<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 4, 1999
REGISTRATION NO. 333--
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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>
TITLE OF EACH CLASS PROPOSED MAXIMUM AMOUNT OF
OF SECURITIES AGGREGATE REGISTRATION
TO BE REGISTERED OFFERING PRICE (1)(2) FEE
<S> <C> <C>
Common Stock, par value $.01 per share $250,000,000 $69,500
</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 of Common Stock 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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
The information in this preliminary prospectus is not complete and may be
changed. These securities may not be sold until the registration statement filed
with the Securities and Exchange Commission is effective. This preliminary
prospectus is not an offer to sell nor does it seek an offer to buy these
securities in any jurisdiction where the offer or sale is not permitted.
<PAGE>
Subject to Completion. Dated August , 1999.
[LOGO]
SHARES
NEUBERGER BERMAN INC.
COMMON STOCK
------------------
This is an initial public offering of shares of common stock of Neuberger
Berman Inc. This prospectus relates to an offering of shares in the
United States. In addition, shares are being offered outside the
United States in an international offering.
Neuberger Berman is offering of the shares to be sold in the
offerings. The selling stockholders identified in this prospectus are offering
an additional shares. Neuberger Berman will not receive any of the
proceeds from the sale of the shares being sold by the selling stockholders.
Prior to this offering, there has been no public market for the common
stock. It is currently estimated that the initial public offering price per
share will be between $ and $ . Neuberger Berman intends to list the
common stock on the New York Stock Exchange under the symbol " ".
SEE "RISK FACTORS" BEGINNING ON PAGE TO READ ABOUT CERTAIN FACTORS YOU
SHOULD CONSIDER BEFORE BUYING SHARES OF THE COMMON STOCK.
------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY BODY
HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
------------------------
<TABLE>
<CAPTION>
PER SHARE TOTAL
---------------- ----------------
<S> <C> <C>
Initial public offering price................................................. $ $
Underwriting discount......................................................... $ $
Proceeds, before expenses, to Neuberger Berman................................ $ $
Proceeds to the selling stockholders.......................................... $ $
</TABLE>
To the extent that the underwriters sell more than shares of common
stock, the underwriters have the option to purchase up to an additional
from the selling stockholders at the initial public offering price less
the underwriting discount.
------------------------
The underwriters expect to deliver the shares against payment in New York,
New York on , 1999.
GOLDMAN, SACHS & CO.
---------------
Prospectus dated , 1999.
<PAGE>
[DESCRIPTION OF INSIDE FRONT COVER ARTWORK]
[The Neuberger Berman logo is at the top of the page]
Assets Under Management
[Beneath this text appear two pie charts presenting the following data:]
<TABLE>
<S> <C>
At December 31, 1994
Mutual Fund and Institutional 74%
Private Asset Management 26%
100% = $28.6 billion
At June 30, 1999
Mutual Fund and Institutional 64%
Private Asset Management 36%
100% = $56.8 billion
</TABLE>
Net Income before Principal Compensation
[Beneath this text appear two pie charts presenting the following data:]
<TABLE>
<S> <C>
Twelve Months Ended December 31, 1994
Mutual Fund and Institutional 41%
Professional Securities Services 8%
Private Asset Management 51%
100% = $151.0 million
Six Months Ended June 30, 1999
Mutual Fund and Institutional 36%
Professional Securities Services 6%
Private Asset Management 58%
100% = $156.8 million
</TABLE>
Growth in Net Income before Principal Compensation
[Beneath this text appears a bar chart presenting the following data:]
<TABLE>
<S> <C>
(in millions)
1994 $151.0
1995 $186.1
1996 $229.1
1997 $298.7
1998 $320.1
</TABLE>
2
<PAGE>
PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS.
THIS SUMMARY DOES NOT CONTAIN ALL OF THE INFORMATION THAT YOU SHOULD CONSIDER
BEFORE INVESTING IN THE COMMON STOCK. YOU SHOULD READ THE ENTIRE PROSPECTUS
CAREFULLY, ESPECIALLY THE RISKS OF INVESTING IN THE COMMON STOCK DISCUSSED UNDER
"RISK FACTORS" ON PAGES 11-17.
NEUBERGER BERMAN INC.
OUR BUSINESS
We are an independent investment advisory firm providing our clients with a
broad array of investment strategies and products. We were founded by Roy R.
Neuberger in 1939 to be a premier provider of investment products and services
to high net worth individuals. We have built upon the qualities that have made
us successful in the high net worth market to establish a strong presence in the
mutual fund and institutional marketplaces.
Our goal is to provide highly personalized service and superior investment
advice and returns to all of our clients. We believe that our dedication to
serving the individual needs of our clients distinguishes us from many of our
competitors. We have developed a reputation and recognized brand name for our
demonstrated commitment to these principles.
We seek to provide our clients with access to our investment products and
services through the distribution channel most appropriate to serve their needs.
Today, in addition to individuals and wealthy families, our clients include
corporations, insurance companies, pension funds, foundations and endowments.
Our principal business segments include:
- Private Asset Management;
- Mutual Fund and Institutional; and
- Professional Securities Services.
We have produced strong growth in assets under management and net income
before principal compensation through varying market conditions. From December
31, 1989 to June 30, 1999, our assets under management increased from $17.8
billion to $56.8 billion, representing a compound annual rate of 13.0%. From
December 31, 1989 to December 31, 1998, our net income before principal
compensation increased from $111.5 million to $320.1 million, representing a
compound annual rate of 12.4%.
Since we derive our revenue principally from fees and commissions based on
our assets under management, we believe our net income before principal
compensation is more stable as compared to other financial institutions. In
addition, we believe our business has attractive margins since (1) more than 80%
of our assets under management are held in equity accounts, which carry higher
fees than fixed income accounts, (2) approximately 58% of our net income before
principal compensation is derived from our higher-margin Private Asset
Management business and (3) we have effectively leveraged our franchise and
infrastructure to enhance profitability by developing complementary businesses
such as our professional investor clearing services and by generating commission
revenue from recipients of our proprietary research (an activity that we refer
to as research sales).
We are committed to attracting and retaining the best people. In connection
with the offerings, we will make awards under our defined contribution plan to
substantially all of our employees (other than principals). After the offerings
our employees (other than principals) will own approximately % of our common
stock, and our principals will own approximately % of our common stock.
PRINCIPAL BUSINESS SEGMENTS
PRIVATE ASSET MANAGEMENT. Our Private Asset Management business represented
36% of our assets under management and 58% of our net income before principal
compensation as of and for the six-month period ended June 30, 1999. We are a
premier provider of investment advisory, trust and customized services to high
net worth investors
3
<PAGE>
(I.E., individuals, wealthy families and smaller institutions with at least
$500,000 to invest). This business is marked by long-term client loyalty,
sometimes spanning several generations. Our Private Asset Management business
has grown rapidly, with assets under management growing from $7.3 billion as of
December 31, 1994 to $20.5 billion as of June 30, 1999, representing a compound
annual rate of 25.6%.
We have a broad array of private client investment teams who work directly
with high net worth clients in order to tailor individual portfolios addressing
clients' investment goals, income requirements, capital preservation needs, tax
posture, social considerations and requirements for estate planning, trust and
custody services. In addition, we have a 26-person national sales force for the
Private Asset Management business that operates in New York and eight regional
offices, with 15 sales professionals and five regional offices added in the last
three years.
MUTUAL FUND AND INSTITUTIONAL. Our Mutual Fund and Institutional business
represented 64% of our assets under management and 36% of our net income before
principal compensation as of and for the six-month period ended June 30, 1999.
We provide investment management, distribution and administrative services to
our proprietary family of 41 Neuberger Berman mutual funds. In addition, we
provide advisory and subadvisory services to 15 mutual funds sponsored by third
parties. We also participate in wrap fee accounts through our relationships with
nine sponsors of wrap fee programs, including three of the four largest
programs, and in over 100 strategic alliances with third-party administrators
for defined contribution plans, insurance companies, mutual fund "supermarkets",
broker-dealers and banks. As of June 30, 1999, we managed $22.7 billion in
mutual fund and wrap accounts.
We provide advisory services to over 250 corporations, pension funds,
foundations and endowments through separate accounts or commingled funds. As of
June 30, 1999, we managed $13.6 billion in institutional accounts.
PROFESSIONAL SECURITIES SERVICES. Our Professional Securities Services
business represented 6% of our net income before principal compensation for the
six-month period ended June 30, 1999. Our research sales group makes our
research reports available to third-party investment advisers and professional
investors. Our professional investor clearing services group provides prime
brokerage services to private investment partnerships, registered investment
advisers and family offices. It also provides correspondent clearing services to
introducing brokers. We have opportunistically developed this business in order
to leverage our existing infrastructure and experience. We believe the
Professional Securities Services business enhances our margins and diversifies
our earnings stream.
4
<PAGE>
<TABLE>
<CAPTION>
AS OF OR FOR THE SIX
AS OF OR FOR THE YEAR ENDED DECEMBER MONTHS ENDED JUNE
----------------------------------------------------- --------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1994 1995 1996 1997 1998 1998 1999
--------- --------- --------- --------- --------- --------- ---------
(IN MILLIONS)
ASSETS UNDER MANAGEMENT:
Private Asset Management.................... $ 7,349 $ 9,491 $ 12,050 $ 15,553 $ 17,905 $ 17,806 $ 20,504
Mutual Fund and Institutional............... 21,300 28,833 32,310 37,958 37,682 41,283 36,260
Total................................... $ 28,649 $ 38,324 $ 44,360 $ 53,511 $ 55,587 $ 59,089 $ 56,764
(IN THOUSANDS)
NET INCOME BEFORE PRINCIPAL COMPENSATION: (1)
Private Asset Management.................... $ 76,546 $ 86,373 $ 104,557 $ 135,802 $ 164,833 $ 80,465 $ 90,491
Mutual Fund and Institutional............... 62,199 77,275 95,709 127,730 131,644 74,283 56,108
Professional Securities Services............ 12,230 22,444 28,860 35,134 23,618 14,880 10,172
Total................................... $ 150,975 $ 186,092 $ 229,126 $ 298,666 $ 320,095 $ 169,628 $ 156,771
</TABLE>
- ------------------------------
(1) Historically, we have distributed substantially all of our net income to our
principals as capital distributions and dividends. Certain principals were
also paid through compensation expense. As a result, our earnings and
compensation and benefits expense have not fully reflected payments for
services rendered by our principals and understate the expected operating
costs to be incurred by us after the offerings. Following the offerings,
Neuberger Berman will fully reflect payments for services rendered by our
principals in compensation and benefits expense. For financial information
that includes pro forma compensation and benefits expense as if payments for
services rendered by our principals had been fully reflected, see "Pro Forma
Combined Financial Statements (Unaudited)".
INVESTMENT PROCESS AND PROPRIETARY RESEARCH
We believe our investment ideas and proprietary research differentiate us
from our competitors. All of our portfolio managers in the Private Asset
Management and Mutual Fund and Institutional businesses perform fundamental
research and are supported by our centralized research department. We currently
have over 120 investment professionals including portfolio managers and research
analysts. Many of our portfolio managers began their careers in securities
research at Neuberger Berman or with other investment management firms. In
total, our investment professionals cover over 40 industries and over 1,000
companies.
STRATEGY
Our objective is to provide highly personalized service and superior
investment returns to a growing number of clients across all of the principal
distribution channels. In order to accomplish this objective we will:
CAPITALIZE ON OPPORTUNITIES IN THE GROWING HIGH NET WORTH MARKET. Managing
wealth is one of the fastest growing segments of the financial services
industry. According to The Spectrum Group, Affluent Market Research Program,
there are currently 2.9 million households in the United States with over $1
million in investable assets and this number is currently growing at a rate of
7.3% a year. With our brand name and our commitment to personalized service, we
believe that we are well positioned to take advantage of growth in this market.
Our two principal initiatives to generate growth are:
- EXPANDING OUR NATIONAL SALES AND CLIENT SERVICE FORCE. We intend to grow
our national sales force by more than 50%, to 40 sales professionals, by
the end of 2000. For the first six months of 1999, our sales force added
$290 million in new assets under management. As this sales force increases
in number and years of experience, we expect that it will add
substantially more assets under management.
- ADDING INVESTMENT TEAMS WITH PRE-EXISTING CLIENT RELATIONSHIPS. This year,
through July 1999, three investment teams have joined our firm. They have
added approximately $200 million in assets under management and are
expected to add an additional $700 million in assets under management by
year end. By
5
<PAGE>
adding investment teams, we will expand our investment capabilities and
increase our assets under management and earnings.
EXPAND MUTUAL FUND AND RETAIL DISTRIBUTION CAPABILITIES. We have realized
significant growth in our mutual funds from the addition of new distribution
channels. We believe that further opportunities for growth will result from the
following initiatives:
- DEFINED CONTRIBUTION PLAN ADMINISTRATORS. We expect growth from our
existing relationships with defined contribution plan administrators and
seek to establish new relationships. As of June 30, 1999, we had strategic
alliances with 77 administrators of defined contribution plans.
- PROVIDERS OF VARIABLE INSURANCE PRODUCTS. We also seek to expand our
relationships with insurance companies that offer variable annuity and
variable life insurance products that invest in our proprietary mutual
funds. As of June 30, 1999, we had relationships with 38 insurance
companies offering these variable products, including five of the top 10
sellers of variable annuities in 1998.
- BUILD WRAP FEE PROGRAM PARTICIPATION. Over the past two years, we have
added Salomon Smith Barney and Morgan Stanley Dean Witter to our wrap fee
equity programs. Today, we manage assets for nine sponsors of wrap fee
programs, including three of the four largest programs. These programs
offer a range of equity products, including mid-cap and large-cap value
products and mid-cap growth products. We expect significant growth from
these new relationships.
- INTERNET DISTRIBUTION. Our Internet distribution channel allows mutual
fund investors to access account information, view prospectuses, submit
applications, and buy, sell and exchange shares in Neuberger Berman funds.
We believe that our e-commerce strategy positions us to take advantage of
the growing volume of online investment activity.
PROMOTE BRAND NAME. We have established a strong brand name through our
commitment to personalized service and will seek to further enhance our brand
awareness. In addition to our national print and television advertising directed
at mutual fund investors, we will introduce a new advertising campaign geared to
high net worth investors during the third quarter of 1999. We also believe that
listing our common stock on the New York Stock Exchange will enhance our
national visibility.
FURTHER DIVERSIFY PRODUCT AND SERVICE OFFERINGS. We seek to complement our
existing product offerings through the internal development or acquisition of
new investment capabilities. In the past, we have relied primarily on our
value-oriented domestic equity products. Currently we offer growth-oriented
equity, international equity, balanced, domestic and international fixed income
and money market products. We believe these products will provide additional
growth in assets under management by attracting new clients and through
cross-selling to existing clients.
ENHANCE PROFIT MARGINS BY GROWING PROFESSIONAL SECURITIES SERVICES. We seek
to generate incremental revenues without a commensurate increase in expenses by
continuing to expand our professional securities services to third parties.
ATTRACT AND RETAIN EXPERIENCED PROFESSIONALS. Our most important asset is
our people. The ability to attract and retain highly experienced investment and
other professionals will continue to be a significant factor in our long-term
growth. We believe that the ability to offer shares of, or options to purchase,
our publicly traded common stock will be a significant incentive in attracting
and retaining employees.
PURSUE STRATEGIC ACQUISITION AND JOINT VENTURE OPPORTUNITIES. In addition
to adding investment teams, we will evaluate strategic acquisitions of, or joint
ventures with,
6
<PAGE>
companies that would add new product and services offerings, investment
capabilities or distribution channels for our clients. In addition, we believe
the ability to offer shares of our publicly traded common stock will facilitate
those acquisitions.
THE EXCHANGE AND RELATED TRANSACTIONS
Our business is conducted by Neuberger Berman, LLC (including its
subsidiaries) and Neuberger Berman Management Inc., which are owned by the
Neuberger Berman principals. The principals have formed Neuberger Berman Inc. to
be a holding company for Neuberger Berman, LLC and Neuberger Berman Management
Inc. and allow for the issuance of the common stock in the offerings. Before we
complete the offerings, the Neuberger Berman principals will become the sole
stockholders of Neuberger Berman Inc., and Neuberger Berman Inc. will become the
sole owner of Neuberger Berman, LLC and Neuberger Berman Management Inc.,
through a series of exchange and merger transactions (the "Exchange").
In connection with the offerings we will also:
- contribute shares of common stock to our defined contribution
plan;
- contribute $10 million in cash to the Neuberger Berman Foundation, a newly
formed charitable foundation; and
- use a portion of the net proceeds from the offerings to repay a $50
million subordinated note held by NB Associates, LLC, which is owned by
the Neuberger Berman principals.
The Exchange, the Neuberger Berman Foundation and the subordinated note are
described under "Certain Relationships and Related Transactions". Our defined
contribution plan is described under "Management-- Executive
Compensation--Defined Contribution Plan". We expect to record a substantial
pre-tax loss in the third quarter of 1999 in connection with the contribution of
shares to the defined contribution plan and the cash contribution to the
Neuberger Berman Foundation as described under "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Subsequent Events".
OUR HEADQUARTERS
Our headquarters are located at 605 Third Avenue, New York, NY 10158,
telephone (212) 476-9000.
7
<PAGE>
THE OFFERINGS
<TABLE>
<S> <C>
Common stock:
Offered by Neuberger Berman.................................................. shares
Offered by selling stockholders.............................................. shares
Total.................................................................... shares
U.S offering................................................................... shares
International offering......................................................... shares
Total.................................................................... shares
Common stock to be outstanding after the offerings:
Shares to be outstanding after the Exchange.................................. shares
Shares to be contributed to the defined contribution plan (1)................ shares
Shares offered by Neuberger Berman........................................... shares
Shares to be outstanding after the offerings................................. shares
</TABLE>
- ------------------------
(1) We will contribute these shares to our defined contribution plan at or
shortly after the completion of the offerings. The defined contribution plan
is described under "Management-- Executive Compensation--Defined
Contribution Plan". We expect to record a substantial pre-tax loss in the
third quarter of 1999 in connection with the initial contribution to the
defined contribution plan and other transactions as described under
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Subsequent Events".
------------------------
<TABLE>
<S> <C>
Voting Rights................................ Holders of common stock will have one vote
per share.
Dividend Policy.............................. Our board of directors intends to declare
quarterly dividends on the common stock and
expects that the first quarterly dividend
will be $.10 per share and that it will be
declared in the fourth quarter of 1999. For a
discussion of the factors that affect the
determination by our board of directors to
declare dividends as well as other matters
concerning our dividend policy, see "Dividend
Policy".
Use of Proceeds.............................. We estimate that we will receive net proceeds
from the offerings of $92 million. We will
use all of the net proceeds we receive to
repay a $50 million subordinated note held by
NB Associates, LLC (which is wholly owned by
the Neuberger Berman principals) and
approximately $42 million of short-term
borrowings. We will not receive any proceeds
from the sale of shares by the selling
stockholders. The subordinated note is
described under "Certain Relationships and
Related Transactions--The Subordinated Note".
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
Risk Factors................................. For a discussion of factors you should
consider before buying shares of common
stock, see "Risk Factors".
Proposed New York Stock Exchange Symbol......
</TABLE>
9
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA COMBINED FINANCIAL DATA
Our business is conducted by Neuberger Berman, LLC, its subsidiaries and
Neuberger Berman Management Inc., and our combined financial statements present
the financial condition and results of operations of their combined businesses.
The summary historical combined financial data presented below is derived from
our combined financial statements and accompanying notes. Our combined financial
statements as of December 31, 1997 and 1998 and for the years ended December 31,
1996, 1997 and 1998 have been audited by Arthur Andersen LLP, independent public
accountants. These combined financial statements, together with our unaudited
combined financial statements as of June 30, 1999 and for the six months ended
June 26, 1998 and June 30, 1999, are included elsewhere in this prospectus. The
results for the six months ended June 30, 1999 are not necessarily indicative of
the results to be expected for our full fiscal year.
The summary historical combined income statement data presented below for
the years ended December 31, 1994 and 1995 have been derived from audited
combined financial statements that are not included in this prospectus.
The summary pro forma data presented below is based on historical combined
financial information which has been derived from our combined financial
statements and accompanying notes included elsewhere in this prospectus. This
pro forma data gives effect to the Exchange, the initial contribution to the
defined contribution plan, the offerings and the other matters described under
"Pro Forma Combined Financial Statements (Unaudited)". This pro forma data is
not necessarily indicative of the results that would have been achieved had the
Exchange, the offerings and related matters occurred in the prior periods or of
the results that may be achieved in the future.
The data presented below should be read in conjunction with "Pro Forma
Combined Financial Statements (Unaudited)" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the combined
financial statements and accompanying notes included elsewhere in this
prospectus.
<TABLE>
<CAPTION>
AS OF OR FOR
THE
SIX MONTHS
AS OF OR FOR THE YEAR ENDED DECEMBER ENDED JUNE
----------------------------------------------------- ---------------
1994 1995 1996 1997 1998 1999
--------- --------- --------- --------- --------- ---------------
<S> <C> <C> <C> <C> <C> <C>
(IN MILLIONS)
ASSETS UNDER MANAGEMENT:........................ $ 28,649 $ 38,324 $ 44,360 $ 53,511 $ 55,587 $ 56,764
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net revenues after interest expense........... $ 281,997 $ 340,332 $ 416,114 $ 502,525 $ 574,136 $ 283,415
Net income before principal compensation
(1)......................................... $ 150,975 $ 186,092 $ 229,126 $ 298,666 $ 320,095 $ 156,771
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
PRO FORMA DATA (UNAUDITED): (2)
Pro forma pre-tax net income.................. -- -- -- -- $ 259,961 $ 119,486
Pro forma after-tax net income................ -- -- -- -- $ 142,978 $ 65,717
Pro forma earnings per share (3).............. -- -- -- -- $ 2.86 $ 1.31
Pro forma stockholders' equity................ -- -- -- -- -- $ 263,199
SELECTED RATIOS (UNAUDITED):
Profit margin before principal compensation... 54% 55% 55% 59% 56% 55%
Pro forma pre-tax profit margin............... -- -- -- -- 45% 42%
Pro forma after-tax profit margin............. -- -- -- -- 25% 23%
</TABLE>
- ------------------------------
(1) Historically, we have distributed substantially all of our net income to our
principals as capital distributions and dividends. Certain principals were
also paid through compensation expense. As a result our earnings and
compensation and benefits expense have not fully reflected payments for
services rendered by our principals and understate the expected operating
costs to be incurred by us after the offerings. Following the offerings,
Neuberger Berman will fully reflect payments for services rendered by our
principals in compensation and benefits expense. For financial information
that includes pro forma compensation and benefits expense as if payments for
services rendered by our principals had been fully reflected, see "Pro Forma
Combined Financial Statements (Unaudited)".
(2) See "Pro Forma Combined Financial Statements (Unaudited)" for information
concerning pro forma adjustments.
(3) Calculated based on 50,000,000 shares outstanding after giving effect to the
pro forma adjustments described under "Pro Forma Combined Financial
Statements (Unaudited)", including the sale of shares of common stock
by Neuberger Berman Inc. and the initial contribution of shares of
common stock to the defined contribution plan.
10
<PAGE>
RISK FACTORS
AN INVESTMENT IN THE COMMON STOCK INVOLVES A NUMBER OF RISKS, SOME OF WHICH,
INCLUDING MARKET, OPERATIONAL, LEGAL AND REGULATORY RISKS, COULD BE SUBSTANTIAL
AND ARE INHERENT IN OUR BUSINESSES. YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING
INFORMATION ABOUT THESE RISKS, TOGETHER WITH THE OTHER INFORMATION IN THIS
PROSPECTUS, BEFORE BUYING SHARES OF COMMON STOCK.
A DECLINE IN THE PRICES OF SECURITIES COULD LEAD TO A DECLINE IN OUR ASSETS
UNDER MANAGEMENT, REVENUES AND EARNINGS
A large portion of our revenue (approximately 66% for the year ended
December 31, 1998 and 65% for the six months ended June 30, 1999) is derived
from investment advisory contracts with our clients. Under these contracts, the
investment advisory fee we receive is typically based on the market value of
assets under management. Accordingly, a decline in the prices of securities
generally may cause our revenues and income to decline by:
- causing the value of our assets under management to decrease, which would
result in lower investment advisory fees; or
- causing our clients to withdraw funds in favor of investments they
perceive offer greater opportunity or lower risk, which would also result
in lower investment advisory fees.
If our revenues decline without a commensurate reduction in our expenses, our
net income will be reduced.
Declines in securities prices could be the result of several factors
including economic downturn in the U.S. or foreign markets, political events,
defaults by major financial institutions or adverse public or investor
perceptions. The increases in our aggregate assets under management, revenues
and net income from 1993 through 1997 resulted in part from rising prices of
securities. Other factors being constant, decreasing securities prices would
have the opposite effect.
WE COULD LOSE CLIENTS AND SUFFER A DECLINE IN OUR REVENUES AND EARNINGS IF THE
INVESTMENTS WE CHOOSE PERFORM POORLY, REGARDLESS OF THE TREND IN THE PRICES OF
SECURITIES
We believe that investment performance is one of the most important factors
for the growth of our assets under management. Poor investment performance could
impair our revenues and growth because:
- existing clients might withdraw funds in favor of better performing
products, which would result in lower investment advisory fees;
- our ability to attract funds from existing and new clients might diminish;
or
- firms with which we have strategic alliances may terminate their
relationships with us, and future strategic alliances may be unavailable.
If our revenues decline without a commensurate reduction in our expense, our net
income will be reduced.
Even when securities prices are rising, performance can be affected by
investment style. In each year from 1995 through 1998, growth stocks
outperformed value stocks as measured by the S&P/BARRA growth and value indices.
Because of our historical emphasis on the value style of investing, our clients'
portfolios were less invested in growth stocks. The difference was most
pronounced in 1998, when we experienced loss of institutional accounts and
increased redemptions of shares of the Neuberger Berman mutual funds. While we
are seeking to diversify our investing styles of investing, our value style
remains predominant.
11
<PAGE>
OUR CLIENTS CAN REMOVE THE ASSETS WE MANAGE ON SHORT NOTICE
Our investment advisory 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 we have strategic
alliances, can terminate their relationship with us, 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 of fund shares, increased redemptions of
fund shares, and the loss of institutional or individual accounts or strategic
alliances. The decrease in revenues that could result from any such event could
have a material adverse effect on our business.
WE DEPEND ON KEY PERSONNEL TO ATTRACT AND RETAIN CLIENTS AND MUTUAL FUND
SHAREHOLDERS
Our ability to attract and retain clients and mutual fund shareholders is
highly dependent on our ability to attract and retain highly skilled investment
management, research, client service, legal, 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. Our policy has been to provide our professionals with
compensation and benefits that we believe to be competitive with other leading
investment management firms. We intend to continue this policy following the
offerings and provide our employees with substantial ownership of our common
stock. These arrangements, however, may not be as effective a retention method
as the opportunity, which existed prior to the offerings, to become a principal
of our firm.
While we have historically experienced little turnover among our
professionals, we cannot be sure that we will continue to be successful in
retaining our key personnel or in attracting highly qualified professionals. The
loss of key personnel could have a material adverse effect on our business. We
do not maintain any "key person" insurance on any of our personnel.
THE INVESTMENT MANAGEMENT BUSINESS IS INTENSELY COMPETITIVE
The investment management business is intensely competitive, with
competition based on a variety of factors including:
- the range of products offered;
- brand recognition and business reputation;
- investment performance;
- the continuity of client relationships and of assets under management;
- the quality of service provided to clients;
- the level of fees and commissions charged for services;
- the level of commissions and other compensation paid;
- the level of expenses paid to financial intermediaries related to
administration and/or distribution; and
- financial strength.
We compete in all aspects of our business with a large number of investment
management firms, commercial banks, investment banks, broker-dealers, insurance
companies and other financial institutions. A number of factors serve to
increase our competitive risks:
- A number of our competitors have greater capital and other resources, and
offer more comprehensive lines of products and services, than we do.
12
<PAGE>
- 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 our competitors.
- There are relatively few barriers to entry by new investment management
firms, and the successful efforts of new entrants into our various lines
of business, including major banks, insurance companies and other
financial institutions, have resulted in increased competition.
- Other industry participants will from time to time seek to recruit our
investment professionals and other employees away from us.
- Our competitors are seeking to expand market share in the products and
services we offer or intend to offer in the future. We describe this trend
in more detail in "Business--Competition".
This competitive pressure may reduce our revenues and earnings.
WE DEPEND ON ACCESSING CLIENTS THROUGH INTERMEDIARIES
Our ability to market our mutual funds and subadvisory services 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 investment products. To a
lesser extent, our Private Asset Management business depends on referrals from
accountants, lawyers, financial planners and other professional advisors.
Although we have historically been successful in gaining access to these
channels, we cannot be sure that we will continue to be able to do so. The
inability to have this access could have a material adverse effect on our
business.
REGULATORY RISK IS SUBSTANTIAL IN OUR BUSINESS
As with all investment management companies and broker-dealers, we and our
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
our business organizations or key personnel;
- the imposition of fines and censures; and
- reputational loss.
Any of these events could have a material adverse effect on our business. In
addition, existing laws or the enactment of new laws or regulations affecting
the sale of our products and services or our investment strategies could cause
or contribute to reduced sales of our products or impair the investment
performance of our products, adversely affecting our aggregate assets under
management, revenues and earnings. The principal regulatory considerations
applicable to our business are described under "Business-- Regulation".
OPERATIONAL RISKS AND SYSTEMS FAILURE MAY DISRUPT OUR BUSINESS
Our business is highly dependent on communications and information systems
and those of our key service vendors. Any failure or interruption of such
systems could have a material adverse effect on our operating results.
Operational risk arises from mistakes made in the confirmation or settlement of
transactions or from the improper recording or accounting of transactions. We
are highly dependent on our ability to process a large number of transactions on
a daily basis, and rely heavily on financial, accounting and other data
processing systems. If any of these do not function properly, we could suffer
financial loss, business disruption, liability to clients,
13
<PAGE>
regulatory intervention or damage to our reputation. If systems are unable to
accommodate an increasing volume of transactions, our ability to expand could be
affected. Although we have back-up systems in place, we cannot be sure that any
such systems failure or interruption, whether caused by a fire, other natural
disaster, power or telecommunications failure, 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.
OUR COMPUTER SYSTEMS AND THOSE OF THIRD PARTIES MAY NOT ACHIEVE YEAR 2000
READINESS
Many existing computer systems and microprocessors use only two digits to
identify a year in the date field, which assumes that the first two digits of
the year are always "19". As a result, beginning on January 1, 2000, computers
that are not "Year 2000" compliant may interpret the year as "1900" instead of
"2000". Systems that calculate, compare or sort data using the incorrect date
(including non-information technology equipment and systems) may malfunction.
We are significantly dependent upon the proper functioning of our own
computer systems. A failure of our systems to be Year 2000 compliant would have
a material adverse effect on our business. For example, failure could lead to
incomplete or inaccurate accounting, recording or processing of trades in
securities and other assets, cause settlement of trades to fail, or generate
erroneous results. Unless remedied, potential risks include business
interruption or shutdown, regulatory action, financial loss, reputational harm
and legal liability.
We also depend on the proper functioning of computer and non-information
technology systems of third parties. These parties may include trading
counterparties, financial intermediaries and vendors that provide
telecommunication services and other utilities. As part of our Year 2000
preparedness program, we assess counterparties, intermediaries and vendors that
are major service providers, to determine the extent of their Year 2000
preparedness. While we have attempted to obtain sufficient information from
these parties as to their Year 2000 preparedness to ascertain the effectiveness
of their efforts, we are not in a position to verify the accuracy or
completeness of the information we receive. As a result, we are dependent on the
willingness and ability of third parties to address and disclose their Year 2000
difficulties.
The following problems could occur if third parties with whom we interact
have Year 2000 difficulties that are not remedied:
- disruption of essential services upon which we depend, such as
telecommunications and electrical problems;
- receipt of inaccurate information that would impair our ability to perform
critical data functions; or
- failed trade settlements.
Uncertainty among investors about the success of Year 2000 remediation
efforts may cause market participants to reduce the level of their market
activity temporarily, as they assess the effectiveness of these efforts. There
may be a reduction in client and general market activity and an increase in
mutual fund redemptions for a short period of time before and after January 1,
2000. We cannot predict the impact that these kinds of reductions may have on
our business.
We may be exposed to litigation as a result of Year 2000 problems. This
could arise from problems relating to our own internal systems or to external
systems on which we depend. In addition, litigation could arise from problems
involving companies in which our clients or the mutual funds we manage hold
investments.
For a description of our Year 2000 program, see "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Year 2000 Readiness
Disclosure". Our Year 2000 program may not be effective
14
<PAGE>
and estimates of the costs and timing for its completion may not be accurate.
THE SECURITIES BROKERAGE BUSINESS HAS INHERENT 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. Our trading activities for our own account are limited.
Therefore, the principal risks of trading are those relating to counterparty
failure and unauthorized trading. We have risk management procedures and
internal controls to address these risks but we cannot be certain that these
procedures and controls will prevent losses from occurring.
WE WILL BE EFFECTIVELY CONTROLLED BY OUR PRINCIPAL STOCKHOLDERS WHOSE INTERESTS
MAY DIFFER FROM THOSE OF OTHER STOCKHOLDERS
After giving effect to the sale of the shares of common stock sold in the
offerings, the Neuberger Berman principals and certain family limited
partnerships and trusts formed by them will beneficially own in the aggregate
% of our outstanding common stock. Neuberger Berman Inc. has entered into a
Stockholders Agreement with the principals and these affiliated entities
providing that:
- before every stockholders' meeting, the principals and their affiliates
will take a separate preliminary vote on all the issues that will be
presented at the stockholders' meeting, and
- all shares held by them must be voted as a block in accordance with the
majority of shares voted in such preliminary vote.
As a result, the principals and their affiliates will control our board of
directors, and, therefore, our business, policies and affairs including certain
corporate transactions that require stockholder approval, such as mergers and
sales of our assets. See "Certain Relationships and Related Transactions--
Stockholders Agreement". The control exerted by the principals and their
affiliates and the transfer restrictions in the Stockholders Agreement could
preclude any unsolicited acquisition of Neuberger Berman and, consequently,
adversely affect the market price of the common stock or prevent our
stockholders from realizing a premium on their shares.
PROVISIONS OF OUR ORGANIZATIONAL DOCUMENTS AND DELAWARE LAW MAY DISCOURAGE AN
ACQUISITION OF NEUBERGER BERMAN
Under our certificate of incorporation, our board of directors has the
authority, without action by our stockholders, to fix certain terms and issue
shares of preferred stock, par value $.01 per share. Actions of our board of
directors pursuant to this authority may have the effect of delaying, deterring,
or preventing a change in control of Neuberger Berman. Other provisions in the
certificate of incorporation and in our by-laws impose procedural and other
requirements that may be deemed to have anti-takeover effects. These provisions
include the inability of our 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, our stockholders can amend the by-laws and certain
provisions of the certificate of incorporation only with a two-thirds majority
vote.
As a Delaware corporation we are subject to section 203 of the Delaware
General Corporation Law. With certain exceptions, section 203 imposes
restrictions on mergers and other business combinations between us
15
<PAGE>
and any holder of 15% or more of our voting stock. See "Description of Capital
Stock" for a more detailed description of our capital stock and section 203.
OUR SHARE PRICE MAY DECLINE DUE TO THE LARGE NUMBER OF SHARES ELIGIBLE FOR
FUTURE SALE
Upon completion of the offerings and the initial contribution of shares of
common stock to our defined contribution plan, shares of common stock will
be issued and outstanding. Of these shares, % will be owned beneficially by
the Neuberger Berman principals and their affiliates. Sales, or the possibility
of sales, of substantial amounts of common stock by the principals and their
affiliates may materially adversely affect the market price of the common stock
prevailing from time to time. The principals and their affiliates will enter
into the 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 shares received in the Exchange.
The restrictions on the disposition of shares contained in the Stockholders
Agreement can be waived by our board of directors or its designee without notice
to or consent of our stockholders. After the expiration of a 180-day "lock-up"
period to which all of the Neuberger Berman principals and their affiliates will
be subject pursuant to the underwriting agreement entered into in connection
with the offerings, the principals and their affiliates will in general be
entitled to dispose of their shares, subject to Rule 144 under the Securities
Act and the Stockholders Agreement. See "Certain Relationships and Related
Transactions-- Stockholders Agreement", "Shares Eligible for Future Sale" and
"Underwriting" for more details on shares eligible for future sale.
OUR COMMON STOCK MAY TRADE AT PRICES BELOW THE INITIAL PUBLIC OFFERING PRICE
Prior to the offerings, there has been no public market for our common
stock. Although we will make an application for listing the common stock on the
New York Stock Exchange, we cannot be sure that an active trading market will be
created or sustained. The initial public offering price will be determined by
negotiations among Neuberger Berman, 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, we cannot be sure 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.
THE MARKET PRICE OF OUR COMMON STOCK MAY BE VOLATILE
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
perceived prospects of Neuberger Berman and the investment management business
in general, differences between our actual financial and operating results and
those expected by investors and analysts, news 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.
YOU WILL EXPERIENCE DILUTION IF YOU PURCHASE COMMON STOCK IN THE OFFERINGS
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, as more fully described under
"Dilution".
16
<PAGE>
WE EXPECT TO RECORD A SUBSTANTIAL PRE-TAX LOSS IN THE THIRD QUARTER OF FISCAL
1999
We expect to record a substantial pre-tax loss in the third quarter of
fiscal 1999 due to a number of nonrecurring items described under "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Subsequent Events".
USE OF PROCEEDS
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), we will receive net proceeds from the offerings of $92
million, after deducting estimated underwriting discounts and other expenses
payable by us. We will use all of the net proceeds we receive to repay:
- a $50 million subordinated note due September 1, 2000 on which interest
accrues at a rate of 6.75% per annum and is payable quarterly; and
- approximately $42 million of short-term borrowings with varying maturities
and an estimated weighted average interest rate of 5.5% per annum.
The subordinated note is held by NB Associates, LLC, which is owned by the
Neuberger Berman principals. The subordinated note is described under "Certain
Relationships and Related Transactions--The Subordinated Note".
We will not receive any proceeds from the sale of shares by the selling
stockholders. We have 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
Our board of directors intends to declare quarterly dividends on the common
stock. We expect that the first quarterly dividend payment will be $.10 per
share (an annual amount of $.40 per share), which is expected to be declared in
the fourth quarter of 1999. The declaration and payment of dividends by
Neuberger Berman is subject to the discretion of our board of directors. Our
board of directors will take into account such matters as general economic and
business conditions, our strategic plans, our financial results and condition,
contractual, legal and regulatory restrictions on the payment of dividends by us
and our subsidiaries, and such other factors as our board of directors may
consider to be relevant. Neuberger Berman is a holding company, and, as such,
our ability to pay dividends is subject to the ability of our subsidiaries to
provide the necessary cash.
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<PAGE>
CAPITALIZATION
The following table sets forth the combined capitalization of Neuberger
Berman, LLC, its subsidiaries and Neuberger Berman Management Inc. as of June
30, 1999:
- on an actual basis;
- on a pro forma basis as if the Exchange, the initial contribution of
shares of common stock to our defined contribution plan (at an
assumed value of $150 million, based on the midpoint of the initial public
offering price range set forth on the cover of this prospectus), the cash
contribution of $10 million to the Neuberger Berman Foundation and the
recognition of a net tax asset described under "Pro Forma Combined
Financial Statements (Unaudited)" had occurred on June 30, 1999; and
- as adjusted for the sale of shares of common stock by
Neuberger Berman Inc. in the offerings at 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 the application
of the net proceeds of the offerings received by Neuberger Berman Inc.
This table should be read in conjunction with "Pro Forma Combined Financial
Statements (Unaudited)" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the combined financial statements and
accompanying notes included elsewhere in this prospectus.
<TABLE>
<CAPTION>
PRO FORMA AS
ADJUSTED FOR THE
ACTUAL PRO FORMA OFFERINGS
----------- ------------ -------------------
(UNAUDITED, IN THOUSANDS EXCEPT SHARE DATA)
<S> <C> <C> <C>
Subordinated Liability(1)........................................ $ 50,000 $ 50,000 --
Principals' Capital and Stockholders' Equity:
Principals' Capital of Neuberger Berman, LLC................... 100,000 -- --
Common Stock, par value $.01 per share, of NBMI; 34,484 shares
authorized; 12,500 shares issued and outstanding, historical;
no shares issued and outstanding, pro forma; no shares issued
and outstanding, pro forma as adjusted for the offerings..... -- --
Common Stock, par value $.01 per share, of Neuberger Berman
Inc.; 250,000,000 shares authorized; no shares issued and
outstanding, historical; shares issued and
outstanding, pro forma; 50,000,000 issued and outstanding,
pro forma as adjusted for the offerings(2)................... -- 500
Preferred Stock, par value $.01 per share, of Neuberger Berman
Inc.; 5,000,000 shares authorized; no shares issued and
outstanding, historical; pro forma; or pro forma as adjusted
for the offerings............................................ -- -- --
Paid-in capital................................................ 2,876 344,376
Retained earnings.............................................. 6,323 (81,677) (81,677)
Total principals' capital and stockholders' equity........... 109,199 263,199
----------- ------------ ----------
Total capitalization......................................... $ 159,199 $ $ 263,199
----------- ------------ ----------
----------- ------------ ----------
</TABLE>
- ------------------------
(1) The subordinated note is described under "Certain Relationships and Related
Transactions--The Subordinated Note".
(2) Does not include 10,000,000 shares of common stock issuable under our
long-term incentive plan and 200,000 shares of common stock issuable under
directors stock incentive plan. These plans are described under
"Management-- Compensation of Directors--Directors Stock Incentive Plan" and
"--Executive Compensation--Long-Term Incentive Plan". We do not intend to
issue any shares of common stock or rights to acquire shares of common stock
under these plans in connection with the offerings.
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<PAGE>
DILUTION
As of June 30, 1999, the pro forma net tangible book value of Neuberger
Berman, after giving effect to the Exchange, the initial contribution of
shares of common stock to our defined contribution plan and the cash
contribution of $10 million to the Neuberger Berman Foundation was approximately
$ or approximately $ per share of common stock. "Pro forma net
tangible book value" per share represents the amount of Neuberger Berman's total
consolidated tangible assets minus total combined liabilities, divided by the
shares of common stock outstanding on a pro forma basis after giving effect to
the Exchange, the contribution to the defined contribution plan and the cash
contribution of $10 million to the Neuberger Berman Foundation, but before
giving effect to the sale of the shares offered in the offerings. After giving
effect to the sale by Neuberger Berman 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
offering expenses payable by Neuberger Berman of $ , the pro forma net
tangible book value of Neuberger Berman as of June 30, 1999 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 new
investors purchasing common stock in the offerings at the assumed initial public
offering price.
<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 (1).......................................................... $
Increase in net tangible book value per share attributable to the
offerings (2)..........................................................
---------
Pro forma net tangible book value per share after the offerings (1)........
---------
Net tangible book value dilution per share to new investors (3)............ $
</TABLE>
- ------------------------
(1) Does not include 10,000,000 shares of common stock issuable under our
long-term incentive plan and 200,000 shares of common stock issuable under
our directors stock incentive plan. These plans are described under
"Management-- Compensation of Directors--Directors Stock Incentive Plan" and
"--Executive Compensation--Long-Term Incentive Plan". We do not intend to
issue any shares of common stock or rights to acquire shares of common stock
under these plans in connection with the offerings.
(2) After deducting the underwriting discounts and estimated expenses paid by
Neuberger Berman in the offerings.
(3) Dilution is determined by subtracting pro forma net tangible value per share
from the assumed initial public offering price paid by a new investor.
The following table summarizes, on a pro forma basis at the assumed initial
public offering price, as of June 30, 1999, 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 new investors.
<TABLE>
<CAPTION>
TOTAL CONSIDERATION
SHARES PURCHASED -------------------------
--------------------------- AMOUNT AVERAGE
NUMBER (IN PRICE PER
(IN THOUSANDS) PERCENT MILLIONS) PERCENT SHARE
-------------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
Existing stockholders.......... % $ % $
New Investors
Total........................ 100% $ 100% $
--- ------------ --- -----------
--- ------------ --- -----------
</TABLE>
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<PAGE>
PRO FORMA COMBINED FINANCIAL STATEMENTS (UNAUDITED)
The pro forma combined financial statements presented below are based on
historical combined financial information which has been derived from the
combined financial statements and accompanying notes included elsewhere in this
prospectus. The combined financial statements present the financial condition
and results of operations of Neuberger Berman, LLC, its subsidiaries and
Neuberger Berman Management Inc. on a combined basis, because these entities
operate under common management and common ownership. These entities will be
consolidated using reorganization accounting upon the Exchange, in which the
principals of Neuberger Berman, LLC and the stockholders of Neuberger Berman
Management Inc. will exchange their ownership interests for million
shares of our common stock. Our consolidated financial statements will be
retroactively restated to show the effect of this reorganization.
The pro forma combined financial statements below give effect to:
- the Exchange;
- the initial contribution of shares of common stock to our defined
contribution plan;
- an adjustment to compensation and benefits to principals (historically,
our principals have shared in the net income of the firm based upon their
ownership interests; we have implemented new employment agreements for our
principals which will become effective upon the completion of the
offerings);
- an adjustment to compensation and benefits to nine employee portfolio
managers (we will implement new employment agreements with respect to
these employee portfolio managers which will become effective upon the
completion of the offerings);
- a provision for corporate income taxes (historically, Neuberger Berman,
LLC and Neuberger Berman Management Inc. were not subject to Federal
income taxes; following the Exchange, we will be subject to Federal, state
and local income taxes);
- the cash contribution of $10 million to the Neuberger Berman Foundation;
- the recognition of a net tax asset of $72 million; and
- the offerings and the repayment of a $50 million subordinated note and $42
million of short-term borrowings from the net proceeds we receive;
These items are collectively referred to as the "Pro Forma Adjustments".
The pro forma combined statements of income do not give effect to the
contribution of shares of common stock to our defined contribution plan or the
cash contribution of $10 million to the Neuberger Berman Foundation because of
their non-recurring nature. The pro forma combined statements of income are
presented as if the other Pro Forma Adjustments had occurred on January 1, 1998.
The pro forma combined statement of financial condition is presented as if the
Pro Forma Adjustments, including the non-recurring items, had occurred on June
30, 1999. These pro forma combined financial statements are not necessarily
indicative of the results that would have been achieved had the Pro Forma
Adjustments occurred on these dates or that may be achieved in the future.
The pro forma combined financial statements and accompanying notes should be
read in conjunction with "Capitalization" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the combined
financial statements and accompanying notes included elsewhere in this
prospectus.
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<PAGE>
PRO FORMA COMBINED STATEMENT OF FINANCIAL CONDITION (UNAUDITED)
AS OF JUNE 30, 1999
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA PRO FORMA
COMBINED ADJUSTMENTS COMBINED
----------- ------------- -----------
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents............................... $ 46,604 $ (10,000)(1)
92,000(2)
(29,000)(3)
(13,000)(3)
(50,000)(4) $ 36,604
Cash and securities segregated for the exclusive benefit
of clients............................................ 569,663 569,663
Cash and securities deposited with clearing
organizations......................................... 3,623 3,623
Securities purchased under agreements to resell......... 96,400 96,400
Receivable from brokers, dealers and clearing
organizations......................................... 1,757,489 1,757,489
Receivable from clients................................. 521,314 521,314
Securities owned, at market value....................... 17,343 17,343
Fees receivable......................................... 12,017 12,017
Furniture, equipment and leasehold improvements, at
cost, net............................................. 27,121 27,121
Other assets............................................ 19,035 72,000(5) 91,035
----------- ------------- -----------
Total assets........................................ $ 3,070,609 $ 62,000 $3,132,609
----------- ------------- -----------
----------- ------------- -----------
LIABILITIES, PRINCIPALS' CAPITAL AND STOCKHOLDERS'
EQUITY
Liabilities:
Bank loans............................................ $ 29,000 $ (29,000)(3) $ --
Securities sold under agreements to repurchase........ 101,913 101,913
Payable to brokers, dealers and clearing
organizations....................................... 1,102,863 (13,000)(3) 1,089,863
Payable to clients.................................... 1,571,609 1,571,609
Securities sold but not yet purchased, at market
value............................................... 18,542 18,542
Other liabilities and accrued expenses................ 51,780 51,780
Payable to principals................................. 35,703 35,703
----------- ------------- -----------
2,911,410 (42,000) 2,869,410
----------- ------------- -----------
Subordinated liability................................ 50,000 (50,000)(4) --
----------- ------------- -----------
Principals' capital and stockholders' equity:
Principals' capital..................................... 100,000 (100,000)(2) --
Pro forma common stock, $.01 par value; 250,000,000
shares authorized, 50,000,000 issued and
outstanding........................................... -- 500(2) 500
Paid-in capital......................................... 2,876 99,500(2)
150,000(6)
92,000(2) 344,376
Retained earnings....................................... 6,323 (150,000)(6)
(10,000)(1)
72,000(5) (81,677)
----------- ------------- -----------
Total principals' capital and stockholders' equity.... 109,199 154,000 263,199
----------- ------------- -----------
Total liabilities, principals' capital and
stockholders' equity................................ $ 3,070,609 $ 62,000 $3,132,609
----------- ------------- -----------
----------- ------------- -----------
</TABLE>
(see accompanying notes)
21
<PAGE>
PRO FORMA COMBINED STATEMENT OF INCOME (UNAUDITED)
YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA PRO FORMA
COMBINED ADJUSTMENTS COMBINED
----------- ------------ -----------
<S> <C> <C> <C>
REVENUES:
Investment advisory and administrative fees...... $ 378,838 $ 378,838
Commissions...................................... 145,969 145,969
Interest......................................... 164,781 164,781
Principal transactions in securities............. 5,983 5,983
Clearance fees................................... 11,311 11,311
Other income..................................... 4,584 4,584
----------- ------------ -----------
Gross revenues............................... 711,466 711,466
Interest expense................................. 137,330 (5,008)(7) 132,322
----------- ------------ -----------
Net revenues after interest expense.......... 574,136 5,008 579,144
----------- ------------ -----------
OPERATING EXPENSES:
Employee compensation and benefits............... 139,693 (2,396)(8)
(9,960)(9)
87,004 (10 214,341
Information technology........................... 15,155 15,155
Rent and occupancy............................... 12,493 12,493
Brokerage, clearing and exchange fees............ 12,437 12,437
Advertising and sales promotion.................. 14,955 14,955
Distribution and fund administration............. 12,432 12,432
Professional fees................................ 16,034 16,034
Depreciation and amortization.................... 8,761 8,761
Other expenses................................... 22,081 (9,506) 11) 12,575
----------- ------------ -----------
Total operating expenses..................... 254,041 65,142 319,183
----------- ------------ -----------
Net income before principal compensation and
provision for income taxes................. 320,095 (60,134) 259,961
Principal compensation........................... 35,144 (35,144) 12) --
----------- ------------ -----------
Net income before provision for income
taxes...................................... 284,951 (24,990) 259,961
Provision for income taxes....................... -- 116,983 (11 116,983
----------- ------------ -----------
Net income................................... $ 284,951 $ (141,973) $ 142,978
----------- ------------ -----------
----------- ------------ -----------
Shares outstanding............................... 50,000,000
-----------
-----------
Basic and diluted earnings per share (13)........ $ 2.86
-----------
-----------
</TABLE>
(see accompanying notes)
22
<PAGE>
PRO FORMA COMBINED STATEMENT OF INCOME (UNAUDITED)
SIX MONTHS ENDED JUNE 30, 1999
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA PRO FORMA
COMBINED ADJUSTMENTS COMBINED
----------- ------------- -------------
<S> <C> <C> <C>
REVENUES:
Investment advisory and administrative fees..... $ 184,398 $ 184,398
Commissions..................................... 74,248 74,248
Interest........................................ 76,739 76,739
Principal transactions in securities............ 5,115 5,115
Clearance fees.................................. 5,214 5,214
Other income.................................... 2,854 2,854
----------- ------------- -------------
Gross revenues................................ 348,568 348,568
Interest expense................................ 65,153 (2,674)(7) 62,479
----------- ------------- -------------
Net revenues after interest expense........... 283,415 2,674 286,089
----------- ------------- -------------
OPERATING EXPENSES:
Employee compensation and benefits.............. 71,065 (1,325)(8)
45,836 (10 115,576
Information technology.......................... 8,730 8,730
Rent and occupancy.............................. 6,557 6,557
Brokerage, clearing and exchange fees........... 6,679 6,679
Advertising and sales promotion................. 6,123 6,123
Distribution and fund administration............ 5,514 5,514
Professional fees............................... 4,934 4,934
Depreciation and amortization................... 4,891 4,891
Other expenses.................................. 12,151 (4,552)(11) 7,599
----------- ------------- -------------
Total operating expenses...................... 126,644 39,959 166,603
----------- ------------- -------------
Net income before principal compensation and
provision for income taxes.................. 156,771 (37,285) 119,486
Principal compensation.......................... 15,690 (15,690)(12)
----------- ------------- -------------
Net income before provision for income
taxes....................................... 141,081 (21,595) 119,486
Provision for income taxes...................... -- 53,769 (11 53,769
----------- ------------- -------------
Net income.................................... $ 141,081 (75,364) $ 65,717
----------- ------------- -------------
----------- ------------- -------------
Shares outstanding.............................. 50,000,000
-------------
-------------
Basic and diluted earnings per share (13)....... $ 1.31
-------------
-------------
</TABLE>
(see accompanying notes)
23
<PAGE>
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS (UNAUDITED)
(1) Adjustment to reflect the cash contribution of $10 million to the Neuberger
Berman Foundation.
(2) Adjustment to reflect recapitalization for the Exchange and the offerings,
including the receipt of $92 million of net proceeds in the offerings.
(3) Adjustment to reflect the use of $42 million of net proceeds received from
the offerings to repay $29 million of bank loans and $13 million of payable
to brokers, dealers and clearing organizations as of June 30, 1999.
(4) Adjustment to reflect the use of $50 million of net proceeds from the
offerings to repay the $50 million of subordinated liability as of June 30,
1999.
(5) Adjustment to reflect an addition to retained earnings related to the
recognition of a net tax asset of $72.0 million under Statement of Financial
Accounting Standards No. 109 at an effective tax rate of 45%. The components
of this net asset are (i) a benefit of $67.5 million related to the initial
irrevocable contribution of shares of common stock to the
defined contribution plan and (ii) a benefit of $4.5 million related to the
cash contribution of $10 million to the Neuberger Berman Foundation.
(6) Adjustment to reflect the initial irrevocable non-cash contribution of
shares of common stock to the defined contribution plan at or
shortly after the completion of the offerings assuming that the fair value
of the shares contributed is equal to the assumed initial public offering
price of $ per share (the mid point of the range set forth on the cover
of this prospectus). This non-cash contribution will be recognized at its
fair market value on the date it is made in accordance with Statement of
Financial Accounting Standards No. 87.
(7) Adjustment to reflect the decrease in actual interest expense incurred from
August 31, 1998 (date of issuance) related to the repayment of the
subordinated liability. In addition, adjustment reflects the reversal of a
portion of actual interest expense incurred on short-term borrowings (e.g.,
bank loans, payable to brokers, dealers and clearing organizations). To
determine the amount of the short-term interest expense reversal, a monthly
average of daily short-term amounts borrowed was analyzed. Borrowings with
higher interest rates were repaid first. If the monthly average of
subordinated liability and daily short-term borrowings exceeded $92 million,
interest expense attributable to amounts borrowed in excess of $92 million
was not included in the adjustment. Correspondingly, if the monthly average
of subordinated liability and daily short-term borrowings was less than $92
million, only the actual interest expense incurred was included in the
adjustment. The monthly average of the subordinated liability and daily
short-term borrowings assumed to be repaid for the period January 1, 1998 to
August 31, 1998 is $87.3 million and from September 1, 1998 to December 31,
1998 is $77.0 million. The monthly average of the subordinated liability and
daily short-term borrowings assumed to be repaid for the period January 1,
1999 to June 30, 1999 is $89.5 million.
(8) Adjustment to reflect a change in compensation for nine employee portfolio
managers who will be paid based on employment agreements, which will be
effective at the time of the offerings. As a result, a decrease to
compensation expense of $2.4 million for the year ended December 1998 and
$1.3 million for the six months ended June 1999 has been reflected on the
pro forma combined statements of income.
(9) Several employees were admitted as principals during 1998. No employees were
admitted as principals during the six months ended June 30, 1999. Employees'
compensation expense of $10.0 million is being reversed, and the
corresponding revised pro forma compensation of $87.0 million (see note 10)
includes the pro forma compensation adjustment for 1998 for the employees
admitted as principals in 1998.
24
<PAGE>
(10) Because Neuberger Berman Inc. has operated as a partnership, there is no
actual historical measure of the compensation and benefits that would have
been paid, in corporate form, to the principals for services rendered in
fiscal 1998 and for the six months ended June 30, 1999. Accordingly, the pro
forma combined financial statements reflect compensation amounts, based on
new employment agreements for principals, which will be effective at the
time of the offerings. The majority of the compensation expense to
principals under these agreements is formula based. For those principals
whose compensation is not formula based their compensation under these
agreements has been determined and approved by the Executive Committee based
upon a study using competitive market data conducted by an outside
consultant giving consideration to the individuals' position,
responsibilities and expected performance levels. The pro forma adjustment
for principals' compensation for the year ended December 31, 1998 and the
six months ended June 30, 1999 has been determined as if the new employment
agreements had been in place during these periods, and, for principals whose
compensation is formula based, by applying the formula to actual results for
the periods, and, for other principals, using the compensation amount
provided pursuant to their agreements. As a result of the offerings, there
are several principals who will be retiring from Neuberger Berman upon
completion of the offerings and will not be providing any future services to
Neuberger Berman as employees. Therefore, for these principals no adjustment
to determine compensation has been made to the pro forma combined statements
of income.
(11) Adjustment to reflect a pro forma provision for Federal, state and local
income taxes for Neuberger Berman Inc. in corporate form at an effective tax
rate of 45% and to reverse actual unincorporated business tax and state and
local taxes included in "Other expenses" on the pro forma combined
statements of income.
(12) Principal compensation was adjusted to reverse actual amounts previously
paid.
(13) Pro forma basic and diluted earnings per share was calculated by dividing
pro forma net income by 50,000,000 shares of common stock. Except for the
initial contribution of
shares of common stock to the defined contribution plan, we do not
intend to issue any shares of common stock or rights to acquire shares of
common stock under our employee compensation plans in connection with the
offerings.
25
<PAGE>
SELECTED HISTORICAL COMBINED FINANCIAL DATA
Our business is conducted by Neuberger Berman, LLC, its subsidiaries and
Neuberger Berman Management Inc., and our combined financial statements present
the financial condition and results of operations of their combined businesses.
The selected historical combined financial data presented below is derived from
our combined financial statements and their notes. Our combined financial
statements as of December 31, 1997 and 1998 and for the years ended December 31,
1996, 1997 and 1998 have been audited by Arthur Andersen LLP, independent public
accountants. These financial statements, together with our unaudited combined
financial statements as of June 30, 1999 and for the six months ended June 26,
1998 and June 30, 1999, are included elsewhere in this prospectus. The results
for the six months ended June 30, 1999 are not necessarily indicative of the
results to be expected for our full fiscal year.
The selected historical combined income statement and balance sheet data
presented below as of December 31, 1994, 1995 and 1996 and for the years ended
December 31, 1994 and 1995 have been derived from audited combined financial
statements that are not included in this prospectus.
The pro forma data presented below is based on historical combined financial
information which has been derived from our combined financial statements and
accompanying notes included elsewhere in this prospectus. This pro forma data
gives effect to the Pro Forma Adjustments described under "Pro Forma Combined
Financial Statements (Unaudited)". This pro forma data is not necessarily
indicative of the results that would have been achieved had the Pro Forma
Adjustments occurred in the prior periods or of the results that may be achieved
in the future.
The data presented below should be read in conjunction with "Pro Forma
Combined Financial Statements (Unaudited)" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the combined
financial statements and their notes included elsewhere in this prospectus.
<TABLE>
<CAPTION>
AS OF OR FOR THE
SIX MONTHS ENDED
AS OF OR FOR THE YEAR ENDED DECEMBER JUNE
----------------------------------------------------- --------------------
1994 1995 1996 1997 1998 1998 1999
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
(IN MILLIONS)
ASSETS UNDER MANAGEMENT:.......................... $ 28,649 $ 38,324 $ 44,360 $ 53,511 $ 55,587 $ 59,089 $ 56,764
(IN THOUSANDS)
INCOME STATEMENT DATA:
REVENUES:
Investment advisory and administrative fees..... $ 176,486 $ 207,888 $ 260,775 $ 327,898 $ 378,838 $ 194,401 $ 184,398
Commissions..................................... 83,231 96,400 109,621 124,911 145,969 67,845 74,248
Interest........................................ 79,712 119,713 143,928 154,280 164,781 79,753 76,739
Clearance fees.................................. 5,925 7,893 8,152 8,332 11,311 4,886 5,214
Other income.................................... 3,095 11,726 13,436 11,634 10,567 5,076 7,969
Gross revenues................................ 348,449 443,620 535,912 627,055 711,466 351,961 348,568
Interest expense................................ 66,452 103,288 119,798 124,530 137,330 66,095 65,153
Net revenues after interest expense........... 281,997 340,332 416,114 502,525 574,136 285,866 283,415
(IN THOUSANDS)
OPERATING EXPENSES:
Employee compensation and benefits.............. 76,461 87,816 106,431 114,617 139,693 65,146 71,065
Information technology.......................... 9,602 11,245 12,954 13,642 15,155 7,429 8,730
Rent and occupancy.............................. 8,252 8,613 9,189 9,882 12,493 5,685 6,557
Brokerage, clearing and exchange fees........... 9,359 10,108 11,319 12,727 12,437 5,363 6,679
Advertising and sales promotion................. 6,113 7,763 12,732 14,915 14,955 7,035 6,123
Distribution and fund administration............ 1,339 3,196 5,289 8,528 12,432 6,370 5,514
Professional fees............................... 2,669 3,718 4,486 5,165 16,034 4,187 4,934
Depreciation and amortization................... 3,386 4,151 5,576 6,445 8,761 3,151 4,891
Income tax expense.............................. 5,554 7,397 8,851 8,857 9,506 4,805 4,552
Other expenses.................................. 8,287 10,233 10,161 9,081 12,575 7,067 7,599
Total operating expenses...................... 131,022 154,240 186,988 203,859 254,041 116,238 126,644
Net Income before principal compensation(1)... $ 150,975 $ 186,092 $ 229,126 $ 298,666 $ 320,095 $ 169,628 $ 156,771
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
AS OF OR
FOR THE
SIX MONTHS
AS OF OR FOR THE YEAR ENDED DECEMBER ENDED JUNE
---------------------------------------------------------- ------------
1994 1995 1996 1997 1998 1999
---------- ---------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
PRO FORMA DATA (UNAUDITED):(2)
Pro forma pre-tax net income.................. -- -- -- -- $ 259,961 $ 119,486
Pro forma after-tax net income................ -- -- -- -- $ 142,978 $ 65,717
Pro forma earnings per share (3).............. -- -- -- -- $ 2.86 $ 1.31
Pro forma stockholders' equity................ -- -- -- -- -- $ 263,199
SELECTED RATIOS (UNAUDITED):
Profit margin before principal compensation... 54% 55% 55% 59% 56% 55%
Pro forma pre-tax profit margin............... -- -- -- -- 45% 42%
Pro forma after-tax profit margin............. -- -- -- -- 25% 23%
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets.................................... $1,542,931 $2,019,476 $2,446,811 $2,410,213 $3,829,435 $3,070,609
Assets related to broker-dealer
activities(4)............................... 1,456,951 1,892,257 2,327,522 2,243,573 3,719,932 2,965,832
Total liabilities excluding subordinated
liabilities................................. 1,410,180 1,911,707 2,288,811 2,251,182 3,670,236 2,911,410
Total subordinated liabilities................ 95,000 70,000 -- -- 50,000 50,000
Total liabilities............................... 1,505,180 1,981,707 2,288,811 2,251,182 3,720,236 2,961,410
Liabilities related to broker-dealer
activities(5)............................... 1,448,244 1,895,920 2,210,097 2,138,656 3,607,434 2,873,927
Total principals' capital and stockholders
equity........................................ $ 37,751 $ 37,769 $ 158,000 $ 159,031 $ 109,199 $ 109,199
</TABLE>
- ------------------------------
(1) Historically, we have distributed substantially all of our net income to our
principals as capital distributions and dividends. Certain principals were
also paid through compensation expense. As a result, our earnings and
compensation and benefits expense have not fully reflected payments for
services rendered by our principals and understate the expected operating
costs to be incurred by us after the offerings. Following the offerings,
Neuberger Berman will fully reflect payments for services rendered by our
principals in compensation and benefits expense. For financial information
that includes pro forma compensation and benefits expense as if payments for
services rendered by our principals had been fully reflected, see "Pro Forma
Combined Financial Statements (Unaudited)".
(2) See "Pro Forma Combined Financial Statements (Unaudited)" for information
concerning the Pro Forma Adjustments.
(3) Calculated based on 50,000,000 shares outstanding after giving effect to the
Pro Forma Adjustments, including the sale of shares of common stock
by Neuberger Berman Inc. and the initial contribution of shares of
common stock to the defined contribution plan.
(4) Includes cash and securities segregated for the exclusive benefit 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).
(5) 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 the subordinated
liability.
27
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THIS DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION WITH OUR COMBINED
FINANCIAL STATEMENTS AND THEIR NOTES, THE PRO FORMA FINANCIAL INFORMATION AND
THE OTHER FINANCIAL INFORMATION INCLUDED ELSEWHERE IN THIS PROSPECTUS.
We are an independent investment advisory and securities firm organized in
three business segments.
- Private Asset Management;
- Mutual Fund and Institutional; and
- Professional Securities Services.
All references to 1996, 1997 and 1998 refer to the calendar year. All
references to the six months ended June 1998 and June 1999 refer to our
six-month fiscal periods ended June 26, 1998 and June 30, 1999.
BUSINESS ENVIRONMENT
Over the past five years, the investment management industry has experienced
growth in assets under management resulting from a number of favorable economic
conditions including:
- Strong returns in the equity markets;
- Strong growth in U.S. gross national product (GNP);
- Low interest rates; and
- Low inflation.
U.S. equity returns (as measured by the S&P 500 index) exceeded 20% for each
of the years ending December 31, 1995 through December 31, 1998. However, this
period of strong returns in the equity markets did not affect all categories of
equity investments uniformly. For example, throughout this period, growth stocks
outperformed value stocks as tracked by the S&P/BARRA growth index and value
index. This trend was especially pronounced in 1998. Also in that year, large
capitalization stocks outperformed small and medium capitalization stocks. These
exceptional market conditions created an environment in which large-cap growth
funds and large-cap index funds captured the vast majority of new mutual fund
assets.
During this period, our Private Asset Management segment grew substantially.
We believe this growth resulted from significant wealth creation combined with a
rising equity market. In addition, the diversity of our Private Asset Management
investment styles, the nature of the high net worth investor market (which is
more relationship-driven) and our ability to provide our clients customized
services allowed us to capitalize on the favorable economic conditions.
Our Mutual Fund and Institutional business, on the other hand, has recently
experienced a decline in assets under management following a period of robust
growth from the beginning of 1995 through June 30, 1998. This business has
historically emphasized a value style of investing, which is generally
characterized by investment in securities which have relatively low valuations,
as measured by ratios such as price-to-earnings, price-to-book and price-to-cash
flows. In addition, some of our portfolios target small to mid-capitalization
stocks. As a result of our value focus and the business environment, certain of
our mutual funds and separate accounts have periodically underperformed growth
oriented funds, the S&P 500 index and other applicable indices over the past
five years.
Specifically, Neuberger Berman Guardian Portfolio, a large capitalization
value fund and our largest mutual fund portfolio, performed poorly relative to
other value funds from December 31, 1995 through September 30, 1998 and
significantly underperformed the S&P 500 and large capitalization growth styles
in 1998. At December 31, 1995 Neuberger Berman Guardian Portfolio had assets of
$5.3 billion, representing 45% of Neuberger Berman mutual fund assets, and at
June 30, 1999 had assets of $5.5 billion, representing 26% of Neuberger Berman
mutual fund assets. In addition, Neuberger Berman Partners Portfolio,
28
<PAGE>
a mid to large-cap value product, and Neuberger Berman Genesis Portfolio, a
small-cap product, which produced generally favorable returns relative to their
respective categories in 1996 and 1997, had below average performance in 1998.
As a result, beginning in mid-1998, we experienced a reversal in assets under
management from net cash inflows to net cash outflows in our mutual fund
business. The sharp downturn in the U.S. equity market in August 1998
accelerated these cash outflows. Our mutual fund business had net cash outflows
of $788 million for the year end December 31, 1998 and $2.3 billion for the six
months ended June 30, 1999. Similar factors negatively affected our
institutional asset management business which had net cash outflows of $1.4
billion for the year ended December 31, 1998 and $1.4 billion for the six months
ended June 30, 1999.
In response, we have taken the following steps.
- In September 1998, we hired a seasoned portfolio manager with 17 years of
investment experience, including six years managing a large capitalization
value fund, to co-manage the Neuberger Berman Guardian Portfolio. Since
the beginning of the fourth quarter 1998, the performance of the Guardian
Portfolio has improved significantly, and its volatility has decreased.
- Shortly thereafter, we hired a portfolio manager with 17 years of
investment experience to work as co-manager of Neuberger Berman Partners
Portfolio, which has performed well over the nine months ended June 30,
1999. This manager also co-manages Neuberger Berman Regency Portfolio, a
mid-cap value mutual fund product launched in June 1999.
- About this time, we hired a portfolio manager with 8 years of investment
experience in our Boston-based growth equity group as co-manager of
Neuberger Berman Millennium Portfolio. That product, which began
operations in October 1998, has expanded our product line in the small-cap
growth area, and has delivered strong performance.
- We also hired a portfolio manager with 21 years of investment experience
to help manage a substantial number of large-cap equity institutional
accounts.
- Finally, we have diversified our product offering to include a broader
universe of investment styles.
We believe our ability to attract talented portfolio managers was critical
to our ability to address these issues. Since the beginning of April 1999, value
indices have generally outperformed growth indices for the first time since
1994, and the Russell 2000 (a small-cap index) has significantly outperformed
the S&P 500 index. We believe our initiatives, together with these recent
trends, will be favorable over time to growth in assets under management in our
Mutual Fund and Institutional segment.
RESULTS OF OPERATIONS
Our revenues are recorded in the business segments in which they are earned.
Our operating expenses include direct expenses, such as employee compensation
and benefits, information technology and rent and occupancy, which are charged
to the operating business in which they are incurred. Our operating expenses
also include indirect expenses, such as general and administrative, proprietary
research and execution and clearance expenses. These expenses are allocated to
each business segment based upon various methodologies determined by management.
We derive our revenues primarily from fees for investment advisory and
administrative services provided to private asset management, mutual fund,
institutional and wrap fee clients. Our investment advisory and administrative
fees are generally based on the total market value and composition of assets
under management. As a result, fluctuations in financial markets and client
contributions and withdrawals have a direct effect on our
29
<PAGE>
revenues and our net income. Our 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, we earn commission revenue by executing securities
transactions for our Private Asset Management, Mutual Fund and Institutional
clients as well as for third parties in professional investor clearing services
and research sales transactions. The majority of our commissions are earned from
transactions for our Private Asset Management clients. Our commission revenue
may fluctuate from time to time based on general market conditions. We also earn
clearance fees for the execution of securities transactions for various
introducing brokers.
We also generate income by managing cash balances available as a result of
our broker-dealer activities. The three principal areas from which our net
interest income is generated are treasury management (managing overnight cash
balances), securities lending activities, and from client cash and margin
balances, primarily for professional investor clearing services and private
asset management clients. We evaluate 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.
Our largest operating expense is employee compensation and benefits, the
largest components of which are compensation for our portfolio managers and
sales personnel (which is based on commissions and fees) and for our information
technology groups.
Historically, because we have operated as a partnership, payments to our
principals have been accounted for as distributions from principals' capital and
not recorded as compensation expense. Accordingly, our historical compensation
and benefits will increase after the offerings, since, as a corporation, we will
include these payments to our principals in compensation and benefits expense.
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 the time of promotion, such employees' compensation
from Neuberger Berman ceased and instead they generally received distributions
of net income directly from capital. Following the offerings, the distinction
between employees and principals will end.
Federal income taxes have not been provided against our net income because,
prior to the offerings, Neuberger Berman, LLC, as a limited liability company,
has not been subject to U.S. Federal and state income taxes. Members of
Neuberger Berman LLC were individually liable for such taxes. The earnings of
Neuberger Berman, LLC have been subject to the 4% New York City unincorporated
business tax. In addition, Neuberger Berman Management Inc., as an S
corporation, has been subject to certain state and local taxes. For information
on the pro forma effective tax rate of Neuberger Berman Inc. under corporate
form, see "Pro Forma Combined Financial Statements (Unaudited)".
Our operating expenses have increased as a result of numerous factors,
including:
- Higher employee compensation and benefits related to increased staffing.
We have hired additional portfolio managers for both our asset management
segments and additional sales professionals for all our segments, and have
increased headcount in information technology, marketing and trust and
custody services.
- Increased technology expenses. We have made a number of hardware and
software investments to provide better services to our investment
professionals. These investments include a new network, client accounting
and telecommunication systems, and a comprehensive electronic investment
library. We are currently enhancing both our Internet and intranet
websites, which
30
<PAGE>
will create new opportunities for existing lines of businesses.
- Building our infrastructure. In recent years, we have increased the number
of regional offices and expanded our New York facilities. We have taken
additional floors at our New York headquarters to accommodate increased
staff, moved to a new facility for our New York back office clearing
operations and established a fully equipped office facility for our
professional investor clearing services clients.
We have made investments in these initiatives despite decreases in revenues
related to our Mutual Fund and Institutional segment, with an eye towards
building for the future.
The following is a summary of assets under management, revenue and expense
data by business segment:
<TABLE>
<CAPTION>
AS OF OR FOR THE SIX
AS OF OR FOR THE MONTHS
YEAR ENDED DECEMBER ENDED JUNE
------------------------------- --------------------
<S> <C> <C> <C> <C> <C>
1996 1997 1998 1998 1999
--------- --------- --------- --------- ---------
(IN MILLIONS)
ASSETS UNDER MANAGEMENT:
Private Asset Management............. $ 12,050 $ 15,553 $ 17,905 $ 17,806 $ 20,504
Mutual Fund and Institutional........ 32,310 37,958 37,682 41,283 36,260
--------- --------- --------- --------- ---------
$ 44,360 $ 53,511 $ 55,587 $ 59,089 $ 56,764
(IN THOUSANDS)
NET REVENUES AFTER INTEREST EXPENSE:
Private Asset Management............. $ 161,845 $ 198,421 $ 237,933 $ 116,807 $ 129,127
Mutual Fund and Institutional........ 185,428 230,852 258,344 133,181 115,449
Professional Securities Services..... 68,841 73,252 77,859 35,878 38,839
--------- --------- --------- --------- ---------
$ 416,114 $ 502,525 $ 574,136 $ 285,866 $ 283,415
(IN THOUSANDS)
OPERATING EXPENSES:
Private Asset Management............. $ 57,288 $ 62,619 $ 73,100 $ 36,342 $ 38,636
Mutual Fund and Institutional........ 89,719 103,122 126,700 58,898 59,341
Professional Securities Services..... 39,981 38,118 54,241 20,998 28,667
--------- --------- --------- --------- ---------
$ 186,988 $ 203,859 $ 254,041 $ 116,238 $ 126,644
(IN THOUSANDS)
NET INCOME BEFORE PRINCIPAL
COMPENSATION: (1)
Private Asset Management............. $ 104,557 $ 135,802 $ 164,833 $ 80,465 $ 90,491
Mutual Fund and Institutional........ 95,709 127,730 131,644 74,283 56,108
Professional Securities Services..... 28,860 35,134 23,618 14,880 10,172
--------- --------- --------- --------- ---------
$ 229,126 $ 298,666 $ 320,095 $ 169,628 $ 156,771
</TABLE>
- ------------------------
(1) Historically, we have distributed substantially all of our net income to our
principals as capital distributions and dividends. Certain principals were
also paid through compensation expense. As a result, our earnings and
compensation and benefits expense have not fully reflected payments for
services rendered by our principals and understate the expected operating
costs to be incurred by us after the offerings. Following the offerings,
Neuberger Berman will fully reflect payments for services rendered by our
principals in compensation and benefits expense.
31
<PAGE>
For financial information that includes pro forma compensation and benefits
expense as if payments for services rendered by our principals had been
fully reflected, see "Pro Forma Combined Financial Statements (Unaudited)".
The following is a summary of changes in assets under management in our
Private Asset Management and Mutual Fund and Institutional businesses:
<TABLE>
<CAPTION>
AS OF OR FOR THE SIX
AS OF OR FOR THE YEAR ENDED
DECEMBER MONTHS ENDED JUNE
------------------------------- --------------------
<S> <C> <C> <C> <C> <C>
1996 1997 1998 1998 1999
--------- --------- --------- --------- ---------
(IN MILLIONS)
PRIVATE ASSET MANAGEMENT:
Assets under management beginning of
period.................................. $ 9,491 $ 12,050 $ 15,553 $ 15,553 $ 17,905
Net additions (withdrawals)............... 617 (66) 76 351 309
Market appreciation....................... 1,942 3,569 2,276 1,902 2,290
--------- --------- --------- --------- ---------
Total increase.......................... 2,559 3,503 2,352 2,253 2,599
Assets under management end of period..... $ 12,050 $ 15,553 $ 17,905 $ 17,806 $ 20,504
MUTUAL FUND AND INSTITUTIONAL:
Assets under management beginning of
period.................................. $ 28,833 $ 32,310 $ 37,958 $ 37,958 $ 37,682
Net additions (withdrawals)............... (145) 352 (2,173) 425 (3,766)
Market appreciation....................... 3,622 5,296 1,897 2,900 2,344
--------- --------- --------- --------- ---------
Total increase (decrease)............... 3,477 5,648 (276) 3,325 (1,422)
Assets under management end of period..... $ 32,310 $ 37,958 $ 37,682 $ 41,283 $ 36,260
TOTAL:
Assets under management beginning of
period.................................. $ 38,324 $ 44,360 $ 53,511 $ 53,511 $ 55,587
Net additions (withdrawals)............... 472 286 (2,097) 776 (3,457)
Market appreciation....................... 5,564 8,865 4,173 4,802 4,634
--------- --------- --------- --------- ---------
Total increase.......................... 6,036 9,151 2,076 5,578 1,177
Assets under management end of period..... $ 44,360 $ 53,511 $ 55,587 $ 59,089 $ 56,764
</TABLE>
OVERVIEW
JUNE 1999 COMPARED TO JUNE 1998. Our net revenues after interest expense
decreased by $2.5 million for the six-month period ended June 1999 to $283.4
million, a reduction of 0.9% compared to the same period in 1998. Strong results
in Private Asset Management and Professional Securities Services were offset by
a significant decrease in Mutual Fund and Institutional due to the lower level
of assets under management in that segment resulting from net withdrawals. Net
revenue growth was strong in Private Asset Management, increasing $12.3 million
or 10.5%, reflecting asset growth from market appreciation and additions to
assets under management from our dedicated national sales force. Net revenues
after interest expense in Mutual Fund and Institutional decreased $17.7 million
or 13.3% as a result of reduced average assets under management. Net revenues
after interest expense in Professional Securities Services increased by $3.0
million or 8.3% as higher commissions and increased revenues from market making
activities more than offset a reduction in net interest income due to lower
client margin balances.
32
<PAGE>
Our operating expenses increased $10.4 million during the period, an
increase of 9.0% to $126.6 million over the same period in 1998. This resulted
from an increase of $5.9 million or 9.1% in employee compensation and benefits
to $71.1 million due to the hiring of new portfolio managers, other investment
professionals and information technology personnel. Depreciation and
amortization increased $1.7 million or 55.2% to $4.9 million due to leasehold
write-offs and to capital expenditures on telecommunications and
technology-related equipment. Brokerage, clearing and exchange fees increased
$1.3 million or 24.5% primarily due to higher transaction volumes in Private
Asset Management and Professional Securities Services.
Net income before principal compensation decreased $12.9 million or 7.6% to
$156.8 million.
1998 COMPARED TO 1997. Our net revenues after interest expense were $574.1
million in 1998, an increase of $71.6 million or 14.3% compared to 1997. Net
revenue growth was strong in Private Asset Management, which increased $39.5
million or 19.9% to $237.9 million due to additional assets under management and
higher commissions from equity securities transactions. Notwithstanding net
asset withdrawals in the second half of 1998, net revenues after interest
expense in Mutual Fund and Institutional increased $27.5 million or 11.9% to
$258.3 million as a result of higher average assets under management, which
peaked in the second quarter of 1998. Net revenues after interest expense for
Professional Securities Services were higher by $4.6 million or 6.3% due to a
$3.0 million or 35.8% increase in clearance fees and a $3.7 million or 13.7%
increase in commissions primarily from increased market activity.
Our operating expenses were $254.0 million in 1998, an increase of $50.2
million or 24.6% over 1997. This was primarily due to increased employee
compensation and benefits and professional fee expenses. Employee compensation
and benefits increased $25.1 million or 21.9% due to the hiring of new portfolio
managers and sales professionals and to increased headcount in information
technology and marketing. Professional fees increased $10.9 million or 210.4%
due to higher investment technology expenditures including Y2K-related
initiatives. This increase included non-recurring charges of $4.1 million
resulting from a proposed initial public offering that was subsequently
withdrawn due to market conditions. Distribution and fund administration
expenses increased $3.9 million or 45.8% as a direct result of increased average
assets under management. Rent and occupancy expenses increased $2.6 million or
26.4%, reflecting additional office space to accommodate higher staffing levels
and new regional offices. The allocation of indirect expenses, which include
general and administrative, increased $3.5 million or 38.5%.
Net income before principal compensation increased $21.4 million or 7.2% to
$320.1 million.
1997 COMPARED TO 1996. Our net revenues after interest expense were $502.5
million in 1997, an increase of $86.4 million or 20.8% compared to 1996. Net
revenue growth was strong in both the Private Asset Management and the Mutual
Fund and Institutional segments. This was due to increased average assets under
management from net additions, which generated investment advisory and
administration fees that were higher by $66.4 million or 25.5%. Additionally,
commissions from these two segments increased by $14.3 million or 17.1% compared
to 1996. Professional Securities Services contributed net revenues after
interest expense of $73.3 million, an increase of $4.4 million or 6.4%. This was
primarily comprised of net interest income from the treasury management of
overnight cash balances.
Our operating expenses were $203.9 million in 1997, an increase of $16.9
million or 9.0% compared to 1996. Employee compensation and benefits expense
33
<PAGE>
increased $8.2 million or 7.7% which resulted from an increase in sales
professionals, higher compensation in professional investor clearing services
and research sales and an increase in general employment levels. Distribution
and fund administration expenses increased $3.2 million or 61.2% as a direct
result of increased average assets under management. Advertising and sales
promotion increased $2.2 million or 17.1% as a result of a national television
campaign to promote our brand name.
Net income before principal compensation increased $69.5 million or 30.4%,
to $298.7 million.
PRIVATE ASSET MANAGEMENT
JUNE 1999 COMPARED TO JUNE 1998. Private Asset Management achieved net
revenues after interest expense of $129.1 million for the six-month period ended
June 1999, an increase of $12.3 million or 10.5% compared to the same period in
1998. All major components of this segment exhibited strong net revenue growth
during the period. Investment advisory fees increased to $79.6 million, up $7.0
million or 9.7% because of increased average assets under management.
Commissions increased to $48.0 million, up $4.9 million or 11.5% as a result of
generally strong and volatile equity markets. Net interest income increased $0.4
million or 31.5% to $1.5 million.
Operating expenses rose to $38.6 million, an increase of $2.3 million or
6.3% compared to the same period in 1998. This was primarily due to $1.1 million
in advertising, sales promotion and marketing, principally for a new print and
media campaign targeting our high net worth clients.
1998 COMPARED TO 1997. Private Asset Management achieved net revenues after
interest expense of $237.9 million for 1998, an increase of $39.5 million or
19.9% compared to 1997. Investment advisory fees increased to $145.6 million, up
$28.8 million or 24.6% because of increased average assets under management.
Commissions increased to $89.7 million, up $11.2 million or 14.2%.
Operating expenses rose to $73.1 million, an increase of $10.5 million or
16.7% compared to 1997. This was primarily due to an increase in employee
compensation and benefits of $4.6 million or 17.3%, principally for portfolio
managers and sales professionals. Information technology increased $1.0 million
or 23.4%, which was largely attributable to the development and implementation
of a new client accounting system. The allocation of indirect expenses, which
include general and administrative, increased $2.1 million or 7.7%.
1997 COMPARED TO 1996. Private Asset Management achieved net revenues after
interest expense of $198.4 million for 1997, an increase of $36.6 million or
22.6% compared to 1996. Investment advisory fees increased to $116.8 million, up
$25.4 million or 27.8% because of increased average assets under management.
Commissions increased to $78.5 million, up $10.3 million or 15.1% due to the
increased volume of transactions.
Operating expenses rose to $62.6 million, an increase of $5.3 million or
9.3% compared to 1996. Employee compensation and benefits remained relatively
stable, with an increase of only $0.8 million or 2.9%. In addition, other
expenses included clearing and execution which rose by $1.2 million or 17.9%,
due to increased transaction charges.
MUTUAL FUND AND INSTITUTIONAL
JUNE 1999 COMPARED TO JUNE 1998. Mutual Fund and Institutional achieved net
revenues after interest expense of $115.4 million for the six-month period ended
June 1999, a reduction of $17.7 million or 13.3% compared to the same period in
1998. Investment advisory and administrative fees decreased $11.8 million or
14.5% for mutual funds and $5.3 million or 14.8% for institutional as a result
of decreased average assets under management due to net withdrawals.
Operating expenses remained relatively stable, increasing by $0.4 million or
less than 1% to $59.3 million. Information technology and professional fees
increased, offset by a decrease in distribution and fund administration
expenses.
34
<PAGE>
1998 COMPARED TO 1997. Mutual Fund and Institutional achieved net revenues
after interest expense of $258.3 million, an increase of $27.5 million or 11.9%
compared to 1997. Mutual fund investment advisory and administrative fees
increased $24.5 million or 18.7% compared to 1997 due to higher average under
management, notwithstanding net withdrawals in the second half of 1998.
Institutional investment advisory and administrative fees decreased $4.0 million
or 5.6% compared to 1997 due to a decrease in average assets under management.
Commissions increased $6.1 million or 32.0% primarily from increased
transactions in the mutual fund business.
Operating expenses rose to $126.7 million, an increase of $23.6 million or
22.9% over 1997. Employee compensation and benefits were up $12.1 million or
31.5% because of the hiring of new portfolio managers, sales professionals and
information technology personnel. Advertising and sales promotion increased by
$10.8 million or 108.9%, as a result of a national television campaign to
promote our brand name. Mutual fund distribution and fund administration
expenses increased $3.9 million or 45.8% to $12.4 million, as a result of
increased average assets under management.
1997 COMPARED TO 1996. Mutual Fund and Institutional achieved net revenues
after interest expense of $230.9 million, an increase of $45.4 million or 24.5%
compared to 1996 as a result of substantial increase in average assets under
management. Both major components of this segment exhibited strong net revenue
growth during the year, with investment advisory and administrative fees
increasing $37.3 million or 39.8% for Mutual Funds and $3.8 million or 5.0% for
Institutional. Commissions increased $3.9 million or 25.9% primarily from
increased Mutual Fund transactions.
Operating expenses rose to $103.1 million, an increase of $13.4 million or
14.9% compared to 1996. Employee compensation and benefits were up $2.8 million
or 7.9% due to general increases in employment levels. Distribution and fund
administration expenses increased $3.2 million or 61.2%, as a direct result of
increased average assets under management. The allocation of indirect expenses,
which include general and administrative, increased $10.3 million or 46.5%.
Advertising and sales promotion decreased $4.4 million or 30.1%.
PROFESSIONAL SECURITIES SERVICES.
JUNE 1999 COMPARED TO JUNE 1998. Professional Securities Services achieved
net revenues after interest expense of $38.8 million for the six-month period
ended June 1999, an increase of $3.0 million or 8.3% compared to the same period
in 1998. Commission income increased $1.6 million or 11.9% to $15.4 million.
This resulted from an increase in commission revenues from our professional
investor clearing services of $1.0 million or 17.4% and research sales
activities of $0.6 million or 8.1%. Trading revenues from our over-the-counter
market making activities increased by $1.1 million or 43.3%.
Operating expenses rose to $28.7 million, an increase of $7.7 million or
36.5% compared to 1998. Employee compensation and benefits increased $2.9
million or 42.7%. Trust services compensation increased $1.1 million or 98.6%
due to a significant increase in professional staff. We are investing in this
area in order to build for the future. Information technology increased $0.7
million or 32.7% due to initiatives in professional investor clearing services.
1998 COMPARED TO 1997. Professional Securities Services achieved net
revenues after interest expense of $77.9 million for 1998, an increase of $4.6
million or 6.3% compared to 1997. Commission income increased $3.7 million or
13.7%. This resulted from increases in professional investor clearing services
activities of $2.8 million or 24.7% and research sales activities of $0.8
million or 5.3%. Clearance fees rose $3.0 million or 35.8% due to increased
market activity. This was partially offset by a reduction in net interest income
from our securities lending activities of $0.7 million or 14.4% and the treasury
35
<PAGE>
management of overnight balances of $1.8 million or 16.9%.
Operating expenses increased to $54.2 million for 1998, an increase of $16.1
million or 42.3% compared to 1997. Employee compensation and benefits increased
to $16.9 million, up $3.4 million or 24.8%, principally as a result of increases
in employment levels for the servicing of professional investor clearing
services clients and compensation for a corporate officer. Information
technology increased $1.4 million or 44.0% as a result of new initiatives in
professional investor clearing services. Also included in operating expenses
were the non-recurring charges of $4.1 million resulting from the proposed
initial public offering that was withdrawn due to market conditions.
1997 COMPARED TO 1996. Professional Securities Services achieved net
revenues after interest expense of $73.3 million for 1997, an increase of $4.4
million or 6.4% compared to 1996. Net interest income increased $4.8 million or
21.7% due to a $3.6 million or 50.8% increase on treasury management of
overnight balances. Commission income increased $1.0 million or 4.0%, primarily
from research sales. This was partially offset by a $2.5 million or 28.8%
decrease in trading revenues from our over-the-counter market making activities.
Operating expenses decreased to $38.1 million, down $1.9 million or 4.7%
compared to 1996 due to a decrease of $2.6 million in other corporate expenses.
This was partially offset by a $1.4 million or 11.6% increase in employee
compensation and benefits resulting from performance related payouts in
professional investor clearing services and research sales.
CAPITAL RESOURCES AND LIQUIDITY
Our investment advisory activities do not require us to maintain significant
capital balances. However, as a result of our broker-dealer activities, our
balance sheet includes higher levels of assets and liabilities than is typical
for an investment adviser of our size. Our broker-dealer activities provide
financing, trade execution, clearing and custody services for clients of our
Private Asset Management, Mutual Fund and Institutional and Professional
Securities Services businesses.
Our financial condition is highly liquid with the significant majority of
our assets readily convertible to cash. Receivables from and payables to
brokers, dealers and clearing organizations represent either current open
transactions that 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 our clients arise in the normal course of
business in connection with cash and margin securities transactions. Client
receivables are secured by securities held as collateral. We continuously
analyze our liquidity and maintain lines of credit well in excess of anticipated
liquidity requirements.
We have $410 million in lines of credit, of which $150 million is committed.
At June 30, 1999, $231 million of the uncommitted, and $150 of the committed,
lines of credit were unused and available.
It is our policy to continuously monitor and evaluate the adequacy of our
capital. We have consistently maintained net capital in excess of the regulatory
requirements prescribed by the SEC and other regulatory authorities. At June 30,
1999, Neuberger Berman, LLC had regulatory net capital which exceeded the
minimum requirement by $101 million. We believe that our cash flow from
operations and existing committed and uncommitted lines of credit, as well as
the net proceeds of the offerings, will be more than adequate to meet our debt
and other obligations as they come due and anticipated capital requirements.
SUBSEQUENT EVENTS
Immediately prior to the offerings, Neuberger Berman, LLC and Neuberger
Berman Management Inc. intend to distribute to their members and stockholders
any net income and dividends not previously distributed.
36
<PAGE>
In connection with the offerings, we will record the following non-recurring
items in the third quarter of 1999:
- the initial irrevocable contribution of an estimated $150 million of
shares of common stock to the defined contribution plan (as described
under "Management--Executive Compensation--Defined Contribution Plan");
- a $10 million cash contribution to the Neuberger Berman Foundation (as
described under "Certain Relationships and Related Transactions--Neuberger
Berman Foundation"); and
- the recognition of a net tax asset of $72 million relating to these two
contributions.
As a result, we expect to record a substantial pre-tax loss in the third quarter
of 1999.
YEAR 2000 READINESS DISCLOSURE
Neuberger Berman has recognized the need to upgrade, modify or replace
portions of our information technology systems in order to satisfy all Year 2000
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.
In June 1997, we initiated a comprehensive Year 2000 project. This project
is based on a six-phase approach that includes: awareness, inventory,
assessment, remediation, testing and contingency planning. A Y2K committee meets
on a monthly basis to review progress of the project and coordinate Y2K
activities. The committee includes representatives from senior management,
information services, selected business units, internal audit and legal and
compliance.
We completed our inventory and assessment phases in September 1998. The
remediation of our technical infrastructure and internally developed systems was
completed in the first quarter of 1999.
We have tracked the progress of our key external vendors and business
partners throughout the course of our Y2K project. As part of the inventory and
assessment phases we attempted to identify and contact vendors and business
partners that present a risk of a Year 2000 adverse impact. The responses
received from vendors and business partners have been evaluated as they are
received to determine risk potential and to determine what actions may be
required. The depth at which we track the progress of third parties is directly
related to how critical the third parties are to us.
Testing is the most critical phase of the Y2K project. The process may
require up to 50% of the time and resources available. Our approach has been to
first address our internal technology infrastructure and then integrate testing
with third parties. We completed internal testing in June 1999 and no Y2K
problems were revealed that remain outstanding. We expect to complete external
testing in August 1999.
We have also participated in various industry-wide tests, such as the
"Streetwide" test coordinated by the Securities Industry Association in March
and April 1999 in which more than 400 firms participated. Other tests
coordinated by the Securities Industries Association in which we participated
included the Market Data Test, Securities Lending Test and the National
Securities Clearing Corporation testing for the Automated Customer Account
Transfer Service. Additionally, we participated in the Year 2000 testing
organized by the Futures Industry Association.
We substantially completed our contingency planning in March 1999, subject
to continuing review and revision of those plans. Our efforts are directed
toward developing plans to provide us with some assurance that mission critical
business operations can continue, or will resume within a reasonable time frame,
should an unforeseen problem arise.
37
<PAGE>
We have incurred and expect to continue to incur expenses allocable to
internal staff, as well as costs for outside consultants, to complete the
remediation and testing of internally developed systems and the replacement and
testing of third-party products and services, including non-technology products
and services, in order to achieve Year 2000 compliance. We currently estimate
that these costs will total $3.5 million, a substantial majority of which has
been spent to date. These estimates include the cost of technology personnel and
those non-technology personnel involved in our Year 2000 effort. The remaining
cost of our Year 2000 program is expected to be incurred in 1999 and early 2000.
The Year 2000 program costs will continue to be funded through operating cash
flow. These costs are expensed as incurred. We do not expect that the costs
associated with implementing our Year 2000 program will have a material adverse
effect on our results of operations, financial condition, liquidity or capital
resources.
The costs of the Year 2000 program and the date on which we plan to complete
the Year 2000 modifications are based on current estimates, which reflect
numerous assumptions about future events, including the continued availability
of resources, the timing and effectiveness of third-party remediation plans and
other factors. We can give no assurance that these estimates will be achieved,
and actual results could differ materially from our plans. Specific factors that
might cause material differences include, but are not limited to, the
availability and cost of personnel trained in this area, the ability to locate
and correct relevant computer source codes and embedded chip technology, the
results of internal and external testing and the timeliness and effectiveness of
remediation efforts of third parties.
38
<PAGE>
BUSINESS
OVERVIEW
We are an independent investment advisory firm providing our clients with a
broad array of investment strategies and products. We were founded by Roy R.
Neuberger in 1939 to be a premier provider of investment products and services
to high net worth individuals. We have built upon the qualities that have made
us successful in the high net worth market to establish a strong presence in the
mutual fund and institutional marketplaces.
Our goal is to provide highly personalized service and superior investment
advice and returns to all of our clients. We believe that our dedication to
serving the individual needs of our clients distinguishes us from many of our
competitors. We have developed a reputation and recognized brand name for our
demonstrated commitment to these principles.
We seek to provide our clients with access to our investment products and
services through the distribution channel most appropriate to serve their needs.
Today, in addition to individuals and wealthy families, our clients include
corporations, insurance companies, pension funds, foundations and endowments.
Our principal business segments include:
- Private Asset Management;
- Mutual Fund and Institutional; and
- Professional Securities Services.
We have produced strong growth in assets under management and net income
before principal compensation through varying market conditions. From December
31, 1989 to June 30, 1999, our assets under management increased from $17.8
billion to $56.8 billion, representing a compound annual rate of 13.0%. From
December 31, 1989 to December 31, 1998, our net income before principal
compensation increased from $111.5 million to $320.1 million, representing a
compound annual rate of 12.4%.
Since we derive our revenue principally from fees and commissions based on
our assets under management, we believe our net income before principal
compensation is more stable as compared to other financial institutions. In
addition, we believe our business has attractive margins since (1) more than 80%
of our assets under management are held in equity accounts, which carry higher
fees than fixed income accounts, (2) approximately 58% of our net income before
principal compensation is derived from our higher-margin Private Asset
Management business and (3) we have effectively leveraged our franchise and
infrastructure to enhance profitability by developing complementary businesses
such as our professional investor clearing services and by generating commission
revenue from recipients of our proprietary research (an activity that we refer
to as research sales).
We are committed to attracting and retaining the best people. In connection
with the offerings, we will make awards under our defined contribution plan to
substantially all of our employees (other than principals). After the offerings
our employees (other than principals) will own approximately % of our common
stock, and our principals will own approximately % of our common stock.
We have experienced significant growth in recent years in our assets under
management, net revenues after interest expense and net income before principal
compensation. This growth is shown by business segment on the following table:
39
<PAGE>
<TABLE>
<CAPTION>
AS OF OR FOR THE SIX
AS OF AND FOR THE YEAR ENDED DECEMBER MONTHS ENDED JUNE
----------------------------------------------------- --------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1994 1995 1996 1997 1998 1998 1999
--------- --------- --------- --------- --------- --------- ---------
(IN MILLIONS)
ASSETS UNDER MANAGEMENT:
Private Asset Management.................... $ 7,349 $ 9,491 $ 12,050 $ 15,553 $ 17,905 $ 17,806 $ 20,504
Mutual Fund and Institutional
Mutual funds................................ 7,314 11,814 15,312 21,184 21,263 24,267 20,834
Institutional............................... 12,819 15,751 15,610 15,227 14,748 15,377 13,551
Wrap fee.................................... 1,167 1,268 1,388 1,547 1,671 1,639 1,875
Total..................................... $ 28,649 $ 38,324 $ 44,360 $ 53,511 $ 55,587 $ 59,089 $ 56,764
(IN THOUSANDS)
NET REVENUES AFTER INTEREST EXPENSE:
Private Asset Management.................... $ 120,978 $ 135,155 $ 161,845 $ 198,421 $ 237,933 $ 116,807 $ 129,127
Mutual Fund and Institutional
Mutual funds.............................. 51,912 74,763 105,109 146,268 176,856 91,025 79,469
Institutional............................. 61,245 67,045 73,417 77,273 73,209 37,859 32,111
Wrap fee.................................. 7,067 6,452 6,902 7,311 8,279 4,297 3,869
Professional Securities Services............ 40,795 56,917 68,841 73,252 77,859 35,878 38,839
Total..................................... $ 281,997 $ 340,332 $ 416,114 $ 502,525 $ 574,136 $ 285,866 $ 283,415
(IN THOUSANDS)
NET INCOME BEFORE PRINCIPAL COMPENSATION: (1)
Private Asset Management.................... $ 76,546 $ 86,373 $ 104,557 $ 135,802 $ 164,833 $ 80,465 $ 90,491
Mutual Fund and Institutional............... 62,199 77,275 95,709 127,730 131,644 74,283 56,108
Professional Securities Services............ 12,230 22,444 28,860 35,134 23,618 14,880 10,172
Total..................................... $ 150,975 $ 186,092 $ 229,126 $ 298,666 $ 320,095 $ 169,628 $ 156,771
</TABLE>
- ------------------------------
(1) Historically, we have distributed substantially all of our net income to our
principals as capital distributions and dividends. Certain principals were
also paid through compensation expense. As a result, our earnings and
compensation and benefits expense have not fully reflected payments for
services rendered by our principals and understate the expected operating
costs to be incurred by us after the offerings. Following the offerings,
Neuberger Berman Inc. will fully reflect payments for services rendered by
our principals in compensation and benefits expense. For financial
information that includes pro forma compensation and benefits expense as if
payments for services rendered by our principals had been fully reflected,
see "Pro Forma Combined Financial Statements (Unaudited)".
INVESTMENT PROCESS AND PROPRIETARY RESEARCH
We believe our investment ideas and proprietary research differentiate us
from our competitors. Our nearly 100 portfolio managers generally base their
decisions on fundamental analysis, attempting to make knowledgeable judgments
about the investment merits of industry groups and, even more importantly,
specific companies. Many of our senior portfolio managers began their careers in
securities research at Neuberger Berman or with other investment management
firms; several are former heads of research at Neuberger Berman or elsewhere.
A centralized proprietary research department supports all of our investment
professionals. Organized by industry for the most part, these security analysts
are responsible for understanding developments within the companies and
industries they follow. To do this, they meet with senior managements of
companies they follow and interview customers and competitors. In some cases,
they employ specialized consultants, and develop earnings and cash flow
estimates. At present, there are 16 analysts in our Research Department
supported by 12 research assistants. In addition to this centralized Research
Department, many of our investment groups employ dedicated analysts who focus on
securities of particular interest to their specific investment approach. In
total, over 120 investment professionals cover over 40 industries and over 1,000
companies.
We believe that the sharing of investment ideas across investment groups is
a key factor supporting our investment results. To this end,
40
<PAGE>
our analysts and portfolio managers conducted more than 800 meetings with
companies in our offices in the 12 months ended June 30, 1999. These meetings
serve as a springboard for frequent discussions about individual securities
throughout our firm.
In addition, our portfolio managers and analysts have web-based access to a
comprehensive electronic investment library, called NBiPortal. We believe this
powerful support function further enables our investment professionals to
perform sophisticated and timely company and industry analysis.
PRIVATE ASSET MANAGEMENT
Neuberger Berman was founded by Roy R. Neuberger in 1939 as an investment
firm for wealthy individuals. The Private Asset Management business--which
provides asset management services to individuals, wealthy families and smaller
institutions that generally have at least $500,000 to invest--remains one of our
principal pursuits.
As of June 30, 1999, our Private Asset Management business managed $20.5
billion in assets in over 12,000 individual accounts, including assets managed
for clients of our three trust company subsidiaries. For the year ended December
31, 1998, our Private Asset Management business produced $237.9 million in net
revenues after interest expense, representing 41.4% of the firm's total net
revenues after interest expense. We generate significant commission revenue as
broker for almost all listed equity trades on behalf of our Private Asset
Management clients. The Private Asset Management assets under management grew at
a compound annual rate of 25.6% between December 31, 1994 and June 30, 1999.
The following table shows, for our Private Asset Management business, assets
under management, number of accounts and net revenues after interest expense:
<TABLE>
<CAPTION>
AS OF OR FOR THE
SIX MONTHS ENDED
AS OF OR FOR THE YEAR ENDED DECEMBER JUNE
----------------------------------------------------- --------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1994 1995 1996 1997 1998 1998 1999
--------- --------- --------- --------- --------- --------- ---------
ASSETS UNDER MANAGEMENT (IN MILLIONS)......... $ 7,349 $ 9,491 $ 12,050 $ 15,553 $ 17,905 $ 17,806 $ 20,504
Number of accounts............................ 8,278 8,865 9,555 10,446 11,482 11,091 12,161
(IN THOUSANDS)
NET REVENUES AFTER INTEREST EXPENSE:
Investment advisory and administrative
fees...................................... $ 67,005 $ 72,711 $ 91,423 $ 116,816 $ 145,578 $ 72,546 $ 79,587
Commissions................................. 52,203 60,555 68,209 78,518 89,705 43,082 48,026
Net interest income......................... 1,746 1,883 2,211 3,087 2,580 1,140 1,499
Other income................................ 24 6 2 -- 70 39 15
Total................................... $ 120,978 $ 135,155 $ 161,845 $ 198,421 $ 237,933 $ 116,807 $ 129,127
</TABLE>
EXPANSION OF THE PRIVATE ASSET MANAGEMENT BUSINESS
We believe that the high net worth market offers significant growth
opportunities for us. According to The Spectrum Group, Affluent Market Research
Program, there are currently 2.9 million households in the United States with
over $1 million in investable assets and this number is growing at a rate of
7.3% a year. This large and growing market is generally fragmented, regionalized
and underpenetrated by independent portfolio managers like ourselves that focus
primarily on personalized asset management. We believe that our Private Asset
Management business is well positioned to attract and retain clients in this
market because of our respected retail brand, our ability to meet the individual
needs of our Private Asset Management clients and our ability to provide estate
and financial planning, trust administration and fiduciary services through our
trust company operations.
We currently obtain new clients from three sources:
TRADITIONAL MARKETING EFFORTS. Traditionally, the Private Asset Management
business generated new business through referrals from existing clients and
marketing efforts by individual portfolio managers.
DEDICATED NATIONAL SALES AND CLIENT SERVICE FORCE. We continue to expand
our
41
<PAGE>
dedicated Private Asset Management sales group, which accounted for $290 million
in new assets under management in the first half of 1999.
- Formed in 1986, this group currently consists of 26 sales professionals
working in New York and regional offices in Atlanta, Boston, Chicago,
Dallas, Los Angeles, Miami, San Francisco, and West Palm Beach, with 15
sales professionals and five regional offices added in the last three
years. We expect to increase the number of sales professionals by more
than 50%, to 40 sales professionals, by the end of the year 2000. Our
sales professionals average industry experience of 16 years and many have
advanced business, accounting or law degrees.
- The primary focus of this sales group is to build long-term relationships
based on continuity and trust. Turnover is relatively low among the sales
professionals, resulting in relationships with the same clients covering
many years.
- We believe that channeling sales and client services through our dedicated
sales group has increased client acquisition capabilities, strengthened
existing client relationships and further promoted our brand name among
the professional network of high net worth advisors and has enabled the
portfolio managers to have more time to focus on managing the accounts of
existing clients.
ATTRACTING INVESTMENT PROFESSIONALS. We actively seek to identify, evaluate
and attract experienced individual investment professionals and small investment
management groups to join our firm. We can provide these professionals and
groups research, trust and custody services and back office clearing
capabilities. This year, through July 1999, three investment teams have joined
our firm. They have added approximately $200 million in assets under management
and are expected to add an additional $700 million in assets under management by
year end. By adding investment teams, we will expand our investment capabilities
and increase our assets under management and earnings.
SERVICES TO PRIVATE ASSET MANAGEMENT CLIENTS
CUSTOMIZED INVESTMENT ADVISORY SERVICES. We believe that our dedication to
serving the individual needs of clients distinguishes us from many of our
competitors. Through close individual contact with high net worth clients, our
portfolio managers can tailor individual portfolios specifically to address
clients' investment goals, 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 firm. We believe that we have
excellent relationships with our Private Asset Management clients; this business
is marked by long-term client loyalty, sometimes spanning several generations.
Recently, we expanded the number of clients who use more than one portfolio
manager at our firm. We believe that our ability to offer portfolio managers
with different money management styles gives us a distinct advantage in
significantly reducing the need for clients to diversify their assets among more
than one investment management firm. As of June 30, 1999, there were over 200
Private Asset Management relationships using two or more portfolio managers with
different investment styles at the firm.
TRUST COMPANIES. Through our three trust companies in New York, Delaware
and Florida, we provide an integrated approach to wealth management through
estate, income, financial and retirement planning, trust administration,
fiduciary and other services to our clients nationally. The mission of our trust
companies is to win and retain individuals' trust and confidence so that they
commit major aspects of the management and administration of their family's,
company's, or employees' wealth to our trust companies over decades. We believe
that our ability to offer trust and custody services to our Private Asset
Management clients increases the firm's value
42
<PAGE>
to them. By helping attract and retain clients, we expect that our trust
companies will contribute to the stability of our relationships over time.
To accomplish this mission, the trust companies offer independent advice,
fiduciary and planning talent and experience, customized services and account
structures, access to our many portfolio managers, and the ability to combine
recordkeeping of those investment portfolios with portfolios managed by outside
managers. They provide specialized services designed to address the needs of
clients:
- HIGH NET WORTH INDIVIDUALS. The trust companies provide unbiased advice on
tax planning and investment policy to high net worth individuals, wealthy
families and family offices, combined with multijurisdictional trust,
partnership and estate administration services. They also provide
oversight, performance measurement and consolidated statements of
investments managed by Neuberger Berman and non-Neuberger Berman portfolio
managers.
- FOR PROFIT INSTITUTIONS. The trust companies deliver flexible, qualified
and nonqualified employee benefit plan trustee services to corporations
and other for profit institutions.
- CHARITIES. The trust companies offer custom-made planned giving program
investment and administration services to charities.
The trust companies obtain their clients from our existing client base, the
Private Asset Management sales force and the trust companies' own sales efforts.
We expect to open trust companies and offices within the next several years in
certain states where Private Asset Management offices are either currently open
or planned, such as Texas and California.
MUTUAL FUND AND INSTITUTIONAL
Our 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. This business segment also offers balanced, fixed
income and money market products.
The following table shows, for our Mutual Fund and Institutional business,
assets under management and net revenues after interest expense:
<TABLE>
<CAPTION>
AS OF OR FOR THE SIX
AS OF OR FOR THE YEAR ENDED DECEMBER MONTHS ENDED JUNE
----------------------------------------------------- --------------------
1994 1995 1996 1997 1998 1998 1999
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
(IN MILLIONS)
ASSETS UNDER MANAGEMENT:
Mutual funds................................ $ 7,314 $ 11,814 $ 15,312 $ 21,184 $ 21,263 $ 24,267 $ 20,834
Institutional............................... 12,819 15,751 15,610 15,227 14,748 15,377 13,551
Wrap fee.................................... 1,167 1,268 1,388 1,547 1,671 1,639 1,875
Total..................................... $ 21,300 $ 28,833 $ 32,310 $ 37,958 $ 37,682 $ 41,283 $ 36,260
(IN THOUSANDS)
NET REVENUES AFTER INTEREST EXPENSE:
Investment advisory and administrative
fees...................................... $ 109,481 $ 135,179 $ 169,326 $ 210,376 $ 231,792 $ 121,551 $ 104,038
Commissions................................. 10,388 12,350 15,260 19,205 25,352 11,018 10,838
Net interest income......................... 32 46 28 18 13 5 11
Other income................................ 323 685 814 1,253 1,187 607 562
Total..................................... $ 120,224 $ 148,260 $ 185,428 $ 230,852 $ 258,344 $ 133,181 $ 115,449
</TABLE>
MUTUAL FUND MANAGEMENT
In 1950, Neuberger Berman organized one of the first no load mutual funds in
the United States. As of June 30, 1999, we managed $20.8 billion in mutual fund
assets invested in our 41 Neuberger Berman funds based on 23 separate investment
portfolios that span the entire range of the firm's investment strategies,
43
<PAGE>
and we advised or subadvised 15 mutual funds sponsored by third parties. The
assets under management in the Neuberger Berman funds and the advised or
subadvised funds grew at a compound annual rate of 26.2% between December 31,
1994 and June 30, 1999.
The following table shows assets under management for the Neuberger Berman
funds and the funds sponsored by third parties that are advised or subadvised by
Neuberger Berman, as well as sales of fund shares (net of redemptions) for the
Neuberger Berman funds:
<TABLE>
<CAPTION>
AS OF OR FOR THE SIX
AS OF OR FOR THE YEAR ENDED DECEMBER MONTHS ENDED JUNE
--------------------------------------------------------- -----------------------
1994 1995 1996 1997 1998 1998 1999
--------- ---------- ---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
(IN MILLIONS)
ASSETS UNDER MANAGEMENT:
Equity funds...................... $ 5,471 $ 9,772 $ 13,282 $ 19,097 $ 18,599 $ 21,808 $ 17,880
Balanced funds.................... 179 203 173 162 178 180 164
Fixed income funds................ 933 953 809 789 858 825 805
Money market funds................ 731 886 1,048 1,136 1,628 1,454 1,985
Total........................... $ 7,314 $ 11,814 $ 15,312 $ 21,184 $ 21,263 $ 24,267 $ 20,834
(IN MILLIONS)
NET NEW SALES OF FUND SHARES........ $ 699 $ 2,187 $ 1,590 $ 2,419 $ (788) $ 1,031 $ (2,333)
</TABLE>
S&P 500 returns exceeded 20% per year during each of 1995, 1996, 1997 and
1998. This extraordinary performance led to rapid growth for the mutual fund
industry in general and for Neuberger Berman in particular. Throughout this
period, however, growth stocks generally outperformed value stocks and large
capitalization stocks generally outperformed medium and small capitalization
stocks. These factors were especially pronounced in 1998. As a result, new
investments in mutual funds flowed increasingly into large capitalization growth
stock funds and large capitalization index funds that attempted to match the
performance of the major market averages. Given our primary focus on value-style
mutual funds, this trend, which continued during the first half of 1999, has
been unfavorable for us.
Specifically, Neuberger Berman Guardian Portfolio, a large capitalization
value fund and our largest mutual fund portfolio, performed poorly relative to
other value funds from December 31, 1995 through September 30, 1998 and
significantly underperformed the S&P 500 and large capitalization growth styles
in 1998.
At December 31, 1995, Neuberger Berman Guardian Portfolio had assets of $5.3
billion, representing 45% of Neuberger Berman mutual fund assets, and at June
30, 1999 had assets of $5.5 billion, representing 26% of Neuberger Berman mutual
fund assets. In addition, Neuberger Berman Partners Portfolio and Neuberger
Berman Genesis Portfolio, which each had produced favorable returns in 1996 and
1997, had below-average years in 1998.
These factors resulted in a loss of assets under management by our mutual
fund business beginning in mid-1998. The sharp downturn in the stock market in
the late summer and fall of 1998 accelerated these outflows. In response, we
have added several experienced portfolio managers to our existing staff and
broadened our mutual fund product line as follows:
- In September 1998, we hired a seasoned portfolio manager with 17 years of
investment experience, including 6 years managing a large capitalization
value fund, to co-manage Neuberger Berman Guardian Portfolio, which had
been most severely hit by net outflows. Since the beginning of the fourth
quarter 1998, the performance of this portfolio has improved
significantly, and its volatility has decreased.
- Another portfolio manager with 17 years of investment experience joined
the mid-cap value group. He and two other portfolio managers co-manage
Neuberger Berman Partners Portfolio, which has performed well over the
nine months ended June 30, 1999. This team also manages Neuberger Berman
44
<PAGE>
Regency Portfolio, a mid-cap value mutual fund product launched in June
1999.
- A third seasoned portfolio manager joined our growth equity group in
Boston, where he co-manages Neuberger Berman Millennium Portfolio. That
product, which began operations in October 1998, has expanded our product
line in the small-cap growth area, and has delivered strong performance.
We also continue to add analytical strength to our growth team in Boston.
The Neuberger Berman fund shareholders appear to have recognized these
changes, and the level of mutual fund share redemptions has slowed considerably.
EXPANSION OF THE MUTUAL FUND BUSINESS. Our core strategy is to increase
mutual fund assets under management. We are focused on targeting different
segments of the investor population and offering products and services specific
to their needs. We will continue to introduce new product offerings to meet the
needs of our mutual fund shareholder base. Furthermore, we will continue to
promote our brand name through national advertising and promotional activities
to reach new mutual fund shareholders.
Neuberger Berman fund shares are made available to investors through
multiple channels and strategic alliances.
- DIRECT 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.
- DEFINED CONTRIBUTION PLANS. As of June 30, 1999, we had strategic
alliances with 77 administrators of defined contribution plans (such as
401(k), 403(b) and nonqualified deferred compensation plans). These
alliances allow Neuberger Berman, as investment adviser, and these
administrators, as recordkeepers and plan participant service providers,
to perform the task each party is best suited to carry out. The Neuberger
Berman funds have experienced significant growth through these alliances
in recent years without capital investment by us for the development and
maintenance of these administrative services. Our defined contribution
plan assets under management in mutual funds grew at a compound annual
rate of 39.0% from $1.1 billion at December 31, 1994 to $5.0 billion at
June 30, 1999.
- VARIABLE INSURANCE PRODUCTS. As of June 30, 1999, we had also developed
relationships with 38 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. These relationships included
five of the top ten sellers of variable annuities in 1998. The amount
invested directly in Neuberger Berman funds that provide investment
options for variable insurance products grew at a compound annual rate of
22.1% from $900 million at December 31, 1994 to $2.2 billion at June 30,
1999.
- MUTUAL FUND SUPERMARKETS. Neuberger Berman 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 14 such services as of June 30, 1999. These services
offer investors the opportunity to invest in a broad range of mutual funds
through a single brokerage account.
- INTERNET SALES. Through our Internet site, mutual fund investors can
access account information and buy, sell and exchange Neuberger Berman
fund shares. Our Internet site also has Neuberger Berman fund prospectuses
and applications, daily share prices, performance, articles and
educational materials for mutual fund investors. A portion of the Internet
site contains information for investment professionals.
45
<PAGE>
- OTHER INTERMEDIARIES. As of June 30, 1999, Neuberger Berman fund shares
were also sold through 35 broker-dealers and 23 banks.
In our strategic alliances with these third parties, we generally pay the
third parties for recordkeeping, sub-accounting or other services that they
perform with respect to assets that are invested either directly or indirectly,
in the Neuberger Berman Funds.
ADDITIONAL SERVICES TO MUTUAL FUNDS. We provide a range of additional
services to our own Neuberger Berman funds, as well as to mutual funds sponsored
by third parties.
- SUB-ADVISORY SERVICES. We began providing subadvisory services to mutual
funds that are managed or sponsored by third parties in 1994. Since
entering this business, the assets under management that we subadvise have
grown to $1.7 billion. Since May 1998, we became subadviser to ten new
funds which we expect to provide continued growth. Of these new funds,
five were load funds, which provide us with the opportunity to access new
distribution channels. Our institutional sales force is focusing on
subadvisory services as a potential area of continued growth.
- ADMINISTRATIVE AND BROKERAGE SERVICES. In addition to investment advisory
and sub-advisory fees, we also generate 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 47% of the commissions paid by the Neuberger Berman
funds for the six months ended June 30, 1999 were paid to us for executing
listed equity trades as broker pursuant to Rule 17e-1 under the Investment
Company Act.
SERVICES TO AND COMMUNICATIONS WITH MUTUAL FUND INVESTORS. We continue to
take steps to enhance the quality and range of services provided to our mutual
fund investors.
- FUND ADVISORY SERVICE. We launched Fund Advisory Service in July 1999,
designed for the affluent shareholder/ prospect base and the retirement
market. This nondiscretionary investment advisory service offers
professional advice to mutual fund investors seeking to build and monitor
a customized portfolio of mutual funds from well-known fund groups,
including Neuberger Berman funds and mutual funds sponsored by third
parties. It also provides these investors consolidated statements,
"one-stop" transactions and a variety of mutual fund investment options.
We intend to market this service through our internal mutual fund
shareholder base, intra-company client referrals, advertising, Internet
and public relations efforts.
- SHAREHOLDER COMMUNICATIONS. The firm recently redesigned and simplified
the Neuberger Berman fund prospectuses and unified its corporate identity
across our mutual fund distribution channels. We intend next to redesign
and simplify our mutual fund annual reports, newsletters and account
applications in order to communicate more effectively with our retail
shareholders.
- CALL CENTER TECHNOLOGY. Shareholder service has recently been enhanced by
call center technology that equips shareholder servicing representatives
with a suite of integrated applications. These applications are designed
to permit our representatives to process transactions more efficiently,
thereby increasing their productivity and shareholder satisfaction. These
technological enhancements will provide comprehensive information on our
shareholders, enabling our shareholder servicing representatives to better
address the needs of the caller and to identify potential opportunities to
sell additional mutual fund shares.
MASTER-FEEDER STRUCTURE. The Neuberger Berman funds are organized in a
master-feeder structure in which, as of
46
<PAGE>
June 30, 1999, shares of 41 feeder funds, invested in 23 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 be adapted through separate contractual
arrangements to address the particular distribution, administration or other
services requirements that may be appropriate for different groups of investors.
This structure allows us to achieve certain economies of scale, operating
efficiencies and marketing flexibility. We believe that the recent growth in
assets of the Neuberger Berman funds may be attributed in part to the
flexibility and efficiency of our master-feeder structure, which we established
in 1993. For example, our defined contribution plan assets under management in
mutual funds grew at a compound annual rate of 39.0% from $1.1 billion at
December 31, 1994 to $5.0 billion at June 30, 1999. The diagram below shows the
master/feeder structure for certain Neuberger Berman fund equity products, and
the additional channels now available compared to our historical dependence on
direct sales of our mutual funds.
NEUBERGER BERMAN MASTER/FEEDER STRUCTURE
(EXAMPLE USING CERTAIN EQUITY PRODUCTS):
[LOGO]
INSTITUTIONAL ASSET MANAGEMENT
Neuberger Berman manages domestic, international and global equity,
balanced, fixed income and cash management separate account portfolios for over
250 U.S. institutional clients, including but not limited to:
- defined benefit and defined contribution plans for corporations and
municipalities;
- Taft-Hartley plans;
- insurance companies;
- endowments and foundations; and
- hospital and health care organizations.
47
<PAGE>
The following table shows, for our institutional asset management business,
assets under management and number of accounts:
<TABLE>
<CAPTION>
AS OF THE
SIX MONTHS ENDED
AS OF THE YEAR ENDED DECEMBER JUNE
----------------------------------------------------- --------------------
1994 1995 1996 1997 1998 1998 1999
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS UNDER MANAGEMENT (IN MILLIONS): (1)
Equity............................................ $ 5,904 $ 7,512 $ 8,162 $ 9,113 $ 7,798 $ 8,838 $ 7,385
Fixed income...................................... 4,076 6,066 5,250 5,161 5,988 5,494 4,884
Cash management................................... 2,839 2,173 2,198 953 962 1,045 1,282
Total......................................... $ 12,819 $ 15,751 $ 15,610 $ 15,227 $ 14,748 $ 15,377 $ 13,551
Number of accounts.................................... 459 486 471 498 492 510 491
</TABLE>
- ------------------------
(1) Balanced accounts are reflected in their equity and fixed income components.
STRATEGIES FOR THE INSTITUTIONAL ASSET MANAGEMENT BUSINESS. Our
institutional equity accounts are predominantly invested in value stocks. The
pronounced outperformance of growth stocks in 1998, coupled with some managed
accounts that underperformed value benchmarks, has led to a loss of assets.
Nonetheless, we believe that our strategy of diversifying our product line,
coordinating our selling efforts and separating our direct sales and client
servicing teams has positioned the firm for future growth in institutional asset
management.
- DIVERSIFICATION OF INVESTMENT STYLES AND EXPANDED SALES THROUGH
CONSULTANTS. A significant portion of our institutional accounts is
attributable to relationships with pension consulting firms. These
consultants typically evaluate investment advisers based on their
classification of investment styles which generally include various
methods of equity investing and market capitalization ranges. We have
diversified the investment styles of our advisory services offered to
institutional investors, and we currently offer equity products employing
small-cap, mid-cap and large-cap value investing styles, and within the
past three years have added small-cap and mid-cap growth investing styles.
We entered the fixed income business in 1983. We manage fixed income
accounts using several different investment strategies for our clients,
including cash management portfolios, limited maturity portfolios,
municipal bonds, broad investment grade portfolios, and opportunistic core
and international portfolios. We have recently added a high yield
capability. As a stand alone business the fixed income group adds a degree
of stability and diversification to our equity assets. Performance for
many of our strategies has been extremely competitive. Cross-selling
efforts between our fixed income and equity capabilities have helped us
attract and retain clients.
There is generally a lead time between the development of a particular
investment capability and its acceptance and subsequent recommendations by
consultants. Since certain capabilities, including growth equity and high
yield fixed-income, have been introduced to consultants only recently, we
believe that sales may increase as these capabilities become recognized
and accepted by consultants. Since January 1, 1998, we added accounts from
institutional investors that were advised by a total of 18 pension
consulting firms.
- COORDINATED DIRECT SELLING EFFORTS. Our institutional sales group pursues
an intensive direct calling effort focused on plan sponsors. These sales
efforts to institutional investors have traditionally been pursued
independently of our sales activities related to the Neuberger
48
<PAGE>
Berman funds. Because institutional investors, particularly defined
contribution plans, are now an important source of sales by mutual funds,
we have coordinated previously separate sales activities for institutional
and mutual fund investors under common leadership.
- SEPARATION OF SALES AND CLIENT SERVICING TEAMS. In addition, we have
recently separated our institutional sales team from our client servicing
team. As third parties become a more significant part of the mutual fund
business, we have established a separate client servicing team aimed at
direct contact with the ultimate investor. We believe that this separation
of individual responsibility will enhance our abilities both to increase
the sales of an expanded product line and to better service our clients.
TRUST SERVICES. Our trust company subsidiaries enable us 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
recordkeepers and plan sponsors, and distribution of funds. Services are also
provided to non-profit organizations for 403(b) and other retirement plans.
BROKERAGE. Approximately 44% of the commissions paid by institutional
clients for the six months ended June 30, 1999 were paid to Neuberger Berman for
executing listed equity trades as broker.
WRAP FEE MANAGEMENT
Neuberger Berman acts as investment adviser to more than 5,500 accounts
through nine wrap fee programs sponsored by third party banks and brokerage
firms. Wrap fee programs -- which are 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, recordkeeping and reporting.
Prior to 1996, our 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, we added Morgan Stanley Dean Witter to our existing
relationships and in 1998, joined the fiduciary services wrap program of Salomon
Smith Barney. As a result, we now have relationships with three of the four
largest sponsors of wrap fee programs and have begun to offer through these wrap
fee programs a range of equity products, including mid-cap and large-cap value
products and mid-cap growth products. We believe that these developments offer
the opportunity for significant growth through increased participation in wrap
fee programs. We maintain a national sales and service force organized
specifically for these programs.
The following table shows, for our wrap fee business, assets under
management and number of accounts:
<TABLE>
<CAPTION>
AS OF THE
SIX
MONTHS
ENDED
AS OF THE YEAR ENDED DECEMBER JUNE
----------------------------------------------------- ---------
<S> <C> <C> <C> <C> <C> <C>
1994 1995 1996 1997 1998 1998
--------- --------- --------- --------- --------- ---------
ASSETS UNDER MANAGEMENT (IN MILLIONS):
Equity.................................................... $ 9 $ 36 $ 126 $ 255 $ 389 $ 371
Balanced.................................................. 623 688 725 775 674 747
Fixed income.............................................. 535 544 537 517 608 521
Total................................................. $ 1,167 $ 1,268 $ 1,388 $ 1,547 $ 1,671 $ 1,639
Number of accounts............................................ 4,918 4,511 4,685 4,842 5,325 5,268
<CAPTION>
<S> <C>
1999
---------
ASSETS UNDER MANAGEMENT (IN MILLIONS):
Equity.................................................... $ 491
Balanced.................................................. 639
Fixed income.............................................. 745
Total................................................. $ 1,875
Number of accounts............................................ 5,567
</TABLE>
49
<PAGE>
PROFESSIONAL SECURITIES SERVICES
Neuberger Berman generates additional income by marketing professional
securities services to third party investment advisers and professional
investors. Because these services are based upon the capabilities and resources
developed for our other asset management businesses, we can generally provide
these services at modest incremental cost.
The net revenue after interest expense for the Professional Securities
Services business for the year ended December 31, 1998 was $77.9 million. This
is made up of professional investor clearing services, 53%, research sales, 24%,
and other activities, 23%. Net revenue after interest expense for the six months
ended June 30, 1999 was $38.8 million in total. This is comprised of
professional investor clearing services, 52%, research sales, 27%, and other
activities, 21%.
PROFESSIONAL INVESTOR CLEARING SERVICES. Neuberger Berman has been providing
professional investor clearing services for over 30 years. As of June 30, 1999,
Neuberger Berman provided prime brokerage to 48 private investment partnerships,
registered investment advisers and family offices and correspondent clearing
services to 12 introducing brokers.
- These services include trade execution, custody, clearance and settlement,
margin financing and the borrowing of securities to meet short sale
obligations, portfolio reporting and consulting advice regarding
communications and information technology required to operate a small
financial concern. We also provide certain clients use of a fully-equipped
Neuberger Berman office facility.
- These services are actively marketed through select market channels. We
also seek to cross-sell certain of the firm's other services, including
research sales and trust and custody services.
These services resulted in net revenues after interest expense of $41.3
million for the year ended December 31, 1998 and $20.1 million for the six
months ended June 30, 1999. These net revenues consisted primarily of
commissions, clearance fees and net interest income.
RESEARCH SALES. Our centralized research department regularly prepares and
updates research reports for our Private Asset Management and our Mutual Fund
and Institutional businesses. Twelve sales professionals in our research sales
group make these research reports available to almost 200 third-party investment
managers. If these third-party managers decide to buy or sell securities based
on this research, they usually place their trades through us, although they have
no obligation to do so. Our research sales group includes seven traders who
execute these brokerage transactions. Through our corporate relationships, we
participate in public offerings of securities (we do not participate in such
offerings, however, for our advisory clients).
These efforts resulted in commissions and other income of $19.0 million for
the year ended December 31, 1998 and $10.5 million for the six months ended June
30, 1999.
OTHER ACTIVITIES. Professional Securities Services also includes the
following additional activities:
- As of June 30, 1999, we acted as market maker for almost 200 securities
traded on the over-the-counter market, buying or selling such securities
as principal. We impose strict limits on our trading desk and individual
traders to limit risk. Our monthly average net long positions in our
market making activities were $1.4 million during the year ended December
31, 1998 and $1.8 million during the six months ended June 30, 1999.
- We provide custody and record keeping services to clients of our three
trust companies.
- We generate additional net revenue after interest expense by managing cash
available to us as a result of our broker-dealer activities.
50
<PAGE>
These activities resulted in principal transactions in securities,
administrative fees and net interest income of $17.6 million for the year ended
December 31, 1998 and $8.2 million for the six months ended June 30, 1999.
The following table shows our net revenues after interest expense derived
from our Professional Securities Services business:
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS
FOR THE YEAR ENDED DECEMBER ENDED JUNE
----------------------------------------------------- --------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1994 1995 1996 1997 1998 1998 1999
--------- --------- --------- --------- --------- --------- ---------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
NET REVENUES AFTER INTEREST EXPENSE:
Administrative fees............................... $ -- $ -- $ 26 $ 706 $ 1,468 $ 304 $ 773
Commissions....................................... 20,640 23,498 26,152 27,188 30,912 13,745 15,384
Net interest income............................... 11,473 14,495 21,891 26,645 24,858 12,513 10,076
Clearance fees.................................... 5,925 7,893 8,152 8,332 11,311 4,886 5,214
Other income...................................... 2,757 11,031 12,620 10,381 9,310 4,430 7,392
Total......................................... $ 40,795 $ 56,917 $ 68,841 $ 73,252 $ 77,859 $ 35,878 $ 38,839
</TABLE>
INTERNET STRATEGY
We view Internet technology and electronic commerce as powerful forces that
will create new opportunities to enhance our existing lines of business as well
as develop new business opportunities for the firm. At the present time, our
website delivers critical information and account services to our varied client
base. For example, our direct mutual fund clients have the ability to query
their account, conduct transactions, obtain timely fund data and calculate
hypothetical savings plans for college and retirement. Our institutional clients
and intermediaries have password secured areas where proprietary research
information, quarterly portfolio commentaries and daily account information can
be obtained.
INFORMATION TECHNOLOGY
Technology plays a vital role in the initiatives of our various businesses.
We are firmly committed to the ongoing use of technology throughout our
organization, whether developed internally or purchased from quality vendors.
Our Information Services department has grown to comprise more than 10% of our
employees as of June 30, 1999. Many significant systems and software have been
deployed over the years. We have developed a staff with depth and a valuable
understanding of our businesses. Our mission is to provide quality, responsive,
information and technological support for services that can be broadly
categorized as:
- enhancing client service;
- enabling informed money management decisions; and
- facilitating overall efficiency and control.
We are constantly working closely with our portfolio managers to provide
information that can be tailored to meet the needs of a diverse client base.
Over the years many systems have been purchased or developed enabling our
portfolio managers to make informed decisions. Working closely with a major
market data vendor, we were one of the first firms to enable portfolio managers
to have secure access to their accounts and market data information, on a real
time basis, while traveling away from the office. We have just finished
replacing our physical research library with a gateway on our Intranet internal
website, called NBiPortal. The customizable application enables our portfolio
managers and research staff to obtain individual security profiles, opinions,
analyses, message boards, regulatory filings and other information from over 100
Internet sites.
In addition, we have enhanced our mutual fund call center technology to
equip our shareholder servicing representatives with integrated applications
that are expected to enhance productivity and shareholder satisfaction.
51
<PAGE>
Technology has been a key factor in allowing certain businesses of Neuberger
Berman to grow efficiently. For example, our back office clearing operations are
now processing more than twice the number of trades per year processed in 1992
with minimal staff additions.
COMPETITION
The investment management business is intensely competitive, with
competition based on a variety of factors including:
- the range of products offered;
- brand recognition and business reputation;
- investment performance;
- the continuity of client relationships and of assets under management;
- the quality of service provided to clients;
- the level of fees and commissions charged for services in response to
competitive conditions;
- the level of commissions and other compensation paid;
- the level of expenses paid to financial intermediaries related to
administration and/or distribution; and
- financial strength.
We compete in all aspects of our business with a large number of investment
management firms, commercial banks, investment banks, broker-dealers, insurance
companies and other financial institutions. Several factors serve to increase
our competitive risks:
- A number of our competitors have greater capital and other resources, and
offer more comprehensive lines of products and services, than we do.
- 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 our competitors.
- There are relatively few barriers to entry by new investment management
firms, and the successful efforts of new entrants into our various lines
of business, including major banks, insurance companies and other
financial institutions, have resulted in increased competition.
- Our competitors are seeking to expand market share in the products and
services we offer or intend to offer in the future.
- The financial intermediaries who make available certain of our products
also make available numerous competing products, including products
sponsored by the firms that employ such financial intermediaries.
We expect that other industry participants will from time to time seek to
recruit our investment professionals and other employees away from us. The loss
of key professionals could have a material adverse effect on us.
At the end of 1998, there were approximately 7,500 registered open-end
investment companies, of varying sizes and investment policies. The shares of
such funds are currently being offered to the public both on a load basis (that
is, subject to a sales commission) and no-load basis (that is, not subject to a
sales commission). 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.
In addition to competition from other mutual fund managers and investment
advisers, Neuberger Berman and the mutual fund industry generally compete with
investment alternatives offered by insurance companies, commercial banks,
broker-dealers and other financial institutions.
52
<PAGE>
REGULATION
Our 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. The securities and commodities industry is one
of the nation's most 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 self-regulatory
organizations. These self-regulatory organizations include all the national
securities and commodities exchanges and the NASD. Subject to approval by the
SEC and the Commodity Futures Trading Commission, the self-regulatory
organizations adopt rules that govern the industry and conduct periodic
examinations of the operations of Neuberger Berman, LLC and Neuberger Berman
Management Inc. In addition, these subsidiaries are subject to regulation under
the laws of the 50 states, the District of Columbia and certain foreign
countries in which they are registered to conduct securities, investment
banking, insurance or commodities business.
Both Neuberger Berman, LLC and Neuberger Berman Management Inc. are
registered as investment advisers with the SEC. As registered advisers, each is
subject to the requirements of the Investment Advisers Act, and the SEC's
regulations thereunder. Such requirements relate to, among other things,
recordkeeping 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 Neuberger
Berman, LLC and Neuberger Berman Management Inc. and the mutual funds managed by
Neuberger Berman 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.
Neuberger Berman, LLC is registered with the Commodity Futures Trading
Commission as a commodity pool operator, commodity trading advisor and futures
commission merchant. Neuberger Berman, LLC's commodity futures and options
activities are also regulated by the National Futures Association. Neuberger
Berman, LLC limits its futures and options activities to those permitted by the
Commodity Futures Trading Commission 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, recordkeeping 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, Neuberger Berman, LLC and Neuberger Berman
Management Inc. are each subject to certain net capital requirements under the
Securities Exchange Act of 1934; Neuberger Berman, LLC is also a member of the
New York Stock Exchange. 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. Neuberger Berman, LLC and
Neuberger Berman Management Inc. 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.
53
<PAGE>
Neuberger Berman, LLC'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. Neuberger Berman Trust Company of
Florida, a Florida corporation authorized to engage in trust business chartered
under the Florida Banking Law, is subject to oversight by the Comptroller of the
Department of Banking and Finance of the State of Florida.
In addition to being regulated in the United States, our business is subject
to regulation by various foreign governments and regulatory bodies. Neuberger
Berman, 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
investment business, including regulatory capital, sales and trading practices,
use and safekeeping of client funds and securities, recordkeeping, margin
practices and procedures, registration standards, reporting and disclosure. To
the extent that Neuberger Berman 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
self-regulatory organizations or changes in the interpretation or enforcement of
existing laws and rules may adversely affect our manner of operation and
profitability. Our businesses may be materially affected not only by regulations
applicable to us as an investment adviser or broker-dealer, but also by
regulations of general application.
LEGAL MATTERS
In the normal course of business, we are subject to various legal
proceedings. However, in management's opinion, there are no legal proceedings
pending against us or any of our subsidiaries that would have a material adverse
effect on our financial position, results of operations or liquidity.
INTELLECTUAL PROPERTY
We regard the Neuberger Berman name as material to our business and have
made applications for trademark registrations of the name "Neuberger Berman". We
currently hold trademark registrations of the name "Neuberger & Berman" and
trademark registrations relating to the Neuberger Berman funds.
OFFICES
Our executive office is located in leased office space at 605 Third Avenue,
New York, New York. We also have leased premises at 55 Water Street and at 600
Third Avenue, New York, New York. A growth equity portfolio management group
operates alongside sales personnel in office space leased in Boston,
Massachusetts. We have also leased premises for regional sales offices in
Atlanta, Georgia; Chicago, Illinois; Los Angeles and San Francisco, California;
Dallas, Texas; Columbia, Maryland; and Miami and West Palm Beach, Florida.
Neuberger Berman Trust Company of Delaware leases office space in Wilmington,
Delaware. We do not own any real property. We consider these arrangements to be
adequate for our present needs.
EMPLOYEES
As of June 30, 1999, we employed 1,066 people (1,136 including principals).
None of our employees are subject to any collective bargaining agreements. We
believe we have good relations with our employees.
54
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Set forth below is information concerning our directors and executive
officers. We anticipate appointing additional directors over time who will not
be employees of Neuberger Berman or affiliated with management.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------- --- ------------------------------------------------------------
<S> <C> <C>
Lawrence Zicklin....... 63 Chairman and Director
Richard A. Cantor...... 66 Vice Chairman and Director
Marvin C. Schwartz..... 58 Vice Chairman and Director
Jeffrey B. Lane........ 57 President, Chief Executive Officer and Director
Executive Vice President, Chief Investment Officer and
Michael M. Kassen...... 46 Director
Executive Vice President, Chief Administrative Officer and
Robert Matza........... 43 Director
Heidi S. Steiger....... 46 Executive Vice President and Director
Peter E. Sundman....... 40 Executive Vice President and Director
Philip Ambrosio........ 43 Senior Vice President and Chief Financial Officer
</TABLE>
All directors are elected annually to serve until our next meeting of
stockholders and thereafter until their successors are elected and qualified.
Executive officers are appointed by and serve at the pleasure of our board of
directors. A brief biography of each director and executive officer follows.
LAWRENCE ZICKLIN is non-executive Chairman of the Board of Directors of
Neuberger Berman Inc. Mr. Zicklin is the Managing Principal of Neuberger Berman,
LLC and has been a Director of Neuberger Berman Management Inc. since December
1974. He joined our organization in April 1969.
RICHARD A. CANTOR is non-executive Vice Chairman and a Director of Neuberger
Berman Inc. Mr. Cantor is the Executive Principal of Neuberger Berman, LLC and
has been a Director of Neuberger Berman Management Inc. since March 1988 and its
Chairman since August 1991. He joined our organization in October 1973.
MARVIN C. SCHWARTZ is Vice Chairman and a Director of Neuberger Berman Inc.
Mr. Schwartz joined our organization in January 1961. He is a senior portfolio
manager. Mr. Schwartz was a Director of Neuberger Berman Management Inc. from
December 1990 to April 1996.
JEFFREY B. LANE is President, Chief Executive Officer and a Director of
Neuberger Berman Inc. Since joining our organization in July 1998, Mr. Lane has
served as Chief Administrative Officer of Neuberger Berman, LLC. Mr. Lane is
also a Director of Neuberger Berman Trust Company. He was previously employed by
Primerica Corp. (subsequently known as Travelers Group Inc.) 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 (then a subsidiary of Primerica) from February 1991 through December
1995, and Vice Chairman of Travelers Group from January 1996 to July 1998.
MICHAEL M. KASSEN is Executive Vice President, Chief Investment Officer and
a Director of Neuberger Berman Inc. Mr. Kassen joined our organization in June
1990. He is a senior portfolio manager. Mr. Kassen has served as a Vice
President of Neuberger Berman Management Inc. since June 1990 and a Director of
Neuberger Berman Management Inc. since April 1996.
ROBERT MATZA is Executive Vice President, Chief Administrative Officer and a
Director of Neuberger Berman Inc. Upon completion of the offerings, Mr. Matza
will become head of the Professional Securities Services business. Mr. Matza
joined our organization in April 1999 as Operations Principal. He was previously
55
<PAGE>
Vice President and Deputy Treasurer of Citigroup, Inc. (formerly known as
Travelers Group Inc.) from October 1998 to April 1999 and Vice President and
Treasurer of Travelers Group Inc. from July 1996 to October 1998. Mr. Matza was
previously employed by Lehman Brothers Inc. and Lehman Brothers Holdings Inc.
where he served in several capacities, including Chief Financial Officer and
Member of the Corporate Management Committee of Lehman Brothers Holdings Inc.
from January 1994 to July 1996, Chief Financial Officer and a Director of Lehman
Brothers Inc. from January 1994 to July 1996, and Managing Director of Lehman
Brothers Inc. from 1992 to July 1996.
HEIDI S. STEIGER is Executive Vice President and a Director of Neuberger
Berman Inc. Upon completion of the offerings, Ms. Steiger will become the head
of the Private Asset Management business. Ms. Steiger is also a Director of
Neuberger Berman Trust Company. Ms. Steiger joined our organization in January
1986, when she started the Individual Asset Management Group.
PETER E. SUNDMAN is Executive Vice President and a Director of Neuberger
Berman Inc. Upon completion of the offerings, Mr. Sundman will become head of
the Mutual Fund and Institutional business. Mr. Sundman joined our organization
in February 1988. He has served as a Senior Vice President of Neuberger Berman
Management Inc. since January 1996 and was the Director of Institutional
Services of Neuberger Berman Management Inc. from February 1988 to January 1996.
PHILIP AMBROSIO is Senior Vice President and Chief Financial Officer of
Neuberger Berman Inc. Mr. Ambrosio joined our organization in October 1983. He
has served as Controller of Neuberger Berman, LLC since April 1985 and as
Controller of Neuberger Berman Management Inc. since January 1999.
There are no family relationships between any of the executive officers or
directors of Neuberger Berman.
COMMITTEES OF THE BOARD
Our board of directors will have an Audit Committee. The Audit Committee
will consist of the Messrs. Lane and Matza and at least two directors who are
not employed by Neuberger Berman or affiliated with management. One of the
directors who is not affiliated with Neuberger Berman or management will be
chairman of the Audit Committee. The Audit Committee will:
- recommend the firm to be appointed as independent accountants to audit our
financial statements and to perform services related to the audit;
- review the scope and results of the audit with the independent
accountants;
- consider the adequacy of our internal accounting and control procedures;
and
- review any non-audit services to be performed by the independent
accountants, and consider the effect of such services on the accountants'
independence.
Our board of directors will also have a Compensation Committee. The
Compensation Committee will consist of Messrs. Lane and Matza and at least two
directors who are not employed by Neuberger Berman or affiliated with
management. One of the directors who is not affiliated with Neuberger Berman or
management will be Chairman of the Compensation Committee. The Compensation
Committee will oversee the compensation and benefits of our management and
employees.
The Compensation Committee will establish a subcommittee composed solely of
directors who are not affiliated with Neuberger Berman or management. This
subcommittee will be responsible for:
- reviewing and making recommendations as to the compensation of our Chief
Executive Officer, our four other most highly compensated executive
officers and any other individuals whose compensation the Compensation
Committee anticipates may become
56
<PAGE>
subject to Section 162(m) of the Internal Revenue Code;
- approving any awards of stock or options to those of our directors who are
employees of Neuberger Berman and to other individuals who are "officers"
of Neuberger Berman for purposes of Section 16 of the Exchange Act; and
- administering certain elements of our annual performance incentive plan
(described below).
In the remainder of this prospectus, when we refer to the board of directors or
the Compensation Committee, we are referring to our board of directors or to the
subcommittee of the Compensation Committee where Section 162(m) of the Internal
Revenue Code or Section 16 of the Exchange Act would require that action be
taken by the full board of directors or the subcommittee rather than the
Compensation Committee.
Our board of directors may from time to time establish other committees to
facilitate the management of Neuberger Berman.
COMPENSATION OF DIRECTORS
Our directors who are not officers or employees of Neuberger Berman will
receive an annual retainer fee of $25,000, payable in quarterly installments.
Directors who are officers or employees of Neuberger Berman will not receive any
additional compensation for serving as a director. We will reimburse all
directors for reasonable and necessary expenses they incur in performing their
duties as directors.
DIRECTORS STOCK INCENTIVE PLAN
Before the completion of the offerings, we will adopt a stock incentive plan
for members of our board of directors who are not employees of Neuberger Berman.
Directors who are employees of Neuberger Berman will not be eligible to
participate in the directors stock incentive plan. The following is a
description of the material terms of the directors stock incentive plan. You
should, however, refer to the exhibits that are a part of the registration
statement for a copy of the directors stock incentive plan. See "Available
Information".
DISCRETIONARY AWARDS. Our board of directors may award an eligible director
shares of common stock or options to purchase shares of common stock, which, in
each case, may be fully vested at the time of grant or may be subject to such
vesting or other restrictions, and having such other terms and conditions, as
the board of directors determines appropriate.
DEFERRED COMPENSATION. The directors stock incentive plan will permit an
eligible director to elect to defer receipt of all or any part of his or her
annual retainer fee payable with respect to a calendar year following the year
in which the election is made. A director who elects to defer fees will be
credited with a number of "phantom" shares of common stock equal to the amount
of the deferred fee divided by the fair market value per share of common stock
on the date the fee would otherwise have been payable (rounded to the nearest
100th of a share). If any dividends other than stock dividends are paid on the
common stock, the director will be credited with additional notional shares of
common stock equal to the dividend that would have been paid on the director's
phantom shares divided by the fair market value per share of common stock on the
dividend payment date. The board of directors will adjust the number of phantom
shares credited to a director if there is a 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 (including a stock dividend).
A director who elects to defer any portion of his or her fees will also
elect whether (i) the aggregate amounts credited 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) the distribution will commence immediately
57
<PAGE>
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) the 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. A director may also elect to receive a distribution of all or any
portion of the amounts with which he or she has been credited as of a date at
least one full year after the date when he or she initially elected to defer
fees, but any director who does so will cease to be eligible to make any
additional deferrals for the two immediately following calendar years.
A director to whom phantom shares of common stock have been credited will
have only the rights of a general unsecured creditor of Neuberger Berman and
will have no rights as a stockholder of Neuberger Berman with respect to phantom
shares with which he or she has been credited until the common stock underlying
the phantom shares is delivered.
SHARE LIMITATION; ADMINISTRATIVE MATTERS; ETC. A maximum of 200,000 shares
may be issued under the directors stock incentive plan, subject to appropriate
adjustments in the event of certain corporate transactions, including
reorganizations, stock dividends and stock splits. Options awarded under the
directors stock incentive plan will generally not be assignable or transferable
other than by will or by the laws of descent and distribution, except for
certain transfers to the director's family members or to entities of which the
director or his or her family members are the sole beneficiaries or owners, and
all awards and rights will be exercisable during the life of the director only
by the director or his or her legal representative. The board of directors may
permit a director to defer the receipt of shares he or she might otherwise
receive upon exercise of an option, upon such terms and conditions as the board
of directors determines appropriate. The directors stock incentive plan will not
have a stated term. The directors stock incentive plan will be administered, and
may be amended or terminated by, the board of directors; however, no amendment
or termination of the plan may adversely affect the rights of any director
participating in the plan without his or her consent.
FEDERAL INCOME TAX CONSEQUENCES. The following is a brief description of the
material U.S. federal income tax consequences generally arising with respect to
options awarded and the deferral of fees under the directors stock incentive
plan.
The award of an option will create no tax consequences for the director
receiving the option or Neuberger Berman. When a director exercises an option,
he or she will generally recognize ordinary income equal to the difference
between the exercise price and the fair market value of the shares acquired on
the date of exercise, and Neuberger Berman generally will be entitled to a tax
deduction in the same amount. A director who defers retainer fees will generally
not recognize ordinary income with respect to deferred fees when they are so
deferred, but will generally recognize ordinary income equal to the amount of
the cash or the fair market value of shares distributed in the year in which the
cash or shares are distributed. Neuberger Berman generally will be entitled to a
deduction in an amount equal to the ordinary income recognized by the
participant.
DIRECTOR STOCK OWNERSHIP GUIDELINES
We believe that the interests of our non-employee directors should be
aligned with the interests of our stockholders. To this end, we may adopt stock
ownership guidelines for our non-employee directors that will require them to
make an investment in our common stock.
EXECUTIVE COMPENSATION
Before the offerings, our officers and other employees were employees and/or
principals of Neuberger Berman Management Inc. or Neuberger Berman, LLC. Our
executive officers, and those other individuals who were principals, were
stockholders or members of Neuberger Berman Management Inc. or Neuberger Berman,
LLC and received most of their compensation as a share of our net
58
<PAGE>
income through capital distributions and dividends. In connection with the
offerings, we undertook a study of the compensation programs and practices that
Neuberger Berman should have as a public company. We obtained the services of
independent compensation consultants who provided independent analyses,
viewpoints and guidance with respect to prevailing compensation levels and
practices of other comparable public firms.
Based upon this study, we sought to establish a compensation system for our
executive officers and other key employees that would:
- provide for total compensation that is comparable to our competitors, to
enable us to recruit and retain talented individuals who have been, and
will be in the future, critical to our long-term growth and profitability;
and
- enhance our growth and profitability as a whole and motivate and reward
individual performance by providing compensation that includes a
significant variable element that takes into account, as appropriate, our
overall success and achievement of our strategic objectives, as well as
individual performance.
We also took into account available data relating to comparable firms.
In general, compensation for our executive officers and other key employees
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 our long-term
incentive plan.
To implement certain of our compensation arrangements, before we complete
the offerings, we will adopt an annual performance incentive plan, a deferred
compensation plan, a long-term incentive plan and a defined contribution plan.
The material terms of these plans are described below. You should, however,
refer to the exhibits that are a part of the registration statement for copies
of these plans. See "Available Information".
We may repurchase shares of common stock on the open market from time to
time in order to minimize the potential dilutive effect of equity awards under
these plans, to the extent we have available cash.
ANNUAL PERFORMANCE INCENTIVE PLAN
Each year the Compensation Committee will establish target incentive bonuses
for participants in the annual performance incentive plan and will select the
performance criteria for that year for a participant or group of participants
from among the following:
- earnings per share growth;
- revenue growth;
- growth in assets under management;
- controlling expenses; and/or
- relative investment and/or financial 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.
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.
Bonuses will generally 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, and will
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generally be payable only if the participant remains employed with Neuberger
Berman. If a participant in the plan dies or becomes disabled prior to the
payment of the bonus with respect to the year in which he or she dies or becomes
disabled, the Compensation Committee may award to the participant (or his or her
estate or legal representative) all or such pro rata portion of the bonus that
would otherwise have been payable as it determines appropriate.
The Compensation Committee may require that a portion of a participant's
annual incentive bonus will be payable in restricted stock or options awarded
under our long-term incentive plan. Shares of restricted stock will generally
vest over five years, and may be awarded at a discount from fair market value at
the time of award in order to reflect the impact on the value of the stock of
the restrictions and the risk of forfeiture related to this vesting requirement.
Dividends will be payable on unvested shares of restricted stock.
The annual performance incentive plan will be administered by our board of
directors or the Compensation Committee, which may delegate its authority except
to the extent that it relates to the compensation of our Chief Executive
Officer, our four other most highly compensated executive officers or any other
individual whose compensation the board of directors or the Compensation
Committee believes may become subject to Section 162(m) of the Code. The
determination of the Compensation Committee on all matters relating to the
annual performance incentive plan will be final and binding.
The annual performance incentive plan will generally be effective for 1999
and each of calendar years 2000, 2001 and 2002. Our board of directors or the
Compensation Committee may at any time amend, suspend, discontinue or terminate
the annual performance incentive plan.
FEDERAL INCOME TAX CONSEQUENCES. The following is a brief description of the
material U.S. federal income tax consequences generally arising with respect to
the annual performance incentive plan.
A participant in the annual performance incentive plan will generally
recognize ordinary income equal to the cash bonus he or she receives in the year
it is paid or made available, and we will generally be entitled to a deduction
of the same amount in the year to which the bonus relates. (If a portion of a
participant's annual bonus is paid in restricted stock or options under the
long-term incentive plan, the federal income tax consequences to the participant
and we will generally be as described below under the description of the
long-term incentive plan.)
Section 162(m) of the Internal Revenue Code generally limits the ability of
a public corporation to deduct compensation greater than $1,000,000 paid with
respect to a particular year to an individual who is, on the last day of that
year, the corporation's chief executive officer or one of its four other most
highly compensated executive officers, other than compensation that is
"performance related" within the meaning of Section 162(m). Under a special rule
that applies to corporations that become public through an initial public
offering, this limitation generally will not apply to compensation that is paid
pursuant to the annual performance incentive plan before the first meeting of
our stockholders in 2003 at which directors will be elected.
DEFERRED COMPENSATION PLAN
In general, the deferred compensation plan will permit participants in our
annual performance incentive plan, as well as other employees selected by the
Compensation Committee to participate in the deferred compensation plan, to
elect to defer receipt of all or any part of their annual incentive bonus or a
portion of their salary payable with respect to the calendar year following the
year in which the election to participate is made. Amounts that a participant
defers under the plan will, at the election of the participant be credited to
(i) a "stock account" and will be deemed to be invested in phantom shares of
common stock and/or (ii) one or more "phantom investment fund accounts" and will
be deemed invested in one or more of the mutual funds selected by
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the Compensation Committee from among those mutual funds that we manage.
A participant whose deferred compensation is credited to a stock account
will be credited with a number of phantom shares of common stock equal to the
amount of the deferred compensation so credited divided by the fair market value
per share of common stock on the date the compensation would otherwise have been
payable (rounded to the nearest 100th of a share). If any dividends other than
stock dividends are paid on the common stock, the participant's stock account
will be credited with additional phantom shares of common stock equal to the
dividend that would have been paid on the phantom shares in his or her stock
account divided by the fair market value per share of common stock on the
dividend payment date. The board of directors will adjust the number of phantom
shares credited to a participant's stock account if there is a 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 (including a stock dividend).
Subject to such rules and administrative procedures as the Compensation
Committee may establish from time to time, participants will be able to request
how their deferred compensation will be deemed invested from among the stock
account and the available phantom investment funds, although the Compensation
Committee will not be required to follow any such request.
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 accounts 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 a distribution of all or a portion of
the amounts credited to his or her accounts as of a date at least one full year
after the date he or she initially elected to defer compensation, but any
participant who does so will cease to be eligible to make any additional
deferrals for the two immediately following calendar years. In addition, the
Compensation Committee may permit a participant to elect to receive a
distribution of all or a portion of the amounts credited to his or her accounts
if the participant suffers an unforeseen personal hardship.
If a participant does not make a distribution election, or if the election
does not apply to the entire balance in the accounts, the balance in the
participant's accounts 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 the 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 accounts 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. A
participant's interest or rights in the deferred compensation plan will
generally not be assignable or transferable other than by will or by the laws of
descent and distribution, and rights will be exercisable during the life of the
participant only by the participant or his or her legal representative.
A participant in the deferred compensation plan will have only the rights of
a general unsecured creditor of Neuberger Berman and will have no rights with
respect to his or her accounts as a stockholder of Neuberger
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Berman or of any of the mutual funds in which deferred compensation is deemed
invested.
The deferred compensation plan will be administered by the Compensation
Committee, which may delegate all or a portion of its authority. The
determination of the Compensation Committee on all matters relating to the
deferred compensation plan will be final and binding. The deferred compensation
plan does not have a fixed term. Our board of directors or the Compensation
Committee may at any time amend, suspend, discontinue or terminate the deferred
compensation plan.
FEDERAL INCOME TAX CONSEQUENCES. The following is a brief description of the
material U.S. federal income tax consequences generally arising with respect to
the deferred compensation plan. A participant will generally not recognize
ordinary income with respect to the deferred compensation when it is so
deferred, but will generally recognize ordinary income equal to the amount of
any cash distributed to the participant in the calendar year in which it is
distributed. We generally will be entitled to a deduction in an amount equal to
the ordinary income recognized by the participant.
LONG-TERM INCENTIVE PLAN
TYPES OF AWARDS. The long-term incentive plan provides for the award of (1)
stock options, including incentive stock options (within the meaning of Section
422 of the Internal Revenue Code); (2) restricted stock and restricted units;
(3) incentive stock and incentive units; and (4) deferred stock units.
ELIGIBILITY. Awards may be made to any director, officer or employee of
Neuberger Berman, including any prospective employee, and to any consultant or
advisor to Neuberger Berman selected by the Compensation Committee. The number
of employees participating in the long-term incentive plan will vary from year
to year.
SHARES SUBJECT TO THE STOCK INCENTIVE PLAN. Initially, 10,000,000 shares of
common stock will be authorized to be issued under the long-term incentive plan.
If shares subject to an award under the plan cease to be subject to such award
as a result of forfeiture or if an award otherwise terminates without a payment
being made to the participant in the form of common stock, the shares will again
be available for future award under the long-term incentive plan. If there is a
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, the Compensation Committee may make
appropriate adjustments to the type and number of shares covered by options and
other awards then outstanding under the long-term incentive plan, the exercise
price of outstanding options and the shares that remain available for award
under the plan.
LIMITATIONS ON AWARDS. The maximum number of shares of common stock with
respect to which options may be granted to any one person in 1999 is 1,000,000
and, in each fiscal year that follows, is 110% of the maximum number of shares
applicable for the preceding fiscal year.
ADMINISTRATION. The long-term incentive plan will be administered by the
Compensation Committee, which may delegate its authority except to the extent
that it relates to the compensation of our Chief Executive Officer, our four
other most highly compensated executive officers or any other individual whose
compensation the board of directors or Compensation Committee believes may
become subject to Section 162(m) of the Code. The Compensation Committee will
have the authority to construe, interpret and implement the long-term incentive
plan and any agreements evidencing any awards under the plan, and to prescribe,
amend and rescind rules and regulations relating to the plan. The determination
of the Compensation Committee on all matters relating to the long-term incentive
plan or any award agreement will be final and binding.
STOCK OPTIONS. The Compensation Committee may grant options to purchase
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shares of common stock that are either "qualified," which includes those awards
that satisfy the requirements of Section 422 of the Internal Revenue Code for
incentive stock options, or "nonqualified," which includes those awards that are
not intended to satisfy the requirements of Section 422 of the Internal Revenue
Code. Under the terms of the long-term incentive plan, the exercise price of the
options will, unless the Compensation Committee determines otherwise, not be
less than the fair market value of the common stock 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 three equal installments on
each of the second, third and fourth anniversary of the date of grant. If an
option holder ceases employment with Neuberger Berman 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 at the time of or following the date of
grant).
The Compensation Committee may permit a participant to deliver shares of
common stock to exercise an option, and may provide that, if a participant does
so when the market value of the common stock exceeds the exercise price of the
option, he or she 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 Compensation Committee may award
restricted stock and restricted units. For purposes of the long-term incentive
plan, restricted stock is an award of common stock and a restricted unit is a
contractual right to receive common stock (or cash based on the fair market
value of common stock). These 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 will generally become vested and nonforfeitable and the
restriction period will lapse pro rata on the second, third and fourth
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.
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INCENTIVE STOCK AND INCENTIVE UNITS. The Compensation Committee may also
award incentive stock and incentive units. For purposes of the long-term
incentive plan, 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). These awards will be contingent upon the
attainment, in 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 long-term incentive plan's terms, to determine the terms and conditions
of awards, including the performance objectives to be achieved during the
performance measurement period and the determination of whether and to what
degree the specified 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 performance 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 of employment.
DEFERRED STOCK. The Compensation Committee may award deferred stock units,
which confer upon a participant the right to receive shares of common stock at
the end of a specified deferral period. To the extent determined by the
Compensation Committee, and upon such terms and conditions as the Compensation
Committee may determine, a participant who elects to defer compensation under
the deferred compensation plan in a stock account may also receive supplemental
deferred stock units. 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 fifth 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.
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NONTRANSFERABILITY OF AWARDS. Awards under the long-term incentive plan
will generally not be assignable or transferable other than by will or by the
laws of descent and distribution, and all awards and rights will be exercisable
during the life of the participant only by the director or his or her legal
representative. The Compensation Committee may, upon such terms and conditions
as it determines appropriate, permit transfers to the participant's family
members or to entities of which the participant or his or her family members are
the sole beneficiaries or owners.
STATUS OF PARTICIPANTS. The participants in the long-term incentive plan
will be unsecured general creditors of Neuberger Berman. Unless otherwise
provided in an award agreement, a participant will have no rights as a
stockholder with respect to any shares covered by any award until the underlying
shares are delivered. An award will not confer on a participant any right to
continued employment. Unless otherwise required by law or determined by the
Compensation Committee, awards under the long-term incentive plan will not be
taken into account for purposes of any other compensation or benefit plan or
arrangement of Neuberger Berman.
TAX WITHHOLDING. Neuberger Berman will be entitled to withhold from any
payment any required withholding or other taxes, and may require that the
participant provide sufficient funds to Neuberger Berman to satisfy any required
withholding tax obligations before we will deliver any shares or make any other
payment to the participant. The Compensation Committee may permit a participant
to satisfy any required withholding tax obligations by delivering shares of
common stock previously owned by the participant or by withholding a number of
shares of common stock otherwise deliverable to the participant, in each case
having a fair market value at the time equal to the amount of the required
withholding taxes, and upon such other terms and conditions as the Compensation
Committee determines appropriate.
TERM AND AMENDMENT. The long-term incentive plan will have a 10 year term.
The board of directors or the Compensation Committee may amend, suspend or
terminate the long-term incentive plan. The expiration of the term of the plan,
or any amendment, suspension or termination will not adversely affect any
outstanding award held by a participant without the consent of the participant.
FEDERAL INCOME TAX CONSEQUENCES. The following is a brief description of the
material U.S. federal income tax consequences generally arising with respect to
awards under the long-term incentive plan.
The grant of an option will give rise to no tax consequences for the
participant or us. Upon exercising an option, other than an incentive stock
option, the participant will generally recognize ordinary income equal to the
difference between the exercise price and the fair market value of the shares
acquired on the date of exercise, and we generally will be entitled to a tax
deduction in the same amount. A participant generally will not recognize taxable
income upon exercising an incentive stock option and we will not be entitled to
any tax deduction with respect to an incentive stock option if the participant
holds the shares for the applicable periods specified in the Internal Revenue
Code.
With respect to other awards, upon the payment of cash or the issuance of
shares or other property that is either not restricted as to transferability or
not subject to a substantial risk of forfeiture, the participant will generally
recognize ordinary income equal to the cash or the fair market value of shares
or other property delivered. Neuberger Berman will be entitled to a deduction in
an amount equal to the ordinary income recognized by the participant.
DEFINED CONTRIBUTION PLAN
The defined contribution plan is not intended to be qualified under Section
401(a) of the Internal Revenue Code, and is not
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subject to the Employee Retirement Income Security Act of 1974.
ELIGIBILITY AND PARTICIPATION. Our board of directors or the Compensation
Committee will select the employees to participate in the defined contribution
plan.
CONTRIBUTIONS. We will make an initial irrevocable contribution to the
Defined Contribution Plan Trust, the trust underlying the defined contribution
plan, of shares of common stock at or shortly after the completion
of the offerings. We may contribute additional shares of common stock or cash to
the Defined Contribution Plan Trust from time to time in our sole discretion. We
currently intend to make ongoing contributions to the defined contribution plan
and to reallocate forfeitures under the defined contribution plan to
participants.
ALLOCATION OF CONTRIBUTIONS. An account in the name of each participant and
a separate, unallocated account to which any forfeitures of common stock will be
credited pending reallocation to participants will be established. The
Compensation Committee will designate the number of shares of common stock
allocable to the account of each participant. Any common stock remaining in the
unallocated account as of the last day of each plan year due to forfeitures and
any distributions received on common stock credited to the unallocated account
will be reallocated among the accounts of participants who are employed by us on
the last day of each plan year pro rata to each such participant's share of our
contributions, for that plan year, or on such other formulaic basis as the
Compensation Committee may determine.
VOTING OF COMMON STOCK. All shares of common stock in the Defined
Contribution Plan Trust will be voted in accordance with the Stockholders
Agreement. See "Certain Relationships and Related Transactions-- Stockholders
Agreement" for a discussion of these voting arrangements.
DIVIDENDS. Any cash dividends on shares of common stock allocated to a
participant's account will be distributed to each participant after the end of
the calendar quarter in which such dividend is received.
VESTING AND DISTRIBUTION. With respect to the initial contribution of
common stock to the defined contribution plan, the right to receive shares of
common stock allocated to a participant's account generally will become vested,
and the common stock generally will be distributable, in three equal
installments on each of the second, third and fourth anniversaries of the date
of contribution if the participant satisfies certain conditions and the
participant's employment with Neuberger Berman has not been terminated, with
certain exceptions for termination due to death or following a change in control
as described below.
With respect to contributions to the defined contribution plan other than
the initial contribution, the Compensation Committee may determine the dates on
which the right to receive common stock (or cash) allocated to a
participant's account will vest and be distributable.
ADMINISTRATION OF THE DEFINED CONTRIBUTION PLAN. The defined contribution
plan will be administered by our board of directors or the Compensation
Committee, which may delegate its authority. All determinations by the board of
directors or the Compensation Committee under the plan will be conclusive and
binding.
AMENDMENTS. Subject to limitations with respect to contributions previously
made to the defined contribution plan, our board of directors or the
Compensation Committee may modify, alter, amend or terminate the defined
contribution plan or the Defined Contribution Plan Trust. No modification or
amendment of the defined contribution plan may be made which would cause or
permit any part of the assets of the Defined Contribution Plan Trust to be used
for, or diverted to, purposes other than for the exclusive benefit of
participants or their beneficiaries, or which would cause any part of the assets
of the Defined Contribution Plan Trust to revert to or become the property of
Neuberger Berman.
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LIMIT ON LIABILITY. All distributions under the defined contribution plan
will be paid or provided solely from the assets of the Defined Contribution Plan
Trust and Neuberger Berman will have no responsibility or liability to any
participant or beneficiary relating to the common stock or other assets of the
Defined Contribution Plan Trust. The agreement establishing the Defined
Contribution Plan Trust will provide that no creditor of Neuberger Berman will
have any rights to the assets of the Defined Contribution Plan Trust.
U.S. FEDERAL INCOME TAX CONSEQUENCES. The following is a brief description
of the material U.S. federal income tax consequences generally arising with
respect to participation in the defined contribution plan. A participant in the
defined contribution plan will recognize ordinary income upon the vesting of
shares of common stock allocated to such participant's account in an amount
equal to the fair market value of the vested shares. Neuberger Berman will
generally be entitled to a deduction equal to the fair market value of the
shares at the time of the contribution in the taxable year in which the
participant recognizes income under the defined contribution plan in respect of
the vesting of shares of common stock.
CHANGE IN CONTROL.
If there is a "change in control", all outstanding awards under the
directors stock incentive plan, the long-term incentive plan and the defined
contribution plan will generally become fully vested and any restrictions or
limitations will lapse, and a participant in the deferred compensation plan will
be entitled to receive all amounts credited to his or her accounts. In addition,
we will be deemed to have satisfied any performance criteria established under
the annual incentive plan for the year in which the change in control occurs at
the target level or such higher level as our board of directors (as constituted
immediately prior to the change in control) determines appropriate.
Notwithstanding the foregoing, awards under the long-term incentive plan and the
defined contribution plan will not become fully vested and any restrictions or
limitations will not lapse as a result of a change of control if our board of
directors (as constituted immediately prior to the change in control) determines
that we will continue to honor the outstanding awards or that our successor will
grant to participants substitute awards that will have terms no less favorable
than the original awards to which they relate, and, in each case, awards held by
a participant will become fully vested, and any restrictions will lapse, if the
participant's employment is terminated following the change in control other
than for "cause" or the participant terminates his or her employment for "good
reason". Whether a participant's employment is terminated other than for cause
or the participant has terminated employment for good reason will be determined
by Neuberger Berman.
In connection with a change in control, our board (as constituted
immediately prior to the change in control) may provide that each outstanding
vested award will be canceled in exchange for a payment of cash equal to the
value of the shares covered by any outstanding award (in the case of any option,
less the exercise price for the shares covered by the option) or that the
participants will receive the shares covered by outstanding awards and, in the
case of options, have a reasonable opportunity to exercise their options upon or
in connection with the transaction giving rise to the change in control.
For these purposes, a "change in control" means the occurrence of any of the
following events:
- the members of our board of directors 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
of directors, provided that any director whose election, or nomination for
election by our stockholders, was approved by a vote of at least a
majority of those members of the board of directors then still in office
and who were members of the board of directors at the beginning of such
twenty-four calendar month period, other than as a result of a proxy
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contest, or any agreement arising out of an actual or threatened proxy
contest, will be treated as an incumbent director for these purposes;
- any "person", including a "group" (as such terms are used in Sections
13(d) and 14(d)(2) of the Securities Act), but excluding Neuberger Berman,
any subsidiary of Neuberger Berman or any employee benefit plan of
Neuberger Berman or any subsidiary of Neuberger Berman, is or becomes the
"beneficial owner" (as defined in Rule 13(d)(3) under the Securities Act),
directly or indirectly, of securities of Neuberger Berman representing 20%
or more of the combined voting power of our then outstanding securities;
- our stockholders approve a definitive agreement for the merger or other
business combination of Neuberger Berman with or into another entity, or
the sale or other disposition of all or substantially all of our assets to
any other entity, provided, in each case, that (1) a majority of the
directors of the other entity were not directors of Neuberger Berman
immediately prior to the merger transaction in question, (2) our
stockholders immediately prior to the transaction in question owned a
percentage of the voting power in the other entity that is less than
one-half of the percentage of the voting power they own in Neuberger
Berman, and (3) the transaction in question has been consummated; or
- 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 Securities Act), other than Neuberger Berman,
any subsidiary of Neuberger Berman or an employee benefit plan of
Neuberger Berman or any subsidiary of Neuberger Berman, for 20% or more of
our common stock.
A "change in control" will not be deemed to occur in the event we file for
bankruptcy, liquidation or reorganization under the United States Bankruptcy
Code.
"Cause" includes, among other things, the participant's conviction of
certain misdemeanors or felonies, violation of applicable laws and violation of
any policy of Neuberger Berman, including policies with respect to
confidentiality.
"Good reason" means a materially adverse alteration in the participant's
position or in the nature or status of the participant's responsibilities from
those in effect immediately prior to the change in control, a material reduction
in the participant's aggregate annual compensation opportunity (other than a
reduction that is part of a general reduction affecting similarly situated
employees), or certain relocations of a participant's principal place of
employment.
OTHER BENEFIT PLANS AND ARRANGEMENTS
We maintain other defined contribution plans consisting of an employee
profit-sharing plan and a money purchase pension plan covering all full-time and
qualifying part-time employees (as defined in the applicable plan) who have
completed one year of continuous service. Contributions to the plans, which in
the case of our profit-sharing plan are at our discretion, are determined
annually but do not exceed the amount permitted under the Code as a deductible
expense.
We may establish additional compensation or other benefit plans for our
employees in the future.
THE EMPLOYEE INITIAL PUBLIC OFFERING AWARDS
At or shortly after the completion of the offerings, we will make an initial
irrevocable contribution of shares of common stock to our defined
contribution plan. Dividends paid on shares allocated to participants will be
distributed currently.
We will record non-cash compensation expense of $ million related to
the initial irrevocable contribution of shares of common
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stock to the defined contribution plan. This non-cash expense will be recognized
on the date it is funded in accordance with Statement of Financial Accounting
Standards No. 87.
We will make awards under the defined contribution plan to substantially all
our employees other than the Neuberger Berman principals.
EMPLOYMENT AGREEMENT
Neuberger Berman is entering into employment agreements with each principal
who will be actively employed following the offerings, including each principal
who is an executive officer. Each employment agreement has an initial term
extending through December 31, 2000 (thereafter no set term), requires each
continuing principal to devote his or her entire working time to the business
and affairs of Neuberger Berman and generally may be terminated at any time by
either that principal or Neuberger Berman on 90 days' prior written notice.
ANTICIPATED COMPENSATION IN 2000
Neuberger Berman Inc. was formed in August 1998, and has had no business
operations or employees. Prior to the consummation of the offerings, our
executive officers were members and stockholders of Neuberger Berman, LLC and
Neuberger Berman Management Inc. and received most of their compensation as a
share of our net income through capital distributions and dividends. After the
consummation of the offerings, our executive officers will, in general, receive
compensation consisting of base salary and annual bonus awards and may receive
long-term incentive awards of options or restricted stock. Accordingly, amounts
received as distributions by our executive officers prior to the offerings
cannot meaningfully be compared to the salary based compensation that will be in
effect after the offerings. See "--Executive Compensation" and the pro forma
combined financial statements (unaudited) and accompanying notes included
elsewhere in this prospectus.
The following table sets forth the compensation anticipated to be earned by
our Chief Executive Officer and our four other most highly compensated executive
officers for all services rendered to Neuberger Berman and its subsidiaries for
the year ending December 31, 2000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------------------
NAME AND PRINCIPAL POSITION SALARY TARGET-BONUS(1)
- --------------------------------------------------------------------------------- ------------- ----------------
<S> <C> <C>
Jeffrey B. Lane, President and Chief Executive Officer........................... $ 1,000,000 $ 2,000,000
Michael M. Kassen, Executive Vice President and Chief Investment Officer......... 750,000 1,750,000
Robert Matza, Executive Vice President and Chief Administrative Officer.......... 500,000 1,000,000
Heidi S. Steiger, Executive Vice President....................................... 750,000 1,250,000
Peter E. Sundman, Executive Vice President....................................... 500,000 1,000,000
</TABLE>
- ------------------------
(1) Reflects target bonuses for 2000. Actual bonuses may be higher or lower
depending on actual results. See "--Annual Performance Incentive Plan."
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<PAGE>
SECURITY OWNERSHIP BY MANAGEMENT
AND PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of our common stock by:
- each director of Neuberger Berman and each of our executive officers named
in the summary compensation table on the preceding page;
- all directors and executive officers of Neuberger Berman as a group; and
- each person owning beneficially more than 5% of the outstanding shares of
the common stock.
Beneficial ownership is shown as of the date of this prospectus:
- after giving effect to the Exchange and the initial contribution of shares
of common stock to our defined contribution plan, but without giving
effect to the offerings; and
- as adjusted to reflect the sale of the shares of common stock in the
offerings.
No executive officer of Neuberger Berman is selling shares of common stock in
the offerings.
For purposes of this table, we have assumed that shares of common
stock are outstanding prior to the completion of the offerings and shares
of common stock are outstanding after the offerings, assuming that the
underwriters' options to purchase additional shares are not exercised. The
shares of common stock assumed to be outstanding prior to the offerings includes
shares to be issued in the Exchange and shares that we will
contribute to our defined contribution plan at, or shortly after, the completion
of the offerings.
For purposes of this table, "beneficial ownership" is determined in
accordance with Rule 13d-3 under the Securities Exchange Act of 1934, pursuant
to which a person or group of persons is deemed to have "beneficial ownership"
of any shares of common stock that such person has the right to acquire within
60 days after the date of this prospectus. For purposes of computing the
percentage of outstanding shares of common stock held by each person or group of
persons named above, any shares which such person or persons has the right to
acquire within 60 days after the date of this prospectus are deemed to be
outstanding but are not deemed to be outstanding for the purpose of computing
the percentage ownership of any other person.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED SHARES BENEFICIALLY OWNED
PRIOR TO THE OFFERINGS (1) AFTER THE OFFERINGS (1)
-------------------------------- --------------------------------
<S> <C> <C> <C> <C>
NAME OF BENEFICIAL OWNER NUMBER PERCENT NUMBER PERCENT
- ----------------------------------- ------------- ----------------- ------------- -----------------
Lawrence Zicklin (2)............... %
Richard A. Cantor (3)..............
Jeffrey B. Lane....................
Michael M. Kassen (4)..............
Robert Matza.......................
Marvin C. Schwartz (5).............
Heidi S. Steiger (6)...............
Peter E. Sundman (7)...............
All directors and executive
officers
as a group (9 persons)...........
Dietrich Weismann (8)..............
Management Stockholders (9)........
</TABLE>
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<PAGE>
- ------------------------
* Less than 1%.
(1) Does not include 10,000,000 shares of common stock issuable under our
long-term incentive plan and 200,000 shares of common stock issuable under
our directors stock incentive plan. These plans are described under
"Management--Compensation of Directors--Directors Stock Incentive Plan" and
"--Executive Compensation--Long-Term Incentive Plan".
(2) Includes 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.
(3) Includes 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.
(4) Includes 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.
(5) Includes (a) 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) 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.
(6) Includes 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.
(7) Includes 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.
(8) Includes 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.
(9) All of the Neuberger Berman principals and their affiliated family limited
partnerships and trusts are parties to the Stockholders Agreement, which
will become effective upon consummation of the Exchange, pursuant to which
each principal and affiliate has agreed to vote his, her or its shares in
accordance with a majority of the shares held by all of the principals and
affiliates voting in a preliminary vote. See "Certain Relationships and
Related Transactions-- Stockholders Agreement--Voting". The business address
of each of the parties to the Stockholders Agreement is (a) in the case of
each principal, 605 Third Avenue, New York, New York 10158, and (b) in the
case of each of the affiliates, c/o Neuberger Berman Trust Company of
Delaware, 919 Market Street, Suite 506, Wilmington, Delaware 19801.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
THE EXCHANGE
Our business is conducted by Neuberger Berman, LLC and Neuberger Berman
Management Inc., which are wholly owned by the Neuberger Berman principals. The
principals have formed Neuberger Berman Inc. to be a holding company for
Neuberger Berman, LLC and Neuberger Berman Management Inc. and allow for the
issuance of the common stock in the offerings.
Neuberger Berman Inc. was organized as a Delaware corporation on August 13,
1998 and has had no business operations. Prior to the completion of the
offerings, the Neuberger Berman principals and Neuberger Berman Inc. will engage
in a series of transactions (the "Exchange") in which:
- the principals will contribute all of their limited liability company
interests in Neuberger Berman, LLC to Neuberger Berman Inc. in exchange
for shares of common stock; and
- a subsidiary formed by Neuberger Berman Inc. will merge into Neuberger
Berman Management Inc., with Neuberger Berman Management Inc. surviving
the merger, and the principals will receive shares of common stock of
Neuberger Berman Inc. in exchange for their Neuberger Berman Management
Inc. shares.
Immediately following the Exchange, the Neuberger Berman principals will be our
sole stockholders. Neuberger Berman will thereafter operate as a holding company
and will indirectly own all the entities that are presently owned by either
Neuberger Berman, LLC or Neuberger Berman Management Inc. The Exchange will not
result in a change of control of either Neuberger Berman, LLC or Neuberger
Berman Management Inc.
Neuberger Berman, 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. Neuberger
Berman, LLC, the successor limited liability company, was organized under the
name Neuberger & Berman, LLC. As a result of the conversion, Neuberger Berman,
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 change in the ownership, management, or business operations of the
firm, or in any change of control. Neuberger & Berman, LLC changed its name to
Neuberger Berman, LLC on November 16, 1998. Neuberger & Berman Management
Incorporated changed its name to Neuberger Berman Management Inc. on November 9,
1998.
The Neuberger Berman principals have agreed to indemnify us for taxes
imposed on or with respect to Neuberger Berman, LLC or Neuberger Berman
Management Inc. for periods prior to the completion of the Exchange. We have
agreed to pay to the principals any tax refunds received in respect of these
prior periods.
STOCKHOLDERS AGREEMENT
The Neuberger Berman principals, certain family limited partnerships and
trusts formed by them (their "Family Affiliates") and Neuberger Berman Inc. have
entered into a Stockholders Agreement that will become effective upon the
completion of the Exchange. The Stockholders Agreement will govern transfers and
voting of the shares of common stock received by the principals and Family
Affiliates in the Exchange (the "Founder Shares").
TRANSFER RESTRICTIONS
The Stockholders Agreement prohibits any transfers of Founder Shares by the
principals or their Family Affiliates prior to January 1, 2002. Thereafter, the
principals and their Family
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Affiliates may transfer their Founder Shares only as follows:
(a) (1) In each calendar year beginning on January 1, 2002, each principal
and his or her Family Affiliates may transfer in the aggregate up to 10%
of the aggregate number of Founder Shares initially received by them in
the Exchange (plus, in 2002, a number of Founder Shares equal to the
amount, if any, by which 15% of the aggregate number of Founder Shares
initially received by them in the Exchange exceeds the aggregate number
of Founder Shares sold by them in the offerings).
(2) Founder Shares eligible to be transferred in any calendar year but
not transferred may be transferred at any time thereafter without
restriction.
(3) Notwithstanding (1) and (2) above, during the three years following
the date on which a principal's employment with Neuberger Berman
terminates (the "Employment Termination Date"), that principal and his
or her Family Affiliates may not transfer any Founder Shares other than
their Founder Shares that were eligible to be transferred but were not
transferred before the Employment Termination Date.
(b) Notwithstanding paragraph (a) above, each principal and his or her
Family Affiliates must at all times continue to hold at least 30% of the
aggregate number of Founder Shares initially received by them in the
Exchange until the third anniversary of the principal's Employment
Termination Date.
Notwithstanding paragraphs (a) and (b) above, if a principal's Employment
Termination Date occurs prior to January 1, 2003 for any reason other than
death, disability or termination by Neuberger Berman without cause, that
principal and his or her Family Affiliates may not transfer any Founder Shares
prior to January 1, 2007. On and after January 1, 2007, that principal and his
or her Family Affiliates may in any calendar year transfer in the aggregate a
maximum of 20% of the aggregate amount of Founder Shares held by them on the
principal's Employment Termination Date. The number of Founder 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 Neuberger
Berman terminates due to disability or death, the principal (or his or her
estate) and his or her Family Affiliates may transfer their Founder Shares
without restriction. In addition, our board of directors or a body designated by
our board of directors 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
Prior to any vote of our stockholders, the Stockholders Agreement provides
for a separate, preliminary vote of the principals and their Family Affiliates
(and any additional stockholders who have agreed with us to vote their shares of
common stock in accordance with the Stockholders Agreement) on each matter upon
which a vote of the stockholders is proposed to be taken. In this preliminary
vote, the participating stockholders may vote all of the shares currently owned
by them in such manner as each may determine in his, her or its sole discretion.
Each must then vote all of their Founder Shares in accordance with the vote of
the majority of the shares of common stock present (in person or by proxy) and
voting in such preliminary vote.
Each principal and Family Affiliate will grant to our secretary (or other
officer designated by the secretary) an irrevocable proxy to vote his, her or
its Founder 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 that principal's
Employment Termination Date.
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CALL RIGHT
The Stockholders Agreement provides that we may repurchase the Founder
Shares of a principal and his or her Family Affiliates if the principal engages
in "Harmful Activity" at any time during his or her employment or during the
first three years after leaving. "Harmful Activity" includes:
- soliciting or accepting business from any person or institution who was a
client or prospective client of Neuberger Berman during the year prior to
the departure of the principal (or, in the case of an action taken during
employment, during the prior year);
- soliciting or accepting business from any financial intermediary (or any
employee of a financial intermediary) with which the principal had
business contact during the year prior to his or her departure (or, in the
case of an action taken during employment, during the prior year);
- employing or soliciting for employment employees or consultants of
Neuberger Berman;
- using (other than in seeking new employment) the investment performance
record of any mutual fund or client account with which the principal was
associated during his or her employment;
- using or disclosing confidential information of Neuberger Berman; and
- publicly disparaging our firm or our principals.
If our board of directors or a body designated by our board of directors
determines in good faith that a principal has engaged in Harmful Activity, we
may purchase from that principal the excess of the number of Founder Shares
received by the principal and his or her Family Affiliates in the Exchange over
the number of Founder Shares that the principal and his or her Family Affiliates
could have transferred prior to the date on which the principal initially
engaged in Harmful Activity. If a principal does not hold sufficient Founder
Shares, we may purchase Founder Shares from his or her Family Affiliates pro
rata in accordance with their then current holdings. The purchase price of any
Founder Shares we purchase in this manner will be $2.00 per share.
TRANSFER ADMINISTRATION AND DISTRIBUTIONS
The certificates representing the Founder Shares beneficially owned by each
principal and Family Affiliate will be registered in the name of Neuberger
Berman or our nominee and held in our custody at our principal office. During
any period in which we are in dispute with any principal regarding his or her
obligations under the Stockholders Agreement, the Exchange Agreement or the
Non-Competition Agreement, we will not release for transfer any Founder Shares
of that principal or his or her Family Affiliates or distribute to them any
dividends or distributions received in respect of their Founder Shares.
AMENDMENTS AND TERM
The Stockholders Agreement may be amended by our board of directors or a
body designated by our board of directors, 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 Founder 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 we agree with principals and Family
Affiliates who are then bound by its terms to terminate the agreement.
NON-COMPETITION AGREEMENT
The Neuberger Berman principals have also entered into a Non-Competition
Agreement that will become effective upon the closing of the Exchange. Each
principal has agreed:
- not to compete with us while they are employed by us or during the three
years following their Employment Termination Date; and
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- to take all actions (before or after their Employment Termination Date)
reasonably requested by our board of directors or a body designated by our
board of directors to maintain the business, goodwill and business
relationship with any of our clients with whom he or she worked during the
term of his or her employment.
The obligation not to compete will not apply to a principal that is
terminated by Neuberger Berman without cause.
NEUBERGER BERMAN FOUNDATION
After the consummation of the offerings, we will make a $10 million cash
contribution to the Neuberger Berman Foundation, a charitable foundation. This
newly-formed entity will conduct charitable initiatives for Neuberger Berman.
The Neuberger Berman Foundation is subject to federal tax rules that prohibit it
from engaging in any act of self-dealing or any activities that result in an
impermissible benefit to private persons. While the Neuberger Berman Foundation
has no specific intention to contribute to organizations with which Neuberger
Berman's executive officers or directors are affiliated, the Neuberger Berman
Foundation may in the future make contributions to educational and other
organizations with which Neuberger Berman's directors or executive officers are
involved.
THE SUBORDINATED NOTE
In 1998, NB Associates, LLC, which is wholly owned by the Neuberger Berman
principals, loaned Neuberger Berman, LLC $50 million pursuant to a subordinated
promissory note. This amount is payable on September 1, 2000. Interest accrues
on the unpaid principal amount of the loan at a rate of 6.75% per annum and is
payable quarterly. This loan was approved by the New York Stock Exchange, and
the unpaid principal amount is available to Neuberger Berman, LLC in computing
net capital under the SEC's net capital rule (Rule 15c3-1). Neuberger Berman,
LLC's obligation to repay the outstanding principal amount may be suspended if,
at any time, Neuberger Berman, LLC fails to meet applicable net capital
requirements imposed by the New York Stock Exchange. The maturity of the
subordinated note will be automatically extended for successive terms of one
year, unless at least seven months prior to the maturity date, NB Associates
notifies us in writing that the maturity will not be extended.
SELLING STOCKHOLDERS
The following table sets forth certain information provided to us by the
selling stockholders regarding themselves and their beneficial ownership of our
common stock. Beneficial ownership is shown as of the date of this prospectus:
- after giving effect to the Exchange and the initial contribution of shares
of common stock to our defined contribution plan, but without giving
effect to the offerings; and
- as adjusted to reflect the sale of the shares of common stock in the
offerings.
No executive officer of Neuberger Berman is selling shares of common stock in
the offerings.
Pursuant to the Stockholders Agreement, Neuberger Berman or its nominee is
the record holder of all of the shares of common stock set forth on the table.
Except as set forth in the footnotes to the table, each selling stockholder has
informed us that he or she has sole voting and investment power with respect to
his or her shares of common stock. The sale of shares of common stock by the
selling stockholders in the offerings will not result in a change in our
control.
For purposes of this table, we have assumed that shares of common
stock are outstanding prior to the completion of the offerings and shares
of common stock are outstanding after the offerings, assuming that the
underwriters' options to purchase
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<PAGE>
additional shares are not exercised. The shares of common stock assumed to be
outstanding prior to the offerings includes shares to be issued in
the Exchange and shares that we will contribute to our defined
contribution plan at, or shortly after, the completion of the offerings.
For purposes of this table, "beneficial ownership" is determined in
accordance with Rule 13d-3 under the Securities Exchange Act of 1934, pursuant
to which a person or group of persons is deemed to have "beneficial ownership"
of any shares of common stock that such person has the right to acquire within
60 days after the date of this prospectus. For purposes of computing the
percentage of outstanding shares of common stock held by each person or group of
persons named above, any shares which such person or persons has the right to
acquire within 60 days after the date of this prospectus are deemed to be
outstanding but are not deemed to be outstanding for the purpose of computing
the percentage ownership of any other person.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED SHARES BENEFICIALLY OWNED
PRIOR TO THE OFFERINGS (1) NUMBER OF AFTER THE OFFERINGS (1)
--------------------------------- SHARES BEING ---------------------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENT OFFERED NUMBER PERCENT
- ----------------------------------- -------------- ----------------- ------------- -------------- -----------------
<S> <C> <C> <C> <C> <C>
% %
</TABLE>
- ------------------------
* Less than 1%.
(1) Does not include 10,000,000 shares of common stock issuable under our long
term incentive plan and 200,000 shares of common stock issuable under our
directors stock incentive plan. These plans are described under
"Management--Compensation of Directors--Directors Stock Incentive Plan" and
"--Executive Compensation--Long-Term Incentive Plan".
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<PAGE>
DESCRIPTION OF CAPITAL STOCK
The following description of our 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 our certificate of incorporation and by-laws.
Copies of the forms of certificate of incorporation and by-laws have been filed
as exhibits to the registration statement of which this prospectus forms a part.
Our authorized capital stock consists of 255,000,000 shares, each with a par
value of $.01 per share, of which:
- 250,000,000 are designated as common stock; and
- 5,000,000 are designated as preferred stock.
COMMON STOCK
After giving effect to the Exchange, there will be shares of common
stock outstanding. All of these shares will be held of record by one stockholder
as nominee for the Neuberger Berman principals and their Family Affiliates, as
required by the Stockholders Agreement.
VOTING RIGHTS. Each holder 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 any cumulative voting rights.
DIVIDEND RIGHTS. Subject to the preferential rights of any holders of any
outstanding series of preferred stock and restrictions set forth in our credit
facilities and restrictions, if any, imposed by other indebtedness outstanding
from time to time, the holders of common stock will be entitled to such
dividends and distributions, whether payable in cash or otherwise, as may be
declared from time to time by our board of directors from legally available
funds. See "Dividend Policy".
OTHER RIGHTS. Upon our liquidation, dissolution or winding up, the holders
of shares of common stock would be entitled to share PRO RATA in the
distribution of all of our assets remaining available for distribution after
satisfaction of all of our 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 common stock,
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
Our certificate of incorporation authorizes 5,000,000 shares of preferred
stock, none of which are outstanding. Our board of directors 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. We have no present plans to issue any of the preferred
stock.
CERTAIN EFFECTS OF AUTHORIZED BUT UNISSUED STOCK
We believe that the ability of our board of directors to issue one or more
series of preferred stock will provide us with flexibility in structuring
possible future acquisitions and in meeting other corporate needs that might
arise. Our board of directors, 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 our board of directors 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. Our board of directors will
make any determination to issue such shares based on its judgment as to the best
interests of
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Neuberger Berman and its stockholders. Our board of directors, in so acting,
could issue preferred stock having terms that could discourage a potential
acquiror from making, without first negotiating with our board of directors, an
acquisition attempt through which such acquiror may be able to change the
composition of our board of directors, including a tender offer or other
transaction that some, or a majority, of our stockholders might believe to be in
their best interests or in which stockholders might receive a premium for their
stock over the then current market price.
ANTI-TAKEOVER PROVISIONS OF THE CERTIFICATE OF INCORPORATION AND BY-LAWS
Some provisions of our certificate of incorporation and by-laws, applicable
law and the Stockholders Agreement could make the acquisition of Neuberger
Berman by means of a tender offer, a proxy contest or otherwise more difficult.
As described above, our certificate of incorporation authorizes our board of
directors to designate and issue preferred stock. Other provisions in the
certificate of incorporation and in our by-laws impose procedural and other
requirements that may be deemed to have anti-takeover effects. These provisions
include the inability of our 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, our stockholders can amend our by-laws and certain
provisions of our certificate of incorporation only with a two-thirds majority
vote. Additionally, the Stockholders Agreement requires all Neuberger Berman
principals and their Family Affiliates to vote their shares in accordance with a
preliminary vote conducted solely among these stockholders.
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW
We are subject to section 203 of the Delaware General Corporation Law, which
prohibits a public Delaware corporation from engaging in a "business
combination" with a stockholder that is an "interested stockholder" for a period
of three years after the date of the transaction in which the stockholder became
an interested stockholder unless:
(i) prior to such date, our board of directors 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 the date on which the stockholder became an interested
stockholder, the business combination is approved by both our board of
directors and by holders of at least 66 2/3% of our 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.
78
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to the offerings, there has been no public market for our common
stock. Future sales of substantial amounts of common stock in the public market,
or the perception that substantial sales may occur, could adversely affect the
prevailing market price of the common stock. After completion of the offerings,
there will be shares of common stock outstanding. Of these shares, the
shares of common stock sold in the offerings ( shares if the
underwriters' options to purchase additional shares are exercised in full) will
be freely transferable without restriction under the Securities Act, except by
persons who may be deemed to be our "affiliates", 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 as currently in effect, a person (or persons
whose shares are aggregated), including an affiliate, who beneficially owns
"restricted securities" may not sell those securities until they have been
beneficially owned for at least one year. Thereafter, the person would be
entitled to sell within any three-month period a number of shares that does not
exceed the greater of:
(1) 1% of the then outstanding shares of common stock (approximately
shares after the offerings); and
(2) the average weekly trading volume of the common stock on the New York
Stock Exchange 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 Neuberger
Berman and may be effected only through unsolicited brokers' transactions.
A person who is not deemed an "affiliate" of Neuberger Berman 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 his, her or its Restricted Shares under Rule 144 without regard to the
volume or other limitations described above, provided that two years have
elapsed since the Restricted Shares were acquired from Neuberger Berman or an
affiliate of Neuberger Berman.
Neuberger Berman 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 this prospectus, we and they will
not, directly or indirectly, offer, sell, contract to sell or otherwise dispose
of any shares of common stock or any securities of Neuberger Berman 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 our case, pursuant to our existing
employee compensation 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 received through the Exchange by the Neuberger Berman principals and their
Family Affiliates. See "Certain Relationships and Related Transactions--
Stockholders Agreement".
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 our future ability to raise capital through an
offering of our equity securities. See "Risk Factors--Our Share Price May
Decline Due to the Large Numbers of Shares Eligible for Future Sale".
79
<PAGE>
VALIDITY OF SHARES
The validity of the shares of common stock will be passed upon for Neuberger
Berman 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 combined financial statements of Neuberger Berman, LLC and
subsidiaries and Neuberger Berman Management Inc. included in this prospectus
have been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their report with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in accounting and auditing
in giving said report.
AVAILABLE INFORMATION
Upon completion of the offerings, Neuberger Berman will be required to file
annual, quarterly and current reports, proxy statements and other information
with the SEC. You may read and copy any documents filed by us at the SEC's
public reference room at 450 Fifth Street, N.W., Washington, D.C. 20549. Please
call the SEC at 1-800-SEC-0330 for further information on the public reference
room. Our filings with the SEC are also available to the public through the
SEC's Internet site at http://www.sec.gov and through the New York Stock
Exchange, 20 Broad Street, New York, New York 10005, on which our common stock
is listed. After the offerings, we expect to provide annual reports to our
stockholders that include financial information reported on by our independent
public accountants.
We have filed a registration statement on Form S-1 with the SEC. This
prospectus is a part of the registration statement and does not contain all of
the information in the registration statement. Whenever a reference is made in
this prospectus to a contract or other document of Neuberger Berman, please be
aware that such reference is not necessarily complete and that you should refer
to the exhibits that are a part of the registration statement for a copy of the
contract or other document. You may review a copy of the registration statement
at the SEC's public reference room in Washington, D.C., as well as through the
SEC's Internet site.
80
<PAGE>
INDEX TO COMBINED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
NEUBERGER BERMAN, LLC AND SUBSIDIARIES AND
NEUBERGER BERMAN MANAGEMENT INC.
Report of Independent Public Accountants................................................................... F-2
Combined Statements of Financial Condition as of December 31, 1997 and 1998 (audited) and as of June 30,
1999 (unaudited)......................................................................................... F-3
Combined Statements of Income for the Years Ended December 1996, 1997 and 1998 (audited) and the Six Months
Ended June 1998 and June 1999 (unaudited)................................................................ F-4
Combined Statements of Changes in Principals' Capital and Stockholders' Equity for the Years Ended December
1996, 1997 and 1998 (audited) and the Six Months Ended June 1999 (unaudited)............................. F-5
Combined Statements of Cash Flows for the Years Ended December 1996, 1997 and 1998 (audited) and the Six
Months Ended June 1998 and June 1999 (unaudited)......................................................... F-6
Notes to Combined Financial Statements..................................................................... F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Principals and Stockholders of Neuberger Berman, LLC and subsidiaries and
Neuberger
Berman Management Inc.:
We have audited the accompanying combined statements of financial condition
of Neuberger Berman, LLC and subsidiaries and Neuberger Berman Management Inc.
as of December 31, 1997 and 1998, 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, 1998. 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
subsidiaries and Neuberger Berman Management Inc. as of December 31, 1997 and
1998, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1998, in conformity with generally
accepted accounting principles.
/s/Arthur Andersen LLP
New York, New York
February 16, 1999
F-2
<PAGE>
NEUBERGER BERMAN, LLC AND SUBSIDIARIES
AND NEUBERGER BERMAN MANAGEMENT INC.
COMBINED STATEMENTS OF FINANCIAL CONDITION
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
---------------------- ------------
<S> <C> <C> <C>
1997 1998 1999
---------- ---------- ------------
<CAPTION>
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents...................................... $ 103,446 $ 50,383 $ 46,604
Cash and securities segregated for the exclusive benefit of
clients...................................................... 220,062 657,278 569,663
Cash and securities deposited with clearing organizations...... 3,628 3,591 3,623
Securities purchased under agreements to resell................ 284,435 496,769 96,400
Receivable from brokers, dealers and clearing organizations.... 1,185,719 2,223,870 1,757,489
Receivable from clients........................................ 539,627 326,235 521,314
Securities owned, at market value.............................. 10,102 12,189 17,343
Fees receivable................................................ 13,198 13,070 12,017
Furniture, equipment and leasehold improvements, at cost, net
of accumulated depreciation and amortization of $19,712,
$19,169 and $19,493 at December 31, 1997 and 1998 and June
30, 1999, respectively....................................... 22,023 25,194 27,121
Other assets................................................... 27,973 20,856 19,035
---------- ---------- ------------
Total assets............................................... $2,410,213 $3,829,435 $3,070,609
---------- ---------- ------------
---------- ---------- ------------
LIABILITIES, PRINCIPALS' CAPITAL AND STOCKHOLDERS' EQUITY
Liabilities:
Bank loans................................................... $ 10,000 $ 25,000 $ 29,000
Securities sold under agreements to repurchase............... 289,416 488,159 101,913
Payable to brokers, dealers and clearing organizations....... 582,395 1,368,971 1,102,863
Payable to clients........................................... 1,218,749 1,624,894 1,571,609
Securities sold but not yet purchased, at market value....... 38,096 50,410 18,542
Other liabilities and accrued expenses....................... 46,756 59,138 51,780
Payable to principals........................................ 65,770 53,664 35,703
---------- ---------- ------------
2,251,182 3,670,236 2,911,410
---------- ---------- ------------
Subordinated liability....................................... -- 50,000 50,000
---------- ---------- ------------
Commitments and contingencies.................................. -- -- --
Principals' capital and stockholders' equity:
Principals' capital.......................................... 150,000 100,000 100,000
Common stock, $.01 par value; 34,484 shares authorized,
12,500, 12,668 and 12,500 issued and outstanding as of
December 31, 1997 and 1998 and June 30, 1999,
respectively...............................................
Paid-in capital.............................................. 2,742 2,876 2,876
Retained earnings............................................ 6,289 6,323 6,323
---------- ---------- ------------
Total principals' capital and stockholders' equity......... 159,031 109,199 109,199
---------- ---------- ------------
Total liabilities, principals' capital and stockholders'
equity................................................... $2,410,213 $3,829,435 $3,070,609
---------- ---------- ------------
---------- ---------- ------------
</TABLE>
The accompanying Notes to Combined Financial Statements
are an integral part of these statements.
F-3
<PAGE>
NEUBERGER BERMAN, LLC AND SUBSIDIARIES
AND NEUBERGER BERMAN MANAGEMENT INC.
COMBINED STATEMENTS OF INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER JUNE
------------------------------- --------------------
1996 1997 1998 1998 1999
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
REVENUES:
Investment advisory and administrative
fees................................. $ 260,775 $ 327,898 $ 378,838 $ 194,401 $ 184,398
Commissions............................ 109,621 124,911 145,969 67,845 74,248
Interest............................... 143,928 154,280 164,781 79,753 76,739
Principal transactions in securities... 10,758 7,838 5,983 2,702 5,115
Clearance fees......................... 8,152 8,332 11,311 4,886 5,214
Other income........................... 2,678 3,796 4,584 2,374 2,854
--------- --------- --------- --------- ---------
Gross revenues....................... 535,912 627,055 711,466 351,961 348,568
Interest expense....................... 119,798 124,530 137,330 66,095 65,153
--------- --------- --------- --------- ---------
Net revenues after interest
expense............................ 416,114 502,525 574,136 285,866 283,415
--------- --------- --------- --------- ---------
OPERATING EXPENSES:
Employee compensation and benefits..... 106,431 114,617 139,693 65,146 71,065
Information technology................. 12,954 13,642 15,155 7,429 8,730
Rent and occupancy..................... 9,189 9,882 12,493 5,685 6,557
Brokerage, clearing and exchange
fees................................. 11,319 12,727 12,437 5,363 6,679
Advertising and sales promotion........ 12,732 14,915 14,955 7,035 6,123
Distribution and fund administration... 5,289 8,528 12,432 6,370 5,514
Professional fees...................... 4,486 5,165 16,034 4,187 4,934
Depreciation and amortization.......... 5,576 6,445 8,761 3,151 4,891
Income taxes........................... 8,851 8,857 9,506 4,805 4,552
Other expenses......................... 10,161 9,081 12,575 7,067 7,599
--------- --------- --------- --------- ---------
Total operating expenses............. 186,988 203,859 254,041 116,238 126,644
--------- --------- --------- --------- ---------
Net income before principal
compensation....................... 229,126 298,666 320,095 169,628 156,771
Principal compensation............... 27,045 33,684 35,144 19,925 15,690
--------- --------- --------- --------- ---------
Net income........................... $ 202,081 $ 264,982 $ 284,951 $ 149,703 $ 141,081
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
The accompanying Notes to Combined Financial Statements
are an integral part of these statements.
F-4
<PAGE>
NEUBERGER BERMAN, LLC AND SUBSIDIARIES
AND NEUBERGER BERMAN MANAGEMENT INC.
COMBINED STATEMENTS OF CHANGES IN PRINCIPALS' CAPITAL
AND STOCKHOLDERS' EQUITY
(SIX MONTHS ENDED JUNE 30, 1999 UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRINCIPALS' COMMON PAID-IN RETAINED TOTAL
CAPITAL STOCK CAPITAL EARNINGS COMBINED
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
BEGINNING 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........................ (230,639) -- -- (35,312) (265,951)
Common stock issuance.............. -- -- 2,000 -- 2,000
Net income......................... 230,639 -- -- 34,343 264,982
----------- ----------- ----------- ----------- -----------
ENDING BALANCE,
December 31, 1997................ 150,000 -- 2,742 6,289 159,031
Capital contributions.............. 12,660 -- -- -- 12,660
Capital withdrawals................ (62,660) -- -- -- (62,660)
Capital distributions and
dividends........................ (247,509) -- -- (37,408) (284,917)
Common stock issuance.............. -- -- 134 -- 134
Net income......................... 247,509 -- -- 37,442 284,951
----------- ----------- ----------- ----------- -----------
ENDING BALANCE,
December 31, 1998................ 100,000 -- 2,876 6,323 109,199
Capital contributions.............. 525 -- -- -- 525
Capital withdrawals................ (525) -- -- -- (525)
Capital distributions and
dividends........................ (126,245) -- -- (14,836) (141,081)
Net income......................... 126,245 -- -- 14,836 141,081
----------- ----------- ----------- ----------- -----------
ENDING BALANCE, June 30, 1999...... $ 100,000 $ -- $ 2,876 $ 6,323 $ 109,199
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
</TABLE>
The accompanying Notes to Combined Financial Statements
are an integral part of these statements.
F-5
<PAGE>
NEUBERGER BERMAN, LLC AND SUBSIDIARIES
AND NEUBERGER BERMAN MANAGEMENT INC.
COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER JUNE
-------------------------------- --------------------
<S> <C> <C> <C> <C> <C>
1996 1997 1998 1998 1999
--------- --------- ---------- --------- ---------
<CAPTION>
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income............................................... $ 202,081 $ 264,982 $ 284,951 $ 149,703 $ 141,081
Adjustments to reconcile net income to net cash provided
by operating activities-
Depreciation and amortization.......................... 5,576 6,445 8,761 3,151 4,891
(Increase) decrease in operating assets-
Cash and securities segregated for the exclusive
benefit of clients................................... 150,847 (88,058) (437,216) (89,172) 87,615
Cash and securities deposited with clearing
organizations........................................ (1,371) (473) 37 (23) (32)
Securities purchased under agreements to resell........ (76,264) (208,171) (212,334) 23,016 400,369
Receivable from brokers, dealers and clearing
organizations........................................ (475,277) 457,950 (1,038,151) (314,944) 466,381
Receivable from clients................................ (51,726) (71,079) 213,392 (26,964) (195,079)
Securities owned, at market value...................... 18,526 (6,220) (2,087) (2,294) (5,154)
Fees receivable........................................ (2,344) (3,797) 128 (1,502) 1,053
Other assets........................................... 15,618 (1,375) 7,117 4,883 1,821
Increase (decrease) in operating liabilities-
Bank loans............................................. 5,000 (29,000) 15,000 174,000 4,000
Securities sold under agreements to repurchase......... 58,715 219,153 198,743 (36,397) (386,246)
Payable to brokers, dealers and clearing
organizations........................................ 445,825 (179,628) 786,576 413,206 (266,108)
Payable to clients..................................... (127,958) (77,973) 406,145 (211,137) (53,285)
Securities sold but not yet purchased, at market
value................................................ 2,595 (3,993) 12,314 32,420 (31,868)
Other liabilities and accrued expenses................. 2,037 7,567 12,382 2,690 (7,358)
--------- --------- ---------- --------- ---------
Net cash provided by operating activities................ 171,880 286,330 255,758 120,636 162,081
--------- --------- ---------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITY:
Payments for purchases of furniture, equipment and
leasehold improvements............................... (6,399) (9,531) (11,932) (5,756) (6,818)
--------- --------- ---------- --------- ---------
Cash used in investing activity...................... (6,399) (9,531) (11,932) (5,756) (6,818)
--------- --------- ---------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from capital contributions.................... 120,000 9,196 12,660 8,410 525
Payments for capital withdrawals....................... -- (9,196) (62,660) (8,410) (525)
Payments for capital distributions and dividends....... (210,960) (239,706) (297,023) (159,959) (159,042)
Common stock issuance.................................. -- 2,000 134 134 --
Proceeds from subordinated liability................... -- -- 50,000 -- --
Repayment of subordinated liabilities.................. (70,000) -- -- -- --
--------- --------- ---------- --------- ---------
Net cash used in financing activities................ (160,960) (237,706) (296,889) (159,825) (159,042)
--------- --------- ---------- --------- ---------
Net increase (decrease) in cash and cash
equivalents........................................ 4,521 39,093 (53,063) (44,945) (3,779)
CASH AND CASH EQUIVALENTS, beginning of period........... 59,832 64,353 103,446 103,446 50,383
--------- --------- ---------- --------- ---------
CASH AND CASH EQUIVALENTS, end of period................. $ 64,353 $ 103,446 $ 50,383 $ 58,501 $ 46,604
--------- --------- ---------- --------- ---------
--------- --------- ---------- --------- ---------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for--
Interest............................................. $ 120,449 $ 128,220 $ 138,042 $ 66,734 $ 65,263
Taxes................................................ 8,211 9,277 3,450 3,061 1,276
</TABLE>
The accompanying Notes to Combined Financial Statements
are an integral part of these statements.
F-6
<PAGE>
NEUBERGER BERMAN, LLC AND SUBSIDIARIES
AND NEUBERGER BERMAN MANAGEMENT INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
1. ORGANIZATION AND DESCRIPTION OF BUSINESS
The Combined Financial Statements include the accounts of Neuberger Berman,
LLC and subsidiaries ("NB, LLC"), a Delaware limited liability company, and
Neuberger Berman Management Inc. ("NBMI"), a New York corporation (collectively,
the "Company"). The Company's wholly owned subsidiaries are Neuberger Berman
Trust Company, a New York corporation, Neuberger Berman Trust Company of
Delaware, a Delaware corporation, Neuberger Berman Trust Company of Florida, a
Florida corporation, and Neuberger & Berman Agency Incorporated, a New York
corporation. Material intercompany transactions and balances have been
eliminated in combination.
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 the same and will be 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, as the entities operate under common management and there is identical
common ownership. The Company's Combined Financial Statements do not include the
financial condition and results of operations of NB Associates, LLC, a Delaware
limited liability company ("Associates"), which is commonly owned by the
principals and was established to make a subordinated loan to the Company (see
Note 7).
The Company is a registered investment adviser providing investment
management services to high net worth clients, mutual funds and institutional
clients. As a registered investment adviser, the Company manages equity, fixed
income, balanced, socially responsive, and international portfolios for
individuals, families, endowments, foundations, trusts, employee benefit plans,
and advises the Neuberger Berman family of funds. 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 30,1999 and for the
six months ended June 26, 1998 and June 30, 1999 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 financial
condition and results of operations for such periods. The results for the
interim period ended June 30, 1999 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.
F-7
<PAGE>
NEUBERGER BERMAN, LLC AND SUBSIDIARIES
AND NEUBERGER BERMAN MANAGEMENT INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 are recorded on a
settlement date basis, which is not materially different from trade date.
CASH AND CASH EQUIVALENTS--For purposes of the Combined Statements of
Financial Condition, the Company considers all investments in money market funds
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 the account's net asset value at the
beginning of a quarter. Investment advisory and administrative fees earned 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 using
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.
COLLATERALIZED FINANCING TRANSACTIONS--Securities purchased and sold under
agreements to resell and repurchase, respectively, 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 Financial Accounting
Standards Board issued Statement of Financial Accounting Standards ("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. SFAS No. 133 is effective prospectively on
January 1, 2001 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
F-8
<PAGE>
NEUBERGER BERMAN, LLC AND SUBSIDIARIES
AND NEUBERGER BERMAN MANAGEMENT INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
4. RECEIVABLE FROM AND PAYABLE TO CLIENTS (CONTINUED)
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 1998, amounts receivable from and payable to
brokers, dealers and clearing organizations include approximately $1,173 million
and $2,203 million of securities borrowed and $555 million and $1,347 million of
securities loaned, respectively. Certain stock loan transactions are entered
into for financing purposes. The interest expense incurred on these transactions
was $2,396,000 and $341,000 for the year ended December 31, 1998, and the six
months ended June 30, 1999 (unaudited), respectively.
6. BANK LOANS
As of December 31, 1997 and 1998 and June 30, 1999 (unaudited), bank loans
represent unsecured short-term borrowings payable to commercial banks and bear
weighted average interest at rates of 5.73%, 5.76% and 5.01%, respectively. For
the years ended December 31, 1996, 1997 and 1998, and the six months ended June
30, 1999 (unaudited), interest expense incurred on these borrowings was
approximately $1,591,000, $2,486,000, $4,142,000 and $1,243,000, respectively.
7. SUBORDINATED LIABILITY
During 1998, the principals of the Company withdrew $50 million of capital
and invested it in the newly formed entity, Associates. Associates is owned by
the principals in the same proportion as the Company. Concurrently, Associates
loaned the $50 million to the Company in the form of a subordinated liability.
The subordinated liability matures on September 1,1999 and bears interest at
6.75% per annum. This subordinated liability has been approved by the New York
Stock Exchange to be included as capital for the purpose of computing net
capital under SEC rule 15c3-1.
Interest expense for the year ended December 31, 1998 incurred on the
subordinated liability was $1,137,000.
On March 30, 1999, the Company extended the maturity on the subordinated
liability to September 1, 2000 (unaudited).
8. 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.
F-9
<PAGE>
NEUBERGER BERMAN, LLC AND SUBSIDIARIES
AND NEUBERGER BERMAN MANAGEMENT INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
9. NET CAPITAL
NB, LLC and NBMI, as registered broker-dealers and member firms of the New
York Stock Exchange, Inc. and the 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 December 31, 1997 and 1998 and
June 30, 1999 (unaudited), NB, LLC and NBMI had combined net capital in the
aggregate of $141,220,677, $147,159,692 and $124,293,793, respectively, which
exceeded their combined requirements by $122,060,287, $125,137,104 and
$102,412,266, respectively.
10. 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 (000'S OMITTED)
- ----------------------------------------------------------- ---------------
<S> <C>
1999....................................................... $ 10,570
2000....................................................... 11,000
2001....................................................... 11,000
2002....................................................... 10,905
2003....................................................... 10,106
Thereafter................................................. 35,637
</TABLE>
Rent expense for the years ended December 31, 1996, 1997 and 1998 was
$7,878,901, $8,282,073 and $9,939,073, 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 December 31, 1997 and 1998 and June 30, 1999
(unaudited) were $7,500,000, $9,000,000 and $14,312,000, respectively. Unused
committed lines of credit were $150,000,000 as of December 31, 1997 and 1998 and
June 30, 1999 (unaudited).
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.
11. 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 and qualifying part-time employees who have completed one year of
continuous service, as defined. Contributions to the plans, which are at the
discretion of management, are determined annually but do not exceed the amount
permitted under the Internal Revenue Code as a deductible expense. Contributions
to the
F-10
<PAGE>
NEUBERGER BERMAN, LLC AND SUBSIDIARIES
AND NEUBERGER BERMAN MANAGEMENT INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
11. EMPLOYEE BENEFIT PLANS (CONTINUED)
plans for the years ended December 31, 1996, 1997 and 1998 were $6,625,601,
$7,225,518 and $7,626,106, respectively.
12. 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 income taxes on
the combined statements of income (000's omitted):
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER JUNE
------------------------------- --------------------
<S> <C> <C> <C> <C> <C>
1996 1997 1998 1998 1999
--------- --------- --------- --------- ---------
<CAPTION>
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
UBT............................................... $ 7,630 $ 6,157 $ 7,136 $ 3,240 $ 3,463
State and local................................... 1,221 2,700 2,370 1,565 1,089
--------- --------- --------- --------- ---------
$ 8,851 $ 8,857 $ 9,506 $ 4,805 $ 4,552
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
13. 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.
14. 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.
F-11
<PAGE>
NEUBERGER BERMAN, LLC AND SUBSIDIARIES
AND NEUBERGER BERMAN MANAGEMENT INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
14. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND CONCENTRATIONS
OF CREDIT RISK (CONTINUED)
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
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
over-the-counter ("OTC") put options on listed equity securities with certain of
its prime brokerage clients. Market risk is mitigated as the options are
generally deep in the money and covered by an equivalent number of securities
sold but not yet purchased. The notional amounts of options sold were
approximately $36,031,000, $49,549,000 and $18,069,000 at December 31, 1997 and
1998 and June 30, 1999 (unaudited), respectively.
A summary of the fair value of OTC options included in the Combined
Statements of Financial Condition appears below. Averages are based on
quarter-end balances (000's omitted):
<TABLE>
<CAPTION>
LIABILITIES
------------------------
<S> <C> <C>
FAIR VALUE AVERAGE
----------- -----------
Option contracts:
December 31, 1997..................................... $ 7,798 $ 6,276
December 31, 1998..................................... $ 8,647 $ 9,828
June 30, 1999 (unaudited)............................. $ 2,394 $ 6,672
</TABLE>
The Company's net gain from such activity was approximately $1,165,000,
$1,940,000 and $941,000 for the years ended December 31, 1997 and 1998 and for
the six months ended June 30, 1999 (unaudited), respectively.
15. 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
F-12
<PAGE>
NEUBERGER BERMAN, LLC AND SUBSIDIARIES
AND NEUBERGER BERMAN MANAGEMENT INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
15. SEGMENT INFORMATION (CONTINUED)
reportable segments based upon how "chief decision makers" organize segments.
The following tables represent summarized information by operating segment
(000's omitted):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 1996
----------------------------------------------------------
<S> <C> <C> <C> <C>
PROFESSIONAL
PRIVATE ASSET MUTUAL FUND AND SECURITIES
MANAGEMENT INSTITUTIONAL SERVICES TOTAL
------------- ----------------- ------------- ---------
Investment advisory and
administrative fees............ $ 91,423 $ 169,326 $ 26 $ 260,775
Commissions...................... 68,209 15,260 26,152 109,621
Net interest income.............. 2,211 28 21,891 24,130
Principal transactions in
securities..................... -- 65 10,693 10,758
Clearance fees................... -- -- 8,152 8,152
Other income..................... 2 749 1,927 2,678
------------- ----------------- ------------- ---------
Net revenues after interest
expense........................ 161,845 185,428 68,841 416,114
Operating expenses............... 57,288 89,719 39,981 186,988
------------- ----------------- ------------- ---------
Net income before principal
compensation................... 104,557 95,709 28,860 229,126
Principal compensation........... -- 27,045 -- 27,045
------------- ----------------- ------------- ---------
Net income....................... $ 104,557 $ 68,664 $ 28,860 $ 202,081
------------- ----------------- ------------- ---------
------------- ----------------- ------------- ---------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 1997
----------------------------------------------------------
<S> <C> <C> <C> <C>
PROFESSIONAL
PRIVATE ASSET MUTUAL FUND AND SECURITIES
MANAGEMENT INSTITUTIONAL SERVICES TOTAL
------------- ----------------- ------------- ---------
Investment advisory and
administrative fees............ $ 116,816 $ 210,376 $ 706 $ 327,898
Commissions...................... 78,518 19,205 27,188 124,911
Net interest income.............. 3,087 18 26,645 29,750
Principal transactions in
securities..................... -- 238 7,600 7,838
Clearance fees................... -- -- 8,332 8,332
Other income..................... -- 1,015 2,781 3,796
------------- ----------------- ------------- ---------
Net revenues after interest
expense........................ 198,421 230,852 73,252 502,525
Operating expenses............... 62,619 103,122 38,118 203,859
------------- ----------------- ------------- ---------
Net income before principal
compensation................... 135,802 127,730 35,134 298,666
Principal compensation........... -- 33,684 -- 33,684
------------- ----------------- ------------- ---------
Net income....................... $ 135,802 $ 94,046 $ 35,134 $ 264,982
------------- ----------------- ------------- ---------
------------- ----------------- ------------- ---------
</TABLE>
F-13
<PAGE>
NEUBERGER BERMAN, LLC AND SUBSIDIARIES
AND NEUBERGER BERMAN MANAGEMENT INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
15. SEGMENT INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 1998
----------------------------------------------------------
<S> <C> <C> <C> <C>
PROFESSIONAL
PRIVATE ASSET MUTUAL FUND AND SECURITIES
MANAGEMENT INSTITUTIONAL SERVICES TOTAL
------------- ----------------- ------------- ---------
Investment advisory and
administrative fees............ $ 145,578 $ 231,792 $ 1,468 $ 378,838
Commissions...................... 89,705 25,352 30,912 145,969
Net interest income.............. 2,580 13 24,858 27,451
Principal transactions in
securities..................... 3 9 5,971 5,983
Clearance fees................... -- -- 11,311 11,311
Other income..................... 67 1,178 3,339 4,584
------------- ----------------- ------------- ---------
Net revenues after interest
expense........................ 237,933 258,344 77,859 574,136
Operating expenses............... 73,100 126,700 54,241 254,041
------------- ----------------- ------------- ---------
Net income before principal
compensation................... 164,833 131,644 23,618 320,095
Principal compensation........... -- 35,144 -- 35,144
------------- ----------------- ------------- ---------
Net income....................... $ 164,833 $ 96,500 $ 23,618 $ 284,951
------------- ----------------- ------------- ---------
------------- ----------------- ------------- ---------
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 1998 (UNAUDITED)
----------------------------------------------------------
<S> <C> <C> <C> <C>
PROFESSIONAL
PRIVATE ASSET MUTUAL FUND AND SECURITIES
MANAGEMENT INSTITUTIONAL SERVICES TOTAL
------------- ----------------- ------------- ---------
Investment advisory and
administrative fees............ $ 72,546 $ 121,551 $ 304 $ 194,401
Commissions...................... 43,082 11,018 13,745 67,845
Net interest income.............. 1,140 5 12,513 13,658
Principal transactions in
securities..................... -- 86 2,616 2,702
Clearance fees................... -- -- 4,886 4,886
Other income..................... 39 521 1,814 2,374
------------- ----------------- ------------- ---------
Net revenues after interest
expense........................ 116,807 133,181 35,878 285,866
Operating expenses............... 36,342 58,898 20,998 116,238
------------- ----------------- ------------- ---------
Net income before principal
compensation................... 80,465 74,283 14,880 169,628
Principal compensation........... -- 19,925 -- 19,925
------------- ----------------- ------------- ---------
Net income....................... $ 80,465 $ 54,358 $ 14,880 $ 149,703
------------- ----------------- ------------- ---------
------------- ----------------- ------------- ---------
</TABLE>
F-14
<PAGE>
NEUBERGER BERMAN, LLC AND SUBSIDIARIES
AND NEUBERGER BERMAN MANAGEMENT INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
15. SEGMENT INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 1999 (UNAUDITED)
----------------------------------------------------------
<S> <C> <C> <C> <C>
PROFESSIONAL
PRIVATE ASSET MUTUAL FUND AND SECURITIES
MANAGEMENT INSTITUTIONAL SERVICES TOTAL
------------- ----------------- ------------- ---------
Investment advisory and
administrative fees............ $ 79,587 $ 104,038 $ 773 $ 184,398
Commissions...................... 48,026 10,838 15,384 74,248
Net interest income.............. 1,499 11 10,076 11,586
Principal transactions in
securities..................... -- 66 5,049 5,115
Clearance fees................... -- -- 5,214 5,214
Other income..................... 15 496 2,343 2,854
------------- ----------------- ------------- ---------
Net revenues after interest
expense........................ 129,127 115,449 38,839 283,415
Operating expenses............... 38,636 59,341 28,667 126,644
------------- ----------------- ------------- ---------
Net income before principal
compensation................... 90,491 56,108 10,172 156,771
Principal compensation........... -- 15,690 -- 15,690
------------- ----------------- ------------- ---------
Net income....................... $ 90,491 $ 40,418 $ 10,172 $ 141,081
------------- ----------------- ------------- ---------
------------- ----------------- ------------- ---------
</TABLE>
Due to the nature of the securities business, it is impractical to separate
assets related to reportable business segments.
16. RELATED PARTY TRANSACTIONS
During the years ended December 31, 1996, 1997 and 1998, the Company earned
approximately $10,535,000, $13,969,000 and $19,779,000, 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, 1996, 1997 and 1998 of approximately $1,816,000, $1,503,000 and
$1,502,000, respectively, to the extent that such Funds exceeded their specified
expense limitations.
F-15
<PAGE>
UNDERWRITING
Neuberger Berman, the selling stockholders and the underwriters for the U.S.
offering (the "U.S. underwriters") named below have entered into an underwriting
agreement with respect to the shares being offered in the United States. Subject
to certain conditions, each U.S. underwriter has severally agreed to purchase
the number of shares indicated in the following table. Goldman, Sachs & Co. and
are the representatives of the U.S. underwriters.
<TABLE>
<CAPTION>
NUMBER OF
U.S. UNDERWRITERS SHARES OF
- --------------------------------------------------------------- -----------
<S> <C>
Goldman, Sachs & Co............................................
-----------
Total........................................................
-----------
-----------
</TABLE>
------------------------
If the U.S. underwriters sell more shares than the total number set forth in
the table above, the U.S. underwriters have an option to buy up to an additional
shares from the selling stockholders to cover such sales. They may
exercise that option for 30 days. If any shares are purchased pursuant to this
option, the U.S. underwriters will severally purchase shares in approximately
the same proportion as set forth in the table above.
The following table shows the per share and total underwriting discounts and
commissions to be paid to the U.S. underwriters by Neuberger Berman and the
selling stockholders. In the case of the selling stockholders, such amounts are
shown assuming both no exercise and full exercise of the U.S. underwriters'
option to purchase additional shares.
<TABLE>
<CAPTION>
PAID BY NEUBERGER BERMAN INC.
-------------------------------
<S> <C>
Per Share.................................. $
Total...................................... $
</TABLE>
<TABLE>
<CAPTION>
PAID BY THE SELLING
STOCKHOLDERS
---------------------------
NO EXERCISE FULL EXERCISE
------------ -------------
<S> <C> <C>
Per Share............................... $ $
Total................................... $ $
</TABLE>
Shares sold by the underwriters to the public will initially be offered at
the initial public offering price set forth on the cover page of this
prospectus. Any shares sold by the underwriters to securities dealers may be
sold at a discount of up to $ per share from the initial public offering
price. Any such securities dealers may resell any shares purchased from the
underwriters to certain other brokers or dealers at a discount of up to
$ per share from the initial public offering price. If all the shares are
not sold at the initial public offering price, the representatives may change
the offering price and the other selling terms.
Neuberger Berman and the selling stockholders have entered into an
underwriting agreement with the underwriters for the sale of shares
outside of the United States. The terms and conditions of both offerings are the
same and the sale of shares in both offerings are conditioned on each other.
Goldman Sachs International and are representatives of the underwriters
for the international offering outside of the United States.
The underwriters for both offerings have entered into an agreement in which
they have agreed to restrictions on where and to whom they and any dealer
purchasing from them may offer shares as a part of the distribution of the
shares. The underwriters have also agreed that they may sell shares among each
of the underwriting groups.
U-1
<PAGE>
Neuberger Berman, the selling stockholders, and all of the directors and
executive officers of Neuberger Berman, have agreed not to dispose of or hedge
any of their common stock or securities convertible into or exchangeable for
shares of common stock during the period from the date of this prospectus
continuing through the date 180 days after the date of this prospectus, except
with the prior written consent of the representatives, and except, in the case
of Neuberger Berman, pursuant to existing employee compensation plans. See
"Shares Available for Future Sale" for a discussion of certain transfer
restrictions.
Prior to the offerings, there has been no public market for the shares. The
initial public offering price will be negotiated among Neuberger Berman and the
representatives. Among the factors to be considered in determining the initial
public offering price of the shares, in addition to prevailing market
conditions, will be Neuberger Berman's historical performance, estimates of the
business potential and earnings prospects of Neuberger Berman, an assessment of
Neuberger Berman's management and the consideration of the above factors in
relation to market valuation of companies in related businesses.
Neuberger Berman intends to list the common stock on the New York Stock
Exchange under the symbol " ". In order to meet one of the requirements for
listing the common stock on the New York Stock Exchange, the 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
shares of common stock in the open market. These transactions may include short
sales, stabilizing transactions and purchases to cover positions created by
short sales. Short sales involve the sale by the underwriters of a greater
number of shares than they are required to purchase in the offerings.
Stabilizing transactions consist of certain bids or purchases made for the
purpose of preventing or retarding a decline in the market price of the common
stock while the offerings are in progress.
The underwriters also may impose a penalty bid. This occurs when a
particular underwriter repays to the underwriters a portion of the underwriting
discount received by it because the representatives have repurchased shares sold
by or for the account of such underwriter in stabilizing or short covering
transactions.
These activities by the underwriters may stabilize, maintain or otherwise
affect the market price of the common stock. As a result, the price of the
common stock may be higher than the price that otherwise might exist in the open
market. If these activities are commenced, they may be discontinued by the
underwriters at any time. These transactions may be effected on the New York
Stock Exchange, in the over-the-
counter market or otherwise.
The underwriters do not expect sales to discretionary accounts to exceed
five percent of the total number of shares offered.
Neuberger Berman estimates that total expenses of the offerings, excluding
underwriting discounts and commissions, will be approximately $ .
Neuberger Berman and the selling stockholders have agreed to indemnify the
several underwriters against certain liabilities, including liabilities under
the Securities Act of 1933.
Goldman, Sachs & Co. has in the past provided, and may in the future from
time to time provide investment banking and financial advisory services to
Neuberger Berman for which Goldman, Sachs & Co. has in the past received, and
may in the future receive, customary fees.
This prospectus may be used by the underwriters and other dealers in
connection with offers and sales of the shares, including sales of shares
initially sold by the underwriters in the offering being made outside of the
United States, to persons located in the United States.
Since two subsidiaries of Neuberger Berman Inc., Neuberger Berman, LLC and
Neuberger Berman Management Inc., are members of the NASD, this offering is
being made pursuant to the applicable provisions of NASD Conduct Rule 2720. No
NASD member may make sales to a discretionary account without the prior specific
written approval of the customer.
U-2
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
No dealer, salesperson or other person is authorized to give any information
or to represent anything not contained in this prospectus. You must not rely on
any unauthorized information or representations. This prospectus is an offer to
sell only the shares offered hereby, but only under circumstances and in
jurisdictions where it is lawful to do so. The information contained in this
prospectus is current only as of its date.
--------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 11
Use of Proceeds....................... 17
Dividend Policy....................... 17
Capitalization........................ 18
Dilution.............................. 19
Pro Forma Combined Financial
Statements (Unaudited).............. 20
Selected Historical Combined Financial
Data................................ 26
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 28
Business.............................. 39
Management............................ 55
Security Ownership by Management and
Principal Stockholders.............. 70
Certain Relationships and Related
Transactions........................ 72
Selling Stockholders.................. 75
Description of Capital Stock.......... 77
Shares Eligible for Future Sale....... 79
Validity of Shares.................... 80
Experts............................... 80
Available Information................. 80
Index to Combined Financial
Statements.......................... F-1
Underwriting.......................... U-1
</TABLE>
--------------
Through and including , 1999 (the 25th day after the date of this
prospectus), all dealers effecting transactions in these securities, whether or
not participating in this offering, may be required to deliver a prospectus.
This is in addition to the dealers' obligation to deliver a prospectus when
acting as an underwriter and with respect to an unsold allotment or
subscription.
Shares
NEUBERGER BERMAN INC.
Common Stock
-------------
[LOGO]
-------------
GOLDMAN, SACHS & CO.
Representatives of the underwriters
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
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. Neuberger Berman Inc. (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.............................................................. $ 69,500
National Association of Securities Dealers filing fee............................. *
New York Stock Exchange listing fee............................................... *
Accounting fees and expenses...................................................... *
Legal fees and expenses........................................................... *
Printing and engraving............................................................ *
Transfer Agent's fees............................................................. *
Premium for directors and officers insurance...................................... *
Miscellaneous expenses............................................................ *
Total............................................................................. $ *
---------
---------
</TABLE>
- ------------------------
* To be provided by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law (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.
II-1
<PAGE>
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 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 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 , 1999, the registrant sold the
following securities without registration under the Securities Act:
On August 2, 1999, the registrant, the Neuberger Berman principals and their
Family Affiliates entered into a definitive agreement (the "Plan of Merger and
Exchange Agreement") providing for the Exchange pursuant to which the principals
and their Family Affiliates 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.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
EXHIBITS
(a) Attached hereto are the following exhibits:
<TABLE>
<C> <S>
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 2, 1999, by and among
Neuberger Berman Inc., Neuberger Berman, LLC, the members of Neuberger Berman, LLC,
Neuberger Berman Management Inc., the stockholders of Neuberger Berman Management
Inc. and Neuberger Berman Sub Inc., a New York corporation
3.1 Certificate of Incorporation
3.2 By-Laws
4.1* Specimen of Common Stock Certificate
4.2 Stockholders Agreement, dated as of August 2, 1999, by and among Neuberger Berman
Inc. and the stockholders named therein
5.1* Opinion of Debevoise & Plimpton as to the legality of the securities being registered
10.1* 1999 Neuberger Berman Inc. Directors Stock Incentive Plan
10.2* 1999 Neuberger Berman Inc. Long-Term Incentive Plan
10.3* 1999 Neuberger Berman Inc. Annual Incentive Plan
10.4* 1999 Neuberger Berman Inc. Deferred Compensation Plan
10.5* Neuberger Berman Inc. Employee Defined Contribution Stock Incentive Plan
10.6* Non-Competition Agreement, dated as of August 2, 1999, by and among Neuberger Berman
Inc. and the stockholders named therein
10.7 Form of Employment Agreement, dated August 2, 1999, between Neuberger Berman, LLC and
each continuing principal
</TABLE>
II-2
<PAGE>
<TABLE>
<C> <S>
10.8* Subordinated Loan Agreement, dated August 31, 1998, between Neuberger Berman, LLC and
NB Associates, LLC
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 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 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-3
<PAGE>
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 4, 1999.
<TABLE>
<S> <C> <C>
NEUBERGER BERMAN INC.
/s/ JEFFREY B. LANE
-----------------------------------------
Name: Jeffrey B. Lane
Title: President and Chief Executive
Officer
</TABLE>
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Jeffrey B. Lane and Robert Matza, 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
- ------------------------------ --------------------------- -------------------
<C> <S> <C>
/s/ LAWRENCE ZICKLIN Chairman of the Board of
- ------------------------------ Directors August 4, 1999
Lawrence Zicklin
/s/ RICHARD A. CANTOR Vice Chairman and Director
- ------------------------------ August 4, 1999
Richard A. Cantor
/s/ MARVIN C. SCHWARTZ Vice Chairman and Director
- ------------------------------ August 4, 1999
Marvin C. Schwartz
President, Chief Executive
/s/ JEFFREY B. LANE Officer and Director
- ------------------------------ (Principal Executive August 4, 1999
Jeffrey B. Lane Officer)
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
- ------------------------------ --------------------------- -------------------
<C> <S> <C>
/s/ MICHAEL M. KASSEN Executive Vice President,
- ------------------------------ Chief Investment Officer August 4, 1999
Michael M. Kassen and Director
/s/ ROBERT MATZA Executive Vice President,
- ------------------------------ Chief Administrative August 4, 1999
Robert Matza Officer and Director
/s/ HEIDI S. STEIGER Executive Vice President
- ------------------------------ and Director August 4, 1999
Heidi S. Steiger
/s/ PETER E. SUNDMAN Executive Vice President
- ------------------------------ and Director August 4, 1999
Peter E. Sundman
Senior Vice President and
/s/ PHILIP AMBROSIO Chief Financial Officer
- ------------------------------ (Principal Financial and August 4, 1999
Philip Ambrosio Accounting Officer)
</TABLE>
II-5
<PAGE>
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 2, 1999, by and among Neuberger Berman
Inc., Neuberger Berman, LLC, the members of Neuberger Berman, LLC, Neuberger Berman Management
Inc., the stockholders of Neuberger Berman Management Inc. and Neuberger Berman Sub Inc., a New
York corporation
3.1 Certificate of Incorporation
3.2 By-Laws
4.1* Specimen of Common Stock Certificate
4.2 Stockholders Agreement, dated as of August 2, 1999, by and among Neuberger Berman Inc. and the
stockholders named therein.
5.1* Opinion of Debevoise & Plimpton as to the legality of the securities being registered
10.1* 1999 Neuberger Berman Inc. Directors Stock Incentive Plan
10.2* 1999 Neuberger Berman Inc. Long-Term Incentive Plan
10.3* 1999 Neuberger Berman Inc. Annual Incentive Plan
10.4* 1999 Neuberger Berman Inc. Deferred Compensation Plan
10.5* Neuberger Berman Inc. Employee Defined Contribution Stock Incentive Plan
10.6 Non-Competition Agreement, dated as of August 2, 1999, by and among the Company and the
stockholders named therein
10.7 Form of Employment Agreement, dated August 2, 1999, between Neuberger Berman, LLC and each
continuing principal.
10.8* Subordinated Loan Agreement, dated as of August 31, 1998, between Neuberger Berman, LLC and NB
Associates, LLC
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 Financial Data Schedule
</TABLE>
- ------------------------
* To be filed by amendment.
II-6
<PAGE>
Exhibit 2.1
PLAN OF MERGER AND EXCHANGE AGREEMENT
<PAGE>
EXECUTION COPY
================================================================================
NEUBERGER BERMAN INC.
PLAN OF MERGER AND EXCHANGE AGREEMENT
Dated as of August 2, 1999
================================================================================
<PAGE>
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........................................................4
ARTICLE II
EXCHANGE OF NB LLC INTERESTS....................................................................5
2.1 The Exchange...........................................................................5
2.2 Termination of Rights..................................................................5
2.3 Consent of Executive Committee.........................................................6
2.4 Consent to Transaction; No Appraisal Rights............................................6
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
THE FOUNDER 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
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY, MERGER SUB AND NBMI................................................................8
i
<PAGE>
4.1 Organization and Good Standing.........................................................9
4.2 Capital Stock; Preemptive Rights.......................................................9
4.3 Authorization and Validity of Agreements...............................................9
4.4 No Conflicts; Consents.................................................................9
4.5 Purchase for Investment...............................................................10
4.6 No Prior Operations...................................................................10
ARTICLE V
COVENANTS......................................................................................10
5.1 No Transfers Prior to Closing.........................................................10
5.2 Tax Matters. ........................................................................10
5.3 Further Assurances....................................................................11
ARTICLE VI
CONDITIONS PRECEDENT TO THE OBLIGATIONS
OF THE COMPANY, MERGER SUB, NBMI AND OF
THE FOUNDER 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 Founder Stockholders.............................12
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
9.1 Authority.................................................................................16
9.2 Terms.....................................................................................17
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<PAGE>
ARTICLE X
MISCELLANEOUS..................................................................................18
10.1 Notices...............................................................................18
10.2 Termination...........................................................................18
10.3 Obligations of Founder 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 Tax Indemnity; Tax Refunds............................................................21
10.11 Submission to Jurisdiction; Waiver of Immunity........................................21
10.12 Execution in Counterparts.............................................................22
10.13 Entire Agreement......................................................................22
Schedule I
Schedule II
</TABLE>
iii
<PAGE>
PLAN OF MERGER AND
EXCHANGE AGREEMENT
This PLAN OF MERGER AND EXCHANGE AGREEMENT (this "AGREEMENT") is dated
as of August 2, 1999, 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 Inc., 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 "FOUNDER
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>
WHEREAS, the Founder 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
provisions 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>
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;
(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
3
<PAGE>
to receive from the Company the number of shares of Common Stock equal
to the quotient of (I) 8,270,281 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.
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
4
<PAGE>
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
Founder Stockholder hereby assigns and delivers to the Company, as of the
Effective Time, all right, title and interest in, to and with respect to the NB
LLC Interest held by such Founder 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 Founder 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 Founder Stockholder shall be deemed to be the capital account and
share of profits and losses of the Company, and the Founder 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, as of the
Effective Time, the assignment of the NB LLC Interests and assumes and agrees to
perform and be bound by, as of the Effective Time, any and all of the
conditions, covenants and obligations of the Founder 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 Founder Stockholder
shall be released from all obligations under the NB LLC Agreement.
(c) EXCHANGE OF COMMON STOCK. Immediately after the Effective
Time, each Founder Stockholder shall receive in consideration for the exchange
of such Founder Stockholder's NB LLC Interest, the number of shares of Common
Stock equal to the product of 34,229,719 and such Founder Stockholder's
Operations Percentage (as defined in the NB LLC Agreement).
2.2 TERMINATION OF RIGHTS. Each Founder Stockholder hereby
affirms and agrees that, from and after the Effective Time, such Founder
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.
5
<PAGE>
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
undersigned Founder Stockholders, together constituting all of the holders of
limited liability company interests in NB LLC, hereby assents to the terms,
conditions and transactions contemplated hereby and acknowledges that such
Founder 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 FOUNDER STOCKHOLDERS
Each Founder Stockholder hereby severally represents and
warrants to the Company as follows:
3.1 ORGANIZATION, AUTHORIZATION AND VALIDITY OF BASIC
AGREEMENTS. (a) ENTITIES. If such Founder Stockholder is not a natural person,
(I) such Founder Stockholder is duly formed or organized, validly existing and
in good standing under the laws of the jurisdiction in which such Founder
Stockholder was formed or organized; (II) such Founder 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 Founder
Stockholder, and each is a legal, valid and binding obligation of such Founder
Stockholder enforceable against such Founder Stockholder in accordance with
their terms.
(b) NATURAL PERSONS. If such Founder Stockholder is a natural
person, (I) such Founder Stockholder is of sound mind and has full legal
capacity to enter into, execute and deliver this Agreement and the Stockholders
Agreement and perform his or
6
<PAGE>
her obligations hereunder and thereunder, and (II) this Agreement and the
Stockholders Agreement have been duly executed and delivered by such Founder
Stockholder and are legal, valid and binding obligations of such Founder
Stockholder enforceable against such Founder Stockholder in accordance with
their terms.
3.2 TITLE. Such Founder Stockholder owns, beneficially and of
record, the NB LLC Interest held by such Founder 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 Founder Stockholder is a Principal, such Founder
Stockholder owns, beneficially and of record, the number of shares of NBMI Stock
set forth opposite such Founder 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 Founder Stockholder
under (A) any Contract to which such Founder 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 Founder Stockholder that is not a natural person.
3.4 INVESTMENT PURPOSE. Such Founder 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 Founder Stockholder acknowledges that it must
bear the economic risk of an investment in the Founder Shares for an indefinite
period of time because, among other reasons, the Founder 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 Founder Stockholder understands that the
Founder 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 Founder Shares. Such Founder
Stockholder also acknowledges that transfers of the Founder Shares are further
restricted by applicable United States federal and state and foreign securities
laws.
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3.5 ACCESS TO INFORMATION. Such Founder Stockholder
understands the risks of, and other considerations relating to, its acquisition
and ownership of the Founder Shares. Such Founder 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 Founder Shares, and has
obtained any and all additional information from the Company and its
representatives that such Founder Stockholder deems necessary regarding the
Founder Shares.
3.6 EVALUATION OF AND ABILITY TO BEAR RISKS. Such Founder
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 Founder Shares, and has not relied in connection with
its acquisition of the Founder Shares upon any representations, warranties or
agreements other than those set forth in this Agreement. Such Founder
Stockholder's financial situation is such that it can afford to bear the
economic risk of holding the Founder Shares for an indefinite period of time,
and such Founder Stockholder can afford to suffer the complete loss of its
investment in the Shares.
3.7 NO LIABILITIES IN EXCESS OF TAX BASIS. Such Founder
Stockholder's tax basis in its NB LLC Interests, is equal to or greater than
such Founder Stockholder's share of NB LLC's liabilities determined under
Section 752 of the Code.
3.8 NO DISPOSITIONS. No Founder Stockholder has any present
plan, intention or arrangement to dispose of any of the Founder Shares to be
received by such Founder 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 Founder Shares to a person who
was not a Founder Stockholder immediately prior to the date hereof.
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 Founder Stockholders as follows:
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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 12,500 shares are currently issued and
outstanding. The Founder 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 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
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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
transactions 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 Founder Stockholder shall Transfer
all or any portion of its interest in an NB LLC Interest or any shares of NBMI
Stock held by such Founder 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 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
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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 FOUNDER STOCKHOLDERS
6.1 CONDITIONS TO THE OBLIGATIONS OF THE PARTIES. The
obligations of the Company, Merger Sub, NBMI and the Founder 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 and Florida
banking authorities, 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;
(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,
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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 Founder
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 Founder
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 the Closing; and
(b) The Stockholders Agreement substantially in the form of
Exhibit A hereto (the "STOCKHOLDERS AGREEMENT") shall have been
executed and delivered by each of the Founder Stockholders to the
Company.
6.3 CONDITIONS TO THE OBLIGATIONS OF THE FOUNDER STOCKHOLDERS.
The obligations of the Founder 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 be 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
(b) The Stockholders Agreement shall have been executed and
delivered by the Company to each of the Founder Stockholders.
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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.
"Common Stock" has the meaning set forth in the recitals to
this Agreement.
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"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.
"Founder Shares" means, with respect to any Founder
Stockholder, the shares of Common Stock received or to be received by
such Founder Shareholder pursuant to the terms of this Agreement.
"Founder Stockholders" has the meaning set forth in the
recitals to this Agreement.
"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 Founder Stockholders that,
pursuant to the terms of this Agreement, will receive more than 50% of
the Founder Shares.
"Merger" has the meaning set forth in the recitals to this
Agreement.
"Merger Consideration" has the meaning set forth in Section
1.4(c).
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"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.
"Pre-Closing Taxes" means all Taxes which are imposed on or
with respect to NB LLC or NBMI or the assets or properties of NB LLC or
NBMI for any taxable period (or a portion thereof) ending on or prior
to the Effective Time; PROVIDED that, any such Taxes attributable to a
taxable period that begins before and ends after the Effective Time
shall be apportioned between the portion of such period ending on the
Effective Time and the portion of such period beginning on the date
after the Effective Time as follows: (X) in the case of real or
personal property Taxes, by apportioning such Taxes on a per diem
basis, (Y) in the case of income Taxes, on the basis of the taxable
income or loss of NB LLC or NBMI as determined from the books and
records of such entity for such partial period and
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(Z) in all other cases, on the basis of the actual activities of such
entity as determined from the books and records of such entity for such
partial period.
"Principals" means the Persons listed on Schedule I hereto.
"Stockholders Agreement" has the meaning set forth in Section
6.2(b).
"Surviving Corporation" has the meaning set forth in Section
1.1.
"Tax" means any federal, state, local, foreign or other
income, alternative, minimum, accumulated earnings, personal holding
company, franchise, capital stock, net worth, capital, profits,
windfall profits, gross receipts, value added, sales (including, but
not limited to, bulk sales), use, goods and services, excise, customs
duties, transfer, conveyance, mortgage, registration, stamp,
documentary, recording, premium, severance, environmental (including,
but not limited to, taxes under section 59A of the Code), real
property, personal property, ad valorem, intangibles, rent, occupancy,
license, occupational, employment, unemployment insurance, social
security, disability, workers' compensation, payroll, health care,
withholding, estimated or other similar tax, duty or other governmental
charge or assessment or deficiencies thereof, including, but not
limited to, all interest and penalties thereon and additions thereto
whether disputed or not.
"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 Founder 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:
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(i) the Stockholders Agreement, with such changes and
alteration as may be approved by the Executive Committee;
(ii) if such Founder Stockholder has provided notice to the
Executive Committee that such Founder Stockholder desires to
participate in the IPO, (x) one or more underwriting agreements among
the Company, underwriters and the Founder 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.
(b) Each Founder 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 Founder
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
Section 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 Founder 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.
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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:
(i) after March 31, 2000, 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 Founder 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.
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(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 FOUNDER STOCKHOLDERS. The obligations of
the Founder 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.
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 Founder 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.
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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 Founder 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 Founder Stockholder will have an adequate remedy at
law. Therefore, the Company, Merger Sub, NBMI and each Founder 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.
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
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(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 TAX INDEMNITY; TAX REFUNDS. (a) Each Founder Stockholder
shall severally indemnify the Company and each of its subsidiaries and hold them
harmless from and against, and pay and reimburse them for, any and all demands,
claims, actions, losses, damages, liabilities, obligations, Taxes, deficiencies,
out-of-pocket costs and expenses (including reasonable consultants' and
attorneys' fees), whether or not resulting from third-party claims, including
interest and penalties with respect thereto, asserted against or incurred or
sustained by any of them as a result of or arising out of all Pre-Closing Taxes.
Such obligations shall be borne by Founder Stockholders in the same proportion
that such Pre-Closing Taxes would have been borne by Founder Stockholders had
such Pre-Closing Taxes been paid when incurred.
(b) All refunds received by the Company, NB LLC or NBMI in
respect of Pre-Closing Taxes shall be paid to the Founder Stockholders in the
same proportion that related Pre-Closing Taxes were borne by the Founder
Stockholders when such Pre-Closing Taxes were paid.
10.11 SUBMISSION TO JURISDICTION; WAIVER OF IMMUNITY. Each
Founder 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
Founder 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 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.
21
<PAGE>
10.12 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.
10.13 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.
22
<PAGE>
IN WITNESS THEREOF, the parties have executed and delivered
this Agreement as of the date first written above.
NEUBERGER BERMAN INC.
By: /s/ Jeffrey B. Lane
----------------------------------------
Name: Jeffrey B. Lane
Title: President, Chief Executive Officer
NEUBERGER BERMAN SUB INC.
By: /s/ Lawrence Zicklin
----------------------------------------
Name: Lawrence Zicklin
Title: President
NEUBERGER BERMAN MANAGEMENT INC.
By: /s/ Ellen Metzger
----------------------------------------
Name: Ellen Metzger
Title: Secretary
NEUBERGER BERMAN, LLC
By: /s/ Lawrence Zicklin
----------------------------------------
Name: Lawrence Zicklin
Title: Managing Principal and
Chief Executive Officer
<PAGE>
The foregoing Plan of Merger and
Exchange Agreement is hereby
agreed to by the undersigned as of
August 2, 1999.
/s/Herbert W. Ackerman
/s/Robert J. Appel
/s/Howard R. Berlin
/s/Jeffrey Bolton
/s/Richard A. Cantor
/s/Vincent Cavallo
/s/Lawrence J. Cohn
/s/Robert W. D'Alelio
/s/Salvatore D'Elia
/s/Stanley Egener
/s/Michael N. Emmerman
/s/Robert D. English
/s/Jack M. Ferraro
/s/Gregory P. Francfort
/s/Howard L. Ganek
/s/Robert T. Gendelman
/s/Theodore P. Giuliano
/s/Mark R. Goldstein
/s/Lee H. Idleman
/s/Alan L. Jacobs
/s/Kenneth M. Kahn
/s/Michael W. Kamen
/s/Michael M. Kassen
/s/Michael P. Kleiman
/s/Lee P. Klingenstein
/s/Irwin Lainoff
/s/Jeffrey B. Lane
/s/Joseph R. Lasser
/s/Richard S. Levine
/s/Christopher J. Lockwood
/s/Lawrence Marx III
/s/Robert Matza
/s/Robert R. McComsey
<PAGE>
/s/Martin McKerrow
/s/Martin E. Messinger
/s/Beth W. Nelson
/s/Roy R. Neuberger
/s/Harold J. Newman
/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 A. Rosenblatt
/s/J. Curt Schnackenberg, Jr.
/s/Marvin C. Schwartz
/s/Jennifer K. Silver
/s/Kent C. Simons
/s/R. Edward Spilka
/s/Gloria H. Spivak
/s/ Heidi S. Steiger
/s/Bernard Z. Stein
/s/Fred Stein
/s/Eleanor M. Sterne
/s/Stephanie J. Stiefel
/s/Philip A. Straus
/s/Peter Strauss
/s/Peter E. Sundman
/s/Allan D. Sutton
/s/Richard J. Sweetnam, Jr.
/s/Judith M. Vale
/s/David I. Weiner
/s/Michael J. Weiner
/s/Dietrich Weismann
/s/Leslie J. Werkstell
/s/Allan R. White, III
/s/Lawrence Zicklin
HERBERT W. ACKERMAN ASSOCIATES, L.P.
By: Herbert W. Ackerman Associates, Inc.,
its general partner
By: /s/Herbert W. Ackerman
President
<PAGE>
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
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
<PAGE>
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
NEUBERGER ASSOCIATES, L.P.
By: Neuberger Associates, Inc., its general partner
By: /s/Roy R. Neuberger
President
<PAGE>
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
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
STEIGER ASSOCIATES, L.P.
By: Steiger Associates, Inc., its general partner
By: /s/Heidi S. Steiger
President
<PAGE>
STIEFEL ASSOCIATES, L.P.
By: Stiefel Associates, Inc., its general partner
By: /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
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
<PAGE>
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
<PAGE>
SCHEDULE I
Name and Address* of Principal Number of NBMI Shares
- ------------------------------ ---------------------
Herbert W. Ackerman 104
Robert J. Appel 548
John J. Barker 88
Howard R. Berlin 229
Jeffrey Bolton 171
Richard A. Cantor 431
Vincent T. Cavallo 104
Lawrence J. Cohn 63
Robert W. D'Alelio 126
Salvatore D'Elia 57
Stanley Egener 308
Michael N. Emmerman 77
Robert D. English 99
Jack M. Ferraro 75
Gregory P. Francfort 244
Howard L. Ganek 327
Robert T. Gendelman 170
Theodore P. Giuliano 128
Mark R. Goldstein 76
Lee H. Idleman 77
Alan L. Jacobs 112
Kenneth M. Kahn 62
Michael W. Kamen 125
Michael M. Kassen 351
Mark P. Kleiman 245
Lee P. Klingenstein 56
Irwin Lainoff 291
Jeffrey B. Lane 157
Joseph R. Lasser 75
- --------
* Unless otherwise indicated, the address of each Principal is c/o
Neuberger Berman, LLC, 605 Third Avenue, New York, New York 10158.
<PAGE>
Name and Address* of Principal Number of NBMI Shares
- ------------------------------ ---------------------
Richard S. Levine 147
Christopher J. Lockwood 137
Lawrence Marx III 158
Robert Matza 94
Robert R. McComsey 142
Martin McKerrow 89
Martin E. Messinger 291
Beth W. Nelson 263
Roy R. Neuberger 56
Harold J. Newman 99
Daniel P. Paduano 229
Norman H. Pessin 34
Leslie M. Pollack 171
William A. Potter 68
Janet W. Prindle 262
C. Carl Randolph 63
Kevin L. Risen 108
Daniel H. Rosenblatt 95
J. Curt Schnackenberg, Jr. 63
Marvin C. Schwartz 1,657
Jennifer K. Silver 113
Kent C. Simons 226
R. Edward Spilka 161
Gloria H. Spivak 63
Heidi S. Steiger 178
Bernard Z. Stein 39
Fred Stein 94
Eleanor M. Sterne 104
Stephanie J. Stiefel 82
Philip A. Straus 38
Peter Strauss 98
Peter E. Sundman 95
Allan D. Sutton 70
Richard J. Sweetnam Jr. 127
<PAGE>
Name and Address* of Principal Number of NBMI Shares
- ------------------------------ ---------------------
Judith M. Vale 257
David I. Weiner 183
Michael J. Weiner 63
Dietrich Weismann 670
Leslie J. Werkstell 63
Allan R. White, III 109
Lawrence Zicklin 465
Total 12,500
======
<PAGE>
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>
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.
<PAGE>
Exhibit 3.1
CERTIFICATE OF INCORPORATION
<PAGE>
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 New Castle, 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>
(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 series
entitled to vote on a particular matter shall be deemed to be voted on
such
2
<PAGE>
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>
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 stockholders:
(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 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
4
<PAGE>
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.
5
<PAGE>
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/ Elizabeth Nosarios
---------------------------
Elisabeth Nosarios
6
<PAGE>
Exhibit 3.2
BY-LAWS
<PAGE>
================================================================================
NEUBERGER BERMAN INC.
BY-LAWS
As adopted on August 13, 1998
================================================================================
<PAGE>
NEUBERGER BERMAN INC.
BY-LAWS
<TABLE>
<CAPTION>
TABLE OF CONTENTS
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
i
<PAGE>
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
ii
<PAGE>
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..........................................................................20
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.....................................................................................24
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
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8.05. Deposits.........................................................................................26
8.06. Checks...........................................................................................26
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....................................................................27
ARTICLE IX
AMENDMENT OF BY-LAWS
9.01. Amendment........................................................................................28
ARTICLE X
CONSTRUCTION
10.01. Construction....................................................................................28
</TABLE>
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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
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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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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
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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 pro poses 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
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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.
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(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;
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(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.
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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
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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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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 employ ment 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
superceding 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 thereto fore 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
certifi cates 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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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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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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Exhibit 4.2
STOCKHOLDERS AGREEMENT
<PAGE>
EXECUTION COPY
================================================================================
NEUBERGER BERMAN INC.
STOCKHOLDERS AGREEMENT
Dated as of August 2, 1999
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
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..................................4
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..........................................6
ARTICLE II
VOTING AGREEMENT................................................................................6
Section 2.1. Preliminary Vote of Founder Stockholders..........................................6
Section 2.2. Voting by Founder Stockholders....................................................6
Section 2.3. Termination of Voting Provisions..................................................7
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 Founder Stockholders........................8
Section 4.2. Representations and Warranties of the Company.....................................9
ARTICLE V
DEFINITIONS.....................................................................................9
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ARTICLE VI
MISCELLANEOUS..................................................................................16
Section 6.1. Notices..........................................................................16
Section 6.2. Term of the Agreement............................................................16
Section 6.3. Amendments; Waivers..............................................................16
Section 6.4. Adjustment Upon Changes in Capitalization........................................17
Section 6.6. Severability.....................................................................17
Section 6.7. Representatives, Successors and Assigns..........................................17
Section 6.8. Governing Law....................................................................18
Section 6.9. Specific Performance.............................................................18
Section 6.10. Arbitration.....................................................................18
Section 6.11. Submission to Jurisdiction; Waiver of Immunity..................................19
Section 6.12. Further Assurances..............................................................19
Section 6.13. Execution in Counterparts.......................................................19
Section 6.14. Entire Agreement................................................................19
Schedule I
Schedule II
</TABLE>
ii
<PAGE>
STOCKHOLDERS AGREEMENT
This STOCKHOLDERS AGREEMENT (this "AGREEMENT") is dated as of
August 2, 1999, 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 the date hereof (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
Inc., 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 "FOUNDER
STOCKHOLDERS") will Own all of the issued and outstanding Common Stock;
WHEREAS, the Company and the Founder 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
WHEREAS, it is a condition precedent to the closing under the
Exchange Agreement that the parties hereto enter into this Agreement.
<PAGE>
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 Founder Stockholder
agrees that, in addition to any restrictions imposed by law, no Founder
Stockholder shall Transfer any Founder Shares Owned by such Founder Stockholder,
except that:
(a) Subject to Sections 1.1(b) and 1.1(c), each Principal,
together with his or her Family Affiliates, may in the aggregate
Transfer (X) on and after January 1, 2002 and prior to January 1, 2003,
a number of Founder Shares not to exceed the sum of such Principal's
Unsold IPO Allotment and 10% of the aggregate Number of Initial Founder
Shares Owned by such Principal and Family Affiliates and (Y) in each
calender year commencing January 1, 2003, a number of Founder Shares
not to exceed 10% of the aggregate Number of Initial Founder Shares
Owned by such Principal and Family Affiliates, PROVIDED that, in the
case of each of the preceding clauses (x) and (y):
(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 Founder
Shares if, as a result of such Transfer, such Principal and
Family Affiliates would in the aggregate Own less than that
number of Founder Shares that is equal to 30% of the aggregate
Number of Initial Founder 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 Founder Shares other than Founder Shares
eligible to be Transferred but not Transferred on or prior to
such Employment Termination Date; and
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(iii) Any Founder 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 Founder Shares eligible to be Transferred in any calendar
year under this Section 1.1(a) but not so Transferred may be
Transferred in any future calendar year without any restriction imposed
by this Section 1.1(a).
(b) Notwithstanding Section 1.1(a), if the Employment
Termination Date of any Principal occurs prior to January 1, 2003,
(i) Such Principal and his or her Family
Affiliates may not Transfer any Founder Shares prior to
January 1, 2007; and
(ii) Subject to Section 3.1, on and after January 1,
2007, such Principal, together with his or her Family
Affiliates, may in the aggregate Transfer in any calendar year
up to that number of Founder Shares that is equal to 20% of
the aggregate number of Founder Shares Owned by such Principal
and his or her Family Affiliates on the Employment Termination
Date of such Principal, PROVIDED that any number of Founder
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(b) shall not apply if such
Principal's employment with the Company Group was terminated by the
Company Group without Cause.
(c) Notwithstanding Sections 1.1 (a) and 1.1(b), no Principal
nor any of his or her Family Affiliates may Transfer Founder Shares
during the pendency of any dispute between the Company and such
Principal or any of his or her Family Affiliates regarding the
obligations under this Agreement, the Exchange Agreement or the
Non-Competition Agreement of such Principal or any of his or her Family
Affiliates.
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 Founder Shares free of any provisions of this
Agreement.
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Section 1.3. TRANSFERS WITH THE CONSENT OF BOARD OF DIRECTORS.
Notwithstanding any other provisions of this Agreement, a Founder Stockholder
may Transfer any number of Founder 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.
Section 1.4. COMPLIANCE WITH LAW AND REGULATIONS. Each Founder
Stockholder agrees that any Transfer of Founder Shares by such Founder
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 Founder Stockholder agrees that each outstanding certificate
representing any Founder 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 [ ], 1999 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 Founder 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
Founder Stockholder agrees that the certificates representing such Founder
Stockholder's Founder Shares shall be issued in the name of a nominee holder to
be designated by the Company
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<PAGE>
and shall be held in custody by the Company at its principal office. Subject to
Section 1.6(c), the Company shall, upon the request of any such Founder
Stockholder or the estate of any Founder 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 representation by such Founder
Stockholder or estate thereof that such Founder Stockholder is then permitted to
Transfer a specified number of Founder Shares under the provisions of this
Agreement), promptly release from custody the certificates representing such
specified number of Founder Stockholder's Founder Shares which are then intended
and permitted to be Transferred under the provisions of this Agreement.
(b) Subject to Section 1.6(c), so long as the Founder
Stockholders have provided appropriate written direction to the Company,
whenever the nominee holder shall receive any cash dividend or other cash
distribution upon any Founder 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 Founder Stockholders in proportion to the
number of Founder 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 Founder 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 Founder Stockholders.
(c) Notwithstanding Section 1.6(b), during the pendency of any
dispute between the Company and any Principal or any of his or her Family
Affiliates regarding the obligations under this Agreement, the Exchange
Agreement or the Non-Competition Agreement of such Principal or any of his or
her Family Affiliates, all cash dividends and other cash distributions received
by the nominee holder in respect of the Founder Shares of such Principal and his
or her Family Affiliates shall be retained by the nominee holder and shall not
be distributed until the final resolution of such dispute. Each Principal and
his or her Family Affiliates hereby irrevocably (I) authorizes the Company, upon
any amount becoming payable by such Principal or his or her Family Affiliates in
connection with any such dispute, to set off and apply against such amount an
equal amount of any cash dividends or other cash distributions in respect of
such the Founder Shares of such Principal and his or her Family Affiliates then
retained by the nominee holder and (II) instructs the nominee holder to
distribute such amounts to the Company.
5
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Section 1.7. TRANSFERS IN VIOLATION OF AGREEMENT VOID. Any
attempted Transfer of Founder 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 FOUNDER 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 Founder
Stockholders Owning Founder Shares and of Additional Stockholders Owning
Additional Shares, in accordance with procedures established from time to time
by the Board of Directors, upon all such matters upon which such stockholder
vote or other action is proposed to be taken, in which each Founder Stockholder
and Additional Shareholder shall be permitted to vote the Founder 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 FOUNDER 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 Founder Stockholder agrees to vote or act by written
consent with respect to all the Founder 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 Founder 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 Founder Stockholder's Founder 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 Founder Shares, in each case in accordance with Section 2.2(a) and (II)
vote such Founder Stockholder's Founder 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
6
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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 Founder 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 Founder 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.
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 (including during such Principal's
employment with the Company Group), 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 Founder Shares Owned by such Family Affiliates on the Notice Date),
the number of Founder Shares Owned by such Principal and his or her Family
Affiliates that could not have been Transferred by such Founder Stockholders in
accordance with Section 1.1 prior to the Notice Date. The purchase price of each
Founder Share (the "PURCHASE PRICE") purchased by the Company pursuant to this
Section 3.1 shall equal $2.00 per share.
(b) The Company may exercise its right to purchase Founder
Shares under this Section 3.1 in accordance with the following procedures:
(i) The Company shall give notice to the Founder Stockholder
that Owns the Founder 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 Founder Stockholder of the
7
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Company's election to exercise such right, stating the number of
Founder Shares to be so purchased, the Purchase Price, closing
arrangements and a closing date at which payment of the consideration
for such Founder 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 Founder
Stockholder shall cause the nominee holding the Founder Shares being so
purchased to deliver the certificates representing such Founder Shares,
properly endorsed for transfer by such Founder 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 Founder Stockholder the
consideration therefor (it being understood and confirmed that NB LLC
has been appointed attorney-in-fact for such Founder Stockholder
pursuant to the Exchange 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 Founder 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 Founder 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 Founder 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 (including during
such Principal's employment with the Company Group), each Principal 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 FOUNDER
STOCKHOLDERS. Each Founder Stockholder severally represents and warrants to the
Company and to each
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other Founder Stockholder that (A) in the case of a Founder Shareholder who is
not a natural person, such Founder Stockholder is duly authorized to execute,
deliver and perform this Agreement; (B) this Agreement has been duly executed by
such Founder Shareholder or his, her or its attorney-in-fact on behalf of such
Founder Stockholder and is a valid and binding agreement of such Founder
Shareholder, enforceable against such Founder Shareholder in accordance with its
terms; (C) the execution, delivery and performance by such Founder 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 Founder Shareholder is a party; and (D) such Founder
Stockholder has good and marketable title to the shares of Common Stock 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 Founder 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.
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"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 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
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(d) a finding by the Commission or a court of
competent jurisdiction that he or she has committed an act
that would cause such Founder 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.
"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 Founder 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
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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 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 Founder
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.
"Founder Shares" means, with respect to any Founder
Stockholder, the shares of Common Stock received by such Founder
Shareholders as a result of the Exchange or, in the case of any Founder
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 Founder Stockholder's Founder Shares.
"Founder Stockholders" has the meaning set forth in the
recitals to this Agreement.
"Harmful Activity" by a Principal means such Principal,
directly or indirectly, either individually or as owner, partner,
agent, employee, consultant or otherwise:
(a) 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, in the case of an action
12
<PAGE>
taken during such Principal's employment with the Company
Group, during the one-year period immediately prior to such
action) or (II) any prospective client of the Company Group
who, within the one year period prior to such Employment
Termination Date (or, in the case of an action taken during
such Principal's employment with the Company Group, within the
one-year period immediately prior to such action), had been
directly solicited by such 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;
(b) 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;
(c) (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;
(d) 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;
(e) 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
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<PAGE>
uses the same in any way other than in connection with the
business of the Company Group; or
(f) publicly makes disparaging or derogatory comments
regarding (I) the Company Group or any member of the Company
Group or (II) any current or former Principal, employee or
consultant of the Company Group in their capacity as a
Principal, employee or consultant or with the effect of
damaging the business or reputation of the Company Group.
"Investment Company Act" means the Investment Company Act of
1940, as amended, and the rules and regulations promulgated thereunder.
"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.
"Non-Competition Agreement" means the Non-Competition
Agreement, dated as of the date hereof, between the Company and the
Principals.
"Notice Date" has the meaning set forth in Section 3.1(b)(i).
"Number of Initial Founder Shares" means, with respect to any
Principal and his or her Family Affiliates, the aggregate number of
Founder Shares received by such Persons in the Exchange or, in the case
of any Founder 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 Founder Stockholder's Initial
Founder Shares.
"NYSE" means the New York Stock Exchange, Inc.
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<PAGE>
"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.
"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 Founder Shares, directly
or indirectly, (I) to sell, assign, transfer, pledge (including in
margin transactions), 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.
"Unsold IPO Allotment" means, with respect to any Principal,
that number of Founder Shares Owned by such Principal and his or her
Family Affiliates that is equal to the amount, if any, by which (A) 15%
of the Number of Initial Founder Shares Owned by such Principal and his
or her Family Affiliates exceeds (B) the aggregate number of Founder
Shares sold by such Principal and his or her Family Affiliates in the
initial public offering of Common Stock of the Company.
15
<PAGE>
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.
(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 Founder
Stockholders who remain bound by its terms and (II) the date on which the
Company and all Founder 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 Founder Stockholder shall be bound by its terms
until all Founder Shares Owned by such Founder 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 Founder
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 Founder Stockholders
that Own a majority of the Founder Shares subject to this Agreement as of the
date of such amendment or modification, PROVIDED, FURTHER, that,
16
<PAGE>
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, 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 "Founder Shares" and "Purchase
Price," shall be appropriately adjusted so that each Founder 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 Founder 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 Founder Stockholder who is also a member of the Board of
Directors breaches his or her obligations under this Agreement, such Founder
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
17
<PAGE>
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 Founder 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).
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 Founder 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 Founder Stockholder will
have an adequate remedy at law. Therefore, the Company and each Founder
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
18
<PAGE>
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.
Section 6.11. SUBMISSION TO JURISDICTION; WAIVER OF IMMUNITY.
Each Founder 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
Founder 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 Founder 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>
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/ Jeffrey B. Lane
--------------------------------------
Name: Jeffrey B. Lane
Title: President, Chief Executive Officer
20
<PAGE>
The foregoing Stockholders
Agreement is hereby agreed
to by the undersigned as
of August 2, 1999.
/s/Herbert W. Ackerman
/s/Robert J. Appel
/s/Howard R. Berlin
/s/Jeffrey Bolton
/s/Richard A. Cantor
/s/Vincent Cavallo
/s/Lawrence J. Cohn
/s/Robert W. D'Alelio
/s/Salvatore D'Elia
/s/Stanley Egener
/s/Michael N. Emmerman
/s/Robert D. English
/s/Jack M. Ferraro
/s/Gregory P. Francfort
/s/Howard L. Ganek
/s/Robert T. Gendelman
/s/Theodore P. Giuliano
/s/Mark R. Goldstein
/s/Lee H. Idleman
/s/Alan L. Jacobs
/s/Kenneth M. Kahn
/s/Michael W. Kamen
/s/Michael M. Kassen
/s/Michael P. Kleiman
/s/Lee P. Klingenstein
/s/Irwin Lainoff
/s/Jeffrey B. Lane
/s/Joseph R. Lasser
/s/Richard S. Levine
/s/Christopher J. Lockwood
/s/Lawrence Marx III
/s/Robert Matza
/s/Robert R. McComsey
/s/Martin McKerrow
<PAGE>
/s/Martin E. Messinger
/s/Beth W. Nelson
/s/Roy R. Neuberger
/s/Harold J. Newman
/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 A. Rosenblatt
/s/J. Curt Schnackenberg, Jr.
/s/Marvin C. Schwartz
/s/Jennifer K. Silver
/s/Kent C. Simons
/s/R. Edward Spilka
/s/Gloria H. Spivak
/s/Heidi S. Steiger
/s/Bernard Z. Stein
/s/Fred Stein
/s/Eleanor M. Sterne
/s/Stephanie J. Stiefel
/s/Philip A. Straus
/s/Peter Strauss
/s/Peter E. Sundman
/s/Allan D. Sutton
/s/Richard J. Sweetnam, Jr.
/s/Judith M. Vale
/s/David I. Weiner
/s/Michael J. Weiner
/s/Dietrich Weismann
/s/Leslie J. Werkstell
/s/Allan R. White, III
/s/Lawrence Zicklin
HERBERT W. ACKERMAN ASSOCIATES, L.P.
By: Herbert W. Ackerman Associates, Inc.,
its general partner
By: /s/Herbert W. Ackerman
President
<PAGE>
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
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
<PAGE>
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
NEUBERGER ASSOCIATES, L.P.
By: Neuberger Associates, Inc., its general partner
By: /s/Roy R. Neuberger
President
<PAGE>
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
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
<PAGE>
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
By: /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
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
<PAGE>
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
<PAGE>
SCHEDULE I
TO
STOCKHOLDERS AGREEMENT
Name and Address* of Principal
- ------------------------------
Herbert W. Ackerman
Robert J. Appel
John J. Barker
Howard R. Berlin
Jeffrey Bolton
Richard A. Cantor
Vincent T. Cavallo
Lawrence J. Cohn
Robert W. D'Alelio
Salvatore D'Elia
Stanley Egener
Michael N. Emmerman
Robert D. English
Jack M. Ferraro
Gregory P. Francfort
Howard L. Ganek
Robert T. Gendelman
Theodore P. Giuliano
Mark R. Goldstein
Lee H. Idleman
Alan L. Jacobs
Kenneth M. Kahn
Michael W. Kamen
Michael M. Kassen
Mark P. Kleiman
Lee P. Klingenstein
Irwin Lainoff
- --------
* Unless otherwise indicated, the address of each Principal is c/o
Neuberger Berman, LLC, 605 Third Avenue, New York, New York 10158.
<PAGE>
Name and Address* of Principal
- ------------------------------
Jeffrey B. Lane
Joseph R. Lasser
Richard S. Levine
Christopher J. Lockwood
Lawrence Marx III
Robert Matza
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, Jr.
Marvin C. Schwartz
Jennifer K. Silver
Kent C. Simons
R. Edward Spilka
Gloria H. Spivak
Heidi S. Steiger
Bernard Z. Stein
Fred Stein
Eleanor M. Sterne
Stephanie J. Stiefel
Philip A. Straus
Peter Strauss
Peter E. Sundman
Allan D. Sutton
Richard J. Sweetnam Jr.
2
<PAGE>
Name and Address* of Principal
- ------------------------------
Judith M. Vale
David I. Weiner
Michael J. Weiner
Dietrich Weismann
Leslie J. Werkstell
Allan R. White, III
Lawrence Zicklin
3
<PAGE>
SCHEDULE II
TO
STOCKHOLDERS AGREEMENT
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
- --------
** 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>
Steiger Associates, L.P.
Stiefel Associates, L.P.
Strauss 1998 Trust
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.
<PAGE>
Exhibit 10.6
NON-COMPETITION AGREEMENT
<PAGE>
EXECUTION COPY
NON-COMPETITION AGREEMENT
-------------------------
This NON-COMPETITION AGREEMENT is dated as of August 2, 1999 (this
"AGREEMENT"), between Neuberger Berman Inc., a Delaware corporation ("NB INC."),
on its behalf and on behalf of its subsidiaries and affiliates (collectively
with NB Inc., and its and their predecessors and successors, the "FIRM"), and
the individuals listed on Schedule I hereto (each, a "PRINCIPAL"). Capitalized
terms used herein without definition have their respective meanings set forth in
Article II of this Agreement.
W I T N E S S E T H :
WHEREAS, each Principal is a party to the Plan of Merger and Exchange
Agreement, dated as of the date hereof, pursuant to which (I) all of the members
(including each Principal) of Neuberger Berman, LLC, a Delaware limited
liability company ("NB LLC"), will contribute their respective interests in NB
LLC to NB Inc. in exchange for shares of common stock, par value $.01 (the
"COMMON STOCK"), of NB Inc. (the "EXCHANGE") and (II) Neuberger Berman Sub Inc.,
a wholly-owned direct subsidiary of NB Inc., will merge into Neuberger Berman
Management Inc., a New York corporation ("NBMI"), with the Principals, as
shareholders of NBMI, to receive shares of the Common Stock (the "MERGER");
WHEREAS, as a result of the Exchange and Merger, the former members
of NB LLC and shareholders of NBMI will own all of the issued and outstanding
Common Stock;
WHEREAS, the Principals have been employees of NB LLC or NBMI, and
the Principals and NB Inc. desire to enter into certain agreements with respect
to their continued or terminated employment by the Firm; and
WHEREAS, in connection with each Principal's continued or terminated
employment with the Firm, the Principals have agreed to enter into an agreement
with NB Inc., on its behalf and on behalf of its subsidiaries and affiliates, in
respect of certain obligations, INTER ALIA, not to engage in competitive
activities and to cooperate with the Firm in maintaining certain relationships
following the termination of the Principals' employment.
<PAGE>
NOW, THEREFORE, in consideration of the premises contained herein and
for other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the Principal and the Firm agree as follows:
ARTICLE I
NON-COMPETITION;
TRANSFER OF CLIENT RELATIONSHIPS
Section 1.1 NON-COMPETITION. In view of each Principal's importance
to the Firm, each Principal hereby agrees that the Firm would likely suffer
significant harm from such Principal's competing with the Firm during such
Principal's Employment Period (as defined in the employment agreement between
the Principal and NB Inc., dated the date hereof (the "EMPLOYMENT AGREEMENT"))
and for some period of time thereafter or, if such Principal has separated or
will separate from the Firm on or prior to the date of consummation of the
initial public offering of the common stock of NB Inc. (the "IPO DATE"), for
some time after the IPO Date. Accordingly, each Principal hereby agrees that
such Principal will not, without the written consent of NB Inc., during the
Employment Period, if any, and for three-year period following the Date of
Termination, directly or indirectly, either individually or as an owner,
partner, agent, employee, consultant or otherwise:
(a) form, or acquire a 5% or greater equity ownership, voting
or profit participation interest in, any Competitive Enterprise; or
(b) associate (including, but not limited to, association as
an officer, employee, partner, director, consultant, agent or advisor)
with any Competitive Enterprise and in connection with such association
engage in, or directly or indirectly manage or supervise personnel
engaged in, any activity (1) which is similar or substantially related
to any activity in which such Principal was engaged, in whole or in
part, at the Firm, (2) for which such Principal had direct or indirect
managerial or supervisory responsibility at the Firm, or (3) which
calls for the application of the same or similar specialized knowledge
or skills as those utilized by such Principal in such Principal's
activities with the Firm, at any time during the one-year period
immediately prior to the Date of Termination (or, in the case of an
action taken during the Employment Period, during the one-year period
immediately prior to such action), and, in any such case, irrespective
of the purpose of the activity or whether the activity is or was in
furtherance of advisory, agency, proprietary or fiduciary business of
either the Firm or the Competitive Enterprise (by way of example only,
this provision precludes an
2
<PAGE>
investment manager or research analyst from joining a hedge fund,
without the written consent of NB Inc.);
PROVIDED that the restriction imposed by this Section 1.1 to any Principal whose
employment with the Firm has been terminated by the Firm other than for Cause.
Each Principal understands that the provisions of this Section 1.1 may limit
such Principal's ability to earn a livelihood in a business similar to the
business of the Firm.
Section 1.2 TRANSFER OF CLIENT RELATIONSHIPS. Each Principal hereby
agrees to take all actions and do all such things (before of after the Date of
Termination) as may be reasonably requested by the Firm from time to time prior
to such Principal's Date of Termination, or during the ninety day period
thereafter, to maintain for the Firm the business, goodwill, and business
relationships with any of the Firm's Clients with whom such Principal worked
during the term of such Principal's employment.
ARTICLE II
DEFINITIONS
For purposes of this Agreement, the following terms shall have the
following meanings:
"Cause" has the meaning given in the Stockholders Agreement, dated as
of the date hereof, among NB Inc. and the individuals listed therein, as in
effect from time to time.
"Competitive Enterprise" means a business enterprise that (1) engages
in any activity, or (2) owns or controls a significant interest in any entity
that engages in any activity, that, in either case, competes anywhere with any
activity in which the Firm is engaged. The activities covered by the previous
sentence include, without limitation, investment advisory and broker-dealer
services such as investment advisory services; private investing (for anyone
other than the Principal and members of the Principal's family); asset or hedge
fund management or sales; mutual fund management, sales or administration; trust
company services; prime brokerage; or securities brokerage, sales, securities
lending, custody, clearance, settlement or trading.
"Date of Termination" means, with respect to each Principal, such
Principal's Date of Termination (as defined in the Employment Agreement) or, if
such Principal is not a party to an Employment Agreement, the IPO Date.
3
<PAGE>
ARTICLE III
MISCELLANEOUS
Section 3.1 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 last address in the Firm's employment records, or, in the case of NB
Inc., 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.
(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 3.2 TERM OF THE AGREEMENT. This Agreement shall become
effective on the IPO Date and shall terminate on the earlier to occur of (I) the
first date on which there are no Principal who remains bound by its terms and
(II) the date on which NB Inc. and all Principals who are then bound by its
terms agree to terminate this Agreement.
Section 3.3 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 Principal (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 such Principal as of the date of such
amendment or modification.
(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.
4
<PAGE>
Section 3.4 DISINTERESTED BOARD MEMBERS TO MAKE DETERMINATIONS. In the
event that any Principal breaches his or her obligations under this Agreement,
then the Board of Directors (or any such committee as the Board of Directors may
designate) shall have the exclusive right to make (on behalf of the Firm) 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 such Principal is a member of the
Board of Directors (or such committee) at the time such breach, such Principal
must refrain from exercising his or her vote at meetings of the Board of
Directors (or such committee) and general meetings of NB Inc. to give effect to
this Section 3.4.
Section 3.5 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 3.6 REPRESENTATIVES, SUCCESSORS AND ASSIGNS. 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 no Principal may assign, delegate or otherwise transfer any of his or
her rights or obligations under this Agreement except with the written consent
of the Board of Directors.
Section 3.7 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).
Section 3.8 SPECIFIC PERFORMANCE. Each Principal acknowledges that it
will be impossible to measure in money the damage to the Firm if such Principal
fails to comply with the provisions of this Agreement and agrees that in the
event of any such failure the Firm will not have an adequate remedy at law. Each
Principal further acknowledges that a violation of this Agreement would cause
irreparable damage to the Firm. Therefore, the Firm, 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 this Agreement by obtaining injunctive relief against any actual or
threatened 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.
5
<PAGE>
Section 3.9 ARBITRATION. Except for claims for specific performance
brought in accordance with Section 3.8, any dispute, controversy or claim
between the Principal and the Firm, arising out of or relating to or concerning
the provisions of this Agreement, each Principal's employment with the Firm or
otherwise concerning any rights, obligations or other aspects of such
Principal's employment relationship in respect of the Firm, shall be submitted:
(a) to the New York Stock Exchange (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 (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.
Section 3.10 SUBMISSION TO JURISDICTION; WAIVER OF IMMUNITY. Each
Principal, 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 Principal 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
6
<PAGE>
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 3.8 or before any arbitral body in accordance with
Section 3.9 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.
Section 3.11 FURTHER ASSURANCES. Each Principal agrees to execute
such additional documents and take such further action as may be requested by
the Firm to effect the provisions of this Agreement.
Section 3.12 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 3.13 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.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Non-Competition Agreement to be duly executed as of the date first above
written.
NEUBERGER BERMAN INC.
By: /s/ Jeffrey B. Lane
--------------------------------------------
Name: Jeffrey B. Lane
Title: President, Chief Executive Officer
8
<PAGE>
The foregoing Non-Competition Agreement
is hereby agreed to by the undersigned
as of August 2, 1999.
/s/Herbert W. Ackerman
/s/Robert J. Appel
/s/Howard R. Berlin
/s/Jeffrey Bolton
/s/Richard A. Cantor
/s/Vincent Cavallo
/s/Lawrence J. Cohn
/s/Robert W. D'Alelio
/s/Salvatore D'Elia
/s/Stanley Egener
/s/Michael N. Emmerman
/s/Robert D. English
/s/Jack M. Ferraro
/s/Gregory P. Francfort
/s/Howard L. Ganek
/s/Robert T. Gendelman
/s/Theodore P. Giuliano
/s/Mark R. Goldstein
/s/Lee H. Idleman
/s/Alan L. Jacobs
/s/Kenneth M. Kahn
/s/Michael W. Kamen
/s/Michael M. Kassen
/s/Michael P. Kleiman
/s/Lee P. Klingenstein
/s/Irwin Lainoff
/s/Jeffrey B. Lane
/s/Joseph R. Lasser
/s/Richard S. Levine
/s/Christopher J. Lockwood
/s/Lawrence Marx III
<PAGE>
/s/Robert Matza
/s/Robert R. McComsey
/s/Martin McKerrow
/s/Martin E. Messinger
/s/Beth W. Nelson
/s/Roy R. Neuberger
/s/Harold J. Newman
/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 A. Rosenblatt
/s/J. Curt Schnackenberg, Jr.
/s/Marvin C. Schwartz
/s/Jennifer K. Silver
/s/Kent C. Simons
/s/R. Edward Spilka
/s/Gloria H. Spivak
/s/ Heidi S. Steiger
/s/Bernard Z. Stein
/s/Fred Stein
/s/Eleanor M. Sterne
/s/Stephanie J. Stiefel
/s/Philip A. Straus
/s/Peter Strauss
/s/Peter E. Sundman
/s/Allan D. Sutton
/s/Richard J. Sweetnam, Jr.
/s/Judith M. Vale
/s/David I. Weiner
/s/Michael J. Weiner
/s/Dietrich Weismann
/s/Leslie J. Werkstell
/s/Allan R. White, III
/s/Lawrence Zicklin
<PAGE>
SCHEDULE I
Name and Address* of Principal
- ------------------------------
Herbert W. Ackerman
Robert J. Appel
John J. Barker
Howard R. Berlin
Jeffrey Bolton
Richard A. Cantor
Vincent T. Cavallo
Lawrence J. Cohn
Robert W. D'Alelio
Salvatore D'Elia
Stanley Egener
Michael N. Emmerman
Robert D. English
Jack M. Ferraro
Gregory P. Francfort
Howard L. Ganek
Robert T. Gendelman
Theodore P. Giuliano
Mark R. Goldstein
Lee H. Idleman
Alan L. Jacobs
Kenneth M. Kahn
Michael W. Kamen
Michael M. Kassen
Mark P. Kleiman
Lee P. Klingenstein
Irwin Lainoff
Jeffrey B. Lane
Joseph R. Lasser
- --------
* Unless otherwise indicated, the address of each Principal is c/o Neuberger
Berman, LLC, 605 Third Avenue, New York, New York 10158.
<PAGE>
Name and Address* of Principal
- ------------------------------
Richard S. Levine
Christopher J. Lockwood
Lawrence Marx III
Robert Matza
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, Jr.
Marvin C. Schwartz
Jennifer K. Silver
Kent C. Simons
R. Edward Spilka
Gloria H. Spivak
Heidi S. Steiger
Bernard Z. Stein
Fred Stein
Eleanor M. Sterne
Stephanie J. Stiefel
Philip A. Straus
Peter Strauss
Peter E. Sundman
Allan D. Sutton
Richard J. Sweetnam Jr.
Judith M. Vale
David I. Weiner
2
<PAGE>
Name and Address* of Principal
- ------------------------------
Michael J. Weiner
Dietrich Weismann
Leslie J. Werkstell
Allan R. White, III
Lawrence Zicklin
3
<PAGE>
Exhibit 10.7
FORM OF EMPLOYMENT AGREEMENT
<PAGE>
EXECUTION COPY
NEUBERGER BERMAN, LLC
August __, 1999
EMPLOYMENT AGREEMENT
--------------------
We are pleased that you will be continuing your employment as a
Principal of Neuberger Berman, LLC, a Delaware limited liability company ("NB
LLC"), or one or more of its subsidiaries or affiliates (collectively with NB
LLC, and its and their predecessors and successors, the "FIRM"), and are writing
to set forth the terms and conditions of such employment. This Agreement shall
become effective upon the consummation of the initial public offering of the
common stock of NB LLC. Certain capitalized terms are defined in Section 2
hereof.
1. EMPLOYMENT
You will be employed by NB LLC, or one or more of its subsidiaries or
affiliates, subject to the terms and conditions of this Agreement for the period
commencing on the date hereof and ending on December 31, 2000 (the "INITIAL
EMPLOYMENT PERIOD"). After the Initial Employment Period (unless otherwise
agreed by you and the Firm in writing), there will be no set term of employment.
You or the Firm may terminate your employment at any time during or after the
Initial Employment Period for any reason, or for no reason, by giving not less
than ninety (90) days' prior written notice of termination; PROVIDED, however,
that the Firm may elect to place you on paid leave for all or any part of such
90-day period; and PROVIDED, FURTHER, that no advance notice need be given by
the Firm to you in connection with a termination of your employment for Cause or
on account of Extended Absence.
During the Employment Period: (I) you will have such duties and
responsibilities as the Firm may from time to time determine; (II) you will
devote your entire working time, labor, skill and energies to the business and
affairs of the Firm; and (III) you will be paid the base salary and bonus set
forth on Schedule A hereto.
2. CERTAIN DEFINITIONS
As used herein, the following terms have the following meanings:
<PAGE>
"Cause" has the meaning given in the Stockholders Agreement, dated as
of the date hereof, among Neuberger Berman Inc., a Delaware corporation
("NB INC."), and the individuals listed therein, as in effect from time to
time.
"Date of Termination" means (I) if your employment is terminated by
the Firm for Cause or on account of Extended Absence, the date of the
Firm's delivery of written notice of termination, (II) if your employment
is terminated by the Firm other than for Cause or on account of Extended
Absence, the date that is ninety (90) days after the Firm's delivery of
written notice of termination, or (III) if your employment is terminated
by you, the date that is ninety (90) days after your delivery of written
notice of termination, or such earlier date as may be determined by the
Firm in its sole discretion.
"Employment Period" means the period commencing on the date hereof
and ending on your Date of Termination, and includes the Initial
Employment Period.
"Extended Absence" means your absence from employment for at least
180 days in any 12-month period as a result of your incapacity due to
mental or physical illness, as determined by the Firm.
"Noncompetition Agreement" means the Non-Competition Agreement, dated
as of the date hereof, between NB Inc. and the Principals listed therein,
as in effect from time to time.
3. DISPUTE RESOLUTION
Any dispute, controversy or claim between you and the Firm, arising
out of or relating to or concerning the provisions of this Agreement, your
employment with the Firm or otherwise concerning any rights, obligations or
other aspects of your employment relationship in respect of the Firm, shall be
finally resolved in accordance with the provisions of Sections 3.4, 3.8, 3.9 and
3.10 of the Noncompetition Agreement. Without limiting the foregoing, you
acknowledge that a violation on your part of this Agreement would cause
irreparable damage to the Firm. Accordingly, you agree that the Firm will be
entitled to injunctive relief for any actual or threatened violation of this
Agreement in addition to any other remedies it may have.
4. GOVERNING LAW
<PAGE>
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF
LAWS.
5. MISCELLANEOUS
This Agreement shall not supersede any other agreement, written or
oral, pertaining to the matters covered herein, except to the extent of any
inconsistency between this Agreement and any prior agreement, in which case this
Agreement shall prevail. Notices hereunder shall be delivered to the Firm at its
principal executive office directed to the attention of NB LLC's General
Counsel, and to you at your last address appearing in the Firm's employment
records.
You may not, directly or indirectly (including by operation of law),
assign your rights or obligations hereunder without the prior written consent of
NB LLC or its successors, and any such assignment by you in violation of this
Agreement shall be void. This Agreement shall be binding upon your permitted
successors and assigns. Without impairing your obligations hereunder, NB LLC may
at any time and from time to time assign its rights and obligations hereunder to
any of its subsidiaries or affiliates (and have such rights and obligations
reassigned to it or to any other subsidiary or affiliate). This Agreement shall
inure to the benefit of and be binding upon the Firm and its assigns. This
Agreement may not be amended or modified other than by a written agreement
executed by you and NB LLC or its successors, nor may any provision hereof be
waived other than by a writing executed by you or NB LLC or its successors;
PROVIDED that any waiver, amendment or modification of any of the provisions of
this Agreement shall not be effective against the Firm without the written
consent of NB LLC or such individual's designee.
If any provision of this Agreement is finally held to be invalid,
illegal or unenforceable (whether in whole or in part), such provision shall be
deemed modified to the extent, but only to the extent, of such invalidity,
illegality or unenforceability and the remaining provisions shall not be
affected thereby. Except as expressly provided herein, this Agreement shall not
confer on any person other than you and the Firm any rights or remedies
hereunder. The captions in this Agreement are for convenience of reference only
and shall not define or limit the provisions hereof.
<PAGE>
If the foregoing is in accordance with your understanding, kindly
confirm your acceptance and agreement by signing and returning the enclosed
duplicate of this letter which will thereupon constitute an agreement between
you and NB LLC, on its behalf and on behalf of its subsidiaries and affiliates.
Very truly yours,
NEUBERGER BERMAN, LLC
(on its behalf, and on behalf of its
subsidiaries and affiliates)
By:
---------------------------------
Name:
Title:
Agreed to and accepted as of
the date of this letter
By:
-------------------------------
Name:
<PAGE>
SCHEDULE A
If the Principal is an employee of the Private Asset Management business, the
Principal shall be entitled to receive compensation in an amount determined as
follows:
(a) The Firm shall periodically allocate to the investment group of
which the Principal is a member (the "PAM GROUP") 22% of all commissions
and investment advisory fees generated by such PAM Group.
(b) The amount so allocated shall be paid as compensation to the
members of such PAM Group (including the Principal) in such proportion as
may be determined by the Principals who are members of such PAM Group or,
in the event of a dispute among such Principals, in such proportion as may
be determined by the Executive Committee of NB LLC in its sole discretion.
If the Principal is not an employee of the Private Asset Management business,
the Principal will receive an amount of compensation, as separately communicated
to the Principal based upon the recommendation of an outside consultant and
approved by the Executive Committee.
<PAGE>
Exhibit 21.1
SUBSIDIARIES OF THE COMPANY
<PAGE>
SUBSIDIARIES OF THE COMPANY
Neuberger Berman, LLC
Neuberger Berman Management Incorporated
Neuberger Berman Trust Company
Neuberger Berman Trust Company of Delaware
Neuberger Berman Trust Company of Florida
Neuberger & Berman Agency, Inc.
<PAGE>
Exhibit 23.1
CONSENT OF ARTHUR ANDERSEN
<PAGE>
[LETTERHEAD OF ARTHUR ANDERSEN]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
dated February 16, 1999 (and to all references to our firm) included in or made
part of this Registration Statement.
/s/ Arthur Andersen LLP
------------------------
ARTHUR ANDERSEN LLP
New York, New York
August 4, 1999
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<PAGE>
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