forth the compensation anticipated to be earned by
the Chief Executive Officer and the four other most highly compensated executive
officers of the Company (the "Named Executives") for all services rendered to
the Company and its subsidiaries for the year ending December 31, 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-----------------------------
NAME AND PRINCIPAL POSITION SALARY TARGET BONUS(1)
- --------------------------- ------ ---------------
<S> <C> <C>
Lawrence Zicklin, Chief Executive Officer and Chairman of
the Board of Directors.................................... $1,000,000
Richard A. Cantor, President and Chief Operating Officer.... 950,000
Jeffrey B. Lane, Executive Vice President and Chief
Administrative Officer.................................... 750,000
Vincent T. Cavallo, Senior Vice President and Chief
Financial Officer......................................... 300,000
C. Carl Randolph, Senior Vice President, General Counsel and
Secretary................................................. 300,000
</TABLE>
- ---------------
(1) Reflects target bonuses for 1999. Actual bonuses may be higher or lower
depending on actual results. See "-- Annual Performance Incentive Plan".
JEFFREY B. LANE LETTER AGREEMENT
In connection with the employment of Mr. Jeffrey B. Lane, Chief
Administrative Officer of the Company, Mr. Lane and NB LLC entered into a July
2, 1998 letter agreement, which was amended and restated as of August 18, 1998.
The agreement has a four-year term, commencing July 21, 1998, unless otherwise
extended. The agreement provides for Mr. Lane to serve on the Board and have
oversight responsibility for the following: Finance, Investor Relations, Human
Resources, Systems, Operations, Prime Brokerage and Clearing, Legal, Accounting,
Audit, Compliance, and Real Estate. Pursuant to the agreement, Mr. Lane will
receive a base salary of $750,000 per annum and an annual bonus for 1998 of
$1,580,000.
56
<PAGE> 58
The agreement also provides that at the time of or promptly following the
Offerings, Mr. Lane will receive shares of fully vested Common Stock,
shares of restricted stock and options to acquire shares of
Common Stock. Subject to his continued employment, the restricted shares will
vest pro rata (i.e., 20%) on each of the first five anniversaries of the date
that he commenced employment with NB LLC and the options will vest pro rata
(i.e., 25%) on each of the first four anniversaries of such date. The agreement
provides that Mr. Lane will be required to hold the fully vested shares of
Common Stock that he receives at the time of the Offerings for at least one
year, after which time he will be entitled to sell, subject to applicable
securities laws, the same portion of those shares as principals were entitled to
sell in the Offerings and that all vested restricted shares or shares acquired
upon exercise of options will be subject to the Stockholders Agreement on the
same basis as shares so acquired by principals.
57
<PAGE> 59
SECURITY OWNERSHIP BY MANAGEMENT
AND PRINCIPAL STOCKHOLDERS
The following table furnishes certain information, to the best knowledge of
the Company, after giving effect to the Exchange and as adjusted to reflect the
sale of the shares of Common Stock in the Offerings, as to the shares of Common
Stock beneficially owned by (1) each director of the Company, (2) each Named
Executive, (3) all directors and executive officers of the Company as a group
and (4) each person owning beneficially more than 5% of the outstanding shares
of the Common Stock.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED SHARES BENEFICIALLY OWNED
PRIOR TO THE OFFERINGS(1)(2) AFTER THE OFFERINGS(1)(2)
----------------------------- -------------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENT NUMBER PERCENT
- ------------------------ ------ ------- ------ -------
<S> <C> <C> <C> <C>
Lawrence Zicklin(3)..................... 3,927,258 4.1% %
Richard A. Cantor(4).................... 3,592,005 3.7
Jeffrey B. Lane(5)...................... -- --
Vincent T. Cavallo(6)................... 862,081 *
C. Carl Randolph........................ 472,171 *
Stanley Egener(7)....................... 2,990,101 3.1
Michael M. Kassen(8).................... 2,991,198 3.1
Marvin C. Schwartz(9)................... 13,570,704 14.1
Heidi S. Steiger(10).................... 1,240,355 1.3
Dietrich Weismann(11)................... 4,797,990 4.9
All directors and executive officers as
a group (10 persons).................. 34,443,863 35.9
Robert J. Appel(12)..................... 4,870,839 5.1
Management Stockholders(13)............. 96,000,000 100.0
</TABLE>
- ---------------
* Less than 1%.
(1) Beneficial ownership is determined in accordance with Rule 13d-3 of the
SEC.
(2) Does not include shares of Common Stock expected to be
outstanding at, or shortly after, the time of the Offerings after giving
effect to expected employee stock awards and contributions of shares by the
Company to the Defined Contribution Stock Plan and expected contributions
of shares by the Management Stockholders to the Company. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Subsequent Events". In addition, shares of Common Stock will be
reserved for issuance under the LTIP and shares of Common
Stock will be reserved for issuance under the Directors Plan. See
"Management -- Compensation of Directors -- Directors Stock Incentive
Plan", "-- Executive Compensation -- Long-Term Incentive Plan" and
"-- Defined Contribution Stock Incentive Plan".
(3) Includes, prior to the Offerings, 1,748,054 shares and, after the
Offerings, shares held by Zicklin Associates, L.P., with respect
to which Mr. Zicklin has sole voting and investment control as the sole
stockholder of its sole general partner.
(4) Includes, prior to the Offerings, 2,665,360 shares and, after the
Offerings, shares held by Cantor Associates, L.P., with respect
to which Mr. Cantor has sole voting and investment control as the sole
stockholder of its sole general partner.
(5) Mr. Lane will receive shares of fully vested Common Stock,
shares of restricted stock and options to acquire
shares of Common Stock at, or shortly after, the time of the Offerings. See
"Management -- Executive Compensation -- Jeffrey B. Lane Letter Agreement".
58
<PAGE> 60
(6) Includes, prior to the Offerings, 639,037 shares and, after the Offerings,
shares held by Cavallo Associates, L.P., with respect to which
Mr. Cavallo has sole voting and investment control as the sole stockholder
of its sole general partner.
(7) Includes, prior to the Offerings, 762,166 shares and, after the Offerings,
shares held by Egener Associates, L.P., with respect to which Mr.
Egener has sole voting and investment control as the sole stockholder of
its sole general partner.
(8) Includes, prior to the Offerings, 819,111 shares and, after the Offerings,
shares held by Kassen Associates, L.P., with respect to which Mr.
Kassen has sole voting and investment control as the sole stockholder of
its sole general partner.
(9) Includes (a) prior to the Offerings, 5,261,559 shares and, after the
Offerings, shares held by Schwartz CS Associates, L.P., with
respect to which Mr. Schwartz has sole voting and investment control as the
sole stockholder of its sole general partner, and (b) prior to the
Offerings, 5,261,558 shares and, after the Offerings, shares held
by Schwartz ES Associates, L.P., with respect to which Mr. Schwartz has
sole voting and investment control as the sole stockholder of its sole
general partner.
(10) Includes, prior to the Offerings, 129,467 shares and, after the Offerings,
shares held by Steiger Associates, L.P., with respect to which
Ms. Steiger has sole voting and investment control as the sole stockholder
of its sole general partner.
(11) Includes, prior to the Offerings, 1,987,025 shares and, after the
Offerings, shares held by Weismann Associates, L.P., with respect
to which Mr. Weismann has sole voting and investment control as the sole
stockholder of its sole general partner.
(12) Includes (a) prior to the Offerings, 457,657 shares held by Appel
Associates, L.P., with respect to which Mr. Appel has sole voting and
investment control as the sole stockholder of its sole general partner, (b)
shares offered by Appel Associates, L.P. in the Offerings and (c)
after the Offerings, shares held by Appel Associates, L.P.
(13) All of the Management Stockholders are parties to the Stockholders
Agreement, which will become effective upon consummation of the Exchange,
pursuant to which each Management Stockholder has agreed to vote his, her
or its shares in accordance with a majority of the shares held by
Management Stockholders voting in a preliminary vote. See "Stockholders
Agreement -- Voting". The business address of each of the Management
Stockholders is 605 Third Avenue, New York, New York 10158.
59
<PAGE> 61
THE EXCHANGE AND THE SUBORDINATED NOTE TRANSACTION
Prior to the completion of the Offerings, the Company, the members of NB
LLC and the shareholders of NBMI will engage in a series of exchange and merger
transactions (the "Exchange"). The Company, a Delaware corporation organized on
August 13, 1998, has no business operations and was created for the express
purpose of acting as a holding company for NB LLC and NBMI.
The principal objective of the Exchange is to create a simpler
organizational structure and allow for the issuance of the Common Stock in the
Offerings. In the Exchange, the members of NB LLC will contribute all of their
interest in NB LLC to the Company in exchange for shares of Common Stock of the
Company, and a newly formed subsidiary of the Company will merge into NBMI, with
NBMI surviving the merger and the present shareholders of NBMI receiving shares
of Common Stock of the Company in exchange for their shares of common stock in
NBMI. Immediately following the Exchange, the members of NB LLC and the
shareholders of NBMI will be the sole stockholders of the Company, and the
Company will operate as a holding company and will indirectly own all the
entities that are presently owned by either NB LLC or NBMI. The Exchange will
not result in a change of control of either NB LLC or NBMI.
NB LLC, a Delaware limited liability company, is an investment adviser and
a securities broker-dealer. On November 1, 1996, Neuberger & Berman, L.P., a New
York limited partnership, converted to a Delaware limited liability company and,
immediately thereafter, ceased doing business as a broker-dealer and investment
adviser and was dissolved. NB LLC, the successor limited liability company, was
organized under the name Neuberger & Berman, LLC. As a result of the conversion,
NB LLC assumed all of Neuberger & Berman, L.P.'s existing obligations, assets
and liabilities and succeeded to all of its existing rights. The conversion did
not result in any changes in the ownership, management, or business operations
of the firm, or in any change of control.
The Company has agreed to indemnify the Management Stockholders for losses
resulting from acts or omissions of such party, or from any such party's status,
as a member of NB LLC or shareholder of NBMI prior to the Exchange.
Prior to the closing of the Offerings, NB LLC will distribute, on a pro
rata basis, $50 million as a return of capital to its members who will in turn
contribute such amount to NB Associates, LLC ("NB Associates"), a newly formed
Delaware limited liability company owned by them in the same proportions as NB
LLC. NB Associates will then lend this amount to NB LLC in exchange for NB LLC's
$50 million subordinated promissory note (the "Subordinated Note" and such
transaction, the "Subordinated Note Transaction"). NB LLC will be required to
repay the Subordinated Note on a date that is one year and a day after the date
of issuance, unless extended, together with interest on the unpaid principal
amount, payable quarterly at a rate of 6.75% per annum. The loan will be made,
and the Subordinated Note issued, pursuant to a Subordinated Loan Agreement
approved by the NYSE and thus will be available to NB LLC in computing net
capital under the SEC's net capital rule (Rule 15c3-1). Under the Subordinated
Loan Agreement, NB LLC's obligation to repay the principal amount of the
Subordinated Note may be suspended if, at any time, NB LLC fails to meet
applicable net capital requirements imposed by the NYSE.
60
<PAGE> 62
STOCKHOLDERS AGREEMENT
The Company, the former members of NB LLC and shareholders of NBMI (the
"Principals") and certain family limited partnerships and trusts formed by them
(the "Family Affiliates") have entered into the Stockholders Agreement, to
become effective upon the closing of the Exchange, that will govern transfers
and voting in respect of the shares of Common Stock to be received by the
Principals and Family Affiliates as a result of the Exchange (the "Management
Shares"). In addition, the Company will require certain employees to whom it
expects to make stock awards at, or shortly after, the Offerings to become party
to the Stockholders Agreement as a condition to such awards.
TRANSFER RESTRICTIONS
The Stockholders Agreement prohibits any transfers of Management Shares by
the Principals or their Family Affiliates prior to January 1, 2001, with limited
exceptions for certain persons who became Principals within twelve months prior
to the closing of the Offerings. Thereafter, the Principals and their Family
Affiliates may transfer their Management Shares only as follows:
(a) In each calendar year beginning on January 1, 2001, each Principal
and his or her Family Affiliates may transfer in the aggregate up to 10% of
the aggregate number of Management Shares initially received by them in the
Exchange. Management Shares eligible to be transferred in any calendar year
but not transferred may be transferred at any time thereafter without
restriction. Notwithstanding the preceding two sentences, during the 36
month period following the date on which a Principal's employment with the
Company terminates (the "Employment Termination Date"), such Principal and
his or her Family Affiliates may not transfer any Management Shares other
than Management Shares that were eligible to be transferred but were not
transferred before the Employment Termination Date.
(b) Notwithstanding paragraph (a) at all times prior to the third
anniversary of the Employment Termination Date, such Principal and his or
her Family Affiliates must continue to hold at least 20% of the aggregate
number of Management Shares initially received by them in the Exchange.
Notwithstanding paragraphs (a) and (b) above, if a Principal's Employment
Termination Date occurs prior to January 1, 2002 for any reason other than
death, disability or termination by the Company without cause, such Principal
and his or her Family Affiliates may not transfer any Management Shares prior to
January 1, 2006. On and after January 1, 2006, such Principal and Family
Affiliates may in any calendar year transfer in the aggregate a maximum of 20%
of the aggregate amount of Management Shares held by them on the Principal's
Employment Termination Date. The number of Management Shares eligible for
transfer in any one calendar year but not transferred may be added to the number
otherwise eligible to be transferred in any future year.
Notwithstanding the foregoing, if a Principal's employment with the Company
terminates due to disability or death, the Principal (or his or her estate) and
his or her Family Affiliates may transfer their Management Shares without
restriction. In addition, the Board of Directors of the Company or a body
designated by the Board of Directors (the "Committee") has the authority to make
exceptions to any or all of the transfer restrictions contained in the
Stockholders Agreement and may permit or cause other persons to become party to
the agreement.
VOTING
The Stockholders Agreement provides that before any vote of the
stockholders of the Company, a preliminary vote will be taken at which the
Principals and Family Affiliates (and any additional stockholders who have
agreed with the Company to vote their Common Stock in accordance with the
Stockholders Agreement) may vote all of the shares currently owned by them in
such manner as each may determine in his, her or its sole discretion. The
Principals and Family
61
<PAGE> 63
Affiliates must then vote all of their Management Shares in accordance with the
vote of the majority of the Management Shares (and shares held by any such
additional stockholders) present (in person or by proxy) and voting in such
preliminary vote. Each Principal and Family Affiliate will grant to the
Secretary of the Company (or other officer designated by the Secretary) an
irrevocable proxy to vote his, her or its Management Shares in order to give
effect to the voting provisions. The right and obligation of a Principal and his
or her Family Affiliates to vote in accordance with the Stockholders Agreement
will terminate on such Principal's Employment Termination Date.
CALL RIGHT
The Stockholders Agreement provides that if a Principal separates from the
Company for any reason other than disability or death and, within three years of
the Principal's Employment Termination Date, the Committee determines in good
faith that the Principal has engaged in Harmful Conduct (as defined in the
Stockholders Agreement), the Company has the right to purchase from the
Principal a number of Management Shares equal to the excess of the number of
Management Shares received by such Principal and his or her Family Affiliates
through the Exchange over the number of Management Shares that could have been
transferred by such Principal and Family Affiliates prior to the date on which
such Principal initially engaged in Harmful Conduct. To the extent the Principal
does not hold sufficient shares of Common Stock to satisfy the foregoing
obligation, the Company may purchase Management Shares from such Principal's
Family Affiliates pro rata in accordance with their current holdings of such
shares. The purchase price of any Management Shares so purchased will equal
$1.75 per share.
TRANSFER ADMINISTRATION AND DISTRIBUTIONS
The certificates representing the Management Shares held by each Principal
and Family Affiliate will be registered in the name of the Company or its
nominee and held in the custody of the Company at its principal office.
AMENDMENTS AND TERM
The Stockholders Agreement may be amended by the Committee, provided that
any amendment that materially adversely affects the Principals or Family
Affiliates (or any group of Principals or Family Affiliates) (other than any
amendment to cure any ambiguity in the Agreement) must be approved by the
Principals and Family Affiliates holding a majority of the Management Shares
then subject to the agreement. The agreement will terminate on the earlier to
occur of (i) the first date on which there are no Principals or Family
Affiliates who remain bound by its terms and (ii) the date on which the Company,
Principals and Family Affiliates who are then bound by its terms agree to
terminate the agreement.
62
<PAGE> 64
SELLING STOCKHOLDERS
The following table furnishes certain information, as provided to the
Company by the Selling Stockholders, with respect to the Selling Stockholders
and their beneficial ownership of the Common Stock after giving effect to the
Exchange and as adjusted to reflect the sale of the Common Stock in the
Offerings. Except as set forth in the footnotes to the table, each stockholder
listed below has informed the Company that such stockholder has record and
beneficial ownership as well as sole voting and investment power with respect to
such stockholder's shares of Common Stock. The sale by the Selling Stockholders
in the Offerings will not result in a change of control of the Company.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED SHARES BENEFICIALLY OWNED
PRIOR TO THE OFFERINGS(1)(2) NUMBER OF AFTER THE OFFERINGS(1)(2)
---------------------------- SHARES BEING -------------------------
NAME OF BENEFICIAL OWNER(3) NUMBER PERCENT OFFERED(1) NUMBER PERCENT
- --------------------------- ------ ------- ------------ ------ -------
<S> <C> <C> <C> <C> <C>
Herbert W. Ackerman(4)..... 862,081 * %
Robert J. Appel(5)......... 4,870,839 5.1%
Howard R. Berlin(6)........ 1,887,961 2.0
Jeffrey Bolton(7).......... 1,125,945 1.2
Richard A. Cantor(8)....... 3,592,005 3.7
Vincent T. Cavallo(9)...... 862,081 *
Salvatore D'Elia........... 336,442 *
Stanley Egener(10)......... 2,990,101 3.1
Michael N. Emmerman........ 945,432 *
Robert English............. 908,176 *
Jack M. Ferraro............ 641,769 *
Gregory P. Francfort(11)... 934,596 *
Howard L. Ganek(12)........ 2,815,189 2.9
Robert Gendelman........... 1,281,483 1.3
Theodore Giuliano(13)...... 937,748 *
Mark R. Goldstein(14)...... 720,000 *
Lee H. Idleman............. 1,362,312 1.4
Alan L. Jacobs............. 911,302 *
Kenneth Kahn............... 207,646 *
Michael W. Kamen(15)....... 702,738 *
Michael M. Kassen(16)...... 2,991,198 3.1
Mark P. Kleiman............ 1,231,153 1.3
Lee P. Klingenstein(17).... 528,842 *
Irwin Lainoff(18).......... 2,198,409 2.3
Joseph Lasser(19).......... 641,769 *
Richard Levine............. 649,118 *
Christopher J. Lockwood.... 1,492,963 1.6
Lawrence Marx III(20)...... 3,084,198 3.2
Robert R. McComsey......... 1,436,738 1.5
Martin McKerrow(21)........ 680,020 *
Martin E. Messinger(22).... 2,198,409 2.3
Beth W. Nelson............. 2,359,215 2.5
Roy R. Neuberger(23)....... 178,968 *
Harold J. Newman(24)....... 977,870 1.0
Daniel P. Paduano(25)...... 1,887,965 2.0
Norman H. Pessin........... 590,888 *
Leslie M. Pollack(26)...... 1,337,132 1.4
</TABLE>
63
<PAGE> 65
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED SHARES BENEFICIALLY OWNED
PRIOR TO THE OFFERINGS(1)(2) NUMBER OF AFTER THE OFFERINGS(1)(2)
---------------------------- SHARES BEING -------------------------
NAME OF BENEFICIAL OWNER(3) NUMBER PERCENT OFFERED(1) NUMBER PERCENT
- --------------------------- ------ ------- ------------ ------ -------
<S> <C> <C> <C> <C> <C>
William A. Potter(27)...... 574,721 *
Janet W. Prindle........... 1,953,838 2.0
C. Carl Randolph........... 472,171 *
Kevin L. Risen............. 715,023 *
Daniel H. Rosenblatt....... 270,558 *
J. Curt Schnackenberg...... 411,772 *
Marvin C. Schwartz(28)..... 13,570,704 14.1
Jennifer Silver............ 644,327 *
Kent C. Simons............. 4,136,509 4.3
R. Edward Spilka(29)....... 868,937 *
Gloria Spivak.............. 391,309 *
Heidi S. Steiger(30)....... 1,240,355 1.3
Bernard Z. Stein........... 309,691 *
Fred Stein................. 934,919 *
Eleanor M. Sterne.......... 859,923 *
Stephanie Stiefel(31)...... 291,161 *
Philip A. Straus........... 178,969 *
Peter Strauss.............. 326,455 *
The Strauss 1998 Trust..... 658,695 *
Peter Sundman(32).......... 539,939 *
Allan D. Sutton(33)........ 532,094 *
Sutton 1998 GST Trust...... 37,042 *
Richard J. Sweetnam,
Jr. ..................... 523,696 *
Judith M. Vale............. 2,757,296 2.9
David Weiner(34)........... 713,947 *
Dietrich Weismann(35)...... 4,797,990 4.9
Lawrence Zicklin(36)....... 3,927,258 4.1
</TABLE>
- ---------------
* Less than 1%.
(1) Beneficial ownership is determined in accordance with Rule 13d-3 of the
SEC.
(2) Does not include shares of Common Stock expected to be
outstanding at, or shortly after, the time of the Offerings after giving
effect to expected employee stock awards and contributions of shares by the
Company to the Defined Contribution Stock Plan and expected contributions
of shares by the Management Stockholders to the Company. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Subsequent Events". In addition, shares of Common Stock will be
reserved for issuance under the LTIP and shares of Common Stock
will be reserved for issuance under the Directors Plan. See
"Management -- Compensation of Directors -- Directors Stock Incentive
Plan", "-- Executive Compensation -- Long-Term Incentive Plan" and
"-- Defined Contribution Stock Incentive Plan".
(3) Pursuant to the Stockholders Agreement, the Company or its nominee is the
record holder for the Selling Stockholders.
(4) Includes (a) prior to the Offerings, 639,037 shares held by Herbert W.
Ackerman Associates, L.P., with respect to which Mr. Ackerman has sole
voting and investment control as the sole stockholder of its sole general
partner, (b) shares offered by Herbert W. Ackerman Associates,
L.P. in the Offerings and (c) after the Offerings, shares held by
Herbert W. Ackerman Associates, L.P.
64
<PAGE> 66
(5) Includes (a) prior to the Offerings, 457,657 shares held by Appel
Associates, L.P., with respect to which Mr. Appel has sole voting and
investment control as the sole stockholder of its sole general partner, (b)
shares offered by Appel Associates, L.P. in the Offerings and (c)
after the Offerings, shares held by Appel Associates, L.P.
(6) Includes (a) prior to the Offerings, 948,279 shares held by Berlin
Associates, L.P., with respect to which Mr. Berlin has sole voting and
investment control as the sole stockholder of its sole general partner, (b)
shares offered by Berlin Associates, L.P. in the Offerings and
(c) after the Offerings, shares held by Berlin Associates, L.P.
(7) Includes (a) prior to the Offerings, 228,260 shares held by Bolton
Associates, L.P., with respect to which Mr. Bolton has sole voting and
investment control as the sole stockholder of its sole general partner, (b)
shares offered by Bolton Associates, L.P. in the Offerings and
(c) after the Offerings, shares held by Bolton Associates, L.P.
(8) Includes (a) prior to the Offerings, 2,665,360 shares held by Cantor
Associates, L.P., with respect to which Mr. Cantor has sole voting and
investment control as the sole stockholder of its sole general partner, (b)
shares offered by Cantor Associates, L.P. in the Offerings and
(c) after the Offerings, shares held by Cantor Associates, L.P.
(9) Includes (a) prior to the Offerings, 639,037 shares held by Cavallo
Associates, L.P., with respect to which Mr. Cavallo has sole voting and
investment control as the sole stockholder of its sole general partner, (b)
shares offered by Cavallo Associates, L.P. in the Offerings and
(c) after the Offerings, shares held by Cavallo Associates, L.P.
(10) Includes (a) prior to the Offerings, 762,166 shares held by Egener
Associates, L.P., with respect to which Mr. Egener has sole voting and
investment control as the sole stockholder of its sole general partner, (b)
shares offered by Egener Associates, L.P. in the Offerings and
(c) after the Offerings, shares held by Egener Associates, L.P.
(11) Includes (a) prior to the Offerings, 276,386 shares held by Francfort 1998
Grantor Retained Annuity Trust, with respect to which Mr. Francfort has
sole voting and investment control as trustee, (b) shares offered
by Francfort 1998 Grantor Retained Annuity Trust in the Offerings and (c)
after the Offerings, shares held by Francfort 1998 Grantor
Retained Annuity Trust.
(12) Includes (a) prior to the Offerings, 263,853 shares held by Ganek
Associates, L.P., with respect to which Mr. Ganek has sole voting and
investment control as the sole stockholder of its sole general partner, (b)
shares offered by Ganek Associates, L.P. in the Offerings and (c)
after the Offerings, shares held by Ganek Associates, L.P.
(13) Includes (a) prior to the Offerings, 147,578 shares held by Giuliano
Associates, L.P., with respect to which Mr. Giuliano has sole voting and
investment control as the sole stockholder of its sole general partner, (b)
shares offered by Giuliano Associates, L.P. in the Offerings and
(c) after the Offerings, shares held by Giuliano Associates, L.P.
(14) Includes (a) prior to the Offerings, 131,767 shares held by Goldstein
Associates, L.P., with respect to which Mr. Goldstein has sole voting and
investment control as the sole stockholder of its sole general partner, (b)
shares offered by Goldstein Associates, L.P. in the Offerings and
(c) after the Offerings, shares held by Goldstein Associates,
L.P.
(15) Includes (a) prior to the Offerings, 120,271 shares held by Kamen
Associates, L.P., with respect to which Mr. Kamen has sole voting and
investment control as the sole stockholder of its sole general partner, (b)
shares offered by Kamen Associates, L.P. in the Offerings and (c)
after the Offerings, shares held by Kamen Associates, L.P.
(16) Includes (a) prior to the Offerings, 819,111 shares held by Kassen
Associates, L.P., with respect to which Mr. Kassen has sole voting and
investment control as the sole stockholder of its sole general partner, (b)
shares offered by Kassen Associates, L.P. in the Offerings and
(c) after the Offerings, shares held by Kassen Associates, L.P.
65
<PAGE> 67
(17) Includes (a) prior to the Offerings, 354,462 shares held by Klingenstein
Associates, L.P., with respect to which Mr. Klingenstein has sole voting
and investment control as the sole stockholder of its sole general partner,
(b) shares offered by Klingenstein Associates, L.P. in the
Offerings and (c) after the Offerings, shares held by
Klingenstein Associates, L.P.
(18) Includes (a) prior to the Offerings, 442,967 shares held by Lainoff
Associates, L.P., with respect to which Mr. Lainoff has sole voting and
investment control as the sole stockholder of its sole general partner, (b)
shares offered by Lainoff Associates, L.P. in the Offerings and
(c) after the Offerings, shares held by Lainoff Associates, L.P.
(19) Includes (a) prior to the Offerings, 414,837 shares held by Lasser
Associates, L.P., with respect to which Mr. Lasser has sole voting and
investment control as the sole stockholder of its sole general partner, (b)
shares offered by Lasser Associates, L.P. in the Offerings and
(c) after the Offerings, shares held by Lasser Associates, L.P.
(20) Includes (a) prior to the Offerings, 1,273,247 shares held by Lawrence Marx
III Associates, L.P., with respect to Mr. Marx has sole voting and
investment control as the sole stockholder of its sole general partner, (b)
shares offered by Lawrence Marx III Associates, L.P. in the
Offerings and (c) after the Offerings, shares held by Lawrence
Marx III Associates, L.P.
(21) Includes (a) prior to the Offerings, 106,926 shares held by McKerrow
Associates, L.P., with respect to which Mr. McKerrow has sole voting and
investment control as the sole stockholder of its sole general partner, (b)
shares offered by McKerrow Associates, L.P. in the Offerings and
(c) after the Offerings, shares held by McKerrow Associates, L.P.
(22) Includes (a) prior to the Offerings, 1,060,442 shares held by Messinger
Associates, L.P., with respect to which Mr. Messinger has sole voting and
investment control as the sole stockholder of its sole general partner, (b)
shares offered by Messinger Associates, L.P. in the Offerings and
(c) after the Offerings, shares held by Messinger Associates,
L.P.
(23) Includes (a) prior to the Offerings, 176,940 shares held by Neuberger
Associates, L.P., with respect to which Mr. Neuberger has sole voting and
investment control as the sole stockholder of its sole general partner, (b)
shares offered by Neuberger Associates, L.P. in the Offerings and
(c) after the Offerings, shares held by Neuberger Associates,
L.P.
(24) Includes (a) prior to the Offerings, 343,402 shares held by Newman
Associates, L.P., with respect to which Mr. Newman has sole voting and
investment control as the sole stockholder of its sole general partner, (b)
shares offered by Newman Associates, L.P. in the Offerings and
(c) after the Offerings, shares held by Newman Associates, L.P.
(25) Includes (a) prior to the Offerings, 1,354,688 shares held by Paduano
Associates, L.P., with respect to which Mr. Paduano has sole voting and
investment control as the sole stockholder of its sole general partner, (b)
shares offered by Paduano Associates, L.P. in the Offerings and
(c) after the Offerings, shares held by Paduano Associates, L.P.
(26) Includes (a) prior to the Offerings, 650,350 shares held by Pollack 1998
Grantor Retained Annuity Trust, with respect to which Mr. Pollack has sole
voting and investment control as trustee, (b) shares offered by
Pollack 1998 Grantor Retained Annuity Trust in the Offerings and (c) after
the Offerings, shares held by Pollack 1998 Grantor Retained
Annuity Trust.
(27) Includes (a) prior to the Offerings, 153,612 shares held by Potter
Associates, L.P., with respect to which Mr. Potter has sole voting and
investment control as the sole stockholder of its sole general partner, (b)
shares offered by Potter Associates, L.P. in the Offerings and
(c) after the Offerings, shares held by Potter Associates, L.P.
66
<PAGE> 68
(28) Includes (a) prior to the Offerings, 5,261,559 shares held by Schwartz CS
Associates, L.P. and 5,261,558 shares held by Schwartz ES Associates, L.P.,
with respect to which Mr. Schwartz has sole voting and investment control
as the sole stockholder of their sole general partners, (b)
shares offered by Schwartz CS Associates, L.P. and shares offered
by Schwartz ES Associates, L.P., in the Offerings and (c) after the
Offerings, shares held by Schwartz CS Associates, L.P. and
shares held by Schwartz ES Associates, L.P.
(29) Includes (a) prior to the Offerings, 157,934 shares held by Robert Edward
Spilka 1998 Grantor Retained Annuity Trust, with respect to which Mr.
Spilka has sole voting and investment control as trustee, (b)
shares offered by Robert Edward Spilka 1998 Grantor Retained Annuity Trust
in the Offerings and (c) after the Offerings, shares held by
Robert Edward Spilka 1998 Grantor Retained Annuity Trust.
(30) Includes (a) prior to the Offerings, 129,467 shares held by Steiger
Associates, L.P., with respect to which Ms. Steiger has sole voting and
investment control as the sole stockholder of its sole general partner, (b)
shares offered by Steiger Associates, L.P. in the Offerings and
(c) after the Offerings, shares held by Steiger Associates, L.P.
(31) Includes (a) prior to the Offerings, 27,697 shares held by Stiefel
Associates, L.P., with respect to which Ms. Stiefel has sole voting and
investment control as the sole stockholder of its sole general partner, (b)
shares offered by Stiefel Associates, L.P. in the Offerings and
(c) after the Offerings, shares held by Stiefel Associates, L.P.
(32) Includes (a) prior to the Offerings, 248,679 shares held by Sundman
Associates, L.P., with respect to which Mr. Sundman has sole voting and
investment control as the sole stockholder of its sole general partner, (b)
shares offered by Sundman Associates, L.P. in the Offerings and
(c) after the Offerings, shares held by Sundman Associates, L.P.
(33) Includes (a) prior to the Offerings, 370,424 shares held by Allan D. Sutton
1998 Grantor Retained Annuity Trust, with respect to which Mr. Sutton has
sole voting and investment control as trustee, (b) shares offered
by Allan D. Sutton 1998 Grantor Retained Annuity Trust in the Offerings and
(c) after the Offerings, shares held by Allan D. Sutton 1998
Grantor Retained Annuity Trust.
(34) Includes (a) prior to the Offerings, 95,230 shares held by Weiner 1998
Grantor Retained Annuity Trust, with respect to which Mr. Weiner has sole
voting and investment control as trustee, (b) shares offered by
Weiner Associates, L.P. in the Offerings and (c) after the Offerings,
shares held by Weiner Associates, L.P.
(35) Includes (a) prior to the Offerings, 1,987,025 shares held by Weismann
Associates, L.P., with respect to which Mr. Weismann has sole voting and
investment control as the sole stockholder of its sole general partner, (b)
shares offered by Weismann Associates, L.P. in the Offerings and
(c) after the Offerings, shares held by Weismann Associates, L.P.
(36) Includes (a) prior to the Offerings, 1,748,054 shares held by Zicklin
Associates, L.P., with respect to which Mr. Zicklin has sole voting and
investment control as the sole stockholder of its sole general partner, (b)
shares offered by Zicklin Associates, L.P. in the Offerings and
(c) after the Offerings, shares held by Zicklin Associates, L.P.
67
<PAGE> 69
DESCRIPTION OF CAPITAL STOCK
The following description of the Company's capital stock does not purport
to be complete and is qualified in its entirety by reference to applicable
Delaware law and to the provisions of the Company's Certificate of Incorporation
and By-Laws. Copies of the Certificate of Incorporation and By-Laws have been
filed as exhibits to the Registration Statement of which this Prospectus forms a
part.
The Company's authorized capital stock consists of 250,000,000 shares of
Common Stock, par value $.01 per share, and 5,000,000 shares of Preferred Stock,
par value $.01 per share.
COMMON STOCK
On a pro forma basis after giving effect to the Exchange, there were
96,000,000 shares of Common Stock outstanding held of record by one stockholder
as nominee for the Management Stockholders under the Stockholders Agreement.
VOTING RIGHTS. Each holder of shares of Common Stock is entitled to one
vote per share on all matters to be voted on by stockholders. Holders of Common
Stock are not entitled to cumulative voting rights in the election of directors.
DIVIDEND RIGHTS. The holders of Common Stock are entitled to dividends and
other distributions if, as and when declared by the Board out of assets legally
available therefor, subject to the rights of any holder of preferred stock,
restrictions set forth in the Company's credit facilities and restrictions, if
any, imposed by other indebtedness outstanding from time to time. See "Dividend
Policy" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Capital Resources and Liquidity".
OTHER RIGHTS. Upon the liquidation, dissolution or winding up of the
Company, the holders of shares of Common Stock would be entitled to share pro
rata in the distribution of all of the Company's assets remaining available for
distribution after satisfaction of all its liabilities and the payment of the
liquidation preference of any outstanding preferred stock. The holders of Common
Stock have no preemptive or other subscription rights to purchase shares of the
Company, nor are they entitled to the benefits of any sinking fund provisions.
No share of Common Stock issued in connection with or outstanding prior to the
Offerings is subject to any further call or assessment.
PREFERRED STOCK
The Company's Certificate of Incorporation authorizes 5,000,000 shares of
Preferred Stock, none of which are outstanding. The Board has the authority to
issue shares of Preferred Stock in one or more series and to fix the rights,
preferences, privileges and restrictions granted to or imposed upon any unissued
shares of Preferred Stock and to fix the number of shares constituting any
series and the designations of such series, without any further vote or action
by the stockholders. The Company has no present plans to issue any of the
Preferred Stock.
CERTAIN EFFECTS OF AUTHORIZED BUT UNISSUED STOCK
The Company believes that the ability of the Board to issue one or more
series of Preferred Stock will provide the Company with flexibility in
structuring possible future acquisitions and in meeting other corporate needs
that might arise. The Board, without stockholder approval, can issue Preferred
Stock with voting and conversion rights which could adversely affect the voting
power of the holders of Common Stock. Although the Board has no current
intention of doing so, it could issue one or more series of Preferred Stock that
could, depending on the terms of such series, impede the completion of a merger,
tender offer or other takeover attempt. The Board will make any determination to
issue such shares based on its judgment as to the best interests of the Company
and its stockholders. The Board, in so acting, could issue Preferred Stock
having terms that could discourage a potential acquiror from making, without
first negotiating with the Board, an acquisition
68
<PAGE> 70
attempt through which such acquiror may be able to change the composition of the
Board, including a tender offer or other transaction that some, or a majority,
of the Company's 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 such stock.
ANTI-TAKEOVER PROVISIONS OF THE CERTIFICATE OF INCORPORATION AND BY-LAWS
Certain provisions of the Company's Certificate of Incorporation and
By-Laws, applicable law and the Stockholders Agreement could make the
acquisition of the Company by means of a tender offer, a proxy contest or
otherwise more difficult. As described above, the Company's Certificate of
Incorporation authorizes the Board of Directors to designate and issue Preferred
Stock. Other provisions in the Certificate of Incorporation and in the By-Laws
impose procedural and other requirements that may be deemed to have
anti-takeover effects. These provisions include the inability of the
stockholders to take any action without a meeting or to call special meetings of
stockholders, certain advance notice procedures for nominating candidates for
election as directors and for submitting proposals for consideration at
stockholders' meetings, and limitations on the ability to remove directors.
Further, stockholders can amend the By-Laws and certain provisions of the
Certificate of Incorporation only with a two-thirds majority vote. Additionally,
the Stockholders Agreement requires all Management Stockholders to vote their
shares, together with certain employees who acquire Common Stock after the
Offerings, in accordance with a preliminary vote conducted solely among such
stockholders.
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW
The Company is subject to Section 203 of the DGCL, which prohibits a public
Delaware corporation from engaging in a "business combination" with an
"interested stockholder" for a period of three years after the date of the
transaction in which such person became an interested stockholder unless: (i)
prior to such date, the Board approved either the business combination or the
transaction which resulted in the stockholder becoming an interested
stockholder; or (ii) upon becoming an interested stockholder, the stockholder
then owned at least 85% of the voting stock, as defined in Section 203; or (iii)
subsequent to such date, the business combination is approved by both the Board
and by holders of at least 66 2/3% of the corporation's outstanding voting
stock, excluding shares owned by the interested stockholder. For these purposes,
the term "business combination" includes mergers, asset sales and other similar
transactions with an "interested stockholder". An "interested stockholder" is a
person who, together with affiliates and associates, owns (or, within the prior
three years, did own) 15% or more of the corporation's voting stock.
TRANSFER AGENT AND REGISTRAR
has been appointed as the transfer agent and registrar for
the shares of Common Stock.
69
<PAGE> 71
SHARES ELIGIBLE FOR FUTURE SALE
After completion of the Offerings, the Company will have shares
of Common Stock outstanding. Of these shares, the shares of Common
Stock sold in the Offerings ( shares if the Underwriters'
over-allotment options are exercised in full) will be freely transferable
without restriction under the Securities Act, except by persons who may be
deemed to be "affiliates" of the Company, as that term is defined in Rule 144
under the Securities Act. All the remaining shares of Common Stock ("Restricted
Shares") may not be sold unless they are registered under the Securities Act or
are sold pursuant to an exemption from registration, including an exemption
contained in Rule 144 under the Securities Act.
In general, under Rule 144, if one year has elapsed since the Restricted
Shares have been acquired from the Company or from an affiliate of the Company
(whichever is later), the holder of such Restricted Shares, including for this
purpose persons who may be deemed "affiliates" of the Company whether or not
they hold Restricted Shares, would be entitled to sell, within any three-month
period, up to a number of Restricted Shares that does not exceed the greater of
(1) 1% of the then outstanding shares of Common Stock (approximately
shares immediately after the Offerings assuming that the Underwriters'
over-allotment options are exercised in full) and (2) the average weekly trading
volume of the Common Stock on the NYSE during the four calendar weeks preceding
the date on which notice of the sale is filed with the SEC. Sales under Rule 144
are subject to certain restrictions relating to manner of sale, notice and the
availability of current public information about the Company and may be effected
only through unsolicited brokers' transactions. A person who is not deemed an
"affiliate" of the Company at any time during the 90 days preceding a sale would
(but for the Stockholders Agreement described above and the "lock-up"
arrangements described below) be entitled to sell such Restricted Shares under
Rule 144 without regard to the volume or other limitations described above,
provided that two years have elapsed since such Restricted Shares were acquired
from the Company or an affiliate of the Company.
The Company and the Selling Stockholders have agreed that, during the
period beginning from the date of this Prospectus and continuing to and
including the date 180 days after the date of the Prospectus, they will not,
directly or indirectly, offer, sell, contract to sell or otherwise dispose of
any shares of Common Stock or any securities of the Company which are
substantially similar to the shares of the Common Stock or which are convertible
into or exchangeable for securities which are substantially similar to the
shares of Common Stock (other than, in the case of the Company, pursuant to
existing employee stock option plans) without the prior written consent of the
representatives of the Underwriters, except for the shares of Common Stock
offered in connection with the Offerings. In addition, the Stockholders
Agreement places significant restrictions on the transfer of shares of Common
Stock by the Management Stockholders. See "Stockholders Agreement".
Prior to the Offerings, there has been no public market for the Common
Stock and no prediction can be made as to the effect, if any, that market sales
of Restricted Shares or the availability of such Restricted Shares for such
sales will have on the market price of the Common Stock prevailing from time to
time. Nevertheless, sales of substantial amounts of Common Stock, or the
perception that such sales could occur, could adversely affect prevailing market
prices for the Common Stock and could impair the Company's future ability to
raise capital through an offering of its equity securities. See "Risk
Factors -- Shares Eligible for Future Sale".
70
<PAGE> 72
VALIDITY OF SHARES
The validity of the shares of Common Stock will be passed upon for the
Company and the Selling Stockholders by Debevoise & Plimpton, New York, New York
and for the Underwriters by Sullivan & Cromwell, New York, New York.
EXPERTS
The audited financial statements of the Company included in this Prospectus
have been audited by Arthur Andersen LLP, independent public accountants, to the
extent and for the periods indicated in their report, and are included herein in
reliance upon the authority of said firm as experts in accounting and auditing
in giving said report.
71
<PAGE> 73
INDEX TO COMBINED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
NEUBERGER BERMAN INC. AND SUBSIDIARIES
Pro Forma Combined Financial Statements (unaudited)......... F-2
Pro Forma Combined Statement of Financial Condition as of
June 26, 1998 (unaudited)................................. F-3
Pro Forma Combined Statement of Income for the Six Months
Ended June 26, 1998 (unaudited)........................... F-4
Pro Forma Combined Statement of Income for the Year Ended
December 31, 1997 (unaudited)............................. F-5
Notes to Pro Forma Combined Financial Statements
(unaudited)............................................... F-6
NEUBERGER & BERMAN, LLC AND NEUBERGER & BERMAN MANAGEMENT
INCORPORATED
Report of Independent Public Accountants.................... F-7
Combined Statements of Financial Condition as of June 26,
1998 (unaudited) and as of December 31, 1997 and 1996
(audited)................................................. F-8
Combined Statements of Income for the Six Months Ended June
26, 1998 and June 27, 1997 (unaudited) and the Years Ended
December 31, 1997, 1996 and 1995 (audited)................ F-9
Combined Statements of Changes in Principals' Capital and
Stockholders' Equity for the Six Months Ended June 26,
1998 (unaudited) and the Years Ended December 31, 1997,
1996 and 1995 (audited)................................... F-10
Combined Statements of Cash Flows for the Six Months Ended
June 26, 1998 and June 27, 1997 (unaudited) and the Years
Ended December 31, 1997, 1996 and 1995 (audited).......... F-11
Notes to Combined Financial Statements...................... F-12
</TABLE>
F-1
<PAGE> 74
PRO FORMA COMBINED FINANCIAL STATEMENTS (UNAUDITED)
The following Pro Forma Combined Financial Statements are based on the
historical Combined Financial Statements of Neuberger & Berman, LLC ("NB LLC")
and Neuberger & Berman Management Incorporated ("NBMI") (collectively, the
"Company") after giving effect to the Exchange and the Subordinated Note
Transaction. See "The Exchange and the Subordinated Note Transaction". The Pro
Forma Combined Statements of Income for the six months ended June 26, 1998 and
the year ended December 31, 1997 present the results of the Company as if the
Exchange and the Subordinated Note Transaction had occurred on January 1, 1997
and the Subordinated Note had remained outstanding through June 26, 1998. The
Pro Forma Combined Statement of Financial Condition presents the results of the
Company as if the Exchange and the Subordinated Note Transaction had occurred on
June 26, 1998. The pro forma adjustments are described in the accompanying Notes
to Pro Forma Combined Financial Statements. The Pro Forma Combined Financial
Statements do not give effect to the Offerings or Common Stock transactions
expected to occur after the Offerings. See Note 8 in the Notes to Pro Forma
Combined Financial Statements.
The historical Combined Financial Statements present the financial
condition and results of operations of NB LLC and NBMI on a combined basis, at
historical cost, as the entities operate under common management and there is a
high degree of common ownership. The entities will be consolidated upon the
Exchange as the principals and stockholders of NB LLC and NBMI, respectively
(collectively, the "principals"), will exchange their ownership interests in the
respective entities for 96 million shares of Common Stock in Neuberger Berman
Inc. ("NBI"). NB LLC and NBMI are not currently subject to Federal income taxes.
Following the Exchange, NBI, on a consolidated basis, will be subject to
Federal, state and local income taxes.
The Pro Forma Combined Financial Statements have been prepared by the
Company's management and are not necessarily indicative of the results that
would have been achieved had the Exchange and the Subordinated Note Transaction
occurred and the Subordinated Note been outstanding on the dates indicated or
that may be achieved in the future. The Pro Forma Combined Financial Statements
should be read in conjunction with the audited Combined Financial Statements of
the Company as of December 31, 1997 and 1996, the notes thereto, and the
unaudited Combined Financial Statements as of June 26, 1998 and June 27, 1997
and the notes thereto.
Prior to the Offerings, NB LLC will distribute $50 million as a return of
capital to its principals, on a pro rata basis, who will then contribute $50
million to a newly-organized Delaware limited liability company, NB Associates,
LLC ("NB Associates"), owned by the principals in the same proportion as NB LLC.
Concurrently, NB Associates will lend $50 million to NB LLC in the form of the
Subordinated Note payable by NB LLC to NB Associates one year and a day after
issuance, unless extended. Interest on the Subordinated Note will be payable
quarterly at a rate of 6.75% per annum. This transaction will result in the
Company returning capital to the principals without immediately reducing NB LLC
regulatory net capital.
F-2
<PAGE> 75
NEUBERGER BERMAN INC.
PRO FORMA COMBINED STATEMENT OF FINANCIAL CONDITION
(UNAUDITED)
AS OF JUNE 26, 1998
(000'S OMITTED)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA PRO FORMA
COMBINED ADJUSTMENTS COMBINED
---------- ----------- ---------
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents.................................. $ 58,314 $ -- $ 58,314
Cash and securities segregated for the exclusive benefit of
clients.................................................. 309,234 309,234
Cash and securities deposited with clearing
organizations............................................ 3,651 3,651
Securities purchased under agreements to resell............ 261,419 261,419
Receivable from brokers, dealers and clearing
organizations............................................ 1,500,663 1,500,663
Receivable from clients.................................... 583,204 583,204
Securities owned, at market value.......................... 8,812 8,812
Exchange memberships....................................... 346 346
Furniture, equipment and leasehold improvements, at cost,
net of accumulated depreciation and amortization of
$20,218.................................................. 24,548 24,548
Fees receivable............................................ 14,399 14,399
Other assets............................................... 10,479 10,479
---------- ---------- ----------
Total assets...................................... $2,775,069 $ -- $2,775,069
========== ========== ==========
LIABILITIES, PRINCIPALS' CAPITAL AND STOCKHOLDERS' EQUITY
Liabilities:
Bank loans............................................... $ 191,566 $ -- $ 191,566
Securities sold under agreements to repurchase........... 253,019 253,019
Payable to brokers, dealers and clearing organizations... 995,601 995,601
Payable to clients....................................... 1,007,612 1,007,612
Securities sold but not yet purchased, at market value... 70,516 70,516
Other liabilities and accrued expenses................... 41,468 41,468
Payable to principals.................................... 56,121 56,121
Subordinated debt........................................ -- 50,000(1) 50,000
---------- ---------- ----------
Total liabilities................................. 2,615,903 50,000 2,665,903
Principals' capital and stockholders' equity:
Principals' capital...................................... 150,000 (150,000)(2) --
Pro forma common stock, $.01 par value; 250,000 shares
authorized, 96,000 issued and outstanding.............. -- 960(2) 960
Paid-in-capital.......................................... 2,877 (50,000)(1)
149,040(2) 101,917
Retained earnings........................................ 6,289 -- 6,289
---------- ---------- ----------
Total principals' capital and stockholders'
equity.......................................... 159,166 (50,000) 109,166
---------- ---------- ----------
Total liabilities, principals' capital and
stockholders' equity............................ $2,775,069 $ -- $2,775,069
========== ========== ==========
</TABLE>
See Notes to Pro Forma Combined Financial Statements
F-3
<PAGE> 76
NEUBERGER BERMAN INC.
PRO FORMA COMBINED STATEMENT OF INCOME
(UNAUDITED)
SIX MONTHS ENDED JUNE 26, 1998
(000'S OMITTED, EXCEPT PER SHARE AMOUNT)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA PRO FORMA
COMBINED ADJUSTMENTS COMBINED
---------- ----------- ---------
<S> <C> <C> <C>
REVENUES:
Investment advisory and administrative fees............ $194,697 $ -- $194,697
Commissions............................................ 67,845 67,845
Interest............................................... 79,672 79,672
Clearance fees......................................... 4,886 4,886
Net gain on principal transactions in securities....... 3,168 3,168
Other income........................................... 1,874 1,874
-------- -------- --------
Gross revenues............................... 352,142 -- 352,142
Interest expense....................................... 66,095 1,688(3) 67,783
-------- -------- --------
Net revenues after interest expense.......... 286,047 (1,688) 284,359
-------- -------- --------
OPERATING EXPENSES:
Employee compensation and benefits..................... 64,474 64,474
Principal employee compensation and benefits........... -- 42,450(4) 42,450
Advertising and promotion.............................. 7,963 7,963
Information technology................................. 7,674 7,674
Rent and occupancy..................................... 5,375 5,375
Floor brokerage........................................ 3,972 3,972
Distributor expense.................................... 2,994 2,994
Fund administrative expenses........................... 2,627 2,627
Other expenses......................................... 20,696 (4,806)(5) 15,890
-------- -------- --------
Total operating expenses..................... 115,775 37,644 153,419
-------- -------- --------
Net income before principal compensation and
provision for income taxes................. 170,272 (39,332) 130,940
Principal compensation................................. 19,925 (19,925)(4) --
-------- -------- --------
Net income before provision for income
taxes...................................... 150,347 (19,407) 130,940
Provision for income taxes............................. -- 58,923(5) 58,923
-------- -------- --------
Net income................................... $150,347 $(78,330) $ 72,017
======== ======== ========
Pro forma weighted average shares outstanding.......... 96,000
========
Pro forma basic earnings per share(6).................. $ .75
========
</TABLE>
See Notes to Pro Forma Combined Financial Statements
F-4
<PAGE> 77
NEUBERGER BERMAN INC.
PRO FORMA COMBINED STATEMENT OF INCOME
(UNAUDITED)
YEAR ENDED DECEMBER 31, 1997
(000'S OMITTED, EXCEPT PER SHARE AMOUNT)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA PRO FORMA
COMBINED ADJUSTMENTS COMBINED
---------- ----------- ---------
<S> <C> <C> <C>
REVENUES:
Investment advisory and administrative fees.......... $327,191 $ -- $327,191
Commissions.......................................... 124,911 124,911
Interest............................................. 153,954 153,954
Clearance fees....................................... 8,332 8,332
Net gain on principal transactions in securities..... 7,838 7,838
Other income......................................... 4,353 4,353
-------- --------- --------
Gross revenues............................. 626,579 -- 626,579
Interest expense..................................... 124,530 3,375(3) 127,905
-------- --------- --------
Net revenues after interest expense........ 502,049 (3,375) 498,674
-------- --------- --------
OPERATING EXPENSES:
Employee compensation and benefits................... 112,840 112,840
Principal employee compensation and benefits......... -- 79,915(4) 79,915
Advertising and promotion............................ 14,722 14,722
Information technology............................... 13,503 13,503
Rent and occupancy................................... 9,761 9,761
Floor brokerage...................................... 9,198 9,198
Distributor expense.................................. 4,323 4,323
Fund administrative expenses......................... 4,205 4,205
Other expenses....................................... 34,832 (6,257)(5) 28,575
-------- --------- --------
Total operating expenses................... 203,384 73,658 277,042
-------- --------- --------
Net income before principal compensation
and provision for income taxes........... 298,665 (77,033) 221,632
Principal compensation............................... 33,685 (33,685)(4) --
-------- --------- --------
Net income before provision for income
taxes.................................... 264,980 (43,348) 221,632
-------- --------- --------
Provision for income taxes........................... -- 99,734(5) 99,734
-------- --------- --------
Net income................................. $264,980 $(143,082) $121,898
======== ========= ========
Pro forma weighted average shares outstanding........ 96,000
========
Pro forma basic earnings per share(6)................ $ 1.27
========
</TABLE>
See Notes to Pro Forma Combined Financial Statements
F-5
<PAGE> 78
NEUBERGER BERMAN INC.
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
1. To reflect pro rata distribution of capital to principals and issuance of the
Subordinated Note payable.
2. To reflect recapitalization for the Exchange.
3. To reflect interest expense on the Subordinated Note payable. For purposes of
the presentation, the Subordinated Note payable is assumed to be outstanding
through June 26, 1998.
4. To reflect compensation and benefits based on new employment policies for
principals and reverse actual compensation and benefits paid to principals.
See "Management -- Executive Compensation".
5. To reflect Federal, state and local income taxes at an estimated effective
tax rate of approximately 45% and reverse actual unincorporated business tax
and state and local taxes included in other expenses. The effective tax rate
for 1997 and 1998 reflects various state and local taxes and investment
income allocations.
6. Pro forma basic earnings per share was calculated by dividing pro forma net
income by 96,000,000 shares of Common Stock. It is not expected that there
will be any additional Common Stock or other dilutive Common Stock rights
issued prior to the Offerings.
7. No pro forma adjustments are required to the Pro Forma Combined Statement of
Financial Condition for the pro forma decrease in net income as the effect of
such decrease is assumed to equal the decrease in principal capital
distributions and dividends.
8. The Pro Forma Combined Financial Statements do not reflect the
shares of Common Stock expected to be outstanding at, or
shortly after, the time of the Offerings after giving effect to expected
employee stock awards and contributions of shares by the Company to the
Defined Contribution Plan and the expected contribution of shares by the
Management Stockholders to the Company. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Subsequent
Events".
F-6
<PAGE> 79
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Principals and Stockholders of Neuberger & Berman, LLC
and Neuberger & Berman Management Incorporated:
We have audited the accompanying combined statements of financial condition
of Neuberger & Berman, LLC and Neuberger & Berman Management Incorporated as of
December 31, 1997 and 1996 and the related combined statements of income,
changes in principals' capital and stockholders' equity, and cash flows for each
of the three years in the period ended December 31, 1997. These financial
statements are the responsibility of the Company'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 financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Neuberger & Berman, LLC and
Neuberger & Berman Management Incorporated as of December 31, 1997 and 1996, and
the results of their operations and their cash flows for each of the three years
in the period ended December 31, 1997 in conformity with generally accepted
accounting principles.
/s/ ARTHUR ANDERSEN LLP
- --------------------------------------
New York, New York
February 17, 1998
F-7
<PAGE> 80
NEUBERGER & BERMAN, LLC AND
NEUBERGER & BERMAN MANAGEMENT INCORPORATED
COMBINED STATEMENTS OF FINANCIAL CONDITION
(000'S OMITTED)
<TABLE>
<CAPTION>
DECEMBER 31,
JUNE 26, -----------------------
1998 1997 1996
-------- ---- ----
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents................................... $ 58,314 $ 103,099 $ 64,353
Cash and securities segregated for the exclusive benefit of
clients................................................... 309,234 220,062 132,004
Cash and securities deposited with clearing organizations... 3,651 3,628 3,155
Securities purchased under agreements to resell............. 261,419 284,435 76,264
Receivable from brokers, dealers and clearing
organizations............................................. 1,500,663 1,185,719 1,643,669
Receivable from clients..................................... 583,204 539,627 468,548
Securities owned, at market value........................... 8,812 6,238 3,882
Exchange memberships........................................ 346 288 272
Furniture, equipment and leasehold improvements, at cost,
net of accumulated depreciation and amortization of
$20,218, $19,654 and $15,102 at June 26, 1998, December
31, 1997 and 1996, respectively........................... 24,548 21,942 18,937
Fees receivable............................................. 14,399 13,158 9,401
Other assets................................................ 10,479 32,007 26,326
---------- ---------- ----------
Total assets....................................... $2,775,069 $2,410,203 $2,446,811
========== ========== ==========
LIABILITIES, PRINCIPALS' CAPITAL
AND STOCKHOLDERS' EQUITY
Liabilities:
Bank loans................................................ $ 191,566 $ 10,000 $ 39,000
Securities sold under agreements to repurchase............ 253,019 289,416 70,263
Payable to brokers, dealers and clearing organizations.... 995,601 582,395 762,023
Payable to clients........................................ 1,007,612 1,218,749 1,296,722
Securities sold but not yet purchased, at market value.... 70,516 38,096 42,089
Other liabilities and accrued expenses.................... 41,468 46,746 39,189
Payable to principals..................................... 56,121 65,770 39,525
---------- ---------- ----------
Total liabilities.................................. 2,615,903 2,251,172 2,288,811
---------- ---------- ----------
Commitments and contingencies............................... -- -- --
Principals' capital and stockholders' equity:
Principals' capital....................................... 150,000 150,000 150,000
Common stock, $.01 par value; 34,484 shares authorized,
12,668, 12,500 and 10,000 issued and outstanding as of
June 26, 1998, December 31, 1997 and 1996,
respectively............................................ -- -- --
Paid-in capital........................................... 2,877 2,742 742
Retained earnings......................................... 6,289 6,289 7,258
---------- ---------- ----------
Total principals' capital and stockholders'
equity........................................... 159,166 159,031 158,000
---------- ---------- ----------
Total liabilities, principals' capital and
stockholders' equity............................. $2,775,069 $2,410,203 $2,446,811
========== ========== ==========
</TABLE>
The accompanying Notes to Combined Financial Statements are an integral part of
these statements.
F-8
<PAGE> 81
NEUBERGER & BERMAN, LLC AND
NEUBERGER & BERMAN MANAGEMENT INCORPORATED
COMBINED STATEMENTS OF INCOME
(000'S OMITTED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
-------------------- --------------------------------
JUNE 26, JUNE 27,
1998 1997 1997 1996 1995
-------- -------- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES:
Investment advisory and
administrative fees........... $194,697 $147,918 $327,191 $260,775 $207,888
Commissions..................... 67,845 62,082 124,911 109,621 96,400
Interest........................ 79,672 75,743 153,954 143,928 119,713
Clearance fees.................. 4,886 4,356 8,332 8,152 7,893
Net gain on principal
transactions in securities.... 3,168 3,940 7,838 10,758 8,822
Other income.................... 1,874 1,533 4,353 3,331 3,358
-------- -------- -------- -------- --------
Gross revenues................ 352,142 295,572 626,579 536,565 444,074
Interest expense................ 66,095 61,941 124,530 119,798 103,288
-------- -------- -------- -------- --------
Net revenues after interest
expense.................... 286,047 233,631 502,049 416,767 340,786
-------- -------- -------- -------- --------
OPERATING EXPENSES:
Employee compensation and
benefits...................... 64,474 50,893 112,840 106,431 87,816
Advertising and promotion....... 7,963 6,918 14,722 12,732 7,763
Information technology.......... 7,674 6,404 13,503 12,906 12,013
Rent and occupancy.............. 5,375 4,808 9,761 9,189 8,613
Floor brokerage................. 3,972 4,547 9,198 8,032 7,051
Distributor expense............. 2,994 1,757 4,323 2,224 1,032
Fund administrative expenses.... 2,627 1,854 4,205 3,065 2,165
Other expenses.................. 20,696 18,159 34,832 33,062 28,241
-------- -------- -------- -------- --------
Total operating expenses...... 115,775 95,340 203,384 187,641 154,694
-------- -------- -------- -------- --------
Net income before principal
compensation(1)............ 170,272 138,291 298,665 229,126 186,092
Principal compensation........ 19,925 14,491 33,685 27,045 18,973
-------- -------- -------- -------- --------
Net income.................... $150,347 $123,800 $264,980 $202,081 $167,119
======== ======== ======== ======== ========
</TABLE>
- ---------------
(1) Substantially all net income was distributed to principals as capital
distributions and dividends. Certain principals were also paid through
compensation expense. See Note 7 to the Combined Financial Statements.
The accompanying Notes to Combined Financial Statements are an integral part of
these statements.
F-9
<PAGE> 82
NEUBERGER & BERMAN, LLC AND
NEUBERGER & BERMAN MANAGEMENT INCORPORATED
COMBINED STATEMENTS OF CHANGES IN PRINCIPALS' CAPITAL
AND STOCKHOLDERS' EQUITY
(SIX MONTHS ENDED JUNE 26, 1998 UNAUDITED)
(000'S OMITTED)
<TABLE>
<CAPTION>
NB LLC NBMI STOCKHOLDERS' EQUITY
----------- -----------------------------
PRINCIPALS' COMMON PAID-IN RETAINED TOTAL
CAPITAL STOCK CAPITAL EARNINGS COMBINED
----------- ------ ------- -------- ---------
<S> <C> <C> <C> <C> <C>
BEGINNING BALANCE, December 31,
1994........................... $ 30,000 $-- $ 742 $ 7,009 $ 37,751
Capital contributions.......... 3,570 -- -- -- 3,570
Capital withdrawals............ (3,570) -- -- -- (3,570)
Capital distributions and
dividends................... (154,601) -- -- (12,500) (167,101)
Net income..................... 154,601 -- -- 12,518 167,119
--------- -- ------ -------- ---------
ENDING BALANCE, December 31,
1995........................... 30,000 -- 742 7,027 37,769
Capital contributions.......... 120,000 -- -- -- 120,000
Capital distributions and
dividends................... (185,389) -- -- (16,461) (201,850)
Net income..................... 185,389 -- -- 16,692 202,081
--------- -- ------ -------- ---------
ENDING BALANCE, December 31,
1996........................... 150,000 -- 742 7,258 158,000
Capital contributions.......... 9,196 -- -- -- 9,196
Capital withdrawals............ (9,196) -- -- -- (9,196)
Capital distributions and
dividends................... (230,637) -- -- (35,312) (265,949)
Common stock issuance.......... -- -- 2,000 -- 2,000
Net income..................... 230,637 -- -- 34,343 264,980
--------- -- ------ -------- ---------
ENDING BALANCE, December 31,
1997........................... 150,000 -- 2,742 6,289 159,031
Capital contributions.......... 8,410 -- -- -- 8,410
Capital withdrawals............ (8,410) -- -- -- (8,410)
Capital distributions and
dividends................... (126,426) -- -- (23,921) (150,347)
Common stock issuance.......... -- -- 135 -- 135
Net income..................... 126,426 -- -- 23,921 150,347
--------- -- ------ -------- ---------
ENDING BALANCE, June 26, 1998.... $ 150,000 $-- $2,877 $ 6,289 $ 159,166
========= == ====== ======== =========
</TABLE>
The accompanying Notes to Combined Financial Statements are an integral part of
these statements.
F-10
<PAGE> 83
NEUBERGER & BERMAN, LLC AND
NEUBERGER & BERMAN MANAGEMENT INCORPORATED
COMBINED STATEMENTS OF CASH FLOWS
(000'S OMITTED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
---------------------- YEAR ENDED DECEMBER 31,
JUNE 26, JUNE 27, -----------------------------------
1998 1997 1997 1996 1995
-------- -------- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income....................................... $ 150,347 $ 123,800 $ 264,980 $ 202,081 $ 167,119
Adjustments to reconcile net income to net cash
provided by operating activities-
Depreciation and amortization.................. 3,107 2,665 6,392 5,576 4,162
(Increase) decrease in operating assets
Cash and securities segregated for the
exclusive benefit of clients................. (89,172) 130,713 (88,058) 150,847 253,515
Cash and securities deposited with clearing
organizations................................ (23) (177) (473) (1,371) (445)
Securities purchased under agreements to
resell....................................... 23,016 68,264 (208,171) (76,264) --
Receivable from brokers, dealers and clearing
organizations................................ (314,944) (342,617) 457,950 (475,277) (535,503)
Receivable from clients........................ (43,577) 8,968 (71,079) (51,726) (149,669)
Securities owned, at market value.............. (2,574) (1,285) (2,356) 18,526 (3,204)
Exchange memberships........................... (58) (15) (16) (8) --
Fees receivable................................ (1,241) (1,502) (3,757) (2,344) (3,195)
Other assets................................... 21,528 708 (5,681) 15,626 (9,875)
Increase (decrease) in operating liabilities-
Bank loans..................................... 181,566 (26,000) (29,000) 5,000 (9,000)
Securities sold under agreements to
repurchase................................... (36,397) (52,448) 219,153 58,715 (17,078)
Payable to brokers, dealers and clearing
organizations................................ 413,206 331,947 (179,628) 445,825 (19,951)
Payable to clients............................. (211,137) (144,129) (77,973) (127,958) 500,685
Securities sold but not yet purchased, at
market value................................. 32,420 (2,692) (3,993) 2,595 18,020
Other liabilities and accrued expenses......... (5,278) (2,166) 7,558 2,037 11,499
--------- --------- --------- --------- ---------
Net cash provided by operating activities.... 120,789 94,034 285,848 171,880 207,080
--------- --------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITY:
Payments for purchases of furniture, equipment
and leasehold improvements................... (5,713) (4,396) (9,397) (6,399) (6,063)
--------- --------- --------- --------- ---------
Cash used in investing activity.............. (5,713) (4,396) (9,397) (6,399) (6,063)
--------- --------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from capital contributions............ 8,410 8,807 9,196 120,000 3,570
Payments for capital withdrawals............... (8,410) (8,807) (9,196) -- (3,570)
Payments for capital distributions and
dividends.................................... (159,996) (122,995) (239,705) (210,960) (149,749)
Issuance of common stock....................... 135 2,000 2,000 -- --
Repayment of subordinated liabilities.......... -- -- -- (70,000) (25,000)
--------- --------- --------- --------- ---------
Net cash used in financing activities........ (159,861) (120,995) (237,705) (160,960) (174,749)
--------- --------- --------- --------- ---------
Net increase (decrease) in cash and cash
equivalents................................ (44,785) (31,357) 38,746 4,521 26,268
CASH AND CASH EQUIVALENTS, beginning of period... 103,099 64,353 64,353 59,832 33,564
--------- --------- --------- --------- ---------
CASH AND CASH EQUIVALENTS, end of period......... $ 58,314 $ 32,996 $ 103,099 $ 64,353 $ 59,832
========= ========= ========= ========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for-
Interest..................................... $ 66,734 $ 61,909 $ 128,220 $ 120,449 $ 103,859
Taxes........................................ 3,061 4,783 9,277 8,211 6,106
</TABLE>
The accompanying Notes to Combined Financial Statements are an integral part of
these statements.
F-11
<PAGE> 84
NEUBERGER & BERMAN, LLC AND
NEUBERGER & BERMAN MANAGEMENT INCORPORATED
NOTES TO COMBINED FINANCIAL STATEMENTS
1. ORGANIZATION AND DESCRIPTION OF BUSINESS
The Combined Financial Statements include the accounts of Neuberger &
Berman, LLC ("NB LLC"), a Delaware limited liability company, and Neuberger &
Berman Management Incorporated ("NBMI"), a New York corporation (collectively,
the "Company"). Material intercompany transactions and balances have been
eliminated in combination. NB LLC has two trust company subsidiaries, which are
carried on the equity basis of accounting as their financial condition and
results of operations are immaterial.
Neuberger Berman Inc. ("NBI") plans to sell shares of its Common Stock in
an initial public offering, which will result in new stockholders owning a
portion of NBI. Prior to the offering, the principals of NB LLC and the
stockholders of NBMI (collectively, the "principals") will exchange their
ownership interests for shares of NBI (the "Exchange"). The percentage ownership
interest of the principals in each of the combining entities are substantially
the same and will be substantially the same immediately after the Exchange. The
Combined Financial Statements present the financial condition and results of
operations of NB LLC and NBMI on a combined basis, at historical cost, utilizing
reorganization accounting, as the entities operate under common management and
there is a high degree of common ownership.
The Company is a registered investment adviser providing investment
management services to high net worth clients, mutual funds and institutional
clients. As a registered broker-dealer, the Company executes securities
transactions for its clients and others and provides prime brokerage and
correspondent clearing services to other firms.
2. UNAUDITED INTERIM COMBINED FINANCIAL INFORMATION
The interim combined financial information as of June 26, 1998 and for the
six months ended June 26, 1998 and June 27, 1997 is unaudited. In the opinion of
management, such information contains all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the results for such
periods. The results for the interim period ended June 26, 1998 are not
necessarily indicative of the results to be obtained for a full fiscal year.
3. SIGNIFICANT ACCOUNTING POLICIES
Use of estimates -- The Combined Financial Statements are prepared in
accordance with generally accepted accounting principles. The preparation of the
financial statements requires management to make estimates and assumptions that
affect the reported amounts in the financial statements. Management does not
believe that actual results will differ materially from these estimates.
Securities transactions -- Securities owned and securities sold but not yet
purchased are valued at market. Principal transactions in securities and the
related revenues and expenses are recorded on a trade date basis. Client
transactions in securities and the related commission income is recorded on a
settlement date basis, which is not materially different from trade date.
Cash and cash equivalents -- For purposes of the Combined Statement of
Financial Condition, the Company considers all highly liquid investments with
maturities of less than 90 days when acquired to be cash equivalents.
Investment advisory and administrative fees -- The majority of investment
advisory fees earned from institutional and high net worth clients are charged
or billed to accounts quarterly based upon net asset value at the beginning of a
quarter. Investment advisory and administrative fees earned
F-12
<PAGE> 85
NEUBERGER & BERMAN, LLC AND
NEUBERGER & BERMAN MANAGEMENT INCORPORATED
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
from the Company's mutual fund business (the "Funds") are charged monthly to the
Funds based upon average daily net assets under management.
Depreciation and amortization -- Leasehold improvements are amortized on
the straight-line method over the lesser of the economic life of the improvement
or the life of the lease. Depreciation of furniture and equipment is computed by
various methods over the useful life of the asset.
Exchange memberships -- Exchange memberships are carried at cost.
Collateralized financing transactions -- Securities purchased and sold
under agreements to resell and repurchase, as well as securities borrowed and
loaned for which cash is deposited or received, are treated as collateralized
financing transactions and are recorded at contract amount.
Collateral -- The Company continues to report assets as owned when they are
pledged as collateral in secured financing arrangements and the secured party
cannot sell or repledge the assets or the Company can substitute collateral or
otherwise redeem it on short notice. The Company continues not to report
securities received as collateral in secured financing arrangements because the
debtor typically has the right to substitute or redeem the collateral on short
notice.
Payable to principals -- The Company accrues substantially all
undistributed net income as payable to principals.
New accounting pronouncement -- In June 1998, the FASB issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities", which
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments imbedded in other contracts, and for
hedging activities. It requires that an entity recognize all derivatives as
either assets or liabilities in the statement of financial condition and measure
those instruments at fair value. The Statement is effective prospectively on
January 1, 2000 for calendar year companies. The impact of the provisions of
SFAS No. 133 is not anticipated to have a material effect on the financial
condition or results of operations of the Company.
4. RECEIVABLE FROM AND PAYABLE TO CLIENTS
Receivable from and payable to clients represent amounts due from or to
clients of the Company in connection with cash and margin securities
transactions. Amounts receivable are collateralized by clients' securities held
by NB LLC and by others for delivery to NB LLC, the value of which is not
reflected in the accompanying Combined Financial Statements.
5. RECEIVABLE FROM AND PAYABLE TO BROKERS, DEALERS AND CLEARING ORGANIZATIONS
As of December 31, 1997 and 1996, amounts receivable from and payable to
brokers, dealers and clearing organizations include approximately $1,173 million
and $1,633 million of securities borrowed and $555 million and $731 million of
securities loaned, respectively.
6. BANK LOANS
As of December 31, 1997 and 1996, bank loans represent unsecured short-term
borrowings payable to commercial banks and bear weighted average interest at
rates of 5.75% and 7.63%, respectively. For the years ended December 31, 1997,
1996 and 1995, interest expense was approximately $2,486,000, $1,591,000 and
$2,622,000, respectively.
F-13
<PAGE> 86
NEUBERGER & BERMAN, LLC AND
NEUBERGER & BERMAN MANAGEMENT INCORPORATED
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
7. NET INCOME BEFORE PRINCIPAL COMPENSATION
The Company has historically distributed substantially all of its net
income to its principals in the form of capital distributions and dividends.
Certain principals of NBMI were also paid through compensation expense, which is
presented as principal compensation in the accompanying combined statements of
income.
8. NET CAPITAL
NB LLC and NBMI, as registered broker-dealers and member firms of the New
York Stock Exchange, Inc. and National Association of Securities Dealers, Inc.,
respectively, are subject to the Uniform Net Capital Rule 15c3-1 of the
Securities and Exchange Commission, which requires that broker-dealers maintain
a minimum level of net capital, as defined. As of June 26, 1998 (unaudited),
December 31, 1997 and December 31, 1996, NB LLC and NBMI had combined net
capital in the aggregate of $132,951,157, $141,220,677 and $145,370,445, which
exceeded their combined requirements by $115,127,354, $122,060,287 and
$122,073,940, respectively.
9. COMMITMENTS AND CONTINGENCIES
The Company leases office space under lease agreements expiring on various
dates through 2013. These operating leases are subject to escalation based on
increases in costs incurred by the lessor. Minimum rentals excluding escalation
under these lease agreements are as follows:
<TABLE>
<CAPTION>
YEARS ENDING
DECEMBER 31, (000'S OMITTED)
- ------------ ---------------
<S> <C>
1998................................. $ 9,549
1999................................. 9,904
2000................................. 9,927
2001................................. 10,048
2002................................. 10,054
Thereafter............................. 42,727
</TABLE>
Rent expense for the years ended December 31, 1997, 1996 and 1995 was
$8,282,073, $8,085,309 and $7,564,293, respectively.
The Company has satisfied margin requirements with clearing organizations
by obtaining letters of credit in favor of the clearing organizations. Open
unsecured letters of credit as of June 26, 1998 (unaudited), December 31, 1997
and 1996 were $15,000,000, $7,500,000 and $3,500,000, respectively. Unused
committed lines of credit were $125,000,000, $150,000,000 and $136,000,000,
respectively, as of June 26, 1998 (unaudited), December 31, 1997 and 1996.
In the normal course of business, the Company is subject to various legal
proceedings. In the opinion of management, based on discussions with legal
counsel, the resolution of pending proceedings will not have a material adverse
effect on the financial condition or results of operations of the Company.
10. EMPLOYEE BENEFIT PLANS
The Company has defined contribution plans consisting of an employee
profit-sharing plan and a money purchase pension plan covering all full-time
employees who have completed one year of continuous service, as defined.
Contributions to the plans, which are at the discretion of manage-
F-14
<PAGE> 87
NEUBERGER & BERMAN, LLC AND
NEUBERGER & BERMAN MANAGEMENT INCORPORATED
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
ment, are determined annually but do not exceed the amount permitted under the
Internal Revenue Code as a deductible expense. Contributions to the plans for
the years ended December 31, 1997, 1996 and 1995 were $7,225,518, $6,625,601 and
$6,269,750, respectively.
11. TAXES
Federal income taxes have not been provided on the net income of NB LLC, as
principals are individually liable for their own tax payments, except NB LLC is
subject to New York City unincorporated business tax ("UBT"). NBMI elected to be
taxed as an S Corporation and, as such, income tax expense represents state and
local taxes.
The following represents the components of taxes included in other expenses
on the combined statements of income (000's omitted):
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
-------------------- DECEMBER 31,
JUNE 26, JUNE 27, --------------------------
1998 1997 1997 1996 1995
-------- -------- ------ ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
UBT............................... $3,241 $1,871 $3,557 $7,630 $6,421
State and local................... 1,565 800 2,700 1,221 976
------ ------ ------ ------ ------
$4,806 $2,671 $6,257 $8,851 $7,397
====== ====== ====== ====== ======
</TABLE>
12. FAIR VALUE OF FINANCIAL INSTRUMENTS
Substantially all financial instruments carried at contract value, such as
receivable and payable to clients, brokers and dealers, repurchase agreements
and fees receivable, approximate market value due to their relatively short-term
nature or variable market rates of interest.
13. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND CONCENTRATIONS OF
CREDIT RISK
In the normal course of business, the Company enters into various debt and
equity transactions as principal or agent. The execution, settlement and
financing of these transactions can result in off-balance sheet risk or
concentrations of credit risk.
The Company has a high net worth and institutional client base. The Company
records client securities transactions on a settlement date basis, which is
generally three business days after trade date. The Company is exposed to
off-balance sheet risk of loss on unsettled transactions in the event clients
and other counterparties are unable to fulfill contractual obligations.
The Company's policy is to continuously monitor its exposure to market and
counterparty risk through the use of a variety of credit exposure, position and
financial reporting and control procedures. In addition, the Company has a
policy of reviewing the credit standing, where applicable, of each
broker-dealer, client and other counterparty with which it conducts business.
The Company monitors the market value of collateral and requests and receives
additional collateral when required.
For transactions in which the Company extends credit to clients and
non-clients, the Company seeks to control the risks associated with these
activities by requiring clients and non-clients to maintain margin collateral in
compliance with various regulatory and internal guidelines. The Company monitors
required margin levels daily and, pursuant to such guidelines, requests the
F-15
<PAGE> 88
NEUBERGER & BERMAN, LLC AND
NEUBERGER & BERMAN MANAGEMENT INCORPORATED
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
deposit of additional collateral, or reduces securities positions when
necessary. The Company's policy is to take possession of securities purchased
under agreements to resell.
SFAS No. 105, "Disclosure of Information About Financial Instruments with
Off-Balance Sheet Risk and Financial Instruments with Concentrations of Credit
Risk", and SFAS No. 119, "Disclosure About Derivative Financial Instruments and
Fair Value of Financial Instruments", require the disclosure of notional or
contractual amounts and other information about derivative financial instruments
that give rise to off-balance sheet risk. Notional amounts discussed below are
indicative only of the volume of activity. Notional amounts should not be
interpreted as a measure of actual market or credit risk; to do so could be
materially misleading.
As part of its prime brokerage clearing business, the Company writes
covered OTC call options on listed equity securities with certain of its prime
brokerage clients. Market risk is mitigated as the options are generally covered
by an equivalent number of securities sold but not yet purchased. The notional
amounts of options sold were approximately $69,703,000, $36,031,000 and
$40,140,000 at June 26, 1998 (unaudited), December 31, 1997 and 1996,
respectively.
A summary of the fair value of OTC options included in the statements of
financial condition appears below. Averages are based on quarter-end balances
(000's omitted):
<TABLE>
<CAPTION>
LIABILITIES
-----------------------
MARKET VALUE AVERAGE
------------ -------
<S> <C> <C>
Option contracts:
June 26, 1998 (unaudited).......................... $12,860 $8,972
December 31, 1997.................................. $ 7,798 $6,276
December 31, 1996.................................. $ 6,901 $5,680
</TABLE>
The Company's net gain from such activity was approximately $793,000,
$1,165,000 and $1,208,000 for the six months ended June 26, 1998 (unaudited) and
for the years ended December 31, 1997 and 1996, respectively.
F-16
<PAGE> 89
NEUBERGER & BERMAN, LLC AND
NEUBERGER & BERMAN MANAGEMENT INCORPORATED
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
14. SEGMENT INFORMATION
The Company has elected to adopt early SFAS No. 131, "Disclosures About
Segments of an Enterprise and Related Information." This Statement introduces a
new approach to presenting reportable segments based upon how "chief decision
makers" organize segments.
The following tables represent summarized information by operating segment
(000's omitted):
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 26, 1998 (UNAUDITED)
---------------------------------------------------
HIGH NET MUTUAL FUND &
WORTH INSTITUTIONAL OTHER
BUSINESS BUSINESS BUSINESSES TOTAL
-------- ------------- ---------- -----
<S> <C> <C> <C> <C>
REVENUES:
Investment advisory and administrative
fees................................... $ 72,533 $122,152 $ 12 $194,697
Commissions.............................. 43,077 11,018 13,750 67,845
Net interest income...................... 1,139 5 12,433 13,577
Other.................................... 40 608 9,280 9,928
-------- -------- ------- --------
Net revenues after interest
expense........................... 116,789 133,783 35,475 286,047
Operating expenses....................... 36,495 58,946 20,334 115,775
-------- -------- ------- --------
Net income before principal
compensation...................... 80,294 74,837 15,141 170,272
Principal compensation................... -- 19,925 -- 19,925
-------- -------- ------- --------
Net income.......................... $ 80,294 $ 54,912 $15,141 $150,347
======== ======== ======= ========
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 27, 1997 (UNAUDITED)
---------------------------------------------------
HIGH NET MUTUAL FUND &
WORTH INSTITUTIONAL OTHER
BUSINESS BUSINESS BUSINESSES TOTAL
-------- ------------- ---------- -----
<S> <C> <C> <C> <C>
REVENUES:
Investment advisory and administrative
fees.................................... $52,613 $95,296 $ 9 $147,918
Commissions............................... 39,817 8,442 13,823 62,082
Net interest income....................... 1,365 6 12,431 13,802
Other..................................... 2 454 9,373 9,829
------- ------- ------- --------
Net revenues after interest
expense............................ 93,797 104,198 35,636 233,631
Operating expenses........................ 29,535 46,217 19,588 95,340
------- ------- ------- --------
Net income before principal
compensation....................... 64,262 57,981 16,048 138,291
Principal compensation.................... -- 14,491 -- 14,491
------- ------- ------- --------
Net income........................... $64,262 $43,490 $16,048 $123,800
======= ======= ======= ========
</TABLE>
F-17
<PAGE> 90
NEUBERGER & BERMAN, LLC AND
NEUBERGER & BERMAN MANAGEMENT INCORPORATED
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
---------------------------------------------------
HIGH NET MUTUAL FUND &
WORTH INSTITUTIONAL OTHER
BUSINESS BUSINESS BUSINESSES TOTAL
-------- ------------- ---------- -----
<S> <C> <C> <C> <C>
REVENUES:
Investment advisory and administrative
fees................................... $116,795 $210,375 $ 21 $327,191
Commissions.............................. 78,465 19,205 27,241 124,911
Net interest income...................... 3,049 17 26,358 29,424
Other.................................... (3) 1,254 19,272 20,523
-------- -------- ------- --------
Net revenues after interest
expense........................... 198,306 230,851 72,892 502,049
Operating expenses....................... 62,599 103,121 37,664 203,384
-------- -------- ------- --------
Net income before principal
compensation...................... 135,707 127,730 35,228 298,665
Principal compensation................... -- 33,685 -- 33,685
-------- -------- ------- --------
Net income.......................... $135,707 $ 94,045 $35,228 $264,980
======== ======== ======= ========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
---------------------------------------------------
HIGH NET MUTUAL FUND &
WORTH INSTITUTIONAL OTHER
BUSINESS BUSINESS BUSINESSES TOTAL
-------- ------------- ---------- -----
<S> <C> <C> <C> <C>
REVENUES:
Investment advisory and administrative
fees................................... $ 91,423 $169,325 $ 27 $260,775
Commissions.............................. 68,209 15,260 26,152 109,621
Net interest income...................... 2,211 29 21,890 24,130
Other.................................... 1 742 21,498 22,241
-------- -------- ------- --------
Net revenues after interest
expense........................... 161,844 185,356 69,567 416,767
Operating expenses....................... 57,287 89,648 40,706 187,641
-------- -------- ------- --------
Net income before principal
compensation...................... 104,557 95,708 28,861 229,126
Principal compensation................... -- 27,045 -- 27,045
-------- -------- ------- --------
Net income.......................... $104,557 $ 68,663 $28,861 $202,081
======== ======== ======= ========
</TABLE>
F-18
<PAGE> 91
NEUBERGER & BERMAN, LLC AND
NEUBERGER & BERMAN MANAGEMENT INCORPORATED
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
---------------------------------------------------
HIGH NET MUTUAL FUND &
WORTH INSTITUTIONAL OTHER
BUSINESS BUSINESS BUSINESSES TOTAL
-------- ------------- ---------- -----
<S> <C> <C> <C> <C>
REVENUES:
Investment advisory and administrative
fees.................................... $72,711 $135,178 $ (1) $207,888
Commissions............................... 60,555 12,354 23,491 96,400
Net interest income....................... 1,630 46 14,749 16,425
Other..................................... 8 681 19,384 20,073
------- -------- ------- --------
Net revenues after interest
expense............................ 134,904 148,259 57,623 340,786
Operating expenses........................ 48,720 70,985 34,989 154,694
------- -------- ------- --------
Net income before principal
compensation....................... 86,184 77,274 22,634 186,092
Principal compensation.................... -- 18,973 -- 18,973
------- -------- ------- --------
Net income........................... $86,184 $ 58,301 $22,634 $167,119
======= ======== ======= ========
</TABLE>
Due to the nature of the securities business, it is impractical to separate
assets related to reportable business segments.
15. RELATED PARTY TRANSACTIONS
During the years ended December 31, 1997, 1996 and 1995, the Company earned
approximately $13,969,000, $10,535,000 and $7,717,000, respectively, in
brokerage commissions from the Funds.
Certain principals of the Company are officers and/or trustees of the
Funds. The Company also reimbursed certain Funds for expenses during the years
ended December 31, 1997, 1996 and 1995 of approximately $1,503,000, $1,816,000
and $2,236,000, respectively, to the extent that such Funds exceeded their
specified expense limitations.
F-19
<PAGE> 92
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Company and the Selling Stockholders have agreed to sell to each of the U.S.
Underwriters named below, and each of such U.S. Underwriters, for whom Goldman,
Sachs & Co. and are acting as representatives, has severally
agreed to purchase from the Company and the Selling Stockholders, the respective
number of shares of Common Stock set forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
UNDERWRITER COMMON STOCK
- ----------- ------------
<S> <C>
Goldman, Sachs & Co. .......................................
--------
Total.............................................
========
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the U.S.
Underwriters are committed to take and pay for all of the shares offered hereby,
if any are taken.
The U.S. Underwriters propose to offer the shares of Common Stock in part
directly to the public at the initial public offering price set forth on the
cover page of this Prospectus and in part to certain securities dealers at such
price less a concession of $ per share. The U.S. Underwriters may allow, and
such dealers may reallow, a concession not in excess of $ per share to
certain brokers and dealers. After the shares of Common Stock are released for
sale to the public, the offering price and other selling terms may from time to
time be varied by the representatives.
The Company and the Selling Stockholders have entered into an underwriting
agreement (the "International Underwriting Agreement") with the underwriters of
the international offering (the "International Underwriters") providing for the
concurrent offer and sale of shares of Common Stock in an
international offering outside the United States. The offering price and
aggregate underwriting discounts and commissions per share for the two offerings
are identical. The closing of the offering made hereby is a condition to the
closing of the international offering, and vice versa. The representatives of
the International Underwriters are Goldman Sachs International and .
Pursuant to an Agreement between the U.S. and International Underwriting
Syndicates (the "Agreement Between") relating to the two offerings, each of the
U.S. Underwriters named herein has agreed that, as a part of the distribution of
the shares offered hereby and subject to certain exceptions, it will offer, sell
or deliver the shares of Common Stock, directly or indirectly, only in the
United States of America (including the States and the District of Columbia),
its territories, its possessions and other areas subject to its jurisdiction
(the "United States") and to U.S. persons, which term shall mean, for purposes
of this paragraph: (a) any individual who is a resident of the United States or
(b) any corporation, partnership or other entity organized in or under the laws
of the United States or any political subdivision thereof and whose office most
directly involved with the purchase is located in the United States. Each of the
International Underwriters has agreed pursuant to the Agreement Between that, as
a part of the distribution of the shares offered as a part of the international
offering, and subject to certain exceptions, it will (i) not, directly or
indirectly, offer, sell or deliver shares of Common Stock (a) in the United
States or to any U.S. persons or (b) to any person whom it believes intends to
reoffer, resell or deliver the shares in the United States or to any U.S.
persons, and (ii) cause any dealer to whom it may sell such shares at any
concession to agree to observe a similar restriction.
Pursuant to the Agreement Between, sales may be made between the U.S.
Underwriters and the International Underwriters of such number of shares of
Common Stock as may be mutually
U-1
<PAGE> 93
agreed. The price of any shares so sold shall be the initial public offering
price, less an amount not greater than the selling concession.
The Company and the Selling Stockholders have granted the U.S. Underwriters
an option exercisable for 30 days after the date of this Prospectus to purchase
up to an aggregate of additional shares of Common Stock solely to
cover over-allotments, if any. If the U.S. Underwriters exercise their
over-allotment option, the U.S. Underwriters have severally agreed, subject to
certain conditions, to purchase approximately the same percentage thereof that
the number of shares to be purchased by each of them, as shown in the foregoing
table, bears to the shares of Common Stock offered hereby. The
Company and the Selling Stockholders have granted the International Underwriters
a similar option to purchase up to an aggregate of additional
shares of Common Stock.
The Company and the Management Stockholders have agreed that, during the
period beginning from the date of this Prospectus and continuing to and
including the date 180 days after the date of the Prospectus, they will not,
directly or indirectly, offer, sell, contract to sell or otherwise dispose of
any shares of Common Stock or any securities of the Company that are
substantially similar to the shares of the Common Stock, including, but not
limited to, any securities that are convertible into or exchangeable for, or
that represent the right to receive, shares of Common Stock or any substantially
similar securities (other than, in the case of the Company, pursuant to existing
employee stock option plans), without the prior written consent of the
representatives of the Underwriters, except for shares of Common Stock offered
in connection with the concurrent U.S. and international offerings.
The representatives of the Underwriters have informed the Company that they
do not expect sales to accounts over which the Underwriters exercise
discretionary authority to exceed five percent of the total number of shares of
Common Stock offered by them.
Prior to this offering, there has been no public market for the shares. The
initial public offering price will be negotiated among the Company, the Selling
Stockholders and the representatives of the U.S. Underwriters and the
International Underwriters. Among the factors to be considered in determining
the initial public offering price of the Common Stock, in addition to prevailing
market conditions, will be the Company's historical performance, estimates of
the business potential and earnings prospects of the Company, an assessment of
the Company's management and the consideration of the above factors in relation
to market valuation of companies in related businesses.
The Common Stock will be listed on the NYSE under the symbol "NEU". In
order to meet one of the requirements for listing the Common Stock on the NYSE,
the U.S. Underwriters have undertaken to sell lots of 100 or more shares to a
minimum of 2,000 beneficial holders.
In connection with the offerings, the Underwriters may purchase and sell
the Common Stock in the open market. These transactions may include
over-allotment and stabilizing transactions and purchases to cover syndicate
short positions created in connection with the offerings. Stabilizing
transactions consist of certain bids or purchases for the purpose of preventing
or retarding a decline in the market price of the Common Stock and syndicate
short positions involve the sale by the Underwriters of a greater number of
shares of Common Stock than they are required to purchase from the Company in
the offerings. The Underwriters also may impose a penalty bid, whereby selling
concessions allowed to syndicate members or other broker-dealers in respect of
the securities sold in the offerings for their account may be reclaimed by the
syndicate if such shares of Common Stock are repurchased by the syndicate in
stabilizing or covering transactions. These activities may stabilize, maintain
or otherwise affect the market price of the Common Stock, which may be higher
than the price that might otherwise prevail in the open market; and these
activities, if commenced, may be discontinued at any time. These transactions
may be effected on the NYSE, in the over-the-counter market or otherwise.
U-2
<PAGE> 94
The Company and the Selling Stockholders have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities under
the Securities Act.
Goldman Sachs & Co. performs investment banking and financial advisory
services for the Company from time to time.
This Prospectus may be used by underwriters and dealers in connection with
offers and sales of the Common Stock, including shares initially sold in the
international offering, to persons located in the United States.
U-3
<PAGE> 95
- ------------------------------------------------------
- ------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF ANY OFFER TO BUY
SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information..................... 3
Special Note Regarding Forward-looking
Statements.............................. 3
Prospectus Summary........................ 5
Risk Factors.............................. 15
Use of Proceeds........................... 19
Dividend Policy........................... 19
Capitalization............................ 20
Dilution.................................. 21
Selected Historical Combined Financial
Data.................................... 22
Pro Forma Combined Financial Data
(Unaudited)............................. 24
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.............................. 26
Business.................................. 33
Management................................ 47
Security Ownership by Management and
Principal Stockholders.................. 58
The Exchange and the Subordinated Note
Transaction............................. 60
Stockholders Agreement.................... 61
Selling Stockholders...................... 63
Description of Capital Stock.............. 68
Shares Eligible for Future Sale........... 70
Validity of Shares........................ 71
Experts................................... 71
Index to Combined Financial Statements.... F-1
Underwriting.............................. U-1
</TABLE>
------------------
UNTIL , 1998 (THE 25TH DAY AFTER THE DATE OF THIS PROSPECTUS),
ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER
A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
------------------------------------------------------
------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
SHARES
NEUBERGER BERMAN INC.
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
------------------
[LOGO]
------------------
GOLDMAN, SACHS & CO.
REPRESENTATIVES OF THE UNDERWRITERS
------------------------------------------------------
------------------------------------------------------
<PAGE> 96
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is an itemized list of the estimated expenses to be incurred
in connection with the offering of the securities being offered in the Offerings
other than underwriting discounts and commissions. The Company has agreed to
bear these expenses in connection with the sale of shares by the Company and by
the Selling Stockholders.
<TABLE>
<S> <C>
SEC Registration fee........................................ $73,750
NASD filing fee............................................. 30,500
NYSE listing fee............................................ *
Accounting fees and expenses................................ *
Legal fees and expenses..................................... *
Printing and engraving...................................... *
Transfer Agent's fees....................................... *
Miscellaneous expenses...................................... *
-------
Total............................................. $
=======
</TABLE>
- ---------------
* To be provided by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the DGCL empowers a Delaware corporation to indemnify any
persons who are, or are threatened to be made, parties to any threatened,
pending or completed legal action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of such
corporation), by reason of the fact that such person was an officer or director
of such corporation, or is or was serving at the request of such corporation as
a director, officer, employee or agent of another corporation or enterprise. The
indemnity may include expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding, provided that such officer or
director acted in good faith and in a manner he or she reasonably believed to be
in, or not opposed to, the corporation's best interests, and, for criminal
proceedings, had no reasonable cause to believe his or her conduct was illegal.
A Delaware corporation may indemnify officers and directors in an action by or
in the right of the corporation under the same conditions, except that no
indemnification is permitted without judicial approval if the officer or
director is adjudged to be liable to the corporation in the performance of his
or her duty. Where a present or former officer or director is successful on the
merits or otherwise in the defense of any action referred to above, the
corporation must indemnify him against the expenses which such person actually
and reasonably incurred.
Article VI of the Company's By-Laws provides for indemnification by the
Company of its directors and officers to the full extent permitted by the
Delaware Law.
Pursuant to specific authority granted by Section 102 of the DGCL, Article
VII of the Company's Certificate of Incorporation contains the following
provision regarding limitation of liability of directors and officers:
"(VII) No director of the Corporation shall be liable to the Corporation or
its stockholders for monetary damages for breach of his or her fiduciary duty as
a director, provided that nothing contained in this Certificate of Incorporation
shall eliminate or limit the liability of a director (a) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (b) for acts
or
II-1
<PAGE> 97
omissions not in good faith or which involve intentional misconduct or a knowing
violation of the law, (c) under Section 174 of the General Corporation Law of
the State of Delaware or (d) for any transaction from which the director derived
an improper personal benefit".
Reference is hereby made to Section 8 of the Underwriting Agreement filed
as Exhibit 1.1 hereto, for certain indemnification arrangements.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
During the three year period ended August 19, 1998, the Registrant sold the
following securities without registration under the Securities Act:
On August 18, 1998, the Registrant and the Management Stockholders entered
into a definitive agreement providing for the Exchange pursuant to which the
Management Stockholders will receive by way of exchange or merger, as the case
may be, shares of Common Stock. These issuances of Common Stock to a limited
number of sophisticated investors are exempt from the registration provisions of
the Securities Act in reliance on Regulation D under the Securities Act.
II-2
<PAGE> 98
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
Exhibits
(a) Attached hereto are the following exhibits:
<TABLE>
<S> <C>
1.1 Form of Underwriting Agreement
1.2* Form of International Underwriting Agreement
2.1 Plan of Merger and Exchange Agreement, dated as of August
18, 1998, by and among the Company, Neuberger & Berman, LLC,
the members of Neuberger & Berman, LLC, Neuberger & Berman
Management Incorporated, the shareholders of Neuberger &
Berman Management Incorporated and Neuberger Berman Sub
Inc., a New York corporation
3.1 Certificate of Incorporation
3.2 By-Laws
4.1* Specimen of Common Stock
4.2 Stockholders Agreement, dated as of August 18, 1998, by and
among the Company and the stockholders named therein.
5.1* Opinion of Debevoise & Plimpton as to the legality of the
securities being registered
10.1* 1998 Neuberger Berman Inc. Directors Stock Incentive Plan
10.2* 1998 Neuberger Berman Long-Term Incentive Plan
10.3* 1998 Neuberger Berman Inc. Annual Incentive Plan
10.4* 1998 Neuberger Berman Inc. Deferred Compensation Plan
10.5* Neuberger & Berman Inc. Employee Defined Contribution Stock
Incentive Plan
10.6* Amended and Restated Letter Agreement, dated as of August
18, 1998, between Neuberger & Berman, LLC and Jeffrey B.
Lane
10.7* Form of Subordinated Loan Agreement, dated ,
1998, between Neuberger & Berman, LLC and NB Associates, LLC
10.8* Indemnity Agreement, dated as of , 1998, by and among
the Company, Neuberger & Berman, LLC, Neuberger & Berman
Management Incorporated, the members of Neuberger & Berman,
LLC and the shareholders of Neuberger & Berman Management
Incorporated
21.1 Subsidiaries of the Company
23.1 Consent of Arthur Andersen, LLP
23.2* Consent of Debevoise & Plimpton (included in Exhibit 5.1)
24.1 Powers of Attorney (included on signature page)
27.1 Financial Data Schedule
27.2 Financial Data Schedule
</TABLE>
- ---------------
* To be filed by amendment.
(b) Attached hereto are the following schedules: None.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
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
II-3
<PAGE> 99
provisions, or otherwise, the registrant has been advised that in the opinion of
the SEC such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act of 1933 and will be governed by the
final adjudication of such issue.
The undersigned registrant 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-4
<PAGE> 100
SIGNATURES
Pursuant to the requirement of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of New York, State of New
York, on August 19, 1998.
NEUBERGER BERMAN INC.
/s/ LAWRENCE ZICKLIN
--------------------------------------
Name: Lawrence Zicklin
Title: Chief Executive Officer and
Chairman of the Board of
Directors
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints Lawrence Zicklin and Richard A.
Cantor, or either of them, as each such person's true and lawful
attorney-in-fact and agent, with full powers of substitution and resubstitution,
for him/her and in his/her name, place and stead, in any and all capacities, to
sign any or all amendments (including post-effective amendments) to this
Registration Statement, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully for all intents and purposes as
such person might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or their substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
--------- -------- ----
<S> <C> <C>
/s/ LAWRENCE ZICKLIN Chief Executive Officer and August 19, 1998
- ------------------------------------------ Chairman of the Board of Directors
Lawrence Zicklin (Principal Executive Officer)
/s/ RICHARD A. CANTOR President, Chief Operating Officer August 19, 1998
- ------------------------------------------ and Director
Richard A. Cantor
/s/ JEFFREY B. LANE Executive Vice President, Chief August 19, 1998
- ------------------------------------------ Administrative Officer and Director
Jeffrey B. Lane
/s/ VINCENT T. CAVALLO Senior Vice President and Chief August 19, 1998
- ------------------------------------------ Financial Officer (Principal
Vincent T. Cavallo Financial and Accounting Officer)
/s/ C. CARL RANDOLPH Senior Vice President, General August 19, 1998
- ------------------------------------------ Counsel and Secretary
C. Carl Randolph
/s/ STANLEY EGENER Director August 19, 1998
- ------------------------------------------
Stanley Egener
</TABLE>
II-5
<PAGE> 101
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
--------- -------- ----
<S> <C> <C>
/s/ MICHAEL M. KASSEN Director August 19, 1998
- ------------------------------------------
Michael M. Kassen
/s/ MARVIN C. SCHWARTZ Director August 19, 1998
- ------------------------------------------
Marvin C. Schwartz
/s/ HEIDI S. STEIGER Director August 19, 1998
- ------------------------------------------
Heidi S. Steiger
/s/ DIETRICH WEISMANN Director August 19, 1998
- ------------------------------------------
Dietrich Weismann
</TABLE>
II-6
<PAGE> 102
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE
- ------- ----------- ----
<S> <C> <C>
1.1 Form of Underwriting Agreement..............................
1.2* Form of International Underwriting Agreement................
2.1 Plan of Merger and Exchange Agreement, dated as of August
18, 1998, by and among the Company, Neuberger & Berman, LLC,
the members of Neuberger & Berman, LLC, Neuberger & Berman
Management Incorporated, the shareholders of Neuberger &
Berman Management Incorporated and Neuberger Berman Sub
Inc., a New York corporation................................
3.1 Certificate of Incorporation................................
3.2 By-Laws.....................................................
4.1* Specimen of Common Stock....................................
4.2 Stockholders Agreement, dated as of August 18, 1998, by and
among the Company and the stockholders named therein. ......
5.1* Opinion of Debevoise & Plimpton as to the legality of the
securities being registered.................................
10.1* 1998 Neuberger Berman Inc. Directors Stock Incentive Plan...
10.2* 1998 Neuberger Berman Long-Term Incentive Plan..............
10.3* 1998 Neuberger Berman Inc. Annual Incentive Plan............
10.4* 1998 Neuberger Berman Inc. Deferred Compensation Plan.......
10.5* Neuberger & Berman Inc. Employee Defined Contribution Stock
Incentive Plan..............................................
10.6* Amended and Restated Letter Agreement, dated as of August
18, 1998, between Neuberger & Berman, LLC and Jeffrey B.
Lane........................................................
10.7* Form of Subordinated Loan Agreement, dated as of ,
1998, between Neuberger & Berman, LLC and NB Associates,
LLC.........................................................
10.8* Indemnity Agreement, dated as of , 1998, by and among
the Company, Neuberger & Berman, LLC, Neuberger & Berman
Management Incorporated, the members of Neuberger & Berman,
LLC and the shareholders of Neuberger & Berman Management
Incorporated................................................
21.1 Subsidiaries of the Company.................................
23.1 Consent of Arthur Andersen, LLP.............................
23.2* Consent of Debevoise & Plimpton (included in Exhibit 5.1)...
24.1 Powers of Attorney (included on signature page).............
27.1 Financial Data Schedule.....................................
27.2 Financial Data Schedule.....................................
</TABLE>
- ---------------
* To be filed by amendment.
<PAGE> 1
Draft of August 19, 1998
NEUBERGER BERMAN INC.
COMMON STOCK
(PAR VALUE $0.01 PER SHARE)
UNDERWRITING AGREEMENT
(U.S. VERSION)
-, 1998
Goldman, Sachs & Co.,
[Names of Co-Representatives,]
As representatives of the several Underwriters
named in Schedule I hereto,
c/o Goldman, Sachs & Co.,
85 Broad Street,
New York, New York 10004.
Ladies and Gentlemen:
Neuberger Berman Inc., a Delaware corporation (the "Company"),
proposes, subject to the terms and conditions stated herein, to issue and sell
to the Underwriters named in Schedule I hereto (the "Underwriters") an aggregate
of - shares and, at the election of the Underwriters, up to - additional shares
of Common Stock, par value $0.01 per share ("Stock"), of the Company, and the
stockholders of the Company named in Schedule II hereto (the "Selling
Stockholders") propose, subject to the terms and conditions stated herein, to
sell to the Underwriters an aggregate of - shares and, at the election of the
Underwriters, up to - additional shares of Stock. The aggregate of - shares to
be sold by the Company and the Selling Stockholders is herein called the "Firm
Shares" and the aggregate of - additional shares to be sold by the Company and
the Selling Stockholders is herein called the "Optional Shares". The Firm Shares
and the Optional Shares that the Underwriters elect to purchase pursuant to
Section 2 hereof are herein collectively called the "Shares".
It is understood and agreed to by all parties that the Company and the
Selling Stockholders are concurrently entering into an agreement (the
"International Underwriting Agreement") providing for the sale by the Company
and the Selling Stockholders of up to a total of - shares of Stock (the
"International Shares"), including the overallotment option thereunder, through
arrangements with certain underwriters outside the United States (the
"International Underwriters"), for whom Goldman Sachs International and are
acting as lead managers. Anything herein or therein to the contrary
notwithstanding, the respective closings under this Agreement and the
International Underwriting Agreement are hereby expressly made conditional on
one another. The Underwriters hereunder and the International Underwriters are
simultaneously entering into an Agreement between U.S. and International
Underwriting Syndicates (the "Agreement between Syndicates") which provides,
among other things, for the transfer of shares of Stock between the two
syndicates. Two forms of prospectus are to be used in connection with the
offering and sale of shares of Stock contemplated by the foregoing, one relating
to the Shares hereunder and the other relating to the International Shares. The
latter form of prospectus will be identical to the former except for certain
substitute pages. Except as used in Sections 2, 3, 4, 9 and 11 herein, and
except as the context may otherwise require, references hereinafter to the
Shares shall include all the shares of Stock which may be sold pursuant to
either this Agreement or the International Underwriting Agreement, and
references herein to any prospectus whether in preliminary or final form, and
whether as amended or supplemented, shall include both the U.S. and the
international versions thereof.
<PAGE> 2
Reference in this Agreement to "subsidiaries" of the Company shall be
deemed to include entities that will become subsidiaries of the Company upon
consummation of the transactions contemplated in the Plan of Merger and Exchange
Agreement, dated as of August 19, 1998 (the "Exchange Agreement"), among the
Company, Neuberger & Berman LLC ("NB LLC"), Neuberger & Berman Management
Incorporated ("NBMI"), Neuberger Berman Sub Inc., and the principals and family
affiliates named on Schedule I and II thereof (collectively, the "Management
Stockholders") and, prior to consummation of such transactions, NB LLC and NBMI
and their respective subsidiaries.
1. (a) Each of the Company, NB LLC and NBMI represents and
warrants to, and agrees with, each of the Underwriters that:
(i) A registration statement on Form S-1 (File No. 333--) (the
"Initial Registration Statement") in respect of the Shares has been
filed with the Securities and Exchange Commission (the "Commission");
the Initial Registration Statement and any post-effective amendment
thereto, each in the form heretofore delivered to you, and, excluding
exhibits thereto, to you for each of the other Underwriters, have been
declared effective by the Commission in such form; other than a
registration statement, if any, increasing the size of the offering (a
"Rule 462(b) Registration Statement"), filed pursuant to Rule 462(b)
under the Securities Act of 1933, as amended (the "Act"), which became
effective upon filing, no other document with respect to the Initial
Registration Statement has heretofore been filed with the Commission;
and no stop order suspending the effectiveness of the Initial
Registration Statement, any post-effective amendment thereto or the
Rule 462(b) Registration Statement, if any, has been issued and no
proceeding for that purpose has been initiated or threatened by the
Commission (any preliminary prospectus included in the Initial
Registration Statement or filed with the Commission pursuant to Rule
424(a) of the rules and regulations of the Commission under the Act is
hereinafter called a "Preliminary Prospectus"; the various parts of the
Initial Registration Statement and the Rule 462(b) Registration
Statement, if any, including all exhibits thereto and including the
information contained in the form of final prospectus filed with the
Commission pursuant to Rule 424(b) under the Act in accordance with
Section 5(a) hereof and deemed by virtue of Rule 430A under the Act to
be part of the Initial Registration Statement at the time it was
declared effective, each as amended at the time such part of the
Initial Registration Statement became effective, or such part of the
Rule 462(b) Registration Statement, if any, became or hereafter becomes
effective, are hereinafter collectively called the "Registration
Statement"; and such final prospectus, in the form first filed pursuant
to Rule 424(b) under the Act, is hereinafter called the "Prospectus");
(ii) No order preventing or suspending the use of any
Preliminary Prospectus has been issued by the Commission, and each
Preliminary Prospectus, at the time of filing thereof, conformed in all
material respects to the requirements of the Act and the rules and
regulations of the Commission thereunder, and did not contain an untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not
misleading; provided, however, that this representation and warranty
shall not apply to any statements or omissions made in reliance upon
and in conformity with information furnished in writing to the Company
by or on behalf of an Underwriter through Goldman, Sachs & Co.
expressly for use therein or by a Selling Stockholder expressly for use
in the preparation of the answers therein to Items 7 and 11(l) of Form
S-1;
(iii) The Registration Statement conforms, and the Prospectus
and any further amendments or supplements to the Registration Statement
or the Prospectus will conform, in all material respects to the
requirements of the Act and the rules and regulations of the Commission
thereunder and do not and will not, as of the applicable effective date
as to the Registration Statement and any amendment thereto and as of
the applicable filing date as to the Prospectus and any amendment or
supplement thereto, contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided,
however, that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity with
information furnished in writing to the
2
<PAGE> 3
Company by or on behalf of an Underwriter through Goldman, Sachs & Co.
expressly for use therein or by a Selling Stockholder expressly for use
in the preparation of the answers therein to Items 7 and 11(l) of Form
S-1;
(iv) Neither the Company nor any of its subsidiaries has
sustained since the date of the latest audited financial statements
included in the Prospectus any material loss or interference with its
business from fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any labor dispute or court or
governmental action, order or decree, otherwise than as set forth or
contemplated in the Prospectus; and, since the respective dates as of
which information is given in the Registration Statement and the
Prospectus, there has not been any change in the capital stock or
long-term debt of the Company or any of its subsidiaries or any
material adverse change, or any development involving a prospective
material adverse change, in or affecting the general affairs,
management, financial position, stockholders' equity or results of
operations of the Company and its subsidiaries, otherwise than as set
forth or contemplated in the Prospectus;
(v) The Company and each of its subsidiaries have good and
marketable title in fee simple to all real property and good and
marketable title to all personal property owned by them and material to
the business of the Company and its subsidiaries taken as a whole, in
each case free and clear of all liens, encumbrances and defects except
such as are described in the Prospectus or such as do not materially
affect the value of such property and do not materially interfere with
the use made and proposed to be made of such property by the Company
and its subsidiaries; and any real property and buildings held under
lease by the Company and its subsidiaries and material to the business
of the Company and its subsidiaries taken as a whole are held by them
under valid, subsisting and enforceable leases with such exceptions as
are not material and do not materially interfere with the use made and
proposed to be made of such property and buildings by the Company and
its subsidiaries;
(vi) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Delaware, with power and authority (corporate and other) to own its
properties and conduct its business as described in the Prospectus, and
has been duly qualified as a foreign corporation for the transaction of
business and is in good standing under the laws of each other
jurisdiction in which it owns or leases properties or conducts any
business so as to require such qualification, except for any failures
to be so qualified or in good standing that, individually or in the
aggregate, would not reasonably be expected to have a material adverse
effect on the general affairs, management, financial condition,
stockholders' equity, results of operations or prospects of the Company
and its subsidiaries taken as a whole (a "Material Adverse Effect");
(vii) NB LLC has been duly formed and is validly existing as a
limited liability company in good standing under the laws of the State
of Delaware, with power and authority to own its properties and conduct
its business as described in the Prospectus and has been duly qualified
for the transaction of business and is in good standing under the laws
of each other jurisdiction in which it owns or leases properties or
conducts any business so as to require such qualification, except for
any failures to be so qualified or in good standing that, individually
or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect; and each other subsidiary of the Company has
been duly incorporated and is validly existing as a corporation in good
standing under the laws of its jurisdiction of incorporation, with
power and authority (corporate and other) to own its properties and
conduct its business as described in the Prospectus, and has been duly
qualified as a foreign corporation for the transaction of business and
is in good standing under the laws of each other jurisdiction in which
it owns or leases properties or conducts any business so as to require
such qualification, except for any failure to be so qualified or in
good standing that, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect;
(viii) Upon consummation of the transactions contemplated in
the Exchange Agreement, the Company will have an authorized
capitalization as set forth in the Prospectus, and all of the issued
shares of capital stock of the Company will have been duly and validly
authorized and issued, fully
3
<PAGE> 4
paid and non-assessable and conform to the description of the Stock
contained in the Prospectus; all of the membership interests of NB LLC
have been validly issued in accordance with applicable law and the
limited liability company agreement of such subsidiary, and upon
consummation of the transactions contemplated in the Exchange
Agreement, will be owned directly by the Company, free and clear of all
liens, encumbrances, equities or claims; all of the issued shares of
capital stock of each other subsidiary of the Company have been duly
and validly authorized and issued and are fully paid and
non-assessable, and upon consummation of the transactions contemplated
in the Exchange Agreement, will be owned directly or indirectly by the
Company, free and clear of all liens, encumbrances, equities or claims;
upon consummation of the transactions contemplated in the Exchange
Agreement, there will be no outstanding subscriptions, rights,
warrants, options, calls, commitments or liens related to or entitling
any person to purchase or otherwise to acquire any shares of the
capital stock of, or membership interest or other ownership interest
in, the Company or any of its subsidiaries;
(ix) The unissued Shares to be issued and sold by the Company
to the Underwriters hereunder and under the International Underwriting
Agreement have been duly and validly authorized and, when issued and
delivered against payment therefor as provided herein and therein, will
be duly and validly issued and fully paid and non-assessable and will
conform to the description of the Stock contained in the Prospectus;
(x) Each of the Company, NB LLC and NBMI has all requisite
corporate power and authority to execute, deliver and perform its
obligations under this Agreement and the International Underwriting
Agreement and to consummate the transactions contemplated hereby and
thereby, including without limitation, in the case of the Company, the
corporate power and authority to issue, sell and deliver the Shares, as
provided herein and therein;
(xi) This Agreement and the International Underwriting
Agreement have been duly authorized, executed and delivered by each of
the Company, NB LLC and NBMI;
(xii) The issue and sale of the Shares to be sold by the
Company hereunder and under the International Underwriting Agreement
and the compliance by each of the Company, NB LLC and NBMI with all of
the provisions of this Agreement, the International Underwriting
Agreement, the Exchange Agreement and the Stockholders Agreement, dated
as of August 19, 1998, among the Company and the Management
Stockholders named therein (the "Stockholders Agreement"), as
applicable, and the consummation of the transactions herein and therein
contemplated will not (a) conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a default
under, any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which the Company, NB LLC or NBMI or any of
their respective subsidiaries is a party or by which the Company, NB
LLC and NBMI or any of their respective subsidiaries is bound or to
which any of the property or assets of the Company, NB LLC or NBMI or
any of their respective subsidiaries is subject, (b) result in any
violation of the provisions of the Certificate of Incorporation or
By-laws or other organizational documents of the Company, NB LLC or
NBMI or (c) result in any violation of any statute or any order, rule
or regulation of any court or governmental agency or body having
jurisdiction over the Company, NB LLC or NBMI or any of their
respective subsidiaries or any of their properties, except, in the case
of clauses (a) and (c) above, any conflicts, breaches, defaults or
violations that, individually or in the aggregate, would not reasonably
be expected to have a Material Adverse Effect or impair the ability of
the Company and its subsidiaries to perform their respective
obligations under, or consummate the transactions contemplated by, this
Agreement, the International Underwriting Agreement, the Exchange
Agreement or the Stockholders Agreement, as applicable; and no consent,
approval, authorization, order, registration or qualification of or
with any such court or governmental agency or body is required for the
issue and sale of the Shares or the consummation by the Company, NB LLC
or NBMI of the transactions contemplated by this Agreement, the
International Underwriting Agreement, the Exchange Agreement or the
Stockholders Agreement except the registration under the Act of the
Shares and registration under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), of the Stock and such consents,
approvals,
4
<PAGE> 5
authorizations, registrations or qualifications as may be required
under foreign or state securities or Blue Sky laws in connection with
the purchase and distribution of the Shares by the Underwriters and the
International Underwriters;
(xiii) Each of the Company and its subsidiaries is in
compliance with all laws, regulations, permits, judgments, decrees,
ordinances and orders applicable to it or its businesses, including
without limitation Rule 15c3-1 under the Exchange Act, except for any
failures to be so in compliance that, individually or in the aggregate,
would not reasonably be expected to have a Material Adverse Effect;
(xiv) (A) Each of the Company and its subsidiaries has all
certificates, consents, exemptions, orders, permits, licenses,
authorizations or other approvals (each, an "Authorization") of and
from, and has made all declarations and filings with, all Federal,
state, local and other governmental authorities, all self-regulatory
organizations and all courts and other tribunals, necessary or required
to engage in the business currently conducted by it in the manner
described in the Prospectus, except for any failures to have any such
Authorizations or have made any such declarations or filings that,
individually or in the aggregate, would not reasonably be expected to
have a Material Adverse Effect; (B) all Authorizations required
pursuant to clause (A) of this paragraph are valid and in full force
and effect, except for any failures to be so valid and in full force
and effect that, individually or in the aggregate, would not reasonably
be expected to have a Material Adverse Effect; and (C) each of the
Company and its subsidiaries is in compliance with the terms and
conditions of all such Authorizations and with the rules and
regulations of the regulatory authorities and governing bodies having
jurisdiction with respect thereto except for any failures to be in such
compliance that, individually or in the aggregate, would not reasonably
be expected to have a Material Adverse Effect;
(xv) The Company is not required to be registered, licensed or
qualified as an investment adviser or a broker-dealer or as a commodity
trading advisor, a commodity pool operator or a future commission
merchant or any or all of the foregoing, as applicable; each of the
Company's subsidiaries that is required to be registered, licensed or
qualified as an investment adviser or a broker-dealer or as a commodity
trading advisor, a commodity pool operator or a futures commission
merchant or any or all of the foregoing, as applicable, is so
registered, licensed or qualified in each jurisdiction where the
conduct of its business requires such registration, license or
qualification (and such registration, license or qualification is in
full force and effect), and is in compliance with all applicable laws
requiring any such registration, licensing or qualification, except for
any failures to be so registered, licensed or qualified or to be in
such compliance that, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect; and neither
the Company nor any of its subsidiaries is prohibited from carrying on
its business as described in the Prospectus by any applicable laws,
rules, regulations, orders, or similar requirements except for any such
prohibitions that, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect;
(xvi) The Company is not a party to any investment advisory
agreement or distribution agreement; each of the investment advisory
agreements and distribution agreements to which any of the Company's
subsidiaries is a party is a valid and legally binding obligation of
such subsidiary which is a party thereto and complies with the
applicable provisions of the Investment Advisers Act of 1940, as
amended (the "Advisers Act"), except for any failures to be so in
compliance that, individually or in the aggregate, would not reasonably
be expected to have a Material Adverse Effect; and none of the
Company's subsidiaries is in breach or violation of or in default under
any such agreement which breach, violation, default or invalidity,
individually or in the aggregate, would reasonably be expected to have
a Material Adverse Effect;
(xvii) The Company does not sponsor any funds; each fund
sponsored by any of the Company's subsidiaries (a "Fund" or the
"Funds") and which is required to be registered with the Commission as
an investment company under the Investment Company Act of 1940, as
amended (the "Investment Company Act") is duly registered with the
Commission as an investment company
5
<PAGE> 6
under the Investment Company Act, except for any failures to be so
registered that, individually or in the aggregate, would not reasonably
be expected to have a Material Adverse Effect;
(xviii) Neither the Company nor any of its subsidiaries is in
violation of its Certificate of Incorporation or By-laws or other
organizational documents, as applicable, or, except for such defaults
that, individually or in the aggregate, would not reasonably expected
to have a Material Adverse Effect, in default in the performance or
observance of any material obligation, agreement, covenant or condition
contained in any indenture, mortgage, deed of trust, loan agreement
lease or other agreement or instrument to which it is a party or by
which it or any of its properties may be bound;
(xix) Consummation of the transactions contemplated by this
Agreement, the International Underwriting Agreement, the Exchange
Agreement or the Stockholders Agreement will not constitute an
"assignment", as defined in the Advisers Act (and the rules and
regulations thereunder) or the Investment Company Act (and the rules
and regulations thereunder); nor will consummation of such transactions
adversely affect in any material respects the ability of the Company
and its subsidiaries to conduct its business in compliance with
applicable law as described in the Prospectus, including, but not
limited to, providing investment advisory services to clients and
mutual funds, whether or not such funds are registered under the
Investment Company Act;
(xx) The statements set forth in the Prospectus under the
caption "Description of Capital Stock", insofar as they purport to
constitute a summary of the terms of the Stock, under the caption
"United States Federal Tax Considerations for Non-U.S. Holders" in the
Prospectus relating to the International Shares, and under the captions
"Management","The Exchange and the Subordinated Note Transaction",
"Stockholders Agreement", and "Underwriting", insofar as they purport
to describe the provisions of the laws and documents referred to
therein, are, in all material respects, accurate and complete summaries
or descriptions thereof;
(xxi) Other than as set forth in the Prospectus, there are no
legal or governmental proceedings pending to which the Company or any
of its subsidiaries is a party or of which any property of the Company
or any of its subsidiaries is the subject that, individually or in the
aggregate, would reasonably be expected to have a Material Adverse
Effect or adversely affect the issuance and sale of the Shares or
affect the validity of this Agreement, the International Underwriting
Agreement, the Exchange Agreement or the Stockholders Agreement; and,
to the best of the Company's knowledge, no such proceedings are
threatened by governmental authorities or others;
(xxii) Each of (A) the Exchange Agreement and (B) the
Stockholders Agreement has been duly authorized, executed and delivered
by, and constitutes a valid and legally binding obligation of, the
Company (in the case of (A) and (B)) and each of NB LLC and NBMI (in
the case of (A)), enforceable against such party in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity
principles;
(xxiii) The combined historical financial statements, together
with the accompanying notes, set forth in the Prospectus fairly
present, in all material respects, the combined financial position of
the Company and its subsidiaries at the respective dates indicated and
the combined results of their operations and their combined cash flows
for the respective periods indicated, in accordance with United States
generally accepted accounting principles consistently applied
throughout such periods; the pro forma financial statements contained
in the Prospectus have been prepared on a basis consistent with such
historical statements, except for the pro forma adjustments specified
therein, and fairly present, in all material respects, the historical
and proposed transactions described in the Prospectus or contemplated
by this Agreement, the International Underwriting Agreement, the
Exchange Agreement and the Stockholders Agreement, on the basis of
assumptions that, in the opinion of the Company, were reasonable at the
time such pro forma financial statements were prepared; and all other
historical and pro forma financial information and other data included
in the
6
<PAGE> 7
Prospectus are, in all material respects, accurately presented and
prepared on a basis consistent with such financial statements and the
books and records of the Company and its subsidiaries;
(xxiv) Each of the Company and its subsidiaries owns or
possesses or has the right to use the 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 and trade names
(collectively, the "Intellectual Property") presently employed by it in
connection with, and material to, individually or in the aggregate, the
operation of the businesses now operated by it, and none of the Company
or any of its subsidiaries has received any notice of infringement of
or conflict with asserted rights of others with respect to the
foregoing; and, to the best of the Company's knowledge, the use of such
Intellectual Property in connection with the business and operations of
the Company and each of its subsidiaries does not infringe on the
rights of any person except for any infringements that, individually or
in the aggregate, would not reasonably be expected to have a Material
Adverse Effect;
(xxv) All material tax returns required to be filed by the
Company or any of its subsidiaries in any jurisdiction have been timely
and duly filed, other than those filings being contested in good faith;
there are no tax returns of the Company or any of its subsidiaries that
are currently being audited by state, local or federal taxing
authorities or agencies (and with respect to which the Company or any
of its subsidiaries has received notice); and all taxes, including
withholding taxes, penalties and interest, assessments, fees and other
charges due or claimed to be due from such entities have been paid,
other than those being contested in good faith and for which adequate
reserves have been provided or those currently payable without penalty
or interest, and other than those that are not material;
(xxvi) Each of the Company and its subsidiaries maintains
insurance covering its properties, operations, personnel and businesses
which insures against such losses and risks as are adequate in
accordance with its reasonable business judgment to protect the Company
and each of its subsidiaries and their businesses; and all such
insurance is outstanding and duly in force on the date hereof and will
be outstanding and duly in force at each Time of Delivery (as defined
in Section 4 hereof);
(xxvii) There are no holders of securities of the Company or
any of its subsidiaries who, by reason of the execution of this
Agreement, the International Underwriting Agreement, the Exchange
Agreement or the Stockholders Agreement by the Company or any of its
subsidiaries or any Selling Stockholder, as the case may be, or the
consummation of the transactions contemplated hereby or thereby, have
or will have the right to request or demand the Company or any of its
subsidiaries or any Selling Stockholder to register under the Act any
securities held by them;
(xxviii) There are no contracts or other documents which are
required to be described in the Prospectus or filed as exhibits to the
Registration Statement by the Act or the rules and regulations of the
Commission thereunder which have not been described in the Prospectus
or filed as exhibits to the Registration Statement;
(xxix) The Company does not anticipate incurring operating
expenses or costs (except as set forth in the Prospectus) material to
the Company's financial condition or results of operations in
connection with the actions the Company currently believes are
necessary to ensure that all management information systems of the
Company and its subsidiaries will be year 2000 compliant, or by reason
of the failure of the clients, customers or suppliers of the Company or
any of its subsidiaries to be year 2000 compliant;
(xxx) No material labor dispute with the employees of the
Company or any of its subsidiaries exists or, to the knowledge of the
Company or any of its subsidiaries, is imminent;
7
<PAGE> 8
(xxxi) Neither the Company nor any of its subsidiaries is and,
after giving effect to the offering and sale of the Shares, will be an
"investment company" or an entity "controlled" by an "investment
company", as such terms are defined in the Investment Company Act;
(xxxii) Neither the Company nor any of its affiliates does
business with the government of Cuba or with any person or affiliate
located in Cuba within the meaning of Section 517.075, Florida
Statutes; and
(xxxiii) Arthur Andersen LLP, who have certified certain
financial statements of the Company and its subsidiaries, are
independent public accountants as required by the Act and the rules and
regulations of the Commission thereunder.
(b) Each of the Selling Stockholders, severally and not jointly,
represents and warrants to, and agrees with, each of the Underwriters and the
Company and, with respect to clause (b)(v), agrees with each of the
Underwriters, that:
(i) All consents, approvals, authorizations and orders
necessary for the execution and delivery by such Selling Stockholder of
this Agreement, the International Underwriting Agreement, the Exchange
Agreement, the Stockholders Agreement and the Power of Attorney and for
the sale and delivery of the Shares to be sold by such Selling
Stockholder hereunder and under the International Underwriting
Agreement, have been obtained, except for the registration under the
Act of the Shares, the registration under the Exchange Act of the
Stock, the filing and/or notices under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and such consents, approvals,
authorizations, registrations or qualifications as may be required
under foreign or state securities or Blue Sky laws; and such Selling
Stockholder has full right, power and authority to enter into this
Agreement, the International Underwriting Agreement, the Exchange
Agreement, the Stockholder Agreement and the Power of Attorney and upon
the consummation of the transactions contemplated in the Exchange
Agreement, will have full right, power and authority to sell, assign,
transfer and deliver the Shares to be sold by such Selling Stockholder
hereunder and under the International Underwriting Agreement;
(ii) The sale of the Shares to be sold by such Selling
Stockholder hereunder and under the International Underwriting
Agreement and the compliance by such Selling Stockholder with all of
the provisions of this Agreement, the International Underwriting
Agreement, the Exchange Agreement, the Stockholder Agreement and the
Power of Attorney and the consummation of the transactions herein and
therein contemplated will not conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a default
under, any statute, indenture, mortgage, deed of trust, loan agreement
or other agreement or instrument to which such Selling Stockholder is a
party or by which such Selling Stockholder is bound, or to which any of
the property or assets of such Selling Stockholder is subject, nor will
such action result in any violation of the provisions of the
Certificate of Incorporation or By-laws or other organizational
documents, as applicable, of such Selling Stockholder or any statute or
any order, rule or regulation of any court or governmental agency or
body having jurisdiction over such Selling Stockholder or the property
of such Selling Stockholder;
(iii) Immediately prior to each Time of Delivery, such Selling
Stockholder will have good and valid title to the Shares to be sold by
such Selling Stockholder hereunder and under the International
Underwriting Agreement, free and clear of all liens, encumbrances,
equities or claims; upon payment therefor and the delivery to The
Depository Trust Company ("DTC") or its agent of such Shares,
registered in the name of Cede & Co. or such other nominee designated
by DTC, both as provided for herein and in the International
Underwriting Agreement, and the crediting of such Shares to the
Underwriter's accounts with DTC, Cede & Co. or such other nominee
designated by DTC will be a "protected purchaser" of such Shares (as
defined in Section 8-303 of the Uniform Commercial Code as adopted in
the State of New York (the "UCC")), the Underwriters will acquire a
valid "security entitlement" (within the meaning of Section 8-501 of
the UCC) to such Shares, and no action based on an "adverse claim" (as
defined in Section 8-102 of the UCC) may be asserted against the
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<PAGE> 9
Underwriters with respect to such security entitlement (assuming that
the Underwriters are without notice of any such adverse claim);
(iv) This Agreement and the International Agreement have been
duly executed and delivered by or on behalf of such Selling
Stockholder;
(v) Each of the Exchange Agreement and the Stockholders
Agreement has been duly executed and delivered by or on behalf of, and
constitute valid and binding obligation of, such Selling Stockholder,
enforceable in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar
laws of general applicability relating to or affecting creditors'
rights and to general equity principles;
(vi) During the period beginning from the date hereof and
continuing to and including the date 180 days after the date of the
Prospectus, such Selling Stockholder will not, directly or indirectly,
offer, sell, contract to sell or otherwise dispose of, except as
provided hereunder or under the International Underwriting Agreement,
any shares of Stock or any other securities of the Company that are
substantially similar to the Shares, including but not limited to any
securities that are convertible into or exchangeable for, or that
represent the right to receive, Stock or any such substantially similar
securities, without your prior written consent;
(vii) Such Selling Stockholder has not taken and will not
take, directly or indirectly, any action which is designed to or which
has constituted or which might reasonably be expected to cause or
result in stabilization or manipulation of the price of any security of
the Company to facilitate the sale or resale of the Shares;
(viii) To the extent that any statements or omissions made in
the Registration Statement, any Preliminary Prospectus, the Prospectus
or any amendment or supplement thereto are made in reliance upon and in
conformity with written information furnished to the Company by or on
behalf of such Selling Stockholder expressly for use therein, such
Preliminary Prospectus and the Registration Statement did, and the
Prospectus and any further amendments or supplements to the
Registration Statement and the Prospectus, when they become effective
or are filed with the Commission, as the case may be, will conform in
all material respects to the requirements of the Act and the rules and
regulations of the Commission thereunder and will not contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading;
(ix) In order to document the Underwriters' compliance with
the reporting and withholding provisions of the Tax Equity and Fiscal
Responsibility Act of 1982 with respect to the transactions herein
contemplated, such Selling Stockholder will deliver to you prior to or
at the First Time of Delivery (as hereinafter defined) a properly
completed and executed United States Treasury Department Form W-9 (or
other applicable form or statement specified by Treasury Department
regulations in lieu thereof);
(x) Certificates in negotiable form representing all of the
Shares to be sold by such Selling Stockholder hereunder and under the
International Underwriting Agreement will, upon consummation of the
transactions contemplated by the Exchange Agreement, be placed in
custody pursuant to the Exchange Agreement, with the Company as
custodian (the "Custodian"), and such Selling Stockholder has duly
executed and delivered a Power of Attorney pursuant to the Exchange
Agreement (the "Power of Attorney"), appointing the Company as such
Selling Stockholder's attorneys-in-fact (the "Attorneys-in-Fact") with
authority to, among others, execute and deliver this Agreement and the
International Underwriting Agreement on behalf of such Selling
Stockholder, to determine the purchase price to be paid by the
Underwriters and the International Underwriters to the Selling
Stockholders as provided in Section 2 hereof, to authorize the delivery
of the Shares to be sold by such Selling Stockholder hereunder and
otherwise to act on behalf of such Selling Stockholder in
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<PAGE> 10
connection with the transactions contemplated by this Agreement, the
International Underwriting Agreement, the Exchange Agreement and the
Stockholders Agreement; and
(xi) The Shares represented by the certificates to be held in
custody for such Selling Stockholder under the Exchange Agreement will
be subject to the interests of the Underwriters hereunder and the
International Underwriters under the International Underwriting
Agreement; the arrangements made by such Selling Stockholder for such
custody, and the appointment by such Selling Stockholder of the
Attorneys-in-Fact by the Power of Attorney, are to that extent
irrevocable; the obligations of the Selling Stockholders hereunder
shall not be terminated by operation of law, whether by the death or
incapacity of any individual Selling Stockholder or, in the case of an
estate or trust, by the death or incapacity of any executor or trustee
or the termination of such estate or trust, or in the case of a
partnership, corporation or other entity, by the dissolution of such
partnership, corporation or other entity, or by the occurrence of any
other event; if any individual Selling Stockholder or any such executor
or trustee should die or become incapacitated, or if any such estate or
trust should be terminated, or if any such partnership, corporation or
other entity should be dissolved, or if any other such event should
occur, before the delivery of the Shares hereunder, certificates
representing the Shares shall be delivered by or on behalf of the
Selling Stockholders in accordance with the terms and conditions of
this Agreement, the International Underwriting Agreement, the Exchange
Agreement and the Stockholders Agreement; and actions taken by the
Attorneys-in-Fact pursuant to the Powers of Attorney shall be as valid
as if such death, incapacity, termination, dissolution or other event
had not occurred, regardless of whether or not the Custodian, the
Attorneys-in-Fact, or any of them, shall have received notice of such
death, incapacity, termination, dissolution or other event.
2. Subject to the terms and conditions herein set forth, (a) the
Company and each of the Selling Stockholders agree, severally and not jointly,
to sell to each of the Underwriters, and each of the Underwriters agrees,
severally and not jointly, to purchase from the Company and each of the Selling
Stockholders, at a purchase price per share of $-, the number of Firm Shares (to
be adjusted by you so as to eliminate fractional shares) determined by
multiplying the aggregate number of Firm Shares to be sold by the Company and
each of the Selling Stockholders as set forth opposite their respective names in
Schedule II hereto by a fraction, the numerator of which is the aggregate number
of Firm Shares to be purchased by such Underwriter as set forth opposite the
name of such Underwriter in Schedule I hereto and the denominator of which is
the aggregate number of Firm Shares to be purchased by all of the Underwriters
from the Company and all of the Selling Stockholders hereunder and (b) in the
event and to the extent that the Underwriters shall exercise the election to
purchase Optional Shares as provided below, the Company and each of the Selling
Stockholders agree, severally and not jointly, to sell to each of the
Underwriters, and each of the Underwriters agrees, severally and not jointly, to
purchase from the Company and each of the Selling Stockholders, at the purchase
price per share set forth in clause (a) of this Section 2, that portion of the
number of Optional Shares as to which such election shall have been exercised
(to be adjusted by you so as to eliminate fractional shares) determined by
multiplying such number of Optional Shares by a fraction the numerator of which
is the maximum number of Optional Shares which such Underwriter is entitled to
purchase as set forth opposite the name of such Underwriter in Schedule I hereto
and the denominator of which is the maximum number of Optional Shares that all
of the Underwriters are entitled to purchase hereunder.
The Company and the Selling Stockholders, as and to the extent
indicated in Schedule II hereto, hereby grant, severally and not jointly, to the
Underwriters the right to purchase at their election up to Optional Shares, at
the purchase price per share set forth in the paragraph above, for the sole
purpose of covering overallotments in the sale of the Firm Shares. Any such
election to purchase Optional Shares shall be made -. Any such election to
purchase Optional Shares may be exercised only by written notice from you to the
Company and the Attorneys-in-Fact, given within a period of 30 calendar days
after the date of this Agreement and setting forth the aggregate number of
Optional Shares to be purchased and the date on which such Optional Shares are
to be delivered, as determined by you but in no event earlier than the First
Time of Delivery or, unless you and the Company and the Attorneys-in-Fact
otherwise agree in writing, earlier than two or later than ten business days
after the date of such notice.
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3. Upon the authorization by you of the release of the Firm Shares, the
several Underwriters propose to offer the Firm Shares for sale upon the terms
and conditions set forth in the Prospectus.
4. (a) The Shares to be purchased by each Underwriter hereunder, in
definitive form, and in such authorized denominations and registered in such
names as Goldman, Sachs & Co. may request upon at least forty-eight hours' prior
notice to the Company and the Selling Stockholders shall be delivered by or on
behalf of the Company and the Selling Stockholders to Goldman, Sachs & Co.,
through the facilities of DTC, for the account of such Underwriter, against
payment by or on behalf of such Underwriter of the purchase price therefor by
wire transfer of Federal (same-day) funds to the account specified by the
Company and the Custodian, as their interests may appear, to Goldman, Sachs &
Co. at least forty-eight hours in advance. The Company will cause the
certificates representing the Shares to be made available for checking and
packaging at least twenty-four hours prior to the Time of Delivery (as defined
below) with respect thereto at the office of DTC or its designated custodian
(the "Designated Office"). The time and date of such delivery and payment shall
be, with respect to the Firm Shares, 9:30 a.m., New York City time, on -, 1998
or such other time and date as Goldman, Sachs & Co., the Company and the Selling
Stockholders may agree upon in writing, and, with respect to the Optional
Shares, 9:30 a.m., New York City time, on the date specified by Goldman, Sachs &
Co. in the written notice given by Goldman, Sachs & Co. of the Underwriters'
election to purchase such Optional Shares, or such other time and date as
Goldman, Sachs & Co., the Company and the Selling Stockholders may agree upon in
writing. Such time and date for delivery of the Firm Shares is herein called the
"First Time of Delivery", such time and date for delivery of the Optional
Shares, if not the First Time of Delivery, is herein called the "Second Time of
Delivery", and each such time and date for delivery is herein called a "Time of
Delivery".
(b) The documents to be delivered at each Time of Delivery by or on
behalf of the parties hereto pursuant to Section 7 hereof, including the
cross-receipt for the Shares and any additional documents requested by the
Underwriters pursuant to Section 7(o) hereof, will be delivered at the offices
of Sullivan & Cromwell, 125 Broad Street, New York, New York 10004 (the "Closing
Location"), and the Shares will be delivered at the Designated Office, all at
each Time of Delivery. A meeting will be held at the Closing Location at 3:00
p.m., New York City time, on the New York Business Day next preceding each Time
of Delivery, at which meeting the final drafts of the documents to be delivered
pursuant to the preceding sentence will be available for review by the parties
hereto. For the purposes of this Section 4 (and Section 5(c) hereof), "New York
Business Day" shall mean each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in New York are generally
authorized or obligated by law or executive order to close.
5. Each of the Company, NB LLC and NBMI agrees with each of the
Underwriters:
(a) To prepare the Prospectus in a form approved by you and to
file such Prospectus pursuant to Rule 424(b) under the Act not later
than the Commission's close of business on the second business day
following the execution and delivery of this Agreement, or, if
applicable, such earlier time as may be required by Rule 430A(a)(3)
under the Act; to make no further amendment or any supplement to the
Registration Statement or Prospectus which shall be disapproved by you
promptly after reasonable notice thereof; to advise you, promptly after
it receives notice thereof, of the time when any amendment to the
Registration Statement has been filed or becomes effective or any
supplement to the Prospectus or any amended Prospectus has been filed
and to furnish you copies thereof; to advise you, promptly after it
receives notice thereof, of the issuance by the Commission of any stop
order or of any order preventing or suspending the use of any
Preliminary Prospectus or Prospectus, of the suspension of the
qualification of the Shares for offering or sale in any jurisdiction,
of the initiation or threatening of any proceeding for any such
purpose, or of any request by the Commission for the amending or
supplementing of the Registration Statement or Prospectus or for
additional information; and, in the event of the issuance of any stop
order or of any order preventing or suspending the use of any
Preliminary Prospectus or Prospectus or suspending any such
qualification, promptly to use its best efforts to obtain the
withdrawal of such order;
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(b) Promptly from time to time to take such action as you may
reasonably request to qualify the Shares for offering and sale under
the securities laws of such jurisdictions as you may request and to
comply with such laws so as to permit the continuance of sales and
dealings therein in such jurisdictions for as long as may be necessary
to complete the distribution of the Shares, provided that in connection
therewith the Company shall not be required to qualify as a foreign
corporation or to file a general consent to service of process or take
any action that would subject the Company to any material tax to which
it would not otherwise be subject in any jurisdiction;
(c) Prior to 10:00 a.m., New York City time, on the New York
Business Day next succeeding the date of this Agreement and from time
to time, to furnish the Underwriters with copies of the Prospectus in
New York City in such quantities as you may reasonably request, and, if
the delivery of a prospectus is required at any time prior to the
expiration of nine months after the time of issue of the Prospectus in
connection with the offering or sale of the Shares and if at such time
any event shall have occurred as a result of which the Prospectus as
then amended or supplemented would include an untrue statement of a
material fact or omit to state any material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made when such Prospectus is delivered, not misleading,
or, if for any other reason it shall be necessary during such period to
amend or supplement the Prospectus in order to comply with the Act to
notify you and upon your request to prepare and furnish without charge
to each Underwriter and to any dealer in securities as many copies as
you may from time to time reasonably request of an amended Prospectus
or a supplement to the Prospectus which will correct such statement or
omission or effect such compliance, and in case any Underwriter is
required to deliver a prospectus in connection with sales of any of the
Shares at any time nine months or more after the time of issue of the
Prospectus, upon your request but at the expense of such Underwriter,
to prepare and deliver to such Underwriter as many copies as you may
reasonably request of an amended or supplemented Prospectus complying
with Section 10(a)(3) of the Act;
(d) To make generally available to its securityholders as soon
as practicable, but in any event not later than eighteen months after
the effective date of the Registration Statement (as defined in Rule
158(c) under the Act), an earnings statement of the Company and its
subsidiaries (which need not be audited) complying with Section 11(a)
of the Act and the rules and regulations of the Commission thereunder
(including, at the option of the Company, Rule 158);
(e) During the period beginning from the date hereof and
continuing to and including the date 180 days after the date of the
Prospectus, not to, directly or indirectly, offer, sell, contract to
sell or otherwise dispose of, except as provided hereunder and under
the International Underwriting Agreement, any shares of Stock or any
other securities of the Company that are substantially similar to the
Shares, including but not limited to any securities that are
convertible into or exchangeable for, or that represent the right to
receive, Stock or any such substantially similar securities (other than
pursuant to the 1998 Neuberger Berman Directors Stock Incentive Plan,
the 1998 Neuberger Berman Long-Term Incentive Plan and the Neuberger
Berman Employee Deferred Contribution Stock Incentive Plan as in effect
on the date of this Agreement), without your prior written consent;
(f) To furnish to its stockholders (i) after the end of each
fiscal year, an annual report (including a balance sheet and statements
of income, stockholders' equity and cash flows of the Company and its
consolidated subsidiaries certified by independent public accountants)
and (ii) after the end of each of the first three quarters of each
fiscal year (beginning with the fiscal quarter ending after the
effective date of the Registration Statement), consolidated summary
financial information of the Company and its subsidiaries for such
quarter in reasonable detail, in each case no later than required by
the rules and regulations of the Commission or any national securities
exchange on which any securities of the Company may be listed;
(g) During a period of five years from the effective date of
the Registration Statement, to furnish to you copies of all reports or
other communications (financial or other) furnished to stockholders,
and to deliver to you (i) as soon as they are available, copies of any
reports and
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<PAGE> 13
financial statements furnished to or filed with the Commission or any
national securities exchange on which any class of securities of the
Company is listed; and (ii) such additional information concerning the
business and financial condition of the Company as you may from time to
time reasonably request (such financial statements to be on a
consolidated basis to the extent the accounts of the Company and its
subsidiaries are consolidated in reports furnished to its stockholders
generally or to the Commission);
(h) To use the net proceeds received by it from the sale of
the Shares pursuant to this Agreement and the International
Underwriting Agreement in the manner specified in the Prospectus under
the caption "Use of Proceeds";
(i) To use its best efforts to list, subject to notice of
issuance, the Shares on the New York Stock Exchange (the "Exchange");
(j) To file with the Commission such information on Form 10-Q
or Form 10-K as may be required by Rule 463 under the Act; and
(k) If the Company elects to rely upon Rule 462(b), to file a
Rule 462(b) Registration Statement with the Commission in compliance
with Rule 462(b) by 10:00 p.m., Washington, D.C. time, on the date of
this Agreement, and at the time of such filing either pay to the
Commission the filing fee for the Rule 462(b) Registration Statement or
give irrevocable instructions for the payment of such fee pursuant to
Rule 111(b) under the Act.
6. The Company covenants and agrees with the several Underwriters that
the Company will pay or cause to be paid the following: (i) the fees,
disbursements and expenses of the Company's counsel and accountants in
connection with the registration of the Shares under the Act and all other
expenses in connection with the preparation, printing and filing of the
Registration Statement, any Preliminary Prospectus and the Prospectus and
amendments and supplements thereto and the mailing and delivering of copies
thereof to the Underwriters and dealers; (ii) the cost of printing or producing
any Agreement among Underwriters, this Agreement, the International Underwriting
Agreement, the Agreement between Syndicates, the Selling Agreements, the Blue
Sky Memorandum, closing documents (including any compilations thereof) and any
other documents in connection with the offering, purchase, sale and delivery of
the Shares; (iii) all expenses in connection with the qualification of the
Shares for offering and sale under state securities laws as provided in Section
5(b) hereof, including the reasonable fees and disbursements of counsel for the
Underwriters in connection with such qualification and in connection with the
Blue Sky survey; (iv) all fees and expenses in connection with listing the
Shares on the Exchange; (v) the filing fees incident to, and the fees and
disbursements of counsel for the Underwriters in connection with, securing any
required review by the National Association of Securities Dealers, Inc. of the
terms of the sale of the Shares; (vi) the cost of preparing stock certificates;
(vii) the cost and charges of any transfer agent or registrar; (viii) any
expenses and taxes incident to the sale and delivery of the Shares to be sold by
the Selling Stockholders to the Underwriters and (ix) all other costs and
expenses incident to the performance of the Company's and each Selling
Stockholder's obligations hereunder (other than fees and expenses of counsel for
such Selling Stockholder which is not counsel to the Selling Stockholders) which
are not otherwise specifically provided for in this Section. In connection with
(viii) of the preceding sentence, Goldman, Sachs & Co. agrees to pay any
required New York State stock transfer tax, and such Selling Stockholders agree
to reimburse Goldman, Sachs & Co. for associated carrying costs if such tax
payment is not rebated on the day of payment and for any portion of such tax
payment not rebated. It is understood, however, that the Company shall bear, and
the Selling Stockholders shall not be required to pay or to reimburse the
Company for, the cost of any other matters not directly relating to the sale and
purchase of the Shares pursuant to this Agreement, and that, except as provided
in this Section, and Sections 8 and 11 hereof, the Underwriters will pay all of
their own costs and expenses, including the fees of their counsel, stock
transfer taxes on resale of any of the Shares by them, and any advertising
expenses connected with any offers they may make.
7. The obligations of the Underwriters hereunder, as to the Shares to
be delivered at each Time of Delivery, shall be subject, in their discretion, to
the condition that all representations and warranties and
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<PAGE> 14
other statements of the Company and of the Selling Stockholders herein are, at
and as of such Time of Delivery, true and correct, the condition that the
Company and the Selling Stockholders shall have performed all of its and their
obligations hereunder theretofore to be performed, and the following additional
conditions:
(a) The Prospectus shall have been filed with the Commission
pursuant to Rule 424(b) within the applicable time period prescribed
for such filing by the rules and regulations under the Act and in
accordance with Section 5(a) hereof; if the Company has elected to rely
upon Rule 462(b), the Rule 462(b) Registration Statement shall have
become effective by 10:00 p.m., Washington, D.C. time, on the date of
this Agreement; no stop order suspending the effectiveness of the
Registration Statement or any part thereof shall have been issued and
no proceeding for that purpose shall have been initiated or threatened
by the Commission; and all requests for additional information on the
part of the Commission shall have been complied with to your reasonable
satisfaction;
(b) Sullivan & Cromwell, counsel for the Underwriters, shall
have furnished to you such written opinion or opinions (a draft of each
such opinion is attached as Annex II(a) hereto), dated such Time of
Delivery, with respect to the incorporation of the Company, the
validity of the Shares being delivered at such Time of Delivery, the
Registration Statement and the Prospectus, as well as such other
related matters as you may reasonably request, and such counsel shall
have received such papers and information as they may reasonably
request to enable them to pass upon such matters;
(c) Debevoise & Plimpton, counsel for the Company, shall have
furnished to you their written opinion (a draft of such opinion is
attached as Annex II(b)(1) hereto), dated such Time of Delivery, in
form and substance satisfactory to you, to the effect that:
(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, with corporate power and
authority to own its properties and conduct its business as
described in the Prospectus;
(ii) The Company has an authorized capitalization as
set forth in the Prospectus, and all of the issued shares of
capital stock of the Company (including the Shares being
delivered at such Time of Delivery) have been duly and validly
authorized and issued and are fully paid and non-assessable;
and the Shares conform to the description of the Stock
contained in the Prospectus;
(iii) The Company has been duly qualified as a
foreign corporation for the transaction of business and is in
good standing under the laws of each other jurisdiction in
which it owns or leases properties or conducts any business so
as to require such qualification, except for any failures to
be so qualified or in good standing that, individually or in
the aggregate, would not reasonably be expected to have a
Material Adverse Effect (such counsel being entitled to rely
in respect of the opinion in this clause upon opinions of
local counsel and in respect of matters of fact upon
certificates of officers of the Company, provided that such
counsel shall state that they believe that both you and they
are justified in relying upon such opinions and certificates);
(iv) NB LLC has been duly formed and is validly
existing as a limited liability company in good standing under
the laws of the State of Delaware; all of the membership
interests of NB LLC have been validly issued in accordance
with applicable law and the limited liability company
agreement of NB LLC, and are owned directly by the Company;
NBMI has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of
New York; all of the issued shares of capital stock of NBMI
have been duly and validly authorized and issued, are fully
paid and non-assessable, and are owned directly by the
Company; and each of NB LLC and NBMI has been duly qualified
as a foreign corporation for the transaction of business and
is in good standing under the laws of each other jurisdiction
in which it owns or leases properties or conducts any business
so as to require such qualification, except for failures to be
so qualified or in good standing that,
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<PAGE> 15
individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect (such counsel being
entitled to rely in respect of the opinion in this clause upon
opinions of local counsel and in respect of matters of fact
upon certificates of officers of the Company or its
subsidiaries, provided that such counsel shall state that they
believe that both you and they are justified in relying upon
such opinions and certificates);
(v) To the best of such counsel's knowledge and other
than as set forth in the Prospectus, there are no legal or
governmental proceedings pending to which the Company or any
of its subsidiaries is a party or of which any property of the
Company or any of its subsidiaries is the subject that,
individually or in the aggregate, would reasonably be expected
to have a Material Adverse Effect, would adversely affect the
issuance and sale of the Shares or would affect the validity
of this Agreement, the International Underwriting Agreement,
the Exchange Agreement or the Stockholders Agreement; and, to
the best of such counsel's knowledge, no such proceedings are
threatened by governmental authorities or others;
(vi) This Agreement and the International
Underwriting Agreement have been duly authorized, executed and
delivered by each of the Company, NB LLC and NBMI; and each of
the Company, NB LLC and NBMI has all requisite corporate power
and authority to perform its obligations under this Agreement
and the International Underwriting Agreement and to consummate
the transactions contemplated hereby and thereby, including
without limitation, in the case of the Company, the corporate
power and authority to issue, sell and deliver the Shares as
provided herein and therein;
(vii) Each of (A) the Exchange Agreement and (B) the
Stockholders Agreement has been duly authorized, executed and
delivered by, and constitute valid and binding obligation of,
the Company (in the case of (A) and (B)) and each of NB LLC
and NBMI (in the case of (A)), enforceable against such party
in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium
and similar laws of general applicability relating to or
affecting creditors' rights and to general equity principles;
(viii) The issue and sale of the Shares being
delivered at such Time of Delivery to be sold by the Company
and the compliance by each of the Company, NB LLC and NBMI
with all of the provisions of this Agreement, the
International Underwriting Agreement, the Exchange Agreement
and the Stockholders Agreement, as applicable, and the
consummation of the transactions herein and therein
contemplated (a) will not conflict with or result in a breach
or violation of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument known
to such counsel to which the Company, NB LLC or NBMI or any of
their respective subsidiaries is a party or by which the
Company, NB LLC or NBMI or any of their respective
subsidiaries is bound or to which any of the property or
assets of the Company, NB LLC or NBMI or any of their
respective subsidiaries is subject, (b) result in any
violation of the provisions of the Certificate of
Incorporation or By-laws or other organizational documents of
the Company or NB LLC or NBMI, or (c) result in any violation
of any statute or any order, rule or regulation (other than
State securities or Blue Sky laws as to which such counsel
need express no opinion, and other than United States federal
securities laws, as to which such counsel need express no
opinion except as otherwise specifically set forth herein), or
any order known to such counsel of any court or governmental
agency or body having jurisdiction over the Company, NB LLC or
NBMI or any of their respective subsidiaries or any of their
properties, except, in the case of clauses (a) and (c) above,
any conflicts, breaches, defaults or violations that,
individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect or impair the
ability of the Company and its subsidiaries to perform their
respective obligations under, or consummate the transactions
contemplated by, this Agreement, the International
Underwriting Agreement, the Exchange Agreement or the
Stockholders Agreement, as applicable;
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(ix) No consent, approval, authorization, order,
registration or qualification of or with any court or
governmental agency or body is required for the issue and sale
of the Shares or the consummation by the Company or any of its
subsidiaries of the transactions contemplated by this
Agreement, the International Underwriting Agreement, the
Exchange Agreement or the Stockholders Agreement, except the
registration under the Act of the Shares and the registration
under the Exchange Act of the Stock, and such consents,
approvals, authorizations, registrations or qualifications as
may be required under state securities or Blue Sky laws in
connection with the purchase and distribution of the Shares by
the Underwriters and the International Underwriters;
(x) The statements set forth in the Prospectus under
the caption "Description of Capital Stock", insofar as they
purport to constitute a summary of the terms of the Stock,
under the caption "United States Federal Tax Considerations
for Non-U.S. Holders" in the Prospectus relating to the
International Shares, and under the captions "Management",
"The Exchange and the Subordinated Note Transaction",
"Stockholders Agreement", and "Underwriting", insofar as they
purport to describe the provisions of the laws and documents
referred to therein, are, in all material respects accurate
and complete summaries or descriptions thereof;
(xi) Consummation of the transactions contemplated by
this Agreement, the International Underwriting Agreement, the
Exchange Agreement or the Stockholders Agreement will not
constitute an "assignment", within the meaning of such term
under the Advisers Act (and the rules and regulations
thereunder) or the Investment Company Act
(and the rules and regulations thereunder);
(xii) Such counsel does not know of any contracts or
other documents which are required to be filed as exhibits to
the Registration Statement by the Act or by the rules and
regulations thereunder which have not been filed as exhibits
to the Registration Statement;
(xiii) The Company is not required to be registered,
licensed or qualified as an investment adviser or a
broker-dealer or as a commodity trading advisor, a commodity
pool operator or a futures commission merchant or any or all
of the foregoing, as applicable; each of the Company's
subsidiaries that is required to be registered as an
investment adviser under the Advisers Act is so registered
(and such registration is in full force and effect), except
for failures to be so registered that, individually or in the
aggregate, would not reasonably be expected to have a Material
Adverse Effect. Each of the Company's subsidiaries that is
required to be registered as a broker-dealer under the
Exchange Act is so registered (and such registration is in
full force and effect), except for failures to be so
registered that, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect. Each
of the Company's subsidiaries that is required to be
registered as a commodity trading advisor and/or commodity
pool operator under the Commodity Exchange Act (the "CEA") is
so registered (and such registration is in full force and
effect), except for failures to be so registered that,
individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect. Each of the
Company's subsidiaries that is required to be registered as a
futures commission merchant under the CEA is so registered
(and such registration is in full force and effect), except
for failures to be so registered that, individually or in the
aggregate, would not reasonably be expected to have a Material
Adverse Effect. Each of the Company's subsidiaries has been
duly registered, licensed or qualified as an investment
adviser or a broker-dealer or as a commodity trading advisor,
commodity pool operator or a futures commission merchant or
any or all of the foregoing, as applicable, in all
jurisdictions in which the conduct of its business requires
such registration, licensing or qualification, except for
failures to be so registered, licensed or qualified that,
individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect;
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<PAGE> 17
(xiv) Neither the Company nor any of its subsidiaries
is and, after giving effect to the offering and sale of the
Shares, will be an "investment company" or an entity
"controlled" by an "investment company", as such terms are
defined in the Investment Company Act; and
(xv) The Registration Statement and the Prospectus
and any further amendments and supplements thereto made by the
Company prior to such Time of Delivery (other than the
financial statements, related notes and schedules and other
financial data therein, as to which such counsel need express
no opinion) comply as to form in all material respects with
the requirements of the Act and the rules and regulations
thereunder.
In addition, such counsel shall state that it has participated
in conferences with directors, officers and other representatives of
the Company, various of the Selling Stockholders, representatives of
the independent public accountants for the Company, representatives of
the Underwriters and representatives of counsel for the Underwriters,
at which conferences the contents of the Registration Statement and the
Prospectus and related matters were discussed, and, although such
counsel has not independently verified and is not passing upon and
assumes no responsibility for the accuracy, completeness or fairness of
the statements contained in the Registration Statement or the
Prospectus, except to the extent specified in subsection (x) of this
Section 7(c)(1), no facts have come to such counsel's attention which
leads such counsel to believe that the Registration Statement, as of
its effective date, (other than the financial statements, related notes
and schedules and other financial data, as to which such counsel need
express no opinion) 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, as of
its date, the Prospectus or any further amendment or supplement thereto
made by the Company prior to such Time of Delivery (other than the
financial statements, related notes and schedules and other financial
data, as to which such counsel need express no opinion) 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, in the light of the circumstances under which they were made,
not misleading or that, as of such Time of Delivery, either the
Registration Statement or the Prospectus or any further amendment or
supplement thereto made by the Company prior to such Time of Delivery
(other than the financial statements, related notes and schedules and
other financial data, as to which such counsel need express no opinion)
contains an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading; and they do not know of any amendment to the
Registration Statement required to be filed or of any contracts or
other documents of a character required to be filed as an exhibit to
the Registration Statement or required to be described in the
Registration Statement or the Prospectus which are not filed or
described as required.
In rendering such opinion, such counsel may state that they express no
opinion as to the laws of any jurisdiction other than the laws of the State of
New York, Delaware corporate and the federal laws of the United States.
(d) C. Carl Randolph, Senior Vice President and General
Counsel of the Company, shall have furnished to you his written opinion
(a draft of such opinion is attached as Annex (II)(b)(2) hereto), dated
such Time of Delivery, in form and substance satisfactory to you, to
the effect that:
(i) Each of (A) Neuberger & Berman Trust Company, (B)
Neuberger & Berman Trust Company of Delaware and (C) Neuberger
& Berman Agency, Inc. (which, together with NB LLC and NBMI,
constitute all the subsidiaries of the Company) has been duly
incorporated and is validly existing as a corporation in good
standing under the laws of its jurisdiction of incorporation;
all of the issued shares of capital stock of each such
subsidiary have been duly and validly authorized and issued,
are fully paid and non-assessable, and are owned indirectly by
the Company through NB LLC, free and clear of all liens,
encumbrances, equities or claims; and each such subsidiary has
been duly qualified as a foreign corporation for the
transaction of business and is in good standing under the laws
of each other
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<PAGE> 18
jurisdiction in which it owns or leases properties or conducts
any business so as to require such qualification, except for
any failures to be so qualified or in good standing that,
individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect (such counsel being
entitled to rely in respect of the opinion in this clause upon
opinions of local counsel and in respect of matters of fact
upon certificates of officers of the Company or its
subsidiaries, provided that such counsel shall state that they
believe that both you and they are justified in relying upon
such opinions and certificates);
(ii) To the best of such counsel's knowledge, there
are no outstanding subscriptions, rights, warrants, options,
calls, convertible securities, commitments of sale or liens
related to or entitling any person to purchase or otherwise to
acquire any shares of the capital stock of, membership
interests or other ownership interest in, the Company or any
of its subsidiaries; and all of the membership interests of NB
LLC and the issued shares of capital stock of NBMI are owned
by the Company free and clear of all liens, encumbrances,
equities or claims; and
(iii) Neither the Company nor any of its subsidiaries
is in violation of its Certificate of Incorporation or By-laws
or other organizational documents or, except for such defaults
that would not have a Material Adverse Effect, in default in
the performance or observance of any obligation, agreement,
covenant or condition contained in any indenture, mortgage,
deed of trust, loan agreement, lease or other agreement or
instrument to which it is a party or by which it or any of its
properties may be bound.
In rendering such opinion, such counsel may state that they express no
opinion as to the laws of any jurisdiction other than the laws of the State of
New York, Delaware corporate and the federal laws of the United States.
(e) - , counsel for of the Company, shall have furnished to
you its written opinion (drafts of such opinion are attached as Annex
II(b)(3) hereto) dated such Time of Delivery, in form and substance
satisfactory to you, to the effect that:
(i) Each Fund which is required to be registered with
the Commission as an investment company under the Investment
Company Act is duly registered with the Commission as an
investment company under the Investment Company Act, except
for failures to be so registered that, individually or in the
aggregate, would not reasonably be expected to have a Material
Adverse Effect.
In rendering such opinion, such counsel may state that they express no
opinion as to the laws of any jurisdiction other than the laws of the State of
New York, Delaware corporate and the federal laws of the United States.
(f) Debevoise & Plimpton, counsel for of the Selling
Stockholders, shall have furnished to you its written opinion (drafts
of such opinion are attached as Annex II(c) hereto) dated such Time of
Delivery, in form and substance satisfactory to you, to the effect
that:
(i) A Power of Attorney, the Exchange Agreement and
the Stockholders Agreement have been duly executed and
delivered by each Selling Stockholder and constitute valid and
legally binding agreements of such Selling Stockholder in
accordance with their terms, subject as to enforcement to
bankruptcy, insolvency, reorganization and similar laws of
general applicability relating to or affecting creditors'
rights generally and to general equity principles;
(ii) This Agreement and the International
Underwriting Agreement have been duly executed and delivered
by or on behalf of each Selling Stockholder; and the sale of
the Shares to be sold by such Selling Stockholder hereunder
and thereunder and the compliance
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<PAGE> 19
by such Selling Stockholder with all of the provisions of this
Agreement, the International Underwriting Agreement, the
Exchange Agreement, the Stockholders Agreement and the Power
of Attorney and the consummation of the transactions herein
and therein contemplated will not conflict with or result in a
breach or violation of any terms or provisions of, or
constitute a default under, any statute, indenture, mortgage,
deed of trust, loan agreement or other agreement or instrument
known to such counsel to which such Selling Stockholder is a
party or by which such Selling Stockholder is bound, or to
which any of the property or assets of such Selling
Stockholder is subject and that is material to such Selling
Stockholders, nor will such action result in any violation of
the provisions of the Certificate of Incorporation or By-laws
or other organizational documents, as applicable, of such
Selling Stockholder or any rule or regulation (other than
State securities or Blue Sky laws as to which such counsel
need express no opinion, and other than United States federal
securities laws, as to which such counsel need express no
opinion except as otherwise specifically set forth herein) or
any order known to such counsel of any court or governmental
agency or body having jurisdiction over such Selling
Stockholder or the property of such Selling Stockholder;
(iii) No consent, approval, authorization or order of
any court or governmental agency or body is required for the
consummation of the transactions contemplated by this
Agreement, the International Underwriting Agreement, the
Exchange Agreement or the Stockholders Agreement in connection
with the Shares to be sold by such Selling Stockholder
hereunder or thereunder, except [name any such consent,
approval, authorization or order] which [has] [have] been duly
obtained and [is] [are] in full force and effect, the
registration of the Shares under the Act, the registration of
the Stock under the Exchange Act and such as may be required
under foreign or state securities or Blue Sky laws in
connection with the purchase and distribution of such Shares
by the Underwriters or the International Underwriters; and
(iv) Immediately prior to such Time of Delivery such
Selling Stockholder had good and valid title to the Shares to
be sold at such Time of Delivery by such Selling Stockholder
under this Agreement and the International Underwriting
Agreement, free and clear of all liens, encumbrances, equities
or claims; and upon payment therefor and the delivery to DTC
or its agent of such Shares, registered in the name of Cede &
Co. or such other nominee designated by DTC, both as provided
for herein and in the International Underwriting Agreement,
and the crediting of such Shares to the Underwriter's accounts
with DTC, Cede & Co. or such other nominee designated by DTC
will be a "protected purchaser" of such Shares (as defined in
Section 8-303 of the UCC), the Underwriters will acquire a
valid "security entitlement" (within the meaning of Section
8-501 of the UCC) to such Shares, and no action based on an
"adverse claim" (as defined in Section 8-102 of the UCC) may
be asserted against the Underwriters with respect to such
security entitlement (assuming that the Underwriters are
without notice of any such adverse claim).
In rendering such opinion, such counsel may state that they express no
opinion as to the laws of any jurisdiction other than the laws of the State of
New York, Delaware corporate and the federal laws of the United States and in
rendering the opinion in subparagraph (iv) such counsel may rely upon a
certificate of such Selling Stockholder in respect of matters of fact as to
ownership of, and liens, encumbrances, equities or claims on the Shares sold by
such Selling Stockholder, provided that such counsel shall state that they
believe that both you and they are justified in relying upon such certificate;
(g) On the date of the Prospectus at a time prior to the
execution of this Agreement, at 9:30 a.m., New York City time, on the
effective date of any post-effective amendment to the Registration
Statement filed subsequent to the date of this Agreement and also at
each Time of Delivery, Arthur Andersen LLP shall have furnished to you
a letter or letters, dated the respective dates of delivery thereof, in
form and substance satisfactory to you, to the effect set forth in
Annex I hereto (the executed copy of the letter delivered prior to the
execution of this Agreement is attached as Annex I(a) hereto and a
draft of the form of letter to be delivered on the effective date of
any post-
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<PAGE> 20
effective amendment to the Registration Statement and as of each Time
of Delivery is attached as Annex I(b) hereto);
(h) (i) Neither the Company nor any of its subsidiaries shall
have sustained since the date of the latest audited financial
statements included in the Prospectus any loss or interference with its
business from fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any labor dispute or court or
governmental action, order or decree, otherwise than as set forth or
contemplated in the Prospectus, and (ii) since the respective dates as
of which information is given in the Prospectus there shall not have
been any change in the capital stock or long-term debt of the Company
or any of its subsidiaries or any change, or any development involving
a prospective change, in or affecting the general affairs, management,
financial position, stockholders' equity or results of operations of
the Company and its subsidiaries, otherwise than as set forth or
contemplated in the Prospectus, the effect of which, in any such case
described in Clause (i) or (ii), is in the judgment of the
Representatives so material and adverse as to make it impracticable or
inadvisable to proceed with the public offering or the delivery of the
Shares being delivered at such Time of Delivery on the terms and in the
manner contemplated in the Prospectus;
(i) On or after the date hereof (i) no downgrading shall have
occurred in the rating accorded the Company's debt securities by any
"nationally recognized statistical rating organization", as that term
is defined by the Commission for purposes of Rule 436(g)(2) under the
Act, and (ii) no such organization shall have publicly announced that
it has under surveillance or review, with possible negative
implications, its rating of any of the Company's debt securities;
(j) On or after the date hereof there shall not have occurred
any of the following: (i) a suspension or material limitation in
trading in securities generally on the Exchange; (ii) a suspension or
material limitation in trading in the Company's securities on the
Exchange; (iii) a general moratorium on commercial banking activities
declared by either Federal or New York State authorities; or (iv) the
outbreak or escalation of hostilities involving the United States or
the declaration by the United States of a national emergency or war, if
the effect of any such event specified in this Clause (iv) in the
judgment of the Representatives makes it impracticable or inadvisable
to proceed with the public offering or the delivery of the Shares being
delivered at such Time of Delivery on the terms and in the manner
contemplated in the Prospectus;
(k) The Shares to be sold by the Company and the Selling
Stockholders at such Time of Delivery shall have been duly listed,
subject to notice of issuance, on the Exchange;
(l) The Company has obtained and delivered to the Underwriters
executed copies of an agreement from each Management Stockholder that
is not a party to this Agreement substantially to the effect set forth
in Subsection 5(e) hereof in form and substance satisfactory to you;
(m) (A) The Company shall have delivered to the Underwriters
executed copies of the Exchange Agreement and the Stockholders
Agreement, and (B) the transactions contemplated under the Exchange
Agreement shall have been duly and validly consummated in accordance
with applicable law;
(n) The Company shall have complied with the provisions of
Section 5(c) hereof with respect to the furnishing of prospectuses on
the New York Business Day next succeeding the date of this Agreement;
and
(o) The Company and the Selling Stockholders shall have
furnished or caused to be furnished to you at such Time of Delivery
certificates of officers of the Company and of the Selling
Stockholders, respectively, reasonably satisfactory to you as to the
accuracy of the representations and warranties of the Company and the
Selling Stockholders, respectively, herein at and as of such Time of
Delivery, as to the performance by the Company and the Selling
Stockholders of all of their respective obligations hereunder to be
performed at or prior to such Time of Delivery, and as to such
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<PAGE> 21
other matters as you may reasonably request, and the Company shall have
furnished or caused to be furnished certificates as to the matters set
forth in subsections (a), (h) and (m)(B) of this Section, and as to
such other matters as you may reasonably request.
8. (a) Each of the Company, NB LLC and NBMI, jointly and severally,
will indemnify and hold harmless each Underwriter against any losses, claims,
damages or liabilities, joint or several, to which such Underwriter may become
subject, under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus, the Registration Statement or the Prospectus, or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and will
reimburse each Underwriter for any legal or other expenses reasonably incurred
by such Underwriter in connection with investigating or defending any such
action or claim as such expenses are incurred; provided, however, that the
Company, NB LLC and NBMI shall not be liable in any such case to the extent that
any such loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in any Preliminary Prospectus, the Registration Statement or the Prospectus
or any such amendment or supplement in reliance upon and in conformity with
written information furnished to the Company by or on behalf of any Underwriter
through Goldman, Sachs & Co. expressly for use therein.
(b) Each of the Selling Stockholders will indemnify and hold
harmless each Underwriter, in proportion to the maximum number of Shares sold by
such Selling Stockholder, including any Optional Shares, as set forth in
Schedule II hereto, against any losses, claims, damages or liabilities, joint or
several, to which such Underwriter may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and will reimburse each Underwriter for
any legal or other expenses reasonably incurred by such Underwriter in
connection with investigating or defending any such action or claim as such
expenses are incurred; provided, however, that such Selling Stockholder shall
not be liable in any such case to the extent that any such loss, claim, damage
or liability arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in any Preliminary
Prospectus, the Registration Statement or the Prospectus or any such amendment
or supplement in reliance upon and in conformity with written information
furnished to the Company by or on behalf of any Underwriter through Goldman,
Sachs & Co. expressly for use therein; provided, further, that the liability of
a Selling Stockholder pursuant to this Section 8(b) shall not exceed the product
of the number of Shares sold by such Selling Stockholder, including any Optional
Shares, and the initial public offering price of the Shares as set forth in the
Prospectus.
(c) Each Underwriter will indemnify and hold harmless the
Company, NB LLC, NBMI and each Selling Stockholder against any losses, claims,
damages or liabilities to which the Company, NB LLC, NBMI or such Selling
Stockholder may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, the Registration
Statement or the Prospectus, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in any Preliminary Prospectus, the Registration Statement or
the Prospectus or any such amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by or on behalf of
such Underwriter through Goldman, Sachs & Co. expressly for use therein; and
will reimburse the Company, NB LLC, NBMI and each Selling Stockholder for any
legal or other expenses reasonably incurred by the Company, NB LLC, NBMI or such
Selling Stockholder in connection with investigating or defending any such
action or claim as such expenses are incurred.
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(d) Promptly after receipt by an indemnified party under subsection
(a), (b) or (c) above of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made against an
indemnifying party under such subsection, notify the indemnifying party in
writing of the commencement thereof; but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party otherwise than under such subsection. In case any such
action shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it shall wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party (which shall not,
except with the consent of the indemnified party, be counsel to the indemnifying
party), and, after notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof, the indemnifying party shall
not be liable to such indemnified party under such subsection for any legal
expenses of other counsel or any other expenses, in each case subsequently
incurred by such indemnified party, in connection with the defense thereof other
than reasonable costs of investigation. No indemnifying party shall, without the
written consent of the indemnified party, effect the settlement or compromise
of, or consent to the entry of any judgment with respect to, any pending or
threatened action or claim in respect of which indemnification or contribution
may be sought hereunder (whether or not the indemnified party is an actual or
potential party to such action or claim) unless such settlement, compromise or
judgment (i) includes an unconditional release of the indemnified party from all
liability arising out of such action or claim and (ii) does not include a
statement as to or an admission of fault, culpability or a failure to act, by or
on behalf of any indemnified party.
(e) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a), (b) or (c) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative benefits received by the Company, NB LLC, NBMI and the Selling
Stockholders on the one hand and the Underwriters on the other from the offering
of the Shares. If, however, the allocation provided by the immediately preceding
sentence is not permitted by applicable law or if the indemnified party failed
to give the notice required under subsection (d) above, then each indemnifying
party shall contribute to such amount paid or payable by such indemnified party
in such proportion as is appropriate to reflect not only such relative benefits
but also the relative fault of the Company, NB LLC, NBMI and the Selling
Stockholders on the one hand and the Underwriters on the other in connection
with the statements or omissions which resulted in such losses, claims, damages
or liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative benefits received by the Company, NB LLC,
NBMI and the Selling Stockholders on the one hand and the Underwriters on the
other shall be deemed to be in the same proportion as the total net proceeds
from the offering of the Shares purchased under this Agreement (before deducting
expenses) received by the Company and the Selling Stockholders bear to the total
underwriting discounts and commissions received by the Underwriters with respect
to the Shares purchased under this Agreement, in each case as set forth in the
table on the cover page of the Prospectus. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company or the Selling
Stockholders on the one hand or the Underwriters on the other and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company, NB LLC, NBMI, each of the
Selling Stockholders and the Underwriters agree that it would not be just and
equitable if contributions pursuant to this subsection (e) were determined by
pro rata allocation (even if the Underwriters were treated as one entity for
such purpose) or by any other method of allocation which does not take account
of the equitable considerations referred to above in this subsection (e). The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to above
in this subsection (e) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
subsection (e), no Underwriter shall be required to contribute any amount in
excess of the amount by which the total price at which the Shares underwritten
by it and distributed to the public were offered to the public exceeds the
amount of any damages which such Underwriter has otherwise been required to pay
by reason of such untrue or alleged untrue statement or
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<PAGE> 23
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations in this subsection (e) to
contribute are several in proportion to their respective underwriting
obligations and not joint.
(f) The obligations of the Company, NB LLC, NBMI and the Selling
Stockholders under this Section 8 shall be in addition to any liability which
the Company, NB LLC, NBMI and the respective Selling Stockholders may otherwise
have and shall extend, upon the same terms and conditions, to each person, if
any, who controls any Underwriter within the meaning of the Act; and the
obligations of the Underwriters under this Section 8 shall be in addition to
any liability which the respective Underwriters may otherwise have and shall
extend, upon the same terms and conditions, to each officer and director of the
Company (including any person who, with his or her consent, is named in the
Registration Statement as about to become a director of the Company) and to each
person, if any, who controls the Company, NB LLC, NBMI or any Selling
Stockholder within the meaning of the Act.
9. (a) If any Underwriter shall default in its obligation to purchase
the Shares which it has agreed to purchase hereunder at a Time of Delivery, you
may in your discretion arrange for you or another party or other parties to
purchase such Shares on the terms contained herein. If within thirty-six hours
after such default by any Underwriter you do not arrange for the purchase of
such Shares, then the Company and the Selling Stockholders shall be entitled to
a further period of thirty-six hours within which to procure another party or
other parties satisfactory to you to purchase such Shares on such terms. In the
event that, within the respective prescribed periods, you notify the Company and
the Selling Stockholders that you have so arranged for the purchase of such
Shares, or the Company and the Selling Stockholders notify you that they have so
arranged for the purchase of such Shares, you or the Company and the Selling
Stockholders shall have the right to postpone such Time of Delivery for a period
of not more than seven days, in order to effect whatever changes may thereby be
made necessary in the Registration Statement or the Prospectus, or in any other
documents or arrangements, and the Company agrees to file promptly any
amendments to the Registration Statement or the Prospectus which in your opinion
may thereby be made necessary. The term "Underwriter" as used in this Agreement
shall include any person substituted under this Section with like effect as if
such person had originally been a party to this Agreement with respect to such
Shares.
(b) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company and
the Selling Stockholders as provided in subsection (a) above, the aggregate
number of such Shares which remains unpurchased does not exceed one-eleventh of
the aggregate number of all of the Shares to be purchased at such Time of
Delivery, then the Company and the Selling Stockholders shall have the right to
require each non-defaulting Underwriter to purchase the number of Shares which
such Underwriter agreed to purchase hereunder at such Time of Delivery and, in
addition, to require each non-defaulting Underwriter to purchase its pro rata
share (based on the number of Shares which such Underwriter agreed to purchase
hereunder) of the Shares of such defaulting Underwriter or Underwriters for
which such arrangements have not been made; but nothing herein shall relieve a
defaulting Underwriter from liability for its default.
(c) If, after giving effect to any arrangements for the purchase of
the Shares of a defaulting Underwriter or Underwriters by you and the Company
and the Selling Stockholders as provided in subsection (a) above, the aggregate
number of such Shares which remains unpurchased exceeds one-eleventh of the
aggregate number of all of the Shares to be purchased at such Time of Delivery,
or if the Company and the Selling Stockholders shall not exercise the right
described in subsection (b) above to require non-defaulting Underwriters to
purchase Shares of a defaulting Underwriter or Underwriters, then this Agreement
(or, with respect to the Second Time of Delivery, the obligations of the
Underwriters to purchase and of the Company and the Selling Stockholders to sell
the Optional Shares) shall thereupon terminate, without liability on the part of
any non-defaulting Underwriter or the Company or the Selling Stockholders,
except for the expenses to be borne by the Company and the Selling Stockholders
and the Underwriters as provided in Section 6 hereof and the indemnity and
contribution agreements in Section 8 hereof; but nothing herein shall relieve a
defaulting Underwriter from liability for its default.
23
<PAGE> 24
10. The respective indemnities, agreements, representations, warranties
and other statements of the Company, NB LLC, NBMI, the Selling Stockholders and
the several Underwriters, as set forth in this Agreement or made by or on behalf
of them, respectively, pursuant to this Agreement, shall remain in full force
and effect, regardless of any investigation (or any statement as to the results
thereof) made by or on behalf of any Underwriter or any controlling person of
any Underwriter, or the Company, NB LLC, NBMI or any of the Selling
Stockholders, or any officer or director or controlling person of the Company,
NB LLC, NBMI, or any controlling person of any Selling Stockholder, and shall
survive delivery of and payment for the Shares.
11. If this Agreement shall be terminated pursuant to Section 9 hereof,
neither the Company nor the Selling Stockholders shall then be under any
liability to any Underwriter except as provided in Sections 6 and 8 hereof; but,
if for any other reason any Shares are not delivered by or on behalf of the
Company and the Selling Stockholders as provided herein, the Company and each of
the Selling Stockholders pro rata (based on the number of Shares to be sold by
the Company and such Selling Stockholder hereunder) will reimburse the
Underwriters through you for all out-of-pocket expenses approved in writing by
you, including fees and disbursements of counsel, reasonably incurred by the
Underwriters in making preparations for the purchase, sale and delivery of the
Shares not so delivered, but the Company and the Selling Stockholders shall then
be under no further liability to any Underwriter in respect of the Shares not so
delivered except as provided in Sections 6 and 8 hereof.
12. In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Underwriter made or
given by you jointly or by Goldman, Sachs & Co. on behalf of you as the
representatives; and in all dealings with any Selling Stockholder hereunder, you
and the Company shall be entitled to act and rely upon any statement, request,
notice or agreement on behalf of such Selling Stockholder made or given by any
or all of the Attorneys-in-Fact for such Selling Stockholder.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to you as the representatives in care of Goldman, Sachs &
Co., 32 Old Slip, 9th Floor, New York, New York 10004, Attention: Registration
Department; if to any Selling Stockholder shall be delivered or sent by mail,
telex or facsimile transmission to counsel for such Selling Stockholder at its
address set forth in Schedule II hereto; and if to the Company, NB LLC or NBMI
shall be delivered or sent by mail, telex or facsimile transmission to the
address of the Company set forth in the Registration Statement, Attention:
Secretary; provided, however, that any notice to an Underwriter pursuant to
Section 8(d) hereof shall be delivered or sent by mail, telex or facsimile
transmission to such Underwriter at its address set forth in its Underwriters'
Questionnaire or telex constituting such Questionnaire, which address will be
supplied to the Company or the Selling Stockholders by you upon request. Any
such statements, requests, notices or agreements shall take effect upon receipt
thereof.
13. This Agreement shall be binding upon, and inure solely to the
benefit of, the Underwriters, the Company, NB LLC, NBMI and the Selling
Stockholders and, to the extent provided in Sections 8 and 10 hereof, the
officers and directors of the Company and each person who controls the Company,
NB LLC, NBMI, any Selling Stockholder or any Underwriter, and their respective
heirs, executors, administrators, successors and assigns, and no other person
shall acquire or have any right under or by virtue of this Agreement. No
purchaser of any of the Shares from any Underwriter shall be deemed a successor
or assign by reason merely of such purchase.
14. Time shall be of the essence of this Agreement. As used herein, the
term "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business.
15. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK.
16. This Agreement may be executed by any one or more of the parties
hereto in any number of counterparts, each of which shall be deemed to be an
original, but all such counterparts shall together constitute one and the same
instrument.
24
<PAGE> 25
If the foregoing is in accordance with your understanding, please sign
and return to us counterparts hereof, and upon the acceptance hereof by you, on
behalf of each of the Underwriters, this letter and such acceptance hereof shall
constitute a binding agreement among each of the Underwriters, the Company, NB
LLC, NBMI and each of the Selling Stockholders. It is understood that your
acceptance of this letter on
25
<PAGE> 26
behalf of each of the Underwriters is pursuant to the authority set forth in a
form of Agreement among Underwriters (U.S. Version), the form of which shall be
submitted to the Company and the Selling Stockholders for examination upon
request, but without warranty on your part as to the authority of the signers
thereof.
Any person executing and delivering this Agreement as Attorney-in-Fact
for a Selling Stockholder represents by so doing that he has been duly appointed
as Attorney-in-Fact by such Selling Stockholder pursuant to a validly existing
and binding Power of Attorney which authorizes such Attorney-in-Fact to take
such action.
Very truly yours,
Neuberger Berman Inc.
By:........................................................
Name:
Title:
Neuberger & Berman, LLC
By:........................................................
Name:
Title:
Neuberger & Berman Management Incorporated
By:........................................................
Name:
Title:
The Selling Stockholders listed in Schedule II hereto
By: Neuberger Berman Inc.
By:........................................................
Name:
Title:
As Attorney-in-Fact acting on behalf of each of the Selling
Stockholders named in Schedule II to this Agreement.
Accepted as of the date hereof
in New York, New York:
Goldman, Sachs & Co.
[Names of Co-Representatives]
By:........................................................
(Goldman, Sachs & Co.)
On behalf of each of the Underwriters
26
<PAGE> 27
SCHEDULE I
<TABLE>
<CAPTION>
Number of Optional
Shares to be
Total Number of Purchased if
Firm Shares Maximum Option
Underwriter to be Purchased Exercised
----------- --------------- ------------------
<S> <C> <C>
Goldman, Sachs & Co....................................................
[Names of Co-Representatives]..........................................
[Names of other Underwriters]..........................................
--------------- ------------------
Total......................................................... =============== ==================
</TABLE>
27
<PAGE> 28
SCHEDULE II
<TABLE>
<CAPTION>
Number of Optional
Shares to be
Total Number of Sold if
Firm Shares Maximum Option
to be Sold Exercised
--------------- ------------------
<S> <C> <C>
The Company.........................................................
The Selling Stockholders(a):
Herbert W. Ackerman........................................
Robert J. Appel............................................
Howard R. Berlin...........................................
Jeffrey Bolton.............................................
Richard A. Cantor..........................................
Vincent T. Cavallo.........................................
Salvatore D'Elia...........................................
Stanley Egener.............................................
Michael N. Emmerman........................................
Robert English.............................................
Jack M. Ferraro............................................
Gregory P. Francfort.......................................
Howard L. Ganek............................................
Robert Gendelman...........................................
Theodore Giuliano..........................................
Mark R. Goldstein..........................................
Lee H. Idleman.............................................
Alan L. Jacobs.............................................
Kenneth Kahn...............................................
Michael W. Kamen...........................................
Michael M. Kassen..........................................
Mark P. Kleiman............................................
Lee P. Klingenstein........................................
Irwin Lainoff..............................................
Joseph Lasser..............................................
Richard Levine.............................................
Christopher J. Lockwood....................................
Lawrence Marx III..........................................
Robert R. McComsey.........................................
Martin McKerrow............................................
Martin E. Messinger........................................
Beth W. Nelson.............................................
Roy R. Neuberger...........................................
Harold J. Newman...........................................
Daniel P. Paduano..........................................
Norman H. Pessin...........................................
Leslie M. Pollack..........................................
William A. Potter..........................................
Janet W. Prindle...........................................
C. Carl Randolph...........................................
Kevin L. Risen.............................................
Daniel H. Rosenblatt.......................................
J. Curt Schnackenberg......................................
</TABLE>
28
<PAGE> 29
<TABLE>
<S> <C> <C>
Marvin C. Schwartz.........................................
Jennifer Silver............................................
Kent C. Simons.............................................
R. Edward Spilka...........................................
Gloria Spivak..............................................
Heidi S. Steiger...........................................
Bernard Z. Stein...........................................
Fred Stein.................................................
Eleanor M. Sterne..........................................
Stephanie Stiefel..........................................
Philip A. Straus...........................................
Peter Strauss..............................................
The Strauss 1998 Trust.....................................
Peter Sundman..............................................
Allan D. Sutton............................................
Sutton 1998 GST Trust......................................
Richard J. Sweetnam, Jr....................................
Judith M. Vale.............................................
David Weiner...............................................
Dietrich Weismann..........................................
Lawrence Zicklin........................................... --------------- ------------------
Total..................................... =============== ==================
</TABLE>
(a) Each of the Selling Stockholders named above is
represented by Debevoise & Plimpton, counsel to the Selling Stockholders, and
has appointed the Company as the Attorney-in-Fact for such Selling Stockholder.
29
<PAGE> 30
ANNEX I
Pursuant to Section 7(g) of the Underwriting Agreement, the accountants
shall furnish letters to the Underwriters to the effect that:
(i) They are independent certified public accountants with
respect to the Company and its subsidiaries within the meaning of the
Act and the applicable rules and regulations thereunder adopted by the
Commission;
(ii) In their opinion, the financial statements and any
supplementary financial information and schedules (and, if applicable,
financial forecasts and/or pro forma financial information) examined by
them and included in the Prospectus or the Registration Statement
comply as to form in all material respects with the applicable
accounting requirements of the Act and the related rules and
regulations adopted by the Commission; and, if applicable, they have
made a review in accordance with standards established by the American
Institute of Certified Public Accountants of the unaudited combined
interim financial statements, selected financial data, pro forma
financial information, financial forecasts, management's discussion and
analysis and/or condensed financial statements derived from audited
financial statements of the Company for the periods specified in such
letter, as indicated in their reports thereon, copies of which have
been furnished to the representatives of the Underwriters (the
"Representatives") and are attached hereto;
(iii) They have made a review in accordance with standards
established by the American Institute of Certified Public Accountants
of the unaudited condensed combined statements of income, combined
balance sheets and combined statements of cash flows, and management's
discussion and analysis included in the Prospectus as indicated in
their reports thereon copies of which are attached hereto; and on the
basis of specified procedures including inquiries of officials of the
Company who have responsibility for financial and accounting matters
regarding whether the unaudited condensed combined financial statements
referred to in paragraph (vi)(A)(i) below comply as to form in all
material respects with the applicable accounting requirements of the
Act and the related rules and regulations adopted by the Commission,
nothing came to their attention that caused them to believe that the
unaudited condensed combined financial statements do not comply as to
form in all material respects with the applicable accounting
requirements of the Act and the related rules and regulations adopted
by the Commission;
(iv) The unaudited selected financial information with respect
to the combined results of operations and financial position of the
Company for the five most recent fiscal years included in the
Prospectus agrees with the corresponding amounts (after restatements
where applicable) in the audited combined financial statements for such
five fiscal years;
(v) They have compared the information in the Prospectus under
selected captions with the disclosure requirements of Regulation S-K
and on the basis of limited procedures specified in such letter nothing
came to their attention as a result of the foregoing procedures that
caused them to believe that this information does not conform in all
material respects with the disclosure requirements of Items 301, 302
and 402, respectively, of Regulation S-K;
1
<PAGE> 31
(vi) On the basis of limited procedures, not constituting an
examination in accordance with generally accepted auditing standards,
consisting of a reading of the unaudited financial statements and other
information referred to below, a reading of the latest available
interim financial statements of the Company and its subsidiaries,
inspection of the minute books of the Company and its subsidiaries
since the date of the latest audited financial statements included in
the Prospectus, inquiries of officials of the Company and its
subsidiaries responsible for financial and accounting matters and such
other inquiries and procedures as may be specified in such letter,
nothing came to their attention that caused them to believe that:
(A) (i) the unaudited combined statements of income,
combined balance sheets and combined statements of cash flows
included in the Prospectus do not comply as to form in all
material respects with the applicable accounting requirements
of the Act and the related rules and regulations adopted by
the Commission, or (ii) any material modifications should be
made to the unaudited condensed combined statements of income,
combined balance sheets and combined statements of cash flows
included in the Prospectus for them to be in conformity with
generally accepted accounting principles;
(B) any other unaudited income statement data and
balance sheet items included in the Prospectus do not agree
with the corresponding items in the unaudited combined
financial statements from which such data and items were
derived, and any such unaudited data and items were not
determined on a basis substantially consistent with the basis
for the corresponding amounts in the audited combined
financial statements included in the Prospectus;
(C) the unaudited financial statements which were not
included in the Prospectus but from which were derived any
unaudited condensed financial statements referred to in Clause
(A) and any unaudited income statement data and balance sheet
items included in the Prospectus and referred to in Clause (B)
were not determined on a basis substantially consistent with
the basis for the audited combined financial statements
included in the Prospectus;
(D) any unaudited pro forma combined condensed
financial statements included in the Prospectus do not comply
as to form in all material respects with the applicable
accounting requirements of the Act and the rules and
regulations adopted by the Commission thereunder or the pro
forma adjustments have not been properly applied to the
historical amounts in the compilation of those statements;
(E) as of a specified date not more than five days
prior to the date of such letter, there have been any changes
in the combined capital stock (other than issuances of capital
stock upon exercise of options and stock appreciation rights,
upon earn-outs of performance shares and upon conversions of
convertible securities, in each case which were outstanding on
the date of the latest financial statements included in the
Prospectus) or any increase in the combined long-term debt of
the Company and its subsidiaries, or any decreases in combined
net current assets or stockholders' equity or other items
specified by the Representatives, or any increases in any
items specified by the Representatives, in each case as
compared with amounts shown in the latest balance sheet
included in the Prospectus, except in each case for changes,
increases or decreases which the Prospectus discloses have
occurred or may occur or which are described in such letter;
and
2
<PAGE> 32
(F) for the period from the date of the latest
financial statements included in the Prospectus to the
specified date referred to in Clause (E) there were any
decreases in combined net revenues or operating profit or the
total or per share amounts of combined net income or other
items specified by the Representatives, or any increases in
any items specified by the Representatives, in each case as
compared with the comparable period of the preceding year and
with any other period of corresponding length specified by the
Representatives, except in each case for decreases or
increases which the Prospectus discloses have occurred or may
occur or which are described in such letter; and
(vii) In addition to the examination referred to in their
report(s) included in the Prospectus and the limited procedures,
inspection of minute books, inquiries and other procedures referred to
in paragraphs (iii) and (vi) above, they have carried out certain
specified procedures, not constituting an examination in accordance
with generally accepted auditing standards, with respect to certain
amounts, percentages and financial information specified by the
Representatives, which are derived from the general accounting records
of the Company and its subsidiaries, which appear in the Prospectus, or
in Part II of, or in exhibits and schedules to, the Registration
Statement specified by the Representatives, and have compared certain
of such amounts, percentages and financial information with the
accounting records of the Company and its subsidiaries and have found
them to be in agreement.
3
<PAGE> 1
Execution Copy
- -------------------------------------------------------------------------------
NEUBERGER BERMAN INC.
PLAN OF MERGER AND EXCHANGE AGREEMENT
Dated August 18, 1998
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I
MERGER OF MERGER SUB INTO NBMI ........................................ 2
1.1 The Merger ..................................................... 2
1.2 Effective Time ................................................. 3
1.3 Organizational Matters ......................................... 3
1.4 Effect on Capital Stock ........................................ 3
1.5 Exchange of Shares ............................................. 4
1.6 Existing Stockholders Agreement ................................ 4
1.7 NBMI Shareholder Approval; No Appraisal Rights ................. 4
1.8 Merger Sub Shareholder Approval ................................ 5
ARTICLE II
EXCHANGE OF NB LLC INTERESTS .......................................... 5
2.1 The Exchange ................................................... 5
2.2 Termination of Rights .......................................... 6
2.3 Consent of Executive Committee ................................. 6
2.4 Consent to Transaction; No Appraisal Rights .................... 6
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE MANAGEMENT STOCKHOLDERS ......... 6
3.1 Organization, Authorization and Validity of Basic Agreements ... 6
3.2 Title .......................................................... 7
3.3 No Conflicts ................................................... 7
3.4 Investment Purpose ............................................. 7
3.5 Access to Information .......................................... 8
3.6 Evaluation of and Ability to Bear Risks ........................ 8
3.7 No Liabilities in Excess of Tax Basis .......................... 8
3.8 No Dispositions ................................................ 8
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY, MERGER SUB AND NBMI .... 9
4.1 Organization and Good Standing .................................. 9
4.2 Capital Stock; Preemptive Rights ................................ 9
4.3 Authorization and Validity of Agreements ........................ 10
4.4 No Conflicts; Consents .......................................... 10
4.5 Purchase for Investment ......................................... 10
4.6 No Prior Operations ............................................. 10
ARTICLE V
COVENANTS ............................................................. 11
5.1 No Transfers Prior to Closing ................................... 11
5.2 Tax Matters ..................................................... 11
5.3 Further Assurances .............................................. 11
ARTICLE VI
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE COMPANY, MERGER SUB,
NBMI AND OF THE MANAGEMENT STOCKHOLDERS .............................. 11
6.1 Conditions to the Obligations of the Parties .................... 11
6.2 Conditions to the Obligations of the Company, Merger Sub and NBMI 12
6.3 Conditions to the Obligations of the Management Stockholders .... 13
ARTICLE VII
THE CLOSING ........................................................... 13
7.1 Closing Date .................................................... 13
7.2 Closing Deliveries .............................................. 13
ARTICLE VIII
DEFINITIONS............................................................ 13
ARTICLE IX
POWER OF ATTORNEY...................................................... 16
Section 9.1 Authority.................................................. 16
Section 9.2 Terms...................................................... 17
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
ARTICLE X
MISCELLANEOUS......................................................... 18
10.1 Notices......................................................... 18
10.2 Termination..................................................... 18
10.3 Obligations of Management Stockholders.......................... 19
10.4 Amendments; Waivers............................................. 19
10.5 Severability.................................................... 19
10.6 Representatives, Successors and Assigns......................... 19
10.7 Governing Law................................................... 20
10.8 Specific Performance............................................ 20
10.9 Arbitration..................................................... 20
10.10 Submission to Jurisdiction; Waiver of Immunity.................. 21
10.11 Execution in Counterparts....................................... 21
10.12 Entire Agreement................................................ 21
</TABLE>
Schedule I
Schedule II
iii
<PAGE> 5
PLAN OF MERGER AND
EXCHANGE AGREEMENT
This PLAN OF MERGER AND EXCHANGE AGREEMENT (this
"Agreement") is dated as of August 18, 1998, by and among (i) Neuberger Berman
Inc., a Delaware corporation (the "Company"); (ii) Neuberger Berman Sub Inc., a
New York corporation ("Merger Sub"); (iii) Neuberger & Berman Management
Incorporated, a New York corporation ("NBMI"); (iv) Neuberger & Berman, LLC, a
Delaware limited liability company ("NB LLC"); (v) the Principals (as defined
below) listed on Schedule I hereto; and (vi) the Family Affiliates (as defined
below) listed on Schedule II hereto. Capitalized terms used herein have their
respective meanings set forth in Article VIII of this Agreement.
W I T N E S S E T H :
WHEREAS, the Principals and Family Affiliates (together, the "Man-
agement Stockholders") own all of the limited liability company interests in NB
LLC, and the Principals are the only shareholders of NBMI;
WHEREAS, the Company is a Delaware corporation having authorized
capital of 250,000,000 shares of common stock, par value $.01 (the "Common
Stock"), of which no shares are issued and outstanding on the date hereof, and
5,000,000 shares of preferred stock, par value $.01, of which no shares are
issued and outstanding on the date hereof;
WHEREAS, Merger Sub is a wholly-owned subsidiary of the Company;
WHEREAS, the Company, Merger Sub, NBMI and the Principals, in their
capacity as shareholders of NBMI, desire to have Merger Sub merge with and into
NBMI (the "Merger") on terms and conditions and for the consideration described
in this Agreement;
WHEREAS, in furtherance of such Merger, the Boards of Directors of
the Company, Merger Sub and NBMI and the shareholders of NBMI have approved the
Merger upon terms and subject to the conditions set forth in this Agreement;
<PAGE> 6
WHEREAS, the Management Stockholders desire to exchange their
respective interests in NB LLC for shares of Common Stock (the "Exchange") on
the terms and for the consideration described in this Agreement;
WHEREAS, the Executive Committee of NB LLC has consented to the
Exchange;
WHEREAS, as a result of the Merger and Exchange, NB LLC and NBMI
will become wholly-owned direct subsidiaries of the Company and Merger Sub would
cease to exist; and
WHEREAS, for U.S. federal income tax purposes, it is intended that
the Exchange will qualify as a tax-free exchange under Section 351 of the
Internal Revenue Code of 1986, as amended (the "Code") and that the Merger will
qualify as a reorganization within the meaning of Sections 368(a)(1)(A) and
368(a)(2)(E) of the Code.
NOW THEREFORE, in consideration of the premises and of the mutual
agreements, covenants and provisions herein contained and for good and valuable
consideration, the receipt of which is hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
MERGER OF MERGER SUB INTO NBMI
1.1 The Merger. In accordance with and subject to the terms and pro
visions of this Agreement and the BCL, at the Effective Time: (i) Merger Sub
shall be merged with and into NBMI, the separate existence of Merger Sub shall
cease and NBMI shall be the surviving corporation (the "Surviving Corporation")
and shall continue its corporate existence under the laws of New York under the
name "Neuberger Berman Management Inc."; (ii) all rights, privileges,
immunities, powers, purposes, franchises, properties and assets of Merger Sub
and NBMI shall vest in the Surviving Corporation; and (iii) all debts,
liabilities, obligations, restrictions, disabilities and duties of Merger Sub
and NBMI shall become the debts, liabilities, obligations, restrictions,
disabilities and duties of the Surviving Corporation. Merger Sub will use its
best efforts to ensure that the foregoing liabilities of Merger Sub described in
(iii) will, on the Closing Date, be transferred to the Surviving Corporation.
The Merger shall have the effects set forth in Section 906 of the BCL.
2
<PAGE> 7
1.2 Effective Time. Upon the terms and subject to the conditions of
this Agreement, following the satisfaction or waiver of the conditions set forth
in Article VI, NBMI and Merger Sub shall execute and file a Certificate of
Merger (together with any other documents required by applicable law to
effectuate the Merger) with the Secretary of State of the State of New York in
accordance with applicable provisions of the BCL. Prior to such time, a closing
(the "Closing") will be held in accordance with Article VII hereof. The Merger
shall become effective simultaneously with the filing of such Certificate of
Merger pursuant to Section 906 of the BCL. The date and time when the Merger
shall become effective is referred to in this Agreement as the "Effective Time."
1.3 Organizational Matters. (a) Certificate of Incorporation. The
Amended and Restated Certificate of Incorporation of NBMI, as in effect
immediately prior to the Effective Time, shall be the certificate of
incorporation of the Surviving Corporation until thereafter changed or amended
as provided therein or by applicable law.
(b) By-Laws. The NBMI By-Laws as in effect immediately prior to the
Effective Time shall be the by-laws of the Surviving Corporation, until
thereafter changed or amended as provided therein or by applicable law.
(c) Directors and Officers. From and after the Effective Time, the
directors and officers of NBMI immediately prior to the Effective Time shall be
the directors and officers, respectively, of the Surviving Corporation, each to
hold office in accordance with the certificate of incorporation and by-laws of
the Surviving Corporation until his or her successor is elected or appointed, as
the case may be, and qualified or until his or her earlier death, resignation,
disqualification or removal.
1.4 Effect on Capital Stock. As of the Effective Time, by virtue of
the Merger and without any action on the part of any holder of shares of NBMI
Stock or the Company:
(a) Capital Stock of Merger Sub. Each issued and outstanding share
of capital stock of Merger Sub shall be converted into and become one
fully paid and nonassessable share of common stock, par value $0.01 per
share, of the Surviving Corporation;
(b) Cancellation of Treasury Stock. Each NBMI Share that is owned by
NBMI shall automatically be canceled and retired and shall cease to exist,
and no consideration shall be delivered in exchange therefor;
3
<PAGE> 8
(c) Conversion of NBMI Common Stock. Each share of NBMI Stock (other
than shares held in the treasury of NBMI) shall be converted into the
right to receive from the Company the number of shares of Common Stock
equal to the quotient of (i) 24,721,350 divided by (ii) the number of
shares of NBMI issued and outstanding (other than shares held in the
Treasury of NBMI) at the Effective Time (the "Merger Consideration"); and
(d) No Rights as Stockholders. The holders of certificates
representing shares of NBMI Stock shall as of the Effective Time cease to
have any rights as stockholders of NBMI and, except as aforesaid, their
sole right shall be the right to receive their share of the Merger
Consideration, as determined and paid in the manner set forth in this
Agreement.
1.5 Exchange of Shares. From and after the Effective Time, each
holder of an outstanding certificate or certificates which prior thereto
represented outstanding shares of NBMI Stock (the "Certificates") shall, upon
surrender to the Company of such Certificates (accompanied by all requisite
stock transfer stamps) and acceptance thereof by the Company, be entitled to the
Merger Consideration into which the aggregate number of shares of NBMI Stock
previously represented by such Certificate or Certificates surrendered shall
have been converted pursuant to this Agreement. Until surrendered in accordance
with the provisions of this Section 1.5, from and after the Effective Time, each
Certificate (other than Certificates representing former shares of NBMI Stock
held in the treasury of the Surviving Corporation) shall represent for all
purposes only the right to receive a portion of the Merger Consideration as
determined and paid in the manner set forth in this Agreement. After the
Effective Time there shall be no transfers on the stock transfer books of the
Surviving Corporation of the shares of NBMI Stock that were outstanding
immediately prior to the Effective Time.
1.6 Existing Stockholders Agreement. NBMI and the Principals, being
all of the parties to the Stockholders' Agreement of NBMI dated as of December
31, 1990 (the "NBMI Stockholders' Agreement"), hereby agree that, effective as
of the Effective Time, without any further action of any Person, such agreement
shall be terminated.
1.7 NBMI Shareholder Approval; No Appraisal Rights. Each Principal,
in his or her capacity as a shareholder of NBMI, in accordance with Article IV,
section 5 of the NBMI By-Laws and section 615 of the BCL, which provide for
actions by written consent, hereby (i) consents to and approves the Merger, (ii)
waives any right to notice of any shareholder action and (iii) waives any right
to receive payment of the fair value or other rights and benefits that may be
available to shareholders of a New York corporation pursuant to section 623 of
the BCL.
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1.8 Merger Sub Shareholder Approval. The Company in its capacity as
sole shareholder of Merger Sub in accordance with section 1.9 of the By-Laws of
Merger Sub and section 615 of the BCL, hereby (i) consents to and approves the
Merger and (ii) waives any right to notice of any shareholder action.
ARTICLE II
EXCHANGE OF NB LLC INTERESTS
2.1 The Exchange. (a) Assignment of NB LLC Interests. Each
Management Stockholder hereby assigns and delivers to the Company all right,
title and interest in, to and with respect to the NB LLC Interest held by such
Management Stockholder, including without limitation (i) all allocations of
profits and losses (and all distributions of cash or other property) in respect
of such NB LLC and (ii) all other rights otherwise accruing to the Management
Stockholder by virtue of owning such NB LLC Interest. From and after the
Effective Time, the entire capital account and share of profits and losses of
each Management Stockholder shall be deemed to be the capital account and share
of profits and losses of the Company, and the Management Stockholders shall have
no further interest or rights of any kind in or with respect to any of the NB
LLC Interests.
(b) Acceptance, Etc. The Company hereby accepts the assignment of
the NB LLC Interests and assumes and agrees to perform and be bound by any and
all of the conditions, covenants and obligations of the Management Stockholders
pursuant to the NB LLC Agreement as if the Company had executed the NB LLC
Agreement originally with respect to the NB LLC Interests. At the Effective
Time, the Company shall become the sole member of NB LLC, and each Management
Stockholder shall be released from all obligations under the NB LLC Agreement.
(c) Exchange of Common Stock. Immediately after the Effective Time,
each Management Stockholder shall receive in consideration for the exchange of
such Management Stockholder's NB LLC Interest, the number of shares of Common
Stock equal to the product of 71,278,650 and such Management Stockholder's
Operations Percentage (as defined in the NB LLC Agreement).
2.2 Termination of Rights. Each Management Stockholder hereby
affirms and agrees that, from and after the Effective Time, such Management
Stockholder shall have no rights under the NB LLC Agreement, including, without
limitation, any rights under Section 13 thereof relating to a sale of NB LLC
and/or an NB Group Affiliate (as defined in the NB LLC Agreement) and/or a
division of NB LLC.
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2.3 Consent of Executive Committee. By its execution hereof, NB LLC
acknowledges that the Executive Committee of NB LLC approves of the form of this
Agreement, acknowledges receipt of a duly executed copy of the same, consents to
the assignment of all of the NB LLC Interests to the Company in accordance with
Section 4.5 of the NB LLC Agreement and consents to the admission of the
Company as a New Member of NB LLC in accordance with Section 4.7 of the NB LLC
Agreement.
2.4 Consent to Transaction; No Appraisal Rights. Each of the under
signed Management Stockholders, together constituting all of the holders of
limited liability company interests in NB LLC, hereby assents to the terms,
conditions and trans actions contemplated hereby and acknowledges that such
Management Stockholder shall not, as a result of such terms, conditions and
transactions, have any right to receive payment of the fair value of any
interest such Member may be deemed to have in Neuberger & Berman Trust Company
or otherwise be entitled to any other rights and benefits referred to in
Section 143-a(4) of the New York Banking Law, as amended, or otherwise as may be
deemed to result from NB LLC's ownership of Neuberger & Berman Trust Company of
Delaware.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
THE MANAGEMENT STOCKHOLDERS
Each Management Stockholder hereby severally represents and warrants
to the Company as follows:
3.1 Organization, Authorization and Validity of Basic Agreements.
(a) Entities. If such Management Stockholder is not a natural person, (i) such
Management Stockholder is duly formed or organized, validly existing and in good
standing under the laws of the jurisdiction in which such Management Stockholder
was formed or organized; (ii) such Management Stockholder has the full legal
right, power and authority required to enter into and deliver this Agreement and
the Stockholders Agreement and to consummate the transactions contemplated
hereby and thereby; and (iii) this Agreement and the Stockholders Agreement have
been duly authorized, executed and delivered by such Management Stockholder, and
each is a legal, valid and binding obligation of such Management Stockholder
enforceable against such Management Stockholder in accordance with their terms.
(b) Natural Persons. If such Management Stockholder is a natural
person, (i) such Management Stockholder is of sound mind and has full legal
capacity to enter
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into, execute and deliver this Agreement and the Stockholders Agreement and
perform his or her obligations hereunder and thereunder, and (ii) this Agreement
and the Stockholders Agreement have been duly executed and delivered by such
Management Stockholder and are legal, valid and binding obligations of such
Management Stockholder enforceable against such Management Stockholder in
accordance with their terms.
3.2 Title. Such Management Stockholder owns, beneficially and of
record, the NB LLC Interest held by such Management Stockholder free and clear
of any Liens; at the Effective Time, the Company will acquire good and valid
title to such NB LLC Interest, free and clear of any Liens other than any Lien
created by the Company; and, if such Management Stockholder is a Principal, such
Management Stockholder owns, beneficially and of record, the number of shares of
NBMI Stock set forth opposite such Management Stockholder's name on Schedule I
free and clear of any Liens other than any Lien created by the Company.
3.3 No Conflicts. Except for the applicable requirements under the
HSR Act, the rules and regulations of the NYSE, the New York Banking Law and the
Delaware banking law, the execution, delivery and performance of this Agreement
and the Ancillary Agreement and the consummation of the transactions
contemplated hereby and thereby will not conflict with, contravene, result in a
violation or breach of or default under (with or without the giving of notice or
the lapse of time or both), permit any party to terminate, amend or accelerate
the provisions of, or result in the imposition of any Lien (or any obligation to
create any Lien) upon any of the property or assets of such Management
Stockholder under (a) any Contract to which such Management Stockholder is a
party or by which any of its property or assets may be bound or (b) any
provision of any partnership agreement, trust agreement or other organizational
document of any such Management Stockholder that is not a natural person.
3.4 Investment Purpose. Such Management Stockholder is acquiring
shares of Common Stock under this Agreement for its own account for investment
purposes, and not with a view to, or for resale in connection with, any
distribution thereof other than in compliance with the Securities Act and other
applicable securities laws. Such Management Stockholder acknowledges that it
must bear the economic risk of an investment in the Management Shares for an
indefinite period of time because, among other reasons, the Management Shares
have not been registered under the Securities Act and, therefore, such shares
cannot be sold unless subsequently registered under the Securities Act or an
exemption from such registration is available. Such Management Stockholder
understands that the Management Shares will be subject to the provisions of a
Stockholders Agreement, which defines certain rights of the stockholders of the
Company and provides certain restrictions on the transferability of the
Management
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Shares. Such Management Stockholder also acknowledges that transfers of the
Management Shares are further restricted by applicable United States federal and
state and foreign securities laws.
3.5 Access to Information. Such Management Stockholder understands
the risks of, and other considerations relating to, its acquisition and
ownership of the Management Shares. Such Management Stockholder has been
provided an opportunity to ask questions of, and has received answers
satisfactory to it from, the Company and its representatives regarding the
Management Shares, and has obtained any and all additional information from the
Company and its representatives that such Management Stockholder deems necessary
regarding the Management Shares.
3.6 Evaluation of and Ability to Bear Risks. Such Management
Stockholder has such knowledge and experience in financial affairs that it is
capable of evaluating the merits and risks of, and other considerations relating
to, the ownership of the Management Shares, and has not relied in connection
with its acquisition of the Management Shares upon any representations,
warranties or agreements other than those set forth in this Agreement. Such
Management Stockholder's financial situation is such that it can afford to bear
the economic risk of holding the Management Shares for an indefinite period of
time, and such Management Stockholder can afford to suffer the complete loss of
its investment in the Shares.
3.7 No Liabilities in Excess of Tax Basis. Such Management Stock
holder's tax basis in its NB LLC Interests, is equal to or greater than such
Management Stockholder's share of NB LLC's liabilities determined under Section
752 of the Code.
3.8 No Dispositions. No Management Stockholder has any present plan,
intention or arrangement to dispose of any of the Management Shares to be
received by such Management Stockholder except as described in any registration
statement on Form S-1 to be filed by the Company in respect of an initial public
offering of its shares. For purposes of this Section 3.8, a disposition shall
include a Transfer and shall include any other transaction (including, without
limitation, a short-sale-against-the-box, forward sale, equity swap or other
derivative contract) which transfers a substantial portion of the opportunity
for gain and risk of loss with respect to such Management Shares to a person who
was not a Management Stockholder immediately prior to the date hereof.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY, MERGER SUB AND NBMI
The Company, Merger Sub and NBMI jointly and severally represent and
warrant to the Management Stockholders as follows:
4.1 Organization and Good Standing. Each of the Company, Merger Sub
and NBMI is a corporation duly organized, validly existing and in good standing
under the laws of, in the case of the Company, the State of Delaware and, in the
case of Merger Sub and NBMI, the State of New York. NBMI was organized under the
name "Cedar Street Consultants, Inc." on October 27, 1970.
4.2 Capital Stock; Preemptive Rights. (a) Capital Stock. The
authorized capital stock of the Company consists of 250,000,000 shares of Common
Stock of which no shares are currently issued and outstanding, and 5,000,000
shares of preferred stock, par value $.01, of which no shares are currently
issued and outstanding. The authorized capital stock of Merger Sub consists of
100 shares of common stock, par value $.01, of which all shares are currently
issued and outstanding. The authorized capital stock of NBMI consists of 34,484
shares of NBMI Stock of which 12,192 shares are currently issued and
outstanding. The Management Shares when so issued will be duly and validly
authorized and issued, fully paid and nonassessable.
(b) Preemptive Rights. Except for the NBMI Stockholders' Agreement,
there are no preemptive or similar rights on the part of any Person with respect
to the issuance of any shares of capital stock of the Company, Merger Sub or
NBMI. Except for this Agreement, the NBMI Stockholders' Agreement and the
Stockholders Agreement, there are no subscriptions, options, warrants or other
similar rights, agreements or commitments of any kind obligating the Company,
Merger Sub or NBMI to issue or sell, or to cause to be issued or sold, or to
repurchase or otherwise acquire, any shares of its capital stock or any
securities convertible into or exchangeable for, or any options, warrants or
other similar rights relating to, any such shares.
4.3 Authorization and Validity of Agreements. Each of the Company,
Merger Sub and NBMI has all requisite corporate power and authority to execute
and deliver this Agreement and, in the case of the Company, the Stockholders
Agreement, to perform their obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery of this Agreement and, in the case of the Company, the Stockholders
Agreement, the performance by each of the Company, Merger Sub and NBMI of their
obligations hereunder and thereunder and the
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consummation of the transactions contemplated hereby and thereby have been duly
authorized by all requisite corporate action of the Company, Merger Sub and
NBMI. This Agreement and the Stockholders Agreement constitute legal, valid and
binding obligations of the Company, Merger Sub and NBMI enforceable against the
Company, Merger Sub and NBMI, respectively, in accordance with their respective
terms.
4.4 No Conflicts; Consents. Except for the applicable requirements
under the HSR Act, the rules and regulations of the NYSE, the New York Banking
Law and the Delaware banking law, the execution, delivery and performance of
this Agreement by the Company, Merger Sub and NBMI and the Stockholders
Agreement by the Company and the consummation by the Company, Merger Sub and
NBMI of the trans actions contemplated hereby and thereby do not and will not
conflict with, contravene, result in a violation or breach of or default under
(with or without the giving of notice or the lapse of time, or both), permit any
party to terminate, amend or accelerate the provisions of, or result in the
imposition of any Lien (or any obligation to create any Lien) upon any of the
property or assets of the Company, Merger Sub and NBMI under (a) any Contract to
which any of the Company, Merger Sub and NBMI is a party or by which any of
their property or assets may be bound or (b) any provision of the certificate of
incorporation or the bylaws of the Company, Merger Sub and NBMI.
4.5 Purchase for Investment. The Company is acquiring the NB LLC
Interests solely for investment, with no present intention to resell the NB LLC
Interests. The Company hereby acknowledges that the NB LLC Interests have not
been registered pursuant to the Securities Act and may not be transferred in the
absence of such registration or an exemption therefrom under the Securities Act.
4.6 No Prior Operations. Neither the Company nor Merger Sub has
had any operations or assets prior to the date hereof.
ARTICLE V
COVENANTS
5.1 No Transfers Prior to Closing. From and after the date of this
Agreement and prior to the Closing, no Management Stockholder shall Transfer all
or any portion of its interest in an NB LLC Interest or any shares of NBMI Stock
held by such Management Stockholder without the prior written consent of the
Company.
5.2 Tax Matters. (a) Merger. The parties intend the Merger to
qualify as a reorganization under Sections 368(a)(1)(A) and 368(a)(2)(E) of the
Code; each party
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and its affiliates shall use all reasonable efforts to cause the Merger to so
qualify; no party nor any affiliate thereof shall take any action that would
reasonably be expected to cause the Merger not to so qualify; and the parties
will take the position for all purposes that the Merger so qualifies.
(b) Exchange. The parties intend the Exchange to qualify as an
exchange under Section 351 of the Code; each party and its affiliates shall use
all reasonable efforts to cause the Exchange to so qualify; no party nor any
affiliate thereof shall take any action that would reasonably be expected to
cause the Exchange not to so qualify; and the parties will take the position for
all purposes that the Exchange so qualifies.
5.3 Further Assurances. Each party hereto shall execute and deliver
such instruments and take such other actions prior to or after the Closing as
any other party may reasonably request in order to carry out the intent of this
Agreement, including without limitation obtaining any required consents or
approvals from third parties, and hereby agrees to use their respective
reasonable best efforts to consummate the Exchange and the Merger at the
earliest practicable time.
ARTICLE VI
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE COMPANY,
MERGER SUB, NBMI AND OF THE MANAGEMENT STOCKHOLDERS
6.1 Conditions to the Obligations of the Parties. The obligations of
the Company, Merger Sub, NBMI and the Management Stockholders to consummate the
transactions contemplated hereby are subject to the fulfillment (or waiver by
the Company, Merger Sub, NBMI and a Majority in Interest) of each of the
following conditions prior to the Closing:
(a) All conditions to the closing of the IPO pursuant to the
applicable underwriting agreements (other than any conditions that the
Closing and Effective Time shall have occurred) shall have been satisfied.
(b) The consent of, or any required notice to, the NYSE, the New
York Banking Department and the applicable Delaware banking authority, and
all material regulatory, governmental and other third party approvals or
notices required in the judgment of the Company for the consummation of
the transactions contemplated by this Agreement shall have been obtained
or made;
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(c) In respect of any required notification pursuant to the HSR Act,
the applicable waiting period and any extension thereof shall have expired
or been terminated; and
(d) The consummation of the transactions contemplated hereby shall
not have been precluded by any order, decree, judgment or injunction of a
court of competent jurisdiction or other governmental or regulatory
authority, and there shall not have been any action taken or any statute,
rule or regulation enacted, promulgated or deemed applicable to, the
transactions contemplated hereby by any court, governmental agency or
regulatory or administrative authority that makes consummation of such
transactions illegal.
6.2 Conditions to the Obligations of the Company, Merger Sub and
NBMI. The obligations of the Company, Merger Sub and NBMI under this Agreement
to consummate the transactions contemplated hereby are subject to the
fulfillment (or waiver by the Company) of the following condition prior to the
Closing:
(a) The representations and warranties of the Management
Stockholders contained in or made pursuant to this Agreement shall be
deemed to have been made again at and as of the Closing and shall then be
true and accurate in all material respects, and each of the Management
Stockholders shall have performed and complied in all material respects
with all agreements required by this Agreement to be performed or complied
with by each of them prior to or at he Closing; and
(b) The Stockholders Agreement substantially in the form of Exhibit
A hereto (the "Stockholders Agreement") shall have executed and delivered
by each of the Management Stockholders to the Company.
6.3 Conditions to the Obligations of the Management Stockholders.
The obligations of the Management Stockholders under this Agreement to
consummate the transactions contemplated hereby are subject to the fulfillment
(or waiver in writing by a Majority in Interest) of the following condition
prior to the Closing:
(a) All representations and warranties of the Company, Merger Sub
and NBMI in this Agreement shall be deemed to have been made again at and
as of the Closing and shall then by true and accurate in all material
respects, and the Company, Merger Sub and NBMI shall have performed and
complied in all material respects with all agreements required by this
Agreement to be performed or complied with by it prior to or at the
Closing; and
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(b) The Stockholders Agreement shall have been executed and
delivered by the Company to each of the Management Stockholders.
ARTICLE VII
THE CLOSING
7.1 Closing Date. The Closing shall take place at the offices of
Debevoise & Plimpton, 875 Third Avenue, New York, New York 10022, on such date
as the Company shall determine by notice as soon as practicable following
satisfaction or waiver of all of the conditions required to be satisfied (or
waived) pursuant to Article VI for the purpose of confirming the Merger and the
Exchange.
7.2 Closing Deliveries. At the Closing, (a) the Principals will
deliver the Certificates in accordance with Section 1.6(a); (b) the Company
shall issue shares of Common Stock required to be delivered under Articles I and
II of this Agreement to a nominee designated by the Company, which nominee shall
hold such shares in accordance with the Stockholders Agreement; and (c) the
parties will make such other deliveries as are contemplated by this Agreement to
be made at the Closing.
ARTICLE VIII
DEFINITIONS
For purposes of this Agreement, the following terms shall have the
following meanings:
"Agreement" has the meaning set forth in the preamble to this
Agreement.
"AMEX" has the meaning set forth in Section 10.7(b).
"BCL" means the New York Business Corporation Law.
"Certificates" has the meaning set forth in Section 1.5.
"Closing" has the meaning set forth in Section 7.1.
"Code" has the meaning set forth in the recitals to this Agreement.
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"Common Stock" has the meaning set forth in the recitals to this
Agreement.
"Company" has the meaning set forth in the preamble to this
Agreement.
"Contract" means any contract, agreement, indenture, letter of
credit, mortgage, security agreement, pledge agreement, deed of trust,
bond, note, guarantee, surety obligation, warranty, license, franchise,
permit, power of attorney, lease, instrument or other agreement.
"Effective Time" has the meaning set forth in Section 1.2.
"Exchange" has the meaning set forth in the recitals to this
Agreement.
"Executive Committee" means the executive committee of NB LLC or any
Person or Persons authorized by such executive committee to perform any
action, approve any matter or make any determination permitted to be
taken, approved or determined by the Executive Committee under this
Agreement.
"Family Affiliates" means the Persons listed on Schedule II hereto.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"IPO" means the initial public offering of the Common Stock of the
Company.
"Lien" means any claim, lien, pledge, deed of trust, option, charge,
security interest, hypothecation, encumbrance, right of first offer,
voting trust, proxy, right of third parties or other restriction or
limitation of any nature whatsoever.
"Majority in Interest" means Management Stockholders that, pursuant
to the terms of this Agreement, will receive more than 50% of the
Management Shares.
"Management Shares" means, with respect to any Management
Stockholder, the shares of Common Stock received or to be received by such
Management Shareholder pursuant to the terms of this Agreement.
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"Management Stockholders" has the meaning set forth in the recitals
to this Agreement.
"Merger" has the meaning set forth in the recitals to this
Agreement.
"Merger Consideration" has the meaning set forth in Section 1.4(c).
"Merger Sub" has the meaning set forth in the preamble to this
Agreement.
"NASD" has the meaning set forth in Section 10.7(c).
"NB LLC" has the meaning set forth in the preamble to this
Agreement.
"NB LLC Agreement" means the Limited Liability Company Agreement of
NB LLC, dated as November 1, 1996, as amended by the First Amendment
thereto, dated as of August 3, 1998.
"NB LLC Interest" means a limited liability company interest in NB
LLC held by any member thereof, including without limitation all right,
title and interest of such member in the capital, allocations of profit
and loss, distributions of cash and property and all other rights
otherwise accruing to such Person pursuant to the NB LLC Agreement.
"NBMI" has the meaning set forth in the preamble to this Agreement.
"NBMI By-Laws" means the Amended and Restated By-Laws of NBMI.
"NBMI Stock" shall mean the common stock, par value $.01, of NBMI.
"NBMI Stockholders' Agreement" has the meaning set forth in Section
1.6.
"NYSE" means the New York Stock Exchange.
"Person" means any natural person or any firm, partnership, limited
liability partnership, association, corporation, limited liability
company, trust, business trust, governmental authority or other entity.
"Principals" means the Persons listed on Schedule I hereto.
"Stockholders Agreement" has the meaning set forth in Section
6.2(b).
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"Surviving Corporation" has the meaning set forth in Section 1.1.
"Transfer" means, with respect to any shares of capital stock,
directly or indirectly, (i) to sell, assign, transfer, pledge, convey,
distribute, mortgage, encumber, hypothecate or otherwise dispose, whether
by gift, for consideration or for no consideration or (ii) to grant any
proxy or voting rights, or enter into any voting agreement or trust.
"Securities Act" means the Securities Act of 1933, as amended.
ARTICLE IX
POWER OF ATTORNEY
Section 9.1 Authority. (a) Each Management Stockholder hereby makes,
constitutes and appoints the Secretary of the Company, and any successor
thereof, with full power of substitution and resubstitution, his, her or its
true and lawful attorney for his, her or it and in his, her or its name, place
and stead and for his, her or its use and benefit, to execute and deliver:
(i) the Stockholders Agreement, with such changes and alteration as
may be approved by the Executive Committee;
(ii) if such Management Stockholder has provided notice to the
Executive Committee that such Management Stockholder desires to
participate in the IPO, (x) one or more underwriting agreements among the
Company, underwriters and the Management Stockholders participating in the
IPO and (y) a power-of-attorney to be used in connection with the IPO, in
all cases substantially in the form approved by the Executive Committee;
(iii) all stock powers, instruments of assignment, endorsements and
other documents necessary, appropriate, advisable or convenient to
facilitate or consummate the sale of Common Stock in accordance with
Article III of the Stockholders Agreement; and
(iv) all other agreements, instruments, acknowledgments, filings,
receipts, powers-of-attorney, endorsements, stock powers, other
instruments of assignment and other documents of any kind that the
Executive Committee shall deem necessary, appropriate, advisable or
convenient to facilitate or consummate the Exchange, the Merger or the
IPO.
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(b) Each Management Stockholder authorizes such attorney-in-fact to
take any further action which such attorney-in-fact shall consider necessary,
appropriate, advisable or convenient in connection with any of the foregoing,
hereby giving such attorney-in-fact full power and authority to do and perform
each and every act or thing whatsoever requisite, appropriate, advisable or
convenient to be done in and about the foregoing as fully as such Management
Stockholder might or could do if personally present, and hereby ratifying and
confirming all that such attorney-in-fact shall lawfully do or cause to be done
by virtue hereof.
Section 9.2 Terms. The power of attorney granted pursuant to Sec-
tion 9.1 (a) is a special power of attorney coupled with an interest and, until
terminated in accordance with Section 10.2, is irrevocable and (b) may be
exercised by such attorney-in-fact by listing all of the Management Stockholders
executing any agreement, instrument, acknowledgment, filing, receipt,
power-of-attorney and other document with the single signature of such
attorney-in-fact acting as attorney-in-fact for all of them.
ARTICLE X
MISCELLANEOUS
10.1 Notices. (a) All notices, requests, demands, waivers and other
communications to be given by any party hereunder shall be in writing and shall
be (i) mailed by first-class, registered or certified mail, postage prepaid,
(ii) sent by hand delivery or reputable overnight delivery service or (iii)
transmitted by telecopy (provided that a copy is also sent by reputable
overnight delivery service) addressed, in the case of any Principal, to him or
her at the address set forth on Schedule I, in the case of any Family Affiliate,
to it at the address set forth on Schedule II or, in the case of the Company,
Merger Sub or NBMI, to it at 605 Third Avenue, New York, NY 10158, Attention:
Secretary, or, in each case, to such other address as may be specified in
writing to the other parties hereto.
(b) All such notices, requests, demands, waivers and other
communications shall be deemed to have been given and received (i) if by
personal delivery or telecopy, on the day of such delivery, (ii) if by
first-class, registered or certified mail, on the fifth Business Day after the
mailing thereof or (iii) if by reputable overnight delivery service, on the day
delivered.
10.2 Termination. (a) This Agreement may be terminated at any time
prior to the consummation of the transactions contemplated hereby:
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(i) after March 31, 1999, by the Company, Merger Sub, NBMI or a
Majority in Interest by written notice if the Closing has not occurred for
any reason other than a breach of this Agreement by the terminating party;
(ii) by the Company, Merger Sub or NBMI, if there has been a
material breach by any of the Management Stockholders of a material
agreement, representation or warranty contained in this Agreement which
has not been cured after notice from the Company;
(iii) by a Majority in Interest, if there has been a material breach
by the Company, Merger Sub or NBMI of a material agreement, representation
or warranty contained in this Agreement which has not been cured after
notice from a Majority in Interest; or
(iv) by mutual consent of the Company, Merger Sub, NBMI and a
Majority in Interest.
(b) In the event of the termination of this Agreement in accordance
with Section 10.2(a), this Agreement shall become void and have no effect,
without any liability to any person in respect hereof or of the transactions
contemplated hereby on the part of any party hereto, or any of its directors,
officers, officers, representatives, stockholders or affiliates, except for any
liability resulting from such party's willful and material breach of this
Agreement.
10.3 Obligations of Management Stockholders. The obligations of the
Management Stockholders under this Agreement shall be several and shall not be
joint and several.
10.4 Amendments; Waivers. The provisions of this Agreement may not
be amended or modified except by a writing signed by the Company, Merger Sub,
NBMI and a Majority in Interest, provided that the Company may amend this
Agreement, without the consent of any other Person, to cure any ambiguity or to
correct or supplement any provisions of this Agreement that may be incomplete or
inconsistent with any other provisions contained herein. The failure of any
party at any time or times to require performance of any provision of this
Agreement shall in no manner affect the rights at a later time to enforce the
same. No waiver by any party of the breach of any term contained in this
Agreement, whether by conduct or otherwise, in any one or more instances, shall
be deemed to be or construed as a further or continuing waiver of any such
breach or the breach of any other term of this Agreement.
18
<PAGE> 23
10.5 Severability. If the final determination of an arbitral body or
a court of competent jurisdiction declares, after the expiration of the time
within which judicial review (if permitted) of such determination may be
perfected, that any term or provision hereof is invalid or unenforceable, (a)
the remaining terms and provisions hereof shall be unimpaired and (b) the
invalid or unenforceable term or provision shall be deemed replaced by a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision.
10.6 Representatives, Successors and Assigns. Each Principal shall
cause his or her Family Affiliate to comply with the terms and provisions of
this Agreement. This Agreement shall be binding upon and inure to the benefit of
the respective parties hereto and their respective legatees, legal
representatives, successors and assigns; provided that Management Stockholders
may not in any manner whatsoever assign, delegate or otherwise Transfer any of
their rights or obligations under, or with respect to the Merger Consideration
or the Company Stock to be received through the Exchange pursuant to, this
Agreement except with the prior written consent of the Company.
10.7 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD
TO THE CONFLICT OF LAWS PRINCIPLES OR RULES THEREOF).
10.8 Specific Performance. (a) Each of the parties hereto
acknowledges that it will be impossible to measure in money the damage to the
Company, Merger Sub, NBMI or the Management Stockholders if any party hereto
fails to comply with the provisions of Article I or II or Section 5.1 and each
party hereto agrees that in the event of any such failure, neither the Company,
nor Merger Sub, nor NBMI nor any Management Stockholder will have an adequate
remedy at law. Therefore, the Company, Merger Sub, NBMI and each Management
Stockholder, in addition to all of the other remedies which may be available,
shall have the right to equitable relief, including, without limitation, the
right to enforce specifically the provisions of Article I and II and Section 5.1
by obtaining injunctive relief against any violation thereof, or otherwise or
(b) All claims for specific performance of one or more provisions of
this Agreement, including all such claims with respect to the obligations
hereunder to consummate the Exchange and the Merger, shall be resolved
exclusively by litigation before a court of competent jurisdiction located in
the State of New York.
19
<PAGE> 24
10.9 Arbitration.Except for claims for specific performance brought
in accordance with Section 10.8, all disputes, differences, and controversies
arising out of or in any way related to this Agreement shall be submitted:
(a) to the NYSE to be heard and decided under the terms of this
Agreement and the then applicable rules of the NYSE or, if those rules as
interpreted by the NYSE do not permit the disputes, differences and
controversies to be submitted to the NYSE for arbitration; then
(b) to the American Stock Exchange (the "AMEX") in New York, New
York, to be heard and decided under the terms of this Agreement and the
then applicable rules of the AMEX or, if those rules as interpreted by the
AMEX do not permit the disputes, differences and controversies to be
submitted to the AMEX for arbitration; then
(c) to the National Association of Securities Dealers, Inc. (the
"NASD") in New York, New York, to be heard and decided under the terms of
this Agreement and the then applicable rules of the NASD or, if the
disputes, differences and controversies are not eligible for submission to
the NASD for arbitration under those rules as interpreted by the NASD;
then
(d) to the American Arbitration Association in New York, New York;
to be heard and decided under the terms of this Agreement and in accordance with
the then applicable rules of the hearing body by a panel of three arbitrators
(unless the rules of the hearing body shall require a different number of
arbitrators) chosen in accordance with the then applicable rules of the hearing
body. The decision of the arbitrators shall be final and binding upon the
parties, and an order may be entered upon the award of the arbitrators in any
court of competent jurisdiction.
10.10 Submission to Jurisdiction; Waiver of Immunity. Each
Management Stockholder, for itself and its successors and assigns, hereby
irrevocably waives (a) any objection, and agrees not to assert, as a defense in
any arbitration or legal or equitable action, suit or proceeding against such
Management Stockholder arising out of or relating to this Agreement or any
transaction contemplated hereby or the subject matter of any of the foregoing,
that (i) it is not subject thereto or that such action, suit or proceeding may
not be brought or is not maintainable before such arbitral body or in said
courts, (ii) the venue thereof may not be appropriate and (iii) the internal
laws of the State of New York do not govern the validity, interpretation or
effect of this Agreement, (b) any immunity from jurisdiction to which it might
otherwise be entitled in any such arbitration, action, suit or proceeding which
may be instituted in any state or federal court
20
<PAGE> 25
in the State of New York in accordance with Section 10.8 or before any arbitral
body in accordance with Section 10.9 and (c) any immunity from the maintaining
of an action against it to enforce any judgment for money obtained in any such
arbitration, action, suit or proceeding and, to the extent permitted by
applicable law, any immunity from execution.
10.11 Execution in Counterparts. This Agreement may be executed in
any number of counterparts, each of which shall be deemed an original, but all
such counterparts shall together constitute but one and the same instrument.
10.12 Entire Agreement. This Agreement, including the Schedules and
Exhibits hereto, contains the entire understanding of the parties with respect
to the subject matter hereof, and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof.
21
<PAGE> 26
IN WITNESS THEREOF, the parties have executed and delivered this
Agreement as of the date first written above.
NEUBERGER BERMAN INC.
By:/s/Lawrence Zicklin
--------------------------------------
Name: Lawrence Zicklin
Title: Chief Executive Officer
NEUBERGER BERMAN SUB INC.
By:/s/C. Carl Randolph
--------------------------------------
Name: C. Carl Randolph
Title: Secretary
NEUBERGER & BERMAN MANAGEMENT
INCORPORATED
By:/s/Stanley Egener
--------------------------------------
Name: Stanley Egener
Title: President
NEUBERGER & BERMAN, LLC
By:/s/Lawrence Zicklin
--------------------------------------
Name: Lawrence Zicklin
Title:
<PAGE> 27
The foregoing Plan of Merger and Exchange
Agreement is hereby agreed to by the undersigned
as of August 18, 1998.
/s/Herbert W. Ackerman
/s/Robert J. Appel
/s/Howard R. Berlin
/s/Jeffrey Bolton
/s/Richard A. Cantor
/s/Vincent Cavallo
/s/Salvatore D'Elia
/s/Stanley Egener
/s/Michael N. Emmerman
/s/Robert English
/s/Jack M. Ferraro
/s/Gregory P. Francfort
/s/Howard L. Ganek
/s/Robert Gendelman
/s/Theodore Giuliano
/s/Mark R. Goldstein
/s/Lee H. Idleman
/s/Alan L. Jacobs
/s/Kenneth Kahn
/s/Michael W. Kamen
/s/Michael M. Kassen
/s/Michael P. Kleiman
/s/Lee P. Klingenstein
/s/Irwin Lainoff
/s/Joseph Lasser
/s/Richard Levine
/s/Christopher J. Lockwood
/s/Lawrence Marx III
/s/Robert R. McComsey
/s/Martin McKerrow
/s/Martin E. Messinger
/s/Beth W. Nelson
/s/Roy R. Neuberger
/s/Harold J. Newman
<PAGE> 28
/s/Daniel P. Paduano
/s/Norman H. Pessin
/s/Leslie M. Pollack
/s/William A. Potter
/s/Janet W. Prindle
/s/C. Carl Randolph
/s/Kevin L. Risen
/s/Daniel Rosenblatt
/s/J. Curt Schnackenberg
/s/Marvin C. Schwartz
/s/Jennifer Silver
/s/Kent C. Simon
/s/R. Edward Spilka
/s/Gloria Spivak
/s/Heidi S. Steiger
/s/Bernard Z. Stein
/s/Fred Stein
/s/Eleanor M. Sterne
/s/Stephanie Stiefel
/s/Philip A. Straus
/s/Peter Strauss
/s/Peter Sundman
/s/Allan D. Sutton
/s/Richard J. Sweetnam Jr.
/s/Judith M. Vale
/s/David I. Weiner
/s/Dietrich Weismann
/s/Lawrence Zicklin
HERBERT W. ACKERMAN ASSOCIATES, L.P.
By: Herbert W. Ackerman Associates, Inc.,
its general partner
By: /s/Herbert W. Ackerman
President
APPEL ASSOCIATES, L.P.
By: Appel Associates, Inc., its general partner
By: /s/Robert J. Appel
President
BERLIN ASSOCIATES, L.P.
By: Berlin Associates, Inc., its general partner
By: /s/Howard R. Berlin
President
<PAGE> 29
BOLTON ASSOCIATES, L.P.
By: Bolton Associates, Inc., its general partner
By: /s/Jeffrey Bolton
President
CANTOR ASSOCIATES, L.P.
By: Cantor Associates, Inc., its general partner
By: /s/Richard A. Cantor
President
CAVALLO ASSOCIATES, L.P.
By: Cavallo Associates, Inc., its general partner
By: /s/Vincent Cavallo
President
EGENER ASSOCIATES, L.P.
By: Egener Associates, Inc., its general partner
By: /s/Stanley Egener
President
FRANCFORT 1998 GRANTOR RETAINED ANNUITY TRUST
By: Neuberger&Berman Trust Company of Delaware,
as Trustee
By: /s/John W. Mack
Vice President
/s/Gregory Francort
Trustee
/s/Patricia Francfort
Trustee
GANEK ASSOCIATES, L.P.
By: Ganek Associates, Inc., its general partner
By: /s/Howard L. Ganek
President
GIULIANO ASSOCIATES, L.P.
By: Giuliano Associates, Inc., its general partner
By: /s/Theodore Giuliano
President
GOLDSTEIN ASSOCIATES, L.P.
By: Goldstein Associates, Inc., its general partner
By: /s/Mark R. Goldstein
President
KAMEN ASSOCIATES, L.P.
By: Kamen Associates, Inc., its general partner
By: /s/Michael W. Kamen
President
<PAGE> 30
KASSEN ASSOCIATES, L.P.
By: Kassen Associates, Inc., its general partner
By: /s/Michael M. Kassen
President
KLINGENSTEIN ASSOCIATES, L.P.
By: Klingenstein Associates, Inc., its general partner
By: /s/Lee P. Klingenstein
President
LAINOFF ASSOCIATES, L.P.
By: Lainoff Associates, Inc., its general partner
By: /s/Irwin Lainoff
President
LASSER ASSOCIATES, L.P.
By: Lasser Associates, Inc., its general partner
By: /s/Joseph Lasser
President
LAWRENCE MARX III ASSOCIATES, L.P.
By: Lawrence Marx III Associates, Inc.,
its general partner
By: /s/Lawrence Marx III
President
McKERROW ASSOCIATES, L.P.
By: McKerrow Associates, Inc., its general partner
By: /s/Martin McKerrow
President
MESSINGER ASSOCIATES, L.P.
By: Messinger Associates, Inc., its general partner
By: /s/Martin E. Messinger
President
NEUBERGER ASSOCIATES, L.P.
By: Neuberger Associates, Inc., its general partner
By: /s/Roy R. Neuberger
President
NEWMAN ASSOCIATES, L.P.
By: Newman Associates, Inc., its general partner
By: /s/Harold J. Newman
President
PADUANO ASSOCIATES, L.P.
By: Paduano Associates, Inc., its general partner
By: /s/Daniel P. Paduano
President
<PAGE> 31
POLLACK 1998 GRANTOR RETAINED ANNUITY TRUST
By: Neuberger&Berman Trust Company of Delaware,
as Trustee
By: /s/John W. Mack
Vice President
/s/Leslie M. Pollack
Trustee
/s/Yvonne S. Pollack
Trustee
POTTER ASSOCIATES, L.P.
By: Potter Associates, Inc., its general partner
By: /s/William A. Potter
President
SCHWARTZ CS ASSOCIATES, L.P.
By: Schwartz CS Associates, Inc., its general partner
By: /s/Marvin C. Schwartz
President
SCHWARTZ ES ASSOCIATES, L.P.
By: Schwartz ES Associates, Inc., its general partner
By: /s/Marvin C. Schwartz
President
ROBERT EDWARD SPILKA 1998 GRANTOR RETAINED ANNUITY TRUST
By: Neuberger&Berman Trust Company of Delaware,
as Trustee
By: /s/John W. Mack
Vice President
/s/R. Edward Spilka
Trustee
/s/Linda Galarza Spilka
Trustee
STEIGER ASSOCIATES, L.P.
By: Steiger Associates, Inc., its general partner
By: /s/Heidi S. Steiger
President
STIEFEL ASSOCIATES, L.P.
By: Stiefel Associates, Inc., its general partner
President
By: /s/Stephanie Stiefel
STRAUSS 1998 TRUST
By: Neuberger&Berman Trust Company of Delaware,
as Trustee
<PAGE> 32
By: /s/John W. Mack
Vice President
/s/Barbara Strauss
Trustee
SUNDMAN ASSOCIATES, L.P.
By: Sundman Associates, Inc., its general partner
By: /s/Peter Sundman
President
ALLAN D. SUTTON 1998 GRANTOR RETAINED ANNUITY TRUST
By: Neuberger&Berman Trust Company of Delaware,
as Trustee
By: /s/John W. Mack
Vice President
/s/Allan D. Sutton
Trustee
/s/Anita Sutton
Trustee
SUTTON 1998 GST TRUST
By: Neuberger&Berman Trust Company of Delaware,
as Trustee
By: /s/John W. Mack
Vice President
/s/Nancy Sutton Finley
Trustee
/s/Peggy Lynn Sutton
Trustee
WEINER 1998 GRANTOR RETAINED ANNUITY TRUST
By: Neuberger&Berman Trust Company of Delaware,
as Trustee
By: /s/John W. Mack
Vice President
/s/David J. Weiner
Trustee
/s/Laurie L. Weiner
Trustee
/s/Bintoar Palar
Trustee
WEISMANN ASSOCIATES, L.P.
By: Weismann Associates, Inc., its general partner
By: /s/Dietrich Weismann
President
<PAGE> 33
ZICKLIN ASSOCIATES, L.P.
By: Zicklin Associates, Inc., its general partner
By: /s/Lawrence Zicklin
President
<PAGE> 34
SCHEDULE I
<TABLE>
<CAPTION>
Name and Address* of Principal Number of NBMI Shares
- ------------------------------ ---------------------
<S> <C>
Herbert W. Ackerman 110
Robert J. Appel 790
Howard R. Berlin 263
Jeffrey Bolton 105
Richard A. Cantor 457
Vincent Cavallo 110
Salvatore D'Elia 22
Stanley Egener 347
Michael N. Emmerman 157
Robert English 153
Jack M. Ferraro 75
Gregory P. Francfort 52
Howard L. Ganek 304
Robert Gendelman 78
Theodore Giuliano 139
Mark R. Goldstein 123
Lee H. Idleman 259
Alan L. Jacobs 129
Kenneth Kahn 5
Michael W. Kamen 50
Michael M. Kassen 321
Mark P. Kleiman 65
Lee P. Klingenstein 86
Irwin Lainoff 356
Joseph Lasser 71
Richard Levine 35
Christopher J. Lockwood 273
Lawrence Marx III 555
Robert R. McComsey 272
Martin McKerrow 101
Martin E. Messinger 355
</TABLE>
- ---
* Unless otherwise indicated, the address of each Principal is c/o Neuberger
Berman, 605 Third Avenue, New York, New York 10158.
<PAGE> 35
<TABLE>
<S> <C>
Beth W. Nelson 303
Roy R. Neuberger 1
Harold J. Newman 200
Daniel P. Paduano 263
Norman H. Pessin 93
Leslie M. Pollack 166
William A. Potter 73
Janet W. Prindle 213
C. Carl Randolph 55
Kevin L. Risen 50
Daniel Rosenblatt 6
J. Curt Schnackenberg 60
Marvin C. Schwartz 1,503
Jennifer Silver 25
Kent C. Simon 592
R. Edward Spilka 104
Gloria Spivak 50
Heidi S. Steiger 132
Bernard Z. Stein 62
Fred Stein 162
Eleanor M. Sterne 92
Stephanie Stiefel 7
Philip A. Straus 1
Peter Strauss 161
Peter Sundman 21
Allan D. Sutton 98
Richard J. Sweetnam Jr 31
Judith M. Vale 178
David I. Weiner 39
Dietrich Weismann 733
Lawrence Zicklin 500
------
Total 12,192
======
</TABLE>
<PAGE> 36
SCHEDULE II
Name and Address* of Family Affiliate
Herbert W. Ackerman Associates, L.P.
Appel Associates, L.P.
Berlin Associates, L.P.
Bolton Associates, L.P.
Cantor Associates, L.P.
Cavallo Associates, L.P.
Egener Associates, L.P.
Francfort 1998 Grantor Retained Annuity Trust
Ganek Associates, L.P.
Giuliano Associates, L.P.
Goldstein Associates, L.P.
Kamen Associates, L.P.
Kassen Associates, L.P.
Klingenstein Associates, L.P.
Lainoff Associates, L.P.
Lasser Associates, L.P.
Lawrence Marx III Associates, L.P.
McKerrow Associates, L.P.
Messinger Associates, L.P.
Neuberger Associates, L.P.
Newman Associates, L.P.
Paduano Associates, L.P.
Pollack 1998 Grantor Retained Annuity Trust
Potter Associates, L.P.
Schwartz ES Associates, L.P. Schwartz CS Associates, L.P.
Robert Edward Spilka 1998 Grantor Retained Annuity Trust
Steiger Associates, L.P.
Stiefel Associates, L.P.
Strauss 1998 Trust
- --------
* Unless otherwise indicated, the address of each Family Affiliate is c/o
Neuberger & Berman Trust Company of Delaware, 919 Market Street, Suite
506, Wilmington, Delaware 19801.
<PAGE> 37
Sundman Associates, L.P.
Allan D. Sutton 1998 Grantor Retained Annuity Trust
Sutton 1998 GST Trust
Weiner 1998 Grantor Retained Annuity Trust
Weismann Associates, L.P.
Zicklin Associates, L.P.
2
<PAGE> 1
CERTIFICATE OF INCORPORATION
OF
NEUBERGER BERMAN INC.
FIRST: The name of the Corporation is Neuberger Berman Inc.
SECOND: The Corporation's registered office in the State of Delaware is
at 1209 Orange Street, City of Wilmington, County of Newcastle, Delaware 19801.
The name of its registered agent at such address is The Corporation Trust
Company.
THIRD: The nature of the business of the Corporation and its purpose 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.
FOURTH: (a) The total number of shares of stock which the Corporation
shall have authority to issue is 250,000,000 shares of common stock, par value
$0.01 per share (the "Common Stock"), and 5,000,000 shares of preferred stock,
par value $0.01 per share (the "Preferred Stock").
(b) Each holder of Common Stock shall be entitled to one vote for each
share of Common Stock held of record by such holder and shall be entitled to
vote with respect to all matters as to which a stockholder of a Delaware
corporation would be entitled to vote.
(c) The Preferred Stock may be issued at any time and from time to time
in one or more series. The Board of Directors is hereby authorized to provide
for the issuance of shares of Preferred Stock in series and, by filing a
certificate of designation pursuant to the applicable provisions of the General
Corporation Law of the State of Delaware (hereinafter referred to as a
"Preferred Stock Certificate of Designation"), to establish from time to time
the number of shares to be included in each such series, and to fix the
designation, powers, preferences and rights of shares of each such series and
the qualifications, limitations and restrictions thereof.
The authority of the Board of Directors with respect to each series of
Preferred Stock shall include, but not be limited to, determination of the
following:
(i) the designation of the series, which may be by
distinguishing number, letter or title;
<PAGE> 2
(ii) the number of shares of the series, which number the
Board of Directors may thereafter (except where otherwise provided in
the applicable Preferred Stock Certificate of Designation) increase or
decrease (but not below the number of shares thereof then outstanding);
(iii) whether dividends, if any, shall be cumulative or
noncumulative and the dividend rate of the series;
(iv) whether dividends, if any, shall be payable in cash, in
kind or otherwise;
(v) the dates on which dividends, if any, shall be payable;
(vi) the redemption rights and price or prices, if any, for
shares of the series;
(vii) the terms and amount of any sinking fund provided for
the purchase or redemption of shares of the series;
(viii) the amounts payable on shares of the series in the
event of any voluntary or involuntary liquidation, dissolution or
winding up of the affairs of the Corporation;
(ix) whether the shares of the series shall be convertible or
exchangeable into shares of any other class or series, or any other
security, of the Corporation or any other corporation, and, if so, the
specification of such other class or series or such other security, the
conversion or exchange price or prices or rate or rates, any
adjustments thereof, the date or dates as of which such shares shall be
convertible or exchangeable and all other terms and conditions upon
which such conversion or exchange may be made;
(x) restrictions on the issuance of shares of the same series
or of any other class or series; and
(xi) whether or not the holders of the shares of such series
shall have voting rights, in addition to the voting rights provided by
law, and if so the terms of such voting rights, which may provide,
among other things and subject to the other provisions of this
Certificate of Incorporation, that each share of such series shall
carry one vote or more or less than one vote per share, that the
holders of such series shall be entitled to vote on certain matters as
a separate class (which for such purpose may be comprised solely of
such series or of such series and one or more other series or classes
of stock of the Corporation) and that all the shares of such
2
<PAGE> 3
series entitled to vote on a particular matter shall be deemed to be
voted on such matter in the manner that a specified portion of the
voting power of the shares of such series or separate class are voted
on such matter.
(d) The Common Stock shall be subject to the express terms of the
Preferred Stock and any series thereof.
(e) Subject to the rights of the holders of any series of Preferred
Stock, the number of authorized shares of any series of Preferred Stock may be
increased or decreased (but not below the number of shares thereof then
outstanding) by resolution of the Board of Directors of the Corporation and
approved by the affirmative vote of the holders of a majority of the voting
power of all outstanding shares of Common Stock of the Corporation and all other
outstanding shares of stock of the Corporation entitled to vote on such matter
irrespective of the provisions of Section 242(b)(2) of the General Corporation
Law of the State of Delaware or any corresponding provision hereafter enacted,
with such outstanding shares of Common Stock and other stock considered for this
purpose a single class.
(f) Except as otherwise required by law, holders of Common Stock, as
such, shall not be entitled to vote on any amendment to this Certificate of
Incorporation or to a Preferred Stock Certificate of Designation that alters or
changes the powers, preferences, rights or other terms of one or more
outstanding series of Preferred Stock if the holders of such affected series are
entitled, either separately or together with the holders of one or more other
series of Preferred Stock, to vote thereon as a separate class pursuant to this
Certificate of Incorporation or a Preferred Stock Certificate of Designation or
pursuant to the General Corporation Law of the State of Delaware as currently in
effect or as the same may hereafter be amended.
(g) Except as may be required by law or as provided in this Certificate
of Incorporation or in a Preferred Stock Certificate of Designation, the Common
Stock shall have the exclusive right to vote for the election of Directors and
for all other purposes, and holders of Preferred Stock shall not be entitled to
vote on any matter or receive notice of any meeting of stockholders.
(h) The Corporation shall be entitled to treat the person in whose name
any share of its stock is registered as the owner thereof for all purposes and
shall not be bound to recognize any equitable or other claim to, or interest in,
such share on the part of any other person, whether or not the Corporation shall
have notice thereof, except as expressly provided by applicable law.
3
<PAGE> 4
FIFTH: The name and mailing address of the incorporator is as follows:
Elisabeth Nosarios
c/o Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
SIXTH: The following provisions are inserted for the management of the
business and for the conduct of the affairs of the Corporation and for the
purpose of creating, defining, limiting and regulating the powers of the
Corporation and its directors and stock holders:
(a) The number of Directors constituting the Board of Directors shall
be as set forth in or pursuant to the By-Laws of the Corporation, subject to the
rights of holders of any series of preferred stock, if any.
(b) Subject to the rights of any holders of any series of preferred
stock, if any, to elect additional Directors under specified circumstances, the
holders of a majority of the combined voting power of the then outstanding stock
of the Corporation entitled to vote generally in the election of Directors may
remove any Director or the entire Board of Directors, but only for cause.
(c) Vacancies in the Board of Directors resulting from death,
resignation, retirement, disqualification, removal from office or other cause
and newly created Directorships resulting from any increase in the authorized
number of Directors shall be filled in the manner provided in the By-Laws of the
Corporation.
(d) Advance notice of nominations for the election of Directors shall
be given in the manner and to the extent provided in the By-Laws of the
Corporation.
(e) The election of Directors may be conducted in any manner approved
by the stockholders at the time when the election is held and need not be by
written ballot.
(f) All corporate powers and authority of the Corporation (except as at
the time otherwise provided by law, by this Certificate of Incorporation or by
the By-Laws) shall be vested in and exercised by the Board of Directors.
(g) The Board of Directors shall have the power without the assent or
vote of the stockholders to adopt, amend, alter or repeal the By-Laws of the
Corporation, except to the extent that the By-Laws or this Certificate of
Incorporation otherwise provide. In addition
4
<PAGE> 5
to any requirements of law and any other provision of this Certificate of
Incorporation, the stockholders of the Corporation may adopt, amend, alter or
repeal any provision of the By-Laws upon the affirmative vote of the holders of
two-thirds (2/3) or more of the combined voting power of the then outstanding
stock of the Corporation entitled to vote generally in the election of
Directors.
SEVENTH: (a) No Director of the Corporation shall be liable to the
Corporation or its stockholders for monetary damages for breach of his or her
fiduciary duty as a Director, except to the extent that such exemption from
liability or limitation thereof is not permitted under the Delaware General
Corporation Law as currently in effect or as the same may hereafter be amended.
If the General Corporation Law of the State of Delaware is amended after the
filing of this Certificate of Incorporation to authorize corporate action
further eliminating or limiting the personal liability of Directors, then the
liability of a Director of the Corporation shall be eliminated or limited to the
fullest extent permitted by the General Corporation Law of the State of
Delaware, as so amended.
(b) Any repeal or modification of the foregoing paragraph by the
stockholders of the Corporation shall not adversely affect any right or
protection of a Director or the Corporation existing at the time of such repeal
or modification.
EIGHTH: Effective as of the time the Common Stock shall be registered
pursuant to the provisions of the Securities Exchange Act of 1934, as amended,
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 the
stockholders of the Corporation, and the ability of the stockholders to consent
in writing to the taking of any action is specifically denied.
NINTH: The Corporation reserves the right to amend or repeal any
provision contained in this Certificate of Incorporation in the manner now or
hereafter prescribed by the laws of the State of Delaware, and all rights herein
conferred upon stockholders or Directors (in the present form of this
Certificate of Incorporation or as hereinafter amended) are granted subject to
this reservation; provided, however, that any amendment or repeal of Article
SEVENTH of this Certificate of Incorporation shall not adversely affect any
right or protection existing hereunder immediately prior to such amendment or
repeal; and, provided, further, that Articles SIXTH, SEVENTH, EIGHTH and NINTH
of this Certificate of Incorporation shall not be amended, altered or repealed
without the affirmative vote of the holders of at least two-thirds (2/3) of the
then outstanding stock of the Corporation entitled to vote generally in the
election of Directors.
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IN WITNESS WHEREOF, I, the undersigned, being the incorporator
hereinabove named, for the purpose of forming a corporation pursuant to the
General Corporation Law of the State of Delaware, do make and file this
Certificate, hereby declaring and certifying that the facts herein stated are
true, and accordingly have hereunto set my hand this 13th day of August, 1998.
/s/ Elisabeth Nosarios
Elisabeth Nosarios
6
<PAGE> 1
NEUBERGER BERMAN INC.
BY-LAWS
As Adopted on August 13, 1998
<PAGE> 2
NEUBERGER BERMAN INC.
BY-LAWS
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
<S> <C>
ARTICLE I
STOCKHOLDERS
1.01. Annual Meetings .................................................. 1
1.02. Special Meetings ................................................. 1
1.03. Notice of Meetings; Waiver ....................................... 1
1.04. Quorum ........................................................... 2
1.05. Voting ........................................................... 2
1.06. Voting by Ballot ................................................. 2
1.07. Adjournment ...................................................... 2
1.08. Proxies .......................................................... 3
1.09. Organization; Procedure .......................................... 3
1.10. Notice of Stockholder Business and Nominations ................... 4
1.11. Inspectors of Elections .......................................... 6
1.12. Opening and Closing of Polls ..................................... 7
1.13. No Stockholder Action by Written Consent ......................... 7
ARTICLE II
BOARD OF DIRECTORS
2.01. General Powers ................................................... 8
2.02. Number and Term of Office ........................................ 8
2.03. Election of Directors ............................................ 8
2.04. Annual and Regular Meetings ...................................... 8
2.05. Special Meetings; Notice ......................................... 9
2.06. Quorum; Voting ................................................... 9
2.07. Adjournment ...................................................... 9
2.08. Action Without a Meeting ......................................... 9
2.09. Regulations; Manner of Acting .................................... 10
2.10. Action by Telephonic Communications .............................. 10
2.11. Resignations ..................................................... 10
2.12. Removal of Directors ............................................. 10
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
2.13. Vacancies and Newly Created Directorships ........................ 10
2.14. Compensation ..................................................... 11
2.15. Reliance on Accounts and Reports, etc ............................ 11
ARTICLE III
EXECUTIVE COMMITTEE AND OTHER COMMITTEES
3.01. Committees of Directors .......................................... 11
3.02. Other Committees ................................................. 12
3.03. Powers ........................................................... 12
3.04. Proceedings ...................................................... 13
3.05. Quorum and Manner of Acting ...................................... 13
3.06. Action by Telephonic Communications .............................. 13
3.07. Absent or Disqualified Members ................................... 14
3.08. Resignations ..................................................... 14
3.09. Removal .......................................................... 14
3.10. Vacancies ........................................................ 14
ARTICLE IV
OFFICERS
4.01. Number ........................................................... 14
4.02. Election ......................................................... 14
4.03. Salaries ......................................................... 15
4.04. Removal and Resignation; Vacancies ............................... 15
4.05. Authority and Duties of Officers ................................. 15
4.06. The Chairman ..................................................... 15
4.07. The Chief Executive Officer ...................................... 15
4.08. The President .................................................... 16
4.09. The Vice President ............................................... 16
4.10. The Secretary .................................................... 16
4.11. The Chief Financial Officer ...................................... 17
4.12. The Treasurer .................................................... 18
4.13. Additional Officers .............................................. 18
4.14. Security ......................................................... 19
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
ARTICLE V
CAPITAL STOCK
5.01. Certificates of Stock, Uncertificated Shares ..................... 19
5.02. Signatures; Facsimile ............................................ 19
5.03. Lost, Stolen or Destroyed Certificates ........................... 19
5.04. Transfer of Stock ................................................ 20
5.05. Record Date ...................................................... 20
5.06. Registered Stockholders .......................................... 21
5.07. Transfer Agent and Registrar ..................................... 21
ARTICLE VI
INDEMNIFICATION
6.01. Nature of Indemnity .............................................. 21
6.02. Successful Defense ............................................... 22
6.03. Determination that Indemnification is Proper ..................... 22
6.04. Advance Payment of Expenses ...................................... 23
6.05. Procedure for Indemnification of Directors and Officers .......... 23
6.06. Survival; Preservation of Other Rights ........................... 24
6.07. Insurance ........................................................ 24
6.08. Severability ..................................................... 25
ARTICLE VII
OFFICES
7.01. Registered Office ................................................ 25
7.02. Other Offices .................................................... 25
ARTICLE VIII
GENERAL PROVISIONS
8.01. Dividends ........................................................ 25
8.02. Reserves ......................................................... 26
8.03. Execution of Instruments ......................................... 26
8.04. Corporate Indebtedness ........................................... 26
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C>
8.05. Deposits ......................................................... 26
8.06. Checks ........................................................... 27
8.07. Sale, Transfer, etc. of Securities ............................... 27
8.08. Voting as Stockholder ............................................ 27
8.09. Fiscal Year ...................................................... 27
8.10. Seal ............................................................. 27
8.11. Books and Records; Inspection .................................... 28
ARTICLE IX
AMENDMENT OF BY-LAWS
9.01. Amendment ........................................................ 28
ARTICLE X
CONSTRUCTION
10.01. Construction .................................................... 28
</TABLE>
iv
<PAGE> 6
Neuberger Berman Inc.
BY-LAWS
As adopted on August 13, 1998
------------------------------------------------
ARTICLE I
STOCKHOLDERS
Section 1.01. Annual Meetings. The annual meeting of the
stockholders of the Corporation for the election of Directors and for the
transaction of such other business as properly may come before such meeting
shall be held at such place, either within or without the State of Delaware, and
at such date and at such time, as may be fixed from time to time by resolution
of the Board of Directors and set forth in the notice or waiver of notice of the
meeting.
Section 1.02. Special Meetings. Special meetings of the stockholders
may be called at any time by the Chief Executive Officer (or, in the event of
his absence or disability, by the President or any Vice President), or by the
Board of Directors. A special meeting shall be called by the Chief Executive
Officer (or, in the event of his absence or disability, by the President or any
Vice President), or by the Secretary pursuant to a resolution approved by a
majority of the entire Board of Directors. Such special meetings of the
stockholders shall be held at such places, within or without the State of
Delaware, as shall be specified in the respective notices or waivers of notice
thereof. Except as expressly provided in this Section 1.02, any power of the
stockholders of the Corporation to call a special meeting is specifically
denied.
Section 1.03. Notice of Meetings; Waiver. The Secretary or any
Assistant Secretary shall cause written notice of the place, date and hour of
each meeting of the stockholders, and, in the case of a special meeting, the
purpose or purposes for which such meeting is called, to be given personally or
by mail, not less than ten nor more than sixty days prior to the meeting, to
each stockholder of record entitled to vote at such meeting. If such notice is
mailed, it shall be deemed to have been given to a stockholder when deposited in
the United States mail, postage prepaid, directed to the stockholder at his
address as it appears on the record of stockholders of
<PAGE> 7
the Corporation, or, if a stockholder shall have filed with the Secretary of the
Corporation a written request that notices to such stockholder be mailed to some
other address, then directed to such stockholder at such other address. Such
further notice shall be given as may be required by law.
A written waiver of any notice of any annual or special meeting
signed by the person entitled thereto, shall be deemed equivalent to notice.
Neither the business to be transacted at, nor the purpose of, any regular or
special meeting of the stockholders need be specified in a written waiver of
notice. Attendance of a stockholder at a meeting of stockholders shall
constitute a waiver of notice of such meeting, except when the stockholder
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business on the ground that the meeting is
not lawfully called or convened.
Section 1.04. Quorum. Except as otherwise required by law or by the
Certificate of Incorporation, the presence in person or by proxy of the holders
of record of a majority of the shares entitled to vote at a meeting of
stockholders shall constitute a quorum for the transaction of business at such
meeting.
Section 1.05. Voting. If, pursuant to Section 5.05 of these By-Laws,
a record date has been fixed, every holder of record of shares entitled to vote
at a meeting of stockholders shall be entitled to one vote for each share
outstanding in his or her name on the books of the Corporation at the close of
business on such record date. If no record date has been fixed, then every
holder of record of shares entitled to vote at a meeting of stockholders shall
be entitled to one vote for each share of stock standing in his or her name on
the books of the Corporation at the close of business on the day next preceding
the day on which notice of the meeting 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. Except as otherwise required by law or by the Certificate of Incorporation
or by these By-Laws, the vote of a majority of the shares represented in person
or by proxy at any meeting at which a quorum is present shall be sufficient for
the transaction of any business at such meeting.
Section 1.06. Voting by Ballot. No vote of the stockholders need be
taken by written ballot unless otherwise required by law. Any vote not required
to be taken by ballot may be conducted in any manner approved at the meeting at
which such vote is taken.
Section 1.07. Adjournment. If a quorum is not present at any meeting
of the stockholders, the stockholders present in person or by proxy shall have
the
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<PAGE> 8
power to adjourn any such meeting from time to time until a quorum is present.
Notice of any adjourned meeting of the stockholders of the Corporation need not
be given if the place, date and hour thereof are announced at the meeting at
which the adjournment is taken, provided, however, that if the adjournment is
for more than thirty days, or if after the adjournment a new record date for the
adjourned meeting is fixed pursuant to Section 5.05 of these By-Laws, a notice
of the adjourned meeting, conforming to the requirements of Section 1.03 hereof,
shall be given to each stockholder of record entitled to vote at such meeting.
At any adjourned meeting at which a quorum is present, any business may be
transacted that might have been transacted on the original date of the meeting.
Section 1.08. Proxies. Any stockholder entitled to vote at any
meeting of the stockholders may authorize another person or persons to vote at
any such meeting and express such consent or dissent for him or her by proxy. A
stockholder may authorize a valid proxy by executing a written instrument signed
by such stockholder, or by causing his or her signature to be affixed to such
writing by any reasonable means including, but not limited to, by facsimile
signature, or by transmitting or authorizing the transmission of a telegram,
cablegram or other means of electronic transmission to the person designated as
the holder of the proxy, a proxy solicitation firm or a like authorized agent.
No such proxy shall be voted or acted upon after the expiration of three years
from the date of such proxy, unless such proxy provides for a longer period.
Every proxy shall be revocable at the pleasure of the stockholder executing it,
except in those cases where applicable law provides that a proxy shall be
irrevocable. A stockholder may revoke any proxy which is not irrevocable by
attending the meeting and voting in person or by filing an instrument in writing
revoking the proxy or by filing another duly executed proxy bearing a later date
with the Secretary. Proxies by telegram, cablegram or other electronic
transmission must either set forth or be submitted with information from which
it can be determined that the telegram, cablegram or other electronic
transmission was authorized by the stockholder. Any copy, facsimile
telecommunication or other reliable reproduction of a writing or transmission
created pursuant to this section may be substituted or used in lieu of the
original writing or transmission for any and all purposes for which the original
writing or transmission could be used, provided that such copy, facsimile
telecommunication or other reproduction shall be a complete reproduction of the
entire original writing or transmission.
Section 1.09. Organization; Procedure. At every meeting of
stockholders the presiding officer shall be the Chairman or, in the event of his
or her absence or disability, a presiding officer chosen by a majority of the
stockholders present in person or by proxy. The Secretary, or in the event of
his or her absence or
3
<PAGE> 9
disability, the Assistant Secretary, if any, or if there be no Assistant
Secretary, in the absence of the Secretary, an appointee of the presiding
officer, shall act as Secretary of the meeting. The order of business and all
other matters of procedure at every meeting of stockholders may be determined by
such presiding officer.
Section 1.10. Notice of Stockholder Business and Nominations.
(a) Annual Meetings of Stockholders. (i) Nominations of persons for
election to the Board of Directors of the Corporation and the proposal of
business to be considered by the stockholders may be made at an annual meeting
of stockholders (A) by or at the direction of the Board of Directors or the
Chairman of the Board, or (B) by any stockholder of the Corporation who is
entitled to vote at the meeting, who complies with the notice procedures set
forth in clauses (ii) and (iii) of this paragraph and who was a stockholder of
record at the time such notice is delivered to the Secretary of the Corporation.
(ii) For nominations or other business to be properly brought before
an annual meeting by a stockholder, pursuant to clause (b) of paragraph (a)(i)
of this Section 1.10, the stockholder must have given timely notice thereof in
writing to the Secretary of the Corporation. To be timely, a stockholder's
notice shall be delivered to the Secretary at the principal executive offices of
the Corporation not less than ninety days nor more than one hundred and twenty
days prior to the first anniversary of the preceding year's annual meeting;
provided, that if the date of the annual meeting is advanced by more than twenty
days or delayed by more than seventy days from such anniversary date, notice by
the stockholder to be timely must be so delivered not earlier than one hundred
and twenty days prior to such annual meeting and not later than the close of
business on the later of the ninetieth day prior to such annual meeting or the
tenth day following the day on which public announcement of the date of such
meeting is first made. In no event shall the adjournment of an annual meeting
commence a new time period for the giving of a stockholder's notice as described
above. Such stockholder's notice shall set forth (A) as to each person whom the
stockholder proposes to nominate for election or reelection as a Director all
information relating to such person that is required to be disclosed in
solicitations of proxies for election of Directors, or is otherwise required, in
each case pursuant to Regulation 14A under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), and Rule 14A-11 thereunder, including such
person's written consent to being named in the proxy statement as a nominee and
to serving as a Director if elected; (B) as to any other business that the
stockholder proposes to bring before the meeting, a brief description of the
business desired to be brought before the meeting, the reasons for conducting
such business at the meeting and any material interest in such business of such
4
<PAGE> 10
stockholder and of any beneficial owner on whose behalf the proposal is made;
and (C) as to the stockholder giving the notice and any beneficial owner on
whose behalf the nomination or proposal is made (1) the name and address of such
stockholder, as they appear on the Corporation's books, and of such beneficial
owner and (2) the class and number of shares of the Corporation which are owned
beneficially and of record by such stockholder and such beneficial owner.
(iii) Notwithstanding anything in the second sentence of paragraph
(a)(ii) of this Section 1.10 to the contrary, in the event that the number of
Directors to be elected to the Board of Directors of the Corporation is
increased and there is no public announcement naming all of the nominees for
Director or specifying the size of the increased Board of Directors made by the
Corporation at least one hundred days prior to the first anniversary of the
preceding year's annual meeting, a stockholder's notice under this paragraph
shall also be considered timely, but only with respect to nominees for any new
positions created by such increase, if it shall be delivered to the Secretary at
the principal executive offices of the Corporation not later than the close of
business on the tenth day following the day on which such public announcement is
first made by the Corporation.
(b) Special Meetings of Stockholders. Only such business as shall
have been brought before the special meeting of the stockholders pursuant to the
Corporation's notice of meeting pursuant to Section 1.03 of these By-Laws shall
be conducted at such meeting. Nominations of persons for election to the Board
of Directors may be made at a special meeting of stockholders at which Directors
are to be elected pursuant to the Corporation's notice of meeting (1) by or at
the direction of the Board of Directors or (2) by any stockholder of the
Corporation who is entitled to vote at the meeting, who complies with the notice
procedures set forth in this Section 1.10 and who is a stockholder of record at
the time such notice is delivered to the Secretary of the Corporation.
Nominations by stockholders of persons for election to the Board of Directors
may be made at such special meeting of stockholders if the stockholder's notice
as required by paragraph (a)(ii) of this Section 1.10 shall be delivered to the
Secretary at the principal executive offices of the Corporation not earlier than
the one hundred and twentieth day prior to such special meeting and not later
than the close of business on the later of the ninetieth day prior to such
special meeting or the tenth day following the day on which public announcement
is first made of the date of the special meeting and of the nominees proposed by
the Board of Directors to be elected at such meeting. In no event shall the
adjournment of a special meeting commence a new time period for the giving of a
stockholder's notice as described above.
5
<PAGE> 11
(c) General. (i) Only persons who are nominated in accordance with
the procedures set forth in this Section 1.10 shall be eligible to serve as
Directors and only such business shall be conducted at a meeting of stockholders
as shall have been brought before the meeting in accordance with the procedures
set forth in this Section 1.10. Except as otherwise provided by law, the
Certificate of Incorporation or these By-Laws, the Chairman of the meeting shall
have the power and duty to determine whether a nomination or any business
proposed to be brought before the meeting was made in accordance with the
procedures set forth in this Section 1.10 and, if any proposed nomination or
business is not in compliance with this Section 1.10, to declare that such
defective proposal or nomination shall be disregarded.
(ii) For purposes of this Section 1.10, "public announcement" shall
mean disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable national news service or in a document publicly
filed by the Corporation with the Securities and Exchange Commission pursuant to
Section 13, 14, or 15(d) of the Exchange Act.
(iii) Notwithstanding the foregoing provisions of this Section 1.10,
a stockholder shall also comply with all applicable requirements of the Exchange
Act and the rules and regulations thereunder with respect to the matters set
forth in this Section 1.10. Nothing in this Section 1.10 shall be deemed to
affect any rights (A) of stockholders to request inclusion of proposals in the
Corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act, or
(B) of the holders of any series of Preferred Stock, if any, to elect Directors
if so provided under any applicable Preferred Stock Certificate of Designation
(as defined in the Certificate of Incorporation).
Section 1.11. Inspectors of Elections. Preceding any meeting of the
stockholders, the Board of Directors shall appoint one or more persons to act as
Inspectors of Elections, and may designate one or more alternate inspectors. In
the event no inspector or alternate is able to act, the person presiding at the
meeting shall appoint one or more inspectors to act at the meeting. Each
inspector, before entering upon the discharge of the duties of an inspector,
shall take and sign an oath faithfully to execute the duties of inspector with
strict impartiality and according to the best of his or her ability. The
inspector shall:
(a) ascertain the number of shares outstanding and the voting power
of each;
(b) determine the shares represented at a meeting and the validity
of proxies and ballots;
6
<PAGE> 12
(c) count all votes and ballots;
(d) determine and retain for a reasonable period a record of the
disposition of any challenges made to any determination by the inspectors; and
(e) certify his or her determination of the number of shares
represented at the meeting, and his or her count of all votes and ballots;
(f) the inspector may appoint or retain other persons or entities to
assist in the performance of the duties of inspector; and
(g) when determining the shares represented and the validity of
proxies and ballots, the inspector shall be limited to an examination of the
proxies, any envelopes submitted with those proxies, any information provided in
accordance with Section 1.08 of these By-Laws, ballots and the regular books and
records of the Corporation. The inspector may consider other reliable
information for the limited purpose of reconciling proxies and ballots submitted
by or on behalf of banks, brokers or their nominees or a similar person which
represent more votes than the holder of a proxy is authorized by the record
owner to cast or more votes than the stockholder holds of record. If the
inspector considers other reliable information as outlined in this section, the
inspector, at the time of his or her certification pursuant to (e) of this
section, shall specify the precise information considered, the person or persons
from whom the information was obtained, when this information was obtained, the
means by which the information was obtained, and the basis for the inspector's
belief that such information is accurate and reliable.
Section 1.12. Opening and Closing of Polls. The date and time for
the opening and the closing of the polls for each matter to be voted upon at a
stockholder meeting shall be announced at the meeting. The inspector of the
election shall be prohibited from accepting any ballots, proxies or votes or any
revocations thereof or changes thereto after the closing of the polls, unless
the Court of Chancery upon application by a stockholder shall determine
otherwise.
Section 1.13. No Stockholder Action by Written Consent. Effective as
of the time the Common Stock shall be registered pursuant to the provisions of
the Exchange Act, 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 the stockholders of the Corporation, and the ability of the
stockholders to consent in writing to the taking of any action is specifically
denied.
7
<PAGE> 13
ARTICLE II
BOARD OF DIRECTORS
Section 2.01. General Powers. Except as may otherwise be provided by
law, by the Certificate of Incorporation or by these By-Laws, the property,
affairs and business of the Corporation shall be managed by or under the
direction of the Board of Directors and the Board of Directors may exercise all
the powers of the Corporation.
Section 2.02. Number and Term of Office. Subject to the rights of
the holders of any series of Preferred Stock, if any, the number of Directors
shall be fixed from time to time exclusively pursuant to a resolution adopted by
a majority of the entire Board. But the Board shall at no time consist of not
fewer than three (3) Directors. Each Director (whenever elected) shall hold
office until his or her successor has been duly elected and qualified, or until
his or her earlier death, resignation or removal.
Section 2.03. Election of Directors. Except as otherwise provided in
Sections 2.12 and 2.13 of these By-Laws, the Directors shall be elected at each
annual meeting of the stockholders. If the annual meeting for the election of
Directors is not held on the date designated therefor, the Directors shall cause
the meeting to be held as soon thereafter as convenient. At each meeting of the
stockholders for the election of Directors, provided a quorum is present, the
Directors shall be elected by a plurality of the votes validly cast in such
election.
Section 2.04. Annual and Regular Meetings. The annual meeting of the
Board of Directors for the purpose of electing officers and for the transaction
of such other business as may come before the meeting shall be held as soon as
possible following adjournment of the annual meeting of the stockholders at the
place of such annual meeting of the stockholders. Notice of such annual meeting
of the Board of Directors need not be given. The Board of Directors from time to
time may by resolution provide for the holding of regular meetings and fix the
place (which may be within or without the State of Delaware) and the date and
hour of such meetings. Notice of regular meetings need not be given, provided,
however, that if the Board of Directors shall fix or change the time or place of
any regular meeting, notice of such action shall be mailed promptly, or sent by
telephone, including a voice messaging system or other system or technology
designed to record and communicate messages, telegraph, facsimile, electronic
mail or other electronic means, to each Director who
8
<PAGE> 14
shall not have been present at the meeting at which such action was taken,
addressed to him or her at his or her usual place of business, or shall be
delivered to him or her personally. Notice of such action need not be given to
any Director who attends the first regular meeting after such action is taken
without protesting the lack of notice to him or her, prior to or at the
commencement of such meeting, or to any Director who submits a signed waiver of
notice, whether before or after such meeting.
Section 2.05. Special Meetings; Notice. Special meetings of the
Board of Directors shall be held whenever called by the Chief Executive Officer
(or, in the event of his or her absence or disability, by the President or any
Vice President), or by the Chairman of the Board of Directors, at such place
(within or without the State of Delaware), date and hour as may be specified in
the respective notices or waivers of notice of such meetings. Special meetings
of the Board of Directors may be called on twenty-four (24) hours' notice, if
notice is given to each Director personally or by telephone, including a voice
messaging system, or other system or technology designed to record and
communicate messages, telegraph, facsimile, electronic mail or other electronic
means, or on five (5) days' notice, if notice is mailed to each Director,
addressed to him or her at his or her usual place of business. Notice of any
special meeting need not be given to any Director who attends such meeting
without protesting the lack of notice to him or her, prior to or at the
commencement of such meeting, or to any Director who submits a signed waiver of
notice, whether before or after such meeting, and any business may be transacted
thereat.
Section 2.06. Quorum; Voting. At all meetings of the Board of
Directors, the presence of a majority of the total authorized number of
Directors shall constitute a quorum for the transaction of business. Except as
otherwise required by law, the vote of a majority of the Directors present at
any meeting at which a quorum is present shall be the act of the Board of
Directors.
Section 2.07. Adjournment. A majority of the Directors present,
whether or not a quorum is present, may adjourn any meeting of the Board of
Directors to another time or place. No notice need be given of any adjourned
meeting unless the time and place of the adjourned meeting are not announced at
the time of adjournment, in which case notice conforming to the requirements of
Section 2.05 of these By-Laws shall be given to each Director.
Section 2.08. Action Without a Meeting. Any action required or
permitted to be taken at any meeting of the Board of Directors may be taken
without a meeting if all members of the Board of Directors consent thereto in
writing, and such writing or writings are filed with the minutes of proceedings
of the Board of Directors.
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<PAGE> 15
Section 2.09. Regulations; Manner of Acting. To the extent
consistent with applicable law, the Certificate of Incorporation and these
By-Laws, the Board of Directors may adopt such rules and regulations for the
conduct of meetings of the Board of Directors and for the management of the
property, affairs and business of the Corporation as the Board of Directors may
deem appropriate. The Directors shall act only as a Board and the individual
Directors shall have no power as such.
Section 2.10. Action by Telephonic Communications. Members of the
Board of Directors may participate in a meeting of the Board of Directors by
means of conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other, and
participation in a meeting pursuant to this provision shall constitute presence
in person at such meeting.
Section 2.11. Resignations. Any Director may resign at any time by
delivering a written notice of resignation, signed by such Director, to the
Chairman or the Secretary. Unless otherwise specified therein, such resignation
shall take effect upon delivery.
Section 2.12. Removal of Directors. Subject to the rights of the
holders of any series of Preferred Stock, if any, to elect additional Directors
under specified circumstances, any Director may be removed at any time, but only
for cause, upon the affirmative vote of the holders of a majority of the
combined voting power of the then outstanding stock of the Corporation entitled
to vote generally in the election of Directors. Any vacancy in the Board of
Directors caused by any such removal may be filled at such meeting by the
stockholders entitled to vote for the election of the Director so removed. If
such stockholders do not fill such vacancy at such meeting, such vacancy may be
filled in the manner provided in Section 2.13 of these By-Laws.
Section 2.13. Vacancies and Newly Created Directorships. Subject to
the rights of the holders of any series of Preferred Stock, if any, to elect
additional Directors under specified circumstances, and except as provided in
Section 2.12, if any vacancies shall occur in the Board of Directors, by reason
of death, resignation, removal or otherwise, or if the authorized number of
Directors shall be increased, the Directors then in office shall continue to
act, and such vacancies and newly created directorships may be filled by a
majority of the Directors then in office, although less than a quorum. A
Director elected to fill a vacancy or a newly created directorship shall hold
office until his successor has been elected and qualified or until his earlier
death, resignation or removal. Any such vacancy or newly created directorship
may also be filled at any time by vote of the stockholders.
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Section 2.14. Compensation. The amount, if any, which each Director
shall be entitled to receive as compensation for such Director's services as
such shall be fixed from time to time by resolution of the Board of Directors.
Section 2.15. Reliance on Accounts and Reports, etc. A Director, or
a member of any committee designated by the Board of Directors shall, in the
performance of such Director's duties, be fully protected in relying in good
faith upon the records of the Corporation and upon information, opinions,
reports or statements presented to the Corporation by any of the Corporation's
officers or employees, or committees designated by the Board of Directors, or by
any other person as to the matters the member reasonably believes are within
such other person's professional or expert competence and who has been selected
with reasonable care by or on behalf of the Corporation.
ARTICLE III
EXECUTIVE COMMITTEE AND OTHER COMMITTEES
Section 3.01. Committees of Directors. The Board of Directors shall
establish an Audit Committee and may establish an Executive Committee, and a
Nominating Committee. Such committees shall have the following complement and
responsibilities in addition to any the Board of Directors may by resolution
establish:
(a) Executive Committee. If the Board of Directors establishes an
Executive Committee, the Board of Directors shall determine the number of
members of the Executive Committee who shall consist of four members who shall
serve for a term of one year or until their successors are appointed. The
members of the Executive Committee shall be Directors of the Corporation and
shall be appointed to the Executive Committee by the Chairman of the Board,
provided such appointments are confirmed by a majority of the entire Board of
Directors. The Executive Committee shall exercise the full power of the Board of
Directors between meetings of the Board, subject to the limitations set forth in
Section 3.03 below.
(b) Nominating Committee. If the Board of Directors establishes a
Nominating Committee, the Board of Directors shall determine the number of
members of the Nominating Committee. Each member of the Nominating Committee
shall serve a one-year term. All members shall be appointed by the Chairman of
the Board of Directors or the Vice-Chairman, or such other officer as the Board
of Directors may designate from time to time, provided such appointments are
confirmed by a majority
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of the entire Board of Directors. The Nominating Committee shall nominate
candidates for membership of the Board of Directors and shall cause the names of
its nominees to be mailed to all shareholders not less than thirty days before
the annual meeting at which the election shall take place. A stockholder may
nominate a candidate for election to the Board of Directors provided the
nominating stockholder gives written notice of his or her intention to nominate
a Director and the name of the nominee not less than thirty days before the
annual meeting at which the election shall take place.
(c) Audit Committee. The Audit Committee shall consist of three
members, at least two of whom shall be Directors appointed by the Chairman of
the Board of Directors, provided such appointments are confirmed by a majority
of the entire Board of Directors and each of whom shall serve one-year terms. No
member of the Audit Committee shall be an employee of the Corporation. The Audit
Committee shall meet periodically with the Corporation's management, internal
auditors and independent public accountants to discuss the scope of the annual
audit, internal control, internal auditing and financial reporting matters. The
Corporation's independent public accountants and internal auditors shall have
direct access to the Audit Committee.
Section 3.02. Other Committees. The Board of Directors may designate
one or more other committees, each such committee to consist of such number of
Directors as from time to time may be fixed by the Board of Directors. The Board
of Directors may designate one or more Directors as alternate members of any
such committee, who may replace any absent or disqualified member or members at
any meeting of such committee. Thereafter, members (and alternate members, if
any) of each such committee may be designated at the annual meeting of the Board
of Directors. Any such committee may be abolished or re-designated from time to
time by the Board of Directors. Each member (and each alternate member) of any
such committee (whether designated at an annual meeting of the Board of
Directors or to fill a vacancy or otherwise) shall hold office until his or her
successor shall have been designated or until he or she shall cease to be a
Director, or until his or her earlier death, resignation or removal.
Section 3.03. Powers. During the intervals between the meetings of
the Board of Directors, if the Board of Directors has established an Executive
Committee, such committee, except as otherwise provided in this section, and
subject to the provisions of the Certificate of Incorporation, shall have and
may exercise all the powers and authority of the Board of Directors in the
management of the property, affairs and business of the Corporation, including
the power to declare dividends and to authorize the issuance of stock. Each such
other committee, except as otherwise
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provided in this section, shall have and may exercise such powers of the Board
of Directors as may be provided by resolution or resolutions of the Board of
Directors. Neither the Executive Committee nor any such other committee shall
have the power or authority:
(a) to approve or adopt, or recommend to the stockholders, any
action or matter expressly required by the General Corporation Law to be
submitted to the stockholders for approval; or
(b) to adopt, amend or repeal the By-Laws of the Corporation.
The Executive Committee shall have, and any such other committee may be granted
by the Board of Directors, power to authorize the seal of the Corporation to be
affixed to any or all papers which may require it.
Section 3.04. Proceedings. Each such committee may fix its own rules
of procedure and may meet at such place (within or without the State of
Delaware), at such time and upon such notice, if any, as it shall determine from
time to time. Each such committee shall keep minutes of its proceedings and
shall report such proceedings to the Board of Directors at the meeting of the
Board of Directors next following any such proceedings.
Section 3.05. Quorum and Manner of Acting. Except as may be
otherwise provided in the resolution creating such committee, at all meetings of
any committee, the presence of members (or alternate members) constituting a
majority of the total authorized membership of such committee shall constitute a
quorum for the transaction of business. The act of the majority of the members
present at any meeting at which a quorum is present shall be the act of such
committee. Any action required or permitted to be taken at any meeting of any
such committee may be taken without a meeting, if all members of such committee
shall consent to such action in writing and such writing or writings are filed
with the minutes of the proceedings of the committee. The members of any such
committee shall act only as a committee, and the individual members of such
committee shall have no power as such.
Section 3.06. Action by Telephonic Communications. Members of any
committee designated by the Board of Directors may participate in a meeting of
such committee by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in a meeting pursuant to this provision shall
constitute presence in person at such meeting.
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Section 3.07. Absent or Disqualified Members. In the absence or
disqualification of a member of any committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he, she
or they constitute a quorum, may unanimously appoint another member of the Board
of Directors to act at the meeting in the place of any such absent or
disqualified member.
Section 3.08. Resignations. Any member (and any alternate member) of
any committee may resign at any time by delivering a written notice of
resignation, signed by such member, to the Board of Directors or the Chairman.
Unless otherwise specified therein, such resignation shall take effect upon
delivery.
Section 3.09. Removal. Any member (and any alternate member) of any
committee may be removed at any time, either for or without cause, by resolution
adopted by a majority of the whole Board of Directors.
Section 3.10. Vacancies. If any vacancy shall occur in any
committee, by reason of disqualification, death, resignation, removal or
otherwise, the remaining members (and any alternate members) shall continue to
act, and any such vacancy may be filled by the Board of Directors.
ARTICLE IV
OFFICERS
Section 4.01. Number. The officers of the Corporation shall be
chosen by the Board of Directors and shall be a Chairman of the Board, Chief
Executive Officer, President, one or more Vice Presidents, Chief Financial
Officer, a Secretary and a Treasurer. The Board of Directors also may elect one
or more Assistant Secretaries and Assistant Treasurers in such numbers as the
Board of Directors may determine. Any number of offices may be held by the same
person. No officer need be a Director of the Corporation.
Section 4.02. Election. Unless otherwise determined by the Board of
Directors, the officers of the Corporation shall be elected by the Board of
Directors at the annual meeting of the Board of Directors, and shall be elected
to hold office until the next succeeding annual meeting of the Board of
Directors. In the event of the failure to elect officers at such annual meeting,
officers may be elected and qualified, or until his or her earlier death,
resignation or removal at any regular or special
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meeting of the Board of Directors. Each officer shall hold office until his
successor has been elected and qualified, or until his or her earlier death,
resignation or removal.
Section 4.03. Salaries. The salaries of all officers and agents of
the Corporation shall be fixed by the Board of Directors.
Section 4.04. Removal and Resignation; Vacancies. Any officer may be
removed for or without cause at any time by the Board of Directors. Any officer
may resign at any time by delivering a written notice of resignation, signed by
such officer, to the Board of Directors or the Chief Executive Officer. Unless
otherwise specified therein, such resignation shall take effect upon delivery.
Any vacancy occurring in any office of the Corporation by death, resignation,
removal or otherwise, shall be filled by the Board of Directors.
Section 4.05. Authority and Duties of Officers. The officers of the
Corporation shall have such authority and shall exercise such powers and perform
such duties as may be specified in these By-Laws, except that in any event each
officer shall exercise such powers and perform such duties as may be required by
law.
Section 4.06. The Chairman. The Directors shall elect from among the
members of the Board a "Chairman" of the Board. The Chairman shall have such
duties and powers as set forth in these By-Laws or as shall otherwise be
conferred upon the Chairman from time to time by the Board. The Chairman shall
preside over all meetings of the Stockholders and the Board.
Section 4.07. The Chief Executive Officer. The Chief Executive
Officer shall have general control and supervision of the policies and
operations of the Corporation and shall see that all orders and resolutions of
the Board of Directors are carried into effect. He or she shall manage and
administer the Corporation's business and affairs and shall also perform all
duties and exercise all powers usually pertaining to the office of a chief
executive officer of a corporation. He or she shall have the authority to sign,
in the name and on behalf of the Corporation, checks, orders, contracts, leases,
notes, drafts and other documents and instruments in connection with the
business of the Corporation, and together with the Secretary or an Assistant
Secretary, conveyances of real estate and other documents and instruments to
which the seal of the Corporation is affixed. He or she shall have the authority
to cause the employment or appointment of such employees and agents of the
Corporation as the conduct of the business of the Corporation may require, to
fix their compensation, and to remove or suspend any employee or agent elected
or appointed by the Chief Executive Officer
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or the Board of Directors. The Chief Executive Officer shall perform such other
duties and have such other powers as the Board of Directors may from time to
time prescribe.
Section 4.08. The President. The President, subject to the authority
of the Chief Executive Officer, shall be the Chief Operating Officer of the
Company and shall have primary responsibility for, and authority with respect
to, the management of the day-to-day business and affairs of the Company. The
President shall have the authority to sign, in the name and on behalf of the
Company, checks, orders, contracts, leases, notes, drafts and other documents
and instruments. The President shall have the authority to cause the employment
or appointment of such employees and agents of the Company as the conduct of the
business of the Company may require, to fix their compensation, and to remove or
suspend any employee or agent elected or appointed by the President.
Section 4.09. The Vice President. In the absence of the Chief
Executive Officer and the President or in the event of the Chief Executive
Officer and the President's inability to act, the Vice President, if any (or in
the event there be more than one Vice President, the Vice Presidents in the
order designated by the Board, or in the absence of any designation, then in the
order of their election) shall perform the duties of the Chief Executive Officer
and the President, and when so acting, shall have all the powers of and be
subject to all the restrictions upon the President. The Vice Presidents, if any,
shall have such designations and shall perform such other duties and have such
other powers as the Board or the Chief Executive Officer or President may from
time to time prescribe.
Section 4.10. The Secretary. The Secretary shall have the following
powers and duties:
(a) he or she shall keep or cause to be kept a record of all the
proceedings of the meetings of the stockholders and of the Board of
Directors in books provided for that purpose.
(b) he or she shall cause all notices to be duly given in accordance
with the provisions of these By-Laws and as required by law.
(c) whenever any committee shall be appointed pursuant to a
resolution of the Board of Directors, he or she shall furnish a copy of
such resolution to the members of such committee.
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(d) he or she shall be the custodian of the records and of the seal
of the Corporation and cause such seal (or a facsimile thereof) to be
affixed to all certificates representing shares of the Corporation prior
to the issuance thereof and to all instruments the execution of which on
behalf of the Corporation under its seal shall have been duly authorized
in accordance with these By-Laws, and when so affixed he or she may attest
the same.
(e) he or she shall properly maintain and file all books, reports,
statements, certificates and all other documents and records required by
law, the Certificate of Incorporation or these By-Laws.
(f) he or she shall have charge of the stock books and ledgers of
the Corporation and shall cause the stock and transfer books to be kept in
such manner as to show at any time the number of shares of stock of the
Corporation of each class issued and outstanding, the names
(alphabetically arranged) and the addresses of the holders of record of
such shares, the number of shares held by each holder and the date as of
which each became such holder of record.
(g) he or she shall sign (unless the Chief Financial Officer, the
Treasurer, an Assistant Treasurer or Assistant Secretary shall have
signed) certificates representing shares of the Corporation, the issuance
of which shall have been authorized by the Board of Directors.
(h) he or she shall perform, in general, all duties incident to the
office of secretary and such other duties as may be specified in these
By-Laws or as may be assigned to him or her from time to time by the Board
of Directors, or the President.
Section 4.11. The Chief Financial Officer. The Chief Financial
Officer of the Corporation shall have the following powers and duties:
(a) he or she shall have charge and supervision over and be
responsible for the moneys, securities, receipts and disbursements of the
Corporation, and shall keep or cause to be kept full and accurate records
of all receipts of the Corporation.
(b) he or she shall cause the moneys and other valuable effects of
the Corporation to be deposited in the name and to the credit of the
Corporation in such banks or trust companies or with such bankers or other
depositaries as shall be selected in accordance with Section 8.05 of these
By-Laws.
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(c) he or she shall cause the moneys of the Corporation to be
disbursed by checks or drafts (signed as provided in Section 8.06 of these
By-Laws) upon the authorized depositaries of the Corporation and cause to
be taken and preserved proper vouchers for all moneys disbursed.
(d) he or she shall render to the Board of Directors, the Chief
Executive Officer or the President, whenever requested, a statement of the
financial condition of the Corporation and of all his or her transactions
as Chief Financial Officer, and render a full financial report at the
annual meeting of the stockholders, if called upon to do so.
(e) he or she shall be empowered from time to time to require from
all officers or agents of the Corporation reports or statements giving
such information as he or she may desire with respect to any and all
financial transactions of the Corporation.
(f) he or she may sign (unless the Treasurer, an Assistant Treasurer
or the Secretary or an Assistant Secretary shall have signed) certificates
representing stock of the Corporation, the issuance of which shall have
been authorized by the Board of Directors.
(g) he or she shall perform, in general, all duties incident to the
office of treasurer and such other duties as may be specified in these
By-Laws or as may be assigned to him or her from time to time by the Board
of Directors, or the Chief Executive Officer.
Section 4.12. The Treasurer. The Treasurer shall perform such duties
and exercise such powers as may be assigned to him or her from time to time by
the Chief Financial Officer. In the absence of the Chief Financial Officer, the
duties of the Chief Financial Officer shall be performed and his or her powers
may be exercised by the Treasurer; subject in any case to review and
superseding action by the Board of Directors or the Chief Executive Officer.
Section 4.13. Additional Officers. The Board of Directors may
appoint such other officers and agents as it may deem appropriate, and such
other officers and agents shall hold their offices for such terms and shall
exercise such powers and perform such duties as may be determined from time to
time by the Board of Directors. The Board of Directors from time to time may
delegate to any officer or agent the power to appoint subordinate officers or
agents and to prescribe their respective rights,
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terms of office, authorities and duties. Any such officer or agent may remove
any such subordinate officer or agent appointed by him or her, for or without
cause.
Section 4.14. Security. The Board of Directors may require any
officer, agent or employee of the Corporation to provide security for the
faithful performance of his or her duties, in such amount and of such character
as may be determined from time to time by the Board of Directors.
ARTICLE V
CAPITAL STOCK
Section 5.01. Certificates of Stock, Uncertificated Shares. The
shares of the Corporation shall be represented by certificates, provided that
the Board of Directors may provide by resolution or resolutions that some or all
of any or all classes or series of the stock of the Corporation shall be
uncertificated shares. Any such resolution shall not apply to shares represented
by a certificate until each certificate is surrendered to the Corporation.
Notwithstanding the adoption of such a resolution by the Board of Directors,
every holder of stock in the Corporation represented by certificates and upon
request every holder of uncertificated shares shall be entitled to have a
certificate signed by, or in the name of the Corporation, by the Chief Executive
Officer, the President or a Vice President, and by the Chief Financial Officer,
the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant
Secretary, representing the number of shares registered in certificate form.
Such certificate shall be in such form as the Board of Directors may determine,
to the extent consistent with applicable law, the Certificate of Incorporation
and these By-Laws.
Section 5.02. Signatures; Facsimile. All of such signatures on the
certificate referred to in Section 5.01 of these By-Laws may be a facsimile,
engraved or printed, to the extent permitted by law. In case any officer,
transfer agent or registrar who has signed, or whose facsimile signature has
been placed upon a certificate shall have ceased to be such officer, transfer
agent or registrar before such certificate is issued, it may be issued by the
Corporation with the same effect as if he or she were such officer, transfer
agent or registrar at the date of issue.
Section 5.03. Lost, Stolen or Destroyed Certificates. The Board of
Directors may direct that a new certificate be issued in place of any
certificate theretofore issued by the Corporation alleged to have been lost,
stolen or destroyed, upon delivery to the Board of Directors of an affidavit of
the owner or owners of such
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certificate, setting forth such allegation. The Board of Directors may require
the owner of such lost, stolen or destroyed certificate, or his or her legal
representative, to give the Corporation a bond sufficient to indemnify it
against any claim that may be made against it on account of the alleged loss,
theft or destruction of any such certificate or the issuance of any such new
certificate.
Section 5.04. Transfer of Stock. Upon surrender to the Corporation
or the transfer agent of the Corporation of a certificate for shares, duly
endorsed or accompanied by appropriate evidence of succession, assignment or
authority to transfer, the Corporation shall issue a new certificate to the
person entitled thereto, cancel the old certificate and record the transaction
upon its books. Within a reasonable time after the transfer of uncertificated
stock, the Corporation shall send to the registered owner thereof a written
notice containing the information required to be set forth or stated on
certificates pursuant to Sections 151, 156, 202(a) or 218(a) of the General
Corporation Law of the State of Delaware. Subject to the provisions of the
Certificate of Incorporation and these By-Laws, the Board of Directors may
prescribe such additional rules and regulations as it may deem appropriate
relating to the issue, transfer and registration of shares of the Corporation.
Section 5.05. Record Date. In order to 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, in advance, a record date,
which record date shall not precede the date on which the resolution fixing the
record date is adopted by the Board of Directors, and which shall not be more
than sixty (60) nor less than ten (10) days before the date of such meeting. 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.
In order that the Corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or allotment
of any rights of 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 5.06. Registered Stockholders. Prior to due surrender of a
certificate for registration of transfer, the Corporation may treat the
registered owner as the person exclusively entitled to receive dividends and
other distributions, to vote, to receive notice and otherwise to exercise all
the rights and powers of the owner of the shares represented by such
certificate, and the Corporation shall not be bound to recognize any equitable
or legal claim to or interest in such shares on the part of any other person,
whether or not the Corporation shall have notice of such claim or interests.
Whenever any transfer of shares shall be made for collateral security, and not
absolutely, it shall be so expressed in the entry of the transfer if, when the
certificates are presented to the Corporation for transfer or uncertificated
shares are requested to be transferred, both the transferor and transferee
request the Corporation to do so.
Section 5.07. Transfer Agent and Registrar. The Board of Directors
may appoint one or more transfer agents and one or more registrars, and may
require all certificates representing shares to bear the signature of any such
transfer agents or registrars.
ARTICLE VI
INDEMNIFICATION
Section 6.01. Nature of Indemnity. The Corporation shall indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding (a "Proceeding"),
whether civil, criminal, administrative or investigative, by reason of the fact
that he or she is or was or has agreed to become a director or officer of the
Corporation, or is or was serving or has agreed to serve at the request of the
Corporation as a director or officer, of another corporation, partnership, joint
venture, trust or other enterprise, or by reason of any action alleged to have
been taken or omitted in such capacity, and may indemnify any person who was or
is a party or is threatened to be made a party to such an action, suit or
proceeding by reason of the fact that he or she is or was or has agreed to
become an employee or agent of the Corporation, or is or was serving or has
agreed to serve at the request of the Corporation as an employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him or her or on his or her
behalf in connection with such action, suit or proceeding and any appeal
therefrom, if he or she acted in good faith and in a manner he or she reasonably
believed to be in or not opposed to the best interests of the Corporation, and,
with respect to any criminal action or proceeding had
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no reasonable cause to believe his or her conduct was unlawful; except that in
the case of an action or suit by or in the right of the Corporation to procure a
judgment in its favor (1) such indemnification shall be limited to expenses
(including attorneys' fees) actually and reasonably incurred by such person in
the defense or settlement of such action or suit, and (2) no indemnification
shall be made in respect of any claim, issue or matter as to which such person
shall have been adjudged to be liable to the Corporation unless and only to the
extent that the Delaware Court of Chancery or the court in which such action or
suit was brought shall determine upon application that, despite the adjudication
of liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the Delaware
Court of Chancery or such other court shall deem proper. Notwithstanding the
foregoing, but subject to Section 6.05 of these By-Laws, the Corporation shall
not be obligated to indemnify a director or officer of the Corporation in
respect of a Proceeding (or part thereof) instituted by such director or
officer, unless such Proceeding (or part thereof) has been authorized by the
Board of Directors.
The termination of any action, suit or proceeding by judgment, order
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which he or she reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his or her
conduct was unlawful.
Section 6.02. Successful Defense. To the extent that a present or
former director or officer of the Corporation has been successful on the merits
or otherwise in defense of any action, suit or proceeding referred to in Section
6.01 hereof or in defense of any claim, issue or matter therein, such person
shall be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection therewith.
Section 6.03. Determination that Indemnification is Proper. Any
indemnification of a present or former director or officer of the Corporation
under Section 6.01 hereof (unless ordered by a court) shall be made by the
Corporation unless a determination is made that indemnification of the present
or former director or officer is not proper in the circumstances because he or
she has not met the applicable standard of conduct set forth in Section 6.01
hereof. Any indemnification of a present or former employee or agent of the
Corporation under Section 6.01 hereof (unless ordered by a court) may be made by
the Corporation upon a determination that indemnification of the present or
former employee or agent is proper in the circumstances because he or she has
met the applicable standard of conduct set forth in Section 6.01 hereof. Any
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such determination shall be made, with respect to a person who is a director or
officer at the time of such determination, (1) by a majority vote of the
Directors who are not parties to such action, suit or proceeding, even though
less than a quorum, or (2) by a committee of such Directors designated by
majority vote of such Directors, even though less than a quorum, or (3) if there
are no such Directors, or if such Directors so direct, by independent legal
counsel in a written opinion, or (4) by the stockholders.
Section 6.04. Advance Payment of Expenses. Expenses (including
attorneys' fees) incurred by a director or officer in defending any civil,
criminal, administrative or investigative action, suit or proceeding shall be
paid by the Corporation in advance of the final disposition of such action, suit
or proceeding upon receipt of an undertaking by or on behalf of the director or
officer to repay such amount if it shall ultimately be determined that such
person is not entitled to be indemnified by the Corporation as authorized in
this Article. Such expenses (including attorneys' fees) incurred by former
Directors and officers or other employees and agents may be so paid upon such
terms and conditions, if any, as the Corporation deems appropriate. The Board of
Directors may authorize the Corporation's counsel to represent such director,
officer, employee or agent in any action, suit or proceeding, whether or not the
Corporation is a party to such action, suit or proceeding.
Section 6.05. Procedure for Indemnification of Directors and
Officers. Any indemnification of a director or officer of the Corporation under
Sections 6.01 and 6.02, or advance of costs, charges and expenses to a director
or officer under Section 6.04 of these By-Laws, shall be made promptly, and in
any event within thirty (30) days, upon the written request of the director or
officer. If a determination by the Corporation that the director or officer is
entitled to indemnification pursuant to this Article VI is required, and the
Corporation fails to respond within sixty (60) days to a written request for
indemnity, the Corporation shall be deemed to have approved such request. If the
Corporation denies a written request for indemnity or advancement of expenses,
in whole or in part, or if payment in full pursuant to such request is not made
within thirty (30) days, the right to indemnification or advances as granted by
this Article VI shall be enforceable by the director or officer in any court of
competent jurisdiction. Such person's costs and expenses incurred in connection
with successfully establishing his or her right to indemnification, in whole or
in part, in any such action shall also be indemnified by the Corporation. It
shall be a defense to any such action (other than an action brought to enforce a
claim for the advance of costs, charges and expenses under Section 6.04 of these
By-Laws where the required undertaking, if any, has been received by the
Corporation) that the claimant has not met the standard of conduct set forth in
Section 6.01 of these By-Laws, but the burden of proving such defense shall be
on the Corporation. Neither the failure of the Corporation (including
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<PAGE> 29
its Board of Directors, its independent legal counsel, and 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 Section 6.01 of these
By-Laws, nor the fact that there has been an actual determination by the
Corporation (including its Board of Directors, its independent legal counsel,
and 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 6.06. Survival; Preservation of Other Rights. The foregoing
indemnification provisions shall be deemed to be a contract between the
Corporation and each director, officer, employee and agent who serves in any
such capacity at any time while these provisions as well as the relevant
provisions of the Delaware Corporation Law are in effect and any repeal or
modification thereof shall not affect any right or obligation then existing with
respect to any state of facts then or previously existing or any action, suit or
proceeding previously or thereafter brought or threatened based in whole or in
part upon any such state of facts. Such a "contract right" may not be modified
retroactively without the consent of such director, officer, employee or agent.
The indemnification provided by this Article VI shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any by-law, agreement, vote of stockholders or disinterested Directors or
otherwise, both as to action in such person's official capacity and as to action
in another capacity while holding such office, and shall continue as to a person
who has ceased to be a director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such a person.
Section 6.07. Insurance. The Corporation may purchase and maintain
insurance on behalf of any person who is or was or has agreed to become 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 corporation, partnership,
joint venture, trust or other enterprise against any liability asserted against
such person and incurred by such person or on such person's behalf in any such
capacity, or arising out of such person's status as such, whether or not the
Corporation would have the power to indemnify him or her against such liability
under the provisions of this Article VI, provided that such insurance is
available on acceptable terms, which determination shall be made by a vote of a
majority of the entire Board of Directors.
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Section 6.08. Severability. If this Article VI or any portion hereof
shall be invalidated on any ground by any court of competent jurisdiction, then
the Corporation shall nevertheless indemnify each director or officer and may
indemnify each employee or agent of the Corporation as to costs, charges and
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement with respect to any action, suit or proceeding, whether civil,
criminal, administrative or investigative, including an action by or in the
right of the Corporation, to the fullest extent permitted by any applicable
portion of this Article VI that shall not have been invalidated and to the
fullest extent permitted by applicable law.
ARTICLE VII
OFFICES
Section 7.01. Registered Office. The registered office of the
Corporation in the State of Delaware shall be located at Corporation Trust
Center, 1209 Orange Street in the City of Wilmington, County of New Castle.
Section 7.02. Other Offices. The Corporation may maintain offices or
places of business at such other locations within or without the State of
Delaware as the Board of Directors may from time to time determine or as the
business of the Corporation may require.
ARTICLE VIII
GENERAL PROVISIONS
Section 8.01. Dividends. Subject to any applicable provisions of law
and the Certificate of Incorporation, dividends upon the shares of the
Corporation may be declared by the Board of Directors at any regular or special
meeting of the Board of Directors and any such dividend may be paid in cash,
property, or shares of the Corporation's capital stock.
A member of the Board of Directors, or a member of any committee
designated by the Board of Directors shall be fully protected in relying in good
faith upon the records of the Corporation and upon such information, opinions,
reports or statements presented to the Corporation by any of its officers or
employees, or committees of the Board of Directors, or by any other person as to
matters the Director
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<PAGE> 31
reasonably believes are within such other person's professional or expert
competence and who has been selected with reasonable care by or on behalf of the
Corporation, as to the value and amount of the assets, liabilities and/or net
profits of the Corporation, or any other facts pertinent to the existence and
amount of surplus or other funds from which dividends might properly be declared
and paid.
Section 8.02. Reserves. There may be set aside out of any funds of
the Corporation available for dividends such sum or sums as the Board of
Directors from time to time, in its absolute discretion, thinks proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation or for such other
purpose as the Board of Directors shall think conducive to the interest of the
Corporation, and the Board of Directors may similarly modify or abolish any such
reserve.
Section 8.03. Execution of Instruments. The Chief Executive Officer,
the President, any Vice President, the Secretary, the Chief Financial Officer or
the Treasurer may enter into any contract or execute and deliver any instrument
in the name and on behalf of the Corporation. The Board of Directors or the
Chief Executive Officer may authorize any other officer or agent to enter into
any contract or execute and deliver any instrument in the name and on behalf of
the Corporation. Any such authorization may be general or limited to specific
contracts or instruments.
Section 8.04. Corporate Indebtedness. No loan shall be contracted on
behalf of the Corporation, and no evidence of indebtedness shall be issued in
its name, unless authorized by the Board of Directors or the Chief Executive
Officer. Such authorization may be general or confined to specific instances.
Loans so authorized may be effected at any time for the Corporation from any
bank, trust company or other institution, or from any firm, corporation or
individual. All bonds, debentures, notes and other obligations or evidences of
indebtedness of the Corporation issued for such loans shall be made, executed
and delivered as the Board of Directors or the Chief Executive Officer shall
authorize. When so authorized by the Board of Directors or the Chief Executive
Officer, any part of or all the properties, including contract rights, assets,
business or good will of the Corporation, whether then owned or thereafter
acquired, may be mortgaged, pledged, hypothecated or conveyed or assigned in
trust as security for the payment of such bonds, debentures, notes and other
obligations or evidences of indebtedness of the Corporation, and of the interest
thereon, by instruments executed and delivered in the name of the Corporation.
Section 8.05. Deposits. Any funds of the Corporation may be
deposited from time to time in such banks, trust companies or other depositaries
as may be
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determined by the Board of Directors or the Chief Executive Officer, or by such
officers or agents as may be authorized by the Board of Directors or the Chief
Executive Officer to make such determination.
Section 8.06. Checks. All checks or demands for money and notes of
the Corporation shall be signed by such officer or officers or such agent or
agents of the Corporation, and in such manner, as the Board of Directors or the
Chief Executive Officer from time to time may determine.
Section 8.07. Sale, Transfer, etc. of Securities. To the extent
authorized by the Board of Directors or by the Chief Executive Officer, the
President, any Vice President, the Secretary, the Chief Financial Officer or the
Treasurer or any other officers designated by the Board of Directors or the
Chief Executive Officer may sell, transfer, endorse, and assign any shares of
stock, bonds or other securities owned by or held in the name of the
Corporation, and may make, execute and deliver in the name of the Corporation,
under its corporate seal, any instruments that may be appropriate to effect any
such sale, transfer, endorsement or assignment.
Section 8.08. Voting as Stockholder. Unless otherwise determined by
resolution of the Board of Directors, the Chief Executive Officer, the President
or any Vice President shall have full power and authority on behalf of the
Corporation to attend any meeting of stockholders of any corporation in which
the Corporation may hold stock, and to act, vote (or execute proxies to vote)
and exercise in person or by proxy all other rights, powers and privileges
incident to the ownership of such stock. Such officers acting on behalf of the
Corporation shall have full power and authority to execute any instrument
expressing consent to or dissent from any action of any such corporation without
a meeting. The Board of Directors may by resolution from time to time confer
such power and authority upon any other person or persons.
Section 8.09. Fiscal Year. The fiscal year of the Corporation shall
commence on the first day of January of each year (except for the Corporation's
first fiscal year which shall commence on the date of incorporation) and shall
terminate in each case on December 31.
Section 8.10. Seal. The seal of the Corporation shall be circular in
form and shall contain the name of the Corporation, the year of its
incorporation and the words "Corporate Seal" and "Delaware". The form of such
seal shall be subject to alteration by the Board of Directors. The seal may be
used by causing it or a facsimile thereof to be impressed, affixed or
reproduced, or may be used in any other lawful manner.
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Section 8.11. Books and Records; Inspection. Except to the extent
otherwise required by law, the books and records of the Corporation shall be
kept at such place or places within or without the State of Delaware as may be
determined from time to time by the Board of Directors.
ARTICLE IX
AMENDMENT OF BY-LAWS
Section 9.01. Amendment. These By-Laws may be amended, altered or
repealed
(a) by resolution adopted by a majority of the Board of Directors at
any special or regular meeting of the Board if, in the case of such
special meeting only, notice of such amendment, alteration or repeal is
contained in the notice or waiver of notice of such meeting; or
(b) at any regular or special meeting of the stockholders upon the
affirmative vote of the holders of two-thirds or more of the combined
voting power of the outstanding shares of the Corporation entitled to vote
generally in the election of Directors if, in the case of such special
meeting only, notice of such amendment, alteration or repeal is contained
in the notice or waiver of notice of such meeting.
ARTICLE X
CONSTRUCTION
Section 10.01. Construction. In the event of any conflict between
the provisions of these By-Laws as in effect from time to time and the
provisions of the Certificate of Incorporation of the Corporation as in effect
from time to time, the provisions of such Certificate of Incorporation shall be
controlling.
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<PAGE> 1
NEUBERGER BERMAN INC.
STOCKHOLDERS AGREEMENT
Dated August 18, 1998
<PAGE> 2
TABLE OF CONTENTS
Page
ARTICLE I
LIMITATIONS ON TRANSFER OF SHARES............................................2
Section 1.1. Transfers Generally........................................2
Section 1.2. Transfers Following Death or Disability....................3
Section 1.3. Transfers with the Consent of Board of Directors...........3
Section 1.4. Compliance with Law and Regulations........................4
Section 1.5. Legend on Certificates; Entry of Stop Transfer Orders......4
Section 1.6. Certificates to be Held by Company.........................4
Section 1.7. Transfers in Violation of Agreement Void...................5
ARTICLE II
VOTING AGREEMENT.............................................................5
Section 2.1. Preliminary Vote of Management Stockholders................5
Section 2.2. Voting by Management Stockholders..........................6
Section 2.3. Termination of Voting Provisions...........................6
ARTICLE III
RIGHT TO PURCHASE SHARES.....................................................7
Section 3.1. Right of the Company to Purchase Shares in Case of Harmful
Activity...................................................7
Section 3.2. Notice of Harmful Activity.................................8
ARTICLE IV
REPRESENTATIONS AND WARRANTIES...............................................8
Section 4.1. Representations and Warranties of the Management
Stockholders...............................................8
Section 4.2. Representations and Warranties of the Company..............9
ARTICLE V
DEFINITIONS..................................................................9
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<PAGE> 3
ARTICLE VI
MISCELLANEOUS...............................................................15
Section 6.1. Notices...................................................15
Section 6.2. Term of the Agreement.....................................16
Section 6.3. Amendments; Waivers.......................................16
Section 6.4. Adjustment Upon Changes in Capitalization.................16
Section 6.6. Severability..............................................17
Section 6.7. Representatives, Successors and Assigns...................17
Section 6.8. Governing Law.............................................17
Section 6.9. Specific Performance......................................17
Section 6.10. Arbitration...............................................18
Section 6.11. Submission to Jurisdiction; Waiver of Immunity............18
Section 6.12. Further Assurances........................................19
Section 6.13. Execution in Counterparts.................................19
Section 6.14. Entire Agreement..........................................19
Schedule I
Schedule II
Schedule III
ii
<PAGE> 4
STOCKHOLDERS AGREEMENT
This STOCKHOLDERS AGREEMENT (this "Agreement") is dated as of August
18, 1998, by and among (i) Neuberger Berman Inc., a Delaware corporation (the
"Company"), (ii) the Principals (as defined below) listed on Schedule I hereto
and (iii) the Family Affiliates (as defined below) listed on Schedule II hereto.
Capitalized terms used herein have their respective meanings set forth in
Article V of this Agreement.
W I T N E S S E T H :
WHEREAS, the parties hereto have entered into a Plan of Merger and
Exchange Agreement, dated as of August 18, 1998 (the "Exchange Agreement"),
pursuant to which (i) the Principals and their Family Affiliates, as sole
members of Neuberger & Berman, LLC, a Delaware limited liability company ("NB
LLC"), will contribute their respective interests in NB LLC to the Company in
exchange for shares of common stock, par value $.01 (the "Common Stock"), of the
Company (the "Exchange") and (ii) Neuberger Berman Sub Inc., a wholly-owned
direct subsidiary of the Company, will merge into Neuberger Berman Management
Incorporated, a New York corporation ("NBMI"), with the Principals, as the sole
shareholders of NBMI, will receive shares of the Common Stock (the "Merger");
WHEREAS, as a result of the Exchange and Merger, the Principals and
their Family Affiliates (collectively, the "Management Stockholders") will Own
all of the issued and outstanding Common Stock;
WHEREAS, the Company and the Management Stockholders desire to enter
into certain agreements with respect to the Transfer and voting of their Common
Stock and various other matters in order to continue harmonious relationships
among the themselves with respect to the conduct of the business and affairs of
the Company;
WHEREAS, most of the Principals have devoted a substantial portion of
their professional careers with the Company Group and its predecessors, and the
parties hereto desire to encourage the Principals to continue their long-term
professional association with the Company for the good of all parties; and
<PAGE> 5
WHEREAS, it is a condition precedent to the closing under the Exchange
Agreement that the parties hereto enter into this Agreement.
NOW THEREFORE, in consideration of the premises and of the mutual
agreements, covenants and provisions herein contained and for good and valuable
consideration, the receipt of which is hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
LIMITATIONS ON TRANSFER OF SHARES
Section 1.1. Transfers Generally. Each Management Stockholder agrees
that, in addition to any restrictions imposed by law, no Management Stockholder
shall Transfer any Management Shares Owned by such Management Stockholder,
except that:
(a) Prior to January 1, 2001, each New Principal may Transfer a number
of Management Shares not to exceed the number of Management Shares set forth
opposite his or her name on Schedule III;
(b) Subject to Section 1.1(c), on and after January 1, 2001, each
Principal, together with his or her Family Affiliates, may in the aggregate
Transfer in any calendar year a number of Management Shares not to exceed
10% of the aggregate Number of Initial Shares Owned by such Principal and
Family Affiliates, provided that:
(i) Prior to the third anniversary of the Employment
Termination Date of such Principal, neither such Principal nor any of
his or her Family Affiliates may Transfer Management Shares if, as a
result of such Transfer, such Principal and Family Affiliates would in
the aggregate Own less than that number of Management Shares that is
equal to 20% of the aggregate Number of Initial Shares Owned by such
Principal and Family Affiliates; and
(ii) Commencing on such Principal's Employment Termination
Date and continuing until the third anniversary thereof, such Principal
and his or her Family Affiliates may not Transfer any Management Shares
other than Management Shares eligible to be Transferred but not
Transferred on or prior to such Employment Termination Date; and
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<PAGE> 6
(iii) Any Management Shares in respect of which the Company
has exercised its right of purchase pursuant to Article III hereof may
only be Transferred in accordance with Article III.
Any number of Management Shares eligible to be Transferred in any
calendar year under this Section 1.1(b) but not so Transferred may be
Transferred in any future calendar year without any restriction imposed by
this Section 1.1(b).
(c) Notwithstanding Section 1.1(b), if the Employment Termination Date
of any Principal occurs prior to January 1, 2002,
(i) Such Principal and his or her Family Affiliates may not
Transfer any Management Shares prior to January 1, 2006; and
(ii) Subject to Section 3.1, on and after January 1, 2006,
such Principal, together with his or her Family Affiliates, may in the
aggregate Transfer in any calendar year up to that number of Management
Shares that is equal to 20% of the aggregate number of Management
Shares Owned by such Principal and his or her Family Affiliates on the
Employment Termination Date of such Principal, provided that any number
of Management Shares that was eligible to be Transferred under this
clause (ii) but not so Transferred may be Transferred in any future
calendar year without regard to the 20% annual limit imposed on
Transfers by this clause (ii);
provided, further, that this Section 1.1(c) shall not apply if such
Principal's employment with the Company Group was terminated by the Company
Group without Cause.
Section 1.2. Transfers Following Death or Disability. Notwithstanding
any other provisions of this Agreement, upon the death or Disability of any
Principal, such Principal (or his or her estate) and his or her Family
Affiliates may Transfer Management Shares free of any provisions of this
Agreement.
Section 1.3. Transfers with the Consent of Board of Directors.
Notwithstanding any other provisions of this Agreement, a Management Stockholder
may Transfer any number of Management Shares at any time with the prior written
consent of the Board of Directors, which consent may be withheld or delayed, or
granted on such terms and conditions as it may determine, in its sole
discretion.
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<PAGE> 7
Section 1.4. Compliance with Law and Regulations. Each Management
Stockholder agrees that any Transfer of Management Shares by such Management
Stockholder shall be in compliance with any applicable constitution, rule or
regulation of, or any applicable policy of, the NASD, any of the exchanges or
associations or other institutions with which the Company Group has membership
or other privileges (including, without limitation, the NYSE), federal and state
securities laws, and any applicable law, rule or regulation of the Commission or
any other governmental agency having jurisdiction.
Section 1.5. Legend on Certificates; Entry of Stop Transfer Orders. (a)
Each Management Stockholder agrees that each outstanding certificate
representing any Management Shares that are subject to this Agreement shall bear
an endorsement noted conspicuously on each such certificate reading
substantially as follows:
"The securities represented by this certificate were issued without
registration under the Securities Act of 1933. No transfer of such
securities may be made without an opinion of counsel, satisfactory to the
Company, that such transfer may properly be made without registration under
the Securities Act of 1933 or that such securities have been so registered
under a registration statement which is in effect at the date of such
transfer.
The securities represented by this certificate are subject to the
provisions of an agreement dated as of August __, 1998 among the Company and
certain persons listed on Schedules I and II to such agreement, a copy of
which is on file at the principal executive office of the Company, and such
securities may be sold, assigned, pledged or otherwise transferred only in
accordance with such agreement."
(b) Each Management Stockholder agrees to the entry of stop transfer
orders against the transfer of legended certificates representing shares of
Common Stock except in compliance with this Agreement.
Section 1.6. Certificates to be Held by Company. (a) Each Management
Stockholder agrees that the certificates representing such Management
Stockholder's Management Shares shall be issued in the name of a nominee holder
to be designated by the Company and shall be held in custody by the Company at
its principal office. The Company shall, upon the request of any such Management
Stockholder or the estate of any Management Stockholder, as the case may be, in
writing addressed to the Secretary of the Company or any officer designated by
the Secretary (which request shall include a
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<PAGE> 8
representation by such Management Stockholder or estate thereof that such
Management Stockholder is then permitted to Transfer a specified number of
Management Shares under the provisions of this Agreement), promptly release from
custody the certificates representing such specified number of Management
Stockholder's Management Shares which are then intended and permitted to be
Transferred under the provisions of this Agreement.
(b) Subject to the Management Stockholders having provided appropriate
written direction to the Company, whenever the nominee holder shall receive any
cash dividend or other cash distribution upon any Management Shares deposited
pursuant to Section 1.6(a), the Company shall cause the nominee holder to
distribute promptly such cash dividend or other distribution (by sale or any
other manner that it may determine, net of its charges and expenses in effecting
such conversion), by checks drawn on a bank in the United States, to the
Management Stockholders in proportion to the number of Management Shares Owned
by each of them respectively; provided that the Company shall cause the nominee
holder to make appropriate adjustments in the amounts so distributed in respect
of any amounts required to be withheld by the nominee holder from any
distribution on account of taxes. The nominee holder shall distribute only such
amount as can be distributed without distributing to any Management Stockholder
a fraction of one cent, and any balance not so distributable shall be held by
the nominee holder (without liability for interest thereon) and shall be added
to and become part of the next sum received by the nominee holder for
distribution to the Management Stockholders.
Section 1.7. Transfers in Violation of Agreement Void. Any attempted
Transfer of Management Shares not made in accordance with the provisions of this
Agreement shall be void, and the Company shall not register, or cause or permit
the registry, of Common Stock Transferred in violation of this Agreement.
ARTICLE II
VOTING AGREEMENT
Section 2.1. Preliminary Vote of Management Stockholders. Before any
vote of the stockholders of the Company at a meeting called with respect to any
corporate action or before action is taken by stockholders of the Company by
written consent, a vote (the "Preliminary Vote") shall be taken of Management
Stockholders Owning Management Shares and of Additional Stockholders Owning
Additional Shares, in accordance with procedures established from time to time
by the Board of Directors,
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<PAGE> 9
upon all such matters upon which such stockholder vote or other action is
proposed to be taken, in which each Management Stockholder and Additional
Shareholder shall be permitted to vote the Management Shares and Additional
Shares then Owned by such stockholder in such manner as each such stockholder
may determine in his, her or its sole discretion.
Section 2.2. Voting by Management Stockholders. (a) At any meeting of
the stockholders of the Company called to vote with respect to any corporate
action or where action by stockholders of the Company is taken by written
consent, each Management Stockholder agrees to vote or act by written consent
with respect to all the Management Shares then Owned by such stockholder on all
such matters in which action is proposed to be taken in accordance with the vote
of the majority of the shares present (in person or by proxy) and voting in the
Preliminary Vote.
(b) For purposes of effecting any vote pursuant to this Section 2.2,
each Management Stockholder does hereby irrevocably make, constitute and appoint
the Secretary of the Company, or any officer(s) designated in writing by the
Secretary, with full power of substitution, as his, her or its true
attorney-in-fact and agent, for and in his, her or its name, place and stead, to
act as his proxy to the maximum extent and for the maximum term permitted by law
to (i) vote such Management Stockholder's Management Shares at any meeting of
stockholders of the Company or to take any corporate action where action by
stockholders of the Company is taken by written consent with respect to such
Management Shares, in each case in accordance with Section 2.2(a) and (ii) vote
such Management Stockholder's Management Shares in such proxy holder's
discretion upon any other business which properly comes before such meetings or
for which action is to be taken pursuant to such written consents, giving and
granting to said attorney full power and authority to do and perform each and
every act and thing whether necessary or desirable to be done in and about the
premises, as fully as he, she or it might or could do if personally present,
with full power of substitution, appointment and revocation. The foregoing
power of attorney and proxy are coupled with an interest and shall not be
revocable or revoked by such Management Stockholder and shall be binding upon
such stockholder and his, her or its successors and assigns.
Section 2.3. Termination of Voting Provisions. Notwithstanding any
other provisions of this Agreement, (i) the right of any Principal and his or
her Family Affiliate to participate in the Preliminary Vote, (ii) the obligation
of any Principal and his or her Family Affiliate to vote in accordance with
Section 2.2 and (iii) the irrevocable power of attorney and proxy provided by
such Management Stockholders pursuant to Section 2.2(b) shall, in each case,
terminate at the close of business on the Employment Termination Date of such
Principal.
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ARTICLE III
RIGHT TO PURCHASE SHARES
Section 3.1. Right of the Company to Purchase Shares in Case of Harmful
Activity. (a) If, on or prior to the third anniversary of the Employment
Termination Date of any Principal, the Board of Directors determines in its good
faith judgment that such Principal has engaged in Harmful Activity, the Company
shall have the right to purchase, at any time or from time to time, from such
Principal (or, to the extent a Principal does not Own sufficient shares of
Common Stock to satisfy his or her obligations under this Section 3.1, to
purchase from his or her Family Affiliates pro rata in accordance with the
number of Management Shares Owned by such Family Affiliates on the Notice Date),
the number of Management Shares Owned by such Principal and his or her Family
Affiliates that could not have been Transferred by such Management Stockholders
in accordance with Section 1.1 prior to the Notice Date. The purchase price of
each Management Share (the "Purchase Price") purchased by the Company pursuant
to this Section 3.1 shall equal $1.75 per share.
(b) The Company may exercise its right to purchase Management Shares
under this Section 3.1 in accordance with the following procedures:
(i) The Company shall give notice to the Management Stockholder that
Owns the Management Shares subject to such right of purchase not later than
the close of business on the third anniversary of the Employment Termination
Date of such Principal (the "Notice Date"), advising such Management
Stockholder of the Company's election to exercise such right, stating the
number of Management Shares to be so purchased, the Purchase Price, closing
arrangements and a closing date at which payment of the consideration for
such Management Shares will be made, which date shall be not less than five
days nor more than 90 days after the Notice Date.
(ii) On the closing date, the Company and such Management Stockholder
shall cause the nominee holding the Management Shares being so purchased to
deliver the certificates representing such Management Shares, properly
endorsed for transfer by such Management Stockholder or his, her or its
attorney-in-fact, to the Company at its principal place of business and the
Company shall deliver to such Management Stockholder the consideration
therefor (it being understood and confirmed that NB LLC has been appointed
attorney-in-fact for such Management Stockholder pursuant to the Exchange
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<PAGE> 11
Agreement to take all such actions, to make such endorsements and to
execute such documents as may be required to consummate the sale under this
Section 3.1 of Management Shares to the Company).
(c) If a Principal and his or her Family Affiliates are unable to
satisfy their obligations under this Section 3.1 to deliver Management Shares to
the Company for any reason, such Principal shall be liable to the Company, as
liquidated damages and not as a penalty, for an amount equal to the product of
(i) the number of Management Shares that should have been sold to the Company
under this Section 3.1 but were not sold and (ii) the excess, if any, of the
Market Value of such shares as of the Notice Date over the Purchase Price.
Section 3.2. Notice of Harmful Activity. Prior to the third anniversary
of such Principal's Employment Termination Date, each Principal who ceases to be
an employee of the Company and who engages (or intends to engage) in Harmful
Activity agrees (a) to notify the Company in writing in reasonable detail at
least 30 days prior to engaging in such Harmful Activity, (b) to respond to such
questions and furnish such additional information as the Company may request
with respect to such Harmful Activity and (c) to update such written notice or
inquiries promptly in the event of any circumstances that would cause any
notices or responses to be inaccurate or incomplete.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.1. Representations and Warranties of the Management
Stockholders. Each Management Stockholder severally represents and warrants to
the Company and to each other Management Stockholder that (a) in the case of a
Management Shareholder who is not a natural person, such Management Stockholder
is duly authorized to execute, deliver and perform this Agreement; (b) this
Agreement has been duly executed by such Management Shareholder or his, her or
its attorney-in-fact on behalf of such Management Stockholder and is a valid and
binding agreement of such Management Shareholder, enforceable against such
Management Shareholder in accordance with its terms; (c) the execution, delivery
and performance by such Management Shareholder of this Agreement does not
violate or conflict with or result in a breach of or constitute (or with notice
or lapse of time or both constitute) a default under any agreement to which such
Management Shareholder is a party; and (d) such Management Stockholder has good
and marketable title to the shares of Common Stock
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<PAGE> 12
acquired pursuant to the Exchange free and clear of any pledge, lien, security
interest, charge, claim, equity or encumbrance of any kind, other than pursuant
to this Agreement.
Section 4.2. Representations and Warranties of the Company. The Company
represents and warrants to the Management Stockholders that (a) the Company is
duly authorized to execute, deliver and perform this Agreement; (b) this
Agreement has been duly authorized, executed and delivered by the Company and is
a valid and binding agreement of the Company, enforceable against the Company in
accordance with its terms; and (c) the execution, delivery and performance by
the Company of this Agreement does not violate or conflict with or result in a
breach by the Company of or constitute (or with notice or lapse of time or both
constitute) a default by the Company under its Certificate of Incorporation or
By-Laws, any existing applicable law, rule, regulation, judgment, order, or
decree of any government, governmental instrumentality or court, domestic or
foreign, having jurisdiction over the Company or its property including the
requirements of the NYSE, or any agreement or instrument to which the Company is
a party or by which the Company or its property may be bound.
ARTICLE V
DEFINITIONS
For purposes of this Agreement, the following terms shall have the
following meanings:
"Additional Shares" means shares of Common Stock Owned by an Additional
Stockholder that, pursuant to an agreement with the Company, are to be voted
in accordance with Article II of this Agreement.
"Additional Stockholder" means any Person that Owns Common Stock who
has agreed, pursuant to an agreement with the Company, to vote shares of
such Common Stock in accordance with Article II of this Agreement.
"Agreement" has the meaning set forth in the preamble to this
Agreement.
"AMEX" has the meaning set forth in Section 6.10(b).
"Board of Directors" means the Board of Directors of the Company or, to
the extent expressly authorized by the Board of Directors to exercise the
powers of the Board of Directors under this Agreement, (i) any committee of
such Board
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of Directors or (ii) any board of directors or committee of any
Subsidiary of the Company.
"Business Day" means a day on which the principal national securities
exchange on which shares of Common Stock are listed or admitted to trading
is open for the transaction of business or, if the shares of Common Stock
are not listed or admitted to trading on any national securities exchange, a
Monday, Tuesday, Wednesday, Thursday or Friday on which banking institutions
in the Borough of Manhattan, City and State of New York are not authorized
or obligated by law or executive order to close.
"Cause" means, with respect to any Principal:
(a) gross negligence or willful misconduct in the performance
of his or her duties as an employee of the Company Group or willful and
repeated failure to perform his or her duties after written notice
specifying such failure and a reasonable time having been afforded to
correct such failure;
(b) conviction of, or entering a plea of nolo contendere to, a
felony (other than for a traffic violation) or a misdemeanor involving
fraud, embezzlement, forgery or perjury;
(c) dishonesty that has resulted in damage to the property,
business or reputation of the Company and its Subsidiaries,
misappropriation of, or intentional damage to, the property, business
or reputation of the Company and its Subsidiaries, perpetration of
fraud on the Company Group that has resulted in damage to the property
or business of the Company Group; or
(d) a finding by the Commission or a court of competent
jurisdiction that he or she has committed an act that would cause such
Management Stockholder, the Company or any of its affiliates to be
disqualified in any manner under section 9 of the Investment Company
Act, if the Commission were not to grant an exemptive order under
section 9(c) thereof, or that would constitute grounds for the
Commission to deny, revoke or suspend registration of the Company or
any of its affiliates as an investment advisor, broker-dealer or
transfer agent, as applicable, with the Commission.
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"Closing Price" means, on any day, the last sales price, regular way,
per share of Common Stock on such day, or, in case no such sale takes place
on such day, the average of the closing bid and asked prices, regular way,
as reported in the principal consolidated transaction reporting system
covering securities listed or admitted to trading on the NYSE or, if shares
of Common Stock are not listed or admitted to trading on the NYSE, as
reported in the principal consolidated transaction reporting system covering
securities listed on the principal national securities exchange on which the
shares of Common Stock are listed or admitted to trading or, if the shares
of Common Stock are not listed or admitted to trading on any national
securities exchange, the average of the high bid and low asked prices in the
over-the-counter market, as reported by the National Quotation Bureau, Inc.,
or a similar reporting service designated by the Board of Directors.
"Commission" means the Securities and Exchange Commission.
"Common Stock" has the meaning set forth in the recitals to this
Agreement.
"Company" has the meaning set forth in the preamble to this Agreement
and any successors thereof, whether by operation of law or otherwise.
"Company Group" means the Company and its Subsidiaries.
"Confidential Information" means information developed by or for the
Company Group that has a significant business purpose related to the
business of the Company Group and that is not generally available in the
investment management industry or the public generally, but only for so long
as such information continues to have a significant business purpose for the
Company Group.
"Disability" means disability as that term is defined under the
Company's long-term disability plan in effect at the date of such
determination, or any other plan or definition designated by the Board of
Directors for the purpose of this provision.
"Effective Time" shall have the meaning given therefor in the Exchange
Agreement.
"Employment Termination Date" means, with respect to any Principal, the
date of termination of such Principal's employment with the Company Group
for
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<PAGE> 15
any reason, (whether or not terminated by action of the Company Group),
as determined by the Board of Directors in its sole and absolute discretion.
"Exchange" has the meaning set forth in the recitals to this Agreement.
"Exchange Agreement" has the meaning set forth in the recitals to this
Agreement.
"Family Affiliates" means, as the context requires, (a) the Persons
listed on Schedule II hereto or (b) with respect to any Principal, (i) the
Persons listed on Schedule II hereto to whom such Principal transferred a
limited liability company interest prior to the Exchange and (ii) any Person
to whom such Principal Transfers Management Shares with the written consent
of the Board of Directors in accordance with Section 1.3 and who agrees in
writing to be subject to the terms and provisions of this Agreement as a
Family Affiliate.
"Harmful Activity" by a Principal means such Principal, directly or
indirectly, either individually or as owner, partner, agent, employee,
consultant or otherwise:
(a) engages in any business or activity in which the Company
Group was, at any time during the one year period prior to such
Principal's Employment Termination Date, engaged or that the Company
Group, to the knowledge of such Principal, intends to commence,
provided that the foregoing shall not be construed to prevent a
Principal from owning, as an investment, less than 5% of a class of
equity securities issued by any entity (or its Subsidiaries) engaged in
such business or activity so long as such securities are publicly
traded and registered under section 12 of the Securities Exchange Act
of 1934, as amended, or such entity is registered as an investment
company under the Investment Company Act, provided, further, that the
foregoing shall not be deemed to be Harmful Activity if engaged in by
any Principal (i) whose employment by the Company Group is terminated
by the Company Group other than for Cause or (ii) whose Employment
Termination Date occurs after December 31, 2005;
(b) solicits or accepts business from (i) any Person who was a
client of the Company Group during the one year period prior to such
Principal's Employment Termination Date or (ii) any prospective client
of the Company Group who, within the one year period prior to such
Employment Termination Date, had been directly solicited by such
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<PAGE> 16
Principal or where, directly or indirectly, in whole or in part, such
Principal supervised or participated in the Company Group's
solicitation activities related to such prospective client;
(c) solicits or accepts business from or through, or engages
in any sales or marketing activities with, any financial intermediary
(including, without limitation, any broker-dealer, bank, insurance
company, financial planner or other financial institution), or any
person employed by or associated with a financial intermediary, with
whom such Principal had business contact during the one year period
prior to such Principal's Employment Termination Date;
(d) (i) employs any current or former employee or consultant
of the Company Group (other than clerical, secretarial and other
similar support personnel) or (ii) recruits, solicits or induces (or in
any way assists another in recruiting, soliciting or inducing) any such
Person to terminate his or her employment or consultantship with the
Company Group, unless, in the case of (i) or (ii), such person shall
have ceased to be employed by or a consultant to the Company Group for
a period of at least one year prior to the time of such employment,
recruitment, solicitation or inducement;
(e) markets, promotes or otherwise trades on or (other than
solely in connection with seeking new employment) claims (or in any
way, other than in connection with the business of the Company Group,
assists any Person in marketing, promoting or otherwise trading on or
claiming) as such Principal's (or such other Person's), the investment
performance record (including without limitation performance ratings or
rankings provided by any rating or ranking service) of any mutual fund,
client account or group of mutual funds or client accounts with which
such Principal was associated while employed with the Company Group; or
(f) discloses to any person, firm or corporation any
Confidential Information that is known to the Principal as a result of
his or her employment or professional association with the Company
Group or uses the same in any way other than in connection with the
business of the Company Group.
"Investment Company Act" means the Investment Company Act of 1940, as
amended, and the rules and regulations promulgated thereunder.
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<PAGE> 17
"Management Shares" means, with respect to any Management Stockholder,
the shares of Common Stock received by such Management Shareholders as a
result of the Exchange or, in the case of any Management Stockholder that
becomes a party to this Agreement by an amendment to Schedule I or II
hereof, the shares of Common Stock designated on such Schedule as such
Management Stockholder's Management Shares.
"Management Stockholders" has the meaning set forth in the recitals to
this Agreement.
"Market Value" means the average of the daily Closing Prices for the
ten consecutive Business Days ending on the Business Day immediately prior
to the date of determination.
"Merger" has the meaning set forth in the recitals to this Agreement.
"NASD" means the National Association of Securities Dealers, Inc.
"New Principal" means a Principal listed on Schedule III.
"NB LLC" has the meaning set forth in the recitals to this Agreement.
"NBMI" has the meaning set forth in the recitals to this Agreement.
"Notice Date" has the meaning set forth in Section 3.1(b)(i).
"Number of Initial Shares" means, with respect to any Management
Stockholder, the number of shares set forth opposite such Management
Stockholder's name on Schedule I or Schedule II, as the case may be.
"NYSE" means the New York Stock Exchange, Inc.
"Option Period" has the meaning set forth in Section 3.1(a).
"Own" means to own of record or beneficially, whether directly, through
a nominee designated by the Company pursuant to Section 1.6 or through any
other Person.
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<PAGE> 18
"Person" means any natural person or any firm, partnership,
limited liability partnership, association, corporation, limited
liability company, trust, business trust, governmental authority or
other entity.
"Preliminary Vote" has the meaning set forth in Section 2.1.
"Principals" means the natural persons listed on Schedule I
hereto.
"Purchase Price" has the meaning set forth in Section 3.1(a).
"Subsidiary" means a corporation, limited liability company or
other entity of which the Company, directly or indirectly, has the
power, whether through the ownership of voting securities, equity
interests, contract or otherwise, (i) to elect at least a majority of
the members of such entity's board of directors or other governing body
or (ii) in the absence of a governing body, to control the business
affairs of such entity.
"Transfer" means, with respect to any Management Shares,
directly or indirectly, (i) to sell, assign, transfer, pledge, convey,
distribute, mortgage, encumber, hypothecate or otherwise dispose,
whether by gift, for consideration or for no consideration and (ii) to
grant any right to vote, whether by proxy, voting agreement, voting
trust or otherwise.
ARTICLE VI
MISCELLANEOUS
Section 6.1. Notices. (a) All notices, requests, demands,
waivers and other communications to be given by any party hereunder shall be in
writing and shall be (i) mailed by first-class, registered or certified mail,
postage prepaid, (ii) sent by hand delivery or reputable overnight delivery
service or (iii) transmitted by telecopy (provided that a copy is also sent by
reputable overnight delivery service) addressed, in the case of any Principal,
to him or her at the address set forth on Schedule I, in the case of any Family
Affiliate, to it at the address set forth on Schedule II or, in the case of the
Company, to Neuberger Berman Inc., 605 Third Avenue, New York, NY 10158,
Attention: Secretary, or, in each case, to such other address as may be
specified in writing to the other parties hereto.
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<PAGE> 19
(b) All such notices, requests, demands, waivers and other
communications shall be deemed to have been given and received (i) if by
personal delivery or telecopy, on the day of such delivery, (ii) if by
first-class, registered or certified mail, on the fifth Business Day after the
mailing thereof or (iii) if by reputable overnight delivery service, on the day
delivered.
Section 6.2. Term of the Agreement. (a) This Agreement shall
become effective upon the occurrence of the Effective Time and shall terminate
on the earlier to occur of (i) the first date on which there are no Management
Stockholders who remain bound by its terms and (ii) the date on which the
Company and all Management Stockholders who are then bound by its terms agree to
terminate this Agreement.
(b) Unless this Agreement is theretofore terminated pursuant
to Section 6.2(a) hereof, a Management Stockholder shall be bound by its terms
until all Management Shares Owned by such Management Stockholder are free of the
provisions of Articles I, II and III hereof.
Section 6.3. Amendments; Waivers. (a) This Agreement may be
amended or modified, and any provision in this Agreement may be waived, if such
amendment, modification or waiver is approved by the Board of Directors,
provided that any amendment that would materially adversely affect any
Management Stockholder (other than an amendment that, in the good faith judgment
of the Board of Directors, is intended to cure any ambiguity or correct or
supplement any provisions of this Agreement that may be incomplete or
inconsistent with any other provision contained herein) must be approved by the
Management Stockholders that Own a majority of the Management Shares subject to
this Agreement as of the date of such amendment or modification, provided,
further, that, without the consent of any Person, the Board of Directors may
permit any Person who executes and delivers a counterpart of this Agreement to
become a party to this Agreement by amending Schedule I or II hereto, as the
case may be.
(b) The failure of any party at any time or times to require
performance of any provision of this Agreement shall in no manner affect the
rights at a later time to enforce the same. No waiver by any party of the breach
of any term contained in this Agreement, whether by conduct or otherwise, in any
one or more instances, shall be deemed to be or construed as a further or
continuing waiver of any such breach or the breach of any other term of this
Agreement.
Section 6.4. Adjustment Upon Changes in Capitalization. In the
event of any change in the outstanding shares of the Company by reason of stock
dividends, split-ups,
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<PAGE> 20
recapitalizations, combinations, exchanges of shares and the like, the term
"shares of Common Stock" shall refer to and include the securities received or
resulting therefrom and the terms and provisions of this Agreement, including
without limitation the terms "Management Shares" and "Purchase Price," shall be
appropriately adjusted so that each Management Stockholder will thereafter
continue to have and be subject to, to the greatest extent practicable, the same
rights and obligations he, she or it had been subject to prior to such change.
Section 6.5. Disinterested Board Members to Make
Determinations. In the event that any Management Stockholder breaches its
obligations under this Agreement, then the Board of Directors shall have the
exclusive right to make (on behalf of the Company) any and all determinations
that may be necessary or appropriate under this Agreement, including without
limitation, determinations relating to the exercise and enforcement of remedies
hereunder. If a Management Stockholder who is also a member of the Board of
Directors breaches his or her obligations under this Agreement, such Management
Stockholder must refrain from exercising his or her vote at meetings of the
Board and general meetings of the Company to give effect to this Section 6.5.
Section 6.6. Severability. If the final determination of a
court of competent jurisdiction declares, after the expiration of the time
within which judicial review (if permitted) of such determination may be
perfected, that any term or provision hereof is invalid or unenforceable, (a)
the remaining terms and provisions hereof shall be unimpaired and (b) the
invalid or unenforceable term or provision shall be deemed replaced by a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision.
Section 6.7. Representatives, Successors and Assigns. Each
Principal shall cause his or her Family Affiliate to comply with the terms and
provisions of this Agreement. This Agreement shall be binding upon and inure to
the benefit of the respective parties hereto and their respective legatees,
legal representatives, successors and assigns; provided that Management
Stockholders may not assign, delegate or otherwise transfer any of their rights
or obligations under this Agreement except with the written consent of the Board
of Directors.
Section 6.8. Governing Law. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF DELAWARE (WITHOUT REGARD TO THE CONFLICT OF
LAWS PRINCIPLES OR RULES THEREOF).
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<PAGE> 21
Section 6.9. Specific Performance. Each of the parties hereto
acknowledges that it will be impossible to measure in money the damage to the
Company or the Management Stockholders if any party hereto fails to comply with
the provisions of Article I, II or III and each party hereto agrees that in the
event of any such failure, neither the Company nor any Management Stockholder
will have an adequate remedy at law. Therefore, the Company and each Management
Stockholder, in addition to all of the other remedies which may be available,
shall have the right to equitable relief, including, without limitation, the
right to enforce specifically the provisions of Article I, II and III by
obtaining injunctive relief against any violation thereof, or otherwise. All
claims for specific performance of one or more provisions of this Agreement
shall be resolved exclusively by litigation before a court of competent
jurisdiction located in the State of New York.
Section 6.10. Arbitration. Except for claims for specific
performance brought in accordance with Section 6.9, all disputes, differences,
and controversies arising out of or in any way related to this Agreement shall
be submitted:
(a) to the NYSE to be heard and decided under the terms of
this Agreement and the then applicable rules of the NYSE or, if those
rules as interpreted by the NYSE do not permit the disputes,
differences and controversies to be submitted to the NYSE for
arbitration; then
(b) to the American Stock Exchange (the "AMEX") in New York,
New York, to be heard and decided under the terms of this Agreement and
the then applicable rules of the AMEX or, if those rules as interpreted
by the AMEX do not permit the disputes, differences and controversies
to be submitted to the AMEX for arbitration; then
(c) to the NASD in New York, New York, to be heard and decided
under the terms of this Agreement and the then applicable rules of the
NASD or, if the disputes, differences and controversies are not
eligible for submission to the NASD for arbitration under those rules
as interpreted by the NASD; then
(d) to the American Arbitration Association in New York, New
York;
to be heard and decided under the terms of this Agreement and in accordance with
the then applicable rules of the hearing body by a panel of three arbitrators
(unless the rules of the hearing body shall require a different number of
arbitrators) chosen in accordance with the then applicable rules of the hearing
body. The decision of the arbitrators shall
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<PAGE> 22
be final and binding upon the parties, and an order may be entered upon the
award of the arbitrators in any court of competent jurisdiction.
Section 6.11. Submission to Jurisdiction; Waiver of Immunity.
Each Management Stockholder, for itself and its successors and assigns, hereby
irrevocably waives (a) any objection, and agrees not to assert, as a defense in
any arbitration or legal or equitable action, suit or proceeding against such
Management Stockholder arising out of or relating to this Agreement or any
transaction contemplated hereby or the subject matter of any of the foregoing,
that (i) it is not subject thereto or that such action, suit or proceeding may
not be brought or is not maintainable before such arbitral body or in said
courts, (ii) the venue thereof may not be appropriate and (iii) the internal
laws of the State of New York do not govern the validity, interpretation or
effect of this Agreement, (b) any immunity from jurisdiction to which it might
otherwise be entitled in any such arbitration, action, suit or proceeding which
may be instituted before any state or federal court in the State of New York in
accordance with Section 6.9 or before any arbitral body in accordance with
Section 6.10 and (c) any immunity from the maintaining of an action against it
to enforce any judgment for money obtained in any such arbitration, action, suit
or proceeding and, to the extent permitted by applicable law, any immunity from
execution.
Section 6.12. Further Assurances. Each Management Stockholder
agrees to execute such additional documents and take such further action as may
be requested by the Company to effect the provisions of this Agreement.
Section 6.13. Execution in Counterparts. This Agreement may be
executed in any number of counterparts, each of which shall be deemed an
original, but all such counterparts shall together constitute but one and the
same instrument.
Section 6.14. Entire Agreement. This Agreement, including the
Schedules hereto, contains the entire understanding of the parties with respect
to the subject matter hereof, and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof.
19
<PAGE> 23
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date first above written.
NEUBERGER BERMAN INC.
By:/s/ Lawrence Zicklin
---------------------------------
Name: Lawrence Zicklin
Title: Chief Executive Officer
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<PAGE> 24
The foregoing Stockholders Agreement is hereby agreed to by the undersigned as
of August 18, 1998.
/s/Herbert W. Ackerman
/s/Robert J. Appel
/s/Howard R. Berlin
/s/Jeffrey Bolton
/s/Richard A. Cantor
/s/Vincent Cavallo
/s/Salvatore D'Elia
/s/Stanley Egener
/s/Michael N. Emmerman
/s/Robert English
/s/Jack M. Ferraro
/s/Gregory P. Francfort
/s/Howard L. Ganek
/s/Robert Gendelman
/s/Theodore Giuliano
/s/Mark R. Goldstein
/s/Lee H. Idleman
/s/Alan L. Jacobs
/s/Michael W. Kamen
/s/Michael M. Kassen
/s/Michael P. Kleiman
/s/Lee P. Klingenstein
/s/Irwin Lainoff
/s/Joseph Lasser
/s/Richard Levine
/s/Christopher J. Lockwood
/s/Lawrence Marx III
/s/Robert R. McComsey
/s/Martin McKerrow
/s/Martin E. Messinger
/s/Beth W. Nelson
/s/Roy R. Neuberger
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<PAGE> 25
/s/Harold J. Newman
/s/Daniel P. Paduano
/s/Norman H. Pessin
/s/Leslie M. Pollack
/s/William A. Potter
/s/C. Carl Randolph
/s/Kevin L. Risen
/s/Daniel Rosenblatt
/s/J. Curt Schnackenberg
/s/Marvin C. Schwartz
/s/Kent C. Simon
/s/R. Edward Spilka
/s/Gloria Spivak
/s/Bernard Z. Stein
/s/Fred Stein
/s/Eleanor M. Sterne
/s/Stephanie Stiefel
/s/Philip A. Straus
/s/Peter Strauss
/s/Peter Sundman
/s/Allan D. Sutton
/s/Richard J. Sweetnam Jr.
/s/Judith M. Vale
/s/David I. Weiner
/s/Dietrich Weismann
/s/Lawrence Zicklin
HERBERT W. ACKERMAN ASSOCIATES, L.P.
By: Herbert W. Ackerman Associates, Inc.,
its general partner
By: /s/Herbert W. Ackerman
President
APPEL ASSOCIATES, L.P.
By: Appel Associates, Inc., its general partner
By: /s/Robert J. Appel
President
22
<PAGE> 26
BERLIN ASSOCIATES, L.P.
By: Berlin Associates, Inc., its general partner
By: /s/Howard R. Berlin
President
BOLTON ASSOCIATES, L.P.
By: Bolton Associates, Inc., its general partner
By: /s/Jeffrey Bolton
President
CANTOR ASSOCIATES, L.P.
By: Cantor Associates, Inc., its general partner
By: /s/Richard A. Cantor
President
CAVALLO ASSOCIATES, L.P.
By: Cavallo Associates, Inc., its general partner
By: /s/Vincent Cavallo
President
EGENER ASSOCIATES, L.P.
By: Egener Associates, Inc., its general partner
By: /s/Stanley Egener
President
FRANCFORT 1998 GRANTOR RETAINED ANNUITY TRUST
By: Neuberger&Berman Trust Company of Delaware, as Trustee
By: /s/John W. Mack
Trustee
/s/Gregory Francfort
Trustee
GANEK ASSOCIATES, L.P.
By: Ganek Associates, Inc., its general partner
By: /s/Howard L. Ganek
President
GIULIANO ASSOCIATES, L.P.
By: Giuliano Associates, Inc., its general partner
By: /s/Theodore Giuliano
President
23
<PAGE> 27
GOLDSTEIN ASSOCIATES, L.P.
By: Goldstein Associates, Inc., its general partner
By: /s/Mark R. Goldstein
President
KAMEN ASSOCIATES, L.P.
By: Kamen Associates, Inc., its general partner
By: /s/Michael W. Kamen
President
KASSEN ASSOCIATES, L.P.
By: Kassen Associates, Inc., its general partner
By: /s/Michael M. Kassen
President
KLINGENSTEIN ASSOCIATES, L.P.
By: Klingenstein Associates, Inc., its general partner
By: /s/Lee P. Klingenstein
President
LAINOFF ASSOCIATES, L.P.
By: Lainoff Associates, Inc., its general partner
By: /s/Irwin Lainoff
President
LASSER ASSOCIATES, L.P.
By: Lasser Associates, Inc., its general partner
By: /s/Joseph Lasser
President
LAWRENCE MARX III ASSOCIATES, L.P.
By: Lawrence Marx III Associates, Inc.,
its general partner
By: /s/Lawrence Marx III
President
McKERROW ASSOCIATES, L.P.
By: McKerrow Associates, Inc., its general partner
By: /s/Martin McKerrow
President
MESSINGER ASSOCIATES, L.P.
By: Messinger Associates, Inc., its general partner
By: /s/Martin E. Messinger
President
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<PAGE> 28
NEUBERGER ASSOCIATES, L.P.
By: Neuberger Associates, Inc., its general partner
By: /s/Roy R. Neuberger
President
NEWMAN ASSOCIATES, L.P.
By: Newman Associates, Inc., its general partner
By: /s/Harold J. Newman
President
PADUANO ASSOCIATES, L.P.
By: Paduano Associates, Inc., its general partner
By: /s/Daniel P. Paduano
President
POLLACK 1998 GRANTOR RETAINED ANNUITY TRUST
By: Neuberger&Berman Trust Company of Delaware, as Trustee
By: /s/John W. Mack
Trustee
/s/Leslie M. Pollack
Trustee
/s/Yvonne S. Pollack
Trustee
POTTER ASSOCIATES, L.P.
By: Potter Associates, Inc., its general partner
By: /s/William A. Potter
President
SCHWARTZ CS ASSOCIATES, L.P.
By: Schwartz CS Associates, Inc., its general partner
By: /s/Marvin C. Schwartz
President
SCHWARTZ ES ASSOCIATES, L.P.
By: Schwartz ES Associates, Inc., its general partner
By: /s/Marvin C. Schwartz
President
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ROBERT EDWARD SPILKA 1998 GRANTOR RETAINED ANNUITY TRUST
By: Neuberger&Berman Trust Company of Delaware, as Trustee
By: /s/John W. Mack
Trustee
/s/R. Edward Spilka
Trustee
STEIGER ASSOCIATES, L.P.
By: Steiger Associates, Inc., its general partner
By: /s/Heidi S. Steiger
President
STIEFEL ASSOCIATES, L.P.
By: Stiefel Associates, Inc., its general partner
/s/Barbara Strauss
Trustee
STRAUSS 1998 TRUST
By: Neuberger&Berman Trust Company of Delaware,
as Trustee
By: /s/John W. Mack
Vice President
/s/Barbara Strauss
Trustee
SUNDMAN ASSOCIATES, L.P.
By: Sundman Associates, Inc., its general partner
By: /s/Peter Sundman
President
ALLAN D. SUTTON 1998 GRANTOR RETAINED ANNUITY TRUST
By: Neuberger&Berman Trust Company of Delaware,
as Trustee
By: /s/John W. Mack
Vice President
/s/Allan D. Sutton
Trustee
/s/Anita Sutton
Trustee
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SUTTON 1998 GST TRUST
By: Neuberger&Berman Trust Company of Delaware, as Trustee
By: /s/John W. Mack
Trustee
/s/Nancy Sutton Finley
Trustee
/s/Peggy Lynn Sutton
Trustee
WEINER 1998 GRANTOR RETAINED ANNUITY TRUST
By: Neuberger&Berman Trust Company of Delaware,
as Trustee
By: /s/John W. Mack
Vice President
/s/David J. Weiner
Trustee
/s/Laurie L. Weiner
Trustee
/s/Bintoar Palar
Trustee
WEISMANN ASSOCIATES, L.P.
By: Weismann Associates, Inc., its general partner
By: /s/Dietrich Weismann
President
ZICKLIN ASSOCIATES, L.P.
By: Zicklin Associates, Inc., its general partner
By: /s/Lawrence Zicklin
President
27
<PAGE> 31
SCHEDULE I
TO
STOCKHOLDERS AGREEMENT
<TABLE>
<CAPTION>
Name and Address* of Principal Number of Initial Shares
- ------------------------------ ------------------------
<S> <C>
Herbert W. Ackerman 223,044
Robert J. Appel 4,413,182
Howard R. Berlin 939,682
Jeffrey Bolton 897,685
Richard A. Cantor 926,645
Vincent Cavallo 223,044
Salvatore D'Elia 336,442
Stanley Egener 2,227,935
Michael N. Emmerman 945,432
Robert English 908,176
Jack M. Ferraro 641,769
Gregory P. Francfort 658,210
Howard L. Ganek 2,551,336
Robert Gendelman 1,281,483
Theodore Giuliano 790,170
Mark R. Goldstein 588,233
Lee H. Idleman 1,362,312
Alan L. Jacobs 911,302
Kenneth Kahn 207,646
Michael W. Kamen 582,467
</TABLE>
- --------
* Unless otherwise indicated, the address of each Principal is c/o
Neuberger Berman, 605 Third Avenue, New York, New York 10158.
<PAGE> 32
<TABLE>
<S> <C>
Michael M. Kassen 2,172,087
Mark P. Kleiman 1,231,153
Lee P. Klingenstein 174,380
Irwin Lainoff 1,755,442
Joseph Lasser 226,932
Richard Levine 649,118
Christopher J. Lockwood 1,492,963
Lawrence Marx III 1,810,951
Robert R. McComsey 1,436,738
Martin McKerrow 573,094
Martin E. Messinger 1,137,967
Beth W. Nelson 2,359,215
Roy R. Neuberger 2,028
Harold J. Newman 634,468
Daniel P. Paduano 533,277
Norman H. Pessin 590,888
Leslie M. Pollack 686,782
William A. Potter 421,109
Janet W. Prindle 1,953,838
C. Carl Randolph 472,171
Kevin L. Risen 715,023
Daniel Rosenblatt 270,558
J. Curt Schnackenberg 411,772
Marvin C. Schwartz 3,047,587
Jennifer Silver 644,327
Kent C. Simons 4,136,509
R. Edward Spilka 711,003
Gloria Spivak 391,309
Heidi S. Steiger 1,110,888
Bernard Z. Stein 309,691
Fred Stein 934,919
Eleanor M. Sterne 859,923
Stephanie Stiefel 263,464
Philip A. Straus 178,969
Peter Strauss 326,455
Peter Sundman 291,260
Allan D. Sutton 161,670
Richard J. Sweetnam Jr 523,696
Judith M. Vale 2,757,296
David I. Weiner 618,717
</TABLE>
2
<PAGE> 33
<TABLE>
<S> <C>
Dietrich Weismann 2,810,965
Lawrence Zicklin 2,179,204
</TABLE>
3
<PAGE> 34
SCHEDULE II
TO
STOCKHOLDERS AGREEMENT
<TABLE>
<CAPTION>
Name and Address* of Family Affiliate Number of Initial Shares
- ------------------------------------- ------------------------
<S> <C>
Herbert W. Ackerman Associates, L.P. 639,037
Appel Associates, L.P. 457,657
Berlin Associates, L.P. 948,279
Bolton Associates, L.P. 228,260
Cantor Associates, L.P. 2,665,360
Cavallo Associates, L.P. 639,037
Egener Associates, L.P. 762,166
Francfort 1998 Grantor Retained Annuity Trust 276,286
Ganek Associates, L.P. 263,853
Giuliano Associates, L.P. 147,578
Goldstein Associates, L.P. 131,767
Kamen Associates, L.P. 120,271
Kassen Associates, L.P. 819,111
Klingenstein Associates, L.P. 354,462
Lainoff Associates, L.P. 442,967
Lasser Associates, L.P. 414,837
Lawrence Marx III Associates, L.P. 1,273,247
McKerrow Associates, L.P. 106,926
Messinger Associates, L.P. 1,060,442
Neuberger Associates, L.P. 176,940
Newman Associates, L.P. 343,402
Paduano Associates, L.P. 1,354,688
Pollack 1998 Grantor Retained Annuity Trust 650,350
Potter Associates, L.P. 153,612
Schwartz ES Associates, L.P. 5,261,559
</TABLE>
- ---------
* Unless otherwise indicated, the address of each Family Affiliate is c/o
Neuberger & Berman Trust Company of Delaware, 919 Market Street, Suite
506, Wilmington, Delaware 19801.
<PAGE> 35
<TABLE>
<S> <C>
Schwartz CS Associates, L.P. 5,261,558
Robert Edward Spilka 1998 Grantor Retained Annuity Trust 157,934
Steiger Associates, L.P. 129,467
Stiefel Associates, L.P. 27,697
Strauss 1998 Trust 658,695
Sundman Associates, L.P. 248,679
Allan D. Sutton 1998 Grantor Retained Annuity Trust 370,424
Sutton 1998 GST Trust 37,042
Weiner 1998 Grantor Retained Annuity Trust 95,230
Weismann Associates, L.P. 1,987,025
Zicklin Associates, L.P. 1,748,054
</TABLE>
2
<PAGE> 36
SCHEDULE III
TO
STOCKHOLDERS AGREEMENT
<TABLE>
<CAPTION>
Number of Shares Eligible
New Principals To be Sold At Any Time
- -------------- ----------------------
<S> <C>
Kenneth Kahn
Leslie M. Pollock
Daniel Rosenblatt
Stephanie Stiefel
</TABLE>
<PAGE> 1
EXHIBIT 21.1
Subsidiaries of the Company
Neuberger & Berman, LLC
Neuberger & Berman Management Incorporated
Neuberger & Berman Trust Company
Neuberger & Berman Trust Company of Delaware
Neuberger & Berman Agency, Inc.
<PAGE> 1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
dated February 17, 1998 (and to all references to our Firm) included in or made
part of this Registration Statement.
ARTHUR ANDERSEN LLP
New York, New York
August 19, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's Unaudited Combined Financial Statements for the Six Months Ended
June 26, 1998, and is qualified in its entirety by reference to such
Combined Financial Statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-26-1998
<CASH> 371,199
<SECURITIES> 8,812
<RECEIVABLES> 2,359,685
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,739,696
<PP&E> 44,766
<DEPRECIATION> (20,218)
<TOTAL-ASSETS> 2,775,069
<CURRENT-LIABILITIES> 2,615,903
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 159,166
<TOTAL-LIABILITY-AND-EQUITY> 2,775,069
<SALES> 0
<TOTAL-REVENUES> 352,142
<CGS> 0
<TOTAL-COSTS> 201,795
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 150,347
<INCOME-TAX> 0
<INCOME-CONTINUING> 150,347
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 150,347
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's Audited Combined Financial Statements for the Year Ended
December 31, 1997, and is qualified in its entirety by reference to such
Combined Financial Statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 326,789
<SECURITIES> 6,238
<RECEIVABLES> 2,022,939
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,355,966
<PP&E> 41,596
<DEPRECIATION> (19,654)
<TOTAL-ASSETS> 2,410,203
<CURRENT-LIABILITIES> 2,251,172
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 159,031
<TOTAL-LIABILITY-AND-EQUITY> 2,410,203
<SALES> 0
<TOTAL-REVENUES> 626,579
<CGS> 0
<TOTAL-COSTS> 361,599
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 264,980
<INCOME-TAX> 0
<INCOME-CONTINUING> 264,980
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 264,980
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
