<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998 OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
Commission file number 1-9215
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UNITED ASSET MANAGEMENT CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 04-2714625
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
ONE INTERNATIONAL PLACE
BOSTON, MASSACHUSETTS 02110
(Address of principal executive offices)
Registrant's telephone number, including area code: (617) 330-8900
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. X Yes No
--- ---
The number of shares of the registrant's common stock outstanding as of
November 9, 1998 was 63,448,820.
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<PAGE> 2
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements. (Pages F-1 to F-5)
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations. (Pages F-5 to F-11)
Item 3. Quantitative and Qualitative Disclosures About Market Risk. Not
Applicable.
PART II
OTHER INFORMATION
Item 1. Legal Proceedings.
The Company and certain of the Company's subsidiaries are subject to
legal proceedings arising in the ordinary course of business. On the
basis of information presently available and advice received from legal
counsel, it is the opinion of management that the disposition or
ultimate determination of such legal proceedings will not have a
material adverse effect on the Company's consolidated financial
position, its consolidated results of operations or its consolidated
cash flows.
Item 2. Changes in Securities.
During the third quarter of 1998, UAM issued an aggregate of 85,799
shares of its Common Stock in reliance on Section 4(2) of the
Securities Act of 1933, as amended (the Act), to certain executives of
its subsidiaries upon the exercise of warrants originally issued in
connection with the acquisition of such subsidiaries by UAM. The
exercise prices of the warrants ranged from $14.50 to $17.50 per
share.
Item 3. Defaults Upon Senior Securities. None
Item 4. Submission of Matters to a Vote of Security Holders. None
Item 5. Other Information. None
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibit 10.1 - $250,000,000 Note Purchase Agreement dated as of
August 12, 1998.
Exhibit 10.2 - Undertaking to Furnish Copies of Omitted Exhibits
and Schedules to $250,000,000 Note Purchase
Agreement dated as of August 12, 1998.
Exhibit 10.3 - Amendment No. 1 to Amended and Restated Credit
Agreement dated as of August 12, 1998.
Exhibit 11 - Calculation of Earnings Per Share (Page F-12).
Exhibit 27 - Financial Data Schedule.
Exhibit 99.1 - Risk Factors.
<PAGE> 3
(b) There have been no reports on Form 8-K filed by the Company
during the quarter ended September 30, 1998.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNITED ASSET MANAGEMENT CORPORATION
NOVEMBER 12, 1998 /s/ William H. Park
- --------------------- ----------------------------------
(Date) William H. Park
Executive Vice President and
Chief Financial Officer
<PAGE> 4
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
UNITED ASSET MANAGEMENT CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $226,745,000 $241,710,000 $722,941,000 $676,804,000
- ------------------------------------------------------------------------------------------------------------------------------------
Operating expenses:
Compensation and related
expenses 108,023,000 119,183,000 352,740,000 331,296,000
Amortization of cost assigned
to contracts acquired 28,473,000 27,775,000 86,118,000 78,349,000
Other operating expenses 43,094,000 43,677,000 134,512,000 114,605,000
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179,590,000 190,635,000 573,370,000 524,250,000
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Operating income 47,155,000 51,075,000 149,571,000 152,554,000
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Non-operating expenses:
Interest expense, net 14,802,000 9,839,000 38,115,000 26,201,000
Other amortization 1,319,000 543,000 3,122,000 1,595,000
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16,121,000 10,382,000 41,237,000 27,796,000
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Income before income tax expense 31,034,000 40,693,000 108,334,000 124,758,000
Income tax expense 13,281,000 17,467,000 46,366,000 53,447,000
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Net income $ 17,753,000 $ 23,226,000 $ 61,968,000 $ 71,311,000
====================================================================================================================================
Basic earnings per share $ .27 $ .33 $ .92 $ 1.02
Diluted earnings per share $ .27 $ .32 $ .89 $ .97
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Dividends declared per share $ .20 $ .20 $ .60 $ .57
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</TABLE>
See Notes to Condensed Consolidated Financial Statements.
F-1
<PAGE> 5
UNITED ASSET MANAGEMENT CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
September 30, December 31,
1998 1997
(Unaudited)
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 164,097,000 $ 173,638,000
Investment advisory fees receivable 154,772,000 180,921,000
Other current assets 9,644,000 11,863,000
- ---------------------------------------------------------------------------------------------------
Total current assets 328,513,000 366,422,000
Fixed assets, net 42,876,000 41,110,000
Cost assigned to contracts acquired, net 968,614,000 1,018,172,000
Other assets 122,278,000 87,796,000
- ---------------------------------------------------------------------------------------------------
Total assets $ 1,462,281,000 $ 1,513,500,000
===================================================================================================
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses $ 106,478,000 $ 118,249,000
Accrued compensation 120,810,000 143,633,000
Current portion of notes payable - 137,000
- ---------------------------------------------------------------------------------------------------
Total current liabilities 227,288,000 262,019,000
Senior notes payable 672,150,000 514,843,000
Subordinated notes payable 210,700,000 258,412,000
Deferred income taxes 32,178,000 20,074,000
- ---------------------------------------------------------------------------------------------------
Total liabilities 1,142,316,000 1,055,348,000
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Commitments and contingencies
Stockholders' equity:
Common stock, par value $.01 per share 703,000 703,000
Capital in excess of par value 360,546,000 357,239,000
Retained earnings 142,160,000 133,291,000
Accumulated other comprehensive income (10,908,000) (4,369,000)
- --------------------------------------------------------------------------------------------------
492,501,000 486,864,000
Less treasury shares at cost (172,536,000) (28,712,000)
- --------------------------------------------------------------------------------------------------
Total stockholders' equity 319,965,000 458,152,000
- ---------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 1,462,281,000 $ 1,513,500,000
==================================================================================================
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
F-2
<PAGE> 6
UNITED ASSET MANAGEMENT CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cash flow from (used in) operating activities:
Net income $ 17,753,000 $ 23,226,000 $ 61,968,000 $ 71,311,000
Adjustments to reconcile net income to net cash flow
from operating activities:
Amortization of cost assigned to contracts acquired 28,473,000 27,775,000 86,118,000 78,349,000
Depreciation 3,359,000 2,670,000 9,817,000 7,505,000
Amortization of goodwill and other 1,658,000 543,000 4,141,000 1,595,000
- ------------------------------------------------------------------------------------------------------------------------------------
Net income plus amortization and depreciation 51,243,000 54,214,000 162,044,000 158,760,000
Changes in assets and liabilities:
Decrease (increase) in investment advisory fees receivable 11,411,000 (14,708,000) 26,265,000 (10,517,000)
Decrease (increase) in other current assets 5,662,000 (198,000) 2,610,000 714,000
Decrease in accounts payable and accrued expenses (3,083,000) (2,161,000) (17,566,000) (6,361,000)
Increase (decrease) in accrued compensation 17,596,000 27,251,000 (21,465,000) 1,187,000
Increase (decrease) in deferred income taxes (373,000) 2,179,000 1,920,000 335,000
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Net cash flow from operating activities 82,456,000 66,577,000 153,808,000 144,118,000
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Cash flow used in investing activities:
Cash additions to cost assigned to contracts acquired (417,000) (47,395,000) (29,578,000) (158,277,000)
Change in other assets (15,856,000) (1,962,000) (38,647,000) (13,382,000)
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Net cash flow used in investing activities (16,273,000) (49,357,000) (68,225,000) (171,659,000)
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Cash flow from (used in) financing activities:
Purchase of treasury shares (76,171,000) (19,935,000) (205,552,000) (54,764,000)
Additions to notes payable, net 47,974,000 25,098,000 127,163,000 14,583,000
Issuance or reissuance of equity securities 6,549,000 4,370,000 23,823,000 23,074,000
Dividends paid (13,269,000) (12,959,000) (40,949,000) (37,650,000)
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Net cash flow used in financing activities (34,917,000) (3,426,000) (95,515,000) (54,757,000)
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Effect of foreign exchange rate changes on cash flow (43,000) (1,115,000) 391,000 (1,797,000)
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Net increase (decrease) in cash and cash equivalents 31,223,000 12,679,000 (9,541,000) (84,095,000)
Cash and cash equivalents at beginning of period 132,874,000 151,625,000 173,638,000 248,399,000
- ------------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $164,097,000 $164,304,000 $ 164,097,000 $ 164,304,000
====================================================================================================================================
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
F-3
<PAGE> 7
UNITED ASSET MANAGEMENT CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1
In the opinion of management, the accompanying unaudited Condensed
Consolidated Financial Statements contain all adjustments, consisting only of
normal recurring accruals, necessary to present fairly the financial position of
the Company and its subsidiaries at September 30, 1998 and their results of
operations and cash flows for the three- and nine-month periods ended September
30, 1998 and 1997. These Financial Statements should be read in conjunction with
the Company's Annual Report on Form 10-K for the year ended December 31, 1997.
Note 2
Accumulated depreciation of fixed assets was $58,548,000 and $48,731,000 at
September 30, 1998 and December 31, 1997, respectively. The accumulated
amortization of cost assigned to contracts acquired was $829,493,000 and
$743,795,000 at September 30, 1998 and December 31, 1997, respectively.
Note 3
The Company has a systematic program to repurchase shares of its common
stock to meet the requirements for future issuance of shares upon the exercise
of stock options and warrants. During the three- and nine-month periods ended
September 30, 1998, the Company repurchased 3,038,500 and 8,102,000 shares of
its common stock at a cost of $76,171,000 and $205,552,000, respectively,
including certain shares repurchased under the terms of the Company's systematic
program. During the three- and nine-month periods ended September 30, 1998,
exercises of warrants and stock options, as well as the issuance of stock to
former owners of affiliates in connection with purchase price commitments that
came due, resulted in the Company extinguishing subordinated notes, receiving
cash proceeds and issuing stock as follows:
Three Months Nine Months
Ended Ended
September 30, 1998 September 30, 1998
------------------ ------------------
Subordinated notes extinguished $1,393,000 $ 8,572,000
Cash proceeds received $5,878,000 $20,747,000
Shares issued - -
Treasury shares reissued 384,311 2,478,981
As of September 30, 1998, the Company held 6,712,567 treasury shares.
Warrants for the purchase of 8,791,000 shares and stock options for the purchase
of 8,368,000 shares were outstanding at weighted average exercise prices of
$23.42 and $22.55, respectively.
F-4
<PAGE> 8
Note 4
In August 1998, the Company issued an aggregate of $250,000,000 of
fixed-rate long-term senior secured notes to institutional investors. Principal
payments on the notes are due over periods beginning in 2002 and ending in 2008
and bear interest at fixed rates ranging from 8.52% to 8.72%. Under the terms of
the private placement, the Company is required to meet certain financial
covenants including cash flow and debt ratios. The notes outstanding under this
facility are secured by the stock of the Company's subsidiaries.
Note 5
Statement of Financial Accounting Standards No. 130, Reporting
Comprehensive Income (FAS 130), became effective for annual periods beginning
after December 15, 1997 and establishes standards for reporting and displaying
comprehensive income and its components in a full set of financial statements.
FAS 130 requires only additional reporting in the consolidated financial
statements and does not affect the Company's financial position or results of
operations. The components of comprehensive income for the three- and nine-month
periods ended September 30, 1998 are set forth below:
<TABLE>
<CAPTION>
Three Months Nine Months
Ended Ended
September 30, 1998 September 30, 1998
------------------ ------------------
<S> <C> <C>
Net income $17,753,000 $61,968,000
Other comprehensive income -
foreign currency translation adjustment (3,406,000) (6,539,000)
----------- -----------
Comprehensive income $14,347,000 $55,429,000
=========== ===========
</TABLE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The revenues of UAM's affiliated firms are derived primarily from fees for
investment advisory services provided to institutional and other clients.
Investment advisory fees are generally a function of the overall fee rate
charged to each account and the level of assets under management by the
affiliated firms. A minor portion of revenues is generated when firms consummate
transactions for client portfolios. Assets under management can be affected by
the addition of new client accounts or client contributions to existing
accounts, withdrawals of assets from or terminations of client accounts and
investment performance, which may depend on general market conditions.
UAM's assets under management were $183.2 billion as of September 30, 1998,
compared to $210.1 billion under management on June 30, 1998. During the
quarter, market performance subtracted $20.7 billion from assets under
management and net client cash flow reduced these assets by $6.2 billion.
F-5
<PAGE> 9
AMORTIZATION OF COST ASSIGNED TO CONTRACTS ACQUIRED AND OPERATING CASH FLOW (NET
INCOME PLUS AMORTIZATION AND DEPRECIATION)
Cost assigned to contracts acquired, net of accumulated amortization,
represented approximately 66% of the Company's total assets as of September 30,
1998. Amortization of cost assigned to contracts acquired, which is a noncash
charge, represented 16% and 15% of the Company's operating expenses for the
three- and nine-month periods ended September 30, 1998, respectively. Recording
the cost assigned to contracts acquired as an asset, with the resulting
amortization as an operating expense, reflects the application of generally
accepted accounting principles to acquisitions by UAM of investment management
firms in transactions accounted for as purchases. The principal assets acquired
are the investment advisory contracts which evidence the firms' ongoing
relationships with their clients.
Although the contracts acquired are typically terminable on 30-days notice,
analyses conducted by independent consultants retained by UAM and the experience
of UAM's firms to date have indicated that: 1) contracts are usually relatively
long-lived; 2) the duration of contracts can be reasonably estimated; and 3) the
value of the cost assigned to contracts acquired can be estimated based on the
present value of its projected income stream.
The cost assigned to contracts acquired is amortized on a straight-line
basis over the estimated weighted average useful life of the contracts of
individual firms acquired. These lives are estimated through statistical
analysis of historical patterns of terminations and the size and age of the
contracts acquired as of the acquisition date.
When actual terminations differ from the statistical patterns developed, or
upon the occurrence of certain other events, the Company updates the lifing
analyses discussed above. If the update indicates that any of the estimates
should be shortened, the remaining cost assigned to contracts acquired will be
amortized over the shorter life commencing in the year in which the new estimate
is determined. The Company regularly performs reviews for potential impairment
of the value of contracts. If the review indicates that the carrying value of
the contracts is impaired, the asset is adjusted to its estimated fair value.
Cost assigned to contracts acquired is amortized as an operating expense.
It does not, however, require the use of cash and therefore, management believes
that it is important to distinguish this expense from other operating expenses
in order to evaluate the performance of the Company. Amortization of cost
assigned to contracts acquired per share referred to below has been calculated
by dividing total amortization by the same number of shares used in the diluted
earnings-per-share calculation.
For purposes of this discussion, Operating Cash Flow is defined as net
income plus amortization and depreciation, as reflected in the Company's
Condensed Consolidated Statement of Cash Flows. Management uses Operating Cash
Flow not to the exclusion of net income, but rather as an additional important
measure of the Company's performance.
F-6
<PAGE> 10
OPERATING RESULTS
THREE MONTHS ENDED SEPTEMBER 30, 1998
COMPARED TO
THREE MONTHS ENDED SEPTEMBER 30, 1997
Revenues were $226,745,000 for the three months ended September 30, 1998
compared to $241,710,000 for the third quarter of 1997. Revenues declined due to
the effect of negative net client cash flow as well as the effect of Heitman
Financial Ltd. selling its non-retail property management operation during the
third quarter of 1998. Partially offsetting this decrease were acquisition
activity and the impact of market performance which generated higher fee
revenues. The revenues of Lincluden Management Limited and Integra Capital
Management Corporation, acquired September 4, 1997 and January 6, 1998,
respectively, have been included since their acquisition dates.
Compensation and related expenses together with other operating expenses
were $151,117,000 compared to $162,860,000 in 1997, primarily reflecting lower
operating expenses and compensation earned by employees of existing affiliated
firms in accordance with revenue sharing plans, partially offset by the impact
of the acquisitions discussed above. Amortization of cost assigned to contracts
acquired increased to $28,473,000 from $27,775,000 primarily as a result of the
acquisitions discussed above as well as the recording of additional purchase
price commitments associated with prior-year acquisitions, partially offset by a
reduction in the value of intangible assets recorded in the fourth quarter of
1997.
Interest expense increased to $16,765,000 from $11,389,000. The Company's
average debt levels increased due to the amount of stock repurchased as well as
acquisition activity. In addition, the Company completed its $250,000,000
private placement this quarter, creating longer term fixed-rate debt with higher
interest rates.
Income before income tax expense was $31,034,000 compared to $40,693,000 in
1997, reflecting the circumstances described above. The Company's annual
effective tax rate approximated 43% for both of the three-month periods ended
September 30, 1998 and 1997.
Net income was $17,753,000 compared to $23,226,000 reflecting the net
results of the events discussed above. Diluted earnings per share were $.27 for
the third quarter of 1998 compared to $.32 in the third quarter of 1997,
reflecting the effect of the Company's common stock repurchased and the
Company's lower average stock price, partially offset by the impact of the
issuance of shares of common stock and the hypothetical exercise of warrants and
stock options on the calculation of earnings per share under the treasury stock
method. Amortization of cost assigned to contracts acquired per share increased
to $.43 in the third quarter of 1998 from $.38 in 1997. Operating Cash Flow was
$51,243,000 in the third quarter of 1998 compared to $54,214,000 in 1997 due to
the circumstances discussed above.
F-7
<PAGE> 11
OPERATING RESULTS
NINE MONTHS ENDED SEPTEMBER 30, 1998
COMPARED TO
NINE MONTHS ENDED SEPTEMBER 30, 1997
Revenues increased 7% to $722,941,000 for the nine months ended September
30, 1998, from $676,804,000 for the first nine months of 1997. This increase is
the result of rising securities markets, particularly in North America and
Europe, the impact of acquisitions and life insurance proceeds received as a
result of the death of an executive, partially offset by the effect of negative
net client cash flow and Heitman Financial Ltd. selling its non-retail property
management operation. The revenues of Pacific Financial Research, Inc., Thomson
Horstmann & Bryant, Inc., Lincluden Management Limited and Integra Capital
Management Corporation acquired May 29, 1997, June 6, 1997, September 4, 1997
and January 6, 1998, respectively, have been included since their acquisition
dates.
Compensation and related expenses together with other operating expenses
increased 9% to $487,252,000 from $445,901,000, primarily reflecting higher
operating expenses and compensation earned by employees of existing and newly
acquired affiliated firms in accordance with revenue sharing plans. Amortization
of cost assigned to contracts acquired increased 10% to $86,118,000 from
$78,349,000 primarily as a result of the acquisitions discussed above as well as
the recording of additional purchase price commitments associated with prior
year acquisitions, partially offset by a reduction in the value of intangible
assets recorded in the fourth quarter of 1997.
Interest expense increased to $43,457,000 from $31,530,000 primarily due to
the increase in the Company's average debt levels, resulting from stock
repurchases and acquisition activity, as well as an increase in the Company's
average borrowing rates.
Income before income tax expense was $108,334,000 compared to $124,758,000
in 1997, reflecting the circumstances described above. Income tax expense was
$46,366,000 for the nine months ended September 30, 1998, including the effects
of reevaluating certain deferred tax assets related to the sale of certain
operations. Income tax expense for the nine months ended September 30, 1997 was
$53,447,000. The Company's annual effective tax rate approximated 43% for both
of the nine-month periods ended September 30, 1998 and 1997.
Net income was $61,968,000 compared to $71,311,000 reflecting the net
results of the events discussed above. Diluted earnings per share were $.89 for
the nine months ended September 30, 1998 compared to $.97 for the nine months
ended September 30, 1997, reflecting the effect of the Company's common stock
repurchased and the Company's lower average stock price, partially offset by the
impact of the issuance of shares of common stock and the hypothetical exercise
of warrants and stock options on the calculation of earnings per share under the
treasury stock method. Amortization of cost assigned to contracts acquired per
share increased to $1.24 for the nine months ended September 30, 1998 from $1.07
in 1997 primarily due to the circumstances discussed above.
F-8
<PAGE> 12
CHANGES IN FINANCIAL CONDITION; LIQUIDITY AND CAPITAL RESOURCES
The Company generated $51,243,000 and $162,044,000 of Operating Cash Flow
for the three- and nine-month periods ended September 30, 1998. This Operating
Cash Flow and additional borrowings under the Company's line of credit were
primarily used to finance the cash portion of acquisition activity, to
repurchase shares of the Company's common stock and to pay dividends to
shareholders. The Company invests its excess cash in deposits with major banks,
money market funds or in securities, principally commercial paper of companies
with strong credit ratings in diversified industries. As of September 30, 1998,
the Company had $477,850,000 available under its $750,000,000 Reducing Revolving
Credit Agreement.
In August 1998, the Company issued an aggregate of $250,000,000 of
fixed-rate long-term senior secured notes to institutional investors. Principal
payments on the notes are due over periods beginning in 2002 and ending in 2008
and bear interest at fixed rates ranging from 8.52% to 8.72%. Under the terms of
the private placement, the Company is required to meet certain financial
covenants including cash flow and debt ratios. The notes outstanding under this
facility are secured by the stock of the Company's subsidiaries.
Management believes that the Company's existing capital, together with
Operating Cash Flow and borrowings available under its revolving line of credit,
will provide the Company with sufficient resources to meet its present and
reasonably foreseeable future cash needs. Management expects that the principal
uses of financial resources will be to acquire additional investment management
firms, to fund commitments due or potentially due to former owners of affiliated
firms, to repurchase shares of the Company's common stock and to pay shareholder
dividends.
Increases or decreases in interest rates affect UAM's costs of operations
chiefly through increasing or decreasing the interest expense related to the
Company's variable-rate debt outstanding. To mitigate the risks associated with
increases in interest rates, UAM has entered into and plans to continue to enter
into interest-rate protection agreements. Rates of interest on the Senior Notes
and existing subordinated debt are fixed. Increases and decreases in interest
rates may also affect market prices of assets managed by the Company's
affiliated firms. Changes in such prices may affect the affiliated firms'
revenues, and therefore UAM's consolidated revenues.
YEAR 2000 AND OTHER SYSTEMS RELATED ISSUES
The "Year 2000 issue" is the result of computer programs and other
electronic systems that use two digits rather than four to define the applicable
year. These programs and systems may not be able to process dates beyond 1999,
which may cause system failures or create erroneous results.
The Company has retained a consulting firm since 1997 to help develop and
implement a program to assess its Year 2000 readiness. An inventory of the
Company's computer hardware and software programs, as well as surveys conducted
of all of its software and hardware vendors have substantially been completed.
As part of this program, the Company is in the process of testing, modifying,
upgrading or replacing its computer software applications and systems and seeks
to be Year 2000 compliant by June 30, 1999.
F-9
<PAGE> 13
The Company is also addressing Year 2000 issues related to non-information
technology (non-IT) systems, including embedded software and equipment (e.g.
elevators, telephone systems, etc.), and addressing the compliance of key
business partners. The Company has substantially completed an assessment of its
non-IT providers and is in the process of gaining assurances that they will be
Year 2000 compliant, and seeks to have these assurances by June 30, 1999.
The Company is in the process of developing contingency plans in the event
that the IT or non-IT systems of the Company or any of its key service providers
are not Year 2000 compliant by the end of 1999. The contingency plans, which are
expected to be completed by the end of 1999, will address how to mitigate risks
associated with the worst reasonably likely failures of systems at critical
dates in both the short term and the long term. Any Year 2000 compliance problem
of the Company, any of its affiliated firms, any of its vendors and any other
company with which it conducts business could have a material adverse effect on
the Company's consolidated financial position, consolidated results of
operations or consolidated cash flows.
To date, the Company and its affiliates have incurred expenses in the
amount of approximately $800,000 and expect to incur an additional $900,000
related to this issue. These costs, which principally represent consulting fees,
are being expensed as incurred. The Company has performed, and expects to
continue to perform, modifications, upgrades and replacements of its computer
software applications and systems through the Company's ongoing maintenance
program. Therefore, the Company has not incurred, and does not expect to incur,
significant incremental expenses for such modifications, upgrades and
replacements. The Company does not segregate payroll or other internal costs
specifically devoted to its efforts to address Year 2000 issues, but does not
believe these costs to be significant. The expenses of the Company's affiliated
firms related to the Year 2000 issues are funded out of the share of revenues
that is reserved for the affiliates under revenue sharing agreements and do not
affect the share of revenues retained by the Company. The total cost associated
with becoming Year 2000 compliant is not expected to be material to the
Company's consolidated financial position, consolidated results of operations or
consolidated cash flows.
The Company's affiliates that are registered with the Securities and
Exchange Commission (SEC) as investment advisers or broker-dealers are required
to discuss their Year 2000 readiness in Forms ADV-Y2K or BD-Y2K which will be
filed with the SEC and made available to clients.
The estimates and conclusions herein contain forward-looking statements and
are based on management's best estimates of future events. These statements
should be read in conjunction with the Company's disclosures under the heading
"Forward-looking Statements" detailed below.
On January 1, 1999, 11 European Union member states will adopt the "Euro"
as their common national currency. This currency will replace existing national
currencies in all participating countries over a period ending July 1, 2002.
During this period, both the Euro and existing national currencies will be
accepted. The Company is currently assessing the potential impact of the Euro
conversion on its systems and does not expect any costs incurred to have a
material adverse effect on the Company's consolidated financial position, its
consolidated results of operations or its consolidated cash flows.
FORWARD-LOOKING STATEMENTS
Certain statements within this Form 10-Q constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. The words or phrases "can be," "expects," "may affect," "may depend," "
believes," "estimate," "project" and similar words and phrases are intended to
identify such forward-looking statements.
F-10
<PAGE> 14
Such forward-looking statements involve known and unknown risks,
uncertainties and other factors, which may cause the actual results,
performances or achievements of the Company to be materially different from any
future results, performances or achievements expressed or implied by such
forward-looking statements. Some of these risks, uncertainties and other factors
are: changes in domestic and foreign economic and market conditions, effects of
client cash flow, impairment of acquired client contracts, competition in the
investment management industry, and other factors as more thoroughly identified
and explained in Exhibit 99.1 which is being filed with the Securities and
Exchange Commission as part of this Form 10-Q. Because of such risks,
uncertainties and other factors, the Company cautions each person receiving such
forward-looking statements not to place undue reliance on any such statements.
All such forward-looking statements are current only as of the date and time
they are made. The Company has no obligation, and will not undertake, to release
publicly any revisions to such forward-looking statements (for example, to
reflect events or circumstances occurring after the date and time such
statements were made; or to reflect events or circumstances that were not
anticipated at the date and time such statements were made).
F-11
<PAGE> 15
UNITED ASSET MANAGEMENT CORPORATION
CALCULATION OF EARNINGS PER SHARE
(In thousands, except per-share amounts)
(Unaudited)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
For the Three Months Ended September 30, For the Nine Months Ended September 30,
- ---------------------------------------------------------------------------------------- -----------------------------------------
Income Shares Per-Share Income Shares Per-Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
- ---------------------------------------------------------------------------------------- -----------------------------------------
<S> <C> <C> <C> <C> <C> <C>
For the three- and nine-month periods ended
September 30, 1998
Basic Earnings per Share
Income available to common
shareholders $17,753,000 64,950,000 $.27 $61,968,000 67,230,000 $ .92
==== =====
Effect of Dilutive Securities (1) - 1,751,000 - 2,160,000
----------- ---------- ----------- ----------
Diluted Earnings per Share
Income available to common
shareholders + assumed conversions $17,753,000 66,701,000 $.27 $61,968,000 69,390,000 $ .89
=========== ========== ==== =========== ========== =====
===================================================================================== ========================================
For the three- and nine-month periods ended
September 30, 1997
Basic Earnings per Share
Income available to common
shareholders $23,226,000 69,794,000 $.33 $71,311,000 69,988,000 $1.02
==== =====
Effect of Dilutive Securities (2) - 3,106,000 - 3,465,000
----------- ---------- ----------- ----------
Diluted Earnings per Share
Income available to common
shareholders + assumed conversions $23,226,000 72,900,000 $.32 $71,311,000 73,453,000 $ .97
=========== ========== ==== =========== ========== =====
===================================================================================== ========================================
</TABLE>
(1) Options on 2,101,000 and 1,854,000 shares of common stock and warrants on
1,520,000 and 1,524,000 shares of common stock were outstanding during the
three- and nine-month periods ended September 30, 1998, respectively, but
were not included in computing diluted earnings per share because their
effects were antidilutive.
(2) Options on 521,000 and 652,000 shares of common stock and warrants on
1,047,000 and 904,000 shares of common stock were outstanding during the
three- and nine-month periods ended September 30, 1997, respectively, but
were not included in computing diluted earnings per share because their
effects were antidilutive.
F-12
<PAGE> 1
EXHIBIT 10.1
================================================================================
UNITED ASSET MANAGEMENT CORPORATION
$67,000,000 8.52% Senior Secured Notes, Series A,
Due July 25, 2005
$75,000,000 8.52% Senior Secured Notes, Series B,
Due July 25, 2008
$108,000,000 8.72% Senior Secured Notes, Series C,
Due July 25, 2008
-------------------------
NOTE PURCHASE AGREEMENT
-------------------------
Dated as of August 12, 1998
================================================================================
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
(Not a part of the Agreement)
SECTION HEADING PAGE
<S> <C> <C>
SECTION 1. AUTHORIZATION OF NOTES..............................................................................1
SECTION 2. SALE AND PURCHASE OF NOTES; SECURITY................................................................1
Section 2.1. Sale and Purchase of Notes........................................................................1
Section 2.2. Security for the Notes............................................................................2
SECTION 3. CLOSING.............................................................................................5
SECTION 4. CONDITIONS TO CLOSING...............................................................................6
Section 4.1. Representations and Warranties....................................................................6
Section 4.2. Performance; No Default...........................................................................6
Section 4.3. Compliance Certificates...........................................................................6
Section 4.4. Opinions of Counsel...............................................................................7
Section 4.5. Purchase Permitted by Applicable Law, Etc.........................................................7
Section 4.6. Sale of Other Notes...............................................................................7
Section 4.7. Bank Credit Agreement, Security Documents, Etc....................................................7
Section 4.8. Filing and Recording..............................................................................7
Section 4.9. Payment of Special Counsel Fees...................................................................7
Section 4.10. Private Placement Numbers.........................................................................8
Section 4.11. Changes in Corporate Structure....................................................................8
Section 4.12. Proceedings and Documents.........................................................................8
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.......................................................8
Section 5.1. Organization; Power and Authority.................................................................8
Section 5.2. Authorization, Etc................................................................................8
Section 5.3. Disclosure........................................................................................8
Section 5.4. Organization and Ownership of Shares of Subsidiaries; Affiliates..................................9
Section 5.5. Financial Statements.............................................................................10
Section 5.6. Compliance with Laws, Other Instruments, Etc.....................................................10
Section 5.7. Governmental Authorizations, Etc.................................................................10
Section 5.8. Litigation; Observance of Agreements, Statutes and Orders........................................10
Section 5.9. Taxes............................................................................................11
Section 5.10. Title to Property; Leases........................................................................11
Section 5.11. Licenses, Permits, Etc...........................................................................11
Section 5.12. Compliance with ERISA............................................................................12
Section 5.13. Private Offering by the Company..................................................................12
Section 5.14. Use of Proceeds; Margin Regulations..............................................................12
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C> <C>
Section 5.15. Existing Indebtedness; Future Liens..............................................................13
Section 5.16. Foreign Assets Control Regulations, Etc..........................................................13
Section 5.17. Status under Certain Statutes....................................................................13
Section 5.18. Environmental Matters............................................................................13
Section 5.19. Pledge Agreements and Security Agreements........................................................14
Section 5.20. Revenue Sharing Agreements.......................................................................14
SECTION 6. REPRESENTATIONS OF THE PURCHASER...................................................................15
Section 6.1. Purchase for Investment..........................................................................15
Section 6.2. Source of Funds..................................................................................15
SECTION 7. INFORMATION AS TO COMPANY..........................................................................16
Section 7.1. Financial and Business Information...............................................................16
Section 7.2. Officer's Certificate............................................................................19
Section 7.3. Inspection.......................................................................................19
SECTION 8. PREPAYMENT OF THE NOTES............................................................................20
Section 8.1. Required Prepayments.............................................................................20
Section 8.2. Optional Prepayments with Make-Whole Amount......................................................20
Section 8.3. Allocation of Partial Prepayments................................................................21
Section 8.4. Maturity; Surrender, Etc.........................................................................21
Section 8.5. Purchase of Notes................................................................................21
Section 8.6. Make-Whole Amount................................................................................21
SECTION 9. AFFIRMATIVE COVENANTS..............................................................................23
Section 9.1. Compliance with Law..............................................................................23
Section 9.2. Insurance........................................................................................23
Section 9.3. Maintenance of Properties........................................................................23
Section 9.4. Payment of Taxes and Claims......................................................................23
Section 9.5. Corporate Existence, Etc.........................................................................24
Section 9.6. Nature of Business...............................................................................24
Section 9.7. Fixed Charges Coverage Ratio.....................................................................24
SECTION 10. NEGATIVE COVENANTS.................................................................................24
Section 10.1. Transactions with Affiliates.....................................................................24
Section 10.2. Mergers, Consolidations and Sales of Assets......................................................24
Section 10.3. Additional Guaranties............................................................................29
Section 10.4. Limitations on Funded Debt.......................................................................29
Section 10.5. Limitation on Liens..............................................................................31
Section 10.6. Notes to Rank Pari Passu with Senior Indebtedness................................................33
Section 10.7. Limitations on Restrictive Agreements............................................................33
SECTION 11. EVENTS OF DEFAULT..................................................................................33
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<S> <C> <C>
SECTION 12. REMEDIES ON DEFAULT, ETC...........................................................................36
Section 12.1. Acceleration.....................................................................................36
Section 12.2. Other Remedies...................................................................................36
Section 12.3. Rescission.......................................................................................36
Section 12.4. No Waivers or Election of Remedies, Expenses, Etc................................................37
SECTION 13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES......................................................37
Section 13.1. Registration of Notes............................................................................37
Section 13.2. Transfer and Exchange of Notes...................................................................37
Section 13.3. Replacement of Notes.............................................................................38
SECTION 14. PAYMENTS ON NOTES..................................................................................38
Section 14.1. Place of Payment.................................................................................38
Section 14.2. Home Office Payment..............................................................................38
SECTION 15. EXPENSES, ETC......................................................................................39
Section 15.1. Transaction Expenses.............................................................................39
Section 15.2. Survival.........................................................................................40
SECTION 16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.......................................40
SECTION 17. AMENDMENT AND WAIVER...............................................................................40
Section 17.1. Requirements.....................................................................................40
Section 17.2. Solicitation of Holders of Notes.................................................................41
Section 17.3. Binding Effect, Etc..............................................................................41
Section 17.4. Notes Held by Company, Etc.......................................................................41
SECTION 18. NOTICES............................................................................................42
SECTION 19. REPRODUCTION OF DOCUMENTS..........................................................................42
SECTION 20. CONFIDENTIAL INFORMATION...........................................................................42
SECTION 21. SUBSTITUTION OF PURCHASER..........................................................................43
SECTION 22. MISCELLANEOUS......................................................................................44
Section 22.1. Successors and Assigns...........................................................................44
Section 22.2. Payments Due on Non-Business Days................................................................44
Section 22.3. Severability.....................................................................................44
</TABLE>
-iii-
<PAGE> 5
<TABLE>
<S> <C> <C>
Section 22.4. Construction.....................................................................................44
Section 22.5. Counterparts.....................................................................................44
Section 22.6. Governing Law....................................................................................44
Section 22.7. Environmental Indemnity and Covenant Not to Sue..................................................45
Signature.............................................................................................................46
</TABLE>
-iv-
<PAGE> 6
ATTACHMENTS TO NOTE PURCHASE AGREEMENT:
SCHEDULE A -- INFORMATION RELATING TO PURCHASERs
SCHEDULE B -- DEFINED TERMs
SCHEDULE 4.11 -- Changes in Corporate Structure
SCHEDULE 5.3 -- Disclosure Materials
SCHEDULE 5.4 -- Subsidiaries of the Company and Ownership of Subsidiary
Stock
SCHEDULE 5.5 -- Financial Statements
SCHEDULE 5.8 -- Certain Litigation
SCHEDULE 5.11 -- Patents, etc.
SCHEDULE 5.14 -- Use of Proceeds
SCHEDULE 5.15 -- Existing Indebtedness
EXHIBIT 1A -- Form of 8.52% Senior Secured Note, Series A, due
July 25, 2005
EXHIBIT 1B -- Form of 8.52% Senior Secured Note, Series B, due
July 25, 2008
EXHIBIT 1C -- Form of 8.72% Senior Secured Note, Series C, due
July 25, 2008
EXHIBIT 2 -- Form of Subordinated Agreement/Subordinated Note
EXHIBIT 4.4(a) -- Form of Opinion of Special Counsel for the Company
EXHIBIT 4.4(b) -- Form of Opinion of Special Counsel for the Purchasers
-v-
<PAGE> 7
UNITED ASSET MANAGEMENT CORPORATION
One International Place
Boston, Massachusetts 02110
8.52% Senior Secured Notes, Series A, due July 25, 2005
8.52% Senior Secured Notes, Series B, due July 25, 2008
8.72% Senior Secured Notes, Series C, due July 25, 2008
Dated as of
August 12, 1998
TO EACH OF THE PURCHASERS LISTED IN
THE ATTACHED SCHEDULE A:
Ladies and Gentlemen:
UNITED ASSET MANAGEMENT CORPORATION, a Delaware corporation (the
"Company"), agrees with you as follows:
SECTION 1. AUTHORIZATION OF NOTES.
The Company will authorize the issue and sale of $67,000,000 aggregate
principal amount of its 8.52% Senior Secured Notes, Series A, due July 25, 2005
(the "Series A Notes"), $75,000,000 aggregate principal amount of its 8.52%
Senior Secured Notes, Series B, due July 25, 2008 (the "Series B Notes"), and
$108,000,000 aggregate principal amount of its 8.72% Senior Secured Notes,
Series C, due July 25, 2008 (the "Series C Notes," the Series A Notes, the
Series B Notes and the Series C Notes are hereinafter collectively referred to
as the "Notes", such term to include any such notes issued in substitution
therefor pursuant to Section 13 of this Agreement or the Other Agreements (as
hereinafter defined)). The Series A Notes, Series B Notes and Series C Notes
shall be substantially in the forms set out in Exhibits 1A, 1B and 1C,
respectively, with such changes therefrom, if any, as may be approved by you and
the Company. Certain capitalized terms used in this Agreement are defined in
Schedule B; references to a "Schedule" or an "Exhibit" are, unless otherwise
specified, to a Schedule or an Exhibit attached to this Agreement.
SECTION 2. SALE AND PURCHASE OF NOTES; SECURITY.
Section 2.1. Sale and Purchase of Notes. Subject to the terms and
conditions of this Agreement, the Company will issue and sell to you and you
will purchase from the Company, at the Closing provided for in Section 3, Notes
in the principal amount and of the series specified opposite your name in
Schedule A at the purchase price of 100% of the principal amount thereof.
Contemporaneously with entering into this Agreement, the Company is entering
into separate Note Purchase Agreements (the "Other Agreements") identical with
this Agreement with each of the other purchasers named in Schedule A (the
<PAGE> 8
"Other Purchasers"), providing for the sale at such Closing to each of the Other
Purchasers of Notes in the principal amount and of the series specified opposite
its name in Schedule A. Your obligation hereunder, and the obligations of the
Other Purchasers under the Other Agreements, are several and not joint
obligations, and you shall have no obligation under any Other Agreement and no
liability to any Person for the performance or nonperformance by any Other
Purchaser thereunder.
Section 2.2. Security for the Notes. (a) The Notes will be entitled to the
benefit of and will be secured by the following contracts and agreements, each
of which will be in form and substance satisfactory to you and your special
counsel:
(i) the Security Agreement dated as of May 18, 1992 made by the
Company in favor of BankBoston, N.A., as Collateral Agent under the Bank
Credit Agreement, as heretofore amended, as amended by the First Amendment
and Consent and the Amendment and Consent and as the same may be further
amended, supplemented or otherwise modified from time to time (the
"Security Agreement");
(ii) the Subsidiaries Security Agreement dated as of May 18, 1992 made
by UAM Holdings, UAM Trademark and UAM Investment in favor of BankBoston,
N.A., as Collateral Agent under the Bank Credit Agreement, as heretofore
amended, as amended by the First Amendment and Consent and the Amendment
and Consent and as the same may be further amended, supplemented or
otherwise modified from time to time (the "Subsidiaries Security
Agreement");
(iii) the Pledge Agreement dated as of May 18, 1992 by and between the
Company and BankBoston, N.A., as Collateral Agent under the Bank Credit
Agreement, as heretofore amended, as amended by the First Amendment and
Consent and the Amendment and Consent and as the same may be further
amended, supplemented or otherwise modified from time to time (the "Pledge
Agreement");
(iv) the Securities Pledge Agreement dated as of January 7, 1997, by
and between the Company and BankBoston, N.A., as Collateral Agent under the
Intercreditor Agreement, as amended by the Amendment and Consent and as the
same may be further amended, supplemented or otherwise modified from time
to time (the "Second Pledge Agreement");
(v) the Securities Pledge Agreement dated as of December 5, 1997, by
and between the Company and BankBoston, N.A., as Collateral Agent under the
Intercreditor Agreement, as amended by the Amendment and Consent and as the
same may be further amended, supplemented or otherwise modified from time
to time (the "Third Pledge Agreement");
(vi) the Subsidiaries Pledge Agreement dated as of May 18, 1992 by and
between UAM Holdings and BankBoston, N.A., as Collateral Agent under the
Bank Credit Agreement, as heretofore amended, as amended by the First
Amendment and Consent and the Amendment and Consent and as the same may be
further amended,
-2-
<PAGE> 9
supplemented or otherwise modified from time to time (the "Subsidiaries
Pledge Agreement");
(vii) the Heitman Pledge Agreement dated as of August 25, 1993 by and
between Heitman and BankBoston, N.A., as Collateral Agent under the Bank
Credit Agreement, as heretofore amended, as amended by the First Amendment
and Consent and the Amendment and Consent and as the same may be further
amended, supplemented or otherwise modified from time to time (the "Heitman
Pledge Agreement");
(viii) the UAM U.K. Holdings Pledge Agreement dated as of November 17,
1993 by and between UAM U.K. Holdings and BankBoston, N.A., as Collateral
Agent under the Bank Credit Agreement, as heretofore amended, as
supplemented by the Supplementary Pledge Agreement dated as of August 11,
1995 between UAM U.K. Holdings and the Collateral Agent and as supplemented
by a Second Supplementary Pledge Agreement dated as of August 12, 1998
between UAM U.K. Holdings and the Collateral Agent (the "Supplementary
Pledge") and as the same may be further amended, supplemented or otherwise
modified from time to time (the "UAM U.K. Holdings Pledge Agreement");
(ix) the Charge of Shares dated August 28, 1996 between UAM U.K.
Holdings and BankBoston, N.A., as Collateral Agent under the Intercreditor
Agreement, as amended by the Supplementary Pledge and the Amendment and
Consent and as the same may be further amended, supplemented or otherwise
modified from time to time (the "UAM U.K. Charge of Shares");
(x) the Charge of Shares dated August 29, 1996, as amended by the
Deed of Rectification, dated June 2, 1997, between Clay Finlay Inc. and
BankBoston, N.A., as Collateral Agent under the Intercreditor Agreement, as
amended by the Amendment and Consent and as the same may be further
amended, supplemented or otherwise modified from time to time (the "Clay
Finlay Charge of Shares");
(xi) the Securities Pledge Agreement dated as of December 5, 1997, by
and between LML Holdings, Inc. and BankBoston, N.A., as Collateral Agent
under the Intercreditor Agreement, as amended by the Amendment and Consent
and as the same may be further amended, supplemented or otherwise modified
from time to time (the "LML Holdings Pledge Agreement");
(xii) the Subsidiaries Guaranty dated as of the date of this Agreement
made by UAM Holdings, UAM Trademark and UAM Investment in favor of the
holders of the Notes, as the same may be amended, supplemented or otherwise
modified from time to time (the "Subsidiaries Guaranty");
(xiii) the Heitman Guaranty dated as of the date of this Agreement
made by Heitman in favor of the holders of the Notes, as the same may be
amended, supplemented or otherwise modified from time to time (the "Heitman
Guaranty");
-3-
<PAGE> 10
(xiv) the UAM U.K. Holdings Guaranty dated as of the date of this
Agreement made by UAM U.K. Holdings in favor of holders of the Notes, as
the same may be amended, supplemented or otherwise modified from time to
time (the "UAM U.K. Holdings Guaranty");
(xv) the Clay Finlay Guaranty dated the date of this Agreement made by
Clay Finlay in favor of the holders of the Notes, as the same may be
amended, supplemented or otherwise modified from time to time (the "Clay
Finlay Guaranty");
(xvi) the LML Holdings Guaranty dated the date of this Agreement made
by LML Holdings, Inc. in favor of the holders of the Notes, as the same may
be amended, supplemented or otherwise modified from time to time (the "LML
Holdings Guaranty"); and
(xvii) the Amended and Restated Subordination Agreement dated as of
the date of this Agreement made by the Company and UAM Trademark in favor
of the Collateral Agent for the benefit of the Secured Parties, as the same
may be amended, supplemented or otherwise modified from time to time (the
"Trademark Subordination Agreement").
The Security Agreement, the Subsidiaries Security Agreement, the Pledge
Agreement, the Second Pledge Agreement, the Third Pledge Agreement, the
Subsidiaries Pledge Agreement, the Heitman Pledge Agreement, the UAM U.K.
Holdings Pledge Agreement, the Clay Finlay Charge of Shares, the UAM U.K. Charge
of Shares, the LML Holdings Pledge Agreement, the Trademark Subordination
Agreement and any other instruments, documents, agreements referred to herein or
related hereto pursuant to which the Company or any Subsidiary agrees to grant
Liens in favor of the Collateral Agent for the ratable benefit of the Secured
Parties are hereinafter referred to as the "Collateral Documents". The
Subsidiaries Guaranty, the Heitman Guaranty, the UAM U.K. Holdings Guaranty, the
Clay Finlay Guaranty, the LML Holdings Guaranty and any other guaranty executed
and delivered in favor of the holders of the Notes pursuant to Section 10.3 are
hereinafter collectively referred to as the "Subsidiary Guaranties." The
Collateral Documents and the Subsidiary Guaranties are hereinafter collectively
referred to as the "Security Documents."
The enforcement of the rights and benefits in respect of the Security
Documents and the allocation of proceeds thereof will be subject to a Collateral
Agency and Intercreditor Agreement dated as of August 1, 1995, which shall be in
form and substance satisfactory to you and your special counsel (the
"Intercreditor Agreement") entered into by the Banks, the 1995 Institutional
Investors and the Collateral Agent, to which Intercreditor Agreement you shall
become a party pursuant to a First Amendment thereto in form and substance
satisfactory to you and your special counsel (the "Intercreditor Agreement First
Amendment").
(b) If at any time the Company or any Subsidiary shall grant to any one or
more of the Agent, the Banks or the 1995 Institutional Investors additional
security of any kind or provide any one or more of the Agent, the Banks or the
1995 Institutional Investors with
-4-
<PAGE> 11
additional Guaranties or other credit support of any kind pursuant to the
requirements of the Bank Credit Agreement or the 1995 Note Agreements, then the
Company or such Subsidiary shall grant to the holders of the Notes the same
security or Guaranty so that the holders of the Notes shall at all times be
secured on an equal and pro rata basis with the Banks and the 1995 Institutional
Investors. All such additional Guaranties shall be given to the holders of the
Notes pursuant to Section 10.3 of this Agreement. All such additional security
and additional Guaranties shall be subject to the provisions of clause (d) of
this Section 2.2.
(c) The holders of the Notes acknowledge and agree that the Liens of the
Collateral Documents in respect of all or any part of the Collateral therein
described may be released in the manner and upon the terms and conditions
provided in the Intercreditor Agreement, provided, that in the event the Liens
of the Collateral Documents for any reason whatsoever re-attach pursuant to the
terms and provisions of the Collateral Documents or the Bank Credit Agreement,
then the Lien and security interest of the Collateral Documents shall ipso facto
again secure the holders of the Notes on an equal and pro rata basis.
(d) The holders of the Notes agree to release the obligations of any
Subsidiary under any Subsidiary Guaranty to which it is a party upon the request
of the Company if and to the extent the corresponding guaranties given pursuant
to the Bank Credit Agreement are released and discharged, provided that no
Default or Event of Default has occurred and is continuing, and provided,
further, that in the event any Subsidiary shall again become obligated under or
with respect to any previously discharged Subsidiary Guaranty pursuant to the
terms and provisions of the Subsidiary Guaranty or the Bank Credit Agreement,
then the obligations of such Subsidiary under such Subsidiary Guaranty shall
ipso facto again benefit the holders of the Notes on an equal and pro rata
basis. Likewise, the holders of the Notes agree to release any additional
security granted by the Company or any Subsidiary to the holders of the Notes
pursuant to the provisions of Section 2.2(b) upon the same terms as provided
herein for the release of the obligations of any Subsidiary under any Subsidiary
Guaranty.
SECTION 3. CLOSING.
The sale and purchase of the Notes to be purchased by you and the Other
Purchasers shall occur at the offices of Hill & Barlow, One International Place,
Boston, Massachusetts 02110-2607, at 10:00 a.m., Boston, Massachusetts time, at
a closing (the "Closing") on August 12, 1998 or on such other Business Day
thereafter on or prior to August 11, 1998 as may be agreed upon by the Company
and you and the Other Purchasers. At the Closing the Company will deliver to you
the Notes to be purchased by you in the form of a single Note (or such greater
number of Notes in denominations of at least $100,000 as you may request) dated
the date of the Closing and registered in your name (or in the name of your
nominee), against delivery by you to the Company or its order of immediately
available funds in the amount of the purchase price therefor by wire transfer of
immediately available funds for the account of the Company to account number
534-37165 at BankBoston, N.A., 100 Federal Street, Boston, Massachusetts, 02100,
A.B.A. No. 011-000-390. If at the Closing the Company shall fail to tender such
Notes to you as provided above in this
-5-
<PAGE> 12
Section 3, or any of the conditions specified in Section 4 shall not have been
fulfilled to your satisfaction, you shall, at your election, be relieved of all
further obligations under this Agreement, without thereby waiving any rights you
may have by reason of such failure or such nonfulfillment.
SECTION 4. CONDITIONS TO CLOSING.
Your obligation to purchase and pay for the Notes to be sold to you at the
Closing is subject to the fulfillment to your satisfaction, prior to or at the
Closing, of the following conditions:
Section 4.1. Representations and Warranties. (a) The representations and
warranties of the Company in this Agreement shall be correct when made and at
the time of the Closing.
(b) The representations and warranties of each Guaranty Subsidiary in the
Security Documents to which each is a party shall be correct when made and at
the time of the Closing.
Section 4.2. Performance; No Default. The Company shall have performed and
complied with all agreements and conditions contained in this Agreement required
to be performed or complied with by it prior to or at the Closing and after
giving effect to the issue and sale of the Notes (and the application of the
proceeds thereof as contemplated by Schedule 5.14) no Default or Event of
Default shall have occurred and be continuing. Neither the Company nor any
Subsidiary shall have entered into any transaction since the date of the
Memorandum that would have been prohibited by Sections 9.7 and 10.1 through 10.5
had such Sections applied since such date.
Section 4.3. Compliance Certificates.
(a) Officer's Certificate. (i) The Company shall have delivered to you an
Officer's Certificate, dated the date of the Closing, certifying that the
conditions specified in Sections 4.1(a), 4.2 and 4.11 have been fulfilled.
(ii) Each Guaranty Subsidiary shall have delivered to you a certificate of
an authorized officer, dated the date of the Closing, certifying that the
conditions specified in Section 4.1(b) have been fulfilled.
(b) Secretary's Certificate. (i) The Company shall have delivered to you a
certificate certifying as to the resolutions attached thereto and other
corporate proceedings relating to the authorization, execution and delivery of
the Notes, this Agreement, the Other Agreements and the Security Documents to
which the Company is a party.
(ii) Each Guaranty Subsidiary shall have delivered to you a certificate
certifying as to the resolutions attached thereto and other corporate
proceedings relating to the
-6-
<PAGE> 13
authorization, execution and delivery of the Security Documents to which each
such Guaranty Subsidiary is a party.
Section 4.4. Opinions of Counsel. You shall have received opinions in form
and substance satisfactory to you, dated the date of the Closing (a) from Hill &
Barlow, counsel for the Company, covering the matters set forth in Exhibit
4.4(a) and covering such other matters incident to the transactions contemplated
hereby as you or your counsel may reasonably request (and the Company hereby
instructs its counsel to deliver such opinion to you) and (b) from Chapman and
Cutler, your special counsel in connection with such transactions, substantially
in the form set forth in Exhibit 4.4(b) and covering such other matters incident
to such transactions as you may reasonably request.
Section 4.5. Purchase Permitted by Applicable Law, Etc. On the date of the
Closing your purchase of Notes shall (a) be permitted by the laws and
regulations of each jurisdiction to which you are subject, without recourse to
provisions (such as Section 1405(a)(8) of the New York Insurance Law) permitting
limited investments by insurance companies without restriction as to the
character of the particular investment, (b) not violate any applicable law or
regulation (including, without limitation, Regulation T, U or X of the Board of
Governors of the Federal Reserve System) and (c) not subject you to any tax,
penalty or liability under or pursuant to any applicable law or regulation,
which law or regulation was not in effect on the date hereof. If requested by
you, you shall have received an Officer's Certificate certifying as to such
matters of fact as you may reasonably specify to enable you to determine whether
such purchase is so permitted.
Section 4.6. Sale of Other Notes. Contemporaneously with the Closing, the
Company shall sell to the Other Purchasers, and the Other Purchasers shall
purchase the Notes to be purchased by them at the Closing as specified in
Schedule A.
Section 4.7. Bank Credit Agreement, Security Documents, Etc. The Bank
Credit Agreement, the Security Documents, the Intercreditor Agreement, the
Intercreditor Agreement First Amendment and the Revenue Sharing Agreements shall
be in form and substance satisfactory to you and your special counsel, shall
have been duly executed and delivered by the parties thereto and shall be in
full force and effect and you shall have received true, correct and complete
copies of each thereof.
Section 4.8. Filing and Recording. The Collateral Documents (and/or
financing statements or similar notices thereof if and to the extent permitted
or required by applicable law) shall have been recorded or filed for record in
such public offices as may be deemed necessary or appropriate by you or your
special counsel in order to perfect the Liens and security interests granted or
conveyed thereby.
Section 4.9. Payment of Special Counsel Fees. Without limiting the
provisions of Section 15.1, the Company shall have paid on or before the Closing
the reasonable fees, charges and disbursements of your special counsel referred
to in Section 4.4 to the extent reflected in a statement of such counsel
rendered to the Company at least one Business Day prior to the Closing.
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Section 4.10. Private Placement Numbers. A Private Placement Number issued
by Standard & Poor's CUSIP Service Bureau (in cooperation with the Securities
Valuation Office of the National Association of Insurance Commissioners) shall
have been obtained for each series of the Notes.
Section 4.11. Changes in Corporate Structure. Except as specified in
Schedule 4.11, the Company shall not have changed its jurisdiction of
incorporation or been a party to any merger or consolidation and shall not have
succeeded to all or any substantial part of the liabilities of any other entity,
at any time following the date of the most recent financial statements referred
to in Schedule 5.5.
Section 4.12. Proceedings and Documents. All corporate and other
proceedings in connection with the transactions contemplated by this Agreement
and all documents and instruments incident to such transactions shall be
satisfactory to you and your special counsel, and you and your special counsel
shall have received all such counterpart originals or certified or other copies
of such documents as you or they may reasonably request.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to you that:
Section 5.1. Organization; Power and Authority. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation, and is duly qualified as a foreign
corporation and is in good standing in each jurisdiction in which such
qualification is required by law, other than those jurisdictions as to which the
failure to be so qualified or in good standing could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect. The Company
has the corporate power and authority to own or hold under lease the properties
it purports to own or hold under lease, to transact the business it transacts
and proposes to transact, to execute and deliver this Agreement and the Other
Agreements, the Notes, and the Security Documents to which it is a party and to
perform the provisions hereof and thereof.
Section 5.2. Authorization, Etc. This Agreement and the Other Agreements,
the Notes and the Security Documents to which it is a party have been duly
authorized by all necessary corporate action on the part of the Company, and
this Agreement and the Security Documents to which it is a party constitute, and
upon execution and delivery thereof each Note will constitute, legal, valid and
binding obligations of the Company enforceable against the Company in accordance
with their respective terms, except as such enforceability may be limited by (a)
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the enforcement of creditors' rights generally and (b) general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
Section 5.3. Disclosure. The Company, through its placement agents, J.P.
Morgan Securities Inc. and Deutsche Morgan Grenfell, Inc., has delivered to you
and each Other Purchaser a copy of a Private Placement Memorandum dated May,
1998 (the
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<PAGE> 15
"Memorandum"), relating to the transactions contemplated hereby. The Memorandum
fairly describes, in all material respects, the general nature of the business
and principal properties of the Company and its Subsidiaries. Except as
disclosed in Schedule 5.3, this Agreement, the Security Documents, the
Memorandum, the documents, certificates or other writings delivered to you by or
on behalf of the Company in connection with the transactions contemplated hereby
and the financial statements listed in Schedule 5.5, taken as a whole, do not
contain any untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein not misleading in light of the
circumstances under which they were made. Except as disclosed in the Memorandum
or as expressly described in Schedule 5.3, or in one of the documents,
certificates or other writings identified therein, or in the financial
statements listed in Schedule 5.5, since December 31, 1997, there has been no
change in the financial condition, operations, business, properties or prospects
of the Company or any Subsidiary except changes that individually or in the
aggregate could not reasonably be expected to have a Material Adverse Effect.
There is no fact known to the Company that could reasonably be expected to have
a Material Adverse Effect that has not been set forth herein or in the
Memorandum or in the other documents, certificates and other writings delivered
to you by or on behalf of the Company specifically for use in connection with
the transactions contemplated hereby.
Section 5.4. Organization and Ownership of Shares of Subsidiaries;
Affiliates. (a) Schedule 5.4 contains (except as noted therein) complete and
correct lists (i) of the Company's Subsidiaries, showing, as to each Subsidiary,
the correct name thereof, the jurisdiction of its organization, and the
percentage of shares of each class of its capital stock or similar equity
interests outstanding owned by the Company and each other Subsidiary, (ii) of
the Company's Affiliates, other than Subsidiaries, and (iii) of the Company's
directors and senior officers.
(b) All of the outstanding shares of capital stock or similar equity
interests of each Subsidiary shown in Schedule 5.4 as being owned by the Company
and its Subsidiaries have been validly issued, are fully paid and nonassessable
and are owned by the Company or another Subsidiary free and clear of any Lien
(except as otherwise disclosed in Schedule 5.4 or Schedule 5.15).
(c) Each Subsidiary identified in Schedule 5.4 is a corporation or other
legal entity duly organized, validly existing and in good standing under the
laws of its jurisdiction of organization, and is duly qualified as a foreign
corporation or other legal entity and is in good standing in each jurisdiction
in which such qualification is required by law, other than those jurisdictions
as to which the failure to be so qualified or in good standing could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. Each such Subsidiary has the corporate or other power and
authority to own or hold under lease the properties it purports to own or hold
under lease and to transact the business it transacts and proposes to transact.
(d) No Subsidiary is a party to, or otherwise subject to, any legal
restriction or any agreement (other than the agreements listed on Schedule 5.4
and customary limitations imposed by corporate law statutes) restricting the
ability of such Subsidiary to pay dividends
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<PAGE> 16
out of profits or make any other similar distributions of profits to the Company
or any of its Subsidiaries that owns outstanding shares of capital stock or
similar equity interests of such Subsidiary.
Section 5.5. Financial Statements. The Company has delivered to each
Purchaser copies of the financial statements of the Company and its Subsidiaries
listed on Schedule 5.5. All of said financial statements (including in each case
the related schedules and notes) fairly present in all material respects the
consolidated financial position of the Company and its Subsidiaries as of the
respective dates specified in such financial statements and the consolidated
results of their operations and cash flows for the respective periods so
specified and have been prepared in accordance with GAAP consistently applied
throughout the periods involved except as set forth in the notes thereto
(subject, in the case of any interim financial statements, to normal year-end
adjustments).
Section 5.6. Compliance with Laws, Other Instruments, Etc. The execution,
delivery and performance by the Company of this Agreement, the Notes, and the
Security Documents to which it is a party will not (a) contravene, result in any
breach of, or constitute a default under, or result in the creation of any Lien
(other than the Liens in favor of the Collateral Agent for the ratable benefit
of the Secured Parties) in respect of any property of the Company or any
Subsidiary under, any indenture, mortgage, deed of trust, loan, purchase or
credit agreement, lease, corporate charter or by-laws, or any other agreement or
instrument to which the Company or any Subsidiary is bound or by which the
Company or any Subsidiary or any of their respective properties may be bound or
affected, (b) conflict with or result in a breach of any of the terms,
conditions or provisions of any order, judgment, decree, or ruling of any court,
arbitrator or Governmental Authority applicable to the Company or any Subsidiary
or (c) violate any provision of any statute or other rule or regulation of any
Governmental Authority applicable to the Company or any Subsidiary.
Section 5.7. Governmental Authorizations, Etc. No consent, approval or
authorization of, or registration, filing or declaration with, any Governmental
Authority is required in connection with the execution, delivery or performance
by the Company of this Agreement, the Notes or the Security Documents.
Section 5.8. Litigation; Observance of Agreements, Statutes and Orders. (a)
Except as disclosed in Schedule 5.8, there are no actions, suits or proceedings
pending or, to the knowledge of the Company, threatened against or affecting the
Company or any Subsidiary or any property of the Company or any Subsidiary in
any court or before any arbitrator of any kind or before or by any Governmental
Authority that, individually or in the aggregate, could reasonably be expected
to have a Material Adverse Effect.
(b) Neither the Company nor any Subsidiary is in default under any term of
any agreement or instrument to which it is a party or by which it is bound, or
any order, judgment, decree or ruling of any court, arbitrator or Governmental
Authority or is in violation of any applicable law, ordinance, rule or
regulation (including without limitation Environmental Laws) of any Governmental
Authority, which default or violation,
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<PAGE> 17
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.
Section 5.9. Taxes. The Company and its Subsidiaries have filed all tax
returns that are required to have been filed in any jurisdiction, and have paid
all taxes shown to be due and payable on such returns and all other taxes and
assessments levied upon them or their properties, assets, income or franchises,
to the extent such taxes and assessments have become due and payable and before
they have become delinquent, except for any taxes and assessments (a) the amount
of which is not individually or in the aggregate Material or (b) the amount,
applicability or validity of which is currently being contested in good faith by
appropriate proceedings and with respect to which the Company or a Subsidiary,
as the case may be, has established adequate reserves in accordance with GAAP.
The Company knows of no basis for any other tax or assessment that could
reasonably be expected to have a Material Adverse Effect. The charges, accruals
and reserves on the books of the Company and its Subsidiaries in respect of
Federal, state or other taxes for all fiscal periods are adequate. The Federal
income tax liabilities of the Company and its Subsidiaries have been determined
by the Internal Revenue Service and paid for all fiscal years up to and
including the fiscal year ended December 31, 1981.
Section 5.10. Title to Property; Leases. The Company and its Subsidiaries
have good and sufficient title to their respective properties that individually
or in the aggregate are Material, including all such properties reflected in the
most recent audited balance sheet referred to in Section 5.5 or purported to
have been acquired by the Company or any Subsidiary after said date (except as
sold or otherwise disposed of in the ordinary course of business), in each case
free and clear of Liens prohibited by this Agreement. All leases that
individually or in the aggregate are Material are valid and subsisting and are
in full force and effect in all material respects.
Section 5.11. Licenses, Permits, Etc. Except as disclosed in Schedule 5.11,
(a) the Company and its Subsidiaries own or possess all licenses,
permits, franchises, authorizations, patents, copyrights, service marks,
trademarks and trade names, or rights thereto, that individually or in the
aggregate are Material, without known conflict with the rights of others;
(b) to the best knowledge of the Company, no product of the Company
infringes in any material respect any license, permit, franchise,
authorization, patent, copyright, service mark, trademark, trade name or
other right owned by any other Person; and
(c) to the best knowledge of the Company, there is no Material
violation by any Person of any right of the Company or any of its
Subsidiaries with respect to any patent, copyright, service mark,
trademark, trade name or other right owned or used by the Company or any of
its Subsidiaries.
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<PAGE> 18
Section 5.12. Compliance with ERISA. (a) The Company and each ERISA
Affiliate have operated and administered each Plan in compliance with all
applicable laws except for such instances of noncompliance as have not resulted
in and could not reasonably be expected to result in a Material Adverse Effect.
Neither the Company nor any ERISA Affiliate has incurred any liability pursuant
to Title I or IV of ERISA or the penalty or excise tax provisions of the Code
relating to employee benefit plans (as defined in Section 3 of ERISA), and no
event, transaction or condition has occurred or exists that could reasonably be
expected to result in the incurrence of any such liability by the Company or any
ERISA Affiliate, or in the imposition of any Lien on any of the rights,
properties or assets of the Company or any ERISA Affiliate, in either case
pursuant to Title I or IV of ERISA or to such penalty or excise tax provisions
or to Section 401(a)(29) or 412 of the Code, other than such liabilities or
Liens as would not be individually or in the aggregate Material.
(b) Neither the Company nor any of its ERISA Affiliates maintains or has
any liability with respect to any Plan that is subject to Title IV of ERISA.
(c) The expected post-retirement benefit obligation (determined as of the
last day of the Company's most recently ended fiscal year in accordance with
Financial Accounting Standards Board Statement No. 106, without regard to
liabilities attributable to continuation coverage mandated by section 4980B of
the Code) of the Company and its Subsidiaries is not Material.
(d) The execution and delivery of this Agreement and the Security
Documents and the issuance and sale of the Notes hereunder will not involve any
transaction that is subject to the prohibitions of section 406 of ERISA or in
connection with which a tax could be imposed pursuant to section
4975(c)(1)(A)-(D) of the Code. The representation by the Company in the first
sentence of this Section 5.12(d) is made in reliance upon and subject to the
accuracy of your representation in Section 6.2 as to the sources of the funds
used to pay the purchase price of the Notes to be purchased by you.
Section 5.13. Private Offering by the Company. Neither the Company nor
anyone acting on its behalf has offered the Notes or any similar securities for
sale to, or solicited any offer to buy any of the same from, or otherwise
approached or negotiated in respect thereof with, any Person other than you, the
Other Purchasers and not more than 50 other Institutional Investors, each of
which has been offered the Notes at a private sale for investment. Neither the
Company nor anyone acting on its behalf has taken, or will take, any action that
would subject the issuance or sale of the Notes to the registration requirements
of Section 5 of the Securities Act.
Section 5.14. Use of Proceeds; Margin Regulations. The Company will apply
the proceeds of the sale of the Notes as set forth in Schedule 5.14. No part of
the proceeds from the sale of the Notes hereunder will be used, directly or
indirectly, for the purpose of buying or carrying any margin stock within the
meaning of Regulation U of the Board of Governors of the Federal Reserve System
(12 CFR 221), or for the purpose of buying or carrying or trading in any
securities under such circumstances as to involve the Company in a violation of
Regulation X of said Board (12 CFR 224) or to involve any broker or dealer
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<PAGE> 19
in a violation of Regulation T of said Board (12 CFR 220). Margin stock does not
constitute more than 5% of the value of the consolidated assets of the Company
and its Subsidiaries and the Company does not have any present intention that
margin stock will constitute more than 5% of the value of such assets. As used
in this Section, the terms "margin stock" and "purpose of buying or carrying"
shall have the meanings assigned to them in said Regulation U.
Section 5.15. Existing Indebtedness; Future Liens. (a) Except as described
therein, Schedule 5.15 sets forth a complete and correct list of all outstanding
Indebtedness of the Company and its Subsidiaries as of the date of the Closing.
Neither the Company nor any Subsidiary is in default and no waiver of default is
currently in effect, in the payment of any principal or interest on any
Indebtedness of the Company or such Subsidiary and no event or condition exists
with respect to any Indebtedness of the Company or any Subsidiary that would
permit (or that with notice or the lapse of time, or both, would permit) one or
more Persons to cause such Indebtedness to become due and payable before its
stated maturity or before its regularly scheduled dates of payment.
(b) Except as disclosed in Schedule 5.15, neither the Company nor any
Subsidiary has agreed or consented to cause or permit in the future (upon the
happening of a contingency or otherwise) any of its property, whether now owned
or hereafter acquired, to be subject to a Lien not permitted by Section 10.5.
Section 5.16. Foreign Assets Control Regulations, Etc. Neither the sale of
the Notes by the Company hereunder nor its use of the proceeds thereof will
violate the Trading with the Enemy Act, as amended, or any of the foreign assets
control regulations of the United States Treasury Department (31 CFR, Subtitle
B, Chapter V, as amended) or any enabling legislation or executive order
relating thereto.
Section 5.17. Status under Certain Statutes. Neither the Company nor any
Subsidiary is an "investment company" registered or required to be registered
under the Investment Company Act of 1940, as amended, or is subject to
regulation under the Public Utility Holding Company Act of 1935, as amended, the
Interstate Commerce Act, as amended, or the Federal Power Act, as amended.
Section 5.18. Environmental Matters. Neither the Company nor any Subsidiary
has knowledge of any claim or has received any notice of any claim, and no
proceeding has been instituted raising any claim against the Company or any of
its Subsidiaries or any of their respective real properties now or formerly
owned, leased or operated by any of them or other assets, alleging any damage to
the environment or violation of any Environmental Laws, except, in each case,
such as could not reasonably be expected to result in a Material Adverse Effect.
Except as otherwise disclosed to you in writing:
(a) neither the Company nor any Subsidiary has knowledge of any facts
which would give rise to any claim, public or private, of violation of
Environmental Laws or damage to the environment emanating from, occurring
on or in any way related to real properties now or formerly owned, leased
or operated by any of them
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<PAGE> 20
or to other assets or their use, except, in each case, such as could not
reasonably be expected to result in a Material Adverse Effect;
(b) neither the Company nor any of its Subsidiaries has stored any
Hazardous Materials on real properties now or formerly owned, leased or
operated by any of them and has not disposed of any Hazardous Materials in
a manner contrary to any Environmental Laws in each case in any manner that
could reasonably be expected to result in a Material Adverse Effect; and
(c) all buildings on all real properties now owned, leased or
operated by the Company or any of its Subsidiaries are in compliance with
applicable Environmental Laws, except where failure to comply could not
reasonably be expected to result in a Material Adverse Effect.
Section 5.19. Pledge Agreements and Security Agreements. (a) The provisions
of each of the Pledge Agreement, the Second Pledge Agreement, the Third Pledge
Agreement, the Subsidiaries Pledge Agreement, the Heitman Pledge Agreement, the
LML Holdings Pledge Agreement, the Clay Finlay Charge of Shares, the UAM U.K.
Charge of Shares and the UAM U.K. Holdings Pledge Agreement are effective to
create in favor of the Collateral Agent, for the ratable benefit of the Secured
Parties, a legal, valid and enforceable security interest in all right, title
and interest of the Company, UAM Holdings, Heitman, Clay Finlay, LML Holdings or
UAM U.K. Holdings, as the case may be, in the Pledged Stock described therein,
and when the Collateral Agent receives possession of the stock certificates
representing the shares of Pledged Stock with respect to which the Collateral
Agent has been granted a first priority security interest, registered in the
name of the Collateral Agent or otherwise accompanied by undated stock powers
duly executed in blank, the Pledge Agreement, the Second Pledge Agreement and
the Third Pledge Agreement shall constitute a fully perfected and continuing
first priority Lien on and security interest in all right, title and interest of
the Company in the Pledged Stock. The interest of the Collateral Agent in the
Pledged Stock has been duly registered on the books and records of each of the
issuers thereof.
(b) The provisions of each of the Security Agreement and the Subsidiaries
Security Agreement are effective to create in favor of the Collateral Agent, for
the ratable benefit of the Secured Parties, a legal, valid and enforceable
security interest in all right, title and interest of the Company, UAM Holdings,
UAM Trademark and UAM Investment, as the case may be, in collateral described
therein and constitute and shall continue to constitute a fully perfected and
continuing first priority Lien on and security interest in all right, title and
interest of the Company, UAM Holdings, UAM Trademark and UAM Investment, as the
case may be, in such collateral with respect to which a security interest may be
perfected by filing of financing statements under the Uniform Commercial Code.
Section 5.20. Revenue Sharing Agreements. The Revenue Sharing Agreements
have each been duly executed and delivered by the Company and by each Subsidiary
party thereto, and each is in full force and effect and has not been amended in
any manner during the period from the date each was delivered to the Purchasers
through the date hereof except as
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<PAGE> 21
previously disclosed to the Purchasers in writing. The representations and
warranties of the Company and of the Subsidiaries contained in each Revenue
Sharing Agreement are true and correct in all material respects.
SECTION 6. REPRESENTATIONS OF THE PURCHASER.
Section 6.1. Purchase for Investment. You represent that you are purchasing
the Notes for your own account or for one or more separate accounts maintained
by you or for the account of one or more pension or trust funds and not with a
view to the distribution thereof, provided that the disposition of your or their
property shall at all times be within your or their control. You understand that
the Notes have not been registered under the Securities Act and may be resold
only if registered pursuant to the provisions of the Securities Act or if an
exemption from registration is available, except under circumstances where
neither such registration nor such an exemption is required by law, and that the
Company is not required to register the Notes.
Section 6.2. Source of Funds. You represent that at least one of the
following statements is an accurate representation as to each source of funds (a
"Source") to be used by you to pay the purchase price of the Notes to be
purchased by you hereunder:
(a) the Source is an "insurance company general account" within the
meaning of Department of Labor Prohibited Transaction Exemption ("PTE")
95-60 (issued July 12, 1995) and there is no employee benefit plan,
treating as a single plan all plans maintained by the same employer or
employee organization, with respect to which the amount of the general
account reserves and liabilities for all contracts held by or on behalf of
such plan exceed ten percent (10%) of the total reserves and liabilities of
such general account (exclusive of separate account liabilities) plus
surplus, as set forth in the NAIC Annual Statement filed with your state of
domicile; or
(b) the Source is either (i) an insurance company pooled separate
account, within the meaning of PTE 90-1 (issued January 29, 1990), or (ii)
a bank collective investment fund, within the meaning of the PTE 91-38
(issued July 12, 1991) and, except as you have disclosed to the Company in
writing pursuant to this paragraph (b), no employee benefit plan or group
of plans maintained by the same employer or employee organization
beneficially owns more than 10% of all assets allocated to such pooled
separate account or collective investment fund; or
(c) the Source constitutes assets of an "investment fund" (within the
meaning of Part V of the QPAM Exemption) managed by a "qualified
professional asset manager" or "QPAM" (within the meaning of Part V of the
QPAM Exemption), no employee benefit plan's assets that are included in
such investment fund, when combined with the assets of all other employee
benefit plans established or maintained by the same employer or by an
affiliate (within the meaning of Section V(c)(1) of the QPAM Exemption) of
such employer or by the same employee organization and managed by such
QPAM, exceed 20% of the total client assets managed by such QPAM, the
conditions of Part I(c) and (g) of the QPAM Exemption are satisfied,
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<PAGE> 22
neither the QPAM nor a person controlling or controlled by the QPAM
(applying the definition of "control" in Section V(e) of the QPAM
Exemption) owns a 5% or more interest in the Company, and (i) the identity
of such QPAM and (ii) the names of all employee benefit plans whose assets
are included in such investment fund have been disclosed to the Company in
writing pursuant to this paragraph (c); or
(d) the Source is a governmental plan; or
(e) the Source is one or more employee benefit plans, or a separate
account or trust fund comprised of one or more employee benefit plans, each
of which has been identified to the Company in writing pursuant to this
paragraph (e); or
(f) the Source does not include assets of any employee benefit plan,
other than a plan exempt from the coverage of ERISA.
If you or any subsequent transferee of the Notes indicates that it or such
transferee is relying on any representation contained in paragraphs (b), (c) or
(e) above, the Company shall deliver on the date of Closing and on the date of
any applicable transfer a certificate, which shall either state that (i) it is
neither a party in interest nor a "disqualified person" (as defined in Section
4975(e)(2) of the Internal Revenue Code of 1986, as amended), with respect to
any plan identified pursuant to paragraphs (b) or (e) above, or (ii) with
respect to any plan identified pursuant to paragraph (c) above, neither it nor
any "affiliate" (as defined in Section V(c) of the QPAM Exemption) has at such
time, and during the immediately preceding one year, exercised the authority to
appoint or terminate said QPAM as manager of any plan identified in writing
pursuant to paragraph (c) above or to negotiate the terms of said QPAM's
management agreement on behalf of any such identified plan. As used in this
Section 6.2, the terms "employee benefit plan", "governmental plan", "party in
interest" and "separate account" shall have the respective meanings assigned to
such terms in Section 3 of ERISA.
SECTION 7. INFORMATION AS TO COMPANY.
Section 7.1. Financial and Business Information. The Company shall deliver
to each holder of Notes that is an Institutional Investor:
(a) Quarterly Statements -- within 60 days after the end of each
quarterly fiscal period in each fiscal year of the Company (other than the
last quarterly fiscal period of each such fiscal year), duplicate copies
of:
(i) a consolidated balance sheet of the Company and its
Subsidiaries as at the end of such quarter, and
(ii) consolidated statements of income, changes in shareholders'
equity and cash flows of the Company and its Subsidiaries for such
quarter and (in the case of the second and third quarters) for the
portion of the fiscal year ending with such quarter,
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<PAGE> 23
setting forth in each case in comparative form the figures for the
corresponding periods in the previous fiscal year, all in reasonable
detail, prepared in accordance with GAAP applicable to quarterly financial
statements generally, and certified by a Senior Financial Officer as fairly
presenting, in all material respects, the financial position of the
companies being reported on and their results of operations and cash flows,
subject to changes resulting from year-end adjustments, provided that
delivery within the time period specified above of copies of the Company's
Quarterly Report on Form 10-Q prepared in compliance with the requirements
therefor and filed with the Securities and Exchange Commission shall be
deemed to satisfy the requirements of this Section 7.1(a);
(b) Annual Statements -- within 105 days after the end of each fiscal
year of the Company, duplicate copies of,
(i) a consolidated balance sheet of the Company and its
Subsidiaries, as at the end of such year, and
(ii) consolidated statements of income, changes in shareholders'
equity and cash flows of the Company and its Subsidiaries, for such
year,
setting forth in each case in comparative form the figures for the previous
fiscal year, all in reasonable detail, prepared in accordance with GAAP,
and accompanied by
(A) an opinion thereon of independent certified public
accountants of recognized national standing, which opinion shall state
that such financial statements present fairly, in all material
respects, the financial position of the companies being reported upon
and their results of operations and cash flows and have been prepared
in conformity with GAAP, and that the examination of such accountants
in connection with such financial statements has been made in
accordance with generally accepted auditing standards, and that such
audit provides a reasonable basis for such opinion in the
circumstances, and
(B) a certificate of such accountants stating that they have
reviewed this Agreement and stating further whether, in making their
audit, they have become aware of any condition or event that then
constitutes a Default or an Event of Default, and, if they are aware
that any such condition or event then exists, specifying the nature
and period of the existence thereof (it being understood that such
accountants shall not be liable, directly or indirectly, for any
failure to obtain knowledge of any Default or Event of Default unless
such accountants should have obtained knowledge thereof in making an
audit in accordance with generally accepted auditing standards or did
not make such an audit),
provided that the delivery within the time period specified above of the
Company's Annual Report on Form 10-K for such fiscal year (together with
the Company's annual report to shareholders, if any, prepared pursuant to
Rule 14a-3 under the Exchange Act) prepared in accordance with the
requirements therefor and filed with
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the Securities and Exchange Commission, together with the accountant's
certificate described in clause (B) above, shall be deemed to satisfy the
requirements of this Section 7.1(b);
(c) SEC and Other Reports -- promptly upon their becoming available,
one copy of (i) each financial statement, report, notice or proxy statement
sent by the Company or any Subsidiary to public securities holders
generally, and (ii) each regular or periodic report, each registration
statement (without exhibits except as expressly requested by such holder),
and each prospectus and all amendments thereto filed by the Company or any
Subsidiary with the Securities and Exchange Commission and of all press
releases and other statements made available generally by the Company or
any Subsidiary to the public concerning developments that are Material;
(d) Notice of Default or Event of Default -- promptly, and in any
event within five days after a Responsible Officer becoming aware of the
existence of any Default or Event of Default or that any Person has given
any notice or taken any action with respect to a claimed default hereunder
or that any Person has given any notice or taken any action with respect to
a claimed default of the type referred to in Section 11(f), a written
notice specifying the nature and period of existence thereof and what
action the Company is taking or proposes to take with respect thereto;
(e) ERISA Matters -- promptly, and in any event within five days
after a Responsible Officer becoming aware of any of the following, a
written notice setting forth the nature thereof and the action, if any,
that the Company or an ERISA Affiliate proposes to take with respect
thereto:
(i) with respect to any Plan, any reportable event, as defined
in section 4043(b) of ERISA and the regulations thereunder, for which
notice thereof has not been waived pursuant to such regulations as in
effect on the date hereof; or
(ii) the taking by the PBGC of steps to institute, or the
threatening by the PBGC of the institution of, proceedings under
section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Plan, or the receipt by the Company or any
ERISA Affiliate of a notice from a Multiemployer Plan that such action
has been taken by the PBGC with respect to such Multiemployer Plan; or
(iii) any event, transaction or condition that could result in
the incurrence of any liability by the Company or any ERISA Affiliate
pursuant to Title I or IV of ERISA or the penalty or excise tax
provisions of the Code relating to employee benefit plans, or in the
imposition of any Lien on any of the rights, properties or assets of
the Company or any ERISA Affiliate pursuant to Title I or IV of ERISA
or such penalty or excise tax provisions, if such liability or Lien,
taken together with any other such liabilities or Liens then existing,
could reasonably be expected to have a Material Adverse Effect;
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(f) Notices from Governmental Authority -- promptly, and in any event
within 30 days of receipt thereof, copies of any notice to the Company or
any Subsidiary from any Federal or state Governmental Authority relating to
any order, ruling, statute or other law or regulation that could reasonably
be expected to have a Material Adverse Effect; and
(g) Requested Information -- with reasonable promptness, such other
data and information relating to the business, operations, affairs,
financial condition, assets or properties of the Company or any of its
Subsidiaries or relating to the ability of the Company or any Subsidiary to
perform its obligations hereunder and under the Notes, and the Security
Documents to which it is a party as from time to time may be reasonably
requested by any such holder of Notes.
Section 7.2. Officer's Certificate. Each set of financial statements
delivered to a holder of Notes pursuant to Section 7.1(a) or Section 7.1(b)
hereof shall be accompanied by a certificate of a Senior Financial Officer
setting forth:
(a) Covenant Compliance -- the information (including detailed
calculations, if any) required in order to establish whether the Company
was in compliance with the requirements of Section 9.7, 10.2, 10.4 or 10.5
hereof, during the quarterly or annual period covered by the statements
then being furnished (including with respect to each such Section, where
applicable, the calculations of the maximum or minimum amount, ratio or
percentage, as the case may be, permissible under the terms of such
Sections, and the calculation of the amount, ratio or percentage then in
existence); and
(b) Event of Default -- a statement that such officer has reviewed
the relevant terms hereof and has made, or caused to be made, under his or
her supervision, a review of the transactions and conditions of the Company
and its Subsidiaries from the beginning of the quarterly or annual period
covered by the statements then being furnished to the date of the
certificate and that such review shall not have disclosed the existence
during such period of any condition or event that constitutes a Default or
an Event of Default or, if any such condition or event existed or exists
(including, without limitation, any such event or condition resulting from
the failure of the Company or any Subsidiary to comply with any
Environmental Law), specifying the nature and period of existence thereof
and what action the Company shall have taken or proposes to take with
respect thereto.
Section 7.3. Inspection. The Company shall permit the representatives of
each holder of Notes that is an Institutional Investor:
(a) No Default -- if no Default or Event of Default then exists, at
the expense of such holder and upon reasonable prior notice to the Company,
to visit the principal executive office of the Company, to discuss the
affairs, finances and accounts of the Company and its Subsidiaries with the
Company's officers, and (with the consent of the Company, which consent
will not be
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unreasonably withheld) its independent public accountants, and (with the
consent of the Company, which consent will not be unreasonably withheld) to
visit the other offices and properties of the Company and each Subsidiary,
all at such reasonable times and as often as may be reasonably requested in
writing; and
(b) Default -- if a Default or Event of Default then exists, at the
expense of the Company, to visit and inspect any of the offices or
properties of the Company or any Subsidiary, to examine all their
respective books of account, records, reports and other papers, to make
copies and extracts therefrom, and to discuss their respective affairs,
finances and accounts with their respective officers and independent public
accountants (and by this provision the Company authorizes said accountants
to discuss the affairs, finances and accounts of the Company and its
Subsidiaries), all at such times and as often as may be requested.
SECTION 8. PREPAYMENT OF THE NOTES.
Section 8.1. Required Prepayments.
(a) Series A Notes. No regularly scheduled prepayment of the principal of
the Series A Notes is required prior to their date of maturity.
(b) Series B Notes. On July 25, 2002 and on each July 25th thereafter to
and including July 25, 2007, and at maturity, the Company will prepay
$10,714,286 principal amount (or such lesser principal amount as shall then be
outstanding) of the Series B Notes at par and without payment of the Make-Whole
Amount or any premium; provided that upon any partial prepayment of the Series B
Notes pursuant to Section 8.2 or purchase of the Series B Notes permitted by
Section 8.5 the principal amount of each required prepayment of the Series B
Notes becoming due under this Section 8.1(b) on and after the date of such
prepayment or purchase shall be reduced in the same proportion as the aggregate
unpaid principal amount of the Series B Notes is reduced as a result of such
prepayment or purchase.
(c) Series C Notes. No regularly scheduled prepayment of the principal of
the Series C Notes is required prior to their date of maturity.
Section 8.2. Optional Prepayments with Make-Whole Amount. The Company may,
at its option, upon notice as provided below, prepay at any time all, or from
time to time any part of, each series of the Notes, in an amount not less than
10% of the aggregate principal amount of each series of the Notes then
outstanding in the case of a partial prepayment, at 100% of the principal amount
so prepaid, together with interest accrued thereon to the date of such
prepayment, plus the Make-Whole Amount determined for the prepayment date with
respect to such principal amount. The Company will give each holder of Notes
written notice of each optional prepayment under this Section 8.2 not less than
30 days and not more than 60 days prior to the date fixed for such prepayment.
Each such notice shall specify such date, the aggregate principal amount of each
series of the Notes to be prepaid on such date, the principal amount of each
Note held by such holder to be prepaid (determined in accordance with Section
8.3), and the interest to be paid on the prepayment date with
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respect to such principal amount being prepaid, and shall be accompanied by a
certificate of a Senior Financial Officer as to the estimated Make-Whole Amount
due in connection with such prepayment (calculated as if the date of such notice
were the date of the prepayment), setting forth the details of such computation.
Two Business Days prior to such prepayment, the Company shall deliver to each
holder of Notes a certificate of a Senior Financial Officer specifying the
calculation of such Make-Whole Amount as of the specified prepayment date.
Section 8.3. Allocation of Partial Prepayments. In the case of each partial
prepayment of the Notes, the principal amount of the Notes to be prepaid shall
be allocated (a) among each series of the Notes in proportion to the aggregate
principal amount outstanding of such series of the Notes and (b) pro rata among
all of the holders of each series of the Notes at the time outstanding.
Section 8.4. Maturity; Surrender, Etc. In the case of each prepayment of
Notes pursuant to this Section 8, the principal amount of each Note to be
prepaid shall mature and become due and payable on the date fixed for such
prepayment, together with interest on such principal amount accrued to such date
and the applicable Make-Whole Amount, if any. From and after such date, unless
the Company shall fail to pay such principal amount when so due and payable,
together with the interest and Make-Whole Amount, if any, as aforesaid, interest
on such principal amount shall cease to accrue. Any Note paid or prepaid in full
shall be surrendered to the Company and cancelled and shall not be reissued, and
no Note shall be issued in lieu of any prepaid principal amount of any Note.
Section 8.5. Purchase of Notes. The Company will not and will not permit
any Affiliate to purchase, redeem, prepay or otherwise acquire, directly or
indirectly, any of the outstanding Notes except upon the payment or prepayment
of the Notes in accordance with the terms of this Agreement and the Notes. The
Company will promptly cancel all Notes acquired by it or any Affiliate pursuant
to any payment, prepayment or purchase of Notes pursuant to any provision of
this Agreement and no Notes may be issued in substitution or exchange for any
such Notes.
Section 8.6. Make-Whole Amount. The term "Make-Whole Amount" means, with
respect to any Note, an amount equal to the excess, if any, of the Discounted
Value of the Remaining Scheduled Payments with respect to the Called Principal
of such Note over the amount of such Called Principal, provided that the
Make-Whole Amount may in no event be less than zero. For the purposes of
determining the Make-Whole Amount, the following terms have the following
meanings:
"Called Principal" means, with respect to any Note, the principal of
such Note that is to be prepaid pursuant to Section 8.2 or has become or is
declared to be immediately due and payable pursuant to Section 12.1, as the
context requires.
"Discounted Value" means, with respect to the Called Principal of any
Note, the amount obtained by discounting all Remaining Scheduled Payments
with respect to such Called Principal from their respective scheduled due
dates to the Settlement Date with respect to such Called Principal, in
accordance with accepted financial practice
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and at a discount factor (applied on the same periodic basis as that on
which interest on the Notes is payable) equal to the Reinvestment Yield
with respect to such Called Principal.
"Reinvestment Yield" means, with respect to the Called Principal of
any Note, .50% over the yield to maturity implied by (i) the yields
reported, as of 10:00 A.M. (New York City time) on the second Business Day
preceding the Settlement Date with respect to such Called Principal, on the
display designated as "Page 678" on the Telerate Access Service (or such
other display as may replace Page 678 on Telerate Access Service) for
actively traded on-the-run U.S. Treasury securities having a maturity equal
to the Remaining Average Life of such Called Principal as of such
Settlement Date, or (ii) if such yields are not reported as of such time or
the yields reported as of such time are not ascertainable, the Treasury
Constant Maturity Series Yields reported, for the latest day for which such
yields have been so reported as of the second Business Day preceding the
Settlement Date with respect to such Called Principal, in Federal Reserve
Statistical Release H. 15 (519) (or any comparable successor publication)
for actively traded U.S. Treasury securities having a constant maturity
equal to the Remaining Average Life of such Called Principal as of such
Settlement Date. Such implied yield will be determined, if necessary, by
(a) converting U.S. Treasury bill quotations to bond-equivalent yields in
accordance with accepted financial practice and (b) interpolating linearly
between (1) the actively traded on-the-run U.S. Treasury security with the
maturity closest to and greater than the Remaining Average Life and (2) the
actively traded on-the-run U.S. Treasury security with the maturity closest
to and less than the Remaining Average Life.
"Remaining Average Life" means, with respect to any Called Principal,
the number of years (calculated to the nearest one-twelfth year) obtained
by dividing (i) such Called Principal into (ii) the sum of the products
obtained by multiplying (a) the principal component of each Remaining
Scheduled Payment with respect to such Called Principal by (b) the number
of years (calculated to the nearest one-twelfth year) that will elapse
between the Settlement Date with respect to such Called Principal and the
scheduled due date of such Remaining Scheduled Payment.
"Remaining Scheduled Payments" means, with respect to the Called
Principal of any Note, all payments of such Called Principal and interest
thereon that would be due after the Settlement Date with respect to such
Called Principal if no payment of such Called Principal were made prior to
its scheduled due date, provided that if such Settlement Date is not a date
on which interest payments are due to be made under the terms of the Notes,
then the amount of the next succeeding scheduled interest payment will be
reduced by the amount of interest accrued to such Settlement Date and
required to be paid on such Settlement Date pursuant to Section 8.2 or
12.1.
"Settlement Date" means, with respect to the Called Principal of any
Note, the date on which such Called Principal is to be prepaid pursuant to
Section 8.2 or has become or is declared to be immediately due and payable
pursuant to Section 12.1, as the context requires.
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SECTION 9. AFFIRMATIVE COVENANTS.
The Company covenants that so long as any of the Notes are outstanding:
Section 9.1. Compliance with Law. The Company will, and will cause each of
its Subsidiaries to, comply with all laws, ordinances or governmental rules or
regulations to which each of them is subject, including, without limitation,
Environmental Laws and the regulations, rules, orders, decrees and directives
from time to time promulgated by the Securities and Exchange Commission, and
will obtain and maintain in effect all licenses, certificates, permits,
franchises and other governmental authorizations necessary to the ownership of
their respective properties or to the conduct of their respective businesses, in
each case to the extent necessary to ensure that non-compliance with such laws,
ordinances or governmental rules or regulations or failures to obtain or
maintain in effect such licenses, certificates, permits, franchises and other
governmental authorizations could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
Section 9.2. Insurance. The Company will, and will cause each of its
Subsidiaries to, maintain, with financially sound and reputable insurers,
insurance with respect to their respective properties and businesses against
such casualties and contingencies, of such types, on such terms and in such
amounts (including deductibles, co-insurance and self-insurance, if adequate
reserves are maintained with respect thereto) as is customary in the case of
entities of established reputations engaged in the same or a similar business
and similarly situated.
Section 9.3. Maintenance of Properties. The Company will, and will cause
each of its Subsidiaries to, maintain and keep, or cause to be maintained and
kept, their respective properties in good repair, working order and condition
(other than ordinary wear and tear), so that the business carried on in
connection therewith may be properly conducted at all times, provided that this
Section shall not prevent the Company or any Subsidiary from discontinuing the
operation and the maintenance of any of its properties if such discontinuance is
desirable in the conduct of its business and the Company has concluded that such
discontinuance could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
Section 9.4. Payment of Taxes and Claims. The Company will, and will cause
each of its Subsidiaries to, file all tax returns required to be filed in any
jurisdiction and to pay and discharge all taxes shown to be due and payable on
such returns and all other taxes, assessments, governmental charges, or levies
imposed on them or any of their properties, assets, income or franchises, to the
extent such taxes and assessments have become due and payable and before they
have become delinquent and all claims for which sums have become due and payable
that have or might become a Lien on properties or assets of the Company or any
Subsidiary, provided that neither the Company nor any Subsidiary need pay any
such tax or assessment or claims if (a) the amount, applicability or validity
thereof is contested by the Company or such Subsidiary on a timely basis in good
faith and in appropriate proceedings, and the Company or a Subsidiary has
established adequate reserves therefor in accordance with GAAP on the books of
the Company or such Subsidiary or (b) the nonpayment of all
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such taxes and assessments in the aggregate could not reasonably be expected to
have a Material Adverse Effect.
Section 9.5. Corporate Existence, Etc. The Company will at all times
preserve and keep in full force and effect its corporate existence. Subject to
Section 10.2, the Company will at all times preserve and keep in full force and
effect the corporate existence of each of its Subsidiaries (unless merged into
the Company or a Subsidiary) and all rights and franchises of the Company and
its Subsidiaries unless, in the good faith judgment of the Company, the
termination of or failure to preserve and keep in full force and effect such
corporate existence, right or franchise could not, individually or in the
aggregate, have a Material Adverse Effect.
Section 9.6. Nature of Business. Neither the Company nor any Subsidiary
will engage in any business if, as a result, the general nature of the business,
taken on a consolidated basis, which would then be engaged in by the Company and
its Subsidiaries would be substantially changed from the general nature of the
business engaged in by the Company and its Subsidiaries on the date of this
Agreement.
Section 9.7. Fixed Charges Coverage Ratio. The Company will at all times
keep and maintain the ratio of Consolidated Net Earnings Available for Fixed
Charges for the immediately preceding four fiscal quarter period to Consolidated
Fixed Charges for such four fiscal quarter period at not less than 2.50 to 1.00.
SECTION 10. NEGATIVE COVENANTS.
The Company covenants that so long as any of the Notes are outstanding:
Section 10.1. Transactions with Affiliates. The Company will not and will
not permit any Subsidiary to enter into directly or indirectly any Material
transaction or Material group of related transactions (including without
limitation the purchase, lease, sale or exchange of properties of any kind or
the rendering of any service) with any Affiliate (other than the Company or
another Subsidiary), except in the ordinary course and pursuant to the
reasonable requirements of the Company's or such Subsidiary's business and upon
fair and reasonable terms no less favorable to the Company or such Subsidiary
than would be obtainable in a comparable arm's-length transaction with a Person
not an Affiliate.
Section 10.2. Mergers, Consolidations and Sales of Assets. (a) The Company
will not, and will not permit any Subsidiary to, consolidate with or be a party
to a merger with any other Person, or sell, lease or otherwise dispose of all or
substantially all of its assets; provided that:
(i) any Subsidiary may merge or consolidate with or into the Company
or any Substantially-Owned Subsidiary so long as in any merger or
consolidation involving the Company, the Company shall be the surviving or
continuing corporation;
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<PAGE> 31
(ii) any Substantially-Owned Subsidiary may consolidate with or be a
party to a merger with any Person in a transaction the purpose of which is
for such Substantially-Owned Subsidiary to acquire all of the outstanding
capital stock of such Person;
(iii) any Subsidiary may sell or otherwise dispose of (including by
way of liquidation or dissolution) all or substantially all of its assets;
provided that each such sale or disposition of assets shall be made in
compliance with the terms and provisions of Sections 10.2(b) and 10.2(c),
as applicable;
(iv) the Company may consolidate or merge with or into any other
corporation if (A) the corporation which results from such consolidation or
merger (the "surviving corporation") is either (1) the Company or (2) a
corporation organized under the laws of any state of the United States or
the District of Columbia which expressly assumes in writing the due and
punctual payment of the principal of and premium, if any, and interest on
all of the Notes, according to their tenor, and the due and punctual
performance and observation of all of the covenants in the Notes and this
Agreement, and the Security Documents to be performed or observed by the
Company, and the surviving corporation shall furnish to the holders of the
Notes an opinion of counsel satisfactory to such holders to the effect that
the instrument of assumption has been duly authorized, executed and
delivered and constitutes the legal, valid and binding contract and
agreement of the surviving corporation enforceable in accordance with its
terms, except as enforcement of such terms may be limited by bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting the
enforcement of creditors' rights generally and by general equitable
principles, and (B) at the time of such consolidation or merger and
immediately after giving effect thereto, (1) no Default or Event of Default
would exist and (2) the surviving corporation would be permitted by the
provisions of Section 10.4 to incur at least $1.00 of additional Funded
Debt;
(v) the Company may sell or otherwise dispose of all or substantially
all of its assets to any Person for consideration which represents the fair
market value of such assets (as determined in good faith by the Board of
Directors of the Company) at the time of such sale or other disposition if
(A) the acquiring Person is a corporation organized under the laws of any
state of the United States or the District of Columbia, (B) the due and
punctual payment of the principal of and premium, if any, and interest on
all the Notes, according to their tenor, and the due and punctual
performance and observance of all of the covenants in the Notes and in this
Agreement, and the Security Documents to be performed or observed by the
Company are expressly assumed in writing by the acquiring corporation and
the acquiring corporation shall furnish to the holders of the Notes an
opinion of counsel satisfactory to such holders to the effect that the
instrument of assumption has been duly authorized, executed and delivered
and constitutes the legal, valid and binding contract and agreement of such
acquiring corporation enforceable in accordance with its terms, except as
enforcement of such terms may be limited by bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting the enforcement of
creditors'
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rights generally and by general equitable principles, and (C) at the time
of such sale or disposition and immediately after giving effect thereto,
(1) no Default or Event of Default would exist and (2) the acquiring
corporation would be permitted by the provisions of Section 10.4 to incur
at least $1.00 of additional Funded Debt.
(b) The Company will not, and will not permit any Subsidiary to, sell,
lease, transfer, abandon or otherwise dispose of assets (except assets sold in
the ordinary course of business for fair market value and except as provided in
Sections 10.2(a)(v) and 10.2(c)); provided that the foregoing restrictions do
not apply to:
(i) the sale, lease, transfer or other disposition of assets of a
Subsidiary to the Company or a Substantially-Owned Subsidiary; or
(ii) the transfer of assets of the Company to a Substantially-Owned
Subsidiary, provided that such transfer of assets is made substantially
concurrently with the acquisition of such assets by the Company; or
(iii) the sale, lease, transfer or other disposition of assets for
cash or other tangible or intangible property to a Person or Persons other
than an Affiliate if all of the following conditions are met:
(A) such assets (valued at net book value) do not, together with
all other assets of the Company and its Subsidiaries previously
disposed of during the immediately preceding twelve-month period
(other than in the ordinary course of business), exceed 10% of
Consolidated Total Assets, and such assets (valued at net book value)
do not, together with all other assets of the Company and its
Subsidiaries previously disposed of during the period from the date of
this Agreement to and including the date of the sale of such assets
(other than in the ordinary course of business), exceed 25% of
Consolidated Total Assets, in each such case determined as of the end
of the immediately preceding fiscal quarter;
(B) the sale is for fair value and is in the best interests of
the Company or the relevant transferor Subsidiary, as the case may be,
(1) in the opinion of a Responsible Officer of the Company if the
aggregate sale price of such assets is $2,500,000 or less or (2) in
the opinion of the Company's Board of Directors if the aggregate sale
price of such assets is more than $2,500,000; and
(C) immediately after the consummation of the transaction and
after giving effect thereto, (1) no Default or Event of Default would
exist, and (2) the Company would be permitted by the provisions of
Section 10.4 to incur at least $1.00 of additional Funded Debt;
provided, however, that for purposes of the foregoing calculation, there
shall not be included any assets the proceeds of which were or are applied
within twelve months of the date of sale of such assets to either (y) the
acquisition of similar assets useful and intended to be used in the
operation of the business of the Company and its
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Subsidiaries as described in Section 9.6 and having a fair market value (as
determined in good faith by the Board of Directors of the Company) at least
equal to that of the assets so disposed of or (z) the prepayment at any
applicable prepayment premium, on a pro rata basis, of Senior Funded Debt
of the Company; provided, further, that during the period from the date of
any such asset sale to the date of final application of proceeds in
compliance with the requirements of this Section 10.2(b)(iii) (which period
may not exceed twelve months of the date of such sale), the Company shall
not prepay any Senior Funded Debt with the proceeds of such asset sale to
an extent greater than the pro rata share the holder or holders of such
Senior Funded Debt would have been entitled to if the Company had applied,
on the date of such asset sale, all such proceeds to the pro rata
prepayment of Senior Funded Debt of the Company in the manner required by
clause (z) above and provided, further, that until the Company has
satisfied the requirements contained in the first proviso of this Section
10.2(b)(iii) with respect to any assets sold or otherwise disposed of which
are in excess of what is otherwise permitted by clause (A) of this Section
10.2(b)(iii), the Company shall not sell or otherwise dispose of any other
assets. It is understood and agreed by the Company that any such proceeds
paid and applied to the prepayment of the Notes as hereinabove provided
shall be prepaid as and to the extent provided in Section 8.2.
Computations pursuant to this Section 10.2(b) shall include dispositions
made pursuant to Section 10.2(c) and computations pursuant to Section 10.2(c)
shall include dispositions made pursuant to this Section 10.2(b).
(c) The Company will not, and will not permit any Subsidiary to, sell,
pledge or otherwise dispose of any shares of the stock (including as "stock" for
the purposes of this Section 10.2(c) any options or warrants to purchase stock
or other Securities exchangeable for or convertible into stock) of a Subsidiary
(said stock, options, warrants and other Securities herein called "Subsidiary
Stock"), nor will any Subsidiary issue, sell, pledge or otherwise dispose of any
shares of its own Subsidiary Stock, provided that the foregoing restrictions do
not apply to:
(i) the issue of directors' qualifying shares; or
(ii) the sale or other disposition by a Subsidiary of Subsidiary Stock
to the Company or any Wholly-Owned Subsidiary or, in the case of Subsidiary
Stock of a Subsidiary formed or acquired after the date of Closing, to the
Company or any Substantially-Owned Subsidiary; or
(iii) the sale or other disposition by the Company of Subsidiary Stock
to any Wholly-Owned Subsidiary or, in the case of Subsidiary Stock of a
Subsidiary formed or acquired after the date of Closing, to any
Substantially-Owned Subsidiary; or
(iv) the issue of Subsidiary Stock to the Company or a Wholly-Owned
Subsidiary or, in the case of Subsidiary Stock of a Subsidiary formed or
acquired after the date of Closing, to the Company or any
Substantially-Owned Subsidiary; provided
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that concurrently with the issuance of such Subsidiary Stock the Company
shall have complied with all of the terms and provisions relating to the
granting of a security interest in Subsidiary Stock to the Collateral Agent
as required by the Collateral Documents and the Bank Credit Agreement; or
(v) the pledge of Subsidiary Stock to the Collateral Agent pursuant
to the Collateral Documents and the Bank Credit Agreement; or
(vi) the sale, lease, transfer or other disposition at any one time to
a Person (other than directly or indirectly to an Affiliate) of all or any
part of the Investment of the Company and its other Subsidiaries in any
Subsidiary if all of the following conditions are met:
(A) the assets (valued at net book value) of such Subsidiary do
not, together with all other assets of the Company and its
Subsidiaries previously disposed of during the immediately preceding
twelve-month period (other than in the ordinary course of business),
exceed 10% of Consolidated Total Assets, and such assets (valued at
net book value) of such Subsidiary do not, together with all other
assets of the Company and its Subsidiaries previously disposed of
during the period from the date of this Agreement to and including the
date of the sale of such assets (other than in the ordinary course of
business), exceed 25% of Consolidated Total Assets, in each such case
determined as of the end of the immediately preceding fiscal quarter;
(B) the sale is for fair value and is in the best interests of
the Company or the relevant transferor Subsidiary, as the case may be,
(1) in the opinion of a Responsible Officer of the Company if the
aggregate sale price of such Investment is $2,500,000 or less or (2)
in the opinion of the Company's Board of Directors if the aggregate
sale price of such Investment is more than $2,500,000; and
(C) immediately after the consummation of the transaction and
after giving effect thereto, (y) no Default or Event of Default would
exist, and (z) the Company would be permitted by the provisions of
Section 10.4 to incur at least $1.00 of additional Funded Debt;
provided, however, that for purposes of the foregoing calculation, there
shall not be included any assets the proceeds of which were or are applied
within twelve months of the date of sale of such assets to either (y) the
acquisition of similar assets useful and intended to be used in the
operation of the business of the Company and its Subsidiaries as described
in Section 9.6 and having a fair market value (as determined in good faith
by the Board of Directors of the Company) at least equal to that of the
assets so disposed of or (z) the prepayment at any applicable prepayment
premium, on a pro rata basis, of Senior Funded Debt of the Company;
provided, further, that during the period from the date of any such asset
sale to the date of final application of proceeds in compliance with the
requirements of this Section 10.2(c)(vi) (which
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period may not exceed twelve months of the date of such sale), the Company
shall not prepay any Senior Funded Debt with the proceeds of such asset
sale to an extent greater than the pro rata share the holder or holders of
such Senior Funded Debt would have been entitled to if the Company had
applied, on the date of such asset sale, all such proceeds to the pro rata
prepayment of Senior Funded Debt of the Company in the manner required by
clause (z) above and, provided, further, that until the Company has
satisfied the requirements contained in the first proviso of this Section
10.2(c)(vi) with respect to any assets sold or otherwise disposed of which
are in excess of what is otherwise permitted by clause (A) of this Section
10.2(c)(vi), the Company shall not sell or otherwise dispose of any other
assets. It is understood and agreed by the Company that any such proceeds
paid and applied to the prepayment of the Notes as hereinabove provided
shall be prepaid as and to the extent provided in Section 8.2.
Computations pursuant to this Section 10.2(c) shall include dispositions
made pursuant to Section 10.2(b) and computations pursuant to Section 10.2(b)
shall include dispositions made pursuant to this Section 10.2(c). Nothing in
this Section 10.2(c) shall be deemed or construed to prohibit any transaction
permitted by Section 10.2(a).
Section 10.3. Additional Guaranties. If at any time, pursuant to the terms
and conditions of the Bank Credit Agreement, any existing or newly acquired or
formed Subsidiary grants to any one or more of the Agent or the Banks, a
guaranty of obligations owing under the Bank Credit Agreement, the Company shall
cause such Subsidiary to execute and deliver to the holders of the Notes a
Guaranty in substantially the same form as the guaranty agreement delivered to
the Agent or the Banks, or any one or more of them, and the Company shall
deliver, or shall cause to be delivered, to the holders of the Notes (a) all
such certificates, resolutions, legal opinions and other related items in
substantially the same forms as those delivered to and accepted by the Agent or
the Banks, as the case may be, and (b) all such amendments to this Agreement,
the Subsidiaries Guaranties, and the Security Documents as may reasonably be
deemed necessary by the holders of the Notes in order to reflect the existence
of such additional Guaranty of the Notes. All such Guaranties shall be subject
to the provisions of Section 2.2(d) of this Agreement.
Section 10.4. Limitations on Funded Debt. (a) The Company will at all times
keep and maintain Consolidated Operating Cash Flow for the immediately preceding
four fiscal quarters at least equal to the relevant percentage of Consolidated
Senior Funded Debt hereinafter specified during the applicable period set forth
below:
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<PAGE> 36
<TABLE>
<CAPTION>
CONSOLIDATED OPERATING CASH FLOW
AS A MINIMUM PERCENTAGE OF
DURING THE PERIOD: CONSOLIDATED SENIOR FUNDED DEBT:
<S> <C>
July 25, 1998 to and including
December 31, 1999 15.0%
January 1, 2000 to and including
December 31, 2000 18.0%
January 1, 2001 and thereafter 20.0%
</TABLE>
(b) The Company will at all times keep and maintain Consolidated Operating
Cash Flow for the immediately preceding four fiscal quarters at least equal to
the relevant percentage of Consolidated Funded Debt hereinafter specified during
the applicable period set forth below:
<TABLE>
<CAPTION>
CONSOLIDATED OPERATING CASH
FLOW AS A MINIMUM PERCENTAGE
DURING THE PERIOD: OF CONSOLIDATED FUNDED DEBT:
<S> <C>
July 25, 1998 to and including
December 31, 1998 12.0%
January 1, 1999 to and including
December 31, 1999 13.5%
January 1, 2000 and thereafter 15.0%
</TABLE>
(c) The Company will not at any time permit the sum of (i) the aggregate
amount of all Funded Debt secured by Liens permitted by Section 10.5(j) plus
(ii) the aggregate amount of all Funded Debt of Subsidiaries to exceed
$63,000,000.
(d) The Company shall not effect or permit any change in or amendment to
(i) the terms by which any Subordinated Indebtedness purports to be subordinated
to the payment and performance of the Notes or (ii) the terms relating to the
repayment of any Subordinated Indebtedness (other than (1) any extensions of the
date of payment therefor, (2) any reductions in the amount thereof, or (3)
reductions in the rate at which interest or other fees are payable to the
holders thereof in connection therewith).
(e) The Company shall not directly or indirectly make any payment of any
principal of or any redemption, retirement, defeasance or repurchase, in whole
or in part, of any Subordinated Indebtedness or pledge any collateral therefor,
except payments required by the instruments evidencing such Subordinated
Indebtedness, provided that nothing shall
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preclude the Company from permitting the conversion of any Subordinated
Indebtedness to equity by exercise of warrants or otherwise (in accordance with
its terms).
Section 10.5. Limitation on Liens. The Company will not, and will not
permit any Subsidiary to, create or incur, or suffer to be incurred or to exist,
any Lien on its or their property or assets, whether now owned or hereafter
acquired, or upon any income or profits therefrom, or transfer any property for
the purpose of subjecting the same to the payment of obligations in priority to
the payment of its or their general creditors, or acquire or agree to acquire,
or permit any Subsidiary to acquire, any property or assets upon conditional
sales agreements or other title retention devices, except:
(a) Liens for property taxes and assessments or governmental charges
or levies and Liens securing claims or demands of mechanics and
materialmen, provided that payment thereof is not at the time required by
Section 9.4;
(b) Liens of or resulting from any judgment or award, the time for
the appeal or petition for rehearing of which shall not have expired, or in
respect of which the Company or a Subsidiary shall at any time in good
faith be prosecuting an appeal or proceeding for a review and in respect of
which a stay of execution pending such appeal or proceeding for review
shall have been secured;
(c) Liens incidental to the conduct of business or the ownership of
properties and assets (including Liens in connection with worker's
compensation, unemployment insurance and other like laws, warehousemen's
and attorneys' liens and statutory landlords' liens) and Liens to secure
the performance of bids, tenders or trade contracts, or to secure statutory
obligations, surety or appeal bonds or other Liens of like general nature,
in any such case incurred in the ordinary course of business and not in
connection with the borrowing of money, provided in each case, the
obligation secured is not overdue or, if overdue, is being contested in
good faith by appropriate actions or proceedings;
(d) minor survey exceptions or minor encumbrances, easements or
reservations, or rights of others for rights-of-way, utilities and other
similar purposes, or zoning or other restrictions as to the use of real
properties, which are necessary for the conduct of the activities of the
Company and its Subsidiaries or which customarily exist on properties of
corporations engaged in similar activities and similarly situated and which
do not in any event materially impair their use in the operation of the
business of the Company and its Subsidiaries;
(e) Liens securing Indebtedness of a Subsidiary to the Company or to
another Substantially-Owned Subsidiary;
(f) Liens of the Collateral Documents, and other Liens given to the
Collateral Agent for the ratable benefit of the Secured Parties pursuant to
the terms and provisions and upon the conditions set forth in the Security
Documents or the Bank Credit Agreement;
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<PAGE> 38
(g) Liens existing as of the date of the Closing and described in
Schedule 5.15;
(h) Liens created or incurred after the date of the Closing given to
secure the payment of the purchase price incurred in connection with the
acquisition or purchase of real or personal property or the cost of
construction or improvements to real or personal property, in any such
case, useful and intended to be used in carrying on the business of the
Company or a Subsidiary, provided that (i) the Lien shall attach solely to
the real or personal property acquired, purchased, constructed or improved,
(ii) such Lien shall have been created or incurred within 120 days after
the date of acquisition or purchase or the date of completion of
construction or improvement of such real or personal property, as the case
may be, (iii) at the time of the imposition of the Lien, the aggregate
amount remaining unpaid on all Funded Debt secured by Liens on such real or
personal property, as the case may be (whether or not assumed by the
Company or a Subsidiary) shall not exceed an amount equal to 100% of the
lesser of the total acquisition or purchase price or cost of construction
or improvement, as the case may be, or fair market value of such real or
personal property (as determined in good faith by the Board of Directors of
the Company), (iv) all such Funded Debt shall have been incurred within the
applicable limitations provided in Section 10.4, and (v) at the time of the
creation, issuance, assumption, guarantee or incurrence of such Funded Debt
and after giving effect thereto and to the application of the proceeds
thereof, no Default or Event of Default would exist;
(i) Liens affixed on real or personal property existing (i) at the
time of acquisition thereof, whether or not the Funded Debt secured thereby
is assumed by the Company or a Subsidiary, so long as such Lien or Liens
were not incurred, extended or renewed in contemplation of such acquisition
or purchase, or (ii) on the property of a Person at the time such
corporation is merged into or consolidated with the Company or a Subsidiary
or at the time of a sale, lease or other disposition of the properties of a
corporation as an entirety to the Company or a Subsidiary; provided that
(A) the amount of Funded Debt secured by such Liens shall not exceed an
amount equal to the lesser of the acquisition or purchase price or fair
market value of such real or personal property (as determined in good faith
by the Board of Directors of the Company), (B) all such Funded Debt shall
have been incurred within the applicable limitations provided in Section
10.4, and (C) at the time of the creation, issuance, assumption, guarantee
or incurrence of such Funded Debt and after giving effect thereto and to
the application of the proceeds thereof, no Default or Event of Default
would exist;
(j) Liens created or incurred after the date of the Closing given to
secure Funded Debt of the Company or any Subsidiary in addition to the
Liens permitted by the preceding clauses (a) through (j) hereof, provided
that (i) all Indebtedness secured by such Liens shall have been incurred
within the limitations provided in Section 10.4 and (ii) at the time of the
creation, issuance, assumption, guarantee or incurrence of such Funded Debt
and after giving effect thereto and to the application of the proceeds
thereof, no Default or Event of Default would exist; and
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<PAGE> 39
(k) any extension, renewal or refunding of any Lien permitted by the
preceding clauses (h) through (j) of this Section 10.5 in respect of the
same property theretofore subject to such Lien in connection with the
extension, renewal or refunding of the Indebtedness secured thereby;
provided that (i) such extension, renewal or refunding of Indebtedness
shall be without increase in the principal amount remaining unpaid as of
the date of such extension, renewal or refunding, (ii) such Lien shall
attach solely to the same such property, and (iii) the principal amount
remaining unpaid as of the date of such extension, renewal or refunding of
Indebtedness is less than or equal to the fair market value of the property
(determined in good faith by the Board or Directors of the Company) to
which such Lien is attached.
Section 10.6. Notes to Rank Pari Passu with Senior Indebtedness. The
Company will not create, assume, guarantee or otherwise incur or in any manner
be or become liable in respect of any Indebtedness which would or would purport
to rank senior in right of payment to the Notes.
Section 10.7. Limitations on Restrictive Agreements. (a) Except for the
agreements described in subparagraph (d) of Schedule 5.4, the Company will not,
and will not permit any Subsidiary to, enter into, or suffer to exist, any
agreement with any Person which, directly or indirectly, prohibits or limits the
ability of any Subsidiary to (i) pay dividends or make other distributions to
the Company or prepay any Indebtedness owed to the Company or (ii) transfer any
of its properties or assets to the Company (other than with respect to assets
subject to Liens permitted by Section 10.5).
(b) The Company will not, and will not permit any Subsidiary to, enter
into, or suffer to exist, any agreement with any Person which in any way
restricts or limits the ability of the Company to amend, modify, supplement or
otherwise alter the terms applicable to the Notes or this Agreement.
SECTION 11. EVENTS OF DEFAULT.
An "Event of Default" shall exist if any of the following conditions or
events shall occur and be continuing:
(a) the Company defaults in the payment of any principal or
Make-Whole Amount, if any, on any Note when the same becomes due and
payable, whether at maturity or at a date fixed for prepayment or by
declaration or otherwise; or
(b) the Company defaults in the payment of any interest on any Note
for more than five Business Days after the same becomes due and payable; or
(c) the Company defaults in the performance of or compliance with any
term contained in Section 9.7, 10.2(b) or (c) or 10.4; or
(d) the Company defaults in the performance of or compliance with any
term contained herein (other than those referred to in paragraphs (a), (b)
and (c) of this
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<PAGE> 40
Section 11) and such default is not remedied within 30 days after the
earlier of (i) a Responsible Officer obtaining actual knowledge of such
default and (ii) the Company receiving written notice of such default from
any holder of a Note (any such written notice to be identified as a "notice
of default" and to refer specifically to this paragraph (d) of Section 11);
or
(e) any representation or warranty made in writing by or on behalf of
the Company or by any officer of the Company in this Agreement, or by an
officer of any Guaranty Subsidiary in any Subsidiary Guaranty, or in any
writing furnished in connection with the transactions contemplated hereby
proves to have been false or incorrect in any material respect on the date
as of which made; or
(f) (i) the Company or any Subsidiary is in default (as principal or
as guarantor or other surety) in the payment of any principal of or premium
or make-whole amount or interest on any Indebtedness that is outstanding in
an aggregate principal amount of at least $10,000,000 beyond any period of
grace provided with respect thereto, or (ii) the Company or any Subsidiary
is in default in the performance of or compliance with any term of any
evidence of any Indebtedness in an aggregate outstanding principal amount
of at least $10,000,000 or of any mortgage, indenture or other agreement
relating thereto or any other condition exists, and as a consequence of
such default or condition such Indebtedness has become, or has been
declared (or one or more Persons are entitled to declare such Indebtedness
to be), due and payable before its stated maturity or before its regularly
scheduled dates of payment, or (iii) as a consequence of the occurrence or
continuation of any event or condition (other than the passage of time or
the right of the holder of Indebtedness to convert such Indebtedness into
equity interests), (x) the Company or any Subsidiary has become obligated
to purchase or repay Indebtedness before its regular maturity or before its
regularly scheduled dates of payment in an aggregate outstanding principal
amount of at least $10,000,000, or (y) one or more Persons have the right
to require the Company or any Subsidiary so to purchase or repay such
Indebtedness; or
(g) the Company or any Subsidiary (i) is generally not paying, or
admits in writing its inability to pay, its debts as they become due, (ii)
files, or consents by answer or otherwise to the filing against it of, a
petition for relief or reorganization or arrangement or any other petition
in bankruptcy, for liquidation or to take advantage of any bankruptcy,
insolvency, reorganization, moratorium or other similar law of any
jurisdiction, (iii) makes an assignment for the benefit of its creditors,
(iv) consents to the appointment of a custodian, receiver, trustee or other
officer with similar powers with respect to it or with respect to any
substantial part of its property, (v) is adjudicated as insolvent or to be
liquidated (other than the liquidation of a Subsidiary into the Company or
a Wholly-Owned Subsidiary), or (vi) takes corporate action for the purpose
of any of the foregoing; or
(h) a court or governmental authority of competent jurisdiction
enters an order appointing, without consent by the Company or any of its
Subsidiaries, a custodian, receiver, trustee or other officer with similar
powers with respect to it or
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<PAGE> 41
with respect to any substantial part of its property, or constituting an
order for relief or approving a petition for relief or reorganization or
any other petition in bankruptcy or for liquidation or to take advantage of
any bankruptcy or insolvency law of any jurisdiction, or ordering the
dissolution, winding-up or liquidation of the Company or any of its
Subsidiaries, or any such petition shall be filed against the Company or
any of its Subsidiaries and such petition shall not be dismissed within 60
days; or
(i) a final judgment or judgments for the payment of money
aggregating in excess of $3,000,000 are rendered against one or more of the
Company and its Subsidiaries and which judgments are not, within 45 days
after entry thereof, bonded, discharged or stayed pending appeal, or are
not discharged within 45 days after the expiration of such stay; or
(j) if (i) any Plan shall fail to satisfy the minimum funding
standards of ERISA or the Code for any plan year or part thereof or a
waiver of such standards or extension of any amortization period is sought
or granted under section 412 of the Code, (ii) the PBGC shall have
instituted proceedings under ERISA section 4042 to terminate or appoint a
trustee to administer any Plan or the PBGC shall have notified the Company
or any ERISA Affiliate that a Plan may become a subject of any such
proceedings, (iii) the aggregate "amount of unfunded benefit liabilities"
(within the meaning of section 4001(a)(18) of ERISA) under all Plans,
determined in accordance with Title IV of ERISA, shall exceed $500,000,
(iv) the Company or any ERISA Affiliate shall have incurred or is
reasonably expected to incur any liability pursuant to Title I or IV of
ERISA or the penalty or excise tax provisions of the Code relating to
employee benefit plans, (v) the Company or any ERISA Affiliate withdraws
from any Multiemployer Plan, or (vi) the Company or any Subsidiary
establishes or amends any employee welfare benefit plan that provides
post-employment welfare benefits in a manner that would increase the
liability of the Company or any Subsidiary thereunder; and any such event
or events described in clauses (i) through (vi) above, either individually
or together with any other such event or events, could reasonably be
expected to have a Material Adverse Effect; or
(k) an event of default under any Security Document shall have
occurred and be continuing; or
(l) for any reason any Security Document ceases to be in full force
and effect or any Lien on any of the Collateral purported to be created by
any Collateral Document ceases to be or is not a valid and perfected Lien
to the extent and with the priority contemplated hereby or thereby (in any
case, other than pursuant to a release permitted by Section 2.2(c) or (d)
or pursuant to the Intercreditor Agreement or pursuant to any other action
taken by the Collateral Agent under and in accordance with the terms of the
Intercreditor Agreement).
As used in Section 11(j), the terms "employee benefit plan" and "employee
welfare benefit plan" shall have the respective meanings assigned to such terms
in Section 3 of ERISA.
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<PAGE> 42
SECTION 12. REMEDIES ON DEFAULT, ETC.
Section 12.1. Acceleration. (a) If an Event of Default with respect to the
Company described in paragraph (g) or (h) of Section 11 (other than an Event of
Default described in clause (i) of paragraph (g) or described in clause (vi) of
paragraph (g) by virtue of the fact that such clause encompasses clause (i) of
paragraph (g)) has occurred, all the Notes then outstanding shall automatically
become immediately due and payable.
(b) If any other Event of Default has occurred and is continuing, any
holder or holders of more than 51% in principal amount of the Notes at the time
outstanding may at any time at its or their option, by notice or notices to the
Company, declare all the Notes then outstanding to be immediately due and
payable.
(c) If any Event of Default described in paragraph (a) or (b) of Section
11 has occurred and is continuing, any holder or holders of Notes at the time
outstanding affected by such Event of Default may at any time, at its or their
option, by notice or notices to the Company, declare all the Notes held by it or
them to be immediately due and payable.
Upon any Notes becoming due and payable under this Section 12.1, whether
automatically or by declaration, such Notes will forthwith mature and the entire
unpaid principal amount of such Notes, plus (i) all accrued and unpaid interest
thereon and (ii) the Make-Whole Amount determined in respect of such principal
amount (to the full extent permitted by applicable law), shall all be
immediately due and payable, in each and every case without presentment, demand,
protest or further notice, all of which are hereby waived. The Company
acknowledges, and the parties hereto agree, that each holder of a Note has the
right to maintain its investment in the Notes free from repayment by the Company
(except as herein specifically provided for), and that the provision for payment
of a Make-Whole Amount by the Company in the event that the Notes are prepaid or
are accelerated as a result of an Event of Default, is intended to provide
compensation for the deprivation of such right under such circumstances.
Section 12.2. Other Remedies. If any Default or Event of Default has
occurred and is continuing, and irrespective of whether any Notes have become or
have been declared immediately due and payable under Section 12.1, the holder of
any Note at the time outstanding may proceed to protect and enforce the rights
of such holder by an action at law, suit in equity or other appropriate
proceeding, whether for the specific performance of any agreement contained
herein or in any Note, or for an injunction against a violation of any of the
terms hereof or thereof, or in aid of the exercise of any power granted hereby
or thereby or by law or otherwise.
Section 12.3. Rescission. At any time after any Notes have been declared
due and payable pursuant to clause (b) or (c) of Section 12.1, the holders of
not less than 60% in principal amount of the Notes then outstanding, by written
notice to the Company, may rescind and annul any such declaration and its
consequences if (a) the Company has paid all overdue interest on the Notes, all
principal of and Make-Whole Amount, if any, on any Notes that are due and
payable and are unpaid other than by reason of such declaration, and
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all interest on such overdue principal and Make-Whole Amount, if any, and (to
the extent permitted by applicable law) any overdue interest in respect of the
Notes, at the Default Rate, (b) all Events of Default and Defaults, other than
non-payment of amounts that have become due solely by reason of such
declaration, have been cured or have been waived pursuant to Section 17, and (c)
no judgment or decree has been entered for the payment of any monies due
pursuant hereto or to the Notes. No rescission and annulment under this Section
12.3 will extend to or affect any subsequent Event of Default or Default or
impair any right consequent thereon.
Section 12.4. No Waivers or Election of Remedies, Expenses, Etc. No course
of dealing and no delay on the part of any holder of any Note in exercising any
right, power or remedy shall operate as a waiver thereof or otherwise prejudice
such holder's rights, powers or remedies. No right, power or remedy conferred by
this Agreement or by any Note upon any holder thereof shall be exclusive of any
other right, power or remedy referred to herein or therein or now or hereafter
available at law, in equity, by statute or otherwise. Without limiting the
obligations of the Company under Section 15, the Company will pay to the holder
of each Note on demand such further amount as shall be sufficient to cover all
costs and expenses of such holder incurred in any enforcement or collection
under this Section 12, including, without limitation, reasonable attorneys'
fees, expenses and disbursements.
SECTION 13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.
Section 13.1. Registration of Notes. The Company shall keep at its
principal executive office a register for the registration and registration of
transfers of Notes. The name and address of each holder of one or more Notes,
each transfer thereof and the name and address of each transferee of one or more
Notes shall be registered in such register. Prior to due presentment for
registration of transfer, the Person in whose name any Note shall be registered
shall be deemed and treated as the owner and holder thereof for all purposes
hereof, and the Company shall not be affected by any notice or knowledge to the
contrary. The Company shall give to any holder of a Note that is an
Institutional Investor promptly upon request therefor, a complete and correct
copy of the names and addresses of all registered holders of Notes.
Section 13.2. Transfer and Exchange of Notes. Upon surrender of any Note at
the principal executive office of the Company for registration of transfer or
exchange (and in the case of a surrender for registration of transfer, duly
endorsed or accompanied by a written instrument of transfer duly executed by the
registered holder of such Note or his attorney duly authorized in writing and
accompanied by the address for notices of each transferee of such Note or part
thereof), the Company shall execute and deliver, at the Company's expense
(except as provided below), one or more new Notes (as requested by the holder
thereof) in exchange therefor, of the same series and in an aggregate principal
amount equal to the unpaid principal amount of the surrendered Note. Each such
new Note shall be payable to such Person as such holder may request and shall be
substantially in the form of Exhibit 1A, Exhibit 1B and Exhibit 1C, as
applicable. Each such new Note shall be dated and bear interest from the date to
which interest shall have been paid on the
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<PAGE> 44
surrendered Note or dated the date of the surrendered Note if no interest shall
have been paid thereon. The Company may require payment of a sum sufficient to
cover any stamp tax or governmental charge imposed in respect of any such
transfer of Notes. Notes shall not be transferred in denominations of less than
$100,000, provided that if necessary to enable the registration of transfer by a
holder of its entire holding of Notes, one Note may be in a denomination of less
than $100,000. Any transferee, by its acceptance of a Note registered in its
name (or the name of its nominee), shall be deemed to have made the
representation set forth in Section 6.2.
Section 13.3. Replacement of Notes. Upon receipt by the Company of evidence
reasonably satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of any Note (which evidence shall be, in the case of
an Institutional Investor, notice from such Institutional Investor of such
ownership and such loss, theft, destruction or mutilation), and
(a) in the case of loss, theft or destruction, of indemnity
reasonably satisfactory to it (provided that if the holder of such Note is,
or is a nominee for, an original Purchaser or another holder of a Note with
a minimum net worth of at least $2,500,000, such Person's own unsecured
agreement of indemnity shall be deemed to be satisfactory), or
(b) in the case of mutilation, upon surrender and cancellation
thereof,
the Company at its own expense shall execute and deliver, in lieu thereof, a new
Note of the same series, dated and bearing interest from the date to which
interest shall have been paid on such lost, stolen, destroyed or mutilated Note
or dated the date of such lost, stolen, destroyed or mutilated Note if no
interest shall have been paid thereon.
SECTION 14. PAYMENTS ON NOTES.
Section 14.1. Place of Payment. Subject to Section 14.2, payments of
principal, Make-Whole Amount, if any, and interest becoming due and payable on
the Notes shall be made in lawful money of the United States of America at the
principal office of the Company in Boston, Massachusetts. The Company may at any
time, by notice to each holder of a Note, change the place of payment of the
Notes so long as such place of payment shall be either the principal office of
the Company in such jurisdiction or the principal office of a bank or trust
company in such jurisdiction.
Section 14.2. Home Office Payment. So long as you or your nominee shall be
the holder of any Note, and notwithstanding anything contained in Section 14.1
or in such Note to the contrary, the Company will pay all sums becoming due on
such Note for principal, Make-Whole Amount, if any, and interest by the method
and at the address specified for such purpose below your name in Schedule A, or
by such other method or at such other address as you shall have from time to
time specified to the Company in writing for such purpose, without the
presentation or surrender of such Note or the making of any notation thereon,
except that upon written request of the Company made concurrently with or
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<PAGE> 45
reasonably promptly after payment or prepayment in full of any Note, you shall
surrender such Note for cancellation, reasonably promptly after any such
request, to the Company at its principal executive office or at the place of
payment most recently designated by the Company pursuant to Section 14.1. Prior
to any sale or other disposition of any Note held by you or your nominee you
will, at your election, either endorse thereon the amount of principal paid
thereon and the last date to which interest has been paid thereon or surrender
such Note to the Company in exchange for a new Note or Notes of the same series
pursuant to Section 13.2. The Company will afford the benefits of this Section
14.2 to any Institutional Investor that is the direct or indirect transferee of
any Note purchased by you under this Agreement and that has made the same
agreement relating to such Note as you have made in this Section 14.2.
SECTION 15. EXPENSES, ETC.
Section 15.1. Transaction Expenses. (a) Whether or not the transactions
contemplated hereby are consummated, the Company will pay all costs and expenses
(including reasonable attorneys' fees of a special counsel and, if reasonably
required, local or other counsel) incurred by you and each Other Purchaser or
holder of a Note in connection with such transactions and in connection with any
amendments, waivers or consents under or in respect of this Agreement, the
Notes, the Security Documents, the Intercreditor Agreement First Amendment or
the Intercreditor Agreement (whether or not such amendment, waiver or consent
becomes effective), including, without limitation: (a) the costs and expenses
incurred in enforcing or defending (or determining whether or how to enforce or
defend) any rights under this Agreement, the Notes, the Security Documents or
the Intercreditor Agreement or in responding to any subpoena or other legal
process or informal investigative demand issued in connection with this
Agreement, the Notes, the Security Documents or the Intercreditor Agreement, or
by reason of being a holder of any Note, and (b) the costs and expenses,
including financial advisors' fees, incurred in connection with the insolvency
or bankruptcy of the Company or any Subsidiary or in connection with any
work-out or restructuring of the transactions contemplated hereby and by the
Notes, the Security Documents and the Intercreditor Agreement. The Company will
pay, and will save you and each other holder of a Note harmless from, all claims
in respect of any fees, costs or expenses, if any, of brokers and finders (other
than those retained by you).
(b) Without limiting the foregoing, the Company agrees to pay all fees of
the Collateral Agent in connection with the preparation, execution and delivery
of the Intercreditor Agreement First Amendment and Collateral Documents and the
transactions contemplated thereby, including but not limited to reasonable
attorneys fees; to pay to the Collateral Agent from time to time reasonable
compensation for all services rendered by it under the Intercreditor Agreement
and the Collateral Documents; to indemnify the Collateral Agent for, and to hold
it harmless against, any loss, liability or expense incurred without gross
negligence or willful misconduct on its part, arising out of or in connection
with the acceptance or administration of the Intercreditor Agreement and
Collateral Documents, including, but not limited to, the costs and expenses of
defending itself against
-39-
<PAGE> 46
any claim or liability in connection with the exercise or performance of any of
its powers or duties thereunder.
Section 15.2. Survival. The obligations of the Company under this Section
15 will survive the payment or transfer of any Note, the enforcement, amendment
or waiver of any provision of this Agreement, the Notes, the Security Documents
and the Intercreditor Agreement, and the termination of this Agreement, the
Security Documents or the Intercreditor Agreement.
SECTION 16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.
All representations and warranties contained herein shall survive the
execution and delivery of this Agreement, the Notes, the Security Documents and
the Intercreditor Agreement, the purchase or transfer by you of any Note or
portion thereof or interest therein and the payment of any Note, and may be
relied upon by any subsequent holder of a Note, regardless of any investigation
made at any time by or on behalf of you or any other holder of a Note. All
statements contained in any certificate or other instrument delivered by or on
behalf of the Company pursuant to this Agreement or the Security Documents shall
be deemed representations and warranties of the Company under this Agreement and
the Security Documents. Subject to the preceding sentence, this Agreement, the
Notes, and the Security Documents embody the entire agreement and understanding
between you and the Company and supersede all prior agreements and
understandings relating to the subject matter hereof.
SECTION 17. AMENDMENT AND WAIVER.
Section 17.1. Requirements. (a) This Agreement and the Notes, may be
amended, and the observance of any term hereof or of the Notes may be waived
(either retroactively or prospectively), with (and only with) the written
consent of the Company and the Required Holders, except that (a) no amendment or
waiver of any of the provisions of Section 1, 2, 3, 4, 5, 6 or 21 hereof, or any
defined term (as it is used therein), will be effective as to you unless
consented to by you in writing, and (b) no such amendment or waiver may, without
the written consent of the holder of each Note at the time outstanding affected
thereby, (i) subject to the provisions of Section 12 relating to acceleration or
rescission, change the amount or time of any prepayment or payment of principal
of, or reduce the rate or change the time of payment or method of computation of
interest or of the Make-Whole Amount on, the Notes, (ii) change the percentage
of the principal amount of the Notes the holders of which are required to
consent to any such amendment or waiver, or (iii) amend any of Sections 8,
11(a), 11(b), 12, 17 or 20.
(b) The Collateral Documents may be amended in the manner prescribed in
the Intercreditor Agreement, and the Subsidiary Guaranties and the Intercreditor
Agreement may be amended in the manner prescribed in each such document, and all
amendments to the
-40-
<PAGE> 47
Collateral Documents, the Subsidiary Guaranties and the Intercreditor Agreement
obtained in conformity with such requirements shall bind all holders of the
Notes.
Section 17.2. Solicitation of Holders of Notes.
(a) Solicitation. The Company will provide each holder of the Notes
(irrespective of the amount of Notes then owned by it) with sufficient
information, sufficiently far in advance of the date a decision is required, to
enable such holder to make an informed and considered decision with respect to
any proposed amendment, waiver or consent in respect of any of the provisions
hereof or of the Notes or any of the Security Documents. The Company will
deliver executed or true and correct copies of each amendment, waiver or consent
effected pursuant to the provisions of this Section 17 to each holder of
outstanding Notes promptly following the date on which it is executed and
delivered by, or receives the consent or approval of, the requisite holders of
Notes.
(b) Payment. The Company will not directly or indirectly pay or cause to
be paid any remuneration, whether by way of supplemental or additional interest,
fee or otherwise, or grant any security, to any holder of Notes as consideration
for or as an inducement to the entering into by any holder of Notes of any
waiver or amendment of any of the terms and provisions hereof unless such
remuneration is concurrently paid, or security is concurrently granted, on the
same terms, ratably to each holder of Notes then outstanding even if such holder
did not consent to such waiver or amendment.
Section 17.3. Binding Effect, Etc. Any amendment or waiver consented to as
provided in this Section 17 applies equally to all holders of Notes and is
binding upon them and upon each future holder of any Note and upon the Company
without regard to whether such Note has been marked to indicate such amendment
or waiver. No such amendment or waiver will extend to or affect any obligation,
covenant, agreement, Default or Event of Default not expressly amended or waived
or impair any right consequent thereon. No course of dealing between the Company
and the holder of any Note nor any delay in exercising any rights hereunder or
under any Note shall operate as a waiver of any rights of any holder of such
Note. As used herein, the term "this Agreement" and references thereto shall
mean this Agreement as it may from time to time be amended or supplemented.
Section 17.4. Notes Held by Company, Etc. Solely for the purpose of
determining whether the holders of the requisite percentage of the aggregate
principal amount of Notes then outstanding approved or consented to any
amendment, waiver or consent to be given under this Agreement, the Notes, the
Security Documents or the Intercreditor Agreement, or have directed the taking
of any action provided herein or in the Notes to be taken upon the direction of
the holders of a specified percentage of the aggregate principal amount of Notes
then outstanding, Notes directly or indirectly owned by the Company or any of
its Affiliates shall be deemed not to be outstanding.
-41-
<PAGE> 48
SECTION 18. NOTICES.
All notices and communications provided for hereunder shall be in writing
and sent (a) by telecopy if the sender on the same day sends a confirming copy
of such notice by a recognized overnight delivery service (charges prepaid), or
(b) by registered or certified mail with return receipt requested (postage
prepaid), or (c) by a recognized overnight delivery service (with charges
prepaid). Any such notice must be sent:
(i) if to you or your nominee, to you or it at the address specified
for such communications in Schedule A, or at such other address as you or
it shall have specified to the Company in writing,
(ii) if to any other holder of any Note, to such holder at such
address as such other holder shall have specified to the Company in
writing, or
(iii) if to the Company, to the Company at its address set forth at
the beginning hereof to the attention of the Treasurer, or at such other
address as the Company shall have specified to the holder of each Note in
writing.
Notices under this Section 18 will be deemed given only when actually received.
SECTION 19. REPRODUCTION OF DOCUMENTS.
This Agreement and the Security Documents and all documents relating
thereto, including, without limitation, (a) consents, waivers and modifications
that may hereafter be executed, (b) documents received by you at the Closing
(except the Notes themselves), and (c) financial statements, certificates and
other information previously or hereafter furnished to you, may be reproduced by
you by any photographic, photostatic, microfilm, microcard, miniature
photographic or other similar process and you may destroy any original document
so reproduced. The Company agrees and stipulates that, to the extent permitted
by applicable law, any such reproduction shall be admissible in evidence as the
original itself in any judicial or administrative proceeding (whether or not the
original is in existence and whether or not such reproduction was made by you in
the regular course of business) and any enlargement, facsimile or further
reproduction of such reproduction shall likewise be admissible in evidence. This
Section 19 shall not prohibit the Company or any other holder of Notes from
contesting any such reproduction to the same extent that it could contest the
original, or from introducing evidence to demonstrate the inaccuracy of any such
reproduction.
SECTION 20. CONFIDENTIAL INFORMATION.
For the purposes of this Section 20, "Confidential Information" means
information delivered to you by or on behalf of the Company or any Subsidiary in
connection with the transactions contemplated by or otherwise pursuant to this
Agreement that is proprietary in nature and that was clearly marked or labeled
or otherwise adequately identified when
-42-
<PAGE> 49
received by you as being confidential information of the Company or such
Subsidiary, provided that such term does not include information that (a) was
publicly known or otherwise known to you prior to the time of such disclosure,
(b) subsequently becomes publicly known through no act or omission by you or any
Person acting on your behalf, (c) otherwise becomes known to you other than
through disclosure by the Company or any Subsidiary or (d) constitutes financial
statements delivered to you under Section 7.1 that are otherwise publicly
available. You will maintain the confidentiality of such Confidential
Information in accordance with procedures adopted by you in good faith to
protect confidential information of third parties delivered to you, provided
that you may deliver or disclose Confidential Information to (i) your directors,
trustees, officers, employees, agents, attorneys and affiliates (to the extent
such disclosure reasonably relates to the administration of the investment
represented by your Notes), (ii) your financial advisors and other professional
advisors who agree to hold confidential the Confidential Information
substantially in accordance with the terms of this Section 20, (iii) any other
holder of any Note, (iv) any Institutional Investor to which you sell or offer
to sell such Note or any part thereof or any participation therein (if such
Person has agreed in writing prior to its receipt of such Confidential
Information to be bound by the provisions of this Section 20), (v) any Person
from which you offer to purchase any security of the Company (if such Person has
agreed in writing prior to its receipt of such Confidential Information to be
bound by the provisions of this Section 20), (vi) any federal or state
regulatory authority having jurisdiction over you, (vii) the National
Association of Insurance Commissioners or any similar organization, or any
nationally recognized rating agency that requires access to information about
your investment portfolio or (viii) any other Person to which such delivery or
disclosure may be necessary or appropriate (w) to effect compliance with any
law, rule, regulation or order applicable to you, (x) in response to any
subpoena or other legal process, (y) in connection with any litigation to which
you are a party or (z) if an Event of Default has occurred and is continuing, to
the extent you may reasonably determine such delivery and disclosure to be
necessary or appropriate in the enforcement or for the protection of the rights
and remedies under your Notes and this Agreement. Each holder of a Note, by its
acceptance of a Note, will be deemed to have agreed to be bound by and to be
entitled to the benefits of this Section 20 as though it were a party to this
Agreement. On reasonable request by the Company in connection with the delivery
to any holder of a Note of information required to be delivered to such holder
under this Agreement or requested by such holder (other than a holder that is a
party to this Agreement or its nominee), such holder will enter into an
agreement with the Company embodying the provisions of this Section 20.
SECTION 21. SUBSTITUTION OF PURCHASER.
You shall have the right to substitute any one of your Affiliates as the
purchaser of the Notes that you have agreed to purchase hereunder, by written
notice to the Company, which notice shall be signed by both you and such
Affiliate, shall contain such Affiliate's agreement to be bound by this
Agreement and shall contain a confirmation by such Affiliate of the accuracy
with respect to it of the representations set forth in Section 6. Upon receipt
of such notice, wherever the word "you" is used in this Agreement (other than in
this Section 21), such word shall be deemed to refer to such Affiliate in lieu
of you. In the event
-43-
<PAGE> 50
that such Affiliate is so substituted as a purchaser hereunder and such
Affiliate thereafter transfers to you all of the Notes then held by such
Affiliate, upon receipt by the Company of notice of such transfer, wherever the
word "you" is used in this Agreement (other than in this Section 21), such word
shall no longer be deemed to refer to such Affiliate, but shall refer to you,
and you shall have all the rights of an original holder of the Notes under this
Agreement.
SECTION 22. MISCELLANEOUS.
Section 22.1. Successors and Assigns. All covenants and other agreements
contained in this Agreement by or on behalf of any of the parties hereto bind
and inure to the benefit of their respective successors and assigns (including,
without limitation, any subsequent holder of a Note) whether so expressed or
not.
Section 22.2. Payments Due on Non-Business Days. Anything in this
Agreement, the Notes, or the Security Documents to the contrary notwithstanding,
any payment of principal of or Make-Whole Amount or interest on any Note that is
due on a date other than a Business Day shall be made on the next succeeding
Business Day without including the additional days elapsed in the computation of
the interest payable on such next succeeding Business Day.
Section 22.3. Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall (to the full extent permitted by law)
not invalidate or render unenforceable such provision in any other jurisdiction.
Section 22.4. Construction. Each covenant contained herein shall be
construed (absent express provision to the contrary) as being independent of
each other covenant contained herein, so that compliance with any one covenant
shall not (absent such an express contrary provision) be deemed to excuse
compliance with any other covenant. Where any provision herein refers to action
to be taken by any Person, or which such Person is prohibited from taking, such
provision shall be applicable whether such action is taken directly or
indirectly by such Person.
Section 22.5. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which together shall
constitute one instrument. Each counterpart may consist of a number of copies
hereof, each signed by less than all, but together signed by all, of the parties
hereto.
Section 22.6. Governing Law. This Agreement shall be construed and enforced
in accordance with, and the rights of the parties shall be governed by, the laws
of the Commonwealth of Massachusetts excluding choice-of-law principles of the
law of such State that would require the application of the laws of a
jurisdiction other than such State.
-44-
<PAGE> 51
Section 22.7. Environmental Indemnity and Covenant Not to Sue. (a) The
Company agrees to indemnify and hold harmless from time to time the Purchasers
and each other holder of the Notes, each Person claiming by, through, under or
on account of any of the foregoing and the respective directors, officers,
counsel and employees of each of the foregoing Persons (the "Indemnified
Parties") from and against any and all losses, claims, cost recovery actions,
administrative orders or proceedings, damages, personal injuries, property
damages and liabilities to which any such Indemnified Party may become subject
under any Environmental Law applicable to, and arising out of the ownership or
operation by the Company or any of its Subsidiaries, of any of their respective
properties, (1) as a result of the breach, violation or non-compliance by the
Company or any of its Subsidiaries with any Environmental Law applicable to the
Company or any of its Subsidiaries, (2) due to past ownership of any of their
respective properties or past activity on any of their respective properties
which, though lawful and fully permissible at the time, could result in present
liability, (3) as a result of the presence, release or disposal of Hazardous
Materials by the Company or any of its Subsidiaries, or at any of their
respective properties, or (4) in connection with any environmental, health or
safety condition at any property of the Company or its Subsidiaries. The
provisions of this Section 22.7 shall survive termination of this Agreement by
payment in full of all of the Notes issued hereunder and shall survive the
transfer of any Note or Notes issued hereunder.
(b) Without limiting the provisions of clause (a) of this Section 22.7,
the Company and its successors and assigns hereby waive, release and covenant
not to bring against any of the Indemnified Parties any demand, claim, cost
recovery action or lawsuit they may now have or which may hereafter accrue
arising from (1) any Environmental Law now or hereafter enacted applicable to,
and arising out of the ownership or operations of, the Company or any of its
Subsidiaries, (2) the presence, use, release, storage, treatment or disposal of
Hazardous Materials on or at any of the properties owned or operated by the
Company or any of its Subsidiaries, (3) the breach, violation or non-compliance
by the Company or any of its Subsidiaries with any Environmental Law or
environmental covenant applicable to, and arising out of the ownership or
operations of, the Company or any of its Subsidiaries, or (4) any environmental,
health or safety condition at any property of the Company or any of its
Subsidiaries.
-45-
<PAGE> 52
If you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterpart of this Agreement and return it to the
Company, whereupon the foregoing shall become a binding agreement between you
and the Company.
Very truly yours,
UNITED ASSET MANAGEMENT CORPORATION
By /s/ William H. Park
--------------------------------------
Name: William H. Park
Title: Executive Vice President
<PAGE> 53
Accepted as of the date of Closing
JACKSON NATIONAL LIFE INSURANCE COMPANY
By: PPM America, Inc.,
as Attorney-in-Fact on behalf of
Jackson National Life Insurance Company
By /s/ David Brett
-------------------------------------
Name: David Brett
Title: M.D.
Note Purchase Agreement
<PAGE> 54
If you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterpart of this Agreement and return it to the
Company, whereupon the foregoing shall become a binding agreement between you
and the Company.
Very truly yours,
UNITED ASSET MANAGEMENT CORPORATION
By /s/ William H. Park
--------------------------------------
Name: William H. Park
Title: Executive Vice President
<PAGE> 55
Accepted as of the date of Closing
TEACHERS INSURANCE AND ANNUITY
ASSOCIATION OF AMERICA
By /s/ Loren S. Archibald
----------------------------------------
Name: LOREN S. ARCHIBALD
Title: MANAGING DIRECTOR
PRIVATE PLACEMENTS
Note Purchase Agreement
<PAGE> 56
If you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterpart of this Agreement and return it to the
Company, whereupon the foregoing shall become a binding agreement between you
and the Company.
Very truly yours,
UNITED ASSET MANAGEMENT CORPORATION
By /s/ William H. Park
--------------------------------------
Name: William H. Park
Title: Executive Vice President
<PAGE> 57
Accepted as of the date of Closing
KZH - SOLEIL-2 CORPORATION
By /s/ Virginia Conway
----------------------------------------
Name: Virginia Conway
Title: Authorized Agent
Note Purchase Agreement
<PAGE> 58
If you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterpart of this Agreement and return it to the
Company, whereupon the foregoing shall become a binding agreement between you
and the Company.
Very truly yours,
UNITED ASSET MANAGEMENT CORPORATION
By /s/ William H. Park
--------------------------------------
Name: William H. Park
Title: Executive Vice President
<PAGE> 59
Accepted as of the date of Closing
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
By CIGNA Investments, Inc.
By /s/ James R. Kuzemchak
---------------------------------------
Name: JAMES R. KUZEMCHAK
Title: MANAGING DIRECTOR
Note Purchase Agreement
<PAGE> 60
If you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterpart of this Agreement and return it to the
Company, whereupon the foregoing shall become a binding agreement between you
and the Company.
Very truly yours,
UNITED ASSET MANAGEMENT CORPORATION
By /s/ William H. Park
--------------------------------------
Name: William H. Park
Title: Executive Vice President
<PAGE> 61
Accepted as of the date of Closing
LIFE INSURANCE COMPANY OF NORTH AMERICA
By CIGNA Investments, Inc.
By /s/ James R. Kuzemchak
---------------------------------------
Name: JAMES R. KUZEMCHAK
Title: MANAGING DIRECTOR
Note Purchase Agreement
<PAGE> 62
If you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterpart of this Agreement and return it to the
Company, whereupon the foregoing shall become a binding agreement between you
and the Company.
Very truly yours,
UNITED ASSET MANAGEMENT CORPORATION
By /s/ William H. Park
--------------------------------------
Name: William H. Park
Title: Executive Vice President
<PAGE> 63
Accepted as of the date of Closing
CONNECTICUT GENERAL LIFE INSURANCE COMPANY,
on behalf of one or more separate accounts
By CIGNA Investments, Inc.
By /s/ James R. Kuzemchak
---------------------------------------
Name: JAMES R. KUZEMCHAK
Title: MANAGING DIRECTOR
Note Purchase Agreement
<PAGE> 64
If you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterpart of this Agreement and return it to the
Company, whereupon the foregoing shall become a binding agreement between you
and the Company.
Very truly yours,
UNITED ASSET MANAGEMENT CORPORATION
By /s/ William H. Park
--------------------------------------
Name: William H. Park
Title: Executive Vice President
<PAGE> 65
Accepted as of the date of Closing
THE GUARDIAN LIFE INSURANCE COMPANY OF
AMERICA
By /s/ Thomas M. Donohue
----------------------------------------
Name: Thomas M. Donohue
Title: Vice President
Note Purchase Agreement
<PAGE> 66
If you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterpart of this Agreement and return it to the
Company, whereupon the foregoing shall become a binding agreement between you
and the Company.
Very truly yours,
UNITED ASSET MANAGEMENT CORPORATION
By /s/ William H. Park
--------------------------------------
Name: William H. Park
Title: Executive Vice President
<PAGE> 67
Accepted as of the date of Closing
PROVIDENT LIFE AND ACCIDENT INSURANCE COMPANY
By: Provident Investment Management, LLC,
Its Agent
By /s/ David Fussell
---------------------------------------
Name: David Fussell
Title: Vice President
Note Purchase Agreement
<PAGE> 68
If you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterpart of this Agreement and return it to the
Company, whereupon the foregoing shall become a binding agreement between you
and the Company.
Very truly yours,
UNITED ASSET MANAGEMENT CORPORATION
By /s/ William H. Park
--------------------------------------
Name: William H. Park
Title: Executive Vice President
<PAGE> 69
Accepted as of the date of Closing
THE PAUL REVERE PROTECTIVE LIFE INSURANCE
COMPANY
By: Provident Investment Management, LLC,
Its Agent
By /s/ David Fussell
---------------------------------------
Name: David Fussell
Title: Vice President
Note Purchase Agreement
<PAGE> 70
If you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterpart of this Agreement and return it to the
Company, whereupon the foregoing shall become a binding agreement between you
and the Company.
Very truly yours,
UNITED ASSET MANAGEMENT CORPORATION
By /s/ William H. Park
--------------------------------------
Name: William H. Park
Title: Executive Vice President
<PAGE> 71
Accepted as of the date of Closing
PROVIDENT NATIONAL ASSURANCE COMPANY
By: Provident Investment Management, LLC,
Its Agent
By /s/ David Fussell
---------------------------------------
Name: David Fussell
Title: Vice President
Note Purchase Agreement
<PAGE> 72
If you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterpart of this Agreement and return it to the
Company, whereupon the foregoing shall become a binding agreement between you
and the Company.
Very truly yours,
UNITED ASSET MANAGEMENT CORPORATION
By /s/ William H. Park
--------------------------------------
Name: William H. Park
Title: Executive Vice President
<PAGE> 73
Accepted as of the date of Closing
PRINCIPAL LIFE INSURANCE COMPANY
By /s/ Christopher J. Henderson
-----------------------------------------
Name: CHRISTOPHER J. HENDERSON, Counsel
By /s/ Clint Woods
----------------------------------------
Name: CLINT WOODS
Title: COUNSEL
Note Purchase Agreement
<PAGE> 74
If you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterpart of this Agreement and return it to the
Company, whereupon the foregoing shall become a binding agreement between you
and the Company.
Very truly yours,
UNITED ASSET MANAGEMENT CORPORATION
By /s/ William H. Park
--------------------------------------
Name: William H. Park
Title: Executive Vice President
<PAGE> 75
Accepted as of the date of Closing
NATIONAL LIFE INSURANCE COMPANY
By /s/ R. Scott Higgins
----------------------------------------
Name: R. Scott Higgins
Title: Vice President
National Life Investment
Management Co., Inc.
Note Purchase Agreement
<PAGE> 76
If you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterpart of this Agreement and return it to the
Company, whereupon the foregoing shall become a binding agreement between you
and the Company.
Very truly yours,
UNITED ASSET MANAGEMENT CORPORATION
By /s/ William H. Park
--------------------------------------
Name: William H. Park
Title: Executive Vice President
<PAGE> 77
Accepted as of the date of Closing
LIFE INSURANCE COMPANY OF THE SOUTHWEST
By /s/ R. Scott Higgins
----------------------------------------
Name: R. Scott Higgins
Title: Vice President
National Life Investment
Management Co., Inc.
Note Purchase Agreement
<PAGE> 78
If you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterpart of this Agreement and return it to the
Company, whereupon the foregoing shall become a binding agreement between you
and the Company.
Very truly yours,
UNITED ASSET MANAGEMENT CORPORATION
By /s/ William H. Park
--------------------------------------
Name: William H. Park
Title: Executive Vice President
<PAGE> 79
Accepted as of the date of Closing
INTEGRETY LIFE INSURANCE COMPANY
By /s/ Martin H. Ruby
-----------------------------------------
Name: Martin H. Ruby
Title: Chairman & Chief Executive Officer
Note Purchase Agreement
<PAGE> 80
If you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterpart of this Agreement and return it to the
Company, whereupon the foregoing shall become a binding agreement between you
and the Company.
Very truly yours,
UNITED ASSET MANAGEMENT CORPORATION
By /s/ William H. Park
--------------------------------------
Name: William H. Park
Title: Executive Vice President
<PAGE> 81
Accepted as of the date of Closing
THE TRAVELERS INSURANCE COMPANY
By /s/ Pamela Westmoreland
-----------------------------------------
Name: PAMELA WESTMORELAND
Title: VICE PRESIDENT
Note Purchase Agreement
<PAGE> 82
If you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterpart of this Agreement and return it to the
Company, whereupon the foregoing shall become a binding agreement between you
and the Company.
Very truly yours,
UNITED ASSET MANAGEMENT CORPORATION
By /s/ William H. Park
--------------------------------------
Name: William H. Park
Title: Executive Vice President
<PAGE> 83
Accepted as of the date of Closing
THE TRAVELERS LIFE AND ANNUITY COMPANY
By /s/ Pamela Westmoreland
-----------------------------------------
Name: PAMELA WESTMORELAND
Title: VICE PRESIDENT
Note Purchase Agreement
<PAGE> 84
If you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterpart of this Agreement and return it to the
Company, whereupon the foregoing shall become a binding agreement between you
and the Company.
Very truly yours,
UNITED ASSET MANAGEMENT CORPORATION
By /s/ William H. Park
--------------------------------------
Name: William H. Park
Title: Executive Vice President
<PAGE> 85
Accepted as of the date of Closing
ALLSTATE LIFE INSURANCE COMPANY
By /s/ ?????
-----------------------------------------
By /s/ Robert ?????
-----------------------------------------
Authorized Signatories
Note Purchase Agreement
<PAGE> 86
If you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterpart of this Agreement and return it to the
Company, whereupon the foregoing shall become a binding agreement between you
and the Company.
Very truly yours,
UNITED ASSET MANAGEMENT CORPORATION
By /s/ William H. Park
--------------------------------------
Name: William H. Park
Title: Executive Vice President
<PAGE> 87
Accepted as of the date of Closing
ALLSTATE LIFE INSURANCE COMPANY
By /s/ ????????????????
-----------------------------------------
By /s/ ????????????????
-----------------------------------------
Authorized Signatories
Note Purchase Agreement
<PAGE> 88
If you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterpart of this Agreement and return it to the
Company, whereupon the foregoing shall become a binding agreement between you
and the Company.
Very truly yours,
UNITED ASSET MANAGEMENT CORPORATION
By /s/ William H. Park
--------------------------------------
Name: William H. Park
Title: Executive Vice President
<PAGE> 89
Accepted as of the date of Closing
ALLSTATE LIFE INSURANCE COMPANY
By /s/ ????????????????
-----------------------------------------
By /s/ ????????????????
-----------------------------------------
Authorized Signatories
Note Purchase Agreement
<PAGE> 90
DEFINED TERMS
As used herein, the following terms have the respective meanings set
forth below or set forth in the Section hereof following such term:
"Affiliate" means, at any time, and with respect to any Person, (a) any
other Person that at such time directly or indirectly through one or more
intermediaries Controls, or is Controlled by, or is under common Control with,
such first Person, and (b) any Person beneficially owning or holding, directly
or indirectly, 10% or more of any class of voting or equity interests of the
Company or any Subsidiary or any corporation of which the Company and its
Subsidiaries beneficially own or hold, in the aggregate, directly or indirectly,
10% or more of any class of voting or equity interests. As used in this
definition, "Control" means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.
Unless the context otherwise clearly requires, any reference to an "Affiliate"
is a reference to an Affiliate of the Company.
"Agent" shall mean Morgan Guaranty Trust Company of New York, as Agent
under the Bank Credit Agreement, and any successor thereto.
"Amendment and Consent" shall mean the Amendment and Consent dated as
of the date hereof by and among the Company, UAM Holdings, UAM Trademark, UAM
Investment, Heitman, UAM U.K. Holdings, Clay Finlay, LML Holdings, the 1995
Institutional Investors, the Banks, the Agent and the Collateral Agent, pursuant
to which, inter alia, BankBoston, N.A. has agreed to act as Collateral Agent
under each of the Collateral Documents for and on behalf of the Secured Parties
(as defined in the Intercreditor Agreement), and pursuant to which the Security
Documents have been amended to provide that the obligations of the Company and
the Guaranty Subsidiaries in respect of this Agreement, the Other Agreements,
the Notes and the Subsidiary Guarantees constitute secured obligations under
such Security Documents in order to secure, on a ratable basis, the Secured
Parties.
"Bank Collateral Agent" shall mean BankBoston, N.A., as Collateral
Agent under the Bank Credit Agreement, and any successor thereto.
"Bank Credit Agreement" means that certain Amended and Restated Credit
Agreement dated as of April 29, 1998 among the Company, Morgan Guaranty Trust
Company of New York, as Agent, BankBoston, N.A., as Collateral Agent, and the
several banks and other financial institutions from time to time parties
thereto, including the Financing Documents (as defined therein on the date
hereof), as from time to time extended, supplemented, amended, restated or
otherwise modified, and including any replacement revolving credit facility.
"Banks" means the several banks and other financial institutions from
time to time parties to the Bank Credit Agreement.
SCHEDULE B
(to Note Purchase Agreement)
<PAGE> 91
"Bank Secured Debt" means all Indebtedness of the Company and its
Subsidiaries outstanding at any time and from time to time under the Bank Credit
Agreement secured by the Lien of the Collateral Documents, including without
limitation "Non-Facility Borrowings" as defined in, and permitted by, the Bank
Credit Agreement.
"Business Day" means (a) for the purposes of Section 8.6 only, any day
other than a Saturday, a Sunday or a day on which commercial banks in New York
City are required or authorized to be closed, and (b) for the purposes of any
other provision of this Agreement, any day other than a Saturday, a Sunday or a
day on which commercial banks in New York, New York or Boston, Massachusetts are
required or authorized to be closed.
"Capital Lease" means, at any time, a lease with respect to which the
lessee is required concurrently to recognize the acquisition of an asset and the
incurrence of a liability in accordance with GAAP.
"Clay Finlay" means Clay Finlay Inc., a New York corporation and a
Subsidiary of the Company.
"Closing" is defined in Section 3.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, and the rules and regulations promulgated thereunder from time to time.
"Collateral" means collectively (a) the Collateral as such term is
defined in each of the Pledge Agreement, the Second Pledge Agreement, the Third
Pledge Agreement, the Subsidiaries Pledge Agreement, the Security Agreement, the
Subsidiaries Security Agreement and the Heitman Pledge Agreement, (b) the
Pledged Securities as such term is defined in the UAM U.K. Holdings Pledge
Agreement, (c) the Charged Property as such term is defined in each of the Clay
Finlay Charge of Shares and the UAM U.K. Charge of Shares, (d) the Securities
Collateral as such term is defined in the LML Holdings Pledge Agreement and (e)
to the extent not otherwise included in clauses (a) through (d) above, and
subject to the provisions of Sections 2.2(c) and (d) any other collateral
security granted, pledged or otherwise given in favor of or for the benefit of
the holders of the Notes as Secured Parties pursuant to the requirements of any
Security Document.
"Collateral Agent" means BankBoston, N.A., a national banking
association, as Collateral Agent for the Secured Parties.
"Collateral Documents" is defined in Section 2.2(a).
"Company" means United Asset Management Corporation, a Delaware
corporation.
"Confidential Information" is defined in Section 20.
"Consolidated Fixed Charges" for any period means on a consolidated
basis the sum of (a) all Rentals (other than Rentals on Capital Leases) payable
during such period by the
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Company and its Subsidiaries, and (b) all Interest Expense on all Indebtedness
(including the interest component of Rentals on Capital Leases) of the Company
and its Subsidiaries.
"Consolidated Funded Debt" means all Funded Debt of the Company and its
Subsidiaries, determined on a consolidated basis eliminating intercompany items.
"Consolidated Net Earnings" for any period means the gross revenues of
the Company and its Subsidiaries for such period less all expenses and other
proper charges (including taxes on income), determined on a consolidated basis
after eliminating earnings or losses attributable to outstanding Minority
Interests, but excluding in any event:
(a) any gains or losses on the sale or other disposition of
Investments or fixed or capital assets, and any taxes on such excluded
gains and any tax deductions or credits on account of any such excluded
losses;
(b) the proceeds of any life insurance policy;
(c) net earnings and losses of any Subsidiary accrued prior
to the date it became a Subsidiary;
(d) net earnings and losses of any corporation (other than a
Subsidiary), substantially all the assets of which have been acquired
in any manner by the Company or any Subsidiary, realized by such
corporation prior to the date of such acquisition;
(e) net earnings and losses of any corporation (other than a
Subsidiary) with which the Company or a Subsidiary shall have
consolidated or which shall have merged into or with the Company or a
Subsidiary prior to the date of such consolidation or merger;
(f) net earnings of any business entity (other than a
Subsidiary) in which the Company or any Subsidiary has an ownership
interest unless such net earnings shall have actually been received by
the Company or such Subsidiary in the form of cash distributions;
(g) any portion of the net earnings of any Subsidiary which
for any reason is unavailable for payment of dividends to the Company
or any other Subsidiary;
(h) earnings resulting from any reappraisal, revaluation or
write-up of assets by the Company or any Subsidiary;
(i) any deferred or other credit representing any excess of
the equity in any Subsidiary at the date of acquisition thereof over
the amount invested in such Subsidiary;
(j) any gain arising from the acquisition of any securities
of the Company or any Subsidiary;
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(k) any reversal of any contingency reserve, except to the
extent that provision for such contingency reserve shall have been made
from income arising during such period; and
(l) any other extraordinary gain or loss;
all determined in accordance with GAAP.
"Consolidated Net Earnings Available for Fixed Charges" for any period
means the sum of (a) Consolidated Net Earnings during such period plus (to the
extent deducted in determining Consolidated Net Earnings), (b) all provisions
for any Federal, state or other income taxes made by the Company and its
Subsidiaries during such period, (c) all provisions for depreciation and
amortization (other than amortization of debt discount) made by the Company and
its Subsidiaries during such period and (d) Consolidated Fixed Charges during
such period.
"Consolidated Operating Cash Flow" for any period means the sum of (a)
Consolidated Net Earnings during such period plus (to the extent deducted in
determining Consolidated Net Earnings) (b) all provisions for depreciation and
amortization of costs assigned to contracts acquired and other intangibles made
by the Company and its Subsidiaries during such period. For purposes of any
determination of Consolidated Operating Cash Flow pursuant to Section
10.4(a)(v), the Company may include, on a pro forma basis as described below,
earnings plus (to the extent deducted in determining such earnings) all
provisions for depreciation and amortization of costs assigned to contracts
acquired of any Person acquired during the immediately preceding four fiscal
quarters, for that portion of the subject four quarter fiscal period which
precedes such acquisition, provided that concurrently with such determination,
the Company shall have furnished to the holders of the Notes the supporting
documentation described below. Pro forma earnings of any acquired Person shall
be calculated for purposes of the preceding sentence in accordance with the
requirements of Regulation S-X of the Securities and Exchange Commission and
Accounting Principles Board Opinion No. 16, applied on a basis consistent with
that used in the Company's periodic filings with the Securities Exchange
Commission. Whenever Consolidated Operating Cash Flow as calculated pursuant
hereto includes the adjusted pro forma earnings of an acquired Person as
permitted above, supporting documentation delivered to the holders of the Notes
shall include (i) all pro forma financial information and all financial
statements of the acquired Person which would be required to be filed by
reporting persons under Form 8-K of the Securities Exchange Commission, and (ii)
a certificate of a Senior Financial Officer in form satisfactory to the holders
of the Notes to the effect that such calculation of Consolidated Operating Cash
Flow is true and correct and made in accordance with the forgoing provisions.
"Consolidated Senior Funded Debt" means all Senior Funded Debt of the
Company and its Subsidiaries, determined on a consolidated basis eliminating
inter-company items.
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"Consolidated Total Assets" means, as of the date of any determination
thereof, total assets of the Company and its Subsidiaries determined on a
consolidated basis in accordance with GAAP.
"Default" means an event or condition the occurrence or existence of
which would, with the lapse of time or the giving of notice or both, become an
Event of Default.
"Default Rate" means that rate of interest that is the greater of (i)
2% per annum above the rate of interest stated in clause (a) of the first
paragraph of the Notes or (ii) 2% over the rate of interest publicly announced
by Morgan Guaranty Trust Company of New York in New York City, New York, from
time to time, as its "base" or "prime" rate.
"Environmental Laws" means any and all Federal, state, local, and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, concessions, grants, franchises, licenses, agreements or
governmental restrictions relating to pollution and the protection of the
environment or the release of any materials into the environment, including but
not limited to those related to hazardous substances or wastes, air emissions
and discharges to waste or public systems.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the rules and regulations promulgated thereunder
from time to time in effect.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) that is treated as a single employer together with the Company
under section 414 of the Code.
"Event of Default" is defined in Section 11.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"First Amendment and Consent" shall mean the First Amendment and
Consent dated as of August 1, 1995 by and among the Company, UAM Realty
Advisors, UAM Holdings, UAM Trademark, UAM Investment, Heitman, UAM U.K.
Holdings, the Banks, the Agent and the Collateral Agent, pursuant to which,
inter alia, BankBoston, N.A. agreed to act as Collateral Agent under each of the
Collateral Documents for and on behalf of the Secured Parties (as defined in the
Intercreditor Agreement prior to the Intercreditor Agreement First Amendment),
and pursuant to which the Security Documents were amended to provide that the
obligations of the Company and the Guaranty Subsidiaries in respect of the 1995
Note Agreements, the Other Agreements (as defined therein), the notes issued in
connection therewith and the Subsidiary Guaranties constituted secured
obligations under such Security Documents in order to secure, on a ratable
basis, the Secured Parties.
"Funded Debt" of any Person means (a) all Indebtedness of such Person
or Indebtedness which has been incurred in connection with the acquisition of
assets in each case having a final maturity of one or more than one year from
the date of origin thereof (or which is renewable or extendible at the option of
the obligor for a period or periods more
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than one year from the date of origin, including in any event, any Indebtedness
which is renewable or extendible under any revolving or similar credit
agreement), including all payments in respect thereof that are required to be
made within one year from the date of any determination of Funded Debt, whether
or not the obligation to make such payments shall constitute a current liability
of the obligor under GAAP, (b) all Rentals of such Person payable pursuant to
any Capital Lease, and (c) all Guaranties by such Person of Funded Debt of
others.
"GAAP" means generally accepted accounting principles as in effect from
time to time in the United States of America.
"Governmental Authority" means
(a) the government of
(i) the United States of America or any State or
other political subdivision thereof, or
(ii) any jurisdiction in which the Company or any
Subsidiary conducts all or any part of its business, or which
asserts jurisdiction over any properties of the Company or
any Subsidiary, or
(b) any entity exercising executive, legislative,
judicial, regulatory or administrative functions of, or pertaining to,
any such government.
"Guaranty" means, with respect to any Person, any obligation (except
the endorsement in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing or in effect guaranteeing any
Indebtedness, dividend or other obligation of any other Person in any manner,
whether directly or indirectly, including (without limitation) obligations
incurred through an agreement, contingent or otherwise, by such Person:
(a) to purchase such Indebtedness or obligation or any
property constituting security therefor;
(b) to advance or supply funds (i) for the purchase or
payment of such Indebtedness or obligation, or (ii) to maintain any
working capital or other balance sheet condition or any income
statement condition of any other Person or otherwise to advance or make
available funds for the purchase or payment of such Indebtedness or
obligation;
(c) to lease properties or to purchase properties or
services primarily for the purpose of assuring the owner of such
Indebtedness or obligation of the ability of any other Person to make
payment of the Indebtedness or obligation; or
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(d) otherwise to assure the owner of such Indebtedness or
obligation against loss in respect thereof.
In any computation of the Indebtedness or other liabilities of the obligor under
any Guaranty, the Indebtedness or other obligations that are the subject of such
Guaranty shall be assumed to be direct obligations of such obligor.
"Guaranty Subsidiary" means each of UAM Holdings, UAM Trademark, UAM
Investment, Heitman, UAM U.K. Holdings, Clay Finlay and LML Holdings and any
other Subsidiary executing and delivering a Subsidiary Guaranty pursuant to the
requirements of Section 10.3 of this Agreement.
"Hazardous Material" means any and all pollutants, toxic or hazardous
wastes or any other substances that might pose a hazard to health or safety, the
removal of which may be required or the generation, manufacture, refining,
production, processing, treatment, storage, handling, transportation, transfer,
use, disposal, release, discharge, spillage, seepage, or filtration of which is
or shall be restricted, prohibited or penalized by any applicable law
(including, without limitation, asbestos, urea formaldehyde foam insulation and
polychlorinated biphenyls).
"Heitman" means Heitman Financial Ltd., an Illinois corporation and a
Subsidiary of the Company.
"holder" means, with respect to any Note, the Person in whose name such
Note is registered in the register maintained by the Company pursuant to Section
13.1.
"Indebtedness" with respect to any Person means, at any time, without
duplication,
(a) its liabilities for borrowed money and its redemption
obligations in respect of mandatorily redeemable Preferred Stock;
(b) its liabilities for the deferred purchase price of
property acquired by such Person (excluding accounts payable arising in
the ordinary course of business but including all liabilities created
or arising under any conditional sale or other title retention
agreement with respect to any such property);
(c) all liabilities appearing on its balance sheet in
accordance with GAAP in respect of Capital Leases;
(d) all liabilities for borrowed money secured by any Lien
with respect to any property owned by such Person (whether or not it
has assumed or otherwise become liable for such liabilities);
(e) all its liabilities in respect of letters of credit or
instruments serving a similar function issued or accepted for its
account by banks and other financial institutions (whether or not
representing obligations for borrowed money);
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(f) Swaps of such Person; and
(g) any Guaranty of such Person with respect to liabilities
of a type described in any of clauses (a) through (f) hereof.
Indebtedness of any Person shall include all obligations of such Person of the
character described in clauses (a) through (g) to the extent such Person remains
legally liable in respect thereof notwithstanding that any such obligation is
deemed to be extinguished under GAAP.
"Institutional Investor" means (a) any original purchaser of a Note,
(b) any holder of a Note holding more than 5% of the aggregate principal amount
of the Notes then outstanding, and (c) any bank, trust company, savings and loan
association or other financial institution, any pension plan, any investment
company, any insurance company, any broker or dealer, or any other similar
financial institution or entity, regardless of legal form.
"Intercreditor Agreement" is defined in Section 2.2(a).
"Intercreditor Agreement First Amendment" is defined in Section 2.2(a).
"Interest Expense" of the Company and its Subsidiaries for any period
means all interest and all amortization of debt discount and expense on any
particular Indebtedness (including, without limitation, payment-in-kind, zero
coupon and other like securities) for which such calculations are being made.
"Investments" means all investments, in cash or by delivery of
property, made directly or indirectly in any Person, whether by acquisition of
shares of capital stock, Indebtedness or other obligations or Securities or by
loan, advance, capital contribution or otherwise; provided that "Investments"
shall not mean or include routine investments in personal property to be used or
consumed in the ordinary course of business.
"Lien" means any interest in property securing an obligation owed to,
or a claim by, a Person other than the owner of the property, whether such
interest is based on the common law, statute or contract, and including but not
limited to the security interest lien arising from a mortgage, encumbrance,
pledge, conditional sale or trust receipt or a lease, consignment or bailment
for security purposes. The term "Lien" shall include reservations, exceptions,
encroachments, easements, rights-of-way, covenants, conditions, restrictions,
leases and other title exceptions and encumbrances (including, with respect to
stock, stockholder agreements, voting trust agreements, buy-back agreements and
all similar arrangements) affecting property. For the purposes of this
Agreement, the Company or a Subsidiary shall be deemed to be the owner of any
property which it has acquired or holds subject to a conditional sale agreement,
Capital Lease or other arrangement pursuant to which title to the property has
been retained by or vested in some other Person for security purposes and such
retention or vesting shall constitute a Lien.
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"LML Holdings" means LML Holdings, Inc., a Delaware corporation and a
Subsidiary of the Company.
"Make-Whole Amount" is defined in Section 8.6.
"Material" means material in relation to the business, operations,
affairs, financial condition, assets, properties, or prospects of the Company
and its Subsidiaries taken as a whole.
"Material Adverse Effect" means a material adverse effect on (a) the
business, operations, affairs, financial condition, assets or properties of the
Company and its Subsidiaries taken as a whole, or (b) the ability of the Company
to perform its obligations under this Agreement, the Notes, and the Security
Documents, or (c) the validity or enforceability of this Agreement, the Notes,
or any of the Security Documents.
"Memorandum" is defined in Section 5.3.
"Minority Interests" means any shares of stock of any class of a
Subsidiary (other than directors' qualifying shares as required by law) that are
not owned by the Company and/or one or more of its Subsidiaries. Minority
Interests shall be valued by valuing Minority Interests constituting Preferred
Stock at the voluntary or involuntary liquidating value of such Preferred Stock,
whichever is greater, and by valuing Minority Interests constituting common
stock at the book value of capital and surplus applicable thereto adjusted, if
necessary, to reflect any changes from the book value of such common stock
required by the foregoing method of valuing Minority Interests in Preferred
Stock.
"Multiemployer Plan" means any Plan that is a "multiemployer plan" (as
such term is defined in section 4001(a)(3) of ERISA).
"1995 Institutional Investors" shall mean each of the holders of the
Notes outstanding under the 1995 Note Agreements.
"1995 Note Agreements" shall mean the Note Purchase Agreements, each
dated as of August 1, 1995 between the Company and the Purchasers named in
Schedule A thereto, as the same may from time to time be supplemented or
amended.
"Notes" is defined in Section 1.
"Officer's Certificate" means a certificate of a Senior Financial
Officer or of any other officer of the Company whose responsibilities extend to
the subject matter of such certificate.
"Other Agreements" is defined in Section 2.
"Other Purchasers" is defined in Section 2.
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"PBGC" means the Pension Benefit Guaranty Corporation referred to and
defined in ERISA or any successor thereto.
"Person" means an individual, partnership, corporation, limited
liability company, association, trust, unincorporated organization, or a
government or agency or political subdivision thereof.
"Plan" means an "employee benefit plan" (as defined in section 3(3) of
ERISA) that is or, within the preceding five years, has been established or
maintained, or to which contributions are or, within the preceding five years,
have been made or required to be made, by the Company or any ERISA Affiliate or
with respect to which the Company or any ERISA Affiliate may have any liability.
"Pledged Stock" means the shares of capital stock of Subsidiaries which
are pledged by the Company, UAM Holdings, Heitman, Clay Finlay, LML Holdings or
UAM U.K. Holdings, as the case may be, to the Collateral Agent pursuant to the
Pledge Agreement, the Second Pledge Agreement, the Third Pledge Agreement, the
Subsidiaries Pledge Agreement, the Heitman Pledge Agreement, the Clay Finlay
Charge of Shares, the LML Holdings Pledge Agreement, the UAM U.K. Charge of
Shares or the UAM U.K. Holdings Pledge Agreement, as the case may be, and any
other shares of capital stock of Subsidiaries pledged pursuant to the
requirements of any Security Document.
"Preferred Stock" means any class of capital stock of a corporation
that is preferred over any other class of capital stock of such corporation as
to the payment of dividends or the payment of any amount upon liquidation or
dissolution of such corporation.
"property" or "properties" means, unless otherwise specifically
limited, real or personal property of any kind, tangible or intangible, choate
or inchoate.
"QPAM Exemption" means Prohibited Transaction Class Exemption 84-14
issued by the United States Department of Labor.
"Rentals" means and include as of the date of any determination thereof
all fixed payments (including as such all payments which the lessee is obligated
to make to the lessor on termination of the lease or surrender of the property)
payable by the Company or a Subsidiary, as lessee or sublessee under a lease of
real or personal property, but shall be exclusive of any amounts required to be
paid by the Company or a Subsidiary (whether or not designated as rents or
additional rents) on account of maintenance, repairs, insurance, taxes and
similar charges. Fixed rents under any so-called "percentage leases" shall be
computed solely on the basis of the minimum rents, if any, required to be paid
by the lessee regardless of sales volume or gross revenues.
"Revenue Sharing Agreements" means all existing and future agreements
among the Company, any of its Subsidiaries and Persons comprising management of
any such Subsidiaries, pursuant to which a portion of the revenues generated by
such Subsidiary are
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paid to the Company, as the same may be amended, supplemented or otherwise
modified from time to time.
"Required Holders" means, at any time, the holders of at least 51% in
principal amount of the Notes at the time outstanding (exclusive of Notes then
owned by the Company or any of its Affiliates).
"Responsible Officer" means any Senior Financial Officer and any other
officer of the Company with responsibility for the administration of the
relevant portion of this Agreement.
"Secured Parties" shall mean the Secured Parties as defined in the
Intercreditor Agreement as amended by the Intercreditor Agreement First
Amendment.
"Securities Act" means the Securities Act of 1933, as amended from time
to time.
"Security Documents" is defined in Section 2.2(a).
"Senior Financial Officer" means the chief financial officer or
treasurer of the Company.
"Senior Funded Debt" means any Funded Debt which is not expressed to be
subordinate or junior in rank to any other Funded Debt and which by the terms of
the security evidencing such Senior Funded Debt or the instrument or agreement
under or pursuant to which such Senior Funded Debt is outstanding, expressly
prohibits the Person which has issued such Senior Funded Debt from creating,
assuming, guaranteeing or otherwise incurring any Indebtedness which would or
would purport to be senior in rank to such Senior Funded Debt.
"Subordinated Indebtedness" means the Company's (a) Subordinated
Indebtedness designated as such in Schedule 5.15 and (b) all future Indebtedness
incurred by the Company, which Indebtedness is specifically subordinated to
payment in full of the Notes and Indebtedness owing to the Banks pursuant to
documentation substantially in the form of Exhibit 2 hereto or pursuant to terms
and conditions satisfactory to the Required Holders.
"Subsidiary" means, as to any Person, any corporation, association or
other business entity in which such Person or one or more of its Subsidiaries or
such Person and one or more of its Subsidiaries owns sufficient equity or voting
interests to enable it or them (as a group) ordinarily, in the absence of
contingencies, to elect a majority of the directors (or Persons performing
similar functions) of such entity, and any partnership or joint venture if more
than a 50% interest in the profits or capital thereof is owned by such Person or
one or more of its Subsidiaries or such Person and one or more of its
Subsidiaries (unless such partnership can and does ordinarily take major
business actions without the prior approval of such Person or one or more of its
Subsidiaries). Unless the context otherwise clearly requires, any reference to a
"Subsidiary" is a reference to a Subsidiary of the Company.
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"Subsidiary Guaranties" is defined in Section 2.2(a).
"Substantially-Owned Subsidiary" means, at any time, any Subsidiary
eighty (80%) or more of all of the equity interests (except directors'
qualifying shares) and voting interests of which are owned by any one or more of
the Company and the Company's other Substantially-Owned Subsidiaries at such
time.
"Swaps" means, with respect to any Person, payment obligations with
respect to interest rate swaps, currency swaps and similar obligations
obligating such Person to make payments, whether periodically or upon the
happening of a contingency. For the purposes of this Agreement, the amount of
the obligation under any Swap shall be the amount determined in respect thereof
as of the end of the then most recently ended fiscal quarter of such Person,
based on the assumption that such Swap had terminated at the end of such fiscal
quarter, and in making such determination, if any agreement relating to such
Swap provides for the netting of amounts payable by and to such Person
thereunder or if any such agreement provides for the simultaneous payment of
amounts by and to such Person, then in each such case, the amount of such
obligation shall be the net amount so determined.
"UAM Holdings" means United Asset Management Holdings, Inc., a Delaware
corporation and a Subsidiary of the Company.
"UAM Investment" means UAM Investment Corporation, a Delaware
corporation and a Subsidiary of the Company.
"UAM Trademark" means United Asset Management Trademark, Inc., a
Delaware corporation and a Subsidiary of the Company.
"UAM U.K. Holdings" means United Asset Management U.K. Holdings, Inc.,
a Delaware corporation and a Subsidiary of the Company.
"Wholly-Owned Subsidiary" means, at any time, any Subsidiary one
hundred percent (100%) of all of the equity interests (except directors'
qualifying shares) and voting interests of which are owned by any one or more of
the Company and the Company's other Wholly-Owned Subsidiaries at such time.
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Exhibit 10.2
Undertaking to Furnish Copies of Omitted Exhibits and Schedules to
$250,000,000 Note Purchase Agreement dated as of August 12, 1998.
United Asset Management Corporation (the "Registrant") is not filing as
exhibits to its Quarterly Report on Form 10-Q dated November 12, 1998, copies of
the exhibits and schedules to the $250,000,000 Note Purchase Agreement dated as
of August 12, 1998, which Agreement is filed as Exhibit 10.2 thereto.
The Registrant undertakes to furnish to the Securities and Exchange
Commission, upon request, copies of such omitted exhibits and schedules.
Dated: November 12, 1998
UNITED ASSET MANAGEMENT CORPORATION
(Registrant)
By: /s/ William H. Park
-------------------------------
William H. Park
Executive Vice President
and Chief Financial Officer
<PAGE> 1
EXHIBIT 10.3
AMENDMENT NO. 1
TO
AMENDED AND RESTATED CREDIT AGREEMENT
AMENDMENT NO. 1 dated as of August 12, 1998 of the Amended and Restated
Credit Agreement dated as of April 29, 1998 (the "AMENDED AND RESTATED
AGREEMENT") among United Asset Management Corporation, a Delaware corporation
(the "BORROWER"), the banks listed on the signature pages thereof, Morgan
Guaranty Trust Company of New York, as Administrative Agent (the "ADMINISTRATIVE
AGENT"), and BankBoston, N.A., as Collateral Agent (the "COLLATERAL AGENT").
WHEREAS, the Borrower proposes to issue (i) up to $67,000,000 in aggregate
principal amount of its 8.52% Senior Secured Notes, Series A, due July 25, 2005,
(ii) up to $75,000,000 in aggregate principal amount of its 8.52% Senior Secured
Notes, Series B, due July 25, 2008 and (iii) up to $108,000,000 in aggregate
principal amount of its 8.72% Senior Secured Notes, Series C, due July 25, 2008
(collectively, the "1998 SENIOR NOTES") pursuant to several Note Purchase
Agreements substantially in the form of Exhibit B to the Amendment and Consent
referred to below (as such Note Purchase Agreements may be amended, supplemented
or otherwise modified from time to time in accordance with the terms thereof,
the "1998 NOTE PURCHASE AGREEMENTS");
WHEREAS, the obligations of the Borrower in respect of the 1998 Senior
Notes are to be guaranteed by each of the Guaranty Subsidiaries substantially in
the form of Exhibits C-1 through C-5 to the Amendment and Consent referred to
below (as the same may be amended, supplemented or otherwise modified from time
to time in accordance with the terms thereof, the "1998 SENIOR NOTE
GUARANTIES");
WHEREAS, the obligations of the Borrower and the Guaranty Subsidiaries in
respect of the 1998 Senior Notes and the 1998 Senior Note Guaranties are to be
secured by the Collateral from time to time held by the Collateral Agent under
the Collateral Documents pursuant to the Amendment and Consent dated as of
August 12, 1998, in the form delivered to the Banks (the "AMENDMENT AND
CONSENT");
WHEREAS, the relative rights and priorities of the Banks, the Agents and
the holders of the 1995 Senior Notes (as defined below) and of the 1998 Senior
Notes with respect to the Collateral and the guaranties made by the Guaranty
<PAGE> 2
Subsidiaries in favor of the Agents and the Banks and the holders of the 1995
Senior Notes and the 1998 Senior Notes, respectively, are to be governed by a
Collateral Agency and Intercreditor Agreement, as amended by the First Amendment
thereto (the "INTERCREDITOR AMENDMENT"); and
WHEREAS, the parties hereto desire to enter into this Amendment in order to
(i) permit the Borrower to enter into the 1998 Note Purchase Agreements and to
issue the 1998 Senior Notes pursuant thereto and to perform its obligations
thereunder, (ii) permit the Guaranty Subsidiaries to enter into the Senior Note
Guaranties and to perform their respective obligations thereunder and (iii)
effect certain other amendments to the Amended and Restated Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. Definitions.
(a) Unless otherwise specifically defined herein, each term used herein
which is defined in the Amended and Restated Agreement shall have the meaning
assigned to such term in the Amended and Restated Agreement.
(b) The following definitions are added to Section 1.01 of the Amended and
Restated Agreement in the appropriate alphabetical order:
"1995 SENIOR NOTES" means the Borrower's $150,000,000 7.12% Senior
Secured Notes due August 25, 2005.
"1998 SENIOR NOTES" means the Borrower's $67,000,000 8.52% Senior
Secured Notes, Series A, due July 25, 2005, $75,000,000 8.52% Senior
Secured Notes, Series B, due July 25, 2008, and $108,000,000 8.72% Senior
Secured Notes, Series C, due July 25, 2008.
(c) The definition of "Senior Notes" in Section 1.01 of the Amended and
Restated Agreement is amended to read as follows:
"SENIOR NOTES" means the 1995 Senior Notes and the 1998 Senior Notes.
SECTION 2. Commitment Fee. Section 2.08(a) of the Amended and Restated
Agreement is amended to read as follows:
(a) The Borrower shall pay to the Administrative Agent, for the
account of the Banks ratably in proportion to their Commitments, a
commitment fee calculated for each day at the Commitment Fee Rate for
2
<PAGE> 3
such day (determined in accordance with the Pricing Schedule) on the amount
by which the aggregate amount of the Commitments exceeds the aggregate
outstanding principal amount of the Loans on such day. Such commitment fee
shall accrue from and including the Effective Date to but excluding the
date on which the Commitments terminate in their entirety.
Each occurrence of the phrase "Facility Fee Rate" in the Amended and Restated
Agreement is replaced by the phrase "Commitment Fee Rate".
SECTION 3. Limitation on Debt. Section 5.10 of the Amended and Restated
Agreement is amended as follows:
(a) each occurrence of the words "Senior Notes" is replaced by the words
"1995 Senior Notes"; and
(b) the following is added in the appropriate alphabetical order as
subsection (c-1):
(c-1) Debt in an aggregate principal amount not to exceed $250,000,000
incurred in respect of the 1998 Senior Notes, as the principal amount
thereof may be reduced from time to time in accordance with the terms
thereof;
SECTION 4. Events of Default. Section 6.01(k) is amended by replacing the
number $900,000,000 with the number $1,150,000,000.
SECTION 5. Consents. The undersigned Banks hereby consent to and instruct
the Collateral Agent to execute the Amendment and Consent and the Intercreditor
Amendment.
SECTION 6. Counterparts; Effectiveness. This Amendment may be executed in
one or more counterparts, each of which, when so executed and delivered, shall
be deemed to be an original and all of which counterparts, taken together, shall
constitute but one and the same Amendment with the same force and effect as if
the signatures of all of the parties were on a single counterpart, and it shall
not be necessary in making proof of this Amendment to produce more than one such
counterpart. This Amendment shall become effective upon the latest to occur of:
(a) receipt by the Administrative Agent of duly executed counterparts
hereof signed by the Borrower and the Banks (or, in the case of any party as to
which an executed counterpart shall not have been received, the Administrative
3
<PAGE> 4
Agent shall have received telegraphic, telex, facsimile or other written
confirmation from such party of execution of a counterpart hereof by such
party);
(b) effectiveness of the Intercreditor Amendment in accordance with its
terms; and
(c) effectiveness of the Amendment and Consent in accordance with its
terms..
SECTION 7. Governing Law. This Amendment shall be governed by, and
construed and enforced in accordance with, the internal laws of the State of New
York (without reference to conflict of laws principles).
IN WITNESS WHEREOF, this Amendment has been duly executed and delivered as
of the date first above written.
UNITED ASSET MANAGEMENT
CORPORATION
By__________________________
Title:
BANKBOSTON, N.A., as Collateral
Agent and Bank
By___________________________
Title:
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
By___________________________
Title:
4
<PAGE> 5
DEUTSCHE BANK AG NEW YORK
AND/OR CAYMAN ISLANDS
BRANCHES
By___________________________
Title:
By___________________________
Title:
BANK OF AMERICA NT & SA
By___________________________
Title:
THE CHASE MANHATTAN BANK
By___________________________
Title:
MELLON BANK, N.A.
By___________________________
Title:
NATIONSBANK, N.A.
By___________________________
Title:
5
<PAGE> 6
CITIBANK, N.A.
By___________________________
Title:
COMMERZBANK AG NEW YORK
BRANCH
By___________________________
Title:
By___________________________
Title:
CREDIT LYONNAIS NEW YORK
BRANCH
By___________________________
Title:
THE FIRST NATIONAL BANK OF
CHICAGO
By___________________________
Title:
FLEET NATIONAL BANK
By___________________________
Title:
6
<PAGE> 7
THE ROYAL BANK OF SCOTLAND
PLC
By___________________________
Title:
BANQUE PARIBAS
By___________________________
Title:
By___________________________
Title:
BAYERISCHE VEREINSBANK AG
By___________________________
Title:
By___________________________
Title:
THE LONG-TERM CREDIT BANK OF
JAPAN, LIMITED, NEW YORK
BRANCH
By___________________________
Title:
7
<PAGE> 8
STATE STREET BANK AND TRUST
COMPANY
By___________________________
Title:
THE BANK OF NEW YORK
By___________________________
Title:
SOCIETE GENERALE, NEW YORK BRANCH
By___________________________
Title:
UNION BANK OF CALIFORNIA, N.A.
By___________________________
Title:
8
<PAGE> 1
Exhibit 11
UNITED ASSET MANAGEMENT CORPORATION
CALCULATION OF EARNINGS PER SHARE
(In thousands, except per-share amounts)
(Unaudited)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
For the Three Months Ended September 30, For the Nine Months Ended September 30,
- ---------------------------------------------------------------------------------------- -----------------------------------------
Income Shares Per-Share Income Shares Per-Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
- ---------------------------------------------------------------------------------------- -----------------------------------------
<S> <C> <C> <C> <C> <C> <C>
For the three- and nine-month periods ended
September 30, 1998
Basic Earnings per Share
Income available to common
shareholders $17,753,000 64,950,000 $.27 $61,968,000 67,230,000 $ .92
==== =====
Effect of Dilutive Securities (1) - 1,751,000 - 2,160,000
----------- ---------- ----------- ----------
Diluted Earnings per Share
Income available to common
shareholders + assumed conversions $17,753,000 66,701,000 $.27 $61,968,000 69,390,000 $ .89
=========== ========== ==== =========== ========== =====
===================================================================================== ========================================
For the three- and nine-month periods ended
September 30, 1997
Basic Earnings per Share
Income available to common
shareholders $23,226,000 69,794,000 $.33 $71,311,000 69,988,000 $1.02
==== =====
Effect of Dilutive Securities (2) - 3,106,000 - 3,465,000
----------- ---------- ----------- ----------
Diluted Earnings per Share
Income available to common
shareholders + assumed conversions $23,226,000 72,900,000 $.32 $71,311,000 73,453,000 $ .97
=========== ========== ==== =========== ========== =====
===================================================================================== ========================================
</TABLE>
(1) Options on 2,101,000 and 1,854,000 shares of common stock and warrants on
1,520,000 and 1,524,000 shares of common stock were outstanding during the
three- and nine-month periods ended September 30, 1998, respectively, but
were not included in computing diluted earnings per share because their
effects were antidilutive.
(2) Options on 521,000 and 652,000 shares of common stock and warrants on
1,047,000 and 904,000 shares of common stock were outstanding during the
three- and nine-month periods ended September 30, 1997, respectively, but
were not included in computing diluted earnings per share because their
effects were antidilutive.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONDENSED CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1998, AND THE
CONSOLIDATED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30,
1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000796370
<NAME> UNITED ASSET MANAGEMENT CORPORATION
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<EXCHANGE-RATE> 1
<CASH> 164,097
<SECURITIES> 0
<RECEIVABLES> 154,772
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 328,513
<PP&E> 101,424
<DEPRECIATION> 58,548
<TOTAL-ASSETS> 1,462,281<F1>
<CURRENT-LIABILITIES> 227,288
<BONDS> 882,850<F2>
0
0
<COMMON> 703
<OTHER-SE> 319,262
<TOTAL-LIABILITY-AND-EQUITY> 1,462,281
<SALES> 0
<TOTAL-REVENUES> 722,941
<CGS> 0
<TOTAL-COSTS> 487,252
<OTHER-EXPENSES> 86,118<F3>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 41,237
<INCOME-PRETAX> 108,334
<INCOME-TAX> 46,366
<INCOME-CONTINUING> 61,968
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 61,968
<EPS-PRIMARY> .92
<EPS-DILUTED> 89
<FN>
<F1>INCLUDES COST ASSIGNED TO CONTRACTS ACQUIRED, NET OF $968,614.
<F2>INCLUDES SENIOR NOTES PAYABLE OF $672,150 AND SUBORDINATED NOTES PAYABLE OF
$210,700.
<F3>REPRESENTS AMORTIZATION OF COST ASSIGNED TO CONTRACTS ACQUIRED.
</FN>
</TABLE>
<PAGE> 1
EXHIBIT 99.1
RISK FACTORS
UAM's management may make "forward-looking" statements in this Form 10-Q in
other documents filed with the SEC, in press releases, and in discussions with
analysts, investors and others. These statements include:
* descriptions of UAM's operational plans,
* expectations about future earnings and other results of operations,
* views of future industry or market conditions, and
* other statements that include words like "may," "expects," "believes,"
and "intends," and which describe opinions about future events.
Investors should not rely on these statements as though they were
guarantees. These statements are current only when they are made. UAM's
management has no obligation to revise or update these statements based on
future developments. Known and unknown risks may cause UAM's actual results and
performances to be materially different from those expressed or implied by these
statements. Some of these risks are identified and explained below.
MOST OF UAM'S REVENUES ARE BASED ON THE MARKET VALUE OF MANAGED ASSETS AND,
THEREFORE, WILL RISE AND FALL WITH CHANGES IN THE ECONOMY AND FINANCIAL MARKETS
Most of the revenues of UAM's affiliated firms are investment advisory
fees, which are based primarily on the market value of assets under management.
Consequently, UAM's financial results depend directly on changes in the economy
and financial markets. These changes can be extremely volatile and are difficult
to predict.
However, changes in the financial markets may also have an inverse effect
on assets under management. First, when prices in financial markets rise, U.S.
employers may make net withdrawals from their defined benefit plans. The
Employee Retirement Income Security Act of 1974 ("ERISA") and the Internal
Revenue Code of 1986 (the "Tax Code") require employers to fund their plans
sufficiently to generate the benefits they have promised, based on actuarial
calculations. However, the Tax Code also discourages employers from overfunding
these plans by limiting tax deductions for contributions to fully funded plans.
UAM believes that the high investment returns experienced in the 1980s and 1990s
have caused many defined benefit plans to reach or exceed their full funding
limits. Therefore, many employers may have ceased to contribute additional cash
to these plans, even though these employers may be withdrawing assets from the
plans to pay benefits as they become due.
<PAGE> 2
Second, many investors wish to maintain a particular balance in their
portfolios among various asset classes and investment styles. Over time, if
funds allocated to one asset class outperform the rest of the portfolio, the
portfolio may become overweighted in that asset class. If the investor has not
changed its optimal asset allocation, the investor may rebalance the portfolio
by withdrawing funds from the asset class that outperformed and redistributing
those funds among the other asset classes and styles in the portfolio. In this
way, an advisor that manages in one particular asset class or style may
experience negative client cash flows after relative performance was positive,
and positive client cash flows after relative performance was negative.
THE INVESTMENT MANAGEMENT BUSINESS IS HIGHLY COMPETITIVE
UAM's affiliated firms compete to manage domestic and international
investment portfolios for corporate benefit plans, mutual funds, government and
union benefit plans, individuals, endowments, and foundations. UAM believes that
the most important factors affecting competition in the investment management
industry are:
* the abilities and reputations of investment managers,
* stability of a firm's workforce, especially of portfolio managers,
* an effective marketing force with broad access to channels of
distribution,
* differences in the investment performance of investment management
firms,
* adherence to particular investment styles,
* quality of client service,
* the development of new investment strategies,
* resources to invest in information technologies, and
* public recognition of trade names in retail markets
UAM's affiliated firms face many competitors, including public and private
investment advisers, as well as affiliates of securities broker-dealers,
commercial banks, investment banks, and insurance companies. Barriers to entry
are low, and firms in the investment management business are relatively
long-lived.
Institutional clients typically may terminate investment management
contracts without penalty upon 30-days' notice. Mutual funds typically may
terminate investment management contracts without penalty upon 60-days' notice,
and retail clients may redeem investments in mutual funds at any time.
THE INVESTMENT MANAGEMENT BUSINESS IS SUSCEPTIBLE TO INTERNAL SHIFTS AND
FREQUENTLY REQUIRES FIRMS TO ADAPT
Firms typically position themselves to provide investment management
services within certain asset classes (equities, debt, real estate, etc.) and
investment styles (value, growth, sector rotation, etc.). Periodic shifts in the
investment management industry may favor firms with strength in particular areas
and firms that have the ability to adjust to these shifts.
<PAGE> 3
For example, the implementation of the European Monetary Union includes the
elimination of the national currencies and the coordination of economic policy
of the 11 member countries. These developments may cause several shifts in the
industry including:
* The preferred basis for equity asset allocation may shift from
regional and country selection to industry selection;
* Investors in member countries may be more willing to invest in equity
and debt securities from other member countries since there will no
longer be exchange rate risk; and
* Investors may no longer require certain hedging techniques that seek
to reduce exchange rate risk.
As another example, the press release attached as Exhibit 99.1 to the
Company's Form 8-K filed on January 22, 1998, describes a shift in the market
for institutionally managed real estate. Many investors now seek management
through investment vehicles like real estate investment trusts that offer
liquidity and public pricing, rather than investment vehicles like group trusts
that offer a more traditional form of long-term management.
UAM'S AFFILIATED FIRMS DEPEND SIGNIFICANTLY ON KEY EMPLOYEES
Individual investment managers at UAM's affiliated firms often have regular
direct contact with clients, which may cause the clients to base their
relationships largely on trust in that individual manager. Some clients could
withdraw assets if an affiliated firm loses a key investment manager. UAM's
success depends on its ability to attract, retain, and motivate sufficient
numbers of qualified managers at its affiliated firms.
In most cases, key managers have signed long-term employment contracts and
have agreed not to provide investment advisory services to any of their firm's
clients for a period after their employment ends. Also, UAM uses a combination
of short-term and long-term financial incentives to help its firms retain these
individuals. UAM depends on the enforceability of these employment and
non-competition agreements. However, these methods do not guarantee that these
individuals will remain with UAM's firms for the specified term of the
agreements or for any further term. The market for investment managers is
extremely competitive. Increasingly, in the industry, investment managers are
moving among different firms and starting new firms.
UAM'S GROWTH STRATEGY DEPENDS, IN PART, ON A SUCCESSFUL ACQUISITION PROGRAM
To date, UAM has acquired substantial ownership interests in over 50
investment management firms. UAM intends to continue this acquisition program in
the future. The success of this program depends on UAM's ability to identify
suitable firms and to negotiate agreements on acceptable terms. Success also
depends on UAM's ability to finance acquisitions through additional borrowing,
by issuing additional stock in private or public transactions, or through
internally generated cash flow.
<PAGE> 4
The market for acquisition of interests in investment management firms is
highly competitive. There are several other holding companies that invest in
investment management firms. In addition, many domestic and foreign commercial
and investment banks, insurance companies, and investment management firms
maintain active acquisition programs, and many of these companies have longer
operating histories and significantly greater resources than UAM.
Over the past few years, because of competition for acquisitions, prices
for firms have increased, and therefore the expected returns on these
investments have decreased. Further, as the total assets managed by UAM's
affiliated firms rises, this program may require larger or more frequent
acquisitions in order to continue to have a material effect on UAM's financial
results.
UAM'S REPORTED NET EARNINGS MAY BE AFFECTED BY CHANGES IN ITS AMORTIZATION OF
CLIENT CONTRACTS
When UAM acquires an investment advisory firm, UAM's balance sheet gains a
new asset - the cost assigned to investment advisory contracts acquired. UAM
amortizes this amount on a straight-line basis over the estimated weighted
average useful life of the contracts. Determinations of these estimates consider
historical patterns of terminations by clients and the size and age of the
contracts. If actual client terminations occur significantly sooner than
originally estimated or in certain other circumstances, accounting principles
require that UAM amortize the remaining asset over the revised estimated
(shorter) life. This acceleration of amortization further lowers UAM's reported
net earnings during the revised estimated life of the contracts.
In addition, UAM regularly analyzes the value of investment advisory
contracts. Many factors can affect the value of these contracts, including
changes in advisory fee rates, strategic planning at the affiliated firm,
realignment of client and consultant relationships, and performance in managing
assets. In its analysis, UAM compares the carrying value of the contracts
against the estimated undiscounted future cash flows associated with the
contracts. If the undiscounted future cash flows are not sufficient to recover
the carrying value of the asset, accounting principles require that UAM adjust
the carrying cost of the contracts to their estimated fair value. Such an
adjustment, known to accountants as an "impairment" charge, would lower UAM's
reported net earnings. The press release attached as Exhibit 99.1 to UAM's Form
8-K filed on January 22, 1998, describes a charge in the fourth quarter of
fiscal year 1997 resulting from the impairment of client contracts at two of
UAM's affiliated firms.
THE IRS IS SEEKING ADJUSTMENTS TO SEVERAL OF UAM'S FEDERAL INCOME TAX RETURNS
The Notes to Consolidated Financial Statements which are included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1997,
describe UAM's method for amortizing investment advisory contracts for tax
purposes in years prior to 1993 and the method permitted by the Revenue
Reconciliation Act of 1993 (the "93 Act") for subsequent
<PAGE> 5
years. The Internal Revenue Service ("IRS") has audited UAM's federal income tax
returns for 1984 through 1992 and is challenging UAM's amortization prior to the
93 Act. The Notes address this audit and the IRS's position in more detail. UAM
believes that it will prevail in the audit. However, if the IRS prevails in all
aspects, UAM would owe approximately $56,000,000, plus interest, in additional
tax.
UAM DELEGATES AUTHORITY TO CONTROL THE OPERATIONS OF ITS AFFILIATED FIRMS
As sole or principal stockholder, UAM has the power to elect and remove
directors of its affiliated firms and to veto any major actions that the firm
may take. However, UAM authorizes the principals of the affiliated firms to
manage their own day-to-day operations, including employee matters, investment
management policies and fee structures, product development, marketing, client
relationships, compensation programs, and compliance activities. Indeed, UAM
itself is not registered as an investment adviser either with the SEC or with
any state or foreign regulatory agency and therefore cannot render investment
advisory services except through its affiliated firms which are properly
registered. Accordingly, UAM has only limited ability to alter or coordinate the
management practices and policies of its affiliated firms.
THE YEAR 2000 ISSUE AFFECTS UAM'S COMPUTER HARDWARE AND SOFTWARE
Many computer programs use two digits, rather than four, to identify the
year in a date. These programs cannot accurately process dates after December
31, 1999. This failure may cause systems to crash and may cause programs to
generate erroneous results when they process data. This issue affects personal
computers, mainframe computers, networks, and other information technology
systems. This issue also affects any equipment that contains embedded software
(non-IT systems), including telephone lines, elevators, and other
infrastructure. All companies that use or rely on IT systems or non-IT systems
face this issue.
In 1997, UAM started a program to assess its IT systems, to modify, upgrade
or replace all hardware or software that is not Year 2000 compliant, and to
develop a contingency plan in case its IT systems or its business partners' IT
systems are not Year 2000 compliant by January 1, 2000. This program also
addresses UAM's exposure to non-IT systems that may not be Year 2000 compliant.
UAM is assessing its non-IT systems, seeking assurance from the providers of
these systems that they are or soon will be Year 2000 compliant, and developing
a contingency plan in case these non-IT systems are not Year 2000 compliant by
January 1, 2000. UAM hired an outside consultant to assist UAM and its
affiliated firms with the development and implementation of this program. The
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" section of UAM's Form 10-Q for the quarter ended September 30, 1998,
provides more detailed information on this program.
UAM expects to complete this program by June 30, 1999, and expects that the
cost will not be material. However, UAM cannot guarantee that this program will
achieve full and timely Year 2000 compliance, particularly with respect to its
business partners and non-IT systems that
<PAGE> 6
are not owned by UAM or under its control. A failure by UAM, any of its
affiliated firms, any of its business partners, or any of its providers of
non-IT system to achieve full and timely compliance could have a material
adverse effect on UAM's business and financial results.
ADOPTION OF THE NEW "EURO" CURRENCY AFFECTS UAM'S COMPUTER HARDWARE AND SOFTWARE
On January 1, 1999, 11 countries in the European Monetary Union will adopt
the "Euro" as their common currency. Existing national currencies in these
countries will cease to be legal tender on July 1, 2002. Many computer programs
do not recognize the "Euro."
UAM, together with its affiliated firms, recently started a program to
assess its computer hardware and software and to revise or replace any systems
that do not recognize the "Euro." In some cases, UAM's affiliated firms have
coordinated these changes with changes required by their Year 2000 Program. UAM
expects to complete this program in a timely manner and does not expect the
costs will be material. However, UAM cannot guarantee that this program will be
completely successful, and a failure to successfully revise or replace these
systems could have a material adverse effect on UAM's business and financial
results.
